Tufton Oceanic Asset Tufton Oceanic -SHPP - Interim Results for period ended 31 December 2022
17/03/2023 07:00
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RNS Number : 2797T Tufton Oceanic Assets Ltd. 17 March 2023
Tufton Oceanic Assets Limited
("Tufton Oceanic Assets" or the "Company")
Interim Results for the six month period ended 31 December 2022
Tufton Oceanic Assets announces its interim results for the six month period
ended 31 December 2022. A copy of the Interim Report and Unaudited Financial
Statements will shortly be available on the Company's website in the Investor
Relations section at www.tuftonoceanicassets.com.
For further information, please contact:
Tufton Investment Management Ltd (Investment Manager) +44 (0) 20 7518 6700
Andrew Hampson
Paulo Almeida
N+1 Singer +44 (0) 20 7496 3000
James Maxwell, Alex Bond (Corporate Finance)
Alan Geeves, James Waterlow, Sam Greatrex (Sales)
Hudnall Capital LLP +44 (0) 20 7520 9085
Andrew Cade
Highlights
· Portfolio Operating Profit was strong at US$27.0m (vs. US$17.4m in the
financial period ending 31 December 2021) but NAV Total Return over the
financial period was negatively impacted by unrealised losses in bulkers and
the remaining containership, Riposte.
· NAV Total Return was -0.6% during the financial period, 7.7% in
2022 and 91.1% since inception.
· The 31 December 2022 NAV was US$431.6m (£358.8m) or US$1.402
(£1.165) per share.
· The Investment Manager expects the bulker market to improve from 2Q23,
aided by the easing of Covid-related restrictions in China and strong
supply-side fundamentals.
· After the end of the financial period, the Company agreed to divest
Riposte with realised net IRR exceeding 12%. The aggregate realised net IRR on
the Company's containerships over the past five years is c.27%.
· The Company agreed to acquire two product tankers, Mindful and
Courteous, below DRC, financed primarily by a new US$60m loan which is secured
on Mindful, Courteous, Marvelous and Exceptional.
· The Company is well positioned to benefit from the ongoing strength in
the product tanker and chemical tanker markets and the expected improvement in
the bulker market.
· Encouraged by strong visible cash flows from increased charter
cover, diversification and continued supply-side recovery, the Company raised
its target annual dividend from $0.080 to $0.085 per share, which commenced
from 4Q22.
· The Company is forecast to have a dividend cover of c.1.8x over the
next 18 months (through the end of 2Q24) after reinvesting the proceeds from
the divestment of Riposte.
· The Company's operating emissions intensity improved by c.34% YoY
in 2022 primarily because of capital re-allocation. We expect further
improvement as Energy Saving Device ("ESD") retrofits on eight vessels are
fully completed by mid 2023 and on another three vessels by the end of the
year.
· We prioritise crew welfare and have especially taken action to
improve the welfare of the Ukrainian crew members on board the Company's
vessels.
· The Investment Manager's principals acquired an additional 613,000
ordinary shares during the financial period such that Investment
Manager-related shareholders owned 3.2% of the issued share capital at 31
December 2022.
Chairman's Statement
Introduction
On behalf of the Board, I present the Interim Financial Statements of the
Company for the period ended 31 December 2022.
During the financial period, the Company acquired two product tankers and
agreed to divest its last containership, Riposte, after the end of the
financial period. The fleet as at 31 December 2022 consisted of eight
handysize bulkers, an ultramax bulker, one containership and thirteen tankers.
Full details of the investment portfolio are set out in the Investment
Manager's Report.
Performance
As at 31 December 2022, the Company's NAV was US$431.6m, being US$1.402 per
share (US$447.5m and US$1.450 per share as at 30 June 2022). NAV Total Return
over the period was -0.6%. Despite a strong operating profit, performance was
impacted by unrealised capital value losses. The bulker and containership
markets weakened over the financial period. The Investment Manager expects the
bulker market to improve from 2Q23, aided by the easing of Covid-related
restrictions in China and strong supply-side fundamentals.
The Company is well positioned to benefit from the ongoing strength in the
product tanker and chemical tanker markets and the expected improvement in the
bulker market.
The Average Charter Length on the Company's product tankers at 31 December
2022 was 2.3 years. Encouraged by the strong charter coverage, the Company
raised its target annual dividend from US$0.08 to US$0.085 per share,
commencing from 4Q22. The Company is forecast to have a dividend cover of
c.1.8x over the next 18 months (through the end of 2Q24) after reinvesting the
proceeds from the divestment of Riposte.
During the year, the Company's share price decreased from US$1.230 per share
as at the close of business 30 June 2022 to US$1.150 per share as at the close
of business 31 December 2022.
Discount Management
On average, the Company's shares traded at an 18% discount to NAV over the
financial period. As at 10 March 2023, the Company's shares traded at a 18%
discount to the ex-dividend 31 December 2022 NAV. In November and December
2022, the Company (in accordance with the authority granted to it by
Shareholders) repurchased 850,000 shares at a cost of US$969,451. Refer to
Note 5 for more details. At the end of the financial period, there were
850,000 Shares held in Treasury and 307,778,541 Shares outstanding.
From the period end the Company has bought back an additional 710,000 shares
with 1,560,000 Shares held in Treasury and 307,068,541 Shares outstanding as
at 15 March 2023.
Dividends
During the period the Company declared and paid dividends to shareholders as
follows:
Period end Dividend per share (US$) Announce date Ex div date Record date Paid date
Ordinary shareholders
30.06.22 0.02000 19.07.22 28.07.22 29.07.22 12.08.22
30.09.22 0.02000 18.10.22 27.10.22 28.10.22 11.11.22
A further dividend of US$0.02125 per share was declared on 17 January 2023 for
the quarter ending 31 December 2022. The dividend was paid on 10 February 2023
to holders of shares on record date 27 January 2023 with an ex-dividend date
of 26 January 2023.
Russian Invasion of Ukraine
None of the Company's vessels were directly impacted by the war in Ukraine and
all remain fully insured against war perils. The Investment Manager has
formally requested all our charterers and vessel managers to desist from trade
with Russia wherever legally possible except for humanitarian purposes.
Additionally, the Investment Manager monitors compliance through regular
inspection of vessel logs and satellite data. The Company and its vessels will
remain compliant with all international sanctions imposed by the US, UK, EU
and UN. We have had no issues to date with any vessels being damaged or
blocked. The Board and the Investment Manager remain watchful in monitoring
the war and its consequences for shipping and the Company.
Covid-19
The global economy has largely recovered from the negative impact of Covid.
The delays to crew rotation caused by national restrictions put in place to
contain the spread of Covid were largely resolved by 4Q22. The introduction of
Covid-related restrictions in China over the summer of 2022 impacted the
bulker market and increased planned capex and off-hire for some of the
Company's vessels. There is a growing consensus that the easing of
Covid-related restrictions in China from January will lead to improvement in
the bulker market.
Corporate Governance
The Company is a member of the Association of Investment Companies ("AIC") and
complies 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 (the "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.
The Company established a Management Engagement Committee during the period
which is chaired by Paul Barnes and includes all of the members of the Board.
The purpose of the committee is to formulate the reviews undertaken of the
Investment Manager and the other key service providers. The annual reviews
were undertaken during 4Q22 and 1Q23. Further information of the findings of
the reviews will be included in the Audited Financial Statements each year.
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.
Environmental, Social, Governance ("ESG")
Our Investment Manager continues to integrate ESG factors into its investment
recommendations and asset ownership practices. As you will see in the
Investment Manager's Report on pages 20 to 26 there is significant focus given
to the ESG aspects of the Company's operations.
Crew welfare continued to be a significant area of focus with the Investment
Manager paying special attention to the Ukrainian crew members on the
Company's vessels. Where requested, we will assist in the repatriation of crew
members or extension of crew contracts.
The Board has reviewed and approved the Investment Manager's Responsible
Investment Policy and Implementation Report for the Company. Shareholders can
view the policy and the implementation report on the Company's website. Being
a closed-end investment company listed on the Specialist Funds Segment of the
London Stock Exchange, the Company is not required to have disclosure aligned
with the Task Force on Climate-related Financial Disclosures ("TCFD")
framework. Nevertheless, the Investment Manager supports the framework and
will publish a separate sustainability report later this year based on TCFD
guidelines.
Annual General Meeting
The Annual General Meeting ("AGM") of the Company was held on 27 October 2022.
I am pleased to report that all the resolutions were duly passed.
Outlook
The Investment Manager expects:
· the bulker market to improve from 2Q23;
· the Company's chemical tankers to benefit from strong supply-side
fundamentals and the tight product tanker market; and
· further upside in secondhand values of bulkers and tankers due to
limited shipyard capacity for new deliveries and tighter environmental
regulations which increase newbuild prices.
The Investment Manager continues to seek good investment opportunities across
the segments.
………………………
Rob King
Non-executive Chairman
Board Members
The Company's Board of Directors comprises four independent non-executive
Directors. The Board's role is to manage and monitor the Company in accordance
with its objectives. The Board monitors the Company's adherence to its
investment policy, its operational and financial performance and its
underlying assets, as well as the performance of the Investment Manager and
other key service providers. In addition, the Board has overall responsibility
for the review and approval of the Company's NAV calculations and financial
statements. It also maintains the Company's risk register, which it monitors
and updates on a regular basis.
The Directors of the Company who served during the period are:
Robert King
Stephen Le Page
Paul Barnes
Christine Rødsæther
They also served during the year ended 30 June 2022, and their brief
biographies are available in the annual report as at that date.
Investment Manager's Report
Highlights of the Financial Period
The Company continued to re-allocate capital, in line with its investment
strategy and commitment to ESG. During the financial period, the Company
acquired two fuel-efficient product tankers and after the end of the financial
period agreed to divest its last containership. The capital re-allocation has
better positioned the Company to benefit from the ongoing strength in the
product tanker and chemical tanker markets and the expected improvement in the
bulker market from 2Q23.
