26 September 2024
Tufton Oceanic Assets
Limited
("Tufton Oceanic Assets" or
the "Company")
Final Results and Notice of
AGM
Tufton Oceanic Assets announces
its final results for the financial year ended 30 June 2024. A copy
of the Annual Report and Audited Financial Statements will be
submitted to the National Storage Mechanism
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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 2023 Sustainability Report which
is available on the Company's website in the Investor Relations
section under Company Documents. The highlights from the
Sustainability Report include a c.11% improvement in emissions
intensity during 2023, primarily because of capital re-allocation
but also from Energy Saving Device ("ESD") retrofits.
The annual general meeting will be
held at the Company's registered office at 1 Royal Plaza, Royal
Avenue, St Peter Port, Guernsey on 24th October 2024 at
11:00 BST.
For further information, please
contact:
Tufton Investment Management Ltd (Investment
Manager)
Andrew Hampson
Nicolas Tirogalas
|
+44 (0) 20 7518
6700
|
|
|
Singer Capital Markets
James Maxwell, Alex Bond, Jalini
Kalaravy (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
Highlights of Tufton Oceanic
Assets Limited (the "Company") for the financial year ("FY") (vs.
the previous FY ending 30 June 2023):
·
NAV was US$451.1m or US$1.550 per share (FY 2023:
US$412.8m or US$1.365 per share).
·
NAV Total Return Per
Share 20.6% (FY 2023: -0.3%).
·
Dividends paid during the year of US$26.1m (FY
2023: US$25.4m), which from 1Q24 was at the increased target annual
dividend of US$0.10 per share rate.
·
The Company bought back 11,386,000 (FY 2023:
6,160,000) shares at the weighted average price of US$1.014 (FY
2023: US$1.13) per share.
·
Consolidated Gearing Ratio of 12.0% (FY 2023:
13.8%).
·
Average Charter Length of 1.3 years (FY 2023: 1.3
years).
·
Post balance sheet date, the Company completed a
one-off capital return of US$31.5m via redemption ("Redemption") of
shares based on the 2Q24 NAV per share of US$1.550.
Diversified fleet*
·
8 product tankers
o 6
Medium Range ("MR") product tankers
o 2
Handysize product tankers
·
9 bulkers
o 8
Handysize bulkers
o 1
Ultramax bulker
·
2 Chemical tankers
·
1 Gas tanker
The Company owned 21 vessels as at
the end of the FY. One product tanker (Dachshund) was divested on 1
July 2024 bringing the total number of vessels to 20.
Highlights since inception*
|
131.2%
|
US$126.7m
|
US$18.8m
|
39 (19)
|
NAV Total Return Per
Share
|
Dividends
|
Buybacks
|
Vessels Acquired
(Divested)
|
* as at 30 June 2024,
adjusted for the divestment of Dachshund on 1 July 2024. Dividends
include the 2Q24 dividend which was paid in August
2024.
Alternative Performance Measures ("APMs"), applied on a
consolidated basis, are utilised in the Highlights and Investment
Manager's Report to analyse performance. Please see the APMs
definitions from page 87.
Mid-Term strategy and capital allocation
highlights
·
The Company's Board has determined that the
optimal strategy for SHIP through to 2030 is to continue investing
in fuel-efficient secondhand vessels. This approach aims to
maximize shareholder returns, with plans to begin realising the
Company's asset portfolio from 2028, well before the
decarbonisation of shipping accelerates.
·
Continuation votes to be held as planned in 2024
and 2027 to reconfirm the opportunity set and the strategy, before
the realisation period starting in 2028.
·
SHIP's annual target dividend per share was
increased by c.17.6% from US$0.085 per share to US$0.10 per share
starting in 1Q24. Based on this increased target the Company is
forecast to have Dividend Cover of c.1.7x over 18 months following
the end of the FY, through the end of 4Q25.
·
A one-off capital return of US$31.5m via the
Redemption of shares based on the 2Q24 NAV per share (being a
premium to the prevailing share price) less attributable costs was
completed on 26 August 2024.
·
The Company sees fleet renewal (based on age,
technology, and sector outlook) as a priority. Returns from all new
asset investments over a three-year holding period will be compared
to the benefit from a return of capital given the prevailing share
price at the time of the proposed investment and medium-term market
outlook.
·
The Board will annually assess the possibility of
returning additional capital to shareholders using excess
investible cash, provided no suitable investment opportunities
arise.
·
The current buy-back policy (as set out in the
Company's listing documents) is to remain in place.
Chairman's Statement
Introduction
On behalf of The Board of
Directors (the "Board"), I present the Company's Annual Report and
Audited Financial Statements for the year ended 30 June
2024.
Following the divestment of
Dachshund on 1 July 2024, the Company's portfolio consisted of 20
vessels (FY 2023: 22 vessels), details of which are set out in the
Investment Manager's Report. Divestments completed in FY 2024 have
been completed at a premium to their most recent individually
reported NAVs.
Strong Performance and Target Dividend
Increased
As at 30 June 2024, the Company's
NAV was US$451.1m being US$1.550 per share (2023: US$412.8m being
US$1.365 per share). The Company declared a profit of US$76.1m (FY
2023: loss of US$2.5m) or US$0.259 per share (FY 2023: US$0.008)
for the year with the US$ NAV Total Return Per Share over the year
of 20.6% (FY 2023: -0.3%).
The strong return over the FY was
driven by operating performance as well as gains in charter-free
values, as product tanker and bulker values rose.
The Company raised its target
annual dividend from US$0.085 to US$0.1 per share, which commenced
from 1Q24. With the increased dividend, the Company is forecast to
have a Dividend Cover of c.1.7x over the next 18 months (through
the end of 4Q25). As at 30 June 2024, the Average Charter Length
was 1.3 years.
Share Price and Discount Management
During the year, the Company's
share price rose from US$0.99 per share as at the close of business
30 June 2023 to US$1.21 per share as at the close of business 30
June 2024.
Following a tepid performance in
the second half of 2023, the Company's share price increased by
approximately 22% in the latter half of the FY. This rise was
particularly notable after the announcement on 17 January 2024 of
key points from the mid-term strategy review, an increased dividend
policy, a one-time return of capital, and other related changes in
capital allocation. The Board is encouraged to note that the
discount of the Company's share to NAV has narrowed to c.14% (30
June 2023: 27.8%) as at end August 2024.
On average, the Company's shares
traded at a 27% discount to NAV over the FY. During the year, the
Company (in accordance with the authority granted to it by
shareholders) repurchased 11,386,000 (FY 2023: 6,160,000) shares at
a cost of US$11,573,679 (FY 2023: US$6,946,752). Refer to Note 7
for more details. At the end of the FY, there were
17,546,000 (FY 2023: 6,160,000)
shares held in treasury. Since 1 July 2024, the
Company has bought back an additional 20,326,211 shares via the
compulsory Redemption with 17,546,000 Shares held in treasury and
270,756,330 shares outstanding as at 25 September 2024. As at 25
September 2024, the Company's shares traded at a 16.1% discount to
the ex-dividend 30 June 2024 NAV.
Mid-Term strategy review
In January 2024, the Board
reviewed the Company's performance since its inception and
requested that the Investment Manager conduct a study on future
opportunities and the strategy, including capital allocation, to
achieve investment objectives. The Board concluded that the best
strategy for SHIP through 2030 is to continue investing in
fuel-efficient secondhand vessels to maximise shareholder returns,
with plans to begin realising the Company's asset portfolio
starting in 2028, ahead of the anticipated acceleration in shipping
decarbonisation. Details of the mid-term strategy review are set
out on page 2 above.
Canal Transit Disruptions and War in
Ukraine
Transit through two key global
shipping routes, the Panama Canal and the Suez Canal, were
disrupted during the FY.
Vessel transit through the Panama
Canal was disrupted from late October due to an ongoing drought in
the region. While transit through the Suez Canal was disrupted as
Houthi rebel attacks on vessels in the Red Sea escalated from late
November. Disruption of canal transit causes re-routing of cargo
via alternate routes which typically take much longer and add to
shipping demand. For example, disruption of transit through the
Suez Canal is estimated to add c.3% to global shipping demand
growth predominantly due to re-routing around the Cape of Good
Hope. As of August 2024, vessel transit through the Panama Canal is
returning to normal while traffic via the Suez Canal remains at
very low levels due to the ongoing risk of attacks. All of the
Company's vessels remain fully insured against war perils. None of
the Company's vessels have been adversely affected by the war in
Ukraine or the attacks on vessels transiting the Red Sea/Gulf of
Aden. The Investment Manager's policy is
that Company vessels should not transit the Red Sea during this
period of conflict. The Master of each vessel may refuse to allow
the vessel to trade in areas where there is a heightened physical
risk to the vessel or its crew. The Board and the Investment
Manager remain watchful in monitoring the conflicts and their
consequences for shipping in general and for the
Company.
Sanctions
The Company and its vessels were
compliant with all international sanctions imposed by the US, UK,
EU and UN. We have had no issues to date with any vessels being
blocked or otherwise affected by sanctions. The Investment Manager
monitors compliance through regular inspection of vessel logs,
satellite data and direct communication with the vessels. The Board
and Investment Manager are monitoring for new sanctions being put
in place. Where existing guidelines are unclear, the procedure
ensures that the Investment Manager seeks legal advice.
Corporate Governance
The Company is a member of the
Association of Investment Companies ("AIC") and has therefore elected to comply with the
provisions of the current AIC Code of Corporate Governance which
sets out a framework of best practice in respect of governance of
investment companies ("AIC Code"). The AIC Code has been endorsed
by the Financial Reporting Council and the Guernsey Financial
Services Commission (the "GFSC") as an alternative means for AIC
members to meet their obligations in relation to the UK Corporate
Governance Code.
Where the Company's stakeholders,
including shareholders and their appointed agents, have matters
they wish to raise with the Board in respect to the Company, I
would encourage them to contact us at SHIP@tuftonoceanicassets.com.
Board Composition
As in previous years, all
Directors are offering themselves for re-election in accordance
with the AIC Code of Corporate Governance and the Articles of
Incorporation of the Company (the "Articles").
Three of the current five members
of the Board were appointed at the formation of the Company in
2017. Whilst their respective tenure is much less than the AIC
Guidance figure of nine years, a succession plan has been
considered by the Board. As part of the continued Board review of
its composition, Trina Le Noury was appointed as a non-executive
Director of the Company with effect from 1 November
2023.
Annual General Meeting
The Annual General Meeting ("AGM")
of the Company will be held on 24 October 2024 at 11:00 am BST the
details of which are set out in the AGM notice and Proxy form on
pages 97 to 109.
Where shareholders, or their
appointed agent have matters they wish to raise with the Board at
the AGM, I would encourage them to contact us at
SHIP@tuftonoceanicassets.com
ahead of the AGM date.
Continuation Vote
The vote for the continuation of
the Company is presented to the Shareholders at this year's AGM in
accordance with the terms set out in the latest listing document of
the Company. The Board of Directors presented the mid-term strategy
to Shareholders on 17 January 2024 and this strategy is the basis
for the future continuation of the Company.
If this Continuation Resolution is
passed, the next continuation vote will be presented to
Shareholders in October 2027. The Directors shall every three years
thereafter at the annual general meeting held, following the
publication of the audited accounts, propose a further Continuation
Resolution.
The Board of Directors are
supportive of the continuation of the Company and believe that the
mid-term strategy presented to Shareholders provides a clear
direction of travel beyond this year's continuation vote and
therefore the Board unanimously recommends that
Shareholders vote in favour of the Continuation Resolution. The
Directors intend to vote the shares they control in favour of the
Continuation Resolution.
Environmental, Social, Governance ("ESG")
Our Investment Manager continues
to integrate ESG factors into its investment recommendations and
asset ownership practices. The Investment Manager has recently
published its annual Sustainability Report which contains details
of ESG integration. The Board has reviewed and approved the
Investment Manager's Sustainability Report for the Company which
can be viewed on the Company's website (www.tuftonoceanicassets.com).
Outlook
The Investment Manager notes that
global shipyard orderbook forward cover (i.e. the number of years
required to deliver the orderbook at the output level of the last
12 months) was 3.4 years at the end of the FY slightly lower than
3.7 years at the end of June 2023. Despite the growth in new orders
over the last few years, fleet growth in product and chemical
tankers and bulkers is limited by yard slot availability. Further
the current orderbook in these segments is only sufficient to
replace ageing, less fuel efficient tonnage.
The Company completely exited the
containership segment in early 2023 in anticipation of a weaker
market due to high fleet growth. The disruption of vessel transit
through the Suez Canal has added significant shipping demand growth
resulting in a much stronger containership market than previously
anticipated by the Investment Manager, offering some interesting
opportunities.
These ongoing developments
continue to support the case for a strong investment environment
until the end of the decade as envisaged in our mid-term strategy
review.
………………………
Rob King
Non-executive Chairman
25 September 2024
Investment Manager's Report
Highlights of the FY
Over the FY NAV Total Return Per
Share was 20.6% (FY 2023: -0.3%), meaning the NAV Total Return
since inception has been 131.2%. Alternate Performance Measures
("APM"s), applied on a consolidated basis, are utilised in this
section to analyse performance. Please see the APM definitions from
page 87.
The main drivers for the strong
return during the year were:
·
Portfolio Operating Profit was US$52.0m (FY 2023:
US$56.3m): Despite strong performance from our product tankers and
chemical tankers, Portfolio Operating Profit was slightly lower YoY
as the bulker market started the current FY at multi-year lows and
slowly recovered.
·
Charter-free value gain of US$29.7m as product
tanker and bulker values rose.
·
Charter value loss of US$5.6m as the unwind of
negative charter value was outweighed by the ongoing increase in
benchmark time charter rates, both mainly in product
tankers.
The Company paid dividends of
US$26.1m during the FY (FY 2023:
US$25.4m). Under the Company's discount
management policy described in the IPO Prospectus, the Company
repurchased 11,386,000 shares during the FY and has therefore
purchased a total of 17,546,000 of its own shares from 4Q22 until
the end of the FY. The Company returned a
total of US$37.8 million to shareholders during the FY in the form
of dividends and share buybacks ($145.5 million since
inception).
Portfolio Operating Profit was
lower compared to the previous FY because:
·
Gross Operating Profit, an indicator of the
underlying profit from operating activity, was lower YoY mainly due
to the lower contribution from our bulkers. The bulker market
started the FY with rates at multi-year lows and slowly
improved.
·
Loan interest and fees were higher compared to
the previous FY due to the full year impact of the US$60m loan for
the acquisitions of the two MR product tankers, Mindful and
Courteous (completed in November 2022).
Following our December 2023 update
in the Interim Report, the divestment of Pollock closed on
16 May 2024. The divestment of
Dachshund closed on 1 July 2024, shortly after the FY end. Ahead of
the divestments, the loan outstanding on the product tankers
(within two separate Holdco facilities) was refinanced with six
vessels within one Holdco at a lower margin of 3.2% (vs. 3.9%
previously). The Consolidated Gearing Ratio at the end of the FY
was 12% (FY 2023: 13.8%). There was no debt prepayment in
connection with the divestment. Interest rate caps mitigate
interest rate risk through the end of 2025.
Performance
summary*
|
Figures below are in US$ millions unless otherwise
stated
|
From 1 Jul 2023 to 30 Jun
2024
|
From 1 Jul 2022 to 30 Jun
2023
|
|
Ship-Days
|
8,007
|
7,945
|
|
|
|
|
|
Revenue
|
117.7
|
119.9
|
|
Operating Expense
|
(55.0)
|
(55.6)
|
A
|
Gross Operating Profit
|
62.7
|
64.3
|
|
Gross Operating Profit /
Time-Weighted Capital Employed
|
13.5%
|
14.7%
|
|
|
|
|
B
|
Loan interest and fees
|
(6.6)
|
(3.5)
|
C
|
Gain/(loss) in capital
values
|
24.1
|
(62.8)
|
D
|
Portfolio profit / (loss) [A+B+C]
|
80.2
|
(2.0)
|
|
|
|
|
E
|
Interest income
|
0.5
|
0.1
|
F
|
Fund Level Fees and
Expenses
|
(4.6)
|
(4.6)
|
G
|
Performance fee accrual
|
-
|
4.0
|
|
Profit / (Loss) for the period [D+E+F+G]
|
76.1
|
(2.5)
|
|
|
|
|
|
Portfolio Operating Profit [A+B+E+F]
|
52.0
|
56.3
|
*Performance summary is unaudited and presented on a look
through basis
Note: Please see from page 87 for definitions of the APMs
used in the table above.
The product and chemical tanker
markets strengthened during the FY. The capital value gain of
US$24.1m was due to higher charter-free values, in product tankers
and bulkers, outweighing the increase in negative charter values
largely attributable to the strong product tanker market. The
bulker market started the FY with rates at multi-year lows and
slowly improved with rising rates and values.
At the end of the FY, the
portfolio had a total negative charter value of US$50.5m (FY 2023:
US$49.5m). Ceteris
paribus, the negative charter value is expected to unwind
(i.e. increase NAV) in the medium term as
the current charters are completed. From
the end of July 2023, four bulkers Anvil, Awesome, Auspicious and
Charming were fixed on index-linked charters in order to benefit
from the improving market.
Towards the end of the FY, the
Company switched one bulker, Auspicious, from an index-linked
charter back to a high fixed-rate charter to commence from the end
of July 2024. The Investment Manager expects continued improvement
in the bulker market and may switch employment strategies to
opportunistically capture strong yields on a risk-adjusted
basis.
Across the main segments, Gross
Operating Profit contribution during the FY, compared to the
previous FY comprised the following factors:
·
Product tankers - higher because:
o full period contribution from all vessels including Mindful
and Courteous which were acquired during the previous
FY;
o Exceptional's charter was extended starting January 2024 at a
higher rate; and
o Higher rate periods commenced on Cocoa's and Daffodil's
charters during the FY.
·
Chemical tankers - higher as both our chemical
tankers, operating in a pool, benefited from the rising
market.
·
Bulkers - lower as the market recovered slowly
from the very low levels at the beginning of the FY and our vessels
were on short-term charters.
Segment performance summary*
Segment Performance During
the FY
|
Product
Tankers
|
Chemical
Tankers
|
Gas
Tanker
|
Containership**
|
Bulkers
|
Total
|
US$m unless otherwise
stated
|
|
|
|
|
|
|
Gross Operating Profit
|
32.0
|
10.6
|
4.2
|
0.9
|
15.0
|
62.7
|
Loan interest &
fees
|
(6.6)
|
-
|
-
|
-
|
-
|
(6.6)
|
Gain / (loss) in charter-free
values
|
23.2
|
0.8
|
(1.4)
|
0.1
|
7.0
|
29.7
|
Gain / (loss) in charter
values
|
(4.6)
|
-
|
-
|
-
|
(1.0)
|
(5.6)
|
Portfolio profit / (loss)
|
44.0
|
11.4
|
2.8
|
1.0
|
21.0
|
80.2
|
*Segment analysis is unaudited and presented on a look
through basis
**The Company divested its last containership in 1Q23.
Closing adjustments reflected here.
At the end of the FY, the
Company's diversified portfolio had high cash flow visibility from
long-term charters on product tankers (33.9% of NAV). The Company's
two chemical tankers, which represent 8.6% of NAV, benefit from
exposure to the strong spot market as they operate in a pool. The
Forecast Net Yield on our chemical tankers is based on our
expectation of continued market strength. The yield on the Company's bulkers (37.5%
of NAV) rose to 11.6%, from 8.4% at the end of June 2023, as
the market improved during the FY.
Segment exposure and
forecast net yields*
Segment Exposure and Forecast Yields**
|
Product
Tankers
|
Chemical
Tankers
|
Gas
Tanker
|
Bulkers
|
Total
|
% of NAV
|
33.9%
|
8.6%
|
5.2%
|
37.5%
|
85.2%
|
Forecast Net Yields**
|
10.0%
|
24.5%
|
17.4%
|
11.6%
|
12.4%
|
*Segment analysis is unaudited
** Based on the market values at 30 June 2024, post
divestment of Dachshund
As at 30 June 2024, the Company's
vessels (post divestment of Dachshund) had an average age of 12.2
years (FY 2023: 11.4 years) and were chartered to nine different
counterparties.
Review of performance since inception
Since inception, the Company has
delivered on its original investment objectives
including:
·
Diversified portfolio.
·
Provided investors a strong and growing dividend.
Target annual dividend increased by c.21% from US$0.070 per share
to US$0.085 per share through the end of 2023. This was further
increased by 17.6% to US$0.10 per share starting 1Q24. Please see
the charts below.
·
Total capital raised: US$316.5m gross through
primary and secondary issuances. Since inception, the Company has
returned US$145.5m in the form of dividends and share
buybacks.
·
Net Company IRR is 14.4%, ahead of its 12% IRR
target published in its prospectus documents.
·
Acquired 39 vessels with low leverage and
divested 19 vessels (including Dachshund) at c.6% above NAV in
aggregate. Aggregate realised net IRR on all divestments is
c.24%.
·
Low NAV volatility due to diversification,
limited use of leverage and high charter cover.
·
Capital re-allocation based on rigorous
fundamental analysis, industry knowledge and ESG: divested
containerships and older bulkers to re-allocate capital into less
emission-intensive bulkers and tankers.
·
The operating emissions intensity of the
portfolio was reduced by c.41% between 2019 and 2023.
·
Further emissions reduction expected from Energy
Saving Device ("ESD") retrofits, completed on nine vessels and
planned for four other vessels during their next docking. Eight
other vessels are already fuel-efficient relative to their
peers.
As per the Company's share price
discount management policy, the Company repurchased 11,386,000
shares during the FY and has therefore purchased a total of
17,546,000 of its own shares from 4Q22 until the end of the
FY.
