Final Results - Replacement

Ocean Wilsons Holdings Ld 06 March 2007 Replacement to the earlier announcement Number 3892S timed at 08.43 on 6 March 2007 Changes are to Note 4 of the Preliminary Accounts Registration date now 10 April 2007 and AGM date now 19 April 2007 Ocean Wilsons Holdings Limited Preliminary Announcement Chairman's Statement Introduction I am pleased to report that your Company produced another excellent result in 2006. The Group's core businesses performed well with significant growth in the port operations and logistic businesses. For the first time, the port operations division exceeded towage as the Group's largest division. There was a welcome recovery in the Group's margins following several years of decline. The Group continues to invest in its existing businesses as well as to explore new opportunities. Results Turnover for the year increased by 17% to US$334.1 million (2005: US$285.2 million). Operating profit for the year increased by 83% to US$61.4 million (2005: US$33.5 million) reflecting the higher turnover, improved operating margins, a profit on the disposal of our interest in the joint venture WR Operacoes Portuarias Ltda. and the release of surplus on the acquisition of our subsidiary Brasco Logistica Offshore Ltda. Improved returns on the investment portfolio US$11.4 million (2005: US$7.8 million) compensated for a decrease in investment income US$11.2 million (2005: US$14.2 million). Profit before tax was US$28.1 million higher at US$77.6 million (2005: US$49.5 million). Earnings per share were 158.6 cents (2005: 93.6 cents). Brazil Although the Brazilian economic growth was slightly higher in 2006 (2.9%) than in 2005 (2.3%), the Brazilian Government, with a conservative economic policy, has maintained a favourable environment for business activities. The macroeconomic figures show stability in the economy, and an expectation of less volatility in the future. The trade surplus reached US$ 46.1 billion in 2006, as a result of an increase of 19% in the total foreign trade movement, from US$ 192 billion in 2005 to US$ 229 billion in 2006. The higher growth in imports (24%) when compared to exports (16%) is an indication of investments in industry, showing positive expectations from the business community and a stronger exchange rate. For the third year in a row, the Real has appreciated against the USD. The increase in net foreign exchange reserves (from US$ 53 billion in 2005 to US$ 86 billion in 2006), the continuation of a low inflation rate (the consumer price index fell from 5.7% in 2005 to 3.1% in 2006), combined with a high real interest rate resulted again in a stronger currency. Although the Central Bank basic rate dropped from 19.2% in December 2005 to 12.5% in December 2006, it is still one of the highest real interest rates in the world. The Government's objective to pursue a low inflation rate, together with its intent to keep reducing the real interest rate, means that the exchange rate will continue to reflect the fundamental strength of the Real. Along the same lines, the Brazilian sovereign risk premium (as measured by the JP Morgan Emerging Markets Board Index - EMBI) fell during the year, from more than 400 basis points at the end of 2005 to less than 200 basis points in 2006, its lowest level ever. The Government has recently announced an infrastructure investment plan, called 'PAC', to be funded by the public and private sectors, to support future logistic growth and reduce the Brazilian infrastructure bottleneck. However, the implementation of the plan will depend on important pending structural reforms, in areas such as social security, labour legislation and taxation. Exchange rates In 2006, the Brazilian Real (Real) appreciated 8.6% against the US Dollar, from R$2.34 at 1 January 2006 to R$2.14 at year end. The appreciation of the Brazilian Real against the US Dollar generated a net exchange gain of US$4.4 million (2005: US$5.4 million) in the Group's Real denominated cash balances. Dividends The Board is recommending the payment of a final dividend of 20 cents per share (2005:18 cents per share), to be paid on 4 May 2007, to shareholders on the register at the close of business on 10 April 2007, making a total dividend for the year of 22 cents per share (2005: 20 cents per share). The increase reflects the excellent performance of the Group during the year and the Board's confidence in the future prospects of your Company. The Group's dividends are set in US Dollars. Shareholders, receive dividends in Sterling by reference to the exchange rate applicable to the US Dollar on the dividend record date, except for those shareholders that elect to receive dividends in US Dollars. Shareholders electing to receive a dividend in US Dollars should write to the Company's UK transfer agent, Capita Registrars at the address set out at the end of this announcement, before the next dividend record date, 4 April 2007. The Board's dividend policy takes into consideration all aspects of the Group's financial performance and prospects, but especially profitability and free cash flow. Shareholders should also be aware that the future value of dividend payments in Sterling terms will depend on the prevailing Sterling/US Dollar exchange rate at the relevant dividend record date. Corporate social responsibility The Board has adopted the fundamental principles of corporate social responsibility. We are committed to understanding the needs and interests of all stakeholders with whom we are involved and are concerned for the community and environment. We