TIDMSHIP TIDMSHPP
RNS Number : 5346A
Tufton Oceanic Assets Ltd.
26 September 2022
26 September 2022
Tufton Oceanic Assets Limited
("Tufton Oceanic Assets" or the "Company")
Final Results and Notice of AGM
Tufton Oceanic Assets announces its final results for the period
ended 30 June 2022. A copy of the Annual Report and Audited
Financial Statements has been submitted to the National Storage
Mechanism https://data.fca.org.uk/#/nsm/nationalstoragemechanism
and will shortly be available on the Company's website in the
Investor Relations section under Company Documents at
www.tuftonoceanicassets.com /financial-statements
The annual general meeting will be held at the Company's
registered office at 3(rd) Floor, 1 Le Truchot, St Peter Port,
Guernsey on 27(th) October 2022 at 1230 BST.
For further information, please contact:
Tufton Investment Management Ltd (Investment
Manager)
Andrew Hampson
Paulo Almeida +44 (0) 20 7518 6700
N+1 Singer
James Maxwell, Alex Bond (Corporate Finance)
Alan Geeves, James Waterlow, Sam Greatrex
(Sales) +44 (0) 20 7496 3000
Hudnall Capital LLP
Andrew Cade +44 (0) 20 7520 9085
Highlights
-- Tufton Oceanic Assets Limited (the "Company") had a profit
for the year of US$107.3m, or US$0.362 per weighted average
share.
-- With continued strong performance, the Company raised its
target annual dividend from US$0.075 to US$0.08 per share,
commencing 3Q21. The Investment Manager's forecasted Dividend Cover
through to the end of 2023 was c.1.8x.
-- The NAV per share increased from US$1.158 at 30 June 2021 to
US$1.450 (GBP1.194) at 30 June 2022. The US$ NAV Total Return for
the financial year was 32.5%.
-- As at 22 August 2022, the Company's shares traded at a 13%
discount to the ex-dividend 30 June 2022 NAV.
-- As at 30 June 2022, the EBITDA-Weighted Average Charter
Length was 0.9 years. The Investment Manager expects the portfolio
charter length to increase as it shifts to chartering the Company's
product tankers for longer terms at higher rates. Including the
transactions announced on 20 September 2022 and the new charter for
Marvelous, the pro forma portfolio average charter length is 1.4
years.
-- The Company's fleet had no commercial idle time (voids) during the financial year.
-- As at 30 June 2022, all the Company's vessels except Orson,
Golding and Marvelous were employed on fixed-rate charters. Orson
and Golding are employed in a chemical tanker pool while Marvelous
is employed in a product tanker pool.
-- During the financial year, the Company agreed to divest nine
vessels and to acquire nine vessels. The overall return from the
agreed divestments greatly exceeds the Company's targets. Of the
nine agreed acquisitions, eight vessels were delivered during the
financial year and one after the end of the year.
-- The Investment Manager's commitments to capital re-allocation
and ESG are the key drivers for the significant investment and
divestment activity. With these transactions, the Investment
Manager has re-allocated capital to reduce risk and position the
portfolio for greater upside potential, which is apparent from the
reduction in portfolio Price/Depreciated Replacement Cost ("P/DRC")
from 125% at the end of 3Q21 to less than 100% at the end of the
financial year.
-- Following the announced transactions, the emissions intensity
of the Company's fleet as measured by the Energy Efficiency
Existing Ship Index ("EEXI") improved by more than 40% compared to
the end of 2021.
-- The Investment Manager expects further improvement in the
portfolio emissions intensity as more of the Company's vessels are
retrofitted with Energy Saving Devices ("ESDs") and expects to
complete ESD retrofits on at least eight vessels by early 2023.
-- The Investment Manager took active measures to expedite crew
relief on the Company's vessels. As a result, only 0.2% of the crew
members were overdue by more than 1 month against an average of
4.3% for the top ten ship managers.
Chairman's Statement
Introduction
On behalf of the Board, I present the Company's Annual Report
and Audited Financial Statements for the year ended 30 June
2022.
It has been an active year during which the Company agreed to
acquire nine vessels of which eight were delivered during the year
and one was delivered after the year end. The Company also agreed
to divest nine vessels. The fleet as at the end of the financial
year consisted of eight handysize bulkers, an ultramax bulker, one
containership and ten tankers, and one tanker pending delivery.
There is a further breakdown of the portfolio on pages 12 to
13.
The NAV per share increased from US$1.158 at 30 June 2021 to
US$1.450 at 30 June 2022. The US$ NAV Total Return for the
financial year was 32.5%.
Russian Invasion of Ukraine
On 24 February 2022, Russia invaded Ukraine. None of the
Company's vessels have been directly impacted by the war in Ukraine
and all remain fully insured against war perils. The Investment
Manager is monitoring the movements of all the Company's vessels
and will prohibit the entry of any vessel into conflict zones, a
right established in all the Company's charters. The Board and the
Investment Manager are also monitoring the new sanctions being put
in place. The Company and its vessels will remain compliant with
all international sanctions imposed by the US, UK, EU and UN. The
Board and the Investment Manager remain watchful in monitoring the
war and its consequences for shipping and the Company.
Covid-19
The global economy started recovering from the impacts of
Covid-19 ("Covid") from the end of 1H20. Over the financial year,
containership asset values and time charter rates hit record highs
while the Baltic Dry Index ("BDI"), the index of average prices
paid for the transport of dry bulk materials across more than 20
routes, rose to its highest levels since 2009 in October 2021. The
Investment Manager had expected the product tanker market to
improve in 2022 with global oil demand but the market has also
benefited from short-haul demand for cargoes being partially
replaced by long-haul demand.
As noted previously, the Investment Manager has, where possible,
mitigated the impact of the global humanitarian crisis of crew
members' extended stay on board commercial vessels due to
Covid-related travel restrictions. The Investment Manager took
active measures to expedite crew relief on the Company's vessels.
As a result, only c.0.2% of crew members were overdue for relief by
more than 1 month at the end of 2021 compared to 4.3% for the top
ten ship managers.
Performance
As at 30 June 2022, the Company's NAV was US$447.5m being
US$1.450 per share (US$312.6m and US$1.158 per share as at 30 June
2021). The Company declared a profit of US$107.3m or US$0.362 per
share for the year with the US$ NAV Total Return over the year of
32.5%. Based on the announced transactions as at 30 June 2022, the
Investment Manager's forecasted Dividend Cover to the end of 2023
was c.1.8x.
Along with strong Portfolio Operating Profit and cash flows, the
Company benefited from non-cash fair value gains as asset values
rose. Containership and bulker values rose strongly as the market
benefited from strong demand and inventory re-stocking in 2H21.
Despite a slowdown in global GDP growth in 1H22, the containership
market remained resilient due to port congestion and supply-side
constraints while the bulker market benefited from short-haul
demand for cargoes being partially replaced by long-haul demand.
Please see the Shipping Market section within the Investment
Manager's Report for further details.
During the year, the Company's share price increased from
US$1.08 per share as at the close of business 30 June 2021 to
US$1.230 per share as at the close of business 30 June 2022.
Tap Issues
On 6 August 2021, the Company announced the results of its tap
issue of 10,533,763 shares at US$1.18 per tap issue share, which
raised gross proceeds of US$12.4m. On 12 November 2021, the Company
announced the results of its tap issue of 28,057,140 shares at
US$1.39 per tap issue share, which raised gross proceeds of
US$39.0m. Over the financial year, 38,590,903 new ordinary shares
were admitted to trading on the Specialist Funds Segment of the
Main Market of the London Stock Exchange.
The total number of voting rights of the Company as at 30 June
2022 is 308,628,541.
Discount Management
On average, the Company's shares traded at a 0.5% premium to NAV
over the financial year. As at 22 August 2022, the Company's shares
traded at a 13% discount to the ex-dividend 30 June 2022 NAV. Over
the financial year, no shares were held in Treasury.
Dividends
During the year the Company declared and paid dividends to
Shareholders as follows:
Period end Dividend Announcement Ex div Record Paid date
per share date date date
(US$)
Ordinary Shareholders
30.06.21 0.01875 22.07.21 29.07.21 30.07.21 13.08.21
30.09.21 0.02000 21.10.21 28.10.21 29.10.21 12.11.21
31.12.21 0.02000 18.01.22 27.01.22 28.01.22 11.02.22
31.03.22 0.02000 27.04.22 05.05.22 06.05.22 20.05.22
30.06.22 0.02000 19.07.22 28.07.22 29.07.22 12.08.22
A dividend was declared on 19 July 2022 of US$0.02 per share for
the quarter ending 30 June 2022. The dividend was paid on 12 August
2022 to holders of shares on record date 29 July 2022 with an
ex-dividend date of 28 July 2022.
Corporate Governance
The Company is a member of the Association of Investment
Companies ("AIC") and has therefore elected to comply with the
provisions of the current AIC Code of Corporate Governance which
sets out a framework of best practice in respect of governance of
investment companies ("AIC Code"). The AIC Code has been endorsed
by the Financial Reporting Council and the Guernsey Financial
Services Commission (the "GFSC") as an alternative means for AIC
members to meet their obligations in relation to the UK Corporate
Governance Code.
Where the Company's stakeholders, including Shareholders and
their appointed agents, have matters they wish to raise with the
Board in respect to the Company, I would encourage them to contact
us at SHIP@tuftonoceanicassets.com .
Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held
on 27 October 2022 at 12.30 pm BST the details of which are set out
in the AGM notice and Proxy form on pages 113 to 122.
At the last AGM held on 20 October 2021, the ordinary
resolutions were all duly passed. One extraordinary resolution to
approve the authority to issue and allot shares if the pre-emption
rights in the Articles of Association of the Company are disapplied
was not passed. The Directors believe that it is in the best
interest of the Company to have the ability to issue additional
shares and have engaged with the Shareholders and their voting
agents who voted against this extraordinary resolution.
Where Shareholders or their appointed agent have matters they
wish to raise with the Board at the AGM, I would encourage them to
contact us at SHIP@tuftonoceanicassets.com ahead of the AGM
date.
Environmental, Social, Governance ("ESG")
Our Investment Manager continues to integrate ESG factors into
its investment recommendations and asset ownership practices. As
you will see in the ESG section of the Investment Manager's Report
on pages 20 to 29 there is significant focus given to the ESG
aspects of the Company's operations.
The nature of the Company's significant investment and
divestment activity demonstrates the Investment Manager's
commitment to improving ESG performance. Following the announced
transactions, the emissions intensity of the Company's fleet as
measured by the Energy Efficiency Existing Ship Index ("EEXI")
improved by more than 40% compared to the end of 2021.
Further, the Investment Manager has adopted a proactive approach
to emissions reduction through a program to select ESDs for the
Company's vessels in the medium term while considering investments
in zero-emission capable vessels for the longer term. The
Investment Manager expects to retrofit ESDs on eight of the
Company's vessels by early 2023.
The Investment Manager has also completed trials of sustainable
biofuels on one of the Company's vessels. Please see the ESG
section of the Investment Manager's Report for details (page
20).
Crew welfare continued to be a significant area of focus over
the financial year with travel restrictions imposed during
successive waves of the Covid pandemic delaying crew rotations. Our
Investment Manager engaged with each vessel's technical manager to
address crew issues and facilitate rotations as necessary. As a
result, the proportion of delayed crew members on the Company's
vessels have been consistently lower than industry reported
averages. The Investment Manager continues to promote best
practices among its suppliers and has organised regular,
independent inspections of the Company's vessels.
ESG initiatives represent an opportunity for a proactive
Investment Manager with a well-capitalised fleet. Since December
2018, our Investment Manager is a signatory of the United Nations
Principles of Responsible Investment ("UN PRI") which has become an
industry standard and is a further step in embedding responsible
investment in the Company. The Board has reviewed and approved the
Investment Manager's Responsible Investment Policy and
implementation report for the Company. Shareholders can view the
policy and the implementation report on the Company's website (
www.tuftonoceanicassets.com ). Being a closed-end investment
company listed on the Specialist Funds segment of the London Stock
Exchange, the Company is not required to report against the Task
Force on Climate-related Financial Disclosures ("TCFD") framework.
Nevertheless, the Investment Manager supports the framework and
used it to guide climate-related risk reporting.
Outlook
-- The Company raised its target annual dividend from US$0.075
to US$0.080 per share, commencing from 3Q21.
-- Based on the announced transactions as at 30 June 2022 , the
Investment Manager's forecasted Dividend Cover to the end of 2023
is c.1.8x.
-- At the end of the financial year, the Company had an average charter length of c.0.9 years.
-- The Investment Manager has demonstrated its commitment to
capital re-allocation and ESG by divesting all but one of the
Company's containerships and less fuel-efficient bulkers in order
to re-allocate the capital to fuel-efficient bulkers and tankers
which offer stronger yields and greater potential for capital
appreciation.
-- Investor confidence in the Company's strategy and the
shipping market was apparent from the high levels of interest in
the Company's shares and oversubscription of the tap issue on 12
November 2021.
-- The Investment Manager has held a positive outlook on the
product tanker segment and increased exposure to this segment over
the financial year which appears to be timely based on market
conditions at the time of publication.
I would like to thank my fellow Directors for their commitment
and support during these challenging times, the Investment Manager
and their team for their diligence in dealing with complex and
challenging operational matters which were greatly increased due to
the impact of Covid and more recently by the Russian invasion of
Ukraine. I would also like to take this opportunity to thank our
Shareholders for their support and continued belief in our
strategy.
Investment Manager's Report
Highlights of the Financial Year
The Company continued to re-allocate capital and grow, in line
with its investment strategy and commitment to ESG. US$ NAV Total
Return for the period was 32.5%.
This section utilises alternative measures, applied on an
unconsolidated basis, to analyse performance. Please see the
Glossary and the Investment Performance section for details of the
metrics. Portfolio Operating Profit was strong at US$40.6m. There
was a gain of US$170.0m in charter-free vessel values primarily due
to the strong containership and bulker markets. The gain in
charter-free vessel values was partially offset by a US$99.3m fall
in charter value. Most of the fall in charter value was because
containership time charter rates continued rising into 1Q22.
However, the total negative charter value in the portfolio fell
during the financial year primarily due to the containership
divestments.
The 30 June 2022 NAV was US$447.5m (GBP368.5m), or US$1.450
(GBP1.194) per share.
Having first raised the target dividend in 1Q21, the Company
raised its target dividend again from US$0.075 to US$0.08 per share
commencing from 3Q21. The Investment Manager believes the Company's
strong Portfolio Operating Profit and performance over the year,
both on an absolute basis and relative to other asset classes,
demonstrate its investment thesis and the effectiveness of its
strategy. The Investment Manager's strategy of diversification
across the major segments, conservative leverage and strong charter
cover insulated the portfolio from market volatility, as evidenced
by the portfolio performance and growing dividend in a variety of
market conditions since the Company's listing in December 2017.
Over the financial year, the Clarksons Research Newbuilding
Price Index rose c.16% while the Clarksons Price Index for
10-year-old secondhand vessels rose c.38%.
As the Investment Manager has previously noted, shipping tends
to perform well during periods of inflation. Over the financial
year, charter-free values of bulkers and especially containerships
increased significantly. As containership valuations rose above
200% of DRC, the Company realised strong returns by divesting
containerships and less fuel-efficient bulkers and re-allocating
the capital to fuel-efficient bulkers and tankers, which offer
stronger yields and greater potential for capital appreciation
respectively. These transactions lowered the portfolio
Price/Depreciated Replacement Cost ("P/DRC") from 125% at the end
of 3Q21 to less than 100% at the end of the financial year. P/DRC
is the Investment Manager's preferred valuation metric, which
mean-reverts to 100% in the medium term when supply and demand
converge. The Investment Manager expects further upside in
secondhand values of tankers and bulkers as DRC increases with
higher newbuilding prices due to tighter environmental regulations,
shipyard consolidation and cost inflation. The Investment Manager
believes the lower P/DRC multiple at the end of the financial year
signifies risk reduction and greater potential upside for the
Company.
Highlights of the financial year include:
-- In August 2021 the Company raised gross proceeds of US$12.4m
through a tap issue of 10,533,763 ordinary shares at a price of
US$1.18 per share. In November 2021 the Company raised gross
proceeds of US$39.0m through a tap issue of 28,057,140 ordinary
shares at US$1.39 per share.
-- Having raised the target dividend in January 2021, the
Company raised its target dividend again from US$0.075 to US$0.08
per share commencing from 3Q21. The Dividend Cover for the
financial year was c.1.3x (c.1.0x in the previous financial year).
The main reason for the cover being lower than the Investment
Manager's long-run expectation is that the Company was not fully
invested throughout the period.
-- Based on the announced transactions as of 30 June 2022, the
Investment Manager's forecasted Dividend Cover to the end of 2023
was c.1.8x.
-- The Company agreed to divest its penultimate containership,
Parrot, in May 2022 for US$31m. The loan outstanding amount was
repaid at closing in June 2022.
-- As at 30 June 2022, the expected EBITDA-Weighted Average
Charter Length was 0.9 years. The Investment Manager expects the
portfolio charter length to increase as it shifts to chartering the
Company's product tankers for longer terms at higher rates.
Including the transactions announced on 20 September 2022 and the
new charter for Marvelous, the pro forma portfolio average charter
length is 1.4 years.
-- The Company agreed to divest nine vessels (Swordfish, Citra,
Dragon, Patience, Candy, Echidna, Vicuna, Lavender and Parrot) and
to acquire nine vessels (Idaho, Anvil, Rocky IV, Exceptional,
Awesome, Auspicious, Masterful, Charming and Marvelous). The
overall return from the agreed divestments greatly exceeds the
Company's targets. Of the nine agreed acquisitions, eight vessels
were delivered during the year and one vessel was delivered in July
2022.
-- The significant investment and divestment activity
demonstrates the Investment Manager's commitment to capital
re-allocation and ESG. With these transactions, the Investment
Manager has re-allocated capital to reduce risk and position the
portfolio for greater upside potential which is apparent from the
reduction in portfolio P/DRC from 125% at the end of 3Q21 to less
than 100% at the end of the financial year.
-- Following the announced transactions, the emissions intensity
of the Company's fleet as measured by the Energy Efficiency
Existing Ship Index ("EEXI") improved by more than 40% compared to
the end of 2021.
-- Retrofits of Energy Saving Devices ("ESDs") commenced on
Laurel and Idaho at the end of 2021 and on Orson in 2Q22 and will
be completed in 2022. The Investment Manager expects further
improvement in the portfolio emissions intensity as more of the
Company's vessels are retrofitted with ESDs. The Investment Manager
expects to have completed ESD retrofits on at least 8 of the
Company's vessels by early 2023.
-- The Investment Manager took active measures to expedite crew
relief on the Company's vessels. As a result, crew members overdue
for rotation onboard the Company's vessels decreased from c.16% at
the end of July 2021 to c.5% at the end of June 2022. Only 0.2% of
the crew members were overdue by more than 1 month against an
average of 4.3% for the top ten ship managers.
-- The Investment Manager has taken action to improve the
welfare of Ukrainian crew members onboard the Company's
vessels.
The Assets
As at 30 June 2022, the Company owned twenty-one vessels.
Containerships
Employment for the vessel owned by the Company at the end of the
financial year:
Riposte was on a time charter to a major investment-grade
container shipping group.
Divestments:
The Company agreed to divest:
-- Kale for US$21.5m prior to the financial year, in June 2021.
The divestment closed in October 2021 and the realised IRR was
31%.
-- Citra for US$33m in July 2021 with a realised IRR of 47%.
-- Swordfish for US$19m in December 2021 with a realised IRR of 27%.
-- Parrot for US$31m in May 2022 with a realised IRR of 13%. The
loan outstanding amount was repaid at closing.
-- Patience for US$19.35m in January 2022 with a realised IRR of c.23%.
-- Vicuna for US$18m in February 2022 with a realised IRR of 46%.
-- Candy and Echidna for a total of US$21m in February 2022 with a realised IRR of c.74%.
Tankers
Employment for vessels owned by the Company at the end of the
financial year:
-- Octane and Sierra are on time charters to an investment grade oil major.
-- Pollock, Dachshund, Cocoa and Daffodil are on time charters
to a major commodity trading and logistics company.
-- Exceptional is on a time charter to a leading tanker shipping
company, while Marvelous, which was delivered to the Company in
July 2022, is employed in a leading product tanker pool.
-- The average expected charter length of the Company's product
tankers was 1.2 years (2.2 years if the charter extension options
are exercised on Pollock, Dachshund, Cocoa and Daffodil).
-- The gas carrier Neon operates on a bareboat charter, under
which the Company provides only the vessel to the charterer, who is
responsible for crewing, maintaining, insuring, and operating
it.
-- Two chemical tankers, Orson and Golding, are employed in a
leading chemical tanker pool. As described in the Company's
Prospectus, a pool is a revenue sharing structure run by a
specialist third party or another ship owner.
Acquisitions:
The Company agreed to acquire:
-- Exceptional at c.85% of DRC for US$30.9m in December 2021.
The vessel was delivered to the Company in April 2022.
-- Marvelous at c.90% DRC for US$31.5m in June 2022. The vessel
was delivered to the Company after the end of the financial year,
in July 2022.
Both vessels are in the top quartile of fuel efficiency in their
market segment.
On 20 September 2022, the Company announced that it had agreed
to acquire two product tankers, Courteous and Mindful, for
US$73.0m. Both vessels have fixed-rate time charters for three to
five years to a major commodity trading and logistics company. The
acquisitions will be financed primarily by a new US$60m loan which
will be secured on Courteous, Mindful, Marvelous and Exceptional.
In parallel with the Courteous and Mindful being chartered as
described above, Marvelous will also enter a fixed- rate time
charter for three to five years to the major commodity trading and
logistics company from November.
Bulkers
Employment for vessels owned by the Company at the end of the
financial year:
-- Lavender's time charter was extended for 14-17 months from
February 2022 at a much higher rate than its previous charter.
-- Mayflower's time charter was extended for 5-7 months from
August 2022 at a much higher rate than its current charter.
-- Laurel was delivered to the Company in July 2021. The vessel
commenced its 2-year time charter from September 2021 after the
completion of its special survey.
-- Idaho and Mayflower are on time charters to a leading owner and operator of bulkers.
-- Rocky IV, Anvil and Masterful are on time charters to a
leading merchant and processor of agricultural goods.
-- Charming is on a time charter for 4-6 months to a leading dry bulk shipping company.
Acquisitions:
The Company agreed to acquire:
-- Idaho at below DRC for US$21.4m. The acquisition closed in October 2021.
-- Rocky IV and Anvil at below DRC for a total of US$41.2m. The
acquisitions closed in November and December 2021 respectively.
-- Awesome at below DRC for US$23.6m. The acquisition closed in January 2022.
-- Auspicious at below DRC for US$23.75m. The acquisition closed in February 2022.
-- Masterful slightly above DRC for US$25.5m. The acquisition closed in April 2022.
-- Charming slightly above DRC for US$26.3m. The acquisition closed in June 2022.