During the financial period, the product and chemical tanker markets
strengthened while the bulker and containership markets weakened. We expect
the product and chemical tanker markets to remain strong in the medium term,
the bulker market to improve from 2Q23 and the containership market to remain
relatively weak in 2023. Please see the Shipping Market section of this report
for details.
This section utilises alternative measures, applied on an unconsolidated
basis, to analyse performance. Please see the Definitions on pages 51 to 55
for details of the measures. NAV Total Return was -0.6% during the financial
period, 7.7% for 2022 and 91.1% since inception. The effectiveness of our
strategy of diversification across the major segments, conservative leverage
and strong charter cover is evidenced by the portfolio performance and growing
dividend through a variety of market conditions since the Company's listing in
December 2017.
Portfolio Operating Profit was strong at US$27.0m (vs. US$17.4m in the
financial period ending 31 December 2021) mainly as the Company benefited from
a larger bulker fleet and higher bulker time charter rates. While the bulker
market weakened over the financial period, we expect it to improve from 2Q23,
aided by the easing of Covid-related restrictions in China and strong
supply-side fundamentals. At 31 December 2022, the Average Charter Length on
the Company's bulkers was 0.3 years. We expect the improving bulker market
will offer opportunities to employ our bulkers on charters at higher rates
than at the end of the financial period.
There was a loss of US$16.5m in charter-free value as the bulker and
containership markets weakened during the financial period. The fall in bulker
and containership charter-free values outweighed the rise in product tanker
and chemical tanker charter-free values. We expect the bulker market and
charter-free values to improve from 2Q23. The Company started divesting
containerships from mid 2021 in anticipation of a weaker market and agreed to
divest its last containership, Riposte, just after the end of the financial
period. The realised net IRR on Riposte exceeds 12% and the aggregate realised
net IRR on the Company's containerships over the past five years is c.27%.
There was a loss of US$17.1m in charter value mainly due to rising product
tanker time charter rates. The Company did not benefit significantly from
higher charter values on bulkers, which had only 0.3 years of Average Charter
Length at the end of the financial period. At the end of the financial period,
the portfolio had a total negative charter value of US$43.3m. This will trend
to zero (i.e. increase NAV) in the medium term. Ceteris paribus, the negative
charter value will unwind by c.US$18m in 2023. During the financial period,
the rise in product tanker charter-free values slightly lagged the rise in
time charter rates as the market strengthened. Product tanker charter-free
values should rise further as confidence builds in the duration of the market
strength - or, if rates were to moderate, negative charter value should unwind
more than charter-free values drop.
Both tankers and bulkers benefit from strong supply-side fundamentals. The low
orderbook in both segments will result in slowing fleet growth. We expect
further upside in secondhand values of bulkers and tankers due to limited
shipyard capacity and tighter environmental regulations which increase
newbuild prices.
Highlights of the financial period also include:
· The Company acquired two product tankers, Mindful and Courteous, below
Depreciated Replacement Cost ("DRC"). The acquisitions were financed primarily
by a new US$60m loan with a SOFR cap of 3.5% for the first three years which
is secured on Mindful, Courteous, Marvelous and Exceptional.
· The Company agreed to divest its last containership, Riposte, after
the end of the financial period.
· Our investment activity continues to demonstrate our commitment to
capital re-allocation and ESG. With these transactions, we have re-allocated
capital to position the portfolio for the greater upside potential in
fuel-efficient tankers.
· The Dividend Cover for the financial period was c.0.5x. This was
lower than our long-run expectation because of high planned capex and
off-hire. Capex and off-hire were higher than previously expected due to the
impact of Covid-related restrictions in China.
· At 31 December 2022, the Company forecast much lower planned capex
and off-hire in the next 18 months.
· At 31 December 2022, the Company's Consolidated Gearing Ratio was
13.7%.
· The Company's fleet had no unplanned commercial idle time (voids)
during the financial period.
· The Company's operating emissions intensity, as measured by the
Energy Efficiency Operating Index ("EEOI"), improved by c.34% YoY in 2022
primarily because of capital re-allocation. We expect further improvement in
emissions intensity with ESD retrofits.
· ESD retrofits are substantially complete on seven of the Company's
vessels. We expect ESD retrofits on eight vessels will be fully completed by
mid 2023 and another three vessels by the end of the year.
· We prioritise crew welfare and have especially taken action to
improve the welfare of the Ukrainian crew members on board the Company's
vessels.
· We aim to minimise coal carriage on the Company's vessels without
negative financial impact. During 2022, only one of the Company's bulkers,
Masterful, carried coal, accounting for <2% of the total cargo carried by
the Company's bulkers.
The Assets
As at 31 December 2022, the Company owned twenty-three vessels.
Containership
At the end of the financial period, Riposte was on a fixed-rate time charter
to a major investment-grade container shipping group. The Company agreed to
divest Riposte after the end of the financial period.
Tankers
Employment for vessels owned by the Company at the end of the financial
period:
· Octane and Sierra were on time charters to an investment grade
oil major.
· Pollock, Dachshund, Cocoa and Daffodil were on time charters to a
major commodity trading and logistics company which exercised its optional
periods on Dachshund and Pollock until mid 2024.
· Marvelous, Mindful and Courteous were on time charters to the
same major commodity trading and logistics company.
· Exceptional was on a time charter to a leading tanker shipping
company.
· At 31 December 2022, the Average Charter Length of the product
tankers was 2.3 years.
· The gas carrier Neon operated on a bareboat charter, under which the
Company provides only the vessel to the charterer, who is responsible for
crewing, maintaining, insuring, and operating it.
· Two chemical tankers, Orson and Golding, were employed in a leading
chemical tanker pool. As described in the Company's Prospectus, a pool is a
revenue sharing structure run by a specialist third party or another ship
owner.
Acquisitions:
The Company agreed to acquire:
· Two product tankers, Mindful and Courteous, for US$73.0m in
September 2022. The vessels were delivered to the Company in December 2022.
The acquisitions were financed primarily by a new US$60m loan which is secured
on Mindful, Courteous, Marvelous and Exceptional.
Mindful, Courteous, Marvelous and Exceptional are in the top quartile of fuel
efficiency in their market segment.
Bulkers
Employment for vessels owned by the Company at the end of the financial
period:
· Awesome and Auspicious were on time charters to a leading
operator of bulkers.
· Charming was on a time charter to a leading dry bulk shipping company.
Charming's time charter was extended by 5-8 months from October 2022.
· Laurel was on a time charter to a leading owner and operator of
bulkers.
· Idaho and Mayflower were on time charters to a leading owner and
operator of bulkers.
· Mayflower's time charter was extended by 5-7 months from December
2022.
· Rocky IV, Anvil and Masterful were on time charters to a leading
merchant and processor of agricultural goods.
Awesome, Auspicious, Masterful and Charming are in the top quartile of fuel
efficiency in their market segment. Average Charter Length on our bulkers was
0.3 years at the end of the financial period. We expect the improving bulker
market from 2Q23 will offer opportunities to employ our bulkers on charters at
higher rates than at the end of the financial period.
The Company's fleet across all segments is well maintained and performed well,
though certain vessels had minor Covid-related disruptions or suffered supply
chain issues and inflationary pressures.
As at 31 December 2022:
SPV(+) Vessel Type and Year of Build Acquisition Date Earliest end of charter period Latest end of charter period Expected end of charter period**
Riposteˆ 2500-TEU containership March February July February
built 2009 2018 2023 2023 2023
Neon Mid-sized LPG carrier built 2009 July August August August
2018 2025 2025 2025
Sierra Medium-range ("MR") December June July July
product tanker 2018 2024 2025 2025
built 2010
Octane MR December May June June
product tanker 2018 2024 2025 2025
built 2010
Cocoa Handysize October October January 2026 January
product tanker 2020 2023 2025
built 2008
Pollock Handysize December April
product tanker 2018 2024
built 2008
Daffodil Handysize October October March March
product tanker 2020 2023 2026 2025
built 2008
Dachshund Handysize February May
product tanker 2020 2024
built 2008
Golding 25,600 DWT stainless steel chemical tanker April NA - vessel is employed in a pool
built 2008 2021
Mayflower Handysize bulker June May July July
built 2011 2021 2023 2023 2023
Laurel Handysize bulker July June October June
built 2011 2021 2023 2023 2023
Orson 20,000 DWT stainless steel chemical tanker July NA - vessel is employed in a pool
built 2007 2021
Idaho Ultramax bulker July February July February
built 2011 2021 2023 2023 2023
Anvil Handysize bulker September February May February
built 2013 2021 2023 2023 2023
Rocky IV Handysize bulker September October January January
built 2013 2021 2022 2023 2023
Exceptional MR April April April April
product tanker 2022 2023 2024 2024
built 2015
Awesome Handysize bulker January September March September
built 2015 2022 2023 2024 2023
Auspicious Handysize bulker February September March September
built 2015
2022 2023 2024 2023
Masterful Handysize bulker April January April January
built 2015 2022 2023 2023 2023
Charming Handysize bulker June March June March
built 2015 2022 2023 2023 2023
Marvelous MR July November November November
product tanker 2022 2025 2027 2025
built 2014
Mindful MR December December November December
product tanker 2022 2025 2027 2025
built 2016
Courteous MR December December November December
product tanker 2022 2025 2027 2025
built 2016
Notes:
+ SPV that owns the vessel.
** Based on our assessment of the prevailing market conditions as at 31
December 2022.
ˆ Riposte, the last containership in the portfolio, was divested in
February 2023.
Investment Performance
NAV per share was US$1.402 at 31 December 2022. US$ NAV Total Return for the
financial period was -0.6% and for calendar year 2022 was 7.7%. During the
financial period, Portfolio Operating Profit contributed US$27m (vs. US$17.4m
in the financial period ending 31 December 2021) mainly as the Company
benefited from a larger bulker fleet and higher bulker time charter rates.
There was a Loss in Capital Value of US$33.6m or US$0.109 per share mainly due
to the fall in bulker and containership values as those markets weakened over
the financial period. We expect the bulker market and charter-free values to
improve from 2Q23. After the end of the financial period, the Company agreed
to divest Riposte.