are always working to improve our social and environmental performance, with the objective of ensuring that our activities contribute to the sustainable development of the communities in which we operate. Taxes In 2006 the Group paid in excess of US$70.0 million (2005: US$60.0 million) in Brazilian income, payroll and sales taxes. Local employment At the end of 2006, the Group directly employed more than 3,600 people in Brazil and created numerous employment opportunities through its suppliers and sub-contractors. We continue to have an active and constructive relationship with the local and national trade unions in Brazil that represent our employees, and negotiate wage agreements on their behalf. Best employment practice As part of our commitment to best employment practice, all employees and their dependents receive private medical cover at a cost of US$5.2 million (2005: US$4.1 million) to the Group. In addition, the Group provided US$3.1 million (2005: US$2.2 million) of food assistance, and spent a further US$568,000 (2005: US$400,000) on education and professional development for employees. The Group will continue to invest in its management and employees. Charitable donations In line with our policy to support local charities the Group made charitable donations of US$130,000 (2005: US$163,000) during the year. The primary focus of the Group's charitable efforts continues to be projects helping homeless children and adolescents. The Group continued its support of Escola de Gente, Casa Jimmy and Pastoral do Menor in Rio, Fundo da Infancia e Adolescencia in Rio Grande and Casa da Crianca in Salvador. In addition to financial support, the Group encourages employees to participate in social initiatives of this nature. Strategy On 12 February 2007 the Board of Ocean Wilsons Holdings Limited made the following announcement: ' The board of Ocean Wilsons Holdings Limited notes the recent rumors in the market, and confirms that the Board is actively considering a partial IPO of its Brazilian operations. If a decision is taken to proceed, further information will be made available in due course.' In the event that the Board does decide to proceed with the IPO, the Group's shareholders will receive a document with full details of the proposal and the reasons and background to it. Long term incentive plan The Board is currently finalising a new long term incentive plan to reward senior management with compensation linked to the performance of the Ocean Wilsons Holdings Limited share price. Outlook The Group remains in a very good position to take advantage of the positive Brazilian economic environment. We expect to continue to grow and invest in our core businesses, primarily in Port Terminals and Offshore (Platform Supply Vessels - PSVs). Our investments in 2007 will be concentrated in Tecon Rio Grande and PSV's. We expect to conclude the expansion of Tecon Rio Grande by the end of 2007 and deliver a new PSV in April 2007. We have already started to build two other PSV's, out of the four new vessels that we will build to satisfy the terms of the Petrobras public tender that we were awarded. The strong Brazilian currency is still a challenge facing management, given the very high percentage of our costs that are in Real. However, we believe that the strong results delivered in 2006 are evidence of the ability of your Company to deal effectively with this environment. Management is totally committed to the profitability of the Group, and to increase shareholder value. Management and staff On behalf of your Board, I would like to thank our management and staff for their hard work and loyalty during the year. The Group's performance in a competitive market is a credit to our people, who have delivered outstanding results. We will continue to invest in their future. J. F. Gouvea Vieira Chairman 5th March 2007 OPERATING REVIEW 2006 Annual Operating Review Towage Revenues rose to US$ 118.8 million in 2006 (2005: US$ 106.5 million), an increase of 11.5%, which reflects the continuous effort to increase the income level of the business. Operating margins were slightly lower due to the appreciation of the Real, with segment operating profit of US$ 31.4 million in 2006 (US$ 32.6 million in 2005). The towage business performed well in 2006, with the number of vessels attended in line with 2005 and a 6% increase in the average dead-weight tonnage of ships serviced. Although the total number of vessels calling on Brazilian ports increased by 5%, our market share was slightly lower due to greater competition among the harbour towage operators. The appreciation of the Real against the US Dollar caused operating margins to fall. Continuing the fleet renewal program, our shipyard in Guaruja delivered the 73 tons bollard pull tugs Aquarius and Volans, in March and June respectively. Both have 'Unrestricted Service' and 'FiFi I' Lloyd's Register class notation (fire-fighting capacity of 2.400 m3/hr), and are the largest harbour tugs operating in Brazil. The strategy is to replace the fleet's older tugs with high bollard pull and state of art units, enabling some of the tugs to attend the specific demands of the offshore oil industry. Our joint venture with CVRD Consorcio Baia de Sao Marcos, also had a good result for the year, maintaining revenue and operating profit levels. The joint venture fleet rose from eight to nine tugs during the course of the year. Port Terminals Revenues in this segment increased by 29.2%, rising from US$ 98.6 million in 2005 to US$ 127.4 million in 2006, while operating margins rose