Awesome, Auspicious, Masterful and Charming are in the top
quartile of fuel efficiency in their market segment. The
acquisitions of Masterful and Charming above DRC are significantly
de-risked by strong cash flows from their fixed-rate charters.
Divestments:
The Company agreed to divest:
-- Antler at 100% of DRC prior to the financial year, in May
2021. The realised returns materially exceeded targets. Antler was
acquired for less than 70% of DRC.
-- Dragon at 119% of DRC for US$16.2m in October 2021. Dragon was acquired for 74% of DRC.
-- Lavender at 115% of DRC in May 2022 with realised returns
materially exceeding targets. Lavender was acquired for less than
70% of DRC.
The Company's fleet across all segments is well maintained and
performed well though certain vessels had minor Covid-related
disruptions or suffered supply chain issues and inflationary
pressures. Marvelous was delivered to the Company in July 2022. The
Investment Manager continues to identify an attractive pipeline of
opportunities across a range of the Company's target segments.
As at 30 June 2022:
SPV(+) Vessel Type Acquisition Earliest end Latest Expected
and Year of Date of charter end of end of charter
Build period charter period**
period
Swordfish(*) 1700-TEU February Vessel divested
containership 2018
built 2008
--------------------- ------------ -----------------------------------------------------------------
Patience(*) 2500-TEU March Vessel divested
containership 2018
built 2006
--------------------- ------------ -----------------------------------------------------------------
Riposte 2500-TEU March February July July
containership 2018 2023 2023 2023
built 2009
--------------------- ------------ --------------------- --------------------- -------------------
Neon Mid-sized LPG July August August August
carrier built 2018 2025 2025 2025
2009
--------------------- ------------ --------------------- --------------------- -------------------
Sierra Medium-range December June August July
product tanker 2018 2024 2025 2024
built 2010
--------------------- ------------ --------------------- --------------------- -------------------
Octane Medium-range December May July June
product tanker 2018 2024 2025 2024
built 2010
--------------------- ------------ --------------------- --------------------- -------------------
Cocoa Handysize October October October October
product tanker 2020 2023 2024 2023
built 2008
--------------------- ------------ --------------------- --------------------- -------------------
Pollock Handysize December February February February
product tanker 2018 2023 2024 2023
built 2008
--------------------- ------------ --------------------- --------------------- -------------------
Parrot(*) 8200-TEU July
containership 2019 Vessel divested
built 2006
--------------------- ------------ -----------------------------------------------------------------
Vicuna(*) 2500-TEU October
containership 2019 Vessel divested
built 2006
--------------------- ------------ -----------------------------------------------------------------
Daffodil Handysize October October October October
product tanker 2020 2023 2024 2023
built 2008
--------------------- ------------ ----------------- ------------------------- -------------------
Dachshund Handysize February March
product tanker 2020 2023
built 2008
--------------------- ------------ -----------------------------------------------------------------
Lavender(*) Handysize bulker October Vessel divested (pending closing)
built 2010 2020
--------------------- ------------ -----------------------------------------------------------------
Echidna(*) 2500-TEU December
containership 2020 Vessel divested
built 2003
--------------------- ------------ -----------------------------------------------------------------
Candy(*) 2500-TEU December
containership 2020 Vessel divested
built 2004
--------------------- ------------ -----------------------------------------------------------------
Golding 25,600 DWT stainless April
steel chemical 2021 NA - vessel is employed in a pool
tanker
built 2008
Mayflower Handysize bulker June January March January
built 2011 2021 2023 2023 2023
Laurel Handysize bulker July May September September
built 2011 2021 2023 2023 2023
--------------------- ------------ ------------------- ------------ ------------------------------
Orson 20,000 DWT stainless July NA - vessel is employed in a pool
steel chemical 2021
tanker
built 2007
--------------------- ------------ -----------------------------------------------------------------
Idaho Ultramax bulker July February July February
built 2011 2021 2023 2023 2023
--------------------- ------------ ----------------- ------------------------- -------------------
Anvil Handysize bulker September October February October
built 2013 2021 2022 2023 2022
--------------------- ------------ ----------------- ------------------------- -------------------
Rocky IV Handysize bulker September October February October
built 2013 2021 2022 2023 2022
--------------------- ------------ ----------------- ------------------------- -------------------
Exceptional Medium-range April April April April
product tanker 2022 2023 2024 2024
built 2015
--------------------- ------------ ----------------- ------------------------- -------------------
Awesome Handysize bulker January September March September
built 2015 2022 2023 2024 2023
--------------------- ------------ ----------------- ------------------------- -------------------
Auspicious Handysize bulker February September March September
built 2015 2022 2023 2024 2023
--------------------- ------------ ----------------- ------------------------- -------------------
Masterful Handysize bulker April January April January
built 2015 2022 2023 2023 2023
--------------------- ------------ ----------------- ------------------------- -------------------
Charming Handysize bulker June October December October
built 2015 2022 2022 2022 2022
--------------------- ------------ ----------------- ------------------------- -------------------
Marvelous(++) Medium-range July NA - vessel is employed in a pool
product tanker 2022
built 2014
--------------------- ------------ -----------------------------------------------------------------
Notes:
+ SPV that owns the vessel
** Based on assessment of the prevailing market conditions (as
at 30 June 2022) by the Investment Manager
++ Acquisition agreed and pending delivery
* Details excluded for vessels agreed to be divested
Investment Performance
NAV per share was US$1.450 at 30 June 2022. Portfolio Operating
Profit contributed US$0.137 per share and there was a strong Gain
in Fair Value per Share of US$0.238 (US$0.206 in the previous
financial year). US$ NAV Total Return for the financial year was
32.5% (33.3% in the previous financial year).
Containership and bulker values rose strongly as the markets
benefited from strong demand and inventory re-stocking in 2H21.
Despite a slowdown in global GDP growth in 1H22, the containership
market remained resilient due to port congestion and supply-side
constraints, while the bulker market benefited from short-haul
demand for cargoes being partially replaced by long-haul
demand.
The Company benefited from its growing fleet of bulkers with
higher time charter rates resulting in a higher Portfolio Operating
Profit compared to the previous year.
Figures below are in US$ millions From 1 Jul From 1 Jul
unless otherwise stated 2021 2020
to 30 Jun 2022 to 30 Jun 2021
Total ship-days 7,702 6,695
---------------- ----------------
Revenue 104.0 73.4
---------------- ----------------
Operating expense (57.6) (42.6)
---------------- ----------------
Gross operating profit 46.4 30.8
---------------- ----------------
Gross operating profit / time-weighted
capital employed 13.9% 11.9%
---------------- ----------------
Loan interest and fees (1.6) (1.5)
---------------- ----------------
Gain/(loss) in capital values 70.7 53.2
---------------- ----------------
Portfolio profit 115.5 82.5
---------------- ----------------
Interest income 0.0 0.0
---------------- ----------------
Company level fees and expenses (4.2) (3.0)
---------------- ----------------
Performance fee accrual (4.0) -
---------------- ----------------
Profit for the period 107.3 79.5
---------------- ----------------
Portfolio Operating Profit 40.6 26.3
---------------- ----------------
Portfolio profit across all key segments was driven by rising
capital value and operating profit.
The capital value of our containerships increased by US$39.7m
despite a fall of US$84.1m in charter values. As containership
values rose above 200% of DRC, the Company realised strong returns
by divesting containerships and re-allocating the capital to
bulkers and tankers which offer stronger yields and greater
potential for capital appreciation respectively. Portfolio
containership exposure fell from c.35% at the end of June 2021 to
c.5% at the end of the financial year. The Investment Manager
continues to consider an exit or opportunities to lock in long-term
yields on the remaining containership, Riposte .
Bulker values rose by US$27.6m in a strong market. The Company
divested less fuel-efficient bulkers and acquired seven more
fuel-efficient bulkers with fixed-rate charters producing strong
yields. Portfolio bulker exposure rose from c.16% at the end of
June 2021 to c.47% at the end of the financial year with a yield of
17.1%.
Segment Performance
During the Financial Product Gas Tanker Containerships Bulkers Total
Year & Chemical
Tankers
US$m unless otherwise
stated
------------- ------------- ----------------- ---------- --------
Gross operating profit 12.9 4.2 14.2 15.1 46.4
------------- ------------- ----------------- ---------- --------
Loan interest & fees (1.0) - (0.6) - (1.6)
------------- ------------- ----------------- ---------- --------
Gain/(loss) in charter-free
values 22.4 (1.0) 123.8 24.8 170.0
------------- ------------- ----------------- ---------- --------
Gain/(loss) in charter
values (18.0) - (84.1) 2.8 (99.3)
------------- ------------- ----------------- ---------- --------
Portfolio profit 16.3 3.2 53.3 42.7 115.5
------------- ------------- ----------------- ---------- --------
Product and chemical tanker capital value increased by US$4.4m
as the market strengthened significantly towards the end of the
financial year. The Company agreed to acquire two fuel-efficient
product tankers, one with a fixed-rate charter and the other
(delivered after the end of the financial year) employed in a pool
with current yield >30%. Portfolio product and chemical tanker
exposure rose from c.29% at the end of June 2021 to c.36% at the
end the financial year, with a yield of 10.6%.
Segment Exposure and
Forecast Yields* Product Gas Tanker Containership Bulkers Total
& Chemical
Tankers
% of NAV 36.3% 5.8% 5.4% 47.0% 94.5%
------------- ------------- ---------------- ---------- ---------
Forecast Net Yields 10.6% 15.5% 11.5% 17.1% 13.5%(^)
------------- ------------- ---------------- ---------- ---------
(*) Based on the pro forma fleet for all transactions announced
through 30 June 2022
As at 30 June 2022, the vessels in the portfolio were chartered
to twelve different counterparties. The average age of the
Company's vessels was c.11 years.
The Shipping Market
The Company focuses on three main shipping segments, tankers,
bulkers and containerships, which strengthened over the financial
year. The Clarksea Index, a broad indicator of weighted average
earnings from Clarksons Research across the main commercial vessel
types, ended the financial year at US$41,350/d, 48% higher than the
end of June 2021. The IMF estimated that world GDP grew by 6.1% in
2021 after a 3.1% contraction in 2020. As of January 2022, the
International Monetary Fund ("IMF") forecast 4.4% world GDP growth
in 2022, but this was revised down to 3.2% as of July 2022 due to a
combination of tightening financial conditions globally, slowing
growth in China, Covid outbreaks and lockdowns, and the negative
impact from the war in Ukraine.
The Investment Manager believes the shipping market is in a
multi-year upcycle because of the relative lack of investment in
new capacity (supply). The combination of commodity price inflation
and reduced shipyard capacity is increasing newbuilding prices.
This led to higher values for secondhand vessels.
Major world powers including the US, UK and EU have imposed
sanctions on key Russian institutions, businesses and individuals
in response to the war in Ukraine. Russia is a major exporter of
oil, gas, and coal while both Russia and Ukraine are major
exporters of grain.
The Investment Manager has formally requested all our charterers
and vessel managers to desist from trade with Russia wherever
legally possible except for humanitarian purposes. The impact of
the war in Ukraine on shipping demand growth will be ameliorated by
short-haul demand, especially for tanker and bulker cargoes, being
partially replaced by long-haul demand.
Some notable highlights of the shipping market, based on
Clarksons Research, include:
-- Global seaborne trade is expected to exceed pre-pandemic
levels in 2022 and grow by c.2% in 2023. In comparison, seaborne
trade grew by c.3.3% CAGR in the two decades leading up to 2021
-- Over the financial year, the Clarksons Research Newbuilding
Price Index rose c.16% while the Clarksons Price Index for
10-year-old secondhand vessels rose c.38%
-- Over the financial year, compared to the previous 12 months:
o Average 12-month time charter rates for handysize bulkers rose
c.97%
o Average 12-month time charter rates for 2500-TEU
containerships rose c.286%
o Average 12-month time charter rates for handysize product
tankers rose c.1%
This section utilises data from the Investment Manager's Tufton
Real-Time Activity Capture System ("TRACS") which analyses
satellite data to track the international shipping fleet by the
major segments. TRACS utilises the draught of each vessel as a
proxy for its utilisation and thereby enables the Investment
Manager to have a close to real-time measure of shipping demand.
Other research data used in this section is from Clarksons
Research, unless specified otherwise.
Tankers
According to the US Energy Information Administration, world
petroleum liquids demand is expected to grow by 2.2 mbpd in 2022
and 2.0 mbpd in 2023. We had expected improvement in tanker demand
in 2022 along with the recovery in global oil demand but the war in
Ukraine has partially replaced some demand for short-haul product
tanker cargoes with demand for long-haul: increasing Russian
exports to Asia, notably India, and higher European imports from
non-Russian suppliers including the Middle East, the US and Asia.
This has resulted in improving demand for product tankers from the
end of 1Q22.
12-month time charter rates for medium-range product tankers
rose to c.US$20,500/d at the end of the financial year, c.53%
higher than at the end of June 2021. The Company will benefit from
the current strong market as its latest acquisition, Marvelous, is
employed in a pool with current yields >30%. Beyond the current
market strength, supply-side dynamics for tankers are supportive
especially for product and chemical tankers with the orderbook at
only c.5% of fleet.
The Investment Manager believes the product and chemical tanker
market will continue to benefit from this combination of demand
improvement and slowing supply growth.
The chemical tanker market has benefited from the strength in
product tankers. According to Drewry Research, the capacity of
vessels trading chemicals reduced by 4.5% over 1H22 as some vessels
moved to the improving product tanker market. Tight vessel supply
along with short-haul cargoes being partially replaced by long-haul
cargoes due to the war in Ukraine and lockdowns in China resulted
in an improving chemical tanker market . Both the Company's
chemical tankers, employed in a pool, benefit from this
improvement.
As at the end of the financial year, the Company has seven
product tankers on fixed-rate charters with an average duration of
1.2 years. The Investment Manager expects the product market, well
supported by strong supply-side fundamentals, will offer
opportunities for longer-term charters at higher rates as well as
potential for further capital appreciation.
Bulkers
The effect of strong demand over the financial year was
compounded by port congestion in Asia caused by Covid-related
restrictions. In October 2021, the benchmark BDI rose to its
highest level since 2009. The market remained resilient in the face
of several challenges in early 2022 including seasonal weakness
around the Chinese New Year period, the war in Ukraine and Covid
restrictions in China. Bulker tonne-mile demand growth was aided by
short-haul cargoes being partially replaced by long-haul cargoes
due to the war in Ukraine.
12-month time charter rates for handysize bulkers rose to
c.US$25,000/d at the end of the financial year, c.20% higher than
the end of June 2021. The bulker market remains attractive, with
strong supply-side fundamentals. As at the end of the financial
year, the bulker orderbook was only c.7% of fleet which will result
in slowing fleet growth. The Investment Manager increased bulker
exposure in the portfolio to c.47% at the end of the financial
year. The Company has 9 bulkers on fixed-rate charters with average
charter cover of 0.6 years, producing c.17% annual net yield.
During the financial year, the Company divested less
fuel-efficient bulkers and re-allocated capital into more
fuel-efficient bulkers.
Containerships
The containership market strengthened over the financial year.
Consumer demand was strong in 2021 but weakened in 2022 due to the
impact of inflationary pressure on consumers, Covid-related
lockdowns in China and the war in Ukraine. Container volumes were
down 2.4% YoY (YTD as of April 2022). Nevertheless, the
containership market remained resilient with limited fleet growth
and the effects of port congestion. 12-month time charter rates for
small (2500-TEU) containerships rose to c.US$75,000/d at the end of
the financial year, c.113% higher than the end of June 2021.
The containership orderbook was c.27% of fleet at the end of the
financial year as new orders increased. The Investment Manager
expects the containership market to slowly weaken from record highs
as port congestion eases and the new orders are delivered. Fleet
growth is expected to accelerate to c.8% in 2023.
The Company's containership exposure at the end of the financial
year was only c.5% of NAV as the Investment Manager has
re-allocated capital by divesting containerships and continues to
consider an exit or opportunities to lock in long-term yields on
the Company's remaining containership, Riposte.
Asset values and time charter rates reflect the Investment
Manager's thesis of supply-side adjustment to varying degrees
across the main segments. The increase in asset values and rates
has been the highest in containerships. In bulkers and tankers, the
combination of tightening environmental regulations and lower
shipyard capacity results in rising newbuilding prices. This, in
turn, increases values for secondhand vessels. In addition, many
newbuilding designs incorporate more flexible machinery and storage
systems to handle multiple fuel types to reduce emissions. These
further increase newbuilding prices. Over the financial year, the
Clarksons Research Newbuilding Price Index rose 16% whilst the
Clarksons Research Price Index for 10-year-old secondhand vessels
rose 38%.
The shipping industry has a history of being resilient during
periods of disruption and inflation as recently observed around the
Covid pandemic. Despite the negative impact of the war in Ukraine,
the tanker and bulker markets have been supported as demand for
long-haul cargoes replaced demand for short-haul cargoes and the
supply side remains supportive with slowing fleet growth. High oil
prices incentivise lower speeds resulting in a reduction of
available shipping capacity, aiding the supply-side adjustment.
Fuel-efficient vessels such as the Company's recent acquisitions
are likely to be favoured.
Environmental, Social and Governance ("ESG")
The Investment Manager emphasises the principles of Responsible
Investment in the management of clients' assets through awareness
and integration of ESG factors into its investment process in the
belief that these factors have a positive impact on long-term
financial performance. The Investment Manager recognises that its
first duty is to act in the best financial interests of the
Company's Shareholders and to achieve good financial returns
against acceptable levels of risk, in accordance with the
objectives of the Company. Since December 2018, the Investment
Manager is a signatory of the United Nations Principles of
Responsible Investment and has a Responsible Investment Policy
which is available on the Company's website (
www.tuftonoceanicassets.com ).
Current areas of ESG focus include:
1. Assessment of the fuel efficiency and environmental impact of potential acquisitions
2. Improving fuel efficiency of the Company's vessels and
reducing environmental impact across the asset life cycle
3. Responsible vessel recycling
4. Health and safety of the crew on our vessels
5. Enhanced security to lower risk of contraband
6. Compliance with all international sanctions imposed by the US, UK, EU and UN
7. Promoting acceptance and implementation of ESG principles with our business partners.
Being a closed-end investment company listed on the Specialist
Fund Segment of the London Stock Exchange, the Company is not
required to report against the Task Force on Climate-related
Financial Disclosures ("TCFD") framework. Nevertheless, the
Investment Manager believes the TCFD recommendations provide a
useful framework to increase transparency on climate-related risks
and opportunities within financial markets and has used them to
guide climate-related risk reporting.
ESG Governance: Senior Management (i.e. the CEO and the CIO) of
the Investment Manager are committed to Responsible Investment and
oversee the implementation of its Responsible Investment Policy.
The policy statement is reviewed at least annually and approved by
the Company's Board of Directors.
The Company's Board does not have a separate ESG committee but
collectively reviews implementation progress against the policy
statement and issues an implementation review report which is also
publicly available on the Company's website. The Board recognises
that climate change and related risks will have an impact on the
business, and climate considerations are embedded within the
Company's broader ESG governance framework where climate-related
risks and opportunities are considered across the organisation. The
Board maintains ultimate responsibility for the policy and its
implementation and is committed to upholding high standards of
corporate governance. As a member of the Association of Investment
Companies ("AIC") (https://www.theaic.co.uk/), the Company reports
against the AIC Code of Corporate Governance on a comply or explain
basis.
For investment and divestment decisions, the Board takes into
consideration, inter alia, the historic environmental performance
and energy efficiency metrics of candidate vessels. The Investment
Manager devotes more than 4 full time employee equivalents to ESG
integration related analysis and implementation in aggregate.
Please see pages 27 and 29 for disclosure on the Investment
Manager's analysis of climate-related risks and the strategy
adopted towards addressing the risks.
Environmental
The Investment Manager is committed to reducing greenhouse gas
emissions and aligning the Company to the temperature goals of the
Paris Agreement. In September 2021, the Investment Manager
announced new commitments to align its funds to the temperature
goals of the Paris Agreement by fully transitioning to zero carbon
energy sources by 2050 and investing in zero carbon capable vessels
before 2030. In the medium term, the Investment Manager is reducing
emissions from its existing fleet through investment in Energy
Saving Devices ("ESDs") and promoting best operational practices
such as regular hull and propeller cleaning and optimal use of
auxiliary engines. The Investment Manager is also investing in
digital technologies for performance monitoring and emissions
reduction. Sustainable biofuels are expected to be part of the
long-term fuel mix on the path to decarbonisation. The Investment
Manager also aims to increase the use of sustainable biofuels
following successful trials.
The Investment Manager has engaged a consulting firm of naval
architects to conduct energy efficiency studies on the Company's
vessels and select the appropriate ESDs for retrofit. The selection
of ESDs, investment required, retrofit timing and commercial
arrangements for fuel savings will vary from vessel to vessel
depending upon the results of energy efficiency studies, prevailing
market conditions and commercial considerations. ESD retrofits
commenced on Laurel and Idaho during the financial year coincident
with their second special surveys. High-performance hull coatings
were applied during each vessel's special survey. The Investment
Manager has experienced some supply chain delays in the procurement
and retrofit of the ESDs. Other ESDs will be installed on the
vessels whilst in service over 2022.
The Investment Manager has negotiated with the charterer of each
vessel to increase the time charter rate of the vessel based on the
fuel savings from the ESD retrofits which will result in a payback
period of c.2 years for the Idaho and c.5 years for Laurel. The
Idaho payback period is lower as it is already a very
fuel-efficient vessel and required much lower ESD capital
investment. We expect further upside on ESD retrofits as we better
capture savings from rising fuel prices and carbon prices.
Orson was retrofitted with a Propeller Boss Cap Fin ("PBCF") and
high-performance hull coating in 2Q22. Other ESDs will be
retrofitted on the vessel in 3Q22. The vessel operates in a pool
and will benefit directly from the fuel savings based on the
prevalent prices.
Tufton expects to complete ESD retrofits on at least eight of
the Company's vessels by early 2023.Total emissions from the
Company's fleet in 2021 was 401,348 tonnes of CO2. With a growing
portfolio of vessels, this measure is less relevant to the Company
than normalised measures of emissions intensity. Total emissions
from the portfolio is calculated from the fuel consumption from
vessels owned as at the end of 2021. This includes emissions from
fuel consumed for propulsion and onboard power generation.
The majority of the Company's vessels are on time charter under
which the Company does not have full operating control of the
vessels but is responsible for the regular surveys and maintenance
of the vessels. Data from one vessel on long-term bareboat charter
(Neon) is excluded as the Company does not have operating control
of the vessel and is not responsible for the regular surveys or
maintenance of the vessel.
Environmental Metrics 2021
Total emissions (tonne CO2) 401,348
--------
Portfolio Energy Efficiency Operational Indicator
("EEOI")
(g CO2/tonne cargo-nautical mile) 21.1
--------
Portfolio Annual Efficiency Ratio ("AER")
(g CO2/DWT-nautical mile) 9.9
--------
Oil spills None
--------
During the financial year, the Company agreed to divest nine
vessels and to acquire nine vessels. The Investment Manager's
commitments to capital re-allocation and ESG are the key drivers
for the significant investment and divestment activity.
