TIDMSHIP TIDMSHPP
RNS Number : 5836N
Tufton Oceanic Assets Ltd.
26 September 2023
26 September 2023
Tufton Oceanic Assets Limited
("Tufton Oceanic Assets" or the "Company")
Final Results and Notice of AGM
Tufton Oceanic Assets announces its final results for the period
ended 30 June 2023. A copy of the Annual Report and Audited
Financial Statements will be submitted to the National Storage
Mechanism https://data.fca.org.uk/#/nsm/nationalstoragemechanism
and will shortly be available in the Company's website in the
Investor Relations section under Company Documents at
www.tuftonoceanicassets.com /financial-statements . The Company has
also published its 2022 Sustainability Report which is available on
the Company's website in the Investor Relations section under
Company Documents.
The annual general meeting will be held at the Company's
registered office at 1 Royal Plaza, Royal Avenue, St Peter Port,
Guernsey on 24(th) October 2023 at 1230 BST.
For further information, please contact:
Tufton Investment Management Ltd (Investment
Manager)
Andrew Hampson
Paulo Almeida +44 (0) 20 7518 6700
Singer Capital Markets
James Maxwell, Alex Bond (Corporate Finance)
Alan Geeves, James Waterlow, Sam Greatrex
(Sales) +44 (0) 20 7496 3000
Hudnall Capital LLP
Andrew Cade +44 (0) 20 7520 9085
Highlights
-- 30 June 2023 NAV was US$412.8m (GBP324.7m). 30 June 2023 NAV
per share was US$1.365 compared to 30 June 2022 NAV per share of
US$1.450.
-- The Company had an overall loss for the financial year of
US$2.5m or US$0.008 per share. Despite strong Portfolio Operating
Profit of US$56.3m (US$40.6m in the financial year ended 30 June
2022), the Company was negatively impacted by the fall in capital
values of bulkers and of Riposte, the containership which was
divested during the financial year.
-- NAV Total Return Per Share was -0.3% during the financial
year (2022: 32.5% ; 91.8% since inception).
-- At 30 June 2023, the Average Charter Length was 1.3 years (2022: 0.9 years).
-- Encouraged by 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 divested Riposte with realised net IRR exceeding
12%. The aggregate realised net IRR on the Company's containerships
over the past five years was c.27%.
-- The Company agreed to acquire two fuel-efficient Medium Range
("MR") product tankers, Mindful and Courteous, below Depreciated
Replacement Cost ("DRC"), financed primarily by a new US$60m loan
which is secured on Mindful, Courteous, Marvelous and
Exceptional.
-- With the acquisitions, the Company is well-positioned to
benefit from the ongoing strength in the product tanker and
chemical tanker markets. The capital re-allocation is in line with
its investment strategy and commitment to ESG.
-- The Investment Manager expects the bulker market, supported
by good supply-side fundamentals, to improve with demand
growth.
-- The Dividend Cover for the financial year was c.1.1x. The
Company is forecast to have a dividend cover of c.1.6x through the
end of 4Q24.
-- ESG highlights of the Company are discussed in our 2022
Sustainability Report available on the Company's website. The
highlights include a c.34% improvement in emissions intensity
during 2022, primarily because of capital re-allocation, and an
update on the retrofit of Energy Saving Devices ("ESDs") on the
Company's vessels.
-- The Company purchased 6,160,000 of its own shares at an
average price of US$1.13 per share, in line with its published
discount management policy.
-- The Investment Manager's principals acquired an additional
1,381,136 shares during the financial year such that Investment
Manager-related shareholders owned 3.7% of the issued share capital
as at 30 June 2023.
Chairman's Statement
Introduction
On behalf of The Board of Directors (the "Board"), I present the
Company's Annual Report and Audited Financial Statements for the
year ended 30 June 2023.
Performance
As at 30 June 2023, the Company's NAV was US$412.8m being
US$1.365 per share (US$447.5m being US$1.450 per share as at 30
June 2022). The Company declared a loss of US$2.5m (2022: profit of
US$107.3m) or US$0.008 per share (2022: US$0.362) for the year with
the US$ NAV Total Return Per Share over the year of -0.3% (2022:
32.5%).
Strong Portfolio Operating Profit was outweighed by a fall in
the bulker and containership capital value. The product tanker
market strengthened and the Company acquired two MR product
tankers, employed on long-term charters. The Company raised its
target annual dividend from US$0.080 to US$0.085 per share, which
commenced from 4Q22. As at 30 June 2023, the Average Charter Length
was 1.3 years.
Performance fee accrual of US$4.0m was unwound because the Total
Return Per Share was slightly lower than the High Watermark Per
Share at the end of the financial year. The Company is forecast to
have a dividend cover of c.1.6x over the next 18 months (through
the end of 4Q24). Full details of the investment portfolio are set
out in the Investment Manager's Report.
Share Price and Discount Management
During the year, the Company's share price fell from US$1.23 per
share as at the close of business 30 June 2022 to US$0.99 per share
as at the close of business 30 June 2023. The total number of
voting rights of the Company as at 30 June 2023 is 302,468,541.
On average, the Company's shares traded at a 20% discount to NAV
over the financial year. During the year, the Company (in
accordance with the authority granted to it by shareholders)
repurchased 6,160,000 shares at a cost of US$6,946,752. Refer to
Note 7 for more details. At the end of the financial year, there
were 6,160,000 shares held in treasury.
The share price performance, although disappointing, has
suffered from the wider investment company sector de-rating, in
particular for real asset companies. This has been exacerbated by
many of our Shareholders being under pressure to rebalance their
own portfolios. The Board will continue to support the share price
where available capital permits them to do so in line with the
published discount management policy as set out in the Company's
Prospectus dated 25 September 2018 . The Board also believe that
having a buyback mechanism in place is in the best interest of all
Shareholders as it allows the Company to buy back its own shares at
a significant discount to NAV.
Since 1 July 2023, the Company has bought back an additional
7,386,000 shares with 13,546,000 Shares held in treasury and
295,082,541 shares outstanding as at 8 September 2023. As at 20
September 2023, the Company's shares traded at a 27.8% discount to
the ex-dividend 30 June 2023 NAV.
War in Ukraine
The Investment Manager has continued to monitor the impact of
the war in Ukraine on our fleet. I would like to reconfirm our
previous position in that none of the Company's vessels have been
directly impacted by the war in Ukraine and all remain fully
insured against war perils.
The Investment Manager 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 were compliant with all international sanctions imposed by
the US, UK, EU and UN. We have had no issues to date with any
vessels being damaged or blocked or otherwise affected by
sanctions.
The Board and the Investment Manager remain watchful in
monitoring the war and its consequences for shipping in general and
the Company.
Dividends
The Company raised its target annual dividend from US$0.080 to
US$0.085 per share, which commenced from 4Q22. As at 30 June 2023,
the Average Charter Length was 1.3 years. The Dividend Cover for
the financial year was c.1.1x. The Company is forecast to have a
dividend cover of c.1.6x over the next 18 months (through the end
of 4Q24).
Corporate Governance
The Company is a member of the Association of Investment
Companies ("AIC") and has therefore elected to comply with the
provisions of the current AIC Code of Corporate Governance which
sets out a framework of best practice in respect of governance of
investment companies ("AIC Code"). The AIC Code has been endorsed
by the Financial Reporting Council and the Guernsey Financial
Services Commission (the "GFSC") as an alternative means for AIC
members to meet their obligations in relation to the UK Corporate
Governance Code.
Where the Company's stakeholders, including shareholders and
their appointed agents, have matters they wish to raise with the
Board in respect to the Company, I would encourage them to contact
us at SHIP@tuftonoceanicassets.com .
Board Composition
As in previous years, all Directors are offering themselves for
re-election in accordance with the AIC Code of Corporate Governance
and the Articles of Incorporation of the Company (the "Articles").
Three of the current four members of the Board were appointed at
the formation of the Company in 2017. Whilst their respective
tenure is much less than the AIC Guidance figure of nine years, a
succession plan has been considered by the Board.
As part of our succession plan and despite the fact that a
continuation vote must be put to the AGM in 2024, the Board have
employed the services of a recruitment firm to assist the Board in
identifying suitable candidates. This succession plan also aims to
increase the diversity of the Board.
Continuation Vote
The vote for the continuation of the Company is due to be put
before Shareholders and it's the Board's current intention to hold
this vote at the AGM in October 2024.
Whilst the Board anticipates the continuation vote to be passed,
with discount to NAV at current levels the Directors are not taking
anything for granted and are working with the Investment Manager
and its advisors to consider the most appropriate strategy for the
Company and will update Shareholders of its recommendations
accordingly.
Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held
on 24 October 2023 at 12.30 pm BST the details of which are set out
in the AGM notice and Proxy form.
At the last AGM held on 27 October 2022, the ordinary
resolutions were all duly passed although there were some items
which required further investigation. In the Notice to
Shareholders, the Board have set out our views on the points
requiring further investigation.
Where shareholders or their appointed agent have matters, they
wish to raise with the Board at the AGM, I would encourage them to
contact us at SHIP@tuftonoceanicassets.com ahead of the AGM
date.
Environmental, Social, Governance ("ESG")
Our Investment Manager continues to integrate ESG factors into
its investment recommendations and asset ownership practices. The
Investment Manager has recently published its annual Sustainability
Report which contains details of ESG integration. The Board has
reviewed and approved the Investment Manager's Sustainability
Report for the Company which can be viewed on the Company's website
( www.tuftonoceanicassets.com ).
Outlook
At the end of the financial year, the portfolio had a total
negative charter value of US$49.5m. This is expected to trend to
zero (i.e. increase NAV) in the medium term. Ceteris paribus, the
negative charter value is expected to unwind by c.US$24.8m over the
next 12 months ending 2Q24 through the passage of time. The
Investment Manager expects further upside to NAV as the bulker
market improves and values rise. Meanwhile, the portfolio continues
to benefit from the ongoing strength in the chemical tanker market
with Golding and Orson trading in a pool. Supply-side dynamics are
supportive for product and chemical tankers with very low fleet
growth expected over the next two years. The Investment Manager
believes the product and chemical tanker markets, well supported by
good supply-side fundamentals, continue to offer potential for
operating profit and capital appreciation.
I would like to thank my fellow Directors for their commitment
and support during these challenging times, the Investment Manager
and their team for their diligence in dealing with complex and
challenging operational matters which were increased due to the war
in Ukraine. I would also like to take this opportunity to thank our
Shareholders for their support and continued belief in our
strategy.
Investment Manager's Report
Highlights of the Financial Year
The Company re-allocated capital, in line with its investment
strategy and commitment to ESG. During the year, the Company
acquired two fuel-efficient MR product tankers and divested its
last containership. With the capital re-allocation, the Company is
better positioned to benefit from good supply-side fundamentals in
the product tanker, chemical tanker and bulker markets.
During the financial year ended 30 June 2023, 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 weakened during the year as a result of easing port
congestion as well as disruption caused by the war in Ukraine, and
weaker economic trends, especially in China. We expect the bulker
market will improve with demand growth. Please see the Shipping
Market section of this report for details.
This section utilises alternative performance measures, applied
on a consolidated basis, to analyse performance. Please see the
Alternative Performance Measures ("APMs") for further information
as to the definition and inclusion of these APMs. Over the
financial year NAV Total Return Per Share was -0.3% (32.5% in the
previous financial year), and 91.8% since inception.
Portfolio Operating Profit was strong at US$56.3m (US$40.6m in
the previous financial year) as the Company benefited from higher
bulker time charter rates in the first half of the financial year,
the MR product tankers acquired during the financial year on high
time charter rates, and a strong chemical tanker market during the
financial year.
There was a fall in charter-free value of US$39.5m as the bulker
and containership markets weakened. The fall in bulker and
containership charter-free values outweighed the rise in product
tanker and chemical tanker charter-free values. The Company started
divesting containerships from mid-2021 in anticipation of a weaker
market and divested its last containership, Riposte, in February
2023. The realised net IRR on Riposte exceeded 12% and the
aggregate realised net IRR on the Company's containerships over the
past five years was c.27%.
We had expected the bulker market and charter-free values to
improve from 2Q23 but the expected improvement has been delayed due
to a combination of factors including easing port congestion in
South America and Australia, disruption caused by the war in
Ukraine, and weaker economic trends especially in China. We expect
the bulker market will improve with demand growth.
Both tankers and bulkers benefit from good supply-side
fundamentals. The low orderbook in both segments will result in
slowing fleet growth. We expect upside in secondhand values of
bulkers and tankers due to limited shipyard capacity and tighter
environmental regulations which increase newbuild prices. Please
see the Shipping Market section of this report for details.
There was a fall in charter value of US$23.3m mainly due to the
increasing product tanker time charter rates during the year. Our
bulkers were on shorter-term charters and therefore did not have
significant charter value gains despite the weakening market. At
the end of the financial year, the portfolio had a total negative
charter value of US$49.5m. This is expected to trend to zero (i.e.
increase NAV) in the medium term. Ceteris paribus, the negative
charter value is expected to unwind by c.US$24.8m over the next 12
months ending 2Q24 through the passage of time.
The Company paid dividends of US$25.4m during the financial year
(US$23.0m in the previous financial year). Encouraged by visible
cash flows from increased charter cover, diversification and
continued supply-side recovery, the Company raised its target
annual dividend from US$0.080 to US$0.085 per share, which
commenced from 4Q22.
The Company purchased 6,160,000 of its own shares since 4Q22 in
accordance with the Company's discount management policy. During
the financial year, the Investment Manager's principals acquired an
additional 1,381,136 shares so that the Investment Manager-related
shareholders owned 3.7% of the issued share capital of the Company
as at 30 June 2023. Highlights of the financial year also
include:
-- The Company divested its last containership, Riposte and
agreed to acquire two fuel-efficient MR product tankers, Mindful
and Courteous, below DRC. The acquisitions were financed primarily
by a 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 Dividend Cover for the financial year was c.1.1x. This
was lower than our long-run expectation because of high planned
capex and off-hire in the first half of the financial year. Capex
and off-hire were higher than previously expected due to the impact
of Covid-related restrictions in China. Planned capex and off-hire
in the second half of the financial year were low and as
expected.
-- At 30 June 2023, the Company forecast planned capex and
off-hire at much lower levels for the next 18 months compared to
this financial year.
-- As at the end of June 2023, the loan outstanding was
US$70.5m. Total charter-free value of the fleet was US$512.2m
resulting in the Consolidated Gearing Ratio of 13.8% compared to
the investment restriction of 40% based on loans to charter-free
value on a consolidated basis.
-- The Company's fleet had only c.5 days (corresponding to 0.06%
of total Ship-Days) of unplanned commercial idle time (voids)
during the financial year.
-- Please see the ESG highlights of the Company which are
further discussed in our 2022 Sustainability Report available on
the Company's website.
The Assets
At 30 June 2023, the Company owned twenty-two vessels
(twenty-one vessels at 30 June 2022).
Tankers
Employment for vessels owned by the Company at the end of the
financial year:
-- Octane and Sierra are on time charters to an investment grade oil major.
-- Pollock, Dachshund, Cocoa and Daffodil are on time charters
to a major commodity trading and logistics company which exercised
its optional periods until mid-2024 on Dachshund and Pollock.
-- Marvelous, Mindful and Courteous are on time charters to the
same major commodity trading and logistics company.
-- Exceptional is on a time charter to a leading tanker shipping company.
-- At 30 June 2023, the Average Charter Length of the product tankers was 2 years.
-- The gas carrier Neon operates on a bareboat charter, under
which the Company provides only the vessel to the charterer, who is
responsible for crewing, maintaining, insuring, and operating
it.
-- Two chemical tankers, Orson and Golding, are employed in a
leading chemical tanker pool. As described in the Company's
Prospectus, a pool is a revenue sharing structure run by a
specialist third party or another ship owner.
Bulkers
Employment for vessels owned by the Company at the end of the
financial year:
-- Awesome and Auspicious are on time charters to a leading operator of bulkers.
-- Anvil is on a time charter to an owner and operator of bulkers.
-- Laurel, Mayflower and Idaho are on time charters to leading
owners and operators of bulkers. Mayflower's time charter was
extended by 6-8 months from June 2023.
-- Rocky IV and Masterful are on time charters to a leading
merchant and processor of agricultural goods.
-- Charming commenced a time charter for 10-12 months from July
2023 to the same leading merchant and processor of agricultural
goods as Rocky IV and Masterful.
-- At 30 June 2023, the Average Charter Length on our bulkers
was 0.2 years. We have mostly employed our bulkers on short-term
charters in anticipation of a market improvement.
The Company's fleet, across all segments, performed well.
Marvelous, Mindful, Courteous, Exceptional, Awesome, Auspicious,
Masterful and Charming are in the top quartile of fuel efficiency
in their market segments. The market for secondhand ships is liquid
with more than US$44 billion worth of transactions across 4000+
vessels in 2022. The charter-free and associated charter values of
the Company's standard vessels are calculated predominantly using
the online valuation platform provided by VesselsValue.
The VesselsValue valuation platform utilises transaction data as
well as other market data to estimate charter-free values. The
Company's NAV is, in effect, proven by recent market
transactions.
The Company's portfolio as at 30 June 2023:
SPV(+) Vessel Type Acquisition Earliest Latest end Expected
and Year of Build Date end of charter of charter end of charter
period period period**
Anvil Handysize bulker September August November August
built 2013 2021 2023 2023 2023
----------------------- ------------ ---------------- ------------ ----------------
Auspicious Handysize bulker February August March August
built 2015 2022 2023 2024 2023
----------------------- ------------ ---------------- ------------ ----------------
Awesome Handysize bulker January August March August
built 2015 2022 2023 2024 2023
----------------------- ------------ ---------------- ------------ ----------------
Charming Handysize bulker June July October July
built 2015 2022 2023 2023 2023
----------------------- ------------ ---------------- ------------ ----------------
Cocoa Handysize product October December December December
tanker 2020 2023 2025 2025
built 2008
----------------------- ------------ ---------------- ------------ ----------------
Courteous MR product tanker December December December December
built 2016 2022 2025 2027 2025
----------------------- ------------ ---------------- ------------ ----------------
Dachshund Handysize product February May
tanker 2020 2024
built 2008
----------------------- ------------ ------------------------------------------------
Daffodil Handysize product October February February February
tanker 2020 2024 2026 2026
built 2008
----------------------- ------------ ---------------- ------------
Exceptional MR product tanker April May
built 2015 2022 2024
----------------------- ------------ ------------------------------------------------
Golding 25,600 DWT stainless April NA - vessel is employed in a pool
steel chemical 2021
tanker
built 2008
----------------------- ------------ ------------------------------------------------
Idaho Ultramax bulker July November February November
built 2011 2021 2023 2024 2023
----------------------- ------------ ---------------- ------------
Laurel Handysize bulker July October December October
built 2011 2021 2023 2023 2023
----------------------- ------------ ---------------- ------------
Marvelous MR product tanker July November November November
built 2014 2022 2025 2027 2025
--------------------- ------------ ---------------- ------------ ----------------
Masterful Handysize bulker April June September August
built 2015 2022 2023 2023 2023
--------------------- ------------ ---------------- ------------ ----------------
Mayflower Handysize bulker June December February December
built 2011 2021 2023 2024 2023
--------------------- ------------ ---------------- ------------ ----------------
Mindful MR product tanker December December December December
built 2016 2022 2025 2027 2025
--------------------- ------------ ---------------- ------------ ----------------
Neon Mid-sized LPG July August August August
carrier 2018 2025 2025 2025
built 2009
--------------------- ------------ ---------------- ------------ ----------------
Octane MR product tanker December August August August
built 2010 2018 2024 2025 2025
--------------------- ------------ ---------------- ------------ ----------------
Orson 20,000 DWT stainless July NA - vessel is employed in a pool
steel chemical 2021
tanker
built 2007
--------------------- ------------ ------------------------------------------------
Pollock Handysize product December April
tanker 2018 2024
built 2008
--------------------- ------------ ------------------------------------------------
Rocky IV Handysize bulker September July November August
built 2013 2021 2023 2023 2023
--------------------- ------------ ---------------- ------------ ----------------
Sierra MR product tanker December September September September
built 2010 2018 2024 2025 2025
--------------------- ------------ ---------------- ------------ ----------------
Notes:
+ SPV that owns the vessel.
** Based on our assessment of the prevailing market conditions
at 30 June 2023.
At 30 June 2023, the Company's vessels had an average age of
11.4 years and were chartered to ten different counterparties.
Investment Performance
During the financial year, Portfolio Operating Profit was
US$56.3m (US$40.6m in the previous financial year). Gross Operating
Profit, an indicator of the underlying profit from operating
activity, increased YoY due to a combination of higher bulker time
charter rates, additional MR product tankers at high time charter
rates and the strong chemical tanker market. Loan interest and fees
were higher compared to the previous financial year due to the new
US$60m loan for the acquisitions of the two MR product tankers,
Mindful and Courteous. The new loan is secured on Mindful,
Courteous, Marvelous and Exceptional. The accrued performance fee
was unwound in accordance with the terms in the Company's
Prospectus dated 25 September 2018.
Investment performance summary
From 1 Jul From 1 Jul
Figures below are in US$m unless otherwise 2022 to 30 2021 to 30
stated (unaudited) Jun 2023 Jun 2022
Ship-Days 7,945 7,702
Revenue 119.9 104.0
Operating Expense (55.6) (57.6)
------------ ------------
Gross Operating Profit 64.3 46.4
Gross Operating Profit / Time-Weighted
Capital Employed 14.7% 13.9%
Loan interest and fees (3.5) (1.6)
Gain / (loss) in capital values (62.8) 70.7
------------ ------------
Portfolio (loss) / profit (2.0) 115.5
Interest income 0.1 0.0
Fund Level Fees and Expenses (4.6) (4.2)
Performance fee accrual 4.0 (4.0)
(Loss) / Profit for the period (2.5) 107.3
------------ ------------
Portfolio Operating Profit 56.3 40.6
------------ ------------
There was a loss in capital value of US$62.8m. We expect capital
value gains in the medium term as the charter-free value of product
tankers and bulkers rises and the negative charter value unwinds.