from US$ 12.2 million in 2005 to US$ 39.4 million in 2006, reflecting the significant improvement in the performance of the container terminals. Tecon Rio Grande Tecon Rio Grande operated 614,700 TEU's (Twenty Feet Equivalent Units), against 670,000 TEU's in 2005, which represents a decrease of 8%. The reduction came about mainly due to the impact of (i) chicken influenza, which reduced exports of frozen chicken, (ii) appreciation of the Real, which affected the competitiveness of some export products, and (iii) the operation of some vessels in the public port, due to a combination of our terminal's expansion work and berthing window rules. In order to support growing demand expected over the next years, two Post Panamax Gantry Cranes and four Rubber Tyred Gantries have been purchased and are expected to be in operation by the end of the first semester of 2007. The third berth is expected to be completed by the end of 2007, allowing the operation of three vessels simultaneously. Despite of the volume decrease, strong commercial efforts were made to recover prices to an adequate market level, which improved significantly our revenues and results.Tobacco, frozen chicken, resin, furniture and footwear represented over 55% of the cargoes exported through Tecon Rio Grande. Tecon Salvador The terminal moved 252,790 TEU's, an increase of 14.4% over 2005. Tecon Salvador achieved its record movement of 16,323 boxes per month in October and throughout 2006 accounted for nearly 100% of the containers moved through the port of Salvador. Productivity also improved, from 34.8 moves per hour in 2005 to 36.6 in 2006. Results were positively affected by the increase of full container volume and the commercial efforts to raise prices to an adequate level. Tecon Salvador is the main terminal for agricultural and petrochemicals products exports of the region, and the yard size is a real limitation for future growth Therefore, we plan to invest in new investments in Rubber Tyred Gantries, to allow a more economic usage of the current available area, and thus to increase productivity. Port Terminal for Oil&Gas Support (Brasco) We provide services for the petroleum offshore industry through our onshore port base. Despite the shortage of rigs that affected some clients drilling operations, the new contract with Devon partially compensated this impact in 2006. Our long-term forecast is positive as oil companies are moving to the development phase of their offshore fields. The company is developing an inland site to increase its available storage area, to support its current base, as well as its future operations on the new base in Niteroi (at the former Group shipyard), and for the development of new sites in Rio de Janeiro State. Logistics Logistics revenues increased by 32.7%, rising from US$ 37.1 million in 2005 to US$ 49.3 million in 2006. Our operating results improved 112%, from US$ 2.0 million in 2005 to US$ 4.2 million in 2006. The Logistic division develops and operates customized solutions for storage, distribution and transportation for several different industrial segments, such as cosmetic and pharmaceutical products, agro industry, frozen chicken, petrochemicals, and pulp and paper. The division is an important logistic provider for both Brazilian and multinational companies, namely: Votorantim Celulose e Papel, Votorantim Metais, Doux Frangosul, Merck, Monsanto, Xerox and Petroflex. The division currently manages 135,000m2 of warehouses (including bonded areas) and over 100 pieces of lifting equipment, (forklifts, reach stackers and top loaders). In road transportation services, it performs national distribution operations and managed more than 62,500 trips in 2006, moving both import and export cargoes in containers from and to the main ports in Brazil. As part of the strategy to develop this fast growing business, during 2006 we made continuous efforts to increase revenue, reduce road use costs so as to improve our margin. The logistics division is the fastest growing business within our Group and has been recognized as one of the main logistic service providers in Brazil, winning various awards in 2006. Ship Agency Ship agency revenues decreased by 16.3% to US$ 17.8 million from US$ 20.7 million, although the operating result increased by 89%, rising from US$ 4.6 million to US$ 8.7 million. The agency had a good year in line with our expectations, attending 6,613 ship calls, a growth of 13% compared to the previous year. The partnership with CMA-CGM ended, as our partner wished to be independent in their Brazilian operations. The volume of sales coming from foreign representatives and Gulf Agency Company hub agents network has doubled. We continued to implement service quality improvements and internal process reviews. The centralisation of agency back office activities generated a productivity improvement of 13%. The division is ranked second in its market, with a share of 10%. Offshore (Platform Supply Vessels) Revenues in this segment increased by 16.7%, rising from US$ 7.2 million in 2005 to US$ 8.4 million in 2006, while operating margins decreased from US$ 1.6 million in 2005 to US$ 1.1 million in 2006. The two offshore vessels, under time charter to Petrobras, continued to perform very well during 2006, achieving operational records, though the results were impacted by a few cost items. Both vessels were dry-docked for regular maintenance and ran class surveys during the year. The fleet's third vessel Saveiros Fragata is expected to be delivered in April 2007 and immediately start operating