Tufton Investment Management
Holding Limited Group ("Tufton Group") Stakeholders held ~4.9% of
the issued share capital in the Company at the end of June 2024 (FY
2023: ~3.7%).
Mid-Term strategy review
In January 2024, the Board
reviewed the Company's performance since inception and requested
the Investment Manager to conduct a study of the opportunity set
and strategy for the Company.
The review concluded that the
correct strategy for SHIP over the medium term through to 2030 is
to continue investing in fuel-efficient secondhand vessels to
maximise shareholder returns. In addition, the review concluded to
start divesting the Company's portfolio of assets from 2028, well
before the decarbonisation of shipping accelerates. The review
highlights are documented on page 2.
Compulsory Redemption
On 15 August 2024, the Company
announced the return of approximately US$31.5m by way of the
compulsory Redemption of up to 20,326,211 Shares. The Redemption
was effected at a price of US$1.550 per Share, being the NAV per
Share as at 30 June 2024, pro-rata to holdings of Shares on the
Company's register of members at close of business on 14 August
2024 (the "Redemption Record Date"), being the record date for the
Redemption. The record date for the Company's quarterly dividend
for the three months ending 30 June 2024 (the "2Q24 Dividend") was
26 July 2024 (the "Dividend Record Date"),
which precedes the record date for the Redemption. Accordingly,
Shareholders were eligible to receive both the 2Q24 Dividend and
proceeds from the Compulsory Redemption on the basis they continue
to own Shares on each of the 2Q24 Dividend Record Date and the
Redemption Record Date respectively.
Amendments to Investment Policy
Before June 2024, the Company's
existing Investment Policy restricted it from making new
investments that would result in any shipping Segment (i.e.
Tankers, General Cargo, Containerships and Bulkers) accounting for
more than 50% of NAV.
The Board sought and obtained
Shareholder approval to ease the above investment restriction such
that:
·
the restriction on making further investments
that would result in a shipping Segment accounting for more than
50% of NAV will only apply where the Company is invested in at
least three shipping Segments; and
·
where the Company is only invested in two
shipping Segments: (i) no further investment may be made that
results in any shipping Segment accounting for more than 75% of
NAV; and (ii) if the Tankers shipping Segment accounts for more
than 50% of NAV and exposure is only to a single Tanker sub-segment
(i.e. crude tankers, product tankers, chemical tankers, gas
tankers), no further investment may be made in such tankers
sub-segment.
The Company's share price has
increased by c.37% between the beginning of 2024 and the end of
August 2024. The Investment Manager believes the strong performance
signals investor endorsement of the Company's performance as well
as its disciplined approach to capital allocation.
The Assets
The Company's portfolio as at 30
June 2024:
SPV+
|
Vessel Type and Year of Build
|
Acquisition Date
|
Expected end of charter period**
|
Anvil
|
Handysize bulker built
2013
|
September 2021
|
April 2025
|
Auspicious
|
Handysize bulker built
2015
|
February 2022
|
August 2024
|
Awesome
|
Handysize bulker built
2015
|
January 2022
|
September 2024
|
Charming
|
Handysize bulker built
2015
|
June 2022
|
August 2025
|
Cocoa
|
Handysize product
tanker
built 2008
|
October 2020
|
January 2026
|
Courteous
|
MR product tanker built
2016
|
December 2022
|
December 2026
|
Dachshund
|
Handysize product
tanker
built 2008
|
February 2020
|
NA - divestment
closed on 1 July 2024
|
Daffodil
|
Handysize product
tanker
built 2008
|
October 2020
|
March 2026
|
Exceptional
|
MR product tanker built
2015
|
April 2022
|
December 2025
|
Golding
|
25,600 DWT stainless steel
chemical tanker built 2008
|
April 2021
|
NA - vessel is employed in a
pool
|
Idaho
|
Ultramax bulker built
2011
|
July 2021
|
December 2024
|
Laurel
|
Handysize bulker built
2011
|
July 2021
|
December 2024
|
Marvelous
|
MR product tanker built
2014
|
July 2022
|
November 2026
|
Masterful
|
Handysize bulker built
2015
|
April 2022
|
September 2024
|
Mayflower
|
Handysize bulker built
2011
|
June 2021
|
July 2024
|
Mindful
|
MR product tanker built
2016
|
December 2022
|
December 2026
|
Neon
|
Mid-sized LPG carrier built
2009
|
July 2018
|
August 2025
|
Octane
|
MR product tanker built
2010
|
December 2018
|
October 2025
|
Orson
|
20,000 DWT stainless steel
chemical tanker built 2007
|
July 2021
|
NA - vessel is employed in a
pool
|
Rocky IV
|
Handysize bulker built
2013
|
September 2021
|
December 2024
|
Sierra
|
MR product tanker built
2010
|
December 2018
|
November 2025
|
Notes:
+ SPV that owns the
vessel.
** Based on our assessment of the
prevailing market conditions at 30 June 2024.
The market for secondhand ships is
liquid with >US$40 billion worth of annual transactions in 2022
and 2023. The charter-free and associated charter values of the
Company's standard vessels are calculated using the online
valuation platform provided by VesselsValue which utilises
transaction data as well as other market data to estimate
charter-free values. The Company's NAV is, in effect, proven by
recent market transactions. During the FY, the Company agreed to
divest Pollock and Dachshund at a 3.1% premium to the two vessels'
most recent holding NAV. Divestments to date have been in aggregate
c.6% above NAV.
As at 30 June 2024, the Company
owned twelve tankers as follows:
Tankers
|
Employment
|
Comments
|
Octane and Sierra
|
Time chartered ("TC") to an
investment grade oil major
|
The charterer exercised their
optional periods until October 2025 and November 2025
respectively.
|
Dachshund, Cocoa, Daffodil, Marvelous, Mindful and
Courteous
|
TC to a major commodity trading
and logistics company
|
Dachshund was divested and
delivered to its new owners on 1 July 2024
|
Exceptional
|
TC to a leading tanker shipping
company
|
-
|
Orson and Golding
|
Employed in a leading chemical
tanker pool
|
As described in the Company's
Prospectus, a pool is a revenue sharing structure run by a
specialist third party or another ship owner.
|
Neon
|
Operates on a bareboat charter
under which the Company provides only the vessel to the charterer,
who is responsible for crewing, maintaining, insuring, and
operating it.
|
As at 30 June 2024, the
Average Charter Length of the tankers
(excluding Orson and Golding) was 1.80 years (FY 2023: 2.0
years).
As at 30 June 2024, the Company
owned nine bulkers, as follows:
Bulkers
|
Employment
|
Comments
|
Awesome and Laurel
|
TC to a leading merchant and
processor of agricultural goods
|
After the end of its index-linked
charter to an operator of bulkers in August 2024, Awesome commenced
another index-linked charter for 9-12 months at a slightly higher
rate than previously. Laurel's time charter was extended by 4-7
months from May 2024 at a slightly lower rate than
previously.
|
Anvil and Auspicious
|
TC to an operator of
bulkers
|
Anvil's index-linked charter was
extended by 9-11 months commencing from May 2024 at a slightly
higher rate than previously. After the end of its index-linked
charter in July 2024, Auspicious commenced a time charter for 5-7
months at a higher rate than previously.
|
Idaho and Mayflower
|
TC to a leading owner and operator
of bulkers
|
Mayflower's time charter was
extended by 4-6 months from March 2024 at a much higher rate than
previously.
|
Charming and Masterful
|
TC to a leading merchant and
processor of agricultural goods
|
Charming's index-linked charter
was extended by 10-12 months commencing from August 2024 at the
same rate as previously whilst Masterful's time charter was
extended by 3 months from September 2024 at a slightly lower rate
than previously.
|
Rocky IV
|
TC to an owner and operator of
bulkers
|
Rocky IV's time charter was
extended by 3-6 months from June 2024 at a much higher rate than
previously.
|
At 30 June 2024, the Average
Charter Length on our bulkers was 0.35 years (FY 2023: 0.22 years).
We have chosen to employ many of our bulkers on index-linked
charters in anticipation of ongoing market improvement. Please see
the Shipping Market section of this Report.
The Company's fleet across all
segments performed well. Marvelous, Mindful, Courteous,
Exceptional, Awesome, Auspicious, Masterful and Charming are in the
top quartile of fuel efficiency in their market
segments.
The Shipping Market
The Company aims to provide
investors with an attractive level of regular and growing income
and capital returns through investing in secondhand commercial
sea-going vessels, with the portfolio diversified across the main
segments of shipping including tankers, bulkers, general cargo and
containerships. The ClarkSea Index, a broad vessel earnings
indicator from Clarksons Research, ended the FY at US$28,325/day,
c.31% higher than at the end of June 2023.
The combination of price inflation
(commodity, wage), reduced shipyard capacity and tightening
environmental specifications continue to boost newbuild prices
leading to higher values for secondhand vessels. The Clarksons
Research Newbuilding Price Index rose 9.5% during the FY and has
risen c.49% since the end of 2020. Shipyard capacity fell by ~35%
in the 2010s and is now expanding only incrementally (mainly in
China). Slot availability is very tight. Shipyard orderbook forward
cover (i.e. the number of years required to deliver the orderbook
at the output level of the last 12 months) was 3.4 years at the end
of the FY (FY 2023: 3.7 years). Global seaborne trade is expected
to grow by c.5% in 2024, exceeding the long-term trend rate of c.3%
CAGR between 2003 and 2023 mainly due to the effect of disruption
of traditional trade routes.
Trade routes tend to be optimised
across the industry, so disruption of traditional trade routes
often results in diversion through longer routes which reduces the
available vessel capacity. During the FY, transit through two key
global shipping routes, the Panama Canal and the Suez Canal, faced
disruption. Vessel transit through the Panama Canal was disrupted
from late October due to an ongoing drought while transit through
the Suez Canal was disrupted as Houthi rebel attacks on vessels in
the Red Sea escalated from late November. Disruption of canal
transit causes re-routing of cargo via alternate routes which
typically take much longer and add to shipping demand. For example,
disruption of transit through the Suez Canal is estimated to add
c.3% to global shipping demand growth predominantly due to
re-routing around the Cape of Good Hope. Impact of disruption of
transit through the Panama Canal is harder to measure with a larger
variety of alternate (often land-based) routes.
As of June 2024, vessel transit
through the Panama Canal is returning to normal while traffic via
the Suez Canal remains at very low levels due to the ongoing risk
of attacks. This section utilises data from the Tufton Real-Time
Activity Capture System ("TRACS") which analyses satellite data to
track the international shipping fleet by the major
segments.
TRACS uses the draught of each
vessel as a proxy for its utilisation and thereby enables us to
have a close to real-time measure of shipping demand. Other
research data used in this section is from Clarksons Research,
unless specified otherwise.
Tankers
Product tanker demand growth is
benefiting from refinery capacity expansions in Asia and the Middle
East. Additionally, demand growth accelerated from mid-2022 as the
war in Ukraine partially replaced some demand for short-haul
product tanker cargoes with demand for long-haul cargoes:
increasing Russian exports to Asia and increasing European imports
from non-Russian suppliers including the Middle East, the US and
Asia.
Over the FY, demand growth was
further boosted by the disruption of vessels transiting the Suez
Canal because of attacks by the Houthi rebels on vessels In the
Gulf of Aden. The disruption of normal traffic through the Suez
Canal resulted in vessel re-routing around the Cape of Good Hope,
increasing voyage duration. The longer voyage time added to
tonne-mile demand and further tightened the Product Tanker
market.
The strong fundamentals in the
product tanker segment have attracted capital to newbuild
investments. The product tanker orderbook rose from c.9% of fleet
as at the end of June 2023 to 16% of fleet at the end of the FY. A
significant portion of the new orders are focused on the larger
Long Range segment. The orderbook for crude tankers remained
relatively low at c.9% of fleet at the end of the FY. Despite the
increase in the orderbook, the supply side for product tankers
remains supportive as c.15% of the product tanker fleet is >20
years old.
Older vessels are typically less
fuel-efficient and less flexible operationally so tend not to be
favoured by top-tier charterers such as oil majors and global
trading firms. Further, due to limitations in available yard
capacity at quality yards the delivery cadence of the recent new
orders is distributed over 3+ years resulting in manageable fleet
growth relative to demand growth. Over the FY, 1-year time charter
rates for MR product tankers rose c.17% to
c.US$34,100/day.
The chemical tanker market also
benefits from good supply-side fundamentals with an orderbook c.10%
of fleet and strong demand growth forecast compared to c.18% of the
fleet >20 years old. 25-30% of MR product tankers can engage in
the chemicals/vegetable oil trade. The chemical tanker market
benefits as MR product tankers shift to the tight product tanker
market. The Company's chemical tankers benefit from this trend as
they are employed in a revenue-sharing pool and have spot market
exposure. 2Q24 Chemical tanker pool earnings for 19.9k dwt vessels
averaged c.$23,800/day.
Bulkers
The bulker market strengthened
during the FY due to a combination of improving demand growth and
the impact of reduced transit through the Panama Canal. Variations
in Chinese demand continue to present a near term downside risk as
Chinese demand is an important part of the bulker
market.
From the end of July 2023, we
chose to employ some of our bulkers on index-linked charters in
anticipation of market improvement. Over the FY, 1-year time
charter rates for Handysize bulkers rose c.34% to c.US$14,360/day.
The bulker orderbook rose from the very low level of c.8% of fleet
in June 2023 to 9.5% of fleet at the end of the FY. Despite the
increase in the orderbook, the supply side for bulkers and small
bulkers (10k-69.9k dwt) in particular looks supportive with c.8.5%
of the total Bulker fleet and c.12% of the small bulker fleet
>20 years old. Also, due to limitations in available yard
capacity at quality yards the delivery cadence of the recent new
orders is distributed over 3+ years resulting in manageable fleet
growth relative to demand growth.
Across the major segments, the
combination of tightening environmental regulations and low
shipyard capacity suggests newbuild prices of bulkers and tankers
will remain high thereby also supporting secondhand prices in the
medium term. Global shipyard capacity started increasing from
recent lows but remains c.30% below the 2011 peak. Newbuild prices
are supported by wage inflation for skilled labour in the major
shipbuilding nations.
Further, latest newbuild designs
incorporate more flexible machinery and storage systems to handle
multiple fuel types to reduce emissions. These further increase
newbuild prices. Environmental regulations from the IMO to measure
and improve vessel carbon emission intensity incentivise lower
speeds resulting in reduced shipping capacity, aiding the
supply-side adjustment. The combination of supply constraints and
high replacement costs creates an attractive investment environment
for fuel-efficient secondhand vessels in the medium term. The
Company's fuel-efficient vessels are likely to benefit.
Environmental, Social and Governance Report
The Investment Manager, Tufton,
emphasises the principles of Responsible Investment in the
management of the Company's assets through awareness and
integration of ESG factors into our investment process in the
belief that these factors have a positive impact on long-term
financial performance. We recognise that our first duty is to act
in the best financial interests of the Company's Shareholders and
to generate attractive financial returns against acceptable levels
of risk, in accordance with the objectives of the Company. We have
been a signatory of the United Nations Principles of Responsible
Investment ("UN PRI") since December 2018 and have a Responsible
Investment policy statement which is available on Tufton's website.
In the 2023 UN PRI signatory assessment, Tufton achieved scores
higher than our peer group in all three assessment categories.
Please see the
2023 UN PRI scoring methodology for details.
The Company's Board does not have
a separate ESG committee but collectively reviews progress against
the policy statement as part of the Company's annual Sustainability
Report which will be publicly available on the Company's website
(www.tuftonoceanicassets.com).
ESG highlights of the financial
period include:
·
The Company's operating emissions intensity, as
measured by the Energy Efficiency Operating Index ("EEOI") improved
by c.11 % during 2023 primarily because of capital re-allocation
but also from ESD retrofits.
·
ESDs retrofits have been completed or
substantially completed on nine vessels. We have started receiving
the efficiency hire rate premia on eight of the vessels and expect
to start receiving the premium on one vessel from 2H24.
We aim to minimise coal carriage
on the Company's vessels. In June 2023, Tufton committed to
limiting revenues from transportation of thermal coal to 5% of the
Company's total consolidated revenues. In 2H23, one bulker (Anvil)
carried thermal coal during one voyage and in 1H24, Idaho and Anvil
had voyages with coal carriage. Over the FY, revenues from thermal
coal carriage corresponded to c.1.2% of SHIP consolidated
revenues.
Principal Risks and Uncertainties
The Board has carried out a robust
assessment to identify the principal and emerging risks that could
affect the Company, including those that would threaten its
business model, future performance, solvency or liquidity.
Principal risks are those which the Directors consider have the
greatest chance of materially impacting the Company's objectives.
The Board has adopted a "controls" based approach to its risk
monitoring which requires each of the relevant service providers,
including the Investment Manager, to establish the necessary
controls to ensure that all identified risks are monitored and
controlled in accordance with agreed procedures where
possible.
The Board of Directors receives
periodic updates on principal risks at their meetings and has
adopted its own control review to ensure that risks are monitored
appropriately, mitigation plans are in place, and that emerging
risks are identified and assessed. The Directors also carry out a
regular check on the completeness of risks identified, including a
review of the risk register. The Board believes that the risk
register is comprehensive and addresses all risks that are
currently relevant to the Company. Whilst the Investment Manager
monitors and puts in place controls to mitigate risks, risk and
uncertainty cannot be eliminated.
In addition to the established
principal risks, in the current period, the Board considered the
conflict in the Middle East and the actions of the Houthi rebels in
the Red Sea in the context of whether this situation indicated the
existence of an emerging risk for the Company. After proper
consideration of the situation and its possible economic impacts,
the Board concluded that given the nature of the vessels currently
held it was unlikely to materially impact the Company's results or
operations.
The Board consider that the above
risk and the emerging risks identified in prior periods are
adequately addressed by the overall risk control and monitoring
processes in place.
The following table shows the
Board's view of the principal risks to the business and efforts to
mitigate those risks. The Board considers that no additional
mitigation steps are required at this time.
Underlying cause of risk or uncertainty
|
Objective impacted
(in what way)
|
Control or mitigation implemented
|
Demand for shipping may decline,
either because of a reduction in international trade (e.g., "trade
wars") or because of general GDP growth slowing.
|
Capital growth
Vessel values
Loss of Income
|
This risk cannot be controlled,
but is mitigated by:
-
diversification to reduce reliance on any
particular segment, sector or geography;
-
focus on fleet vessel quality and specifications
to improve utilisation;
-
longer term employment strategy to reduce market
exposure; and
-
ultimately, lower charter rates could be accepted
in order to ensure the employment of the vessels.
|
Failure of, or unwillingness of, a
vessel charterer to meet charter payments.
|
Liquidity
Dividends
Loss of income
|
Charter counterparty credit
worthiness is subjected to extensive checks prior to and throughout
a charter. In the unlikely event of default the Board believes
there will be no issues finding alternative employment for any of
the ships in the portfolio at prevailing market rates.
|
Vessel maintenance or capital
expenditure may be more costly than expected due to delays,
resource constraints or inflation generally.
|
Capital growth
Dividends
Liquidity
Vessel values
|
The Company monitors maintenance
and capital expenditure through experienced technical managers.
Assessments of expected capital expenditure are made prior to
investing in a vessel.
It is important to note that
whilst the Company's fleet has experienced increases beyond
budgeted costs, such increases were not so significant as to
undermine the initial investment decision.
|
A vessel may be lost or
significantly damaged.
|
Capital growth
Vessel values
|
Measures to mitigate operational
risks are included in the employment 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 have
enforceable title to the vessels purchased.
|
Liquidity
Vessel values
|
The Company has engaged a very
experienced Investment Manager who is responsible for establishing
such title. This is then monitored by the Administrator and the
Depositary on behalf of the Board using publicly available
information.
|
Failure of, or unwillingness of,
other non-charterer counterparties to meet their
obligations.
|
Capital growth
Loss of income
|
The Board relies on the Investment
Manager and Asset Manager, who in turn rely on third party service
providers for performance of services integral to the operations of
the Company.
The Asset Manager constantly
monitors the performance of all the Company's key operational
service providers, especially the technical managers and the
administrator.
|
Failure of, or unwillingness of,
other non-charterer counterparties to meet their obligations
(continued).
|
|
SPV operating accounts are held
with one or more unrated banks, because those banks have a strong
track record of facilitating shipping transactions/operations.
Exposures to such banks are limited to US$10m per bank in total for
all SPVs.
Investable funds are invested with
banks of an A- (or equivalent) or higher credit rating as
determined by an internationally recognised rating
agency.
Credit ratings and overall limits
are monitored by the Administrator, who reports exceptions and
exposure levels to the Board.
|
Failure of systems or controls in
the operations of the Investment Manager, Asset Manager or the
Administrator and thereby of the Company including
Cybersecurity.
|
Capital growth
Loss of assets Reputation or
regulatory permissions and resulting fines
|
This risk cannot be directly
controlled but the Management Engagement Committee regularly review
the performance of the service providers and their internal
controls through making enquiries, and inspection visits. Wherever
possible and relevant, the Investment Manager purchases insurance
to mitigate operational risks such as cyber security.
|
Failure to comply with sanctions
applicable to vessels or their cargo.
|
Capital growth
Loss of assets Reputation or
regulatory permissions and resulting fines
|
The Investment Manager assesses
the bona fides of prospective charterers before contracts are
entered into and also monitors the operations of the vessels owned
by the Company's SPVs to ensure that all applicable sanctions are
complied with.
|
The Company shares trade at
discount to the underlying NAV.
|
Capital growth
Liquidity
|
The Board monitors the level of
both the absolute and sector relative discount at which the shares
trade. The Company has authority, when it deems appropriate, to buy
back its existing shares to enhance the NAV per share for remaining
shareholders and to reduce the absolute level of discount and
discount volatility.