Figures below are in US$m unless otherwise stated From 1 Jul 2022 to 31 Dec 2022 From 1 Jul 2021 to 31 Dec 2021
Total ship-days 3,908 3,947
Revenue 57.0 48.5
Operating Expense (26.0) (28.1)
Gross Operating Profit 31.0 20.4
Gross Operating Profit / Time-Weighted Capital Employed 15.0% 13.6%
Loan interest and fees (1.6) (0.8)
Gain/(loss) in Capital Values (33.6) 57.2
Portfolio (loss) / profit (4.2) 76.8
Interest income 0.0 0.0
Fund Level Fees and Expenses (2.4) (2.2)
Performance fee accrual 4.0 (2.4)
(Loss) / Profit for the period (2.6) 72.2
Portfolio Operating Profit 27.0 17.4
Loan interest and fees were higher compared to 2H21 as a new US$60m loan was
committed and drawn for the acquisitions of two product tankers, Mindful and
Courteous, during the financial period. The new loan is secured on Mindful,
Courteous, Marvelous and Exceptional. The accrued performance fee was unwound
because the Total Return per Share was slightly lower than the High Watermark
per Share at the end of the financial period.
The Company benefited from a significant improvement in the market for
chemical tankers as tankers which can trade both chemicals and products
shifted to the tightening product tanker market. The chemical tanker market
benefits from strong supply-side fundamentals with a low orderbook (c.4% of
fleet for stainless steel tankers) and a strong demand growth forecast of c.6%
CAGR (2022-2024). Gross operating profit for chemical tankers during the
financial period was negatively impacted by the planned off-hire of Orson and
Golding, which are operating in a chemical tanker pool.
Segment Performance During the Financial Period Product Tankers Chemical Tankers Gas Tanker Containership Bulkers Total
US$m unless otherwise stated
Gross Operating Profit 8.3 1.4 2.1 1.2 18.0 31.0
Loan interest & fees (1.6) - - - - (1.6)
Gain/(loss) in charter-free values 55.7 5.1 (0.6) (23.4) (53.3) (16.5)
Gain/(loss) in charter values (32.8) - - 10.9 4.8 (17.1)
Portfolio profit 29.6 6.5 1.5 (11.3) (30.5) (4.2)
Segment Exposure and Forecast Yields* Product Tankers Chemical Tankers Gas Tanker Containership Bulkers Total
% of NAV 42.9% 9.0% 5.9% - 37.6% 95.5%
Forecast Net Yields* 9.0% 23.8% 15.8% NA 15.7% 12.0%
(*)Based on the pro forma fleet and market values at 31 December 2022
At 31 December 2022, the Company's vessels had an average age of c.11 years
and were chartered to ten different counterparties. The forecast net yield on
the product tankers slightly fell to 9.0% at the end of December 2022 from
10.6% at the end of June largely due to the rise in asset values during the
financial period.
The Shipping Market
The Company focuses on three main shipping segments: tankers, bulkers and
containerships. The Clarksea Index, a broad vessel earnings indicator from
Clarksons Research, ended the financial period at US$29,657/day, c.29% lower
than at the end of June 2022 and c.15% lower than at the end of December 2021,
because of weakness in the containership and bulker markets. In January 2023,
the IMF forecast 2.9% world GDP growth in 2023, 0.2 percentage points higher
than its forecast of October 2022. The easing of Covid-related restrictions in
China has paved the way for a faster-than-expected recovery. Global seaborne
trade is expected to grow by 1.5% in 2023. In comparison, seaborne trade grew
by c.3% CAGR in the two decades leading up to 2021.
We believe the shipping market is in a multi-year upcycle because of the
relative lack of investment in new capacity (supply). The combination of
commodity price inflation and reduced shipyard capacity has increased newbuild
prices. This led to higher values for secondhand vessels. The Clarksons
Research Newbuilding Price Index has risen c.29% since the end of 2020 while
the Clarksons Research Secondhand Price Index has risen c.57% over the same
period. We expect further upside in secondhand values of bulkers and tankers
due to limited shipyard capacity and tighter environmental regulations which
increase newbuild prices. Clarksons Research estimates that global
shipbuilding capacity is 40% lower compared to a decade ago.
This section utilises data from our Tufton Real-Time Activity Capture System
("TRACS") which analyses satellite data to track the international shipping
fleet by the major segments. TRACS utilises the draught of each vessel as a
proxy for its utilisation and thereby enables 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
According to the US Energy Information Administration, world petroleum liquids
demand is expected to grow 1.1% in 2023 and 1.7% in 2024 after growing by more
than 2% in 2022. We had expected improvement in tanker demand in 2022 along
with the recovery in global oil demand. The improvement in tanker demand was
accelerated as the war in Ukraine partially replaced some demand for
short-haul product tanker cargoes with demand for long-haul: increasing
Russian exports to Asia, notably India, and higher European imports from
non-Russian suppliers including the Middle East, the US and Asia. 1-year time
charter rates for MR product tankers rose 48% to c.US$30,000/day at the end of
the financial period, the highest since 2005. Beyond the current market
strength, supply-side dynamics are supportive for product and chemical tankers
with the orderbook at only c.5% of fleet. The easing of Covid-related
lockdowns in China, refinery expansions in the Middle East and Asia as well as
slowing fleet growth suggest the product tanker market will remain strong in
the medium term. The Company acquired four MR product tankers in 2022:
Exceptional, Marvelous, Courteous and Mindful.
25-30% of MR product tankers are capable of engaging in the chemicals/veg oil
trade. The chemical tanker market benefits from the strength in product
tankers as MR product tankers shift to the tightening product tanker market.
The chemical tanker market also benefits from strong supply-side fundamentals
with a low orderbook (c.4% of fleet for stainless steel tankers) and strong
demand growth forecast of c.6% CAGR (2022-2024). The Company's chemical
tankers benefit from this trend as they are employed in a revenue-sharing pool
and have spot market exposure.
At the end of the financial period, the Company had 10 product tankers on
fixed-rate charters with Average Charter Length of 2.3 years and two chemical
tankers that operate in a pool. We believe the product and chemical tanker
markets, well supported by strong supply-side fundamentals, offer potential
for strong operating profit and capital appreciation.
Bulkers
Over the financial period, the bulker market weakened due to the impact of
Covid-related restrictions in China, a slowdown in global industrial
production and the easing of port congestion. 1-year time charter rates for
Handysize bulkers fell c.41% to US$12,375/day. We expect the bulker market to
improve from 2Q23, aided by the easing of Covid-related restrictions in China,
as the market has strong supply-side fundamentals. The bulker orderbook is
only c.7% of fleet compared to c.80% of fleet in 2008 when the increase in
rates resulted in an ordering boom. Further, c.14% of the Handysize bulker
fleet is ≥20 years old compared to the orderbook of c.7% of fleet which
suggests negative net supply growth as the oldest and least efficient vessels
are recycled. As at the end of the financial period, the Company had 9 bulkers
on fixed-rate charters with Average Charter Length of 0.3 years.
Containerships
The containership market weakened over the financial period. Consumer demand
weakened due to the impact of inflationary pressure on consumers,
Covid-related lockdowns in China and the war in Ukraine. The effect of weak
demand was exacerbated by easing port congestion. Over the financial period,
1-year time charter rates for small (2500-TEU) containerships fell 75% to
US$18,750/day. The containership orderbook was c.29% of fleet at the end of
the financial period. Fleet growth is expected to accelerate to c.7% in 2023.
We expect the containership market to remain relatively weak and have
re-allocated capital by divesting containerships to reinvest in fuel-efficient
tankers and bulkers. After the end of the financial period, the Company agreed
to divest its last containership. The orderbook for small containerships
remains relatively low at c.14% of fleet compared to c.24% of fleet which is
at least 20 years old and will continue to seek opportunities as they arise.
Across the main segments, asset values and time charter rates reflect our
thesis of supply-side adjustment to varying degrees. In bulkers and tankers,
the combination of tightening environmental regulations and lower shipyard
capacity suggest newbuild prices will remain high thereby also supporting
secondhand prices. Clarksons Research estimates that global shipbuilding
capacity is 40% lower compared to a decade ago. Many newbuild designs
incorporate more flexible machinery and storage systems to handle multiple
fuel types to reduce emissions. These further increase newbuild prices.
The shipping industry has a history of being resilient during periods of
disruption. Despite the negative impact of the war in Ukraine, the product
tanker market strengthened to record highs at the end of the financial period
as demand for long-haul cargoes outpaced demand for short-haul cargoes and the
supply side remains supportive with slowing fleet growth. New environmental
regulations from the International Maritime Organisation ("IMO") to measure
and improve vessel carbon emission intensity incentivise lower speeds
resulting in reduced shipping capacity, aiding the supply-side adjustment.
Fuel-efficient vessels such as the Company's recent acquisitions are likely to
be favoured.
Environmental, Social and Governance ("ESG")
We emphasise the principles of Responsible Investment in the management of
clients' 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 achieve good
financial returns against acceptable levels of risk, in accordance with the
objectives of the Company. Since December 2018, we are a signatory of the
United Nations Principles of Responsible Investment ("UN PRI") and have a
Responsible Investment policy statement (most recently revised in June 2022)
which is available on the Company's website. Current areas of ESG focus
include:
1. Assessment of the fuel efficiency and environmental impact of potential
acquisitions
2. Regular review of our fleet to identify opportunities for improving
fuel efficiency
3. Reducing environmental impact across the asset life cycle
4. Responsible vessel recycling
5. Health and safety of the crew on our vessels
6. Enhanced security to lower risk of contraband
7. Compliance with all international sanctions imposed by the US, UK, EU
and UN
8. Promoting acceptance and implementation of ESG principles with our
business partners
We are committed to reducing greenhouse gas emissions and aligning our funds
to the temperature goals of the Paris Agreement by fully transitioning to zero
carbon energy sources by 2050 and investing in zero carbon capable vessels
before 2030. In September, we appointed a Senior Adviser for Decarbonisation.
