Ocean Wilsons Holdings Limited

PRELIMINARY ANNOUNCEMENT

CHAIRMAN'S STATEMENT

Overview

Ocean Wilsons Holdings Limited ("Ocean Wilsons or the Company") is a Bermuda based investment Company and through its subsidiary operates as a maritime services Company in Brazil. The Company is listed on both the Bermuda Stock Exchange and the London Stock Exchange. It has two principal subsidiaries: Wilson Sons Limited and Ocean Wilsons Investments Limited.

Wilson Sons Limited ("Wilson Sons") is an autonomous Bermuda Company listed on the Sao Paulo Stock Exchange (BOVESPA) and Luxembourg Stock Exchange. Ocean Wilsons holds a 58.25% interest in Wilson Sons, which is fully consolidated in its accounts with a 41.75% minority interest. Wilson Sons is one of the largest providers of maritime services in Brazil. The Group's activities include harbour and ocean towage, container terminal operation, offshore support services, logistics, small vessel construction and ship agency. The Group has over four thousand employees and operates in nearly thirty locations throughout Brazil.  

Ocean Wilsons Investments Limited is a wholly owned Bermuda investment company. The Company holds a portfolio of international investments. The Company has appointed Hanseatic Asset Management LBG, a Guernsey registered and regulated investment group as its investment manager.

Introduction

2008 proved to be a challenging year for the Group with the global economic crisis and falling equity markets. Wilson Sons continued to produce strong operating results with good performances from the towage, port terminal, logistic and offshore businesses. However, the fall in global investment markets and depreciation of the Real against the US Dollar created significant losses during the year that adversely affected bottom line earnings. Trading conditions will continue to be difficult in 2009 but the Group remains well placed with ample cash at its disposal to address the challenges and exploit investment opportunities as they arise.

Results  

Revenue for the year increased 23% to US$498.3 million (2007: US$ 404.0 million) whilst operating profit for the year at US$ 98.3 million was US$39.8 million ahead of 2007, US$58.5 million. Aside from the underlying results from operations operating profit increased principally due to a reduction in the long-term incentive plan accrual in the period of US$8.1 million and non-recurring fiscal credits of US$22.4 million. 

Profit before tax decreased US$271.8 million from US$303.4 million to US$31.6 million principally due to  the profit on the disposal of the minority interest in Wilson Sons of US$213.7 million in 2007, the losses on the investment portfolio of US$59.5 million and exchange losses on the Real denominated cash balances of US$23.5 million. 

Losses per share based on ordinary activities after taxation and minority interests were 75.5 cents (2007: Earnings 729.8 cents).

Investment Portfolio

Investment managers

The Group's investment portfolio is held by Ocean Wilson Investments Limited ("Company") a wholly owned subsidiary registered in Bermuda. The Company has appointed Hanseatic Asset Management LBG a Guernsey registered and regulated investment group as its Investment Manager.

The investment managers receive an investment management fee based on the valuation of the funds under management and an annual performance fee of 10% of the annual performance which exceeds the benchmark and provided that the high water mark has been exceeded. The investment management fee is an annual rate of 1% payable monthly in arrears. The performance fee is measured against an absolute benchmark derived from the one year USD LIBOR, prevailing at the commencement of each calendar year plus 2%. In 2008 no performance fee was payable.

Investment strategy

The Board of the Company determines investment guidelines and restrictions in conjunction with the investment manager, these together with the investment managers reports are reviewed at the Company's board meetings. 

The investment strategy agreed with the Company's investment managers is to maximise the total return on assets, by investing in a portfolio of diversified assets including global equities, fixed income and alternative assets with a particular emphasis on emerging markets. Investments are intended to add value over the medium to longer-term through a non-market correlated, conviction based investment style

Investment portfolio performance 

The fall in global equity markets resulted in the value of the trading investment portfolio and cash under management declining 22.5%, from US$274.0 million to $212.4million. The principal causes for the loss of value in 2008 was the portfolio exposure to the Emerging Markets and Natural Resources.

Although falling in value the portfolio outperformed the MSCI World Index (40.7% loss), thanks largely to its significant position in liquidity funds. In response to the uncertainty in world financial markets the Company's investment managers deferred further deployment of the Company's liquid assets and at year end the investment portfolio held US$119.8 million in cash and liquidity funds. During the year the investment managers deployed US$62.1 of the portfolio's cash and liquidity funds in new investments and capital draw downs. Details of the individual investment holdings at 31 December 2008, new investments made during the period and performance, are contained within the Investment Managers report.

Over the eight years that Hanseatic Asset Management has managed the portfolio it has increased in value by 80.3% compared with a loss of 17.9% in the MSCI world index and a 43.2% return from the benchmark in the same period

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Wilson Sons Limited

At the close of business on the 23 March 2009, the Wilson Sons share price was Real 11.25 resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.25% of Wilson Sons) of approximately US$ 207.7 million. 