Both tankers and bulkers benefit from good supply-side
fundamentals. The low orderbook in both segments will result in
slowing fleet growth. We expect upside in secondhand values of
bulkers and tankers due to limited shipyard capacity and tighter
environmental regulations which increase newbuild prices.
Portfolio loss during the financial year was US$2.0m as strong
Gross Operating Profit and gains in charter-free values of product
and chemical tankers were outweighed by the loss in charter-free
value of bulkers and loss in charter values of product tankers. The
loss in charter value of product tankers was mainly due to the
improvement in the product tanker market during the year.
As discussed earlier in this report and the Shipping Market
section, we expect upside in charter-free value of bulkers in the
medium term and from the unwind of the total negative charter
value. At the end of the financial year, the portfolio had a total
negative charter value of US$49.5m. Ceteris paribus, this is
expected to trend to zero as previously mentioned.
Segment performance summary
Segment Performance Product Chemical Gas Containership Bulkers Total
During the Financial Tankers Tankers Tanker
Year (unaudited)
US$m unless otherwise
stated
Gross Operating Profit 24.5 6.1 4.2 1.1 28.4 64.3
Loan interest & fees (3.5) - - - - (3.5)
Gain / (loss) in
charter-free values 33.4 3.3 (1.2) (23.4) (51.6) (39.5)
Gain / (loss) in
charter values (36.2) - - 10.9 2.0 (23.3)
Portfolio (loss)
/ profit 18.2 9.4 3.0 (11.4) (21.2) (2.0)
Segment Exposure Product Chemical Gas Containership Bulkers Total
and Forecast Yields* Tankers Tankers Tanker
(unaudited)
% of NAV 40.1% 9.2% 6.0% - 39.7% 95.0%
Forecast Net Yields* 8.9% 23.8% 16.3% NA 8.4% 11.0%
* Based on the market values at 30 June 2023
With the expected bulker market improvement, we will selectively
redeploy our bulkers, as they complete their current charters, on
longer-term charters at higher rates over the next financial year.
Our two chemical tankers are employed in a pool. The Forecast Net
Yield on our chemical tankers is based on our expectation of a
continued strong chemical tanker market in the medium term. Please
see the Shipping Market section for details.
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$21,539/day, c.47% lower than at the end of June 2022
and c.27% lower than at the end of December 2022. Despite the
recent fall, the Clarksea Index remains well above its long-term
average of c.US$16,700/day. In April, the IMF forecast 2.8% world
GDP growth for 2023. In July, the IMF forecast was revised higher
to 3% with moderating inflation and an improved GDP growth forecast
for Advanced Economies. Global seaborne trade is expected to grow
by 2.3% in 2023 and 3.9% in 2024, roughly in line with the long
term trend rate of c.3% CAGR (over the two decades leading up to
2021).
We believe the market for tankers and bulkers is in the midst of
a multi-year upcycle. 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.36% since the end of 2020 while
the Clarksons Research Secondhand Price Index has risen c.63% over
the same period. We expect further upside in secondhand values of
bulkers and tankers due to tighter environmental regulations which
will further increase newbuild prices. Clarksons Research estimates
that global shipbuilding capacity is 40% lower compared to a decade
ago.
This section utilises data from the Tufton Real-Time Activity
Capture System ("TRACS") which analyses satellite data to track the
international shipping fleet by the major segments. TRACS uses the
draught of each vessel as a proxy for its utilisation and thereby
enables us to have a close to real-time measure of shipping demand.
Other research data used in this section is from Clarksons
Research, unless specified otherwise.
Tankers
According to the US Energy Information Administration, world
petroleum liquids demand is expected to grow 1.8% in 2023 and 1.6%
in 2024 after growing by more than 2% in 2022. Tanker demand growth
accelerated as the war in Ukraine partially replaced some demand
for short-haul product tanker cargoes with demand for long-haul
cargoes: increasing Russian exports to Asia and also increasing
European imports from non-Russian suppliers including the Middle
East, the US and Asia. The attractive fundamentals in the segment
have attracted investment in newbuilds. The product tanker
orderbook rose from c.6% of fleet at the end of June 2022 to c.9%
of fleet as at the end of June 2023. This is still relatively low
in historic terms. Most of the newbuild product tankers ordered are
expected to be delivered only starting in 2025. According to
Banchero Costa research, the chemical tanker orderbook remains low
at c.5% of fleet. Supply-side dynamics are supportive for product
and chemical tankers with very low fleet growth expected over the
next 2 years.
During the financial year, 1-year time charter rates for MR
product tankers rose to c.US$30,250/day in April, the highest since
2005. Time charter rates fell slightly towards the end of the
financial year due to seasonal weakness. Refinery expansions in the
Middle East and Asia as well as limited fleet growth suggest the
product tanker market will remain strong for the next two
years.
25-30% of MR product tankers are capable of engaging in the
chemicals/vegetable oil trade. The chemical tanker market benefits
as MR product tankers shift to the tightening product tanker
market. The chemical tanker market also benefits from good
supply-side fundamentals with a low orderbook and strong demand
growth forecast. 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 years, and two chemical tankers that operate in a pool
.
We believe the product and chemical tanker markets, well
supported by good supply-side fundamentals, continue to offer
potential for operating profit and capital appreciation.
Bulkers
Over the financial year, the bulker market weakened due to a
combination of previously underutilised capacity rejoining the
market as port congestion was rapidly resolved, weaker demand
growth especially for minor bulk from macroeconomic headwinds,
disruption caused by the war in Ukraine, and weaker economic trends
in China . 1-year time charter rates for handysize bulkers fell
c.57% to US$10,700/day. The bulker market has good supply-side
fundamentals. The bulker orderbook was c.7% of fleet as at the end
of June 2023 (c.8% of fleet at the end of June 2022).
We expect the bulker market to improve in the medium term as
utilisation increases with demand growth. Grain and minor bulk
trade demand growth are forecast to improve in 2024 which should
especially benefit Handysize bulkers. As at the end of the
financial year , the Company had 9 bulkers on fixed-rate charters
with Average Charter Length of 0.2 years. We have chosen to employ
some of our bulkers on index-linked charters in anticipation of
market improvement. As the market improves, we will selectively
redeploy our bulkers on new longer-term charters at higher rates
over the next financial year.
The combination of tightening environmental regulations and
lower shipyard capacity suggest newbuild prices of bulkers and
tankers will remain high thereby also supporting secondhand prices
for the next two years. 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
during the financial year with strong demand growth for long-haul
cargoes and a supportive supply side with slowing fleet growth. New
environmental regulations from the IMO to measure and improve
vessel carbon emission intensity incentivise lower speeds resulting
in reduced shipping capacity, aiding the supply-side adjustment.
Fuel-efficient vessels such as the two MR product tankers the
Company acquired during the year 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. We have been a signatory of the
United Nations Principles of Responsible Investment ("UN PRI")
since December 2018 and have a Responsible Investment policy
statement which is available on the Company's website (
www.tuftonoceanicassets.com ).
The Company's Board does not have a separate ESG committee but
collectively reviews progress against the policy statement as part
of the Company's annual Sustainability Report which is also
publicly available on the Company's website.
Highlights of the financial year include:
-- The Company's operating emissions intensity, as measured by
the EEOI, improved by c.34% YoY during 2022 primarily because of
capital re-allocation. We expect further improvement in emissions
intensity with further ESD retrofits.
-- We have started receiving the efficiency hire rate premium
for ESDs on eight vessels after the retrofits were completed or
substantially completed on these vessels. ESD retrofits on another
three vessels will be completed in 2024.
-- We prioritise crew welfare and have especially taken action
to improve the welfare of the Ukrainian crew members on board the
Company's vessels.
-- 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. The issue of overdue crew members was
substantially resolved in the industry as at the end of 3Q22. We
remain prepared to swiftly act should new disruptions to crew
rotations arise in the future.
-- We aim to minimise coal carriage on the Company's vessels
without negative financial impact. During 2022, only one of the
Company's bulkers carried coal, accounting for <2% of the total
cargo carried by the Company's bulkers and <0.5% of total cargo
carried on the Company's vessels.
-- In June 2023, Tufton committed to limiting revenues from
transportation of thermal coal to 5% of the Company's total
consolidated revenues. As part of the ongoing improvement in ESG
related disclosures, we will report thermal coal carriage related
revenues in future periods.
Principal Risks and Uncertainties
The Board has carried out a robust assessment to identify the
principal and emerging risks that could affect the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. Principal risks are those which
the Directors consider have the greatest chance of materially
impacting the Company's objectives. The Board has adopted a
"controls" based approach to its risk monitoring which requires
each of the relevant service providers, including the Investment
Manager, to establish the necessary controls to ensure that all
identified risks are monitored and controlled in accordance with
agreed procedures where possible.
The Board of Directors receives periodic updates on principal
risks at their meetings and has adopted its own control review to
ensure that risks are monitored appropriately, mitigation plans are
in place, and that emerging risks are identified and assessed. The
Directors also carry out a regular check on the completeness of
risks identified, including a review of the risk register. The
Board believes that the risk register is comprehensive and
addresses all risks that are currently relevant to the Company.
Whilst the Investment Manager monitors and puts in place controls
to mitigate risks, risk and uncertainty cannot be eliminated.
The Board identified the Russian war on Ukraine as a principal
risk. The specific areas of concern identified at the time have
become part of the overall risk control and monitoring processes of
the Investment Manager.
In the current period, the Board have identified the
macroeconomic changes of high inflation and higher interest rates
as potential risks to the Company's operations. Gearing levels of
the Company and its SPVs are low in comparison to the restriction
of 40% set out in the Company's Prospectus, and Tufton has further
mitigated the impact of higher interest rate using interest rates
caps. Accordingly, the Board is of the view that higher interest
rates will not have a significant impact on the operations and
financial standing of the Company. High inflation and supply chain
issues are impacting the cost of capital expenditure incurred by
the Company and its SPVs, but again this is not expected to have a
significant impact. Both of these potential impacts are kept under
review by both the Board and the Investment Manager.
The following table shows the Board's view of the principal
risks to the business and efforts to mitigate those risks. The
Board considers that no additional mitigation steps are required at
this time.
Underlying cause Objective impacted Control or mitigation implemented
of risk or uncertainty (in what way)
Demand for shipping Capital growth This risk cannot be controlled,
may decline, either Vessel values but is mitigated by:
because of a * diversification to reduce reliance on any particular
reduction segment, sector or geography;
in international
trade (e.g., "trade
wars") or because * focus on fleet vessel quality and specifications to
of general GDP growth improve utilisation;
slowing.
* longer term employment strategy to reduce market
exposure; and
* ultimately, lower charter rates would be accepted in
order to ensure the employment of the vessels.
----------------------- --------------------------------------------------------------------
Failure of, or Liquidity Charter counterparty credit worthiness
unwillingness Dividends is subjected to extensive checks
of, a vessel prior to and throughout a charter.
charterer In the unlikely event of default
to meet charter the Board believes there will
payments. be no issues finding alternative
employment for any of the ships
in the portfolio at prevailing
market rates.
----------------------- --------------------------------------------------------------------
Vessel maintenance Capital growth The Company monitors maintenance
or capital Dividends and capital expenditure through
expenditure Liquidity experienced technical managers.
may be more costly Vessel values Assessments of expected capital
than expected due expenditure are made prior to
to delays, resource investing in a vessel.
constraints or
inflation It is important to note that whilst
generally. the Company's fleet has experienced
increases beyond budgeted costs,
such increases were not so significant
as to undermine the initial investment
decision.
----------------------- --------------------------------------------------------------------
A vessel may be lost Capital growth Measures to mitigate operational
or significantly Vessel values risks are included in the employment
damaged. charters of the Company's vessels
including:
* avoiding conflict areas;
* daylight sailing, naval escort or route planning
to
avoid higher risk areas; and
* detailed best practice operating procedures to be
followed.
Comprehensive insurance protection
is in place at all times to cover
inter alia significant damages
to or loss of vessels.
----------------------- --------------------------------------------------------------------
The Company may not Liquidity The Company has engaged a very
have enforceable Vessel values experienced Investment Manager
title to the vessels who is responsible for establishing
purchased such title. This is then monitored
by the Administrator on behalf
of the Board using publicly available
information.
----------------------- --------------------------------------------------------------------
Failure of systems
or controls in the Capital growth, This risk cannot be directly controlled
operations of the Loss of assets, but the Management Engagement
Investment Manager, reputation or Committee regularly review the
Asset Manager or regulatory performance of the service providers
the Administrator permissions and their internal controls through
and thereby of the and resulting making enquiries, and inspection
Company fines visits.
----------------------- --------------------------------------------------------------------
Failure to comply Capital growth, The Investment Manager assesses
with sanctions Loss of assets, the bona fides of prospective
applicable reputation or charterers before contracts are
to vessels or their regulatory entered into and also monitors
cargo may impact permissions the operations of the vessels
the Company's and resulting owned by the Company's SPVs to
reputation fines ensure that all applicable sanctions
and/or lead to are complied with.
expropriation
of assets
----------------------- --------------------------------------------------------------------
The Company may be Liquidity , The Investment Manager arranges
exposed to Vessel values, for environmental due diligence
substantial Loss of income, in respect of all vessels considered
risk of loss from reputation or for acquisition by the Company's
environmental claims regulatory SPVs to identify potential sources
arising in respect permissions of pollution, contamination or
of vessels owned and resulting environmental hazard for which
by its SPVs, in fines that vessel may be responsible
particular and to assess the status of its
if such a vessel environmental regulatory compliance.
were to be involved
in an incident with The Asset Manager maintains a
the potential risk detailed manual that documents
of environmental best practice operating procedures
damage, contamination to be followed by crew and technical
or pollution staff. The Asset Manager reviews
the environmental performance
of key service providers and all
vessels and reports its findings
to the Investment Manager annually.
Protection and indemnity mutual
insurance overseen by the Asset
Manager provides cover of up to
US$1 billion per incident for
oil pollution damage compensation.
The Investment Manager is committed
to Responsible Investment and
has identified ESG risk factors
relevant to the industry in its
Responsible Investment Policy
statement. The Board reviews both
the Company's and the Investment
Manager's policy and its implementation
at least annually. Please see
the Investment Manager's Sustainability
Report on the Company's website
( www.tuftonoceanicassets.com
) for details .
As part of their review of the
Company's operational risks and
controls, which takes place on
at least an annual basis, the
Board of Directors consider ESG
specific risks and how these may
be mitigated. This includes receiving
regular reports and updates from
the Investment Manager on the
measures put in place by them
to ensure the Company carries
out its activities in an environmentally
sustainable and responsible manner.
----------------------- --------------------------------------------------------------------
Corporate Summary
The Company is a closed-ended investment company, limited by
shares, registered and incorporated in Guernsey under the Companies
Law on 6 February 2017, with registration number 63061.
The Company is a Registered Closed-ended Collective Investment
Scheme regulated by the GFSC pursuant to the Protection of
Investors (Bailiwick of Guernsey) Law 2020, as amended and the
Registered Closed-ended Investment Scheme Rules 2021.
As at 30 June 2023, the Company has 302,468,541 shares in issue,
all of which are admitted to the Specialist Funds Segment of the
Main Market of the London Stock Exchange under the ticker "SHIP",
ISIN: GG00BDFC1649, and SEDOL: BDFC164. During the financial year ,
the Company bought back 6,160,000 shares.
The Company makes its investments through LS Assets Limited and
other underlying SPVs, which are ultimately wholly owned by the
Company. LS Assets Limited is registered and was incorporated in
Guernsey in accordance with the Companies Law on 18 January 2018
with registered number 64562. The underlying SPVs owned by LS
Assets Limited are incorporated in the Isle of Man, in accordance
with the Isle of Man Companies Act 2006 (the "IOM Companies
Act").
The Company controls the investment policy of each of LS Assets
Limited and the wholly owned SPVs to ensure that each will act in a
manner consistent with the investment policy of the Company. The
Company refers to each vessel by the underlying SPV name rather
than the actual name of the respective vessel for confidentiality
purposes.
The Investment Manager is Tufton Investment Management Ltd, a
company incorporated in England and Wales with registered number
1835984, which is regulated by the FCA and has been authorised to
act as a Full Scope Registered UK AIFM under AIFMD. Tufton
Investment Management Ltd has been a specialist investment manager
in the maritime and energy markets since 2000 and has been focused
on financial services to these industries since its inception in
1985.
Corporate Governance Statement
The Board of Tufton Oceanic Assets Limited has considered the
Principles and Provisions of the AIC Code. The AIC Code addresses
the Principles and Provisions set out in the UK Corporate
Governance Code (the "UK Code"), as well as setting out additional
Provisions on issues that are of specific relevance to the
Company.
The Board considers that reporting in accordance with the
Principles and Provisions of the AIC Code, which has been endorsed
by the Financial Reporting Council and the Guernsey Financial
Services Commission, provides more relevant information to
shareholders. The Company has complied with the Principles and
Provisions of the AIC Code (except as set out below).
The AIC Code is available on the AIC website ( www.theaic.co.uk)
. It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
Areas of exception
Considering that the Board comprises solely of independent
Directors, it has decided not to appoint a senior independent
director. The Chairman of the Audit Committee fulfils the role of
the senior independent director, which includes the following:
- supporting the Chairman in his role;
- acting as an intermediary for other Directors where necessary;
- being available for shareholders and other non-executives to
discuss any questions or concerns; and
- assisting with the performance evaluation and succession planning of the Chairman's role.
Due to the Board's size (four Directors), the Board has not
deemed it necessary to appoint a separate nomination committee and
therefore the role typically undertaken by such a committee is
currently conducted by the Board as a whole. The rules governing
the appointment and replacement of Directors are set out in the
Company's Articles.
The Directors have overall responsibility for reviewing the
size, structure and skills of the Board and considering whether any
changes are required, or new appointments are necessary to meet the
requirements of the Company's business or to maintain a balanced
Board.
Similarly, due to the Board's size, the Company does not have a
separate remuneration committee, as the Board as a whole fulfils
the function of a remuneration committee, which includes the review
on at least an annual basis of the remuneration of the Directors in
accordance with the Company's remuneration policy and market
information.
The Listing Rules regarding diversity do not directly apply to
the Company since it is a member of the Specialist Fund Segment.
There are current challenges such as tenure, knowledge and
experience of our relatively small Board but further consideration
will be given on a voluntary basis to these guidelines during the
course of implementing any future succession plans.
The Board has additionally formulated the following policies and
procedures to assist them to comply with the AIC Code:
Independence
All the non-executive Directors are currently considered by the
Board to be independent of the Company, Investment Manager and the
Tufton Group and have been Directors for less than seven years. The
Board's current policy on tenure, including that of the Chairman,
is that continuity and experience are considered to add
significantly to the strength of the Board.
New Directors receive an induction from the Investment Manager
and the Administrator on joining the Board, and all Directors
receive other relevant training as necessary on their on-going
responsibilities in relation to the Company.
Environmental, Social and Governance
For further details of the Company's approach to ESG matters,
please see the Report of the Directors and the Investment Manager's
Report, together with the Company's Sustainability Report which is
published on its website, (www.tuftonoceanicassets.com).
Diversity and Inclusion Policy
The Company supports the AIC Code provision that the Board
should consider the benefits of diversity, when making appointments
and is committed to ensuring it receives information from the
widest range of perspectives and backgrounds. The Board is
committed to creating a diverse and inclusive environment where all
individuals feel respected, and that their voices are heard. The
Board believes that diversity of gender, age, ethnicity and
personal attributes, amongst others, contribute to a balanced and
more productive Board.
The Board is committed to being non-discriminatory and firmly
believes in equal opportunities for all, with board appointments
being made on merit against a set of objective criteria.
However, while the Board agrees diversity should be sought when
making appointments, it does not consider that this can be best
achieved by establishing specific quotas and targets and
appointments are therefore based wholly on merit. Accordingly, when
changes to the Board are required, due regard is given to both the
need for and importance of diversity and to a comparative analysis
of candidates' qualifications and experience.
A pre-established, clear, neutrally formulated and unambiguous
set of criteria are utilised during the appointment process to
determine the most suitable candidate for the specific position
sought. In each case, the Board ensures that candidates are
considered from a wide range of backgrounds.
UK Companies Act 2006 - Section 172 Statement
Whilst directly applicable only to UK domiciled companies, the
intention of the AIC Code which is followed by the Company is that
the following matters set out in section 172 of the UK Companies
Act, 2006 are reported on by all companies, irrespective of
domicile, provided this does not conflict with local company
law.
Therefore, through adopting the AIC Code, the Board acknowledges
its duty to apply and demonstrate compliance with section 172 of
the UK Companies Act 2006 and to act in a way that promotes the
success of the Company for the benefit of its shareholders as a
whole, having regard to (amongst other things):
-- the consequences of any decision in the long term;
-- the need to foster business relationships with suppliers, customers and others;
-- the impact of the Company's operations on the community and the environment;
-- the desirability of the Company maintaining a reputation for
high standards of business conduct; and
-- the need to act fairly as between members of the Company.
The Board regularly reviews the Company's principal stakeholders
and how the Company engages with them. Stakeholder voices are
considered at Board level and reflected in board decision making
through reporting provided to the Board by the Brokers and the
Investment Manager, together with engagement with stakeholders
themselves either directly or through the above-mentioned
parties.
The Company is an externally managed investment company, has no
employees, and as such is operationally quite simple. The Board
does not believe that the Company has any material stakeholders
other than those set out in the following table.
Investors Service providers Community and environment
Issues that matter to them
Performance of the Reputation of the Company Compliance with laws
shares Compliance with laws and regulations.
Growth of the Company. and regulations.
Remuneration Impact of the Company
Liquidity of the shares. and its activities on
third parties.
--------------------------------- ---------------------------------
Engagement process
Annual General Meeting The main two service The Company and its
providers - Tufton SPVs themselves have
Frequent meetings Investment Management only a very small footprint
with investors by Ltd (Investment Manager) in their local communities
Brokers and the Investment and Maitland Administration and only a very small
Manager and subsequent (Guernsey) Limited direct impact on the
reports to the Board. an Apex Group company environment.
