by: Ch. Muhammad Natiq
Shaukat Khanum Memorial Hospital bought a Sand dune in Oman using a sham company as a vehicle for $28 million. Part of the sand dune flew away reducing that investment to $10 million. The following year the rest of the sand dune flew away reducing that investment to zero. This is as per the audited annual report of Shuakat Khanum. The amount thus swindled comes to about Rs. 700 crores at the current rate of exchange. This is based on an undeniable audited annual report of the hospital.
Imran must be laughing all the way to the bank at the poor idiots who contributed to this sham. Here is an extract from SKMH Annual Report for 2010
This represents investment in 3,000,000 class B ordinary shares of USD 1 each of Cinnabar International Services Limited (CISL), a company incorporated in British Virgin Islands (BVI). The Trust owns the entire class B ordinary share capital of the company, which do not carry any voting rights in the company.
Consequently, the Trust does not have significant influence over the company due to which the company is not considered an associate of the Trust. This investment has been made through an investment company, HBG Management Partners Limited, based in Dubai, United Arab Emirates. Further, CISL is a subsidiary of HBG Investment Holdings Limited (HBG).
CISL owns 3,000 shares as at December 31, 2010 in Sugarland Real Estate (BVI) Limited, a special purpose entity incorporated by HBG to undertake the development of a real estate project in Oman. Sugarland Real Estate (BVI) Limited is also a subsidiary of HBG. The land purchased and development costs for the project are currently appearing in the financial statements of Sugarland Real Estate (BVI) Limited at an aggregate cost of USD 28.323 million reduced by an impairment loss of USD 18.256 million, thereby resulting in a carrying amount of USD 10.067 million as at December 31, 2010.
The land represents capital contribution in kind by one of HBG Groups shareholders, Sheikh Salim Al Mashani (the shareholder). HBGs management have assessed the realizable value of the plot of land at December 31, 2010 by obtaining market valuation from an independent valuer and noted a decline in the value of the plot of land by USD 18.256 million, which is to be adjusted through reduction of capital contributed by the shareholder by virtue of an agreement with him.
In accordance with the agreement with the shareholder dated December 15, 2010, the shareholder agreed for a reduction in his capital contribution commensurate with the reduction in the value of land which shall mutually be agreed between HBG and the shareholder. HBGs management is currently into advanced stages of negotiations with the shareholder to agree a final revised value of the plot of land, after which a resolution shall be passed at an extra-ordinary general meeting of the shareholders to effect the capital reduction. Based on the above, the carrying value of the plot of land has been adjusted based on the independent valuation obtained as of December 31, 2010 against proposed reduction in the capital by an equivalent amount in the financial statements of Sugarland Real Estate (BVI) Limited for the year ended December 31, 2010.
In line with the requirements of IAS 39 Financial Instruments: Recognition and Measurement, the Trusts management has assessed whether there is an indication that the Trusts investment is impaired as at December 31, 2010.
Under the above circumstances, the Trusts management feels that there is no indication that the investment is impaired since the impairment loss on the above mentioned land would be borne by the shareholder. However, based on the decline in the project lands value, the Trusts management performed a further evaluation by reviewing the recoverable amount of the asset (the project) by reference to the present value of expected future cash flows.
The estimation of revenues on unsold properties depends on demand and market conditions. Based on these, the Trusts management is of the opinion that the net realizable value of the project upon completion of development will be higher than its carrying amount as at December 31, 2010. Consequently, no provision for impairment has been recognized in these financial statements as at December 31, 2010.
