ANNUAL REPORT ABOUT OCEAN WILSONS HOLDINGS LIMITED Ocean Wilsons Holdings Limited (“Ocean Wilsons” or the “Company”) is a Bermuda holding company which, through its subsidiaries, holds a portfolio of international investments and operates a maritime services company in Brazil. The Company is a premium listed entity on the London Stock Exchange and is also listed on the Bermuda Stock Exchange. It has two principal subsidiaries: Ocean Wilsons (Investments) Limited (“OWIL”) and Wilson Sons Holdings Brasil S.A. (“Wilson Sons”) (together with the Company and their subsidiaries, the “Group”). OWIL is a wholly owned Bermuda investment company. The Company owns 57% of Wilson Sons which is fully consolidated in the accounts with a 43% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil with activities including towage, container terminals, offshore oil and gas support services, small vessel construction, logistics and ship agency. OBJECTIVE Ocean Wilsons focuses on long-term performance and value creation. This approach applies to both the investment portfolio and our investment in Wilson Sons. This longer-term view of the Board directs an OWIL investment strategy whereby investments are made in a balanced thematic portfolio of funds leveraging our long-standing investment market relationships and through detailed insights and analysis. The Wilson Sons maritime logistic services investment strategy focuses on providing best in class innovative solutions in a rapidly growing market. OCEAN WILSONS HOLDINGS LIMITED Contents 02 12 43 2021 DATA HIGHLIGHTS SECTION THREE Financial Report 14 SECTION FOUR Governance - Report Of The Directors 04 CHAIRMAN’S STATEMENT 07 SECTION ONE Business Review – Investment Manager’s Report 11 SECTION TWO Business Review - Wilson Sons’ Management Report SECTION FIVE Consolidated Financial Statements 44 Independent Auditor’s Report 52 Consolidated Statement of Profit or Loss and Other Comprehensive Income 53 Consolidated Statement of Financial Position 54 Consolidated Statement of Changes in Equity 55 Consolidated Statement of Cash Flow 56 Notes to the Consolidated Financial Statements 103 Statistical Statement (Unaudited) 104 SECTION SIX Directory Notice of Annual General Meeting Form of Proxy CONTENTS 11 2021 Data Highlights KE Y DATA AS AT 31 DECEMBER (In US$ millions) 2021 2020 CHANGE Profit after tax $ 82.5 $ 4 8.0 71.9% Operating Profit $ 97.0 $70.0 38.6% Revenue $396.4 $ 352.8 12.4% Net cash inflow from operating activities $106.1 $105.7 0.4% Investment porfolio assets including cash and cash equivalents $351.8 $ 310.9 13.2% Net assets $783.7 $743.7 5.4% Debt net of cash and cash equivalents $ 440.9 $ 437.3 0.8% 2 Ocean Wilsons Holdings Limited 2021 Annual Report SHARE DATA AS AT 31 DECEMBER Earnings per share US 180.1 cent s US 10 9.5 cent s 6 4.5% 2021 2020 CHANGE Proposed dividend /Actual dividend per share US 70 cent s US 70 cent s -- Share discount 41.6% 39.2% Implied net asset value per share GBP 15.95 GBP 13.89 Share price GBP 9.32 GBP 8.45 PROFIT ANALYSIS AS AT 31 DECEMBER (In US$ millions) Investment Portfolio Net Return Maritime Services Net Profit 2021 $ 4 4.5 $ 41.4 Investment Portfolio as a % of Net Profit 53.9 % Maritime Services as a % of Net Profit 50.2 % 2020 $ 30.3 $ 20.6 6 3.1% 42.9 % 2.4% 14.8 % 10.3% CHANGE 46.9 % 101.0 % ( 9.2 %) 7.3% 2021 DATA HIGHLIGHTS 3 CHAIRMAN’S STATEMENT Strategic Report As we continue to find a balance between getting to pre-pandemic back business operations, minimizing the challenges that “living with Covid” pose, and now considering the potential impacts of the Russia/Ukraine war on both our operations and investments; we find ourselves challenging how we operate, rationalizing our investment strategies and ensuring that we address any issues related sanctions. to Russian When navigating our day- to-day operations, we seek opportunities to grow and protect our investments, drive innovation, address sustainability and minimize risks in the face of geo- political conflict. 4 A significant part of the Board’s focus during the year was given to supporting Wilson Sons’ new listing on the Novo Mercado on the Sao Paulo Stock Exchange and analysing OWIL’s legacy private equity holdings to rationalize the current investment portfolio while seeking to maximize the potential returns on these holdings. At the same time, we have been reducing risk exposure and driving ESG initiatives with Wilson Sons to have more measurable outcomes and to begin to establish climate related emissions targets for the Group. This is the first year that the Company will report on its TCFD disclosures (Taskforce for Climate-related Financial Disclosures) which has driven a more focused approach to the Group’s risk management framework for monitoring and managing climate related risks. It is our ambition to ensure that these risks and related opportunities are examined in depth and across time horizons with clear discussion of strategic implications and mitigating actions. The Group’s financial results are moving back to pre-pandemic performance levels. Driven by the success of the investment portfolio in rising equity markets, the portfolio assets (including cash and cash equivalents) increased 13.2% to US$351.8 million (2020: US$310.9 million) and outperformed the benchmark. Wilson Sons reported better than expected revenues of US$396.4 million, close to comparable of 2019 revenues of US$406.1 million, against a global shipping industry backdrop of container shortages, supply chain challenges, clogged shipping ports and changing demands on the mix of consumer goods generated. Key performance indicators of the Wilson Sons’ main revenue generating activities, the container terminals, towage and offshore vessels businesses improved year over year: Operating Volumes 2021 2020 % Change Container Terminals (container movements in TEU ‘000s) * 1,042.3 1,017.6 2.4% Towage (number of harbour manoeuvres performed) 54,839 52,873 Offshore Vessels (days in operation) 5,400 5,356 3.7% 0.8% * TEUs stands for “twenty-foot equivalent units”. Results Encouragingly, profit for the year at US$82.5 million was US$34.5 million better than the prior year (2020: US$48.0 million) primarily due to the returns on the investment portfolio and significant improvement in Wilson Sons’ revenues with increased activity over the prior year. Operating profit at US$97.0 million (2020: US$70.0 million) improved by US$27.0 million, and total comprehensive income was US$75.3 million, US$78.8 million better than prior year (2020: loss US$3.5 million) driven in part by reduced foreign exchange losses. Operating expenses generally increased in correlation with increased operating revenues at Wilson Sons as business activities return to normalized levels. Ocean Wilsons Holdings Limited 2021 Annual Report The investment portfolio delivered a net return basis 14.5% and outperformed the benchmark (10.0%) by 4.5%. The portfolio including cash increased US$43.0 million to US$351.8 million (2020: US$308.8 million). OWIL paid dividends of US$5.0 million to Ocean Wilsons Holdings Limited and paid the Investment Manager management fees of US$3.3 million (2020: US$2.8 million) and performance fees of US$1.6 million (2020: US$0.3 million). Over the three-year period ended 31 December 2021, the portfolio produced a time-weighted net return of 12.5% per annum compared with the three-year period performance benchmark of 6.5% per annum. At the close of markets on 31 December 2021, the Wilson Sons’ share price was R$55.68 (US$9.99), resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (56.88% of Wilson Sons) of US$414.2 million, the equivalent of US$11.71 (£8.65) per Ocean Wilsons share. The market value per share at 31 December 2021 was US$11.71 for Wilsons Sons and US$9.88 (£7.30) for the investment portfolio. The net asset value per Ocean Wilsons Holdings Limited share was US$22.16 (£16.37). The Ocean Wilsons Holdings Limited share price was £9.32 at 31 December 2021. Earnings per share for the year were US 180.1 cents compared with US 109.5 cents in 2020. The Financial Report provides further details in relation to the performance of the Group. Responsible Investment (“UN PRI”) to demonstrate their and our commitment to responsible investment. At Wilson Sons, it is recognized that continued evolution of the maritime port sector is necessary for the coming years. The combination of the exponential advances in the application of technologies in ports and vessels with the growing demand for the sector to become increasingly sustainable will significantly affect the business dynamics in the industry. Wilson Sons monitors these industry trends to seek opportunities to participate in this transformation and take value from it. We believe that innovation and ESG are intrinsically connected, so that many of the solutions we apply to our current or potential businesses must involve aspects of emissions reduction, inclusion, and positive social impact. ESG is an intrinsic part of our innovative business analysis and selection criteria. Corporate Governance The Board has established corporate governance arrangements which are appropriate for the operation of the Company. The Board has considered the principles and recommendations of the 2018 UK Corporate Governance Code (“the Code”) issued by the Financial Reporting Council applying those aspects which are appropriate to the business. The limited areas where the Company does not comply with the Code, and an explanation of why, are contained in the section on Corporate Governance in the Annual Report. The position is regularly reviewed and monitored by the Board. Environmental Social and Governance Practices (ESG) Outlook Ocean Wilsons is committed to a responsible investing policy and operating practices within its subsidiaries. Ocean Wilsons is in a unique position, relating to ESG, as a holding company of two varied investments. Although our investments are managed by an external investment manager, we do expect the investments in our portfolio to take ESG issues seriously, to clearly report on them and to aspire to do the right thing. As part of the Company’s continued evolution of its ESG practices, the Board is working with the Investment Manager Hanseatic Asset Management LBG (“HAML”) and its Sub-advisor Hansa Capital Partners LLP (“HCP”), collectively the HAML Group, such that they are working towards becoming a signatory in 2022 for the internationally recognized United Nations’ Principles for Our outlook in the earlier part of 2022 would have discussed the ongoing supply-chain challenges triggered by Covid-19, global container shortages and inflationary concerns. These are still factors; however, we now must consider the geo- political uncertainties and global economic impacts stemming from the Russian invasion of Ukraine. We initially expected global economic growth to be more moderate in 2022 following the very strong recovery in 2021 and this is still our general view, albeit with a more cautious lens. As a result of the Ukrainian conflict and the ensuing economic sanctions on Russia, significant pressure has been put on markets especially commodity markets, further impacting inflation and interest rates, the full extent and market reach of these impacts is still to be fully realized. The portfolio’s CHAIRMAN’S STATEMENT 5 CHAIRMAN’S STATEMENT - c o n t i n u e d exposure to Russian linked investments is less than 1.4% at the time of writing and reduced to zero at the end of Q1. Further, we are ensuring that the funds we invest in are, and remain, compliant with sanctions being imposed on Russia. We continue to be alert and cautious in our approach to minimize overreaction and maintain our disciplined approach to focus on the portfolio’s objective of long-term sustainable capital growth. The outlook in Brazil for 2022 remains cautious when considering the impacts of the war in Ukraine on world trade and the upcoming presidential elections which creates a scenario of economic uncertainty. While it is expected that pressures on our container terminal business will continue, we are expecting stronger results in the towage and a move towards recovery of maritime services to the oil and gas industry. I am pleased to report that Wilson Sons’ strategy to maximise its economies of scale to improve operating efficiencies has placed its ports in Salvador and Rio Grande as the most efficient in Brazil according to the rankings of the Global Container Port Performance Index released by the World Bank. Wilson Sons’ ports were the only Brazilian ports to appear among the top 50 ports in the world. Additionally, Ocean Wilsons’ stock became part of the FTSE All-Share Index on 21 March 2022, which is expected to improve the liquidity of our stock. Passing the Torch 23 years have passed since I took office as the Chairman of Ocean Wilsons Board of Directors. At the forthcoming Annual General Meeting, I will be retiring from the Board. I would like to take this opportunity to express my sincere thanks to our valued shareholders, for the ongoing support and confidence you have given to me over the years. It was a great honour for me to serve and I am proud of what our Company has become today. My designated successor, Ms. Caroline Foulger, with her extensive experience and strong leadership, will prove to be an excellent Chair to continue the Company’s growth and evolve its investment strategy. I wish Ocean Wilsons, all its shareholders, employees, and business partners and last, but not least, my colleagues on the Board of Directors and the entire management team all the best and continuing success for the future. J F Gouvêa Vieira Chairman Ocean Wilsons Holdings Limited 23 March 2022 6 Ocean Wilsons Holdings Limited 2021 Annual Report SECTION ONE Business Review - Investment Manager’s Report Market Backdrop 2021 ended in a similar vein to how it started with concerns over new variant of COVID, Omicron. Despite this, 2021 can be best described as a year of normalisation albeit one beset by challenges and setbacks. Risk assets produced another year of double-digit returns, rising by 18.5%. Driving this performance yet again was the US market which rose by 26.4%. Europe and the UK produced positive returns rising by 15.7% and 18.5% for the year, respectively. Japan was up 1.7% whereas China fell by 21.7%. In contrast India and Russia rose by 26.2% and 15.0% albeit coming off very weak performances in 2020. At the sector level, in contrast to recent years where performance has largely been driven by the technology and growth sectors, this year saw a broadening in returns with financials, real estate and IT returning 24.3%, 22.8% and 27.4% respectively. Highlighting contrasting fortunes, commodities rose by 27.1%, with energy the standout performer rising by 36.0%, whereas bonds were typically weaker for the year with US Treasuries falling by 2.3%. Cumulative Por t folio Returns 2021 2020 3 years p.a. 5 years p.a. OWIL 16.1% 12.2% 13.9% 11.0% OWIL (Net)* 14.5% 10.9% 12.5% Performance Benchmark** 10.0% 4.4% 6.5% 9.7% 5.9% MSCI ACWI + FM NR US$ 18.5% 16.2% 20.4% 14.4% Bloomberg Global Treasury TR US$ (Unhedged) -6.6% 9.5% 2.6% MSCI Emerging Markets NR US$ -2.5% 18.3% 10.9% 2.9% 9.9% * The OWIL net performance is after charging investment management and performance fees. ** The OWIL performance benchmark which came into effect on 1 January 2015 is US CPI Urban Consumers NSA +3% p.a. SECTION ONE 7 SECTION ONE 200 180 160 140 120 100 80 31-Dec-16 5 Year Cumulative Indexed Returns 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 OWIL Gross TW Performance Bloomberg Global Treasury TR US$ (Unhedged) MSCI Emerging Markets NR USD Benchmark MSCI ACWI FM NR US$ Por t folio C omment ar y Global markets were more volatile during 2021 with periods of strong performance counterbalanced by declines when concerns about new Covid variants shook confidence. Rising rates became an increasing focus as inflation continued to tick higher as energy prices increased and supply constraints remained unresolved. Towards the end of the year markets initially worried about the new Omicron COVID variant but ultimately this variant turned out to be far less virulent than previous waves and investors quickly looked past it. The investment portfolio was up 16.1% over the year whilst its benchmark returned 10.0% over the same period. The MSCI ACWI gained 18.5% while the Bloomberg Barclays Global Treasury index fell by 6.6%. Looking For ward We entered 2022 with ongoing inflationary concerns albeit with an expectation that we would see an easing as we moved through the year. Interest rates had started to rise in the West having previously been held at historically low levels due to central bank efforts to combat the pandemic. In late February however, the decision by Russia to invade Ukraine stunned world markets. Whilst there were some fears that President Putin might launch an invasion it was not widely expected to occur in face of the limited strategic advantage and Ukraine’s clear commitment to retaining its independence, not to mention the devastating effects on human life. The subsequent global sanctions that have been imposed on Russia have been both swift and severe, placing Russia under significant financial duress as well as being excluded from the global financial system for the foreseeable future. At this stage, it is too early to assess the full financial impact of recent events. Commodity markets, which had already been under considerable pressure, are being squeezed with Russian commodities excluded from the global system. This will place yet further pressure on inflation in the short-term. The knock-on effects to global growth will need to be monitored 8 carefully, albeit Russia itself is a small component of the global economy; however, the effects on Europe will be more severe. Commodities are of particular importance with their many different touch points on Western economies including fuel costs, global supply chains, where Russian metals are important, and food supply. These factors, combined with the impact on economic confidence with a war in Europe, will certainly weigh on growth. Outside of Europe economies will be more immune with the US being a relatively closed economy and largely energy self-sufficient and with many emerging markets far less affected. Our weightings in the US and emerging markets are 50% and 23% respectively compared to 11% in Europe for our core regional, thematic and private equity silos (as at 10 March 2022). We had a modest exposure to Russia through our holding in Prosperity Quest (1.2%) and some de minimis exposures mainly through index funds. The portfolio is highly diverse by country exposure, asset class and number of holdings managed by highly experienced asset managers who have operated through many different economic cycles with underlying holdings that are well positioned to weather more difficult trading conditions. Our defensive holdings have, to-date, held up extremely well. This part of the portfolio was designed to provide a more defensive and diversified exposure at a time when bond markets, the conventional defensive asset class, were looking extremely expensive. So far this year, interestingly, bonds do not appear to be generating the positive performance that would have typically been expected during periods such as this with the ongoing inflationary pressures and prospect of higher rates weighing on them. We will continue to actively monitor the situation over the coming weeks and months and will adjust the portfolio accordingly as matters develop, albeit always with a view to our long-term mandate. Hanseatic Asset Management LBG 10 March 2022 Ocean Wilsons Holdings Limited 2021 Annual Report 0.2% 2.0% 2.9% 49.9% 4.2% 4.2% 4.6% Geographic E xposure 0.2% Cash/Liquidity Funds 2.0% Emerging Europe 2.9% Middle East & Africa 6.3% 4.2% Japan 4.2% Latin America 4.6% UK 6.3% Diversified 10.4% Developed Europe ex UK 15.3% Asia Pacific ex Japan 49.9% North America 10.4% 15.3% 4.3% Sector E xposure 27.0% 6.3% 0.2% Cash/Liquidity Funds 0.2% 0.6% 1.1% 2.2% 2.7% 15.4% 11.4% 12.5% 6.3% 0.6% Utilities 1.1% Real Estate 2.2% Consumer Staples 2.7% Energy 4.3% Materials 10.0% 6.3% Communications Services 6.3% Diversified 10.0% Financials 11.4% Health Care 12.5% Industrials 15.4% Consumer Discretionary 27.0% Information Technology SECTION ONE 9 SECTION ONE Investment Por t folio as at 31 D ecember 2021 Market Value US$000 % of NAV Primary Focus 39,264 16,200 15,590 15,474 14,508 14,454 13,324 8,988 8,364 7,973 11.2 4.6 4.4 4.4 4.1 4.1 3.8 2.5 2.4 2.3 US Equities - Long Only Europe Equities - Hedge Europe Equities - Long Only Europe/US Equities - Hedge US Equities - Long Only Technology Equities - Long Only US Equities - Long Only Asia ex-Japan Equities - Long Only Private Assets - US Venture Capital Private Assets - Latin America 154,139 43.8 7,767 7,670 7,247 6,879 6,817 6,095 5,609 5,394 5,310 5,101 218,028 4,980 4,807 4,733 4,317 4,311 4,092 4,077 4,069 3,832 3,772 261,018 88,595 2,186 351,799 2.2 2.2 2.1 2.1 1.9 1.7 1.6 1.5 1.5 1.4 62.0 1.4 1.4 Japan Equities - Long Only Private Assets - GEM Asia ex-Japan Equities - Long Only Private Assets - North America US Equities - Long Only Private Assets - Global Technology Private Assets - Europe Japan Equities - Long Only Environmental Equities - Long Only Market Neutral - Multi-Strategy Private Assets - US Venture Capital Private Assets - Africa 1.3 Emerging Markets Equities - Long Only Private Assets - Asia Private Assets - Global Technology Private Assets - Europe Russia Equities - Long Only Healthcare Equities - Long Only Financials Equities - Long Only Market Neutral - Event-Driven 1.2 1.2 1.2 1.2 1.1 1.1 1.1 74.2 25.2 0.6 100.0 Findlay Park American Fund BlackRock Strategic Equity Hedge Fund Adelphi European Select Equity Fund Egerton Long - Short Fund Limited Select Equity Offshore, Ltd GAM Star Fund PLC - Disruptive Growth Vulcan Value Equity Fund Schroder ISF Asian Total Return Fund Stepstone Global Partners VI, LP NG Capital Partners II, LP Top 10 Holdings Goodhart Partners: Hanjo Fund Pangaea II, LP NTAsian Discovery Fund KKR Americas XII, LP Pershing Square Holdings Ltd Silver Lake Partners IV, LP Primary Capital IV, LLP Indus Japan Long Only Fund Impax Environmental Markets Fund Hudson Bay International Fund Ltd Top 20 Holdings Stepstone Global Partners IV, LP Helios Investors II, LP Prince Street Opportunities Fund Baring Asia Private Equity Fund VII, LP Silver Lake Partners V, LP EQT Mid Market Europe, LP Prosperity Quest Fund Worldwide Healthcare Trust PLC SPDR MSCI World Financials UCITS ETF Global Event Partners Ltd Top 30 Holdings 58 Remaining Holdings Cash TOTAL 10 Ocean Wilsons Holdings Limited 2021 Annual Report SECTION TWO Business Review - Wilson Sons’ Management Report The Wilson Sons 2021 Earnings Report released on 23 March in the first half of the year with logistical bottlenecks, lack of 2022 is posted on www.wilsonsons.com.br. empty containers and cancellation of vessel calls. Trade flow In the report, Mr. Fernando Salek, CEO of Wilson Sons, said: Wilson Sons’ 2021 EBITDA of US$159.4 million increased 16.3% compared to 2020 (2020: US$137.1 million) with solid growth in towage operating revenues. Container terminal operating results and exports in particular were impacted by the limited availability of empty containers and worldwide logistic bottlenecks causing vessel call cancellations. Despite these challenges Salvador container terminal reached an all-time cargo handling record of 376,400 TEUs in 2021 with new berth infrastructure supporting increased efficiency. Due to robust first half results in 2021 and an improved revenue mix, net revenues from the container terminals were U$141.8 million, 7.3% better than prior year (2020: US$132.2 million). in particular is expected to support strong towage results and maritime services to the oil and gas industry are expected to recover. In terms of sustainability, we are pleased to report our carbon emissions audit has achieved the CDP Gold Seal. Health and safety continue to be fundamental for our business and the highlight for 2021 is exceptional vaccination rates among our employees which together with other precautionary actions like testing and mask wearing have protected our employees and allowed our operations to continue throughout the year. We accomplished more than just solid financial results in 2021. Significant achievements during the year include our listing on B3’s Novo Mercado, we were awarded with the internationally recognized standard of excellence for workplace environments Great Place to Work, publication of the Standard Towage results rebounded with operating volumes driven & Poor’s (S&P) ESG Corporate Sustainability Assessment by strong commodity exports and LNG imports. Towage net with the company ranked in the second quartile and we revenues were US$199.1 million in 2021 (2020: US$173.6 ranked in the 100 Open Start-ups Award. These initiatives million). Our outlook for 2022 remains cautious with the effects on worldwide trade from the war in Ukraine, Brazilian elections and political scenario creating some uncertainty. In addition, our container terminal business will continue to be challenged and successes coupled with our strong financial position and culture of innovation, position us well for continued growth and success as we strive to be the best in class of Brazil’s maritime logistics companies. SECTION TWO 11 SECTION THREE Financial Report Operating Profit Operating profit of US$97.0 million was US$27.0 million better than prior year (2020: US$70.0 million). Operating margin improved year over year at 24.5% (2020: 19.9%) principally due to increased revenues and an improvement in foreign exchange losses on monetary items. Operating expenses increased as expected with increased volumes in the ports nearing pre-pandemic levels. Raw materials and consumables used were US$4.7 million higher at US$24.0 million (2020: US$19.3 million). Employee expenses were US$2.0 million higher at US$112.0 million (2020: US$110.0 million). Employee expenses as a percentage of revenue declined from 31.2% in 2020 to 28.3% in the current year. Other Operating expenses increase US$13.6 million to US$98.3 million (2020: US$84.7 million). Depreciation at $ 61.4 million was US $ 0.1 million higher than the comparative period (2020 : US $ 61.3 million). Revenue from Maritime Ser vices Revenue for the year increased by 12.4% to US$396.4 million (2020: US$352.8 million). The increase in revenue can be attributed to higher towage manoeuvres, increases in special operations and improved operational activity in logistics, the shipyards and shipping agency over the prior year. Container Terminal revenue increased 7.3% year over year to US$141.8 million (2020: US$132.2 million), in spite of a challenging global container bottlenecks in the second half of the year. Towage revenue at US$199.1 million was US$25.5 million higher than the prior year (2020: US$173.6 million) with increased volumes in ports that operate larger ships and success in our ongoing focus to improve our revenue mix. Returns on the Investment Por t folio at Fair Value Through Profit or Loss Returns on the investment portfolio of US$49.5 million (2020: US$33.4 million) comprise realised profits on the disposal of financial assets at fair value through profit or loss of US$11.9 million (2020: US$1.0 million), net income from underlying investment vehicles of US$3.8 million (2020: US$3.3 million) and unrealised gains on financial assets at fair value through profit or loss of US$33.9 million (2020: US$29.1 million). Finance C ost s Finance costs for the year at US$30.2 million were US$7.0 million higher than the prior year (2020: US$23.2 million) as interest on lease liabilities increased US$1.1 million to US$13.9 million (2020: US$12.8 million). Interest on bank loans and overdrafts increased US$5.9 million to US$16.2 million (2020: US$10.3 million) due to normalization of debt repayments in during the current year after “stand still” debt repayment agreements that were given during Covid expired. 12 Ocean Wilsons Holdings Limited 2021 Annual Report E xchange Rates The Group reports in USD and has revenues, costs, assets and liabilities in both BRL and USD. Therefore, movements in the USD/BRL exchange rate influence the Group’s results either positively or negatively from year to year. During 2021 the BRL depreciated 7.1% against the USD from R$5.20 at 1 January 2020 to R$5.57 at the year end. In 2020 the BRL depreciated 29.0% against the USD from R$4.03 at 1 January 2019 to R$5.20 at the year end. Profit Before Tax Profit before tax for the year increased US$35.8 million to US$110.4 million compared to US$74.6 million in 2020. The increase in profit is primarily due to the US$16.1 million in higher returns from the investment portfolio, and the $43.6 million increase in revenues offsetting increased operating expenses and finance costs. Taxation The tax charge for the year at US$27.9 million was US$1.3 million higher than prior year (2020: US$26.6 million). This represents an effective tax rate for the year of 25.3% (2020: 35.6%) for the Group. A more detailed breakdown of Taxation is provided in note 9 to the consolidated financial statements reconciling the effective tax rate. C ash Flow Net cash inflow from operating activities for the period at US$106.1 million was consistent with the prior year (2020: US$105.7 million). Capital expenditure in the year at US$48.7 million was US$10.7 million lower than the prior year (2020: US$59.4 million). The Group drew down new loans of US$19.4 million (2020: US$51.5 million) to finance capital expenditure, while making loan repayments of US$57.9 million in the year (2020: US$25.7 million). Dividends of US$24.8 million were paid to shareholders (2020: US$24.8 million) with a further US$17.8 million paid by Wilson Sons to non-controlling interests (2020: US$17.5 million). Cash and cash equivalents at 31 December 2021 decreased US$34.7 million from the prior year end to US$28.6 million (2020: US$63.3 million). Wilson Sons held a further US$43.3 million in USD denominated investments which are classified as financial assets at fair value through profit or loss (2020: US$39.6 million) which are not part of the Group’s investment portfolio and are intended to fund Wilson Sons. St atement of Financial Position Equity attributable to shareholders of the parent company at the reporting date was US$37.9 million higher at US$593.7 million compared with US$555.8 million at 31 December 2020. The main movements for the year were profits for the period of US$63.7 million, less dividends paid of US$24.8 million and a negative currency translation adjustment of US$4.2 million. The currency translation adjustment arises from exchange differences on the translation of Wilson Sons operations which use a functional currency other than USD. Net D ebt and Financing All debt at the year-end was held in the Wilson Sons subsidiary with no recourse to Ocean Wilsons, or the investment portfolio held by Ocean Wilsons (Investments) Limited. Wilson Sons’ borrowings are used principally to finance vessel construction and the development of its container terminal business. Debt net of cash and cash equivalents at 31 December 2021 was US$440.9 million (2020: US$437.3 million). Leslie J. Rans, CPA Chief Operating and Financial Officer Ocean Wilsons Holdings Limited 23 March 2022 SECTION THREE 13 SECTION FOUR Governance - Report of the Directors The Directors present herewith their Report and Accounts for the year ended 31 December 2021. The Group accounts, presented under International Financial Reporting Standards (IFRS), comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related notes. Profit s and Dividends The Group’s profit after tax on ordinary activities attributable to equity shareholders amounted to US$63.7 million (2020: US$38.7 million). Dividends are set in US Dollars and are normally paid annually. The Ocean Wilsons dividend policy is to pay a percentage of the average capital employed in the investment portfolio and the Company’s full dividend received from Wilson Sons in the period after deducting funding for the parent company costs. The Board may review and amend the dividend policy from time to time in light of our future plans and other factors. The Board is recommending a dividend of US 70 cents per share to be paid on 15 June 2022 to shareholders of the Company as of the close of business on 20 May 2022. Shareholders will receive dividends in Sterling by reference to the exchange rate applicable to the USD on the dividend record date (20 May 2022) except for those shareholders who elect to receive dividends in USD. Principal Activities The Group’s principal activities during the year were the management of a diverse investment portfolio and the provision of maritime and logistics services in Brazil. The investment strategy is to maximise total return by investing in a portfolio of diversified assets including global equities, fixed income and alternative assets. Investments are designed to add value over the medium to longer-term through a non- market correlated, conviction-based investment style. Our subsidiary, Wilson Sons, has provided maritime services in Brazil for over 180 years. Wilson Son’s strategy is to provide maritime and logistics services to the domestic economy, international trade and the oil and gas market. Details of these activities are set out in the Financial Report and Investment Manager’s Report. C ompany Purpose The Company’s purpose is to deliver enhanced long-term value by balancing portfolio risk and avoiding the distraction of short-term cycles with a focus on growing the business through sustainable profit growth. C ompany Strateg y The Company’s strategy is currently twofold: We invest in a balanced thematic portfolio of funds by leveraging our long-term relationships and through our detailed insights and analysis. We invest in maritime logistic services providing best in class innovative solutions in a rapidly growing market. The investment portfolio strategy is to generate real returns through long-term capital growth, whilst emphasising preservation of capital rather than short-term movements in equity markets. The investment portfolio is invested in both publicly quoted and private (unquoted) assets in three components: (i) Core Regional & Thematic Component (ii) Private Equity Component (iii) Diversifying Component 14 Ocean Wilsons Holdings Limited 2021 Annual Report Commensurate with the long-term horizon, it is expected that the majority of investments will be concentrated in equity, across both ‘public’ and ‘private’ markets. In most cases, investments will be made either through collective funds or limited partnership vehicles, working alongside expert managers in specialised sectors or markets to access what we believe represent the most advantageous investment opportunities. The Wilson Sons strategy is to grow and strengthen their businesses while looking for new opportunities in the maritime and transport sector, focusing on Brazil and Latin America. Wilson Sons looks to develop its businesses by maximising economies of scale and efficiency and improving the quality and range of services it provides to customers. Wilson Sons principal services are container terminals, logistics, oil and gas support terminals, towage, shipyard and through our joint venture, offshore support vessels. Values The Company’s core values are to: • Invest and develop our business for the long-term in a sustainable manner without pressure to produce short- term results at the expense of long-term value creation; • Provide a safe operating environment for our employees; • • Respect the environment and the communities in which we operate and the people who work for us; Have meaningful long-term relationships with our stakeholders; and • To act ethically in all our dealings. SECTION FOUR 15 SECTION FOUR Directors & Directors’ Interest s Mr. Jose Francisco Gouvêa Vieira (Chairman) Mr. William Salomon (Deputy Chairman) Mr. Gouvêa Vieira is aged 72 and joined the Board in 1991. He is a partner of the Brazilian law firm of Gouvêa Vieira Advogados. Mr. Gouvêa Vieira is also a member of the Corporate Governance Committee for the American Chamber of Commerce in São Paulo and a non- executive director of Wilson Sons. Mr. Salomon is aged 64 and joined the Board in 1995. He is senior partner of Hansa Capital Partners LLP. He is also a non-executive director of Hansa Investment Company Limited and Wilson Sons and a member of the Company’s Nomination Committee. Ms. Caroline Foulger Ms. Foulger is aged 61 and joined the board in 2020. She is a Chartered Accountant with significant company director experience on boards of both listed and unlisted companies. She is a non-executive director on Hiscox Ltd, Atlas Arteria International Ltd, and Oakley Capital Investments Limited. Ms. Foulger is a retired partner of PWC Bermuda. Ms. Foulger is a member of the Company’s Audit and Risk, and Remuneration and Management Oversight Committees, and is Chair of the Nominations Committee. 