("Administrator") -
Quarterly factsheets engage with the Board However, the Board acknowledges
in face-to-face meetings that it is imperative
Key Information Document quarterly, giving them that everyone contributes
direct input to Board to local and global
discussions. sustainability.
Where face-to-face The activities of the
contact has not been Company in this regard,
possible engagement and in particular concerning
has continued via video the vessels owned, are
conferencing services reflected within the
such as Microsoft Teams. Company's Sustainability
Report and the Responsible
All service providers Investment Policy of
are asked to complete the Investment Manager.
a questionnaire annually
which includes feedback
on their interaction
with the Company, and
the Board ordinarily
undertakes an annual
visit to the offices
of the Investment Manager
and its associated
companies in London,
Cyprus and the Isle
of Man.
--------------------------------- ---------------------------------
Investors Service providers Community and environment
--------------------------------- ---------------------------------
Rationale and example outcomes
Clearly investors The Company relies The Board and the Investment
are the most important on service providers Manager work together
stakeholder for the (including the Investment to ensure that ESG factors
Company. Most of our Manager, Asset Manager are carefully considered
engagement with investors and technical managers) and reflected in investment
is about "business entirely as it has decisions, and that
as usual" matters, no systems or employees vessel operators are
but has also included of its own. influenced positively.
discussions about
the discount of the No major decisions Board members do travel,
share price to the were made by the Board partly to meetings in
NAV. which affected service Guernsey, and partly
providers in the year. elsewhere on Company
The major decisions business, including
arising from this The Board always seeks for the annual due diligence
have been for the to act fairly and transparently visits to London and
Board to seek to ensure with all service providers, the Isle of Man. The
long-term value and and this includes such Board considers this
opportunities to realise aspects as prompt payment essential in overseeing
value through sales of invoices. service providers and
of vessels. A decision safeguarding stakeholder
was also made to buy interests. Otherwise,
back shares in an the Board seeks to minimise
attempt to reduce travel using video conference
or at least contain calls whenever good
the share price discount governance permits.
and to improve the
liquidity of the Company's
shares.
In addition, the Board
has focused on the
valuation of vessels,
a key priority for
shareholders. As a
result, the Board
placed greater emphasis
on reviewing the output
from the VesselsValue
system used and charter
rates to value most
of the Company's fleet
and the charter and
discount rates used
in valuing the remaining
vessels.
--------------------------------- ---------------------------------
Engagement processes are kept under regular review. Investors
and other interested parties are encouraged to contact the Company
via the Company Secretary or SHIP@tuftonoceanicassets.com on these
or any other matters.
Statement of Directors' Responsibilities
The Directors are responsible for preparing an Annual Report and
Audited Financial Statements for each financial year which give a
true and fair view, in accordance with applicable law and
regulations, of the state of affairs of the Company and of the
profit or loss of the Company for that year.
Companies Law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB").
In preparing financial statements the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Company's website is maintained by the Investment Manager.
Legislation in Guernsey governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time, the
financial position of the Company and enabling them to ensure that
financial statements comply with the Companies Law. The Directors
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Each of the Directors confirms that, to the best of their
knowledge:
-- they have complied with the above requirements in preparing the financial statements;
-- there is no relevant audit information of which the Company's Auditor is unaware;
-- all Directors have taken the necessary steps that they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the Auditor is aware of said
information;
-- the financial statements, prepared in accordance with IFRS
and applicable laws, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and
-- the Annual Report includes a fair and balanced review of the
development and performance of the business and the financial
position of the Company, together with a description of the
principal risks and uncertainties that it faces.
The AIC Code, as adopted by the Company, also requires Directors
to ensure that Annual Reports and Audited Financial Statements are
fair, balanced and understandable. In order to reach a conclusion
on this matter the Board has requested that the Audit Committee
advises on whether it considers that this Annual Report and Audited
Financial Statements fulfil these requirements. The process by
which the Audit Committee has reached these conclusions is set out
in the Audit Committee Report.
Furthermore, the Board believes that the Annual Report and
Audited Financial Statements provide the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
Having taken into account all matters considered by the Board
and brought to the attention of the Board for the year ended 30
June 2023, as outlined in the Corporate Governance Statement and
the Audit Committee Report, the Board has concluded that the Annual
Report and Audited Financial Statements for the year ended 30 June
2023, taken as a whole, are fair, balanced and understandable and
provide the information required to assess the Company's
performance, business model and strategy.
Report of Directors
The Directors present their Annual Report and the Audited
Financial Statements of the Company for the year ended 30 June
2023.
The Company was registered in Guernsey on 6 February 2017 and is
a registered closed-ended investment scheme under the POI Law. The
Company's shares were listed on the Specialist Funds Segment of the
Main Market of the London Stock Exchange on 20 December 2017 under
the ticker SHIP.
Investment Objective and Policy
The Company's investment objective is to provide investors with
an attractive level of regular and growing income and capital
returns through investing in secondhand commercial sea-going
vessels. The Board monitors the Investment Manager's activities
through strategy meetings and discussions as appropriate. The
Company has established a wholly-owned subsidiary that acts as a
Guernsey holding company for all its investments, LS Assets
Limited, which is governed by the same Directors as the
Company.
All vessels acquired, vessel-related contracts and costs will be
held by SPVs domiciled in the Isle of Man or other jurisdictions
considered appropriate by the Company's advisers. The Company
conducts its business in a manner that results in it qualifying as
an investment entity (as set out in IFRS 10: Consolidated Financial
Statements) for accounting purposes and as a result applies the
investment entity exemption to consolidation. The Company therefore
reports its financial results on a non-consolidated basis.
Subject to the solvency requirements of the Companies Law, the
Company intends to pay dividends on a quarterly basis. The
Directors expect the dividend to grow, in absolute terms, modestly
over the long term. In October 2022 the Company raised its target
annual dividend to US$0.085 per share (previously US$0.08 per
share).
The Company aims to achieve an IRR of 12% or above (net of
expenses and fees) on the Issue Price over the long term. The loss
for the Company in the financial year was US$2.5m, or US$0.008 per
share.
Shareholder information
Up to date information regarding the Company, including the
quarterly announcement of NAV, can be found on the Company's
website, which is www.tuftonoceanicassets.com and is maintained by
the Investment Manager.
The Company has a 30 June financial year end.
Share issues and buybacks
The Company has not issued any shares in the year ended 30 June
2023 nor in the period to 20 September 2023. On various occasions
during the year the Company purchased a total of 6,160,000 shares
at an average price of US$1.13. Since 1 July 2023 to 20 September
2023 a further 7,386,000 shares have been bought back at an average
price of US$0.98. Accordingly the Company had 295,082,541 shares in
issue at the date of signing these financial statements. All shares
repurchased are held in treasury.
Results and dividends
The Company's performance during the year is discussed in the
Chairman's Statement. The results for the year are set out in the
Statement of Comprehensive Income.
The Directors of the Company who served during the year and to
date are set out below.
Directors' interests
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 June 2023,
and as at the date of signing these financial statements:
2023 2022
-------------------
Director Shares Shares
------- -------
R King 60,000 45,000
------- -------
S Le Page 40,000 40,000
------- -------
P Barnes 5,000 5,000
------- -------
C Rødsaether 30,000 20,000
------- -------
The Directors fees are as disclosed below:
30 June 30 June
2023 2022
Director GBP GBP
-------------- -------------
R King 39,305 36,610
------------------------------- ------ -------------- -------------
S Le Page 36,000 34,000
------------------------------- ------ -------------- -------------
P Barnes 33,525 31,550
------------------------------- ------ -------------- -------------
C Rødsaether 33,525 31,550
------------------------------- ------ -------------- -------------
Directors' Attendance
Attendance of Directors at each meeting held during the
year:
Director Quarterly Board Audit Committee Ad hoc meetings
meetings
Held Attended Held Attended Held Attended
------ ---------- ------ ---------- ------ ----------
R King 4 4 2 2 10 10
------ ---------- ------ ---------- ------ ----------
S Le Page 4 4 2 2 10 10
------ ---------- ------ ---------- ------ ----------
P Barnes 4 4 2 2 10 8
------ ---------- ------ ---------- ------ ----------
C Rødsaether 4 4 2 1 10 8
------ ---------- ------ ---------- ------ ----------
Other Interests
Tufton Investment Management Holding Limited Group ("Tufton
Group") shareholders, employees, non - executive directors and
former shareholders held the following interests in the share
capital of the Company either directly or beneficially.
As at 30 June 2023
% of issued
Name Ordinary Shares Share Capital
Tufton Group Shareholders 6,968,839 2.30
Tufton Group Staff 580,450 0.19
Tufton Group Non-Executive
Directors 403,279 0.13
Former Tufton Group Shareholders 3,258,263 1.08
As at 30 June 2022
% of issued
Name Ordinary Shares Share Capital
Tufton Group Shareholders 5,375,133 1.74
Tufton Group Staff 466,261 0.15
Tufton Group Non-Executive
Directors 403,279 0.13
Former Tufton Group Shareholders 3,041,740 0.99
Share buyback and discount management
Subject to working capital requirements, and at the absolute
discretion of the Board, excess cash may be used to repurchase
shares. The Directors may implement share buybacks at any time
before the 90-day guideline set out in the Prospectus where they
feel it is in the best interest of the Company and all
shareholders.
The Board will consider repurchasing the Company's ordinary
shares in the market if they believe it to be in shareholders'
interests as a whole and as a means of correcting any imbalance
between supply of and demand for the shares.
The Company purchased 6,160,000 of its own shares at an average
price of US$1.13 per share during the financial year. Refer to Note
7 for more details. There were 6,160,000 shares held in treasury
and 302,468,541 shares outstanding as at the end of the financial
year. The Company bought back a further 7,386,000 shares, between
the end of the financial year and 20 September 2023, at an average
price of US$0.98. The purchased shares are held in treasury. The
Company had 295,082,541 shares outstanding as at the date of
approval of these accounts.
Companies Law allows companies to hold shares acquired by way of
market purchase as treasury shares, rather than having to cancel
them.
These treasury shares may be subsequently cancelled or sold for
cash. Therefore, it is agreed that any shares repurchased pursuant
to the general authority referred to above may be held by the
Company in treasury, to the extent permitted by Companies Law.
The Company wishes to operate a buyback programme that is
effective and also adds value for shareholders. As such, unless
authorised by shareholders, no shares will be sold from treasury at
a price less than the NAV per share at the time of the sale unless
they are first offered pro rata to existing shareholders.
Board Responsibilities and Corporate Governance
Please note the Corporate Governance Statement forms part of
this report.
Board Members
The Company's Board of Directors comprises four independent
non-executive Directors. The Board's role is to manage and monitor
the Company in accordance with its objectives. The Board monitors
the Company's adherence to its investment policy, its operational
and financial performance and its underlying assets, as well as the
performance of the Investment Manager and other key service
providers. In addition, the Board has overall responsibility for
the review and approval of the Company's NAV calculations and
financial statements. It also maintains the Company's risk
register, which it monitors and updates on a regular basis.
The Directors of the Company who served during the year are
listed below.
Robert King, Chairman
Rob serves on a number of boards as an independent non-executive
director which includes an International Stock Exchange listed
fund, Golden Prospect Precious Metals Limited (which also has a
trading listing on the LSE). Before becoming an independent
non-executive director in 2011, he was a director of Cannon Asset
Management Limited and their associated companies.
Prior to this he was a director of Northern Trust International
Fund Administration Services (Guernsey) Limited (formerly Guernsey
International Fund Managers Limited) where he had worked from 1990
to 2007. He has been in the offshore finance industry since 1986
specialising in administration and structuring of offshore open and
closed ended investment funds. Rob is British and resident in
Guernsey.
Stephen Le Page, Chairman of Audit Committee
A chartered accountant and chartered tax adviser. He was a
partner at PricewaterhouseCoopers CI LLP in the Channel Islands
from 1994 until his retirement in September 2013. He led that
firm's audit and advisory businesses for approximately ten years
and for five of those years was the Senior Partner (equivalent to
Executive Chairman) for the Channel Islands firm.
Stephen serves on a number of boards as a non-executive
director, including acting as chairman of the audit committee for
three other London listed funds, Highbridge Tactical Credit Fund
Limited (which is winding down), Volta Finance Limited and Amedeo
Air Four Plus Limited and one International Stock Exchange listed
company, Channel Islands Property Fund Limited. Stephen is British
and resident in Guernsey.
Paul Barnes
An investment banker experienced in asset backed, structured and
project financing with wide geographic exposure including Asia,
Central/Eastern Europe, North and Latin America and Scandinavia.
Paul was managing director at BNP Paribas and co-head of its EMEA
Shipping and Offshore business between 2010 and 2015. He was also
head of risk monitoring for Global Shipping at BNP Paribas.
Prior to that, Paul had served as head of shipping (London) at
Fortis Bank, head of specialised industries at Nomura International
and as a corporate finance director of Barclays Bank and as a
director of its Shipping Industry Unit. Paul Barnes is British and
resident in the United Kingdom.
Paul chairs the recently formed Management Engagement
Committee.
Christine Rødsaether
Christine is a partner in law firm Simonsen Vogt Wiig, with more
than 30 years' experience working in the international shipping
sector and offshore related transactions, design, vessel
construction, offshore installations, restructurings, international
banking and finance. Previously, she was a partner in Andersen
Legal ANS and a lawyer at Wikborg, Rein & Co. Christine has
extensive board experience, and currently serves on the boards of
OSE listed Odfjell SE and Oslo Bors listed Gram Car Carriers ASA.
Christine is Norwegian and is resident in Norway.
Conflicts of Interest
None of the Directors nor any persons connected with them had a
material interest in any of the Company's transactions,
arrangements or agreements at the date of this report and none of
the Directors has or had any interest in any transaction which is
or was unusual in its nature or conditions or significant to the
business of the Company, and which was affected by the Company
during the year. At the date of this report, there are no
outstanding loans or guarantees between the Company and any
Director.
Share Dealing Code
The Company has adopted a share dealing code, in conformity with
the requirements of the Listing Rules and the EU Market Abuse
Regulation and takes steps to ensure compliance by the Board and
relevant senior staff with the terms of the policy.
Appointment, re-election and remuneration of Directors
As stated within the Corporate Governance Statement, due to the
Board's size, the Board has not deemed it necessary to appoint a
separate nomination committee and therefore the role typically
undertaken by such committee is currently conducted by the Board as
a whole. The rules governing the appointment and replacement of
Directors are set out in the Company's Articles. The rules
governing the appointment and replacement of Directors are set out
in the Company's Articles. The Articles also require that at each
annual general meeting, all the Directors will submit themselves
for re-election. The Directors have overall responsibility for
reviewing the size, structure and skills of the Board and
considering whether any changes are required, or new appointments
are necessary to meet the requirements of the Company's business or
to maintain a balanced Board.
This is formally considered annually at the time of the Board,
Chairman and Directors' annual performance appraisals.
When considering new appointments in the future, the Board will
ensure that a diverse group of candidates is considered and that
appointments are made against objective criteria, in accordance
with the Company's Diversity & Inclusion Policy. As at 21 July
2023 the Board have employed the services of a Guernsey recruitment
firm to compile a list of candidates for the Boards consideration.
At the end of the selection process suitable candidate or
candidates will look to be appointed to the Board. The Board have
been briefed by their legal advisers about their on-going
responsibilities as directors and newly appointed directors will be
invited to participate in a formal induction process.
The Company does not have a separate remuneration committee as
the Board as a whole fulfils the function of a remuneration
committee, which includes the review on at least an annual basis of
the remuneration of the Directors in accordance with the Company's
remuneration policy and market information. The Company's policy is
for Directors to be remunerated in the form of fees which are paid
quarterly in arrears. No element of the Directors' remuneration is
performance-related, and no Director is involved in setting his or
her own remuneration.
Fees payable to the Directors should reflect the time spent by
the Board on the Company's affairs and the responsibilities borne
by the Board and should be sufficient to enable high calibre
candidates to be recruited to the Board, ultimately contributing to
a composition of the Board that is balanced and effectively
discharges stewardship of the Company's affairs.
Annual performance appraisal
The performance of the Board, committees and individual
Directors have been formally and rigorously evaluated by a
self-assessment process coordinated by the Administrator who
circulates the findings to the Board. This evaluation is performed
annually and the Chairman is considering having externally
facilitated board evaluation. The last internal review took place
in October 2022 with the next annual review taking place in October
2023. Evaluation of the Chairman is led by the Chairman of the
Audit Committee, who carries out the functions of a senior
independent director.
Audit Committee
The Board will delegate certain responsibilities and functions
to the Audit Committee. Stephen Le Page is the chairman of the
Company's Audit Committee which also includes Paul Barnes and
Christine Rødsaether.
In discharging its responsibilities, the Audit Committee will
review the annual and half yearly financial statements, the risks
to which the Company is subject, the system of internal controls,
and the terms of appointment and remuneration of the Independent
Auditor. It is also the forum through which the Auditor reports to
the Board. The Audit Committee is expected to meet at least twice a
year.
The objectivity of the Independent Auditor will be reviewed by
the Audit Committee, which will also review the terms under which
the Independent Auditor is appointed to perform non-audit services.
The Audit Committee will review the scope and results of the audit,
its cost effectiveness and the independence and objectivity of the
Auditor, with particular regard to non-audit services and fees.
The members of the Audit Committee consider that they
collectively have the requisite skills and experience to fulfil the
responsibilities of the audit committee. Given Mr Le Page's skills
and financial experience, the Board has satisfied itself that at
least one member of the Audit Committee has recent and relevant
financial experience.
Other Committees
The Company has recently formed a Management Engagement
Committee chaired by Paul Barnes, which will hold its inaugural
meeting in 2H23.
The functions of the Management Engagement Committee are to
review annually the compliance by the Investment Manager with the
Company's investment policy as established by the Board and with
the Investment Management Agreement ("IMA") entered into and
reviewed between the Company and the Investment Manager ; and to
review annually the performance and remuneration of any other key
service providers to the Company.
During the year, the Board has reviewed the contractual
relationship with and the performance of all the service providers
to the Company, and in particular the Investment Manager. As part
of the review process, the Board concluded that service providers
are performing in accordance with the Company's expectations and
contractual arrangements, and that their continued appointment is
in the best interests of shareholders.
Operation of the Board
It is the responsibility of the Board to ensure that there is
effective stewardship of the Company's affairs. A formal schedule
of matters reserved for decision of the Board has been adopted.
This includes the following items:
-- changes to the structure, size and composition of the Board,
-- the appointment of directors to specified offices of the
Board, including the Chairman and senior independent director,
-- board succession planning, training, development and evaluation,
-- overall leadership of the Company and setting values and standards, and
-- on-going review of the Company's Investment strategy,
investment objectives and investment policy.
The Board and Investment Manager work closely together, with the
Investment Manager attending and presenting at quarterly Board
meetings. At each of these meetings the Board assess, discuss and
challenge the Investment Manager's performance in terms of
investment performance, risk and the management and impact of
operational issues within the portfolio. During the current period,
the Board has not identified any issues with the Investment
Manager's performance.
The Board meet at least quarterly to review the overall business
of the Company and to consider the matters specifically reserved
for it. The quorum at Directors' meetings is two Directors present
in person or by telephone and they are held in Guernsey.
Detailed information is provided by the Investment Manager,
Asset Manager and Administrator for these meetings and additionally
at regular intervals to enable the Directors to monitor compliance
with the investment objective and the investment performance of the
Company both in an absolute and relative sense. Overall Company
strategy is discussed in detail at quarterly meetings of the Board
of Directors and at ad hoc board meetings when required. Directors
also have the opportunity to discuss these and any other matters
with the Investment Manager outside of the Board of Directors
meetings as appropriate.
The Directors are provided with standard papers in advance of
each quarterly meeting to allow the review of several key areas
including the Company's investment activity over the quarter
relative to its investment policy; the global shipping industry;
the revenue and financial position; gearing, performance; share
price discount or premium (both absolute levels and volatility);
and relevant industry and macro-economic issues.
The Board also receive quarterly reports analysing and
commenting on the composition of the Company's share register and
monitoring significant changes to shareholdings.
Independent Auditor
The Audit Committee is responsible for overseeing the Company's
relationship with the Independent Auditor, including making
recommendations to the Board on the appointment of the Independent
Auditor and their remuneration. PricewaterhouseCoopers CI LLP
("PwC") was originally appointed as the Company's Independent
Auditor on 20 December 2017.
The Auditor, PwC, has indicated its willingness to remain in
office. A resolution for the reappointment of PwC was proposed and
approved at the AGM on 27 October 2022. Another resolution for
their appointment will be proposed at the AGM on 24 October
2023.
Service Providers
The Investment Manager / Alternative Investment Fund Manager
("AIFM")
Tufton Investment Management Ltd, a specialist investment
manager in maritime and energy markets since 2000, has been
appointed as the Investment Manager. Since its inception in 1985,
the Investment Manager has been focused on financial services to
these industries.
As of 30 June 2023, the Investment Manager manages investments
of c.US$0.8 billion. Whilst the Board has responsibility for all
the strategic decision making (including acquisitions, disposals,
financing, capital expenditure, charters and other material
contracts) required by the Company, matters concerning the
operations of the vessels (within the approved budgets and
parameters set by the Board for the Company and the SPVs) are
delegated to the Investment Manager.
As of 30 June 2023, the Tufton Group of which the Investment
Manager is part, had 29 employees operating from offices in London,
Isle of Man and Cyprus. The Investment Manager is fully dedicated
to the shipping industry with an in-house research team and
dedicated Asset Manager providing services to each vessel
purchased. As described in the Prospectus, the Investment Manager
has an established track record in managing segregated mandates for
pension funds with similar investment objectives to those of the
Company.
The Investment Manager's employees have significant experience
of investing and financing in the shipping industry. Each member of
their Investment Committee has between 20 and 40 years of
experience in the maritime financial markets either from investment
banking, commercial banking or from the vessel owning/operating
perspective.