Following these transactions, the emissions intensity of the
Company's fleet as measured by the Energy Efficiency Existing Ship
Index ("EEXI") improved by more than 40% compared to the end of
2021. The EEXI measures emissions intensity using a ship's design
characteristics.
A measure of operational emissions intensity defined as the mass
of CO2 emitted per unit of transport work in each time period, the
EEOI measures a ship's fuel efficiency and emissions. All else
equal, a lower EEOI is indicative of a more efficiently operated
asset. The Investment Manager has utilised the EU MRV methodology
for calculating the EEOI using data on total emissions and total
cargo transported by the Company's fleet for the 2021 calendar
year. The emissions intensity of the Company's vessels as measured
by the EEOI for 2021 was c.2% higher YoY primarily because of
higher containership operating speeds established by the charterers
in a strong market rather than by the Company or the Investment
Manager.
Of the three major segments, containerships tend to have the
highest emissions intensity due to higher operating speeds. Over
the financial year, the Company agreed to divest seven
containerships (Swordfish, Citra, Patience, Candy, Echidna, Vicuna
and Parrot) and two bulkers (Dragon and Lavender) and agreed to
acquire nine fuel-efficient vessels (seven bulkers: Idaho, Anvil,
Rocky IV, Awesome, Auspicious, Masterful and Charming; and two
tankers: Exceptional and Marvelous).
The emissions intensity of the Company is reduced significantly
after the announced transactions. Based on the agreed divestments
only, the Investment Manager estimates that the pro forma EEOI is
c.10% better compared to 2020. The Investment Manager also compared
the Company's EEOI to a broader peer group of more than 1180
vessels using the 2021 EU MRV data and estimates the Company's pro
forma portfolio emissions intensity is c.8% better than its peer
group.
The efficiency improvement from the capital re-allocation is not
fully apparent from the 10% improvement in EEOI as the Company does
not hold verified 2021 data for the recently acquired
fuel-efficient vessels. Based on the EEXI improvement described
previously, the Investment Manager expects the Company's EEOI to
also improve materially in 2022 compared to 2021.
The Investment Manager also expects further reduction in
emissions intensity from ESD retrofits and expects to retrofit ESDs
on eight of the Company's vessels by early 2023.
Average Energy Efficiency Operational Indicator
(EEOI)
(g CO2/ tonne cargo-nautical mile) 2021 2020
-------------------------------------------------------- ------ ------
Containership 42.6 28.6 26.3
Bulkers 12.2 12.2 12.6
Tankers 16.5 16.5 17.8
Company 18.6 21.1 20.7
EEOI was c.2% higher in 2021 but the Investment Manager estimates
that the EEOI (after the announced divestments) is 18.6-g CO2/
tonne-nautical mile, c.10% better compared to 2020.
Golding successfully completed a voyage powered by a sustainable
biofuel blend. The trial was organised in partnership with Stolt
Tankers and BP. The fuel was a blend of fossil fuel with 30%
sustainable biofuel. The biofuel component was derived from
feedstocks such as used cooking oil and delivers a well-to-exhaust
CO2 reduction of c.30% compared to fossil fuel equivalents without
requiring modifications to the vessel's engine.
Following the successful trial, the Investment Manager is in
discussions with Stolt Tankers and BP on extending the use of
sustainable biofuel. A vessel in another fund controlled by the
Investment Manager successfully completed a voyage powered by 100%
sustainable biofuel.
Coal is a fuel with high greenhouse gas impact. At COP26, world
leaders agreed upon targets to lower global coal demand growth
which may impact the seaborne coal trade by 2025. The Investment
Manager has proactively implemented a policy that favours long-term
charters that minimise coal carriage without negative financial
impact. The Investment Manager will monitor and report on coal
carriage on the Company's vessels. The Company's vessels have not
carried any coal since the end of 3Q21.
Twelve of the Company's vessels had BWTS installed as at the end
of the financial year. By the end of the calendar year 2022, we
expect to install BWTS on all the Company's vessels except for the
gas carrier Neon, on a bareboat charter, where the charterer is
responsible for BWTS installation and compliance.
Based on the current portfolio and target segments, the
Investment Manager does not expect the Company to have recycling
candidates in its portfolio in the near future.
When recycling situations do arise, the Company will follow
industry best practices in adopting the Hong Kong International
Convention for the Safe and Environmentally Sound Recycling of
Ships.
Social
The Investment Manager considers crew health and safety to be a
priority and works closely with the vessels' technical managers to
promote best practices. The Investment Manager became a signatory
to the Neptune Declaration in January 2021, supporting measures to
ensure timely relief of crew and putting measures in place to
manage any pandemic-related travel restrictions.
As a result of the Investment Manager's proactive approach to
ensure timely relief, crew members overdue for rotation onboard the
Company's vessels decreased from c.16% at the end of July 2021 to
c.5% at the end of June 2022. At the end of the financial year,
only 0.2% of the crew members were overdue by more than 1 month
against an average of 4.3% for the top ten ship managers who are
signatories of the Neptune Declaration.
At the end of the financial year, no crew members onboard any of
the Company's vessels were overdue for rotation by more than two
months. The Investment Manager continued its vaccination program
for all the crew members on the Company's vessels. At the end of
the financial year, c.97% of the crew members were vaccinated.
The Investment Manager works with the vessels' technical
managers to establish a strong safety culture, exceeding regulatory
standards. The technical managers have implemented a collection of
comprehensive safety procedures, policies, and protocols onboard
vessels that conform to the guidelines of the Investment Manager.
Safety performance is monitored by collecting and tracking a
comprehensive list of industry Key Performance Indicators ("KPIs")
every quarter and ensuring that any significant incidents are
reported upon with follow-up actions taken.
Over the financial year, the Company registered one lost time
shipboard injury over c.3 million man-hours, resulting in an LTIF
of 0.33.
Other ESG metrics 2021
Lost Time Injury Frequency ("LTIF")
Industry metric to measure safety performance over a
one-year rolling period, normalised per million man-hours.
A lower number corresponds to better safety performance
The Company 0.33
-------------
Maersk Group(+) 0.93
-------------
Over the financial year, the Investment Manager became a
signatory to Maritime UK's:
-- Mental Health in Maritime pledge to promote quality of mental
health and wellbeing in the industry; and
-- Women in Maritime pledge to build an employment culture that
actively supports and celebrates gender diversity at all levels in
the industry.
The Investment Manager has engaged Mental Health Support
Solutions GmbH ("MHSS") to provide a free counselling service for
crew members to help them handle concerns of stress, anxiety, and
personal issues while onboard. The 24-hour confidential helpline
service is operated by MHSS's professional psychologists, who are
multilingual and can be contacted by phone, messaging apps and
email.
The Investment Manager is specifically monitoring the safety and
well-being of the Ukrainian crew members on board the Company's
vessels. The war could increase stress on crew members and may
exacerbate challenges to crew rotation due to the closure of
airports. Where requested, we will assist in the repatriation or
extension of crew contracts. The Investment Manager has engaged
with all our technical managers to address these issues. As at the
end of the financial year, the Company's vessels have 31 Ukrainian
and 29 Russian nationals onboard and there is a mixture of both
nationalities on seven vessels (nine vessels at the end of 1Q22).
Whilst no problems have arisen to date, we are trying to separate
Russian and Ukrainian nationals wherever possible through
rotations.
The Investment Manager aims to promote acceptance and
implementation of ESG principles with business partners through an
annual survey and feedback. The Investment Manager conducts an
annual survey of all the Company's technical managers which
includes KPIs to assess their performance on numerous metrics
including ESG. The results of the survey are communicated to the
technical managers to ensure best practices are shared.
The Investment Manager has a strict reporting policy for its
technical managers and employs a third party to conduct independent
inspections of the Company's vessels on a regular basis to check on
the performance of the technical managers.
These independent inspections include assessment of key aspects
of vessel condition as well as regulatory compliance and crew
health and safety. The Investment Manager updates the Board of
Directors on the progress of the Company's investments every
quarter with additional updates where significant events have
occurred.
The Investment Manager continues to closely monitor adherence to
sanctions regimes from the US, UK, EU and UN. The employment
contracts for the Company's vessels are structured to exclude
sanctioned regions. Additionally, the Investment Manager monitors
compliance through regular inspection of vessel logs and satellite
data. On 24 February 2022, Russia invaded Ukraine. The Investment
Manager is monitoring the movements of all the Company's vessels.
The Investment Manager will prohibit the entry of any vessel into
conflict zones, a right established in all the Company's
charters.
The Board and the Investment Manager are also monitoring the new
sanctions being put in place. The Company and its vessels will
remain compliant with all international sanctions imposed by the
US, UK, EU and UN. The Board and the Investment Manager remain
watchful in monitoring the war and consequences for shipping and
the Company.
The Investment Manager has a zero-tolerance policy towards
bribery and adheres to the UK Bribery Act with the following
policies in place:
-- payment controls requiring dual sign-off/authorisation of all payments;
-- gifts and entertainment policies that restrict staff from giving and receiving gifts;
-- recruitment policies and ongoing monitoring of the fitness
and propriety of staff including their honesty, integrity, and
financial soundness; and
-- FCA Conduct rules and a Code of Ethics which require staff to
conduct themselves appropriately.
The Investment Manager is also a member of the Maritime
Anti-Corruption Network (MACN).
Analysis of climate-related risks
In this section, the Investment Manager has set out the
financially material climate-related risks and opportunities
associated with the Company over the short (<3 years), medium
(4-10 years) and long (>10 years) term.
Risks Horizon Analysis
Physical Risks Medium Physical risks may include extreme weather
term and events, such as drought or flooding, and
long term the longer-term impact of increasing average
global mean temperatures.
While operations of the vessels in the
portfolio may be temporarily disrupted,
the Investment Manager does not expect
that the globally mobile vessels in the
portfolio will be permanently affected
by climate-change related impacts on any
facilities or even specific geographic
region(s). The global shipping industry
has proved to be resilient and adaptable
to changes over the long term.
----------- ----------------------------------------------------
Transition Risks
Technology Risk from technological improvements or innovations
that support the transition to a lower-carbon,
energy-efficient economic system
-----------------------------------------------------------------
Short Newer vessel designs tend to be more fuel-efficient
term making the oldest and least fuel-efficient
vessels less competitive. The Investment
Manager is committed to adoption of technologies
for emissions reduction including ESDs.
The Investment Manager and the Board carefully
consider the environmental impact associated
with all investment decisions.
----------- ----------------------------------------------------
Technology Risk from technological improvements or innovations
that support the transition to a lower-carbon,
energy-efficient economic system
-----------------------------------------------------------------
Medium The Investment Manager regularly monitors
term and the viability of investment in new fuel
long term technologies and retrofits. The Investment
Manager considers this transition risk
to be low in the medium term due to the
lack of established refuelling infrastructure
as well as technology and safety risks
in new fuel technologies. As of June 2022,
only c.5% of the global fleet is capable
of utilising alternative fuels including
LNG. The Investment Manager has successfully
trialled and aims to increase the usage
of sustainable biofuels.
----------- ----------------------------------------------------
Policy and Risk of policy actions that attempt to constrain
Legal actions that contribute to the adverse effects
of climate change or policy actions that seek to
promote adaptation to climate change.
-----------------------------------------------------------------
Short The Investment Manager aims to be at the
term forefront of decarbonisation and is investing
in ESDs to achieve emissions reduction
beyond regulatory targets. The Board has
reviewed the Investment Manager's plans
to ensure that the Company's vessels will
be compliant with announced regulations.
Please see section on Principal Risks and
Uncertainties.
----------- ----------------------------------------------------
Risks Horizon Analysis
----------- ----------------------------------------------------
Medium There remains significant uncertainty in
term and the medium term on the trajectory of regulatory
long term targets and measures required to meet the
targets. Regulatory uncertainty is greatest
for newbuild investments with an operating
life of >= 20 years, while the Company's
assets will have obligations to operate
efficiently.
The average age of the Company's assets
is c.11 years. The asset life of the portfolio
means that there will structurally be lower
risk to the portfolio residual value towards
the end of the medium-term horizon. The
Investment Manager regularly monitors the
viability of investment in new fuel technologies
and retrofits.
----------- ----------------------------------------------------
Market Risks through shifts in supply and demand for
certain commodities, products, and services as
climate-related risks and opportunities are increasingly
taken into account.
-----------------------------------------------------------------
Medium Risk may come from lower demand for seaborne
term and coal which is not replaced by demand for
long term decarbonisation-related commodities such
as biomass, lithium, and nickel ore. The
Investment Manager is already proactively
minimising coal carriage through long-term
charters without commercial impact.
Where possible, the Investment Manager
chooses charter counterparties that are
structurally less likely to carry coal.
New commercial arrangements may be required
to adapt to changing demand patterns in
the medium term.
----------- ----------------------------------------------------
Reputation Risk tied to changing customer or community perceptions
of an organization's contribution to or detraction
from the transition to a lower-carbon economy.
-----------------------------------------------------------------
Short The Investment Manager aims to be at the
term and forefront of decarbonisation and is investing
medium in ESDs to achieve emissions reduction
term beyond regulatory targets. The Board has
reviewed the Investment Manager's plans
to ensure that the Company's vessels will
be compliant with announced regulations.
Please see section on Principal Risks and
Uncertainties.
----------- ----------------------------------------------------
Principal Risks and Uncertainties
The Board has carried out a robust assessment to identify the
principal and emerging risks that could affect the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. Principal risks are those which
the Directors consider have the greatest chance of materially
impacting the Company's objectives. The Board has adopted a
"controls" based approach to its risk monitoring requiring each of
the relevant service providers, including the Investment Manager,
to establish the necessary controls to ensure that all identified
risks are monitored and controlled in accordance with agreed
procedures where possible.
The Board of Directors receives periodic updates on principal
risks at their meetings and have adopted their own control review
to ensure that, where possible, risks are monitored appropriately,
mitigation plans are in place, and that emerging risks have been
identified and assessed. The Directors also carry out a regular
check on the completeness of risks identified, including a review
of the risk register. The Board believes that the risk register is
comprehensive and addresses all risks that are currently relevant
to the Company. While the Investment Manager monitors and puts in
place controls to mitigate risks, risk or uncertainty cannot be
eliminated.
The Board identified the Russian invasion of Ukraine as an
emerging risk. In consultation with the Investment Manager,
specific areas of concern were identified and dealt with as
follows:
-- Compliance with sanctions and other restrictions on trade -
all the Group's charter agreements require charter counterparties
to comply with sanctions etc., and such compliance is monitored by
the Investment Manager.
-- Crewing of vessels - working with the technical managers of
each vessel, the Investment Manager closely monitors the impact of
the war on crewing. To date, there have been no war related
incidents on any vessel.
-- Impact on vessel demand and utilisation - none of the Group's
vessels has been adversely impacted by the war, and as explained in
the Investment Manager's Report on page 16
The Board would like to highlight in the following table, the
principal risks (not limited to Covid causes only) to the business
and efforts to mitigate the risks. The Board considers that no
additional mitigation steps are required at this time.
Underlying cause Objective impacted Control or mitigation implemented
of risk or uncertainty (in what way)
Demand for shipping Capital growth This risk cannot be controlled,
may decline, either Vessel values but is mitigated by:
because of a reduction * diversification to reduce reliance on any particular
in international sector or geography;
trade (e.g. "trade
wars") or because
of general GDP growth * focus on fleet vessel quality and specifications to
slowing (e.g. impact improve utilisation;
of the war in Ukraine,
inflation or Covid)
* longer term employment strategy to reduce market
exposure; and
* ultimately, lower charter rates would be accepted in
order to ensure the employment of the vessels.
------------------------- -----------------------------------------------------------------
Failure of, or Liquidity Charter counterparty creditworthiness
unwillingness Dividends is subjected to extensive checks
of, a vessel charterer prior to and throughout a charter.
to meet charter In the event of default, the
payments generic nature of the ships in
the portfolio should enable alternative
employment to be found, though
possibly at lower rates.
------------------------- -----------------------------------------------------------------
Vessel maintenance Capital growth The Company has engaged experienced
or capital expenditure Dividends technical managers to monitor
may be more costly Liquidity maintenance and capital expenditure.
than expected due Vessel values Capex provisions are made prior
to delays, resource to investing in a vessel.
constraints or It is important to note that
inflation whilst the Company's fleet has
generally experienced increases beyond
budgeted costs, such increases
were not so significant as to
undermine the initial investment
decision.
------------------------- -----------------------------------------------------------------
A vessel may be lost Capital growth Measures to mitigate operational
or significantly Vessel values risks include:
damaged * avoiding conflict areas;
* daylight sailing, naval escort, route planning to
avoid higher risk areas; and
* detailed best practice operating procedures to be
followed by crew and technical staff.
Comprehensive insurance protection
is in place at all times to cover
inter alia significant damages
to or loss of vessels.
------------------------- -----------------------------------------------------------------
The Company may not Liquidity The Company has engaged a very
have enforceable Vessel values experienced Investment Manager
title to the vessels who is responsible for establishing
purchased such title.
This is then monitored by the
Administrator on behalf of the
Board using publicly available
information.
------------------------- -----------------------------------------------------------------
Failure of, or Capital Growth The Investment Manager and Asset
unwillingness Loss of invested Manager rely on third party service
of, other cash providers for performance of
non-charterer services integral to the operation
counterparties to of the Company.
meet their obligations
The Asset Manager is constantly
monitoring the performance of
all the Company's key operational
service providers and especially
the technical managers.
SPV operating accounts are held
with one or more unrated banks,
because those banks' systems
are better suited for shipping
company operations. Exposures
to such banks are limited to
US$10m per bank.
Surplus funds are invested with
banks of an A- (or equivalent)
or higher credit rating as determined
by an internationally recognised
rating agency.
Credit ratings, monthly cash
sweeps from SPVs and overall
limits are monitored by the Administrator,
who reports exceptions to the
Board.
------------------------- -----------------------------------------------------------------
Failure of systems Capital Growth This risk cannot be directly
or controls in the Loss of assets, controlled but the Board and
operations of the reputation or its Audit Committee regularly
Investment Manager, regulatory permissions review reports from its Service
Asset Manager or and resulting Providers on their internal controls.
the Administrator fines
and thereby of the
Company
------------------------- -----------------------------------------------------------------
The Company may be Liquidity The Investment Manager arranges
exposed to substantial Vessel value for environmental due diligence
risk of loss from Loss of income, in respect of all vessels considered
environmental claims reputation or for acquisition by the Company
arising in respect regulatory permissions to identify potential sources
of vessels owned and resulting of pollution, contamination or
by its SPVs, in fines environmental hazard for which
particular that vessel may be responsible
if a vessel owned and to assess the status of environmental
by the Company's regulatory compliance.
SPVs were to be
involved The Asset Manager maintains a
in an incident with detailed manual that documents
the potential risk best practice operating procedures
of environmental to be followed by crew and technical
damage, contamination staff. The Asset Manager reviews
or pollution. environmental performance of
key service providers and all
vessels, and reports findings
to the Board on a quarterly basis.
Protection and indemnity mutual
insurance provides cover of up
to US$1 billion per incident
for oil pollution damage compensation.
The Investment Manager is committed
to Responsible Investment and
has identified ESG risk factors
relevant to the industry in its
Responsible Investment Policy.
The Board reviews the policy
and the implementation of the
policy at least annually. Please
see the ESG section of the Investment
Manager's Report for details.
The Company also follows its
own Responsible Investment, Sustainability
and ESG Policy which was implemented
by the Board in July 2021 and
is published on the Company's
website, (www.tuftonoceanicassets.com).
As part of their review of the
Company's operational risks and
controls, which takes place on
at least an annual basis, the
Board of Directors consider ESG
and climate change specific risks
and how these may be mitigated.
This includes receiving regular
reports and updates from the
Investment Manager on the measures
put in place by them to ensure
the Company carries out its activities
in an environmentally sustainable
and responsible manner.
------------------------- -----------------------------------------------------------------
Corporate Summary
The Company is a closed-ended investment company, limited by
shares, registered and incorporated in Guernsey under the Companies
Law on 6 February 2017, with registered number 63061.
The Company is a Registered Closed-ended Collective Investment
Scheme regulated by the GFSC pursuant to the Protection of
Investors (Bailiwick of Guernsey) Law 2020, as amended and the
Registered Closed-ended Investment Scheme Rules 2021.
As at 30 June 2022, the Company has 308,628,541 shares in issue,
all of which are admitted to the Specialist Funds Segment of the
Main Market of the London Stock Exchange under the ticker "SHIP",
ISIN: GG00BDFC1649, and SEDOL: BDFC164. During the financial year ,
the Company issued 38,590,903 shares.
The Company makes its investments through LS Assets Limited and
other underlying SPVs, which are ultimately wholly owned by the
Company. LS Assets Limited is registered and was incorporated in
Guernsey in accordance with the Companies Law on 18 January 2018
with registered number 64562. The underlying SPVs owned by LS
Assets Limited were incorporated in the Isle of Man, in accordance
with the Isle of Man Companies Act 2006 (the "IOM Companies
Act").
The Company controls the investment policy of each of LS Assets
Limited and the wholly owned SPVs to ensure that each will act in a
manner consistent with the investment policy of the Company. The
Company refers to each vessel by the underlying SPV name rather
than the actual name of the respective vessel for confidentiality
purposes.
The Investment Manager is Tufton Investment Management Ltd, a
company incorporated in England and Wales with registered number
1835984, which is regulated by the UK FCA and has been authorised
to act as a Small Registered UK AIFM under the AIFMD. Tufton
Investment Management Ltd has been a specialist investment manager
in the maritime and energy markets since 2000 and has been focused
on financial services to these industries since its inception in
1985.
Corporate Governance Statement
The Board of Tufton Oceanic Assets Limited has considered the
Principles and Provisions of the AIC Code of Corporate Governance
("AIC Code"). The AIC Code addresses the Principles and Provisions
set out in the UK Corporate Governance Code (the UK Code), as well
as setting out additional Provisions on issues that are of specific
relevance to the Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and the Guernsey Financial Services
Commission, provides more relevant information to shareholders. The
company has complied with the Principles and Provisions of the AIC
Code (except as set out below).
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
Areas of exception
Considering that the Board comprises of only four independent
Directors, they have agreed not to appoint a senior independent
director. The Chairman of the Audit Committee fulfils the role of
the senior independent director, which includes the following:
- the support of the Chairman in his role;
- acting as an intermediary for other Directors where necessary;
- being available for Shareholders and other non-executives to
discuss any questions or concerns; and
- assisting with the performance evaluation and succession planning of the Chairman's role.
Due to the Board's size, the Board has not deemed it necessary
to appoint a separate nomination committee and therefore the role
typically undertaken by such committee is currently conducted by
the Board as a whole. The rules governing the appointment and
replacement of Directors are set out in the Company's Articles.
The Directors have overall responsibility for reviewing the
size, structure and skills of the Board and considering whether any
changes are required, or new appointments are necessary to meet the
requirements of the Company's business or to maintain a balanced
Board.
