Report of the Directors
The Directors have pleasure in submitting their report together with the audited financial statements of the Company and its subsidiaries (collectively the “Group”) for the year ended 31 December 2015.
PRINCIPAL ACTIVITIES, ANALYSIS OF OPERATIONS, BUSINESS REVIEW AND FINANCIAL SUMMARY
The principal activity of the Company is investment holding. The Company’s principal subsidiaries (set out in Note 35 to the financial statements) are engaged in the ownership and international operation of modern Handysize and Supramax dry bulk ships. In addition, the Group is engaged in the management and investment of the Group’s cash and deposits through its treasury activities.
The business review of the Group for the year ended 31 December 2015 is set out on Business Review Section of this Annual Report. A summary of the results and of the assets and liabilities of the Group for the last five financial years is set out in the “Group Financial Summary” section of this Annual Report.
RESULTS AND APPROPRIATIONS
The results of the Group for the year are set out in the consolidated income statement in Financial Statement Section. In view of the extraordinarily weak dry bulk market and taking into consideration the Group’s performance, operating cash flow and current financial position, the Board recommends not to pay out a dividend for the year ended 31 December 2015.
Distributable reserves of the Company at 31 December 2015, calculated in accordance with the Companies Act 1981 of Bermuda, amounted to US$635.9 million.
Charitable and other donations made by the Group during the year amounted to US$5,000.
SHARE CAPITAL AND PRE-EMPTIVE RIGHTS
Movements in the share capital of the Company are set out in Note 21 to the financial statements. During the year 9,846,000 shares were issued to fulfill the restricted share awards under the 2013 Share Award Scheme. There is no provision for pre-emptive rights under the Company’s Byelaws and there is no restriction against such rights under Bermuda Law.
Details of the convertible bonds issued by the Group are set out in Note 20 to the financial statements. This includes the issue of the new US$125 million 3.25% p.a. coupon guaranteed convertible bonds due 2021 to extend the Group’s debt maturities.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
The Group bought back a total of 10,401 units of the Group’s US$230,000,000 1.75% p.a. coupon guaranteed convertible bonds due 2016 (the “2016 CB”) at face value of US$10,000 each during the year at an average price of US$9,883.82 per unit. The purchase involved a total cash outlay of US$102,801,600 excluding accrued interest of US$455,750 and was made to save related coupon payments on the convertible bonds in the period before maturity. The buyback and the subsequent cancellation of the convertible bonds resulted in a reduction of long-term liabilities and a loss in the income statement. The remaining outstanding principal amount of the 2016 CB was reduced to US$105,590,000, representing 46% of the principal amount of the 2016 CB originally issued.
Save as disclosed above and other than for satisfying restricted share awards granted under the Company’s 2013 Share Award Scheme, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the share capital or convertible bonds of the Company during the year.
2013 SHARE AWARD SCHEME (“SAS”)
The current SAS was adopted by the Board on 28 February 2013 and has an effective term of 10 years. It is a single share award scheme under which no share options can be granted.
The SAS enables the Company to grant share awards or unit awards (“Awards”) to eligible participants, being principally executive Directors and employees, as an incentive and recognition for their contribution to the Group.
Since the adoption of the SAS, the Board has not granted, and currently has no intention to grant, any Awards to Independent Non-executive Directors as they have the responsibility to administer the scheme in accordance with the rules of the SAS.
Maximum Number of Shares
The total number of shares which may be or have been issued by the Company or transferred to the trustee of the SAS in satisfaction of the Awards granted under the SAS must not, in aggregate, exceed 10% of the issued share capital of the Company as at the first date of each financial year during the term of the SAS (equivalent to 1,946,823,119 shares as at 1 January 2016). There were 26,409,000 unvested restricted awards under the SAS which represents 1.4% of the issued share capital of the Company as at 29 February 2016.
Vesting of Awards
Awards typically vest annually over a three year period. New Awards for existing awardees are considered each year by the Remuneration Committee to maintain the incentive period, in which case they vest at the end of the third year.
Limit for Each Eligible Participant
The maximum number of shares which may be subject to an Award or Awards at any one time shall not in aggregate exceed (i) 1% of the issued share capital of the Company as at the first date of the relevant financial year of the Company for any specific eligible participant; and (ii) 0.1% of the issued share capital of the Company as at the first date of the relevant financial year of the Company for any Independent Non-executive Director.