The Investment Manager's role encompasses the identification of
appropriate transaction opportunities, conducting necessary due
diligence, making recommendations to the Board and completing the
proposed transactions on behalf of the Company. The Investment
Manager (in conjunction with the Asset Manager) will also monitor
the performance of the Company's portfolio. The Investment Manager,
which acts as the Company's AIFM under the AIFMD, is authorised and
regulated by the FCA.
Investment Committee
The Investment Manager has established an Investment
Committee.
Each investment proposal is reviewed by the Investment Committee
which meets on a weekly basis. In reviewing each potential
investment, the Investment Committee considers a range of factors
including a detailed analysis of the vessel's technical condition
and other analyses from the Asset Manager, a full risk/reward
analysis, downside stress testing, commercial/employment strategy,
effects of adding moderate leverage in accordance with Company
policy, market outlook, credit quality of charterer, market
reputation of counterparties, deal modelling, exit strategy and any
macro analysis that might be necessary to fully understand the
investment. The Investment Manager is committed to Responsible
Investment and integrates ESG factors into its investment process.
The Investment Manager reviews the environmental footprint of new
vessel acquisitions as well as KPIs of technical managers on safety
and fulfilling regulatory requirements. Should the Investment
Committee be in favour of an acquisition, an appropriate
recommendation will be made to the Board who would ultimately
determine whether an acquisition should be made.
Asset Manager
Tufton Management Limited was established in 2009 to act as the
Asset Manager for vessels owned by funds and investment vehicles
managed or advised by Tufton Group.
The Asset Manager subcontracts technical services from
associated company Tufton Asset Management Limited, based in
Cyprus, which employs professionals who have experience in all
aspects of ship management including special surveys, maintenance,
repair and negotiation of commercial agreements for vessel
employment and provides the services detailed in the
Prospectus.
The Asset Manager enters into an asset management agreement with
each SPV and with effect from 1 July 2022 receives a fee of US$200
per vessel per day.
Administrator and Secretary
Maitland Administration (Guernsey) Limited ("Maitland"), an Apex
Group company, has been appointed as administrator and secretary to
the Company, pursuant to the Administration Agreement dated 27
February 2017 and to LS Assets Limited, pursuant to the
Administration Agreement dated 20 April 2018. Maitland was
incorporated with limited liability in Guernsey on 20 January 2010
and is licensed by the Guernsey Financial Services Commission under
the Protection of Investors (POI) Law. Maitland is also regulated
under The Regulation of Fiduciaries, Administration Businesses and
Company Directors, etc (Bailiwick of Guernsey) Law, 2020.
The Administrator forms part of the Apex Group Ltd ("Apex")
established in Bermuda in 2003. Apex is a global financial services
provider which delivers an extensive range of services to asset
managers, capital markets, private clients and family offices. The
group employs over 12,000 staff in over 50 offices worldwide and
collectively administers in excess of US$200 billion in assets.
The Administrator provides day-to-day administration services to
the Company and is also responsible for the Company's general
administrative and secretarial functions such as the calculation of
the NAV, compliance with the Code and maintenance of the Company's
accounting and statutory records.
Depositary
Apex Depositary (UK) Limited has been appointed as depositary to
the Company, pursuant to the Depositary Agreement dated 4 November
2022. The role of the depositary will ensure that investment
instructions from the Investment Manager comply with the Law or
Constitutional Documents of the Fund. Apex Depositary (UK) Limited
is an active company incorporated on 25 October 2013 with the
registered office located in London. The Depositary also forms part
of the Apex Group Ltd noted above.
Registrar
Computershare Investor Services (Guernsey) Limited was appointed
as registrar to the Company pursuant to the Registrar Agreement
dated 27 February 2017. In such capacity, the Registrar is
responsible for the transfer and settlement of shares held in
certificated and uncertificated form. The Register may be inspected
at the office of the Registrar.
Disclosure Obligations
Shareholders are obliged to comply, from Admission, with the
shareholding notification and disclosure requirements set out in
Chapter 5 of the Disclosure Guidance and Transparency Rules. The
Administrator will monitor disclosure with reference to changes in
shareholdings.
Annual Report and Financial Statements
The Board of Directors is responsible for preparing the Annual
Report and Financial Statements. The Audit Committee advises the
Board on the form and content of the Annual Report and Financial
Statements, any issues which may arise and any specific areas which
require judgement.
Anti-bribery and corruption
The Board acknowledges that the Company's international
operations may give rise to possible claims of bribery and
corruption. In consideration of the UK Bribery Act the Board
reviews the perceived risks to the Company arising from bribery and
corruption to identify aspects of the business which may be
improved to mitigate such risks.
The Board has adopted a zero-tolerance policy towards both
bribery and corruption and has reiterated its commitment to carry
out business fairly, honestly and openly.
In respect of the UK Criminal Finances Act 2017 which introduced
a Corporate Criminal Offence of 'failing to take reasonable steps
to prevent the facilitation of tax evasion', the Board confirms
that it is committed to zero tolerance towards the criminal
facilitation of tax evasion.
Modern slavery
The Company, through its Investment Manager seeks to ensure that
all charter counterparties have policies and procedures which
prevent any possibility of slavery or similar issues on the vessels
comprising the fleet. The Investment Manager has such policies and
procedures in its own right which govern the ship management
contracts used to appoint technical managers.
General Data Protection Regulation ("GDPR")
The Board, through enquiry of its service providers, has ensured
that the requirements of GDPR and its equivalent legislation in the
UK and Guernsey, are met by them when they process any data on
behalf of the Company.
Alternative Investment Fund Managers Directive ("AIFMD")
The Investment Manager, Tufton Investment Management Ltd, has
been authorised by the FCA as a Full Scope Registered UK AIFM under
the AIFMD. The funds managed by the AIFM, including the Company,
are now defined as Alternative Investment Funds and are subject to
the relevant articles of the AIFMD.
The Company notes that while AIFMD no longer binds the UK in its
implementation, a domestic regime has been put in place regulating
the management and marketing of AIFs in the UK, which generally
maintains the AIFMD rules as implemented at the end of the
transition period with respect to the UK's departure from the
European Union on 31 December 2020.
Internal control and financial reporting
The Board is responsible for establishing and maintaining the
system of internal controls required by the Company's operations.
These internal controls are undertaken by the service providers.
Internal control systems are designed to meet the specific needs of
the Company and the risks to which it is exposed, and, by their
very nature, provide reasonable, but not absolute, assurance
against material misstatement or loss.
The key procedures which have been established to provide
effective internal controls include:
-- Maitland Administration (Guernsey) Limited is responsible for
the provision of administration, accounting and company secretarial
duties. Maitland also provides compliance oversight in respect of
the Company and its activities. As the Company itself has no IT
systems and relies on the IT systems of its service providers,
Maitland additionally has a role in cyber security and the
protection of the Company's data through the operation of
Information Security Protection Controls. Maitland staff are also
regularly trained in order to minimise the risk of an accidental
data breach;
-- Tufton Investment Management Ltd is the Investment Manager
and provides portfolio management and risk management services to
the Company. It is also the AIFM for the purposes of AIFMD;
-- Tufton Management Limited, an affiliate of the Investment
Manager, provides Asset Management services to each underlying
SPV;
-- Tufton Corporate Services, an affiliate of the Investment
Manager, provides administration, accounting and company
secretarial services for the SPVs;
-- Computershare Investor Services (Guernsey) Limited is
responsible for the provision of Registrar services;
-- the Board clearly defines the duties and responsibilities of
the Company's agents and advisers in the terms of their
contracts;
-- the Board receives assurances from the Company's agents and
advisers that any amendments required as a result of regulatory
change, are actioned accurately and promptly; and
-- the Board reviews financial information and compliance
reports produced by the Administrator on a regular basis.
The Board and Audit Committee have reviewed the Company's risk
management and internal control systems and believe that the
controls are satisfactory given the size and nature of the
Company.
Responsible Investment, Sustainability and ESG Policy
The Company published its 2022 Sustainability Report, a copy of
which is available on the Company's website
(www.tuftonoceanicassets.com).
The Sustainability Report sets out the combined approach of the
Investment Manager and the Company to the integration of
sustainability risks and responsible investment principles in its
investment decision making and asset ownership practices. The
Investment Manager seeks to align the Company's strategy with best
practices and market standards in all ESG and Responsible
Investment matters.
The Investment Manager believes upholding high standards of ESG
and responsible investment principles and practices are an
essential tool for managing the risks presented by challenges such
as climate change, social inequality and human rights issues,
delivering long-term value and positive returns for the Company's
shareholders as part of the Company's investment objectives, and
ensuring the continued sustainability of shipping as a whole.
The Report includes further details on the Company's approach to
stakeholder engagement, human rights and anti-bribery practices,
together with how the activities of the Company are aligned with
recognised ESG standards such as the UN's Sustainable Development
Goals. In accordance with the Policy, the Directors have requested
that the Investment Manager consider the broader social, ethical
and environmental issues of the vessels within the Company's
portfolio, acknowledging that companies failing to manage these
issues adequately run a long-term risk to the sustainability of
their businesses and that this reflects stakeholders' views.
More specifically, the Board expect companies to demonstrate
ethical conduct, effective management of their stakeholder
relationships, responsible management and mitigation of social and
environmental impacts, as well as due regard for wider societal
issues.
The Directors along with the Investment Manager recognise the
value of integrating principles of Responsible Investment into the
investment management process and ownership practices in the belief
that this can have an impact on long-term financial performance.
The Sustainability Report has further information on how the
Investment Manager practically implements and considers the Policy
when making investment decisions.
Viability statement
The Board, in assessing the long-term viability of the Company,
has paid particular attention to the Principal Risks and
Uncertainties faced by the Company as disclosed in these financial
statements. The Board has taken into account the cashflow-weighted
average length of its charters. The Company is also required to
hold a continuation vote at the AGM to be held 24 October 2024.
Notwithstanding this, the Board have determined that a three-year
viability period is the most appropriate for viability testing. In
addition, the Board has considered the cash flow projection for the
running costs of the Company to ensure the Company retains
sufficient cash to meet its operating costs until the end of the
viability period and is therefore able to sustain its business
model and structure, including the payment of dividends at the
announced level. The Board has also considered the cash flow
projections for the Company and its SPVs in two market stress
scenarios.
The Board has considered the results of a viability test wherein
the primary sensitivity of an extended period of market stress
results in time charter rates staying below the historic median
levels over the entire three-year forecast period along with
significant void periods modelled between charters.
The most extreme scenario modelled resulted in unrestricted cash
balances being exhausted in late 2024, but in the very remote event
of such a cash shortage arising this would be addressed through one
or all of the following significant actions: the sale of a vessel,
the deferral of discretionary capital expenditure, and/or the
deferral or reduction of any dividend payment.
These scenarios allow for considerable idle time in the fleet,
consistently low charter rates and even charter default. The
Directors have also assumed that given the Company's recent level
of performance, it is reasonable to assume that the continuation
vote will be passed. As a result, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due during and that the
business model will remain applicable over that period.
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 also considered the potential impact of
macroeconomic factors, such as high inflation and interest rates on
the current and future operations of the Company and its
investments, as well as those other risks set out in more detail in
the Principal Risks and Uncertainties section. Cash reserves are
held at the LS Assets Limited ("LSA") and SPV levels and paid 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
and meet its ongoing obligations for at least twelve months from
the date of approval of the financial statements. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements. Please also refer to the section below.
Continuation Vote
In accordance with the prospectus published 25 September 2018,
the Directors will propose an ordinary resolution at the annual
general meeting to be held 24 October 2024 that the Company
continues its business (a "Continuation Resolution"). If this
Continuation Resolution is passed, then the Directors shall every
three years thereafter at the annual general meeting held,
following the publication of the audited accounts, propose a
further Continuation Resolution.
Shareholders' significant interests
The following shareholders had notified to the Company a
substantial interest of 5% or more of the issued share capital as
at 30 June 2023.
% of issued share
capital
East Riding Pension Fund 10.57
South Yorkshire Pensions Authority 9.62
Schroder Investment Management 8.07
West Yorkshire Pensions Fund 7.90
Raymond James Investment Services 5.55
FIL Investment International 5.19
The Directors place a great deal of importance on communication
with shareholders. They request regular updates from the Company's
Brokers and financial advisers on their communications with
shareholders. They can also be contacted via the email address
provided in the Chairman's Statement.
The Annual Report and Audited Financial Statements are also
distributed to other parties who have an interest in the Company's
performance. Additional information on the Company can be obtained
through the website www.tuftonoceanicassets.com , which is
maintained by the Investment Manager.
The Notice of the Annual General Meeting is included within the
Annual Report and Audited Financial Statements and is sent out at
least 20 working days in advance of the meeting, in accordance with
the AIC Code. All shareholders have the opportunity to put
questions to the Board or the Investment Manager formally at the
Company's Annual General Meeting.
The Company Secretary and Investment Manager are available to
answer general shareholder queries at any time throughout the year.
The Company can be contacted via the Company Secretary or
SHIP@tuftonoceanicassets.com .
The Company confirms that there is no information that is
required to be disclosed under Listing Rule 9.8.4.
Approved by the Board of Directors on 25 September 2023 and
signed on behalf of the Board by:
Audit Committee Report
Chairman's introduction
I am pleased to present to you the Audit Committee report
prepared in accordance with the current AIC Code, which reflects
the UK Corporate Governance Code to the extent that it is
applicable to investment companies.
The terms of reference for the committee are available on the
Company's website, www.tuftonoceanicassets.com . During the year
ended 30 June 2023 and to the date of this report, the main areas
of activity have been as follows:
-- reviewing and assessing the Principal Risks and
Uncertainties, including the ongoing impact of the Russian invasion
of Ukraine and the emergence of inflation and higher interest rates
on the activities and assets of the Company;
-- reviewing the accounting policies for the Company to ensure
they remain appropriate for the preparation of the Company's Annual
Report and Audited Financial Statements;
-- reconsidering the areas of judgment or estimation arising
from the application of International Financial Reporting Standards
to the Company's activities and the documentation of the rationale
for the decisions made and estimation techniques selected, to
ensure they remain appropriate;
-- meeting with the Independent Auditor, PwC, to review and
discuss their independence, objectivity and proposed scope of work
for their audit of this Annual Report;
-- meeting with the Company's principal service providers to
review the controls and procedures operated by them to ensure that
the Company's risks are properly managed and that its financial
reporting is complete, accurate and reliable; and
-- reviewing in detail the content of this Annual Report, the
work of the service providers in producing it and the results of
the external audit.
Membership and Role of the Committee
The Board will delegate certain responsibilities and functions
to the Audit Committee. Stephen Le Page is the chairman of the
Company's Audit Committee which also includes Paul Barnes and
Christine Rødsaether. In discharging its responsibilities, the
Audit Committee will review the annual and half yearly financial
statements, the risks to which the Company is subject, the system
of internal controls, and the terms of appointment and remuneration
of the Independent Auditor. It is also the forum through which the
Auditor reports to the Board. The Audit Committee is expected to
meet at least twice a year.
The Committee discharges its responsibilities through a series
of scheduled meetings, the agendas of which are linked to events in
the financial calendar of the Company. The Committee met two times
during the year ended 30 June 2023 and three more since the year
end. The Independent Auditors attended three of these five
meetings.
Internal control
The Board reviews the internal controls of the Company's service
providers, who are required to establish and maintain appropriate
systems of internal control, by reviewing regular reports from the
service providers. The Board also ensures segregation of duties
between the service providers.
In addition, the Board seeks to make visits to certain service
providers periodically to assess their organisation and culture and
to meet the individuals responsible for key functions. The Audit
Committee, and particularly the Chairman of the Committee, also
closely monitors the financial reporting process and the tasks
undertaken in the production of the Annual Report.
This has involved discussions with the Administrator of the
Company, the administrator of the Isle of Man SPVs and the
Investment Manager.
Review of accounting policies and areas for judgment or
estimation
These financial statements reflect the application of the
accounting policies and estimation techniques originally set out in
the Company's Prospectus for its IPO in December 2017. The Audit
Committee confirms that they are still considered to be
appropriate.
In particular, the following are the significant issues that the
Audit Committee considered relating to the financial
statements:
-- the application of IFRS 10 - Consolidated Financial Statements ("IFRS 10") to the Company,;
-- the detailed approach to arriving at the estimate of fair
value for each vessel, SPV and the Guernsey holding company,
LSA;
-- the determination of the Company's viability and the
applicability of the going concern assumption.
These financial statements reflect the outcome of those
discussions. In addition, the Independent Auditor's proposed scope
of work in connection with these areas and the statements in
general was agreed.
Fair value estimation
The majority of the NAV of the Company is derived from the fair
value of the vessels owned by the Company's indirect SPV
subsidiaries, which are themselves held by the Company's
subsidiary, LSA. The Company has chosen to use the value provided
by VesselsValue as its best estimate of fair value for the majority
of its fleet. Exact details of the valuation techniques applied to
the vessels and of how the Company's NAV is derived is given in
Note 12 to these financial statements.
The Committee has paid particular regard to evaluating these
techniques to ensure they are in accordance with market
methodology, based on accurate information, reliable and
appropriate. The sensitivity of these valuations to various input
assumptions is given in Note 12, to enable readers of these
financial statements to make their own assessment of the carrying
values.
The Committee is satisfied that these techniques are reasonable
and appropriate for use in the preparation of these financial
statements.
Performance fee
Per the terms of the IMA, the Company accrues performance fees
based on the size of the investment and the continued performance
throughout the financial year. The accrual at year end is US$nil
(2022: US$ 3,980,432). The prior year's accrual was written back in
the current year. The Board reviews and approves the
calculation.
External audit
During the year ended 30 June 2023, and up to the date of this
report, the Committee held formal meetings with the Independent
Auditor on two occasions, and in addition the Chair of the
Committee has spoken to them informally on several occasions. These
informal conversations have been held to ensure the Chairman is
kept up to date with the progress of the audit work, and that the
Independent Auditor's formal reporting meets the Committee's
needs.
The formal meetings included detailed reviews of the proposed
fees and scope of the work to be performed by PwC in their audit
for the year ended 30 June 2023. They also included detailed
reviews of the results of this work, and the audit findings and
observations. I am pleased to report that there are no matters
arising from the Independent Auditor's work which should be brought
to the attention of shareholders.
The Committee has also reviewed PwC's report on PwC's own
independence and objectivity, including the level of non-audit
services provided by them. There were no non-audit services carried
out during the year.
The Committee has therefore concluded that PwC is independent
and objective, carries out its work to a high standard, and
provides concise but useful reporting. The Committee also notes
that Roland Mills has served 5 years as the audit engagement leader
and therefore reached his maximum term as such. PwC CI LLP will
introduce the audit committee to Roland's replacement accordingly.
Accordingly, the Committee has recommended a resolution for their
appointment will be proposed at the AGM on 24 October 2023.
Annual report
The Committee members have each reviewed this Annual Report and
earlier drafts of it in detail, comparing its content with their
own knowledge of the Company, reporting requirements and
shareholder expectations. Formal meetings of the Committee have
also reviewed the report and its content and have received reports
and explanations from the Company's service providers about the
content and the financial results.
The Committee has concluded that the Annual Report, taken as a
whole, is fair, balanced and understandable, and that the Board can
reasonably and with justification make the Statement of Directors'
Responsibilities.
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements give a true and fair
view of the financial position of Tufton Oceanic Assets Limited
(the "company") as at 30 June 2023, and of its financial
performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards and
have been properly prepared in accordance with the requirements of
the Companies (Guernsey) Law, 2008.
What we have audited
The company's financial statements comprise:
-- the statement of financial position as at 30 June 2023;
-- the statement of comprehensive income for the year then ended;
-- the statement of changes in equity for the year then ended;
-- the statement of cash flows for the year then ended; and
-- the notes to the financial statements, which include
significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our
report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements of the company, as required by the Crown Dependencies'
Audit Rules and Guidance. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our audit approach
Overview
Audit scope
* Th e company is a closed-ended investment company,
incorporated and based in Guernsey, whose ordinary
shares are admitted to trading on the London Stock
Exchange's Specialist Fund Segment.
* The financial statements consist of the standalone
parent company financial information and include the
company's investment into its directly held
subsidiary (the "subsidiary") . The subsidiary in
turn holds directly and indirectly 31 Special Purpose
Vehicles ("SPVs") through which the underlying
vessels are held.
* The financial statements are not consolidated but
instead present the fair value of the subsidiary
which includes the fair value of the underlying
vessels held via the SPVs and the other residual net
assets of the subsidiary and SPVs.
* The principal activities of the company comprise
investing in a diversified portfolio of vessels
through its subsidiary based in Guernsey and the SPVs
based in the Isle of Man.
* We conducted our audit of the financial statements
based on financial information provided by the
company's service providers, Maitland Administration
(Guernsey) Limited (the "Administrator") and Tufton
Investment Management Ltd (the "Investment Manager")
to whom the Board of Directors have delegated certain
administrative functions and other activities.
==================================================================
Key audit matters
* Valuation and existence of financial assets at fair
value through profit or loss.
==================================================================
Materiality
* Overall materiality: US$8.26 million (2022: US$8.90
million) based on 2% of net assets.
* Performance materiality: US$6.19 million ( 2022:
US$6.68 million).
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditor's
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter How our audit addressed the
Key audit matter
======================================== ===============================================================
Valuation and existence of financial
assets at fair value through * We obtained an understanding and evaluated the design
profit or loss and implementation of internal controls surrounding
Please refer to Notes 2(j), 3 the valuation process.
and 4 to the financial statements.