16 Ocean Wilsons Holdings Limited 2021 Annual Report Mr. Andrey Berzins Mr. Christopher Townsend Ms. Fiona Beck Mr. Berzins is aged 62 and joined the Board in 2014. He is a Chartered Accountant and sits on the Boards of several Luxemburg investment funds. Mr. Berzins is the Senior Independent Director, Chair of the Company’s Audit and Risk Committee and member of the Company’s Nomination and Remuneration and Management Oversight Committees. Mr. Townsend is aged 48 and joined the Board in 2011. He is a solicitor and has an MBA from the London Business School. He is an investment director of Hansa Capital GmbH and a non-executive director of Wilson Sons. Ms. Beck is aged 56 and joined the Board in 2020. She is a Chartered Accountant and an experienced independent director on several listed and unlisted companies. She was President and CEO of Southern Cross Cable Network. Ms. Beck is a non- executive Director of Oakley Capital Investments Limited, Atlas Arteria International Ltd. and IBEX Ltd. Ms. Beck is a member of the Company’s Audit and Risk Committee and is Chair of the Remuneration and Management Oversight Committee. SECTION FOUR 17 SECTION FOUR The Directors who held office at 31 December 2021 had the following interest in the Company’s shares: Mr. J F Gouvêa Vieira (Chairman) Interest 2021 2020 Beneficial 179,100 179,100 Mr. W Salomon* Beneficial 4,659,349 4,659,349 Mr. C Townsend* Beneficial 4,040,000 4,040,000 Ms. C Foulger Ms. F Beck Mr. A Berzins Beneficial Beneficial Beneficial 15,000 10,000 8,000 5,000 3,000 5,000 * Additional indirect interests of Mr. W Salomon and Mr. C Townsend in the Company are set out in substantial shareholdings below. Mr. W Salomon is Chair of Hanseatic Asset Management LBG. Mr. C Townsend is a director of Hansa Capital GmbH, a wholly owned subsidiary of Hanseatic Asset Management LBG. Fees paid to Hanseatic Asset Management LBG amounted to US$3.3 million (2020: US$2.8 million) for acting as Investment Manager of the Group’s investment portfolio. A performance fee of US$1.6 million is payable to the Investment Manager in 2021 (2020: US$0.3 million). The Board The Board at 31 December 2021 comprised six non-executive directors. Three of the six directors are considered by the Board to be independent under the Code: Mr. A Berzins, Ms. C Foulger and Ms. F Beck. Ms. Beck and Ms. Foulger have links under the 2018 UK Corporate Governance Code as they serve on two other boards together as non-executive directors. Ms. C Foulger is Chair of one of those Boards. The Board still consider Ms. Foulger and Ms. Beck as independent as the Group has no business relationship with either of these companies and both Board members exhibit independent thought. The Board has appointed Mr. A Berzins as the senior independent director. Mr. K. Middleton, an Executive Director retired on 26 March 2021. In accordance with the Company’s byelaws, all Directors are subject to annual re-election by shareholders and if eligible, offer themselves for re-election until the following Annual General Meeting. Mr. J F Gouvêa Viera will be retiring as both Chairman and a director at the conclusion of the next Annual General Meeting and not offering himself for re-election as previously disclosed. Newly appointed directors are subject to election at the first Annual General Meeting following their appointment to the Board. A Director retiring upon the expiration of a term of office at an annual general meeting shall be eligible for reappointment for a further term. The Board, led by the Nomination Committee, considers on a regular basis how to refresh itself. Non-executive directors hold letters of appointment. The other commitments of directors are disclosed on page 16 and the Board is satisfied that these commitments do not conflict with their ability to carry out effectively their duties as directors of the Company. The Board ensures that non- executive directors have sufficient time to undertake their duties through reviewing their other directorships, monitoring attendance and participation at Board meetings. Non-executive Directors’ fees are set within limits set in the Company’s Articles of Association. The present limit is US$900,000 in aggregate per annum and the approval of shareholders in a General Meeting is required to change this amount. The remuneration of non-executive directors is reviewed every three years. Levels of remuneration for the chair and all non-executive directors reflect the time commitment and responsibilities of the role and are benchmarked against comparable companies and considering the Board evaluation. During the year ended 31 December 2021, the Company paid US$0.6 million (2020: US$0.9 million) in directors fees. The division of responsibilities between the Chair and the senior independent non-executive director have been clearly established, set out in writing and agreed by the Board. These are available on the Company’s website. Ocean Wilsons does not have a chief executive. The Board appointed Ms. L Rans as Chief Operating and Financial Officer on 1 January 2021. Our subsidiary, Wilson Sons, is managed by the Board of Wilson Sons who have appointed Mr. F Salek as chief executive of Wilson Sons. Ocean Wilsons manages its interest in Wilson Sons through the appointment of non-executive directors of Wilson Sons (presently Mr. J F Gouvêa Vieira, Mr. W Salomon and Mr. C Townsend) voting on matters requiring Wilson Sons’ shareholders’ approval. The Ocean Wilsons Holdings Limited Board has a formal schedule of matters specifically reserved for its attention which includes: • Determining the Company’s purpose, values and strategy and satisfying itself that these and its culture are aligned; • Determining the responsibilities of the Chair and Directors; • Recommending changes to the capital structure of the Company or other matters relevant to its status as a listed Company for shareholder approval; 18 Ocean Wilsons Holdings Limited 2021 Annual Report • Approving significant matters relating to acquisitions and disposals and consideration of significant financial matters; • Selecting the Chair of the Board; • • Appointing or removing the company executives and company secretary; Reviewing any potential conflicts of interest and, where considered appropriate, to approve any conflict of interest; • Approving annual and interim reports; • Proposing any dividends and dividend policy; • • • • • • Appointing the external auditor and any financial advisor or corporate broker; Determining the Terms of Reference, membership and chair of Board committees, including the Audit and Risk Committee, Remuneration and Management Committee and Nomination Committee; Approving any agreements or amendments to agreements between Ocean Wilsons and Wilson Sons including the relationship agreement; Voting the shares in Wilson Sons on matters presented to shareholders of Wilson Sons for shareholder approval; Undertaking a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors; and Reviewing the Company’s overall corporate governance arrangements. The Company has a procedure in place by which directors can seek independent professional advice at the Company’s expense if the need arises. The Board has full and timely access to all relevant information to enable it to perform its duties. The Company has directors and officer’s insurance in place. The Chief Operating and Financial Officer is responsible for advising the Board on all corporate matters. Each director has access to the advice and services of the Company Secretary, Mr. F McAleavey, and the Chief Operating and Financial Officer. During 2021, seven scheduled meetings of the Ocean Wilsons Board were held in Bermuda with those Directors unable to travel due to the Covid-19 pandemic joining by video conference. Details of attendance at Board meetings are set out below. Directors’ attendance at Board meetings: Director Mr. J F Gouvêa Vieira (Chairman) Mr. W Salomon Ms. C Foulger Mr. C Townsend Mr. A Berzins Ms. F Beck Mr. K Middleton (retired March 26, 2021) Board meetings attended 7 7 7 7 7 7 2 The agenda for each scheduled Board meeting is set by the Chair in consultation with the Chief Operating and Financial Officer. The Board of Ocean Wilsons is invited to the Wilson Sons Board meetings where appropriate to receive operational updates. All new Directors participate in an induction program on joining the Company. This covers such matters as strategy, operation and activities of the subsidiaries and corporate governance matters. Site visits and meetings with senior management are also arranged when possible. Directors make periodic operational site visits. Directors are also provided with industry and regulatory updates as part of their ongoing training. No site visits were performed in 2021 due to travel and operational restrictions resulting from the Covid-19 pandemic. C onflict s of Interest The Board has in place a procedure for the consideration and authorisation of conflicts or possible conflicts of interest with the Company’s interests annually including those resulting from significant shareholdings. If a director has a conflict of interest, he/she leaves the meeting prior to discussion unless requested to remain and leaves determination of such matters to the other directors. The Board ensures that the influence of third parties does not compromise or override independent judgement by requiring disclosure of outside interests, encouraging a culture of openness and debate amongst Board members and promoting independent thought. SECTION FOUR 19 SECTION FOUR Board of Ocean Wilsons (Investment s) Limited The Board of Ocean Wilsons (Investments) Limited is currently constituted by the same directors as the Board of Ocean Wilsons Holdings Limited. Ms. C Foulger was appointed Chair from 1 January 2021. The Board delegates authority to run the investment portfolio held by Ocean Wilsons (Investments) Limited to the Investment Manager, Hanseatic Asset Management LBG within certain guidelines. The Board of Ocean Wilsons (Investments) Limited has a formal schedule of matters specifically reserved for its attention which include: • • Appointment, removal and terms of the Investment Manager; Determination of investment guidelines and restrictions in conjunction with the Investment Manager; • Approval of the investment objective and benchmark; • Approval of and limits on the use of derivative instruments; • Review of the performance of the Investment Manager; • Appointment, removal and terms of the custodian of Ocean Wilsons (Investments) Limited; • Approval of and limits on borrowing; • Approval of the annual accounts for Ocean Wilsons (Investments) Limited; and • Approval of any dividends. OWIL Investment Policy The Investment Manager will seek to achieve the investment objective through investments in publicly quoted and private (unquoted) assets across three ‘silos’: (i) Core Regional & Thematic Component – this forms the core of the portfolio and provides global exposure mostly through single-country and regional equity funds with the balance reflecting the Investment Manager’s current market outlook. Thematic funds are included to provide exposure to growth sectors such as technology and biotechnology. (ii) Private Equity Component – In line with the Company’s long-term investment horizon we invest in private equity funds. This provides access to the improved potential investment returns available by being able to commit capital for multiple years and also to large areas of the economy that are not accessible through public markets. (iii) Diversifying Component – as business cycles mature, we seek to shift dynamically to those asset classes that are likely to add portfolio protection. This component includes a wide variety of investment strategies, with the common thread that they all display low correlations to broad equity markets. The Investment Manager maintains a global network to find the best opportunities across the three silos worldwide. The portfolio contains a high level of investments which would not normally be readily accessible to investors without similar resources. Furthermore, many holdings are closed to new investors. There is currently no gearing although the Board would, under the appropriate circumstances, be open-minded to modest levels of gearing. Likewise, the Board may, from time to time, permit the Investment Manager opportunistically to use derivative instruments (such as index hedges using call and put options) to actively protect the portfolio. C o n t r a c t s a n d A g r e e m e n t s w i t h Subst antial Shareholders Mr. W Salomon and Mr. C Townsend have interests in the investment management agreement with Hanseatic Asset Management LBG. Both Mr. W Salomon and Mr. C Townsend receive remuneration from Hanseatic Asset Management LBG. The independent directors of the Board conduct a regular review of this agreement. Ser vice C ontract s Regarding the Directors proposed for re-election at the Annual General Meeting there are no service contracts between any of them and the Company. Nomination C ommit tee Ms. C Foulger, an independent director, was the Chair of the Nomination Committee throughout 2021. In addition to Ms. Foulger, the Committee comprised of two additional directors, Mr. A Berzins, an independent director, and Mr. W Salomon. There were two scheduled meetings in 2021. Director’s attendance at these meetings is set out below: Director Ms. C Foulger (Chair) Mr. W Salomon Mr. A Berzins Committee meetings attended 2 2 2 . 20 Ocean Wilsons Holdings Limited 2021 Annual Report The Nomination Committee has formal terms of reference approved by the Board which are reviewed on an ongoing basis and are available on the Company’s website. The principal responsibilities of the Nomination Committee are: • • • • to lead the process for the appointment of Directors, ensure plans are in place for orderly succession, and oversee the development of a diverse pipeline for succession, considering the Company’s strategic priorities; to be responsible for identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise; to lead the regular review of the Board structure, size and composition (including its skills, knowledge, diversity and experience); before any appointment is made to the Board, prepare for consideration by the Board an updated evaluation of the balance of skills, knowledge and experience on the Board, and in the light of this evaluation prepare a description of the role and capabilities required for a particular appointment. In identifying suitable candidates, the Committee shall: Annual General Meeting 26 May 2022 At the upcoming Annual General Meeting, Mr. J F Gouvêa Vieira will not stand for re-election after having served as Chairman of the company for the past 23 years. The Board places great importance on a long-term solution for the succession and has decided unanimously that Ms. Caroline Foulger, a current Director, with her extensive experience and strong leadership qualities is the ideal candidate to become the Chair of Ocean Wilsons. Therefore, the Board of Directors proposes to the Annual General Meeting to re-elect her as a member of the Board of Directors after which the Board will appoint Ms. Foulger as Chair. R e m u n e r a t i o n a n d M a n a g e m e n t Oversight C ommit tee The Remuneration and Management Oversight Committee comprises three independent non-executive directors: Ms. F Beck (Chair), Mr. A Berzins and Ms. C Foulger. There were two scheduled meetings held in 2021. Director’s attendance at these meetings is set out below: — use the services of external advisers to facilitate the Director search; Ms. F Beck (Chair) — consider candidates from a wide range of backgrounds; Mr. A Berzins and Ms. C Foulger Committee meetings attended 2 2 2 — consider candidates on merit and against objective criteria and with due regard for the benefits of diversity on the Board, including gender, taking care that appointees have enough time available to devote to the position; • • ensure that, prior to the appointment of a director, the proposed appointee should be required to disclose any business interests that may result in a conflict of interest and be required to report any future business interests that could result in a conflict of interest; and arrange, that on appointment to the Board, Directors receive a formal letter of appointment confirming clearly what is expected of them in terms of time commitment, committee service and involvement outside Board meetings. The Committee’s terms of reference are reviewed annually and are available on the Company’s website. The principal responsibilities are: • • • to determine the policy for Ocean Wilsons’ executive management’s remuneration and the remuneration for the chair and non-executive Directors; to determine bonuses payable to executive management under the Company’s bonus scheme; and to review significant vendor agreements and other management oversight as required. Remuneration Policy The Company’s remuneration policy aims to align the interests of the executive with those of shareholders. The overriding objective is to ensure that the Company’s executive remuneration policy encourages, reinforces and rewards the SECTION FOUR 21 SECTION FOUR delivery of sustainable shareholder value. The Remuneration Committee is responsible for setting non-executive Directors’ fees. Fees are structured as a basic fee for Board membership and an additional fee for any committee chair. Non-executive Director fees are reviewed at least every three years, the last review was in 2019. The Committee believes that an effective remuneration strategy plays an essential part in the future success of the Company. The Committee does not determine the policy for remuneration or set remuneration for the Chair, executive Directors and senior management at Wilson Sons. It also does not review workforce remuneration and related policies or set remuneration policy at Wilson Sons. The Board regularly reviews oversight of Wilson Sons workforce remuneration and related policies to ensure that incentives and rewards are aligned with culture and are considered when setting Wilson Sons’ policy for executive remuneration. Remuneration Non-executive Directors’ fees are set within limits set in the Company’s Articles of Association. The present limit is US$900,000 in aggregate per annum and the approval of shareholders in a General Meeting is required to change this amount. Levels of remuneration for the chair and all non-executive directors reflect the time commitment and responsibilities of the role and are benchmarked against comparable companies and considering the Board evaluation. The board of Wilson Sons is responsible for all remuneration matters relating to Wilson Sons and its subsidiaries. Mr. J F Gouvêa Vieira, Mr. W Salomon and Mr. C Townsend are directors of Wilson Sons. These directors received directors’ fees from Wilson Sons in addition to their fees as directors of Ocean Wilsons in 2021. Audit and Risk C ommit tee The Audit and Risk Committee comprises three independent directors, Mr. A Berzins (Chair), Ms. F Beck and Ms. C Foulger. The Board is satisfied that during 2021 the three members have recent and relevant financial experience as all have served on the audit committees of other listed companies and hold accounting qualifications. The Committee met six times in 2021. The Chief Operating and Financial Officer of Ocean Wilsons attended each of these meetings. The external auditors attended three meetings. The Committee meets with the external auditor without the Chief Operating and Financial Officer present to receive feedback on their performance. Director Mr. A Berzins (Chair) Ms. F Beck Ms. C Foulger Committee meetings attended 6 6 6 The Audit and Risk Committee has defined terms of reference which are available on the Company’s website. The principal responsibilities of the Audit and Risk Committee are to: • • • • • review the integrity of the interim and full year financial statements of the Company, including reviewing significant financial reporting judgements included in them; provide advice to the Board as to whether the annual report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s financial position and performance, business model and strategy; review the Company’s internal control and risk management systems; make recommendations to the Board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, reappointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor; review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements. The independence of the external audit process has been assessed by reviewing reports from the external auditors describing their arrangements to identify, report and manage any conflicts of interest. The Board also reviews the provision of non-audit services provided by the external auditors. Any non-audit services provided by the auditor must be an arms-length transaction; • consult with the Group’s auditor and, where necessary the auditor of the subsidiary companies, regarding any matters arising in the course of the annual audit which should be brought to the attention of the Board; 22 Ocean Wilsons Holdings Limited 2021 Annual Report • • • monitor the Group’s risk exposure, opportunities and mitigation; consider the need for an Ocean Wilsons internal audit function and review the work performed by the Wilson Sons internal audit function; and review arrangements by which employees of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. Report from the Audit and Risk Committee Chair on the actions taken by the Audit and Risk Committee to discharge its duties: Since the beginning of 2021, the Audit and Risk Committee has: reviewed the December 2020 annual report and financial statements, the June 2021 half yearly financial report and the quarterly updates issued in May and November 2021. As part of the review of the December 2020 Annual Report and Financial Statements, the committee received a report from the external auditor on their audit work performed on the annual report and financial statements; provided advice to the Board on whether the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy; reviewed and challenged the assumptions used in the Wilson Sons impairment test on the Brasco offshore support base cash-generating unit “CGU” including long-term revenue; costs and expenses; investments; projection period; growth rate and discount rates based on the weighted average cost of capital (“WACC”); reviewed and approved the scope of audit work to be undertaken by the auditor; • agreed the fees to be paid to the external auditor for the audit of the December 2021 financial statements; undertook a robust request for proposal (“RFP”) and tender process to assess applicants and appoint a new auditor; assessed the qualification, expertise and resources, and independence of the external auditor; • • • • • • • • • • • • • received reports from the Wilson Sons Audit Committee and the Wilson Sons internal audit team; received a report on cybersecurity at Wilson Sons. The report highlighted the principal risks as ransomware, data loss, customer data breaches, mission critical systems failure, reputational damage, financial losses and operational accidents. The Committee was satisfied with the actions being taken to mitigate cyber risks; received a report on the Wilson Sons enterprise risk management process (see principal and emerging risks on page 26); received litigation reports from the Wilson Sons legal department outlining the legal provisions in the accounts and work performed to manage possible claims; received a briefing on the Wilson Sons whistle-blowing channel outlining the structure of the whistle-blowing channel and procedures for following up on complaints received; reviewed the 2021 annual report to assess if the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the performance, strategy and business model of the Company. The Committee is of the opinion that the annual report and accounts articulate how the Company has performed during the year and provides full disclosures at each of the segment levels. The messages in the Chair’s Statement, Directors’ Report and Financial Reports are reflected in the annual accounts and there is consistency between the narrative sections and the financial statements. As part of the review of the December 2021 annual report and financial statements, the committee received a report from the external auditor on their audit work performed on the annual report and financial statements; and reviewed the performance of the external auditors and the effectiveness of the external audit process for the year ended 31 December 2020. The review was based on a survey of key stakeholders across the Group, the quality of the auditors’ reporting to and interaction with the Audit Committee. Based on the information currently available and this review, the Audit Committee was satisfied with the performance of the previous auditors and the effectiveness of the audit process. SECTION FOUR 23 SECTION FOUR To fulfil its responsibility regarding the independence of the external auditor, the Audit and Risk Committee reviewed: • • • • EY’s determination that they would not be independent for the 2021 audit. As such, the Audit Committee accepted EY’s resignation and recommended to the Board that the successful audit firm from the RFP process for the 2022 audit appointment, KPMG Bermuda, be appointed to perform the 2021 audit; the overall extent of non-audit services provided by the external auditor. Non-audit services were provided in 2021, before EY resigned as the Company’s auditor and before the RFP process to appoint a new auditor, by KPMG Bermuda. As part of the RFP process and due diligence performed by KPMG, any potential impairments to independence and the management of those were discussed and it was concluded by both parties that these non-audit services did not impact KPMG’s independence; the external auditor plan for 2021, noting the role of the audit partner who signs the audit report and who, in accordance with professional rules, has not held office for more than five years and any changes in key audit staff; and a report from the external auditor describing their arrangements to identify, report and manage any conflicts of interest. After discussion with the external auditor and Ocean Wilsons (OWHL) management, it was determined that the key risks of misstatement in the Group’s 2021 financial statements relate to: Provisions – Legal claims against the Brazilian operations comprise civil and environmental cases, tax cases and labour claims. The reporting risk relates to the completeness of claims recorded and the estimation of the provisions held against these exposures. There remain a significant number of contingent liabilities, particularly concerning labour and taxation claims. Provisions are based on prior experience, Wilson Sons’ management’s best knowledge of the relevant facts and circumstances and expert legal advice relative to each case. The Committee questioned Wilson Sons’ management on their assumptions used in determining provisions and the procedure for classification of legal liabilities as probable, possible or remote loss by the external lawyers. The Committee reviewed legal reports from Wilson Sons’ management on contingencies and asked questions on the background and progress of material claims. The Committee evaluated the current level of provisions in light • 24 of historical trends and claim history to ensure provisions were adequate. The committee further ensured that adequate resources are allocated to recording, evaluating and monitoring legal claims to ensure the completeness of claims recorded and provisions made. The Committee also discusses potential risks surrounding legal claims with the external auditor and reviewed their audit findings. • Impairment Risk to Wilsons Sons Brasco cash generating unit – The Group has significant property plant and equipment and intangibles balances within the Brasco cash generating unit. The reporting risk is that these balances may be overstated. Wilson Sons’ management perform impairment reviews for property, plant and equipment and intangibles as required by IAS 36, Impairment of Assets. The impairment test is performed by comparing the carrying value of property, plant and equipment and intangibles to its value in use, calculated using the discounted cash flow forecasts under the principles of IAS 36. The committee examined and challenged Wilson Sons’ management’s key assumptions used in the impairment tests to understand their impact on the recoverable amounts. The Committee was satisfied that the significant assumptions used were appropriate and sufficiently robust. The Committee was further satisfied with the impairment disclosures in the financial statements. The Committee also discusses potential risks surrounding impairment risk with the external auditor and reviewed their audit findings. • Revenue recognition – The revenue recognition risk could arise from inappropriate revenue recognition policies, incorrect application of policies or cut-off errors surrounding year end or management override/ manipulation of revenue. The Committee considered the Group’s revenue recognition policies and the level of transactions compared to previous periods. The Committee received quarterly Wilson Sons’ management reports on revenue and financial performance with comparisons to budget and prior year. The Committee reviewed and questioned Wilson Sons’ management explanations for variances and revenue performance. The