REG - Tufton Oceanic Asset Tufton Oceanic -SHPP - Final Results and AGM Notice
26/09/2024 07:00
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RNS Number : 6953F Tufton Oceanic Assets Ltd. 26 September 2024
26 September 2024
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 financial year ended
30 June 2024. A copy of the Annual Report and Audited Financial Statements
will be submitted to the National Storage Mechanism
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and will shortly be
available in the Company's website in the Investor Relations section under
Company Documents at www.tuftonoceanicassets.com/financial-statements
(http://www.tuftonoceanicassets.com/financial-statements) . The Company has
also published its 2023 Sustainability Report which is available on the
Company's website in the Investor Relations section under Company Documents.
The highlights from the Sustainability Report include a c.11% improvement in
emissions intensity during 2023, primarily because of capital re-allocation
but also from Energy Saving Device ("ESD") retrofits.
The annual general meeting will be held at the Company's registered office at
1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey on 24(th) October 2024 at
11:00 BST.
For further information, please contact:
Tufton Investment Management Ltd (Investment Manager) +44 (0) 20 7518 6700
Andrew Hampson
Nicolas Tirogalas
Singer Capital Markets +44 (0) 20 7496 3000
James Maxwell, Alex Bond, Jalini Kalaravy (Corporate Finance)
Alan Geeves, James Waterlow, Sam Greatrex (Sales)
Hudnall Capital LLP +44 (0) 20 7520 9085
Andrew Cade
Highlights
Highlights of Tufton Oceanic Assets Limited (the "Company") for the financial
year ("FY") (vs. the previous FY ending 30 June 2023):
· NAV was US$451.1m or US$1.550 per share (FY 2023: US$412.8m or
US$1.365 per share).
· NAV Total Return Per Share 20.6% (FY 2023: -0.3%).
· Dividends paid during the year of US$26.1m (FY 2023: US$25.4m),
which from 1Q24 was at the increased target annual dividend of US$0.10 per
share rate.
· The Company bought back 11,386,000 (FY 2023: 6,160,000) shares at
the weighted average price of US$1.014 (FY 2023: US$1.13) per share.
· Consolidated Gearing Ratio of 12.0% (FY 2023: 13.8%).
· Average Charter Length of 1.3 years (FY 2023: 1.3 years).
· Post balance sheet date, the Company completed a one-off capital
return of US$31.5m via redemption ("Redemption") of shares based on the 2Q24
NAV per share of US$1.550.
Diversified fleet*
· 8 product tankers
o 6 Medium Range ("MR") product tankers
o 2 Handysize product tankers
· 9 bulkers
o 8 Handysize bulkers
o 1 Ultramax bulker
· 2 Chemical tankers
· 1 Gas tanker
The Company owned 21 vessels as at the end of the FY. One product tanker
(Dachshund) was divested on 1 July 2024 bringing the total number of vessels
to 20.
Highlights since inception*
131.2% US$126.7m US$18.8m 39 (19)
NAV Total Return Per Share Dividends Buybacks Vessels Acquired (Divested)
(*) as at 30 June 2024, adjusted for the divestment of Dachshund on 1 July
2024. Dividends include the 2Q24 dividend which was paid in August 2024.
Alternative Performance Measures ("APMs"), applied on a consolidated basis,
are utilised in the Highlights and Investment Manager's Report to analyse
performance. Please see the APMs definitions from page 87.
Mid-Term strategy and capital allocation highlights
· The Company's Board has determined that the optimal strategy for
SHIP through to 2030 is to continue investing in fuel-efficient secondhand
vessels. This approach aims to maximize shareholder returns, with plans to
begin realising the Company's asset portfolio from 2028, well before the
decarbonisation of shipping accelerates.
· Continuation votes to be held as planned in 2024 and 2027 to
reconfirm the opportunity set and the strategy, before the realisation period
starting in 2028.
· SHIP's annual target dividend per share was increased by c.17.6%
from US$0.085 per share to US$0.10 per share starting in 1Q24. Based on this
increased target the Company is forecast to have Dividend Cover of c.1.7x over
18 months following the end of the FY, through the end of 4Q25.
· A one-off capital return of US$31.5m via the Redemption of shares
based on the 2Q24 NAV per share (being a premium to the prevailing share
price) less attributable costs was completed on 26 August 2024.
· The Company sees fleet renewal (based on age, technology, and
sector outlook) as a priority. Returns from all new asset investments over a
three-year holding period will be compared to the benefit from a return of
capital given the prevailing share price at the time of the proposed
investment and medium-term market outlook.
· The Board will annually assess the possibility of returning
additional capital to shareholders using excess investible cash, provided no
suitable investment opportunities arise.
· The current buy-back policy (as set out in the Company's listing
documents) is to remain in place.
Chairman's Statement
Introduction
On behalf of The Board of Directors (the "Board"), I present the Company's
Annual Report and Audited Financial Statements for the year ended 30 June
2024.
Following the divestment of Dachshund on 1 July 2024, the Company's portfolio
consisted of 20 vessels (FY 2023: 22 vessels), details of which are set out in
the Investment Manager's Report. Divestments completed in FY 2024 have been
completed at a premium to their most recent individually reported NAVs.
Strong Performance and Target Dividend Increased
As at 30 June 2024, the Company's NAV was US$451.1m being US$1.550 per share
(2023: US$412.8m being US$1.365 per share). The Company declared a profit of
US$76.1m (FY 2023: loss of US$2.5m) or US$0.259 per share (FY 2023: US$0.008)
for the year with the US$ NAV Total Return Per Share over the year of 20.6%
(FY 2023: -0.3%).
The strong return over the FY was driven by operating performance as well as
gains in charter-free values, as product tanker and bulker values rose.
The Company raised its target annual dividend from US$0.085 to US$0.1 per
share, which commenced from 1Q24. With the increased dividend, the Company is
forecast to have a Dividend Cover of c.1.7x over the next 18 months (through
the end of 4Q25). As at 30 June 2024, the Average Charter Length was 1.3
years.
Share Price and Discount Management
During the year, the Company's share price rose from US$0.99 per share as at
the close of business 30 June 2023 to US$1.21 per share as at the close of
business 30 June 2024.
Following a tepid performance in the second half of 2023, the Company's share
price increased by approximately 22% in the latter half of the FY. This rise
was particularly notable after the announcement on 17 January 2024 of key
points from the mid-term strategy review, an increased dividend policy, a
one-time return of capital, and other related changes in capital allocation.
The Board is encouraged to note that the discount of the Company's share to
NAV has narrowed to c.14% (30 June 2023: 27.8%) as at end August 2024.
On average, the Company's shares traded at a 27% discount to NAV over the FY.
During the year, the Company (in accordance with the authority granted to it
by shareholders) repurchased 11,386,000 (FY 2023: 6,160,000) shares at a cost
of US$11,573,679 (FY 2023: US$6,946,752). Refer to Note 7 for more details. At
the end of the FY, there were 17,546,000 (FY 2023: 6,160,000) shares held in
treasury. Since 1 July 2024, the Company has bought back an additional
20,326,211 shares via the compulsory Redemption with 17,546,000 Shares held in
treasury and 270,756,330 shares outstanding as at 25 September 2024. As at 25
September 2024, the Company's shares traded at a 16.1% discount to the
ex-dividend 30 June 2024 NAV.
Mid-Term strategy review
In January 2024, the Board reviewed the Company's performance since its
inception and requested that the Investment Manager conduct a study on future
opportunities and the strategy, including capital allocation, to achieve
investment objectives. The Board concluded that the best strategy for SHIP
through 2030 is to continue investing in fuel-efficient secondhand vessels to
maximise shareholder returns, with plans to begin realising the Company's
asset portfolio starting in 2028, ahead of the anticipated acceleration in
shipping decarbonisation. Details of the mid-term strategy review are set out
on page 2 above.
Canal Transit Disruptions and War in Ukraine
Transit through two key global shipping routes, the Panama Canal and the Suez
Canal, were disrupted during the FY.
Vessel transit through the Panama Canal was disrupted from late October due to
an ongoing drought in the region. While transit through the Suez Canal was
disrupted as Houthi rebel attacks on vessels in the Red Sea escalated from
late November. Disruption of canal transit causes re-routing of cargo via
alternate routes which typically take much longer and add to shipping demand.
For example, disruption of transit through the Suez Canal is estimated to add
c.3% to global shipping demand growth predominantly due to re-routing around
the Cape of Good Hope. As of August 2024, vessel transit through the Panama
Canal is returning to normal while traffic via the Suez Canal remains at very
low levels due to the ongoing risk of attacks. All of the Company's vessels
remain fully insured against war perils. None of the Company's vessels have
been adversely affected by the war in Ukraine or the attacks on vessels
transiting the Red Sea/Gulf of Aden. The Investment Manager's policy is that
Company vessels should not transit the Red Sea during this period of conflict.
The Master of each vessel may refuse to allow the vessel to trade in areas
where there is a heightened physical risk to the vessel or its crew. The Board
and the Investment Manager remain watchful in monitoring the conflicts and
their consequences for shipping in general and for the Company.
Sanctions
The Company and its vessels were compliant with all international sanctions
imposed by the US, UK, EU and UN. We have had no issues to date with any
vessels being blocked or otherwise affected by sanctions. The Investment
Manager monitors compliance through regular inspection of vessel logs,
satellite data and direct communication with the vessels. The Board and
Investment Manager are monitoring for new sanctions being put in place. Where
existing guidelines are unclear, the procedure ensures that the Investment
Manager seeks legal advice.
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
(mailto:SHIP@tuftonoceanicassets.com) .
Board Composition
As in previous years, all Directors are offering themselves for re-election in
accordance with the AIC Code of Corporate Governance and the Articles of
Incorporation of the Company (the "Articles").
Three of the current five members of the Board were appointed at the formation
of the Company in 2017. Whilst their respective tenure is much less than the
AIC Guidance figure of nine years, a succession plan has been considered by
the Board. As part of the continued Board review of its composition, Trina Le
Noury was appointed as a non-executive Director of the Company with effect
from 1 November 2023.
Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held on 24 October
2024 at 11:00 am BST the details of which are set out in the AGM notice and
Proxy form on pages 97 to 109.
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 (mailto:SHIP@tuftonoceanicassets.com) ahead of
the AGM date.
Continuation Vote
The vote for the continuation of the Company is presented to the Shareholders
at this year's AGM in accordance with the terms set out in the latest listing
document of the Company. The Board of Directors presented the mid-term
strategy to Shareholders on 17 January 2024 and this strategy is the basis for
the future continuation of the Company.
If this Continuation Resolution is passed, the next continuation vote will be
presented to Shareholders in October 2027. 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.
The Board of Directors are supportive of the continuation of the Company and
believe that the mid-term strategy presented to Shareholders provides a clear
direction of travel beyond this year's continuation vote and therefore the
Board unanimously recommends that Shareholders vote in favour of the
Continuation Resolution. The Directors intend to vote the shares they control
in favour of the Continuation Resolution.
Environmental, Social, Governance ("ESG")
Our Investment Manager continues to integrate ESG factors into its investment
recommendations and asset ownership practices. The Investment Manager has
recently published its annual Sustainability Report which contains details of
ESG integration. The Board has reviewed and approved the Investment Manager's
Sustainability Report for the Company which can be viewed on the Company's
website (www.tuftonoceanicassets.com).
Outlook
The Investment Manager notes that global shipyard orderbook forward cover
(i.e. the number of years required to deliver the orderbook at the output
level of the last 12 months) was 3.4 years at the end of the FY slightly lower
than 3.7 years at the end of June 2023. Despite the growth in new orders over
the last few years, fleet growth in product and chemical tankers and bulkers
is limited by yard slot availability. Further the current orderbook in these
segments is only sufficient to replace ageing, less fuel efficient tonnage.
The Company completely exited the containership segment in early 2023 in
anticipation of a weaker market due to high fleet growth. The disruption of
vessel transit through the Suez Canal has added significant shipping demand
growth resulting in a much stronger containership market than previously
anticipated by the Investment Manager, offering some interesting
opportunities.
These ongoing developments continue to support the case for a strong
investment environment until the end of the decade as envisaged in our
mid-term strategy review.
………………………
Rob King
Non-executive Chairman
25 September 2024
Investment Manager's Report
Highlights of the FY
Over the FY NAV Total Return Per Share was 20.6% (FY 2023: -0.3%), meaning the
NAV Total Return since inception has been 131.2%. Alternate Performance
Measures ("APM"s), applied on a consolidated basis, are utilised in this
section to analyse performance. Please see the APM definitions from page 87.
The main drivers for the strong return during the year were:
· Portfolio Operating Profit was US$52.0m (FY 2023: US$56.3m):
Despite strong performance from our product tankers and chemical tankers,
Portfolio Operating Profit was slightly lower YoY as the bulker market started
the current FY at multi-year lows and slowly recovered.
· Charter-free value gain of US$29.7m as product tanker and bulker
values rose.
· Charter value loss of US$5.6m as the unwind of negative charter
value was outweighed by the ongoing increase in benchmark time charter rates,
both mainly in product tankers.
The Company paid dividends of US$26.1m during the FY (FY 2023: US$25.4m).
Under the Company's discount management policy described in the IPO
Prospectus, the Company repurchased 11,386,000 shares during the FY and has
therefore purchased a total of 17,546,000 of its own shares from 4Q22 until
the end of the FY. The Company returned a total of US$37.8 million to
shareholders during the FY in the form of dividends and share buybacks ($145.5
million since inception).
Portfolio Operating Profit was lower compared to the previous FY because:
· Gross Operating Profit, an indicator of the underlying profit from
operating activity, was lower YoY mainly due to the lower contribution from
our bulkers. The bulker market started the FY with rates at multi-year lows
and slowly improved.
· Loan interest and fees were higher compared to the previous FY due
to the full year impact of the US$60m loan for the acquisitions of the two MR
product tankers, Mindful and Courteous (completed in November 2022).
Following our December 2023 update in the Interim Report, the divestment of
Pollock closed on 16 May 2024. The divestment of Dachshund closed on 1 July
2024, shortly after the FY end. Ahead of the divestments, the loan outstanding
on the product tankers (within two separate Holdco facilities) was refinanced
with six vessels within one Holdco at a lower margin of 3.2% (vs. 3.9%
previously). The Consolidated Gearing Ratio at the end of the FY was 12% (FY
2023: 13.8%). There was no debt prepayment in connection with the divestment.
Interest rate caps mitigate interest rate risk through the end of 2025.
Performance summary*
Figures below are in US$ millions unless otherwise stated From 1 Jul 2023 to 30 Jun 2024 From 1 Jul 2022 to 30 Jun 2023
Ship-Days 8,007 7,945
Revenue 117.7 119.9
Operating Expense (55.0) (55.6)
A Gross Operating Profit 62.7 64.3
Gross Operating Profit / Time-Weighted Capital Employed 13.5% 14.7%
B Loan interest and fees (6.6) (3.5)
C Gain/(loss) in capital values 24.1 (62.8)
D Portfolio profit / (loss) A+B+C 80.2 (2.0)
E Interest income 0.5 0.1
F Fund Level Fees and Expenses (4.6) (4.6)
G Performance fee accrual - 4.0
Profit / (Loss) for the period D+E+F+G 76.1 (2.5)
Portfolio Operating Profit A+B+E+F 52.0 56.3
*Performance summary is unaudited and presented on a look through basis
Note: Please see from page 87 for definitions of the APMs used in the table
above.
The product and chemical tanker markets strengthened during the FY. The
capital value gain of US$24.1m was due to higher charter-free values, in
product tankers and bulkers, outweighing the increase in negative charter
values largely attributable to the strong product tanker market. The bulker
market started the FY with rates at multi-year lows and slowly improved with
rising rates and values.
At the end of the FY, the portfolio had a total negative charter value of
US$50.5m (FY 2023: US$49.5m). Ceteris paribus, the negative charter value is
expected to unwind (i.e. increase NAV) in the medium term as the current
charters are completed. From the end of July 2023, four bulkers Anvil,
Awesome, Auspicious and Charming were fixed on index-linked charters in order
to benefit from the improving market.
Towards the end of the FY, the Company switched one bulker, Auspicious, from
an index-linked charter back to a high fixed-rate charter to commence from the
end of July 2024. The Investment Manager expects continued improvement in the
bulker market and may switch employment strategies to opportunistically
capture strong yields on a risk-adjusted basis.