Valuation
The fair value of the company's As it relates to valuation of
investment totals US$405.99 million the underlying portfolio held
as at 30 June 2023 and comprises by the SPVs:
the company's holding in its For standard vessels:
direct subsidiary, which in turn * We assessed the third-party vessel valuation
directly and indirectly owns service's reputation, independence, competence and
31 SPVs (together the "entities"). expertise through enquiry confirmation with valuation
These SPVs hold the interests experts in the PwC network.
in the vessels (the "underlying
portfolio"), other SPVs and/or
other residual net assets. * We performed back testing procedures through
The fair value of the investment comparison of disposal proceeds received for vessels
is reflected by the net asset sold to the latest valuations recorded in the SPVs
value of the subsidiary and has records to assess the reasonableness of the
been determined based on the valuations determined.
fair value of (a) the underlying
portfolio of vessels and (b)
the other residual net assets * Inspected and agreed the independent valuations
within the entities. obtained by the Investment Manager in respect of
The fair value of the underlying 'charter free' values from the third-party vessel
portfolio has been determined valuation service to those independently obtained
using methodologies considered from the third-party vessel valuation service.
to be most appropriate by the
Investment Manager and the Board,
which considers whether the vessels * Assessed and challenged the charter lease contract
are standard or specialised. adjustments by comparing the actual charter rates,
In limited circumstances, management per the records of the SPVs pertaining to each vessel,
also use an independent broker to market charter rates to assess the reasonableness
to determine the fair value of of the adjustments made by the Investment Manager.
standard vessels.
The Board has set out in Note
3 their consideration of the * Where material, we assessed and agreed any capital
areas of estimation relating expenditure adjustments to appropriate supporting
to the valuation of the vessels. documentation.
Note 4 includes a breakdown of
the investments and Note 12 includes
the key assumptions applied to * Agreed key inputs used by the third-party vessel
the valuations. Significant levels valuation service to independent sources or
of judgement and estimates are underlying agreements (which included such details as
applied by both the Board and the vessel build year, type, size etc).
Investment Manager in determining
the respective fair values of
the underlying portfolio. * We assessed and evaluated the discount rate used by
For the residual net assets within the third-party valuation service in calculating the
the entities there is also a charter lease contracts adjustments through enquiry
risk that the valuations may and/or engagement within the PwC network.
be materially misstated arising
from the misstatement of other
assets and liabilities. * We benchmarked the current year fair values to recent
Existence comparable market transactions per vessel. Where
The company's direct and indirect vessels were outside of the range indicated by the
ownership rights in its subsidiary relevant recent transactions applied by the
and the SPVs within the structure engagement team, we challenged and sought further
consist of unlisted equity securities, evidence and explanation to support the Investment
shareholder loans and capital Manager's determination of fair value.
contributions and therefore there
is no central independent depository
or custodian. For each vessel For specialised vessels:
there is similarly no central * Assessed and agreed the forecast charter income and
depository or custodian. The other discounted cash flow inputs on a sample basis
existence of the investment in to signed agreements.
the subsidiary as well as the
SPVs and vessels is determined
via legal title to each of the * Recalculated and assessed exit values at the end of
equity shares of the subsidiaries the fixed charter period based on the terms
and SPVs and ownership title applicable to each vessel, dependent on management's
to the underlying portfolio. intention or agreement with the counterparties (such
as scrap value or depreciated replacement cost etc.).
As a result of the above and
given the significance of this
balance in the statement of financial * Assessed the counterparty credit conditions as at 30
position, the valuation and existence June 2023 and challenged the reasonableness of the
of financial assets at fair value discount rate applied by benchmarking to market
through profit or loss are considered discount rates used by the third-party vessel
key audit matters. valuation service.
* Recalculated each vessel's discounted cash flow model
to confirm their mathematical accuracy.
For vessels valued by an independent
broker :
* We obtained the independent broker valuations and
assessed and confirmed the reliability, independence,
and reputation of the independent broker.
* We contacted the independent broker directly to
confirm and understand the valuation and discussed
the valuation methodology applied to the valuation of
the respective vessels.
Use of auditor experts :
* We engaged valuation experts within the PwC network
to assess and evaluate the reasonableness and
reliability of the third-party vessel valuation
service, including the discount rates applied, and
broker provided prices for a sample of vessels.
As it relates to the residual
assets of the subsidiary and
SPVs:
* Recalculated the mathematical accuracy of the net
asset values of the SPVs. This included reconciling
the net asset values of the SPVs into the
subsidiary's financial records and subsequently into
the company's financial records.
* Performed sample based substantive testing on the
residual net assets.
* Agreed cash and loan balances back to independently
received confirmations from third party financial
institutions.
As it relates to existence of
the investment in the subsidiary,
SPVs and underlying portfolio:
* Agreed the shareholdings of the directly held
subsidiary as well as the SPVs to share registers and
agreements.
* Agreed the delivery dates and transaction amounts for
the purchase and divestment of all vessels made
during the current financial year to supporting
agreements and contracts.
* Confirmed independently with the respective
recognised Shipping Authorities the title of all of
the vessels as at 30 June 2023 where possible. For
one vessel, we performed alternative audit procedures
that provided us with evidence over existence, as the
flag country's register is unavailable for public
enquiry.
* For all vessels, we utilised open-source vessel
tracking resources to corroborate that the vessels
were operational, the routes they are chartered on
and recent photographical evidence thereof.
We have not identified any matters
to report to those charged with
governance.
---------------------------------------- ---------------------------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
company, the accounting processes and controls, and the industry in
which the company operates , and we considered the risk of climate
change and the potential impact thereof on our audit approach.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality US$8.26 million (2022: US$8.90 million)
How we determined it 2% of net assets
------------------------------------------
Rationale for the materiality We believe that 'net assets' is the most
benchmark appropriate benchmark as this is a key
metric of interest to the members of the
company. It is also a generally accepted
measure used for investment funds.
------------------------------------------
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2022: 75%) of
overall materiality, amounting to US$6.19 million (2022:
US$6.68million) for the company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above US$0.41 million
(2022: US$0.45 million) , as well as misstatements below that
amount that, in our view, warranted reporting for qualitative
reasons.
Reporting on other information
The other information comprises all the information included in
the Annual Report and Audited Financial Statements (the "Annual
Report") but does not include the financial statements and our
auditor's report thereon. The directors are responsible for the
other information.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report based on these
responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements that give a true and fair view in
accordance with International Financial Reporting Standards, the
requirements of Guernsey law and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the company's
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial
statements. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor's report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause
the company to cease to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Use of this report
This independent auditor's report, including the opinions, has
been prepared for and only for the members as a body in accordance
with Section 262 of the Companies (Guernsey) Law, 2008 and for no
other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Report on other legal and regulatory requirements
Company Law exception reporting
Under the Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit;
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this
responsibility.
Other voluntary reporting
Corporate governance statement
The company has reported voluntary compliance against the 2019
AIC Code of Corporate Governance (the "Code") which has been
endorsed by the UK Financial Reporting Council as being consistent
with the UK Corporate Governance Code.
Going concern
The directors have requested that we review the statement on
page 39 in relation to going concern as if the company were a UK
premium listed Guernsey company. We have nothing to report having
performed our review.
The directors' assessment of the prospects of the company and of
the principal and emerging risks that would threaten the solvency
or liquidity of the company
The directors have requested that we perform a review of the
directors' statements on pages 16 to 19 and 38 to 39 that they have
carried out a robust assessment of the principal and emerging risks
facing the company and in relation to the longer-term viability of
the company, as if the company were a UK premium listed Guernsey
company.
Our review was substantially less in scope than an audit and
only consisted of making inquiries and considering the directors'
process supporting their statements; checking that the statements
are in alignment with the relevant provisions of the Code; and
considering whether the statements are consistent with the
knowledge and understanding of the company and its environment
obtained in the course of the audit. We have nothing to report
having performed this review.
Other Code provisions
The directors have prepared a corporate governance statement and
requested that we review it as though the company were a UK premium
listed Guernsey company. We have nothing to report in respect of
the requirement for the auditors of UK premium listed companies to
report when the directors' statement relating to the company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing
Rules, for review by the auditors.
Statement of Comprehensive Income
For the year ended 30 June 2023
2023 2022
Notes US$ US$
Income
Net changes in fair value of
financial assets
at fair value through profit
or loss 4 (33,950,645) 89,604,707
Dividend income 8 32,000,000 25,934,742
Total net (loss) / income (1,950,645) 115,539,449
Expenditure
Administration fees (168,376) (167,441)
Audit fees (261,666) (137,286)
Corporate Broker fees (150,000) (150,000)
Directors' fees 17 (174,913) (177,338)
Foreign exchange (loss) / gain (13,322) 7,171
Insurance fee (24,200) (15,455)
Investment management fees 13 (3,504,464) (3,410,456)
Legal fees - (26,287)
Listing fees (24,297) (23,452)
Performance fees 14 3,980,432 (3,980,432)
Professional fees (145,694) (147,719)
Sundry expenses (39,860) (12,700)
Total expenses (526,360) (8,241,395)
------------- ------------
Operating (loss) / profit (2,477,005) 107,298,054
Finance income 3,646 4,364
Total comprehensive (loss)
/ income for the year (2,473,359) 107,302,418
============= ============
(Loss) / Earnings per ordinary
share (cents) 9 (0.81) 36.17
============= ============
Diluted (Loss) / Earnings
per ordinary share (cents) 9 (0.81) 36.17
============= ============
There were no potentially dilutive instruments in issue at 30
June 2023 or 30 June 2022.
All activities are derived from continuing operations.
There is no other comprehensive income or loss and consequently
a Statement of Other Comprehensive Income has not been
prepared.
The accompanying notes are an integral part of these financial
statements.
Statement of Financial Position
At 30 June 2023
2023 2022
Notes US$ US$
Non-current assets
Financial assets at fair value
through profit or loss 4 405,988,715 446,892,720
Total non-current assets 405,988,715 446,892,720
------------ ------------
Current assets
Trade and other receivables 5 7,881,170 5,740,385
Cash and cash equivalents 47,731 8,823
Total current assets 7,928,901 5,749,208
------------ ------------
Total assets 413,917,616 452,641,928
------------ ------------
Current liabilities
Trade and other payables 6 1,144,523 5,098,219
------------ ------------
Total current liabilities 1,144,523 5,098,219
------------ ------------
Net assets 412,773,093 447,543,709
============ ============
Equity
Ordinary share capital 7 303,326,231 310,272,983
Retained reserves 109,446,862 137,270,726
Total equity attributable to
ordinary Shareholders 412,773,093 447,543,709
============ ============
Net assets per ordinary share
(cents) 11 136.47 145.01
============ ============
The accompanying notes are an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on
25 September 2023 and signed on its behalf by:
Statement of Changes in Equity
For the year ended 30 June 2023
Ordinary
share Retained
capital earnings Total
Notes US$ US$ US$
Shareholders' equity
at 30 June 2021 259,657,871 52,988,084 312,645,955
Share issue 7 51,429,265 - 51,429,265
Direct issue costs 7 (814,153) - (814,153)
Total comprehensive income
for the year - 107,302,418 107,302,418
Dividends paid - (23,019,776) (23,019,776)
Shareholders' equity
at 30 June 2022 310,272,983 137,270,726 447,543,709
Share buybacks 7 (6,946,752) - (6,946,752)
Total comprehensive income
for the year - (2,473,359) (2,473,359)
Dividends paid - (25,350,505) (25,350,505)
Shareholders' equity
at 30 June 2023 303,326,231 109,446,862 412,773,093
The accompanying notes are an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 30 June 2023
2023 2022
Notes US$ US$
Cash flows from operating activities
Total comprehensive (loss) / income
for the year (2,473,359) 107,302,418
Adjustments for:
Changes in fair value on investments
held at fair value through profit
or loss 4 33,950,645 (89,604,707)
Operating cash flows before movements 31,477,286 17,697,711
Sale / (Purchase) of investments 4 6,953,360 (49,560,001)
Movement in trade and other receivables 5 (2,140,785) 19,994
Movement in trade and other payables 6 (3,953,696) 4,225,794
Net cash generated from / (used
in) operating activities 32,336,165 (27,616,502)
------------- -------------
Cash flows from financing activities
Amounts paid for share buybacks 7 (6,946,752) -
Proceeds from issue of shares 7 - 51,429,265
Direct issue cost for issue of
shares 7 - (814,153)
Dividends paid (25,350,505) (23,019,776)
Net cash (used in) / generated
from financing activities (32,297,257) 27,595,336
------------- -------------
Net movement in cash and cash
equivalents during the year 38,908 (21,166)
Cash and cash equivalents at the
beginning of the year 8,823 29,989
Cash and cash equivalents at
the end of the year 47,731 8,823
============= =============
The accompanying notes are an integral part of these financial
statements.
Notes to the financial statements
For the year ended 30 June 2023
1. General information
The Company was incorporated with limited liability in Guernsey
under the Companies (Guernsey) Law, 2008, as amended, on 6 February
2017 with registered number 63061, and is regulated by the GFSC as
a registered closed-ended investment company. The registered office
and principal place of business of the Company is 1 Royal Plaza,
Royal Avenue, St Peter Port, Guernsey, GY1 2HL.
The Company's investment objective is to provide investors with
an attractive level of regular and growing income and capital
returns through investing in secondhand commercial sea-going
vessels.
The Company had 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 year, the Company bought back 6,160,000
ordinary shares at an average price of US$1.13 for a consideration
of US$6,946,752.
The total number of Company's shares in issue was 302,468,541 at
the end of the financial year.
2. Significant accounting policies
(a) Basis of preparation
Compliance with IFRS
The financial statements have been prepared on a going concern
basis in accordance with International Financial Reporting
Standards ("IFRS"), which comprise standards and interpretations
approved by the International Accounting Standards Board ("IASB")
and International Financial Reporting Interpretations Committee
("IFRIC"), Listing rules and applicable Guernsey law.
Historical cost convention
The financial statements have been prepared on a historical cost
basis modified by the revaluation of financial assets at fair value
through profit or loss. The principal accounting policies adopted,
and which have been consistently applied, (unless otherwise
indicated) are set out below.
Basis of non-consolidation
The Directors consider that the Company meets the investment
entity criteria set out in IFRS 10: Consolidated Financial
Statements. As a result, the Company applies the mandatory
exemption applicable to investment entities from producing
consolidated financial statements and instead fair values its
investments in its subsidiaries in accordance with IFRS 13.
The criteria which define an investment entity are, as
follows:
-- an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment management
services;
-- an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both (including having an exit
strategy for investments); and
-- an entity that measures and evaluates the performance of
substantially all its investments on a fair value basis.
The Directors consider that the Company's objective of pooling
investors' funds for the purpose of generating an income stream and
capital appreciation is consistent with the definition of an
investment entity, as is the reporting of the Company's net asset
value on a fair value basis.
(b) New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting
standards and interpretations have been published that are not
mandatory for 30 June 2023 reporting periods and have not been
early adopted by the Company.
-- Amendments to IAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors (effective 1 January 2023); and
-- Amendments to IAS 1: Presentation of Financial Statements (effective 1 January 2023).
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.
(d) Segmental reporting
The chief operating decision maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business, being the investment of the Company's
capital in secondhand commercial vessels. The financial information
used to manage the Company presents the business as a single
segment.
(e) Income
Dividend income
Dividend income is accounted for on the date the dividend is
declared.
Finance income
Interest income is accounted for on an accruals basis.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company's
investment management and administration fees and all other
expenses are charged through the Statement of Comprehensive
Income.
(g) Performance fees
Any performance fee liability is calculated on an amortised cost
basis at each valuation date, with the respective expense or
reversal charged through the Statement of Comprehensive Income.
Refer to note 14.
(h) Dividends to Shareholders
Dividends are accounted for in the Statement of Changes in
Equity in the year in which they are declared.
(i) Taxation
The Company has been granted exemption from liability to income
tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey)
Ordinance, 1989 amended by the Director of Income Tax in Guernsey.
Exemption is applied and granted annually and subject to the
payment of a fee, currently GBP1,200.
(j) Financial assets and financial liabilities
The Company holds its investments through a subsidiary company
which has not been consolidated in line with IFRS 10: Consolidated
Financial Statements.
The Company classifies its investment in LS Assets Limited
("LSA") as a financial asset at fair value through profit or loss
("FVTPL").
The Company measures and evaluates the net assets of LSA on a
fair value basis. The net assets include those of the underlying
SPVs which own and value all vessels on a fair value basis.
The Investment Manager reports fair value information to the
Directors who use this to evaluate the performance of
investments.
Recognition of financial assets and liabilities
At both the Company and the SPV level, financial assets and
financial liabilities are recognised in the Statement of Financial
Position when the Company becomes a party to the contractual
provisions of the instrument. This is deemed to occur when the
memorandum of agreement is signed for vessel acquisitions only.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in the Statement of Comprehensive
Income.
Subsequent to initial recognition, investments at FVTPL are
measured at fair value with gains and losses arising from changes
in the fair value being recognised in the Statement of
Comprehensive Income.
Financial assets at fair value through profit or loss
Financial assets are classified at FVTPL when the financial
asset is held for trading. Financial assets at FVTPL are stated at
fair value, with any gains or losses arising on re-measurement
recognised in the Statement of Comprehensive Income.
The Company's investment in LSA has been measured at FVTPL on
the basis that it is managed and its performance is evaluated on a
fair value basis, in accordance with the Company's documented
investment strategy.
The Company has not taken the option to irrevocably designate
any investment in equity at fair value through other comprehensive
income. The Company measures and evaluates the performance of the
entire investment into LSA on a fair value basis by using the net
asset value of LSA including, in particular, the underlying SPVs
and the fair value of the SPVs' investments in their respective
vessel assets, as well as the residual net assets and liabilities
of both the SPVs and LSA itself. The investment in LSA consists of
both equity and debt instruments.
In estimating the fair value of each underlying SPV (as a
constituent part of LSA's net asset value at fair value), the Board
has approved the valuation methodology for valuing the vessels held
by the SPVs. The valuation methodology takes account of the
indirect factors affecting the shipping industry including currency
exchange rates, interest rates, the availability of credit, and
climate change considerations.
The carrying value of a standard vessel consists of its
charter-free value plus or minus the value of any charter lease
contracts attached to the vessel, plus or minus an adjustment for
the capital expenditure associated with the vessel.
There are time charter contracts in place for standard vessels.
Such charters will vary in length but would typically be in the 1 -
8 year range. As the shipping markets can be volatile over time,
the value of such charters will therefore either add to or detract
from the open market charter-free value of the vessel.
Under a time charter, the vessel owner provides a fully
operational and insured vessel for use by the charterer. There is a
fluid charter market reported daily by shipbrokers.
The charter-free and associated charter values of most standard
vessels are calculated predominantly using an online valuation
platform provided by VesselsValue or, in limited circumstances, the
written valuation of a mainstream broker was elected by the
Investment Manager. For charter-free values, the VesselsValue
system contains a number of algorithms that combine factors such as
vessel type, technical features, age, cargo capacity, freight
earnings, market sentiment and recent vessel sales.
For charter values, the platform provides a DCF ("Discounted
Cashflow") module where vessel specific charter details are input
and measured against a platform or shipbroker-provided market
benchmark to obtain a premium or discount value of the charter
versus the typical prevailing market for that type of vessel. The
adjustment for the capital expenditure associated with the dry
docking of the vessel is time apportioned on a straight-line basis
over the period between the vessel's last visit to dry dock and the
expected date of its next visit, by reference to the actual cost of
the last visit and the budgeted cost of the next. This adjustment
is an addition to value when the valuation date is nearer to the
vessel's last dry docking than to its next expected visit to dry
dock, and vice versa.
The net adjusted valuation is subject to a minimum fair value
being the present value of all current contracted charter cashflows
and the current vessel scrap value at the completion of the
charter. The present value of the cashflows is discounted at the
specific WACC assigned to the vessel type by VesselsValue adjusted
for any counterparty credit risk where appropriate.
Specialist vessels are valued on a DCF basis by the Investment
Manager using vessel specific information and both observable and
unobservable data. The VesselsValue platform is not used for these
assets. Instead a DCF approach is adopted and this determines the
present value of the cashflows discounted at the project cost of
capital IRR, and is deemed to be a fair representation of the
vessel and charter value.
Refer to Note 3 which explains in detail the judgements and
estimates applied.
SPVs and LSA account for residual net assets and liabilities in
line with the accounting policies of the Company.
Derecognition of financial assets
The Company and the SPVs derecognise a financial asset only when
the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risks and rewards of ownership. For vessel purchase and sale
transactions undertaken by the SPVs and derecognition therefore
normally occurs at the point of delivery of the vessel to the
purchaser at the SPV level.
If the Company neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in
the asset and any associated liability.
On derecognition of a financial asset in its entirety, gains and
losses on the sale, which is the difference between initial cost
and sale value, will be taken to the profit or loss in the
Statement of Comprehensive Income in the year in which they
arise.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Statement of Financial Position when there is a
legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously.
Financial liabilities and equity
Debt and equity instruments are classified either as financial
liabilities or as equity in accordance with the substance of the
contractual arrangement. Trade and other payables are financial
liabilities with fixed or determinable payments that are not quoted
in an active market. Trade and other payables are recognised
initially at fair value and subsequently measured at amortised cost
using the effective interest rate method. However, given the nature
of trade and other payables and the short time length involved
between their origination and settlement, their amortised cost is
considered to be the same as their fair value.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or
expire.
Trade and other receivables
Trade and other receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an
active market. Trade and other receivables are recognised initially
at fair value and subsequently measured at amortised cost using the
effective interest rate method, less provision for impairment.
However, given the nature of receivables and the short time length
involved between their origination and settlement, their amortised
cost is considered to be the same as their fair value.
At each reporting date, the Company shall measure the loss
allowance on other receivables at an amount equal to the lifetime
expected credit losses if the credit risk has increased
significantly since initial recognition. If, at the reporting date
the credit risk has not increased significantly since initial
recognition, the Company shall measure the loss allowance at an
amount equal to 12-month expected credit losses.
(k) Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits
and other short-term highly liquid investments with original
maturities of 3 months or less and bank overdrafts. In the current
and prior years, the carrying amount of cash and cash equivalents
approximate their fair value.
(l) Foreign currency translation
i) Functional and presentation currency
The financial statements of the Company are presented in US
Dollars, which is also the currency in which the share capital was
raised, and investments were purchased and is therefore considered
by the Directors to be the Company's functional currency.
ii) Transactions and balances
At each financial position date, monetary assets and liabilities
that are denominated in foreign currencies are translated at the
rates prevailing at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at
the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in the Statement of
Comprehensive Income in the year in which they arise.