Brazil

The impact of the global financial crisis has been slow to arrive in Brazil and to date the effect is less severe than seen in other economies. The first effects were reflected in the fall of the Brazilian stock market "Bovespa" index from its peak of 73,794 in May 2008 to 37,550 at year end, due principally to the fall in world commodity prices and a decrese in investor appetite for emerging markets partly driven by investor liquidity problems. Despite the turmoil in world markets, Brazilian GDP grew over 5% in 2008. However recently exports have fallen sharply and there are signs of a slowing in the Brazilian economy. Forecasters are revising down the outlook for 2009 and there is a risk that Brazil will enter recession in 2009 as domestic demand falls due to increased unemployment and a contraction in domestic credit. The risk of recession in Brazil depends to a large extent on the level of the external crisis and the contraction of credit. 

Despite the uncertainties in the world economy the country is better positioned to face the coming economic challenges than in past crises with over US$200 billion of foreign currency reserves. Additionally compared to most developed economies, trade and internal debt levels remain low relative to the size of the economy. Different from previous crises there is no need for government to reduce discretionary spending and government has started easing monetary policy through a reduction in banks required reserve asset ratio and lowering interest rates, although interest rates remain high at 11.25%.

Exchange rates

The Brazilian Real devalued 24% against the US Dollar from R$1.77 at 1 January 2008 to R$2.33 at the year end. The devaluation of the Brazilian Real against the US Dollar generated a net exchange loss of US$23.6 million (2007: US$7.8 million gain) on the Group's Real-denominated cash balances. On the positive side, margins of services denominated in US Dollars benefited as Real denominated costs were lower when converted into US Dollars.

Dividend

In light of the losses on the investment portfolio the Board is recommending a final dividend of 26 cents per share (2007:36 cents) to be paid on the 22 May 2009, to shareholders on the close of business on 10 April 2009 making a total dividend for the year of 30 cents per share (2007: 40 cents per share). For those shareholders receiving dividends in Sterling the US dollar dividend will be converted by reference to the exchange rate applicable to the US Dollar on the dividend record date. Converting the final dividend at current exchange rates and the interim dividend at the interim dividend record date the full year dividend equates to approximately 20.8 pence per share compared with 20.3 pence per share paid in 2007. 

The Company's target dividend payout in respect of each financial year is to pay the Company's full dividend to be received from Wilson Sons in the period plus a percentage of the average capital employed in the investment portfolio to be determined annually by the Board. 

Dividends will continue to be set in US Dollars and paid twice yearly. Shareholders will continue to receive dividends in Sterling by reference to the exchange rate applicable to the US Dollar on the dividend record date, except for those shareholders that elect to receive dividends in US Dollars.

The Board of Directors may review and amend the dividend policy from time to time in light of our future plans and other factors. The payment of dividends cannot be guaranteed and maybe discontinued or varied at the discretion of the Board.

Depository receipts

On 4 December 2008, shareholders at a Special General Meeting approved the revised set of bye- laws for the Company permitting the Board to sanction the issue of depository receipts. Each depository receipt will represent one share. Their advantage is that the depository receipts can be settled through electronic trading such as CREST, which permits uncertified transfers of most securities listed on the London Stock Exchange. The Company is in the final stages of establishing depository receipts and currently awaiting final regulatory approval in Bermuda. We expect to make a further announcement to shareholders in the near future. 

Long term incentive plan

Ocean Wilsons Holdings Limited implemented a cash settled phantom option scheme that was approved by shareholders at the Special General Meeting held on 19 April 2007. The scheme is for selected senior management and the options provide for the option holder to receive on exercise the difference between the option price and the market value of Wilson Sons per OWHL share at the time of exercise.    

The maximum liability under the plan is US$25.1 million based on the Wilson Sons IPO offer price. No further options will be granted under the scheme. An accrual of US$ 3.3 million has been included in the accounts at 31 December 2008 for benefits accruing under the plan (2007: US$10.0 million). The decrease in the accrual is due to the fall in the Wilson Sons Limited share price from Real 25.95 per share at 31 December 2007 to Real 10.95 at 31 December 2008, which is reflected, in the fair value of the scheme.

Charitable donations 

In line with our policy to support local causes the Group made contributions of US$74,000 (2007: US$138,000) during the year. The emphasis of the Group's actions continues to be community based projects helping disadvantaged children and adolescents. The Group's principal contributions in 2008 were:

Task Brasil - Casa Jimmy project to improve the lives and supports the needs of children and pregnant teenage girls living on the streets of Brazil. The institution is located in Santa Teresa, Rio de Janeiro.

Website: www.taskbrasil.org.uk

Escola de Gente - raising awareness and promoting social inclusion for all parts of the community. Located in Barra da Tijuca, Rio de Janeiro.

Website:www.escoladegente.org.br 

NACCI- Nucleo de Apoio cancer infantil - provides services to support children's cancer treatment. The institution operates principally in the state of Bahia.