Across the main segments, Gross Operating Profit contribution during the FY,
compared to the previous FY comprised the following factors:
· Product tankers - higher because:
o full period contribution from all vessels including Mindful and Courteous
which were acquired during the previous FY;
o Exceptional's charter was extended starting January 2024 at a higher rate;
and
o Higher rate periods commenced on Cocoa's and Daffodil's charters during
the FY.
· Chemical tankers - higher as both our chemical tankers, operating
in a pool, benefited from the rising market.
· Bulkers - lower as the market recovered slowly from the very low
levels at the beginning of the FY and our vessels were on short-term charters.
Segment performance summary*
Segment Performance During the FY Product Chemical Gas Containership(**) Bulkers Total
Tankers
Tankers
Tanker
US$m unless otherwise stated
Gross Operating Profit 32.0 10.6 4.2 0.9 15.0 62.7
Loan interest & fees (6.6) - - - - (6.6)
Gain / (loss) in charter-free values 23.2 0.8 (1.4) 0.1 7.0 29.7
Gain / (loss) in charter values (4.6) - - - (1.0) (5.6)
Portfolio profit / (loss) 44.0 11.4 2.8 1.0 21.0 80.2
*Segment analysis is unaudited and presented on a look through basis
**The Company divested its last containership in 1Q23. Closing adjustments
reflected here.
At the end of the FY, the Company's diversified portfolio had high cash flow
visibility from long-term charters on product tankers (33.9% of NAV). The
Company's two chemical tankers, which represent 8.6% of NAV, benefit from
exposure to the strong spot market as they operate in a pool. The Forecast Net
Yield on our chemical tankers is based on our expectation of continued market
strength. The yield on the Company's bulkers (37.5% of NAV) rose to 11.6%,
from 8.4% at the end of June 2023, as the market improved during the FY.
Segment exposure and forecast net yields*
Segment Exposure and Forecast Yields** Product Chemical Gas Bulkers Total
Tankers
Tankers
Tanker
% of NAV 33.9% 8.6% 5.2% 37.5% 85.2%
Forecast Net Yields** 10.0% 24.5% 17.4% 11.6% 12.4%
*Segment analysis is unaudited
** Based on the market values at 30 June 2024, post divestment of Dachshund
As at 30 June 2024, the Company's vessels (post divestment of Dachshund) had
an average age of 12.2 years (FY 2023: 11.4 years) and were chartered to nine
different counterparties.
Review of performance since inception
Since inception, the Company has delivered on its original investment
objectives including:
· Diversified portfolio.
· Provided investors a strong and growing dividend. Target annual
dividend increased by c.21% from US$0.070 per share to US$0.085 per share
through the end of 2023. This was further increased by 17.6% to US$0.10 per
share starting 1Q24. Please see the charts below.
· Total capital raised: US$316.5m gross through primary and secondary
issuances. Since inception, the Company has returned US$145.5m in the form of
dividends and share buybacks.
· Net Company IRR is 14.4%, ahead of its 12% IRR target published in
its prospectus documents.
· Acquired 39 vessels with low leverage and divested 19 vessels
(including Dachshund) at c.6% above NAV in aggregate. Aggregate realised net
IRR on all divestments is c.24%.
· Low NAV volatility due to diversification, limited use of leverage
and high charter cover.
· Capital re-allocation based on rigorous fundamental analysis,
industry knowledge and ESG: divested containerships and older bulkers to
re-allocate capital into less emission-intensive bulkers and tankers.
· The operating emissions intensity of the portfolio was reduced by
c.41% between 2019 and 2023.
· Further emissions reduction expected from Energy Saving Device
("ESD") retrofits, completed on nine vessels and planned for four other
vessels during their next docking. Eight other vessels are already
fuel-efficient relative to their peers.
As per the Company's share price discount management policy, the Company
repurchased 11,386,000 shares during the FY and has therefore purchased a
total of 17,546,000 of its own shares from 4Q22 until the end of the FY.
Tufton Investment Management Holding Limited Group ("Tufton Group")
Stakeholders held ~4.9% of the issued share capital in the Company at the end
of June 2024 (FY 2023: ~3.7%).
Mid-Term strategy review
In January 2024, the Board reviewed the Company's performance since inception
and requested the Investment Manager to conduct a study of the opportunity set
and strategy for the Company.
The review concluded that the correct strategy for SHIP over the medium term
through to 2030 is to continue investing in fuel-efficient secondhand vessels
to maximise shareholder returns. In addition, the review concluded to start
divesting the Company's portfolio of assets from 2028, well before the
decarbonisation of shipping accelerates. The review highlights are documented
on page 2.
Compulsory Redemption
On 15 August 2024, the Company announced the return of approximately US$31.5m
by way of the compulsory Redemption of up to 20,326,211 Shares. The Redemption
was effected at a price of US$1.550 per Share, being the NAV per Share as at
30 June 2024, pro-rata to holdings of Shares on the Company's register of
members at close of business on 14 August 2024 (the "Redemption Record Date"),
being the record date for the Redemption. The record date for the Company's
quarterly dividend for the three months ending 30 June 2024 (the "2Q24
Dividend") was 26 July 2024 (the "Dividend Record Date"), which precedes the
record date for the Redemption. Accordingly, Shareholders were eligible to
receive both the 2Q24 Dividend and proceeds from the Compulsory Redemption on
the basis they continue to own Shares on each of the 2Q24 Dividend Record Date
and the Redemption Record Date respectively.
Amendments to Investment Policy
Before June 2024, the Company's existing Investment Policy restricted it from
making new investments that would result in any shipping Segment (i.e.
Tankers, General Cargo, Containerships and Bulkers) accounting for more than
50% of NAV.
The Board sought and obtained Shareholder approval to ease the above
investment restriction such that:
· the restriction on making further investments that would result in
a shipping Segment accounting for more than 50% of NAV will only apply where
the Company is invested in at least three shipping Segments; and
· where the Company is only invested in two shipping Segments: (i) no
further investment may be made that results in any shipping Segment accounting
for more than 75% of NAV; and (ii) if the Tankers shipping Segment accounts
for more than 50% of NAV and exposure is only to a single Tanker sub-segment
(i.e. crude tankers, product tankers, chemical tankers, gas tankers), no
further investment may be made in such tankers sub-segment.
The Company's share price has increased by c.37% between the beginning of 2024
and the end of August 2024. The Investment Manager believes the strong
performance signals investor endorsement of the Company's performance as well
as its disciplined approach to capital allocation.
The Assets
The Company's portfolio as at 30 June 2024:
SPV(+) Vessel Type and Year of Build Acquisition Date Expected end of charter period**
Anvil Handysize bulker built 2013 September 2021 April 2025
Auspicious Handysize bulker built 2015 February 2022 August 2024
Awesome Handysize bulker built 2015 January 2022 September 2024
Charming Handysize bulker built 2015 June 2022 August 2025
Cocoa Handysize product tanker October 2020 January 2026
built 2008
Courteous MR product tanker built 2016 December 2022 December 2026
Dachshund Handysize product tanker February 2020 NA - divestment
built 2008 closed on 1 July 2024
Daffodil Handysize product tanker October 2020 March 2026
built 2008
Exceptional MR product tanker built 2015 April 2022 December 2025
Golding 25,600 DWT stainless steel chemical tanker built 2008 April 2021 NA - vessel is employed in a pool
Idaho Ultramax bulker built 2011 July 2021 December 2024
Laurel Handysize bulker built 2011 July 2021 December 2024
Marvelous MR product tanker built 2014 July 2022 November 2026
Masterful Handysize bulker built 2015 April 2022 September 2024
Mayflower Handysize bulker built 2011 June 2021 July 2024
Mindful MR product tanker built 2016 December 2022 December 2026
Neon Mid-sized LPG carrier built 2009 July 2018 August 2025
Octane MR product tanker built 2010 December 2018 October 2025
Orson 20,000 DWT stainless steel chemical tanker built 2007 July 2021 NA - vessel is employed in a pool
Rocky IV Handysize bulker built 2013 September 2021 December 2024
Sierra MR product tanker built 2010 December 2018 November 2025
Notes:
+ SPV that owns the vessel.
** Based on our assessment of the prevailing market conditions at 30 June
2024.
The market for secondhand ships is liquid with >US$40 billion worth of
annual transactions in 2022 and 2023. The charter-free and associated charter
values of the Company's standard vessels are calculated using the online
valuation platform provided by VesselsValue which utilises transaction data as
well as other market data to estimate charter-free values. The Company's NAV
is, in effect, proven by recent market transactions. During the FY, the
Company agreed to divest Pollock and Dachshund at a 3.1% premium to the two
vessels' most recent holding NAV. Divestments to date have been in aggregate
c.6% above NAV.
As at 30 June 2024, the Company owned twelve tankers as follows:
Tankers Employment Comments
Octane and Sierra Time chartered ("TC") to an investment grade oil major The charterer exercised their optional periods until October 2025 and November
2025 respectively.
Dachshund, Cocoa, Daffodil, Marvelous, Mindful and Courteous TC to a major commodity trading and logistics company Dachshund was divested and delivered to its new owners on 1 July 2024
Exceptional TC to a leading tanker shipping company -
Orson and Golding 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.
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.
As at 30 June 2024, the Average Charter Length of the tankers (excluding Orson
and Golding) was 1.80 years (FY 2023: 2.0 years).
As at 30 June 2024, the Company owned nine bulkers, as follows:
Bulkers Employment Comments
Awesome and Laurel TC to a leading merchant and processor of agricultural goods After the end of its index-linked charter to an operator of bulkers in August
2024, Awesome commenced another index-linked charter for 9-12 months at a
slightly higher rate than previously. Laurel's time charter was extended by
4-7 months from May 2024 at a slightly lower rate than previously.
Anvil and Auspicious TC to an operator of bulkers Anvil's index-linked charter was extended by 9-11 months commencing from May
2024 at a slightly higher rate than previously. After the end of its
index-linked charter in July 2024, Auspicious commenced a time charter for 5-7
months at a higher rate than previously.
Idaho and Mayflower TC to a leading owner and operator of bulkers Mayflower's time charter was extended by 4-6 months from March 2024 at a much
higher rate than previously.
Charming and Masterful TC to a leading merchant and processor of agricultural goods Charming's index-linked charter was extended by 10-12 months commencing from
August 2024 at the same rate as previously whilst Masterful's time charter was
extended by 3 months from September 2024 at a slightly lower rate than
previously.
Rocky IV TC to an owner and operator of bulkers Rocky IV's time charter was extended by 3-6 months from June 2024 at a much
higher rate than previously.
At 30 June 2024, the Average Charter Length on our bulkers was 0.35 years (FY
2023: 0.22 years). We have chosen to employ many of our bulkers on
index-linked charters in anticipation of ongoing market improvement. Please
see the Shipping Market section of this Report.
The Company's fleet across all segments performed well. Marvelous, Mindful,
Courteous, Exceptional, Awesome, Auspicious, Masterful and Charming are in the
top quartile of fuel efficiency in their market segments.
The Shipping Market
The Company aims to provide investors with an attractive level of regular and
growing income and capital returns through investing in secondhand commercial
sea-going vessels, with the portfolio diversified across the main segments of
shipping including tankers, bulkers, general cargo and containerships. The
ClarkSea Index, a broad vessel earnings indicator from Clarksons Research,
ended the FY at US$28,325/day, c.31% higher than at the end of June 2023.
The combination of price inflation (commodity, wage), reduced shipyard
capacity and tightening environmental specifications continue to boost
newbuild prices leading to higher values for secondhand vessels. The Clarksons
Research Newbuilding Price Index rose 9.5% during the FY and has risen c.49%
since the end of 2020. Shipyard capacity fell by ~35% in the 2010s and is now
expanding only incrementally (mainly in China). Slot availability is very
tight. Shipyard orderbook forward cover (i.e. the number of years required to
deliver the orderbook at the output level of the last 12 months) was 3.4 years
at the end of the FY (FY 2023: 3.7 years). Global seaborne trade is expected
to grow by c.5% in 2024, exceeding the long-term trend rate of c.3% CAGR
between 2003 and 2023 mainly due to the effect of disruption of traditional
trade routes.
Trade routes tend to be optimised across the industry, so disruption of
traditional trade routes often results in diversion through longer routes
which reduces the available vessel capacity. During the FY, transit through
two key global shipping routes, the Panama Canal and the Suez Canal, faced
disruption. Vessel transit through the Panama Canal was disrupted from late
October due to an ongoing drought while transit through the Suez Canal was
disrupted as Houthi rebel attacks on vessels in the Red Sea escalated from
late November. Disruption of canal transit causes re-routing of cargo via
alternate routes which typically take much longer and add to shipping demand.
For example, disruption of transit through the Suez Canal is estimated to add
c.3% to global shipping demand growth predominantly due to re-routing around
the Cape of Good Hope. Impact of disruption of transit through the Panama
Canal is harder to measure with a larger variety of alternate (often
land-based) routes.
As of June 2024, vessel transit through the Panama Canal is returning to
normal while traffic via the Suez Canal remains at very low levels due to the
ongoing risk of attacks. This section utilises data from the Tufton Real-Time
Activity Capture System ("TRACS") which analyses satellite data to track the
international shipping fleet by the major segments.
TRACS uses the draught of each vessel as a proxy for its utilisation and
thereby enables us 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
Product tanker demand growth is benefiting from refinery capacity expansions
in Asia and the Middle East. Additionally, demand growth accelerated from
mid-2022 as the war in Ukraine partially replaced some demand for short-haul
product tanker cargoes with demand for long-haul cargoes: increasing Russian
exports to Asia and increasing European imports from non-Russian suppliers
including the Middle East, the US and Asia.
Over the FY, demand growth was further boosted by the disruption of vessels
transiting the Suez Canal because of attacks by the Houthi rebels on vessels
In the Gulf of Aden. The disruption of normal traffic through the Suez Canal
resulted in vessel re-routing around the Cape of Good Hope, increasing voyage
duration. The longer voyage time added to tonne-mile demand and further
tightened the Product Tanker market.
The strong fundamentals in the product tanker segment have attracted capital
to newbuild investments. The product tanker orderbook rose from c.9% of fleet
as at the end of June 2023 to 16% of fleet at the end of the FY. A significant
portion of the new orders are focused on the larger Long Range segment. The
orderbook for crude tankers remained relatively low at c.9% of fleet at the
end of the FY. Despite the increase in the orderbook, the supply side for
product tankers remains supportive as c.15% of the product tanker fleet is
>20 years old.
Older vessels are typically less fuel-efficient and less flexible
operationally so tend not to be favoured by top-tier charterers such as oil
majors and global trading firms. Further, due to limitations in available yard
capacity at quality yards the delivery cadence of the recent new orders is
distributed over 3+ years resulting in manageable fleet growth relative to
demand growth. Over the FY, 1-year time charter rates for MR product tankers
rose c.17% to c.US$34,100/day.
The chemical tanker market also benefits from good supply-side fundamentals
with an orderbook c.10% of fleet and strong demand growth forecast compared to
c.18% of the fleet >20 years old. 25-30% of MR product tankers can engage
in the chemicals/vegetable oil trade. The chemical tanker market benefits as
MR product tankers shift to the tight product tanker market. The Company's
chemical tankers benefit from this trend as they are employed in a
revenue-sharing pool and have spot market exposure. 2Q24 Chemical tanker pool
earnings for 19.9k dwt vessels averaged c.$23,800/day.
Bulkers
The bulker market strengthened during the FY due to a combination of improving
demand growth and the impact of reduced transit through the Panama Canal.
Variations in Chinese demand continue to present a near term downside risk as
Chinese demand is an important part of the bulker market.
From the end of July 2023, we chose to employ some of our bulkers on
index-linked charters in anticipation of market improvement. Over the FY,
1-year time charter rates for Handysize bulkers rose c.34% to c.US$14,360/day.
The bulker orderbook rose from the very low level of c.8% of fleet in June
2023 to 9.5% of fleet at the end of the FY. Despite the increase in the
orderbook, the supply side for bulkers and small bulkers (10k-69.9k dwt) in
particular looks supportive with c.8.5% of the total Bulker fleet and c.12% of
the small bulker fleet >20 years old. Also, due to limitations in available
yard capacity at quality yards the delivery cadence of the recent new orders
is distributed over 3+ years resulting in manageable fleet growth relative to
demand growth.