Transactions denominated in foreign currencies are translated
into US Dollars at the rate of exchange at the date of the
transaction.
(m) Going concern
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council and have considered recent market volatility, and the
impact of the ongoing Russian invasion of Ukraine on the Company's
investments (as set out in more detail in the Principal Risks and
Uncertainties section). Cash reserves are held at the LSA and SPV
levels and paid up to the Company as required to enable expenses to
be settled as they fall due.
After making enquiries and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
financial statements. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
(n) Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments is recognised
and deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the
Company's own equity instruments.
3. Critical accounting judgements and estimates
The preparation of financial statements requires management to
make estimates and judgements that affect the amounts reported for
assets and liabilities as at the Statement of Financial Position
date and the amounts reported for revenue and expenses during the
year. The nature of the estimation means that actual outcomes could
differ from those estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in
which the estimates are revised and in any future years
affected.
Critical judgements in applying the Company's accounting
policies - IFRS 10
The audit committee considered the application of IFRS 10, and
whether the Company meets the definition of an investment
entity.
The Company owns the investment portfolio through its investment
in LSA. The investment by LSA comprises the NAVs of the SPVs. The
Company holds 100% voting shares in LSA and has all the
characteristics of an investment company. Cash reserves are held at
the LSA and SPV levels and paid up to the Company as required to
enable expenses to be settled as they fall due.
In the judgement of the Directors, the Company meets the
investment criteria set out in IFRS 10 and they therefore consider
the Company to be an investment entity in accordance with IFRS 10.
As a result, as required by IFRS 10, the Company is not
consolidating its subsidiary but is instead measuring it at fair
value in accordance with IFRS 13 - Fair value measurements.
The criteria which define an investment entity are disclosed in
Note 2(a).
Critical Accounting Estimates
The principal critical accounting estimate in the Company's
financial statements is the value of its investment in LSA, which
is in turn dependent on the values of LSA's investments in the
SPVs. Principal critical accounting estimates in determining the
values of the SPVs comprise the fair values of their vessels, in
turn comprised of the charter-free and attached charter values,
both of which are critical accounting estimates.
The unobservable inputs which significantly impact the fair
value of the vessels have been determined to be the charter-free
valuation and market charter rates for standard vessels (used to
calculate charter values) and the discount rate applied for
specialised vessels.
The process of calculation of the charter-free and charter
values of the vessels is described in Note 2(j), Significant
Accounting Policies.
At 30 June 2023 the charter-free valuations of two vessels (30
June 2022: one vessel) were provided through independent broker
valuations rather than VesselsValue, as elected by the Investment
Manager given limited transactions in this vessel type and the
specialist knowledge of the broker selected. The broker uses
proprietary data that considers vessel specifications as well as
applicable market information.
Further to the information mentioned in Note 2 (j) there are
specific capital adjustments considered as part of the valuation
process for standard vessels, mainly the adjustments for BWTSs and
scrubbers installed. BWTSs installed by the Company's SPVs are
considered to be an enhancement to the charter-free value. They are
initially recognised at cost and straight-line depreciated from the
commissioning date to 8 September 2024, being the date by which the
IMO mandates all vessels should have installed BWTS. Scrubbers are
considered an enhancement to the charter-free value using an
estimated valuation from a shipbroker, and straight-line
depreciated over 5 years.
At 30 June 2023, one vessel was treated as a specialist vessel
(30 June 2022: one vessel).
The specialist vessel was valued on a DCF basis by the
Investment Manager using vessel specific information including the
appropriate discount rate, which is reviewed on a regular basis to
ensure it remains relevant to the project and market risk
parameters.
There were no other material areas of estimation for the
Company.
4. Financial assets at fair value through profit or loss
The Company owns the investment portfolio through its investment
in LSA, which comprises the NAV of the SPVs and residual assets and
liabilities in LSA. The NAVs consist of the fair value of vessel
assets and the SPVs' residual net assets and liabilities. The whole
investment portfolio is designated by the Board as a Level 3 item
on the fair value hierarchy because of the lack of observable
market information in determining the fair value. As a result, all
the information below relates to the Company's Level 3 assets only,
with respect to the requirements set out in IFRS 7 - Financial
Instruments. 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 the Company's investment in
LSA.
The changes in the financial assets measured at fair value
through profit or loss (for which the Company has used Level 3
inputs to determine fair value, after considering dividends
declared (see Note 7 and 8) are as follows:
2023 2022
US$ US$
LSA
Brought forward cost of investment 299,483,224 249,923,223
Total investment (disposed of) /
acquired
in the year (6,953,360) 49,560,001
Carried forward cost of investment 292,529,864 299,483,224
Brought forward unrealised gains
on fair value 147,409,496 57,804,789
Movement in unrealised (losses)
/ gains on fair value (33,950,645) 89,604,707
------------- --------------
Carried forward unrealised gains
on fair value 113,458,851 147,409,496
------------- --------------
Total investment at fair value 405,988,715 446,892,720
============= ==============
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 2023 2022 Direct Principal Ownership Ownership
US$ US$ or indirect activity at 30 June at 30 June
holding 2023 2022
LS Assets
Limited(8) - - Direct Holding company 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Aglow Limited(1) - 107,202 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Antler Limited(1) - 74,463 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Anvil Limited 18,240,972 23,591,722 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Auspicious
Limited 20,137,727 25,929,027 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Awesome Limited 19,704,498 25,638,607 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Bear Limited(1) - 77,702 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Candy Limited(2) 16,785 37,192 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Citra Limited(2) 205,362 220,238 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Charming Limited 18,953,365 25,109,394 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Cocoa Limited(3) - - Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Courteous
Limited(4) - - Indirect SPV 100% -
------------ ------------- ------------- ---------------- ------------ ------------
Dachshund(3)
Limited - - Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Daffodil Limited(3) - - Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Dragon Limited(1) - 133,991 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Echidna Limited(1) - 34,275 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Exceptional
Limited(4) - 29,553,364 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Golding Limited 21,081,370 17,868,732 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Handy HoldCo SPV (Holding
Limited 50,090,478 32,455,919 Indirect Company) 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Idaho Limited 22,322,508 25,150,084 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Kale Limited(1) - 109,304 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Laurel Limited 16,410,147 19,486,868 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Lavender Limited(7) 60,848 18,736,992 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Marvelous
Limited(4) - 1,882,219 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Masterful
Limited 18,893,952 25,761,402 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Mayflower
Limited 15,590,330 20,030,420 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Mindful Limited(4) - - Indirect SPV 100% -
------------ ------------- ------------- ---------------- ------------ ------------
Neon Limited 26,616,326 32,633,044 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Octane Limited 20,155,744 19,243,615 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Orson Limited 17,938,851 11,704,544 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Parrot Limited(7) 674 660,649 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Patience Limited(6) 662,085 475,673 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Pollock Limited(3) - - Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Product HoldCo SPV (Holding
Limited 58,135,471 - Indirect Company) 100% -
------------ ------------- ------------- ---------------- ------------ ------------
Riposte Limited 411,002 24,996,021 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Rocky IV Limited 18,540,092 23,280,175 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Sierra Limited 20,393,002 19,474,698 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Swordfish
Limited(1) - 137,229 Indirect SPV - 100%
------------ ------------- ------------- ---------------- ------------ ------------
Vicuna Limited(2) 2,598 97,243 Indirect SPV 100% 100%
------------ ------------- ------------- ---------------- ------------ ------------
Cash held
pending investment(5) 10,709,986 29,805,237
------------ -------------
Residual net
assets / (liabilities)(5) 10,714,542 (7,604,525)
------------ -------------
Total * 405,988,715 446,892,720
------------ -------------
*Vessels are valued at fair value in each of the SPVs shown in
the table above and combined with the residual net assets /
(liabilities) of each SPV to determine the fair value of the total
investment attributable to LSA.
(1) Dissolved in the current year.
(2) Company in the process of dissolution at year end.
(3) These SPVs report zero fair value in the table above because
they are owned by the intermediate holding company Handy Holdco
Limited and are included in Handy Holdco Limited's fair value.
(4) These SPVs report zero fair value in the table above because
they are owned by the intermediate holding company Product Holdco
Limited and are included in Product Holdco Limited's fair
value.
(5) The cash held pending investment and residual net assets /
(liabilities) are held in LSA.
(6) At 30 June 2022, the SPV Patience had sold and derecognised
its vessel, but continued to operate the vessel under a bareboat
charter from the new owners until the end of its time charter in
November 2022.
(7) Company commenced dissolution process post year end.
(8) Fair value of LSA equals to the sum of the assets of
residual net assets and cash as detailed below.
The movement in the fair value of the investment is recorded in
the Statement of Comprehensive Income.
5. Trade and other receivables
2023 2022
US$ US$
Accrued income - 4
Prepayments 38,577 18,379
Other receivables 1,108 -
Due from LSA (dividend receivable) 7,841,485 5,722,002
Total trade and other receivables 7,881,170 5,740,385
========== ==========
A mounts due from LSA are interest free and payable on demand.
The amount of US$5,722,002 due from LSA for the year ended 30 June
2022 was settled in the current year. Due to the value and
short-term nature of these receivables, the Directors have assessed
there to be no expected credit losses associated with these
outstanding balances.
6. Trade and other payables
2023 2022
US$ US$
Performance fees - 3,980,432
Investment management fees 835,779 908,449
Audit fees 219,762 109,603
Administration fees 41,478 42,446
Corporate Brokers fees 37,500 37,500
Directors' fees 10,004 19,789
Total trade and other payables 1,144,523 5,098,219
========== ==========
7. Ordinary share capital
Share Capital
Share issuance Number Gross amount Direct Share capital
of shares (US$) Issue costs (US$)
(US$)
Total issue at
30 June 2021 270,037,638 264,852,891 (5,195,020) 259,657,871
------------ ------------- ------------- --------------
Tap issue
11 August 2021 10,533,763 12,429,840 (160,917) 12,268,923
------------ ------------- ------------- --------------
Tap issue
12 November 2021 28,057,140 38,999,425 (653,236) 38,346,189
------------ ------------- ------------- --------------
As at 30 June 2022 308,628,541 316,282,156 (6,009,173) 310,272,983
------------ ------------- ------------- --------------
Share buybacks (6,160,000) (6,946,752) - (6,946,752)
------------ ------------- ------------- --------------
As at 30 June 2023 302,468,541 309,335,404 (6,009,173) 303,326,231
------------ ------------- ------------- --------------
The ordinary shares issued are of no par value and are
authorised, issued and fully paid. Ordinary shares carry the right
to receive all income of the Company attributable to ordinary
shares, and to participate in any distribution or other return of
capital attributable to ordinary shares. Ordinary shareholders have
the right to receive notice of and attend any general meeting of
the Company and to vote at such meeting with one vote for each
ordinary share held.
The rights conferred upon the holders of the shares are not
varied by the creation or issue of further shares or classes of
shares or by the purchase or redemption by the Company of its own
shares, or the holding of such shares in treasury.
8. Dividend income
2023 2022
US$ US$
Dividend income 32,000,000 25,934,742
=========== ===========
During the current year, LS Assets Limited declared dividends of
US$32,000,000
(2022: US$25,934,742) to the Company. At 30 June 2023, dividends
of US$7,841,485
(2022: US$5,722,002) were outstanding (refer to Note 5).
9. (Loss) / Earnings per share
2023 2022
US$ US$
Total comprehensive (loss) / income
for the year (2,473,359) 107,302,418
Weighted average number of ordinary
shares 307,057,116 296,654,794
(Loss) / Earnings per ordinary
share (cents) (0.81) 36.17
Diluted (Loss) / Earnings per
ordinary share (cents) (0.81) 36.17
There were no potentially dilutive instruments in issue at 30
June 2023 or 30 June 2022.
10. Dividends
The Company declared the following dividends in respect of the
profit for the year ended 30 June 2023:
Quarter Dividend Ex div Net Dividend Record date Paid date
end per share date paid
30 September 27 October 28 October 11 November
2022 US$0.02 2022 US$6,172,571 2022 2022
----------- ----------- --------------- ------------ ------------
31 December 26 January 27 January 10 February
2022 US$0.02125 2023 US$6,537,831 2023 2023
----------- ----------- --------------- ------------ ------------
31 March 27 April 28 April 11 May
2023 US$0.02125 2023 US$6,467,832 2023 2023
----------- ----------- --------------- ------------ ------------
30 June US$0.02125 27 July US$6,330,992 28 July 11 August
2023 2023 2023 2023
----------- ----------- --------------- ------------ ------------
Under the Companies (Guernsey) Law, 2008, the Company can
distribute dividends from capital and revenue reserves, subject to
a prescribed net asset and solvency test.
The net asset and solvency test consider whether a company is
able to pay its debts when they fall due, and whether the value of
a company's assets is greater than its liabilities. The Board
confirms that the Company passed the net asset and solvency test
for each dividend paid.
11. Net assets per ordinary share
2023 2022
US$ US$
Shareholders' equity 412,773,093 447,543,709
Number of ordinary shares 302,468,541 308,628,541
Net assets per ordinary
share (cents) 136.47 145.01
12. Financial risk management
Capital management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
shareholders. In accordance with the Company's investment policy,
the Company's principal use of cash has been to fund investments as
well as ongoing operational expenses. The Board, with the
assistance of the Investment Manager, monitors and reviews the
broad structure of the Company's capital on an ongoing basis. The
capital structure of the Company consists entirely of equity
(comprising issued capital and retained earnings).
As the Company's ordinary shares are traded on the LSE, the
ordinary shares may trade at a discount or premium to their NAV per
share. However, the Directors and the Investment Manager monitor
the discount on a regular basis and can use share buybacks to
manage the discount.
The Company is not subject to any externally imposed capital
requirements.
Financial risk management objectives
The Board, with the assistance of the Investment Manager,
monitors and manages the financial risks relating to the operations
of the Company through internal risk reports which analyse
exposures by degree and magnitude of risk. These risks include
market risk (including price risk, currency risk and interest rate
risk), credit risk and liquidity risk.
Market risk
The value of the investments held by the Company is indirectly
affected by the factors impacting the shipping industry generally,
being, inter alia, interest rates, the availability of credit, and
currency exchange rates. Other risks such as climate change
considerations, economic or political uncertainty, changes in laws
and regulations governing shipping or trade are considered by the
Investment Manager and the Board. Please see Principal Risks and
Uncertainties. These factors may affect the price or liquidity of
vessels held by the Company's SPVs and thus the value of the SPVs
themselves .
Interest rate risk
The majority of the Company's financial assets and liabilities
are non-interest bearing. However, the Company is exposed to a
small amount of risk due to fluctuations in the prevailing levels
of market interest rates because any excess cash or cash
equivalents are invested at short-term market interest rates.
The Company's interest-bearing financial assets and liabilities
expose it to risks associated with the effects of fluctuations in
the prevailing levels of market interest rates on its financial
position and cash flows.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's assets and trading
liabilities at fair value and the outstanding loans with variable
interest rates. It does not consolidate the US$14.00m (2022:
US$18.00m) outstanding loan (with a variable interest rate capped
at 4.65%) owed by Handy HoldCo Limited or the US$56.5m (with a
variable interest rate capped at 7.66% for 3 years from inception)
owed by Product Holdco Limited.
Interest payments on these loans are subject to limited change
from fluctuations in interest rates due to their capped nature.
2023 Interest Non-interest Total (US$)
bearing less bearing (US$)
than 1 month
(US$)
Assets
-------------- --------------- ------------
Investments - 405,988,715 405,988,715
-------------- --------------- ------------
Trade and other receivables - 7,881,170 7,881,170
-------------- --------------- ------------
Cash and cash equivalents 47,731 - 47,731
-------------- --------------- ------------
Total assets 47,731 413,869,885 413,917,616
-------------- --------------- ------------
Liabilities
-------------- --------------- ------------
Trade and other payables - 1,144,523 1,144,523
-------------- --------------- ------------
Total liabilities - 1,144,523 1,144,523
-------------- --------------- ------------
Total interest sensitivity
gap 47,731 47,731
-------------- --------------- ------------
The weighted average interest rate is 3.63% for cash and cash
equivalents in the current financial year.
Interest rate risk (continued)
2022 Interest Non-interest Total (US$)
bearing less bearing (US$)
than 1 month
(US$)
Assets
-------------- --------------- ------------
Investments - 446,892,720 446,892,720
-------------- --------------- ------------
Trade and other receivables - 5,740,385 5,740,385
-------------- --------------- ------------
Cash and cash equivalents 8,823 - 8,823
-------------- --------------- ------------
Total assets 8,823 452,633,105 452,641,928
-------------- --------------- ------------
Liabilities
-------------- --------------- ------------
Trade and other payables - 5,098,219 5,098,219
-------------- --------------- ------------
Total liabilities - 5,098,219 5,098,219
-------------- --------------- ------------
Total interest sensitivity
gap 8,823 8,823
-------------- --------------- ------------
The weighted average interest rate is 0.25% for cash and cash
equivalents in the prior year.
If the interest rates had been 100 basis points higher or lower
and all other variables were held constant, the Company's profit
for the year ended 30 June 2023 would increase or decrease by
US$477 (2022: US$88) as a result of the Company's exposure to
interest rates on its variable rate deposits only.
The Company and LSA with its SPVs are permitted to utilise
overdraft facilities towards the achievement of the Company's
investment objectives. There was no overdraft utilised during the
current and prior years.
Refer to Price Risk on the following pages for a description of
the indirect impact interest rates have on the valuation of vessel
assets.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to the
Company.
The Company's subsidiary SPVs hold credit risk exposures to
charterers. Potential new charters are evaluated to assess
counterparty credit risk, both at an SPV and portfolio level, prior
to any contractual engagement. The SPVs historical actual
counterparty credit losses over the life of the Company to date
have been zero. At 30 June 2023 there were no receivables held by
the SPVs considered impaired (2022: US$nil).
Cash reserves are held at the LSA and SPV levels and are paid up
to the Company as required to enable expenses to be settled as they
fall due.
The Company maintains its cash and cash equivalents with various
banks to diversify credit risk. These are subject to the Company's
credit monitoring policies including the monitoring of the credit
ratings issued by recognised credit rating agencies.
30 June 2023 Credit rating Cash Short term Total as
Standard & Poor's fixed deposits at 30 June
(US$) 2023
(US$) (US$)
Barclays Bank Plc A+ Long Term
(Barclays) A-1 Short Term 38,624 - 38,624
-------------------- -------- ---------------- ------------
Ravenscroft (1) A+ Long Term - 9,107 9,107
(HSBC London -
call accounts) A-1 Short Term
-------------------- -------- ---------------- ------------
Total 38,624 9,107 47,731
-------- ---------------- ------------
1 Ravenscroft is an execution only broker that acts solely on
instruction of the Board of Directors. The Board of Directors only
invest cash in banking institutions with an A- rating or
higher.
30 June 2022 Credit rating Cash Short term Total as
Standard & Poor's fixed deposits at 30 June
(US$) 2022
(US$) (US$)
Barclays Bank Plc A Long Term
(Barclays) A-1 Short Term 4,152 - 4,152
-------------------- -------- ---------------- ------------
Ravenscroft (1) A+ Long Term - 4,671 4,671
(HSBC London -
call accounts) A-1 Short Term
-------------------- -------- ---------------- ------------
Total 4,152 4,671 8,823
-------- ---------------- ------------
1 Ravenscroft is an execution only broker that acts solely on
instruction of the Board of Directors. The Board of Directors only
invest cash in banking institutions with an A- rating or
higher.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Board of
Directors has established an appropriate liquidity risk management
framework for the management of the Company's short-term,
medium-term and long-term funding and liquidity management
requirements.
The Company manages liquidity risk by maintaining adequate cash
reserves by monitoring forecast and actual cash flows. Cash
reserves are held at the LSA and SPV levels and paid up to the
Company as required to enable expenses to be settled as they fall
due.
The table below shows the maturity of the Company's
non-derivative financial assets and liabilities. The amounts
disclosed are contractual, undiscounted cash flows and may differ
from the actual cash flows received or paid in the future as a
result of early repayments.
30 June 2023 Up to Between Between Total
3 months 3 and 12 1 and 5 years (US$)
(US$) months (US$) (US$)
Assets
-------------- --------------- ------------
Financial assets
at fair value through
profit or loss - - 405,988,715 405,988,715
---------- -------------- --------------- ------------
Trade and other
receivables 7,842,593 - - 7,842,593
---------- -------------- --------------- ------------
Cash and cash equivalents 47,731 - - 47,731
---------- -------------- --------------- ------------
Liabilities
---------- -------------- --------------- ------------
Trade and other
payables 1,144,523 - - 1,144,523
---------- -------------- --------------- ------------
Total 6,745,801 - 405,988,715 412,734,516
---------- -------------- --------------- ------------
30 June 2022 Up to Between Between Total
3 months 3 and 12 1 and 5 years (US$)
(US$) months (US$) (US$)
Assets
-------------- --------------- ------------
Financial assets
at fair value through
profit or loss - - 446,892,720 446,892,720
---------- -------------- --------------- ------------
Trade and other
receivables 5,722,006 - - 5,722,006
---------- -------------- --------------- ------------
Cash and cash equivalents 8,823 - - 8,823
---------- -------------- --------------- ------------
Liabilities
---------- -------------- --------------- ------------
Trade and other
payables 5,098,219 - - 5,098,219
---------- -------------- --------------- ------------
Total 632,610 - 446,892,720 447,525,330
---------- -------------- --------------- ------------
Price risk in the shipping industry
The valuation techniques used by the underlying SPVs in
determining the value of the vessels held (based on assumptions
that are not supported by prices or other inputs from observable
current market transactions) present a price risk to the Company.
The Company's financial assets are measured at fair value which
comprises the fair value of the underlying SPVs. The Company values
its investment in LSA and the SPVs at their respective net asset
values. The net asset values comprise shipping vessels which are
measured at fair value and other residual net assets and
liabilities of each of the entities.
All the assets and underlying vessels are Level 3 assets. All
the market price risk pertains to the Level 3 investment portfolio
in its entirety.
Price risk sensitivity analysis was conducted on vessel and
charter fair values only as these are the unobservable inputs to
the valuation of the Company's investment.