Website: www.nacci.org.br

Creche Flor da Primavera - provides care for low income working mothers

www.crecheflordaprimavera.blogspot.com

Through our corporate programme 'Criando Lacos" (Creating ties), the Group provides financial support and promotes employee involvement in social initiatives.

OUTLOOK

The world is facing a difficult and uncertain economic environment in 2009. However, the Group is well placed to meet the challenges with a healthy balance sheet in both our Brazilian and investment business. 

Ocean Wilsons Investments Limited remains well placed with ample cash resources at its disposal to exploit opportunities as they arise.

Wilson Sons is looking to expand its core businesses. Management intends to move forward with the expansion project at our container terminal in Salvador (Bahia), and continues to hold discussions with the public authorities and regulators in this regard. We are also exploring possibilities to expand our shipyard operation to service the internal and external demand for offshore support vessels, an area management believes it has a key strategic advantage. Towage remains well positioned to meet the challenges from the current global crisis and increased competition throughout 2009 and to reinforce its leadership position. Management remains focused on cost control and margin improvement across the range of businesses and to deliver another strong performance in 2009 consistent with economic conditions.

Management and staff

On behalf of your Board, I would like to thank our management and staff for their continuous efforts and support during the year and for delivering a successful performance. 

J. F. Gouvêa Vieira

Chairman

24 March 2009

FINANCIAL REVIEW

Revenue

Group revenue for the year increased 23% to US$498.3 million (2007: US$404.0 million) principally due to increases in the port operations, shipyard, offshore and logistics businesses. Revenue in the second half 2008 at US$248.4 million was in line with the first half, US$249.8 million. All Group revenue is derived from Wilson Sons operations in Brazil.

Operating profit

Operating profit for the year increased by US$39.8 million to US$98.3 million (2007: US$58.5 million). This improvement was driven mainly by higher turnover, movement in the share based payment expense and non recurring fiscal credits in the period. 

The share based payment expense for the year was a US$8.1 million credit, US$20.7 million lower than prior year (2007: US$12.6 million charge). As both the Ocean Wilsons and Wilson Sons long term incentive schemes are cash settled phantom option schemes, International Accounting Standards require that the fair value is determined at each accounting date. The fall in the Wilson Sons Limited share price from Real 25.95 per share at 31 December 2007 to Real 10.95 at 31 December 2008 resulted in a significant decrease in the fair value of the two incentive schemes at the reporting date, generating a significant credit to the income statement in the period. 

Non recurring fiscal credits relating to prior periods recognised in the year were US$22.4 million against US$5.9 million in 2007. The Group does not expect to recognise significant fiscal credits relating to prior periods in future reporting periods. 

Operating profit also benefitted from the higher turnover outlined in the Wilson Sons operating review. Raw materials increased from US$40.5 million to US$86.5 million reflecting the increase in shipyard sales.

Investment revenues

Investment revenue in 2008 fell US$ 20.4 million to US$6.8 million from US$27.1 million in 2007, primarily due to exchange losses of US$ 23.5 million on Brazilian Real denominated cash balances (2007: US$7.8 million gain). Interest from bank deposits in the period were US$23.6 million (2007: US$ 16.9 million). The increase in interest receivable resulted mainly from the higher average cash balances held throughout the year. Included in investment revenue is a US$4.2 million profit on the disposal by Wilson Sons of its interest in Barcas S/A Transportes Marítimos.

Other gains and losses

Other losses of US$59.5 million (2007 US$ 11.7 million gain) arise from the Group's portfolio of trading investments and resulted from the decrease in the fair value of trading investments held at year end of US$ 65.4 million (2007: US$11.6 million gain) reflecting the severe decline in World Equity markets in the second half of 2008. 

Finance costs 

Finance costs in 2008 increased by US$6.5 million to US$14.1 million from US$7.6 million in 2007. The increase was principally attributable to unrealised exchange losses on foreign currency borrowings, increased interest on bank overdrafts and loans and higher other interest charges. Other interest charges arise mainly from monetary correction on other tax balances.  

Profit before tax 

Group profit before tax for the year fell US$271.8 million to US$31.6 million from US$303.4 million in 2007 principally due to the gain of US$213.7 million on the disposal of the minority interest in Wilson Sons Limited through the IPO of that business included in 2007 and the losses on the trading investment portfolio of US$59.5 million (2007 US$11.7 million gain).. 

Taxation

The US$38.6 million tax charge (2007: US$25.7 million) for the year represents an effective tax rate for the period of 122% (2007: 8%). The corporate tax rate prevailing in Brazil is 34%. The 

difference in the effective tax rate principally reflects losses or income arising in our Bermudian companies that are not subject to income or capital gains tax and hence no carry forward. In 2008 the effective tax rate was adversely impacted by the loss from our Bermudian investment portfolio of US$59.5million and 2007 benefitted from the profit on the sale of the minority interest in Wilson Sons US$213.7 million. Adjusting for income and expenses arising in jurisdictions with no income or capital gains tax the effective tax rate in 2008 is 45%. (2007: 35%) Additionally the 2008 tax charge is impacted by an IFRS deferred tax adjustment arising on the retranslation of the non-current assets caused by the devaluation of the Real against the US Dollar. This effect is partly offset by the deferred tax gain on exchange losses on loans. In 2007, the appreciation of the Real generated an IFRS deferred tax credit partially offset by a deferred tax charge for exchange gains on loans. 