In SHIP, we aim to achieve greenhouse gas reduction and participate in the
energy transition by:
· investing in ESDs;
· deploying digital tools to measure and optimise fuel consumption;
· increasing the use of zero-emission fuels by 2030; and
· favouring long-term charters that minimise coal carriage without
negative financial impact
Being a closed-end investment company listed on the Specialist Fund Segment of
the London Stock Exchange, the Company is not required to report against the
TCFD framework. Nevertheless, we believe the TCFD recommendations provide a
useful framework to increase transparency on climate-related risks and
opportunities within financial markets and intend to publish a sustainability
report later this year on that basis. As a member of the AIC, the Company
reports against the AIC Code of Corporate Governance on a comply or explain
basis. Our Senior Management (i.e. the CEO and the CIO) is committed to
Responsible Investment and oversees the implementation of our Responsible
Investment policy statement. We devote more than 4 full time employee
equivalents to ESG integration-related analysis and implementation in
aggregate. The policy statement is reviewed at least annually and approved by
the Company's Board. The Company's Board does not have a separate ESG
committee but collectively reviews implementation progress against the policy
statement and issues an implementation review report which is also publicly
available on the Company's website.
The Board recognises that climate change and related risks will have an impact
on the Company's business and considers climate-related risks and
opportunities when approving investment decisions. The Board maintains
ultimate responsibility for the policy and its implementation and is committed
to upholding high standards of corporate governance.
We are a signatory of the UN PRI since 2018. In the 2021 UN PRI signatory
assessment, we received a 5-star rating in the Infrastructure category, the
highest rating in that category and above the median rating of our peer group.
We received a 4-star rating in the Investment and Stewardship Policy category
which was also above the median rating of our peer group. Please see the for
details. We are a member of the Getting to Zero Coalition, an alliance of more
than 200 organisations including 160 companies within the maritime, energy,
infrastructure and finance sectors. The Coalition is committed to getting
commercially viable deep sea zero-emission vessels into operation by 2030,
towards full decarbonisation by 2050. In February 2022, we became a Mission
Ambassador to the Maersk Mc-Kinney Møller Center for Zero Carbon Shipping
("MMCZCS"), a not-for-profit research and development organisation. We expect
to benefit from the Center's extensive work in fuel transition and
technologies.
Environmental
We are reducing emissions from the Company's vessels through investment in
ESDs and promoting best operational practices such as regular hull/propeller
cleaning and optimal use of auxiliary engines. We have invested in digital
technologies for performance monitoring and emissions reduction, which provide
data and insights for further emissions reduction and efficiency gains.
Sustainable biofuels are expected to be part of the long-term fuel mix on the
path to decarbonisation. We aim to increase the use of sustainable biofuels
following successful trials.
The potential for ESDs often depends on how efficient a vessel design is
already (the more modern the vessel the smaller the impact of ESDs). The
choice of ESDs also depends on whether a vessel is operating near its original
design parameters or not. The selection of ESDs, the investment required,
retrofit timing, commercial arrangements for fuel savings and returns will
vary from vessel to vessel depending upon the results of energy efficiency
studies, prevailing market conditions and commercial considerations. We have
engaged a consulting firm of naval architects to conduct energy efficiency
studies on the Company's vessels and select the appropriate ESDs for retrofit.
Energy efficiency studies will be carried out on all the Company's
acquisitions.
We have invested c.US$0.5m per vessel on ESDs such as propeller boss cap fins,
Mewis or Schneekluth ducts and variable frequency drives. The expected return
from the ESD investments is c.20% based on the expected increased hire rate
(premium) to reflect fuel savings, from all the ESDs, of c.10% on each vessel.
We expect further upside on ESD retrofits as we better capture savings from
rising fuel prices and carbon prices. We also assess the suitability of
advanced ESDs like wind-assisted propulsion or air lubrication for the
Company's vessels and have invested in rotor sails for a vessel in another
fund that we manage.
Although we have experienced some supply chain delays in the procurement and
retrofit of ESDs, we expect ESD retrofits on eight vessels will be fully
completed by mid 2023 and on another three vessels by the end of the year.
Where possible, the ESD retrofits are planned to coincide with each vessel's
scheduled special survey to minimise installation cost. ESD retrofit studies
are in progress on four other vessels. The other six Company vessels are
already fuel-efficient relative to their peers but will nevertheless be
evaluated for further improvement including the retrofit of ESDs.
We have started receiving the hire rate premium for the ESD retrofits on
Laurel and Idaho. Golding and Orson operate in a pool and will benefit
directly from the fuel savings based on the prevalent fuel prices. We are in
discussion with the charterer of Cocoa, Daffodil, Pollock and Dachshund for
the hire rate premium to reflect the fuel savings from the retrofits.
Total CO2 emissions from the Company's fleet in 2022 was 315,708 tonnes. With
a growing portfolio of vessels, this measure is less relevant to the Company
than normalised measures of emissions intensity. Total CO2 emissions from the
portfolio are calculated from the fuel consumption of the Company's vessels
for propulsion and onboard power generation. The majority of the Company's
vessels are on time charter or operate in a pool wherein the Company does not
have full operating control of the vessels but is responsible for the regular
surveys and maintenance of the vessels. Data from one vessel (Neon) on
long-term bareboat charter is excluded as the Company does not have operating
control of the vessel and is not responsible for the regular surveys or
maintenance of the vessel.
From 2023, the IMO requires the reporting of vessel carbon intensity using the
Carbon Intensity Indicator ("CII"). The CII measures how efficiently a vessel
transports goods and is given in grams of CO2 emitted per cargo-carrying
capacity and nautical mile. All else equal, a lower CII is indicative of a
more efficiently operated asset. The Portfolio CII improved by c.24% in 2022
mainly because of the capital re-allocation.
Environmental Metrics 2022 2021
Total CO2 emissions (tonnes) 315,708 401,348
CII (g CO2/dwt-nautical mile) 7.7 10.1
EEOI (g CO2/tonne-nautical mile) 13.9 21.1
Oil spills None None
Of the three major segments, containerships tend to have the highest emissions
intensity due to higher operating speeds. The Company started divesting
containerships from mid 2021 to re-allocate capital into fuel-efficient
tankers and bulkers.
The EEOI is a measure of operational emissions intensity defined as the mass
of CO2 emitted per unit of transport work. The EEOI measures a ship's fuel
efficiency. Like the CII, a lower EEOI is indicative of a more efficiently
operated asset. We have utilised the EU MRV (Monitoring, Reporting and
Verification) methodology for calculating the EEOI using data on total CO2
emissions and total cargo transported by the Company's fleet for the 2022
calendar year. The emissions intensity of the Company's vessels as measured by
the EEOI for 2022 improved by c.34% YoY. We expect further reduction in
emissions intensity from ESD retrofits as they are completed in 2023. Since
the Company's vessels operate on time charters or within a pool, we are
typically not involved in determining specific voyage parameters and are
therefore not able to influence the geographic and cargo carriage metrics of
the fleet. We can only directly influence CII and EEOI metrics from the
vessel's technical parameters (such as by retrofitting ESDs) and fleet
composition.
We are committed to the deployment of new technologies to reduce emissions and
have invested in the retrofit of rotor sails on a large bulker owned in
another fund that we manage. The Company will benefit from our knowledge and
experience as we continue to evaluate the suitability of such new technologies
for the Company's vessels. The Company's vessels utilise compliant fuel (Very
Low Sulphur Fuel Oil and Marine Gas Oil). Only one vessel, Marvelous, is
capable of utilising Heavy Fuel Oil as it has an open-loop scrubber. According
to DNV research, c.5,000 vessels in the global fleet are scrubber-equipped
with 81% having open-loop scrubbers. The scrubber on Marvelous is compliant
with current regulations and enables the vessel to earn a premium rate for
utilising cheaper Heavy Fuel Oil.
We have proactively implemented a policy to favour long-term charters that
minimise coal carriage without negative financial impact. Over 2022, only one
of the Company's bulkers (Masterful) carried coal, accounting for <2% of
the total cargo carried by the Company's bulkers over the year.
All of the Company's vessels have Ballast Water Treatment Systems ("BWTS")
installed except for the gas carrier Neon (on a bareboat charter) where the
charterer is responsible for BWTS installation and compliance. BWTS prevent
the translocation of marine organisms from one region to another and help
preserve biodiversity. While BWTS installation will be mandatory from late
2024, we have expedited the installation of BWTS on Company vessels in line
with our commitment to be ahead of regulatory requirements.
Biodiversity can also be impacted by waste generated from shipping,
particularly plastic waste. We are installing water purification systems on
all vessels to replace drinking water in plastic bottles. The crew on each
vessel are being provided with complimentary, refillable, metal drinking water
bottles. Environmental benefits include an estimated annual reduction in the
supply of plastic-packaged water by 11,000 (1 Litre) bottles per vessel and an
annual reduction of CO2 by 2 tonnes per vessel.
The average age of the Company's vessels is c.11 years. Based on the current
portfolio and target segments, we do not expect the Company to have recycling
candidates in its portfolio in the near future. When recycling situations do
arise, the Company will follow industry best practices in adopting the Hong
Kong International Convention for the Safe and Environmentally Sound Recycling
of Ships.
For investment and divestment decisions, we consider the historic
environmental performance and energy efficiency metrics of candidate vessels
as well as other important information on potential environmental impact
including the status of BWTS and history of compliance to environmental and
safety regulations. We also consider the candidate track record and capability
(in addition to commercial terms) before recommending the appointment of the
technical manager for each vessel.
Social
The Company has no employees. The crew on board the Company's vessels are
employed by our technical managers. We consider crew health and safety to be a
priority and work closely with our technical managers to promote best
practices and establish a strong safety culture, exceeding regulatory
standards. The technical managers have implemented a collection of
comprehensive safety procedures, policies, and protocols on board vessels that
conform to our guidelines. Safety performance is monitored by collecting and
tracking a comprehensive list of industry Key Performance Indicators ("KPIs")
every quarter, ensuring that any significant incidents are reported upon with
follow-up actions taken.