for Petrobras. Following the Group's strategy to increase our presence in the market, we participated in the latest Petrobras tenders for the new-building and time charter of PSVs. The Group won contracts for four new vessels, to be delivered between 2008 and 2010. Non-segmented activities Revenues from non-segmented activities increased from US$ 29.4 million to US$ 31.0 million, and operating losses increased from US$ 18.3 million to US$21.2 million. The main cost item in this segment is Group administration. Shipyard Besides the Towage fleet maintenance activities, the shipyard was very busy with the new-building program for tugs and the construction of the PSV, Saveiros Fragata. Third party work delivered a good result with the building of a new ferryboat for the S(C)o Paulo State Company, Dersa. Dragaport Our associated dredging company Dragaport had an excellent performance in 2006, performing work at the Brasfels shipyard site (Angra dos Reis - Rio de Janeiro State) and in the ports of Rio Grande, Santos and Rio de Janeiro. Cezar Baiao Chief Executive Brazilian Operations FINANCIAL REVIEW Revenue Group revenue, as reported for the year, was US$334.1 million, up by 17% on 2005 (US$285.2 million) principally due to increases in the port operations and logistics businesses. Operating margins and profit Operating profit for the year increased by 83% to US$61.4 million (2005: US$ 33.6 million) reflecting the higher turnover and improved margins. Margins for the year improved to 18.4%, (2005: 11.8%). This improvement was driven mainly by a recovery in port terminal tariffs, changes in the treatment of the PIS and COFINS taxes and cost reduction. Operating profit for the year further benefitted from the profit on disposal of our interest in the joint venture WR Operacoes Portuarias Ltda. of US$3.0 million and release of surplus on the acquisition of our additional interest in Brasco of US$1.4 million. Investment revenues Investment revenue for the Group for the year was down US$3.0 million to US$11.2 million, (2005: US$14.2 million) principally due to reduced exchange gains on cash and cash equivalents, US$4.4 million (2005: US$5.4 million) and the absence of investment revenues from insurance underwriting activities, US$ nil (2005: US$2.2 million). Other gains and losses Other gains of US$11.4 million (2005: US$7.8 million) arise from the Group's portfolio of trading investments and reflect the increase in unrealised gains in trading investments of US$4.5 million (2005: US$10.7 million), profits on the disposal of trading investments of US$3.1 million (2005: US$1.3 million) and exchange movements on trading investments of US$3.9 million gain (2005: US$4.2 million loss). Finance costs Finance costs for the year ended 31 December 2006 increased by US$0.4 million to US$6.4 million compared with US$6.0 million in 2005. The increase was attributable to losses on derivatives of US$1.2 million (2005: US$nil) and a decrease in exchange gains on foreign currency borrowings, of US$0.8 million (2005: US$1.2 million). These negative movements were partially offset by a reduction in lease interest payments as several large lease contracts terminated in 2006. Profit before tax Group profit before tax for the year increased 57% to US$77.7 million from US$49.5 million in 2005 principally due to the increase in operating profit. Taxation The US$ 20.8 million tax charge (2005: US$14.9 million) for the year represents an effective tax rate for the period of 27% (2005: 30%). The corporate tax rate prevailing in Brazil is 34%. The lower effective tax rate primarily reflects the benefit of income arising in subsidiaries operating in jurisdictions with lower tax rates. Earnings per share Basic earnings per share for the year were 158.6 cents, compared with 93.6 cents in 2005. Cash flow The improvement in operating profit in 2006 was reflected in improved operating cashflow. Net cash inflow from operating activities was US$ 37.2 million, US$12.3 million higher than prior year (2005: US$ 24.9 million). Investing activities for 2006 absorbed US$24.9 million, which was US$ 21.9 million lower than the corresponding outflow last year (2005: US$46.8 million). In 2005 US$23.2 million was used to acquire the minority interest in Tecon Rio Grande. The Groups spending on property plant and equipment increased to US$ 42.2 million from US$36.2 million in 2005. At 31 December 2006, the Group had US$ 62.6 million in cash and cash equivalents, (31 December 2005 : US$50.9 million). Balance sheet At the year end the Group's net assets amounted to US$225.6 million (2005: US$171.4 million). The strong growth in net assets reflects the strong profit performance over the year as well as the appreciation of the Real. This translates into net assets per share of 638 cents per share (31 December 2005: 485 cents). Net assets located in Brazil amounted to 407 cents per share (31 December 2005: 303 cents) and net assets outside Brazil to 231 cents per share (31 December 2005: 182 cents). Debt The Group has net debt (defined as bank loans, overdrafts, obligations under finance leases and derivative financial instruments less cash and cash equivalents) of US$50.0 million (2005: US$ 58.5 million). During 2006 the Group made capital repayments on existing loans in accordance with debt repayment schedules of US$16.1 million (2005: US$11.4 million) and raised new loans of US$21.0 million (2005: US$18.3million) to finance vessel construction and the expansion of Tecon Rio Grande. Risk management Treasury The Group has a centralised treasury