Committee also discussed potential risks surrounding revenue recognition with the external auditor and reviewed their audit findings. The Committee was satisfied with management’s explanations of variances and application of the presented policies relating to revenue recognition. • Investment valuation – The investment valuation risk arises from the valuation of the Level 3 investments which requires significant judgements and estimates by Ocean Wilsons Holdings Limited 2021 Annual Report management and external inputs, principally investment valuations made by the managers of the funds we invest in. The Committee received quarterly reports from the Investment Manager on investment performance which included historical performance analysis and management outlook for investment and market performance. The Committee reviewed and questioned the Investment Manager and obtained explanations for investment performance and variations from market performance, investment expectations and potential risks to future performance. This information is considered in the valuation of Level 3 investments. The Committee examined and challenged management’s key assumptions used in the valuation of investments. The Committee was satisfied that the significant assumptions used were appropriate. The Committee was further satisfied with the disclosures in the financial statements. The Committee also discusses potential risks surrounding investment valuation with the external auditor and reviewed their audit findings. During the year, the audit of the Company’s 2020 financial statements undertaken by Ernst & Young LLP was chosen for inspection by the United Kingdom Financial Reporting Council (“FRC”). The FRC’s review identified limited areas for improvement. As the company changed auditors during 2021 to KPMG, the Committee discussed the areas identified for improvement by the FRC with the Company’s new auditor and understood how the new auditor proposed to ensure their audit of the 2021 financial statements would address the FRC’s findings. Andrey Berzins Audit and Risk Committee Chair Ocean Wilsons Holdings Limited 23 March 2022 Employees The average number of persons, including Directors, employed by the Group in 2021 was 3,207 (2020: 3,807), almost all of whom are employed by our operating subsidiary, Wilson Sons. Share Option Plan On 24 June 2021, the shareholders of Wilson Sons, in a special general meeting, approved the migration of the share options plan (“Migration Plan”) from Wilson Sons Limited (“WSL”) to Wilson Sons Holdings Brasil S.A. as part of Wilson Sons listing on the Novo Mercado. The Migration Plan replaced the share options granted by WSL under the 2014 Share Options Scheme which allowed for the grant of options to eligible participants to be selected by the Wilson Sons Board. Details of the share option plan are disclosed in note 26 to the consolidated financial statements. Subst antial Shareholdings As at 31 December 2021 the Company was aware of the following holdings of its shares, in excess of 3% of the issued ordinary share capital: Name of holder Hansa Investment Company Limited Number of shares 9,352,770 Victualia Limited Partnership 4,435,064 Mr. C Townsend 4,040,000 % Held 26.45 12.54 11.42 Dynamo Administração de Recurso Utilico Emerging Markets Utilities Limited 2,338,369 6.61 1,623,000 4.59 The Company has been advised that Mr. W Salomon has an interest in 4,435,064 shares registered in the name of Victualia Limited Partnership and that Mr. W Salomon has an interest in 27.2% and Mr. C Townsend an interest in 25.9% of the voting shares of Hansa Investment Company Limited. Auditor During the year, Ernst & Young LLP (“EY”) resigned as auditors as EY determined they would not be independent for the Company’s 2021 audit. The Company appointed KPMG Audit Limited (“KPMG”) as the Company’s independent auditor, after a competitive tender process, with effect from 21 October 2021 until the conclusion of the Company’s annual general meeting in 2022. KPMG have expressed their willingness to continue in office as auditor and a resolution to reappoint KPMG Audit Limited under the provisions of Section 89 of the Bermuda Companies Act 1981 will be proposed at the forthcoming Annual General Meeting. During the year ended 31 December 2021, the Company paid US$0.7 million (2020: US$0.7 million) in audit fees for the audit of its consolidated financial statements. SECTION FOUR 25 SECTION FOUR Internal C ontrols Risk Management Ocean Wilsons has an ongoing process for identifying, evaluating and managing key risks including financial, operational and compliance controls. A risk register is maintained detailing business risks, together with controls and responsibilities. The risk register is regularly reviewed by the Audit and Risk Committee. The Board is satisfied that these systems are operating effectively. The principal risks and uncertainties are described below and additionally note 31 to the consolidated financial statements provides detailed explanations of the risks associated with the Company’s financial instruments. The Audit and Risk Committee and the Board carried out a robust assessment of the Group’s emerging and principal risks. The Board is responsible for the system of internal control and reviewing its effectiveness. The Audit and Risk Committee assists the Board in monitoring the effectiveness of our internal control and risk management policies. The internal controls are designed to cover material risks to achieving the Group’s objectives and include business, operational, financial and compliance risks. The internal controls are designed to identify, evaluate and manage rather than eliminate risk of failure to meet business objectives. These controls have been in place throughout the year and no significant deficiencies have been identified. The Board reviews the need for an internal audit department annually and currently considers no internal audit function is required. Wilson Sons has an independent Audit committee in addition to an internal audit function. Hanseatic Asset Management LBG, the Investment Manager of Ocean Wilsons (Investments) Limited and its portfolio custodian Lombard Odier also provide reports on their internal controls for the Board to consider and review in its assessment for the need of an internal audit department. The Board also noted there was segregation of duties between the Investment Manager and the recording and preparing of accounts as this is done by an independent professional accounting firm. Additionally, Wilson Sons presents the results of the Wilson Sons’ internal audit function to the Wilson Sons’ and Ocean Wilsons’ Audit and Risk Committees on an annual basis and reports any material findings on a quarterly basis. No material items were reported in 2021. In reviewing Wilson Sons, the Board receives reports from the Wilson Sons’ legal department, and on cybersecurity from Wilson Sons’ IT department. The Ocean Wilsons’ employee whistle-blowing policy is designed to enable employees of the Company to raise concerns internally and at a high level and to disclose information which the individual believes may show malpractice or impropriety. Wilson Sons’ whistle-blowing policy and procedures enable employees who have concerns about the application of Wilson Sons’ Code of Ethics to raise them with the Wilson Sons’ Ethics Committee. During the year, the Board of Ocean Wilsons received reports on the Ocean Wilsons’ and Wilson Sons’ corporate governance environment as well as the work of the Wilson Sons’ Ethics Committee. 26 Ocean Wilsons Holdings Limited 2021 Annual Report Principal Risks Nature of Risk Description Potential Impact Risk mitigation Financial Risk – equity market exposure The Group’s investment activities expose it to movements in equity values. a r i s i n g L o s s e s from large adverse movements in equity prices. Financial Risk – foreign currency exposure The Group’s investment activities expose it to movements in foreign currency exchange rates. a r i s i n g L o s s e s from large adverse movements in foreign currency exchange rates. Financial Risk – USD/ BRL currency volatility The functional currency of the Group is US Dollars. OWHL has a significant investment in Wilson Sons that in turn has a significant exp o sure the Brazilian Real. to The Group is exposed to to losses due movements the Brazilian Real /US Dollar exchange rate. in As a long-term investor, short-term changes in the value of investments are part of the investment cycle. The Group does not have any significant borrowings or shareholder withdrawals that may put pressure on the Group to sell an investment solely due to its price movements. The Board of OWIL determines investment guidelines and restrictions in conjunction with the Investment Manager, these together, with the Investment Managers reports are reviewed at the OWIL board meetings to monitor performance and ensure compliance with the investment guidelines. The investment portfolio is invested in a diversified range of asset classes and markets, so the Group is not concentrated in one particular market or asset class. OWHL and OWIL do not take speculative positions in non-US Dollar denominated assets. The majority of cash and liquid assets are maintained in US Dollars. The Group (outside of Wilson Sons) does not have material non-US Dollar denominated liabilities. Non-US Dollar denominated liabilities are trade creditors from UK based suppliers, non-US Dollar denominated investment trades waiting to settle and non-US Dollar capital subscription commitments. The Board of Wilson Sons is responsible for managing currency risk in their operations. OWHL does not hedge its exposure as the functional currency of Wilson Sons is US Dollars and the Board does not deem it practicable to hedge this exposure. There is a partial natural hedge in the underlying Wilson Sons business as a significant portion of pricing and cashflows are linked to the US Dollar. The Board of OWHL monitors the performance and risks of Wilson Sons through reviews of the OWHL interim and annual financial statements and the presence of three OWHL appointed Board members on the Board of Wilson Sons. SECTION FOUR 27 SECTION FOUR Principal Risks - c o n t i n u e d Nature of Risk Description Potential Impact Risk mitigation Wilson Sons is a market leader in many of the business segments providing diversification in the service offerings. Wilson Sons maintains levels of capital expenditure and investment in assets and people to be able to remain competitive and seek opportunities to drive efficiencies. The majority of Wilson Sons’ business is not exposed to oil and gas and is well diversified. However, Wilson Sons seeks to engage in long-term contracts to reduce volatility and assesses the value-in-use of these entities to ascertain if there are any impairments. Access to systems and information is password protected and is limited to authorised users. Regular back up on network to cloud and separate disks are performed. Wilson Sons actively manages technology risks and reports to the Wilson Sons’ Board which provides the report to OWHL on measures to protect and, the impact of any breach. The Group continues to monitor opportunities to invest in technology and implement operational efficiencies that could reduce our greenhouse gas emissions. In 2021 Wilson Sons completed the S&P rating for ESG to assist in grading current state and setting goals for improvement. OWIL has requested that Hansa takes the necessary steps to become a signatory to the UN Program for Responsible Investing in 2022. Wilson Sons monitors and trains its employees to reduce injury and improve safety in the work environment. Additionally, they invest in the communities in which they operate with charitable giving. OWHL approved a corporate giving policy in 2021 which will be implemented in 2022. The OWHL Board and management has improved diversity with the addition of 2 female directors and 1 female executive. A female Chair will be appointed for OWHL in May 2022. Financial Risk – domestic and international trade volumes Adverse movements in international trade or offshore oil and gas industry can lead to financial losses. Demand for Wilson Sons’ ser vices is substantially dependent on overall volume of Brazilian domestic and international trade. Wilson Sons’ onshore and offshore support bases are dependent the Brazilian on offshore oil and gas industry. Risk that data could be compromised, denial of service, business continuity issues, or confidential information may be accessed by unauthorised users. The Group may not be performing at best practice ESG levels which could impact both compliance and regulation, potential f ine s, inve s tment p er formanc e and investor relations. IT S e cur i t y Risk – Technolog y and cybersecurity A successful malicious cyber-at tack could cause damage to our business and operations. ESG Risk – compliance with ESG regulations and reaching emission targets set - E n v i r o n m e n t a l emissions reduction t a r g e t s f o r W S operations are not met. ESG Governance - inve s t m ent OW IL holdings do not align w i t h r e sp o n s ib l e investing practices ESG Governance - OWHL Board is not compliant and its ESG strategy is not being effectively managed or communicated ESG Social - Health and Safety targets for WS operations and corporate giving program are not met or implemented ESG Social - OWIL responsible investing practices are not met or implemented ESG Social - OWHL corporate giving and diversity policies are not met or implemented 28 Ocean Wilsons Holdings Limited 2021 Annual Report Emerging Risks Nature of Risk Description Potential Impact Risk mitigation Emerging Risk – Longer-term impacts o f C O V ID -19 o n financial markets and the container shipping industry r e v e n u e s G r o u p and returns on the investment portfolio could be negatively impacted as well as workforce and operational disruption. Emerging Risk – Changing p olitic al e n v i r o n m e n t a n d regulatory policies increases Regulation is becoming geographically diverse with in protectionist behaviours f r a g m e n t e d a n d regulation. Additionally, governments could seek to recover the costs of the COVID-19 pandemic through tax increases. The Group has a diversified portfolio of assets. Since January 2020 Wilson Sons has implemented a number of measures and protocols to ensure: (i) the health, safety and well-being of our employees, clients and partners; (ii) the continuity of operations; and (iii) the financial strength and resilience of the business. We continue to monitor developments in the Covid-19 pandemic and will take actions in managing our businesses where appropriate. The Group holds a diversified portfolio of assets to avoid excessive exposure to specific political risks. Investment decisions take account of suitable risk premia in economies and financial markets most susceptible to political intervention. r e v e n u e s G r o u p and returns on the investment portfolio could be negatively i m p a c t e d f r o m continued volatility in markets as economies seek to recover and avert from pandemic related costs and production delays. Further work disruption in the event of increased severity and spread of new variants. Adverse political and regulatory measures i m p a c t i n g o u r strategy could result in increased costs, create a competitive disadvantage or have negative impact on our return on capital employed. SECTION FOUR 29 SECTION FOUR Emerging Risks - c o n t i n u e d Nature of Risk Description Potential Impact Risk mitigation The Board continues to monitor and evaluate the potential impacts resulting from climate change and extreme weather events including the regulation risk that may cause government action. The Company engaged a consultant to develop its framework for TCFD reporting requirements for 2021 and 2022 which will evolve the Company’s risk management approach as it relates to climate risk and set targets for carbon emission reductions and the path to meet those targets. The Board continues to monitor opportunities to invest in technology and implement operational efficiencies that could reduce our greenhouse gas emissions. Emerging Risk - Climate change and extreme weather events may impact our business or the businesses of our customers Much of the Group’s revenue is derived from services linked to Brazilian trade volumes and are sensitive to the rate of growth in Brazilian GDP and trade flows. Brazilian GDP or trade flows may be adversely impacted by climate change or a change in the frequency or intensity of extreme weather events. Agricultural exports account for a significant portion of Brazilian trade and are particularly vulnerable to changes in weather patterns which may result from climate change. Decreases in Brazilian growth or trade volumes could adversely affect demand for Group ser vice s and it s financial condition. The Group’s operational efficiency may also be adversely impacted by climate change or extreme weather events. Decreases in Brazilian growth or trade volumes c o u l d a d v e r s e l y affect the demand for services and the financial condition of the Group. The operational efficiency may also be adversely impacted by climate change or extreme weather events. There is a regulatory risk that government may act prompted by climate change that impacts our business or the businesses of our customers. The International Maritime initial Organisation G r e e n h o u s e G a s E mis sions ( GH G ) strategy envisages a reduction in carbon intensity of international shipping (to reduce CO2 emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008); and that total annual GHG emissions from international shipping should be reduced by at least 50% by 2050 compared to 2008. 30 Ocean Wilsons Holdings Limited 2021 Annual Report C ommunications with Shareholders The Board regularly monitors the shareholder profile of the Company. It aims to provide shareholders with a full understanding of the Company’s activities and performance and reports formally to shareholders twice a year by way of the Annual Report and Financial Statements and Half Year Financial Report. When a significant proportion of the votes have been cast against a resolution at an Annual General Meeting the Board will contact significant shareholders to understand the reasons behind their vote. The Company’s website www.oceanwilsons.bm contains copies of the annual and interim reports and stock exchange announcements. Environment, Social and Governance Practices ( “ESG” ) The Board believes that responsible investing and sustainable operating practices are integral to the longer-term delivery of the Company’s long term success. The Board works closely with both the Investment Manager and Wilson Sons’ management to regularly review the Company’s performance, investment strategy, capital investment and expansion opportunities. The Board reviews and assesses underlying policies to ensure that the Company is evolving its ESG strategy to drive a culture that ensures effective, ethical and viable investment for our shareholders and future investors. The Board has agreed a responsible investing policy with OWIL’s Investment Manager, Hanseatic Asset Management LBG. As long-term investors, the Company has a natural commitment to be responsible investors and good corporate citizens. This is reflected in the belief that such businesses and investors are likely to generate superior long-term returns and, furthermore, consideration of such issues is an important element to manage potential risks. The Responsible Investment Policy agreed with the Investment Manager incorporates ESG factors into their fund management business. When assessing the attractiveness of a fund or company they consider their environmental impact, social factors and good governance. Currently, Hansa Capital Partners’ investment policies include reviewing its investment portfolio and identifying if a portfolio manager or company are not engaged in practicing ESG. Our Investment Manager will then seek to engage with them to encourage improvement with the ultimate sanction being exiting, or not investing in, a fund or company if their concerns are not sufficiently addressed. As part of the Investment Manager’s fund selection process, ESG is included as part of due diligence. It considers the following factors: • Does the manager take their ESG responsibilities seriously? • Do they have a formal ESG policy? • How does the manager engage with those companies that are failing in their responsibilities? • What is their voting policy? • How do they consider their carbon footprint? When the Investment Manager is selecting funds, they do not seek to exclude specific sectors and countries, but instead, for those companies that make significant use of energy, resources and materials they want to understand how they manage these issues and their responsibilities. The Investment Manager’s Responsible Investing Policy is available on the Hanseatic Group website www.hansagrp.com. Environment The Board closely engages with Wilson Sons Board and Management to ensure that there is alignment on the strategic direction, focus, targets and reporting on ESG matters and on the newly introduced TCFD reporting requirements for 2022. Wilson Sons continues to manage, implement and develop robust ESG practices. Of particular note, the Board received a report from Wilson Sons on their innovation strategies aimed at transforming how Wilson Sons operates and leverages technology to accelerate a digital culture, leverage internal expertise to reduce impacts of interactions with ecosystems and to drive overall ESG initiative success. During 2021 Wilson Sons completed the Standard and Poor’s ESG Rating and ranked in the second quartile. As part of this exercise, Wilson Sons has prioritized the following aspects in driving and measuring environmental sustainability: • Emissions and Climate Change • Energy Usage • Waste and Water Resources Usage • Impact on marine eco-systems As a way to reduce the impact of operating activities on the environment, Wilson Sons has been identifying opportunities for decarbonisation of its energy matrix. Since 2014, Wilson Sons has maintained a commitment to proactively publish its Greenhouse Gas Emissions Inventory (GHG) in the public SECTION FOUR 31 SECTION FOUR emissions registry, a platform managed by the Brazilian GHG Protocol Programme. In 2021, Wilson Sons was awarded the Gold Seal of the GHG Protocol inventory. Wilson Sons has replaced diesel operated cranes with electric cranes and estimate a reduction of about 35% in operational carbon intensity (kgCO2 / TEU) with the electrification of ten cranes. Additionally, the towage operations centre for Wilson Sons reduced the use of maritime fuel with the optimisation of navigation routes. Greenhouse gas emissions GHG Emissions - Scope 1 Unit Container Terminals Towage Others Total tCO2e tCO2e tCO2e tCO2e GHG Emissions - Scope 2 Unit Container Terminals Towage Others Total tCO2e tCO2e tCO2e tCO2e 2021 7,208.94 2020 7,847.90 2019 9,751.34 53,364.03 47,650.22 39,554.55 1,882.27 1,010.48 1,453.55 62,455.24 56,508.60 50,759.44 2021 2,678.96 90.98 398.24 2020 1,573.30 86.21 252.68 2019 1,826.64 94.18 419.76 3,168.18 1,912.19 2,340.58 In addition to container terminal and towage activities, shipyards produced increases in carbon emissions year over year, with an increase of 594 tCO2e. This is due to 22 dockings in 2021, a 29% increase over 2020 which was artificially low due to Covid. The construction of two tugboats was also initiated in 2021 compared to 2020 when the pandemic halted construction and only docking operations were maintained. Wilson Sons full disclosure of environmental metrics can be found in their 2021 Sustainability Report at www.wilsonsons. com.br. The Group reports on its environmental initiatives, emissions and TCFD compliance in its TCFD report on page 34. The towage division represents, on average, about 80% of Wilson Sons’ emissions. Currently, the fleet uses Diesel Marine Oil (DMA) in its propulsion systems. In 2021, there was an increase of 10.5% in Scope 1 emissions due to the significant growth in the total of special operations (29%), the greater need for vessel displacement between the operational units and the number of maneuvers performed. Although accounted for, fuel consumption during vessel transfers between units is not part of the maneuver operational activity. There was an increase of around 25% in electricity consumption at the container terminals, due to the longer stay of customers’ reefer containers at the terminals. In Rio Grande, this length was around 12 days, longer than the historical average of 7 to 8 days. This pattern of change was observed during the COVID-19 pandemic when there was a backlog of vessels in all ports worldwide, as well as a shortage of empty containers and an increase in the value of international freight. The operational carbon intensity in TEU movement also increased by about 22%. This metric does not include the length of container dwell time, a parameter that became relevant in the pandemic and should be considered to improve future performance analysis. 32 Ocean Wilsons Holdings Limited 2021 Annual Report Social Safety When considering the “Social” aspect of ESG, the Board is focused on the Health and Safety of its workforce in Brazil as it is of fundamental importance to incorporate our employees’ safety in our corporate values. We measure our Health and Safety using lost-time injury frequency rate (“LTIFR”). In 2021 the LTIFR rate was 0.63 compared to 2020 of 0.42. The international benchmark is 0.5. Safety performance is continuously monitored to further improve safe work practices, develop annual safety training plans and to prevent future accidents in order to improve the LTIFR rate to meet or exceed the international benchmark. Corporate Giving and Sponsorship Ocean Wilsons and Wilson Sons both have corporate giving programs within the communities they operate. Ocean Wilsons’ Charitable Giving Policy was approved in 2021 with several Bermuda charities being considered to receive a donation in 2022. Wilson Sons continues to support several local charities and causes in Brazil. Donations for the year totalled US$0.7 million, in addition to a corporate volunteer program. C orporate Governance The Board has put in place corporate governance arrangements that it believes are appropriate for the operation of the Company. The Board has considered the principles and recommendations of the 2018 UK Corporate Governance Code (“the Code”) issued by the Financial Reporting Council (available on the FRC website www.frc.org.uk) and applies those aspects which they believe are appropriate to the business. This reflects the fact that Ocean Wilsons Holdings Limited is an investment holding company incorporated by an act of parliament in Bermuda with significant operations in Brazil. The Company complies with the Code where it is appropriate for its business to do so and has done so throughout the year and up to the date of this report except, as noted within this report, where it does not fully comply with the Code. These arrangements are regularly reviewed and monitored by the Board. The areas where Ocean Wilsons Holdings Limited does not comply with the 2018 UK Corporate Governance Code and the rationale for not complying are as follows: • The Code states that the chair should not remain in their post beyond nine years from the date of their first appointment to the Board. The current Chairman, Mr. J F Gouvêa Vieira, was first appointed to the Board in 1991 and made Chairman of the Board in 1999. Due to the Company’s significant investment in Wilson Sons, the Board considered it important that Mr. Gouvêa Vieira continued as Chairman in 2021. His insights and knowledge in relation to Wilson Sons and Brazil through his long association with the Group has been a valuable resource in managing and understanding our Brazilian business. At the conclusion of the May 2022 AGM, Mr. J F Gouvêa Vieira will retire as Chairman and Director of the Company. The Board, led by the Nomination Committee, proposes to appoint Ms. C Foulger as the successor for Chair. The Board assesses and monitors the corporate culture of the Group by receiving periodic reports from Wilson Sons, management on the Brazilian business including corporate governance, health, safety, ethics and legal updates and ensure results are consistent with the Group’s values. Further details are provided in each section of this report. The Board has not undertaken a formal cultural assessment and is considering performing one in the near future. Conflicts of Interest The Board has in place a procedure for the consideration and authorisation of conflicts or possible conflicts of interest with the Company’s interests annually including those resulting from significant shareholdings. If a director has a conflict of interest, he/she leaves the meeting prior to discussion unless requested to remain and leaves determination of such matters to the other directors. The Board ensures that the influence of third parties does not compromise or override independent judgement by requiring disclosure of outside interests, encouraging a culture of openness and debate amongst Board members and promoting independent thought. Board and Committee Evaluations The Board undertakes an annual formal performance evaluation of the Board, its committees and individual directors. The process involves completion of internally prepared questionnaires. The Chair discusses their responses with each Director and then reports verbally the results of the process to the Board. The Board discusses the results highlighting any areas for improvement. The conclusion of the 2021 performance evaluation was that the Board and its committees are operating effectively. The evaluation identified additional site visits to Brazil for the newest Directors and the Chief Operating and Financial Officer in 2022 when Covid-19 travel restrictions have SECTION FOUR 33 SECTION FOUR eased to ensure that they receive training on the various operations of Wilson Sons. In the place of in-person training, the new Directors and management received training utilizing video conferencing. The Board regularly assesses Board performance evaluation procedures and modified the 2021 evaluation survey to include more assessment on longer-term strategy, governance and independent thinking. Board Diversity Policy The Board considers diversity, including the balance of skills, ethnicity, diversity of background and gender, amongst many other factors, when reviewing the appointment of new directors. The Board has not set specific targets for gender diversity but considers this in making new Board appointments. The current composition of the Board is two women and four men. During 2021 the Board appointed a new female management member to the position of Chief Operating and Financial Officer. Taskforce on Climate Related Financial Disclosures ( “TCFD” ) Below is detailed OWHL first TCFD aligned disclosures in accordance with FCA requirements of Premium Listed UK corporates. The Company has provided responses across the TCFD’s pillars and aims to advance the maturity of its climate-related actions and disclosures on an annual basis. The Board is responsible for the system of internal control to ensure strong corporate governance. In addition, the Audit and Risk Committee assists the Board in monitoring the effectiveness of these internal controls and risk management policies. Committee meetings are used to assess the Group’s risk exposure, opportunities, and mitigation, including that of subsidiaries. The Committee met six times in 2021, with the Chief Operating and Financial Officer attending each meeting. OWHL is structured as a holding company. As such, climate-related risks and opportunities arise at the level of its subsidiary companies. The actions taken to address these risks and opportunities, are also undertaken at this subsidiary investment level. OWHL has reflected this in the structure of its TCFD statement, which first outlines OWHL’s governance of Wilson Sons and OWIL, followed by granular TCFD disclosures for the subsidiaries themselves. OWHL shares three common Board members with Wilson Sons. OWHL Directors attend quarterly Wilson Sons’ board meetings for updates on operational activities and management issues, which includes climate-related risks. OWHL also has oversight over OWIL. They share the same directors and quarterly meetings are held with the portfolio Investment Manager. Here, updates on fund performance, asset allocation, ESG status, and progress in becoming a signatory to the UN PRI, are shared. The below table describes Wilson Sons’ climate-related risks, opportunities, and risk mitigation actions. Governance Disclosure The Board’s oversight of climate-related risks and opportunities Wilson Sons’ board has ultimate oversight and accountability for ESG strategy and performance for the company, which includes the approach and actions taken in relation to climate-related issues. The Board is updated on climate-related issues via a report from the climate change Executive Risk Owner on an annual basis and they are discussed as part of quarterly Board meetings where appropriate. This ensures oversight and accountability across all programmes and policies. Climate-related issues are considered when reviewing budgets and capital expenditures, particularly with regard to innovation opportunities and the purchase of capital goods. While ultimate accountability for risk governance sits with the Board, the OWHL’s management and Audit and Risk Committee assist in risk oversight as part of Wilson Sons’ risk management process. This ensures that policies and practices are aligned with OWHL ambitions and disclosure requirements on climate-related issues. Management’s role in assessing and managing climate-related risks and opportunities Primary responsibility for oversight of climate-related strategy implementation sits with the climate Executive Risk Owner, the Head of Health, Safety, Environment and Sustainability. Implementation and risk management is then delivered at the functional level, with mitigation actions assigned to relevant functions. For example, physical risks to offices are overseen by real estate and facilities management teams and reported back through Integrated Risk Management and Environmental and Health & Safety areas. If climate-related risks reach a certain threshold of risk and likelihood, then they are also escalated to Wilson Sons’ executives or board by the relevant function. 