We are a signatory to:
· Maritime UK's Mental Health in Maritime pledge to promote quality
of mental health and well-being in the industry.
We have engaged Mental Health Support Solutions GmbH ("MHSS") to provide a
free counselling service for crew members to help them handle concerns of
stress, anxiety, and personal issues while on board.
· Maritime UK's Women in Maritime pledge to build an employment
culture that actively supports and celebrates gender diversity at all levels
in the industry.
The Company has no employees. As an Investment Manager, we have made a
conscious effort to build a supportive employment culture. As at the end of
the financial period, we had c.38% female employees and 17% female employees
at the Senior Management level.
· The Neptune Declaration since January 2021, supporting measures
to ensure timely relief of crew and putting measures in place to manage any
pandemic-related travel restrictions.
As a result of Covid-related restrictions, crew rotation was significantly
delayed between mid 2020 and the end of the financial period. We monitored and
facilitated (sometimes at additional cost) the prompt rotation of overdue crew
members. The number of overdue crew members was also reported to the Board on
a quarterly basis. As a result of our proactive approach to ensure timely
relief, the Company's vessels had fewer crew members overdue for rotation
compared to peers. We are pleased to note that the issue of overdue crew
members is substantially resolved in the industry as of early 2023. We remain
prepared to swiftly act should new disruptions to crew rotations arise in the
future.
We are specifically monitoring the safety and well-being of the Ukrainian crew
members on board the Company's vessels. The war could increase stress on crew
members and may exacerbate challenges to crew rotation due to the closure of
airports. We have engaged with all our technical managers to address these
issues. Where requested, we will assist in the repatriation of crew members or
extension of crew contracts. We are concerned about potential conflict between
Ukrainian and Russian crew members. Whilst no problems have arisen to date, we
have instructed our technical managers to closely monitor the environment on
board the Company's vessels for potential conflicts.
We are committed to the deployment of new technologies towards improving crew
health and safety and are deploying ShipIN FleetVision on all the Company's
vessels. ShipIN Fleetvision leverages machine learning camera vision
technology to enhance the safety and security of crew and cargo as well as
prevent pollution, while improving real-time, ship-to-shore collaboration.
Governance
We aim to promote acceptance and implementation of ESG principles by business
partners through an annual survey and feedback and conduct an annual survey of
all the Company's technical managers which includes KPIs to assess their
performance on numerous metrics including ESG. The results of the survey are
communicated to the technical managers to ensure best practices are shared.
We have a strict reporting policy for our technical managers. We employ a
third party to conduct independent inspections of the Company's vessels on a
regular basis to assist in evaluating the performance of the technical
managers. These independent inspections include assessment of key aspects of
vessel condition as well as regulatory compliance and crew health and safety.
We update the Board on the progress of the Company's investments every quarter
with additional updates where significant events have occurred.
We continue to closely monitor adherence to sanctions regimes from the US, UK,
EU and UN. The employment contracts for the Company's vessels are structured
to exclude trading in sanctioned regions. Additionally, we monitor compliance
through regular inspection of vessel logs and satellite data to monitor the
movements of all the Company's vessels. Through regular contact with our
charterers, legal counsel and insurers, we are ensuring that all vessels
continue to trade in full compliance with all relevant sanctions laws. All
vessels remain insured against war-like events. We have had no issues to date
with any vessels being damaged or blocked. We continue to monitor the
consequences of the war for shipping and the Company.
We have formally requested all our charterers and vessel managers to desist
from trade with Russia wherever legally possible except for humanitarian
purposes. The Master of each vessel may refuse to allow the vessel to trade in
areas assessed as "perilous" where there is heightened physical risk to the
vessel or its crew. The Master of the vessel will always have the last say on
the safety of the vessel and crew and we will always support the position of
the Master in a dispute with charterers or other interested parties.
We have a zero-tolerance policy towards bribery and adhere to the UK Bribery
Act with the following policies in place:
· payment controls requiring dual sign-off/authorisation of all
payments;
· gifts and entertainment policies that restrict staff from giving
and receiving gifts;
· recruitment policies and ongoing monitoring of the fitness and
propriety of staff including their honesty, integrity, and financial
soundness; and
· FCA Conduct rules and a Code of Ethics which require staff to
conduct themselves appropriately.
We are also a member of the Maritime Anti-Corruption Network ("MACN").
Principal Risks and Uncertainties
The Directors have reconsidered the principal risks and uncertainties
effecting the Company. The directors consider that the principal risks and
uncertainties have not significantly changed since the publication of the
Annual Report for the year ended 30 June 2022. The risks and associated risk
management processes, including financial risks, can be found in the Annual
Report for the financial year ending 30 June 2022.
The risks referred to and which could have a material impact on the Company's
performance for the remainder of the current financial year relate to:
· Shipping and financial markets;
· Commercial risks around charter payments;
· Damage to the Company's assets;
· Cost overruns;
· Regulatory and legislative compliance;
· Safety, health and environment;
· Service quality of the Investment Manager and other Service
Providers;
· Liquidity.
Interim Report of the Directors
The Directors present their Interim Report and the Condensed Interim Financial
Statements of the Company for the six-month period ended 31 December 2022.
The Company was registered in Guernsey on 6 February 2017 and is a registered
closed-ended investment scheme under the POI Law. The Company's Shares were
listed on the Specialist Funds Segment of the Main Market of the London Stock
Exchange on 20 December 2017 under the ticker SHIP.
Investment Objective
The Company's investment objective is to provide investors with an attractive
level of regular and growing income and capital returns through investing in
secondhand commercial sea-going vessels. The Board monitors the Investment
Manager's activities through strategy meetings and discussions as appropriate.
The Company has established a wholly owned subsidiary that acts as a Guernsey
holding company for all its investments, LS Assets Limited, which is governed
by the same Directors as the Company.
All vessels acquired, vessel-related contracts and costs are held in SPVs
domiciled in the Isle of Man or other jurisdictions considered appropriate by
the Company's advisers. The Company conducts its business in a manner that
results in it qualifying as an investment entity (as set out in IFRS 10:
Consolidated Financial Statements) for accounting purposes and as a result
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. In July 2021 the Company
raised its target annual dividend to US$0.08 per share (previously US$0.075
per share). Encouraged by strong visible cash flows from increased charter
cover, diversification and continued supply-side recovery, the Company again
raised its target annual dividend from US$0.080 to US$0.085 per share, which
commenced from 4Q22.
The Company aims to achieve a NAV Total Return of 12% or above (net of
expenses and fees) on the Issue Price over the long term.
Results and dividends
The Company's performance during the period is discussed in the Chairman's
Statement on pages 3 - 6. The results for the year are set out in the
Condensed Statement of Comprehensive Income on page 32.
Related Parties
Details of related party transactions that have taken place during the period
and of any material changes are set out in Note 13 of the Condensed Interim
Financial Statements.
Directors
The Directors of the Company who served during the period and to date are set
out on page 7.
Directors' interests
The Directors held the following interests in the share capital of the Company
either directly or beneficially as of 31 December 2022, and as of the date of
signing these Financial Statements:
31 December 2022 30 June 2022
Shares Shares
R King 60,000 45,000
S Le Page 40,000 40,000
P Barnes 5,000 5,000
C Rødsæther 30,000 20,000
The Directors fees are disclosed below:
Payable from Paid from Paid from
1 January 2023 1 July 2022 1 July 2021
To To to
30 June 2023 31 December 2022 30 June 2022
Director £ £ £
R King 21,000 19,000 36,610
S Le Page 19,250 17,500 34,000
P Barnes 17,750 16,250 31,550
C Rødsæther 17,750 16,250 31,550
Other Interests
Tufton Investment Management Holding Limited group ("Tufton Group")
shareholders, employees, non-executive directors and former shareholders held
the following interests in the share capital of the Company either directly or
beneficially.
As at 31 December 2022
Name Ordinary Shares % of issued
Share Capital
Tufton Shareholders 5,988,133 1.90
Tufton Staff 466,261 0.15
Tufton Non-Executive Directors 403,279 0.13
Former Tufton Shareholders 3,041,740 0.99
As at 30 June 2022
Name Ordinary Shares % of issued
Share Capital
Tufton Group Shareholders 5,375,133 1.74
Tufton Group Staff 466,261 0.15
Tufton Group Non-Executive Directors 403,279 0.13
Former Tufton Group Shareholders 3,041,740 0.99
Share buybacks 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 buyback 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 Company purchased 850,000 of its own Shares at an average price of US$1.14
per Share during November and December 2022. Refer to Note 5 for more details.
There were 850,000 Shares held in Treasury and 307,778,541 Shares outstanding
as at the end of the financial period. The Company bought back a further
710,000 ordinary shares, between the end of the financial period and 15 March
2023, at an average price of US$1.14. The purchased shares will be held in
treasury. The Company had 307,068,541 Shares outstanding as at the date of
approval of these accounts.
Going concern
In assessing the going concern basis of accounting the Directors have,
together with discussions and analysis provided by Tufton, had regard to the
guidance issued by the Financial Reporting Council. They have considered
recent market volatility, the Russian invasion of Ukraine, and the potential
impact of Covid restrictions in China on the current and future operations of
the Company and its investments. Cash reserves are held at the LS Assets
Limited and SPV levels and rolled up to the Company as required to enable
expenses to be settled as they fall due.
Based on these activities and bearing in mind the nature of the Company's
business and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of the Interim Report and the Condensed Interim Financial
Statements. For this reason, they continue to adopt the going concern basis in
preparing the Interim Report and the Condensed Interim Financial Statements.