Across the major segments, the combination of tightening environmental
regulations and low shipyard capacity suggests newbuild prices of bulkers and
tankers will remain high thereby also supporting secondhand prices in the
medium term. Global shipyard capacity started increasing from recent lows but
remains c.30% below the 2011 peak. Newbuild prices are supported by wage
inflation for skilled labour in the major shipbuilding nations.
Further, latest newbuild designs incorporate more flexible machinery and
storage systems to handle multiple fuel types to reduce emissions. These
further increase newbuild prices. Environmental regulations from the IMO to
measure and improve vessel carbon emission intensity incentivise lower speeds
resulting in reduced shipping capacity, aiding the supply-side adjustment. The
combination of supply constraints and high replacement costs creates an
attractive investment environment for fuel-efficient secondhand vessels in the
medium term. The Company's fuel-efficient vessels are likely to benefit.
Environmental, Social and Governance Report
The Investment Manager, Tufton, emphasises the principles of Responsible
Investment in the management of the Company's assets through awareness and
integration of ESG factors into our investment process in the belief that
these factors have a positive impact on long-term financial performance. We
recognise that our first duty is to act in the best financial interests of the
Company's Shareholders and to generate attractive financial returns against
acceptable levels of risk, in accordance with the objectives of the Company.
We have been a signatory of the United Nations Principles of Responsible
Investment ("UN PRI") since December 2018 and have a Responsible Investment
policy statement which is available on Tufton's website. In the 2023 UN PRI
signatory assessment, Tufton achieved scores higher than our peer group in all
three assessment categories. Please see the 2023 UN PRI scoring methodology
(https://dwtyzx6upklss.cloudfront.net/Uploads/f/k/l/02.2023assessmentmethodology_04.12_final_758018.pdf)
for details.
The Company's Board does not have a separate ESG committee but collectively
reviews progress against the policy statement as part of the Company's annual
Sustainability Report which will be publicly available on the Company's
website (www.tuftonoceanicassets.com (http://www.tuftonoceanicassets.com) ).
ESG highlights of the financial period include:
· The Company's operating emissions intensity, as measured by the
Energy Efficiency Operating Index ("EEOI") improved by c.11 % during 2023
primarily because of capital re-allocation but also from ESD retrofits.
· ESDs retrofits have been completed or substantially completed on
nine vessels. We have started receiving the efficiency hire rate premia on
eight of the vessels and expect to start receiving the premium on one vessel
from 2H24.
We aim to minimise coal carriage on the Company's vessels. In June 2023,
Tufton committed to limiting revenues from transportation of thermal coal to
5% of the Company's total consolidated revenues. In 2H23, one bulker (Anvil)
carried thermal coal during one voyage and in 1H24, Idaho and Anvil had
voyages with coal carriage. Over the FY, revenues from thermal coal carriage
corresponded to c.1.2% of SHIP consolidated revenues.
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 which requires 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 has adopted its own control review to ensure that risks are
monitored appropriately, mitigation plans are in place, and that emerging
risks are 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. Whilst the
Investment Manager monitors and puts in place controls to mitigate risks, risk
and uncertainty cannot be eliminated.
In addition to the established principal risks, in the current period, the
Board considered the conflict in the Middle East and the actions of the Houthi
rebels in the Red Sea in the context of whether this situation indicated the
existence of an emerging risk for the Company. After proper consideration of
the situation and its possible economic impacts, the Board concluded that
given the nature of the vessels currently held it was unlikely to materially
impact the Company's results or operations.
The Board consider that the above risk and the emerging risks identified in
prior periods are adequately addressed by the overall risk control and
monitoring processes in place.
The following table shows the Board's view of the principal risks to the
business and efforts to mitigate those risks. The Board considers that no
additional mitigation steps are required at this time.
Underlying cause of risk or uncertainty Objective impacted Control or mitigation implemented
(in what way)
Demand for shipping may decline, either because of a reduction in Capital growth This risk cannot be controlled, but is mitigated by:
international trade (e.g., "trade wars") or because of general GDP growth
slowing. Vessel values - diversification to reduce reliance on any particular segment,
sector or geography;
Loss of Income
- focus on fleet vessel quality and specifications to improve
utilisation;
- longer term employment strategy to reduce market exposure; and
- ultimately, lower charter rates could be accepted in order to
ensure the employment of the vessels.
Failure of, or unwillingness of, a vessel charterer to meet charter payments. Liquidity Charter counterparty credit worthiness is subjected to extensive checks prior
to and throughout a charter. In the unlikely event of default the Board
Dividends believes there will be no issues finding alternative employment for any of the
ships in the portfolio at prevailing market rates.
Loss of income
Vessel maintenance or capital expenditure may be more costly than expected due Capital growth The Company monitors maintenance and capital expenditure through experienced
to delays, resource constraints or inflation generally.
technical managers. Assessments of expected capital expenditure are made prior
Dividends to investing in a vessel.
Liquidity
Vessel values It is important to note that whilst the Company's fleet has experienced
increases beyond budgeted costs, such increases were not so significant as to
undermine the initial investment decision.
A vessel may be lost or significantly damaged. Capital growth Measures to mitigate operational risks are included in the employment charters
of the Company's vessels including:
Vessel values
- avoiding conflict areas;
- daylight sailing, naval escort or route planning to avoid higher
risk areas; and
- detailed best practice operating procedures to be followed.
Comprehensive insurance protection is in place at all times to cover inter
alia significant damages to or loss of vessels.
The Company may not have enforceable title to the vessels purchased. Liquidity The Company has engaged a very experienced Investment Manager who is
responsible for establishing such title. This is then monitored by the
Vessel values Administrator and the Depositary on behalf of the Board using publicly
available information.
Failure of, or unwillingness of, other non-charterer counterparties to meet Capital growth The Board relies on the Investment Manager and Asset Manager, who in turn rely
their obligations.
on third party service providers for performance of services integral to the
Loss of income operations of the Company.
The Asset Manager constantly monitors the performance of all the Company's key
operational service providers, especially the technical managers and the
administrator.
Failure of, or unwillingness of, other non-charterer counterparties to meet SPV operating accounts are held with one or more unrated banks, because those
their obligations (continued). banks have a strong track record of facilitating shipping
transactions/operations. Exposures to such banks are limited to US$10m per
bank in total for all SPVs.
Investable funds are invested with banks of an A- (or equivalent) or higher
credit rating as determined by an internationally recognised rating agency.
Credit ratings and overall limits are monitored by the Administrator, who
reports exceptions and exposure levels to the Board.
Failure of systems or controls in the operations of the Investment Manager, Capital growth This risk cannot be directly controlled but the Management Engagement
Asset Manager or the Administrator and thereby of the Company including
Committee regularly review the performance of the service providers and their
Cybersecurity. Loss of assets Reputation or regulatory permissions and resulting fines internal controls through making enquiries, and inspection visits. Wherever
possible and relevant, the Investment Manager purchases insurance to mitigate
operational risks such as cyber security.
Failure to comply with sanctions applicable to vessels or their cargo. Capital growth The Investment Manager assesses the bona fides of prospective charterers
before contracts are entered into and also monitors the operations of the
Loss of assets Reputation or regulatory permissions and resulting fines vessels owned by the Company's SPVs to ensure that all applicable sanctions
are complied with.
The Company shares trade at discount to the underlying NAV. Capital growth The Board monitors the level of both the absolute and sector relative discount
at which the shares trade. The Company has authority, when it deems
Liquidity appropriate, to buy back its existing shares to enhance the NAV per share for
remaining shareholders and to reduce the absolute level of discount and
discount volatility.
The Board has taken various actions over the FY to address the discount and is
encouraged to note that the discount of NAV of the Company's shares narrowed
from ~27% in June 2023 to ~17% in August 2024.
Environmental damage, contamination and/or pollution caused by a vessel owned Liquidity The Investment Manager arranges for environmental due diligence in respect of
by the Company's SPVs.
all vessels considered for acquisition by the Company's SPVs to identify
Vessel values potential sources of pollution, contamination or environmental hazard for
which that vessel may be responsible and to assess the status of its
Loss of income environmental regulatory compliance.
Reputation or regulatory permissions and resulting fines
The Asset Manager maintains a detailed manual that documents best practice
operating procedures to be followed by crew and technical staff. The Asset
Manager reviews the environmental performance of key service providers and all
vessels and reports its findings to the Investment Manager annually.
Protection and indemnity mutual insurance overseen by the Asset Manager
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 statement. The Board reviews both the Company's and the
Investment Manager's policy and its implementation at least annually.
Please see the Investment Manager's Sustainability Report on the Company's
website (www.tuftonoceanicassets.com (http://www.tuftonoceanicassets.com) )
for details.
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
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 registration 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 2024, the Company had 291,082,541 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 FY, the Company bought back 11,386,000 shares. Effective
15 August 2024, the Company trades under new ISIN: GG00BSFVPB94, and SEDOL:
BSFXP71 post completion of the compulsory Redemption.
The Company makes its investments through LS Assets Limited ("LSA") and other
underlying SPVs, which are ultimately wholly owned by the Company. LSA 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 LSA are 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 LSA 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 FCA and has been authorised to act as a Full Scope Registered
UK AIFM under 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. 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 in accordance with 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 Board confirms that it has reviewed the Company's systems of risk
management and internal control for the year ended 30 June 2024, and to the
date of the approval of this annual report and audited financial statements.
The main features of these systems are segregation of activity between service
providers and critical review and cross checking by both those service
providers and the Board. For further details of the key risks and
uncertainties the Directors believe the Company is exposed to together with
the policies and procedures in place to monitor and mitigate these risks,
please refer to pages 20 to 23 of the annual report and audited financial
statements.
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 solely of independent Directors, it has
decided 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:
· supporting 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.
The Board has not deemed it necessary to appoint a separate nomination
committee and therefore the role typically undertaken by such a 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, 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 Listing Rules regarding diversity do not directly apply to the Company
since it is a member of the Specialist Fund Segment, however, the Board is
currently 40% female. It is important to preserve the current knowledge and
experience of the Board but further consideration will be given on a voluntary
basis to diversity guidelines during the course of implementing any future
succession plans.
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 eight years or less. 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 receive other relevant training as
necessary on their on-going responsibilities in relation to the Company.
Environmental, 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 Sustainability Report 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 where 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 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 Company. Compliance with laws and regulations.
Growth of the Company. Compliance with laws and regulations. Impact of the Company and its activities on third parties.
Liquidity of the shares. Remuneration.
Valuation of vessels.
Engagement process
Annual General Meeting. The main two service providers - Tufton Investment Management Ltd (Investment The Company and its SPVs themselves have only a very small footprint in their
Manager) and Apex Administration (Guernsey) Limited ("Administrator") - engage local communities and only a very small direct impact on the environment.
with the Board in face-to-face meetings quarterly, giving them direct input to
Board discussions.
Frequent meetings with investors by Brokers and the Investment Manager and
subsequent reports to the Board. However, the Board acknowledges that it is imperative that everyone
contributes to local and global sustainability.
Where face-to-face contact has not been possible engagement has continued via
video conferencing services such as Microsoft Teams.
Quarterly factsheets.
The activities of the Company in this regard, and in particular concerning the
vessels owned, are reflected within the Company's Sustainability Report and
All service providers are asked to complete a questionnaire annually which the Responsible Investment Policy of the Investment Manager.
Key Information Document. includes feedback on their interaction with the Company, and the Board
ordinarily undertakes an annual visit to the offices of the Investment Manager
and its associated companies in London, Cyprus and the Isle of Man.
Rationale and example outcomes
Clearly investors are the most important stakeholder for the Company. Most of The Company relies on service providers (including the Investment Manager, The Board and the Investment Manager work together to ensure that ESG factors
our engagement with investors is about "business as usual" matters, but has Asset Manager, Administrator and technical managers) entirely as it has no are carefully considered and reflected in investment decisions, and that
also included discussions about the discount of the share price to the NAV. systems or employees of its own. vessel operators are influenced positively. See page 19 for details of the
Company's approach in this area.
The major decisions arising from this have been - During the year a decision was made to retain some cash rather than distribute
all available funds to investors through compulsory Redemption. This was to Board members do travel, partly to meetings in Guernsey, and partly elsewhere
· Seeking to ensure long-term value and opportunities to realise value ensure that the Company had sufficient capital to fulfil any recommendations on Company business, including for the annual due diligence visits to London,
through sales of vessels. made by the Investment Manager such as acquiring new vessel. Cyprus and the Isle of Man. The Board considers this essential in overseeing
service providers and safeguarding stakeholder interests. Otherwise, the Board
· Buying back shares in an attempt to reduce or at least contain the seeks to minimise travel using video conference calls whenever good governance
share price discount.
permits.
The Board always seeks to act fairly and transparently with all service
· Carrying out a strategy review, the results of which were announced on providers, and this includes such aspects as prompt payment of invoices.
17 January 2024.
The Board has continued to focus on the reliability of the valuation of
vessels, a key priority for shareholders. As a result, the Board placed
greater emphasis on reviewing the output from the VesselsValue system used and
charter rates to value most of the Company's fleet 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
(mailto:SHIP@tuftonoceanicassets.com) on these or any other matters.
Statement of Directors' Responsibilities
The Directors are responsible for preparing an Annual Report and Audited
Financial Statements for each FY 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
FY. Under that law the Directors have elected to prepare the financial
statements in accordance with IFRS accounting standards 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 in co-operation
with Hudnall Capital. 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 enabling 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
Accounting Standards 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 47 to 49.
Furthermore, the Board believes that the Annual Report and Audited Financial
Statements 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 2024, 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 2024, taken as a whole, are fair, balanced and understandable
and provide the information required to assess the Company's performance,
business model and strategy.
…………………………
…………………………
Rob
King
Stephen Le Page
Director
Director
Report of Directors
The Directors present their Annual Report and the Audited Financial Statements
of the Company for the year ended 30 June 2024.
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, LSA, which is governed by the same
Directors as the Company.
On 17 January 2024 the Company announced the results of a strategy review
carried out by the Board in conjunction with the Investment Manager. This
review did not result in any change to the above Objective or Policy, but did
clarify the basis on which capital allocation decisions would be made through
to the end of the decade.
All vessels acquired, vessel-related contracts and costs will be held by 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
applies 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. The Company raised its
target annual dividend to US$0.10 per share starting 1Q24 (previously US$0.085
per share).
The Company aims to achieve an IRR of 12% or above (net of expenses and fees)
on the Issue Price over the long term.
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 (http://www.tuftonoceanicassets.com) and is
maintained by the Investment Manager.
The Company has a 30 June financial year end.
Share issues and buybacks
The Company has not issued any shares in the year ended 30 June 2024 nor in
the period to 25 September 2024. On various occasions during the year ended 30
June 2024 the Company purchased a total of 11,386,000 shares at a weighted
average price of US$1.014. Since 1 July 2024 to 25 September 2024, 20,326,211
shares have been bought back via a compulsory Redemption at an effective price
of US$1.550.
Accordingly, the Company had 270,756,330 shares in issue on 15 August 2024 and
as at the date of signing these financial statements. All shares repurchased
are held in treasury.
Results and dividends
The Company's performance during the year is discussed in the Chairman's
Statement on page 3. The results for the year are set out in the Statement of
Comprehensive Income on page 57.
The Directors of the Company who served during the year and to date are set
out on pages 35 to 36.
Directors' interests
The Directors held the following interests in the share capital of the Company
either directly or beneficially as at 30 June 2024, and as at the date of
signing these financial statements:
25 September 2024 30 June 30 June
2024 2023
Director Shares(1) Shares Shares
R King 55,811 60,000 60,000
S Le Page 38,387 41,268 40,000
P Barnes 4,651 5,000 5,000
C Rødsaether 27,906 30,000 30,000
T Le Noury(3) 4,651 5,000 -
1 Further to the announcement on 15 August 2024 in relation to the
compulsory Redemption of the Company's ordinary shares, the Directors have
each had Shares redeemed.
The Directors fees are as disclosed below:
30 June 2024 30 June 2023
Director £ £
R King 43,500 39,305
S Le Page 40,500 36,000
P Barnes 37,750 33,525
C Rødsaether 37,000 33,525
T Le Noury(3) 25,135 -
Directors' Attendance
Attendance of Directors at each meeting held during the year:
Director Quarterly Board meetings Audit Committee Ad hoc meetings
Held Attended Held Attended Held Attended
R King 4 4 2 1 14 13
S Le Page 4 4 2 2 14 13
P Barnes 4 4 2 1 14 12
C Rødsaether 4 4 2 1 14 10
T Le Noury 2 2 1 1 8 7
Other Interests
Tufton Group related stakeholders including current & former shareholders,
employees, and non-executive directors directly or beneficially held ~4.9% of
the issued share capital as at 30 June 2024 (FY 2023: ~3.7%). Refer to note 15
for details on ordinary shares held and note 7 for rights and obligations of
the Company's 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. The Directors may
implement share buybacks at any time before the 90-day guideline set out in
the Prospectus where they feel it is in the best interest of the Company and
all shareholders. 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.