The Board has taken various
actions over the FY to address the discount and is encouraged to
note that the discount of NAV of the Company's shares narrowed from
~27% in June 2023 to ~17% in August 2024.
|
Environmental damage,
contamination and/or pollution caused by a vessel owned by the
Company's SPVs.
|
Liquidity
Vessel values
Loss of income
Reputation or regulatory
permissions and resulting fines
|
The Investment Manager arranges
for environmental due diligence in respect of all vessels
considered for acquisition by the Company's SPVs to identify
potential sources of pollution, contamination or environmental
hazard for which that vessel may be responsible and to assess the
status of its environmental regulatory compliance.
The Asset Manager maintains a
detailed manual that documents best practice operating procedures
to be followed by crew and technical staff. The Asset Manager
reviews the environmental performance of key service providers and
all vessels and reports its findings to the Investment Manager
annually.
Protection and indemnity mutual
insurance overseen by the Asset Manager provides cover of up to
US$1 billion per incident for oil pollution damage
compensation.
The Investment Manager is
committed to Responsible Investment and has identified ESG risk
factors relevant to the industry in its Responsible Investment
Policy statement. The Board reviews both the Company's and the
Investment Manager's policy and its implementation at least
annually.
Please see the Investment
Manager's Sustainability Report on the Company's website
(www.tuftonoceanicassets.com)
for details.
As part of their review of the
Company's operational risks and controls, which takes place on at
least an annual basis, the Board of Directors consider ESG specific
risks and how these may be mitigated. This includes receiving
regular reports and updates from the Investment Manager on the
measures put in place by them to ensure the Company carries out its
activities in an environmentally sustainable and responsible
manner.
|
Corporate Summary
The Company is a closed-ended
investment company, limited by shares, registered and incorporated
in Guernsey under the Companies Law on 6 February 2017, with
registration number 63061. The Company is a Registered Closed-ended
Collective Investment Scheme regulated by the GFSC pursuant to the
Protection of Investors (Bailiwick of Guernsey) Law 2020, as
amended and the Registered Closed-ended Investment Scheme Rules
2021.
As at 30 June 2024, the Company
had 291,082,541 shares in issue, all of which are admitted to the
Specialist Funds Segment of the Main Market of the London Stock
Exchange under the ticker "SHIP", ISIN: GG00BDFC1649, and SEDOL:
BDFC164. During the FY, the Company bought
back 11,386,000 shares. Effective 15
August 2024, the Company trades under new ISIN: GG00BSFVPB94, and SEDOL: BSFXP71 post completion of the
compulsory Redemption.
The Company makes its investments
through LS Assets Limited ("LSA") and other underlying SPVs, which
are ultimately wholly owned by the Company. LSA is registered and
was incorporated in Guernsey in accordance with the Companies Law
on 18 January 2018 with registered number 64562. The underlying
SPVs owned by LSA are incorporated in the Isle of Man, in
accordance with the Isle of Man Companies Act 2006 (the "IOM
Companies Act").
The Company controls the
investment policy of each of LSA and the wholly owned SPVs to
ensure that each will act in a manner consistent with the
investment policy of the Company. The Company refers to each vessel
by the underlying SPV name rather than the actual name of the
respective vessel for confidentiality purposes.
The Investment Manager is Tufton
Investment Management Ltd, a company incorporated in England and
Wales with registered number 1835984, which is regulated by the FCA
and has been authorised to act as a Full Scope Registered UK AIFM
under AIFMD. Tufton Investment Management Ltd has been a specialist
investment manager in the maritime and energy markets since 2000
and has been focused on financial services to these industries
since its inception in 1985.
Corporate Governance Statement
The Board of Tufton Oceanic Assets
Limited has considered the Principles and Provisions of the AIC
Code. The AIC Code addresses the Principles and Provisions set out
in the UK Corporate Governance Code (the "UK Code"), as well as
setting out additional Provisions on issues that are of specific
relevance to the Company.
The Board considers that reporting
in accordance with the Principles and Provisions of the AIC Code,
which has been endorsed by the Financial Reporting Council and the
Guernsey Financial Services Commission, provides more relevant
information to shareholders. The Company has complied with the
Principles and Provisions of the AIC Code (except as set out
below).
The Board confirms that it has
reviewed the Company's systems of risk management and internal
control for the year ended 30 June 2024, and to the date of the
approval of this annual report and audited financial statements.
The main features of these systems are segregation of activity
between service providers and critical review and cross checking by
both those service providers and the Board. For further details of
the key risks and uncertainties the Directors believe the Company
is exposed to together with the policies and procedures in place to
monitor and mitigate these risks, please refer to pages 20 to 23 of
the annual report and audited financial statements.
The AIC Code is available on the
AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code
adapts the Principles and Provisions set out in the UK Code to make
them relevant for investment companies.
Areas of Exception
Considering that the Board
comprises solely of independent Directors, it has decided not to
appoint a senior independent director The Chairman of the Audit Committee
fulfils the role of the senior independent director, which includes
the following:
·
supporting the Chairman in his role;
·
acting as an intermediary for other Directors
where necessary;
·
being available for shareholders and other
non-executives to discuss any questions or concerns; and
·
assisting with the performance evaluation and
succession planning of the Chairman's role.
The Board has not deemed it
necessary to appoint a separate nomination committee and therefore
the role typically undertaken by such a committee is currently
conducted by the Board as a whole. The rules governing the
appointment and replacement of Directors are set out in the
Company's Articles.
The Directors have overall
responsibility for reviewing the size, structure and skills of the
Board and considering whether any changes are required, or new
appointments are necessary to meet the requirements of the
Company's business or to maintain a balanced Board.
Similarly, the Company does not
have a separate remuneration committee, as the Board as a whole
fulfils the function of a remuneration committee, which includes
the review on at least an annual basis of the remuneration of the
Directors in accordance with the Company's remuneration policy and
market information.
The Listing Rules regarding
diversity do not directly apply to the Company since it is a member
of the Specialist Fund Segment, however, the Board is currently 40%
female. It is important to preserve the current knowledge and
experience of the Board but further consideration will be given on
a voluntary basis to diversity guidelines during the course of
implementing any future succession plans.
The Board has additionally
formulated the following policies and procedures to assist them to
comply with the AIC Code:
Independence
All the non-executive Directors
are currently considered by the Board to be independent of the
Company, Investment Manager and the Tufton Group and have been
Directors for eight years or less. The Board's current policy on
tenure, including that of the Chairman, is that continuity and
experience are considered to add significantly to the strength of
the Board. New Directors receive an induction from the Investment
Manager and the Administrator
on joining the Board, and all Directors receive
other relevant training as necessary on their on-going
responsibilities in relation to the Company.
Environmental, Social and Governance
For further details of the
Company's approach to ESG matters, please see the Report of the
Directors and the Investment Manager's Report, together with the
Company's Sustainability Report which is published on its website,
(www.tuftonoceanicassets.com).
Diversity and Inclusion Policy
The Company supports the AIC Code
provision that the Board should consider the benefits of diversity
when making appointments and is committed to ensuring it receives
information from the widest range of perspectives and backgrounds.
The Board is committed to creating a diverse and inclusive
environment where all individuals feel respected, and where their
voices are heard. The Board believes that diversity of gender, age,
ethnicity and personal attributes, amongst others, contribute to a
balanced and more productive Board.
The Board is committed to being
non-discriminatory and firmly believes in equal opportunities for
all, with board appointments being made on merit against a set of
objective criteria.
However, while the Board agrees
diversity should be sought when making appointments, it does not
consider that this can be best achieved by establishing specific
quotas and targets and appointments are therefore based wholly on
merit. Accordingly, when changes to the Board are required, due
regard is given to both the need for and importance of diversity
and to a comparative analysis of candidates' qualifications and
experience.
A pre-established, clear,
neutrally formulated and unambiguous set of criteria are utilised
during the appointment process to determine the most suitable
candidate for the specific position sought. In each case, the Board
ensures that candidates are considered from a wide range of
backgrounds.
UK Companies Act 2006 - Section 172
Statement
Whilst directly applicable only to
UK domiciled companies, the intention of the AIC Code which is
followed by the Company is that the following matters set out
in section 172 of the UK Companies Act, 2006 are reported on by all
companies, irrespective of domicile, provided this does not
conflict with local company law.
Therefore, through adopting the
AIC Code, the Board acknowledges its duty to apply and demonstrate
compliance with section 172 of the UK Companies Act 2006 and to act
in a way that promotes the success of the Company for the benefit
of its shareholders as a whole, having regard to (amongst other
things):
·
the consequences of any decision in the long
term;
·
the need to foster business relationships with
suppliers, customers and others;
·
the impact of the Company's operations on the
community and the environment;
·
the desirability of the Company maintaining a
reputation for high standards of business conduct; and
·
the need to act fairly as between members of the
Company.
The Board regularly reviews the
Company's principal stakeholders and how the Company engages with
them. Stakeholder voices are considered at Board level and
reflected in board decision making through reporting provided to
the Board by the Brokers and the Investment Manager, together with
engagement with stakeholders themselves either directly or through
the above-mentioned parties.
The Company is an externally
managed investment company, has no employees, and as such is
operationally quite simple. The Board does not believe that the
Company has any material stakeholders other than those set out in
the following table.
Investors
|
Service providers
|
Community and environment
|
Issues
that matter to them
|
Performance of the
shares.
Growth of the Company.
Liquidity of the
shares.
Valuation of vessels.
|
Reputation of the
Company.
Compliance with laws and
regulations.
Remuneration.
|
Compliance with laws and
regulations.
Impact of the Company and its
activities on third parties.
|
Engagement process
|
Annual General Meeting.
Frequent meetings with investors
by Brokers and the Investment Manager and subsequent reports to the
Board.
Quarterly factsheets.
Key Information
Document.
|
The main two service providers -
Tufton Investment Management Ltd (Investment Manager)
and Apex Administration
(Guernsey) Limited ("Administrator") -
engage with the Board in face-to-face meetings quarterly, giving
them direct input to Board discussions.
Where face-to-face contact has not
been possible engagement has continued via video conferencing
services such as Microsoft Teams.
All service providers are asked to
complete a questionnaire annually which includes feedback on their
interaction with the Company, and the Board ordinarily undertakes
an annual visit to the offices of the Investment Manager and its
associated companies in London, Cyprus and the Isle of
Man.
|
The Company and its SPVs
themselves have only a very small footprint in their local
communities and only a very small direct impact on the
environment.
However, the Board acknowledges
that it is imperative that everyone contributes to local and global
sustainability.
The activities of the Company in
this regard, and in particular concerning the vessels owned, are
reflected within the Company's Sustainability Report and the
Responsible Investment Policy of the Investment Manager.
|
Rationale and example outcomes
|
Clearly investors are the most
important stakeholder for the Company. Most of our engagement with
investors is about "business as usual" matters, but has also
included discussions about the discount of the share price to the
NAV.
The major decisions arising from
this have been -
· Seeking to ensure long-term value and opportunities to
realise value through sales of vessels.
· Buying back shares in an attempt to reduce or at least
contain the share price discount.
· Carrying out a strategy review, the results of which were
announced on 17 January 2024.
The Board has continued to focus
on the reliability of the valuation of vessels, a key priority for
shareholders. As a result, the Board placed greater emphasis on
reviewing the output from the VesselsValue system used and charter
rates to value most of the Company's fleet and discount rates used
in valuing the remaining vessels.
|
The Company relies on service
providers (including the Investment Manager, Asset Manager,
Administrator and technical managers) entirely as it has no systems
or employees of its own.
During the year a decision was
made to retain some cash rather than distribute all available funds
to investors through compulsory Redemption. This was to ensure that
the Company had sufficient capital to fulfil any recommendations
made by the Investment Manager such as acquiring new
vessel.
The Board always seeks to act
fairly and transparently with all service providers, and this
includes such aspects as prompt payment of invoices.
|
The Board and the Investment
Manager work together to ensure that ESG factors are carefully
considered and reflected in investment decisions, and that vessel
operators are influenced positively. See page 19 for details of the
Company's approach in this area.
Board members do travel, partly to
meetings in Guernsey, and partly elsewhere on Company business,
including for the annual due diligence visits to London, Cyprus and
the Isle of Man. The Board considers this essential in overseeing
service providers and safeguarding stakeholder interests.
Otherwise, the Board seeks to minimise travel using video
conference calls whenever good governance permits.
|
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 FY which give a true and fair view, in accordance with
applicable law and regulations, of the state of affairs of the
Company and of the profit or loss of the Company for that
year.
Companies Law requires the
Directors to prepare financial statements for each FY. Under that
law the Directors have elected to prepare the financial statements
in accordance with IFRS accounting
standards as issued by the International Accounting Standards Board
("IASB").
In preparing financial statements
the Directors are required to:
·
select suitable accounting policies and then
apply them consistently;
·
make judgements and estimates that are reasonable
and prudent;
·
state whether applicable accounting standards
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
·
prepare the financial statements on a going
concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Company's website is
maintained by the Investment Manager in co-operation with Hudnall
Capital. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
The Directors are responsible for
keeping proper accounting records which disclose with reasonable
accuracy at any time, the financial position of the Company and
enabling them to ensure that financial statements comply with the
Companies Law. The Directors are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
Each of the Directors confirms
that, to the best of their knowledge:
·
they have complied with the above requirements in
preparing the financial statements;
·
there is no relevant audit information of which
the Company's Auditor is unaware;
·
all Directors have taken the necessary steps that
they ought to have taken to make themselves aware of any relevant
audit information and to establish that the Auditor is aware of
said information;
·
the financial statements, prepared in accordance
with IFRS Accounting Standards and applicable laws, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company; and
·
the Annual Report includes a fair and balanced
review of the development and performance of the business and the
financial position of the Company, together with a description of
the principal risks and uncertainties that it faces.
The AIC Code, as adopted by the
Company, also requires Directors to ensure that Annual Reports and
Audited Financial Statements are fair, balanced and understandable.
In order to reach a conclusion on this matter the Board has
requested that the Audit Committee advises on whether it considers
that this Annual Report and Audited Financial Statements fulfil
these requirements. The process by which the Audit Committee has
reached these conclusions is set out in the Audit Committee Report
on pages 47 to 49.
Furthermore, the Board believes
that the Annual Report and Audited Financial Statements provide the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
Having taken into account all
matters considered by the Board and brought to the attention of the
Board for the year ended 30 June 2024, as outlined in the Corporate
Governance Statement and the Audit Committee Report, the Board has
concluded that the Annual Report and Audited Financial Statements
for the year ended 30 June 2024, taken as a whole, are fair,
balanced and understandable and provide the information required to
assess the Company's performance, business model and
strategy.
…………………………
…………………………
Rob
King
Stephen Le Page
Director
Director
Report of Directors
The Directors present their Annual
Report and the Audited Financial Statements of the Company for the
year ended 30 June 2024.
The Company was registered in
Guernsey on 6 February 2017 and is a registered closed-ended
investment scheme under the POI Law. The Company's shares were
listed on the Specialist Funds Segment of the Main Market of the
London Stock Exchange on 20 December 2017 under the ticker
SHIP.
Investment Objective and
Policy
The Company's investment objective
is to provide investors with an attractive level of regular and
growing income and capital returns through investing in secondhand
commercial sea-going vessels. The Board monitors the Investment
Manager's activities through strategy meetings and discussions as
appropriate. The Company has established a wholly-owned subsidiary
that acts as a Guernsey holding company for all its investments,
LSA, which is governed by the same Directors as the
Company.
On 17 January 2024 the Company
announced the results of a strategy review carried out by the Board
in conjunction with the Investment Manager. This review did not
result in any change to the above Objective or Policy, but did
clarify the basis on which capital allocation decisions would be
made through to the end of the decade.
All vessels acquired,
vessel-related contracts and costs will be held by SPVs domiciled
in the Isle of Man or other jurisdictions considered appropriate by
the Company's advisers. The Company conducts its business in a
manner that results in it qualifying as an investment entity (as
set out in IFRS 10: Consolidated Financial Statements) for
accounting purposes and as a result applies the investment entity
exemption to consolidation. The Company therefore reports its
financial results on a non-consolidated basis.
Subject to the solvency
requirements of the Companies Law, the Company intends to pay
dividends on a quarterly basis. The Directors expect the dividend
to grow, in absolute terms, modestly over the long term. The
Company raised its target annual dividend to US$0.10 per share
starting 1Q24 (previously US$0.085 per share).
The Company aims to achieve an IRR
of 12% or above (net of expenses and fees) on the Issue Price over
the long term.
Shareholder information
Up to date information regarding
the Company, including the quarterly announcement of NAV, can be
found on the Company's website, which is www.tuftonoceanicassets.com
and is maintained by the Investment
Manager.
The Company has a 30 June
financial year end.
Share issues and buybacks
The Company has not issued any
shares in the year ended 30 June 2024 nor in the period to 25
September 2024. On various occasions during the year ended 30 June
2024 the Company purchased a total of 11,386,000 shares at a
weighted average price of US$1.014. Since 1 July 2024 to 25
September 2024, 20,326,211 shares have been bought back via a
compulsory Redemption at an effective price of US$1.550.
Accordingly, the Company had
270,756,330 shares in issue on 15 August 2024 and as at the date of
signing these financial statements. All shares repurchased are held
in treasury.
Results and dividends
The Company's performance during
the year is discussed in the Chairman's Statement on page 3. The
results for the year are set out in the Statement of Comprehensive
Income on page 57.
The Directors of the Company who
served during the year and to date are set out on pages 35 to
36.
Directors'
interests
The Directors held the following
interests in the share capital of the Company either directly or
beneficially as at 30 June 2024, and as at the date of signing
these financial statements:
|
25 September
2024
|
30 June
2024
|
30 June
2023
|
Director
|
Shares1
|
Shares
|
Shares
|
R King
|
55,811
|
60,000
|
60,000
|
S Le Page
|
38,387
|
41,268
|
40,000
|
P Barnes
|
4,651
|
5,000
|
5,000
|
C Rødsaether
|
27,906
|
30,000
|
30,000
|
T Le Noury3
|
4,651
|
5,000
|
-
|
1
Further to the announcement on 15 August 2024 in relation to the
compulsory Redemption of the Company's ordinary shares, the
Directors have each had Shares redeemed.
The Directors fees are as
disclosed below:
|
|
30 June
2024
|
30 June
2023
|
Director
|
|
£
|
£
|
R King
|
|
43,500
|
39,305
|
S Le Page
|
|
40,500
|
36,000
|
P Barnes
|
|
37,750
|
33,525
|
C Rødsaether
|
|
37,000
|
33,525
|
T Le Noury3
|
|
25,135
|
-
|
|
|
|
| |
Directors'
Attendance
Attendance of Directors at each
meeting held during the year:
Director
|
Quarterly Board
meetings
|
Audit
Committee
|
Ad hoc
meetings
|
|
Held
|
Attended
|
Held
|
Attended
|
Held
|
Attended
|
R King
|
4
|
4
|
2
|
1
|
14
|
13
|
S Le Page
|
4
|
4
|
2
|
2
|
14
|
13
|
P Barnes
|
4
|
4
|
2
|
1
|
14
|
12
|
C Rødsaether
|
4
|
4
|
2
|
1
|
14
|
10
|
T Le Noury
|
2
|
2
|
1
|
1
|
8
|
7
|
Other Interests
Tufton Group related stakeholders
including current & former shareholders, employees, and
non-executive directors directly or beneficially held ~4.9% of the
issued share capital as at 30 June 2024 (FY 2023: ~3.7%).
Refer to note 15 for details on ordinary shares
held and note 7 for rights and obligations
of the Company's shares.
Share buyback and discount management
Subject to working capital
requirements, and at the absolute discretion of the Board, excess
cash may be used to repurchase shares. The Directors may implement
share buybacks at any time before the 90-day guideline set out in
the Prospectus where they feel it is in the best interest of the
Company and all shareholders. The Board will consider repurchasing
the Company's ordinary shares in the market if they believe it to
be in shareholders' interests as a whole and as a means of
correcting any imbalance between supply of and demand for the
shares.
The Company purchased 11,386,000
of its own shares at a weighted average price of US$1.014 per share
during the FY, for a total consideration of US$11,573,679. The
purchased shares are held in treasury. Refer to Note 7 for more
details. There were 17,546,000 shares held in treasury and
291,082,541 shares outstanding as at the end of the FY.
Companies Law allows companies to
hold shares acquired by way of market purchase as treasury shares,
rather than having to cancel them. These treasury shares may be
subsequently cancelled or sold for cash. Therefore, it is agreed
that any shares repurchased pursuant to the general authority
referred to above may be held by the Company in treasury, to the
extent permitted by Companies Law.
The Company wishes to operate a
buyback programme that is effective and also adds value for
shareholders. As such, unless authorised by shareholders, no shares
will be sold from treasury at a price less than the NAV per share
at the time of the sale unless they are first offered pro rata to
existing shareholders.
Change of Articles and Compulsory
Redemption
The Directors to allot and issue
shares, to grant rights to subscribe for or to convert any security
into shares and to make offers or agreements to allot and issue
equity securities (as defined in Article 5.1(a) of the Articles)
for cash and/or to sell Ordinary Shares held by the Company as
treasury shares as if the pre-emption rights contained in Article
5.2 of the Articles.
A resolution was passed by the
Company's shareholders at its Extraordinary General Meeting on 11
June 2024 to enable compulsory Redemptions of the Company's
ordinary shares. On 14 August 2024 the Company compulsorily
redeemed 20,326,211 shares at a price of US$1.550 per share for
close of business for cancellation, returning US$31.5m to
shareholders, paid on 28 August 2024. The Company had 270,756,330
shares outstanding as at the date of approval of these
accounts.
Board Responsibilities and Corporate
Governance
Please note the Corporate
Governance Statement on pages 25 to 29 forms part of this
report.