Responsibility Statement
For the period from 1 July 2022 to 31 December 2022
The Directors are responsible for preparing the Interim Report and Condensed
Interim Financial Statements, which have not been audited or reviewed by an
independent auditor, and confirm that to the best of their knowledge:
· the Condensed Interim Financial Statements have been prepared in
accordance with International Accounting Standard (IAS) 34, Interim Financial
Reporting;
· the Interim Report includes a fair review of the information
required by:
· DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the Condensed Interim Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
· DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Approved by the Board of Directors on 16 March 2023 and signed on behalf of
the Board by:
…………………………
…………………………
Rob
King
Stephen Le Page
Non-executive Chairman
Director
Condensed Statement of Comprehensive Income
For the 6-month period ended 31 December 2022
Notes 31 December 2022 31 December 2021
US$ US$
Income (Unaudited) (Unaudited)
Net changes in fair value of financial assets at fair value through profit or 4 (4,314,159) 76,730,838
loss
Foreign exchange gain - 1,008
Total net (loss) / income (4,314,159) 76,731,846
Expenditure
Administration fees (85,547) (83,577)
Audit fees (119,636) (79,757)
Corporate Broker fees (75,000) (75,000)
Directors' fees 15 (80,996) (88,055)
Directors' expenses (3,892) (238)
Foreign exchange loss (10,144) -
Insurance fee (4,925) (3,025)
Investment management fee 11 (1,815,843) (1,645,783)
Legal fees - (26,287)
Performance fees 12 3,980,432 (2,419,323)
Professional fees (66,096) (109,239)
Sundry expenses (13,716) (21,486)
Total credit / (expenses) 1,704,637 (4,551,770)
Operating (loss) / profit (2,609,522) 72,180,076
Finance income 1,246 4,348
(Loss) / Profit and comprehensive income for the period (2,608,276) 72,184,424
IFRS Earnings per ordinary share (cents) 6 (0.85) 25.34
There were no potentially dilutive instruments in issue at 31 December 2022.
All activities are derived from continuing operations.
There is no other comprehensive income or expense apart from those disclosed
above and consequently a Statement of Other Comprehensive Income has not been
prepared. The accompanying notes are an integral part of these condensed
interim financial statements.
Condensed Statement of Financial Position
At 31 December 2022
Notes 31 December 2022 30 June
US$ 2022
US$
Non-current assets (Unaudited) (Audited)
Financial assets designated at fair value 4 442,578,561 446,892,720
through profit or loss
Total non-current assets 442,578,561 446,892,720
Current assets
Trade and other receivables 18,800 5,740,385
Cash and cash equivalents 11,018 8,823
Total current assets 29,818 5,749,208
Total assets 442,608,379 452,641,928
Current liabilities
Trade and other payables 11,001,541 5,098,219
Total current liabilities 11,001,541 5,098,219
Net assets 431,606,838 447,543,709
Equity
Ordinary share capital 5 309,289,530 310,272,983
Retained reserves 5 122,317,308 137,270,726
Total equity attributable to ordinary shareholders 431,606,838 447,543,709
Net assets per ordinary share (cents) 8 140.23 145.01
The accompanying notes are an integral part of these condensed interim
financial statements.
The financial statements were approved and authorised for issue by the Board
of Directors on
16 March 2023 and signed on its behalf by:
________________________________
_____________________________
Rob
King
Stephen Le Page
Non-executive
Chairman
Director
Condensed Statement of Changes in Equity
For the 6-month period ended 31 December 2022
Notes Ordinary share capital US$ Retained earnings Total
US$ US$
For the six months ended
31 December 2022 (Unaudited)
310,272,983 137,270,726 447,543,709
Shareholders' equity at 1 July 2022
Loss and comprehensive income for the period - (2,608,276) (2,608,276)
Share buybacks 5 (969,451) - (969,451)
Share issue costs 5 (14,002) - (14,002)
Dividends paid 7 - (12,345,142) (12,345,142)
Shareholders' equity at 31 December 2022 309,289,530 122,317,308 431,606,838
Ordinary share capital US$ Retained earnings Total
US$ US$
For the six months ended
31 December 2021 (Unaudited)
259,657,871 52,988,084 312,645,955
Shareholders' equity at 1 July 2021
Profit and comprehensive income for the period - 72,184,424 72,184,424
Share issue 51,429,265 - 51,429,265
Share issue costs (827,640) - (827,640)
Dividends paid 7 - (10,674,634) (10,674,634)
Shareholders' equity at 31 December 2021 310,259,496 114,497,874 424,757,370
The accompanying notes are an integral part of these condensed interim
financial statements.
Condensed Statement of Cash Flows
For the 6-month period ended 31 December 2022
Notes 31 December 2022 31 December 2021
US$ US$
(Unaudited) (Unaudited)
Cash flows from operating activities
(Loss) / profit and comprehensive income for the period (2,608,276) 72,184,424
Adjustments for:
Purchase of investments 4 - (49,560,001)
Change in fair value on investments 4 4,314,159 (76,730,838)
Operating cash flows before movements in working capital 1,705,883 (54,106,415)
Changes in working capital:
Movement in trade and other receivables 5,721,585 5,740,147
Movement in trade and other payables 5,903,322 8,663,489
Net cash generated from / (used in) operating activities 13,330,790 (39,702,779)
Cash flows from financing activities
Share issue costs 5 (14,002) 50,601,625
Net cost from share buybacks 5 (969,451) -
Dividends paid to Ordinary shareholders 7 (12,345,142) (10,674,634)
Net cash (utilised in) / generated from financing activities (13,328,595) 39,926,991
Net movement in cash and cash equivalents during the period 2,195 224,212
Cash and cash equivalents at the beginning of the period 8,823 29,989
Cash and cash equivalents at the end of the period 11,018 254,201
The accompanying notes are an integral part of these condensed interim
financial statements.
Notes to the Condensed Interim Financial Statements
For the 6-month period ended 31 December 2022
1. General information
The Company was incorporated with limited liability in Guernsey under the
Companies (Guernsey) Law, 2008, as amended, on 6 February 2017 with registered
number 63061, and is regulated by the GFSC as a registered closed-ended
investment company. The registered office and principal place of business of
the Company is 1 Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1
1WD.
The Company had 308,628,541 ordinary shares in issue on 1 July 2022 all of
which were listed on the Specialist Funds Segment of the Main Market of the
London Stock Exchange.
During the current period, the Company bought a total of 850,000 of its own
ordinary shares at an average price of US$1.14 per Share. Further details are
noted in Note 5. The total number of Company's shares in issue was 307,778,541
at the end of the financial period.
2. Significant accounting policies
(a) Basis of Preparation
The Condensed Interim Financial Statements have been prepared
on a going concern basis in accordance with IAS 34 Interim Financial
Reporting, and applicable Guernsey law. These Condensed Interim Financial
Statements do not comprise statutory Financial Statements within the meaning
of the Companies (Guernsey) Law, 2008, and should be read in conjunction with
the Financial Statements of the Company as of and for the year ended 30 June
2022, which were prepared in accordance with International Financial Reporting
Standards. The statutory Financial Statements for the year ended 30 June 2022
were approved by the Board of Directors on 23 September 2022. The opinion of
the auditors on those Financial Statements was not qualified. The accounting
policies adopted in these Condensed Interim Financial Statements are
consistent with those of the previous financial year and the corresponding
interim reporting period can be found in the Annual Report for the financial
year ending 30 June 2022, except for the adoption of new and amended standards
as set out below.
Compliance with IFRS
The financial statements have been prepared on a going concern basis in
accordance with International Financial Reporting Standards ("IFRS"), which
comprise standards and interpretations approved by the International
Accounting Standards Board ("IASB") and International Financial Reporting
Interpretations Committee ("IFRIC"), Listing rules and applicable Guernsey
law.
Historical cost convention
The financial statements have been prepared on a historical cost basis
modified by the revaluation of investments at fair value through profit or
loss. The principal accounting policies adopted, and which have been
consistently applied (unless otherwise indicated), are set out below.
Basis of non-consolidation
The Directors consider that the Company meets the investment entity criteria
set out in IFRS 10. As a result, the Company applies the mandatory exemption
applicable to investment entities from producing consolidated financial
statements and instead fair values its investments in its subsidiaries in
accordance with IFRS 13. The criteria which define an investment entity are as
follows:
· an entity that obtains funds from one or more investors for the
purpose of providing those investors with investment services; and
· an entity that commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation, investment
income or both (including having an exit strategy for investments); and
· an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Directors consider that the Company's objective of pooling investors'
funds for the purpose of generating an income stream and capital appreciation
is consistent with the definition of an investment entity, as is the reporting
of the Company's net asset value on a fair value basis.
(b) New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2022 reporting periods and have not been early adopted by the Company. These
standards, amendments or interpretations are not expected to have a material
impact on the Company in the current or future reporting periods and on
foreseeable future transactions.
(c) Standards, amendments and interpretations effective during the year
There are no standards, amendments to standards or interpretations that are
effective for annual periods beginning on 1 July 2022 that have a material
effect on the financial statements of the Company.
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 period. The nature of the estimation means
that actual outcomes could differ from those estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimates are revised and in any future years affected.
Information about significant judgements, estimates and assumptions which have
the greatest effect on the recognition and measurement of assets, liabilities,
income and expenses were the same as those that applied to the Annual Report
and Financial Statements for the year ended 30 June 2022.
Critical judgements in applying the Company's accounting policies - IFRS 10:
Consolidated Financial Statements
The audit committee considered the application of IFRS 10, and whether the
Company meets the definition of an investment entity.
The Company owns the investment portfolio through its investment in LS Assets
Limited ("LSA"). The investment by LSA comprises the NAVs of the SPVs. The
Company holds 100% voting shares in LSA and has all the characteristics of an
investment company. Cash is held at the LSA level and transferred to the
Company when needed to cover expenditure.
In the judgement of the Directors, the Company meets the investment criteria
set out in IFRS 10 and they therefore consider the Company to be an investment
entity in terms of IFRS 10. As a result, as required by IFRS 10, the Company
is not consolidating its subsidiary but is instead measuring it at fair value
in accordance with IFRS 13.
The criteria which define an investment entity are documented in Note 2 (a).
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.
Critical judgements and estimates in applying the Company's accounting
policies - financial assets at fair value
Specific capital adjustments are considered as part of the valuation process
for standard vessels, mainly the adjustment for BWTS installed on vessels is
considered an enhancement to the charter-free value, initially recognised at
cost and straight line depreciated from the commissioning date to 8 September
2024.