The Company purchased 11,386,000 of its own shares at a weighted average price
of US$1.014 per share during the FY, for a total consideration of
US$11,573,679. The purchased shares are held in treasury. Refer to Note 7 for
more details. There were 17,546,000 shares held in treasury and 291,082,541
shares outstanding as at the end of the FY.
Companies 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
Companies 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.
Change of Articles and Compulsory Redemption
The Directors to allot and issue shares, to grant rights to subscribe for or
to convert any security into shares and to make offers or agreements to allot
and issue equity securities (as defined in Article 5.1(a) of the Articles) for
cash and/or to sell Ordinary Shares held by the Company as treasury shares as
if the pre-emption rights contained in Article 5.2 of the Articles.
A resolution was passed by the Company's shareholders at its Extraordinary
General Meeting on 11 June 2024 to enable compulsory Redemptions of the
Company's ordinary shares. On 14 August 2024 the Company compulsorily redeemed
20,326,211 shares at a price of US$1.550 per share for close of business for
cancellation, returning US$31.5m to shareholders, paid on 28 August 2024. The
Company had 270,756,330 shares outstanding as at the date of approval of these
accounts.
Board Responsibilities and Corporate Governance
Please note the Corporate Governance Statement on pages 25 to 29 forms part of
this report.
Board Members
The Company's Board of Directors comprises five 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 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 at
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 two other London listed funds,
Volta Finance Limited and Amedeo Air Four Plus 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. Paul chairs
the recently formed Management Engagement Committee.
Christine Rødsaether
Christine is a partner in law firm Simonsen Vogt Wiig, with more than 35
years' experience advising clients in the international shipping and offshore
sectors, in relation to design, construction, operation, financing, sale and
purchase of vessels and offshore installations, restructuring and
reorganisation of companies and financing of assets, representing major
international financiers. 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 chemical tanker
and tank terminals owner and operator Odfjell SE and privately owned Mosvolds
Rederi and Lufttransport Adm. AS. Christine is Norwegian and is resident in
Norway.
Katriona Le Noury ("Trina") - appointed 1 November 2023
Trina is a qualified chartered accountant with more than 20 years' experience
working in the funds industry. Before becoming an independent non-executive
director in 2023, she held senior management positions at two separate Private
Equity firms, including holding directorships on the respective firms' fund
General Partner boards. She currently serves on the board of JPEL Private
Equity Limited and Fair Oaks Income Limited, both London listed investment
companies, as well as four private companies for a leading global private
equity firm and two not-for-profit organisations. Trina is British and a
resident in Guernsey.
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 affected 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 Articles also require that at each annual general meeting, all
the Directors will submit themselves for re-election. 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, the Board ensures 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.
In the process to recruit Ms Trina Le Noury to the Board the services of OSA
Recruitment Limited, an independent third-party consultant, were employed to
compile a list of candidates for the Board's consideration. Initial interviews
were carried out by the Guernsey resident directors and second interviews were
carried out by the rest of the Board using video conferencing facilities. At
the end of the selection process Ms Le Noury was identified as the most
suitable candidate for appointment to the Board. The Board have been briefed
by their legal advisers about their on-going responsibilities as directors and
Ms Le Noury participated in a formal induction process. It is the Board's
intention that a similar process will be followed for future appointments.
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 a 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
formally and rigorously evaluated by a self-assessment process coordinated by
the Administrator who circulates the findings to the Board. This evaluation is
performed annually. The last annual review took place in June 2024 with the
next annual review taking place in June 2025. 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 delegates 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, Trina Le Noury 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, quality of
work and the independence and objectivity of the Auditor, with particular
regard to non-audit services and fees.
Appointment, re-election and remuneration of Directors
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 two members of the Audit Committee has recent
and relevant financial experience.
Other Committees
The Company formed a Management Engagement Committee chaired by Paul Barnes in
2023, which also includes Stephen Le Page, Rob King, and Christine
Rødsaether.
The functions of the Management Engagement Committee are to review annually
the compliance by the Investment Manager with the Company's investment policy
as established by the Board and with the Investment Management Agreement
("IMA") entered into between the Company and the Investment Manager; and to
review annually the performance and remuneration of any other service
providers to the Company.
During the year, the Committee 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
Committee 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 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 has 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 24 October 2023. Another resolution for their appointment will be proposed
at the AGM on 24 October 2024.
Service Providers
The Investment Manager / Alternative Investment Fund Manager ("AIFM")
Tufton Investment Management Ltd, a specialist investment manager in maritime
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 this industry.
As of 30 June 2024, the Investment Manager manages investments of c.US$0.8
billion and mandated capital of c. US$1.5 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 operations 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 2024, the Tufton Group of which the Investment Manager is part,
had 29 employees operating from offices in London, Isle of Man and Cyprus. The
Investment Manager is fully dedicated to the shipping industry with in-house
research 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
transaction opportunities, conducting necessary due diligence, making
recommendations to the Board and completing the proposed transactions 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 AIFMD, is authorised and regulated
by the 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. In reviewing each potential investment, the Investment
Committee considers 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 investment 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
Apex Administration (Guernsey) Limited ("Apex") has been appointed as
administrator and secretary to the Company, pursuant to the Administration
Agreement dated 27 February 2017 and to LSA, pursuant to the Administration
Agreement dated 20 April 2018. Apex 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. Apex is also regulated
under The Regulation of Fiduciaries, Administration Businesses and Company
Directors, etc (Bailiwick of Guernsey) Law, 2020.
The Administrator forms part of the Apex Group Ltd ("Apex Group") established
in Bermuda in 2003. Apex Group is a global financial services provider which
delivers an extensive range of services to asset managers, capital markets,
private clients and family offices. The group employs over 13,000 staff in
over 100 offices worldwide and collectively administers in excess of US$200
billion 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.
Depositary
Apex Depositary (UK) Limited has been appointed as depositary to the Company,
pursuant to the Depositary Agreement dated 4 November 2022. The role of the
depositary will ensure that investment instructions from the Investment
Manager comply with the Law or Constitutional Documents of the Fund. Apex
Depositary (UK) Limited is an active company incorporated on 25 October 2013
with the registered office located in London. The Depositary also forms part
of the Apex Group noted above.
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.
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. Since April 2019, Tufton is an active member of the
Maritime Anti-Corruption Network ("MACN"), a global network to eliminate
corruption in the industry.
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 FCA as a Full Scope 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:
· Apex Administration (Guernsey) Limited ("Apex") is responsible for
the provision of administration, accounting and company secretarial duties.
Apex 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, Apex additionally has a role in cyber
security and the protection of the Company's data through the operation of
Information Security Protection Controls. Apex 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. It
is also the AIFM for the purposes of 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's 2023 Sustainability Report can be found on the Company's
website, (www.tuftonoceanicassets.com).
The Sustainability Report 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 Investment Manager seeks to align the Company's
strategy with best practices and market standards in all ESG and Responsible
Investment matters.
The Investment Manager 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 Sustainability Report includes further details on the Company's approach
to stakeholder engagement, 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 consider
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 Sustainability Report has
further information on how the Investment Manager practically implements and
considers the Policy when making investment decisions.
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 20 to 23 of these financial statements. The
Company is also required to hold a continuation vote at the AGM to be held 24
October 2024. Notwithstanding this, the Board have determined that a
three-year viability period is the most appropriate for viability testing
since they are advised by their corporate brokers that the shareholders are
unlikely to vote for discontinuation. The Board has considered the
cashflow-weighted average length of its charters. 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
target level.
The Board has also considered the cash flow projections for the Company and
its SPVs 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. The most extreme scenario
modelled resulted in unrestricted cash balances being exhausted in late 2025,
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
the Gas Tanker Neon after completion of its current charter in mid-2025, the
deferral of discretionary capital expenditure, and/or the deferral or
reduction of any dividend payment.
These scenarios allow for 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 and that the business model will remain applicable during the
viability period.
Going concern
In assessing the going concern basis of accounting the Directors have,
together with discussions and analysis provided by the Investment Manager, had
regard to the guidance issued by the Financial Reporting Council. They have
considered the possible impact of recent market volatility and geopolitical
events on the current and future operations of the Company and its
investments. 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 Company is required to hold a vote on the Continuation of the Company at
the AGM on 24 October 2024. During the year the Investment Manager and Brokers
engaged major shareholders regarding their voting intentions, and as a result
of these discussions and given the positive performance of the Company for its
life to date, the Directors hold the view that the Continuation Vote will be
for the Company to continue its operations. In the event the vote does not
pass, the Board have six months in which to bring forward proposals for the
future of the Company.
The Directors are satisfied that, at the time of approving the financial
statements, no other material uncertainties exist that may cast significant
doubt concerning the Company's ability to continue for the foreseeable future
concluding 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 these reasons, the Directors continue to adopt the
going concern basis in preparing the financial statements.
Further Details of 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
24 October 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 2024.
% of issued share capital
East Riding Pension Fund 10.48
South Yorkshire Pensions Authority 9.85
Schroder Investment Management 9.69
West Yorkshire Pensions Fund 8.09
Raymond James Investment Services 6.63
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 (http://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
(mailto: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 25 September 2024 and signed on behalf
of the Board by:
…………………………
…………………………
Rob
King
Stephen Le Page
Director
Director
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 (http://www.tuftonoceanicassets.com) .
During the year ended 30 June 2024 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 20 to 23);
· 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 Board has delegated 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, Trina Le Noury 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 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 two times during the year ended 30 June 2024
and once more since the year end. The Independent Auditors attended all of
these 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. The Audit 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 and the Investment Manager.
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 are the 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 63;
· the detailed approach to arriving at the estimate of fair value for
each vessel, SPV and the Guernsey holding company, LSA; and
· the determination of the Company's viability and the applicability
of the going concern assumption, on page 44 and 45.
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 values
provided by the Investment Manager, which uses valuation techniques
appropriate to each vessel, as its best estimate of fair value. For the
majority of the fleet this comprises values sourced from VesselsValue. 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 in accordance with market methodology, based on accurate
information, 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 IMA, the Company accrues performance fees based on the
size of the investment and the continued performance throughout the FY. The
accrual at year end is US$nil (2023: US$nil). The Board reviews and approves
the calculation.
External audit
During the year ended 30 June 2024, and up to the date of this report, the
Committee held formal meetings with the Independent Auditor on two 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
2024. 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 notes, following PwC rotation rules, Ross Burne has
been appointed the new engagement leader. Accordingly, the Committee has
recommended a resolution for their appointment to be proposed at the AGM on 24
October 2024.
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 30 to
31.
…………………………
Stephen Le Page
Chairman of the Audit Committee
Independent Auditor's report to the members of Tufton Oceanic Assets Limited
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 2024, and of its financial performance and its cash flows for the year
then ended in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting 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 2024;
● 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, comprising material
accounting policy information 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.
Material uncertainty related to going concern
We draw attention to note 2(m) in the financial statements, which indicates
that the company is due to hold a continuation vote at its Annual General
Meeting in October 2024. This event or condition indicates that a material
uncertainty exists that may cast significant doubt on the company's ability to
continue as a going concern. Our opinion is not modified in respect of this
matter.
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 (the "subsidiary"). The subsidiary in turn holds directly and
indirectly Special Purpose Vehicles ("SPVs") through which the underlying
vessels are held.
· The financial statements are not consolidated but instead present
the fair value of the subsidiary which includes the fair value of the
underlying vessels held via the SPVs and the other residual net assets of the
subsidiary and SPVs.
· 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, Apex
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
● Material uncertainty related to going concern.
● Valuation and ownership/existence of financial assets at fair
value through profit or loss.
Materiality
● Overall materiality: US$9.02 million (2023: US$8.26 million)
based on 2% of net assets.
● Performance materiality: US$6.77 million (2023: US$6.19
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 the auditor's professional
judgement, were of most significance in the 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.
In addition to the matter described in the Material uncertainty related to
going concern section, we have determined the matters described below to be
the key audit matters to be communicated in our report.
This is not a complete list of all risks identified by our audit.
Key audit matter How our audit addressed the Key audit matter
Valuation and ownership/existence of financial assets at fair value through Valuation
profit or loss (the "investments")
· We assessed the accounting policy for investments, as set out in
Please refer to Notes 2(j), 3 and 4 to the financial statements. note 2(j) for compliance with IFRS Accounting Standards.
Valuation
The Company's financial assets at fair value through profit and loss amounting · We obtained an understanding and evaluated the design and
to US$444.14 million comprises the Company's holding in its unconsolidated implementation of internal controls surrounding the valuation process.
direct subsidiary which further invests into SPVs (together the "entities").
The SPVs ultimately invest into a portfolio of shipping vessels (the
"underlying portfolio") and/or other residual net assets. The fair value of
the direct subsidiary investment has been determined based on the fair value For standard vessels:
of (a) the underlying portfolio and (b) the other residual net assets within
the entities. · We assessed the third-party vessel valuation service's
reputation, independence, competence and expertise through independent
The fair value of the underlying portfolio has been assessed using research, enquiry with the Investment Manager and auditor's experts.
methodologies deemed most appropriate by the Investment Manager and the Board,
taking into account whether the vessels are standard or specialised. In · We inspected and observed the independent valuations being
certain cases, management also consults an independent broker to establish the obtained by the Investment Manager in respect of 'charter free' values from
fair value of standard vessels. the third-party vessel valuation service.
The Board has detailed their considerations regarding estimation areas for · We assessed and challenged the charter lease contract adjustments
vessel valuation in Note 3. Note 4 provides a breakdown of the investments, made by the Investment Manager by comparing the actual charter rates, as
while Note 12 outlines the key assumptions used in the valuations. Both the documented by the SPVs for each vessel, to the market charter rates.
Board and the Investment Manager apply significant judgment and estimates in
determining the fair values of the underlying portfolio. · Where material, we assessed and agreed any capital expenditure
adjustments to appropriate supporting documentation.
For the residual net assets within the entities there is also a risk that the
valuations may be materially misstated arising from the misstatement of other · We agreed key inputs used by the third-party vessel valuation
assets and liabilities. service to independent sources or underlying agreements (which included such
details as the vessel build year, type, size etc).
Ownership/Existence
· We assessed and evaluated the discount rate used by the
The company's ownership in its subsidiary and the SPVs includes unlisted third-party valuation service in calculating the charter lease contracts
equity securities and shareholder loans so there is no central independent adjustments through enquiry with our auditor's expert.
depository or custodian. Similarly, there is no central depository or
custodian for each vessel. The investment in the subsidiary, SPVs, and vessels · We conducted back testing procedures by comparing the proceeds
is verified through legal ownership of the equity shares and the underlying received from the sale of vessels to the most recent valuations recorded in
portfolio. the SPVs'.
As a result of the above and given the significance of this balance in the
statement of financial position, the valuation and ownership/existence of
financial assets at fair value through profit or loss are considered key audit For specialised vessels:
matters.
· We reviewed and agreed the significant inputs used in the model
against signed agreements on a sample basis.
· We recalculated and assessed the exit values at the end of the
fixed charter period based on the terms applicable to each vessel, considering
management's intentions or agreements with counterparties (such as scrap value
or depreciated replacement cost, etc.).
· We assessed the counterparty credit conditions as at 30 June 2024
and challenged the reasonableness of the discount rate applied by benchmarking
them to market discount rates used by the third-party vessel valuation
service.
· We recalculated each vessel's discounted cash flow model to
confirm their mathematical accuracy.
For vessels valued by an independent broker:
· We obtained the independent broker valuations and evaluated the
reliability, independence, and reputation of the broker.
· We contacted the independent broker directly to confirm our
understanding of the valuation methodology used for the respective vessels.
Use of auditor experts:
· We engaged valuation experts within the PwC network to assess and
evaluate the reasonableness and reliability of the third-party vessel
valuation service, including the discount rates applied and valuation of two
standard vessels. The expert also evaluated the reliability of the independent
broker used.