Earnings per share

Basic losses per share for the year were 75.5 cents, compared with 729.8 cents earnings per share in 2007.

Cash flow

Net cash flow from operating activities for the year at US$52.1 million was US$4.1 million lower than prior year (2007: US$56.2 million). 

Net cash used in investing activities for 2008 absorbed US$ 63.7 million (2007: US$73.3 million inflow) and included capital expenditure of US$90.2 million on vessel construction and Tecon Rio Grande (2007: US$92.3 million), net proceeds on disposal/purchase of trading investments US$3.4 million inflow (2007: US$ 187.9 million outflow) and interest received US$23.6 million (2007 US$ 16.9 million). 2007 also included the US$ 324.7 million inflow from the disposal of the minority interest in Wilson Sons. 

The Group raised new loans in the period to finance asset construction of US$49.1 million (2007: US$54.9 million) and made repayments on existing loans of US$13.4 million (2007: US$16.7 million).

At 31 December 2008 the Company and its subsidiaries had US$205.3 million in cash and cash equivalents (31 December 2007: US$227.6 million) of which US$128.8 million was in US Dollar denominated assets and US$75.4 million in Brazilian Real denominated assets.

Balance sheet 

At the year end the Group's net equity (equity attributable to ordinary shareholders of the Company) amounted to US$ 424.6 million (2007 US$ 478.8 million). This decrease is attributable to the loss in the period after minority interests, dividends paid to shareholders and the devaluation of the Brazilian Real. This translates into net assets per share excluding minority interests of US$12.01 per share (31 December 2007: US$13.54).Of this trading investments of US$210.0 million equates to US$5.94 per share. Trading investments together with your Group's share of the Wilson Sons cash resources held outside Brazil of US$63.1 million equates to US$7.72 per share.

Minority interests increased from US$134.3 million at the beginning of the year to US$139.5 million principally due to the Wilson Sons Limited profit in the period. During the year Wilson Sons Limited purchased the minority interest in Tecon Salvador S.A from the IFC (International Finance Corporation) for US$5.1 million.

Debt

The Group's consolidated borrowings (including obligations under finance leases) increased US$ 37.7 million at 31 December 2008 to US$189.5 million, (31 December 2007: US$ 151.8 million). US$ 181.0 million of Group debt is held in US Dollars term loans or linked to the US Dollar with long maturity profiles for debt repayments. During 2008 the Group made capital repayments on existing loans in accordance with debt repayment schedules of US$13.4 million (2007: US$16.7 million) and raised new loans of US$49.1 million (2007 US$ 54.9 million) to finance vessel construction and the expansion of Tecon Rio Grande. 

INVESTMENT MANAGERS REPORT

Hanseatic Asset Management LBG that manages the Group's Investment portfolio reports as follows:

Background

2008 was the worst year for equity investment since the 1930's. A catalogue of collapse and disappearance, or in more fortunate cases, emergency rescues of household names in the financial services sector together with a frenetic process of 'deleveraging' destroyed wealth across all markets. Ultimately, this process can trace its roots to a profound underestimation of risk inherent in property values and the banking sector, a legacy of the excessive easing of monetary policy following the burst "dot-com" bubble. It was compounded by the complexity of financial products, the opaqueness of bank balance sheets and incompetence in the regulatory and credit rating agencies. Few prisoners were taken in such an environment. Only the US dollar and government bonds offered any protection of value.

For the record, the MSCI World Index declined by 40.7% in US dollar terms. The extent of this decline was magnified by the strength in the US dollar against most currencies. The dollar rose by 4% against the Euro, by 26% against Sterling and by 24% against the Brazilian Real. The Yen was the only major currency to post significant strength against the dollar. This ensured that Japan, at least on a relative basis, was the best performing of the major equity markets. More precisely, it was the least worst, declining by 28.7%.

The Emerging Markets suffered most from the 'deleveraging' environment despite, in many cases, superior economic fundamentals to developed economies. Risks are perceived to be higher and selling pressure is exacerbated by liquidity issues. The MSCI Global Emerging Market Index declined by 54.5% in 2008, the largest annual decline since the creation of this index in 1987. Unlike previous bear markets in this asset class where contagion spread from a currency devaluation or debt default, this collapse in prices reflected a crisis amongst investors rather than underlying fundamentals.