operation in Brazil, which manages the investment of surplus funds and borrowings. Clear guidelines have been established relating to cash management authority levels and investment limits. The guidelines prohibit taking speculative financial instrument positions, and regular financial management reports are supplied to senior management. The main financial risks facing the Group relate to funding, interest rates, currency fluctuations and movements in the market price of securities. Funding risk The Group conducts business principally in Brazil and holds a portfolio of international investments outside Brazil. The Group borrows to fund capital projects and looks to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating revenues. There is limited long term commercial funding available in Brazil except from the Banco Nacional de Desenvolvimento Economico e Social (BNDES). All long term funding is obtained by our Brazilian subsidiaries from the BNDES or the International Finance Corporation (IFC, part of the World Bank) except for specific equipment supplier financing when available at favourable terms. At the year end, the Group had US$110.2 million in borrowings repayable over periods of up to 16 years. The Group also held approximately US$53.6 million in Real denominated cash deposits in Brazil and the equivalent of US$9.0 million in Sterling, US Dollar and Euro denominated deposits outside Brazil. The Group maintains large cash balances to fund investment opportunities and to manage short term fluctuations in cash flow. Interest rate risk The Group has three main types of borrowings, Real denominated, Real denominated linked to the US Dollar and US Dollar borrowings. Real denominated borrowings linked to the US Dollar have fixed interest rates and expose the Group to fair value risk. US Dollar borrowings have variable interest rates and expose the Group to cash flow risk. Currency risk The Group operates principally in Brazil with a substantial proportion of the Group's revenue, expenses and assets denominated in the Real. Due to the cost of hedging the Real, the Group does not normally hedge its net exposure to the Real as the Board does not consider it economically viable. However during 2006 the Group used immaterial currency swaps to manage its exposure on the short term portion of its US Dollar and US Dollar linked debt. Such swaps are only undertaken with Board approval. Additionally the Group hedges US Dollar and US Dollar linked loan repayments for periods of up to one year by investing surplus funds in US Dollar linked Brazilian Government bonds or by purchasing foreign exchange options. The Group has significant long-term borrowings in US Dollars and in Real denominated loans linked to the US Dollar. These are used to finance Real denominated capital projects. This exposes the Group to a potential currency mismatch of costs and revenues. The Group accepts this risk, as there are few sources of long term Real denominated financing available. Market price risk The Group invests in internationally listed securities or funds principally for the long-term. The Group's exposure to market price risk arises mainly from potential loss the Group may suffer through holding market positions due to price movements or currency fluctuations. INVESTMENT PORTFOLIO Hanseatic Asset Management LBG that manages the Group's investment portfolio reports as follows: General '2006 was a positive year for global equities with the MSCI World Index advancing by 20.1 % exceeding the returns available from cash or bonds for the fourth consecutive year. Amongst the developed markets, Europe outperformed and gains were augmented for US Dollar denominated investors by appreciation of the Euro by 11.5% and Sterling by 13.7%. The US and Japan both underperformed. Japan was particularly disappointing with the Topix essentially unchanged on the year. It was another good year in the Emerging Markets especially in Asia. China in the 'Year of the Dog' was the standout theme for investors. Oil prices surrendered their strength of the first half of the year to end 2006 where they started it. Copper fell sharply in December but still finished 35% higher. The price of an ounce of gold rose by 23%. Ten year bond yields were 30 basis points higher in the US and 70 basis points higher in Europe but both were well below their mid year peaks. Twelve month interest rates rose from 4.8% too 5.3% in the US and from 2.8% to 4% in Europe. With the exception of a bout of pessimism in the second quarter investors remained sanguine for much of the year. A number of factors lay behind the sell-off such as how far the decline in US housing would drag down the world economy, the threat to inflation posed by commodity prices and the implications of a change at the helm of the US Federal Reserve. This sell-off was compounded by the scale of investor leverage which had been exploiting what amounted to free finance via the Yen 'carry trade'. However such concerns proved short lived as they were offset by record levels of corporate profitability, robust margins and the process of shrinking equity. The high levels of capital available for merger and acquisition and leveraged buyout activity has meant that the available pool of equity has been declining at a rate which exceeds supply. In particular these factors underpinned the strength of European equities where low levels of volatility and tight credit spreads sustained a benign financing environment for retiring equity. Japan proved to be the most frustrating market of 2006. Despite double