As it relates to the residual net assets of the subsidiary and SPVs:
· We recalculated the mathematical accuracy of the net asset values
of the SPVs. This involved reconciling the net asset values of the SPVs with
the subsidiary's financial records and subsequently with the company's
financial records.
· We agreed cash and loan balances back to independently received
confirmations from third party financial institutions.
· Performed sample based substantive testing on the residual net
assets.
Ownership/Existence
· We obtained an understanding and evaluated the design and
implementation of internal controls surrounding the ownership/existence
process.
· We agreed the shareholdings of the directly held subsidiary as
well as the SPVs to share registers and agreements.
· Where appropriate, we independently confirmed the titles of all
vessels with the respective recognised Shipping Authorities as of June 30,
2024. For one vessel, we conducted alternative audit procedures to verify its
existence since the flag country's register is not available for public
inquiry.
· On a sample basis, we utilised open-source vessel tracking
resources to corroborate that the vessels were operational.
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, and we considered the risk of
climate change and the potential impact thereof on our audit approach.
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 materiality US$9.02 million (2023: US$8.26 million)
How we determined it 2% of net assets
Rationale for the materiality benchmark We believe that 'net assets' is the most appropriate benchmark because this is
the 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% (2023: 75%) of
overall materiality, amounting to US$6.77 million (2023: US$6.19 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 (2023: US$0.41 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.
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 IFRS Accounting 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 45 in
relation to going concern as if the company was a UK incorporated closed-ended
investment fund with equity shares listed under the Closed-Ended Investment
Fund category. 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 20 to 23 and 44 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 was a
UK incorporated closed-ended investment fund with equity shares listed under
the Closed-Ended Investment Fund category.
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 was a UK incorporated closed-ended
investment fund with equity shares listed under the Closed-Ended Investment
Fund category. We have nothing to report in respect of our agreed
responsibility 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.
Ross Alexander Houlihan Burne
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
25 September 2024
Statement of Comprehensive Income
For the year ended 30 June 2024
2024 2023
Notes US$ US$
Income
Net changes in fair value of financial assets 4 50,555,223 (33,950,645)
at fair value through profit or loss
Dividend income 8 30,000,000 32,000,000
Total net income / (loss) 80,555,223 (1,950,645)
Expenditure
Administration fees (168,137) (168,376)
Audit fees (217,751) (261,666)
Corporate Broker fees (150,000) (150,000)
Depositary fees (39,493) -
Directors' fees 17 (231,674) (174,913)
Foreign exchange gain / (loss) 4,468 (13,322)
Insurance fee (33,016) (24,200)
Investment management fees 13 (3,484,902) (3,504,464)
Listing fees (27,433) (24,297)
Performance fees 14 - 3,980,432
Professional fees (93,122) (145,694)
Sundry expenses (53,008) (39,860)
Total expenses (4,494,068) (526,360)
Operating profit / (loss) 76,061,155 (2,477,005)
Finance income 6,567 3,646
Total comprehensive income / (loss) for the year 76,067,722 (2,473,359)
Earnings / (Loss) per ordinary share (cents) 9 25.89 (0.81)
Diluted Earnings / (Loss) per ordinary share (cents) 9 25.89 (0.81)
There were no potentially dilutive instruments in issue at 30 June 2024 or 30
June 2023.
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 2024
2024 2023
Notes US$ US$
Non-current assets
Financial assets at fair value 4 444,977,383 405,988,715
through profit or loss
Total non-current assets 444,977,383 405,988,715
Current assets
Trade and other receivables 5 7,229,829 7,881,170
Cash and cash equivalents 56,007 47,731
Total current assets 7,285,836 7,928,901
Total assets 452,263,219 413,917,616
Current liabilities
Trade and other payables 6 1,207,547 1,144,523
Total current liabilities 1,207,547 1,144,523
Net assets 451,055,672 412,773,093
Equity
Ordinary share capital 7 291,640,823 303,326,231
Retained reserves 159,414,849 109,446,862
Total equity attributable to ordinary Shareholders 451,055,672 412,773,093
Net assets per ordinary share (cents) 11 154.96 136.47
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
25 September 2024 and signed on its behalf by:
________________________________
_____________________________
Rob
King
Stephen Le Page
Director
Director
Statement of Changes in Equity
For the year ended 30 June 2024
Ordinary
share capital Retained
earnings Total
Notes US$ US$ US$
Shareholders' equity at 30 June 2022 310,272,983 137,270,726 447,543,709
Share buybacks 7 (6,946,752) - (6,946,752)
Total comprehensive loss for
the year - (2,473,359) (2,473,359)
Dividends paid 10 - (25,350,505) (25,350,505)
Shareholders' equity at 30 June 2023 303,326,231 109,446,862 412,773,093
Share buybacks 7 (11,685,408) - (11,685,408)
Total comprehensive income for the year
- 76,067,722 76,067,722
Dividends paid 10 - (26,099,735) (26,099,735)
Shareholders' equity at 30 June 2024 291,640,823 159,414,849 451,055,672
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
For the year ended 30 June 2024
Notes 2024 2023
US$ US$
Cash flows from operating activities
Total comprehensive income / (loss) for the year 76,067,722 (2,473,359)
Adjustments for:
Changes in fair value on investments held at fair value through profit or loss 4 (50,555,223) 33,950,645
Foreign exchange (gain) / loss (4,468) 13,322
Operating cash flows before movements 25,508,031 31,490,608
Return of investment capital 4 11,566,555 6,953,360
Movement in trade and other receivables 5 651,341 (2,140,785)
Movement in trade and other payables 6 63,024 (3,953,696)
Net cash generated from operating activities 37,788,951 32,349,487
Cash flows from financing activities
Amounts paid for share buybacks 7 (11,685,408) (6,946,752)
Dividends paid 10 (26,099,735) (25,350,505)
Net cash used in financing activities (37,785,143) (32,297,257)
Net movement in cash and cash equivalents during the year 3,808 52,230
Cash and cash equivalents at the beginning of the year 47,731 8,823
Foreign exchange gain / (loss) 4,468 (13,322)
Cash and cash equivalents at the end of the year 56,007 47,731
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 30 June 2024
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 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.
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 302,468,541 ordinary shares in issue on 1 July 2023, all of
which were listed on the Specialist Funds Segment of the Main Market of the
London Stock Exchange. During the current year, the Company bought back
11,386,000 ordinary shares at a weighted average price of US$1.014 for a
consideration of US$11,685,409. The total number of Company's shares in issue
was 291,082,541 at the end of the FY.
2. Material accounting policies
(a) Basis of preparation
Compliance with IFRS Accounting Standards
The financial statements have been prepared on a going concern basis in
accordance with IFRS accounting standards as issued 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: Consolidated Financial Statements. 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: Fair Value
measurement.
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 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 2024
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 2023 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.
Finance income
Finance 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 and all other expenses are charged through
the Statement of Comprehensive Income.
(g) Performance fees
Any performance fee liability is calculated on an amortised cost basis at each
valuation date, with the respective expense or reversal charged through the
Statement of Comprehensive Income. Refer to note 14.
(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 £1,600.
(j) Financial assets and financial liabilities
The Company holds its investments through a subsidiary company which has not
been consolidated in line with IFRS 10: Consolidated Financial Statements.
The Company classifies its investment in 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 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 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 for vessel
acquisitions only.
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
indirectly 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 being
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 irrevocably designate any investment
in equity at 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 in 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 takes account of the indirect factors affecting the shipping
industry including currency exchange rates, interest rates, the availability
of credit, and climate change considerations.
Vessels sold before the period end for settlement/delivery afterwards, are
carried at the sale price set out in the contract for sale less a provision
for estimated costs of disposal (such as re-delivery costs) and the costs of
liquidating the relevant SPV.
The fair value of a standard vessel 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 1 - 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 shipbrokers.
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, based on a written valuation of a
mainstream broker appointed by the Investment Manager. For charter-free values
only, 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 Discounted Cashflow
("DCF") 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 expected date
of its next 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 IRR, 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 and LSA 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. For vessel purchase and sale transactions undertaken by the SPVs
derecognition normally occurs at the point of delivery of the vessel to the
purchaser at the SPV level.
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 the 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 financial liabilities with fixed or determinable
payments that are not quoted in an active market. Trade and other payables are
recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method. However, given the nature of trade
and other payables and the short time length involved between their
origination and settlement, their amortised cost is considered to be the same
as their fair value.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or expire.
Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Trade and other
receivables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest rate method, less provision for
impairment. However, given the nature of receivables and the short time length
involved between their origination and settlement, their amortised cost is
considered to be the same as their fair value.
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.
Trade and other payables
Trade and other payables that have fixed or determinable payments
that are not quoted in an active market are classified as payables. Payables
are measured at amortised cost using the effective interest rate method.
Interest expense is recognised by applying the effective interest rate, except
for short-term payables when the recognition of interest would be immaterial.
(k) Cash and cash equivalents
Cash and cash equivalents include 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 are
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 at the date of the transaction.
(m) Going concern
In assessing the going concern basis of accounting the Directors have,
together with discussions and analysis provided by the Investment Manager, had
regard to the guidance issued by the Financial Reporting Council. They have
considered the possible impact of recent market volatility and geopolitical
events on the current and future operations of the Company and its
investments. 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 Company is required to hold a vote on the Continuation of the Company at
the AGM on 24 October 2024. During the year the Investment Manager and Brokers
engaged major shareholders regarding their voting intentions, and as a result
of these discussions and given the positive performance of the Company for its
life to date, the Directors hold the view that the Continuation Vote will be
for the Company to continue its operations. In the event the vote does not
pass, the Board have six months in which to bring forward proposals for the
future of the Company.
The Directors are satisfied that, at the time of approving the financial
statements, no other material uncertainties exist that may cast significant
doubt concerning the Company's ability to continue for the foreseeable future
concluding 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 these reasons, the Directors 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 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. This note provides an overview of the
areas that involved a higher degree of judgement or complexity, and of items
which are more likely to be materially adjusted due to estimates and
assumptions turning out to be wrong. 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
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 reserves are held at the LSA and SPV levels and paid up to the Company as
required to enable expenses to be settled as they fall due.
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 accordance with 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 - Fair value measurements.
The criteria which define an investment entity are disclosed in Note 2(a).
Critical Accounting Estimates
The following are the key assumptions and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next FY.
The principal critical accounting estimate in the Company's financial
statements is the value of its investment in LSA, which is in turn dependent
on the values of LSA's investments in the SPVs. Principal critical accounting
estimates in determining the values of the SPVs comprise the fair values of
their vessels, in turn comprised of the charter-free and attached charter
values and capital expenditure, all of which are critical accounting
estimates.
The unobservable inputs which significantly impact the fair value of the
vessels have been determined to be the charter-free valuation and market
charter rates for standard vessels (used to calculate charter values) and the
discount rate applied for specialised vessels.
The process of calculating the charter-free and charter values of the vessels
is described in Note 2(j).
At 30 June 2024 the charter-free valuations of two vessels (2023: two vessels)
were provided through independent broker valuations rather than VesselsValue.
These broker valuations are themselves estimates derived from the specialist
knowledge of the broker, their proprietary data that considers vessel
specifications and applicable market information.
Further to the information mentioned in Note 2 (j) 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 8 September 2024, being the date by which the IMO
mandates all vessels should have installed BWTS. 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 2024, one vessel was treated as a specialist vessel (2023: one
vessel). 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, however the discount rate remains a
material driver to the valuation.
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: Financial
Instruments: Disclosures. 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.
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 and 8) are as follows:
2024 2023
US$ US$
LSA
Brought forward cost of investment 292,529,864 299,483,224
Total return of investment capital during the year (11,566,555) (6,953,360)
Carried forward cost of investment 292,529,864
280,963,309
Brought forward unrealised gains on fair value 113,458,851 147,409,496
Movement in unrealised gains / (losses) on fair value 50,555,223 (33,950,645)
Carried forward unrealised gains on fair value 164,014,074 113,458,851
Total investment at fair value 444,977,383 405,988,715
The SPVs and holding companies Handy Holdco Limited and Product Holdco Limited
(which are also SPVs) are incorporated in the Isle of Man. The subsidiary
company LSA is incorporated in Guernsey. The country of incorporation is also
their principal place of business.
Breakdown of Fair Value:
Name 2024 2023 Direct or indirect holding Principal activity Ownership at 30 June Ownership at 30 June
US$
US$
2024 2023
LSA(7) - - Direct Holding company 100% 100%
Anvil Limited 17,502,570 18,240,972 Indirect SPV 100% 100%
Auspicious Limited 20,505,411 20,137,727 Indirect SPV 100% 100%
Awesome Limited 20,060,142 19,704,498 Indirect SPV 100% 100%
Candy Limited(6) - 16,785 Indirect SPV 100% 100%
Charming Limited 20,221,500 18,953,365 Indirect SPV 100% 100%
Citra Limited(6) - 205,362 Indirect SPV 100% 100%
Cocoa Limited(4) - - Indirect SPV 100% 100%
Courteous Limited(4) - - Indirect SPV 100% 100%
Dachshund(3) - - Indirect SPV 100% 100%
Limited
Daffodil Limited(4) - - Indirect SPV 100% 100%
Exceptional Limited(4) - - Indirect SPV 100% 100%
Golding Limited 19,055,526 21,081,370 Indirect SPV 100% 100%
Handy HoldCo Limited 36,973,101 50,090,478 Indirect SPV (Holding Company) 100% 100%
Idaho Limited 20,235,105 22,322,508 Indirect SPV 100% 100%
Laurel Limited 14,803,667 16,410,147 Indirect SPV 100% 100%
Lavender Limited(6) - 60,848 Indirect SPV 100% 100%
Marvelous Limited(4) - - Indirect SPV 100% 100%
Masterful Limited 19,630,327 18,893,952 Indirect SPV 100% 100%
Mayflower Limited 15,101,491 15,590,330 Indirect SPV 100% 100%
Mindful Limited(4) - - Indirect SPV 100% 100%
Neon Limited 24,405,007 26,616,326 Indirect SPV 100% 100%
Octane Limited 22,977,354 20,155,744 Indirect SPV 100% 100%
Orson Limited 15,603,911 17,938,851 Indirect SPV 100% 100%
Parrot Limited(1, 2) 29,502 674 Indirect SPV 100% 100%
Patience Limited(1, 2) 617,575 662,085 Indirect SPV 100% 100%
Pollock - - Indirect SPV 100% 100%
Limited(1, 3)
Product HoldCo Limited 56,855,114 58,135,471 Indirect SPV (Holding Company) 100% 100%
Riposte 1,127,015 411,002 Indirect SPV 100% 100%
Limited(1, 2)
Rocky IV Limited 17,392,312 18,540,092 Indirect SPV 100% 100%
Sierra Limited 23,195,939 20,393,002 Indirect SPV 100% 100%
Vicuna Limited(6) - 2,598 Indirect SPV 100% 100%
Cash held pending investment(5) 30,136,235 10,709,986
Residual net assets / (liabilities)(5) 48,548,579 10,714,542
Total* 444,977,383 405,988,715
*Vessels are valued at fair value in each of the SPVs shown in the table above
and combined with the residual net assets / (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 at year end.
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 Limited's fair value.
4 These SPVs report zero fair value in the table above because they are owned
by the intermediate holding company Product Holdco Limited and are included in
Product Holdco Limited's fair value.
5 The cash held pending investment and residual net assets / (liabilities) are
held in LSA.
6 Company has been dissolved.
7 Fair value of LSA equals the sum of the assets of residual net assets, and
cash as detailed below.
The movement in the fair value of the investment is recorded in the Statement
of Comprehensive Income.
5. Trade and other receivables
2024 2023
US$ US$
Prepayments 35,051 38,577
Other receivables 4,799 1,108
Due from LSA (dividend receivable) 7,189,979 7,841,485
Total trade and other receivables 7,229,829 7,881,170
Amounts due from LSA are interest free and payable on demand. The amount of
US$7,841,485 due from LSA for the year ended 30 June 2023 was settled in the
current year. Due to the value and short-term nature of these receivables, the
Directors have assessed there to be no expected credit losses associated with
these outstanding balances.
6. Trade and other payables
2024 2023
US$ US$
Investment management fees 907,483 835,779
Audit fees 218,758 219,762
Administration fees 42,435 41,478
Corporate Brokers fees 37,500 37,500
Directors' fees 1,371 10,004
Total trade and other payables 1,207,547 1,144,523
The carrying amounts of trade and other payables are considered to be the same
as their fair values, due to their short term nature.