Similarly, due to the Board's size, the Company does not have a
separate remuneration committee as the Board as a whole fulfils the
function of a remuneration committee, which includes the review on
at least an annual basis of the remuneration of the Directors in
accordance with the Company's remuneration policy and market
information.
The Board has additionally formulated the following policies and
procedures to assist them to comply with the AIC Code:
Independence
All the non-executive Directors are currently considered by the
Board to be independent of the Company, Investment Manager and the
Tufton Group and have been Directors for less than six years. The
Board's current policy on tenure, including that of the Chairman,
is that continuity and experience are considered to add
significantly to the strength of the Board, new Directors receive
an induction from the Investment Manager and the Administrator on
joining the Board, and all Directors will receive other relevant
training as necessary on their on-going responsibilities in
relation to the Company.
Environment, Social and Governance
For further details of the Company's approach to ESG matters,
please see the Report of the Directors and the Investment Manager's
Report, together with the Company's Responsible Investment,
Sustainability and ESG Policy which is published on its website,
(www.tuftonoceanicassets.com).
Diversity and Inclusion Policy
The Company supports the AIC Code provision that the Board
should consider the benefits of diversity, when making appointments
and is committed to ensuring it receives information from the
widest range of perspectives and backgrounds. The Board is
committed to creating a diverse and inclusive environment where all
individuals feel respected, and that their voices are heard. The
Board believes that diversity of gender, age, ethnicity and
personal attributes, amongst others, contribute to a balanced and
more productive Board.
The Board is committed to being non-discriminatory and firmly
believes in equal opportunities for all, with board appointments
being made on merit against a set of objective criteria.
However, while the Board agrees diversity should be sought when
making appointments, it does not consider that this can be best
achieved by establishing specific quotas and targets and
appointments are therefore based wholly on merit. Accordingly, when
changes to the Board are required, due regard is given to both the
need for and importance of diversity and to a comparative analysis
of candidates' qualifications and experience.
A pre-established, clear, neutrally formulated and unambiguous
set of criteria are utilised during the appointment process to
determine the most suitable candidate for the specific position
sought. In each case, the Board ensures that candidates are
considered from a wide range of backgrounds.
UK Companies Act 2006 - Section 172 Statement
Whilst directly applicable only to UK domiciled companies, the
intention of the AIC Code which is followed by the Company is that
the following matters set out in section 172 of the UK Companies
Act, 2006 are reported on by all companies, irrespective of
domicile, provided that this does not conflict with local company
law.
Therefore, through adopting the AIC Code, the Board acknowledges
its duty to apply and demonstrate compliance with section 172 of
the UK Companies Act 2006 and to act in a way that promotes the
success of the Company for the benefit of its Shareholders as a
whole, having regard to (amongst other things):
-- the consequences of any decision in the long term;
-- the need to foster business relationships with suppliers, customers and others;
-- the impact of the Company's operations on the community and the environment;
-- the desirability of the Company maintaining a reputation for
high standards of business conduct; and
-- the need to act fairly as between members of the Company.
The Board regularly reviews the Company's principal stakeholders
and how the Company engages with them. Stakeholder voices are
considered at Board level and reflected in board decision making
through reporting provided to the Board by the Brokers and the
Investment Manager, together with engagement with stakeholders
themselves either directly or through the above mentioned
parties.
The Company is an externally managed investment company, has no
employees, and as such is operationally quite simple. The Board
does not believe that the Company has any material stakeholders
other than those set out in the following table.
Investors Service providers Community and environment
Issues that matter to them
Performance of the shares Reputation of the Compliance with Law
Growth of the Company Company and Regulation
Liquidity of the shares Compliance with Law Impact of the Company
and Regulation and its activities on
Remuneration third parties
----------------------------- ---------------------------------
Engagement process
Annual General Meeting The main two service The Company and its
providers - Tufton subsidiaries themselves
Frequent meetings with Investment Management have only a very small
investors by brokers Ltd ("Tufton IML") footprint in their local
and the Investment Manager and Maitland Administration communities and only
and subsequent reports (Guernsey) Limited a very small direct
to the Board. ("MAGL") - engage impact on the environment.
with the Board in
face-to-face meetings
Quarterly factsheets quarterly, giving However, the Board acknowledges
them direct input that it is imperative
Key Information Document to Board discussions. that everyone contributes
to local and global
sustainability and the
Where face to face activities of the Company
contact has not been in this regard are reflected
possible due to the within the Company's
Covid pandemic, engagement Responsible Investment,
has continued via Sustainability and ESG
video conferencing Policy and the Responsible
services such as Microsoft Investment Policy of
Teams. the Investment Manager.
All service providers
are asked to complete
a questionnaire annually
which includes feedback
on their interaction
with the Company,
and the Board ordinarily
undertakes an annual
visit to Tufton in
both London and the
Isle of Man.
Unfortunately, due
to Covid restrictions,
this was not possible
during the year, however
regular communications
between the Investment
Manager and the Board
were maintained via
Microsoft Teams.
----------------------------- ---------------------------------
Rationale and example outcomes
Clearly investors are The Company relies The Board and the Investment
the most important stakeholder on service providers Manager work together
for the Company. Most (including the Investment to ensure that ESG factors
of our engagement with Manager, Asset Manager are carefully considered
investors is about "business and technical managers) and reflected in investment
as usual" matters, but entirely as it has decisions, and that
has also included discussions no systems or employees vessel operators are
about the premium or of its own. influenced positively.
discount of the share See pages 16 to 20 for
price to the NAV. No major decisions details of the Company's
were made by the Board approach in this area.
The major decisions which effected service
arising from this have providers in the year. Board members do travel,
been for the Board to partly to meetings in
seek to ensure long-term The Board always seeks Guernsey, and partly
value and, opportunities to act fairly and elsewhere on Company
to realise value through transparently with business, including
sales of vessels. A all service providers, for the annual due diligence
decision was also made and this includes visits to London and
to issue shares under such aspects as prompt the Isle of Man, travel
the tap facility to payment of invoices. restrictions permitting.
marginally reduce the The Board considers
Company's Total Expense this essential in overseeing
Ratio and improve the service providers and
liquidity of the Company's safeguarding stakeholder
shares. interests. Otherwise,
the Board seeks to minimise
In addition, the Board travel using conference
has focused on the valuation calls whenever good
of vessels, a key priority governance permits.
for Shareholders. As
a result, the Board
placed greater emphasis
on reviewing the output
from the VesselsValue
system used to value
most of the Company's
fleet and the charter
and discount rates used
in valuing the remaining
vessels.
----------------------------- ---------------------------------
Engagement processes are kept under regular review. Investors
and other interested parties are encouraged to contact the Company
via the Company Secretary or SHIP@tuftonoceanicassets.com on these
or any other matters.
Statement of Directors' Responsibilities
The Directors are responsible for preparing an Annual Report and
Annual Financial Statements for each financial year which give a
true and fair view, in accordance with applicable law and
regulations, of the state of affairs of the Company and of the
profit or loss of the Company for that year.
Companies Law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB").
In preparing financial statements the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Company's website is maintained by the Investment Manager.
Legislation in Guernsey governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable them to ensure
that financial statements comply with the Companies Law. The
Directors are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Each of the Directors confirms that, to the best of their
knowledge:
-- they have complied with the above requirements in preparing the financial statements;
-- there is no relevant audit information of which the Company's auditor is unaware;
-- all Directors have taken the necessary steps that they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of said
information;
-- the financial statements, prepared in accordance with IFRS
and applicable laws, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and
-- the Annual Report includes a fair and balanced review of the
development and performance of the business and the financial
position of the Company, together with a description of the
principal risks and uncertainties that it faces.
The AIC Code, as adopted by the Company, also requires Directors
to ensure that Annual Reports and Audited Financial Statements are
fair, balanced and understandable. In order to reach a conclusion
on this matter the Board has requested that the Audit Committee
advises on whether it considers that this Annual Report and Audited
Financial Statements fulfil these requirements. The process by
which the Audit Committee has reached these conclusions is set out
in the Audit Committee Report on pages 59 to 61.
Furthermore, the Board believes that the disclosures set out on
pages 72 to 102 in the Annual Report provide the information
necessary for Shareholders to assess the Company's performance,
business model and strategy.
Having taken into account all matters considered by the Board
and brought to the attention of the Board for the year ended 30
June 2022, as outlined in the Corporate Governance Statement and
the Audit Committee Report, the Board has concluded that the Annual
Report and Audited Financial Statements for the year ended 30 June
2022, taken as a whole, are fair, balanced and understandable and
provide the information required to assess the Company's
performance, business model and strategy.
Report of Directors
The Directors present their Annual Report and the Audited
Financial Statements of the Company for the year ended 30 June
2022.
The Company was registered in Guernsey on 6 February 2017 and is
a registered closed-ended investment scheme under the POI Law. The
Company's shares were listed on the Specialist Funds Segment of the
Main Market of the London Stock Exchange on 20 December 2017 under
the ticker SHIP.
Investment Objective and Policy
The Company's investment objective is to provide investors with
an attractive level of regular and growing income and capital
returns through investing in secondhand commercial sea-going
vessels. The Board monitors the Investment Manager's activities
through strategy meetings and discussions as appropriate. The
Company has established a wholly-owned subsidiary that acts as a
Guernsey holding company for all its investments, LS Assets
Limited, which is governed by the same Directors as the
Company.
All vessels acquired, vessel-related contracts and costs will be
held in SPVs domiciled in the Isle of Man or other jurisdictions
considered appropriate by the Company's advisers. The Company
conducts its business in a manner that results in it qualifying as
an investment entity (as set out in IFRS 10: Consolidated Financial
Statements) for accounting purposes and as a result will apply the
investment entity exemption to consolidation. The Company therefore
reports its financial results on a non-consolidated basis.
Subject to the solvency requirements of the Companies Law, the
Company intends to pay dividends on a quarterly basis. The
Directors expect the dividend to grow, in absolute terms, modestly
over the long term. In July 2021 the Company raised its target
annual dividend to US$0.08 per share (previously US$0.075 per
share).
The Company aims to achieve a NAV Total Return of 12% or above
(net of expenses and fees) on the Issue Price over the long term.
The profit for the Company in the financial year was US$107.3m, or
US$0.362 per share.
Shareholder information
Up to date information regarding the Company, including the
quarterly announcement of NAV, can be found on the Company's
website, which is www.tuftonoceanicassets.com and is maintained by
the Investment Manager.
The Company has a 30 June financial year end.
Share issues
On 6 August 2021, the Company announced the results of its tap
issue of 10,533,763 shares at US$1.18 per tap issue share, which
raised gross proceeds of US$12.4m. On 17 November 2021, the Company
announced the results of its tap issue of 28,057,140 shares at
US$1.39 per tap issue share, which raised gross proceeds of
US$39.0m.
The Directors set the issue price for each of the tap issues,
after their costs, at a premium to the prevailing dividend adjusted
NAV per share prior to each issue respectively.
Results and dividends
The Company's performance during the year is discussed in the
Chairman's Statement pages 2 and 3. The results for the year are
set out in the Statement of Comprehensive Income on page 72.
The Directors of the Company who served during the year and to
date are set out on pages 46 to 48.
Directors' interests
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 June 2022,
and as at the date of signing these Financial Statements:
2022 2021
Shares Shares
------------------- ------- -------
R King 45,000 45,000
------- -------
S Le Page 40,000 40,000
------- -------
P Barnes 5,000 5,000
------- -------
C Rødsaether 20,000 20,000
------- -------
The Directors fees are as disclosed below:
30 June 30 June
2022 2021
Director GBP GBP
-------- --------
R King 36,610 33,610
-------------------- -------- --------
S Le Page 34,000 31,500
-------------------- -------- --------
P Barnes 31,550 29,300
-------------------- -------- --------
C Rødsaether 31,550 24,064
-------------------- -------- --------
Directors' Attendance
Attendance of Directors at each meeting held during the
year:
Director Quarterly Board Audit Committee Ad hoc meetings
meetings
Held Attended Held Attended Held Attended
------ ---------- ------ ---------- ------ ----------
R King 4 4 0 0 20 18
------ ---------- ------ ---------- ------ ----------
S Le Page 4 4 1 1 20 20
------ ---------- ------ ---------- ------ ----------
P Barnes 4 4 1 1 20 19
------ ---------- ------ ---------- ------ ----------
C Rødsaether 4 4 1 1 20 17
------ ---------- ------ ---------- ------ ----------
Other Interests
Tufton Investment Management Holding Limited Group ("Tufton
Group") shareholders, employees, non - executive directors and
former shareholders held the following interests in the share
capital of the Company either directly or beneficially.
As at 30 June 2022
% of issued
Name Ordinary Shares Share Capital
Tufton Group Shareholders 5,375,133 1.74
Tufton Group Staff 466,261 0.15
Tufton Group Non-Executive
Directors 403,279 0.13
Former Tufton Group Shareholders 3,041,740 0.99
As at 30 June 2021
% of issued
Name Ordinary Shares Share Capital
Tufton Group Shareholders 4,474,786 1.66
Tufton Group Staff 374,668 0.14
Tufton Group Non-Executive
Directors 403,279 0.15
Former Tufton Group Shareholders 2,758,168 1.02
The Company has a Share Buyback and Discount Management Policy
in place, which has been formally approved and adopted by the Board
of Directors.
The Board of Directors (the "Board") will consider repurchasing
the Company's Ordinary shares in the market if they believe it to
be in Shareholders' interests as a whole and as a means of
correcting any imbalance between supply of and demand for the
shares.
Share buyback and discount management
Subject to working capital requirements, and at the absolute
discretion of the Board, excess cash may be used to repurchase
shares should the Company's shares close at a, or more than a, 10%
average discount to NAV for a period of 90 consecutive days. The
Directors may implement share buyback at any time before the 90-day
guideline where they feel it is in the best interests of the
Company and all Shareholders.
The Administrator, Maitland Administration (Guernsey) Limited
("Maitland"), is responsible for tracking the discount/premium of
the share price to NAV and presents the information to the Board on
an as-needed basis.
The Companies (Guernsey) Law, 2008 (the "Law") allows companies
to hold shares acquired by way of market purchase as treasury
shares, rather than having to cancel them.
These treasury shares may be subsequently cancelled or sold for
cash. Therefore, it is agreed that any shares repurchased pursuant
to the general authority referred to above may be held by the
Company in treasury, to the extent permitted by Law.
The Company wishes to operate a buyback programme that is
effective and also adds value for Shareholders. As such, unless
authorised by Shareholders, no shares will be sold from treasury at
a price less than the NAV per share at the time of the sale unless
they are first offered pro rata to existing Shareholders.
Share Buyback Programme Terms and Conditions
-- the maximum number of shares authorised to be purchased shall
be 14.99 per cent. of the shares in issue;
-- the minimum price which may be paid for a share is US$0.01;
-- the maximum price which may be paid for a share shall be the higher of:
o an amount equal to 105 per cent. of the average of the middle
market quotations of a share (as taken from the Daily Official List
of the London Stock Exchange) for the five business days prior to
the date the purchase is made; and
o the higher of:
a) the price of the last independent trade; and
b) the highest current independent bid for shares on the London
Stock Exchange at the time the purchase is carried out.
-- the minimum number of shares authorised to be purchased in a
single day shall be 50,000, unless otherwise agreed by the
Board;
-- this authority shall expire on the conclusion of the next
annual general meeting of the Company or if earlier, eighteen
months from the date of passing of the resolution, save that the
Directors shall be entitled to make offers or agreements before the
expiry of such power which would or might require the purchase of
shares after such expiry pursuant to any such offer or agreement as
if the power conferred by the resolution had not expired;
-- pursuant to Article 4.6 of the Company's Articles of
Incorporation, the Company may hold any of the shares purchased
pursuant to the authority conferred by paragraph 2.6.4 as treasury
shares;
-- the Company may sell the shares back to the market from
treasury at the discretion of the Directors. This may only be done
in the event that the shares are trading at a premium to the
prevailing NAV per share;
-- the Company may not sell shares back from treasury during a
closed dealing period, as defined in the Company's Share Dealing
Policy;
-- for the avoidance of doubt, sales from treasury may only be
authorised by the Directors if the amount to be received by the
Company for the shares is at least the prevailing NAV per share,
exclusive of commissions and dealing costs. Shares may not be sold
for more than a 10% discount to market value; and
-- the minimum number of shares authorised to be sold from
treasury in a single day shall be 100,000, unless otherwise agreed
by the Board.
Buybacks are conducted by Singer Capital Markets on the
Company's behalf, on the instruction of the Board of Directors or a
duly authorised committee thereof. Prior to giving such
instruction, the Board or a duly authorised committee of the Board
shall meet and give due consideration to the Solvency of the
Company to the extent provided by Law, and a duly authorised
representative of the Board or such Committee shall sign a solvency
certificate in respect of each buyback instructed. For the
avoidance of doubt, no buyback may be performed during a period
whereby the Company does not meet the statutory solvency test.
Singer Capital Markets also conduct sales of the shares from
treasury on behalf of the Company, on the instruction of the Board
of Directors or a duly authorised committee thereof. Following the
completion of a sale, an RNS announcement will be released by the
Company to the market, which shall include the restated amount of
voting rights.
The buyback programme may be suspended around key market
announcements and during times where market price calculations are
being made, or at any other time where the Board considers this to
be appropriate.
The purchase of shares by the Company is at the absolute
discretion of the Directors and is subject to the working capital
requirements of the Company and the amount of cash available to the
Company to fund such purchases. Accordingly, no expectation or
reliance should be placed on the Directors exercising such
discretion on any one or more occasions.
Board Responsibilities and Corporate Governance
Please note the Corporate Governance Statement on pages 35 to 39
forms part of this report.
Board Members
The Company's Board of Directors comprises four independent
non-executive Directors. The Board's role is to manage and monitor
the Company in accordance with its objectives. The Board monitors
the Company's adherence to its investment policy, its operational
and financial performance and its underlying assets, as well as the
performance of the Investment Manager and other key service
providers. In addition, the Board has overall responsibility for
the review and approval of the Company's NAV calculations and
financial statements. It also maintains the Company's risk
register, which it monitors and updates on a regular basis.
The Directors of the Company who served during the year are
listed below.
Robert King, Chairman
Rob serves on a number of boards as an independent non-executive
director which includes one AIM listed fund, Weiss Korea
Opportunities Fund Limited (Rob will retire with effect from 30
September 2022), and an International Stock Exchange listed fund,
Golden Prospect Precious Metals Limited (which also has a trading
listing on the LSE). Before becoming an independent non-executive
director in 2011 he was a director of Cannon Asset Management
Limited and their associated companies.
Prior to this he was a director of Northern Trust International
Fund Administration Services (Guernsey) Limited (formerly Guernsey
International Fund Managers Limited) where he had worked from 1990
to 2007. He has been in the offshore finance industry since 1986
specialising in administration and structuring of offshore open and
closed ended investment funds. Rob is British and resident in
Guernsey.
Stephen Le Page, Chairman of Audit Committee
A chartered accountant and chartered tax adviser. He was a
partner in PricewaterhouseCoopers CI LLP in the Channel Islands
from 1994 until his retirement in September 2013. He led that
firm's audit and advisory businesses for approximately ten years
and for five of those years was the Senior Partner (equivalent to
Executive Chairman) for the Channel Islands firm.
Stephen serves on a number of boards as a non-executive
director, including acting as chairman of the audit committee for
four London listed funds, Highbridge Tactical Credit Fund Limited
(which is winding down), Volta Finance Limited, Amedeo Air Four
Plus Limited and Princess Private Equity Holding Limited and one
International Stock Exchange listed company, Channel Islands
Property Fund Limited. Stephen is British and resident in
Guernsey.
Paul Barnes
An investment banker experienced in asset backed, structured and
project financing with wide geographic exposure including Asia,
Central/Eastern Europe, North and Latin America and Scandinavia.
Paul was managing director at BNP Paribas and co-head of its EMEA
Shipping and Offshore business between 2010 and 2015. He was also
head of risk monitoring for Global Shipping at BNP Paribas.
Prior to that, Paul had served as head of shipping (London) at
Fortis Bank, head of specialised industries at Nomura International
and as a corporate finance director of Barclays Bank and as a
director of its Shipping Industry Unit. Paul Barnes is British and
resident in the United Kingdom.
Christine Rødsaether
Christine is a partner in law firm Simonsen Vogt Wiig, with more
than 30 years' experience working in the international shipping
sector and offshore related transactions, design, vessel
construction, offshore installations, restructurings, international
banking and finance. Previously, she was a partner in Andersen
Legal ANS and a lawyer at Wikborg, Rein & Co. Christine has
extensive board experience, and currently serves on the boards of
OSE listed Odfjell SE and Euronext Growth (Oslo) listed Gram Car
Carriers ASA. Christine is Norwegian and is resident in Norway.
Conflicts of Interest
None of the Directors nor any persons connected with them had a
material interest in any of the Company's transactions,
arrangements or agreements at the date of this report and none of
the Directors has or had any interest in any transaction which is
or was unusual in its nature or conditions or significant to the
business of the Company, and which was effected by the Company
during the year. At the date of this Report, there are no
outstanding loans or guarantees between the Company and any
Director.
Share Dealing Code
The Company has adopted a share dealing code, in conformity with
the requirements of the Listing Rules and the EU Market Abuse
Regulation and takes steps to ensure compliance by the Board and
relevant senior staff with the terms of the policy.
Appointment, re-election and remuneration of Directors
As stated within the Corporate Governance Statement, due to the
Board's size, the Board has not deemed it necessary to appoint a
separate nomination committee and therefore the role typically
undertaken by such committee is currently conducted by the Board as
a whole. The rules governing the appointment and replacement of
Directors are set out in the Company's Articles. The Directors have
overall responsibility for reviewing the size, structure and skills
of the Board and considering whether any changes are required, or
new appointments are necessary to meet the requirements of the
Company's business or to maintain a balanced Board.
This is formally considered annually at the time of the Board,
Chairman and Directors' annual performance appraisals.
When considering new appointments in the future, the Board will
ensure that a diverse group of candidates is considered and that
appointments are made against objective criteria, in accordance
with the Company's Diversity & Inclusion Policy. An external
search consultancy is used to help identify candidates for Board
appointments. This consultancy is unconnected with the Company or
any of the Directors. The Board have been briefed by their legal
advisers about their on-going responsibilities as directors and
newly appointed directors will be invited to participate in a
formal induction process.
The Articles require that at each annual general meeting, all
the Directors will submit themselves for re-election. The Company
does not have a separate remuneration committee as the Board as a
whole fulfils the function of a remuneration committee, which
includes the review on at least an annual basis of the remuneration
of the Directors in accordance with the Company's remuneration
policy and market information.
The Company's policy is for Directors to be remunerated in the
form of fees which are paid quarterly in arrears. No element of the
Directors' remuneration is performance related, and no Director is
involved in setting his or her own remuneration.
Fees payable to the Directors should reflect the time spent by
the Board on the Company's affairs and the responsibilities borne
by the Board and should be sufficient to enable high calibre
candidates to be recruited to the Board, ultimately contributing to
the composition of the Board that is balanced and effectively
discharges stewardship of the Company's affairs.