The headlines in 2008 were dominated by a steady flow of unsettling news and developments in the financial services sector, starting with the nationalisation of Northern Rock in the UK and the fire sale of Bear Stearns to JP Morgan. Bad news also came from unexpected quarters. The scale of fallout from the collapse of the Icelandic banking sector, for instance, massively exceeded the tiny population of this remote country. However, it was the collapse of Lehman Brothers in the US, which policy makers abandoned to its fate that truly panicked all and sundry, induced cardiac arrest in the banking system and unleashed a pernicious wave of forced selling. These events were shocking enough, but investor nerves were further frayed by the confusion and indecision shown by policy makers. The about turn over TARP (Troubled Asset Relief Programme), together with the handling of major mortgage companies Fannie Mae and Freddie Mac, all contributed to a crisis of confidence in the world's leaders. To complete this perfect storm for battered investors, it emerged at the end of the year that one of the largest and apparently consistently successful hedge funds run by Bernard Madoff was in fact a case of massive fraud and a further $50 billion of investor assets had been wiped out.

The energy and industrial commodity complex were also severely impacted by this environment. Having nearly reached $150 a barrel in July and with leading analysts forecasting $200 a barrel by year-end, the oil price plummeted to nearer $50. Industrial commodities experienced a similar retracement. From chronic shortages in June, the metals markets had moved into oversupply within weeks. Surging inventories, the prospect of imminent recession and a rising dollar combined to put the bull market in commodities and mining companies into sharp reverse.

Performance

Cumulative Returns since November 2000

The portfolio's exposure to the Emerging Markets and Natural Resources, which had driven strong performance in previous years, were the principal causes of loss of value in 2008. Approximately 17% of the Fund's assets were invested in Emerging Markets and the Far East. The MSCI Emerging Market Index declined by 54.5% and the MSCI Far East ex-Japan declined by 52.0%. Between them, the holdings in Emerging Markets and the Far East accounted for 11.0% of the portfolio's decline (41.1% of the total), with a further 6.5% of value lost in the global Nature Resources theme (24.2% of the total decline). Despite the extent of losses in these two areas, the portfolio outperformed the MSCI World Index thanks largely to its significant cash/cash equivalents position (56.5% of the portfolio at period end). Furthermore, in a year where there were virtually no hiding places in global equity markets, good relative performance at the underlying fund level in most regions (including Far East, Japan, North America and United Kingdom) helped to offset the negative impact of exposure to the Emerging Markets and Natural Resources.

As at 31st December 2008, the portfolio's (excluding cash) largest holdings were as follows:

Portfolio Activity

At the beginning of the year, the portfolio had cash and liquid funds of $167.7m available for investment. During 2008, $62.1m of this cash and liquid funds was deployed. Of this, $31.9m was for "new investments", $16.1m was for "follow-on investments" (additions to pre-existing holdings) and there were draw downs of capital in the portfolio's "fixed term investments" of $14.1m.

As at 31st December 2008, the portfolio's cash and liquid funds totalled $119.8m. In response to the dramatic collapse in financial markets in the second half of 2008, the Investment Adviser decided to defer further deployment of OWIL's liquid assets and consequently is in a position of strength to evaluate new opportunities.

Purchases - New Investments

Ten new investments, totalling $31.9m, were made in 2008, as detailed below:

Aberforth Smaller Companies Trust Plc invests in small UK quoted companies and will normally consist of investments in over 80 companies.

Ashmore Local Currency Debt Portfolio invests in a diversified portfolio of emerging markets local currency and local currency denominated assets. Investments are mainly in shorter duration bonds, loans and derivatives of sovereign and corporate issuers and to a lesser extent, special situations. See 'Switches' below.

Atlantis China Fund invests in equity and equity related investments of companies operating in The People's Republic of China. The Fund focuses on small and mid-cap Chinese equities.

BlackRock Middle East and North Africa Opportunities Fund is a hedge fund, investing in the securities of companies operating in the Middle East and North Africa.

EFG-Hermes Middle East & Developing Africa Fund invests in equity and equity-related securities of listed companies across the 'MEDA' region.

Gazprom ADR represents four ordinary shares in Gazprom, Russia's largest company. The Company extracts, transports, stores and sells natural gas.

GLG Emerging Equity Fund is a hedge fund investing, in emerging as well as frontier markets. Due to the lead manager's resignation, OWIL redeemed its holding in the Fund (at a small gain). See 'Sales' below.

Harbinger Capital Partners Special Situations Fund is a hedge fund, investing globally in medium to long term investments including special situation equities, distressed/high yield debt and private loans/notes.

Jupiter Financial Opportunities Fund invests in investments in financial services companies and, to a lesser extent, property related companies.

Neptune Russia & Greater Russia Fund invests in Russian (and to a much lesser extent Ukraine and the 'Stans') liquid blue chips.

Purchases - Follow-on Investments

In addition, seven additional investments were made to pre-existing (prior to 2008) holdings during the period. These additions, totalling $16.1m, were into the following holdings: (i) BlackRock Agriculture Fund, (ii) BlackRock World Mining Trust Plc, (iii) Finsbury Growth & Income Trust Plc, (iv) Investec Global Energy Fund, (v) Jupiter European Opportunities Trust Plc, (vi) Prusik Asia Fund Plc and (vii) VinaCapital Vietnam Opportunity Fund Ltd.