(a) Standard Vessel valuations
The fair value of a standard vessel comprises both the
charter-free value and the charter valuation. The charter-free and
associated charter values of typical vessels are calculated using
an online valuation system provided by VesselsValue or, in limited
circumstances, written mainstream broker valuations. For
charter-free values, the VesselsValue system contains a number of
algorithms that combine factors such as vessel type, technical
features, age, cargo capacity, freight earnings, market sentiment
and recent vessel sales.
Similarly, the charter-free values determined by written
mainstream broker valuations consider vessel specifications and
other applicable market information.
For charter values, the system provides a DCF module where
vessel specific charter details are input and measured against a
system or shipbroker-provided market benchmark to obtain a premium
or discount value of the charter versus prevailing market.
The lower bound of the charter valuation process comprises the
DCF value of the current charter plus scrap value of the vessel at
the end of the charter. At the current and prior year ends this
minimum value was not applied to any vessels.
(b) Specialised Vessels and arrangements
There will be cases where the Company may invest in vessels and
make arrangements which are (i) of a specialised nature and fall
out of scope of mainstream brokers and/or (ii) where contracted
employment does not have an available reference benchmark in the
freight brokerage community.
The Investment Manager will make its own assessment of a
vessel's value with charter using a discounted cashflow model ("DCF
Model"). The DCF Model will calculate the net present value of the
charter and vessel value using the following inputs:
-- Discount rate;
-- Charter Rate; and
-- Exit/scrappage value
There was one specialised vessel arrangement held at the year
end (one vessel at 30 June 2022) being a gas tanker with a
long-term bareboat charter attached.
Refer to Note 3 for further information on the valuation
methodologies applied. The Directors and Tufton believe that the
above reflects those inputs where price risk could be significant,
and where estimate and judgement can potentially be used.
Covid
The global economy has largely recovered from the negative
impacts of Covid. 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. With the easing of Covid-related restrictions in China
from January, port congestion caused by the restrictions has been
resolved. The delays to crew rotation caused by national
restrictions put in place to contain the spread of Covid were also
largely resolved by 4Q22.
The Investment Manager believes the Company's strong operating
profit and performance in the Covid crisis, both on an absolute
basis and relative to other asset classes, demonstrate it can be an
attractive high income and low correlation investment.
Price risk sensitivity analysis
Charter-free valuation for standard vessels
If the charter-free vessel values at 30 June were 10% higher or
lower, then the effect on the standard vessel portfolio value would
be as follows:
Vessel values +10% change Standard vessel -10% change
in charter-free portfolio value in charter-free
values values
US$ 000 US$ 000 US$ 000
Fair value at 30 June
2023 +47,659 437,843 (47,659)
----------------- ----------------- -----------------
Fair value at 30 June
2022 +47,265 432,089 (47,265)
----------------- ----------------- -----------------
The ballast water treatment system and scrubber adjustments are
not considered significant or material and therefore no sensitivity
analysis has been prepared.
Charter valuation for standard vessels
Charter rates
The Directors have concluded that use of a 10% movement in
benchmark charter rates remains a suitable sensitivity calculation,
noting that most of the charter value is derived from charters
having remaining periods of 1 year or more, the market benchmarks
for which show lower volatility than spot rates and already reflect
market expectations for the period of the charter. If market
charter rates used to determine charter values were 10% higher or
lower, then the effect on the standard vessel portfolio value would
be as follows:
Vessel values +10% change Standard vessel -10% change
portfolio value
US$ 000 US$ 000 US$ 000
Fair value at 30 June
2023 (14,988) 437,852 +14,959
------------ ----------------- ------------
Fair value at 30 June
2022 (11,368) 432,089 +12,184
------------ ----------------- ------------
Price risk sensitivity analysis
Specialised vessels
If the discount rates were 0.5% higher or lower, then the effect
on the specialised vessel portfolio value would be as follows:
+0.5% change Specialised -0.5%
Vessel portfolio change
US$ 000 value
US$ 000 US$ 000
Specialised vessel fair
value at 30 June 2023 (188) 24,904 +191
------------- ------------------ ---------
Specialised vessel fair
value at 30 June 2022 (270) 26,069 +275
------------- ------------------ ---------
There was one specialised vessel held at the year end (one at 30
June 2022).
Currency risk
The Company may have assets and liabilities denominated in
currencies other than the United States Dollar, the functional
currency. It therefore may be exposed to currency risk as the value
of assets or liabilities denominated in other currencies will
fluctuate due to changes in exchange rates.
However, such exposure is currently, and is expected to remain,
insignificant. Consequently, no further information has been
provided.
13 . Investment management fee
The Investment Manager is entitled to receive an annual fee,
calculated on a sliding scale, as follows:
(a) 0.85 per cent per annum of the quarter end Adjusted Net
Asset Value up to US$250m;
(b) 0.75 per cent per annum of the quarter end Adjusted Net
Asset Value in excess of US$250m but not exceeding US$500m; and
(c) 0.65 per cent per annum of the quarter end Adjusted Net
Asset Value in excess of US$500m.
For the year ended 30 June 2023 the Company has incurred
US$3,504,464 (2022: US$3,410,456) in investment management fees of
which US$835,779 was outstanding at 30 June 2023 (2022:
US$908,449).
14. Performance fees
Tufton ODF Partners LP shall be entitled to a performance fee in
respect of a Calculation Period provided that the Total Return Per
Share on the Calculation Day for the Calculation Period of
reference is greater than the High Watermark Per Share and such
performance fee shall be an amount equal to the Performance Fee
Pay-Out Amount if:
-- the High Watermark is greater than the Total Return Per Share on any Calculation Day; and
-- the prevailing Historic Performance Fee Amount is greater than zero on such Calculation Day,
Any fee accruing as at the end of the Calculation Period is paid
50% subsequent to the end of that period, with the remaining 50%
being retained by the Company and deferred until the next time that
a performance fee payment is due, being adjusted for any subsequent
underperformance during that time.
The prevailing Historic Performance Fee Amount shall be reduced
by the lower of: (i) 20 per cent of the difference between the High
Watermark Per Share and the Total Return Per Share on such
Calculation Day multiplied by the Relevant Number of shares; and
(ii) the prevailing Historic Performance Fee Amount.
The prior year's accrued performance fees of US$3,980,432 was
reversed, resulting in an accrued performance fee of US$nil (2022:
US$3,980,432) at year end.
15. Related parties
The Investment Manager, Tufton Investment Management Ltd, is a
related party due to having common key management personnel with
the SPVs of the Company. All management fee transactions with the
Investment Manager are disclosed in Note 13.
Tufton ODF Partners LP is a related party due to being the
beneficiary of any performance fee paid by the Company. Refer to
note 14.
Transactions with LSA and SPVs are not disclosed.
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 June 2023,
and as at the date of signing these financial statements:
2023 2022
Director Shares Shares
R King 60,000 45,000
S Le Page 40,000 40,000
P Barnes 5,000 5,000
C Rødsaether 30,000 20,000
Other Interests
Tufton Investment Management Holding Limited Group ("Tufton
Group") shareholders, employees, non-executive directors and former
shareholders held the following interests in the share capital of
the Company either directly or beneficially.
As at 30 June 2023
% of issued
Name Ordinary Shares Share Capital
Tufton Group Shareholders 6,968,839 2.30
Tufton Group Staff 580,450 0.19
Tufton Group Non-Executive Directors 403,279 0.13
Former Tufton Group Shareholders 3,258,263 1.08
As at 30 June 2022
% of issued
Name Ordinary Shares Share Capital
Tufton Group Shareholders 5,375,133 1.74
Tufton Group Staff 466,261 0.15
Tufton Group Non-Executive Directors 403,279 0.13
Former Tufton Group Shareholders 3,041,740 0.99
16. Controlling party
In the opinion of the Directors, based on shareholdings advised
to them, the Company has no immediate or ultimate controlling
party.
17. Directors' fees
The remuneration of the Directors was US$174,913 (2022:
US$177,338) for the year which consisted solely of short-term
benefits. At 30 June 2023, Directors' fees of US$10,004 (2022:
US$19,789) were outstanding.
The Directors fees are as disclosed below:
30 June 30 June
2023 2022
Director GBP GBP
R King 39,305 36,610
S Le Page 36,000 34,000
P Barnes 33,525 31,550
C Rødsaether 33,525 31,550
18. Events after the reporting year
The Company purchased a total of 7,386,000 ordinary shares at a
price of US$0.98 per share post period end to 20 September
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, the results of those operations, or the state of
affairs of the Company the next financial period up to the date of
approval of these financial statements.
Alternative Performance Measures ("APMs")
This Annual Report and Audited Financial Statements contain
APMs, which are financial measures not defined in IFRS. These
include certain financial and operational highlights and key
financials. The definition of each of these APMs is shown
below.
The Company assesses its performance using a variety of measures
that are not specifically defined under IFRS and are therefore
termed APMs. The APMs that the Company uses may not be directly
comparable with those used by other companies. These APMs are used
to present a clearer picture of how the Company has performed over
the year and are all financial measures of historical performance.
The APMs are prepared on a consolidated basis.
Alternative Performance Definition / Method of calculation Reason for use
Measure
--------------------------- --------------------------------------- -----------------------------------
Average Charter Total forecast EBITDA from To provide information
Length charters in place, divided about the extent to which
by the expected annualised the future revenue of
EBITDA of those charters the SPVs is contractually
fixed
CAGR Compound Annual Growth Rate. To provide a measure
A business and investing of annual compound growth
specific term for the geometric rate over time
progression ratio that provides
a constant rate of return
over the time period
Consolidated Gearing Loans to charter-free value To provide an indication
Ratio on a consolidated basis of leverage, which is
not reported in the financial
statements which are
not prepared on a consolidated
basis
Dividend Cover Portfolio Operating Profit To provide information
less capex less debt amortisation, about the extent to which
divided by dividends for past dividends are covered
the period by past earnings
EBITDA Earnings before interest, To provide a measure
taxes, depreciation and amortisation of profitability from
operating activity, independent
of financing strategy
Forecast Net Yield Forecast EBITDA over the To provide information
current charters minus any about profitability from
capex accruals for the vessels future operating activity
in the portfolio divided relative to current vessel
by the time-weighted vessel values
values over the same period
Gain / (loss) Fair value gains and losses Fair value of the Company's
in Capital Values (being the change in charter-free underlying investments
value + change in charter is a key component of
value) from marking assets the Company's overall
to market in accordance with investment performance
the valuation policy of the
Company
Gross Operating Operating profit before gain To provide an indication
Profit / (loss) in capital values, of the underlying profit
loan interest, fees, and from operating activity,
all other Company level expenses which is not reported
in the financial statements,
before interest, fees
and Company level expenses
IRR Internal rate of return - A widely used APM which
the internal rate of return allows the shareholders
is the interest rate at which to compare performance
the net present value of of different funds
all the cash flows from a
project or investment equal
zero, and is a common performance
indicator used in investment
funds
NAV Total Return The change in NAV per share A measure showing how
Per Share plus dividends per share the NAV per share has
paid by the Company during performed over a period
the period, divided by the of time, taking into
initial NAV per share at account both capital
inception return and dividends
paid to Shareholders
Portfolio Operating Gross Operating Profit and To provide an indication
Profit interest income less loan of the underlying net
interest and fees, Company profit from operating
Level Fees and Expenses activity, which is not
reported in the financial
statements
Portfolio Price Price divided by the Depreciated The Investment Manager's
/ Depreciated Replacement Replacement Cost. Price may preferred valuation metric
Cost ("P/DRC") refer to a transaction (investment for investment analysis.
or divestment) value or fair P/DRC tends to revert
value at a certain date to 100% in the long-term
Revenue Charter income, net of broker To provide an indication
commissions and charter related of the underlying income
costs, earned by SPVs from operating activity
which is not reported
in the financial statements
Ship-Days The sum of the number of To provide information
days each vessel was owned about the vessel operating
by the Company over the financial activity measured in
period days
Time-Weighted Time-weighted capital invested A metric used to compare
Capital Employed in vessels Gross Operating Profit
across different periods
Total Return Per The Net Asset Value per ordinary A measure showing how
Share share on any Calculation the investment in the
Day adjusted to: Company's shares has
(i) include the gross amount performed over a period
of any dividends and/or distributions of time, taking into
paid to an ordinary share account both capital
since Admission; return and dividends
(ii) not take account of paid to Shareholders
any accrual made in respect
of the performance fee itself
for that Calculation Period;
Total Return Per (iii) not take account of
Share any accrual made in respect
of any prevailing Historic
Performance Fee Amount (as
adjusted pursuant to the
operation of this paragraph
below);
(iv) not take account of
any increase in Net Asset
Value per share attributable
to the issue of ordinary
shares at a premium to Net
Asset Value per share or
any buyback of any ordinary
shares at a discount to Net
Asset Value per ordinary
share during such Calculation
Period;
(v) not take account of any
increase in Net Asset Value
per share attributable to
any consolidation or sub-division
of ordinary shares;
(vi) take into account any
other reconstruction, amalgamation
or adjustment relating to
the share capital of the
Company (or any share, stock
or security derived therefrom
or convertible there into);
and
(vii) take into account the
prevailing Net Asset Value
of any C Shares in issue
Corporate Information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsaether
Registered office
3rd Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Prior to effective date of 31 March 2023
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Effective from 31 March 2023
Investment Manager and AIFM
Tufton Investment Management Ltd
70 Pall Mall
1st Floor London
SW1Y 5ES
Asset Manager
Tufton Management Limited
3rd Floor, St George's Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Secretary and Administrator
Maitland Administration (Guernsey) Limited, an Apex Group
company ("Maitland")
3rd Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Prior to effective date of 31 March 2023
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Effective from 31 March 2023
Brokers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Depositary
Apex Depositary (UK) Limited
Bastion House
140 London Wall
London
EC2Y 5DN
Appointment date: 4 November 2022
Guernsey Legal Advisers
Carey Olsen (Guernsey) LLP
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Registrar
Computershare Investor Services (Guernsey) Limited
1(st) Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Receiving Agent
Computershare Investor Services PLC
The Pavillions
Bridgewater Road
Bristol
BS99 6AH
Independent Auditor to the Company
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Principal Bankers
Barclays Bank Plc
Guernsey International Banking
PO Box 41
St Peter Port
Guernsey, GY1 3BE
Definitions
The following definitions apply throughout this document unless
the context requires otherwise:
Adjusted Net Asset Value The Net Asset Value less uninvested monies
(cash and cash value equivalents) held by the
Company from time to time excluding monies
arising on or from the realisation of or a
distribution from an investment.
Administrator Maitland Administration (Guernsey) Limited
an Apex Group company.
AIC the Association of Investment Companies.
AIFM Directive or AIFMD the EU Directive on Alternative Investment
Fund Managers (No. 2011/61/EU).
AIF an alternative investment fund.
AIFM an alternative investment fund manager.
AIFM Rules the AIFM Directive and all applicable rules
and regulations implementing the AIFM Directive
in the UK.
Articles of Incorporation the articles of incorporation of the Company,
or Articles as amended from time-to-time.
Asset Manager Tufton Management Limited
Auditor PricewaterhouseCoopers CI LLP
Board the Directors from time to time.
Brokers a mercantile agent employed in buying and selling
shares -
The Company's brokers are Hudnall Capital LLP
and Singer Capital Markets.
BWTS Ballast Water Treatment System.
Calculation Day The last business day of each Calculation Period.
Calculation Period (a) the period starting on Admission and ending
on the earlier of (i) 30 June 2024; (ii) the
commencement of the winding up of the Company;
and (iii) the termination of the Manager's
appointment; and
(b) if the previous Calculation Year ended
on 30 June of the previous Year, each successive
period starting on 1 July and ending on the
earlier of (i) 30 June three years later; (ii)
the commencement of the winding up of the Company;
and (iii) the termination of the Manager's
appointment.
Calculation Year 1 July to 30 June
Companies Law the Companies (Guernsey) Law, 2008 as amended.
Company Tufton Oceanic Assets Limited (Guernsey registered
number 63061) which, when the context so permits,
shall include any intermediate holding company
of the Company and the SPVs.
Depreciated Replacement The Investment Manager's preferred valuation
Cost or DRC metric. DRC for a secondhand vessel is the
current cost of replacing the vessel with an
equivalent newbuild, depreciated to the same
age.
Directors or Board the Board of Directors of the Company.
Disclosure Guidance and the disclosure guidance and transparency rules
Transparency Rules or made by the Financial Conduct Authority under
DTRs Section 73A of FSMA.
Discount Control Policy The policy described in the Discount Control
section of the Company's Prospectus.
Environmental, Social, an evaluation of the company's collective conscientiousness
and Corporate Governance for social and environmental factors.
(ESG)
FCA the UK Financial Conduct Authority
Financial Reporting Council the UK Financial Reporting Council
or FRC
FSMA the Financial Services and Markets Act 2000
and any statutory modification or re-enactment
thereof for the time being in force.
Fund Level Fees and Expenses Investment management fee and other professional
fees and expenses at fund level.
GFSC or Commission the Guernsey Financial Services Commission
High Watermark Per Share the higher of: (i) US$1.00 increased by the
Hurdle; and (ii) if a Performance Fee has previously
been paid, the Total Return Per Share on the
Calculation Day for the last Calculation Period
(if any) by reference to which a Performance
Fee was paid.
High Performance Fee in respect of any Calculation Period, an amount
Amount equal to the Performance Fee Pay-Out Amount
for the previous Calculation Period where a
Performance Fee was payable.
Historic Performance in respect of any Calculation Period, an amount
Fee Amount equal to be Performance Fee Pay-Out Amount
for the previous Calculation Period where a
performance fee was payable.
IASB International Accounting Standards Board
IFRIC International Financial Reporting Interpretations
Committee
IFRS International Financial Reporting Standards
Investment Manager Tufton Investment Management Limited
Issue Price An issue price refers to the initial cost of
a security when it first becomes available
for purchase by the public.
Listing Rules the listing rules made by the UKLA pursuant
to Part VI of FSMA
London Stock Exchange London Stock Exchange plc
or LSE
LPG Carrier a vessel used to transport liquefied petroleum
gas.
LS Assets Limited or the Guernsey holding company owning the SPVs
LSA through which the Company investment into vessels.
LSE Admission Standards the rules issued by the London Stock Exchange
in relation to the admission to trading of,
and continuing requirements for, securities
admitted to the SFS.
Main Market the main market for listed securities operated
by the London Stock Exchange.
Market Abuse Regulation Regulation (EU) No 596/2014 of the European
or MAR Parliament and of the Council of 16 April 2014
on market abuse.
Memorandum the memorandum of association of the Company.
Net Asset Value or NAV the value, as at any date, of the assets of
the Company after deduction of all liabilities
of the Company and in relation to a class of
shares in the Company, the value, as at any
date of the assets attributable to that class
of shares after the deduction of all liabilities
attributable to that class of shares determined
in accordance with the accounting policies
adopted by the Company from time-to-time.
Performance Fee Amount 20 per cent. of the excess in Total Return
Per Share and the High Watermark Per Share
multiplied by the time weighted average number
of shares in issue during the Calculation Period.
Performance Fee Pay-Out in respect of the relevant Calculation Period,
Amount an amount equal to "A", where:
A = (0.5 x B) + C;
B = the Performance Fee Amount; and
C = an amount equal to the High Performance
Fee Amount.
POI Law the Protection of Investors (Bailiwick of Guernsey)
Law, 2020, as amended.
Portfolio the Company's portfolio of investments from
time to time.
Paris Agreement The Paris Agreement is a legally binding international
treaty on climate change.
Prospectus The Placing and Offer for Subscription document
for the Company dated 8th December 2017.
Register the register of members of the Company.
Relevant Number of Shares for any Calculation Period the time weighted
average number of ordinary shares in issue
during such Calculation Period.
Responsible Investment A strategy and practice to incorporate environmental,
social and governance (ESG) factors in investment
decisions and active ownership.
SFS or Specialist Funds the Specialist Funds Segment of the Main Market
Segment (previously known as the Specialist Fund Market
or SFM).
Segment classifications of vessels within the shipping
industry including, inter alia, Tankers, General
Cargo, Containerships and Bulkers.
SOFR Secured Overnight Financing Rate.
SPV or Special Purpose corporate entities, formed and wholly owned
Vehicle (directly or indirectly) by the Company, specifically
to hold one or more vessels, and including
(where the context permits) any intermediate
holding company of the Company.
GBP or Sterling the lawful currency of the United Kingdom.
Tufton the Investment Manager
Tufton Group Tufton Investment Management Holding Ltd and
its subsidiaries.
UK Corporate Governance the UK Corporate Governance Code as published
Code by the Financial Reporting Council from time-to-time.
UK Listing Authority the FCA acting in its capacity as the competent
authority for the purposes of Part VI of FSMA.
United Kingdom or UK the United Kingdom of Great Britain and Northern
Ireland.
VesselsValue VesselsValue Limited, a third party provider
of vessel valuations to the Company and Investment
Manager.
WACC the weighted average cost of capital.
VLCC Very large crude carrier.
Notice of AGM
Tufton Oceanic Assets Limited
Registered Office Address: 1 Royal Plaza, Royal Avenue, St Peter
Port, Guernsey, GY1 2HL.
Registration Number: 63061
This document is important and requires your immediate
attention. If you are in doubt as to any aspect of the proposals
referred to in this document or the action you should take, you
should seek your own advice from a stockbroker, solicitor or other
independent professional adviser. If you have recently sold or
transferred all your shares in Tufton Oceanic Assets Limited,
please forward this document, together with the accompanying
documents, as soon as possible either to the purchaser or
transferee or to the person who arranged the sale or transfer so
they can pass these documents to the person who now holds the
shares.
Dear Shareholder,
I am pleased to send you the notice of the seventh Annual
General Meeting ("AGM") of the members of Tufton Oceanic Assets
Limited (the "Company"), to be held at 1 Royal Avenue, St Peter
Port, Guernsey GY1 2HL on Tuesday, 24 October 2023 at 12.30 p.m.