34 Ocean Wilsons Holdings Limited 2021 Annual Report Strategy and Risk Management Disclosure The Group’s processes identif ying and for assessing climate-related risks Wilson Sons’ risk governance and management processes are detailed within Wilson Sons’ Sustainability Report. During the year, Wilson Sons assessed and evaluated risks relating to climate change as part of the review cycle, and they were discussed by the Wilson Sons Executive and the Wilson Sons Audit Committee. Risks evaluated include those related to existing and emerging regulatory requirements, as well as other transition and physical risks. In addition, a sustainability focused materiality assessment assessed climate change as a risk for Wilsons Sons and its stakeholders. This materiality assessment utilised the methodology employed by Fundação Dom Cabral (FDC) to identify and prioritise climate-related risk. It is based on internal and external interviews, in addition to analysis of stakeholder statements to determine the relative internal and external importance of sustainability issues. How processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management Climate-related risks have been identified as a risk for Wilson Sons and are therefore embedded into a central Integrated Risk Management framework (see Wilson Sons’ Sustainability Report). Within that framework, risks will be monitored by the Wilson Sons Executive and Audit Committee to ensure they are embedded in strategic decision-making. On a more granular level, climate- related risks are then communicated and actioned either as standalone risks or assessed and mitigated as part of existing or emerging adjacent risks within the framework. The Group’s processes for managing climate- related risks The climate-related risks and opportunities the Group has identified over the short, medium and long term The impact of climate- risks and relate d opportunities on the Group’s business(es), strategy and financial planning Wilson Sons’ process for managing climate related risk is grounded in its emissions monitoring work, which includes GHG emissions, tide and ocean data, as well as market movements and impacts suffered by clients. This intelligence enables Wilson Sons to mitigate potential risks and identify opportunities, particularly in the reduction of its direct emissions. Wilson Sons continues to adopt advancing technologies to reduce its GHG emissions as a result. Examples include updating conventional platform supply vessels to more efficient diesel-electric systems, using rubber-tyred gantry electric yard cranes with lower environmental impact in container terminals, and expanding Towage Operations Centre, enabling the reduction of fuel consumption by optimising vessel operations. The below table details Wilson Sons’ key climate-related risks. Risks have been categorised in alignment with the TCFD recommendations. Climate-related risks were considered across the categories of policy and legal, technology, market, and reputation, alongside acute and chronic physical risks. Time horizons have been defined by Wilson Sons as short term (< 3 years), medium term (3-10 years), and long term (> 10 years). The Group notes that while climate-related risks are considered as part of Wilson Sons’ financial planning, particularly in consideration of the useful lifetime of assets and infrastructure, this is Wilsons Sons’ first TCFD disclosure. This means that in future years Wilson Sons aims to explore the financial materiality of identified risks in greater detail. In addition to risk, Wilson Sons has identified several linked climate-related opportunities relevant to the business. These include: a. b. c. Increased demand from cargo owners seeking alternatives to road haulage and airfreight as part of lower-carbon supply chains. Potential for increased transport volume of decarbonisation-related cargoes, such as solar panels and wind turbines. Finally, Wilson Sons could position itself as the partner of choice for customers through best practice disclosure and action a decarbonisation strategy. SECTION FOUR 35 SECTION FOUR Risk Title Risk Category Risk Description Impact Changes in precipitation patterns Physical: Chronic Increase in extreme weather events Physical: Acute Rising sea levels Physical: Acute / Chronic Changes in energy mix Transition: Market and Technology Reinforcement of regulation Transition: Policy and Compliance Rising and increasing variability of mean temperatures resulting in altered precipitation patterns. Timeframe: Short- term Likelihood: High Impact: Moderate Climate-related alterations in precipitation patterns are expected to negatively impact Brazilian agricultural production over the medium to long-term. Wilson Sons’ customers transport significant volumes of agricultural cargo from Brazil, and as such, adverse climate effects on agricultural output could result in decreased demand for Wilson Sons‘ services over this time horizon. In addition, Brazil’s energy matrix relies on a high proportion of hydroelectric power. Reduced precipitation could negatively affect the industrial production of our clients or our operations. Increased incidence and magnitude of e x t r e m e w e a t h e r events. Timeframe: Medium-term Likelihood: High Impact: Moderate The impact of extreme weather events could impact Wilson Sons in two ways. First, as identified above, Wilson Sons‘ revenues are sensitive to Brazilian trade volumes. Increasing incidence of extreme weather events has the potential to negatively impact Brazilian economic activity over the long-term, and as such demand for Wilson Sons’ services could decrease. Second, Wilson Sons’ operations could be directly impacted by storms and flooding, for instance through loss of equipment and load, as well as damages to infrastructure. levels Rising sea result in significant damage, disruption, and mitigation costs to Brazilian por t infrastructure. Timeframe: Long-term Likelihood: Moderate Impact: Moderate Declining oil trade volumes as a result of policy action and/ or changing consumer demand. Timeframe: Long-term Likelihood: Moderate Impact: Moderate Governments legislate for stronger climate action from shipping and logistics industries. Timeframe: Medium-term Likelihood: Moderate Impact: Moderate Ports and connecting coastal transport infrastructure are exposed to rising mean sea levels as well as potential increases in the frequency/intensity of extreme sea levels (ESLs) due to storm surges. The potential impacts of such events include damage to port infrastructure and increase operational halts. This has potential financial implications for Wilson Sons and its customers. Over the long-term world crude oil demand could plateau and then reduce due to the progress of low-carbon forms of energy production in response to policy and/or consumer demand. Transport volume of carbon-related cargo is likely to decrease in step with a reduced demand for Brazilian crude oil exports and extraction with potential reductions in demand for Wilson Sons’ services during this period. Environmental regulation on shipping and logistics may become more stringent with associated impacts for Wilson Sons. First, the Group notes that the International Maritime Organisation’s initial GHG strategy envisages a reduction in carbon intensity of international shipping by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008. This is likely to impact Wilson Sons and its customers via costs associated with reducing the carbon-intensity of operations. That said, Wilson Sons also expects some of these costs to be offset by operational efficiency savings. In addition, Wilson Sons recognises the risks associated with the introduction of a carbon tax over the medium to long-term. This would also increase costs associated with Wilson Sons and its customers’ operations. 36 Ocean Wilsons Holdings Limited 2021 Annual Report Risk Title Risk Category Risk Description Impact External pressure for decarbonisation Transition: Reputational External pressure for decarbonization from business customers. Wilson Sons customers may increasingly value working with logistics providers with lower absolute GHG emissions as a result of their own Scope 3 decarbonisation targets. Timeframe: Long-term Likelihood: Moderate Impact: Moderate For Wilson Sons, increasing requirements to decarbonise operations could result in costs, for example via the introduction of alternative-fuel powered vessels. Metrics and Targets Disclosure Metrics used by the Group to assess climate-related risks and opportunities Commitment to the ongoing tracking and monitoring of climate-relevant metrics facilitates the effective management of climate-related risks and opportunities. The key metrics include those related to emissions, energy and water consumption, and solid waste disposal. All metrics are disclosed in Wilson Sons’ Sustainability Report at www.wilsonsons. com.br. Scope 1, Scope 2 and Scope 3 greenhouse (‘GHG’) emissions, and the related risks The Company’s Scope 1 and 2 emissions are summarised within the table on page 32, detailing comparative years where available. Wilson Sons’ good practice in this area was recognised with the Gold Seal from the GHG Protocol Program in 2021. Targets used by the Group to manage climate-related risks and opportunities and performance against targets As part of the Wilson Sons’ roadmap development, a timeline to the disclosure of decarbonisation targets will also be published in the Ocean Wilsons 2022 Annual Report. The below table describes OWIL’s climate-related risks, opportunities, and risk mitigation actions. Governance Disclosure The Board’s oversight of climate-related risks and opportunities The Board of OWHL, through its 100% subsidiary OWIL, holds ultimate accountability for responsible investing, and within that, climate-related issues for this subsidiary. In this instance the OWIL Board shares the same directors as OWHL. The OWIL Board are updated on the performance of the portfolio in quarterly meetings, where information on climate-related risks and opportunities is also reviewed. OWIL appointed HAML as its Investment Manager in November 2000. Importantly, the portfolio is structured as a fund-of-funds and therefore engagement with the managers of selected underlying fund investments is required to appropriately influence climate- related issues. In this regard, the HAML Group has discussed its ESG views with the managers of the underlying investments of the Company as part of its ongoing due diligence process. Management’s role in assessing and managing climate-related risks and opportunities As part of their regular due diligence processes, which are applied to both new and existing investments of the Company, the HAML Group discusses ESG related issues with the managers of the Company’s underlying investments. The Directors of OWIL regularly meet with representatives of the HAML Group and, as part of those meetings, ESG issues and points of interest are discussed including feedback relating to the underlying portfolio of investments. SECTION FOUR 37 SECTION FOUR Strategy and Risk Management Disclosure The Group’s processes for identifying and assessing climate-related risks The Group’s processes for managing climate-related risks This year, climate-related risks were identified with support from a specialist ESG consultancy. Risks were identified on a qualitative basis of impact and likelihood of risk materialisation. Risks evaluated include those related to existing and emerging regulatory requirements, as well as other transition and physical risks. More broadly, the HAML Group’s responsible investing policy aims to support a long-term and responsible approach to investment to reduce and manage long-term risk. ESG due diligence requirements and considerations reduce the initial climate-related risk of the portfolio. Subsequent to this, engagement processes and divestment options provide mechanisms for reducing the climate-related risks present in the existing portfolio. HAML Group continue engaging with the underlying fund managers to understand the ESG related risks within their funds. A full review has been completed of all current investments to ensure they are consistent with the HAML Group’s responsible investing policy, and this review will also be ongoing as policies develop. In addition, the HAML Group will become a signatory for the internationally recognized UN PRI to demonstrate their and our commitment to responsible investment. This will ensure that climate risk has been identified and actively managed in order to reduce the exposure of the portfolio. Finally, the HAML Group are continually upskilling in ESG, to better assess and manage climate-related risks and opportunities in the future. Investment team members have exposure to ESG related matters through training courses, investment due diligence and relevant forums and bodies to ensure they remain up to date on best practice. Resilience of the Group’s s t r a t e g y, i n t o consideration different climate- related scenarios t a k i n g This is the first year of TCFD aligned disclosures related to OWIL, as such the focus has been identifying risks and opportunities, in the context of Hansa’s broader responsible investing policy. Given this focus, alongside considered relatively low exposure in the medium-term to climate-related risk scenario analysis is not considered a priority for the OWIL portfolio. The climate-related risks and opportunities the Group has identified over the short, medium and long term The impact of climate-related risks and opportunities on the Group’s business(es), strategy and financial planning The below table details OWIL’s key climate-related risks. Risks have been categorised in alignment with the TCFD recommendations. Climate-related risks were considered across the categories of policy and legal, technology, market, and reputation, alongside acute and chronic physical risks. Time horizons have been defined by the Company as short term (< 3 years), medium term (3-10 years), and long term (> 10 years). This is the Company’s first TCFD disclosure, and in future years the Company aims to explore the financial materiality of identified risks in greater detail. 38 Ocean Wilsons Holdings Limited 2021 Annual Report Risk Title Risk Category Risk Description Impact Physical impacts of extreme climate phenomena Physical: Acute / Chronic Policy Risk Transition: Policy and Regulation Climate- related technological Disruption Transition: Technology Changing market dynamics Transition: Market Impacts of increased i n c i d e n c e a n d magnitude of extreme weather events across sectors. Timeframe: Medium-term Likelihood: High Impact: Low Climate policy and regulation increases costs and reduces business profitability. Timeframe: Medium-term Likelihood: Moderate Impact: Low P o t e n t i a l f o r technological disruption within exposed sectors. Timeframe: Medium / long-term Likelihood: Moderate Impact: Low Impacts associated w i t h c o n s u m e r demand-based market transformation. Timeframe: Medium / long-term Likelihood: High Impact: Low As the consequences of extreme weather events become more severe over the long-term, economic disruption is likely to accelerate, with impacts across geographic locations, supply chains, and sectors. However, we recognise the risk to OWIL is likely to be limited due to the diversification of the portfolio and ability to divest from underperforming funds. Legal and regulatory change is likely to affect social licence to operate, supply chains, or management practices, particularly in exposed sectors and regions. Investment managers could be impacted in several ways: Companies may face higher costs in proving compliance with more stringent regulations, reducing their profitability and valuations. Investment managers might then face higher costs in order to prove compliance with regulation, including ESG reporting, metrics, and due diligence. Increased risk of obsolescence and stranded assets due to regulatory changes, again particularly in exposed sectors, for instance energy and extractives. Emerging technology and innovative business models are expected to provide widespread disruption across a range of sectors as they transition towards more sustainable models, for instance as currently observed in the automotive sector. This has negative implications for legacy companies and increases risk of stranded assets within the portfolio. In some, particularly exposed markets, this may result in obsolescence and stranded assets across a range of assets, products, and geographies. Again, this has implications for the performance of the portfolio over the medium to long-term, with expected risk reduction as a result of investment diversification. Metrics and Targets Disclosure Metrics and targets pillar disclosures Given its position as a fund-of-funds, collection of the relevant data and using this data as the basis of decarbonisation targets presents transitional challenges. However, this year the HAML Group aims to explore the feasibility of collecting climate-related data with fund managers. This will provide the organisation with a stronger understanding of data availability, and therefore a timeline to the disclosure of this information. SECTION FOUR 39 SECTION FOUR Going C oncern Wilson Sons Limited The Group has considerable financial resources including US$28.6 million in cash and cash equivalents at year end and the Group’s borrowings have a long maturity profile. The Group’s business activities together with the factors likely to affect its future development and performance are set out in the Chairman’s Statement, Financial Report, Investment Manager’s Report and Wilson Sons’ Management Report. The financial position, cash flows and borrowings of the Group are set out in the Financial Report. In addition, note 31 to the consolidated financial statements includes details of its financial instruments and its exposure to credit risk and liquidity risk. Details of the Group’s borrowings are set out in note 21 to the consolidated financial statements. The Group closely monitors and manages its liquidity risk and does so in a manner that reflects its structure, of two distinct businesses, being the parent company along with Ocean Wilsons (Investments) Limited, and Wilson Sons Limited. In performing its going concern assessment, the Board considered the 15-month period to 31 March 2023. Ocean Wilsons Holdings Limited and Ocean Wilsons (Investments) Limited Ocean Wilsons and Ocean Wilson (Investments) Limited have combined cash and cash equivalents of US$4.9 million and further highly liquid investments of US$113.9 million as at 31 December 2021. They have no debts but have made commitments in respect of investment subscriptions amounting to US$43.2 million, for which details are provided in note 11 to the consolidated financial statements. The timing of the investment commitments may be accelerated or delayed, however, the highly liquid investments held are significantly in excess of the commitments. Neither Ocean Wilsons, nor Ocean Wilsons (Investments) Limited have made any commitments or have obligations towards Wilsons Sons and its subsidiaries and their creditors or lenders. Therefore, in the unlikely circumstance that Wilsons Sons was to encounter financial difficulty, the parent company and its subsidiary have no obligations to provide support and have sufficient cash and other liquid resources to continue as a going concern on a standalone basis. Wilson Sons has cash and cash equivalents of US$23.6 million and further highly liquid investments of US$43.3 million. All of the debt, as set out in note 21 to the consolidated financial statements, and all of the lease liabilities, as set out in note 16 to the consolidated financial statements, relate to Wilson Sons and have a long maturity profile. The debt held by Wilson Sons is subject to covenant compliance tests as summarised in note 21 to the consolidated financial statements, which were in compliance at 31 December 2021 and are forecast to be complied with throughout the forecast period. The covenants are most sensitive to changes in EBITDA, debt service costs and asset values. Management and the Audit and Risk Committee reviewed Wilson Sons’ 15-month forecasts for the financial year 2022 and the first quarter of 2023 which included analysis of cash flows and loan covenant compliance for the forecasting period. Budgets are compared with prior period actual results and previous forecasts to identify variances and understand the drivers of the changes and their future impact so as to allow management to take action as appropriate. Additional market analysis is performed to corroborate other key assumptions underpinning the forecasts. In preparing the forecasts consideration has been given to the commitments Wilson Sons has to its joint ventures in respect of their loan agreements as set out in note 14 to the consolidated financial statements and possible cash outflows these may give rise to, should the joint ventures breach their loan covenants. Cash flow and loan covenant compliance forecasts were then reverse stress tested to understand the headroom available before a covenant breach occurs or liquidity is exhausted. Consideration was then given as to whether the principal risks attributable to Wilsons Sons would give rise to severe downside scenarios that could cause loan covenant breaches or exhausting of liquidity, such as significant reductions in revenues. The possibility of these scenarios happening are considered remote when contemplating Wilson Sons’ financial performance during Brazil’s economic crisis in 2015 and 2016 and in the Covid-19 pandemic in 2020 and given the outlook for the global and Brazilian economies in 2021 and beyond. The potential impact of both the Russia/ Ukraine conflict and Covid-19 have been considered as part of the going concern assessment. Whilst the going concern assessment does not indicate it will be necessary, should it 40 Ocean Wilsons Holdings Limited 2021 Annual Report be required, Wilson Sons has the ability to delay or cancel forecast capital expenditure in order to manage liquidity and or loan covenant compliance. This assessment confirmed that Wilson Sons has adequate cash, other liquid resources and undrawn credit facilities to enable it to meet its obligations as they fall due in order to continue its operations during the going concern forecast period. Based on the Board’s review of Wilson Sons’ going concern assessment and the liquidity and cash flow reviews of the Company and its subsidiary OWIL, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the annual report and accounts. Viabilit y St atement In accordance with the UK Corporate Governance Code, the Directors have assessed the viability of the Group over a three-year period to 31 December 2024, taking into account the Group’s current position and potential impact of the principal risks and uncertainties. Based on this assessment, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 31 December 2024. Whilst the Directors have no reason to believe the Company will not be viable over a longer period, given the uncertainties involved in longer term forecasting the Directors have determined that a three-year period to 31 December 2024 is an appropriate period over which to provide its viability statement. The three-year period also aligns with the rolling three-year investment portfolio performance benchmark. In making the assessment, the Directors have considered a number of factors that affect the Group, including the principal risks and mitigating factors. The Directors also took into account that the Group has two distinct and separate investments and there is no recourse between them. Wilson Sons Limited The assessment considered that the Wilson Sons business model has proven to be strong in the long term with a range of businesses that have consistently demonstrated their ability to trade. Operational activities are funded by cash generated from operations while the Wilson Sons borrowings are used to finance capital expenditure. The Wilson Sons borrowings are generally long-term with defined repayment schedules repayable over different periods up to 18 years. There is no recourse from Wilson Sons to the Company or Ocean Wilsons (Investments) Limited in respect of Wilson Sons’ borrowings. Wilson Sons is not reliant on one customer: its largest customer constituted approximately 11.4% of their IFRS revenue in 2021. The largest customer is served by seven different businesses in the Group. In addition, Wilson Sons has opportunities to mitigate any adverse impacts given the flexible cost base of some of their businesses. Ocean Wilsons (Investments) Limited In making the assessment for the investment portfolio, the Board has considered matters such as significant stock market volatility, changes in exchange rate and a significant reduction in the liquidity of the portfolio. The investment portfolio and cash under management at 31 December 2021 was US$351.8 million with outstanding capital commitments of US$43.2 million and no external debt. At 31 December 2021 the investment portfolio had US$2.2 million in cash and cash equivalents and daily liquidity of $113.9 million. This available liquidity covers more than 250% of the capital commitment in a reasonable time frame on the remote chance that there was a need to fund all of commitments at one time. The Directors’ assessment is that if severe but plausible downside scenarios were to crystallize, many of the individual risks disclosed would be likely to be confined to either Wilson Sons or Ocean Wilsons (Investments) Limited. The risk is to the Group’s net asset valuation rather than to the viability of the Group. Directors’ Responsibilit y St atement The Directors are responsible for preparing the annual report in accordance with applicable laws and regulations. Each of the Directors, whose names and functions are listed in the Board of Directors section of this report, confirms that, to the best of his/her knowledge: • the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces; SECTION FOUR 41 SECTION FOUR • • • the consolidated financial statements, prepared in accordance with IFRS, present fairly, in all material respects, the assets, liabilities, financial position and profit or loss of the Company and, taken as a whole, are in compliance with the requirements set out in the Bermuda Companies Act 1981 (as amended); the Chair’s statement, Director’s report, Investment Manager’s report and Wilson Sons’ Management Report, include a fair review of the information as required; and the Annual Report and consolidated financial statements, taken as a whole, provide the information necessary to assess the Company’s position and performance, business model and strategy, and is fair, balanced and understandable. By Order of the Board Fergus McAleavey Company Secretary 23 March 2022 42 Ocean Wilsons Holdings Limited 2021 Annual Report Consolidated Financial Statements SECTION FIVE 43 SECTION FIVE - FINANCIALS KPMG Audit Limited Crown House 4 Par-la-Ville Road KPMG Audit Limited Hamilton Crown House HM 08 4 Par-la-Ville Road Bermuda Hamilton HM 08 Bermuda Telephone Fax Internet Telephone Fax Internet +1 441 295 5063 +1 441 295 9132 www.kpmg.bm +1 441 295 5063 +1 441 295 9132 www.kpmg.bm INDEPENDENT AUDITOR’S REPORT To the Shareholders and Board of Directors of Ocean Wilsons Holdings Limited INDEPENDENT AUDITOR’S REPORT Report on the audit of the consolidated financial statements To the Shareholders and Board of Directors of Ocean Wilsons Holdings Limited Opinion Report on the audit of the consolidated financial statements We have audited the consolidated financial statements of Ocean Wilsons Holdings Limited (the “Company”) and its Opinion subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2021, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year We have audited the consolidated financial statements of Ocean Wilsons Holdings Limited (the “Company”) and its then ended, and notes, comprising significant accounting policies and other explanatory information. subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2021, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated then ended, and notes, comprising significant accounting policies and other explanatory information. financial position of the Group as at 31 December 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2021, and its consolidated financial performance and its consolidated Basis for opinion cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those Basis for opinion standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) standards are further described in the Auditor’s responsibilities for the audit of the Consolidated Financial Statements (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with International Ethics Standards Board for in Bermuda and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) Code. (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Bermuda and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Code. Key audit matters We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Key audit matters consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the on these matters. consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 44 Ocean Wilsons Holdings Limited 2021 Annual Report kpmg The key audit matter How the matter was addressed in our audit Unbilled revenue (2021: US$13.5m; 2020: US$10.7m) Revenue recognition is presumed by auditing standards to be a fraud risk area, therefore we determined that this is a key audit matter. For the risk of fictitious revenues recognition we have focused specifically on unbilled revenue recognised for services rendered but not yet invoiced at year end, due to its significance and the manual nature of the process. § We walked through and understood the controls designed and implemented by the Group related to unbilled revenue recognition, but we did not test the operating effectiveness of the controls; § We evaluated the accounting policies applied in the recognition of unbilled revenue in accordance with the principles of IFRS 15; § We tested on a sample basis unbilled revenue to address the identified fraud risk by obtaining supporting documentation to evidence: the provision of the service, the value of the transaction and where applicable the subsequent invoicing and recovery of the unbilled revenue; § We performed analytical procedures to identify and trading patterns which could investigate unusual indicate inappropriate revenue recognition; and § We assessed the adequacy of the disclosures in the consolidated financial statements with regard to the requirements of IFRS 15. The key audit matter How the matter was addressed in our audit Risk of impairment of Brasco cash generating unit’s (CGU) assets (2021: US$39.8m tangible assets, US$7.2m intangible assets and US$5.2m lease rights; 2020: US$39.2m tangible assets, US$7.4m lease rights respectively) intangible assets and US$5.8m Due to losses incurred by the CGU and the inherent uncertainty involved in forecasting and discounting future cash flows there is a risk that an impairment has not been recognised. the CGU recoverability of The is dependent on management’s estimates of the future cash flows that the CGU is expected to produce. The carrying value of the assets are particularly sensitive in management's revenue growth and discount rates applied. to changes Due to the level of judgement required in determining the value in use there are inherent risks and uncertainties involved in forecasting and discounting future cash flows in this industry. § We walked through and understood the controls designed and implemented by the Group over the impairment review, but we did not test the operating effectiveness of the controls; § We considered past cash flow projections and actual results assess management’s forecasting track record to ascertain if there may be indicators of management bias or excessive optimism in