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 2014.
PRINCIPAL ACTIVITIES, ANALYSIS OF OPERATIONS AND FINANCIAL SUMMARY
The principal activity of the Company is investment holding. The Company’s principal subsidiaries (set out in Note 38 to the financial statements) are engaged in the ownership and international operation of modern Handysize and Handymax 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. 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. Taking into consideration the Group’s performance, operating cash flow and current financial position, the Directors have recommended the payment of a final dividend of HK 5 cents per share for the year ended 31 December 2014. No interim dividend was declared.
The proposed final dividend for 2014 of HK 5 cents per share will be considered at the Annual General Meeting scheduled for 22 April 2015.
RESERVES AND DISTRIBUTABLE RESERVES
Distributable reserves of the Company at 31 December 2014, calculated in accordance with the Companies Act 1981 of Bermuda, amounted to US$651.2 million.
Movements in the reserves of the Group and of the Company are set out in Note 25 to the financial statements.
Charitable and other donations made by the Group during the year amounted to US$41,000.
PROPERTY, PLANT AND EQUIPMENT
Movements in the property, plant and equipment of the Group are set out in Note 6 to the financial statements.
SHARE CAPITAL AND PRE-EMPTIVE RIGHTSMovements in the share capital of the Company are set out in Note 24 to the financial statements. There is no provision for pre-emptive rights under the Company’s Bye-laws 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 23 to the financial statements.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
Following the exercise of the put option right by bondholders of the Group’s convertible bonds due 2016, redemption and cancellation of the bonds (having an aggregate full principal amount of US$20,400,000 together with accrued but unpaid interest thereon) was completed on 14 April 2014. The remaining outstanding aggregate principal amount of the bonds was reduced to US$209,600,000, representing 91.13% of the total principal amount of the bonds originally issued.
Save as disclosed above and other than for satisfying restricted awards granted under the Company’s 2013 Share Award Scheme and the Long Term Incentive Scheme as disclosed below, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the share capital or convertible bonds of the Group during the year.
2013 SHARE AWARD SCHEME (“SAS”) AND 2004 LONG TERM INCENTIVE SCHEME (“LTIS”)
The LTIS adopted in 2004 expired on 14 July 2014 and was replaced by the SAS adopted by the Board on 28 February 2013, which is a single share award scheme under which no share options can be granted. The remaining 400,000 share options granted under the LTIS were exercised by the grantee in June 2014 and all other unvested awards granted under the LTIS shall remain valid until they fully vest in July 2015 or lapse in accordance with the rules of the LTIS.
Purpose and Eligible Participants of the SAS
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. The SAS incentivises performance of participants by linking part of their remuneration to the achievement of the Group. The value offered is related to job position and contribution to the management of the business. 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 administer the scheme at their sole discretion 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 193,697,711 shares as at 1 January 2015). There were 23,357,000 unvested restricted awards under the SAS and LTIS which represents 1.21% of the issued share capital of the Company as at 26 February 2015.
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.
Life of the Schemes
The SAS has an effective term of 10 years from 28 February 2013 which replaces the LTIS expired in July 2014.
Details of the grant of long-term incentives and the movements of the outstanding incentives during the year ended 31 December 2014 under both the SAS and the LTIS on a combined basis are as follows:
(i) History and Movement of Restricted Awards Granted
|'000 shares/units||Date of first award||Total awarded||Vested to date||At 31 Dec 2014||At
|David M. Turnbull||5-Aug-08||2,407||(1,315)||1,092||1,097||347||(352)||300||445||347|
|Mats H. Berglund||1-Jun-12||4,198||(1,752)||2,446||2,607||715||(876)||876||855||715|
|Andrew T. Broomhead||11-May-07||3,307||(1,540)||1,767||1,691||453||(377)||764||550||453|
|Jan Rindbo (resigned)1||11-May-07||4,778||(2,615)||-||2,109||557||(2,666)||-||-||-|
(1) Mr. Rindbo resigned as an Executive Director and Chief Operating Officer with effect from 7 November 2014 and the restricted awards of 2,163,000
shares lapsed upon his resignation.
(2) 833,000 shares vested due to termination of employment of seven employees and 423,000 shares vested due to the retirement of three employees.
1,682,000 shares lapsed following resignation of three employees.
The closing price of the shares of the Company immediately before the grant of 7,273,000 restricted awards on 5 May 2014 was HK$4.45 and before the grant of 867,000 restricted awards on 13 August 2014 was HK$4.69.