7. Ordinary share capital
Share Capital
Share issuance Number of shares Gross amount (US$) Direct Issue costs (US$) Share capital (US$)
As at 30 June 2022 308,628,541 316,282,156 (6,009,173) 310,272,983
Share buybacks (6,160,000) (6,946,752) - (6,946,752)
As at 30 June 2023 302,468,541 309,335,404 (6,009,173) 303,326,231
Share buybacks (11,386,000) (11,573,679) (111,729) (11,685,408)
As at 30 June 2024 291,082,541 297,761,725 (6,120,902) 291,640,823
The ordinary shares issued are of no par value and are authorised, issued and
fully paid. Ordinary shares carry the right to receive all income of the
Company attributable to ordinary shares, and to participate in any
distribution or other return of capital attributable to ordinary shares.
Ordinary shareholders have the right to receive notice of and attend any
general meetings of the Company and to vote at such meeting with one vote for
each ordinary share held.
The rights conferred upon the holders of the shares are not varied by the
creation or issue of further shares or classes of shares or by the purchase or
redemption by the Company of its own shares, or the holding of such shares in
treasury.
At the end of the FY, there were 17,546,000 shares (2023: 6,160,000 shares)
held in treasury. These treasury shares may be subsequently cancelled or sold
for cash.
No shares will be sold from treasury at a price less than the NAV per share at
the time of the sale unless they are first offered pro rata to existing
shareholders.
8. Dividend income
2024 2023
US$ US$
Dividend income 30,000,000 32,000,000
During the current year, LSA declared dividends of
US$30,000,000 (2023: US$32,000,000) to the Company. At 30 June 2024, dividends
of US$7,189,979 (2023: US$7,841,485) were outstanding (refer to Note 5).
9. Earnings / (Loss) per share
2024 2023
US$ US$
Total comprehensive income / (loss) for the year 76,067,722 (2,473,359)
Weighted average number of ordinary shares 293,851,833 307,057,116
Earnings / (Loss) per ordinary share (cents) 25.89 (0.81)
Diluted Earnings / (Loss) per ordinary share (cents) 25.89 (0.81)
There were no potentially dilutive instruments in issue at 30 June 2024 or 30
June 2023.
10. Dividends
The company paid the following dividends during the year:
Quarter end Dividend per share Ex div date Net Dividend paid Record date Paid date
30 June US$0.02125 27 July US$6,296,601 28 July 11 August 2023
2023 2023 2023
30 September 2023 US$0.02125 26 October US$6,264,129 27 October 2023 10 November 2023
2023
31 December US$0.02125 25 January 2024 US$6,248,192 26 January 6 February 2024
2023 2024
31 March 2024 US$0.025 25 April 2024 US$7,290,814 26 April 10 May
2024 2024
In addition, the company declared the following dividend in
relation to the profit for the year ended 30 June 2024:
Quarter end Dividend per share Ex div date Net Dividend paid Record date Paid date
30 June US$0.025 25 July US$7,277,064 26 July 9 August 2024
2024 2024 2024
Under the Companies (Guernsey) Law, 2008, the Company can distribute dividends
from capital and revenue reserves, subject to a prescribed net asset and
solvency test.
The net asset and solvency test consider whether a company is able to pay its
debts when they fall due, and whether the value of a company's assets is
greater than its liabilities. The Board confirms that the Company passed the
net asset and solvency test for each dividend paid.
11. Net assets per ordinary share
2024 2023
US$ US$
Shareholders' equity 451,055,672 412,773,093
Number of ordinary shares 291,082,541 302,468,541
Net assets per ordinary share (cents) 154.96 136.47
12. Financial risk management
Capital management
The Board 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 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. However, the
Directors and the Investment Manager monitor the discount on a regular basis
and can use share buybacks 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, inter alia,
interest rates, the availability of credit, and currency exchange rates. Other
risks such as climate change considerations, economic or political
uncertainty, changes in laws and regulations governing shipping or trade are
considered by the Investment Manager and the Board. Please see Principal Risks
and Uncertainties. These factors may affect the price or liquidity of vessels
held by the Company's SPVs and thus the value of the SPVs themselves.
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
interest rate 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 value and the
outstanding loans with variable interest rates. It does not consolidate the
US$62.0m (2023: US$56.5m) loan (with a variable interest rate at SOFR plus a
margin of 3.2% owed by Product Holdco Limited (with SOFR interest rate caps at
0.5% and 4.65% on amounts of US$9.0m and US$47.75m respectively for 3 years).
(2023: loan of US$14.00m owed by Handy HoldCo Limited).
Interest payments on these loans are subject to limited change from
fluctuations in interest rates due to their capped nature.
2024 Interest bearing less than 1 month (US$) Non-interest bearing (US$) Total (US$)
Assets
Investments - 444,977,383 444,977,383
Trade and other receivables excluding prepayments - 7,194,778 7,194,778
Cash and cash equivalents 56,007 - 56,007
Total assets 56,007 452,172,161 452,228,168
Liabilities
Trade and other payables - 1,207,547 1,207,547
Total liabilities - 1,207,547 1,207,547
Total interest sensitivity gap 56,007 56,007
The weighted average interest rate is 5.10% for cash and cash equivalents in
the current FY.
2023 Interest bearing less than 1 month (US$) Non-interest bearing (US$) Total (US$)
Assets
Investments - 405,988,715 405,988,715
Trade and other receivables excluding prepayments - 7,842,593 7,842,593
Cash and cash equivalents 47,731 - 47,731
Total assets 47,731 413,831,308 413,879,039
Liabilities
Trade and other payables - 1,144,523 1,144,523
Total liabilities - 1,144,523 1,144,523
Total interest sensitivity gap 47,731 47,731
The weighted average interest rate was 3.63% 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
2024 would increase or decrease by US$560 (2023: US$477) as a result of the
Company's exposure to interest rates on its variable rate deposits only.
The Company and LSA with its SPVs are permitted to utilise overdraft
facilities towards the achievement of the Company's investment objectives.
There was no overdraft utilised during the current and prior years. Refer to
Price Risk on the following pages for a description of the indirect impact
interest rates have on the valuation of vessel assets.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in a financial loss to the Company.
The Company's subsidiary SPVs hold credit risk exposures to
charterers. Potential new charters are evaluated to assess counterparty credit
risk, both at an SPV and portfolio level, prior to any contractual engagement.
The SPVs historical actual counterparty credit losses over the life of the
Company to date have been zero. At 30 June 2024 there were no receivables held
by the SPVs considered impaired (2023: US$nil).
Cash reserves are held at the LSA and SPV levels and are paid up
to the Company as required to enable expenses to be settled as they fall due.
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 2024 Credit rating Standard & Poor's Cash Short term fixed deposits (US$) Total as at 30 June 2024
(US$) (US$)
Barclays Bank Plc (Barclays) A+ Long Term 34,990 - 34,990
A-1 Short Term
Ravenscroft (1) A+ Long Term - 21,017 21,017
(HSBC London - call accounts) A-1 Short Term
Total 34,990 21,017 56,007
30 June 2023 Credit rating Standard & Poor's Cash Short term fixed deposits (US$) Total as at 30 June 2023
(US$) (US$)
Barclays Bank Plc (Barclays) A+ Long Term 38,624 - 38,624
A-1 Short Term
Ravenscroft (1) A+ Long Term - 9,107 9,107
(HSBC London - call accounts) A-1 Short Term
Total 38,624 9,107 47,731
1 Ravenscroft is an execution only broker that acts solely on
instruction of the Board of Directors. The Board of Directors only invest cash
in banking institutions with an A- rating or higher.
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 paid 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 2024 Up to 3 months (US$) Between 3 and 12 months (US$) Between 1 and 5 years Total
(US$) (US$)
Assets
Financial assets at fair value through profit or loss - - 444,977,383 444,977,383
Trade and other receivables excluding prepayments 7,194,778 - - 7,194,778
Cash and cash equivalents 56,007 - - 56,007
Liabilities
Trade and other payables 1,207,547 - - 1,207,547
Total 6,043,238 - 444,977,383 451,020,621
30 June 2023 Up to 3 months (US$) Between 3 and 12 months (US$) Between 1 and 5 years Total
(US$) (US$)
Assets
Financial assets at fair value through profit or loss - - 405,988,715 405,988,715
Trade and other receivables (excluding prepayments) 7,842,593 - - 7,842,593
Cash and cash equivalents 47,731 - - 47,731
Liabilities
Trade and other payables 1,144,523 - - 1,144,523
Total 6,745,801 - 405,988,715 412,734,516
Price risk in the shipping industry
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) present a price risk
to the Company. The Company's financial assets are measured at fair value
which comprises the fair value of the underlying SPVs. 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 Level 3 assets. All the market price
risk pertains to the Level 3 investment portfolio in its entirety.
Price risk sensitivity analysis was conducted on vessel and charter fair
values only as these are the most significant unobservable inputs to the
valuation of the Company's investment.
(a) Standard Vessel valuations
The fair value of a standard vessel comprises both the charter-free value, the
charter valuation and capital expenditure. The charter-free and associated
charter values of typical vessels are calculated using an online 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.
Similarly, the charter-free values determined by written mainstream broker
valuations consider vessel specifications and other applicable market
information.
For charter values, the system provides a DCF module where vessel specific
charter details are input and measured against a system or shipbroker-provided
market benchmark to obtain a premium or discount value of the charter versus
prevailing market.
The lower bound of the charter valuation process comprises the DCF value of
the current charter plus scrap value of the vessel at the end of the charter.
At the current and prior year ends this minimum value was not applied to any
vessels.
(b) Specialised Vessels and arrangements
There will be cases where the Company may invest in vessels and make
arrangements 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:
· Discount rate;
· Charter Rate; and
· Exit/scrappage value
There was one specialised vessel arrangement held at the year end (2023: one
vessel) being a gas tanker with a long-term bareboat charter attached.
Refer to Note 3 for further information on the valuation methodologies
applied. The Board and the Investment Manager believe that the above reflects
those inputs where price risk could be significant, and where estimate and
judgement can potentially be used.
Price risk sensitivity analysis
Charter-free valuation for standard vessels
A 10% change in vessel values is within the normal range of value variation
over the course of a year and is simple to understand and flex. 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 in charter-free values Standard vessel portfolio value -10% change in charter-free values
US$ 000 US$ 000
US$ 000
Fair value at 30 June 2024 +51,674 466,238 (51,674)
Fair value at 30 June 2023 +47,659 437,843 (47,659)
The ballast water treatment system and scrubber adjustments are not considered
significant or material and therefore no sensitivity analysis has been
prepared.
Charter valuation for standard vessels
Charter rates
The Board has concluded that use of a 10% movement in benchmark charter rates
remains a suitable sensitivity calculation, being within a normal range of
benchmark variation over the course of a month and is simple to understand and
flex, noting that most of the charter value is derived from charters having
remaining periods of 1 year or more, the market benchmarks for which show
lower volatility than spot rates and already reflect market expectations for
the period of the charter. 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 portfolio value -10% change
US$ 000 US$ 000 US$ 000
Fair value at 30 June 2024 (13,598) 466,238 +13,607
Fair value at 30 June 2023 (14,988) 437,852 +14,959
( )
Specialised vessels
If the discount rates were 0.5% higher or lower, being within a normal range
of interest rate variation over the course of a year, then the effect on the
specialised vessel portfolio value would be as follows:
+0.5% change Specialised Vessel portfolio value -0.5% change
US$ 000 US$ 000 US$ 000
Specialised vessel fair value at 30 June 2024 (100) 23,510 +101
Specialised vessel fair value at 30 June 2023 (188) 24,904 +191
There was one specialised vessel held at the year end (2023: one vessel).
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.
13. Investment management fee
The Investment Manager is entitled to receive an annual fee, calculated on a
sliding scale, as follows:
(a) 0.85% per annum of the quarter end Adjusted Net Asset Value up to US$250m;
(b) 0.75% per annum of the quarter end Adjusted Net Asset Value in excess of
US$250m but not exceeding US$500m; and
(c) 0.65% cent per annum of the quarter end Adjusted Net Asset Value in excess
of US$500m.
For the year ended 30 June 2024 the Company has incurred US$3,484,902
(2023: US$3,504,464) in investment management fees of which US$907,483 was
outstanding at 30 June 2024 (2023: US$835,779).
14. Performance fees
Tufton ODF Partners LP shall be entitled to a performance fee in respect of a
Calculation Period provided that the Total Return Per Share on the Calculation
Day for the Calculation Period of reference is greater than the High Watermark
Per Share and such performance fee shall be an amount equal to the Performance
Fee Pay-Out Amount if:
· the High Watermark is greater than the Total Return Per Share on any
Calculation Day; and
· the prevailing Historic Performance Fee Amount is greater than zero
on such Calculation Day,
Any fee accruing as at the end of the Calculation Period is paid 50%
subsequent to the end of that period, with the remaining 50% being retained by
the Company and deferred until the next time that a performance fee payment is
due, being adjusted for any subsequent underperformance during that time.
The prevailing Historic Performance Fee Amount shall be reduced by the lower
of: (i) 20% of the difference between the High Watermark Per Share and the
Total Return Per Share on such Calculation Day multiplied by the Relevant
Number of shares; and (ii) the prevailing Historic Performance Fee Amount.
A performance fee of US$nil (2023: US$nil) was accrued at year end. The prior
year included a reversal of accrued performance fees amounting to US$3,980,432
in the Statement of Comprehensive Income.
15. Related parties
The Investment Manager, Tufton Investment Management Ltd, is a related party
due to having common key management personnel with the SPVs of the Company.
All management fee transactions with the Investment Manager are disclosed in
Note 13.
Tufton ODF Partners LP is a related party due to being the beneficiary of any
performance fee paid by the company, as disclosed in note 14.
Transactions with LSA are not disclosed. There are no commercial transactions
between the Company and LSA other than the business of investment into LSA,
the transactions of which are shown in the main financial statements.
The Directors held the following interests in the share capital of the Company
either directly or beneficially:
25 September 2024 30 June 30 June
2024 2023
Director Shares(1) Shares Shares
R King 55,811 60,000 60,000
S Le Page 38,387 41,268 40,000
P Barnes 4,651 5,000 5,000
C Rødsaether 27,906 30,000 30,000
T Le Noury 4,651 5,000 -
(1. Further to the announcement on 15 August 2024 in relation to the
compulsory Redemption of the Company's ordinary shares, the Directors have
each had Shares redeemed.)
Other Interests
Tufton Group related stakeholders including current & former shareholders,
employees, and non-executive directors directly or beneficially held ~4.9% of
the issued share capital as at 30 June 2024 (2023: ~3.7%).
16. Controlling party
In the opinion of the Directors, based on shareholdings advised to them, the
Company has no immediate or ultimate controlling party.
17. Directors' fees
The remuneration of the Directors was US$231,674 (2023: US$174,913) for the
year which consisted solely of short-term benefits. At 30 June 2024, no
Directors' fees (2023: US$10,004) were outstanding.
The Directors fees are as disclosed below:
30 June 30 June
2024 2023
Director £ £
R King 43,500 39,305
S Le Page 40,500 36,000
P Barnes 37,750 33,525
C Rødsaether 37,000 33,525
T Le Noury (Appointed 1 November 2023) 25,135 -
18. Events after the reporting year
Following the announcement of the sale of Pollock and Dachshund on 11 January
2024 for combined total of US$41.75m, representing a 3.1% premium to the
vessels' previous NAV, and the completion of the sale of Pollock in May 2024,
the sale of Dachshund was completed on 1 July 2024. The realised net IRR
across the two vessels was c.25% with net MOIC of c.2.0x, significantly ahead
of the Company's published IRR target of 12%.
On 17 July 2024, the Company declared a dividend of US$0.025 per ordinary
share for the quarter ending 30 June 2024. The dividend was paid on 9 August
2024 to holders of ordinary shares recorded on the register as at close of
business on 26 July 2024 with an ex-dividend date of 25 July 2024.
On 14 August 2024 the Company compulsorily redeemed 20,326,211 shares at a
price of US$1.550 per share for close of business for cancellation, returning
US$31.5m to shareholders, paid on 28 August 2024.
There has not been any other matter or circumstance occurring subsequent to
the end of the financial period that has significantly affected, or may
significantly affect, the operations of the Company, the results of those
operations, or the state of affairs of the Company the next financial period
up to the date of approval of these financial statements.