forecasting cash flows; subsequently achieved to § We obtained the Group’s impairment model and tested its mathematical accuracy; § We challenged the Group’s determination of the projection period used; § We performed independent research on forecasts for the oil and gas sector, globally and also for Brazil. We considered multiple sources of information including those published by oil and gas companies, industry organisations, and industry analysts. We challenged and evaluated management’s forecasts in the context of this information; © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. SECTION FIVE 45 SECTION FIVE - FINANCIALS kpmg tender inspected § With regard to near team forecast cashflows which were based on specifically identified projects, tenders submitted and expected outcomes from such tenders, examined we correspondence with potential customers, reviewed management’s internal reporting with regard tender and sales pipeline reporting and reviewed press releases and other media published by prospective customers with regard their specific projects. We challenged and evaluated management’s forecasts in the context of this information; submissions, testing, impairment § We used our own valuation specialists to assist us in the our valuation methodology used by management, and challenging specific inputs into the determination of the discount rate with reference to independently sourced external data and benchmarks and in developing independently an appropriate discount rate; including assessing § We identified those assumptions which are most sensitive to change and performed sensitivity analysis to ascertain what changes in assumptions could produce significantly different outcomes. In doing so we noted the future forecasted revenues, and the discount rate are the most sensitive assumptions. In doing so, we ascertained the extent of changes that individually, or in combination, would be required for Brasco’s assets to be impaired; and § We assessed the fairness, accuracy and completeness of disclosures required by IAS 36. © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 46 Ocean Wilsons Holdings Limited 2021 Annual Report kpmg The key audit matter How the matter was addressed in our audit Provisions and contingencies (2021: US$8.9m, 2020: US$9.6m) The unprovided amounts for possible losses are US$72.6m (2020: US$77.4m). resultant contingent The Group is party to a high volume of legal claims arising from civil proceedings, labor claims and tax legislation. These liabilities are potentially significant and the application of accounting standards to determine the amount, if any, to be recognised as a liability or disclosed, requires judgement. inherently subjective and is Inappropriate evaluations of the possible outcome on material claims may materially the Group’s consolidated financial statements for the year. impact § We walked through and understood the controls designed and implemented by the Group over claims and litigation. However, we did not test the operating effectiveness of the controls; § We obtained a listing of all current open claims and litigation, including details of quantum, appointed advisors, provided and disclosed amounts; § We obtained an understanding from Group’s in-house legal counsel of the basis for their judgements of financial amounts. We challenged the basis of those judgements with reference to the latest available corroborative information such as correspondence with the Group’s external counsel on all significant legal cases and held discussions with them when further clarity was deemed necessary; § We reviewed legal expenses and Board of Directors minutes to identify possible litigation and claims that had not been identified by the Group and disclosed to us; § We obtained direct confirmations from the Group’s external counsel for all litigation cases and assessed the Group’s judgements in the context of these confirmations; § We considered cases settled or litigation concluded in the year and also changes in assessments for ongoing cases year on year. We considered whether the Group’s previous judgements were proven to be reasonable and materially correct; and § We assessed and completeness of disclosures in the consolidated financial statements as required by IAS 37. accuracy fairness, the © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. SECTION FIVE 47 SECTION FIVE - FINANCIALS kpmg The key audit matter How the matter was addressed in our audit Fair value estimates – Level 3 investments (2021: US$129.7m, 2020: US$99.1m) Valuation of the level 3 investments requires significant judgements and estimates by management. Inappropriate selection of valuation methods, significant assumptions and significant data inputs used in determining these fair values could result in a material misstatement to the consolidated financial statements. § We walked through and understood the controls designed and the Group over implemented by valuation of level 3 investments. However, we did not test the operating effectiveness of the controls; § We read the accounting policy for investment valuation its compliance with accounting and assessed standards; § We have tested the appropriateness of the valuation methodologies and techniques applied to all the level 3 investments including comparing them with the International Private Equity and Venture Capital Valuation Guidelines (‘IPEV’); § We obtained independent support to corroborate the stated values for all the level 3 investments. We also considered whether any changes had been made in valuation; § We considered the date of valuations, where these were not as of 31 December 2021. We performed procedures to ascertain if any significant changes in value might be expected where investments were valued at an interim date. We used our own valuation specialists to challenge management’s assumptions used in determining the fair value of these investments, in the context of the IPEV valuation guidelines. § We obtained the existence and accuracy of the level 3 investments from counterparties; independent confirmations of § We also considered valuations received after the year end until the date of our opinion for such investments; and § We assessed and completeness of disclosures in the consolidated financial statements required by IFRS 7 and IFRS 9. accuracy fairness, the . . © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 48 Ocean Wilsons Holdings Limited 2021 Annual Report kpmg Other Matter The consolidated financial statements of the Group for the year ended December 31, 2020, were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on March 12, 2021. Other information Management is responsible for the other information. The other information comprises the Annual Report, but does not include the consolidated financial statements and our auditor’s report thereon. Except as described in the Report on Other Legal and Regulatory Requirements section of our report, our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, we consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: — Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. SECTION FIVE 49 SECTION FIVE - FINANCIALS kpmg — Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. — Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. — Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. — Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Corporate Governance Statement We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules of the UK Listing Authority for our review. We have nothing to report in this respect. Disclosures of emerging and principal risks and longer term viability We are required to review the Going Concern and Viability Statements, set out on pages 40 and 41 under the Listing Rules. Based on the knowledge we acquired during our audit of the consolidated financial statements, we have nothing material to add or draw attention to in relation to: © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 50 Ocean Wilsons Holdings Limited 2021 Annual Report kpmg — — — the directors’ confirmation within the longer-term viability statement on page 41 that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; the Emerging and Principal Risks disclosures describing these risks and how emerging risks are identified, and explaining how they are being managed and mitigated; and the directors’ explanation in the Going Concern and Viability Statements of how they have assessed the prospects of the Group, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Our work is limited to assessing these matters in the context of only the knowledge acquired during our consolidated financial statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s longer-term viability. In addition, the above conclusions are not a guarantee that the Group will continue in operation. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s shareholders and Board of Directors, as a body. Our audit work has been undertaken so that we might state to the Company’s shareholders and Board of Directors those matters we are required to state to them in an auditor’s report and the further matters we are required to state to them in accordance with the terms agreed with the Company and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company’s shareholders and Board of Directors, as a body, for our audit work, for this report, or for the opinion we have formed. The Engagement Partner on the audit resulting in this independent auditor’s report is James Berry. Chartered Professional Accountants Hamilton, Bermuda March 23, 2022 © 2022 KPMG Audit Limited, a Bermuda limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. SECTION FIVE 51 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Note 2021 2020 Sales of services Raw materials and consumables used Employee charges and benefits expense Other operating expenses Depreciation of owned assets Depreciation of right-of-use assets Amortisation of intangible assets (Loss)/gain on disposal of property, plant and equipment and intangible assets Foreign exchange losses on monetary items Operating profit Share of results of joint ventures Returns on investment portfolio at fair value through profit or loss Investment portfolio performance and management fees Other investment income Finance costs Profit before tax Tax expense Profit for the year Other comprehensive income: Items that will not be reclassified subsequently to profit or loss Post-employment benefits remeasurement Items that will be or may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations Effective portion of changes in fair value of derivatives Other comprehensive loss for the year Total comprehensive income/(loss) for the year Profit for the year attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income/(loss) for the year attributable to: Equity holders of the Company Non-controlling interests Earnings per share: Basic and diluted 5 6 7 15 16 17 14 5 5 8 9 22 27 27 29 396,376 (24,036) (112,026) (98,289) (46,631) (12,063) (2,718) (499) (3,100) 97,014 (5,029) 49,474 (4,954) 4,113 (30,227) 110,391 (27,925) 82,466 108 (7,459) 158 (7,193) 75,273 63,687 18,779 82,466 59,604 15,669 75,273 180.1c 352,792 (19,266) (110,016) (84,666) (47,793) (10,706) (2,824) 65 (7,551) 70,035 (4,142) 33,383 (3,130) 1,644 (23,210) 74,580 (26,577) 48,003 351 (51,824) (35) (51,508) (3,505) 38,712 9,291 48,003 9,064 (12,569) (3,505) 109.5c The accompanying notes are an integral part of these consolidated financial statements. 52 Ocean Wilsons Holdings Limited 2021 Annual Report CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2021 (Expressed in thousands of US Dollars) Current assets Cash and cash equivalents Financial assets at fair value through profit and loss Recoverable taxes Trade and other receivables Inventories Non-current assets Other trade receivables Related party loans receivable Other non-current assets Recoverable taxes Investment in joint ventures Deferred tax assets Property, plant and equipment Right-of-use assets Other intangible assets Goodwill Total assets Current liabilities Trade and other payables Tax liabilities Lease liabilities Bank overdrafts and loans Net current assets Non-current liabilities Bank loans Post-employment benefits Deferred tax liabilities Provisions for legal claims Lease liabilities Total liabilities Capital and reserves Share capital Retained earnings Translation and hedging reserve Equity attributable to equity holders of the Company Non-controlling interests Total equity Signed on behalf of the Board F. Beck Director A. Berzins Director Note 2021 2020 10 11 9 12 13 12 24 23 9 14 9 15 16 17 18 20 9 16 21 21 22 9 23 16 25 27 28,565 392,931 25,380 59,350 12,297 518,523 1,580 10,784 3,582 12,816 61,553 22,332 563,055 157,869 14,981 13,272 861,824 1,380,347 (58,513) (8,057) (19,449) (45,287) (131,306) 387,217 (256,312) (1,562) (50,194) (8,907) (148,394) (465,369) (596,675) 11,390 678,006 (95,739) 593,657 190,015 783,672 63,255 347,464 22,479 47,807 11,764 492,769 9 30,460 4,905 11,006 26,185 29,716 579,138 149,278 16,967 13,429 861,093 1,353,862 (41,066) (6,346) (18,192) (58,672) (124,276) 368,493 (283,989) (1,641) (50,987) (9,560) (139,702) (485,879) (610,155) 11,390 635,987 (91,595) 555,782 187,925 743,707 The accompanying notes are an integral part of these consolidated financial statements. SECTION FIVE 53 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Share capital Retained earnings Hedging and Translation reserve Attributable to equity holders of the Company Balance at 1 January 2020 Currency translation adjustment Post-employment benefits (note 22) Effective portion of changes in fair value of derivatives Profit for the year Total comprehensive income/(loss) for the year Dividends (notes 27, 28) Tax incentives Share options exercised in subsidiary (note 26) Share based payment expense (note 26) 11,390 - - - - - - - - - Non- controlling interests 216,067 (21,997) 152 (15) 9,291 Total equity 785,860 (51,824) 351 (35) 48,003 (3,505) (42,209) 19 620,151 - 199 - 38,712 (61,748) (29,827) - (20) - 569,793 (29,827) 199 (20) 38,712 38,911 (29,847) 9,064 (12,569) (24,754) - 1,679 - - - - - (24,754) - (17,455) 19 1,679 1,657 3,336 - 206 206 Balance at 31 December 2020 11,390 635,987 (91,595) 555,782 187,925 743,707 Balance at 1 January 2021 Currency translation adjustment Post-employment benefits (note 22) Effective portion of changes in fair value of derivatives Profit for the year Total comprehensive income/(loss) for the year Dividends (notes 27, 28) Share options exercised in subsidiary (note 26) Share based payment expense (note 26) 11,390 - - - - - - - - 635,987 - 61 - 63,687 63,748 (24,754) 3,025 - (91,595) (4,234) - 90 - (4,144) - - - 555,782 (4,234) 61 90 63,687 59,604 187,925 (3,225) 47 68 18,779 15,669 743,707 (7,459) 108 158 82,466 75,273 (24,754) (17,808) (42,562) 3,025 3,860 6,885 - 369 369 Balance at 31 December 2021 11,390 678,006 (95,739) 593,657 190,015 783,672 Hedging and translation reserve The hedging and translation reserve arises from exchange differences on the translation of operations with a functional currency other than US Dollars and effective movements on designated hedging relationships. Amounts in the statement of changes in equity are stated net of tax where applicable. The accompanying notes are an integral part of these consolidated financial statements. 54 Ocean Wilsons Holdings Limited 2021 Annual Report CONSOLIDATED STATEMENT OF CASH FLOW For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Operating activities Profit for the year Adjustment for: Depreciation & amortisation Loss/(gain) on disposal of property, plant and equipment and intangible assets Share of results of joint ventures Returns on investment portfolio at fair value through profit or loss Other investment income Finance costs Foreign exchange losses on monetary items Share based payment expense Post-employment benefits Tax expense Changes in: Inventories Trade and other receivables Other current and non-current assets Trade and other payables Provisions for legal claims Taxes paid Interest paid Net cash inflow from operating activities Investing activities Income received from trading investments Purchase of trading investments Proceeds on disposal of trading investments Purchase of property, plant and equipment Proceeds on disposal of property, plant and equipment Purchase of intangible assets Proceeds on disposal of intangible assets Investment in joint ventures Net cash used in investing activities Financing activities Dividends paid to equity holders of the Company Dividends paid to non-controlling interests in subsidiary Repayments of borrowings Payments of lease liabilities New bank loans drawn down Issue of new shares in subsidiary under employee share option plan Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year Notes 2021 2020 82,466 48,003 15,16,17 14 5 5 8 26 22 9 13 12, 24 9,23 20 23 15 17 14 28 27 21 16 21 26 61,412 499 5,029 (49,474) (4,113) 30,227 3,100 369 136 27,925 (533) (13,629) (3,388) 19,158 (653) (27,256) (25,161) 106,114 5,700 (72,811) 73,064 (47,352) 304 (1,375) 517 (20,016) (61,969) (24,754) (17,808) (57,926) (8,473) 19,438 6,885 (82,638) (38,493) 63,255 3,803 28,565 61,323 (65) 4,142 (33,383) (1,644) 23,210 7,551 127 134 26,577 (1,257) 8,141 22,565 (8,914) 1,030 (29,137) (22,703) 105,700 5,076 (63,723) 45,154 (58,360) 1,259 (1,085) - (23) (71,702) (24,754) (17,455) (25,725) (6,345) 51,455 3,336 (19,488) 14,510 68,979 (20,234) 63,255 The accompanying notes are an integral part of these consolidated financial statements. SECTION FIVE 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 1 General Information Ocean Wilsons Holdings Limited (“Ocean Wilsons” or the “Company”) is a Bermuda investment holding company which, through its subsidiaries, operates a maritime services company in Brazil and holds a portfolio of international investments. The Company is incorporated in Bermuda under the Companies Act 1981 and the Ocean Wilsons Holdings Limited Act, 1991. The Company’s registered office is Clarendon House, 2 Church Street, Hamilton, Bermuda. These consolidated financial statements comprise the Company and its subsidiaries (the “Group”). These consolidated financial statements were approved by the Board 23 March 2022. 2 Significant accounting policies and critical accounting judgement s Basis of accounting These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and are presented in US Dollars, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. Although the outbreak of the COVID-19 pandemic and the measures adopted by governments to mitigate its spread have impacted the Group, management continues to have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and that the going concern basis of accounting remains appropriate. These consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments, share-based payments liabilities and defined health benefit plan liabilities that are measured at fair value. Basis of consolidation These consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. The Group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. The financial statements of subsidiaries are prepared in accordance with the accounting policies set out in note 2. All intra-group transactions and balances are eliminated on consolidation. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests’ share of changes in equity since the date of the combination. Where a change in percentage of interests in a controlled entity does not result in a change of control, the difference between the consideration paid for the additional interest and the book value of the net assets in the subsidiary at the time of the transaction is taken directly to equity. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Joint arrangements Joint ventures A joint venture is a contractual agreement where the Group has joint control and has rights to the net assets of the contractual arrangement, rather than being entitled to specific assets and liabilities arising from the agreement. Joint venture entities are accounted for using the equity method. After initial recognition at cost, these consolidated financial statements include the Group’s share in the profit or loss and other comprehensive income of the joint venture until the date that significant influence or joint control ceases. Joint operations A joint operation is a contractual agreement where the Group and other parties undertake an economic activity that is subject to joint control, where the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. The joint operations’ assets and any liabilities incurred jointly with other ventures are recognised in the financial statements of the relevant entity and classified according to their nature. The Group’s share of the assets, liabilities, income and expenses of joint operation entities are combined with the equivalent items in these consolidated financial statements on a line-by-line basis. 56 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Foreign currency The functional currency of each entity of the Group is established as the currency of the primary economic environment in which it operates. Transactions other than those in the functional currency of the entity are translated at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences arising on the settlement and on the translation of monetary items are included in profit or loss for the period. On consolidation, the statement of profit or loss and comprehensive income of entities with a functional currency other than US Dollars are translated into US Dollars, at the average exchange rates for the period. Statement of financial position items are translated into US Dollars at the exchange rate at the reporting date. Exchange differences arising on consolidation of entities with functional currencies other than US Dollars are recognised in other comprehensive income and accumulated in the translation reserve, less the translation difference allocated to non-controlling interest. Revenue Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business net of trade discounts and other sales related taxes. Shipyard revenue Revenue related to services and construction contracts is recognised throughout the period of the project when the work in proportion to the stage of completion of the transaction contracted has been performed. Port terminals revenue Revenue from providing container movement and associated services is recognised on the date that the services have been performed. Offshore support base revenue Revenue from providing vessel turnarounds is recognised on the date that the services have been performed. Towage revenue Revenue from towage services is recognised on the date that the services have been performed. Ship agency and logistics revenues Revenue from providing agency and logistics services is recognised when the agreed services have been performed. Employee Benefits Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Share option plan For equity settled share-based payment transactions, the Group measures the options granted, and the corresponding increase in equity, directly at the fair value of the option grant. Subsequent to initial recognition and measurement, the estimate of the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied is revised during the vesting period. The cumulative amount recognised is based on the number of equity instruments for which the service and non-market related vesting conditions are expected to be satisfied. No adjustments are made in respect of market related vesting conditions. SECTION FIVE 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 2 Significant accounting policies and critical accounting judgements ( c o n t in u e d) Defined contribution plan Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Defined health benefit plans The Group’s net obligation regarding defined health benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees receive in return for their service in the current period and prior periods. That health benefit is discounted to determine its present value. The calculation of the liability of the defined health benefit plan is performed annually by a qualified actuary using the projected unit credit method. Remeasurements of the net defined health benefit obligation, which include actuarial gains and losses, are immediately recognised in other comprehensive income. The Group determines the net interest expense on the net defined benefit liabilities for the period by multiplying them by the discount rate used to measure the defined health benefit obligations. Defined health benefit liabilities for the period take into account any changes during the period due to the payment of contributions and benefits. Net interest and other expenses related to defined health benefit plans are recognised in profit or loss. When the benefits of a health plan are changed, the portion of the change in benefits relating to past services rendered by employees is recognised immediately in profit or loss. The Group recognised gains and losses on the settlement of a defined health benefit plan when settlement occurs. Termination benefits Termination benefits are recognised as an expense when the Group can no longer withdraw the offer of such benefits. If payments are settled after 12 months from the reporting date, then they are discounted to their present values. Finance income and finance costs The Group’s finance income and finance costs include interest income, interest expense and the net gain or loss on the disposal on financial assets at fair value through profit or loss. Interest income or expense is recognised in profit or loss using the effective interest method. Taxation Tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income, in which case the tax is also recognised directly in equity or in other comprehensive income. Current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of profit or loss and other comprehensive income because it excludes or includes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s current tax expense is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is generally recognised for all taxable temporary differences except for when the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that the related tax benefit will be realised. Prior reductions are reversed when the probability of future taxable profits improves. 58 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is recognised, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. The Company offsets current tax assets against current tax liabilities when these items are in the same entity and relate to taxes levied by the same taxation authority and the taxation authority permits the Company to make or receive a single net payment. Financial instruments Recognition and initial measurement Trade and other receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instruments. Trade and other receivables are initially measured at the transaction price which reflects fair value. All other financial assets and financial liabilities are initially measured at fair value plus transaction costs that are directly attributable to their acquisition or issue. Classification and subsequent measurement Management determines the classification of its financial instruments at the time of initial recognition. The classification depends on the purpose for which the financial instruments were acquired or issued, their characteristics and the Group’s designation of such instruments. Financial assets A financial asset is classified as measured at amortised cost if it is not designated as at fair value through profit and loss and if it is held within a business model whose objective is to hold assets to collect contractual cash flows and if its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets are subsequently measured at amortised cost using the effective interest method, reduced by any impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. A financial asset is classified as measured at fair value through other comprehensive income if it is not designated as at fair value through profit and loss and if it is held within a business model whose objective is to both hold assets to collect contractual cash flows and to sell financial assets, and if its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, dividends, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss. A financial asset is classified as measured at fair value through profit and loss if it is not classified as measured at amortised cost or at fair value through other comprehensive income, or if it is designated as such by management on initial recognition. Financial assets held for trading are classified as measured at fair value through profit and loss. These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes the stated policies and objectives for the portfolio, how the performance of the portfolio is evaluated and reported to the Group’s management and the risks that affect the performance of the business model and how those risks are managed. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument, including assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. Financial liabilities Financial liabilities are classified as at fair value through profit and loss when the financial liability is either held for trading or it is designated as such by management on initial recognition. These liabilities are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. SECTION FIVE 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 2 Significant accounting policies and critical accounting judgements ( c o n t in u e d) Financial liabilities that are not classified as at fair value through profit and loss are classified as other financial liabilities and are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. The following summarises the classification the Group applies to each of its significant categories of financial instruments: Category Trade and other receivables Financial assets at fair value through profit and loss Cash and cash equivalents Trade and other payables Bank overdraft and loans Derecognition Classification Amortised cost At fair value through profit and loss Amortised cost Other financial liabilities Other financial liabilities The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers the rights to receive the contractual cash flows in a transaction in which the Group either substantially transfers all of the risks and rewards of ownership of the financial asset or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. Hedge Accounting (Cash flow hedge) The Company seeks to apply hedge accounting (cash flow hedge) to manage volatility in profit or loss. When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in other comprehensive income are transferred from equity and included in the measurement of the initial carrying amount of the asset or liability. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. Impairment of financial assets The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For financial assets measured at amortised cost, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the receivables and the economic environment. The Group considers a financial asset in default when contractual payments are 180 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the 60 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Group is unlikely to receive the outstanding contractual amounts in full before. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Impairment losses are recognised in profit and loss and reflected in an allowance account against trade and other receivables. If, in a subsequent period, an event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit and loss. Inventories Inventories are measured at the lower of cost and net realisable value. Cost comprises direct materials, spare parts and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Property, plant and equipment Property, plant and equipment is measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and any accumulated impairment losses. Subsequent expenditure is recognised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Depreciation is calculated to write off the cost less the estimated residual value of items of property, plant and equipment, other than freehold land or assets under construction, over their estimated useful lives, using the straight-line method. Land is not depreciated, and assets under construction are not depreciated until they are transferred to the appropriate category of property, plant and equipment when the assets are ready for intended use. Depreciation is recognised in profit or loss. The estimated useful life of the different categories of property, plant and equipment are as follows: Freehold Buildings: Leasehold Improvements: Floating Craft: Vehicles: Plant and Equipment: 25 to 60 years Lower of the rental period and useful life 25 years 5 years 5 to 30 years The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on disposal or retirement of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Leased assets At inception of a contract, the Group assesses whether it is a lease or contains a lease component, which it is if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the lease commencement date, the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any incentives received. The lease liability is initially measured at the present value of the lease payments unpaid at the commencement date using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group applies the incremental borrowing rate. For a portfolio of leases with similar characteristics, lease liabilities are discounted using a single discount rate. Lease payments included in the measurement of the lease liability comprises fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee, and payments arising from options reasonably certain to be exercised. Variable lease payments not related to an index or rate are recognised in profit or loss as incurred. SECTION FIVE 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 2 Significant accounting policies and critical accounting judgements ( c o n t in u e d) Right-of-use assets are depreciated using the straight-line method, from the lease commencement date to the earlier of the end of their useful life or the end of the lease term, over their expected useful lives, on the same basis as owned assets except when there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, in which case the right-of-use asset shall be fully depreciated over the shorter of the lease term and its useful life. Right-of-use assets are reduced by impairment losses, if any, and adjusted for remeasurements of the lease liability. Subsequent to the initial measurement, the carrying amount of the liability is reduced to reflect the lease payments made and increased to reflect the interest payable. If there is a change in the expected cash flows arising from an index or rate, the lease liability is recalculated. If the modification is related to a change in the amounts to be paid, the discount rate is not revised. Otherwise, if a modification is made to a lease, the Group revises the discount rate as if a new lease arrangement had been made. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Intangible assets Intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses. Subsequent expenditure is recognised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Amortisation is calculated to write off the cost less the estimated residual values of intangible assets, using the straight-line method. Amortisation is recognised in profit or loss. The estimated useful life of the different category of intangible assets are as follows: Concession rights: Computer software: 10 to 33 years 3 to 5 years The estimated useful life, residual values and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on disposal or retirement of an intangible asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Goodwill Goodwill arising on an acquisition of a business is measured at cost as established at the date of acquisition of the business less accumulated impairment losses. Goodwill is not amortised. Impairment of non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs). Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the 62 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period taking into account the risks and uncertainties surrounding the obligation. Use of judgements and estimates The preparation of these consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In the process of applying the Group’s accounting policies, the following judgements, estimates and assumptions made by management have the most significant effect on the amounts recognised in these consolidated financial statements: a. Provisions for tax, labour and civil risks – Judgement Provisions for legal cases are made when the Group’s management, together with their legal advisors, consider the probable outcome is a financial settlement against the Group. Provisions are measured at managements’ best estimate of the expenditure required to settle the obligation based upon legal advice received. For labour claims, the provision is based on prior experience and management’s best knowledge of the relevant facts and circumstances. b. Impairment loss on non-financial assets – Judgement, estimates and assumptions Impairment losses occur when book value of an asset or cash generating unit exceeds its recoverable value, which is the highest of fair value less selling costs and value in use. Calculation of fair value less selling costs is based on information available on similar assets’ selling transactions or market prices less additional costs to dispose of the asset. The value- in-use calculation is based on the discounted cash flow model. The recoverable value of the cash-generating unit is defined as the higher of the fair value less sales costs and value in use. c. Valuation of unquoted investments – Judgement and estimates The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs. Changes in significant accounting policies Amendments to IFRS 16 COVID-19 Related Rent Concessions On 28 May 2020, the IASB issued COVID-19-Related Rent Concessions - amendment to IFRS 16 Leases. The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification. SECTION FIVE 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 2 Significant accounting policies and critical accounting judgements ( c o n t in u e d) The amendment applies to annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted and the Group adopted the amendment for the year ending 31 December 2020, with an impact of US$0.02 million in discounts obtained and US$0.2 million in payment deferrals from 2020 to 2021. Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships. Standards issued but not yet effective A number of new or amended standards are effective for annual periods beginning after 31 December 2021 with early adoption permitted. The Group has elected to not adopt early the following new or amended standards, and is assessing their impact on the preparation of its consolidated financial statements. - Reference to Conceptual Framework – Amendments to IFRS 3, effective for periods beginning on or after 1 January 2022 - Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16, effective for periods beginning on or after 1 January 2022 - Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37, effective for periods beginning on or after 1 January 2022 - Amendments to IAS 1: Classification of Liabilities as Current or Non-current, effective for periods beginning on or after 1 January 2023 - Amendments to IAS 8: Definition of Accounting Estimates, effective for periods beginning on or after 1 January 2023 - Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies, effective for periods beginning on or after 1 January 2023 64 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 3 Group composition Ocean Wilsons has direct ownership in Ocean Wilsons (Investments) Limited and Wilson Sons Holdings Brasil S.A, which in turn has direct ownership in the towage, shipyard, ship agency, logistics, container terminal and offshore support bases subsidiaries. The effective ownership interest of Ocean Wilsons at the end of each reporting period is as follows: Subsidiaries Investments Ocean Wilsons (Investments) Limited Holding company Wilson Sons Limited1 Wilson Sons Holdings Brasil S.A.1 Towage Saveiros, Camuyrano Serviços Marítimos S.A.2 Shipyard Wilson Sons Shipping Services Ltda. Wilson Sons Estaleiros Ltda. Ship agency Wilson Sons Agência Marítima Ltda. Dock Market Soluções Ltda. Logistics Wilson Sons Terminais e Logística Ltda. EADI Santo André Terminais de Cargas Ltda. Allink Transportes Internacionais Ltda. Container terminal Wilport Operadores Portuários Ltda. Tecon Rio Grande S.A. Tecon Salvador S.A. Offshore support bases and towage Wilson Sons Serviços Marítimos Ltda Place of incorporation and operation Ownership interest Segment 2021 2020 Bermuda Investment 100% 100% Bermuda Maritime service Brazil Maritime service NA 56.88% 57.77% 57.77% Brazil Maritime service – 57.77% Brazil Maritime service Brazil Maritime service 56.88% 56.88% 57.77% 57.77% Brazil Maritime service Brazil Maritime service 56.88% 56.88% 57.77% 57.77% Brazil Maritime service Brazil Maritime service Brazil Maritime service Brazil Maritime service Brazil Maritime service Brazil Maritime service 56.88% 56.88% 56.88% 56.88% 56.88% 56.88% 57.77% 57.77% 57.77% 57.77% 57.77% 57.77% Brazil Maritime service 56.88% 57.77% (1) During the year ended 31 December 2021, Wilson Sons Limited (WSL) merged into Wilson Sons Holdings Brasil S.A. (WSSA), its controlled subsidiary. As all WSL shareholders received WSSA shares at the ratio of 1:1, the transaction had no impact on the Group composition or ownership interests. (2) During the year ended 31 December 2021, Saveiros, Camuyrano Serviços Marítimos S.A. was merged into Wilson Sons Serviços Marítimos Ltda. The decrease in ownership interest from the year ended 31 December 2020 to 31 December 2021 is due to the exercise of share options in subsidiaries, for which the details are presented in note 26. The information on non-controlling interests is presented in note 27. SECTION FIVE 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 4 Business and geographical segment s The Group has two reportable segments: maritime services and investments. These segments report their financial and operational data separately to the Board. The Board considers these segments separately when making business and investment decisions. The maritime services segment provides towage and ship agency, port terminals, offshore, logistics and shipyard services in Brazil. The investment segment holds a portfolio of international investments and is a Bermuda based company. For the year ended 31 December 2021 Brazil - Maritime Services Bermuda - Investment Unallocated Consolidated Sale of services 396,376 – – 396,376 103,488 (5,029) – – 4,113 (30,227) (2,990) 69,355 (27,925) 41,430 48,727 7,718 (61,412) 13,272 14,981 157,869 563,055 61,553 10,784 3,582 1,580 163,967 1,025,791 (594,218) (212) – 49,474 (4,954) – – (6) 44,302 - 44,302 – – – – – – – – – – – 351,774 351,774 (2,211) (3,162) – – – – – (104) (3,266) - (3,266) – – – – – – – – – – – 2,782 2,782 (246) 100,114 (5,029) 49,474 (4,954) 4,113 (30,227) (3,100) 110,391 (27,925) 82,466 48,727 7,718 (61,412) 13,272 14,981 157,869 563,055 61,553 10,784 3,582 1,580 518,523 1,380,347 (596,675) Result Segment result Share of results of joint ventures Return on investment portfolio at fair value through profit or loss Investment portfolio performance and management fees Other investment income Finance costs Foreign exchange losses on monetary items Profit/(loss) before tax Tax Profit/(loss) after tax Other information Capital additions Right-of-use asset additions Depreciation and amortisation Statement of financial position Goodwill Other intangible assets Right-of-use assets Property, plant and equipment Investment in joint ventures Related party loans Other non-current assets Other trade receivables Total current assets Segment assets Segment liabilities 66 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) For the year ended 31 December 2020 Brazil - Maritime Services Bermuda - Investment Unallocated Consolidated Sale of services 352,792 – – 352,792 Result Segment result Share of results of joint ventures Return on investment portfolio at fair value through profit or loss Investment portfolio performance and management fees Other investment income Finance costs Foreign exchange losses on monetary items Profit/(loss) before tax Tax Profit/(loss) after tax Other information Capital additions Right-of-use asset additions Depreciation and amortisation Statement of financial position Goodwill Other intangible assets Right-of-use assets Property, plant and equipment Investment in joint ventures Related party loans Other non-current assets Other trade receivables Total current assets Segment assets Segment liabilities 80,279 (4,142) (185) – – 33,383 – 1,644 (23,210) (7,444) 47,127 (26,577) 20,550 62,486 5,200 (61,323) 13,429 16,967 149,278 579,138 26,185 30,460 4,905 9 178,281 1,039,374 (609,104) (3,130) – – (12) 30,056 – 30,056 – – – – – – – – – – – 310,882 310,882 (621) (2,508) – – – – – (95) (2,603) – (2,603) – – – – – – – – – – – 3,606 3,606 (430) 77,586 (4,142) 33,383 (3,130) 1,644 (23,210) (7,551) 74,580 (26,577) 48,003 62,486 5,200 (61,323) 13,429 16,967 149,278 579,138 26,185 30,460 4,905 9 492,769 1,353,862 (610,155) SECTION FIVE 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 5 Revenue An analysis of the Group’s revenue is as follows: Sale of services Net income from underlying investment vehicles Profit on disposal of financial assets at fair value through profit or loss Unrealised gains on financial assets at fair value through profit or loss Returns on investment portfolio at fair value through profit or loss Interest on bank deposits Other interest Other investment income Total Revenue 2021 2020 396,376 3,754 11,870 33,850 49,474 2,254 1,859 4,113 449,963 352,792 3,327 1,001 29,055 33,383 1,078 566 1,644 387,819 The Group derives its revenue from contracts with customers from the sale of services in its Brazil – Maritime services segment. The revenue from contracts with customers can be disaggregated as follows: Harbour manoeuvres Special operations Ship agency Towage and ship agency services Container handling Warehousing Ancillary services Offshore support bases Other services Port terminals Logistics Logistics Repairs/dry-docking Shipyard Total Revenue from contracts with customers Contract balance 2021 2020 178,552 20,558 8,774 207,884 72,402 35,036 21,283 7,234 13,040 148,995 35,142 35,142 4,355 4,355 396,376 159,134 14,462 8,122 181,718 71,401 28,727 18,534 8,045 13,514 140,221 28,616 28,616 2,237 2,237 352,792 Trade receivables are generally received within 30 days. The carrying amount of operational trade receivables at the end of the reporting period was US$49.1 million (2020: US$40.6 million). These amounts include US$13.5 million (2020: US$10.7 million) of contract assets (unbilled accounts receivables). There were no contract liabilities as of 31 December 2021 (2020: none). 68 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Performance obligations Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer, and the payment is generally due within 30 days. Information about the Group’s performance obligations timing is as follows: Performance obligation When performance obligation is typically satisfied Towage and agency services Harbour Maneuvers Special Operations Ship Agency Port Terminals Container handling Warehousing Ancillary services Offshore support bases Other services Logistics Logistics Shipyard Ship construction contracts Technical assistance/dry-docking At a point in time At a point in time At a point in time At a point in time At a point in time At a point in time At a point in time At a point in time At a point in time Over time Over time The disaggregation of revenue from contracts with customers based on the timing of performance obligations is as follows: At a point of time Over time Total Revenue from contracts with customers 2021 2020 392,021 4,355 396,376 350,555 2,237 352,792 The performance obligation of ship construction contracts, technical assistance and drydocking is satisfied over time and the revenue related to these contracts is recognised when the work in proportion to the stage of completion of the transaction contracted has been performed. As at 31 December 2021 and 2020, there were no warranties or refund obligations associated with ship construction contracts. There are no significant judgements in the determination of when performance obligations are typically satisfied. All revenue is derived from continuing operations. SECTION FIVE 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 6 Employee charges and benefit s expense Employee charges and benefits expense are classified as follows: Wages, salaries and benefits Social security costs Other pension costs Share based payments Employee charges and benefits expense 2021 2020 (90,868) (20,062) (772) (324) (112,026) (87,852) (21,271) (687) (206) (110,016) Defined contribution retirement benefit schemes The Group operates defined contribution retirement benefit schemes for all qualifying employees in its Brazilian operations. The assets of the scheme are held separately from those of the Group in funds under the control of independent managers. An expense of US$0.7 million (2020: US$0.6 million) recognised under other pension costs represents contributions payable to the scheme by the Group at rates specified in the rules of the plan. Information regarding the defined health benefit plans are detailed in note 22. 7 O ther operating expenses Other operating expenses are classified as follows: Utilities and communications Insurance Corporate, governance and compliance costs Short-term or low-value asset leases Service costs Freight Port expenses Other operating expenses 8 Finance cost s Finance costs are classified as follows: Interest on lease liabilities Interest on bank overdrafts and loans Exchange loss on foreign currency borrowings Other interest costs 70 2021 2020 (12,309) (4,076) (2,359) (32,881) (24,401) (10,717) (6,629) (4,917) (98,289) (10,352) (2,632) (2,459) (26,522) (21,953) (7,031) (6,172) (7,545) (84,666) 2021 2020 (13,882) (16,219) (32) (94) (30,227) (12,836) (10,262) - (112) (23,210) Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 9 Taxation At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda and accordingly, no expenses or provisions for such taxes has been recorded by the Group for its Bermuda operations. The Company has received an undertaking from the Bermuda Government exempting it from all such taxes until 31 March 2035. Tax expense The reconciliation of the amounts recognised in profit or loss is as follows: Current tax expense Brazilian corporation tax Brazilian social contribution Total current tax expense Deferred tax – origination and reversal of timing differences Charge for the year in respect of deferred tax liabilities Credit for the year in respect of deferred tax assets Total deferred tax (expense)/credit Total tax expense 2021 2020 (17,239) (7,114) (24,353) (6,737) 3,165 (3,572) (27,925) (20,912) (8,276) (29,188) (17,601) 20,212 2,611 (26,577) Brazilian corporation tax is calculated at 25% (2020: 25%) of the taxable profit for the year. Brazilian social contribution tax is calculated at 9% (2020: 9%) of the taxable profit for the year. The reconciliation of the effective tax rate is as follows: Profit before tax Less: Profit before tax of Bermuda and unallocated segments Profit before tax – Maritime services Tax at the aggregate Brazilian tax rate of 34% (2020: 34%) Net operating losses in the period Non-deductible expenses Foreign exchange variance on loans Tax effect of share of results of joint ventures Tax effect of foreign exchange gains or losses on monetary items Retranslation of non-monetary items Share option scheme Leasing Other Tax expense for the year Effective rate for the year – Maritime services Effective rate for the year – Group 2021 2020 110,391 (41,036) 69,355 (23,581) (816) (554) 1,142 (1,710) (881) 228 (110) 158 (1,801) (27,925) 40% 25% 74,580 (27,453) 47,127 (16,023) (2,869) (2,018) 14,631 (1,408) (4,248) (13,972) (43) 108 (735) (26,577) 56% 36% SECTION FIVE 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 9 Taxation ( c o n t i n u e d) The tax expense related to amounts recognised in other comprehensive income is as follows: For the year ended 31 December 2021 Before tax Post-employment benefits Items that will not be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations Effective portion of changes in fair value of derivatives Items that will be or may be reclassified subsequently to profit or loss Total amounts recognised in other comprehensive income For the year ended 31 December 2020 Post-employment benefits Items that will not be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations Effective portion of changes in fair value of derivatives Items that will be or may be reclassified subsequently to profit or loss Total amounts recognised in other comprehensive income Deferred tax 164 164 (11,302) 239 (11,063) (10,899) Before tax 532 532 (78,521) (53) (78,574) (78,042) Tax (expense)/ credit Net of tax (56) (56) 3,843 (81) 3,762 3,706 Tax (expense)/ credit (181) (181) 26,697 18 26,715 26,534 108 108 (7,459) 158 (7,301) (7,193) Net of tax 351 351 (51,824) (35) (51,859) (51,508) The following are the major deferred tax assets and liabilities recognised by the Group and their movements during the current and prior reporting period: Foreign exchange variance on loans Tax losses Profit on construction contracts Other timing differences Retranslation of non- monetary items Total Tax depreciation At 1 January 2020 (Charge)/credit to income Other adjustments Exchange differences At 31 December 2020 (Charge)/credit to income Other adjustments Exchange differences At 31 December 2021 (37,274) 29,379 14,933 (638) 15,135 3,235 - 8,429 (29,483) - (8,057) 36,457 (63) (3,400) 14,705 (2,497) 1,251 (4,159) - 2,130 (29,850) - (2,436) 35,272 - (868) 9,678 16,962 (1,439) - - 15,523 (632) (83) - 14,808 7,152 (51,314) (20,162) 290 (13,972) 2,611 121 (1,379) 6,184 2,237 (1,456) (429) 6,536 - 629 (64,657) 58 (3,778) (21,271) 228 (3,572) - 123 (64,306) (1,539) (1,480) (27,862) 72 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Certain tax assets and liabilities have been offset on an entity-by-entity basis. After offset, deferred tax balances are disclosed in the statement of financial position as follows: Deferred tax liabilities Deferred tax assets 2021 2020 (50,194) 22,332 (27,862) (50,987) 29,716 (21,271) As at 31 December 2021, the Group had unused tax losses of US$39.0 million (2020: US$64.4 million) available for offset against future profits in the company in which they arose. No deferred tax asset has been recognised in respect of US$7.6 million (2020: US$6.9 million) due to the unpredictability of future profit streams, as a tax asset of one entity of the Group cannot be offset against a tax liability of another entity of the Group as there is no legally enforceable right to do so. The Group expects to recover the deferred tax assets between three and five years. Deferred tax on foreign exchange variance on loans arises from exchange gains or losses on the Group’s US Dollar and Brazilian Real denominated loans linked to the US Dollar that are not deductible or payable for tax in the period they arise. Exchange gains on these loans are taxable when settled and not in the period in which gains arise. Retranslation of non-monetary items deferred tax arises on Brazilian property, plant and equipment held in subsidiaries with US Dollar as their functional currency. Deferred tax is calculated on the difference between the historical US Dollar balances recorded in the Group’s accounts and the Brazilian Real balances used in the Group’s Brazilian tax calculations. Recoverable and payable taxes The Group reviews taxes and levies impacting its business to ensure that payments are accurately made. In the event that tax credits arise, the Group intends to use them in future years within their legal term. If the Group does not utilise the tax credit within their legal term, a reimbursement of such amounts will be requested from the Brazilian Internal Revenue Service. The recoverable taxes relate to Brazilian federal taxes, Brazilian sales and rendering of services taxes, Brazilian payroll taxes, Brazilian income tax, Brazilian social contributions, and judicial bond related those previous items. The recoverable taxes are classified as current if they are expected to be used or reimbursed within 12 months of the end of the period, otherwise they are classified as non-current, and are as follows: Recoverable taxes – current Recoverable taxes – non-current Total recoverable taxes 2021 2020 25,380 12,816 38,196 22,479 11,006 33,485 The payable taxes relate to Brazilian federal taxes, Brazilian rendering of services taxes, Brazilian payroll taxes and Brazilian income tax. The payable taxes are classified as current if they are payable within 12 months of the end of the period, otherwise they are classified as non-current, and are as follows: Taxes payable – current Total taxes payable 2021 2020 (8,057) (8,057) (6,346) (6,346) SECTION FIVE 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 10 C ash and cash equivalent s Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. 11 Financial asset s at fair value through profit or loss The movement in financial assets at fair value through profit or loss is as follows: Opening balance – 1 January Additions, at cost Disposals, at market value Increase in fair value of financial assets at fair value through profit or loss Profit on disposal of financial assets at fair value through profit or loss Closing balance – 31 December Bermuda – Investment segment Brazil – Maritime services segment Bermuda – Investment segment 2021 2020 347,464 72,811 (73,064) 33,850 11,870 392,931 349,613 43,318 298,839 63,723 (45,154) 29,055 1,001 347,464 307,874 39,590 The financial assets at fair value through profit or loss held in this segment represent investments in listed equity securities, funds and unquoted equities that present the Group with opportunity for return through dividend income and capital appreciation. Included in financial assets at fair value through profit or loss are open ended funds whose shares may not be listed on a stock exchange but are redeemable for cash at the current net asset value at the option of the Group. They have no fixed maturity or coupon rate. The fair values of these securities are based on quoted market prices where available. Where quoted market prices are not available, fair values are determined by third parties using various valuation techniques that include inputs for the asset or liability that are not based on observable market data. The Investment Manager receives an investment management fee of 1% of the valuation of funds under management and an annual performance fee of 10% of the net investment return which exceeds the benchmark, provided that the high- water mark has been exceeded. The portfolio performance is measured against a benchmark calculated by reference to the US CPI Urban Consumers index not seasonally adjusted plus 3% per annum over rolling three-year periods. Payment of performance fees are subject to a high-water mark and are capped at a maximum of 2% of the portfolio net asset value. The Board considers a three-year measurement period appropriate due to the investment mandate’s long-term horizon and an absolute return inflation-linked benchmark appropriately reflects the Group’s investment objectives while having a linkage to economic factors. At the end of the reporting period, the Group had entered into commitment agreements with respect to the investment portfolio for capital subscriptions. The classification of those commitments based on their expiry date is as follows: Within one year In the second to fifth year inclusive After five years Total 74 2021 2020 5,219 2,946 35,056 43,221 4,670 5,153 35,495 45,318 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) The exact timing of capital calls made in respect of the above commitments are at the discretion of the manager of the underlying structure. If required, amounts expected to be settled within one year will be met from the realisation of liquid investment holdings. There may be situations when commitments may be extended by the manager of the underlying structure beyond the initial expiry date dependent upon the terms and condition of each individual structure. Brazil – Maritime Services segment The financial assets at fair value through profit or loss held in this segment are held and managed separately from the Bermuda – Investment segment portfolio and consist of US Dollar denominated depository notes, an investment fund and an exchange fund both privately managed. Those funds’ financial obligations are limited to service fees to the asset management company employed to execute investment transactions, audit fees and other similar expenses. The funds’ underlying investments are highly liquid and readily convertible. Information about the Group’s exposure to financial risks and fair value information related to financial assets at fair value through profit or loss is included in note 31. 12 Trade and other receivables Trade and other receivables are classified as follows: Non-current Other trade receivables Total other trade receivables Current Trade receivable for the sale of services Unbilled trade receivables Total gross current trade receivables Allowance for expected credit loss Total current trade receivables Prepayments Insurance claim receivable Employee advances Other receivables Total other current receivables Total trade and other receivables The aging of the trade receivables is as follows: Current From 0 – 30 days From 31 – 90 days From 91 – 180 days More than 180 days Total 2021 2020 1,580 1,580 35,915 13,517 49,432 (338) 49,094 6,646 632 1,236 1,742 10,256 59,350 9 9 30,436 10,716 41,152 (554) 40,598 4,252 995 1,099 863 7,209 47,807 2021 2020 43,160 4,098 858 988 328 49,432 34,561 4,800 852 197 742 41,152 SECTION FIVE 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 12 Trade and other receivables ( c o n t i n u e d) The movement in allowance for expected credit loss is as follows: Opening balance – 1 January Decrease in allowance recognised in profit or loss Exchange differences Closing balance – 31 December 2021 2020 554 (188) (28) 338 837 (99) (184) 554 Information about the Group’s exposure to credit risks related to trade receivables is included in note 31. 13 Inventories Inventories are classified as follows: Operating materials Raw materials for third party vessel construction Total 2021 2020 10,829 1,468 12,297 9,404 2,360 11,764 Inventories are presented net of provision for obsolescence, amounting to US$0.4 million (2020: US$0.3 million). 14 Joint arrangement s Joint operations The Group holds the following significant interests in joint operations at the end of the reporting period: Towage Consórcio de Rebocadores Baia de São Marcos1 (1) The joint operation was terminated in December 2021 Place of incorporation and operation Proportion of ownership 2021 2020 Brazil - 50% The following amounts are included in the Group’s financial information as a result of proportional consolidation of joint operations listed above: Sales of services Other operating expenses Profit for the year 76 2021 2020 - (1,059) (1,059) 4,067 (2,449) 1,618 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Property, plant and equipment Other intangible assets Inventories Trade and other receivables Cash and cash equivalents Total assets Trade and other payables Deferred tax liabilities Total liabilities Joint ventures 2021 2020 - - - - - - - - - 1,842 2 186 990 1,408 4,428 (4,237) (191) (4,428) The Group holds the following significant interests in joint ventures at the end of the reporting period: Logistics Porto Campinas, Logística e Intermodal Ltda Offshore Wilson, Sons Ultratug Participações S.A. Atlantic Offshore S.A. Place of incorporation and operation Proportion of ownership 2021 2020 Brazil 50% 50% Brazil Panamá 50% 50% 50% 50% The aggregated Group’s interests in joint ventures are equity accounted. The Group has not given separate disclosure of each material joint ventures because they belong to the same economic group. The financial information of the joint ventures and reconciliations to the share of result of joint ventures and the investment in joint ventures recognised for the period are as follows: Sales of services Operating expenses Depreciation and amortisation Foreign exchange losses on monetary items Results from operating activities Finance income Finance costs Loss before tax Tax credit Loss for the year Participation Share of result of joint ventures 2021 2020 118,049 (70,364) (50,962) (3,904) (7,181) 302 (15,789) (22,668) 12,610 (10,058) 50% (5,029) 121,616 (59,344) (51,199) (16,998) (5,925) 65 (17,415) (23,275) 14,991 (8,284) 50% (4,142) SECTION FIVE 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 14 Joint arrangement s ( c o n t i n u e d) Non-current assets Other current assets Cash and cash equivalents Total assets Non-current liabilities Other current liabilities Trade and other payables Total liabilities Total net assets Participation Group’s share of net assets Cumulative elimination of profit on construction contracts Investment in joint ventures 2021 2020 584,886 46,548 7,541 638,975 375,988 49,173 66,567 491,728 147,247 50% 73,624 (12,071) 61,553 590,734 37,942 15,219 643,895 387,478 78,011 98,145 563,634 80,261 50% 40,131 (13,946) 26,185 Investment in joint ventures movement 2021 2020 Opening balance – 1 January Share of result of joint ventures Capital increase Elimination of profit on construction contracts Post-employment benefits Translation reserve Closing balance – 31 December 26,185 (5,029) 40,207 17 10 163 61,553 30,334 (4,142) 23 45 24 (99) 26,185 During the year ended 31 December 2021, the Group increased its invested capital in the joint venture Wilson Sons Ultratug Participações S.A. with a cash contribution of US$20.0 million (2020: nil), and in the joint venture Atlantic Offshore S.A. with the conversion in capital of a US$20.2 million (2020: nil) related party loan. Guarantees The joint venture Wilson Sons Ultratug Participações S.A. has loans with the Brazilian Development Bank which are guaranteed by a lien on the financed supply vessel and by a corporate guarantee from its participants, proportionate to their ownership. The Group’s subsidiary Wilson Sons Holdings Brasil Ltda. is guaranteeing US$160.4 million (2020: US$170.7 million). The joint venture Wilson Sons Ultratug Participações S.A. has a loan with Banco do Brasil guaranteed by a pledge on the financed offshore support vessels, a letter of credit issued by Banco de Crédito e Inversiones and its long-term contracts with Petrobas. The joint venture has to maintain a cash reserve account, presented as long-term investment, until full repayment of the loan agreement, amounting to US$2.1 million (2020: US$2.1 million). Covenants On 31 December 2021 the joint venture Wilson Sons Ultratug Participações S.A. was not in compliance with one of the covenants’ ratios with Banco do Brasil. In the event of non-compliance, the joint venture has to increase its capital within a year to reach US$5.5 million. As the capital will be increased to that amount within a year, management will not negotiate a waiver letter with Banco do Brasil. There are no other capital commitments for the joint ventures as of 31 December 2021 (2020: none). 