digit gains in operating earnings, and profit margins at their highest levels for 30 years the market never recovered from its setback in the second quarter. Concerns about the impact of a slowing US economy and an ongoing lack of confidence amongst domestic investors dominated instead. Emerging markets were again a rewarding home for investors in 2006, particularly anything China related. High levels of investment ahead of the 2008 Olympics in Beijing have unleashed a boom in the economy. Profitability is rising sharply in Chinese companies. Inflation has not so far been a significant worry for policy makers as the country's huge supply of labour together with productivity gains have kept a lid on goods and services inflation. US retail investors in particular have been attracted to China and together with demand from savings rich local investors resulted in a gain in local Chinese shares in excess of 100%. Performance The portfolio benefited from this generally positive market background and increased by 18.4% over the year, marginally less than the gains of 20% in the MSCI World Index but significantly ahead of its performance benchmark which increased by 6.8%. Over the six years that Hanseatic Asset Management has had the assignment of managing the portfolio it has increased in value by 59.6%. Over the same period the MSCI World Index increased by only 2.9% and the performance benchmark by 25.6%. In 2006, the best performing area of the portfolio was the UK where returns were augmented by the strength of Sterling. In particular, there were significant positive contributions from Lansdowne UK Equity Fund, Cathedral Capital PLC and Finsbury Growth and Income Trust PLC. The Far East and the Emerging Markets also performed very well in particular the Close Finsbury Far East Fund, which emphasised China and related plays, and the SR - Emerging Markets Portfolio. The one negative area was in Japan where an overweight exposure together with poor performing funds undermined returns on both a relative and absolute basis. Japan was frustrating last year. The improving profitability of the corporate sector that the case for investing in Japan was predicated on is definitely occurring, but domestic investors seem to have very little confidence in their own market. Without the same level of foreign participation which characterised 2005 the market lagged other parts of the world. It was particularly weak in the smaller and medium sized domestic companies which the portfolio is exposed to. The best performing individual investments in 2006 were % Cathedral Capital PLC 92.5 Merrill Lynch World Mining Trust PLC 48.0 Close Finsbury Far East Equity Fund 38.9 Jupiter European Opportunities Trust PLC 38.5 Lansdowne UK Equity Fund 38.3 Ivanhoe Mines Limited 36.7 Finsbury Growth and Income Trust PLC 35.1 Aberdeen Global - Asia Pacific Fund 27.4 SR Global Fund - Emerging Markets Portfolio 26.5 Lansdowne European Equity Fund 26.2 Portfolio activity During the year, there were purchases worth approximately US$14.5m and sales to the value of US$17.3m. The most significant new investments were BlueBay European Credit Opportunities Fund, the Melchior Japan Investment Trust PLC, Finsbury Emerging Biotechnology Trust PLC and UFG Russia Select Fund Limited. The BlueBay fund offers leveraged exposure to a diversified portfolio of primarily European senior secured leveraged loans and high yield bonds. Crucially the managers have the flexibility to short securities which is an attractive factor given the performance of the high yield market and the compression in spreads. The Melchior Fund concentrates on smaller and mid cap growth stocks in Japan. It was a new listing whose management team had a strong track record. The timing was unfortunate as this sector of the market in particular suffered during the second half of the year. Finsbury Emerging Biotechnology Trust was a placing following a change of management term and geographical focus. Valuations have become very attractive as this sector has been out of favour. The managers anticipate a more benign environment for biotechnology companies going forward following the appointment of a new Commissioner of the FDA. The UFG Russia Fund is a long/short equity fund operating in Russia. The manager distinguished himself from other Russian Funds in the market setback in the second quarter by using shorting to successfully protect value. The largest sale in the period was the holding in Cathedral Capital a private Lloyds based insurance company operating primarily in the aviation and the real estate markets of the US following a bid from its management. The other major sales included the Putnam New Flag High Yield Fund, which funded the purchase of Blue Bay. The holding in Endeavour Corporation was sold to take profits after the run up in oil prices in early 2006 and partial profits were taken in the Ashmore Emerging Markets Liquid Investment Portfolio holding following tightening Sovereign spreads. The holding in Odey European Inc was sold and proceeds from the Russian Century Fund were used to invest in UFG Russia. Outlook Since the current bull market in global equities began in March 2003 there have been two principal drivers behind higher share prices - the corporate profits cycle and in the developed world a shrinking supply of equity through merger and acquisition activity, leveraged buyouts and share repurchases. There has been little in the way of multiple expansion. The only metric by which shares have become significantly more expensive is price to book. A