BST. Explanatory notes on all resolutions accompany the notice of
the AGM (the "Notice").
Re-Election of Directors
As in previous years, all Directors are offering themselves for
re-election in accordance with the AIC Code of Corporate Governance
and the Articles of Incorporation of the Company (the "Articles").
Three of the current four members of the Board were appointed at
the formation of the Company in 2017. Whilst their respective
tenure is much less than the AIC Guidance figure of nine years, a
succession plan has been considered by the Board. As part of this
plan and despite the fact that a continuation vote must be put to
the AGM in 2024, it has been decided to start a search for a new
director using an external agency. This succession plan also aims
to increase the diversity of the Board. Please note for your
information that biographical details of all the Directors offering
themselves for re-election are set out in the explanatory notes to
the resolutions that follow this Notice.
Resolution 9 (Market Acquisitions of Shares)
The Company will only exercise the authority to buy back shares
(granted by resolution 9) when, in the prevailing circumstances, it
believes to do so is in the best interests of the Company and its
shareholders.
Typically the authority to buy back shares would be exercised as
a means of addressing any discount at which the Company's shares
trade to their underlying net asset value (the "Discount"). The
existence and extent of any Discount is a product of many factors
including the total market capitalisation of the Company and the
liquidity in terms of the trading in its shares. It is also noted
that in the current macro-economic environment many closed ended
investment companies trade on wide discounts to their underlying
net asset values.
The Board does not believe:
-- the total expense ratio of the Company; or
-- the performance of the Company's investment manager and the
level and structure of the fees payable to the Company's investment
manager are significant contributing factors to the Discount
The Board will continue to monitor the Discount and the
appropriateness of utilising the authority to buy back shares as a
means of addressing the Discount. However it should be appreciated
that there can be no guarantee that such utilisation will reduce
the Discount either on a temporary or permanent basis.
Since the Company's general authority to make market purchases
was last approved at the 2022 AGM, the Company has made 6,160,000
market purchases of shares, amounting to 2.04% of the shares in
issue as at 30 June 2023. All the shares were acquired at a
significant discount (averaging 17.9%) to the prevailing Net Asset
Value (NAV) per share issued by the Company quarterly. The Board,
in making the decision to acquire shares, took into account the
views against making share buy backs expressed by some advisors to
the Company's shareholder base, but felt that the very wide
discount to which the shares had fallen resulted from factors
external to the Company. This market wide discount represented a
very good capital management opportunity to enhance the NAV per
share attributable to long term shareholders and create a better
return for them than investing the funds in a new vessel. For the
avoidance of doubt, the Board has not benefitted directly or
indirectly from these market purchases except to the extent to
which all remaining shareholders have benefitted. The Board is
seeking authority to continue making market purchases of shares, to
the extent permitted in the Articles of the Company, when it
believes such activity to be in the best interests of shareholders
as a whole.
Voting
The Board of Directors of the Company believe that the proposed
resolutions set out in this Notice are in the best interests of the
Company and its members as a whole.
If you would like to vote on the resolutions, please appoint a
proxy by no later than 12.30 pm BST on Friday, 20 October 2023. A
form of proxy accompanies the Notice.
All resolutions will be put to a poll in reflection of best
practice and to ensure that all members have their votes taken into
account, proportional to their shareholdings in the Company.
The results of the AGM will be announced to the market as soon
as practicable after the conclusion of the AGM. Should you wish to
discuss anything ahead of the AGM, please see the contact details
below:
Tufton Investment Management Ltd, the Investment Manager
andrew.hampson@tufton.com
Paulo.almeida@tufton.com
Hudnall Capital, the Joint Broker
ac@hudnallcapital.com
Singer Capital Markets, the Joint Broker
James.Maxwell@singercm.com
Alex.Bond@singercm.com
Maitland Administration (Guernsey) Limited, the Company
Secretary & Chairman
admin.guernsey@maitlandgroup.com
NOTICE OF ANNUAL GENERAL MEETING 2023
Notice is hereby given that the seventh Annual General Meeting
of the members of Tufton Oceanic Assets Limited (the "Company")
will be held at 1 Royal Avenue, Royal Plaza, St Peter Port,
Guernsey GY1 2HL on Tuesday, 24 October 2023 at 12.30 pm BST to
transact the business set out in the resolutions below.
ORDINARY RESOLUTIONS
1. To receive the Company's Annual Report and Audited Financial
Statements for the year ended 30 June 2023.
2. To re-appoint PricewaterhouseCoopers CI LLP as Auditor to the
Company until the conclusion of the next general meeting at which
accounts are laid before the Company.
3. To authorise the Directors of the Company (the "Directors")
to determine the remuneration of the Auditor.
4. To approve the remuneration of the Directors for the year
ended 30 June 2023, as set out in the Directors' Report.
5. To re-elect Mr Robert King as a Director who retires by
rotation in accordance with Article 21.3 of the Articles of
Incorporation of the Company (the "Articles").
6. To re-elect Mr Stephen Le Page as a Director who retires by
rotation in accordance with Article 21.3 of the Articles of
Incorporation of the Company.
7. To re-elect Mr Paul Barnes as a Director who retires by
rotation in accordance with Article 21.3 of the Articles of
Incorporation of the Company.
8. To re-elect Ms Christine Rødsæther as a Director who retires
by rotation in accordance with Article 21.3 of the Articles of
Incorporation of the Company.
9. To authorise the Company to make market acquisitions (as
defined in the Companies (Guernsey) Law, 2008, as amended) of its
own ordinary shares of no par value ("ordinary shares"), either for
cancellation or to hold as treasury shares for future resale or
transfer, provided that:
a. the maximum number of ordinary shares authorised to be
purchased shall be up to 14.99 per cent. of the ordinary shares in
issue (excluding treasury shares in issue) as at 23 September 2023
(being the last business day prior to the publication of the
Notice);
b. the minimum price (exclusive of expenses) which may be paid
for an ordinary share is US$0.01;
c. the maximum price (exclusive of expenses) which may be paid
for an ordinary share is an amount equal to the higher of:
i. an amount equal to 5 per cent. above the average of the
mid-market values of an ordinary share taken from the London Stock
Exchange Daily Official List for the five business days before the
purchase is made; or
ii. the higher of the price of the last independent trade or the
highest current independent bid for ordinary shares on the London
Stock Exchange at the time the purchase is carried out;
d. subject to paragraph (e), such authority shall expire at the
annual general meeting of the Company to be held in 2024 (unless
previously varied, revoked or renewed by the Company in general
meeting) or, if earlier, the date falling 15 months from the
passing of this resolution; and
e. notwithstanding paragraph (d), the Company may make a
contract to purchase its ordinary shares pursuant to the authority
hereby conferred prior to the expiry of such authority which will
or may be executed wholly or partly after the expiry of such
authority and may make a purchase of its own ordinary shares in
pursuance of any such contract notwithstanding the expiry of the
authority given by this resolution.
10. To re-approve the dividend policy of the Company as set out
in the Prospectus dated 25 September 2018.
EXTRAORDINARY RESOLUTION
11. To authorise the Directors to allot and issue shares, to
grant rights to subscribe for or to convert any security into
shares and to make offers or agreements to allot and issue equity
securities (as defined in Article 5.1(a) of the Articles) for cash
and/or to sell ordinary shares held by the Company as treasury
shares as if the pre-emption rights contained in Article 5.2 of the
Articles did not apply to any such allotment, grant or sale,
provided that such authority shall be limited to the allotment of
shares and/or grant of rights to subscribe for or to convert any
security into shares and/or sale of treasury shares up to an
aggregate number of ordinary shares as equal to 30,862,854 ordinary
shares (representing 10 per cent. of the ordinary shares in issue
as at 23 September 2023) (excluding any ordinary shares held in
treasury and after giving effect to the exercise of warrants,
options or other convertible securities outstanding as at such
date).
The authority granted by this resolution shall, unless renewed,
varied or revoked by the Company, expire on the earlier of the
conclusion of the next annual general meeting of the Company and 15
months after the passing of this resolution, save that the Company
may, before such expiry, make offers or enter into agreements
during the relevant period which would or might require.
Ordinary shares to be allotted and issued or rights to subscribe
for or to convert any security into ordinary shares to be granted
or ordinary shares held in treasury to be sold after this authority
has expired and the Directors may allot and issue equity securities
and/or sell ordinary shares out of treasury in pursuance of any
such offer or agreement as if this power had not expired.
By order of the Board
On behalf of Maitland Administration (Guernsey) Limited
Company Secretary
1 Royal Avenue
Royal Plaza
St Peter Port
Guernsey
GY1 1WD
EXPLANATORY NOTES - GENERAL
The following notes explain your general rights as a member and
your right to vote at the 2023 AGM or to appoint someone else to
vote on your behalf.
A member of the Company who is entitled to attend the AGM is
entitled to appoint one or more proxies to attend, speak and vote
in their place. A proxy does not need to be a member of the Company
but must attend the AGM to represent you. Details of how to appoint
the Chairman of the AGM or another person as your proxy using the
proxy form are set out in the notes to the proxy form. If you wish
your proxy to speak on your behalf at the AGM you will need to
appoint your own choice of proxy (not the Chairman) and give your
instructions directly to them. A member may appoint more than one
proxy to attend the AGM, provided that each proxy is appointed to
exercise rights attached to different shares. Under the current
circumstances, the Board strongly advises shareholders to appoint
the Chairman of the meeting as their proxy for all votes. Please
note that appointing a proxy who cannot attend the AGM will
effectively void your vote.
A corporation which is a member can appoint one or more
corporate representatives who may exercise, on its behalf, all its
powers as a member provided that no more than one corporate
representative exercises powers over the same share. Corporate
members are strongly encouraged to complete and return a form of
proxy appointing the Chairman of the meeting to ensure their votes
are included in the poll.
A form of proxy is enclosed which should be completed in
accordance with the instructions. To be valid, this form of proxy
and any power of attorney or other authority under which it is
executed (or a duly certified copy of such power of attorney) must
be lodged with the Company's Registrar, Computershare Investor
Services (Guernsey) Limited, c/o The Pavilions, Bridgwater Road,
Bristol, BS99 6ZY, or by e-mail to
#UKCSBRS.ExternalProxyQueries@computershare.co.uk . Alternatively,
completed forms can be sent to the registered office of the Company
c/o Maitland Administration (Guernsey) Limited, 3rd Floor, 1 Royal
Avenue, Royal Plaza, St Peter Port, Guernsey, GY1 2HL. All proxies
must be received by no later than 12.30pm BST on Friday, 20 October
2023, being 48 hours before the time appointed for the AGM.
Submission of a proxy appointment will not preclude a member from
attending and voting at the AGM should they wish to do so.
CREST offers a proxy voting service which the Company's
Registrar, Computershare are an agent of.
Shareholders are advised that, upon receipt of their proxy form
from the Company, if they wish to appoint a proxy or to give or
amend an instruction to a previously appointed proxy via the CREST
system, the CREST message must be received by the Company's agent
(ID 3RA50) two days prior to the date of the Company's AGM at the
latest. For this purpose, the time of receipt will be taken to be
the time (as determined by the timestamp applied to the message by
the CREST Applications Host) from which the issuer's agent is able
to retrieve the message. After this time any change of instructions
to a proxy appointed through CREST should be communicated to the
proxy by other means.
CREST Personal Members or other CREST sponsored members, and
those CREST Members who have appointed voting service provider(s)
should contact their CREST sponsor or voting service provider(s)
for assistance with appointing proxies via CREST.
For further information on CREST procedures, limitations and
system timings, please refer to the CREST Manual. We may treat as
invalid a proxy appointment sent by CREST in the circumstances set
out in Regulation 41 of the Uncertificated Securities (Guernsey)
Regulations 2009.
If you are an institutional investor, you may be able to appoint
a proxy electronically via the Proxymity platform, a process which
has been agreed by the Company and approved by the Registrar. For
further information regarding Proxymity, please go to
www.proxymity.io . Your proxy must be lodged by 11.00 on 15 October
2023 in order to be considered valid. Before you can appoint a
proxy via this process you will need to have agreed to Proxymity's
associated terms and conditions. It is important that you read
these carefully as you will be bound by them and they will govern
the electronic appointment of your proxy.
Please note that the AGM will not be made available by way of
publicly available real-time broadcast.
As at 23 September 2023 (being the last business day prior to
the publication of the Notice), the Company's issued share capital
consists of 308,628,541 ordinary shares, carrying one vote each.
Therefore, the total number of voting rights in the Company as at
20 September 2023 is 308,628,541.
EXPLANATORY NOTES - ORDINARY RESOLUTIONS 1 to 10
ORDINARY RESOLUTION 1 - The Company must present the financial
statements for the year ended 30 June 2023 and the reports of the
Directors and the Auditor to the AGM for approval.
ORDINARY RESOLUTION 2 - The Auditor of the Company must be
re-appointed at each general meeting where accounts are laid, to
hold office until the conclusion of the next such general meeting.
It is proposed that PricewaterhouseCoopers CI LLP Limited be
re-appointed as the Company's Auditor, to hold office from the
AGM's conclusion until the conclusion of the next general meeting
at which accounts are laid before the Company.
ORDINARY RESOLUTION 3 - This resolution gives authority to the
Board of Directors to determine the remuneration of the
Auditor.
ORDINARY RESOLUTION 4 - Guernsey-registered companies are not
obliged to prepare and publish a Directors' Remuneration Report.
However, the Company has included details of its Directors'
remuneration within the Financial Report and Audited Financial
Statements and an ordinary resolution will be put to shareholders
seeking approval of the Directors' remuneration, which will be
advisory only.
ORDINARY RESOLUTIONS 5-8 - The full Board of Directors are
retiring. They are offering themselves for re-election in
accordance with Article 23.1 of the Articles and the Association of
Investment Companies ("AIC") Code of Corporate Governance, of which
the Company is a member. A brief biography for each of the
Directors is set out on pages 30 and 31 of the Annual Report and
Audited Financial Statements.
ORDINARY RESOLUTION 9 - This resolution grants the Company
authority to make market purchases of up to 14.99 per cent. of the
ordinary shares in issue as at 23 September 2023 (being the last
business day prior to the publication of the Notice). The ordinary
shares bought back will either be cancelled or placed into treasury
at the determination of the Directors.
The maximum price which may be paid for each ordinary share must
not be more than the higher of (i) 5 per cent. above the average of
the mid-market values of an ordinary share taken from the London
Stock Exchange Daily Official List for the five business days
before the purchase is made; or (ii) the higher of the price of the
last independent trade or the highest current independent bid for
the ordinary shares on the London Stock Exchange at the time the
purchase is carried out. The minimum price which may be paid for
each ordinary share is US$0.01.
This authority shall expire at the next annual general meeting
of the Company (or, if earlier, the date falling 15 months from the
passing of this resolution), when a resolution to renew the
authority will be proposed. The Company currently intends that any
ordinary shares repurchased would be held in treasury, subject to
applicable law and regulation.
ORDINARY RESOLUTION 10 - Shareholders are being asked to approve
the Company's policy with respect to the payment of dividends. This
approval will be advisory only. The dividend policy, as set out in
the Prospectus dated 25 September 2018, is summarised below:
Dividend Policy
The Company intends to pay dividends on a quarterly basis with
dividends declared in January, April, July and October. The Company
will target a quarterly dividend of 2.125 cents per ordinary share
for the financial year 2024.
An Ordinary Resolution is a resolution passed by a simple
majority of Members.
EXTRAORDINARY RESOLUTION 11 - General Disapplication of
Pre-emption Rights - This resolution will, if passed, give the
Directors power to allot shares or grant rights to subscribe for or
to convert any security into shares or sell treasury shares for
cash without first offering them to existing shareholders in
proportion to their existing holdings up to an aggregate number of
ordinary shares as equal to 29,508,254 ordinary shares, which
represents approximately 10 per cent of the Company's issued
ordinary shares (excluding treasury shares) as at 23 September
2023.
Resolution 11 will allow the Company to carry out one or more
tap issues, in aggregate, up to 10 per cent of the number of
ordinary shares in issue as at the last business day prior to
publication of the Notice and thus to pursue specific investment
opportunities in a timely manner in the future and without the
requirement to publish a prospectus and incur the associated
costs.
Any new ordinary shares issued under the combined authority will
be at a minimum issue price equal to the prevailing NAV per
ordinary share at the time of allotment together with a premium
intended at least to cover the costs and expenses of the relevant
placing or issue of new ordinary shares (including, without
limitation, any placing commissions). The issue price in respect of
each relevant placing or issue of new ordinary shares will be
determined on the basis described above to cover the costs and
expenses of each placing or issue and thereby avoid any dilution of
the NAV of the then existing ordinary shares held by
shareholders.
In accordance with the Articles, an Extraordinary Resolution is
a resolution of the shareholders present in person in a general
meeting passed by a majority of not less than seventy-five percent
of the votes recorded on a show of hands or by way of a poll.
Form of Proxy - Annual General Meeting 2023
To be held at 1 Royal Avenue, Royal Plaza, St Peter Port,
Guernsey GY1 2HL
On Thursday, 24 October 2023 at 12.30 pm BST and at any
adjournment thereof
I/We............................................,.....................................................................
(BLOCK LETTERS PLEASE)
of.....................................................................................................................
........................................................................................................................
being (a) member(s) of the above-named Company, hereby appoint
the Chairman of the meeting/ or*
..............................................................................................................................
as my/our proxy to vote for me/us and on my/our behalf at the
Annual General Meeting of the Company to be held at 1 Royal Avenue
Royal Plaza, St Peter Port, Guernsey, GY1 2HL on Tuesday, 24
October 2023 at 12.30 pm BST and at any adjournment thereof.
* To allow effective constitution of the meeting, if it is
apparent to the Chairman that no shareholders will be present other
than by proxy, then the Chairman may appoint a substitute to act as
proxy in his stead for any shareholder, provided that such
substitute proxy shall vote on the same basis as the Chairman. A
proxy need not be a member of the Company.
I/We direct my/our proxy to vote as follows:
ORDINARY RESOLUTIONS FOR AGAINST VOTE WITHHELD**
1. To receive the Company's Annual Report
and Audited Financial Statements for the
year ended 30 June 2023.
---- -------- ----------------
2. To re-appoint PricewaterhouseCoopers
CI LLP as auditor to the Company until the
conclusion of the next general meeting at
which accounts are laid before the Company.
---- -------- ----------------
3. To authorise the Directors to determine
the remuneration of the Auditor.
---- -------- ----------------
4. To approve the remuneration of the Directors
for the year ended 30 June 2023, as set
out in the Directors' Report.
---- -------- ----------------
5. To re-elect Mr Robert King as a Director
who retires by rotation in accordance with
Article 21.3 of the Articles.
---- -------- ----------------
6. To re-elect Mr Stephen Le Page as a Director
who retires by rotation in accordance with
Article 21.3 of the Articles.
---- -------- ----------------
7. To re-elect Mr Paul Barnes as a Director
who retires by rotation in accordance with
Article 21.3 of the Articles.
---- -------- ----------------
8. To re-elect Ms Christine Rødsæther
as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
---- -------- ----------------
9. Authority to make acquisitions of the
Company's own shares.
---- -------- ----------------
10. To approve the Company's dividend policy.
---- -------- ----------------
EXTRAORDINARY RESOLUTION FOR AGAINST VOTE WITHHELD**
---- -------- ----------------
11. Authority to allot and issue shares
and to sell shares held in treasury as if
the pre-emption rights in the Articles do
not apply.
---- -------- ----------------
Signed this day of 2023
Signature
[ ] Please tick here to indicate that this proxy instruction is
in addition to a previous instruction . Otherwise it will overwrite
any previous instruction given.
NOTES TO THE FORM OF PROXY:
i. Please indicate with an "X" in the appropriate box how you wish the proxy to vote.
ii. If no "X" is marked in any of the for/against/vote withheld
boxes in respect of a resolution, the proxy will exercise their
discretion as to how they vote or whether they withhold their vote.
The proxy will also exercise their discretion as to how they vote
or whether they withhold their vote on any business or resolution
considered at the AGM other than the resolutions referred to in
this form of proxy.
iii. In accordance with sections 222 and 223 of The Companies
(Guernsey) Law 2008, you may appoint more than one person as your
proxy to exercise all or any rights to attend and to speak and
vote.
iv. **A vote withheld is not a vote in law and will not be
counted in the calculation of the votes "For" and "Against" a
resolution.
v. To be valid this form of proxy and any power of attorney or
of the authority under which it is executed (or a duly certified
copy of such power of attorney) must be lodged with the Company's
Registrar: Computershare Investor Services (Guernsey) Limited, c/o
The Pavilions, Bridgwater Road, Bristol, BS99 6ZY or the registered
office of the Company c/o Maitland Administration (Guernsey)
Limited, 1 Royal Avenue, Royal Plaza, St Peter Port, Guernsey, GY1
2HL by no later than 12.30 pm on Friday, 20 October 2023, being 48
hours before the time appointed for the AGM. Completing and
returning this form of proxy will not prevent you from attending
the meeting and voting in person if you so wish.
vi. In order to revoke a proxy instruction, a member will need
to send a signed hard copy notice clearly stating their intention
to revoke a proxy appointment, together with the power of attorney
or other authority (if any) under which it is signed, or a
notarially certified copy of such power of attorney or authority,
to the Company's Registrar to the contact details noted above.
vii. A form of proxy executed by a corporation must be either
under its common seal or signed by an officer or attorney duly
authorised by that corporation.
viii. In the case of joint holdings, the signature of the first
named member on the Register of Members will be accepted to the
exclusion of the votes of the other joint holders.
ix. Pursuant to Regulation 41 of the Uncertificated Securities
(Guernsey) Regulations 2009, entitlement to attend and vote at the
meeting and the number of votes which may be cast thereat will be
determined by reference to the Register of Members of the Company
at close of business on the day which is two business days before
the day of the meeting. Changes to entries on the Register of
Members after that time shall be disregarded in determining the
rights of any person to attend and vote at the meeting.
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END
FR NKPBBABKDNCB
(END) Dow Jones Newswires
September 26, 2023 02:00 ET (06:00 GMT)
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