Board
Members
The Company's Board of Directors
comprises five independent non-executive Directors. The Board's
role is to manage and monitor the Company in accordance with its
objectives. The Board monitors the Company's adherence to its
investment policy, its operational and financial performance and
its underlying assets, as well as the performance of the Investment
Manager and other key service providers.
In addition, the Board has overall
responsibility for the review and approval of the Company's NAV
calculations and financial statements. It also maintains the
Company's risk register, which it monitors and updates on a regular
basis. The Directors of the Company who
served during the year are listed below.
Robert King, Chairman
Rob serves on a number of boards
as an independent non-executive director which includes an
International Stock Exchange listed fund, Golden Prospect Precious
Metals Limited (which also has a trading listing on the LSE).
Before becoming an independent non-executive director in 2011, he
was a director of Cannon Asset Management Limited and their
associated companies.
Prior to this he was a director of
Northern Trust International Fund Administration Services
(Guernsey) Limited (formerly Guernsey International Fund Managers
Limited) where he had worked from 1990 to 2007. He has been in the
offshore finance industry since 1986 specialising in administration
and structuring of offshore open and closed ended investment funds.
Rob is British and resident in Guernsey.
Stephen Le Page, Chairman of Audit
Committee
A chartered accountant and
chartered tax adviser. He was a partner at PricewaterhouseCoopers
CI LLP in the Channel Islands from 1994 until his retirement in
September 2013. He led that firm's audit and advisory businesses
for approximately ten years and for five of those years was the
Senior Partner (equivalent to Executive Chairman) for the Channel
Islands firm.
Stephen serves on a number of
boards as a non-executive director, including acting as chairman of
the audit committee for two other London listed funds, Volta
Finance Limited and Amedeo Air Four Plus Limited and one
International Stock Exchange listed company, Channel Islands
Property Fund Limited. Stephen is British and resident in
Guernsey.
Paul Barnes
An investment banker experienced
in asset backed, structured and project financing with wide
geographic exposure including Asia, Central/Eastern Europe, North
and Latin America and Scandinavia. Paul was managing director at
BNP Paribas and co-head of its EMEA Shipping and Offshore business
between 2010 and 2015. He was also head of risk monitoring for
Global Shipping at BNP Paribas.
Prior to that, Paul had served as
head of shipping (London) at Fortis Bank, head of specialised
industries at Nomura International and as a corporate finance
director of Barclays Bank and as a director of its Shipping
Industry Unit. Paul Barnes is British and resident in the United
Kingdom. Paul chairs the recently formed Management Engagement
Committee.
Christine Rødsaether
Christine is a partner in law firm
Simonsen Vogt Wiig, with more than 35 years' experience advising
clients in the international shipping and offshore sectors, in
relation to design, construction, operation, financing, sale and
purchase of vessels and offshore installations, restructuring and
reorganisation of companies and financing of assets, representing
major international financiers. Previously, she was a partner in
Andersen Legal ANS and a lawyer at Wikborg, Rein & Co.
Christine has extensive board experience, and currently serves on
the boards of OSE listed chemical tanker and tank terminals owner
and operator Odfjell SE and privately owned Mosvolds Rederi and
Lufttransport Adm. AS. Christine is Norwegian and is resident in
Norway.
Katriona Le Noury ("Trina") -
appointed 1 November 2023
Trina is a qualified chartered
accountant with more than 20 years' experience working in the funds
industry. Before becoming an independent non-executive director in
2023, she held senior management positions at two separate Private
Equity firms, including holding directorships on the respective
firms' fund General Partner boards. She currently serves on the
board of JPEL Private Equity Limited and Fair Oaks Income Limited,
both London listed investment companies, as well as four private
companies for a leading global private equity firm and two
not-for-profit organisations. Trina is British and a resident in
Guernsey.
Conflicts of
Interest
None of the Directors nor any
persons connected with them had a material interest in any of the
Company's transactions, arrangements or agreements at the date of
this report and none of the Directors has or had any interest in
any transaction which is or was unusual in its nature or conditions
or significant to the business of the Company, and which was
affected by the Company during the year. At the date of this
report, there are no outstanding loans or guarantees between the
Company and any Director.
Share Dealing
Code
The Company has adopted a share
dealing code, in conformity with the requirements of the Listing
Rules and the EU Market Abuse Regulation and takes steps to ensure
compliance by the Board and relevant senior staff with the terms of
the policy.
Appointment, re-election
and remuneration of Directors
As stated within the Corporate
Governance Statement, due to the Board's size, the Board has not
deemed it necessary to appoint a separate nomination committee and
therefore the role typically undertaken by such committee is
currently conducted by the Board as a whole. The rules governing
the appointment and replacement of Directors are set out in the
Company's Articles. The Articles also require that at each annual
general meeting, all the Directors will submit themselves for
re-election. The Directors have overall responsibility for
reviewing the size, structure and skills of the Board and
considering whether any changes are required, or new appointments
are necessary to meet the requirements of the Company's business or
to maintain a balanced Board.
This is formally considered
annually at the time of the Board, Chairman and Directors' annual
performance appraisals.
When considering new appointments,
the Board ensures that a diverse group of candidates is considered
and that appointments are made against objective criteria, in
accordance with the Company's Diversity & Inclusion Policy. In
the process to recruit Ms Trina Le Noury to the Board the services
of OSA Recruitment Limited, an independent third-party consultant,
were employed to compile a list of candidates for the Board's
consideration. Initial interviews were carried out by the Guernsey
resident directors and second interviews were carried out by the
rest of the Board using video conferencing facilities. At the end
of the selection process Ms Le Noury was identified as the most
suitable candidate for appointment to the Board. The Board have
been briefed by their legal advisers about their on-going
responsibilities as directors and Ms Le Noury participated in a
formal induction process. It is the Board's intention that a
similar process will be followed for future
appointments.
The Company does not have a
separate remuneration committee as the Board as a whole fulfils the
function of a remuneration committee, which includes the review on
at least an annual basis of the remuneration of the Directors in
accordance with the Company's remuneration policy and market
information. The Company's policy is for Directors to be
remunerated in the form of fees which are paid quarterly in
arrears. No element of the Directors' remuneration is
performance-related, and no Director is involved in setting his or
her own remuneration.
Fees payable to the Directors
should reflect the time spent by the Board on the Company's affairs
and the responsibilities borne by the Board and should be
sufficient to enable high calibre candidates to be recruited to the
Board, ultimately contributing to a composition of the Board that
is balanced and effectively discharges stewardship of the Company's
affairs.
Annual performance
appraisal
The performance of the Board,
committees and individual Directors have been formally and
rigorously evaluated by a self-assessment process coordinated by
the Administrator who circulates the findings to the Board. This
evaluation is performed annually. The last annual review took place
in June 2024 with the next annual review taking place in June 2025.
Evaluation of the Chairman is led by the Chairman of the Audit
Committee, who carries out the functions of a senior independent
director.
Audit
Committee
The Board delegates certain
responsibilities and functions to the Audit Committee. Stephen Le
Page is the chairman of the Company's Audit Committee which also
includes Paul Barnes, Trina Le Noury and Christine
Rødsaether.
In discharging its
responsibilities, the Audit Committee will review the annual and
half yearly financial statements, the risks to which the Company is
subject, the system of internal controls, and the terms of
appointment and remuneration of the Independent Auditor. It is also
the forum through which the Auditor reports to the Board. The Audit
Committee is expected to meet at least twice a year.
The objectivity of the Independent
Auditor will be reviewed by the Audit Committee, which will also
review the terms under which the Independent Auditor is appointed
to perform non-audit services. The Audit Committee will review the
scope and results of the audit, its cost effectiveness, quality of
work and the independence and objectivity of the Auditor, with
particular regard to non-audit services and fees.
Appointment, re-election
and remuneration of Directors
The members of the Audit Committee
consider that they collectively have the requisite skills and
experience to fulfil the responsibilities of the audit committee.
Given Mr Le Page's skills and financial experience, the Board has
satisfied itself that at least two members of the Audit Committee
has recent and relevant financial experience.
Other
Committees
The Company formed a Management
Engagement Committee chaired by Paul Barnes in 2023, which also
includes Stephen Le Page, Rob King, and Christine
Rødsaether.
The functions of the Management
Engagement Committee are to review annually the compliance by the
Investment Manager with the Company's investment policy as
established by the Board and with the Investment Management
Agreement ("IMA") entered into between the Company and the
Investment Manager; and to review annually
the performance and remuneration of any other service providers to
the Company.
During the year, the Committee has
reviewed the contractual relationship with and the performance of
all the service providers to the Company, and in particular the
Investment Manager. As part of the review process, the Committee
concluded that service providers are performing in accordance with
the Company's expectations and contractual arrangements, and that
their continued appointment is in the best interests of
shareholders.
Operation of the
Board
It is the responsibility of the
Board to ensure that there is effective stewardship of the
Company's affairs. A formal schedule of matters reserved for
decision of the Board has been adopted. This includes the following
items:
·
changes to the structure, size and composition of
the Board,
·
the appointment of directors to specified offices
of the Board, including the Chairman and senior independent
director,
·
board succession planning, training, development
and evaluation,
·
overall leadership of the Company and setting
values and standards, and
·
on-going review of the Company's Investment
strategy, investment objectives and investment policy.
The Board and Investment Manager
work closely together, with the Investment Manager attending and
presenting at quarterly Board meetings. At each of these meetings
the Board assess, discuss and challenge the Investment Manager's
performance in terms of investment performance, risk and the
management and impact of operational issues within the portfolio.
During the current period, the Board has not identified any issues
with the Investment Manager's performance.
The Board meet at least quarterly
to review the overall business of the Company and to consider the
matters specifically reserved for it. The quorum at Directors'
meetings is two Directors present in person or by telephone and
they are held in Guernsey.
Detailed information is provided
by the Investment Manager, Asset Manager and Administrator for
these meetings and additionally at regular intervals to enable the
Directors to monitor compliance with the investment objective and
the investment performance of the Company both in an absolute and
relative sense. Overall Company strategy is discussed in detail at
quarterly meetings of the Board of Directors and at ad hoc board
meetings when required. Directors also have the opportunity to
discuss these and any other matters with the Investment Manager
outside of the Board of Directors meetings as
appropriate.
The Directors are provided with
standard papers in advance of each quarterly meeting to allow the
review of several key areas including the Company's investment
activity over the quarter relative to its investment policy; the
global shipping industry; the revenue and financial position;
gearing, performance; share price discount or premium (both
absolute levels and volatility); and relevant industry and
macro-economic issues.
The Board also receive quarterly
reports analysing and commenting on the composition of the
Company's share register and monitoring significant changes to
shareholdings.
Independent Auditor
The Audit Committee is responsible
for overseeing the Company's relationship with the Independent
Auditor, including making recommendations to the Board on the
appointment of the Independent Auditor and their remuneration.
PricewaterhouseCoopers CI LLP ("PwC") was originally appointed as
the Company's Independent Auditor on 20 December 2017.
The Auditor, PwC, has indicated
its willingness to remain in office. A resolution for the
reappointment of PwC was proposed and approved at the AGM on 24
October 2023. Another resolution for their appointment will be
proposed at the AGM on 24 October 2024.
Service Providers
The Investment Manager /
Alternative Investment Fund Manager ("AIFM")
Tufton Investment Management Ltd,
a specialist investment manager in maritime markets since 2000, has
been appointed as the Investment Manager. Since its inception in
1985, the Investment Manager has been focused on financial services
to this industry.
As of 30 June 2024, the Investment
Manager manages investments of c.US$0.8 billion and mandated
capital of c. US$1.5 billion. Whilst the Board has responsibility
for all the strategic decision making (including acquisitions,
disposals, financing, capital expenditure, charters and other
material contracts) required by the Company, matters concerning the
operations of the vessels (within the approved budgets and
parameters set by the Board for the Company and the SPVs) are
delegated to the Investment Manager.
As of 30 June 2024, the Tufton
Group of which the Investment Manager is part, had 29 employees
operating from offices in London, Isle of Man and Cyprus. The
Investment Manager is fully dedicated to the shipping industry with
in-house research and dedicated Asset Manager providing services to
each vessel purchased.
As described in the Prospectus,
the Investment Manager has an established track record in managing
segregated mandates for pension funds with similar investment
objectives to those of the Company. The Investment Manager's
employees have significant experience of investing and financing in
the shipping industry. Each member of their Investment Committee
has between 20 and 40 years of experience in the maritime financial
markets either from investment banking, commercial banking or from
the vessel owning/operating perspective.
The Investment Manager's role
encompasses the identification of appropriate transaction
opportunities, conducting necessary due diligence, making
recommendations to the Board and completing the proposed
transactions on behalf of the Company.
The Investment Manager (in
conjunction with the Asset Manager) will also monitor the
performance of the Company's portfolio. The Investment Manager,
which acts as the Company's AIFM under the AIFMD, is authorised and
regulated by the FCA.
Investment
Committee
The Investment Manager has
established an Investment Committee.
Each investment proposal is
reviewed by the Investment Committee which meets on a weekly basis.
In reviewing each potential investment, the Investment Committee
considers a range of factors including a detailed analysis of the
vessel's technical condition and other analyses from the Asset
Manager, a full risk/reward analysis, downside stress testing,
commercial/employment strategy, effects of adding moderate leverage
in accordance with Company policy, market outlook, credit quality
of charterer, market reputation of counterparties, deal modelling,
exit strategy and any macro analysis that might be necessary to
fully understand the investment. The Investment Manager is
committed to Responsible Investment and integrates ESG factors into
its investment process. The Investment Manager reviews the
environmental footprint of new vessel acquisitions as well as KPIs
of technical managers on safety and fulfilling regulatory
requirements. Should the Investment Committee be in favour of an
acquisition, an appropriate recommendation will be made to the
Board who would ultimately determine whether an acquisition should
be made.
Asset
Manager
Tufton Management Limited was
established in 2009 to act as the Asset Manager for vessels owned
by funds and investment vehicles managed or advised by Tufton
Group.
The Asset Manager subcontracts
technical services from associated company Tufton Asset Management
Limited, based in Cyprus, which employs professionals who have
experience in all aspects of ship management including special
surveys, maintenance, repair and negotiation of commercial
agreements for vessel employment and provides the services detailed
in the Prospectus.
The Asset Manager enters into an
asset management agreement with each SPV and with effect from 1
July 2022 receives a fee of US$200 per vessel per day.
Administrator and
Secretary
Apex Administration (Guernsey)
Limited ("Apex") has been appointed as administrator and secretary
to the Company, pursuant to the Administration Agreement dated 27
February 2017 and to LSA, pursuant to the Administration Agreement
dated 20 April 2018. Apex was incorporated with limited liability
in Guernsey on 20 January 2010 and is licensed by the Guernsey
Financial Services Commission under the Protection of Investors
(POI) Law. Apex is also regulated under The Regulation of
Fiduciaries, Administration Businesses and Company Directors, etc
(Bailiwick of Guernsey) Law, 2020.
The Administrator forms part of
the Apex Group Ltd ("Apex Group") established in Bermuda in 2003.
Apex Group is a global financial services provider which delivers
an extensive range of services to asset managers, capital markets,
private clients and family offices. The group employs over 13,000
staff in over 100 offices worldwide and collectively administers in
excess of US$200 billion in assets.
The Administrator provides
day-to-day administration services to the Company and is also
responsible for the Company's general administrative and
secretarial functions such as the calculation of the NAV,
compliance with the Code and maintenance of the Company's
accounting and statutory records.
Depositary
Apex Depositary (UK) Limited
has been appointed as depositary to the Company,
pursuant to the Depositary Agreement dated 4 November 2022. The
role of the depositary will ensure that investment instructions
from the Investment Manager comply with the Law or Constitutional
Documents of the Fund. Apex Depositary (UK) Limited is an
active company incorporated on 25 October 2013 with the registered
office located in London. The Depositary
also forms part of the Apex Group noted above.
Registrar
Computershare Investor Services
(Guernsey) Limited was appointed as registrar to the Company
pursuant to the Registrar Agreement dated 27 February 2017. In such
capacity, the Registrar is responsible for the transfer and
settlement of shares held in certificated and uncertificated form.
The Register may be inspected at the office of the
Registrar.
Disclosure Obligations
Shareholders are obliged to
comply, from Admission, with the shareholding notification and
disclosure requirements set out in Chapter 5 of the Disclosure
Guidance and Transparency Rules. The Administrator will monitor
disclosure with reference to changes in shareholdings.
Annual Report and Financial Statements
The Board of Directors is
responsible for preparing the Annual Report and Financial
Statements. The Audit Committee advises the Board on the form and
content of the Annual Report and Financial Statements, any issues
which may arise and any specific areas which require
judgement.
Anti-bribery and corruption
The Board acknowledges that the
Company's international operations may give rise to possible claims
of bribery and corruption. In consideration of the UK Bribery Act
the Board reviews the perceived risks to the Company arising from
bribery and corruption to identify aspects of the business which
may be improved to mitigate such risks.
The Board has adopted a
zero-tolerance policy towards both bribery and corruption and has
reiterated its commitment to carry out business fairly, honestly
and openly. Since April 2019, Tufton is an active member of the
Maritime Anti-Corruption Network ("MACN"), a global network to
eliminate corruption in the industry.
In respect of the UK Criminal
Finances Act 2017 which introduced a Corporate Criminal Offence of
'failing to take reasonable steps to prevent the facilitation of
tax evasion', the Board confirms that it is committed to zero
tolerance towards the criminal facilitation of tax
evasion.
Modern slavery
The Company, through its
Investment Manager seeks to ensure that all charter counterparties
have policies and procedures which prevent any possibility of
slavery or similar issues on the vessels comprising the fleet. The
Investment Manager has such policies and procedures in its own
right which govern the ship management contracts used to appoint
technical managers.
General Data Protection Regulation ("GDPR")
The Board, through enquiry of its
service providers, has ensured that the requirements of GDPR and
its equivalent legislation in the UK and Guernsey, are met by them
when they process any data on behalf of the Company.
Alternative Investment Fund Managers Directive
("AIFMD")
The Investment Manager, Tufton
Investment Management Ltd, has been authorised by the FCA as a Full
Scope Registered UK AIFM under the AIFMD. The funds managed by the
AIFM, including the Company, are now defined as Alternative
Investment Funds and are subject to the relevant articles of the
AIFMD.
The Company notes that while AIFMD
no longer binds the UK in its implementation, a domestic regime has
been put in place regulating the management and marketing of AIFs
in the UK, which generally maintains the AIFMD rules as implemented
at the end of the transition period with respect to the UK's
departure from the European Union on 31 December 2020.
Internal control and financial reporting
The Board is responsible for
establishing and maintaining the system of internal controls
required by the Company's operations. These internal controls are
undertaken by the service providers. Internal control systems are
designed to meet the specific needs of the Company and the risks to
which it is exposed, and, by their very nature, provide reasonable,
but not absolute, assurance against material misstatement or
loss.
The key procedures which have been
established to provide effective internal controls
include:
·
Apex Administration (Guernsey) Limited ("Apex")
is responsible for the provision of administration, accounting and
company secretarial duties. Apex also provides compliance oversight
in respect of the Company and its activities. As the Company itself
has no IT systems and relies on the IT systems of its service
providers, Apex additionally has a role in cyber security and the
protection of the Company's data through the operation of
Information Security Protection Controls. Apex staff are also
regularly trained in order to minimise the risk of an accidental
data breach;
·
Tufton Investment Management Ltd is the
Investment Manager and provides portfolio management and risk
management services to the Company. It is also the AIFM for the
purposes of AIFMD;
·
Tufton Management Limited, an affiliate of the
Investment Manager, provides Asset Management services to each
underlying SPV;
·
Tufton Corporate Services, an affiliate of the
Investment Manager, provides administration, accounting and company
secretarial services for the SPVs;
·
Computershare Investor Services (Guernsey)
Limited is responsible for the provision of Registrar
services;
·
the Board clearly defines the duties and
responsibilities of the Company's agents and advisers in the terms
of their contracts;
·
the Board receives assurances from the Company's
agents and advisers that any amendments required as a result of
regulatory change, are actioned accurately and promptly;
and
·
the Board reviews financial information and
compliance reports produced by the Administrator on a regular
basis.
The Board and Audit Committee have
reviewed the Company's risk management and internal control systems
and believe that the controls are satisfactory given the size and
nature of the Company.
Responsible Investment, Sustainability and ESG
Policy
The Company's 2023 Sustainability
Report can be found on the Company's website, (www.tuftonoceanicassets.com).
The Sustainability Report sets out
the combined approach of the Investment Manager and the Company to
the integration of sustainability risks and responsible investment
principles in its investment decision making and asset ownership
practices. The Investment Manager seeks to align the Company's
strategy with best practices and market standards in all ESG and
Responsible Investment matters.
The Investment Manager believes
upholding high standards of ESG and responsible investment
principles and practices are an essential tool for managing the
risks presented by challenges such as climate change, social
inequality and human rights issues, delivering long-term value and
positive returns for the Company's shareholders as part of the
Company's investment objectives, and ensuring the continued
sustainability of shipping as a whole.
The Sustainability Report includes
further details on the Company's approach to stakeholder
engagement, human rights and anti-bribery practices, together with
how the activities of the Company are aligned with recognised ESG
standards such as the UN's Sustainable Development Goals. In
accordance with the Policy, the Directors have requested that the
Investment Manager consider the broader social, ethical and
environmental issues of the vessels within the Company's portfolio,
acknowledging that companies failing to manage these issues
adequately run a long-term risk to the sustainability of their
businesses and that this reflects stakeholders' views.
More specifically, the Board
expect companies to demonstrate ethical conduct, effective
management of their stakeholder relationships, responsible
management and mitigation of social and environmental impacts, as
well as due regard for wider societal issues.
