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 2017.
The principal activity of the Company is investment holding. The Company’s principal subsidiaries (set out in Note 31 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 2017 is set out in Business Review. 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. A brief introduction of the Group’s Corporate Social Responsibility (“CSR”) efforts for the year ended 31 December 2017 is set out in the “CSR Highlights” section of this Annual Report and a comprehensive 2017 CSR Report is available on our website.
The results of the Group for the year are set out in the consolidated income statement. In view of the Group’s small profit for the year ended 31 December 2017, the Board recommends not to pay out a dividend.
Distributable reserves of the Company at 31 December 2017, calculated in accordance with the Companies Act 1981 of Bermuda, amounted to US$635.9 million.
Charitable and other donations and sponsorships made by the Group during the year amounted to US$58,000.
Movements in the share capital of the Company are set out in Note 18 to the financial statements.
During the reporting year, a total of 426,957,827 ordinary shares were issued including 23,115,000 shares issued on 17 March 2017 to fulfil the Company’s 2017 restricted awards under the 2013 Share Award Scheme. The balance comprises shares issued to placees and four ship sellers as partial funding and consideration for the acquisition of five vessels agreed in August. The placees were issued 186,939,553 shares on 10 August 2017 pursuant to a placing agreement which raised cash of US$37.6 million. The four ship sellers were issued an aggregate of 216,903,274 shares during the period from August to November 2017 upon delivery of the vessels into Pacific Basin’s ownership.
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 17(c) to the financial statements.
Other than for satisfying restricted awards granted under the Company’s 2013 Share Award Scheme, neither the Company nor any of its subsidiaries has during the year purchased, sold or redeemed any of the share capital or convertible bonds of the Company.
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.
The total number of shares which may be or already 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 444,227,110 shares as at 1 January 2018). There were 71,558,000 unvested restricted awards under the SAS which represents 1.61% of the issued share capital of the Company as at 28 February 2018.
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.
The maximum number of shares which may be subject to an Award or Awards at any one time shall not in aggregate exceed 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.
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 grant of Awards (if comprising new shares) can 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.
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 history and movements of the outstanding incentives during the year ended 31 December 2017 under the SAS are as follows:
|'000 shares/units||Date of|
David M. Turnbull
|Mats H. Berglund||1-Jun-12||15,623||(5,768)||9,855||7,662||3,623||(1,430)||2,830||3,402||3,623|
|Andrew T. Broomhead 1||11-May-07||7,881||(4,310)||-||4,477||-||(4,477)||-||-||-|
|Chanakya Kocherla 2||11-May-07||6,324||(2,276)||-||4,048||-||(4,048)||-||-||-|
|(1) 906,000 shares were vested to Mr. Broomhead on 14 July 2017 according to the annual vesting schedule, and the balance of 3,571,000|
shares lapsed when he stepped down on 20 August 2017.
|(2) 4,048,000 unvested restricted share awards lapsed upon Mr. Kocherla's resignation on 12 April 2017.|
|(3) The closing price of the shares of the Company immediately before the grant of: 30,443,000 restricted awards on 17 March 2017 was |
HK$1.80; 836,000 restricted awards on 26 May 2017 was HK$1.56; and 3,443,000 restricted awards on 21 August 2017 was HK$1.85.
|(4) A total of 12,948,000 shares vested during the year in accordance with the award vesting schedule. In addition, 4,099,000 shares vested |
due to the retirement and redundancy of four employees and 3,306,000 shares lapsed due to the resignation of three employees.
The Directors who held office up to the date of this Annual Report are set out below:
|Terms of |
|David M. Turnbull, Chairman||17 May 2006||-||-||-||1 July 2008||3 years until 2020 AGM|
|Mats H. Berglund||1 June 2012||-||-||-||C 1 June 2012||3 years until 2018 AGM|
|Independent Non-executive Directors|
|Patrick B. Paul||25 March 2004||C 18 May 2004||10 June 2004||30 November 2004||-||3 years until 2018 AGM|
|Robert C. Nicholson||25 March 2004||18 May 2004||C 10 June 2004||C 30 November 2004||-||3 years until 2019 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 2019 AGM|
|Irene Waage Basili||1 May 2014||1 May 2014||1 May 2014||1 May 2014||-||3 years until 2020 AGM|
|Stanley H. Ryan||5 July 2016||5 July 2016||5 July 2016||5 July 2016||-||3 years until 2019 AGM|
Pursuant to the Company’s Bye-law 87(1), at each annual general meeting one-third of the Directors for the time being shall retire from
office by rotation, provided that every Director shall be subject to retirement at least once every three years.
C represents Chairman of the Board Committee
Messrs. Mats H. Berglund, Patrick B. Paul and Alasdair G. Morrison shall retire at the 2018 AGM by rotation pursuant to the Company’s Bye-laws 87(1) & (2). All retiring Directors, being eligible, offer themselves for re-election.
None of the Directors who are proposed for re-election at the forthcoming 2018 AGM has a service contract with the Company which is not determinable within one year without payment of compensation, other than statutory compensation.
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.
Brief biographical details of Directors are set out in the “Our Directors and Senior Management” section of this Annual Report.
At 31 December 2017, 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 |
Trust & similar
holding of issued
|31 Dec 17||31 Dec 16|
|David M. Turnbull 1||8,137,000||2,524,918 3||Long||10,661,918||0.24%||0.23%|
|Mats H. Berglund 1||15,623,000||-||Long||15,623,000||0.35%||0.30%|
|Patrick B. Paul||380,000||-||Long||380,000||less than 0.01%||less than 0.01%|
|Daniel R. Bradshaw||-||772,834 4||Long||772,834||0.02%||0.02%|
|(1) Restricted share awards were granted under the 2013 Share Award Scheme and have been disclosed on page 46 of this Report.|
|(2) The total issued share capital of the Company was 4,442,271,102 shares as at 31 December 2017 and was 4,015,313,275 shares as at 31 December 2016.|
|(3) 2,524,918 shares held are in the form of convertible bonds due 2021 at nominal value of US$1 million held by a Trust named Bentley Trust (Malta) Limited.|
|(4) 772,834 shares are held by Cormorant Shipping Limited and Goldeneye Shipping Limited of which Mr. Bradshaw is the sole |
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 2017.
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.
The register of substantial shareholders maintained under Section 336 of the SFO shows that as at 31 December 2017, 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
|Number of |
|Approximate percentage of |
the issued share capital
of the Company1
|31 Dec 17||31 Dec 16|
|Aggregate of Standard Life|
Aberdeen plc affiliated
investment management 2
|Citigroup Inc.3||Person having a |
in corporation controlled/
Custodian corporation &
approved lending agent
|(1) The total issued share capital of the Company was 4,442,271,102 shares as at 31 December 2017 and was 4,015,313,275 shares as at |
31 December 2016.
|(2) Standard Life Aberdeen plc was formed in August 2017 as a result of the merger of Standard Life plc and Aberdeen Asset Management |
plc, the latter held 15.77% of the total issued share capital of the Company as at 31 December 2016.
|(3) The long position in shares held by Citigroup Inc. is held in the capacities of Person having a security interest (relating to 6,059,075 |
shares), Interest in corporation controlled (relating to 7,128,150 shares) and Approved lending agent (relating to 260,394,183 shares).
Save as disclosed above, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, as at 31 December 2017, 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.
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.
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.
Details of the audit, remuneration, nomination, executive and risk management 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 2018 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, 28 February 2018