Annual performance appraisal
The performance of the Board, committees and individual
Directors have been formal and rigorously evaluated by a
self-assessment process coordinated by the Administrator who
circulates the findings to the Board. This evaluation is performed
annually and the Chairman considers having an annual, regular,
externally facilitated board evaluation. The last evaluation took
place in October 2021 with the next annual review taking place in
October 2022. Evaluation of the Chairman is led by the Chairman of
the Audit Committee, who carries out the functions of a senior
independent director.
Audit Committee
The Board will delegate certain responsibilities and functions
to the Audit Committee. Stephen Le Page is the chairman of the
Company's Audit Committee which also includes Paul Barnes and
Christine Rødsaether. In discharging its responsibilities, the
Audit Committee will review the annual and half yearly financial
statements, the risks to which the Company is subject, the system
of internal controls, and the terms of appointment and remuneration
of the Independent Auditor. It is also the forum through which the
auditor reports to the Board. The Audit Committee is expected to
meet at least twice a year.
The objectivity of the Independent Auditor will be reviewed by
the Audit Committee, which will also review the terms under which
the Independent Auditor is appointed to perform non-audit services.
The Audit Committee will review the scope and results of the audit,
its cost effectiveness and the independence and objectivity of the
auditor, with particular regard to non-audit services and fees.
The members of the Audit Committee consider that they
collectively have the requisite skills and experience to fulfil the
responsibilities of the audit committee. Given Mr Le Page's skills
and financial experience, the Board has satisfied itself that at
least one member of the Audit Committee has recent and relevant
financial experience.
Other Committees
The Company has recently formed a Management Engagement
Committee chaired by Paul Barnes, which will hold its inaugural
meeting in Q3-Q4 2022.
During the year, the Board has reviewed the contractual
relationship with and the performance of all the service providers
to the Company, and in particular the Investment Manager. As part
of the review process, the Board concluded that service providers
are performing in accordance with the Company's expectations and
contractual arrangements, and that their continued appointment is
in the best interests of Shareholders.
Operation of the Board
It is the responsibility of the Board to ensure that there is
effective stewardship of the Company's affairs. A formal schedule
of matters reserved for decision of the Board has been adopted.
This includes the following items:
-- changes to the structure, size and composition of the Board,
-- the appointment of directors to specified offices of the
Board, including the Chairman and senior independent director,
-- board succession planning, training, development and evaluation,
-- overall leadership of the Company and setting the values and standards, and
-- on-going review of the Company's Investment strategy,
investment objectives and investment policy.
The Board and Investment Manager work closely together, with the
Investment Manager attending and presenting at quarterly Board
meetings. At each of these meetings the Board assess, discuss and
challenge the Investment Manager's performance in terms of
investment performance, risk and the management and impact of
operational issues within the portfolio. During the current period,
the Board have not identified any issues with the Investment
Manager's performance.
The Board meet at least quarterly to review the overall business
of the Company and to consider the matters specifically reserved
for it. The quorum at Directors' meetings is two Directors present
in person or by telephone and they are held in Guernsey.
Detailed information is provided by the Investment Manager,
Asset Manager and Administrator for these meetings and additionally
at regular intervals to enable the Directors to monitor compliance
with the investment objective and the investment performance of the
Company both in an absolute and relative sense. Overall Company
strategy is discussed in detail at quarterly meetings of the Board
of Directors and at ad hoc board meetings when required. Directors
also have the opportunity to discuss these and any other matters
with the Investment Manager outside of the Board of Directors
meetings as appropriate.
The Directors are provided with standard papers in advance of
each quarterly meeting to allow the review of several key areas
including the Company's investment activity over the quarter
relative to its investment policy; the global shipping industry;
the revenue and financial position; gearing, performance; share
price discount or premium (both absolute levels and volatility);
and relevant industry and macro-economic issues.
The Board also receive quarterly reports analysing and
commenting on the composition of the Company's share register and
monitoring significant changes to Shareholdings.
Independent Auditor
The Audit Committee is responsible for overseeing the Company's
relationship with the Independent Auditor, including making
recommendations to the Board on the appointment of the Independent
Auditor and their remuneration. PricewaterhouseCoopers CI LLP
("PwC") was originally appointed as the Company's Independent
Auditor on 20 December 2017.
The auditor, PwC, has indicated its willingness to remain in
office. A resolution for the reappointment of PwC was proposed and
approved at the AGM on 20 October 2021. Another resolution for
their appointment will be proposed at the AGM on 27 October
2022.
Service Providers
The Investment Manager / Alternative Investment Fund Manager
("AIFM")
Tufton Investment Management Ltd, a specialist investment
manager in the maritime and energy markets since 2000, has been
appointed as the Investment Manager. Since its inception in 1985,
the Investment Manager has been focused on financial services to
these industries.
As of 30 June 2022, the Investment Manager manages investments
of c.US$1.1 billion.
Whilst the Board has responsibility for all the strategic
decision making (including acquisitions, disposals, financing,
capital expenditure, charters and other material contracts)
required by the Company, matters concerning the day-to-day
operation of the vessels, (within the approved budgets and
parameters set by the Board for the Company and the SPVs) are
delegated to the Investment Manager.
As of 30 June 2022, the Tufton Group of which the Investment
Manager is part, had 30 employees operating from offices in London,
Isle of Man and Cyprus. The Investment Manager is fully dedicated
to the shipping industry with an in-house research team and
dedicated Asset Manager providing services to each vessel
purchased. As described in the Prospectus, the Investment Manager
has an established track record in managing segregated mandates for
pension funds with similar investment objectives to those of the
Company.
The Investment Manager's employees have significant experience
of investing and financing in the shipping industry. Each member of
their Investment Committee has between 20 and 40 years of
experience in the maritime financial markets either from investment
banking, commercial banking or from the vessel owning/operating
perspective.
The Investment Manager's role encompasses the identification of
appropriate acquisition opportunities, conducting necessary due
diligence, making recommendations to the Board and completing the
proposed investments on behalf of the Company. The Investment
Manager (in conjunction with the Asset Manager) will also monitor
the performance of the Company's portfolio. The Investment Manager,
which acts as the Company's AIFM under the Alternative Investment
Fund Managers Directive ("AIFMD"), is authorised and regulated by
the UK FCA.
Investment Committee
The Investment Manager has established an Investment
Committee.
Each investment proposal is reviewed by the Investment Committee
which meets on a weekly basis. These weekly meetings continued via
teleconference during the Covid pandemic. In reviewing each
potential investment, the Investment Committee will consider a
range of factors including a detailed analysis of the vessel's
technical condition and other analyses from the Asset Manager, a
full risk/reward analysis, downside stress testing,
commercial/employment strategy, effects of adding moderate leverage
in accordance with Company policy, market outlook, credit quality
of charterer, market reputation of counterparties, deal modelling,
exit strategy and any macro analysis that might be necessary to
fully understand the investment. The Investment Manager is
committed to Responsible Investment and integrates ESG factors into
its investment process. The Investment Manager reviews the
environmental footprint of new vessel acquisitions as well as KPIs
of technical managers on safety and fulfilling regulatory
requirements. Should the Investment Committee be in favour of an
acquisition, an appropriate recommendation will be made to the
Board who would ultimately determine whether an acquisition should
be made.
Asset Manager
Tufton Management Limited was established in 2009 to act as the
Asset Manager for vessels owned by funds and vehicles managed or
advised by Tufton Group.
The Asset Manager subcontracts technical services from
associated company Tufton Asset Management Limited, based in
Cyprus, which employs professionals who have experience in all
aspects of ship management including special surveys, maintenance,
repair and negotiation of commercial agreements for vessel
employment and provides the services detailed in the
Prospectus.
The Asset Manager enters into an asset management agreement with
each SPV and with effect from 1 July 2022 receives a fee of US$200
per vessel per day.
Administrator and Secretary
Maitland Administration (Guernsey) Limited ("Maitland") has been
appointed as administrator and secretary to the Company, pursuant
to the Administration Agreement dated 27 February 2017 and to LS
Assets Limited, pursuant to the Administration Agreement dated 20
April 2018. Maitland was incorporated with limited liability in
Guernsey on 20 January 2010 and is licensed by the Guernsey
Financial Services Commission under the Protection of Investors
(POI) Law.
The Administrator forms part of the Maitland group established
in Luxembourg in 1976. Maitland is a global advisory,
administration and family office firm providing legal, fiduciary
investment and fund administration services to private, corporate
and institutional clients. The group employs over 780 staff in 11
offices across 8 jurisdictions and collectively administers in
excess of US$160bn in assets.
The Administrator provides day-to-day administration services to
the Company and is also responsible for the Company's general
administrative and secretarial functions such as the calculation of
the NAV, compliance with the Code and maintenance of the Company's
accounting and statutory records.
Registrar
Computershare Investor Services (Guernsey) Limited was appointed
as registrar to the Company pursuant to the Registrar Agreement
dated 27 February 2017. In such capacity, the Registrar is
responsible for the transfer and settlement of shares held in
certificated and uncertificated form. The Register may be inspected
at the office of the Registrar.
Receiving Agent
Computershare Investor Services PLC was appointed as receiving
agent to the Company for the purposes of the Offer for Subscription
pursuant to the Receiving Agent Agreement dated 27 February
2017.
Disclosure Obligations
Shareholders are obliged to comply, from Admission, with the
shareholding notification and disclosure requirements set out in
Chapter 5 of the Disclosure Guidance and Transparency Rules. The
Administrator will monitor disclosure with reference to changes in
shareholdings.
Annual Report and Financial Statements
The Board of Directors is responsible for preparing the Annual
Report and Financial Statements. The Audit Committee advises the
Board on the form and content of the Annual Report and Financial
Statements, any issues which may arise and any specific areas which
require judgement.
Anti-bribery and corruption
The Board acknowledges that the Company's international
operations may give rise to possible claims of bribery and
corruption. In consideration of the UK Bribery Act the Board
reviews the perceived risks to the Company arising from bribery and
corruption to identify aspects of the business which may be
improved to mitigate such risks.
The Board has adopted a zero-tolerance policy towards both
bribery and corruption and has reiterated its commitment to carry
out business fairly, honestly and openly.
In respect of the UK Criminal Finances Act 2017 which introduced
a Corporate Criminal Offence of 'failing to take reasonable steps
to prevent the facilitation of tax evasion', the Board confirms
that it is committed to zero tolerance towards the criminal
facilitation of tax evasion.
Modern slavery
The Company, through its Investment Manager seeks to ensure that
all charter counterparties have policies and procedures which
prevent any possibility of slavery or similar issues on the vessels
comprising the fleet. The Investment Manager has such policies and
procedures in its own right which govern the ship management
contracts used to appoint technical managers.
General Data Protection Regulation ("GDPR")
The Board, through enquiry of its service providers, has ensured
that the requirements of GDPR and its equivalent legislation in the
UK and Guernsey, are met by them when they process any data on
behalf of the Company.
Alternative Investment Fund Managers Directive ("AIFMD")
The Investment Manager, Tufton Investment Management Ltd, has
been authorised by the UK FCA as a Small Registered UK AIFM under
the AIFMD. The funds managed by the AIFM, including the Company,
are now defined as Alternative Investment Funds and are subject to
the relevant articles of the AIFMD.
The Company notes that while AIFMD no longer binds the UK in its
implementation, a domestic regime has been put in place regulating
the management and marketing of AIFs in the UK, which generally
maintains the AIFMD rules as implemented at the end of the
transition period with respect to the UK's departure from the
European Union on 31 December 2020.
Internal control and financial reporting
The Board is responsible for establishing and maintaining the
system of internal controls required by the Company's operations.
These internal controls are undertaken by the service providers.
Internal control systems are designed to meet the specific needs of
the Company and the risks to which it is exposed, and, by their
very nature, provide reasonable, but not absolute, assurance
against material misstatement or loss.
The key procedures which have been established to provide
effective internal controls include:
-- Maitland Administration (Guernsey) Limited ("Maitland") is
responsible for the provision of administration, accounting and
company secretarial duties. Maitland also provides compliance
oversight in respect of the Company and its activities. As the
Company itself has no IT systems and relies on the IT systems of
its service providers, Maitland additionally has a role in cyber
security and the protection of the Company's data through the
operation of Information Security Protection Controls. Maitland
staff are also regularly trained in order to minimise the risk of
an accidental data breach;
-- Tufton Investment Management Ltd is the Investment Manager
and provides portfolio management and risk management services to
the Company. They are also the AIFM for the purposes of the
AIFMD;
-- Tufton Management Limited, an affiliate of the Investment
Manager, provides Asset Management services to each underlying
SPV;
-- Tufton Corporate Services, an affiliate of the Investment
Manager, provides administration, accounting and company
secretarial services for the SPVs;
-- Computershare Investor Services (Guernsey) Limited is
responsible for the provision of Registrar services;
-- the Board clearly defines the duties and responsibilities of
the Company's agents and advisers in the terms of their
contracts;
-- the Board receives assurances from the Company's agents and
advisers that any amendments required as a result of regulatory
change, are actioned accurately and promptly; and
-- the Board reviews financial information and compliance
reports produced by the Administrator on a regular basis.
The Board and Audit Committee have reviewed the Company's risk
management and internal control systems and believe that the
controls are satisfactory, given the size and nature of the
Company.
Responsible Investment, Sustainability and ESG Policy
The Company published its Responsible Investment, Sustainability
and ESG Policy (the "Policy"), in July 2021, a copy of which is
available on the Company's website (www.tuftonoceanicassets.com
).
The Policy sets out the combined approach of the Investment
Manager and the Company to the integration of sustainability risks
and responsible investment principles in its investment decision
making and asset ownership practices. The Policy seeks to align the
Company's strategy with best practices and market standards in all
ESG and Responsible Investment matters.
The Company believes upholding high standards of ESG and
responsible investment principles and practices are an essential
tool for managing the risks presented by challenges such as climate
change, social inequality and human rights issues, delivering
long-term value and positive returns for the Company's Shareholders
as part of the Company's investment objectives, and ensuring the
continued sustainability of shipping as a whole.
The Policy includes further details on the Company's approach to
diversity and inclusion, stakeholder engagement, modern slavery,
human rights and anti-bribery practices, together with how the
activities of the Company are aligned with recognised ESG standards
such as the UN's Sustainable Development Goals.
In accordance with the Policy, the Directors have requested that
the Investment Manager take into account the broader social,
ethical and environmental issues of the vessels within the
Company's portfolio, acknowledging that companies failing to manage
these issues adequately run a long-term risk to the sustainability
of their businesses and that this reflects stakeholders' views.
More specifically, the Board expect companies to demonstrate
ethical conduct, effective management of their stakeholder
relationships, responsible management and mitigation of social and
environmental impacts, as well as due regard for wider societal
issues.
The Directors along with the Investment Manager, recognise the
value of integrating principles of Responsible Investment into the
investment management process and ownership practices in the belief
that this can have an impact on long-term financial performance.
The Investment Manager's Report has further information on how the
Investment Manager practically implements and considers the Policy
when making investment decisions.
Going concern
In assessing the going concern basis of accounting the Directors
have, together with discussions and analysis provided by Tufton,
had regard to the guidance issued by the Financial Reporting
Council. They have considered recent market volatility, the Russian
invasion of Ukraine, and the continued impact of the Covid virus on
the current and future operations of the Company and its
investments (as set out in more detail in the Principal Risks and
Uncertainties section). Cash reserves are held at the LS Assets
Limited ("LSA") and SPV levels and rolled up to the Company as
required to enable expenses to be settled as they fall due.
Based on these activities and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
Financial Statements. For this reason, they continue to adopt the
going concern basis in preparing the Financial Statements. Please
also refer to the Viability statement.
Viability statement
The Board, in assessing the long-term viability of the Company,
has paid particular attention to the Principal Risks and
Uncertainties faced by the Company as disclosed on pages 30 to 33
of these financial statements. The Board has taken into account the
cashflow-weighted average length of its charters which is expected
in normal circumstances to be in excess of three years. The Company
is also required to hold a continuation vote at the AGM to be held
in 2024. Notwithstanding this, the Board have determined that a
three-year viability period is the most appropriate for viability
testing. In addition, the Board has considered the cash flow
projection for the running costs of the Company to ensure the
Company retains sufficient cash to meet its operating costs until
the end of the viability period and is therefore able to sustain
its business model and structure, including the payment of
dividends at the announced level. The Board has also considered the
cash flow projections for the Company and its subsidiaries in two
market stress scenarios.
The Board has considered the results of a viability test wherein
the primary sensitivity of an extended period of market stress
results in time charter rates staying below the historic median
levels over the entire three-year forecast period along with
significant void periods modelled between charters.
The most extreme scenario modelled resulted in cash balances
being exhausted, but in the very remote event of such a cash
shortage arising this would be addressed through one or all of the
following significant actions: the sale of a vessel, the deferral
of discretionary capital expenditure, or if unavoidable, the
deferral of any dividend payment.
The Directors believe their assessment of the viability of the
Company over the relevant period is sufficiently robust and
encompassed the risks which could threaten the business model,
future performance, solvency or liquidity of the Company
considering a variety of severe but plausible scenarios. These
scenarios allow for considerable idle time in the fleet,
consistently low charter rates and even charter default. The
Directors have also assumed that given the Company's recent level
of performance, it is reasonable to assume that the continuation
vote will be passed. As a result, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due during the viability
period.
Continuation Vote
In accordance with the prospectus published 25 September 2018,
the Directors will propose an ordinary resolution at the annual
general meeting to be held in 2024 that the Company continues its
business (a "Continuation Resolution"). If this Continuation
Resolution is passed, then the Directors shall every three years
thereafter at the annual general meeting held following the
publication of the audited accounts propose a further Continuation
Resolution.
Shareholders' significant interests
The following Shareholders had notified to the Company a
substantial interest of 5% or more of the issued share capital as
at 30 June 2022.
% of issued share
capital
East Riding Pension Fund 10.20
South Yorkshire Pensions Authority 9.35
Schroder Investment Management 7.97
West Yorkshire Pension Fund 7.63
Raymond James Investment Services 5.71
FIL Investment International 5.28
The Directors place a great deal of importance on communication
with Shareholders. They request regular updates from the Company's
Brokers and financial advisers on their communications with
Shareholders. They can also be contacted via the email address
provided in the Chairman's Statement.
The Annual Report and Audited Financial Statements are also
distributed to other parties who have an interest in the Company's
performance. Additional information on the Company can be obtained
through the website www.tuftonoceanicassets.com , which is
maintained by the Investment Manager.
The Notice of the Annual General Meeting is included within the
Annual Report and Audited Financial Statements and is sent out at
least 20 working days in advance of the meeting, in accordance with
the AIC Code. All Shareholders have the opportunity to put
questions to the Board or the Investment Manager formally at the
Company's Annual General Meeting.
The Company Secretary and Investment Manager are available to
answer general shareholder queries at any time throughout the year.
The Company can be contacted via the Company Secretary or
SHIP@tuftonoceanicassets.com .
The Company confirms that there is no information that is
required to be disclosed under Listing Rule 9.8.4.
Approved by the Board of Directors on 23 September 2022 and
signed on behalf of the Board by:
Audit Committee Report
Chairman's introduction
I am pleased to present to you the Audit Committee report
prepared in accordance with the current AIC Code, which reflects
the UK Corporate Governance Code to the extent that it is
applicable to investment companies.
The terms of reference for the committee are available on the
Company's website, www.tuftonoceanicassets.com . During the year
ended 30 June 2022 and to the date of this report, the main areas
of activity have been as follows:
-- reviewing and assessing the Principal Risks and Uncertainties
(as set out on pages 30 to 33), including the continued impact of
the Covid pandemic and the emerging impact of the Russian invasion
of Ukraine on the activities and assets of the Company;
-- reviewing the accounting policies for the Company to ensure
they remain appropriate for the preparation of the Company's Annual
Report and Audited Financial Statements;
-- reconsidering the areas of judgment or estimation arising
from the application of International Financial Reporting Standards
to the Company's activities and the documentation of the rationale
for the decisions made and estimation techniques selected, to
ensure they remain appropriate;
-- meeting with the Independent Auditor, PwC, to review and
discuss their independence, objectivity and proposed scope of work
for their audit of this Annual Report;
-- meeting with the Company's principal service providers to
review the controls and procedures operated by them to ensure that
the Company's risks are properly managed and that its financial
reporting is complete, accurate and reliable; and
-- reviewing in detail the content of this Annual Report, the
work of the service providers in producing it and the results of
the external audit.
Membership and Role of the Committee
The membership of the Audit Committee (the "Committee") is set
out on page 49 and details about the responsibilities of the
Committee are available in the terms of reference on the
website.
The Committee discharges its responsibilities through a series
of scheduled meetings, the agendas of which are linked to events in
the financial calendar of the Company. The Committee met three
times during the year ended 30 June 2022 and twice more since the
year end. The Independent Auditors attended three of these five
meetings.
Internal control
The Board reviews the internal controls of the Company's Service
Providers, who are required to establish and maintain appropriate
systems of internal control, by reviewing regular reports from the
Service Providers. The Board also ensures segregation of duties
between the Service Providers.
In addition, the Board seeks to make visits to certain service
providers periodically to assess their organisation and culture and
to meet the individuals responsible for key functions. As a result
of travel restrictions resulting from the global Covid pandemic,
these visits have been replaced by video conferences with key
personnel. The Committee, and particularly the Chairman of the
Committee, also closely monitors the financial reporting process
and the tasks undertaken in the production of the Annual
Report.
This has involved discussions with the Administrator of the
Company, the administrator of the Isle of Man SPVs, the Investment
Manager and VesselsValue, (the supplier of the information
underlying the valuation of most of the vessels held by the
Company).
Review of accounting policies and areas for judgment or
estimation
These financial statements reflect the application of the
accounting policies and estimation techniques originally set out in
the Company's Prospectus for its IPO in December 2017. The Audit
Committee confirms that they are still considered to be
appropriate.
In particular, the following significant issues that the Audit
Committee considered relating to the financial statements:
-- the application of IFRS 10 - Consolidated Financial
Statements ("IFRS 10") to the Company, on page 78;
-- the detailed approach to arriving at the estimate of fair
value for each vessel, SPV and the Guernsey Holding Company,
LSA;
-- the determination of the Company's Viability and the
applicability of the Going Concern assumption, on pages 56 and
57.
These financial statements reflect the outcome of those
discussions. In addition, the Independent Auditor's proposed scope
of work in connection with these areas and the statements in
general was agreed.
Fair value estimation
The majority of the NAV of the Company is derived from the fair
value of the vessels owned by the Company's indirect SPV
subsidiaries, which are themselves held by the Company's
subsidiary, LSA. The Company has chosen to use the value provided
by VesselsValue as its best estimate of fair value for the majority
of its fleet. Exact details of the valuation techniques applied to
the vessels and of how the Company's NAV is derived is given in
Note 12 to these financial statements.
The Committee has paid particular regard to evaluating these
techniques to ensure they are reasonably accurate, reliable and
appropriate. The sensitivity of these valuations to various input
assumptions is given in Note 12, to enable readers of these
financial statements to make their own assessment of the carrying
values.