The Directors along with the
Investment Manager recognise the value of integrating principles of
Responsible Investment into the investment management process and
ownership practices in the belief that this can have an impact on
long-term financial performance. The Sustainability Report has
further information on how the Investment Manager practically
implements and considers the Policy when making investment
decisions.
Viability statement
The Board, in assessing the
long-term viability of the Company, has paid particular attention
to the Principal Risks and Uncertainties faced by the Company as
disclosed on pages 20 to 23 of these financial statements. The
Company is also required to hold a continuation vote at the AGM to
be held 24 October 2024. Notwithstanding this, the Board have
determined that a three-year viability period is the most
appropriate for viability testing since they are advised by their
corporate brokers that the shareholders are unlikely to vote for
discontinuation. The Board has considered the cashflow-weighted
average length of its charters. In addition, the Board has
considered the cash flow projection for the running costs of the
Company to ensure the Company retains sufficient cash to meet its
operating costs until the end of the viability period and is
therefore able to sustain its business model and structure,
including the payment of dividends at the announced target
level.
The Board has also considered the
cash flow projections for the Company and its SPVs in two market
stress scenarios. The Board has considered the results of a
viability test wherein the primary sensitivity of an extended
period of market stress results in time charter rates staying below
the historic median levels over the entire three-year forecast
period. The most extreme scenario modelled resulted in unrestricted
cash balances being exhausted in late 2025, but in the very remote
event of such a cash shortage arising this would be addressed
through one or all of the following significant actions: the sale
of the Gas Tanker Neon after completion of its current charter in
mid-2025, the deferral of discretionary capital expenditure, and/or
the deferral or reduction of any dividend payment.
These scenarios allow for
consistently low charter rates and even charter default. The
Directors have also assumed that given the Company's recent level
of performance, it is reasonable to assume that the continuation
vote will be passed. As a result, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due and that the business
model will remain applicable during the viability
period.
Going concern
In assessing the going concern
basis of accounting the Directors have, together with discussions
and analysis provided by the Investment Manager, had regard to the
guidance issued by the Financial Reporting Council. They have
considered the possible impact of recent market volatility and
geopolitical events on the current and future operations of the
Company and its investments. Cash reserves are held at the LSA and
SPV levels and rolled up to the Company as required to enable
expenses to be settled as they fall due.
The Company is required to hold a
vote on the Continuation of the Company at the AGM on 24 October
2024. During the year the Investment Manager and Brokers engaged
major shareholders regarding their voting intentions, and as a
result of these discussions and given the positive performance of
the Company for its life to date, the Directors hold the view that
the Continuation Vote will be for the Company to continue its
operations. In the event the vote does not pass, the Board have six
months in which to bring forward proposals for the future of the
Company.
The Directors are satisfied that,
at the time of approving the financial statements, no other
material uncertainties exist that may cast significant doubt
concerning the Company's ability to continue for the foreseeable
future concluding that the Company has adequate resources to
continue in operational existence for at least twelve months from
the date of approval of the financial statements. For these
reasons, the Directors continue to adopt the going concern basis in
preparing the financial statements.
Further Details of Continuation Vote
In accordance with the prospectus
published 25 September 2018, the Directors will propose an ordinary
resolution at the annual general meeting to be held 24 October 2024
that the Company continues its business (a "Continuation
Resolution"). If this Continuation Resolution is passed, then the
Directors shall every three years thereafter at the annual general
meeting held, following the publication of the audited accounts,
propose a further Continuation Resolution.
Shareholders' significant interests
The following shareholders had
notified to the Company a substantial interest of 5% or more of the
issued share capital as at 30 June 2024.
|
% of issued share
capital
|
|
|
East Riding Pension
Fund
|
10.48
|
South Yorkshire Pensions
Authority
|
9.85
|
Schroder Investment
Management
|
9.69
|
West Yorkshire Pensions
Fund
|
8.09
|
Raymond James Investment
Services
|
6.63
|
The Directors place a great deal
of importance on communication with shareholders. They request
regular updates from the Company's Brokers and financial advisers
on their communications with shareholders. They can also be
contacted via the email address provided in the Chairman's
Statement.
The Annual Report and Audited
Financial Statements are also distributed to other parties who have
an interest in the Company's performance. Additional information on
the Company can be obtained through the website
www.tuftonoceanicassets.com,
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 2024 and signed on behalf of the Board
by:
…………………………
…………………………
Rob
King
Stephen Le Page
Director
Director
Audit Committee Report
Chairman's introduction
I am pleased to present to you the
Audit Committee report prepared in accordance with the current AIC
Code, which reflects the UK Corporate Governance Code to the extent
that it is applicable to investment companies.
The terms of reference for the
committee are available on the Company's website,
www.tuftonoceanicassets.com.
During the year ended 30 June 2024 and to the date of this report,
the main areas of activity have been as follows:
·
reviewing and assessing the Principal Risks and
Uncertainties (as set out on pages 20 to 23);
·
reviewing the accounting policies for the Company
to ensure they remain appropriate for the preparation of the
Company's Annual Report and Audited Financial
Statements;
·
reconsidering the areas of judgment or estimation
arising from the application of International Financial Reporting
Standards to the Company's activities and the documentation of the
rationale for the decisions made and estimation techniques
selected, to ensure they remain appropriate;
·
meeting with the Independent Auditor, PwC, to
review and discuss their independence, objectivity and proposed
scope of work for their audit of this Annual Report;
·
meeting with the Company's principal service
providers to review the controls and procedures operated by them to
ensure that the Company's risks are properly managed and that its
financial reporting is complete, accurate and reliable;
and
·
reviewing in detail the content of this Annual
Report, the work of the service providers in producing it and the
results of the external audit.
Membership and Role of the Committee
The Board has delegated certain
responsibilities and functions to the Audit Committee. Stephen Le
Page is the chairman of the Company's Audit Committee which also
includes Paul Barnes, Trina Le Noury and Christine Rødsaether. In
discharging its responsibilities, the Audit Committee will review
the annual and half yearly financial statements, the risks to which
the Company is subject, the system of internal controls, and the
terms of appointment and remuneration of the Independent Auditor.
It is also the forum through which the Auditor reports to the
Board. The Audit Committee is expected to meet at least twice a
year.
The Committee discharges its
responsibilities through a series of scheduled meetings, the
agendas of which are linked to events in the financial calendar of
the Company. The Committee met two times during the year ended 30
June 2024 and once more since the year end. The Independent
Auditors attended all of these meetings.
Internal control
The Board reviews the internal
controls of the Company's service providers, who are required to
establish and maintain appropriate systems of internal control, by
reviewing regular reports from the service providers. The Board
also ensures segregation of duties between the service
providers.
In addition, the Board seeks to
make visits to certain service providers periodically to assess
their organisation and culture and to meet the individuals
responsible for key functions. The Audit Committee, and
particularly the Chairman of the Committee, also closely monitors
the financial reporting process and the tasks undertaken in the
production of the Annual Report.
This has involved discussions with
the Administrator of the Company, the administrator of the Isle of
Man SPVs and the Investment Manager.
Review of accounting policies and areas for judgment or
estimation
These financial statements reflect
the application of the accounting policies and estimation
techniques originally set out in the Company's Prospectus for its
IPO in December 2017. The Audit Committee confirms that they are
still considered to be appropriate.
In particular, the following are
the significant issues that the Audit Committee considered relating
to the financial statements:
·
the application of IFRS 10 - Consolidated
Financial Statements ("IFRS 10") to the Company, on page
63;
·
the detailed approach to arriving at the estimate
of fair value for each vessel, SPV and the Guernsey holding
company, LSA; and
·
the determination of the Company's viability and
the applicability of the going concern assumption, on page 44 and
45.
These financial statements reflect
the outcome of those discussions. In addition, the Independent
Auditor's proposed scope of work in connection with these areas and
the statements in general was agreed.
Fair value estimation
The majority of the NAV of the
Company is derived from the fair value of the vessels owned by the
Company's indirect SPV subsidiaries, which are themselves held by
the Company's subsidiary, LSA. The Company has chosen to use values
provided by the Investment Manager, which uses valuation techniques
appropriate to each vessel, as its best estimate of fair value. For
the majority of the fleet this comprises values sourced from
VesselsValue. Exact details of the valuation techniques applied to
the vessels and of how the Company's NAV is derived is given in
Note 12 to these financial statements.
The Committee has paid particular
regard to evaluating these techniques to ensure they are in
accordance with market methodology, based on accurate information,
reliable and appropriate. The sensitivity of these valuations to
various input assumptions is given in Note 12, to enable readers of
these financial statements to make their own assessment of the
carrying values.
The Committee is satisfied that
these techniques are reasonable and appropriate for use in the
preparation of these financial statements.
Performance fee
Per the terms of the IMA, the
Company accrues performance fees based on the size of the
investment and the continued performance throughout the FY. The
accrual at year end is US$nil (2023: US$nil). The Board reviews and
approves the calculation.
External audit
During the year ended 30 June
2024, and up to the date of this report, the Committee held formal
meetings with the Independent Auditor on two occasions, and in
addition the Chair of the Committee has spoken to them informally
on several occasions. These informal conversations have been held
to ensure the Chairman is kept up to date with the progress of the
audit work, and that the Independent Auditor's formal reporting
meets the Committee's needs.
The formal meetings included
detailed reviews of the proposed fees and scope of the work to be
performed by PwC in their audit for the year ended 30 June 2024.
They also included detailed reviews of the results of this work,
and the audit findings and observations. I am pleased to report
that there are no matters arising from the Independent Auditor's
work which should be brought to the attention of
shareholders.
The Committee has also reviewed
PwC's report on PwC's own independence and objectivity, including
the level of non-audit services provided by them. There were no
non-audit services carried out during the year.
The Committee has therefore
concluded that PwC is independent and objective, carries out its
work to a high standard, and provides concise but useful reporting.
The committee notes, following PwC rotation rules, Ross Burne has
been appointed the new engagement leader. Accordingly, the
Committee has recommended a resolution for their appointment to be
proposed at the AGM on 24 October 2024.
Annual report
The Committee members have each
reviewed this Annual Report and earlier drafts of it in detail,
comparing its content with their own knowledge of the Company,
reporting requirements and shareholder expectations. Formal
meetings of the Committee have also reviewed the report and its
content and have received reports and explanations from the
Company's service providers about the content and the financial
results.
The Committee has concluded that
the Annual Report, taken as a whole, is fair, balanced and
understandable, and that the Board can reasonably and with
justification make the Statement of Directors' Responsibilities on
pages 30 to 31.
…………………………
Stephen Le Page
Chairman of the Audit
Committee
Independent Auditor's report to the members of Tufton Oceanic
Assets Limited
Report on the audit of the
financial statements
Our opinion
In our opinion, the financial
statements give a true and fair view of the financial position of
Tufton Oceanic Assets Limited (the "company") as at 30 June 2024,
and of its financial performance and its cash flows for the year
then ended in accordance with IFRS Accounting Standards as issued
by the International Accounting Standards Board ("IFRS Accounting
Standards") and have been properly prepared in accordance with the
requirements of The Companies (Guernsey) Law, 2008.
What we have audited
The company's financial statements
comprise:
●
the statement of financial position as at 30 June 2024;
●
the statement of comprehensive income for the year then
ended;
●
the statement of changes in equity for the year then
ended;
●
the statement of cash flows for the year then ended; and
●
the notes to the financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing ("ISAs"). Our
responsibilities under those standards are further described in the
Auditor's responsibilities for
the audit of the financial statements section of our
report.
We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements of the company, as required
by the Crown Dependencies' Audit Rules and Guidance. We have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Material uncertainty related to going
concern
We draw attention to note 2(m) in
the financial statements, which indicates that the company is due
to hold a continuation vote at its Annual General Meeting in
October 2024. This event or condition indicates that a material
uncertainty exists that may cast significant doubt on the company's
ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
Our audit approach
Overview
Audit scope
· The
company is a closed-ended investment company, incorporated and
based in Guernsey, whose ordinary shares are admitted to trading on
the London Stock Exchange's Specialist Fund Segment.
· The
financial statements consist of the standalone parent company
financial information and include the company's investment into its
directly held subsidiary (the "subsidiary"). The subsidiary in turn
holds directly and indirectly Special Purpose Vehicles ("SPVs")
through which the underlying vessels are held.
· The
financial statements are not consolidated but instead present the
fair value of the subsidiary which includes the fair value of the
underlying vessels held via the SPVs and the other residual net
assets of the subsidiary and SPVs.
· The
principal activities of the company comprise investing in a
diversified portfolio of vessels through its subsidiary based in
Guernsey and the SPVs based in the Isle of Man.
· We
conducted our audit of the financial statements based on financial
information provided by the company's service providers, Apex
Administration (Guernsey) Limited (the "Administrator") and Tufton
Investment Management Ltd (the "Investment Manager") to whom the
Board of Directors have delegated certain administrative functions
and other activities.
|
Key audit matters
●
Material uncertainty related to going concern.
●
Valuation and ownership/existence of financial assets at fair value
through profit or loss.
|
Materiality
●
Overall materiality: US$9.02 million
(2023: US$8.26 million) based on 2% of net assets.
● Performance materiality: US$6.77 million (2023: US$6.19
million).
|
The scope of our audit
As part of designing our audit, we
determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we
considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those
matters that, in the auditor's professional judgement, were of most
significance in the audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
the auditors, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
In addition to the matter
described in the Material uncertainty related to going concern
section, we have determined the matters described below to be the
key audit matters to be communicated in our report.
This is not a complete list of all
risks identified by our audit.
Key audit matter
|
How our audit addressed the Key audit
matter
|
Valuation and
ownership/existence of financial assets at fair value through
profit or loss (the "investments")
Please refer to Notes 2(j), 3 and
4 to the financial statements.
Valuation
The Company's financial assets at
fair value through profit and loss amounting to US$444.14 million
comprises the Company's holding in its unconsolidated direct
subsidiary which further invests into SPVs (together the
"entities"). The SPVs ultimately invest into a portfolio of
shipping vessels (the "underlying portfolio") and/or other residual
net assets. The fair value of the direct
subsidiary investment has been determined based on the fair value
of (a) the underlying portfolio and (b) the other residual net
assets within the entities.
The fair value of the underlying
portfolio has been assessed using methodologies deemed most
appropriate by the Investment Manager and the Board, taking into
account whether the vessels are standard or specialised. In certain
cases, management also consults an independent broker to establish
the fair value of standard vessels.
The Board has detailed their
considerations regarding estimation areas for vessel valuation in
Note 3. Note 4 provides a breakdown of the investments, while Note
12 outlines the key assumptions used in the valuations. Both the
Board and the Investment Manager apply significant judgment and
estimates in determining the fair values of the underlying
portfolio.
For the residual net assets within
the entities there is also a risk that the valuations may be
materially misstated arising from the misstatement of other assets
and liabilities.
Ownership/Existence
The company's ownership in its
subsidiary and the SPVs includes unlisted equity securities and
shareholder loans so there is no central independent depository or
custodian. Similarly, there is no central depository or custodian
for each vessel. The investment in the subsidiary, SPVs, and
vessels is verified through legal ownership of the equity shares
and the underlying portfolio.
As a result of the above and given
the significance of this balance in the statement of financial
position, the valuation and ownership/existence of financial assets
at fair value through profit or loss are considered key audit
matters.
|
Valuation
· We
assessed the accounting policy for investments, as set out in note
2(j) for compliance with IFRS Accounting Standards.
· We
obtained an understanding and evaluated the design and
implementation of internal controls surrounding the valuation
process.
For standard vessels:
· We
assessed the third-party vessel valuation service's reputation,
independence, competence and expertise through independent
research, enquiry with the Investment Manager and auditor's
experts.
· We
inspected and observed the independent valuations being obtained by
the Investment Manager in respect of 'charter free' values from the
third-party vessel valuation service.
· We
assessed and challenged the charter lease contract adjustments made
by the Investment Manager by comparing the actual charter rates, as
documented by the SPVs for each vessel, to the market charter
rates.
· Where material, we assessed and agreed any capital
expenditure adjustments to appropriate supporting
documentation.
· We
agreed key inputs used by the third-party vessel valuation service
to independent sources or underlying agreements (which included
such details as the vessel build year, type, size etc).
· We
assessed and evaluated the discount rate used by the third-party
valuation service in calculating the charter lease contracts
adjustments through enquiry with our auditor's expert.
· We
conducted back testing procedures by comparing the proceeds
received from the sale of vessels to the most recent valuations
recorded in the SPVs'.
For specialised vessels:
· We
reviewed and agreed the significant inputs used in the model
against signed agreements on a sample basis.
· We
recalculated and assessed the exit values at the end of the fixed
charter period based on the terms applicable to each vessel,
considering management's intentions or agreements with
counterparties (such as scrap value or depreciated replacement
cost, etc.).
· We
assessed the counterparty credit conditions as at 30 June 2024 and
challenged the reasonableness of the discount rate applied by
benchmarking them to market discount rates used by the third-party
vessel valuation service.
· We
recalculated each vessel's discounted cash flow model to confirm
their mathematical accuracy.
For vessels valued by an independent
broker:
· We
obtained the independent broker valuations and evaluated the
reliability, independence, and reputation of the broker.
· We
contacted the independent broker directly to confirm our
understanding of the valuation methodology used for the respective
vessels.
Use of auditor experts:
· We
engaged valuation experts within the PwC network to assess and
evaluate the reasonableness and reliability of the third-party
vessel valuation service, including the discount rates applied and
valuation of two standard vessels. The expert also evaluated the
reliability of the independent broker used.
As it relates to the residual net assets of the subsidiary
and SPVs:
· We
recalculated the mathematical accuracy of the net asset values of
the SPVs. This involved reconciling the net asset values of the
SPVs with the subsidiary's financial records and subsequently with
the company's financial records.
· We
agreed cash and loan balances back to independently received
confirmations from third party financial institutions.
· Performed sample based substantive testing on the residual
net assets.
Ownership/Existence
· We
obtained an understanding and evaluated the design and
implementation of internal controls surrounding the
ownership/existence process.
· We
agreed the shareholdings of the directly held subsidiary as well as
the SPVs to share registers and agreements.
· Where appropriate, we independently confirmed the titles of
all vessels with the respective recognised Shipping Authorities as
of June 30, 2024. For one vessel, we conducted alternative audit
procedures to verify its existence since the flag country's
register is not available for public inquiry.
· On a
sample basis, we utilised open-source vessel tracking resources to
corroborate that the vessels were operational.
We have not identified any matters
to report to those charged with governance.
|
How we tailored the audit scope
We tailored the scope of our audit
to ensure that we performed enough work to be able to give an
opinion on the financial statements as a whole, taking into account
the structure of the company, the accounting processes and
controls, and the industry in which the company
operates, and we considered the risk of
climate change and the potential impact thereof on our audit
approach.
Materiality
The scope of our audit was
influenced by our application of materiality. We set certain
quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our
audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Based on our professional
judgement, we determined materiality for the financial statements
as a whole as follows:
Overall materiality
|
US$9.02 million (2023: US$8.26
million)
|
How we determined it
|
2% of net assets
|
Rationale for the materiality benchmark
|
We believe that 'net assets' is
the most appropriate benchmark because this is the key metric of
interest to the members of the company. It is also a generally
accepted measure used for investment funds.
|
We use performance materiality to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds
overall materiality. Specifically, we use performance materiality
in determining the scope of our audit and the nature and extent of
our testing of account balances, classes of transactions and
disclosures, for example in determining sample sizes. Our
performance materiality was 75% (2023:
75%) of overall materiality, amounting to
US$6.77 million (2023: US$6.19 million) for the company financial
statements.
In determining the performance
materiality, we considered a number of factors - the history of
misstatements, risk assessment and aggregation risk and the
effectiveness of controls - and concluded that an amount at the
upper end of our normal range was appropriate.
We agreed with the Audit Committee
that we would report to them misstatements identified during our
audit above US$0.45 million (2023: US$0.41 million), as well as
misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Reporting on other information
The other information comprises
all the information included in the Annual Report and Audited
Financial Statements (the "Annual Report") but does not include the
financial statements and our auditor's report thereon. The
directors are responsible for the other information.
Our opinion on the financial
statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of
the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We
have nothing to report based on these responsibilities.
Responsibilities for the financial statements and the
audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements that give a true and fair view in
accordance with IFRS Accounting Standards, the requirements of
Guernsey law and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial
statements, the directors are responsible for assessing the
company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the company or to cease
operations, or have no realistic alternative but to do
so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of
these financial statements.
Our audit testing might include
testing complete populations of certain transactions and balances,
possibly using data auditing techniques. However, it typically
involves selecting a limited number of items for testing, rather
than testing complete populations. We will often seek to target
particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to
enable us to draw a conclusion about the population from which the
sample is selected.
As part of an audit in accordance
with ISAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the company's internal control.
· Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
· Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the company's
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial
statements. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor's report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause
the company to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged
with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with
governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards
applied.
From the matters communicated with
those charged with governance, we determine those matters that were
of most significance in the audit of the financial statements of
the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Use of this report
This independent auditor's report,
including the opinions, has been prepared for and only for the
members as a body in accordance with Section 262 of The Companies
(Guernsey) Law, 2008 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
Report on other legal and regulatory
requirements
Company Law exception reporting
Under The Companies (Guernsey)
Law, 2008 we are required to report to you if, in our
opinion:
● we
have not received all the information and explanations we require
for our audit;
●
proper accounting records have not been kept; or
●
the financial statements are not in agreement with the accounting
records.
We have no exceptions to report
arising from this responsibility.
Other voluntary reporting
Corporate governance statement
The company has reported voluntary
compliance against the 2019 AIC Code of Corporate Governance (the
"Code") which has been endorsed by the UK Financial Reporting
Council as being consistent with the UK Corporate Governance
Code.