Alternative Performance Measures ("APMs")
This Annual Report and Audited Financial Statements contain APMs, which are
financial measures not defined in IFRS Accounting Standards. These include
certain financial and operational highlights and key financials. The
definition of each of these APMs is shown below.
The Company assesses its performance using a variety of measures that are not
specifically defined under IFRS Accounting Standards and are therefore termed
APMs. The APMs that the Company uses may not be directly comparable with those
used by other companies. These APMs are used to present a clearer picture of
how the Company has performed over the year and are all financial measures of
historical performance. The APMs are prepared on a consolidated basis.
Alternative Performance Measure Definition / Method of calculation Reason for use
Aggregate Realised Net IRR Realised IRR based on aggregated equity cash flows across all divested vessels Measures the net realised IRR on all vessel divestments
calculated at SPV level, net of fees.
Average Charter Length Total forecast EBITDA from charters in place, divided by the expected To provide information about the extent to which the future revenue of the
annualised EBITDA of those charters SPVs is contractually fixed
CAGR Compound Annual Growth Rate. A business and investing specific term for the To provide a measure of annual compound growth rate over time
geometric progression ratio that provides a constant rate of return over the
time period
Company IRR The IRR of the Company calculated using all gross capital raises, dividends Measures the IRR achieved by the Company
and buyback and current Company NAV
Consolidated Gearing Ratio Loans to charter-free value including capital adjustments on a consolidated To provide an indication of leverage, which is not reported in the financial
basis statements which are not prepared on a consolidated basis
Depreciated Replacement Cost Estimating the cost to replace the asset, considering any changes in the cost To provide a methodical basis for estimating the residual value of an asset at
of materials and labour since the asset was initially purchased or the end of a planned investment period.
constructed, and subtracting the depreciation that has occurred since that
time
Dividend Cover Portfolio Operating Profit less debt amortisation, divided by dividends for To provide information about the extent to which dividends are covered by
the period earnings
EBITDA Earnings before interest, taxes, depreciation and amortisation To provide a measure of profitability from operating activity, independent of
financing strategy
Forecast Net Yield Forecast EBITDA over the current charters minus any capex accruals for the To provide information about profitability from future operating activity
vessels in the portfolio divided by the time-weighted vessel values over the relative to current vessel values
same period
Gain / (loss) in Capital Values Fair value gains and losses (being the change in charter-free value + change Fair value of the Company's underlying investments is a key component of the
in charter value) from marking assets to market in accordance with the Company's overall investment performance
valuation policy of the Company
Gross Operating Profit Operating profit before gain / (loss) in capital values, loan interest, fees, To provide an indication of the underlying profit from operating activity,
and all other Company level expenses which is not reported in the financial statements, before interest, fees and
Company level expenses
IRR Internal rate of return - the internal rate of return is the interest rate at A widely used APM which allows the shareholders to compare performance of
which the net present value of all the cash flows from a project or investment different funds
equal zero, and is a common performance indicator used in investment funds
NAV Total Return Per Share The change in NAV per share plus dividends per share paid by the Company A measure showing how the NAV per share has performed over a period of time,
during the period, divided by the initial NAV per share at inception taking into account both capital return and dividends paid to Shareholders
Portfolio Operating Profit Gross Operating Profit and interest income less loan interest and fees, To provide an indication of the underlying net profit from operating activity,
Company Level Fees and Expenses which is not reported in the financial statements
Portfolio Price / Depreciated Replacement Cost ("P/DRC") Price divided by the Depreciated Replacement Cost. Price may refer to a The Investment Manager's preferred valuation metric for investment analysis.
transaction (investment or divestment) value or fair value at a certain date P/DRC tends to revert to 100% in the long-term
Revenue Charter income, net of broker commissions and charter related costs, earned by To provide an indication of the underlying income from operating activity
SPVs which is not reported in the financial statements
Ship-Days The sum of the number of days each vessel was owned by the Company over the To provide information about the vessel operating activity measured in days
financial period
Time-Weighted Capital Employed Time-weighted capital invested in vessels A metric used to compare Gross Operating Profit across different periods
Total Return Per Share The Net Asset Value per ordinary share on any Calculation Day adjusted to: A measure showing how the investment in the Company's shares has performed
over a period of time, taking into account both capital return and dividends
(i) include the gross amount of any dividends and/or distributions paid to an paid to Shareholders
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
Corporate Information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsaether
Trina Le Noury - appointed 1 November 2023
Registered office
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Investment Manager and AIFM
Tufton Investment Management Ltd
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
Apex Administration (Guernsey) Limited ("Apex")
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Brokers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Depositary
Apex Depositary (UK) Limited
Bastion House
140 London Wall
London
EC2Y 5DN
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.
Administrator Apex Administration (Guernsey) Limited
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 or Articles the articles of incorporation of the Company, as amended from time-to-time.
Asset Manager Tufton Management Limited
Auditor PricewaterhouseCoopers CI LLP
Brokers a mercantile agent employed in buying and selling shares -
The Company's brokers are Hudnall Capital LLP
and Singer Capital Markets.
BWTS Ballast Water Treatment System.
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.
Depreciated Replacement Cost or DRC The Investment Manager's preferred valuation metric. DRC for a secondhand
vessel is the current cost of replacing the vessel with an equivalent
newbuild, depreciated to the same age.
Directors or Board the Board of Directors of the Company or the Directors from time to time.
Disclosure Guidance and Transparency Rules or DTRs the disclosure guidance and transparency rules made by the Financial Conduct
Authority under Section 73A of FSMA.
Discount Control Policy The policy described in the Discount Control section of the Company's
Prospectus.
Environmental, Social, and Corporate Governance (ESG) an evaluation of the company's collective conscientiousness for social and
environmental factors.
FCA the UK Financial Conduct Authority
Financial Reporting Council or FRC the UK Financial Reporting Council
FSMA the Financial Services and Markets Act 2000 and any statutory modification or
re-enactment thereof for the time being in force.
Fund Level Fees and Expenses Investment management fee and other professional fees and expenses at fund
level.
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 Amount in respect of any Calculation Period, an amount equal to the Performance Fee
Pay-Out Amount for the previous Calculation Period where a Performance Fee was
payable.
Historic Performance Fee Amount in respect of any Calculation Period, an 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 Accounting Standards International Financial Reporting Standards Accounting Standards
IMO International Maritime Organisation
Investment Manager Tufton Investment Management Ltd.
IPO Initial public offering
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 or LSE London Stock Exchange plc
LPG Carrier a vessel used to transport liquefied petroleum gas.
LS Assets Limited or LSA the Guernsey holding company owning the SPVs 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 or MAR Regulation (EU) No 596/2014 of the European 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.
Performance Fee Amount 20%. 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 Amount in respect of the relevant Calculation Period, 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.
Prospectus The Placing and Offer for Subscription document for the Company dated 8
December 2017.
Redemption The one-off capital return of US$31.5m completed by the Company via a
compulsory redemption of 20,326,211 ordinary shares at a price of US$1.550 per
share.
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 Segment the Specialist Funds Segment of the Main Market (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.
SOFR Secured Overnight Financing Rate.
SPV or Special Purpose Vehicle Corporate entities, formed and wholly owned (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.
£ or Sterling the lawful currency of the United Kingdom.
Tufton the Investment Manager
Tufton Group Tufton Investment Management Holding Ltd and its subsidiaries.
UK Corporate Governance Code the UK Corporate Governance Code as published 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.
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.
Notice of AGM
Tufton Oceanic Assets Limited
Registered Office Address: 1 Royal Plaza, Royal Avenue, St Peter Port,
Guernsey, GY1 2HL
Registration Number: 63061
This document is important and requires your immediate attention. If you are
in doubt as to any aspect of the proposals referred to in this document or the
action you should take, you should seek your own advice from a stockbroker,
solicitor, or other independent professional adviser. If you have recently
sold or transferred all your shares in Tufton Oceanic Assets Limited, please
forward this document, together with the accompanying documents, as soon as
possible either to the purchaser or transferee or to the person who arranged
the sale or transfer so they can pass these documents to the person who now
holds the shares.
Dear Shareholder,
I am pleased to send you the notice of the 2024 Annual General Meeting ("AGM")
of the members of Tufton Oceanic Assets Limited (the "Company" or "SHIP"), to
be held at 1 Royal Avenue, St Peter Port, Guernsey GY1 2HL on Thursday, 24
October 2024 at 11.00 am BST time. Explanatory notes on all resolutions
accompany the notice of the AGM (the "Notice").
Re-Election of Directors
As in previous years, all Directors are offering themselves for re-election or
election in accordance with the AIC Code of Corporate Governance and the
Articles of Incorporation of the Company (the "Articles"). Please note for
your information that biographical details of all the Directors offering
themselves for re-election are set out in the explanatory notes to the
resolutions that follow this Notice.
Continuation Vote
Alongside the ordinary business of the 2024 AGM, a resolution for the
continuation of the Company is included in the Notice.
As set out in the Prospectus, the Directors will propose an ordinary
resolution at the 2024 AGM that the Company continues its business (the
"Continuation Resolution"). If the Continuation Resolution is passed at the
2024 AGM, the Directors will put a further resolution to Shareholders at the
2027 AGM and every three years thereafter.
The Board unanimously recommends that Shareholders vote in favour of the
Continuation Resolution and the Board intend to vote the shares they control
in favour.
The Board, in consultation with the Investment Manager, undertook a review of
the Company's mid-term strategy the highlights of which were announced on 17
January 2024 including:
· Since its IPO in December 2017, the Company has delivered strong
results in line with its original objectives, despite the very challenging
economic and operational backdrop during Covid, ongoing geopolitical events
and the impact of inflation.
· The Investment Manager anticipates the investment opportunity set for
fuel-efficient secondhand vessels to be very strong for the next decade as the
shipping industry slowly transitions to net-zero carbon fuels to meet
tightening regulations and decarbonisation targets.
· The Board and the Investment Manager believe that strong supply-side
fundamentals will continue to support high yields and secondhand values in the
medium term, resulting in future IRRs being higher than the Company's
published target.
Acknowledging the discount of the share price to the Company's NAV, the Board
also announced changes to the Company's capital allocation policy and use of
investible cash as follows:
- With effect from 1Q24, SHIP's annual target dividend was increased
by c.17.6% from US$0.085/share to US$0.10/share.
- Towards the end of August 2024, the Company returned US$31.5m by
way of a one-time compulsory Redemption of shares at a price of US$1.550 /
share (being the NAV per share as at 30 June 2024).
- The Company sees fleet renewal (based on age, technology, and
sector outlook) as a priority. Returns from all new asset investments over a
three-year holding period will be compared to the benefit from a further
return of capital given the prevailing share price at the time of the proposed
investment and medium-term market outlook.
- The Board will annually evaluate a further return of capital using
excess investible cash if no suitable investment opportunities are presented.
- The current buy-back policy is to remain in place i.e. excess cash
may be used, at the discretion of the directors, to repurchase shares should
they trade at a >10% discount to NAV, as set out in the Company's listing
documents.
The Board therefore believes the correct strategy for SHIP over the medium
term through to 2030 is to continue investing in fuel-efficient secondhand
vessels to maximise shareholder returns, intending to realise the Company's
current portfolio of assets starting from 2028, well before the
decarbonisation of shipping accelerates.
Company Name Change
The Board is proposing that the name of the Company be changed to Tufton
Assets Limited as of 1 November 2024.
At the time of IPO, the Investment Manager was called Tufton Oceanic Limited
("TOL"). TOL was a professional investment manager with activities in the
maritime industry involving both real maritime asset investments as well as
financial asset (equity and derivative) investments. In late 2020, TOL
informed the Company's Board of a reorganisation of its activities whereby the
financial asset investment side of the business had been subject to a
management buy-out under the subsequent name of Oceanic Investment Management
Limited ("OIM") and that the real maritime asset investment activities of the
Investment Manager would remain in place but with a name change to Tufton
Investment Management Ltd ("TIM"). This change was notified to SHIP
stakeholders on 5 January 2021.
It is proposed to remove "Oceanic" from the name of the Company and to re-name
it Tufton Assets Limited thereby confirming that there is no ongoing
connection between TIM and OIM. There is no change of any sort to the
Investment Manager or any of the services provided by TIM to the Company.
Voting
The Board of Directors of the Company believe that the proposed resolutions
set out in this Notice are in the best interests of the Company and its
members.
If you would like to vote on the resolutions, please appoint a proxy by no
later than Tuesday, 22 October 2024 at 11.00 am BST time. A form of proxy
accompanies the Notice.
All resolutions will be put to a poll in reflection of best practice and to
ensure that all members have their votes considered, proportional to their
shareholdings in the Company.
The results of the AGM will be announced to the market as soon as practicable
after the conclusion of the AGM. Should you wish to discuss anything ahead of
the AGM, please see the contact details below:
Tufton Investment Management Ltd, the Investment Manager
andrew.hampson@tufton.com (mailto:andrew.hampson@tuftonoceanic.com)
nicolas.tirogalas@tufton.com (mailto:nicolas.tirogalas@tufton.com)
Hudnall Capital, the Joint Broker
ac@hudnallcapital.com (mailto:ac@hudnallcapital.com)
Singer Capital Markets, the Joint Broker
James.Maxwell@singercm.com (mailto:James.Maxwell@singercm.com)
Alex.Bond@singercm.com (mailto:Alex.Bond@singercm.com)
Jalini.kalaravy@singercm.com
Apex Administration (Guernsey) Limited, the Company Secretary & Chairman
shipadmin@apexgroup.com (mailto:admin.guernsey@maitlandgroup.com)
Yours faithfully,
Robert King
Independent Non-Executive Chairman
NOTICE OF ANNUAL GENERAL MEETING 2024
Notice is hereby given that the eight Annual General Meeting of the members of
Tufton Oceanic Assets Limited (the "Company") will be held at 1 Royal Avenue,
Royal Plaza, St Peter Port, Guernsey GY1 2HL on Thursday, 24 October 2024 at
11.00am BST time to transact the business set out in the resolutions below.
ORDINARY RESOLUTIONS
1. To receive the Company's Annual Report and Audited Financial
Statements for the year ended 30 June 2024.
2. To re-appoint PricewaterhouseCoopers CI LLP as auditor to the
Company until the conclusion of the next general meeting at which accounts are
laid before the Company.
3. To authorise the Directors of the Company (the "Directors") to
determine the remuneration of the auditor.
4. To approve the remuneration of the Directors for the year ended
30 June 2024, as set out in the Directors' Report.
5. To re-elect Mr Robert King as a Director who retires by
rotation in accordance with Article 21.3 of the Articles.
6. To re-elect Mr Stephen Le Page as a Director who retires by
rotation in accordance with Article 21.3 of the Articles.
7. To re-elect Mr Paul Barnes as a Director who retires by
rotation in accordance with Article 21.3 of the Articles.
8. To re-elect Ms Christine Rødsæther as a Director who retires
by rotation in accordance with Article 21.3 of the Articles.
9. To re-elect Ms Trina Le Noury as a Director who retires by
rotation in accordance with Article 21.3 of the Articles.
8. To authorise the Company to make market acquisitions (as
defined in the Companies (Guernsey) Law, 2008, as amended) of its own ordinary
shares of no par value ("Ordinary Shares"), either for cancellation or to hold
as treasury shares for future resale or transfer, provided that:
a. the maximum number of Ordinary Shares authorised to be
purchased shall be up to 14.99% of the Ordinary Shares in issue (excluding
treasury shares in issue) as at 25 September 2024 (being the last business day
prior to the publication of the Notice);
b. the minimum price (exclusive of expenses) which may be paid for
an Ordinary Share is US$0.01;
c. the maximum price (exclusive of expenses) which may be paid for
an Ordinary Share is an amount equal to the higher of:
i. an amount equal to 5% above the average of the mid-market values of
an Ordinary Share taken from the London Stock Exchange Daily Official List for
the five business days before the purchase is made; or
ii. the higher of the price of the last independent trade or the
highest current independent bid for Ordinary Shares on the London Stock
Exchange at the time the purchase is carried out;
d. subject to paragraph (e), such authority shall expire at the
annual general meeting of the Company to be held in 2025 (unless previously
varied, revoked or renewed by the Company in general meeting) or, if earlier,
the date falling 15 months from the passing of this resolution; and
e. notwithstanding paragraph (d), the Company may make a contract
to purchase its Ordinary Shares pursuant to the authority hereby conferred
prior to the expiry of such authority which will or may be executed wholly or
partly after the expiry of such authority and may make a purchase of its own
Ordinary Shares in pursuance of any such contract notwithstanding the expiry
of the authority given by this resolution.