The Committee is satisfied that these techniques are reasonable
and appropriate for use in the preparation of these financial
statements.
Performance fee
Per the terms of the management agreement, the Company accrues
performance fees based on the size of the investment and the
continued performance throughout the financial year. The accrual at
year end is US$3,980,432 (2021: US$ nil). The Board reviews and
approves the calculation.
External Audit
During the year ended 30 June 2022, and up to the date of this
report, the Committee held formal meetings with the Independent
Auditor on thee occasions, and in addition the Chair of the
Committee has spoken to them informally on several occasions. These
informal conversations have been held to ensure the Chairman is
kept up to date with the progress of the audit work, and that the
Independent Auditor's formal reporting meets the Committee's
needs.
The formal meetings included detailed reviews of the proposed
fees and scope of the work to be performed by PwC in their audit
for the year ended 30 June 2022. They also included detailed
reviews of the results of this work, and the audit findings and
observations. I am pleased to report that there are no matters
arising from the Independent Auditor's work which should be brought
to the attention of Shareholders.
The Committee has also reviewed PwC's report on PwC's own
independence and objectivity, including the level of non-audit
services provided by them. There were no non-audit services carried
out during the year.
The Committee has therefore concluded that PwC is independent
and objective, carries out its work to a high standard, and
provides concise but useful reporting. The Committee also notes
that PwC were appointed to office less than five years ago.
Accordingly, the Committee has recommended to the Board that PwC be
put forward to the AGM of the Company for re-election.
Annual Report
The Committee members have each reviewed this Annual Report and
earlier drafts of it in detail, comparing its content with their
own knowledge of the Company, reporting requirements and
shareholder expectations. Formal meetings of the Committee have
also reviewed the report and its content and have received reports
and explanations from the Company's service providers about the
content and the financial results.
The Committee has concluded that the Annual Report, taken as a
whole, is fair, balanced and understandable, and that the Board can
reasonably and with justification make the Statement of Directors'
Responsibilities on pages 40 to 41.
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements give a true and fair
view of the financial position of Tufton Oceanic Assets Limited
(the "company") as at 30 June 2022, and of its financial
performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards and
have been properly prepared in accordance with the requirements of
The Companies (Guernsey) Law, 2008.
What we have audited
The company's financial statements comprise:
-- the statement of financial position as at 30 June 2022;
-- the statement of comprehensive income for the year then ended;
-- the statement of changes in equity for the year then ended;
-- the statement of cash flows for the year then ended; and
-- the notes to the financial statements, which include
significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our
report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements of the company, as required by the Crown Dependencies'
Audit Rules and Guidance. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our audit approach
Overview
Audit scope
* The company is a closed-ended investment company,
incorporated and based in Guernsey, whose ordinary
shares are admitted to trading on the London Stock
Exchange's Specialist Fund Segment.
* The financial statements consist of the standalone
parent company financial information and include the
company's investment into its directly held
subsidiary, which is held at fair value. The
subsidiary in turn holds directly and indirectly 35
Special Purpose Vehicles ("SPVs") through which the
underlying vessels are held.
* The principal activities of the company comprise
investing in a diversified portfolio of vessels
through its subsidiary based in Guernsey and the SPVs
based in the Isle of Man.
* We conducted our audit of the financial statements
based on financial information provided by the
company's service providers, Maitland Administration
(Guernsey) Limited (the "Administrator") and Tufton
Investment Management Ltd (the "Investment Manager")
to whom the Board of Directors have delegated certain
administrative functions and other activities.
==================================================================
Key audit matters
* Valuation and existence of financial assets at fair
value through profit or loss.
==================================================================
Materiality
* Overall materiality: US$8.90 million (2021: US$6.25
million) based on 2% of net assets.
* Performance materiality: US$6.68 million.
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) identified by the auditors, including those which had the
greatest effect on the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our
procedures thereon, were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How our audit addressed the
Key audit matter
========================================== ================================================================
Valuation and existence of financial
assets at fair value through
profit or loss We planned and executed our audit
Please refer to Notes 2(j), 3 to critically assess how management
and 4 to the financial statements. applied their assumptions in
Valuation determining the fair value of
The fair value of the company's all entities and vessels in the
investment amounts to US$446.89 company's investment ownership
million as at 30 June 2022 and structure and to verify the existence
comprises the company's holding of the company's ownership of
in its direct subsidiary, which all entities and vessels held
in turn directly and indirectly by the SPVs. Our audit procedures
owns 35 SPVs (together the "entities"). included:
These SPVs hold the interests As it relates to valuation of
in the vessels (the "underlying the vessels held by the SPVs:
portfolio"), other SPVs and/or * We obtained an understanding and evaluated the design
other residual net assets. and implementation of the internal controls around
The fair value of the investment the valuations as at 30 June 2022 at the
is reflected by the net asset Administrator and Investment Manager.
value of the subsidiary and has
been determined based on the
fair value of (a) the underlying
portfolio and (b) the other residual
net assets within the subsidiary
and SPVs as at 30 June 2022. For standard vessels:
The fair value of the underlying * Assessed the third-party vessel valuation service's
portfolio has been valued primarily independence, qualifications, and expertise through
using standard industry methodology enquiry with valuation experts within our PwC network
depending on whether the vessel of firms.
is classified as a standard or
specialised vessel, or in limited
circumstances, by an independent * Inspected and agreed the independent valuations
broker. obtained by the Investment Manager in respect of
Standard vessels are generally 'charter free' values from the third-party vessel
valued on a 'charter free' basis valuation service to those independently obtained
using an independent third-party from the third-party vessel valuation service.
vessel valuation service. Any
valuations are then adjusted
for each vessel's charter lease * Assessed and challenged the charter lease contract
contracts attached to the vessel adjustments by comparing the actual charter rates,
(based on premium/discount to per the records of the SPVs pertaining to each vessel,
the independent third party vessel to market charter rates to assess the reasonableness
valuation services standard market of the adjustments made by the Investment Manager.
charter rates) and for the estimated
capital expenditure cycle associated
with the dry docking of the vessel. * Where material, we assessed and challenged any
The latter adjustment necessitates capital expenditure adjustments.
estimation in respect of the
expected condition of each vessel
and the magnitude of capital * Agreed key inputs used by the third-party vessel
expenditure required while in valuation service to independent sources or
dry dock. These cash flows are underlying agreements (which included such details as
then discounted using discounted the vessel build year, type, size etc).
cash flow valuation methodology
and take into consideration the
credit risk of the charter counterparty, * We assessed and evaluated the discount rate used by
where appropriate. the third-party valuation service in calculating the
Specialised vessels are valued charter lease contracts adjustments.
"with charter", by the Investment
Manager, using the discounted
cash flow valuation methodology. * We benchmarked the current year fair values to recent
The other residual net assets comparable market transactions per vessel and the
consist of accounts payable/receivable prior year valuation. Where vessels were outside of
and cash balances which are measured an indicated range applied by the engagement team, we
consistently with the company's challenged and sought further evidence to support the
accounting policies at amortised Investment Manager's determination of fair value.
cost using the effective interest
method.
The Board has set out in Note * We discussed and obtained further detail (such as
3 their consideration of the recent market transaction data) for a sample of
areas of estimation relating vessels directly from the third-party vessel
to the valuation of the vessels. valuation service. This provided us with additional
Note 4 includes a breakdown of comfort over the valuation methodology and approach
the investments and Note 12 includes applied by the third-party vessel valuation service.
the key assumptions applied to
the valuations. Significant levels
of judgement and estimates are
applied by both the Board and For specialised vessels
Investment Manager in determining * Agreed the purchase price (including deferred
the respective fair values of purchase prices where applicable) of each vessel to
the underlying portfolio, the the signed deal documentation and discounted cash
SPVs and the subsidiary. flow model.
Existence
The company's direct and indirect
ownership rights in its subsidiary * Agreed the forecast charter income cash flows to
and the SPVs within the structure signed charter agreements.
consist of unlisted equity securities,
shareholder loans and capital
contributions and therefore there * Recalculated and assessed exit values at the end of
is no central independent depository the fixed charter period based on the terms
or custodian. For each vessel applicable to each vessel, dependent on management's
there is similarly no central intention or agreement with the counterparties (such
depository confirming ownership as scrap value or depreciated replacement cost etc.).
rights. The existence of the
investment in the subsidiary
as well as the SPVs and vessels * Assessed the reasonableness of the discount rate
is determined via legal title applied, as well as the market discount rates used by
to each of the equity shares third-party vessel valuation service and counterparty
of the subsidiaries and SPVs credit conditions as at 30 June 2022.
and ownership title to the underlying
portfolio.
As a result of the above and * Recalculated each vessel's discounted cash flow model
the significance of the investments to confirm their mathematical accuracy.
balance in the statement of financial
position, the valuation and existence
of financial assets at fair value * Assessed the approach applied to the cash flows
through profit or loss are considered utilised within the discounted cash flow models for
key audit matters from an audit appropriateness in line with the vessels and
perspective. agreements in place for specialised vessels.
For vessels valued by an independent
broker :
* We obtained the independent broker valuation and
assessed the reliability, independence, and
reputation of the independent broker.
* We agreed the valuation contained within the broker
quote back to the valuation used by the company.
For vessels pending acquisition
or divestment:
As at 30 June 2022, the company
(via its subsidiary and SPVs)
had entered into two separate
sale and purchase agreements
to acquire one vessel and divest
another vessel that both completed
in July 2022. We have performed
the following procedures over
these vessels:
* Verified that the recognition and derecognition
criteria set out in International Financial Reporting
Standards were applicable by inspection of the
contractual terms set out in the sale and purchase
agreements.
* For the vessel that was acquired in July 2022, the
company has, in evaluating the fair value of the SPVs
and subsidiary, recognised and measured the sale and
purchase contract at its fair value at the year end.
In validating the fair value of this contract we
agreed the Investment Manager's fair value from the
third-party vessel valuation service to those
independently obtained from the third-party vessel
valuation service. We also agreed the post year end
settlement of the contract and delivery of the vessel
to signed delivery notes dated after year end.
* For the vessel that was divested in July 2022, the
fair value recognised by the SPVs has been determined
to be the transaction price, which we have agreed to
the sales and purchase agreement. We have also agreed
the sales proceeds to post year end cash receipts.
As it relates to the residual
assets of the subsidiary and
SPVs:
* Recalculated the mathematical accuracy of the net
asset values of the SPVs. This included reconciling
the net asset values of the SPVs into the
subsidiary's financial records and subsequently into
the company's.
* Performed sample based substantive testing on the
residual net assets
* Agreed cash balances back to independently received
confirmations from third party financial
institutions.
As it relates to existence of
the investment in the subsidiary,
SPVs and underlying vessels that
have been delivered:
* Agreed the shareholdings of the directly held
subsidiary as well as the SPVs to share registers and
agreements.
* Agreed the delivery dates and transaction amounts for
the purchase and divestment of all vessels made
during the current financial year to supporting
agreements and contracts.
* Confirmed independently with the respective
recognised Shipping Authorities the title of all of
the underlying vessels as at 30 June 2022 where
possible. For one vessel, we performed alternative
audit procedures that provided us with evidence over
existence, as the flag country's register is
unavailable for public enquiry.
* For all vessels, we utilised open-source vessel
tracking resources to corroborate that the vessels
were operational, the routes they are chartered on
and recent photographical evidence thereof.
We have not identified any matters
to report to those charged with
governance.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
company, the accounting processes and controls, and the industry in
which the company operates.
The company and its subsidiary are based in Guernsey and the
SPVs are located in the Isle of Man. The financial statements are
not consolidated but instead present the fair value of the
subsidiary and its vessels held via the SPVs and the other residual
net assets of the subsidiary and SPVs.
Scoping was performed at the company level, irrespective of
whether the underlying transactions took place within the company,
subsidiary or SPVs. All audit work was performed in Guernsey by
PricewaterhouseCoopers CI LLP.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall company materiality US$8.90 million (2021: US$6.25 million)
How we determined it 2% of net assets
------------------------------------------
Rationale for the materiality We believe that 'net assets' is the most
benchmark appropriate benchmark as this is a key
metric of interest to the members of the
company. It is also a generally accepted
measure used for investment funds.
------------------------------------------
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2021: 75% of
overall materiality, amounting to US$6.68 million (2021: US$4.69
million) for the company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above US$0.45 million, as
well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all the information included in
the Annual Report and Audited Financial Statements (the "Annual
Report") but does not include the financial statements and our
auditor's report thereon. The directors are responsible for the
other information which includes reporting based on the Task Force
on Climate-related Financial Disclosures ("TCFD")
recommendations.
Our opinion on the 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 financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the 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 based on these
responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements that give a true and fair view in
accordance with International Financial Reporting Standards, the
requirements of Guernsey law and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company'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 the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the 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 aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
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.
-- 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 company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' 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 company's
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial
statements. 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 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 company to cease to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
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 to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the 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.
Use of this report
This independent auditor's report, including the opinions, has
been prepared for and only for the members as a body in accordance
with Section 262 of The Companies (Guernsey) Law, 2008 and for no
other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Report on other legal and regulatory requirements
Company Law exception reporting
Under The Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit;
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this
responsibility.
Other voluntary reporting
Corporate governance statement
The company has reported voluntary compliance against the 2019
AIC Code of Corporate Governance (the "Code") which has been
endorsed by the UK Financial Reporting Council as being consistent
with the UK Corporate Governance Code.
Going concern
The directors have requested that we review the statement on
page 56 in relation to going concern as if the company were a UK
premium listed Guernsey company. We have nothing to report having
performed our review.
The directors' assessment of the prospects of the company and of
the principal and emerging risks that would threaten the solvency
or liquidity of the company
The directors have requested that we perform a review of the
directors' statements on pages 30 to 33 and 56 to 57 that they have
carried out a robust assessment of the principal and emerging risks
facing the company and in relation to the longer-term viability of
the company, as if the company were a UK premium listed Guernsey
company. Our review was substantially less in scope than an audit
and only consisted of making inquiries and considering the
directors' process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the
Code; and considering whether the statements are consistent with
the knowledge and understanding of the company and its environment
obtained in the course of the audit. We have nothing to report
having performed this review.
Other Code provisions
The directors have prepared a corporate governance statement and
requested that we review it as though the company were a UK premium
listed Guernsey company. We have nothing to report in respect of
the requirement for the auditors of UK premium listed companies to
report when the directors' statement relating to the company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing
Rules, for review by the auditors.
Roland Mills
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
23 September 2022
Statement of Comprehensive Income
For the year ended 30 June 2022
2022 2021
Notes US$ US$
Income
Net changes in fair value of financial
assets
at fair value through profit or
loss 4 89,604,707 60,723,698
Dividend income 8 25,934,742 21,752,000
Total net income 115,539,449 82,475,698
Expenditure
Administration fees (167,441) (148,158)
Audit fees (137,286) (122,022)
Corporate Broker fees (150,000) (150,000)
Directors' fees 18 (177,338) (162,332)
Foreign exchange gain / (loss) 7,171 (1,429)
Insurance fee (15,455) (17,721)
Investment management fee 14 (3,410,456) (2,269,097)
Legal fees (26,287) (21,576)
Listing fees (23,452) (17,476)
Performance fees 15 (3,980,432) -
Professional fees (147,719) (75,560)
Sundry expenses (12,700) (3,913)
Total expenses (8,241,395) (2,989,284)
------------ ------------
Operating profit 107,298,054 79,486,414
Finance income 4,364 1,452
Profit and comprehensive
income for the year 107,302,418 79,487,866
============ ============
IFRS Earnings per ordinary share
(cents) 9 36.17 30.70
============ ============
Diluted Earnings per ordinary
share (cents) 9 36.17 30.70
============ ============
There were no potentially dilutive instruments in issue at 30
June 2022 or 30 June 2021.
All activities are derived from continuing operations.
There is no other comprehensive income or loss and consequently
a Statement of Other Comprehensive Income has not been
prepared.
The accompanying notes are an integral part of these financial
statements.
Statement of Financial Position
At 30 June 2022
2022 2021
Notes US$ US$
Non-current assets
Financial assets at fair value
through profit or loss 4 446,892,720 307,728,012
Total non-current assets 446,892,720 307,728,012
------------ ------------
Current assets
Trade and other receivables 5 5,740,385 5,760,379
Cash and cash equivalents 8,823 29,989
Total current assets 5,749,208 5,790,368
------------ ------------
Total assets 452,641,928 313,518,380
------------ ------------
Current liabilities
Trade and other payables 6 5,098,219 872,425
------------ ------------
Total current liabilities 5,098,219 872,425
------------ ------------
Net assets 447,543,709 312,645,955
============ ============
Equity
Ordinary Share capital 7 310,272,983 259,657,871
Retained reserves 7 137,270,726 52,988,084
Total equity attributable to
ordinary Shareholders 447,543,709 312,645,955
============ ============
Net assets per ordinary share
(cents) 11 145.01 115.78
============ ============
The accompanying notes are an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on
23 September 2022 and signed on its behalf by:
Statement of Changes in Equity
For the year ended 30 June 2022
Ordinary
Share Retained
capital earnings Total
Notes US$ US$ US$
Shareholders' equity
at 30 June 2020 245,392,016 (7,723,923) 237,668,093
Share buyback 7 (247,125) - (247,125)
Share issue 7 14,700,000 - 14,700,000
Listing costs (187,020) - (187,020)
Profit and comprehensive
income for the year - 79,487,866 79,487,866
Dividends paid - (18,775,859) (18,775,859)
Shareholders' equity
at 30 June 2021 259,657,871 52,988,084 312,645,955
Share issue 7 51,429,265 - 51,429,265
Listing costs 7 (814,153) - (814,153)
Profit and comprehensive
income for the year - 107,302,418 107,302,418
Dividends paid - (23,019,776) (23,019,776)
Shareholders' equity
at 30 June 2022 310,272,983 137,270,726 447,543,709
The accompanying notes are an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 30 June 2022
2022 2021
Notes US$ US$
Cash flows from operating
activities
Profit and comprehensive income
for the year 107,302,418 79,487,866
Adjustments for:
Purchases of investments 4 (49,560,001) (14,563,172)
Changes in fair value on investments 4 (89,604,707) (60,723,698)
Operating cash flows before
movements in working capital (31,862,290) 4,200,996
Changes in working capital:
Movement in trade and other
receivables 5 19,994 79,549
Movement in trade and other
payables 6 4,225,794 239,007
Net cash (used in) / generated
from operating activities (27,616,502) 4,519,552
------------- -------------
Cash flows from financing
activities
Net amount paid for share buyback 7 - (247,125)
Proceeds from issue of shares 7 51,429,265 14,700,000
Listing cost for issue of shares 7 (814,153) (187,020)
Dividends paid to Ordinary
Shareholders 10 (23,019,776) (18,775,859)
Net cash generated from /
(used in) financing activities 27,595,336 (4,510,004)
------------- -------------
Net movement in cash and cash
equivalents during the year (21,166) 9,548
Cash and cash equivalents at
the beginning of the year 29,989 20,441
Cash and cash equivalents
at the end of the year 8,823 29,989
============= =============
The accompanying notes are an integral part of these financial
statements.
Notes to the financial statements
For the year ended 30 June 2022
1. General information
The Company was incorporated with limited liability in Guernsey
under the Companies (Guernsey) Law, 2008, as amended, on 6 February
2017 with registered number 63061, and is regulated by the GFSC as
a registered closed-ended investment company. The registered office
and principal place of business of the Company is 1 Le Truchot, St
Peter Port, Guernsey, Channel Islands, GY1, 1WD.
The Company's investment objective is to provide investors with
an attractive level of regular and growing income and capital
returns through investing in secondhand commercial sea-going
vessels.
The Company had 270,037,638 ordinary shares in issue on 1 July
2021, all of which were listed on the Specialist Funds Segment of
the Main Market of the London Stock Exchange.
On 6 August 2021 the Company announced that it had raised gross
proceeds of US$12.4m through a tap issue of 10,533,763 ordinary
shares at a price of US$1.18 per tap issue share. On 12 November
2021, the Company announced the results of its tap issue of
28,057,140 shares at US$1.39 per tap issue share, which raised
gross proceeds of US$39.0m.
The total number of Company's shares in issue was 308,628,541 at
the end of the financial year.
2. Significant accounting policies
(a) Basis of Preparation
Compliance with IFRS
The financial statements have been prepared on a going concern
basis in accordance with International Financial Reporting
Standards ("IFRS"), which comprise standards and interpretations
approved by the International Accounting Standards Board ("IASB")
and International Financial Reporting Interpretations Committee
("IFRIC"), Listing rules and applicable Guernsey law.
Historical cost convention
The financial statements have been prepared on a historical cost
basis modified by the revaluation of financial assets at fair value
through profit or loss. The principal accounting policies adopted,
and which have been consistently applied, (unless otherwise
indicated) are set out below.
Basis of non-consolidation
The Directors consider that the Company meets the investment
entity criteria set out in IFRS 10. As a result, the Company
applies the mandatory exemption applicable to investment entities
from producing consolidated financial statements and instead fair
values its investments in its subsidiaries in accordance with IFRS
13. The criteria which define an investment entity are, as
follows:
-- an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment management
services;
-- an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both (including having an exit
strategy for investments); and
-- an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Directors consider that the Company's objective of pooling
investors' funds for the purpose of generating an income stream and
capital appreciation is consistent with the definition of an
investment entity, as is the reporting of the Company's net asset
value on a fair value basis.
(b) New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting
standards and interpretations have been published that are not
mandatory for 30 June 2022 reporting periods and have not been
early adopted by the Company. These standards, amendments or
interpretations are not expected to have a material impact on the
Company in the current or future reporting periods and on
foreseeable future transactions.
(c) Standards, amendments and interpretations effective during the year
There are no standards, amendments to standards or
interpretations that are effective for annual periods beginning on
1 July 2021 that have a material effect on the financial statements
of the Company.
(d) Segmental reporting
The Chief Operating Decision Maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business, being the investment of the Company's
capital in secondhand commercial vessels. The financial information
used to manage the Company presents the business as a single
segment.
(e) Income
Dividend Income
Dividend income is accounted for on the date the dividend is
declared.
Financial Income
Interest income is accounted for on an accruals basis.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company's
investment management and administration fees, finance costs and
all other expenses are charged through the Statement of
Comprehensive Income.
(g) Performance fee
Any performance fee liability is calculated on an amortised cost
basis at each valuation date, with the respective expense charged
through the Statement of Comprehensive Income. Refer to note
15.
(h) Dividends to Shareholders
Dividends are accounted for in the Statement of Changes in
Equity in the year in which they are declared.
(i) Taxation
The Company has been granted exemption from liability to income
tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey)
Ordinance, 1989 amended by the Director of Income Tax in Guernsey.
Exemption is applied and granted annually and subject to the
payment of a fee, currently GBP1,200.
(j) Financial Assets and Financial Liabilities
The Company holds its investments through a subsidiary company
which has not been consolidated in line with the adoption of IFRS
10: Consolidated Financial Statements.
The Company classifies its investment in LS Assets Limited
("LSA") as a financial asset at fair value through profit or loss
("FVTPL").