78 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 15 Proper t y, plant and equipment Cost At 1 January 2020 Additions Transfers to right-of-use assets Transfers to intangible assets Transfers Disposals Exchange differences At 1 January 2021 Additions Transfers from joint operations Transfers Disposals Exchange differences At 31 December 2021 Accumulated depreciation At 1 January 2020 Charge for the year Transfers to right-of-use assets Elimination on construction contracts Disposals Exchange differences At 1 January 2021 Charge for the year Elimination on construction contracts Disposals Exchange differences At 31 December 2021 Carrying Amount At 31 December 2020 At 31 December 2021 Land and buildings Floating craft Vehicles, plant and equipment Assets under construction 313,432 25,901 - - 148 (3,725) (56,443) 279,313 8,992 - (16) (1,998) (11,608) 274,683 91,945 6,774 - - (2,400) (16,691) 79,628 7,989 - (1,193) (3,773) 82,651 516,361 10,216 - - (124) (969) - 525,484 22,152 1,350 1,462 (9,196) - 541,252 217,369 29,030 - 13 (829) - 245,583 26,070 25 (6,842) - 264,836 231,226 25,284 (495) (99) (24) (4,039) (42,819) 209,034 6,919 32 (1,446) (4,607) (11,468) 198,464 124,948 11,989 (471) - (3,928) (22,764) 109,774 12,572 - (3,053) (5,855) 113,438 292 - - - - - - 292 9,289 - - - - 9,581 - - - - - - - - - - - - Total 1,061,311 61,401 (495) (99) - (8,733) (99,262) 1,014,123 47,352 1,382 - (15,801) (23,076) 1,023,980 434,262 47,793 (471) 13 (7,157) (39,455) 434,985 46,631 25 (11,088) (9,628) 460,925 199,685 192,032 279,901 276,416 99,260 85,026 292 9,581 579,138 563,055 Land and buildings with a net book value of US$0.2 million (2020: US$0.2 million) and plant and equipment with a carrying amount of US$0.1 million (2020: US$0.1 million) have been given in guarantee for various legal processes. The Group has pledged assets with a carrying amount of US$251.6 million (2020: US$253.6 million) to secure loans granted to the Group. No borrowing costs were capitalised in 2021. The amount of borrowing costs capitalised in 2020 was US$3.0 million at an average interest rate of 2.76%. The Group has contractual commitments to suppliers for the acquisition and construction of property, plant and equipment amounting to US$14.2 million (2020: US$1.6 million). SECTION FIVE 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 16 Lease arrangement s Right-of-use assets Right-of-use assets are classified as follows: Operational facilities Floating craft Buildings Vehicles, plant and equipment Cost At 1 January 2020 Additions Contractual amendments Transfers from property, plant and equipment Terminated contracts Exchange differences At 1 January 2021 Additions Contractual amendments Terminated contracts Exchange differences At 31 December 2021 Accumulated depreciation At 1 January 2020 Charge for the year Transfers from property, plant and equipment Terminated contracts Exchange differences At 1 January 2021 Charge for the year Terminated contracts Exchange differences At 31 December 2021 Carrying Amount At 31 December 2020 At 31 December 2021 Operational facilities 186,026 1,553 9,376 - - (42,245) 154,710 - 33,466 (15,662) (5,396) 167,118 8,269 7,280 - - (1,810) 13,739 7,410 (3,264) 413 18,298 140,971 148,820 4,481 3,504 52 - - (759) 7,278 7,353 (838) - (716) 13,077 2,276 2,995 - - (521) 4,750 4,187 - (743) 8,194 2,528 4,883 6,449 19 201 - (200) (772) 5,697 176 119 (177) (427) 5,388 1,469 1,099 - (70) (77) 2,421 980 (504) 63 2,960 3,276 2,428 Total 209,659 5,200 9,712 495 (2,111) (45,521) 177,434 7,718 32,787 (16,645) (6,865) 194,429 20,648 12,436 471 (1,931) (3,468) 28,156 13,325 (4,366) (555) 36,560 12,703 124 83 495 (1,911) (1,745) 9,749 189 40 (806) (326) 8,846 8,634 1,062 471 (1,861) (1,060) 7,246 748 (598) (288) 7,108 2,503 1,738 149,278 157,869 The main lease commitments included as operational facilities are described below: Tecon Rio Grande The Tecon Rio Grande lease was signed on 3 February 1997 for a period of 25 years renewable for a further 25 years. Tecon Rio Grande was then granted the right to renew the lease as set out in the contract amendment signed on 7 March 2006. The commitments set forth in the lease agreement and its addendum include a monthly payment for facilities and leased areas, a contractual payment per container moved based on minimum forecast volumes, and a payment per tonne in respect of general cargo handling and unloading. 80 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Tecon Salvador Tecon Salvador S.A. has the right to lease and operate the container terminal and heavy cargo terminal in the Port of Salvador for 25 years renewed in 2016 for a further 25 years. The total lease term of 50 years, until March 2050, is provided in the second addendum to the rental agreement. This addendum requires the Group to make a minimum specified investment in expanding the leased terminal area. The commitments set forth in the lease agreement and its addendums include a monthly payment for facilities and leased areas and a contractual payment per container moved based on minimum forecast volumes and a fee per ton of non-containerised cargo moved based on minimum forecast volumes. Shipyard Lease commitments mainly refer to a 60-year right to lease from June 2008 and operate an area located adjacent to a Group’s shipyard in Guarujá, São Paulo state. The initial lease of 30 years is renewable for a further period of 30 years at the option of the Group. The area has been used to expand and develop the shipyard. Management’s intention is to exercise the renewal option. Brasco The Brasco lease commitments mainly refers to a 30-year lease expiring in 2043 to operate a port area in Caju, Rio de Janeiro, Brazil with convenient access to service the Campos and Santos oil producing basins. Logistics Lease commitments mainly refer to the bonded terminals and distribution centres located in Santo André, São Paulo state and Suape, Pernambuco state with terms ranging between 18 and 24 years. Floating craft Variable chartering of vessels for maritime transport between port terminals. Buildings The Group has lease commitments for its Brazilian business headquarters, branches and commercial offices in several Brazilian cities. Vehicles, plant and equipment Rental contracts mainly for forklifts, vehicles for operational, commercial and administrative activities and other operating equipment. Lease liabilities Lease liabilities by class of asset Discount rate 2021 2020 Operational facilities Floating craft Buildings Vehicles, plant and equipment Total Total current Total non-current 5.17% - 9.33% 7.75% - 10.52% 4.41% - 17.19% 4.87% - 12.9% 159,444 4,823 2,139 1,437 167,843 19,449 148,394 150,513 2,759 2,932 1,690 157,894 18,192 139,702 SECTION FIVE 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 16 Lease arrangement s ( c o n t i n u e d) Maturity analysis - contractual undiscounted cash flows 2021 2020 Within one year In the second year In the third to fifth years inclusive After five years Total cash flows Adjustment to present value Total lease liabilities 20,323 37,535 32,767 313,102 403,727 (235,884) 167,843 19,153 17,365 49,353 292,766 378,637 (220,743) 157,894 The table below presents the lease liabilities balance considering the projected future inflation rate in the discounted payment flows. For the purposes of this calculation, all other assumptions were maintained. Actual outflow Embedded interest Lease liabilities Inflated flow Inflated embedded interest Inflated lease liabilities Amounts recognised in profit and loss Depreciation of right-of-use assets PIS and COFINS taxes Net depreciation of right-of-use assets Interest on lease liabilities PIS and COFINS taxes Interest on lease liabilities Variable lease payments not included in the measurement of lease liabilities1 Expenses relating to short-term leases Expenses relating to low-value assets Total 2021 2020 403,727 (235,884) 167,843 426,694 (252,974) 173,720 378,637 (220,743) 157,894 400,017 (236,886) 163,131 2021 2020 (13,325) 1,262 (12,063) (14,771) 889 (13,882) (2,332) (29,641) (897) (58,815) (12,436) 1,730 (10,706) (14,096) 1,260 (12,836) (2,037) (23,392) (1,093) (50,064) (1) The amounts refer to payments which exceeded the minimum forecast volumes of Tecon Rio Grande and Tecon Salvador and payments related to the number of vessel trips which were not included in the measurement of lease liabilities. 82 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Amounts recognised in the cash flow statement Payment of lease liability Interest paid – lease liability Short-term leases paid Variable lease payments Low-value leases paid Total cash outflow 2021 2020 (8,473) (14,771) (29,641) (2,332) (897) (56,114) (6,345) (14,111) (23,392) (2,037) (1,093) (46,978) 17 O ther int angible asset s Other intangible assets cost and related accumulated amortisation are classified as follows: Computer software Concession rights Other Total Cost At 1 January 2020 Additions Transfers to property, plant and equipment Disposals Exchange differences At 1 January 2021 Additions Disposals Exchange differences At 31 December 2021 Accumulated amortisation At 1 January 2020 Charge for the year Disposals Exchange differences At 1 January 2021 Charge for the year Disposals Exchange differences At 31 December 2021 Carrying Amount 31 December 2020 31 December 2021 42,420 1,085 99 (43) (2,454) 41,107 1,375 (925) (634) 40,923 33,326 2,394 (42) (1,330) 34,348 2,298 (695) (411) 35,540 6,759 5,383 20,461 - - - (4,448) 16,013 - - (512) 15,501 7,304 430 (382) (1,500) 5,852 420 - (324) 5,948 10,161 9,553 61 - - - (14) 47 - - (2) 45 - - - - - - - - - 62,942 1,085 99 (43) (6,916) 57,167 1,375 (925) (1,148) 56,469 40,630 2,824 (424) (2,830) 40,200 2,718 (695) (735) 41,488 47 45 16,967 14,981 SECTION FIVE 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 18 Goodwill Goodwill is classified as follows: Carrying Value: At 1 January 2020 Exchange differences At 1 January 2021 Exchange differences At 31 December 2021 Tecon Rio Grande Tecon Salvador Total 11,610 (661) 11,949 (157) 10,792 2,480 - 2,480 - 2,480 14,090 (661) 13,429 (157) 13,272 The goodwill associated with each cash-generating unit “CGU” (Tecon Salvador and Tecon Rio Grande) is attributed to the Brazil - Maritime Services segment. Each CGU is assessed for impairment annually and whenever there is an indication of impairment. The carrying value of goodwill has been assessed with reference to its value in use reflecting the projected discounted cash flows of each CGU to which goodwill has been allocated. Details of the impairment test are disclosed in note 19. 19 Impairment Test of C ash Generating Unit s Tecon Rio Grande and Tecon Salvador The Tecon Rio Grande and Tecon Salvador CGUs contains goodwill and as such are tested annually for impairment. The cash flows of these CGUs are derived from operating budgets, historical and prospective data, and include forecast assumptions on revenue, costs and expenses, investments, and projection period. The key assumptions used in determining value in use are as follows: Discount rate Growth rate Inflation rate Tecon Rio Grande Tecon Salvador 2021 2020 2021 2020 9.4% 4.3% 3.7% 8.4% 7.4% 4.0% 9.5% 3.4% 3.7% 8.4% 3.9% 4.0% Further assumptions include sales and operating margins, which are based on past experience considering the effect potential changes in market or operating conditions. Projected volumes for both CGUs were based on the expected performance of the Brazilian economy until reaching operating capacity for each. The discount rate was based on weighted average cost of capital (“WACC”), whereas the growth rate for projection is based on the inflation rate only after reaching operating capacity and does not exceed its historical average. As at 31 December 2021 and 2020, the estimated recoverable amount of these CGUs significantly exceeded their carrying value and as such no impairment loss was recognised. An increase in the discount rate of up to 33.7% (2020: 36.6%) for Tecon Rio Grande and 6.4% (2020: 12.6%) for Tecon Salvador would not result in an impairment loss. Offshore support bases For the year ended 31 December 2021 and 2020, the Offshore support bases CGU, which is part of the Brazil – Maritime Services segment, reported negative earnings before taxes, and as such was tested for impairment. The cash flows of this CGU are derived from operating budgets, historical and prospective data, and include the following forecast assumptions: (i) revenue; (ii) costs and expenses; (iii) investments; (iv) projection period; and (v) discount rate. 84 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) (i) Revenue: The assumption considers the estimated pace of growth in oil & gas offshore exploration and production. Data from the Brazilian Petroleum National Agency, the Energy Research Agency, oil companies’ releases and specialised industry reports all support a significant increase in oil exploration and production activities in Brazil in the next 10 years. The Group assesses it will successfully capture part of that increase in demand and expects to reach from 2026 onwards operating levels attained prior to the economic and oil and gas market crises. Based on current and expected future tender activity and competitive advantage, the average growth rate is estimated at 20% each year until 2025. For 2026 onward, the growth rate is estimated at 21%, based on the expected growth in the Brazilian oil and gas sector and in the region in which the CGU operates. Projections for 2022 include a 9% increase from the pricing currently in place and a 29% decrease in public prices for Spot berthing compared to 2021. From 2023 onwards, prices are adjusted for inflation. (ii) Costs and expenses: Projections for 2022 are in line with the budget and include an increase in fixed costs of 23% over 2021. From 2023 onwards, costs are forecasted to increase in line with the increase in activity. (iii) Investments: The Group did not include any expansion investment within its projections. (iv) Projection period: The Group has prepared the projections using a 10 year period plus a perpetuity, as the oil and gas industry life cycle is at least 10 years, due to the life cycle of investment in an oil field from exploration to sustainable production. (v) Discount rate: The discount rate calculation is based on the specific circumstances of the CGU, taking into consideration the time value of money and individual risks of the CGU that have not been incorporated in the cash flow estimates, and is a weighted average cost of capital (WACC). The Group has determined the discount rate using reputable sources to capture macroeconomic assumptions and information from comparator companies in the oilfield and the maritime services sector in which the CGU operates. For the year ended 31 December 2021, the discount rate was estimated at 10.1% (2020: 11.3%), the reduction being principally driven by a reduction of cost of equity due to a reduction in the unlevered beta and in the country risk premium. As at 31 December 2021, the estimated recoverable amount of the CGU of US$72.1 million (2020: US$57.2 million) exceeded its carrying value of US$42.9 million (2020: US$46.3 million) and as such no impairment loss was recognised. While maintaining all other assumptions constant, either an increase in the discount rate of up to 2.5% (2020: 0.9%), a decrease in revenue over the projected period of up to 7.8% (2020: 5.3%), or a decrease in revenue over the first 3 years of the projected period of up to 80.0% (2020: 12.0%) would not result in an impairment loss. 20 Trade and other payables Trade and other payables are classified as follows: Trade payables Accruals Other payables Provisions for employee benefits Deferred income Total 2021 2020 29,242 7,424 441 19,547 1,859 58,513 17,090 5,757 912 16,516 791 41,066 Trade creditors and accruals principally comprise amounts outstanding for trade purposes and ongoing costs. The average credit period for trade purchases is 29 days (2020: 29 days). For most suppliers, interest is charged on outstanding trade payable balances at various interest rates. The Group has financial risk management policies in place to ensure that payables are paid within the credit timeframe agreed with each vendor. SECTION FIVE 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 21 Bank loans and overdraf t s The movement in bank loans is as follows: Opening – 1 January Additions Principal amortisation Interest amortisation Accrued interest Exchange difference Closing – 31 December 2021 2020 342,661 19,438 (57,926) (10,390) 16,246 (8,430) 301,599 334,978 51,455 (25,725) (8,569) 13,840 (23,318) 342,661 The terms and conditions of outstanding secured borrowings are as follows: Lender Currency Annual interest rate % 2021 2020 Year of maturity Carrying value Fair value Carrying value Fair value BNDES BNDES BNDES BNDES BNDES BNDES Banco do Brasil Bradesco Bradesco Itaú Banco Santander Banco Santander Banco Santander China Construction Bank Total linked to US Dollar linked to US Dollar linked to US Dollar Real Real Real linked to US Dollar Real Real Real 2.30% – 3.71% 2.07% – 4.08% 5% 15.91% 14.65% 9.79% 2.00% – 4.00% 10.08% – 10.45% 10.75% 3.38% US Dollar 2.63% 2035 2028 2022 2034 2029 2027 2035 2024 2023 2021 2023 110,514 25,161 177 45,264 6,241 638 71,854 27,248 4,494 - 110,514 25,161 177 45,264 6,241 638 71,854 27,417 4,489 - 117,781 27,060 1,605 47,632 7,545 805 75,795 38,660 - 4,056 117,781 27,060 1,605 47,632 7,545 805 75,795 40,577 - 4,060 10,008 10,008 - - Real Real Real 6.44% 2021 6.44% 2021 5.65% 2021 - - - - - - 6,153 6,144 1,903 1,900 13,666 13,657 301,599 301,763 342,661 344,561 86 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) The breakdown of bank overdrafts and loans by maturity is as follows: Within one year In the second year In the third to fifth years (inclusive) After five years Total Amounts due for settlement within 12 months Amounts due for settlement after 12 months Guarantees 2021 2020 45,287 47,961 86,671 121,680 301,599 45,287 256,312 58,672 44,707 96,250 143,032 342,661 58,672 283,989 The loan agreements with BNDES and Banco do Brasil rely on corporate guarantees from the Group’s subsidiary party to the agreement. For some contracts, the corporate guarantee is in addition to a pledge of the respective financed tugboat or a lien over the logistics and port operations equipment financed. The loan agreements with Bradesco and Banco Santander rely on corporate guarantees from the Group’s subsidiary party to the agreement. Undrawn credit facilities As at 31 December 2021, the Group had US$78.8 million (2020: US$19.1 million) of undrawn borrowing facilities available in relation to the Salvador Terminal expansion and the dry-docking, maintenance and repair of tugs. Covenants Some of the loan agreements include obligations related to financial indicators, including Net Debt/EBITDA, Profit/Total Debt, current liquidity ratio and debt service coverage ratio. As at 31 December 2021 and 2020, the Group was in compliance with all covenants related to its loan agreements. Information about the Group’s exposure to financial risks is included in note 31. 22 Post- employment benefit s The Group operates a private medical insurance scheme for its employees in its Brazilian operations, which requires the eligible employees to pay fixed monthly contributions. In accordance with Brazilian law, eligible employees with greater than ten years’ service acquire the right to remain in the plan following retirement or termination of employment. Ex-employees remaining in the plan will be liable for paying the full cost of their continued scheme membership. SECTION FIVE 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 22 Post- employment benefit s ( c o n t i n u e d) The future actuarial liability for the Group relates to the potential increase in plan costs resulting from additional claims due to the expanded membership of the scheme. The movement in the present value of the actuarial liability for the year is as follows: Opening balance – 1 January Current service cost Interest expense Contributions to the plan Changes in economic and financial assumptions Changes in biometric and demographic assumptions Exchange differences Closing balance – 31 December 2021 2020 (1,641) (3) (133) (30) 522 (391) 114 (1,562) (2,369) (7) (127) (23) 566 (215) 534 (1,641) The calculation of the liability generated by the defined health benefits plan involves actuarial assumptions. The principal actuarial assumptions are as follows: Economic and Financial assumptions Annual interest rate Estimated inflation rate in the long-term Medical cost trend rate Biometric and Demographic assumptions Employee turnover Mortality table Disability table Retirement Age Employees electing to remain in the plan after retirement or termination Probability of marriage Age difference for active participants 2021 8.67% 3.00% 5.58% 14.10% AT-2000 Álvaro Vindas 100% at 62 23% 2020 7.90% 3.50% 6.09% 21.27% AT-2000 Álvaro Vindas 100% at 62 23% 80% of the participants 80% of the participants Men 3 years older than women Men 3 years older than women The present value of future liabilities may change depending on market conditions and actuarial assumptions. Changes on a relevant actuarial assumption, keeping the other assumptions constant, would have affected the defined benefit obligation as follows: Change in assumptions Discount rate + 0.5% Discount rate - 0.5% Medical Cost Trend Rate + 0.5% Medical Cost Trend Rate - 0.5% Aging factor + 0.5% Aging factor - 0.5% 88 2021 (195) 223 229 (199) 145 (145) 2020 (225) 260 264 (229) 151 (151) Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 23 Legal claims In the normal course of its operations in Brazil, the Group is exposed to numerous local legal claims. The Group’s policy is to vigorously contest those claims, many of which appear to have little substance or merit, and manage such claims through its legal counsel. Labour claims – Claims involving payment of health risks, additional overtime and other allowances. Tax cases – Claims involving government tax assessments when the Group considers it has a chance of successfully defending its position. Civil and environmental cases – Claims involving indemnification for material damage, environmental and shipping claims and other contractual disputes. Claims deemed probable and subject to reasonable estimation by management and its legal counsel are recorded as provisions, whereas claims deemed only reasonably possible are disclosed as contingent liabilities. Both provisions and contingent liabilities are subject to uncertainties around the timing and amount of possible cash outflows as the outcome is heavily dependent on court proceedings. The movement in the carrying amount of each class of provision for legal claims for the period is as follows: At 1 January 2021 Additional provisions Unused amounts reversed Utilisation of provisions Exchange difference At 31 December 2021 Labour claims Tax cases Civil and environmental cases 7,985 667 (1,542) (368) (552) 6,190 1,202 280 (102) (2) (83) 1,295 373 1,132 (3) - (80) 1,422 The contingent liabilities at the end of each period are as follows: Labour claims Tax cases Civil and environmental cases At 31 December 2020 At 31 December 2021 13,318 14,881 58,809 52,793 5,264 4,968 Total 9,560 2,079 (1,647) (370) (715) 8,907 Total 77,391 72,642 Other non-current assets of US$3.6 million (2020: US$4.9 million) represent legal deposits required by the Brazilian legal authorities as security to contest legal actions. SECTION FIVE 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 24 Related par t y transactions Transactions between the Group and its subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in this note. Transactions and outstanding balances between the Group and its related parties are as follows: Joint arrangements Consórcio de Rebocadores Baía de São Marcos Wilson, Sons Ultratug Participações S.A.1 Atlantic offshore S.A.2 Others Hanseatic Asset Management LBG3 Gouvêa Vieira Advogados4 CMMR Intermediacão Comercial Limitada5 Jofran Services6 Hansa Capital GMBH7 Revenues /(Expenses) Receivable /(Payable) 2021 2020 2021 2020 - 524 - (4,876) (21) - - - (4) 506 - (3,130) (51) (6) (156) (93) - 10,784 - (2,133) - - - - 1,535 10,346 20,617 (599) - - - - (1) Related party loans with Wilson, Sons Ultratug Participações S.A. (interest – 0.3% per month with no maturity date). (2) Related party loans with Atlantic Offshore S.A. (with no interest and with no maturity date). (3) Mr. W H Salomon is chairman of Hanseatic Asset Management LBG. Fees were paid to Hanseatic Asset Management LBG for acting as Investment Manager of the Group’s investment portfolio. (4) Mr. J F Gouvêa Vieira is a partner in the law firm Gouvêa Vieira Advogados. Fees were paid to Gouvêa Vieira Advogados for legal services. (5) Mr. C M Marote, a former Director of Wilson Sons Limited is a shareholder and Director of CMMR. Intermediacão Comercial Limitada. Fees were paid to CMMR. Intermediacão Comercial Limitada for consultancy services. (6) Mr. J F Gouvêa Vieira is a Director of Jofran Services. Directors’ fees were paid to Jofran Services. (7) Mr. C Townsend is a Director of Hansa Capital GmbH. Directors’ fees were paid to Hansa Capital GmbH. Remuneration of key management personnel The remuneration of the executive directors and other key management of the Group is as follows: 2021 6,131 67 236 6,434 2020 3,877 82 160 4,119 Short-term employee benefits Post-employment benefits Share based payment expense 90 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 25 Share capit al 2021 2020 Authorised 50,060,000 ordinary shares of 20p each (2020: 50,060,000 ordinary shares of 20p each) 16,119 16,119 Issued and fully paid 35,363,040 ordinary shares of 20p each (2020: 35,363,040 ordinary shares of 20p each) 11,390 11,390 The Company has one class of ordinary share which carries no right to fixed income. Share capital is converted at the exchange rate prevailing at 31 December 2002, the date at which the Group’s presentation currency changed from Sterling to US Dollars, being US$1.61 to £1. 26 Share options in subsidiar y On 8 January 2014, the shareholders of the subsidiary WSL approved a share option plan which allowed for the grant of options to eligible participants, including an increase in the authorised capital of WSL through the creation of up to 4,410,927 new shares. Following the merger of WSL into WSSA (note 3), the shareholders of the subsidiary WSL approved on 24 June 2021 the migration of the share option plan to WSSA, where the rights and the granted share options were maintained in accordance with the conditions stipulated in the prior WSL share option plan. The options provide participants with the right to acquire shares in WSL at a predetermined fixed price, following a vesting period of 3 to 5 years, and expire 10 years from the grant date, or immediately on the resignation of the employee, whichever is earlier. Options lapse if not exercised within 6 months of the date that the participant ceases to be employed within the Group by reason of injury, disability or retirement. The movement in share options and related weighted average exercise prices in Brazilian Real (R$) is as follows: Opening balance – 1 January Granted during the period Exercised during the period Expired during the period Outstanding at 31 December Exercisable at 31 December 2021 2020 Number of shares (not rounded) Number of shares (not rounded) WAEP (R$) WAEP (R$) 2,213,490 450,000 (1,123,850) (14,000) 1,525,640 1,047,420 31.96 51.95 31.65 38.00 38.03 32.02 2,702,540 - (475,050) (14,000) 2,213,490 2,063,500 31.85 - 31.23 33.98 31.96 31.66 SECTION FIVE 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 26 Share options in subsidiar y ( c o n t i n u e d) The options outstanding as at 31 December 2021 had an exercise price in the range of R$31.23 to R$51.95 (2020: R$31.23 to R$40.33) and a weighted-average contractual life of 4.7 years (2020: 3.5 years). The weighted average share price at the date of exercise for the year ended 31 December 2021 was R$33.5 (2020: R$45.76). The fair value of the share options at the grant date was determined using the Binomial model based on the following assumptions: Grant date Closing share price (in Real) Expected volatility Expected life Risk free rate Expected dividend yield 10 January 2014 R$30.05 28.00% 13 November 2014 R$33.50 29.75% 11 August 2016 R$32.15 31.56% 10 years 10.8% 1.7% 10 years 12.74% 4.8% 10 years 12.03% 4.8% 16 May 2017 R$38.00 31.82% 10 years 10.17% 4.8% 9 November 2017 R$38.01 31.82% 10 years 10.17% 4.8% Expected volatility was determined by calculating the historical volatility of the subsidiary share price. The expected life used in the model has been adjusted based on management’s best estimate for exercise restrictions and behavioural considerations. During the year ended 31 December 2021, 1,123,850 share options were exercised (2020: 475,050), resulting in an increase in non-controlling interest of 0.89% (2020: 0.39%). 27 Non- controlling interest The following table summarises the information related to non-controlling interests. The non-controlling interests immaterial to the Group originate from the Brazil – Maritime services segment and are presented together as Other. The information on the Group’s composition is presented in note 3. For the year ended 31 december 2021 WSSA Other Total Net assets attributable to non-controlling interest Profit allocated to non-controlling interest Other comprehensive income allocated to non-controlling interest Dividends to non-controlling interest 189,336 17,170 (3,095) 16,533 679 1,609 (15) 1,275 190,015 18,779 (3,110) 17,808 For the year ended 31 december 2020 WSL Other Total Net assets attributable to non-controlling interest Profit allocated to non-controlling interest Other comprehensive income allocated to non-controlling interest Dividends to non-controlling interest 187,595 8,230 (21,674) 16,275 330 1,061 (186) 1,180 187,925 9,291 (21,860) 17,455 92 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 28 Dividends The following dividends were declared and paid by the Company: 70c per share (2020: 70c per share) 2021 2020 24,754 24,754 After the reporting date, the following dividends were proposed by the Board, but have not been recognised as liabilities: 70c per share (2020: 70c per share) 29 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Profit for the year attributable to equity holders of the Company Weighted average number of ordinary shares (not rounded) Earnings per share – basic and diluted The Company has no dilutive or potentially dilutive ordinary shares. 30 Risk management Capital risk management 2021 2020 24,754 24,754 2021 2020 63,687 35,363,040 180.1c 38,712 35,363,040 109.5c The Group manages its capital to ensure that entities within the Group are viable and will be able to continue as a going concern. The capital structure of the Group consists of debt, long term in nature, which includes the borrowings disclosed in note 21 and the lease liabilities included in note 16, cash and cash equivalents, investments, and equity attributable to equity holders of the Company comprising issued capital, reserves and retained earnings disclosed in the consolidated statement of changes in equity. 