10. To re-approve the dividend policy of the Company as set out in the
Prospectus dated 8 December 2017.
11. To approve the continuation of the company as set out in the
Prospectus dated 8 December 2017.
SPECIAL RESOLUTION
12. To consider and approve the Company name change from Tufton
Oceanic Assets Limited to Tufton Assets Limited as of 1 November 2024.
EXTRAORDINARY RESOLUTION
11. To authorise the Directors to allot and issue shares, to grant
rights to subscribe for or to convert any security into shares and to make
offers or agreements to allot and issue equity securities (as defined in
Article 5.1(a) of the Articles) for cash and/or to sell Ordinary Shares held
by the Company as treasury shares as if the pre-emption rights contained in
Article 5.2 of the Articles did not apply to any such allotment, grant or
sale, provided that such authority shall be limited to the allotment of shares
and/or grant of rights to subscribe for or to convert any security into shares
and/or sale of treasury shares up to an aggregate number of Ordinary Shares as
equal to 27,075,633 Ordinary Shares (representing 10% of the Ordinary Shares
in issue as at 25 September 2024) (excluding any Ordinary Shares held in
treasury and after giving effect to the exercise of warrants, options or other
convertible securities outstanding as at such date).
The authority granted by this resolution shall, unless renewed, varied or
revoked by the Company, expire on the earlier of the conclusion of the next
annual general meeting of the Company and 15 months after the passing of this
resolution, save that the Company may, before such expiry, make offers or
enter into agreements during the relevant period which would or might require.
Ordinary Shares to be allotted and issued or rights to subscribe for or to
convert any security into Ordinary Shares to be granted or Ordinary Shares
held in treasury to be sold after this authority has expired and the Directors
may allot and issue equity securities and/or sell Ordinary Shares out of
treasury in pursuance of any such offer or agreement as if this power had not
expired.
By order of the Board
On behalf of Apex Administration (Guernsey) Limited
Company Secretary
1 Royal Avenue
Royal Plaza
St Peter Port
Guernsey
GY1 2HL
EXPLANATORY NOTES - GENERAL
The following notes explain your general rights as a member and your right to
vote at the 2024 AGM or to appoint someone else to vote on your behalf.
A member of the Company who is entitled to attend the AGM is entitled to
appoint one or more proxies to attend, speak and vote in their place. A proxy
does not need to be a member of the Company but must attend the AGM to
represent you. Details of how to appoint the Chairman of the AGM or another
person as your proxy using the proxy form are set out in the notes to the
proxy form. If you wish your proxy to speak on your behalf at the AGM you will
need to appoint your own choice of proxy (not the Chairman) and give your
instructions directly to them. A member may appoint more than one proxy to
attend the AGM, provided that each proxy is appointed to exercise rights
attached to different shares. Under the current circumstances, the Board
strongly advises shareholders to appoint the Chairman of the meeting as their
proxy for all votes. Please note that appointing a proxy who cannot attend the
AGM will effectively void your vote.
A corporation which is a member can appoint one or more corporate
representatives who may exercise, on its behalf, all its powers as a member
provided that no more than one corporate representative exercises powers over
the same share. Corporate members are strongly encouraged to complete and
return a form of proxy appointing the Chairman of the meeting to ensure their
votes are included in the poll.
A form of proxy is enclosed which should be completed in accordance with the
instructions. To be valid, this form of proxy and any power of attorney or
other authority under which it is executed (or a duly certified copy of such
power of attorney) must be lodged with the Company's Registrar, Computershare
Investor Services (Guernsey) Limited, c/o The Pavilions, Bridgwater Road,
Bristol, BS99 6ZY, or by e-mail to
#UKCSBRS.ExternalProxyQueries@computershare.co.uk
(mailto:#UKCSBRS.ExternalProxyQueries@computershare.co.uk) . Alternatively,
completed forms can be sent to the registered office of the Company c/o Apex
Administration (Guernsey) Limited, 1 Royal Avenue, Royal Plaza, St Peter Port,
Guernsey, GY1 2HL. All proxies must be received by no later than 11.00 am BST
time on Tuesday, 22 October 2024, being 48 hours before the time appointed for
the AGM. Submission of a proxy appointment will not preclude a member from
attending and voting at the AGM should they wish to do so.
CREST offers a proxy voting service which the Company's Registrar,
Computershare are an agent of.
Shareholders are advised that, upon receipt of their proxy form from the
Company, if they wish to appoint a proxy or to give or amend an instruction to
a previously appointed proxy via the CREST system, the CREST message must be
received by the Company's agent (ID 3RA50) two days prior to the date of the
Company's AGM at the latest. For this purpose, the time of receipt will be
taken to be the time (as determined by the timestamp applied to the message by
the CREST Applications Host) from which the issuer's agent is able to retrieve
the message. After this time any change of instructions to a proxy appointed
through CREST should be communicated to the proxy by other means.
CREST Personal Members or other CREST sponsored members, and those CREST
Members who have appointed voting service provider(s) should contact their
CREST sponsor or voting service provider(s) for assistance with appointing
proxies via CREST.
For further information on CREST procedures, limitations and system timings,
please refer to the CREST Manual. We may treat as invalid a proxy appointment
sent by CREST in the circumstances set out in Regulation 41 of the
Uncertificated Securities (Guernsey) Regulations 2009.
If you are an institutional investor, you may be able to appoint a proxy
electronically via the Proxymity platform, a process which has been agreed by
the Company and approved by the Registrar. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 11.00
am BST time on 22 October 2024 to be considered valid. Before you can appoint
a proxy via this process you will need to have agreed to Proxymity's
associated terms and conditions. It is important that you read these carefully
as you will be bound by them, and they will govern the electronic appointment
of your proxy.
Please note that the AGM will not be made available by way of publicly
available real-time broadcast.
As at 25 September 2024 (being the last business day prior to the publication
of the Notice), the Company's issued share capital consists of 270,756,330
Ordinary Shares, carrying one vote each. Therefore, the total number of voting
rights in the Company as at 25 September 2024 is 270,756,330.
EXPLANATORY NOTES - ORDINARY RESOLUTIONS 1 to 12
ORDINARY RESOLUTION 1 - The Company must present the financial statements for
the year ended 30 June 2024 and the reports of the Directors and the Auditor
to the AGM for approval.
ORDINARY RESOLUTION 2 - The auditor of the Company must be re-appointed at
each general meeting where accounts are laid, to hold office until the
conclusion of the next such general meeting. It is proposed that
PricewaterhouseCoopers CI LLP Limited be re-appointed as the Company's
auditor, to hold office from the AGM's conclusion until the conclusion of the
next general meeting at which accounts are laid before the Company.
ORDINARY RESOLUTION 3 - This resolution gives authority to the Board of
Directors to determine the remuneration of the Auditor.
ORDINARY RESOLUTION 4 - Guernsey-registered companies are not obliged to
prepare and publish a Directors' Remuneration Report. However, the Company has
included details of its Directors' remuneration within the Financial Report
and Audited Financial Statements and an ordinary resolution will be put to
shareholders seeking approval of the Directors' remuneration, which will be
advisory only.
ORDINARY RESOLUTIONS 5-9 - The full Board of Directors are retiring. They are
offering themselves for re-election or election as appropriate in accordance
with Article 23.1 of the Articles and the Association of Investment Companies
("AIC") Code of Corporate Governance, of which the Company is a member. A
brief biography for each of the Directors is set out on pages 35 and 36 of the
Annual Report and Audited Financial Statements.
ORDINARY RESOLUTION 10 - This resolution grants the Company authority to make
market purchases of up to 14.99% of the Ordinary Shares in issue as at 25
September 2024 (being the last business day prior to the publication of the
Notice). The Ordinary Shares bought back will either be cancelled or placed
into treasury at the determination of the Directors.
The maximum price which may be paid for each Ordinary Share must not be more
than the higher of (i) 5% above the average of the mid-market values of an
Ordinary Share taken from the London Stock Exchange Daily Official List for
the five business days before the purchase is made; or (ii) the higher of the
price of the last independent trade or the highest current independent bid for
the Ordinary Shares on the London Stock Exchange at the time the purchase is
carried out. The minimum price which may be paid for each Ordinary Share is
US$0.01.
This authority shall expire at the next annual general meeting of the Company
(or, if earlier, the date falling 15 months from the passing of this
resolution), when a resolution to renew the authority will be proposed. The
Company currently intends that any Ordinary Shares repurchased would be held
in treasury, subject to applicable law and regulation.
ORDINARY RESOLUTION 11 - Shareholders are being asked to approve the Company's
policy with respect to the payment of dividends. This approval will be
advisory only. The dividend policy, as set out in the Prospectus dated 25
September 2018, is summarised below:
Dividend Policy
The Company intends to pay dividends on a quarterly basis with dividends
declared in January, April, July and October. The Company will target a
quarterly dividend of 2.5 cents per Ordinary Share for the financial year
2025.
ORDINARY RESOLUTION 12 - This resolution grants the Company authority to
continue its business. The Continuation Resolution, as set out in the
Prospectus dated 25 September 2018, is summarised below:
Continuation Resolutions
The Directors 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.
If the Continuation Resolution is not passed, the Directors will put forward
proposals for the reconstruction or reorganisation of the Company to
Shareholders for their approval as soon as reasonably practicable following
the date on which the Continuation Resolution is not passed. These proposals
may or may not involve winding up the Company and, accordingly, failure to
pass the Continuation Resolution will not necessarily result in the winding up
of the Company.
An Ordinary Resolution is a resolution passed by a simple majority of Members.
SPECIAL RESOLUTION 13 - Company Name Change - This resolution will, if passed,
allow the Company to change its name from Tufton Oceanic Assets Limited to
Tufton Assets Limited as of 1 November 2024.
A Special Resolution is a resolution of the shareholders present in person in
a general meeting passed by a majority of not less than seventy-five percent
of the votes recorded on a show of hands or by way of a poll.
EXTRAORDINARY RESOLUTION 14 - General Disapplication of Pre-emption Rights -
This resolution will, if passed, give the Directors power to allot shares or
grant rights to subscribe for or to convert any security into shares or sell
treasury shares for cash without first offering them to existing shareholders
in proportion to their existing holdings up to an aggregate number of Ordinary
Shares as equal to 27,075,633 Ordinary Shares, which represents approximately
10% of the Company's issued ordinary share capital (excluding treasury shares)
as at 25 September 2024.
Resolution 14 will allow the Company to carry out one or more tap issues, in
aggregate, up to 10% of the number of Ordinary Shares in issue as at the last
business day prior to publication of the Notice and thus to pursue specific
investment opportunities in a timely manner in the future and without the
requirement to publish a prospectus and incur the associated costs.
Any new Ordinary Shares issued under the combined authority will be at a
minimum issue price equal to the last published NAV per Ordinary Share at the
time of allotment together with a premium intended at least to cover the costs
and expenses of the relevant placing or issue of new Ordinary Shares
(including, without limitation, any placing commissions). The issue price in
respect of each relevant placing or issue of new Ordinary Shares will be
determined on the basis described above to cover the costs and expenses of
each placing or issue and thereby avoid any dilution of the NAV of the then
existing Ordinary Shares held by shareholders.
In accordance with the Articles, an Extraordinary Resolution is a resolution
of the shareholders present in person in a general meeting passed by a
majority of not less than seventy-five percent of the votes recorded on a show
of hands or by way of a poll.
Form of Proxy - Annual General Meeting 2024
To be held at 1 Royal Avenue, Royal Plaza, St Peter Port, Guernsey GY1 2HL
On Thursday, 24 October 2024 at 11.00 am BST time and at any adjournment
thereof
I/We………………………………………..………………………………………………….………
(BLOCK LETTERS PLEASE)
of………………………………………………………………………………………………………
…………………………………………………………………………………………………………
being (a) member(s) of the above-named Company, hereby appoint the Chairman of
the meeting/ or*
………………………………………………………………………………………………………………
as my/our proxy to vote for me/us and on my/our behalf at the Annual General
Meeting of the Company to be held at 1 Royal Avenue Royal Plaza, St Peter
Port, Guernsey, GY1 2HL on Thursday, 24 October 2024 at 11.00 pm BST time and
at any adjournment thereof.
* To allow effective constitution of the meeting, if it is apparent to the
Chairman that no shareholders will be present other than by proxy, then the
Chairman may appoint a substitute to act as proxy in his stead for any
shareholder, provided that such substitute proxy shall vote on the same basis
as the Chairman. A proxy need not be a member of the Company.
I/We direct my/our proxy to vote as follows:
ORDINARY RESOLUTIONS FOR AGAINST VOTE WITHHELD**
1. To receive the Company's Annual Report and Audited Financial
Statements for the year ended 30 June 2024.
2. To re-appoint PricewaterhouseCoopers CI LLP as auditor to the
Company until the conclusion of the next general meeting at which accounts are
laid before the Company.
3. To authorise the Directors to determine the remuneration of the
auditor.
4. To approve the remuneration of the Directors for the year ended 30
June 2024, as set out in the Directors' Report.
5. To re-elect Mr Robert King as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
6. To re-elect Mr Stephen Le Page as a Director who retires by
rotation in accordance with Article 21.3 of the Articles.
7. To re-elect Mr Paul Barnes as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
8. To re-elect Ms Christine Rødsæther as a Director who retires by
rotation in accordance with Article 21.3 of the Articles.
9. To elect Ms Trina Le Noury as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
10. Authority to make acquisitions of the Company's own shares.
11. To approve the Company's dividend policy.
12. To approve the Continuation of the Company.
SPECIAL RESOLUTION
13. To approve the Company name change.
EXTRAORDINARY RESOLUTION
14. Authority to allot and issue shares and to sell shares held in
treasury as if the pre-emption rights in the Articles do not apply.
Signed this day
of
2024
Signature
[ ] Please tick here to indicate that this proxy instruction is in
addition to a previous instruction. Otherwise it will overwrite any previous
instruction given.
NOTES TO THE FORM OF PROXY:
i. Please indicate with an "X" in the appropriate box how you wish the
proxy to vote.
ii. If no "X" is marked in any of the for/against/vote withheld boxes
in respect of a resolution, the proxy will exercise their discretion as to how
they vote or whether they withhold their vote. The proxy will also exercise
their discretion as to how they vote or whether they withhold their vote on
any business or resolution considered at the AGM other than the resolutions
referred to in this form of proxy.
iii. In accordance with sections 222 and 223 of The Companies (Guernsey)
Law 2008, you may appoint more than one person as your proxy to exercise all
or any rights to attend and to speak and vote.
iv. **A vote withheld is not a vote in law and will not be counted in
the calculation of the votes "For" and "Against" a resolution.
v. To be valid this form of proxy and any power of attorney or of the
authority under which it is executed (or a duly certified copy of such power
of attorney) must be lodged with the Company's Registrar: Computershare
Investor Services (Guernsey) Limited, c/o The Pavilions, Bridgwater Road,
Bristol, BS99 6ZY or the registered office of the Company c/o Apex
Administration (Guernsey) Limited, 1 Royal Avenue, Royal Plaza, St Peter Port,
Guernsey, GY1 2HL by no later than 11.00 am BST time on Tuesday, 22 October
2024, being 48 hours before the time appointed for the AGM. Completing and
returning this form of proxy will not prevent you from attending the meeting
and voting in person if you so wish.
vi. In order to revoke a proxy instruction, a member will need to send a
signed hard copy notice clearly stating their intention to revoke a proxy
appointment, together with the power of attorney or other authority (if any)
under which it is signed, or a notarially certified copy of such power of
attorney or authority, to the Company's Registrar to the contact details noted
above.
vii. A form of proxy executed by a corporation must be either under its
common seal or signed by an officer or attorney duly authorised by that
corporation.
viii. In the case of joint holdings, the signature of the first named member
on the Register of Members will be accepted to the exclusion of the votes of
the other joint holders.
ix. Pursuant to Regulation 41 of the Uncertificated Securities
(Guernsey) Regulations 2009, entitlement to attend and vote at the meeting and
the number of votes which may be cast thereat will be determined by reference
to the Register of Members of the Company at close of business on the day
which is two business days before the day of the meeting. Changes to entries
on the Register of Members after that time shall be disregarded in determining
the rights of any person to attend and vote at the meeting.
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