Fixed Term Investments - New Investment Commitments

Two new investment commitments, totalling $10m, were made to fixed term investments in 2008, as detailed below:

Oaktree Capital Management Value Opportunities (Cayman) Fund Ltd ($5m commitment) invests in distressed debt and other value investments across the capital structure. Oaktree conduct thorough proprietary research and insist upon buying debt at a discount to its true value. The Fund is a feeder into Oaktree Value Opportunities Fund, LP (a Cayman Islands Exempted Limited Partnership) and is structured as an open-ended 'evergreen' entity. 50% of the commitment has an 18 month lock-up with the balance locked up for three years. The Fund's small capital base should allow for an opportunistic, flexible and trade-oriented approach.

Riverstone/Carlyle Global Energy and Power Fund IV, LP ($5m commitment) invests globally in the energy and power industry. The Fund will make equity investment in the $250-450m range, making both controlling and strategic minority investments. The Fund will focus on four sectors of the energy market: (i) Exploration & Production, (ii) Midstream, (iii) Oilfield Services and (iv) Power (generation, transmission and distribution). The Fund has a life of ten years (ending in December 2018).

Switches

Two switches, totalling $41.2m, were made in 2008, as detailed below:

Ashmore Emerging Market Liquid Investment Portfolio - the switch from Ashmore Emerging Market Liquid Investment Portfolio, a dollar based fund, into the Local Currency Debt Portfolio (the 

local currency denominated equivalent) reflected the Investment Adviser's view that these local currencies will have to reflect the strength of their economies through their currencies eventually and the majority of the gains on the dollar have been made.

In August, the holding in Lehman Brothers USD Liquidity Fund was liquidated and the proceeds transferred to JP Morgan USD Liquidity Fund. JP Morgan USD Liquidity Fund aims to offer a high level of security coupled with instant access and a competitive yield. Permissible investments include: government, agency and sovereign debt, repurchase agreements, time deposits, commercial paper, asset-backed securities, mortgage-backed securities and investment grade corporate bonds. In common with the other liquidity fund holdings, JP Morgan USD Liquidity Fund is a separate legal entity and the assets of the Fund are segregated from those of the bank.

Sales

Three sales, totalling $8.9m, were made in 2008, as detailed below:

GLG Emerging Equity Fund - following the resignation of the lead manager.

Lansdowne European Equity Fund - the redemption (made in June) reflected disappointment with Fund's performance, together with the belief that the deteriorating economic prospects for Europe had not been fully discounted into equity prices.

UTS Energy Corporation - consolidation of natural resources exposure in favour of the Investec Global Energy Fund.

Fixed Term Investments - Outstanding Commitments

Notes:

• # sterling commitment expressed in US dollars.

• * commitment entered into during 2008.

MARKET OUTLOOK

With hindsight, there are some clear lessons from the events of 2008, which will have a key impact on future developments. Firstly, the abundance of credit and inflated real estate values that made the current crisis possible can be directly attributed to policy response in the post "dot-com" crash of 2000-2002. The determination of policy makers and central bankers then to avoid a recession at all costs has set the world up for a much more severe and debilitating hangover now the party has ended. More recently, policy has been flawed. Reactive, incoherent and made up on the hoof, it has so far compounded rather than alleviated the situation. More specifically, the consequences of allowing Lehman Brothers to fail were seriously miscalculated. The scale and speed of the 'deleveraging' that followed greatly amplified the magnitude of the ensuing economic and financial meltdown. Globalisation has ensured that there is no corner of the world economy that has not been affected.

A prolonged period of dislocation now seems inevitable as a transition occurs in the world economy. The era of debt fuelled consumption in the US and the stimulative impact that had on manufacturing bases in the developing economies is now in abeyance. A lack of income growth, the need to rebuild savings and severe constraint in the supply of credit create powerful headwinds for growth. What has been described as the "debt supercycle" - essentially putting off painful adjustment to sustain growth in the here and now - may or may not be over for good, but it is clearly in hibernation for the foreseeable future.

With the private sector marginalised, governments are likely to assume growing importance in the world economy. Over time, this will produce unintended consequences, new distortions and excesses. However, more immediately it is likely to dominate the investment landscape. The scale of fiscal policy response will be more analogous to wartime than that has been seen in previous peacetime financial crises. Ultimately, a new cycle of soaring government leverage is likely to replace leverage amongst consumers and in financial services.

In the near term, a severe recession in the world economy is unfolding. Synchronisation during the upswing implies synchronisation in the downswing, which will intensify its extent and duration. A worse than average recession is in prospect. In some countries such as the UK, where the banking sector is so significant in relation to the economy, commentators have talked of depression. On average, it is estimated that the GDP of industrialised economies will contract by 5%. In Eastern Europe, however, the contraction is likely to be much more severe than that. In Asia, declining export markets in the US will hit the manufacturing sector hard and it will take time to transition to more domestically led growth. The US faces a period of stagnation as the fiscal initiatives in areas such as infrastructure are offset by declining consumption. The Euro area will be badly affected, as the Euro creates policy inflexibility and there will be a high cost associated with the stewardship of the ailing East European economies.