The Company measures and evaluates the net assets of LSA on a
fair value basis. The net assets include those of the underlying
SPVs which themselves own and value all vessels on a fair value
basis.
The Investment Manager reports fair value information to the
Directors who use this to evaluate the performance of
investments.
Recognition of financial assets and liabilities
At both the Company and the SPV level, financial assets and
financial liabilities (including trade and other payables) are
recognised in the Statement of Financial Position when the Company
becomes a party to the contractual provisions of the instrument.
This is deemed to occur when the memorandum of agreement is
signed.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in the Statement of Comprehensive
Income.
Subsequent to initial recognition, investments at FVTPL are
measured at fair value with gains and losses arising from changes
in the fair value recognised in the Statement of Comprehensive
Income.
Financial assets at fair value through profit or loss
Financial assets are classified at FVTPL when the financial
asset is held for trading. Financial assets at FVTPL are stated at
fair value, with any gains or losses arising on re-measurement
recognised in the Statement of Comprehensive Income.
The Company's investment in LSA has been measured at FVTPL on
the basis that it is managed and its performance is evaluated on a
fair value basis, in accordance with the Company's documented
investment strategy.
The Company has not taken the option to designate irrevocably
any investment in equity as fair value through other comprehensive
income. The Company measures and evaluates the performance of the
entire investment into LSA on a fair value basis by using the net
asset value of LSA including, in particular, the underlying SPVs
and the fair value of the SPVs' investments into their respective
vessel assets as well as the residual net assets and liabilities of
both the SPVs and LSA itself. The investment in LSA consists of
both equity and debt instruments.
In estimating the fair value of each underlying SPV (as a
constituent part of LSA's net asset value at fair value), the Board
has approved the valuation methodology for valuing the vessels held
by the SPVs. The valuation methodology took into account the
indirect factors affecting the shipping industry including currency
exchange rates, interest rates, the availability of credit, and
climate change considerations.
The carrying value of a standard vessels consists of its
charter-free value plus or minus the value of any charter lease
contracts attached to the vessel, plus or minus an adjustment for
the capital expenditure associated with the vessel.
There are time charter contracts in place for standard vessels.
Such charters will vary in length but would typically be in the 2 -
8 year range. As the shipping markets can be volatile over time,
the value of such charters will therefore either add to or detract
from the open market charter-free value of the vessel.
Under a time charter, the vessel owner provides a fully
operational and insured vessel for use by the charterer. There is a
fluid charter market reported daily by freight brokers.
The charter-free and associated charter values of most standard
vessels are calculated predominantly using an online valuation
platform provided by VesselsValue or, in limited circumstances, the
written valuation of a mainstream broker where elected by the
Investment Manager. For charter-free values, the VesselsValue
system contains a number of algorithms that combine factors such as
vessel type, technical features, age, cargo capacity, freight
earnings, market sentiment and recent vessel sales.
For charter values, the platform provides a DCF ("Discounted
Cashflow") module where vessel specific charter details are input
and measured against a platform or shipbroker provided market
benchmark to obtain a premium or discount value of the charter
versus the typical prevailing market for that type of vessel. The
adjustment for the capital expenditure associated with the dry
docking of the vessel is time apportioned on a straight line basis
over the period between the vessel's last visit to dry dock and the
date of its next expected visit, by reference to the actual cost of
the last visit and the budgeted cost of the next. This adjustment
is an addition to value when the valuation date is nearer to the
vessel's last dry docking than to its next expected visit to dry
dock, and vice versa.
The net adjusted valuation is subject to a minimum fair value
being the present value of all current contracted charter cashflows
and the current vessel scrap value at the completion of the
charter. The present value of the cashflows is discounted at the
specific WACC assigned to the vessel type by VesselsValue adjusted
for any counterparty credit risk where appropriate.
Specialist vessels are valued on a DCF basis by the Investment
Manager using vessel specific information and both observable and
unobservable data. The VesselsValue platform is not used for these
assets. Instead a DCF approach is adopted and this determines the
present value of the cashflows discounted at the project cost of
capital or the specific WACC assigned to the vessel type by
VesselsValue, and is deemed to be a fair representation of the
vessel and charter value.
Refer to Note 3 which explains in detail the judgements and
estimates applied.
SPVs account for residual net assets and liabilities in line
with the accounting policies of the Company.
Derecognition of financial assets
The Company and the SPVs derecognise a financial asset only when
the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risks and rewards of ownership. Derecognition therefore normally
occurs at the point of delivery of the vessel at the SPV level.
For vessel purchase and sale transactions undertaken by the
SPVs, this applies at the point of delivery of the vessel.
At 30 June 2022, the SPV Patience had sold and derecognised its
vessel, but continues to operate the vessel under a bareboat
charter from the new owners until the end of its time charter.
If the Company neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in
the asset and any associated liability.
On derecognition of a financial asset in its entirety, gains and
losses on the sale, which is the difference between initial cost
and sale value, will be taken to the profit or loss in the
Statement of Comprehensive Income in the year in which they
arise.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Statement of Financial Position when there is a
legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously.
Financial liabilities and equity
Debt and equity instruments are classified either as financial
liabilities or as equity in accordance with the substance of the
contractual arrangement. Trade and other payables are also include
under financial liabilities and are subsequently measured at
amortised cost.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or when
they expire.
Trade and other receivables
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as
'loans and receivables'. Loans and receivables are initially and
subsequently measured at amortised cost using the effective
interest method, less any expected credit losses.
At each reporting date, the Company shall measure the loss
allowance on other receivables at an amount equal to the lifetime
expected credit losses if the credit risk has increased
significantly since initial recognition. If, at the reporting date
the credit risk has not increased significantly since initial
recognition, the Company shall measure the loss allowance at an
amount equal to 12-month expected credit losses.
(k) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, demand deposits
and other short-term highly liquid investments with original
maturities of 3 months or less and bank overdrafts. In the current
and prior years, the carrying amount of cash and cash equivalents
approximate their fair value.
(l) Foreign currency translation
i) Functional and presentation currency
The financial statements of the Company are presented in US
Dollars, which is also the currency in which the share capital was
raised, and investments were purchased and is therefore considered
by the Directors' to be the Company's functional currency.
ii) Transactions and balances
At each financial position date, monetary assets and liabilities
that are denominated in foreign currencies are translated at the
rates prevailing at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at
the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in the Statement of
Comprehensive Income in the year in which they arise.
Transactions denominated in foreign currencies are translated
into US Dollars at the rate of exchange ruling at the date of the
transaction.
(m) Going concern
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council and have considered recent market volatility, the Russian
invasion of Ukraine, and the continued impact of the Covid virus on
the Company's investments (as set out in more detail in the
Principal Risks and Uncertainties section on pages 30 to 33). Cash
reserves are held at the LSA and SPV levels and rolled up to the
Company as required to enable expenses to be settled as they fall
due.
In conducting the Company's Viability Study, the Board
considered some very severe market scenarios under which the cash
balances of the Company or its subsidiaries would be exhausted if
no mitigating actions would be taken . In such a scenario the Board
would ensure continuity in operations through one or all of the
following significant actions: the sale of a vessel, the deferral
of discretionary capital expenditure, or if unavoidable, the
deferral of any dividend payment.
After making enquiries and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
financial statements. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
(n) Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments is recognised
and deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the
Company's own equity instruments.
3. Critical Accounting Judgements and Estimates
The preparation of financial statements requires management to
make estimates and judgements that affect the amounts reported for
assets and liabilities as at the Statement of Financial Position
date and the amounts reported for revenue and expenses during the
year. The nature of the estimation means that actual outcomes could
differ from those estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in
which the estimates are revised and in any future years
affected.
Critical judgements in applying the Company's accounting
policies - IFRS 10: Consolidated Financial Statements
The audit committee considered the application of IFRS 10, and
whether the Company meets the definition of an investment
entity.
The Company owns the investment portfolio through its investment
in LSA. The investment by LSA comprises the NAVs of the SPVs. The
Company holds 100% voting shares in LSA and has all the
characteristics of an investment company. Cash is held at the LSA
level and transferred to the Company when needed to cover
expenditure.
In the judgement of the Directors, the Company meets the
investment criteria set out in IFRS 10 and they therefore consider
the Company to be an investment entity in terms of IFRS 10. As a
result, as required by IFRS 10 the Company is not consolidating its
subsidiary but is instead measuring it at fair value in accordance
with IFRS 13.
The criteria which define an investment entity are documented in
Note 2a.
The Company's objective of pooling investors' funds for the
purpose of generating an income stream and capital appreciation is
consistent with the definition of an investment entity.
At the current and prior year ends, the charter-free valuation
of one vessel was provided by broker valuation rather than
VesselsValue, as elected by the Investment Manager given limited
transactions in this vessel type.
Critical Accounting Estimates
The unobservable inputs which significantly impact the fair
value have been determined to be the charter-free valuation and
market charter rates for standard vessels and the discount rate
applied for specialised vessels.
Further to the information mentioned in Note 2 (i) there are
specific capital adjustments considered as part of the valuation
process for standard vessels, mainly the adjustments for BWTSs and
scrubbers installed. BWTSs installed by the Company's SPVs are
considered to be an enhancement to the charter-free value. They are
initially recognised at cost and straight line depreciated from the
commissioning date to 31 December 2021, subsequently amended to 8
September 2024. Scrubbers are considered an enhancement to the
charter-free value using an estimated valuation from a shipbroker,
and straight-line depreciated over 5 years.
At 30 June 2022, one vessel was treated as a specialist vessel
(two vessels at 30 June 2021).
The specialist vessel was valued on a DCF basis by the
Investment Manager using vessel specific information including the
appropriate discount rate, which is reviewed on a regular basis to
ensure it remains relevant to the project and market risk
parameters.
The Prospectus sets out the basis on which non-typical and
specialist vessels would be valued.
There were no other material areas of estimation for the
Company.
4. Financial assets at fair value through profit or loss
The Company owns the investment portfolio through its investment
in LSA, which comprises the NAV of the SPVs and residual assets and
liabilities in LSA. The NAVs consist of the fair value of vessel
assets and the SPVs' residual net assets and liabilities. The whole
investment portfolio is designated by the Board as a Level 3 item
on the fair value hierarchy because of the lack of observable
market information in determining the fair value. As a result, all
the information below relates to the Company's Level 3 assets only,
with respect to the requirements set out in IFRS 7. The investment
held at fair value is recorded under Non-Current Assets in the
Statement of Financial Position as there is no current intention to
dispose of its investment in LSA but at the underlying SPV level
some of the vessels have been agreed to be sold as at 30 June
2022.
The changes in the financial assets measured at fair value
through profit or loss (for which the Company has used Level 3
inputs to determine fair value, after considering dividends
declared (see Note 7)) are as follows:
2022 2021
US$ US$
LSA
Brought forward cost of investment 249,923,223 235,360,051
Total investment acquired
in the year 49,560,001 14,563,172
Carried forward cost of
investment 299,483,224 249,923,223
Brought forward unrealised gains
/ (losses) on valuation 57,804,789 (2,918,909)
Movement in unrealised gains on
valuation 89,604,707 60,723,698
------------ ------------
Carried forward unrealised gains
on valuation 147,409,496 57,804,789
------------ ------------
Total investment at fair value 446,892,720 307,728,012
============ ============
The SPVs and holding company Handy Holdco Limited, which is also
an SPV, are incorporated in the Isle of Man. The subsidiary company
LS Assets Limited is incorporated in Guernsey. The country of
incorporation is also their principal place of business.
Breakdown of Fair Value:
Name 2022 2021 Direct Principal Ownership Ownership
US$ US$ or indirect activity at 30 June at 30 June
holding 2022 2021
Holding
LS Assets Limited - - Direct company 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Aglow Limited(1) 107,202 9,295,994 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Antler Limited(1) 74,463 10,017,889 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Anvil Limited 23,591,722 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Auspicious Limited 25,929,027 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Awesome Limited 25,638,607 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Bear Limited(2) 77,702 439,204 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Candy Limited(1) 37,192 9,579,537 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Citra Limited(1) 220,238 18,033,604 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Charming Limited 25,109,394 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Cocoa Limited(3) - - Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Dachshund(3)
Limited - - Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Daffodil Limited(3) - - Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Dragon Limited(1) 133,991 8,876,752 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Echidna Limited(1) 34,275 10,212,057 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Exceptional
Limited 29,553,364 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Golding Limited 17,868,732 16,578,058 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Handy HoldCo SPV (Holding
Limited 32,455,919 29,581,968 Indirect Company) 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Idaho Limited 25,150,084 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Kale Limited(1) 109,304 20,680,491 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Laurel Limited 19,486,868 1,599,950 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Lavender Limited(5) 18,736,992 13,206,424 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Marvelous Limited(6) 1,882,219 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Masterful Limited 25,761,402 - Indirect SPV 100% -
------------- ------------ ------------- ------------- ------------ ------------
Mayflower Limited 20,030,420 12,762,171 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Neon Limited 32,633,044 29,481,951 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Octane Limited 19,243,615 17,208,816 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Orson Limited 11,704,544 1,356,536 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Parrot Limited(1) 660,649 28,155,312 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Patience Limited(4) 475,673 10,046,760 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Pollock Limited(1) - - Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Riposte Limited 24,996,021 16,749,536 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Rocky IV Limited 23,280,175 - Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Sierra Limited 19,474,698 17,290,472 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Swordfish Limited 137,229 14,340,404 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Vicuna Limited 97,243 8,780,368 Indirect SPV 100% 100%
------------- ------------ ------------- ------------- ------------ ------------
Cash held pending
investment(7) 29,805,237 3,776,976
------------- ------------
Residual net
liabilities(7) (7,604,525) (323,218)
------------- ------------
Total * 446,892,720 307,728,012
------------- ------------
*Vessels are valued at fair value in each of the SPVs shown in
the table above and combined with the residual net liabilities of
each SPV to determine the fair value of the total investment
attributable to LSA.
(1) Vessel sold.
(2) Company in the process of dissolution
(3) These SPVs report zero fair value in the table above because
they are owned by the intermediate holding company Handy Holdco
Limited and are included in Handy Holdco's fair value.
(4) Vessel sold and leased back by SPV until the end of its time
charter (.)
(5) Vessel sold and delivered to buyer on 21 July 2022.
(6) At the year end this SPV had an agreement that was signed on
31 May 2022 with a vendor for the purchase of a vessel. At the year
end the SPV valued the incomplete contract at the difference
between its fair value and costs to complete. The vessel was
delivered 11 July 2022.
(7) The cash held pending investment and residual net
liabilities are held in LSA.
The movement in the fair value of the investment is recorded in
the Statement of Comprehensive Income.
5. Trade and other receivables
2022 2021
US$ US$
Accrued income 4 -
Prepayments 18,379 21,491
Due from LSA (dividend receivable) 5,722,002 5,738,888
Total trade and other receivables 5,740,385 5,760,379
========== ==========
A mounts due from LSA are interest free and payable on demand.
The amount due from subsidiaries in the prior year of US$5,738,888
was settled in the current year. Due to the value and short-term
nature of these receivables, the Directors have assessed there to
be no expected credit losses associated with these outstanding
balances.
6. Trade and other payables
2022 2021
US$ US$
Performance fees 3,980,432 -
Investment Management fees 908,449 648,233
Audit fees 109,602 124,479
Administrative fees 42,446 38,977
Brokers fees 37,500 37,500
Directors fees 19,789 21,161
Listing fees - 2,075
Total trade and other payable 5,098,218 872,425
========== ========
7. Share capital and reserves
Share Capital
Share issuance Number Gross amount Issue costs Share capital
of shares (US$) (US$) (US$)
Total issue at
30 June 2021 270,037,638 264,852,891 (5,195,020) 259,657,871
------------ ------------- ------------ --------------
Tap issue
11 August 2021 10,533,763 12,429,840 (160,917) 12,268,923
------------ ------------- ------------ --------------
Tap issue
12 November 2021 28,057,140 38,999,425 (653,236) 38,346,189
------------ ------------- ------------ --------------
Total issue at
30 June 2022 308,628,541 316,282,156 (6,009,173) 310,272,983
------------ ------------- ------------ --------------
The ordinary shares issued are of no par value and are
authorised, issued and fully paid. Ordinary shares carry the right
to receive all income of the Company attributable to ordinary
shares, and to participate in any distribution or other return of
capital attributable to ordinary shares. Ordinary shareholders have
the right to receive notice of and attend any general meeting of
the Company and to vote at such meeting with one vote for each
ordinary share held.
The rights conferred upon the holders of the shares are not
varied by the creation or issue of further shares or classes of
shares or by the purchase or redemption by the Company of its own
shares, or the holding of such shares in treasury.
Retained reserves comprise the retained earnings as detailed in
the Statement of Changes in Equity.
8. Dividend income
2022 2021
US$ US$
Dividend income 25,934,742 21,752,000
=========== ===========
During the current year, LS Assets Limited declared dividends of
US$25,934,742
(2021: US$21,752,000) to the Company. At 30 June 2022, dividends
of US$5,722,002
(2021: US$5,738,888) were outstanding (refer to Note 5).
9. Earnings per share
2022 2021
US$ US$
Profit and comprehensive income
for the year 107,302,418 79,487,866
Weighted average number of ordinary
shares 296,654,794 258,911,885
Earnings per ordinary share (cents) 36.17 30.70
Diluted Earnings per ordinary
share (cents) 36.17 30.70
The weighted average number of ordinary shares of 296.7m shares
(2021: 258.9m shares).
10. Dividends
The Company declared the following dividends in respect of the
profit for the year ended 30 June 2022:
Quarter Dividend Ex div Net Dividend Record date Paid date
end per share date paid
30 September US$0.02 28 October 29 October 12 November
2021 2021 US$5,611,428 2021 2021
----------- ----------- --------------- ------------ ------------
31 December 27 January 28 January 11 February
2021 US$0.02 2022 US$6,172,571 2022 2022
----------- ----------- --------------- ------------ ------------
31 March 5 May 6 May
2022 US$0.02 2022 US$6,172,571 2022 20 May 2022
----------- ----------- --------------- ------------ ------------
30 June 28 July 29 July 12 August
2022 US$0.02 2022 US$6,172,571 2022 2022
----------- ----------- --------------- ------------ ------------
Under the Companies (Guernsey) Law, 2008, the Company can
distribute dividends from capital and revenue reserves, subject to
a prescribed net asset and solvency test.
The net asset and solvency test considers whether a company is
able to pay its debts when they fall due, and whether the value of
a company's assets is greater than its liabilities. The Board
confirms that the Company passed the net asset and solvency test
for each dividend paid.
11. Net assets per ordinary share
2022 2021
US$ US$
Shareholders' equity 447,543,709 312,645,955
Number of ordinary shares 308,628,541 270,037,638
Net assets per ordinary
share (cents) 145.01 115.78
12. Financial risk management
Capital management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
Shareholders. In accordance with the Company's investment policy,
the Company's principal use of cash has been to fund investments as
well as ongoing operational expenses. The Board, with the
assistance of the Investment Manager, monitors and reviews the
broad structure of the Company's capital on an ongoing basis. The
capital structure of the Company consists entirely of equity
(comprising issued capital, reserves and retained earnings).
As the Company's Ordinary Shares are traded on the LSE, the
Ordinary Shares may trade at a discount or premium to their NAV per
share on occasion. However, the Directors and the Investment
Manager monitor the discount on a regular basis and can use share
buyback to manage the discount.
The Company is not subject to any externally imposed capital
requirements.
Financial risk management objectives
The Board, with the assistance of the Investment Manager,
monitors and manages the financial risks relating to the operations
of the Company through internal risk reports which analyse
exposures by degree and magnitude of risk. These risks include
market risk (including price risk, currency risk and interest rate
risk), credit risk and liquidity risk.
Market risk
The value of the investments held by the Company is indirectly
affected by the factors impacting the shipping industry generally,
being, amongst other factors, currency exchange rates, interest
rates, the availability of credit, climate change considerations,
economic or political uncertainty and changes in laws and
regulations governing shipping or trade. These factors may affect
the price or liquidity of vessels held by the Company's
subsidiaries and thus the value of the SPVs themselves .
Currency risk
The Company may have assets and liabilities denominated in
currencies other than the United States Dollar, the functional
currency. It therefore may be exposed to currency risk as the value
of assets or liabilities denominated in other currencies will
fluctuate due to changes in exchange rates.
However, such exposure is currently, and is expected to remain,
insignificant. Consequently, no further information has been
provided.
Interest rate risk
The majority of the Company's financial assets and liabilities
are non-interest bearing. However, the Company is exposed to a
small amount of risk due to fluctuations in the prevailing levels
of market interest rates because any excess cash or cash
equivalents are invested at short-term market interest rates.
The Company's interest-bearing financial assets and liabilities
expose it to risks associated with the effects of fluctuations in
the prevailing levels of market interest rates on its financial
position and cash flows.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's assets and trading
liabilities at fair values. It does not consolidate the US$18.00m
(2021: US$22.00m) outstanding loan (with a variable rate capped at
4.65%) owed by Handy HoldCo Limited.
The loan owed by Parrot Limited (US$12.45m at 30 June 2021) with
a blended, fixed rate of 5.05% was repaid upon sale of the vessel
in June 2022.
Interest payments on these loans are only subject to limited
change from fluctuations in interest rates due to their fixed and
capped nature.
2022 Interest Non-interest Total (US$)
bearing less bearing (US$)
than 1 month
(US$)
Assets
-------------- --------------- ------------
Investments - 446,892,720 446,892,720
-------------- --------------- ------------
Trade and other receivables - 5,740,385 5,740,385
-------------- --------------- ------------
Cash and cash equivalents 8,823 - 8,823
-------------- --------------- ------------
Total assets 8,823 452,633,105 452,641,928
-------------- --------------- ------------
Liabilities
-------------- --------------- ------------
Trade and other payables - 5,098,219 5,098,219
-------------- --------------- ------------
Total liabilities - 5,098,219 5,098,219
-------------- --------------- ------------
Total interest sensitivity
gap 8,823 8,823
-------------- --------------- ------------
The weighted average interest rate is 0.25% for cash and cash
equivalents in the current financial year.
2021 Interest Non-interest Total (US$)
bearing less bearing (US$)
than 1 month
(US$)
Assets
-------------- --------------- ------------
Investments - 307,728,012 307,728,012
-------------- --------------- ------------
Trade and other receivables - 5,760,379 5,760,379
-------------- --------------- ------------
Cash and cash equivalents 29,989 - 29,989
-------------- --------------- ------------
Total assets 29,989 313,488,391 313,518,380
-------------- --------------- ------------
Liabilities
-------------- --------------- ------------
Trade and other payables - 872,425 872,425
-------------- --------------- ------------
Total liabilities - 872,425 872,425
-------------- --------------- ------------
Total interest sensitivity
gap 29,989 29,989
-------------- --------------- ------------
The weighted average interest rate is 0.06% for cash and cash
equivalents in the prior year.
If the interest rates had been 100 basis points higher or lower
and all other variables were held constant, the Company's profit
for the year ended 30 June 2022 would increase or decrease by US$88
(2021: US$300). This is attributable to the Company's exposure to
interest rates on its variable rate deposits.