robustly profitable corporate sector continues to support the outlook for shares and the abundance of liquidity globally underpins the prospects for high levels of equity withdrawal. Levels of capital spending remain subdued in part due to the platform company model whereby manufacturing operations are relocated to the developing world. This suggests companies will continue to focus on merging either with competitors or geographically contiguous operations. High levels of cash - the average level of cash on the balance sheet of an S&P 500 company is over 8%, which is the highest for 20 years - suggests that buying back stock or special dividends will remain another supportive feature for equities. Relative to bonds, shares remain attractively priced. When these structural factors are added to a relatively benign outlook for a mid cycle slowdown sufficient to hold monetary policy in check but not enough to derail the world economy then equities would appear to be the financial asset class of choice for 2007. There are however a number of issues for concern that should be taken into account. For one thing the consensus amongst investment commentators is positive and many of the industry 'permabears' have capitulated recently. Secondly the bull market is relatively 'long in the tooth' which statistically increases the chances of a serious setback. New technology and the emergence of the developing world has led to a large increase in global manufacturing capacity. This increased level of supply has put downward pressure on the price of traded goods which in turn has boosted the purchasing power of consumers and businesses alike. Productivity and corporate profitability have increased accordingly. The other feature of the impact of globalization has been the huge surge in global savings given the Asian propensity to save. These excesses are recycled into the global financial system creating the liquidity which underpins asset prices. Any change to this current balance would have a massively dislocating effect on capital markets. Although that does not appear imminent it is likely to occur when savings rates come down in Asia to finance rising levels of consumption. The impact of consumers in the developing world going head to head with those in the developed world would result in cost pressures throughout the entire economic chain with very negative implications for monetary policy. If equity markets start to sense this is happening they will become very nervous places. Perhaps a more immediate threat is posed by the prospect of a financial accident emanating from a disruption to the 'carry trade'. Deflation in the domestic economy of Japan has resulted in near zero interest rates. Although it is difficult to quantify it is believed that the world financial markets are very vulnerable to any change in this source of free Yen financing. Any change to Japanese policy in response to say, the weakness in the Yen could have very negative knock on consequences. Finally in terms of potential risks to the equity outlook it is impossible to ignore geopolitical issues. There are any number of potentially negative scenarios involving the Middle East, terrorism and disruption to oil supplies. Also the prospect of brinkmanship between Taiwan and China is likely to increase as the Olympics draws near. Later in 2007 investors are likely to focus on important elections in 2008 involving the US and Russia and the implications of the political climate in those two countries. On balance the Managers of the Portfolio think that equities should be able to deliver better returns than cash and bonds in 2007. They believe however that the margin of out performance will decline from previous years and that there are many reasons to expect the levels of market volatility to rise.' Insurance In October 2005 Ascension Underwriting disposed of all its investments in Lloyds underwriting syndicates through the annual Lloyds auctions and is not currently underwriting insurance. Results for the 2004 and 2005 underwriting years reflect best estimates and consequently may be subject to change in the future although the Board does not anticipate any significant changes. Keith Middleton Group Finance Director Ocean Wilsons Holdings Limited Consolidated income statement At a board meeting held on 5 March 2007 the following announcement of the audited results of the Company and its subsidiary companies for the year ended 31 December 2006 were approved by the Directors. Year to 31 Year to 31 December December 2006 2005 US$'000 US$'000 Note Revenue 334,109 285,227 Raw materials and consumables used (53,886) (50,398) Employee benefits expense (83,225) (71,719) Depreciation and amortisation expense (15,100) (13,959) Other operating expenses (125,247) (116,207) Profit on disposal of property, plant and equipment 435 565 Profit on disposal of joint venture and associate 2,965 - Release of surplus on acquisition of interest in subsidiary 1,433 - Share of (loss)/profit of associate (51) 39 Operating profit 61,433 35,548 Investment revenues 11,196 14,212 Other gains and losses 11,433 7,764 Finance costs (6,414) (6,002) Profit before tax 77,648 49,522 Income tax expense 3 (20,765) (14,865) Profit for the year 56,883 34,657 Attributable to: Equity holders of parent 56,077 33,086 Minority interests 806 1,571 56,883 34,657 Earnings per share Basic and diluted 158,6c 93,6c Ocean Wilsons Holdings Limited Consolidated balance sheet as at 31 December 2006 31 December 2006 31 December 2005 Non current assets US$'000 US$'000 Goodwill 13,132 13,132 Other