Going
concern
The directors have requested that
we review the statement on page 45 in relation to going concern as
if the company was a UK incorporated closed-ended investment fund
with equity shares listed under the Closed-Ended Investment Fund
category. We have nothing to report having performed our
review.
The directors' assessment of the prospects of the company and
of the principal and emerging risks that would threaten the
solvency or liquidity of the company
The directors have requested that
we perform a review of the directors' statements on pages 20 to 23
and 44 that they have carried out a robust assessment of the
principal and emerging risks facing the company and in relation to
the longer-term viability of the company, as if the company was a
UK incorporated closed-ended investment fund with equity shares
listed under the Closed-Ended Investment Fund category.
Our review was substantially less
in scope than an audit and only consisted of making inquiries and
considering the directors' process supporting their statements;
checking that the statements are in alignment with the relevant
provisions of the Code; and considering whether the statements are
consistent with the knowledge and understanding of the company and
its environment obtained in the course of the audit. We have
nothing to report having performed this review.
Other Code
provisions
The directors have prepared a
corporate governance statement and requested that we review it as
though the company was a UK incorporated closed-ended investment
fund with equity shares listed under the Closed-Ended Investment
Fund category. We have nothing to report in respect of our agreed
responsibility to report when the directors' statement relating to
the company's compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified, under
the Listing Rules, for review by the auditors.
Ross Alexander Houlihan
Burne
For and on behalf of
PricewaterhouseCoopers CI LLP
Chartered Accountants and
Recognised Auditor
Guernsey, Channel
Islands
25 September 2024
Statement of Comprehensive Income
For the year ended 30 June
2024
|
|
|
2024
|
|
2023
|
|
Notes
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
Net changes in fair value of
financial assets
at fair value through profit or
loss
|
4
|
|
50,555,223
|
|
(33,950,645)
|
Dividend income
|
8
|
|
30,000,000
|
|
32,000,000
|
|
|
|
|
|
|
Total net income / (loss)
|
|
|
80,555,223
|
|
(1,950,645)
|
|
|
|
|
|
|
Expenditure
|
|
|
|
|
|
Administration fees
|
|
|
(168,137)
|
|
(168,376)
|
Audit fees
|
|
|
(217,751)
|
|
(261,666)
|
Corporate Broker fees
|
|
|
(150,000)
|
|
(150,000)
|
Depositary fees
|
|
|
(39,493)
|
|
-
|
Directors' fees
|
17
|
|
(231,674)
|
|
(174,913)
|
Foreign exchange gain /
(loss)
|
|
|
4,468
|
|
(13,322)
|
Insurance fee
|
|
|
(33,016)
|
|
(24,200)
|
Investment management
fees
|
13
|
|
(3,484,902)
|
|
(3,504,464)
|
Listing fees
|
|
|
(27,433)
|
|
(24,297)
|
Performance fees
|
14
|
|
-
|
|
3,980,432
|
Professional fees
|
|
|
(93,122)
|
|
(145,694)
|
Sundry expenses
|
|
|
(53,008)
|
|
(39,860)
|
|
|
|
|
|
|
Total expenses
|
|
|
(4,494,068)
|
|
(526,360)
|
|
|
|
|
|
|
Operating profit / (loss)
|
|
|
76,061,155
|
|
(2,477,005)
|
|
|
|
|
|
|
Finance income
|
|
|
6,567
|
|
3,646
|
|
|
|
|
|
|
Total comprehensive income / (loss) for the
year
|
|
|
76,067,722
|
|
(2,473,359)
|
|
|
|
|
|
|
Earnings / (Loss) per ordinary share
(cents)
|
9
|
|
25.89
|
|
(0.81)
|
Diluted Earnings / (Loss) per ordinary share
(cents)
|
9
|
|
25.89
|
|
(0.81)
|
There were no potentially dilutive
instruments in issue at 30 June 2024 or 30 June 2023.
All activities are derived from
continuing operations.
There is no other comprehensive
income or loss and consequently a Statement of Other Comprehensive
Income has not been prepared.
The accompanying notes are an
integral part of these financial statements.
Statement of Financial Position
At 30 June 2024
|
|
|
2024
|
|
2023
|
|
Notes
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Financial assets at fair
value
through profit or loss
|
4
|
|
444,977,383
|
|
405,988,715
|
|
|
|
|
|
|
Total non-current assets
|
|
|
444,977,383
|
|
405,988,715
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Trade and other
receivables
|
5
|
|
7,229,829
|
|
7,881,170
|
Cash and cash
equivalents
|
|
|
56,007
|
|
47,731
|
|
|
|
|
|
|
Total current assets
|
|
|
7,285,836
|
|
7,928,901
|
|
|
|
|
|
|
Total assets
|
|
|
452,263,219
|
|
413,917,616
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Trade and other
payables
|
6
|
|
1,207,547
|
|
1,144,523
|
Total current liabilities
|
|
|
1,207,547
|
|
1,144,523
|
|
|
|
|
|
|
Net assets
|
|
|
451,055,672
|
|
412,773,093
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Ordinary share capital
|
7
|
|
291,640,823
|
|
303,326,231
|
Retained reserves
|
|
|
159,414,849
|
|
109,446,862
|
|
|
|
|
|
|
Total equity attributable to ordinary
Shareholders
|
|
|
451,055,672
|
|
412,773,093
|
|
|
|
|
|
|
Net assets per ordinary share (cents)
|
11
|
|
154.96
|
|
136.47
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
The financial statements were
approved and authorised for issue by the Board of Directors on
25 September 2024 and signed on its behalf by:
________________________________
_____________________________
Rob
King
Stephen Le Page
Director
Director
Statement of Changes in Equity
For the year ended 30 June
2024
|
|
|
Ordinary
share
capital
|
|
Retained
earnings
|
|
Total
|
|
|
Notes
|
US$
|
|
US$
|
|
US$
|
Shareholders' equity at 30 June 2022
|
|
|
310,272,983
|
|
137,270,726
|
|
447,543,709
|
|
|
|
|
|
|
|
|
Share buybacks
|
|
7
|
(6,946,752)
|
|
-
|
|
(6,946,752)
|
Total comprehensive loss
for
the year
|
|
|
-
|
|
(2,473,359)
|
|
(2,473,359)
|
Dividends paid
|
|
10
|
-
|
|
(25,350,505)
|
|
(25,350,505)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity at 30 June 2023
|
|
|
303,326,231
|
|
109,446,862
|
|
412,773,093
|
|
|
|
|
|
|
|
|
Share buybacks
|
|
7
|
(11,685,408)
|
|
-
|
|
(11,685,408)
|
Total comprehensive income for the
year
|
|
|
-
|
|
76,067,722
|
|
76,067,722
|
Dividends paid
|
|
10
|
-
|
|
(26,099,735)
|
|
(26,099,735)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity at 30 June 2024
|
|
|
291,640,823
|
|
159,414,849
|
|
451,055,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
Statement of Cash Flows
For the year ended 30 June
2024
|
Notes
|
2024
US$
|
|
2023
US$
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Total comprehensive income /
(loss) for the year
|
|
76,067,722
|
|
(2,473,359)
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
Changes in fair value on
investments held at fair value through profit or loss
|
4
|
(50,555,223)
|
|
33,950,645
|
Foreign exchange (gain) /
loss
|
|
(4,468)
|
|
13,322
|
|
|
|
|
|
Operating cash flows before movements
|
|
25,508,031
|
|
31,490,608
|
|
|
|
|
|
Return of investment
capital
|
4
|
11,566,555
|
|
6,953,360
|
Movement in trade and other
receivables
|
5
|
651,341
|
|
(2,140,785)
|
Movement in trade and other
payables
|
6
|
63,024
|
|
(3,953,696)
|
|
|
|
|
|
Net cash generated from operating
activities
|
|
37,788,951
|
|
32,349,487
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Amounts paid for share
buybacks
|
7
|
(11,685,408)
|
|
(6,946,752)
|
Dividends paid
|
10
|
(26,099,735)
|
|
(25,350,505)
|
|
|
|
|
|
Net cash used in financing activities
|
|
(37,785,143)
|
|
(32,297,257)
|
|
|
|
|
|
Net movement in cash and cash equivalents during the
year
|
|
3,808
|
|
52,230
|
|
|
|
|
|
Cash and cash equivalents at the
beginning of the year
|
|
47,731
|
|
8,823
|
Foreign exchange gain /
(loss)
|
|
4,468
|
|
(13,322)
|
|
|
|
|
|
Cash and cash equivalents at the end of the
year
|
|
56,007
|
|
47,731
|
The accompanying notes are an
integral part of these financial statements.
Notes to the Financial Statements
For the year ended 30 June
2024
1. General
information
The Company was incorporated with
limited liability in Guernsey under the Companies (Guernsey) Law,
2008, as amended, on 6 February 2017 with registered number 63061,
and is regulated by the GFSC as a registered closed-ended
investment company. The registered office and principal place of
business of the Company is 1 Royal Plaza, Royal Avenue, St Peter
Port, Guernsey, GY1 2HL.
The Company's investment objective
is to provide investors with an attractive level of regular and
growing income and capital returns through investing in secondhand
commercial sea-going vessels.
The Company had 302,468,541
ordinary shares in issue on 1 July 2023, all of which were listed
on the Specialist Funds Segment of the Main Market of the London
Stock Exchange. During the current year, the Company bought back
11,386,000 ordinary shares at a weighted average price of US$1.014
for a consideration of US$11,685,409. The total number of Company's
shares in issue was 291,082,541 at the end of the FY.
2. Material accounting
policies
(a) Basis of preparation
Compliance with IFRS
Accounting Standards
The financial statements have been
prepared on a going concern basis in accordance with
IFRS accounting standards as issued by the
International Accounting Standards Board ("IASB")
and International Financial Reporting
Interpretations Committee ("IFRIC"), Listing rules and applicable
Guernsey law.
Historical cost convention
The financial statements have been
prepared on a historical cost basis modified by the revaluation of
financial assets at fair value through profit or loss. The
principal accounting policies adopted, and which have been
consistently applied, (unless otherwise indicated) are set out
below.
Basis of non-consolidation
The Directors consider that the
Company meets the investment entity criteria set out in
IFRS 10: Consolidated Financial
Statements. As a result, the
Company applies the mandatory exemption applicable to investment
entities from producing consolidated financial statements and
instead fair values its investments in its subsidiaries in
accordance with IFRS 13: Fair Value measurement.
The criteria which define an
investment entity are, as follows:
·
an entity that obtains funds from one or more
investors for the purpose of providing those investors with
investment management services;
·
an entity that commits to its investors that its
business purpose is to invest funds solely for returns from capital
appreciation, investment income or both (including having an exit
strategy for investments); and
·
an entity that measures and evaluates the
performance of substantially all its investments on a fair value
basis.
The Directors consider that the
Company's objective of pooling investors' funds for the purpose of
generating an income stream and capital appreciation is consistent
with the definition of an investment entity, as is the reporting of
the Company's net asset value on a fair value basis.
(b) New standards and interpretations not yet
adopted
Certain new accounting standards,
amendments to accounting standards and interpretations have been
published that are not mandatory for 30 June 2024 reporting periods
and have not been early adopted by the Company. These standards,
amendments or interpretations are not expected to have a material
impact on the Company in the current or future reporting periods
and on foreseeable future transactions.
(c) Standards, amendments and interpretations effective
during the year
There are no standards, amendments
to standards or interpretations that are effective for annual
periods beginning on 1 July 2023 that have a material effect on the
financial statements of the Company.
(d) Segmental
reporting
The chief operating decision maker
is the Board of Directors. The Directors are of the opinion that
the Company is engaged in a single segment of business, being the
investment of the Company's capital in secondhand commercial
vessels. The financial information used to manage the Company
presents the business as a single segment.
(e) Income
Dividend
income
Dividend income is accounted for
on the date the dividend is declared.
Finance
income
Finance income is accounted for on
an accruals basis.
(f) Expenses
Expenses are accounted for on an
accruals basis. The Company's investment management and
administration fees and all other expenses are charged through the
Statement of Comprehensive Income.
(g) Performance fees
Any performance fee liability is
calculated on an amortised cost basis at each valuation date, with
the respective expense or reversal charged through the Statement of
Comprehensive Income. Refer to note 14.
(h) Dividends to Shareholders
Dividends are accounted for in the
Statement of Changes in Equity in the year in which they are
declared.
(i) Taxation
The Company has been granted
exemption from liability to income tax in Guernsey under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 amended by the
Director of Income Tax in Guernsey. Exemption is applied and
granted annually and subject to the payment of a fee, currently
£1,600.
(j) Financial assets and financial
liabilities
The Company holds its investments
through a subsidiary company which has not been consolidated in
line with IFRS 10: Consolidated Financial Statements.
The Company classifies its
investment in LSA as a financial asset at fair value through profit
or loss ("FVTPL").
The Company measures and evaluates
the net assets of LSA on a fair value basis. The net assets include
those of the underlying SPVs which own and value all vessels on a
fair value basis.
The Investment Manager reports fair
value information to the Directors who use this to evaluate the
performance of investments.
Recognition of financial assets and
liabilities
At both the Company and the SPV
level, financial assets and financial liabilities are recognised in
the Statement of Financial Position when the Company becomes a
party to the contractual provisions of the instrument. This is
deemed to occur when the memorandum of agreement is signed for
vessel acquisitions only.
Financial assets and financial
liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs indirectly attributable to the
acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in the
Statement of Comprehensive Income.
Subsequent to initial recognition,
investments at FVTPL are measured at fair value with gains and
losses arising from changes in the fair value being recognised in
the Statement of Comprehensive Income.
Financial assets at fair value through profit or
loss
Financial assets are classified at
FVTPL when the financial asset is held for trading. Financial
assets at FVTPL are stated at fair value, with any gains or losses
arising on re-measurement recognised in the Statement of
Comprehensive Income.
The Company's investment in LSA
has been measured at FVTPL on the basis that it is managed and its
performance is evaluated on a fair value basis, in accordance with
the Company's documented investment strategy.
The Company has not taken the
option to irrevocably designate any investment in equity at fair
value through other comprehensive income. The Company measures and
evaluates the performance of the entire investment into LSA on a
fair value basis by using the net asset value of LSA including, in
particular, the underlying SPVs and the fair value of the SPVs'
investments in their respective vessel assets, as well as the
residual net assets and liabilities of both the SPVs and LSA
itself. The investment in LSA consists of both equity and debt
instruments.
In estimating the fair value of
each underlying SPV (as a constituent part of LSA's net asset value
at fair value), the Board has approved the valuation methodology
for valuing the vessels held by the SPVs. The valuation methodology takes account of the
indirect factors affecting the shipping industry
including currency exchange rates, interest rates, the availability
of credit, and climate change considerations.
Vessels sold before the period end
for settlement/delivery afterwards, are carried at the sale price
set out in the contract for sale less a provision for estimated
costs of disposal (such as re-delivery costs) and the costs of
liquidating the relevant SPV.
The fair value of a standard
vessel consists of its charter-free value plus or minus the value
of any charter lease contracts attached to the vessel, plus or
minus an adjustment for the capital expenditure associated with the
vessel. There are time charter contracts
in place for standard vessels. Such charters will vary in length
but would typically be in the 1 - 8 year range. As the shipping
markets can be volatile over time, the value of such charters will
therefore either add to or detract from the open market
charter-free value of the vessel.
Under a time charter, the vessel
owner provides a fully operational and insured vessel for use by
the charterer. There is a fluid charter market reported daily by
shipbrokers.
The charter-free and associated
charter values of most standard vessels are calculated
predominantly using an online valuation platform provided by
VesselsValue or, in limited circumstances, based on a written
valuation of a mainstream broker appointed by the Investment
Manager. For charter-free values only, the VesselsValue system
contains a number of algorithms that combine factors such as vessel
type, technical features, age, cargo capacity, freight earnings,
market sentiment and recent vessel sales.
For charter values, the
platform provides a Discounted Cashflow ("DCF") module where vessel
specific charter details are input and measured against a platform
or shipbroker-provided market benchmark to obtain a premium or
discount value of the charter versus the typical prevailing market
for that type of vessel. The adjustment for the capital expenditure
associated with the dry docking of the vessel is time apportioned
on a straight-line basis over the period between the vessel's last
visit to dry dock and the expected date of its next visit, by
reference to the actual cost of the last visit and the budgeted
cost of the next. This adjustment is an addition to value when the
valuation date is nearer to the vessel's last dry docking than to
its next expected visit to dry dock, and vice versa.
The net adjusted
valuation is subject to a minimum fair value being the present
value of all current contracted charter cashflows and the current
vessel scrap value at the completion of the charter. The present
value of the cashflows is discounted at the specific WACC assigned
to the vessel type by VesselsValue adjusted for any counterparty
credit risk where appropriate.
Specialist vessels are
valued on a DCF basis by the Investment Manager using vessel
specific information and both observable and unobservable data. The
VesselsValue platform is not used for these assets. Instead a DCF
approach is adopted and this determines the present value of the
cashflows discounted at the project cost of capital IRR, and is
deemed to be a fair representation of the vessel and charter
value.
Refer to Note 3 which explains in
detail the judgements and estimates applied.
SPVs and LSA account for residual
net assets and liabilities in line with the accounting policies of
the Company.
Derecognition of
financial assets
The Company and the SPVs
derecognise a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of
ownership. For vessel purchase and sale transactions undertaken by
the SPVs derecognition normally occurs at the point of delivery of
the vessel to the purchaser at the SPV level.
If the Company neither transfers
nor retains substantially all the risks and rewards of ownership
and continues to control the transferred asset, the Company
recognises its retained interest in the asset and any associated
liability.
On derecognition of a financial
asset in its entirety, gains and losses on the sale, which is the
difference between the initial cost and sale value, will be taken
to the profit or loss in the Statement of Comprehensive Income in
the year in which they arise.
Offsetting financial instruments
Financial assets and liabilities
are offset and the net amount reported in the Statement of
Financial Position when there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle
on a net basis or realise the asset and settle the liability
simultaneously.
Financial liabilities and equity
Debt and equity instruments are
classified either as financial liabilities or as equity in
accordance with the substance of the contractual arrangement. Trade
and other payables are financial liabilities with fixed or
determinable payments that are not quoted in an active market.
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest rate method. However, given the nature of trade and other
payables and the short time length involved between their
origination and settlement, their amortised cost is considered to
be the same as their fair value.
Derecognition of financial liabilities
The Company derecognises financial
liabilities when, and only when, the Company's obligations are
discharged, cancelled or expire.
Trade and
other receivables
Trade and other receivables are
non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Trade and other
receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest rate
method, less provision for impairment. However, given the nature of
receivables and the short time length involved between their
origination and settlement, their amortised cost is considered to
be the same as their fair value.
At each reporting date, the
Company shall measure the loss allowance on other receivables at an
amount equal to the lifetime expected credit losses if the credit
risk has increased significantly since initial recognition. If, at
the reporting date the credit risk has not increased significantly
since initial recognition, the Company shall measure the loss
allowance at an amount equal to 12-month expected credit
losses.
Trade and other
payables
Trade and other payables that have fixed or
determinable payments that are not quoted in an active market are
classified as payables. Payables are measured at amortised cost
using the effective interest rate method. Interest expense is
recognised by applying the effective interest rate, except for
short-term payables when the recognition of interest would be
immaterial.
(k) Cash and cash equivalents
Cash and cash equivalents include
cash on hand, demand deposits and other short-term highly liquid
investments with original maturities of 3 months or less and bank
overdrafts. In the current and prior years, the carrying amount of
cash and cash equivalents approximate their fair value.
(l) Foreign currency
translation
i) Functional and presentation
currency
The financial statements of the
Company are presented in US Dollars, which is also the currency in
which the share capital was raised, and investments are purchased
and is therefore considered by the Directors to be the Company's
functional currency.
ii) Transactions and
balances
At each financial position date,
monetary assets and liabilities that are denominated in foreign
currencies are translated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency are
not retranslated. Exchange differences are recognised in the
Statement of Comprehensive Income in the year in which they
arise.
Transactions denominated in
foreign currencies are translated into US Dollars at the rate of
exchange at the date of the transaction.
(m) Going concern
In assessing the going concern
basis of accounting the Directors have, together with discussions
and analysis provided by the Investment Manager, had regard to the
guidance issued by the Financial Reporting Council. They have
considered the possible impact of recent market volatility and
geopolitical events on the current and future operations of the
Company and its investments. Cash reserves are held at the LSA and
SPV levels and rolled up to the Company as required to enable
expenses to be settled as they fall due.
The Company is required to hold a
vote on the Continuation of the Company at the AGM on 24 October
2024. During the year the Investment Manager and Brokers engaged
major shareholders regarding their voting intentions, and as a
result of these discussions and given the positive performance of
the Company for its life to date, the Directors hold the view that
the Continuation Vote will be for the Company to continue its
operations. In the event the vote does not pass, the Board have six
months in which to bring forward proposals for the future of the
Company.
The Directors are satisfied that,
at the time of approving the financial statements, no other
material uncertainties exist that may cast significant doubt
concerning the Company's ability to continue for the foreseeable
future concluding that the Company has adequate resources to
continue in operational existence for at least twelve months from
the date of approval of the financial statements. For these
reasons, the Directors continue to adopt the going concern basis in
preparing the financial statements.
(n) Equity instruments
An equity instrument is any
contract that evidences a residual interest in the assets of an
entity after deducting all its liabilities. Equity instruments
issued by the Company are recognised at the proceeds received, net
of direct issue costs.
Repurchase of the Company's own
equity instruments is recognised and deducted directly in equity.
No gain or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Company's own equity
instruments.