The Company and its subsidiaries are permitted to utilise
overdraft facilities towards the achievement of the Company's
investment objectives. There was no overdraft utilised during the
current and prior years.
Refer to Price Risk on the following pages for a description of
the indirect impact interest rates have on the valuation of vessel
assets.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to the
Company.
The Company does not have any significant external credit risk
exposure to any single counterparty in relation to trade and other
receivables. On-going credit evaluation is performed on the
financial condition of trade and other receivables. As at 30 June
2022 there were no receivables considered impaired (2021:
US$nil).
The Company maintains its cash and cash equivalents with various
banks to diversify credit risk. These are subject to the Company's
credit monitoring policies including the monitoring of the credit
ratings issued by recognised credit rating agencies.
30 June 2022 Credit rating Cash (US$) Short term Total as
Standard & Poor's fixed deposits at 30 June
(US$) 2022 (US$)
Barclays Bank Plc A Long Term
(Barclays) A-1 Short Term 4,152 - 4,152
-------------------- ----------- ---------------- ------------
Ravenscroft
(HSBC London - A+ Long Term
call accounts) A-1 Short Term - 4,671 4,671
-------------------- ----------- ---------------- ------------
Total 4,152 4,671 8,823
----------- ---------------- ------------
30 June 2021 Credit rating Cash (US$) Short term Total as
Standard & Poor's fixed deposits at 30 June
(US$) 2021 (US$)
Barclays Bank Plc A Long Term
(Barclays) A-1 Short Term 22,495 - 22,495
-------------------- ----------- ---------------- ------------
Ravenscroft (b) A+ Long Term
(HSBC London -
call accounts) A-1 Short Term - 7,494 7,494
-------------------- ----------- ---------------- ------------
Total 22,495 7,494 29,989
----------- ---------------- ------------
Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Board of
Directors has established an appropriate liquidity risk management
framework for the management of the Company's short-term,
medium-term and long-term funding and liquidity management
requirements.
The Company manages liquidity risk by maintaining adequate cash
reserves by monitoring forecast and actual cash flows. Cash
reserves are held at the LSA and SPV levels and rolled up to the
Company as required to enable expenses to be settled as they fall
due.
The table below shows the maturity of the Company's
non-derivative financial assets and liabilities. The amounts
disclosed are contractual, undiscounted cash flows and may differ
from the actual cash flows received or paid in the future as a
result of early repayments.
30 June 2022 Up to Between Between 1 Total (US$)
3 months 3 and 12 and 5 years
(US$) months (US$) (US$)
Assets
-------------- ------------- ------------
Financial assets
at fair value through
profit or loss - - 446,892,720 446,892,720
---------- -------------- ------------- ------------
Trade and other
receivables 5,722,006 - - 5,722,006
---------- -------------- ------------- ------------
Cash and cash equivalents 8,823 - - 8,823
---------- -------------- ------------- ------------
30 June 2022 Up to Between Between 1 Total (US$)
3 months 3 and 12 and 5 years
(US$) months (US$) (US$)
---------- -------------- ------------- ------------
Liabilities
---------- -------------- ------------- ------------
Trade and other
payables 5,098,219 - - 5,098,219
---------- -------------- ------------- ------------
Total 632,610 - 446,892,720 447,525,330
---------- -------------- ------------- ------------
30 June 2021 Up to Between Between 1 Total (US$)
3 months 3 and 12 and 5 years
(US$) months (US$) (US$)
Assets
-------------- ------------- ------------
Financial assets
at fair value through
profit or loss - - 307,728,012 307,728,012
---------- -------------- ------------- ------------
Trade and other
receivables 5,738,888 - - 5,738,888
---------- -------------- ------------- ------------
Cash and cash equivalents 29,989 - - 29,989
---------- -------------- ------------- ------------
Liabilities
---------- -------------- ------------- ------------
Trade and other
payables 872,425 - - 872,425
---------- -------------- ------------- ------------
Total 4,896,452 - - 312,624,464
---------- -------------- ------------- ------------
Price risk in the shipping industry
Price risk in the shipping industry presents the valuation
techniques used by the underlying SPVs in determining the value of
the vessels held (based on assumptions that are not supported by
prices or other inputs from observable current market
transactions). The Company's financial assets are measured at fair
value which comprises the fair value of the underlying SPVs and the
residual net assets of each SPV. The Company values its investment
in LSA and the SPVs at their respective net asset values. The net
asset values comprise shipping vessels which are measured at fair
value and other residual net assets and liabilities of each of the
entities.
All the assets and underlying vessels are considered to be Level
3 assets, that price risk pertains to the Level 3 investment
portfolio in its entirety, and that no other market price risk
exists.
Price risk sensitivity analysis was conducted on vessel and
charter fair values only as these comprise the vast majority of
assets.
(a) Standard Vessel valuations
The fair value of a standard vessel comprises both the
charter-free value and the charter valuation. The charter-free and
associated charter values of typical vessels are calculated using
an on-line valuation system provided by VesselsValue or, in limited
circumstances, written mainstream broker valuations. For
charter-free values, the VesselsValue system contains a number of
algorithms that combine factors such as vessel type, technical
features, age, cargo capacity, freight earnings, market sentiment
and recent vessel sales.
For charter values, the system provides a DCF module where
vessel specific charter details are input and measured against
system or shipbroker provided market benchmark to obtain a premium
or discount value of the charter versus prevailing market.
The charter valuation process may be bounded by a minimum value
which comprises the DCF value of the current charter plus scrap
value of the vessel at the end of the charter. At the year end this
minimum value was not applied to any vessels compared to two
vessels at the prior year end.
(b) Specialised Vessels and arrangements
There will be cases where the Company may invest in vessels
which are (i) of a specialised nature and fall out of scope of
mainstream brokers and/or (ii) where contracted employment does not
have an available reference benchmark in the freight brokerage
community.
The Investment Manager will make its own assessment of a
vessel's value with charter using a discounted cashflow model ("DCF
Model"). The DCF Model will calculate the net present value of the
charter and vessel value using the following inputs:
-- IRR/Discount rate
-- Charter Rate
-- Exit/scrappage value
There was one specialised vessel held at the year end (two at 30
June 2021).
Refer to Note 3 for further information on the valuation
methodologies applied. The Directors and Tufton believe that the
above reflects those inputs where market price risk could be
significant. and where there is the potential for estimate and
judgement to be used.
Covid
The global economy started recovering from the impacts of Covid
from the end of 1H20. Over the financial year, containership asset
values and time charter rates hit record highs while the Baltic Dry
Index ("BDI") of average prices paid for the transport of dry bulk
materials across more than 20 routes, rose to its highest levels
since 2009 in October 2021. The Company also benefited from fair
value increases as portfolio asset values rebounded after the
market recovered from Covid-related declines in the prior year.
The product tanker market remained weak in the first half of the
financial year but started to improve in 2022 with increased
overall global oil demand, while also benefiting from short-haul
demand for cargoes being partially replaced by long-haul
demand.
The Investment Manager believes the Company's strong operating
profit and performance in the Covid crisis, both on an absolute
basis and relative to other classes, demonstrate it can be an
attractive high income and low correlation investment.
Price Risk Sensitivity analysis
Charter-free valuation for standard vessels
The Directors have concluded that use of a 10% movement in
benchmark charter rates remains a suitable sensitivity calculation,
noting that the benchmark charter rates used are for charter
periods of 1 year or more, which show lower volatility than spot
rates and already reflect market expectations of the impact of the
Covid pandemic.
If the charter-free vessel values at 30 June were 10% higher or
lower, then the effect on the standard vessel portfolio value would
be as follows:
Vessel values +10% change Standard vessel -10% change
US$ 000 portfolio value US$ 000
US$ 000
Fair value at 30 June
2022 +47,265 432,089 (47,265)
------------ ----------------- ------------
Fair value at 30 June
2021 +31,989 215,939 (31,989)
------------ ----------------- ------------
The ballast water treatment system and scrubber adjustments are
immaterial and therefore no sensitivity analysis has been
prepared.
Charter rates
If market charter rates used to determine charter values were
10% higher or lower, then the effect on the standard vessel
portfolio value would be as follows:
Vessel values +10% change Standard vessel -10% change
portfolio value
US$ 000 US$ 000 US$ 000
Fair value at 30 June
2022 (11,368) 432,089 +12,184
------------ ----------------- ------------
Fair value at 30 June
2021 (16,473) 215,939 +16,438
------------ ----------------- ------------
The ballast water treatment system and scrubber adjustments are
immaterial and therefore no sensitivity analysis has been
prepared.
Specialised Vessels
If the discount rates were 0.5% higher or lower, then the effect
on the specialised vessel portfolio value would be as follows:
+0.5% Specialised -0.5% change
change Vessel(*) portfolio
US$ 000 value US$ 000
US$ 000
Specialised Vessel company
fair value at 30 June 2022 (270) 26,069 +275
--------- --------------------- -------------
Specialised Vessel company
fair value at 30 June 2021 (785) 57,637 +802
--------- --------------------- -------------
The ballast water treatment system and scrubber adjustments are
immaterial and therefore no sensitivity analysis has been
prepared.
There was one specialised vessel held at the year end (two at 30
June 2021).
13. Financial assets and liabilities not measured at fair
value
Cash and cash equivalents, trade and other receivables and trade
and other payables are liquid assets whose carrying value
represents fair value. The fair value of other current assets and
liabilities would not be significantly different from the values
presented at amortised cost.
14 . Investment Management fee
The Investment Manager is entitled to receive an annual fee,
calculated on a sliding scale, as follows:
(a) 0.85 per cent per annum of the quarter end Adjusted Net
Asset Value up to US$250m;
(b) 0.75 per cent per annum of the quarter end Adjusted Net
Asset Value in excess of US$250m but not exceeding US$500m; and
(c) 0.65 per cent per annum of the quarter end Adjusted Net
Asset Value in excess of US$500m.
For the year ended 30 June 2022 the Company has incurred
US$3,410,456 (2021: US$2,269,097) in management fees of which
US$908,449 was outstanding at 30 June 2022 (2021: US$648,233).
15. Performance fee
Tufton ODF Partners LP shall be entitled to a performance fee in
respect of a Calculation Period provided that the Total Return per
Share on the Calculation Day for the Calculation Period of
reference is greater than the High Watermark per Share and such
performance fee shall be an amount equal to the Performance Fee
Pay-Out Amount if:
-- the High Watermark is greater than the Total Return per Share on any Calculation Day; and
-- the prevailing Historic Performance Fee Amount is greater than zero on such Calculation Day;
Any fee accruing as at the end of the Calculation Period is paid
50% subsequent to the end of that period, with the remaining 50%
being retained by the Company and deferred until the next time that
a performance fee payment is due, being adjusted for any subsequent
underperformance during that time.
The prevailing Historic Performance Fee Amount shall be reduced
by the lower of: (i) 20 per cent of the difference between the High
Watermark and the Total Return per Share on such Calculation Day
multiplied by the Relevant Number of Shares; and (ii) the
prevailing Historic Performance Fee Amount. Performance fees of
US$3,980,432 (2021: US$nil) were accrued during the current
year.
16. Related parties
The Investment Manager, Tufton Investment Management Ltd, is a
related party due to having common key management personnel with
the subsidiaries of the Company. All management fee transactions
with the Investment Manager are disclosed in Note 14.
Tufton ODF Partners LP is a related party due to being the
beneficiary of any performance fee paid by the Company.
Transactions with LSA and subsidiary SPVs are not disclosed.
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 June 2022,
and as at the date of signing these Financial Statements:
2022 2021
Shares Shares
------------------- ------- -------
R King 45,000 45,000
------- -------
S Le Page 40,000 40,000
------- -------
P Barnes 5,000 5,000
------- -------
C Rødsaether 20,000 20,000
------- -------
17. Controlling party
In the opinion of the Directors, based on shareholdings advised
to them, the Company has no immediate or ultimate controlling
party.
18. Directors' fees
The remuneration of the Directors was US$177,338 (2021:
US$162,332) for the year which consisted solely of short-term
benefits. At 30 June 2022, Directors' fees of US$19,789 (2021:
US$21,161) were outstanding.
The Directors fees are as disclosed below:
30 June 30 June
2022 2021
Director GBP GBP
-------- --------
R King 36,610 33,610
-------------------- -------- --------
S Le Page 34,000 31,500
-------------------- -------- --------
P Barnes 31,550 29,300
-------------------- -------- --------
C Rødsaether 31,550 24,064
-------------------- -------- --------
19. Events after the reporting year
A dividend was declared on 19 July 2022 of US$0.02 per share for
the quarter ending 30 June 2022. The dividend was paid on 12 August
2022 to holders of shares on record date 29 July 2022 with an
ex-dividend date of 28 July 2022.
On 11 July 2022, the Company completed the acquisition of
Marvelous for US$31.5m.
On 20 July 2022, the Company completed the disposal of Lavender
for US$17.5m.
On 20 September 2022, the Company announced that it had agreed
to acquire two product tankers, Courteous and Mindful, for
US$73.0m. Both vessels have fixed-rate time charters for three to
five years to a major commodity trading and logistics company. The
acquisitions will be financed primarily by a new US$60m loan which
will be secured on Courteous, Mindful, Marvelous and Exceptional.
In parallel with the Courteous and Mindful being chartered as
described above, Marvelous will also enter a fixed-rate time
charter for three to five years to the major commodity trading and
logistics company from November.
Corporate Information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsaether
Registered office
3(rd) Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Investment Manager and AIFM
Tufton Investment Management Ltd ("Tufton IML")
70 Pall Mall
1st Floor London
SW1Y 5ES
Asset Manager
Tufton Management Limited
3rd Floor, St George's Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Secretary and Administrator
Maitland Administration (Guernsey) Limited ("MAGL")
3(rd) Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Joint Placing Agents and Financial Advisers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Guernsey Legal Advisers
Carey Olsen (Guernsey) LLP
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Registrar
Computershare Investor Services (Guernsey) Limited
1(st) Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Receiving Agent
Computershare Investor Services PLC
The Pavillions
Bridgewater Road
Bristol
BS99 6AH
Independent Auditor to the Company
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Principal Bankers
Barclays Bank Plc
Guernsey International Banking
PO Box 41
St Peter Port
Guernsey, GY1 3BE
Definitions
The following definitions apply throughout this document unless
the context requires otherwise:
Adjusted Net Asset Value the Net Asset Value less uninvested monies
(cash and cash
value equivalents) held by the Company from
time to time excluding monies arising on or
from the realisation of or a distribution from
an Investment
AIC the Association of Investment Companies
AIFM Directive or AIFMD the EU Directive on Alternative Investment
Fund Managers (No. 2011/61/EU)
AIF an alternative investment fund
AIFM an alternative investment fund manager
AIFM Rules the AIFM Directive and all applicable rules
and regulations implementing the AIFM Directive
in the UK
Articles of Incorporation the articles of incorporation of the Company,
or Articles as amended from time-to-time
Asset Manager Tufton Management Limited (formerly Oceanic
Marine Management Limited)
Auditor PricewaterhouseCoopers CI LLP
Board the Directors from time to time
Broker a mercantile agent employed in buying and selling
shares - The Company's brokers are Hudnall
Capital LLP and Singer Capital Markets
Calculation Day The last business day of each Calculation Period
Calculation Period (a) the period starting on Admission and ending
on the earlier of (i) 30 June 2024; (ii) the
commencement of the winding up of the Company;
and (iii) the termination of the Manager's
appointment; and
(b) if the previous Calculation Year ended
on 30 June of the previous Year, each successive
period starting on 1 July and ending on the
earlier of (i) 30 June three years later; (ii)
the commencement of the winding up of the Company;
and (iii) the termination of the Manager's
appointment
Calculation Year 1 July to 30 June
Companies Law the Companies (Guernsey) Law, 2008 as amended
Company Tufton Oceanic Assets Limited (Guernsey registered
number 63061) which, when the context so permits,
shall include any intermediate holding company
of the Company and the SPVs
Compensated Gross Tonnage an indicator of the amount of work that is
or CGT necessary to build a given ship and is calculated
by multiplying the tonnage of a ship by a coefficient,
which is determined according to type and size
of a particular ship
Directors or Board the Board of Directors of the Company
Disclosure Guidance and the disclosure guidance and transparency rules
Transparency Rules or made by the Financial Conduct Authority under
DTRs Section 73A of FSMA
Dividend Cover Portfolio Operating Profit less capex less
debt amortisation, divided by dividends for
the period
Energy Efficiency Existing The emissions intensity of a vessel calculated
Ship Index or EEXI using its design characteristics
Environmental, Social, an evaluation of the company's collective conscientiousness
and Corporate Governance for social and environmental factors
(ESG)
EBITDA Earnings before interest, taxes, depreciation
and amortisation
EBITDA-Weighted Average total forecast EBITDA from charters in place,
Charter Length divided by the expected annualised EBITDA of
those charters
FCA the UK Financial Conduct Authority
Financial Reporting Council the UK Financial Reporting Council
or FRC
FSMA the Financial Services and Markets Act 2000
and any statutory modification or re-enactment
thereof for the time being in force
Forecast Net Yield Forecast EBITDA minus any capex accruals for
the vessels in the portfolio divided by the
time-weighted vessel values
Gain in Fair Value per Change in the vessel values (being the change
Share in charter-free value + change in charter value)
in the period divided by the weighted-average
number of ordinary shares during that period
GFSC or Commission the Guernsey Financial Services Commission
High Watermark per Share the higher of: (i) US$1.00 increased by the
Hurdle; and (ii) if a Performance Fee has previously
been paid, the Total Return per share on the
Calculation Day for the last Calculation Period
(if any) by reference to which a Performance
Fee was paid
High Performance Fee in respect of any Calculation Period, an amount
Amount equal to the Performance Fee Pay-Out Amount
for the previous Calculation Period where a
Performance Fee was payable
Historic Performance in respect of any Calculation Period, an amount
Fee Amount equal to be Performance Fee Pay-Out Amount
for the previous Calculation Period where a
performance fee was payable
IASB International Accounting Standards Board
IFRIC International Financial Reporting Interpretations
Committee
IFRS International Financial Reporting Standards
Investment Manager Tufton Investment Management Ltd
IRR Internal rate of return - the Internal rate
of return is the interest rate at which the
net present value of all the cash flows (both
positive and negative) from a project or investment
equal zero, and is a common performance indicator
used in investment funds
Issue Price An issue price refers to the initial cost of
a security when it first becomes available
for purchase by the public.
Listing Rules the listing rules made by the UKLA pursuant
to Part VI of FSMA
London Stock Exchange London Stock Exchange plc
or LSE
LPG Carrier a vessel used to transport liquefied petroleum
gas
LS Assets Limited or the Guernsey holding company owning the SPVs
LSA through which the Company investment into vessels
LSE Admission Standards the rules issued by the London Stock Exchange
in relation to the admission to trading of,
and continuing requirements for, securities
admitted to the SFS
Main Market the main market for listed securities operated
by the London Stock Exchange
Market Abuse Regulation Regulation (EU) No 596/2014 of the European
or MAR Parliament and of the Council of 16 April 2014
on market abuse
Memorandum the memorandum of association of the Company
Net Asset Value or NAV the value, as at any date, of the assets of
the Company after deduction of all liabilities
of the Company and in relation to a class of
shares in the Company, the value, as at any
date of the assets attributable to that class
of shares after the deduction of all liabilities
attributable to that class of shares determined
in accordance with the accounting policies
adopted by the Company from time-to-time
NAV Total Return the change in NAV plus distributions paid by
the Company during the period, divided by the
initial NAV
Overdue Crew Relief or Crew members staying on board vessels beyond
Overdue Crew Rotation contractual periods
Performance Fee Amount 20 per cent. of the excess in Total Return
per Share and the High Watermark per Share
multiplied by the time weighted average number
of Shares in issue during the Calculation Period
Performance Fee Pay-Out in respect of the relevant Calculation Period,
Amount an amount equal to "A", where:
A = (0.5 x B) + C;
B = the Performance Fee Amount; and
C = an amount equal to the High Performance
Fee Amount
POI Law the Protection of Investors (Bailiwick of Guernsey)
Law, 2020, as amended
Portfolio the Company's portfolio of investments from
time to time
Paris Agreement The Paris Agreement is a legally binding international
treaty on climate change
Portfolio Operating Profit Portfolio operating profit is gross operating
profit and interest income less loan interest
and fees, Company level fees and expenses
P/DRC Price divided by the Depreciated Replacement
Cost. Price may refer to a transaction (investment
or divestment) value or fair value at a certain
date.
Prospectus The Placing and Offer for Subscription document
for the Company dated 8th December 2017
Register the register of members of the Company
Relevant Number of Shares for any Calculation Period the time weighted
average number of Ordinary Shares in issue
during such Calculation Period
Responsible Investment A strategy and practice to incorporate environmental,
social and governance (ESG) factors in investment
decisions and active ownership.
SFS or Specialist Funds the Specialist Funds Segment of the Main Market
Segment (previously known as the Specialist Fund Market
or SFM)
Segment classifications of vessels within the shipping
industry including, inter alia, Tankers, General
Cargo, Containerships and Bulkers
SPV or Special Purpose corporate entities, formed and wholly owned
Vehicle (directly or indirectly) by the Company, specifically
to hold one or more vessels, and including
(where the context permits) any intermediate
holding company of the Company
GBP or Sterling the lawful currency of the United Kingdom
Total Return per Share the Net Asset Value per Ordinary Share on any
Calculation Day adjusted to:
(i) include the gross amount of any dividends
and/or distributions paid to an Ordinary Share
since Admission;
(ii) not take account of any accrual made in
respect of the performance fee itself for that
Calculation Period;
(iii) not take account of any accrual made
in respect of any prevailing Historic Performance
Fee Amount (as adjusted pursuant to the operation
of this paragraph below);
(iv) not take account of any increase in Net
Asset Value per Share attributable to the issue
of Ordinary Shares at a premium to Net Asset
Value per Share or any buyback of any Ordinary
Shares at a discount to Net Asset Value per
Ordinary Share during such Calculation Period;
(v) not take account of any increase in Net
Asset Value per Share attributable to any consolidation
or sub-division of Ordinary Shares;
(vi) take into account any other reconstruction,
amalgamation or adjustment relating to the
share capital of the Company (or any share,
stock or security derived therefrom or convertible
there into); and
(vii) take into account the prevailing Net
Asset Value of any C Shares in issue
Tufton Group Tufton Investment Management Holding Ltd and
its subsidiaries.
UK Corporate Governance the UK Corporate Governance Code as published
Code by the Financial Reporting Council from time-to-time
UK Listing Authority the FCA acting in its capacity as the competent
authority for the purposes of Part VI of FSMA
United Kingdom or UK the United Kingdom of Great Britain and Northern
Ireland
Unlevered cash flow run EBITDA net of accruals over the remaining term
rate of the charters for the vessels in the portfolio,
expressed annually
VesselsValue VesselsValue Limited, a third party provider
of vessel valuations to the Company and Investment
Manager
WACC the weighted average cost of capital
VLCC Very Large Crude Carrier
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END
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