Initially, deflation will be a much greater concern than inflation. The most severe wealth shock since the 1930's Depression, a paralysed banking system and very weak energy and commodity prices are all deflationary forces. Looking further ahead, a combination of ballooning budget deficits, quantitative easing of monetary policy, declining currencies, the disappearance of competition as companies fail in each sector, together with the expansion of the state sector, have the potential to create inflationary pressures. The very low yields that governments can currently borrow at look a dangerous trap for frightened investors.

Despite the overwhelmingly negative economic background, there is however potential for market rallies. For one thing, by any historical measure significant value has been re-established in equities. Dividend yield, price-to-book and market capitalisation-to-GDP ratios are at levels associated with major bear market troughs such as 1973-74. Cash offers no return and investor sentiment is at a very low ebb. However, the depressing reality for investors is that market rallies in the current environment are likely to be short lived. They are likely to be aborted by pent up redemptions, deferred debt reduction and nervous investors eager to book any sort of profit. Two major bear markets during the first decade of the 21st century have done much to undermine confidence in long term equity investing. Patience will be a key requirement in the year ahead. The longer term outlook for the key themes in the portfolio are still strongly positive. Natural resources overshot on the upside due to leveraged speculation. However, these exaggerated swings are self-correcting. Supply will contract markedly at current uneconomic levels and stabilise prices. Long term demand trends remain up due to the demographic profile of the developing world. Population growth and industrialisation are major unfolding forces in those countries. Generally speaking, the Emerging Markets have entered this recession with sounder economic fundamentals than in previous downturns. With the exception of some over-reaching Oligarchs in Russia, leverage is not as pervasive in either the private or state sectors as in the West. Recovery in the world economy may be some way off, but when it does occur, the Emerging Markets will have further enhanced their share of it.

In summary, the world faces a difficult recession in 2009. Deflationary forces will negatively impact corporate earnings and until the 'deleveraging' process has fully run its course stock markets will struggle. In the longer term, inflationary pressures may intensify as a consequence of the fiscal and monetary stimulus occurring. Equities offer better wealth protection under such circumstances. The Emerging Markets are set to continue increasing their share of world GDP. Ocean Wilsons Investments Limited remains well placed with ample cash at its disposal to exploit such opportunities and generate good returns in the medium term.

Hanseatic Asset Management LBG

March 2009

WILSON SONS LIMITED OPERATING REVIEW

We have summarised the following highlights from the Wilson Sons 2008 Earnings Report released on the 24 March 2008. The full report is available on the Wilson Sons Limited website: www.wilsonsons.com:

Wilson Sons Limited, through its subsidiaries in Brazil, is one of the largest integrated operators of port and maritime logistics in the Brazilian market, with 170 years of experience, offering a comprehensive range of services with emphasis on the port and shipping sector. The principal operating segments of the business are port terminals, towage, logistics, shipping agency and offshore

Highlights

• Net revenue grew by 23.3% to US$498.3 million from US$404 million in 2007

• EBITDA increased by 34.7% from US$91.4 million to US$122.7 million.

• Capital expenditure of US$93.5 million in the year principally on the expansion of the Tecon Rio Grande container terminal, and further vessel construction for our offshore and tug boat fleets.

• Net debt of US$ 5.2 million at 31 December 2008. 92% of all debt is long-term with 98% US Dollar or linked to the US Dollar.

2008 presented a number of challenges ranging from operational and financial targets, international trade flow uncertainty and a slowdown in export volumes late in the year. The adverse business environment became more critical with the onset of the latest global financial crisis, which deepened late in the third quarter of 2008. Wilson Sons met these challenges diligently, while delivering in 2008 positive year-over-year results, demonstrating the operational and financial strengths of our business model.  

Port Operations

Wilson Sons port terminals operates two container terminals, located in Rio Grande, Rio Grande do Sul and Salvador in Bahia, Brazil (Tecon Rio Grande and Tecon Salvador). Both terminals, offer assistance in port operations for loading and unloading of vessels, storage, and auxiliary services. The Company also operates Brasco, located in Rio de Janeiro, which provides support services to the oil and gas industry

Net revenue increased by 14.4%, from US$ 149.0 million in 2007 to US$ 170.5 million in 2008. Building on strong results throughout the first three quarters of 2008, total net revenues at port terminals declined moderately in 4Q2008, negatively affected by the stronger US Dollar, since its revenue base is predominately denominated in Brazilian Reais.  Container volumes at 865,114 were 3.8% lower than 2007. In October 2008, the third berth expansion at Tecon Rio Grande was delivered, increasing operating capacity by 60%. This had an immediate impact in terms of new liner services calling at the terminal and a decrease in call cancelations by ship owners (from longer "port stays" being offered). 