3. Critical accounting judgements and
estimates
The preparation of financial
statements requires management to make estimates and judgements
that affect the amounts reported for assets and liabilities as at
the Statement of Financial Position date and the amounts reported
for revenue and expenses during the year. This note provides an
overview of the areas that involved a higher degree of judgement or
complexity, and of items which are more likely to be materially
adjusted due to estimates and assumptions turning out to be wrong.
Estimates and underlying assumptions are reviewed on an ongoing
basis.
Revisions to accounting estimates
are recognised in the year in which the estimates are revised and
in any future years affected.
Critical judgements in applying the Company's accounting
policies - IFRS 10
The audit committee considered the
application of IFRS 10, and whether the Company meets the
definition of an investment entity.
The Company owns the investment
portfolio through its investment in LSA. The investment by LSA
comprises the NAVs of the SPVs. The Company holds 100% voting
shares in LSA and has all the characteristics of an investment
company. Cash reserves are held at the LSA and SPV levels and paid
up to the Company as required to enable expenses to be settled as
they fall due.
In the judgement of the Directors,
the Company meets the investment criteria set out in IFRS 10 and
they therefore consider the Company to be an investment entity in
accordance with IFRS 10. As a result, as required by IFRS 10, the
Company is not consolidating its subsidiary but is instead
measuring it at fair value in accordance with IFRS 13 - Fair value
measurements.
The criteria which define an
investment entity are disclosed in Note 2(a).
Critical Accounting Estimates
The following are the key
assumptions and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next FY.
The principal critical accounting
estimate in the Company's financial statements is the value of its
investment in LSA, which is in turn dependent on the values of
LSA's investments in the SPVs. Principal critical accounting
estimates in determining the values of the SPVs comprise the fair
values of their vessels, in turn comprised of the charter-free and
attached charter values and capital expenditure, all of which are
critical accounting estimates.
The unobservable inputs which
significantly impact the fair value of the vessels have been
determined to be the charter-free valuation and market charter
rates for standard vessels (used to calculate charter values) and
the discount rate applied for specialised vessels.
The process of calculating the
charter-free and charter values of the vessels is described in Note
2(j).
At 30 June 2024 the charter-free
valuations of two vessels (2023: two vessels) were provided through
independent broker valuations rather than VesselsValue. These
broker valuations are themselves estimates derived from the
specialist knowledge of the broker, their proprietary data that
considers vessel specifications and applicable market
information.
Further to the information
mentioned in Note 2 (j) there are specific capital adjustments
considered as part of the valuation process for standard vessels,
mainly the adjustments for BWTSs and scrubbers installed. BWTSs
installed by the Company's SPVs are considered to be an enhancement
to the charter-free value.
They are initially recognised at
cost and straight-line depreciated from the commissioning date to 8
September 2024, being the date by which the IMO mandates all
vessels should have installed BWTS. Scrubbers are considered an
enhancement to the charter-free value using an estimated valuation
from a shipbroker, and straight-line depreciated over 5
years.
At 30 June 2024, one vessel was
treated as a specialist vessel (2023: one vessel).
The specialist vessel was valued on a DCF basis
by the Investment Manager using vessel specific information
including the appropriate discount rate, which is reviewed on a
regular basis to ensure it remains relevant to the project and
market risk parameters, however the discount rate remains a
material driver to the valuation.
There were no other material areas
of estimation for the Company.
4. Financial assets at fair
value through profit or loss
The Company owns the investment
portfolio through its investment in LSA, which comprises the NAV of
the SPVs and residual assets and liabilities in LSA. The NAVs
consist of the fair value of vessel assets and the SPVs' residual
net assets and liabilities. The whole investment portfolio is
designated by the Board as a Level 3 item on the fair value
hierarchy because of the lack of observable market information in
determining the fair value.
As a result, all the information
below relates to the Company's Level 3 assets only, with respect to
the requirements set out in IFRS 7: Financial Instruments:
Disclosures. The investment held at fair value is recorded under
Non-Current Assets in the Statement of Financial Position as there
is no current intention to dispose of its investment in
LSA.
The changes in the financial assets
measured at fair value through profit or loss for which the Company
has used Level 3 inputs to determine fair value, after considering
dividends declared (see Note 7 and 8) are as follows:
|
|
2024
US$
|
|
2023
US$
|
LSA
|
|
|
|
|
|
|
|
|
|
Brought forward cost of
investment
|
|
292,529,864
|
|
299,483,224
|
Total return of investment capital
during the year
|
|
(11,566,555)
|
|
(6,953,360)
|
|
|
|
|
|
Carried forward cost of investment
|
|
280,963,309
|
|
292,529,864
|
|
|
|
|
|
Brought forward unrealised gains on
fair value
|
|
113,458,851
|
|
147,409,496
|
Movement in unrealised gains /
(losses) on fair value
|
|
50,555,223
|
|
(33,950,645)
|
Carried forward unrealised gains on fair
value
|
|
164,014,074
|
|
113,458,851
|
Total investment at fair value
|
|
444,977,383
|
|
405,988,715
|
The SPVs and holding companies
Handy Holdco Limited and Product Holdco Limited (which are also
SPVs) are incorporated in the Isle of Man. The subsidiary company
LSA is incorporated in Guernsey. The country of incorporation is
also their principal place of business.
Breakdown of Fair
Value:
Name
|
2024
US$
|
2023
US$
|
Direct or indirect holding
|
Principal activity
|
Ownership at 30 June
2024
|
Ownership at 30 June
2023
|
LSA7
|
-
|
-
|
Direct
|
Holding company
|
100%
|
100%
|
Anvil Limited
|
17,502,570
|
18,240,972
|
Indirect
|
SPV
|
100%
|
100%
|
Auspicious Limited
|
20,505,411
|
20,137,727
|
Indirect
|
SPV
|
100%
|
100%
|
Awesome Limited
|
20,060,142
|
19,704,498
|
Indirect
|
SPV
|
100%
|
100%
|
Candy
Limited6
|
-
|
16,785
|
Indirect
|
SPV
|
100%
|
100%
|
Charming Limited
|
20,221,500
|
18,953,365
|
Indirect
|
SPV
|
100%
|
100%
|
Citra
Limited6
|
-
|
205,362
|
Indirect
|
SPV
|
100%
|
100%
|
Cocoa
Limited4
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Courteous
Limited4
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Dachshund3
Limited
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Daffodil
Limited4
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Exceptional
Limited4
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Golding Limited
|
19,055,526
|
21,081,370
|
Indirect
|
SPV
|
100%
|
100%
|
Handy HoldCo Limited
|
36,973,101
|
50,090,478
|
Indirect
|
SPV (Holding Company)
|
100%
|
100%
|
Idaho Limited
|
20,235,105
|
22,322,508
|
Indirect
|
SPV
|
100%
|
100%
|
Laurel Limited
|
14,803,667
|
16,410,147
|
Indirect
|
SPV
|
100%
|
100%
|
Lavender
Limited6
|
-
|
60,848
|
Indirect
|
SPV
|
100%
|
100%
|
Marvelous
Limited4
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Masterful Limited
|
19,630,327
|
18,893,952
|
Indirect
|
SPV
|
100%
|
100%
|
Mayflower Limited
|
15,101,491
|
15,590,330
|
Indirect
|
SPV
|
100%
|
100%
|
Mindful
Limited4
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Neon Limited
|
24,405,007
|
26,616,326
|
Indirect
|
SPV
|
100%
|
100%
|
Octane Limited
|
22,977,354
|
20,155,744
|
Indirect
|
SPV
|
100%
|
100%
|
Orson Limited
|
15,603,911
|
17,938,851
|
Indirect
|
SPV
|
100%
|
100%
|
Parrot Limited1,
2
|
29,502
|
674
|
Indirect
|
SPV
|
100%
|
100%
|
Patience Limited1,
2
|
617,575
|
662,085
|
Indirect
|
SPV
|
100%
|
100%
|
Pollock
Limited1, 3
|
-
|
-
|
Indirect
|
SPV
|
100%
|
100%
|
Product HoldCo Limited
|
56,855,114
|
58,135,471
|
Indirect
|
SPV (Holding Company)
|
100%
|
100%
|
Riposte
Limited1, 2
|
1,127,015
|
411,002
|
Indirect
|
SPV
|
100%
|
100%
|
Rocky IV Limited
|
17,392,312
|
18,540,092
|
Indirect
|
SPV
|
100%
|
100%
|
Sierra Limited
|
23,195,939
|
20,393,002
|
Indirect
|
SPV
|
100%
|
100%
|
Vicuna
Limited6
|
-
|
2,598
|
Indirect
|
SPV
|
100%
|
100%
|
Cash held pending
investment5
|
30,136,235
|
10,709,986
|
|
|
|
|
Residual net assets /
(liabilities)5
|
48,548,579
|
10,714,542
|
|
|
|
|
Total*
|
444,977,383
|
405,988,715
|
|
|
|
|
*Vessels are valued at fair value
in each of the SPVs shown in the table above and combined with the
residual net assets / (liabilities) of each SPV to determine the
fair value of the total investment attributable to LSA.
1 Vessel
sold.
2 Company
in the process of dissolution at year end.
3 These
SPVs report zero fair value in the table above because they are
owned by the intermediate holding company Handy Holdco Limited and
are included in Handy Holdco Limited's fair value.
4 These
SPVs report zero fair value in the table above because they are
owned by the intermediate holding company Product Holdco Limited
and are included in Product Holdco Limited's fair value.
5 The
cash held pending investment and residual net assets /
(liabilities) are held in LSA.
6 Company
has been dissolved.
7 Fair
value of LSA equals the sum of the assets of residual net assets,
and cash as detailed below.
The movement in the fair value of
the investment is recorded in the Statement of Comprehensive
Income.
5. Trade and other
receivables
|
|
|
2024
|
|
2023
|
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Prepayments
|
|
|
35,051
|
|
38,577
|
Other receivables
|
|
|
4,799
|
|
1,108
|
Due from LSA (dividend
receivable)
|
|
|
7,189,979
|
|
7,841,485
|
|
|
|
|
|
|
Total trade and other receivables
|
|
|
7,229,829
|
|
7,881,170
|
|
|
|
|
|
|
Amounts
due from LSA are interest free and payable on demand. The amount of
US$7,841,485 due from LSA for the year ended 30 June 2023 was
settled in the current year. Due to the value and short-term nature
of these receivables, the Directors have assessed there to be no
expected credit losses associated with these outstanding
balances.
6. Trade and other
payables
|
|
|
2024
|
|
2023
|
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Investment management
fees
|
|
|
907,483
|
|
835,779
|
Audit fees
|
|
|
218,758
|
|
219,762
|
Administration fees
|
|
|
42,435
|
|
41,478
|
Corporate Brokers fees
|
|
|
37,500
|
|
37,500
|
Directors' fees
|
|
|
1,371
|
|
10,004
|
|
|
|
|
|
|
Total trade and other payables
|
|
|
1,207,547
|
|
1,144,523
|
|
|
|
|
|
|
The carrying amounts of trade and
other payables are considered to be the same as their fair values,
due to their short term nature.
7. Ordinary share capital
Share Capital
Share issuance
|
Number of shares
|
Gross amount (US$)
|
Direct Issue costs (US$)
|
Share capital (US$)
|
As
at 30 June 2022
|
308,628,541
|
316,282,156
|
(6,009,173)
|
310,272,983
|
Share buybacks
|
(6,160,000)
|
(6,946,752)
|
-
|
(6,946,752)
|
As
at 30 June 2023
|
302,468,541
|
309,335,404
|
(6,009,173)
|
303,326,231
|
Share buybacks
|
(11,386,000)
|
(11,573,679)
|
(111,729)
|
(11,685,408)
|
As
at 30 June 2024
|
291,082,541
|
297,761,725
|
(6,120,902)
|
291,640,823
|
The ordinary shares issued are of
no par value and are authorised, issued and fully paid. Ordinary
shares carry the right to receive all income of the Company
attributable to ordinary shares, and to participate in any
distribution or other return of capital attributable to ordinary
shares. Ordinary shareholders have the right to receive notice of
and attend any general meetings of the Company and to vote at such
meeting with one vote for each ordinary share held.
The rights conferred upon the
holders of the shares are not varied by the creation or issue of
further shares or classes of shares or by the purchase or
redemption by the Company of its own shares, or the holding of such
shares in treasury.
At the end of the FY, there were
17,546,000 shares (2023: 6,160,000 shares) held in treasury.
These treasury shares may be subsequently
cancelled or sold for cash.
No shares will be sold from
treasury at a price less than the NAV per share at the time of the
sale unless they are first offered pro rata to existing
shareholders.
8. Dividend income
|
|
|
2024
|
|
2023
|
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Dividend income
|
|
|
30,000,000
|
|
32,000,000
|
|
|
|
|
|
|
During the current year, LSA declared dividends of US$30,000,000
(2023: US$32,000,000) to the Company. At 30 June 2024, dividends of
US$7,189,979 (2023: US$7,841,485) were outstanding (refer to Note
5).
9. Earnings / (Loss) per share
|
|
2024
US$
|
|
2023
US$
|
Total comprehensive income /
(loss) for the year
|
|
76,067,722
|
|
(2,473,359)
|
Weighted average number of
ordinary shares
|
|
293,851,833
|
|
307,057,116
|
Earnings / (Loss) per ordinary
share (cents)
|
|
25.89
|
|
(0.81)
|
Diluted Earnings / (Loss) per
ordinary share (cents)
|
|
25.89
|
|
(0.81)
|
There were no potentially dilutive
instruments in issue at 30 June 2024 or 30 June 2023.
10. Dividends
The company paid the following
dividends during the year:
Quarter end
|
Dividend per share
|
Ex div date
|
Net Dividend paid
|
Record date
|
Paid date
|
30 June
2023
|
US$0.02125
|
27
July
2023
|
US$6,296,601
|
28
July
2023
|
11
August 2023
|
30 September 2023
|
US$0.02125
|
26 October
2023
|
US$6,264,129
|
27
October 2023
|
10
November 2023
|
31 December
2023
|
US$0.02125
|
25
January 2024
|
US$6,248,192
|
26
January
2024
|
6
February 2024
|
31 March 2024
|
US$0.025
|
25 April
2024
|
US$7,290,814
|
26
April
2024
|
10
May
2024
|
In addition, the company
declared the following dividend in relation to the profit for the
year ended 30 June 2024:
Quarter end
|
Dividend per
share
|
Ex div
date
|
Net Dividend
paid
|
Record
date
|
Paid date
|
30 June
2024
|
US$0.025
|
25
July
2024
|
US$7,277,064
|
26
July
2024
|
9 August
2024
|
Under the Companies (Guernsey)
Law, 2008, the Company can distribute dividends from capital and
revenue reserves, subject to a prescribed net asset and solvency
test.
The net asset and solvency test
consider whether a company is able to pay its debts when they fall
due, and whether the value of a company's assets is greater than
its liabilities. The Board confirms that the Company passed the net
asset and solvency test for each dividend paid.
11. Net assets per ordinary share
|
|
2024
US$
|
|
2023
US$
|
Shareholders' equity
|
|
451,055,672
|
|
412,773,093
|
|
|
|
|
|
Number of ordinary
shares
|
|
291,082,541
|
|
302,468,541
|
|
|
|
|
|
Net assets per ordinary share
(cents)
|
|
154.96
|
|
136.47
|
12. Financial risk management
Capital management
The Board manages its capital to
ensure that it will be able to continue as a going concern while
maximising the return to shareholders. In accordance with the
Company's investment policy, the Company's principal use of cash
has been to fund investments as well as ongoing operational
expenses. The Board, with the assistance of the Investment Manager,
monitors and reviews the broad structure of the Company's capital
on an ongoing basis. The capital structure of the Company consists
entirely of equity (comprising issued capital and retained
earnings).
As the Company's ordinary shares
are traded on the LSE, the ordinary shares may trade at a discount
or premium to their NAV per share. However, the Directors and the
Investment Manager monitor the discount on a regular basis and can
use share buybacks to manage the discount.
The Company is not subject to any
externally imposed capital requirements.
Financial risk management objectives
The Board, with the assistance of
the Investment Manager, monitors and manages the financial risks
relating to the operations of the Company through internal risk
reports which analyse exposures by degree and magnitude of risk.
These risks include market risk (including price risk, currency
risk and interest rate risk), credit risk and liquidity
risk.
Market risk
The value of the investments held
by the Company is indirectly affected by the factors impacting the
shipping industry generally, being, inter alia, interest rates, the
availability of credit, and currency exchange rates. Other risks
such as climate change considerations, economic or political
uncertainty, changes in laws and regulations governing shipping or
trade are considered by the Investment Manager and the Board.
Please see Principal Risks and Uncertainties. These factors may
affect the price or liquidity of vessels held by the Company's SPVs
and thus the value of the SPVs
themselves.
Interest rate risk
The majority of the Company's
financial assets and liabilities are non-interest bearing. However,
the Company is exposed to a small amount of interest rate risk due
to fluctuations in the prevailing levels of market interest rates
because any excess cash or cash equivalents are invested at
short-term market interest rates.
The Company's interest-bearing
financial assets and liabilities expose it to risks associated with
the effects of fluctuations in the prevailing levels of market
interest rates on its financial position and cash flows.
The table below summarises the
Company's exposure to interest rate risks. It includes the
Company's assets and trading liabilities at fair value and the
outstanding loans with variable interest rates. It does not
consolidate the US$62.0m (2023: US$56.5m) loan (with a variable
interest rate at SOFR plus a margin of 3.2% owed by Product Holdco
Limited (with SOFR interest rate caps at 0.5% and 4.65% on amounts
of US$9.0m and US$47.75m respectively for 3 years). (2023: loan of
US$14.00m owed by Handy HoldCo Limited).
Interest payments on these loans
are subject to limited change from fluctuations in interest rates
due to their capped nature.
2024
|
Interest bearing less than 1 month (US$)
|
Non-interest bearing (US$)
|
Total (US$)
|
Assets
|
|
|
|
Investments
|
-
|
444,977,383
|
444,977,383
|
Trade and other receivables
excluding prepayments
|
-
|
7,194,778
|
7,194,778
|
Cash and cash
equivalents
|
56,007
|
-
|
56,007
|
Total assets
|
56,007
|
452,172,161
|
452,228,168
|
|
|
|
|
Liabilities
|
|
|
|
Trade and other
payables
|
-
|
1,207,547
|
1,207,547
|
Total liabilities
|
-
|
1,207,547
|
1,207,547
|
|
|
|
|
Total interest sensitivity gap
|
56,007
|
|
56,007
|
The weighted average interest rate
is 5.10% for cash and cash equivalents in
the current FY.
2023
|
Interest bearing less than 1 month (US$)
|
Non-interest bearing (US$)
|
Total (US$)
|
Assets
|
|
|
|
Investments
|
-
|
405,988,715
|
405,988,715
|
Trade and other receivables
excluding prepayments
|
-
|
7,842,593
|
7,842,593
|
Cash and cash
equivalents
|
47,731
|
-
|
47,731
|
Total assets
|
47,731
|
413,831,308
|
413,879,039
|
|
|
|
|
Liabilities
|
|
|
|
Trade and other
payables
|
-
|
1,144,523
|
1,144,523
|
Total liabilities
|
-
|
1,144,523
|
1,144,523
|
|
|
|
|
Total interest sensitivity gap
|
47,731
|
|
47,731
|
The weighted average interest rate
was 3.63% for cash and cash equivalents in
the prior year.
If the interest rates had been 100
basis points higher or lower and all other variables were held
constant, the Company's profit for the year ended 30 June 2024
would increase or decrease by US$560 (2023: US$477) as a result of
the Company's exposure to interest rates on its variable rate
deposits only.
The Company and LSA with its SPVs
are permitted to utilise overdraft facilities towards the
achievement of the Company's investment objectives. There was no
overdraft utilised during the current and prior years. Refer to
Price Risk on the following pages for a description of the indirect
impact interest rates have on the valuation of vessel
assets.
Credit risk
Credit risk refers to the risk
that a counterparty will default on its contractual obligations
resulting in a financial loss to the Company.
The Company's subsidiary
SPVs hold credit risk exposures to charterers. Potential new
charters are evaluated to assess counterparty credit risk, both at
an SPV and portfolio level, prior to any contractual engagement.
The SPVs historical actual counterparty credit losses over the life
of the Company to date have been zero. At 30 June 2024 there were
no receivables held by the SPVs considered impaired (2023:
US$nil).
Cash reserves are held
at the LSA and SPV levels and are paid up to the Company as
required to enable expenses to be settled as they fall
due.
The Company maintains
its cash and cash equivalents with various banks to diversify
credit risk. These are subject to the Company's credit monitoring
policies including the monitoring of the credit ratings issued by
recognised credit rating agencies.
30 June 2024
|
Credit rating Standard & Poor's
|
Cash
(US$)
|
Short term fixed deposits (US$)
|
Total as at 30 June 2024
(US$)
|
Barclays Bank Plc
(Barclays)
|
A+ Long Term
A-1 Short Term
|
34,990
|
-
|
34,990
|
Ravenscroft
1
(HSBC London - call
accounts)
|
A+ Long Term
A-1 Short Term
|
-
|
21,017
|
21,017
|
Total
|
|
34,990
|
21,017
|
56,007
|
30 June 2023
|
Credit rating Standard & Poor's
|
Cash
(US$)
|
Short term fixed deposits (US$)
|
Total as at 30 June 2023
(US$)
|
Barclays Bank Plc
(Barclays)
|
A+ Long Term
A-1 Short Term
|
38,624
|
-
|
38,624
|
Ravenscroft
1
(HSBC London - call
accounts)
|
A+ Long Term
A-1 Short Term
|
-
|
9,107
|
9,107
|
Total
|
|
38,624
|
9,107
|
47,731
|
1
Ravenscroft is an execution only broker that acts solely on
instruction of the Board of Directors. The Board of Directors only
invest cash in banking institutions with an A- rating or
higher.