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 activities. There were no significant changes during the year relative to the Group policy relating to capital management. Climate change risk The Group is exposed to both climate-related risks and opportunities. The two major categories of risk being transition and physical risk. Transition risks are those relating to the transition to a lower carbon economy and include risks such as policy and legal risk, technology risk, market risk and reputation risk. Physical risks are those relating to the physical impacts of climate change which can be acute (those from increased frequency and severity of climate related events) or chronic (due to longer-term shifts in climate patterns). The Group is more significantly affected by physical risk through its exposure to acute and chronic climate change. However, consideration must be, and is, given to transition and climate-related litigation risks. SECTION FIVE 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 30 Risk management ( c o n t i n u e d) During the year ended 31 December 2021, the Group assessed and evaluated risks relating to climate change, including those related to existing and emerging regulatory requirements, as well as other transition and physical risks. The Group’s process for managing climate related risks is grounded in its emissions monitoring work, which includes greenhouse gas (GHG) emissions, tide and ocean data, as well as market movements and impacts suffered by clients. This intelligence enables the Group to mitigate potential risks and identify opportunities, particularly in the reduction of its direct emissions, and as a result to continue to adopt advancing technologies to reduce its GHG emissions. A significant part of the Board’s focus during the year ended 31 December 2021 has been reducing risk exposure and driving ESG (Environmental Social and Governance Practices) initiatives to have more measurable outcomes and to begin establishing climate related emissions targets for the Group. This is the first year that the Company will report on its TCFD disclosures (Taskforce for Climate-related Financial Disclosures) which has driven a more focused approach to the Group’s risk management framework for monitoring and managing climate related risks. It is the Board’s ambition to ensure that these risks and related opportunities are examined in depth and across time horizons with clear discussion of strategic implications and mitigating actions. 31 Financial instrument s Accounting classification and fair value The classification, carrying value and fair value of financial instruments is as follows: Classification 2021 2020 Carrying value Fair value Carrying value Fair value Financial assets Trade and other receivables Financial assets at fair value through Amortised cost At fair value through profit and profit and loss loss 59,350 59,350 47,807 47,807 392,931 392,931 347,464 347,464 Cash and cash equivalents Amortised cost 28,565 28,565 63,255 63,255 Financial liabilities Trade and other payables Bank overdraft and loans Other financial liabilities Other financial liabilities (58,513) (301,599) (58,513) (301,763) (41,066) (342,661) (41,066) (344,561) The carrying value of trade and other receivables, cash and cash equivalents and trade and other payable is a reasonable approximation of fair value. The fair value of bank overdraft and loans was established as their present value determined by future cash flows and interest rates applicable to instruments of similar nature, terms and risks or at market quotations of these securities. The fair value of financial assets at fair value through profit and loss are based on quoted market prices at the close of trading at the end of the period if traded in active markets, and based on valuation techniques if not traded in active markets. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. 94 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Fair value measurements recognised in the consolidated financial statements are grouped into levels based on the degree to which the fair value is observable. Financial instruments whose values are based on quoted market prices in active markets are classified as Level 1. These include active listed equities. Financial instruments that trade in markets that are not considered active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. These include certain private investments that are traded over the counter and debt instruments. Financial instruments that have significant unobservable inputs as they trade infrequently and are not quoted in an active market are classified as Level 3. These include investments in limited partnerships and other private equity funds which may be subject to restrictions on redemptions such as lock up periods, redemption gates and side pockets. Valuations are the responsibility of the Board of Directors of the Company. The Group’s Investment Manager considers the valuation techniques and inputs used in valuing these funds as part of its due diligence prior to investing to ensure they are reasonable and appropriate. Therefore, the net asset value (“NAV”) of these funds may be used as an input into measuring their fair value. In measuring this fair value, the NAV of the funds is adjusted, if necessary, for other relevant factors known of the fund. In measuring fair value, consideration is also paid to any clearly identifiable transactions in the shares of the fund. Depending on the nature and level of adjustments needed to the NAV and the level of trading in the fund, the Group classifies these funds as either Level 2 or Level 3. As observable prices are not available for these securities, the Group values these based on an estimate of their fair value. The Group obtains the fair value of their holdings from valuation statements provided by the managers of the invested funds. Where the valuation statement is not stated as at the reporting date, the Group adjusts the most recently available valuation for any capital transactions made up to the reporting date. When considering whether the NAV of the underlying managed funds represent fair value, the Investment Manager considers the valuation techniques and inputs used by the managed funds in determining their NAV. The underlying funds use a blend of methods to determine the value of their own NAV by valuing underlying investments using methodology consistent with the International Private Equity and Venture Capital Valuation Guidelines (‘IPEV’). IPEV guidelines generally provides five ways to determine the fair market value of an investment: (i) binding offer on the company, (ii) transaction multiples, (iii) market multiples, (iv) net assets and (v) discounted cash flows. Such valuations are necessarily dependent upon the reasonableness of the valuations by the fund managers of the underlying investments. In the absence of contrary information, these values are relied upon. The following table provides an analysis of financial instruments recognised in the statement of financial position by the level of hierarchy, excluding financial instruments for which the carrying amount is a reasonable approximation of fair value: 31 December 2021 Financial assets at fair value through profit and loss Bank overdraft and loans 31 December 2020 Financial assets at fair value through profit and loss Bank overdraft and loans Level 1 Level 2 Level 3 Total 67,177 - 59,224 - 196,069 (301,599) 189,103 (342,661) 129,685 - 99,137 - 392,931 (301,599) 347,464 (342,661) SECTION FIVE 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 31 Financial instrument s ( c o n t i n u e d) During the year ended 31 December 2021, no financial instruments were transferred between Level 1 and Level 2 (2020: none). The movement in Level 3 financial instruments for the year is as follows: Balance at 1 January Transfers from Level 2 to Level 3 Purchases of investments and drawdowns of financial commitments Sales of investments and repayments of capital Realised gains/losses Unrealised gains/losses Balance at 31 December Cost Cumulative unrealised gains/losses 2021 2020 99,137 77 15,379 (12,992) 6,873 21,211 129,685 125,983 3,702 101,263 - 9,485 (9,661) (1,196) (754) 99,137 117,649 (18,512) Investment in private equity funds require a long-term commitment with no certainty of return. The Group’s intention is to hold Level 3 investments to maturity. In the unlikely event that the Group is required to liquidate these investments, the proceeds received may be less than the carrying value due to their illiquid nature. The following table summarises the sensitivity of the Company’s Level 3 investments to changes in fair value due to illiquidity at 31 December 2021. The analysis is based on the assumptions that the proceeds realised will be decreased by 5%, 10% or 20%, with all other variables held constant. This represents the Directors’ best estimate of a reasonable possible impact that could arise from a disposal due to illiquidity. Level 3 financial instruments sensitivity 5% scenario 10% scenario 20% scenario 31 December 2021 31 December 2020 Credit risk (6,484) (4,957) (12,968) (9,914) (25,936) (19,827) Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group’s credit risk is primarily attributable to its bank balances, trade receivables, related party loans and investments. The amounts presented as receivables in the consolidated statement of financial position are shown net of allowances for credit loss. The Bermuda – Investment segment primarily transacts with regulated institutions on normal market terms which are trade date plus one to three days. The levels of amounts outstanding from brokers are regularly reviewed by the Investment Manager. The duration of credit risk associated with the investment transaction is the period between the date the transaction took place, the trade date and the date the stock and cash are transferred, and the settlement date. The level of risk during the period is the difference between the value of the original transaction and its replacement with a new transaction. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The credit risk on investments held for trading is limited because the counterparties with whom the Group transacts are regulated institutions or banks with high credit ratings. The Group’s appointed Investment Manager, Hanseatic Asset Management LBG, evaluates the credit risk on trading investments prior to and during the investment period. In addition, the Bermuda – Investment segment invests in limited partnerships and other similar investment vehicles. The level of credit risk associated with such investments is dependent upon the terms and conditions and the management of the investment vehicles. The Board reviews all investments at its regular meetings from reports prepared by the Company’s Investment Manager. 96 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) The Brazil – Maritime Services segment invests temporary cash surpluses in government and private bonds, according to regulations approved by management, which follow the Group policy on credit risk concentration. Credit risk on investments in non-government backed bonds is mitigated by investing only in assets issued by leading financial institutions. The Group stipulates a cash allocation limit per bank, in addition to investment rules according to rating classification. The Group invests in banks with rating classification BBB (limited to a maximum of 15%), from A to AA (limited to a maximum of 40%) or AAA (limited to a minimum of 40% and maximum of 100%). The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group’s sales policy is subordinated to the credit sales rules set by WSSA management which seek to mitigate any loss from customers’ delinquency. The Group has no significant concentration of credit risk for trade receivables as they consist of a large number of customers. Regular credit evaluation is performed on the financial condition of accounts receivable. Allowance for expected credit losses Generally, interest of 1% per month plus a 2% penalty is charged on overdue balances for trade receivables. The Group recognises an allowance for expected credit losses based on an expected credit loss model and a provision matrix that involves historical evaluation of effective losses over billing cycles. The provision matrix is initially based on the Group’s historical observed default rates and is reassessed every 180 days. The period of review is 3.5 years, and the measurement of the default rate considers the recoverability of receivables and will be applied according to the payment profile of debtors. The Group will calibrate, when appropriate, the matrix to adjust the historical credit losses experience with forward-looking information. Due to the COVID-19 pandemic, the Group has reviewed the variables that make up the methodology of measurement of estimated losses. There has been no increase in customer default rate due to the outbreak. Additionally, the Group created a credit committee to monitor and, if necessary, propose payment terms to those customers with credit risk. The allowance for expected credit losses determined using a provision matrix is as follows: Current 1-30 days 31-90 days 91-180 days More than 180 days Total 31 December 2021 Expected credit loss rate Receivables for services Allowance for expected credit losses 31 December 2020 Expected credit loss rate Receivables for services Allowance for expected credit losses 0.05% 43,160 (22) 0.09% 34,561 (35) 0.05% 4,098 (2) 0.09% 4,800 (4) 1.67% 858 (14) 3.30% 852 (28) 8.65% 989 (86) 12.77% 197 (25) 60.08% 327 (214) 62.48% 742 (462) 49,432 (338) 41,152 (554) SECTION FIVE 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 31 Financial instrument s ( c o n t i n u e d) Foreign currency risk The Brazil – Maritime services segment operates principally in Brazil with a substantial proportion of its revenue, expenses, assets and liabilities denominated in Real, exposing the Group exchange rate fluctuations. Due to the high cost of hedging transactions denominated in Real, the Group does not normally hedge its net exposure to the Real, as the Board does not consider it economically viable. Purchases and sells of goods and services are denominated in Real and US Dollars. These transactions are subject to currency fluctuations between the time that the price of goods or services are settled and the actual payment date. For investing and financing cash flows, the resources and their application are monitored with the objective of matching the currency cash flows and due dates. For operating cash flows, the Group seeks to neutralise the currency risk by matching assets (receivables) and liabilities (payments). Furthermore, the Group has contracted US Dollar denominated and Real denominated debt, and the cash and cash equivalents balances are also US Dollar denominated and Real denominated. The Group seeks to generate an operating cash surplus in the same currency in which the debt service of each business is denominated. The Bermuda – Investment segment operates internationally and holds both monetary and non-monetary assets denominated in currencies other than the US Dollar, the functional currency. Foreign currency risk arises as the value of future transactions, recognised monetary assets and monetary liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates. The Company’s policy is not to manage its exposure to foreign exchange movements by entering into any foreign exchange hedging transactions. Instead, when the Investment Manager formulates a view on the future direction of foreign exchange rates and the potential impact on the Company, the Investment Manager factors that into its portfolio allocation decisions. The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows (presented in US Dollar): Real Sterling Swiss Franc Euro Yen Assets Liabilities 2021 2020 2021 2020 173,297 11,603 3,305 31,549 5,394 225,148 160,021 11,492 3,273 31,147 5,125 211,058 (367,528) (22) - - - (367,550) (354,244) (22) - - - (354,266) The Group is primarily exposed to unfavorable movements in the Real on its Brazilian liabilities held by US Dollar functional currency entities. The sensitivity analysis below refers to the position at the end of the reporting period and estimates the impacts of a Real devaluation against the US Dollar, considering three scenarios: a likely scenario (probable), a 25% devaluation scenario (possible) and a 50% devaluation scenario (remote). The Group uses the Brazilian Central Bank’s “Focus” report to determine the probable scenario. 98 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Currency Amount in US Dollars Probable scenario BRL BRL 173,297 (367,528) BRL BRL 160,021 (354,244) 5.59 (294) 625 331 5.20 (101) 225 124 Possible scenario (25%) 6.99 (34,895) 74,005 39,110 6.50 (32,085) 71,029 38,944 Remote scenario (50%) 8.39 (57,963) 122,926 64,963 7.80 (53,408) 118,231 64,823 31 December 2021 Total assets Total liabilities Net impact 31 December 2020 Exchange rate Total assets Total liabilities Net impact Interest rate risk The Group is exposed to interest rate risk as entities within the Group borrow funds at both fixed and floating interest rates. The Group holds most of its debts linked to fixed rates. The Group’s Real denominated investments yield interest rates corresponding to the DI daily fluctuation for privately issued securities and/or “Selic-Over” government-issued bonds. The US Dollar denominated investments are partly in time deposits, with short-term maturities. The Group has floating rate financial assets consisting of bank balances principally denominated in US Dollars and Real that bear interest at rates based on the banks’ floating interest rate. The Group is primarily exposed to unfavorable movements in the interest rate impacting its floating interest rate borrowings, which are partially being offset by the impact on its floating interest rates investments. The sensitivity analysis below refers to the position at the end of the reporting period and estimates the impacts of unfavorable movement in the interest rates, considering three scenarios: a likely scenario (probable), a 25% devaluation scenario (possible) and a 50% devaluation scenario (remote). The Group uses the Brazilian Central Bank’s “Focus” report to determine the probable scenario. 31 December 2021 Borrowing Borrowing Borrowing Borrowing Investments Net impact Risk Amount ($US) Probable scenario Possible scenario (25%) Remote scenario (50%) Brazilian Interbank Interest Rate Brazilian Long-Term Interest Rate Brazilian National Consumer Prices N/A Brazilian Interbank Interest Rate (31,743) (638) (51,506) (217,712) 18,626 (615) - - - 2,207 1,592 (1,342) (6) (1,114) - 4,111 1,649 (2,053) (12) (2,204) - 4,089 (180) SECTION FIVE 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 31 Financial instrument s ( c o n t i n u e d) 31 December 2020 Borrowing Borrowing Borrowing Borrowing Investments Investments Net impact Risk Amount ($US) Probable scenario Possible scenario (25%) Remote scenario (50%) Brazilian Interbank Interest Rate Brazilian Long-Term Interest Rate Brazilian National Consumer Prices N/A LIBOR Brazilian Interbank Interest Rate (64,439) (841) (55,141) (222,240) 39,997 52,995 (440) - - - - 218 (222) (746) (6) (415) - 15 619 (533) (1,050) (12) (825) - 31 1,020 (836) The net impact was obtained by assuming a 12-month period starting at the beginning of the period in which interest rates vary and all other variables are held constant. The scenarios represent the difference between the weighted scenario rate and actual rate. Derivative financial instruments The Group may enter into derivatives contracts to manage risks arising from interest rate fluctuations. All such transactions are carried out within the guidelines set by the risk management committee. Generally, the Group seeks to apply hedge accounting in order to manage volatility. Market price risk By the nature of its activities, the Bermuda – Investment segment’s investments are exposed to market price fluctuations. However, the portfolio as a whole does not correlate exactly to any Stock Exchange Index as it is invested in a diversified range of markets. The Investment Manager and the Board monitor the portfolio valuation on a regular basis and consideration is given to hedging the portfolio against large market movements. The sensitivity analysis below has been determined based on the exposure to market price risks at the year end and shows what the impact would be if market prices had been 5, 10 or 20 percent higher or lower at the end of the financial year. The amounts below indicate an increase in profit or loss and total equity where market prices increase by 5, 10 or 20 percent, assuming all other variables are kept constant. A fall in market prices of 5, 10 or 20 percent would give rise to an equal fall in profit or loss and total equity. 31 December 2021 31 December 2020 Concentration risk 5% scenario 10% scenario 20% scenario 17,481 15,394 34,961 30,787 69,922 61,574 By the nature of its activities, the Bermuda – Investment segment’s investments are exposed to concentration of credit risk and market risk based on geographic exposure and sector exposure. The Investment Manager and the Board monitor the portfolio composition on a regular basis to ensure it remains invested in a diversified range of markets to limit the concentration of exposure by geography and by sector. As at 31 December 2021, the Group has identified concentration risk for its financial assets at fair value through profit and loss within the Bermuda – Investment segment due to their geographic exposure of US$174.8 million in North America (2020: US$132.0 million) and their sector exposure of US$94.6 million in information technology (2020: US$72.2 million). These exposures are based on the immediate investment into investment vehicles and may be further affected by specific allocation of assets within those vehicles. 100 Ocean Wilsons Holdings Limited 2021 Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in fulfilling obligations associated with its financial liabilities that are settled with cash payments or other financial assets. The Group’s approach in managing liquidity is to ensure that the Group always has sufficient liquidity to fulfil its obligations that expire, under normal and stressed conditions, to avoid damage to the reputation of the Group. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group ensures it has sufficient cash reserves to meet the expected operational expenses, including financial obligations. This practice excludes the potential impact of extreme circumstances that cannot be reasonably foreseen except for those taken this year and in prior year in response to COVID-19 liquidity management. The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities, showing the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay, including both interest and principal payments. Weighted average effective interest rate % Less than 12 months 1-5 years 5+ years Total 31 December 2021 Variable interest rate instruments Fixed interest rate instruments Lease liability 31 December 2020 Variable interest rate instruments Fixed interest rate instruments Lease liability 4.26% 2.73% 10.49% 2.78% 2.75% 8.77% 22,445 34,651 20,323 77,419 35,923 31,136 19,153 86,212 48,787 112,903 70,302 231,992 61,088 100,087 66,718 227,893 35,792 98,390 313,102 447,284 42,972 131,858 292,766 467,596 107,024 245,944 403,727 756,695 139,983 263,081 378,637 781,701 The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets. During the year ended 31 December 2020, the Brazilian National Economic and Social Development Bank (BNDES) granted Wilson Sons eligibility for the COVID-19 “Standstill Agreement”. This allowed for the postponement of principal and interest payments that occurred between May and October 2020, a payment deferment of approximately US$10.3 million for the Group and US$9.9 million for the Company’s 50% share in the offshore support vessel joint venture. Loan repayments are to be made according to the remaining terms of the contracts included in the scheme. During the year ended 31 December 2021, the Company signed a second five-month standstill to defer approximately US$7.5 million for the Group and US$8.9 million for the Company’s 50% share in the offshore support vessel joint venture between January 2021 and May 2021. Principal and interest payments resumed as scheduled in June 2021. Additionally, during the last quarter of the year ended 31 December 2020, the Company signed a COVID-19 related “Standstill Agreement” with the Banco do Brazil delaying repayment of approximately US$3.7 million for the Group and US$1.9 million for the Company’s 50% share in the offshore support vessel joint venture. Principal and interest payments resumed as scheduled in the year ended 31 December 2021. Limitations of sensitivity analysis The sensitivity information included in note 31 demonstrates the estimated impact of a change in a major input assumption while other assumptions remain unchanged. In reality, there are normally significant levels of correlation between the assumptions and other factors. SECTION FIVE 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 (Expressed in thousands of US Dollars) 32 Subsequent event s On 24 February 2022, Russia invaded Ukraine, and the ongoing military attack has led multiple states including the UK, the EU and the United States to impose economic sanctions on Russia. The conflict continues to evolve as military activity proceeds and additional sanctions are imposed. The Company is still assessing the full impact on its operations and investments, but it is clear that this conflict is increasingly affecting the global economy and financial markets and exacerbating ongoing economic challenges, including issues such as rising inflation, rising commodity prices and global supply-chain disruption. The Company considers this event as a non-adjusting post year end event which has no impact on the carrying value of its assets and liabilities as at 31 December 2021. In March 2022, the Company wrote down the full value of its investment in Prosperity Quest Fund, a Russia-focused equity fund, following the issue of an investor notice announcing the suspension of its net asset valuation, subscriptions and redemptions. As at 31 December 2021, Prosperity Quest Fund was a Level 3 investment valued at US$4.1 million and included within financial assets at fair value through profit and loss on the consolidated statement of financial position. 102 Ocean Wilsons Holdings Limited 2021 Annual Report STATISTICAL STATEMENT (UNAUDITED) For the year ended 31 December 2021 (Expressed in thousands of US Dollars) INCOME STATEMENT Sales of services Raw materials and consumables used Employee charges and benefits expense Other operating expenses Depreciation & amortisation expense Impairment charge (Loss)/gain on disposal of property, plant and equipment and intangible assets Foreign exchange (loss)/gain on monetary items Operating profit Share of results of joint ventures Returns on investment portfolio at fair value through profit or loss Investment portfolio performance and management fees Other investment income Finance costs Profit before tax Tax expense Profit for the year Profit for the year attributable to: Equity holders of the Company Non-controlling interests Statement of financial position Non-current assets Current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets 2021 2020 2019 2018 2017 396,376 (24,036) (112,026) (98,289) (61,412) - (499) (3,100) 97,014 (5,029) 49,474 352,792 (19,266) (110,016) (84,666) (61,323) - 65 (7,551) 70,035 (4,142) 33,383 406,128 (25,290) (140,348) (89,207) (66,122) (13,025) 294 (79) 72,351 564 34,716 460,196 (38,128) (146,327) (117,025) (56,178) - (296) (8,459) 93,783 (4,062) (7,942) 496,340 (37,679) (166,395) (119,600) (57,481) - (2,930) 2,750 115,005 3,366 42,064 (4,954) (3,130) (3,417) (2,742) (2,710) 4,113 (30,227) 110,391 (27,925) 82,466 63,687 18,779 82,466 1,644 (23,210) 74,580 (26,577) 48,003 38,712 9,291 48,003 6,052 (27,736) 82,530 (21,481) 61,049 46,852 14,197 61,049 4,152 (22,951) 60,238 (26,433) 33,805 13,308 20,497 33,805 9,715 (21,976) 145,464 (36,056) 109,408 78,315 31,093 109,408 861,824 518,523 1,380,347 (131,306) (465,369) (596,675) 783,672 861,093 492,769 1,353,862 (124,276) (485,879) (610,155) 743,707 981,011 460,616 1,441,627 (115,678) (540,089) (655,767) 785,860 773,521 438,928 1,212,449 (119,036) (315,704) (434,740) 777,709 818,714 501,240 1,319,954 (123,908) (371,986) (495,894) 824,060 Key Statistics Earnings per share (US$) Cash dividends per share paid (US$) Book value per share (US$) Mid-market quotation at end of period Mid-market quotation at end of period in (US$) 180.1c 70.0c 22.16 £9.32 $12.62 109.5c 70.0c 21.03 £8.45 $11.55 132.5c 70c 22.22 £9.90 $13.13 37.6c 70c 21.99 £11.70 $14.92 221.5c 63c 23.30 £10.95 $14.79 SECTION FIVE 103 DIRECTORY Bermuda Office mailing address: PO Box HM 2250 Hamilton HM JX Bermuda Registered Office mailing address: PO Box HM 2250 Hamilton HM JX Bermuda Registrars office address: Richmond House – 5th Floor 12 Par-la-Ville Road Hamilton HM 12 Bermuda office address: Clarendon House 2 Church Street Hamilton HM 11 Bermuda Conyers Corporate Services (Bermuda) Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda UK Transfer Agent and Ocean Wilsons Dividend Address Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Auditor KPMG Audit Limited Crown House 4 Par-la-ville Road Hamilton HM 12 Bermuda Investment Manager Hanseatic Asset Management LBG Le Truchot, Guernsey GY1 1WD Channel Islands Switzerland Brokers Peel Hunt 100 Liverpool Street London EC2M 2AT UK 104 Ocean Wilsons Holdings Limited 2021 Annual Report NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the 29th Annual General Meeting of the Company will be held at the offices of Conyers Dill & Pearman Limited, Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda on 26 May 2022 at 8:30 am for the following purposes. 1 2 3 4 5 6 7 8 9 10 11 12 To appoint a chairperson of the meeting. To confirm notice. To receive and, if approved, adopt the Directors’ Report and Accounts for the year ended 31 December 2021. To declare a dividend of 70 cents per share. To determine the maximum number of Directors for the ensuing year as nine and to authorise the Board of Directors to fill any vacancy in their number left unfilled for any reason to serve until the conclusion of the next Annual General Meeting. To re-elect Mr. William Salomon as a Director until the next Annual General Meeting. To re-elect Mr. Andrey Berzins as a Director until the next Annual General Meeting. To re-elect Mr. Christopher Townsend as a Director until the next Annual General Meeting. To re-elect Ms. Fiona Beck as a Director until the next Annual General Meeting. To re-elect Ms. Caroline Foulger as a Director until the next Annual General Meeting. To re-appoint KPMG Audit Limited as the Auditor and to authorise the Directors to determine the remuneration of the Auditor. Ratification and confirmation of all and any actions taken by the Board of Directors and the persons entrusted with Company’s management in the year ended 31 December 2021. By Order of the Board Fergus McAleavey Company Secretary Clarendon House, Church Street, Hamilton HM 11, Bermuda 23 March 2022 Any member of the Company entitled to attend and vote at the meeting may appoint one or more proxies to attend and vote instead of him. A proxy need not be a member of the Company. 105 FORM OF PROXY * I / We * of being a Member of Ocean Wilsons Holdings Limited, hereby appoint Mr. J. F. Gouvêa Vieira, or failing him any Director of the Com- pany as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the company to be held on 26 May 2022 and at any adjournment thereof. The proxy will vote on the Resolutions as indicated opposite. Or as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on 26 May 2022 and at any adjournment thereof. The proxy will vote on the Resolutions as indicated opposite. FOR AGAINST WITHHELD 1 2 3 4 5 6 7 8 9 To receive and, if approved, adopt the Directors’ Report and Accounts for the year ended 31 December 2021. To declare a dividend of 70 cents per share. To determine the maximum number of Directors for the ensuing year as nine and authorise the Board of Directors to elect or appoint on the Members’ behalf a person or persons to act as additional Directors up to such maximum number to serve until the conclusion of the next Annual General Meeting. To re-elect Mr. W. Salomon as a Director until the next Annual General Meeting. To re-elect Mr. A. Berzins as a Director until the next Annual General Meeting. To re-elect Mr. C. Townsend as a Director until the next Annual General Meeting. To re-elect Ms. F Beck as a Director until the next Annual General Meeting. To re-elect Ms. C. Foulger as a Director until the next Annual General Meeting. To re-appoint KPMG Audit Limited as the Auditor and authorise the Directors to fix the remuneration of the Auditor. 10 Ratification and confirmation of all and any actions taken by the Board of Directors and the persons entrusted with Company’s management in the year ended 31 December 2021. Signature Notes Dated 2022 (1) If any other proxy is preferred, delete the names inserted above and add the name of the proxy whom you wish to appoint, and initial the alteration. (2) Please indicate by a cross in the appropriate box how you wish your proxy to vote. If no indication is given your proxy will abstain or vote as he/she thinks fit. (3) To be valid, the proxy should be deposited at the Transfer Agents of the Company, Link Group, PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL, no less than 48 hours before the time for the Meeting. (4) In the case of a corporation, this proxy must be under its Common Seal or under that of an Officer or Attorney duly authorised in writing. (5) In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members, in respect of the joint holding. * Please insert your full name and address in BLOCK CAPITALS. 106 Ocean Wilsons Holdings Limited 2021 Annual Report 107