Share Name Share Symbol Market Type Share ISIN Share Description
Hirco LSE:HRCO London Ordinary Share IM00B1HYQS19 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 20.25 0.00 0.00 0.00 0.00 0.00 0.00 00:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Real Estate Investment & Services 21.5 -53.5 -53.0 - 20

Hirco plc Annual Financial Report

27/03/2013 7:00am

UK Regulatory (RNS & others)


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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    Tel: +44 (0)1624 681250 
  Limited 
-----------------------------------  ------------------------ 
 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 GBP53.6million 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 GBP2.7 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 GBP197.8 million or GBP1.97 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 (GBP142.8 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 GBP220 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 GBP220 million and the net asset value of GBP197.8 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   GBP108,000 
---------------  -----------------  --------------- 
 Peter Barge*     1 July 2010        GBP104,000 
---------------  -----------------  --------------- 
 John Chapman*    20 May 2011        GBP100,000 
---------------  -----------------  --------------- 
 Eitan Milgram    12 October 2011    GBP25,000 
---------------  -----------------  --------------- 
 Vikram Talwar*   29 August 2012     GBP100,000 
---------------  -----------------  --------------- 
 

*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 GBP000

 
                                        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 GBP000

 
                                                                  Group                     Company 
------------------------------------  =====  ==========================  ========================== 
 ASSETS                                Note          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 GBP000

 
                                                           Currency 
                                    Share      Share    Translation     Retained 
 GROUP                            Capital    Premium        Reserve     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 
------------------------------  ---------  ---------  -------------  -----------  ---------- 
 
 
                                                           Currency 
                                    Share      Share    Translation     Retained 
 COMPANY                          Capital    Premium        Reserve     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 GBP000

 
                                                        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)      (2,732) 
-------------------------------------------------  ---------  ----------- 
 
 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              -       11,202 
-------------------------------------------------  ---------  ----------- 
 
 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       13,321 
-------------------------------------------------  ---------  ----------- 
 

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   Effective Date (accounting 
  (IAS/IFRS)                                                periods commencing 
                                                            on or after) 
--------------------------------------------------------  --------------------------- 
 IAS 27 Consolidated and Separate Financial Statements     1 January 2013 
  - Reissued as IAS 27 Separate Financial Statements 
  (as amended in May 2011) 
--------------------------------------------------------  --------------------------- 
 IAS 28 Investments in Associates - Reissued as            1 January 2013 
  IAS 28 Investments in Associates and Joint Ventures 
  (as amended in May 2011) 
--------------------------------------------------------  --------------------------- 
 IFRS 9 Financial Instruments - Classification and         1 January 2013 
  Measurement 
--------------------------------------------------------  --------------------------- 
 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 
                                              GBP000   GBP000 
-------------------------------------------  -------  ------- 
 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 GBP47.1m (2011: GBP34.1m)

   6            ADMINISTRATIVE EXPENSES 
 
                                 2012     2011 
                               GBP000   GBP000 
----------------------------  -------  ------- 
 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 
                       GBP000   GBP000 
--------------------  -------  ------- 
 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 
                       GBP000   GBP000 
--------------------  -------  ------- 
 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 GBP(53,547,224) (2012: loss of GBP273,353,871) 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 
                                              GBP000          GBP000 
-------------------------------------  -------------  -------------- 
 Loss attributable to equity holders 
  of the parent (GBP)                   (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 GBP197,820,963 (2011: GBP251,369,304) by the number of ordinary shares as at 30 September 2012 of 100,526,984 (2011: 100,526,984).

 
                                                     2012          2011 
                                                   GBP000        GBP000 
-------------------------------------------  ------------  ------------ 
 Net assets attributable to equity holders 
  of the parent (GBP)                         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                      Date of   Book Value    Book Value   Book Value        Cost of 
                in India                  Investment     As at 30    Impairment     As at 30    Acquisition 
                                                           Sep 11      loss for       Sep 12 
                                                                     the period 
                                                           GBP000        GBP000       GBP000         GBP000 
------------  ------------------  ------------------  -----------  ------------  -----------  ------------- 
 Investment in participating 
  preference shares of: 
               Chennai 
 Burke 1        township 
  Limited       projects                 13-Feb-2007            -             -            -         77,847 
               Chennai 
 Burke 2        commercial 
  Limited       projects                 23-Mar-2007            -             -            -         47,889 
 Burke 3       Panvel 
  Limited       SEZ, commercial 
  and Burke     and residential          19-Jul-2007 
  4 Limited     projects             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 GBP350.8 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 GBP350.8m and against the preference dividends of GBP99.7m. Of these amounts GBP297.0m and GBP34.1m 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    Burke 2      Burke 3        Total 
                                                Limited    Limited      & Burke 
                                                                      4 Limited 
                                                 GBP000     GBP000       GBP000       GBP000 
 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    Burke 2      Burke 3       Total 
                                    Limited    Limited      & Burke 
                                                          4 Limited 
                                     GBP000     GBP000       GBP000      GBP000 
 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 
                                                GBP000     GBP000 
-------------------------------------------  ---------  --------- 
 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 
                                        GBP000     GBP000 
-----------------------------------  ---------  --------- 
 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 GBP99.7m (2011: GBP34.1m).