Operating profit at US$50.9 million for 2008 was 25% ahead of 2007, (US$40.8 million) due to higher-margin services provided, mostly from warehousing activities, a better mix of deep-sea containers handled, and the benefit from non-recurring fiscal credits reclaimed.

Towage

Wilson Sons offers harbour towage, ocean towage, salvage support and maritime support to the offshore oil and gas industry.

Towage net revenue at US$ 147.1 million was in line with 2007, US$ 146.8 million. Net revenues were lower in 4Q08, relative to 2007, as a result of the deepening of the global crisis, and a decrease in the number of harbour manoeuvres. Revenues were further negatively affected by the adverse foreign exchange impact on Brazilian Real denominated revenues and by a reduction in the number of special operations performed in the quarter. Full year 2008 revenues were mostly in line with the previous-year figures and special operations represented 9.1% of towage net revenues for the year 2008, a 1.5 percentage point increase over 2007.

Operating profit increased by 7%, from US$ 45.4 million in 2007 to US$ 48.6 million in 2008. Margins benefitted from a high margin deal to support LNG activities in Pecém, the stronger US Dollar against the Brazilian Real (as the majority of towage revenues are denominated in US Dollars, whereas most costs are in Reais), and from the benefit derived from non-recurring fiscal credits. These items offset the adverse impact of lower volumes in the fourth quarter.

Two new tugboats were added to the Company's fleet in 2008, one of which replaced an older unit, the tugboat 'Corona'. Overall, the entire fleet increased to 68 units.

Logistics

Wilson Sons develops and provides differentiated logistics solutions for the management of the supply chain of our clients and the distribution of products, including a number of logistics services, such as, storage, customs storage, distribution, highway transportation, multimodal transportation and NVOCC - Non Vessel Operating Common Carrier.

Net revenue from our Logistics business grew 29% from US$ 69.1 million in 2007 to US$89.3 million in 2008. Fourth quarter revenues declined 7% relative to 2007 principally due to the strengthening of the US Dollar in late 2008, as almost all revenue is Real denominated. Revenue from the Company's bonded warehouse (EADI), located in Santo André, improved mainly due to an increase in the value of goods stored, longer storage time and the strengthening of the US Dollar versus the Real. 

Operating profit increased by 15%, from US$ 4.6 million in 2007 to US$ 5.3 million in 2008 due to improved results from the EADI Santo Andre and an increase in the range of services offered to existing clients.

Shipping agency

Wilson Sons acts as the ship owners' representative as well providing the following services to ship owners: commercial representation, cargo documentation, container control and vessel support.

Net revenue declined 14% from US$ 20.4 million in 2007 to US$ 17.6 million in 2008. Despite challenging market conditions, higher bill of lading fees and agency fees partially offset the negative impact from the decline in container volumes caused by the loss of a major agency client.

Operating profit was in line with 2007. The reversal in the doubtful debts provision and increased revenue from the strengthening US Dollar against the Brazilian Real, (revenues are principally US Dollar denominated) offset the negative impact from the loss of a major client in 2008. 

Offshore  

Wilson Sons operates platform supply vessels (PSVs), to transport equipment and supplies to and from offshore oil and gas installations.

Net revenue increased by 102%, from US$ 10.7 million in 2007 to US$ 21.6 million in 2007 due to the larger fleet size (a total of 5 PSVs, 2 of which having operated at spot rates) and better pricing. Pricing improved due to the strengthening of the US Dollar against the Real, annual correction on our long term contacts and premium pricing from the two vessels operating in the spot market. The improvement in revenue was reflected in improved operating margins with 2008 operating margins improving to 37% from 17% in 2007. Operating profit increased 350% from US$ 1.8 million to US$ 8.1 million. The Company's offshore business continued to achieve high levels of growth and maintained its position as the Company's third largest business segment, in terms of EBITDA generation. 

In November 2008 Wilson Sons announced that it was negotiating with Magallanes Navegacao Brasileira S.A., owned by the Ultratug Group from Chile, to create a joint venture to operate offshore support vessels. The proposed joint venture would merge the offshore operations in Brazil of the two companies into a 50/50 joint venture, to include OSVs (Offshore Support Vessels) currently under construction, as well as OSVs in operation. Through the joint venture, Wilson Sons will gain additional expertise and economies of scale from an expanded offshore operation, while taking advantage of growth opportunities in Brazil's offshore oil and gas industry. 

Non Segmental 

Non-segmented activities include shipyard and our joint venture dredging company Dragaport and unallocated corporate costs.

All revenue in 2008 is derived from shipbuilding activities as in 2007 Dragaport sold its 2 Dredgers. Revenue increased from US$8.1 million in 2007 to US$ 52.2 million in 2008 due to the construction of platform supply vessels for third parties. Construction contracts are accounted for upon completion of each phase of the contract.

Unallocated corporate costs accounted for as non-segmented activities, remained fairly stable, as measured on a year-over-year basis.