intangible assets 2,053 2,288 Property, plant and equipment 175,785 147,651 Deferred tax assets 8,289 7,462 Interest in associate - 365 Available for sale investments 5,346 4,821 Other non-current assets 7,809 5,657 212,414 181,376 Current assets Inventories 7,061 6,669 Trading investments 73,192 64,563 Trade and other receivables 54,413 45,295 Cash and cash equivalents 62,599 50,881 197,265 167,408 Total assets 409,679 348,784 Current liabilities Trade and other payables (54,223) (54,266) Current tax liabilities (1,944) (971) Obligations under finance leases (581) (3,893) Bank overdrafts and loans (14,945) (16,431) Derivative financial instrumets (782) - (72,475) (75,561) Net current assets 124,790 91,847 Non-current liabilities Bank loans (95,216) (88,515) Deferred tax liabilities (9,336) (8,455) Provisions (5,913) (4,317) Obligations under finance leases (1,098) (566) (111,563) (101,853) Total liabilities (184,038) (177,414) Net assets 225,641 171,370 Capital and reserves Share capital 11,390 11,390 Retained earnings 173,305 126,331 Capital reserves 25,973 23,942 Investment revaluation reserve 2,381 1,856 Translation reserve 8,762 6,538 Equity attributable to equity holders of the parent 221,811 170,057 Minority interests 3,830 1,313 Total equity 225,641 171,370 OCEAN WILSONS HOLDINGS LIMITED Consolidated statement of changes in equity As at 31 December 2006 Attributable Investment to equity Share Retained Capital revaluation Translation Holders of Minority Capital earnings reserves reserve reserve the parent interests US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2005 11,390 101,137 23,122 1,353 1,406 138,408 9,019 147,427 Gains on available for sale - - - 503 - 503 - 503 investment Currency translation - - - - 5,132 5,132 - 5,132 adjustment Profit for the year - 33,086 - - - 33,086 1,571 34,657 Total recognised income for - 33,086 - 503 6,358 38,721 1,571 40,292 the period Dividends - (7,072) - - - (7,072) - (7,072) Acquisition of minority - - - - - - (9,277) (9,277) interest Transfer to capital reserves - (820) 820 - - - - - Balance at 1 January 2006 11,390 126,331 23,942 1,856 6,538 170,057 1,313 171,370 Gains on available for sale - - - 525 - 525 - 525 investment Currency translation - - - - 2,224 2,224 187 2,411 adjustment Profit for the year - 56,077 - - - 56,077 806 56,883 Total recognised income for - 56,077 - 525 2,224 58,826 993 59,819 the period Dividends - (7,072) - - - (7,072) - (7,072) Sale of minority interest - - - - - - 1,524 1,524 Transfer to capital reserves - (2,031) 2,031 - - - - - Balance at 31 December 2006 11,390 173,305 25,973 2,381 8,762 221,811 3,830 225,641 Ocean Wilsons Holdings Limited Consolidated cash flow statement for the year ended 31 December 2006 Year to Year to 31 December 31 December 2006 2005 US$'000 US$'000 Net cash inflow from operating activities 37,239 24,871 Investing activities Interest received 5,922 5,997 Dividends received from associate 327 323 Dividends received from trading investments 915 642 Proceeds on disposal of trading investments 17,280 12,843 Income from underwriting activities - 1,530 Proceeds on disposal of property, plant and equipment 2,144 3,077 Purchase of property, plant and equipment (42,231) (36,245) Proceeds from disposal of investment in an associate 49 - Net cash inflow/(outflow) arising from acquisition of subsidiary 1,723 (23,222) Purchase of trading investments (14,476) (11,704) Net cash inflow arising on disposal of joint venture 3,464 - Net cash used in investing activities (24,833) (46,759) Financing activities Dividends paid (7,072) (7,072) Repayments of borrowings (16,099) (11,389) Repayments of obligations under finance leases (3,421) (2,932) New bank loans raised 20,955 18,295 Increase/(decrease) in bank overdrafts 640 (409) Net cash used in from financing activities (4,997) (3,507) Net (decrease)/increase in cash and cash equivalents 7,359 (25,395) Cash and cash equivalents at beginning of year 50,881 70,915 Effect of foreign exchange rate changes 4,359 5,361 Cash and cash equivalents at end of year 62,599 50,881 Ocean Wilsons Holdings Limited Preliminary Announcement Notes to the Preliminary Accounts 1. Basis of Accounting The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments. The accounting policies applied are consistent with those set out in the Group's 2006 Annual Report. 2. Basis of Preparation The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2006 or 2005, but is derived from those accounts. The auditors have reported on those accounts and their reports were unqualified. Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. 3. Taxation Year to 31 Year to 31 December December 2006 2005 US$ '000 US$ '000 UK tax - - Brazilian tax 20,765 14,865 20,765 14,865 4. Dividends The proposed final dividend of 20.0 cents per share will be paid on the 4 May 2007, to shareholders on the register at close of business on 10 April 2007 if approved by shareholders at the annual general meeting to be held on 19 April 2007. 5. Other information Additional copies of this announcement can be obtained from the Company's registered office, Clarendon House, Church Street, Hamilton, Bermuda or from the Company's UK transfer agent, Capita Registrars Group Plc, The Registry 34 Beckenham Road, Beckenham, Kent BR3 4TU. Address for dividend currency election Ocean Wilsons Dividend election Capita Registrars The Registry 34 Beckenham Road Beckenham Kent, BR3 4TU This information is provided by RNS The company news service from the London Stock Exchange

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