New Shares to be issued
Apart from the Awards which are to be purchased from the market for the connected persons of the Company, the number of shares to satisfy Awards granted (if comprising of new shares) could be allotted and issued by the Board by utilising the general mandate granted to them by shareholders. The Company will apply to the Stock Exchange for permission to list and to deal in those new shares to be issued as soon as practicable after any grant of Awards.
Procedure of Granting Restricted Awards
The Board entered into a trust deed to appoint a trustee to administer Awards under the SAS and to constitute a trust to hold property transferred by the Company to the trustee (which shall include cash or shares) in order to satisfy grants of Awards. At the direction of the Board, the trustee shall either subscribe for new shares at the relevant benchmarked price as stipulated in the Listing Rules from the Company or acquire existing shares in the market in accordance with the rules of the SAS. The Remuneration Committee administers and oversees the SAS. Their review and approval is required prior to the granting of Awards to any staff members of the Group.
Details of the grant of long-term incentives and the movements of the outstanding incentives during the year ended 31 December 2015 under the SAS are as follows:
History and Movement of Restricted Awards Granted
|Vesting in July of|
|'000 shares/units||Date of|
|At 1 Jan 2015||Granted during the year||Vested1 |
|David M. Turnbull|
Mats H. Berglund
Andrew T. Broomhead
|(300) (876) (764) (428)||445|
|Notes: (1) 8,903,000 shares vested on 14 July 2015 in accordance with the Award vesting schedule. 1,869,000 shares vested following termination of employment contracts of eight employees and 410,000 shares lapsed following resignation of two employees during the year.|
The Directors who held office up to the date of this Annual Report are set out below:
|Date of appointment to:|
|Board||Audit Committee||Remuneration Committee||Nomination Committee||Executive Committee||Terms of appointment|
|David M. Turnbull||17 May 2006||-||-||-||1 July 2008||3 years until 2017 AGM|
|Mats H. Berglund||1 June 2012||-||-||-||1 June 2012||3 years until 2018 AGM|
|Andrew T. Broomhead||1 September 2010||-||-||-||1 January 2010||3 years until 2016 AGM|
|Chanakya Kocherla||25 June 2012||-||-||-||25 June 2012||3years until 2018 AGM|
|Independent Non-executive Directors|
|Patrick B. Paul||25 March 2004||18 May 2004||10 June 2004||30 November 2004||-||3 years until 2018 AGM|
|Robert C. Nicholson||25 March 2004||18 May 2004||10 June 2004||30 November 2004||-||3 years until 2016 AGM|
|Alasdair G. Morrison||1 January 2008||1 January 2008||1 January 2008||1 January 2008||-||3 years until 2018 AGM|
|Daniel R. Bradshaw||7 April 2006||7 April 2006||7 April 2006||7 April 2006||-||3 years until 2017 AGM|
|Irene Waage Basili||1 May 2014||1 May 2014||1 May 2014||1 May 2014||-||3 years until 2018 AGM|
Pursuant to the Company's Bye-law 87(1), at each annual general meeting one-third of the Directors for the time shall retire from office by rotation, provided that
every Director shall be subject to retirement at least once every three years.
Messrs. Andrew T. Broomhead, Robert C. Nicholson and Daniel R. Bradshaw shall retire at the 2016 AGM by rotation pursuant to the Company’s Bye-laws 87(1) & (2). All retiring Directors, being eligible, offer themselves for re-election.
DIRECTORS’ SERVICE CONTRACTS
None of the Directors who are proposed for re-election at the forthcoming 2016 AGM has a service contract with the Company which is not determinable within one year without payment of compensation, other than statutory compensation.
DIRECTORS’ MATERIAL INTERESTS IN TRANSACTION, ARRANGEMENT AND CONTRACTS
No transactions, arrangements and contracts of significance in relation to the Group’s business to which the Company or its subsidiaries was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.
Pursuant to the Company’s Bye-laws, every Director shall be entitled to be indemnified out of the assets and profits of the Company against all losses or liabilities (to the fullest extent permitted by the Companies Ordinance (Cap. 622)) which he/she may sustain or incur in or about the execution of the duties of his/her office. The Company has arranged appropriate directors’ and officers’ liability insurance coverage for the Directors and officers of the Group.
BIOGRAPHICAL DETAILS OF DIRECTORS
Brief biographical details of Directors are set out in the “Our Directors” section of this Annual Report.
DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATION
At 31 December 2015, the disclosable interests and short positions of each Director and the Chief Executive in shares, underlying shares and debentures of the Company and its associated corporations within the meaning of Part XV of the SFO, which: (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or (b) were required to be entered in the register maintained by the Company under Section 352 of the SFO, or (c) were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:
|Name of Director||Personal|
of the issued share
capital of the Company
|David M. Turnbull 1||2,527,000||3,730,996 2||Long||6,257,996||0.32%||0.29%|
|Mats H. Berglund 1||5,613,000||-||Long||5,613,000||0.29%||0.22%|
|Andrew T. Broomhead 1||2,959,000||1,732,180 3||Long|
|Chanakya Kocherla 1||3,489,667||-||3,489,667||0.18%||0.14%|
|Patrick B. Paul||150,000||-||Long||150,000||less than 0.01%||less than 0.01%|
|Daniel R. Bradshaw||-||386,417 4||Long||386,417||0.02%||0.02%|
(1) Restricted share awards were granted under the 2013 Share Award Scheme and have been disclosed on page 52 of this Report.
(2) 3,730,996 shares are in the form of convertible bonds due 2016 at nominal value of US$3,350,000, held by a Trust named Bentley Trust (Malta) Limited, of
which Mr. Turnbull is the founder.
(3) 1,732,180 shares are held via Paulatim Investments Limited which is jointly owned by Mr. Broomhead and his wife, of which 1,336,476 shares are in the form
of convertible bonds due 2016 at nominal value of US$1,200,000.
(4) Mr. Bradshaw is a shareholder holding 100% and 50% of the issued share capital, respectively, of Cormorant Shipping Limited and Goldeneye Shipping
Limited. He beneficially owns 353,241 shares via Cormorant Shipping Limited and is taken to be interested in the 33,176 shares held by Goldeneye Shipping
All the interests stated above represent long positions. No short positions and shares under equity derivatives held by Directors were recorded in the register maintained by the Company under section 352 of the SFO as at 31 December 2015.
Save as disclosed, at no time during the year was the Company, its subsidiaries, or its associated companies a party to any arrangement to enable the Directors and Chief Executive of the Company to hold any interests or short positions in the shares or underlying shares in, or debentures of, the Company or its associated corporations.
SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY
The register of substantial shareholders maintained under Section 336 of the SFO shows that as at 31 December 2015, the Company had been notified of the following substantial shareholders’ interests and short positions, being 5% or more of the Company’s issued share capital.
|Name||Capacity/ Nature of interest||Long/ Short Position||Number|
of the issued share
capital of the Company
|Aberdeen Asset Management Plc |
and its Associates (together the
"Group") on behalf of accounts
|Michael Hagn||Interest in corporation |
|Wellington Management Group LLP||Interest in corporation |
|Royal Bank of Canada 1||Beneficial owner/Interest |
in corporation controlled
|UBS Group AS 2||Person having a security |
interest in shares/
Interest in corporation
(1) The long position in shares held by Royal Bank of Canada is held in the capacities of Beneficial owner (relating to 9,792,884 shares) and Interest in
corporation controlled (relating to 105,129,257 shares).
(2) The long position in shares held by UBS Group AS is held in the capacities of Person having a security interest (relating to 31,756,406 shares) and Interest
in corporation controlled (relating to 67,807,739 shares).
Save as disclosed above, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, as at 31 December 2015, no other person (other than a Director or Chief Executive of the Company) had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or recorded in the register required to be kept by the Company under section 336 of the SFO.
No contracts concerning the management and administration of the whole or any substantial part of the business of the Group were entered into or existed during the year.
MAJOR CUSTOMERS AND SUPPLIERS
During the year, the Group sold less than 30% of its goods and services to its five largest customers and purchased less than 30% of its goods and services from its five largest suppliers.
During the year, the Group had no connected transactions that were subject to the Listing Rules’ reporting requirements for disclosure in this Annual Report.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
Throughout the year, the Group has been fully compliant with all code provisions of the Corporate Governance Code as contained in Appendix 14 of the Listing Rules. Please also refer to the Corporate Governance Report of this Annual Report.
AUDIT AND REMUNERATION COMMITTEES
Details of the audit and remuneration committees are set out in the Corporate Governance Report of this Annual Report.
The financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment at the forthcoming 2016 AGM.
On the basis of information that is publicly available to the Company and within the knowledge of the Directors as at the date of this Annual Report, the Company has complied with the Listing Rules requirement to have at least 25% of the Company’s total issued share capital held by the public.
By Order of the Board
Mok Kit Ting, Kitty
Hong Kong, 29 February 2016