(ii) Share Options and Share Valuation under the LTIS
Share options were granted on 14 July 2004 under the LTIS at an exercise price of HK$2.50 per share. The remaining 400,000 fully vested share options of Other Employees were exercised in June 2014.
Save as disclosed above, no right to subscribe for the securities of the Company or its associated corporations within the meaning of the Securities and Futures Ordinance (the ‘’SFO”), has been granted by the Company to, nor have any rights been exercised by, any person during the year.
The Directors who held office up to the date of this Annual Report are set out below:
|Date of appointment to:|
|David M. Turnbull||17 May 2006||-||-||-||1 July 2008||3 years until|
|Mats H. Berglund||1 June 2012||-||-||-||1 June 2012||3 years until|
|Andrew T. Broomhead||1 September 2010||-||-||-||1 January 2010||3 years until|
|Chanakya Kocherla||25 June 2012||-||-||-||25 June 2012||3 years until|
|Jan Rindbo (resigned)||1 April 2007||-||-||-||23 January 2008||Resigned on|
|Independent Non-executive Directors|
|Patrick B. Paul||25 March 2004||18 May 2004||10 June 2004||30 November 2004||-||3 years until|
|Robert C. Nicholson||25 March 2004||18 May 2004||10 June 2004||30 November 2004||-||3 years until|
|Alasdair G. Morrison||1 January 2008||1 January 2008||1 January 2008||1 January 2008||-||3 years until|
|Daniel R. Bradshaw||7 April 2006||7 April 2006||7 April 2006||7 April 2006||-||3 years until|
|Irene Waage Basili||1 May 2014||1 May 2014||1 May 2014||1 May 2014||-||3 years until|
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.
Mrs. Irene Waage Basili, an Independent Non-executive Director of the Company appointed by the Board during the year, shall retire at the 2015 Annual General Meeting in accordance with the Company’s Bye-law 86(2). In addition, Messrs. Mats H. Berglund, Chanakya Kocherla, Patrick B. Paul and Alasdair G. Morrison shall retire at the 2015 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 2015 AGM has a service contract with the Company which is not determinable within one year without payment of compensation, other than statutory compensation.
DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE
No contracts of significance in relation to the Group’s business to which the Company 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.
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 2014, the discloseable 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
|31 Dec 2014||31 Dec 2013|
|David M. Turnbull 1||1,906,000||3,662,682 2||Long||-||5,568,682||0.29%||0.27%|
|Mats H. Berglund 1||4,198,000||-||Long||-||4,198,000||0.22%||0.20%|
|Andrew T. Broomhead 1||2,448,000||2,328,068 3||Long||-||4,776,068||0.25%||0.22%|
|Chanakya Kocherla 1||2,721,667||-||Long||-||2,721,667||0.14%||0.12%|
|Patrick B. Paul||120,000||-||Long||-||120,000||less than 0.01%||less than 0.01%|
|Daniel R. Bradshaw||-||386,417 4||Long||-||386,417||0.02%||0.02%|
(1) Restricted awards granted under the 2013 Share Award Scheme and the Long Term Incentive Scheme have been disclosed on page 61 of this Report.
(2) 3,662,682 shares are in the form of convertible bonds due 2016 at nominal value of US$3,350,000 and are held by a Trust named Bentley Trust (Malta) Limited, of which Mr. Turnbull is the founder.
(3) 2,328,068 shares are held via Paulatim Investments Limited which is jointly owned by Mr. Broomhead and his wife, of which 1,312,005 shares are in the form of convertible bonds due 2016 at nominal value of US$1,200,000 and 320,359 shares are in the form of convertible bonds due 2018 at nominal value of US$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 Limited.
All the interests stated above represent long positions. No short positions were recorded in the register maintained by the Company under section 352 of the SFO as at 31 December 2014.
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 2014, 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.
nature of interest
of the issued share
capital of the Company
31 Dec 2014 31 Dec 2013
|Aberdeen Asset Management Plc |
and its Associates (together the "Group")
on behalf of accounts managed by the Group
|Michael Hagn||Interest in corporation|
|Mondrian Investment Partners|
Save as disclosed above, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, as at 31 December 2014, 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 Company 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 transaction that was subject to the Listing Rules’ reporting requirements for disclosure in this Annual Report.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
Throughout the year, the Company 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 2015 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, 26 February 2015