At the current and prior period ends, the charter-free valuation of one vessel
was provided by broker valuation rather than VesselsValue, as elected by the
Investment Manager given limited transactions in this vessel type.
At the current period and prior period ends, one vessel was valued at its
expected sale price.
Critical Accounting Estimates
The unobservable inputs which significantly impact the fair value have been
determined to be the charter-free valuation and market charter rates for
standard vessels and the discount rate applied for specialised vessels.
Specific capital adjustments are considered as part of the valuation process
for standard vessels, mainly the adjustments for BWTS and scrubbers installed.
BWTS 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. 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 31 December 2022, one vessel was treated as a specialist vessel (one vessel
at 30 June 2022).
The specialist vessel was valued on a DCF basis by the Investment Manager
using vessel specific information including the appropriate discount rate,
which is reviewed on a regular basis to ensure it remains relevant to the
project and market risk parameters.
The Prospectus sets out the basis on which non-typical and specialist vessels
would be valued.
There were no other material areas of estimation for the Company.
4. Financial Assets designated at fair value through profit or loss
(Investment)
The Company owns the investment portfolio through its investment in LSA, which
comprises the NAV of the SPVs and residual assets and liabilities in LSA. The
NAVs consist of the fair value of vessel assets and the SPVs' residual net
assets and liabilities. The whole investment portfolio is designated by the
Board as a Level 3 item on the fair value hierarchy because of the lack of
observable market information in determining the fair value. As a result, all
the information below relates to the Company's Level 3 assets only, with
respect to the requirements set out in IFRS 7. The investment held at fair
value is recorded under Non-Current Assets in the Statement of Financial
Position as there is no current intention to dispose of its investment in LSA
but at the underlying SPV level one of the vessels was contracted to be sold
as at 31 December 2022.
The changes in the financial assets measured at fair value through profit or
loss (for which the Company has used Level 3 inputs to determine fair value,
after considering dividends declared (see Note 7)) are as follows:
30 June
31 December 2022 2022
US$ US$
LSA (Unaudited) (Audited)
Brought forward cost of investment 299,483,224 249,923,223
Total investment acquired in the period / year - 49,560,001
Carried forward cost of investment 299,483,224 299,483,224
Brought forward unrealised gains on valuation 147,409,496 57,804,789
Movement in unrealised (losses) / gains on valuation (4,314,159) 89,604,707
Carried forward unrealised gains on valuation 143,095,337 147,409,496
Total investment at fair value 442,578,561 446,892,720
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 LS Assets Limited is incorporated in Guernsey. The country
of incorporation is also their principal place of business.
Breakdown of Fair Value:
Name 31 December 2022 30 June Direct or indirect holding Principal activity Ownership at 31 December Ownership at 30 June
US$
2022
US$ 2022 2022
LS Assets Limited - - Direct Holding company 100% 100%
Aglow Limited(1, 6) 101,309 107,202 Indirect SPV 100% 100%
Antler Limited(1, 6) 68,175 74,463 Indirect SPV 100% 100%
Anvil Limited 19,573,459 23,591,722 Indirect SPV 100% 100%
Auspicious Limited 22,010,283 25,929,027 Indirect SPV 100% 100%
Awesome Limited 21,958,158 25,638,607 Indirect SPV 100% 100%
Bear Limited(1, 2) 76,521 77,702 Indirect SPV 100% 100%
Candy Limited(1) 11,679 37,192 Indirect SPV 100% 100%
Charming Limited 21,057,463 25,109,394 Indirect SPV 100% 100%
Citra Limited(1) 205,230 220,238 Indirect SPV 100% 100%
Cocoa Limited(3) - - Indirect SPV 100% 100%
Courteous Limited(5) - - Indirect SPV 100% -
Dachshund(3) Limited - - Indirect SPV 100% 100%
Daffodil Limited(3) - - Indirect SPV 100% 100%
Dragon Limited(1, 6) 119,606 133,991 Indirect SPV 100% 100%
Echidna Limited(1, 6) 79,220 34,275 Indirect SPV 100% 100%
Exceptional Limited(5) - - Indirect SPV 100% 100%
Golding Limited 20,105,693 17,868,732 Indirect SPV 100% 100%
Handy HoldCo Limited 44,431,951 32,455,919 Indirect SPV (Holding Company) 100% 100%
Idaho Limited 23,733,651 25,150,084 Indirect SPV 100% 100%
Kale Limited(1, 6) 140,731 109,304 Indirect SPV 100% 100%
Laurel Limited 16,936,250 19,486,868 Indirect SPV 100% 100%
Lavender Limited(1) 13,193 18,736,992 Indirect SPV 100% 100%
Marvelous Limited(5) - - Indirect SPV 100% 100%
Masterful Limited 22,044,111 25,761,402 Indirect SPV 100% 100%
Mayflower Limited 17,514,882 20,030,420 Indirect SPV 100% 100%
Mindful Limited(5) - - Indirect SPV 100% -
Neon Limited 27,156,298 32,633,044 Indirect SPV 100% 100%
Octane Limited 21,381,954 19,243,615 Indirect SPV 100% 100%
Orson Limited 15,967,898 11,704,544 Indirect SPV 100% 100%
Parrot Limited(1) 415,280 660,649 Indirect SPV 100% 100%
Patience Limited(1) 676,822 475,673 Indirect SPV 100% 100%
Pollock Limited(1,3) - - Indirect SPV 100% 100%
Product HoldCo Limited 73,305,051 - Indirect SPV (Holding Company) 100% -
Riposte Limited 13,950,131 24,996,021 Indirect SPV 100% 100%
Rocky IV Limited 19,165,273 23,280,175 Indirect SPV 100% 100%
Sierra Limited 21,570,430 19,474,698 Indirect SPV 100% 100%
Swordfish Limited(1, 2) 100,033 137,229 Indirect SPV 100% 100%
Vicuna Limited(1) 35,820 97,243 Indirect SPV 100% 100%
Cash held pending investment(4) 740,593 29,805,237
Residual net assets / (liabilities)(4) 17,931,413 (7,604,525)
*Total investment at fair value 442,578,561 446,892,720
The net change in the movement of the fair value of the investment is recorded
in the Statement of Comprehensive Income.
(*) Vessels are valued at fair value in each of the SPVs shown in the table
above and combined with the residual net liabilities of each SPV to determine
the fair value of the total investment attributable to LSA.
(1) Vessel sold.
(2) Company in the process of dissolution.
(3) These SPVs report zero fair value in the table above because they are
owned by the intermediate holding company Handy Holdco Limited and are
included in Handy Holdco Limited's fair value.
(4) The cash held pending investment and residual net liabilities are held in
LSA.
(5) 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.
(6) Company has been dissolved.
The movement in the fair value of the investment is recorded in the Condensed
Statement of Comprehensive Income.
5. Share capital and reserves
Number of shares Gross amount (US$) Issue costs (US$) Share capital (US$)
Total issue at 308,628,541 316,282,156 (6,009,173) 310,272,983
30 June 2022
Share issue costs - - (14,002) (14,002)
Share buyback (100,000) (113,227) - (113,227)
9 November 2022
Share buyback (40,000) (45,693) - (45,693)
17 November 2022
Share buyback (100,000) (114,229) - (114,229)
22 November 2022
Share buyback (100,000) (114,229) - (114,229)
23 November 2022
Share buyback (100,000) (114,229) - (114,229)
25 November 2022
Share buyback (100,000) (114,229) - (114,229)
28 November 2022
Share buyback (25,000) (28,559) - (28,559)
29 November 2022
Share buyback (25,000) (28,308) - (28,308)
30 November 2022
Share buyback (25,000) (28,308) - (28,308)
5 December 2022
Share buyback (35,000) (39,981) - (39,981)
22 December 2022
Share buyback (100,000) (114,229) - (114,229)
28 December 2022
Share buyback (50,000) (57,115) - (57,115)
29 December 2022
Share buyback (50,000) (57,115) - (57,115)
30 December 2022
Total in issue at 307,778,541 315,312,705 (6,023,175) 309,289,530
31 December 2022
Retained reserves
Retained reserves comprise the retained earnings as detailed in the Condensed
Statement of Changes in Equity.
6. Earnings per share calculated in accordance with IFRS
31 December 2022 31 December 2021
US$ US$
(Unaudited) (Unaudited)
(Loss) / profit and comprehensive income for the period (2,608,276) 72,184,424
Weighted average number of ordinary shares 308,495,117 284,876,271
Earnings per ordinary share (cents) (0.85) 25.34
Diluted Earnings per ordinary share (cents) (0.85) 25.34
The weighted average number of ordinary shares is 308.5m shares (2021: 284.9m
shares).
7. Dividends
The Company declared the following dividends to Ordinary
Shareholders in respect of the profit for the periods indicated:
Period end Dividend per share Ex div date Net Dividend paid Record date Paid date
Dividends declared for the period ended 31 December 2022:
30 June US$0.02 28 July US$6,172,571 29 July 12 August 2022
2022
2022
2022
30 September 2022 US$0.02 27 October 2022 US$6,172,571 28 October 2022 11 November 2022
Dividends declared for the period ended 31 December 2021:
30 June US$0.01875 29 July US$5,063,206 30 July 13 August
2021
2021
2021
2021
30 September 2021 US$0.02 28 October 2021 US$5,611,428 29 October 2021 12 November 2021
Under the Companies (Guernsey) Law, 2008, the Company can distribute dividends
from capital and revenue reserves, subject to a prescribed net asset and
solvency test. The net asset and solvency test considers whether a company is
able to pay its debts when they fall due, and whether the value of a company's
assets is greater than its liabilities. The Board confirms that the Company
passed the net asset and solvency test for each dividend paid.
8. Net assets per ordinary share
31 December 2022 30 June
US$ 2022
US$
(Unaudited) (Audited)
Shareholders' equity 431,606,838 447,543,709
Number of ordinary shares 307,778,541 308,628,541
Net assets per ordinary share (cents) 140.23 145.01
9. Financial risk management
The Company's activities expose it to a variety of financial risks; market
risk (including price risk, currency risk and interest rate risk), credit risk
and liquidity risk.
The condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Company's Audited
Financial Statements as at 30 June 2022.
There have been no significant changes in the management of risk or in any
risk management policies since the last Statement of Financial Position date.
10. Financial assets and liabilities not measured at fair value
Cash and cash equivalents and trade and other receivables are liquid assets
whose carrying value represents fair value. The fair value of other current
assets and liabilities would not be significantly different from the values
presented at amortised cost.
11. Management fee
The Investment Manager is entitled to receive an annual fee, calculated on a
sliding scale, as follows:
(a) 0.85 per cent per annum of the quarter end Adjusted Net Asset Value up to
US$250 million;
(b) 0.75 per cent per annum of the quarter end Adjusted Net Asset Value in
excess of US$250 million but not exceeding US$500 million; and
(c) 0.65 per cent per annum of the quarter end Adjusted Net Asset Value in
excess of US$500 million.
For the period ended 31 December 2022 the Company incurred US$1,815,843
(2021: US$1,645,783) in management fees of which US$880,688 (2021:
US$871,872) was outstanding at 31 December 2022.
12. Performance fee
Tufton ODF Partners LP shall be entitled to a performance fee in respect of a
Calculation Period provided that the Total Return per Share on the Calculation
Day for the Calculation Period of reference is greater than the High Watermark
per Share.
Any fee accruing as at the end of the Calculation Period is paid 50%
subsequent to the end of that period, with the remaining 50% being retained by
the Company and deferred until the next time that a performance fee payment is
due, being adjusted for any subsequent underperformance during that time.
A performance fee of US$nil (2021: US$2,419,323) was accrued at 31 December
2022.
13. Related parties
The Investment Manager, Tufton Investment Management Ltd, is a related party
due to having key management personnel in common with the subsidiaries of the
Company. All management fee transactions with the Investment Manager are
disclosed in Note 11.
Tufton ODF Partners LP is a related party due to being the beneficiary of any
performance fee paid by the Company. All performance fee transactions are
disclosed in Note 12.
Transactions with LSA and subsidiary SPVs are not disclosed.
The Directors of the Company and their shareholdings are
stated in the Interim Report of the Directors, page 29.
14. Controlling party
In the opinion of the Directors, on the basis of shareholdings advised to
them, the Company has no immediate or ultimate controlling party.
15. Remuneration of the Directors
The remuneration of the Directors was US$80,996 (2021: US$88,055) for the
period which consisted solely of short-term employment benefits (refer to the
Interim Report of the Directors on page 29). At 31 December 2022, Directors'
fees of US$nil (2022: US$19,789) were outstanding.
16. Events after the reporting period
On 3 January 2023, the Company agreed to divest its last containership,
Riposte, for US$13m.
The Company purchased a total of 710,000 ordinary shares at a price of US$1.14
per share post period end to 15 March 2023.
On 17 January 2023, the Company declared a dividend of US$0.02125 per ordinary
share for the quarter ending 31 December 2022. The dividend was paid on 10
February 2023 to holders of ordinary shares recorded on the register as at
close of business on 27 January 2023 with an ex-dividend date of 26 January
2023.
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 or the state of affairs of
the company in the current or future financial years.
Corporate Information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsæther
Registered office
3(rd) Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Investment Manager and AIFM
Tufton Investment Management Ltd ("Tufton IML")
70 Pall Mall
1(st) Floor London
SW1Y 5ES
Asset Manager
Tufton Management Limited
3(rd) Floor, St George's Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Secretary and Administrator
Maitland Administration (Guernsey) Limited ("MAGL")
3(rd) Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Joint Placing Agents and Financial Advisers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Guernsey Legal Advisers
Carey Olsen (Guernsey) LLP
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Registrar
Computershare Investor Services (Guernsey) Limited
1(st) Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Receiving Agent
Computershare Investor Services PLC
The Pavillions
Bridgewater Road
Bristol
BS99 6AH
Independent Auditor to the Company
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Principal Bankers
Barclays Bank Plc
Guernsey International Banking
PO Box 41
St Peter Port
Guernsey
GY1 3BE
Definitions
The following definitions apply throughout this document unless the context
requires otherwise:
AIC The Association of Investment Companies
AIFM An alternative investment fund manager
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
Asset Manager Tufton Management Limited (formerly Oceanic Marine Management Limited)
Auditor PricewaterhouseCoopers CI LLP
Average Charter Length Total forecast EBITDA from charters in place, divided by the expected
annualised EBITDA of those charters
CAGR Compound Annual Growth Rate. A business and investing specific term for the
geometric progression ratio that provides a constant rate of return over the
time period
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
Consolidated Gearing Ratio Loans to charter-free value on a consolidated basis
Directors or Board The Board of Directors of the Company
Disclosure Guidance and Transparency Rules or DTRs The disclosure guidance and transparency rules made by the Financial Conduct
Authority under Section 73A of FSMA
Dividend Cover Portfolio Operating Profit less capex less debt amortisation, divided by
dividends for the period
EBITDA Earnings before interest, taxes, depreciation and amortisation
Energy Efficiency Existing Ship Index or EEXI The emissions intensity of a vessel calculated using its design
characteristics
Energy Efficiency Operating Index or EEOI The operating emissions intensity of a vessel calculated using the emissions
from that vessel
Environmental, Social, and Governance ("ESG"), An evaluation of the company's collective conscientiousness for
environmental, social and governance factors
FCA The UK Financial Conduct Authority
FSMA The Financial Services and Markets Act 2000 and any statutory modification or
re-enactment thereof for the time being in force
Financial Reporting Council or FRC The UK Financial Reporting Council
Forecast Net Yield Forecast EBITDA minus any capex accruals for the vessels in the portfolio
divided by the time-weighted vessel values
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
Gain/(Loss) in Capital Value Fair value gains and losses (being the change in charter-free value + change
in charter value) from marking assets to market in accordance with the
valuation policy of the Company
Gain/(Loss) in Capital Value per Share Gain/(Loss) in Capital Value divided by the weighted-average number of
ordinary shares during that period
Gross Operating Profit Operating income before gain/(loss) of capital values, loan interest, fees,
and all other fund level expenses
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
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
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
Hurdle US$1.00 (Issue Price) increased by 12 per cent. compounded
annually and expressed as a percentage
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
IRR Internal rate of return - the Internal rate of return is the interest rate at
which the net present value of all the cash flows (both positive and negative)
from a project or investment equal zero, and is a common performance
indicator used in investment funds
Investment Manager Tufton Investment Management Ltd
Issue Price US$1.00 per Share
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
Listing Rules The listing rules made by the UKLA pursuant to Part VI of FSMA
London Stock Exchange or LSE London Stock Exchange
Main Market The main market for listed securities operated by the London Stock Exchange
NAV Total Return The change in NAV plus distributions paid by the Company during the period,
divided by the initial NAV
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
Operating Expense Expenses incurred during vessel and subsidiary company operations
Overdue Crew Relief or Crew members staying on board vessels beyond contractual periods
Overdue Crew Rotation
POI Law The Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended
Paris Agreement The Paris Agreement is a legally binding international treaty on climate
change
Performance Fee Amount 20 per cent. of the excess in Total Return per Share and the High Watermark
per Share multiplied by the time weighted average number of Shares in issue
during the Calculation Period
Performance Fee Pay-Out 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
Portfolio The Company's portfolio of investments from time to time
Portfolio Operating Profit Gross Operating Profit and interest income less loan interest and fees, Fund
Level Fees and Expenses
Prospectus The Placing and Offer for Subscription document for the Company dated 8th
December 2017
Register The register of members of the Company
Relevant Number of Shares For any Calculation Period the time weighted average number of Ordinary Shares
in issue during such Calculation Period
Responsible Investment A strategy and practice to incorporate environmental, social and governance
(ESG) factors in investment decisions and active ownership
Revenue Charter income net of broker commissions and charter related costs
SFS or Specialist Funds Segment The Specialist Funds Segment of the Main Market (previously known as the
Specialist Fund Market or SFM)
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
Segment Classifications of vessels within the shipping industry including, inter alia,
Tankers, General Cargo, Containerships and Bulkers
Ship-days The sum of the number of days each vessel was owned in the fund over the
financial period
Time-Weighted Capital Employed Time-weighted capital invested in vessels
Total Return per Share The Net Asset Value per Ordinary Share on any Calculation Day adjusted to:
(i) include the gross amount of any dividends and/or distributions paid to an
Ordinary Share since Admission;
(ii) not take account of any accrual made in respect of the performance fee
itself for that Calculation Period;
(iii) not take account of any accrual made in respect of any prevailing
Historic Performance Fee Amount (as adjusted pursuant to the operation of this
paragraph below);
(iv) not take account of any increase in Net Asset Value per Share
attributable to the issue of Ordinary Shares at a premium to Net Asset Value
per Share or any buyback of any Ordinary Shares at a discount to Net Asset
Value per Ordinary Share during such Calculation Period;
(v) not take account of any increase in Net Asset Value per Share attributable
to any consolidation or sub-division of Ordinary Shares;
(vi) take into account any other reconstruction, amalgamation or adjustment
relating to the share capital of the Company (or any share, stock or security
derived therefrom or convertible there into); and
(vii) take into account the prevailing Net Asset Value of any C Shares in
issue
Tufton Group Tufton Investment Management Holding Ltd and its subsidiaries
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
£ or Sterling The lawful currency of the United Kingdom
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Recent news on Tufton Assets
See all newsBrief: Tufton Assets Reports NAV Total Return Of 5.0% For 3Q26
Brief: Tufton Assets Says Staithes Floating Rate Charter Converted To Fixed Rate $19,000/Day For Q4
Tufton Assets Ltd. Tufton Assets - SHPP - Charter Update
Brief: Tufton Assets Says Outlook Remains Favourable in Shipping Markets In Which They Operate
Tufton Assets Ltd. Tufton Assets - SHPP - Final Results and Notice of AGM