   13          INVESTMENT IN SUBSIDIARY 
 
                                     GBP 
---------------------------------  ----- 
 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 
                               GBP000     GBP000   GBP000    GBP000 
--------------------------  ---------  ---------  -------  -------- 
 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 
                               GBP000     GBP000   GBP000   GBP000 
--------------------------  ---------  ---------  -------  ------- 
 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 
                    GBP000      GBP000 
----------------  --------  ---------- 
 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 GBP9.4m (2011: GBP14.2m).

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 GBP9,000 (2011: GBP5,000).

   (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          Less than 1                 3 months to 1                                Non-interest 
 2012                        month   1-3 months             year   1-5 years   Over 5 years          bearing     Total 
                            GBP000       GBP000           GBP000      GBP000         GBP000           GBP000    GBP000 
----------------  ----------------  -----------  ---------------  ----------  -------------  ---------------  -------- 
 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         Less than 1                 3 months to 1                                Non-interest 
 2011                       month   1-3 months             year   1-5 years   Over 5 years          bearing      Total 
                           GBP000       GBP000           GBP000      GBP000         GBP000           GBP000     GBP000 
----------------  ---------------  -----------  ---------------  ----------  -------------  ---------------  --------- 
 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 
                                        GBP000    GBP000 
------------------------------------  --------  -------- 
 
 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:

 
                                                          3 months to 1                                      No stated 
 30 September 2012   Less than 1 month   1-3 months                year   1-5 years   Over 5 years            maturity 
                                GBP000       GBP000              GBP000      GBP000         GBP000              GBP000 
------------------  ------------------  -----------  ------------------  ----------  -------------  ------------------ 
 FINANCIAL 
 LIABILITIES 
 Trade and other 
 payables                        2,152            -                   -           -              -                   - 
 Total interest 
 rate sensitivity 
 gap                             2,152            -                   -           -              -                   - 
------------------  ------------------  -----------  ------------------  ----------  -------------  ------------------ 
 
 
                                                          3 months to 1                                      No stated 
 30 September 2011   Less than 1 month   1-3 months                year   1-5 years   Over 5 years            maturity 
                                GBP000       GBP000              GBP000      GBP000         GBP000              GBP000 
------------------  ------------------  -----------  ------------------  ----------  -------------  ------------------ 
 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   Fair value   2011 Carrying   Fair value 
                                            amount                       amount 
                                            GBP000       GBP000          GBP000       GBP000 
----------------------------------  --------------  -----------  --------------  ----------- 
 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 GBP51.

   17          ISSUED CAPITAL 
 
                               Number of   Share capital 
                                  shares             GBP 
 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 
 
                                                                                 Type of 
                                              Country    Field of   Ownership      share 
 Name                                of incorporation    activity    interest       held 
---------------------------------  ------------------  ----------  ----------  --------- 
 HELD BY THE COMPANY 
                                                          Holding 
 Hirco Holdings Limited                     Mauritius     Company        100%   Ordinary 
---------------------------------  ------------------  ----------  ----------  --------- 
 
   HELD BY HIRCO HOLDINGS LIMITED 
                                               United 
                                               States     Holding 
 Hirco Inc                                 of America     Company        100%   Ordinary 
 Hirco Real Estate Services                               Holding 
  Pvt. Ltd.                                     India     Company        100%   Ordinary 
                                                          Holding 
 Development Holdings Co. Limited           Mauritius     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 GBP352,000,000 (2011: GBP352,000,000), which is repayable on demand and is interest-bearing at 12 per cent per annum and a loan amount of GBP5,996,615 (2011: GBP5,996,615), 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 
                    GBP000   GBP000 
-----------------  -------  ------- 
 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 GBP220m. 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

END

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