Liquidity risk
Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as
they fall due. The Board of Directors has established an
appropriate liquidity risk management framework for the management
of the Company's short-term, medium-term and long-term funding and
liquidity management requirements.
The Company manages liquidity risk
by maintaining adequate cash reserves by monitoring forecast and
actual cash flows. Cash reserves are held at the LSA and SPV levels
and paid up to the Company as required to enable expenses to be
settled as they fall due.
The table below shows the maturity
of the Company's non-derivative financial assets and liabilities.
The amounts disclosed are contractual, undiscounted cash flows and
may differ from the actual cash flows received or paid in the
future as a result of early repayments.
30 June 2024
|
Up to 3 months (US$)
|
Between 3 and 12 months (US$)
|
Between 1 and 5 years
(US$)
|
Total
(US$)
|
Assets
|
|
|
|
Financial assets at fair value
through profit or loss
|
-
|
-
|
444,977,383
|
444,977,383
|
Trade and other receivables
excluding prepayments
|
7,194,778
|
-
|
-
|
7,194,778
|
Cash and cash
equivalents
|
56,007
|
-
|
-
|
56,007
|
Liabilities
|
|
|
|
|
Trade and other
payables
|
1,207,547
|
-
|
-
|
1,207,547
|
Total
|
6,043,238
|
-
|
444,977,383
|
451,020,621
|
30 June 2023
|
Up to 3 months (US$)
|
Between 3 and 12 months (US$)
|
Between 1 and 5 years
(US$)
|
Total
(US$)
|
Assets
|
|
|
|
Financial assets at fair value
through profit or loss
|
-
|
-
|
405,988,715
|
405,988,715
|
Trade and other receivables
(excluding prepayments)
|
7,842,593
|
-
|
-
|
7,842,593
|
Cash and cash
equivalents
|
47,731
|
-
|
-
|
47,731
|
Liabilities
|
|
|
|
|
Trade and other
payables
|
1,144,523
|
-
|
-
|
1,144,523
|
Total
|
6,745,801
|
-
|
405,988,715
|
412,734,516
|
Price risk in the
shipping industry
The valuation techniques used by
the underlying SPVs in determining the value of the vessels held
(based on assumptions that are not supported by prices or other
inputs from observable current market transactions) present a price
risk to the Company. The Company's financial assets are measured at
fair value which comprises the fair value of the underlying SPVs.
The Company values its investment in LSA and the SPVs at their
respective net asset values. The net asset values comprise shipping
vessels which are measured at fair value and other residual net
assets and liabilities of each of the entities.
All the assets and underlying
vessels are Level 3 assets. All the market price risk pertains to
the Level 3 investment portfolio in its entirety.
Price risk sensitivity analysis
was conducted on vessel and charter fair values only as these are
the most significant unobservable inputs to the valuation of the
Company's investment.
(a) Standard Vessel
valuations
The fair value of a standard
vessel comprises both the charter-free value, the charter valuation
and capital expenditure. The charter-free and associated charter
values of typical vessels are calculated using an online valuation
system provided by VesselsValue or, in limited circumstances,
written mainstream broker valuations. For charter-free values, the
VesselsValue system contains a number of algorithms that combine
factors such as vessel type, technical features, age, cargo
capacity, freight earnings, market sentiment and recent vessel
sales.
Similarly, the charter-free values
determined by written mainstream broker valuations consider vessel
specifications and other applicable market information.
For charter values, the system
provides a DCF module where vessel specific charter details are
input and measured against a system or shipbroker-provided market
benchmark to obtain a premium or discount value of the charter
versus prevailing market.
The lower bound of the charter
valuation process comprises the DCF value of the current charter
plus scrap value of the vessel at the end of the charter. At the
current and prior year ends this minimum value was not applied to
any vessels.
(b) Specialised Vessels and
arrangements
There will be cases where the
Company may invest in vessels and make arrangements which are (i)
of a specialised nature and fall out of scope of mainstream brokers
and/or (ii) where contracted employment does not have an available
reference benchmark in the freight brokerage community.
The Investment Manager will make
its own assessment of a vessel's value with charter using a
discounted cashflow model ("DCF Model"). The DCF Model will
calculate the net present value of the charter and vessel value
using the following inputs:
·
Discount rate;
·
Charter Rate; and
·
Exit/scrappage value
There was one specialised vessel
arrangement held at the year end (2023: one vessel) being a gas
tanker with a long-term bareboat charter attached.
Refer to Note 3 for further
information on the valuation methodologies applied. The Board and
the Investment Manager believe that the above reflects those inputs
where price risk could be significant, and where estimate and
judgement can potentially be used.
Price risk sensitivity analysis
Charter-free valuation for standard vessels
A 10% change in vessel values is
within the normal range of value variation over the course of a
year and is simple to understand and flex. If the charter-free
vessel values at 30 June were 10% higher or lower, then the
effect on the standard vessel portfolio value would be as
follows:
Vessel values
|
+10% change in charter-free
values
US$ 000
|
Standard vessel portfolio
value
US$ 000
|
-10% change in charter-free
values
US$ 000
|
Fair value at 30 June
2024
|
+51,674
|
466,238
|
(51,674)
|
Fair value at 30 June
2023
|
+47,659
|
437,843
|
(47,659)
|
The ballast water treatment system
and scrubber adjustments are not considered significant or material
and therefore no sensitivity analysis has been prepared.
Charter valuation for
standard vessels
Charter rates
The Board has concluded that use
of a 10% movement in benchmark charter rates remains a suitable
sensitivity calculation, being within a normal range of benchmark
variation over the course of a month and is simple to understand
and flex, noting that most of the charter value is derived from
charters having remaining periods of 1 year or more, the market
benchmarks for which show lower volatility than spot rates and
already reflect market expectations for the period of the charter.
If market charter rates used to determine charter values were 10%
higher or lower, then the effect on the standard vessel portfolio
value would be as follows:
Vessel values
|
+10%
change
US$ 000
|
Standard vessel portfolio
value
US$ 000
|
-10%
change
US$ 000
|
Fair value at 30 June
2024
|
(13,598)
|
466,238
|
+13,607
|
Fair value at 30 June
2023
|
(14,988)
|
437,852
|
+14,959
|
Specialised vessels
If the discount rates were 0.5%
higher or lower, being within a normal range of interest rate
variation over the course of a year, then the effect on the
specialised vessel portfolio value would be as follows:
|
+0.5%
change
US$ 000
|
Specialised Vessel portfolio
value
US$ 000
|
-0.5%
change
US$ 000
|
Specialised vessel fair value at 30
June 2024
|
(100)
|
23,510
|
+101
|
Specialised vessel fair value at 30
June 2023
|
(188)
|
24,904
|
+191
|
There was one specialised vessel
held at the year end (2023: one vessel).
Currency risk
The Company may have assets and
liabilities denominated in currencies other than the United States
Dollar, the functional currency. It therefore may be exposed to
currency risk as the value of assets or liabilities denominated in
other currencies will fluctuate due to changes in exchange
rates.
However, such exposure is
currently, and is expected to remain, insignificant. Consequently,
no further information has been provided.
13. Investment management fee
The Investment Manager is entitled
to receive an annual fee, calculated on a sliding scale, as
follows:
(a) 0.85% per annum of the quarter
end Adjusted Net Asset Value up to US$250m;
(b) 0.75% per annum of the quarter
end Adjusted Net Asset Value in excess of US$250m but not exceeding
US$500m; and
(c) 0.65% cent per annum of the
quarter end Adjusted Net Asset Value in excess of
US$500m.
For the year ended 30 June 2024 the
Company has incurred US$3,484,902 (2023: US$3,504,464) in investment management fees of
which US$907,483 was outstanding at 30 June 2024
(2023: US$835,779).
14. Performance fees
Tufton ODF Partners LP shall be
entitled to a performance fee in respect of a Calculation Period
provided that the Total Return Per Share on the Calculation Day for
the Calculation Period of reference is greater than the High
Watermark Per Share and such performance fee shall be an amount
equal to the Performance Fee Pay-Out Amount if:
·
the High Watermark is greater than the Total
Return Per Share on any Calculation Day; and
·
the prevailing Historic Performance Fee Amount is
greater than zero on such Calculation Day,
Any fee accruing as at the end of
the Calculation Period is paid 50% subsequent to the end of that
period, with the remaining 50% being retained by the Company and
deferred until the next time that a performance
fee payment is due, being adjusted for any subsequent
underperformance during that time.
The prevailing Historic
Performance Fee Amount shall be reduced by the lower of: (i) 20% of
the difference between the High Watermark Per Share and the Total
Return Per Share on such Calculation Day multiplied by the Relevant
Number of shares; and (ii) the prevailing Historic Performance Fee
Amount.
A performance fee of US$nil (2023:
US$nil) was accrued at year end. The prior year included a reversal
of accrued performance fees amounting to US$3,980,432 in the
Statement of Comprehensive Income.
15. Related parties
The Investment Manager, Tufton
Investment Management Ltd, is a related party due to having common
key management personnel with the SPVs of the Company. All
management fee transactions with the Investment Manager are
disclosed in Note 13.
Tufton ODF Partners LP is a related party due to being the
beneficiary of any performance fee paid by the company, as
disclosed in note 14.
Transactions with LSA are not
disclosed. There are no commercial transactions between the Company
and LSA other than the business of investment into LSA, the
transactions of which are shown in the main financial
statements.
The Directors held the following
interests in the share capital of the Company either directly or
beneficially:
|
25 September
2024
|
30 June
2024
|
30 June
2023
|
Director
|
Shares1
|
Shares
|
Shares
|
R King
|
55,811
|
60,000
|
60,000
|
S Le Page
|
38,387
|
41,268
|
40,000
|
P Barnes
|
4,651
|
5,000
|
5,000
|
C Rødsaether
|
27,906
|
30,000
|
30,000
|
T Le Noury
|
4,651
|
5,000
|
-
|
1. Further to the
announcement on 15 August 2024 in relation to the compulsory
Redemption of the Company's ordinary shares, the Directors have
each had Shares redeemed.
Other Interests
Tufton Group related stakeholders
including current & former shareholders, employees, and
non-executive directors directly or beneficially held ~4.9% of the
issued share capital as at 30 June 2024 (2023: ~3.7%).
16. Controlling party
In the opinion of the Directors,
based on shareholdings advised to them, the Company has no
immediate or ultimate controlling party.
17. Directors' fees
The remuneration of the Directors
was US$231,674 (2023: US$174,913) for the year which consisted
solely of short-term benefits. At 30 June 2024, no Directors' fees
(2023: US$10,004) were outstanding.
The Directors fees are as
disclosed below:
|
|
30 June
2024
|
30 June
2023
|
Director
|
|
£
|
£
|
R King
|
|
43,500
|
39,305
|
S Le Page
|
|
40,500
|
36,000
|
P Barnes
|
|
37,750
|
33,525
|
C Rødsaether
|
|
37,000
|
33,525
|
T Le Noury (Appointed 1 November
2023)
|
|
25,135
|
-
|
18. Events after the reporting year
Following the announcement of the
sale of Pollock and Dachshund on 11 January 2024 for combined total
of US$41.75m, representing a 3.1% premium to the vessels' previous
NAV, and the completion of the sale of Pollock in May 2024, the
sale of Dachshund was completed on 1 July 2024. The realised net
IRR across the two vessels was c.25% with net MOIC of c.2.0x,
significantly ahead of the Company's published IRR target of
12%.
On 17 July 2024, the Company
declared a dividend of US$0.025 per ordinary share for the quarter
ending 30 June 2024. The dividend was paid on 9 August 2024 to
holders of ordinary shares recorded on the register as at close of
business on 26 July 2024 with an ex-dividend date of 25 July
2024.
On 14 August 2024 the Company
compulsorily redeemed 20,326,211 shares at a price of US$1.550 per
share for close of business for cancellation, returning US$31.5m to
shareholders, paid on 28 August 2024.
There has not been any other
matter or circumstance occurring subsequent to the end of the
financial period that has significantly affected, or may
significantly affect, the operations of the Company, the results of
those operations, or the state of affairs of the Company the next
financial period up to the date of approval of these financial
statements.
Alternative Performance Measures ("APMs")
This Annual Report and Audited
Financial Statements contain APMs, which are financial measures not
defined in IFRS Accounting Standards. These include certain
financial and operational highlights and key financials. The
definition of each of these APMs is shown below.
The Company assesses its
performance using a variety of measures that are not specifically
defined under IFRS Accounting Standards and are therefore termed
APMs. The APMs that the Company uses may not be directly comparable
with those used by other companies. These APMs are used to present
a clearer picture of how the Company has performed over the year
and are all financial measures of historical performance. The APMs
are prepared on a consolidated basis.
Alternative Performance Measure
|
Definition / Method of calculation
|
Reason for use
|
Aggregate Realised Net IRR
|
Realised IRR based on aggregated
equity cash flows across all divested vessels calculated at SPV
level, net of fees.
|
Measures the net realised IRR on
all vessel divestments
|
Average Charter Length
|
Total forecast EBITDA from charters
in place, divided by the expected annualised EBITDA of those
charters
|
To provide information about the
extent to which the future revenue of the SPVs is contractually
fixed
|
CAGR
|
Compound Annual Growth Rate. A
business and investing specific term for the geometric progression
ratio that provides a constant rate of return over the time
period
|
To provide a measure of annual
compound growth rate over time
|
Company IRR
|
The IRR of the Company calculated
using all gross capital raises, dividends and buyback and current
Company NAV
|
Measures the IRR achieved by the
Company
|
Consolidated Gearing Ratio
|
Loans to charter-free value
including capital adjustments on a consolidated basis
|
To provide an indication of
leverage, which is not reported in the financial statements which
are not prepared on a consolidated basis
|
Depreciated Replacement Cost
|
Estimating the cost to replace the
asset, considering any changes in the cost of materials and labour
since the asset was initially purchased or constructed, and
subtracting the depreciation that has occurred since that
time
|
To provide a methodical basis for
estimating the residual value of an asset at the end of a planned
investment period.
|
Dividend Cover
|
Portfolio Operating Profit less
debt amortisation, divided by dividends for the period
|
To provide information about the
extent to which dividends are covered by earnings
|
EBITDA
|
Earnings before interest, taxes,
depreciation and amortisation
|
To provide a measure of
profitability from operating activity, independent of financing
strategy
|
Forecast Net Yield
|
Forecast EBITDA over the current
charters minus any capex accruals for the vessels in the portfolio
divided by the time-weighted vessel values over the same
period
|
To provide information about
profitability from future operating activity relative to current
vessel values
|
Gain / (loss) in Capital Values
|
Fair value gains and losses (being
the change in charter-free value + change in charter value) from
marking assets to market in accordance with the valuation policy of
the Company
|
Fair value of the Company's
underlying investments is a key component of the Company's overall
investment performance
|
Gross Operating Profit
|
Operating profit before gain /
(loss) in capital values, loan interest, fees, and all other
Company level expenses
|
To provide an indication of the
underlying profit from operating activity, which is not reported in
the financial statements, before interest, fees and Company level
expenses
|
IRR
|
Internal rate of return - the
internal rate of return is the interest rate at which the net
present value of all the cash flows from a project or investment
equal zero, and is a common performance indicator used in
investment funds
|
A widely used APM which allows the
shareholders to compare performance of different funds
|
NAV Total Return Per Share
|
The change in NAV per share plus
dividends per share paid by the Company during the period, divided
by the initial NAV per share at inception
|
A measure showing how the NAV per
share has performed over a period of time, taking into account both
capital return and dividends paid to Shareholders
|
Portfolio Operating Profit
|
Gross Operating Profit and interest
income less loan interest and fees, Company Level Fees and
Expenses
|
To provide an indication of the
underlying net profit from operating activity, which is not
reported in the financial statements
|
Portfolio Price / Depreciated Replacement Cost
("P/DRC")
|
Price divided by the Depreciated
Replacement Cost. Price may refer to a transaction (investment or
divestment) value or fair value at a certain date
|
The Investment Manager's preferred
valuation metric for investment analysis. P/DRC tends to revert to
100% in the long-term
|
Revenue
|
Charter income, net of broker
commissions and charter related costs, earned by SPVs
|
To provide an indication of the
underlying income from operating activity which is not reported in
the financial statements
|
Ship-Days
|
The sum of the number of days each
vessel was owned by the Company over the financial
period
|
To provide information about the
vessel operating activity measured in days
|
Time-Weighted Capital Employed
|
Time-weighted capital invested in
vessels
|
A metric used to compare Gross
Operating Profit across different periods
|
Total Return Per Share
|
The Net Asset Value per ordinary
share on any Calculation Day adjusted to:
(i) include the gross amount of any
dividends and/or distributions paid to an ordinary share since
Admission;
(ii) not take account of any
accrual made in respect of the performance fee itself for that
Calculation Period;
|
A measure showing how the
investment in the Company's shares has performed over a period of
time, taking into account both capital return and dividends paid to
Shareholders
|
|
(iii) not take account of any
accrual made in respect of any prevailing Historic Performance Fee
Amount (as adjusted pursuant to the operation of this paragraph
below);
(iv) not take account of any
increase in Net Asset Value per share attributable to the issue of
ordinary shares at a premium to Net Asset Value per share or any
buyback of any ordinary shares at a discount to Net Asset Value per
ordinary share during such Calculation Period;
(v) not take account of any
increase in Net Asset Value per share attributable to any
consolidation or sub-division of ordinary shares;
(vi) take into account any other
reconstruction, amalgamation or adjustment relating to the share
capital of the Company (or any share, stock or security derived
therefrom or convertible there into); and
(vii) take into account the
prevailing Net Asset Value of any C Shares in issue
|
|
Corporate Information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsaether
Trina Le Noury - appointed 1
November 2023
Registered office
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Investment Manager and AIFM
Tufton Investment Management
Ltd
70 Pall Mall
1st Floor London
SW1Y 5ES
Asset Manager
Tufton Management
Limited
3rd Floor, St George's
Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Secretary and Administrator
Apex Administration (Guernsey)
Limited ("Apex")
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Brokers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Depositary
Apex Depositary (UK)
Limited
Bastion House
140 London Wall
London
EC2Y 5DN
Guernsey Legal Advisers
Carey Olsen (Guernsey)
LLP
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Registrar
Computershare Investor Services
(Guernsey) Limited
1st Floor, Tudor
House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Receiving Agent
Computershare Investor Services
PLC
The Pavillions
Bridgewater Road
Bristol
BS99 6AH
Independent Auditor to the Company
PricewaterhouseCoopers CI
LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Principal Bankers
Barclays Bank Plc
Guernsey International
Banking
PO Box 41
St Peter Port
Guernsey, GY1 3BE
Definitions
The following definitions apply
throughout this document unless the context requires
otherwise:
Adjusted Net Asset Value
|
The Net Asset Value less uninvested
monies (cash and cash value equivalents) held by the Company from
time to time excluding monies arising on or from the realisation of
or a distribution from an investment.
|
Administrator
|
Apex Administration (Guernsey)
Limited
|
AIC
|
the Association of Investment
Companies.
|
AIFM Directive or
AIFMD
|
the EU Directive on Alternative
Investment Fund Managers (No. 2011/61/EU).
|
AIF
|
an alternative investment
fund.
|
AIFM
|
an alternative investment fund
manager.
|
AIFM Rules
|
the AIFM Directive and all
applicable rules and regulations implementing the AIFM Directive in
the UK.
|
Articles of Incorporation or
Articles
|
the articles of incorporation of
the Company, as amended from time-to-time.
|
Asset Manager
|
Tufton Management
Limited
|
Auditor
|
PricewaterhouseCoopers CI
LLP
|
Brokers
|
a mercantile agent employed in
buying and selling shares -
The Company's brokers are Hudnall
Capital LLP
and Singer
Capital Markets.
|
BWTS
|
Ballast Water Treatment
System.
|
Calculation Day
|
The last business day of each
Calculation Period.
|
Calculation Period
|
(a) the period starting on
Admission and ending on the earlier of (i) 30 June 2024; (ii) the
commencement of the winding up of the Company; and (iii) the
termination of the Manager's appointment; and
(b) if the previous Calculation
Year ended on 30 June of the previous Year, each successive period
starting on 1 July and ending on the earlier of (i) 30 June three
years later; (ii) the commencement of the winding up of the
Company; and (iii) the termination of the Manager's
appointment.
|
Calculation Year
|
1 July to 30 June
|
Companies Law
|
the Companies (Guernsey) Law, 2008
as amended.
|
Company
|
Tufton Oceanic Assets Limited
(Guernsey registered number 63061) which, when the context so
permits, shall include any intermediate holding company of the
Company and the SPVs.
|
Depreciated Replacement Cost or DRC
|
The Investment Manager's preferred
valuation metric. DRC for a secondhand vessel is the current cost
of replacing the vessel with an equivalent newbuild, depreciated to
the same age.
|
Directors or Board
|
the Board of Directors of the
Company or the Directors from time to time.
|
Disclosure Guidance and Transparency Rules or
DTRs
|
the disclosure guidance and
transparency rules made by the Financial Conduct Authority under
Section 73A of FSMA.
|
Discount Control Policy
|
The policy described in the
Discount Control section of the Company's Prospectus.
|
Environmental, Social, and Corporate
Governance (ESG)
|
an evaluation of the company's
collective conscientiousness for social and environmental
factors.
|
FCA
|
the UK Financial Conduct
Authority
|
Financial Reporting Council or FRC
|
the UK Financial Reporting
Council
|
FSMA
|
the Financial Services and Markets
Act 2000 and any statutory modification or re-enactment thereof for
the time being in force.
|
Fund Level Fees and Expenses
|
Investment management fee and other
professional fees and expenses at fund level.
|
GFSC or Commission
|
the Guernsey Financial Services
Commission
|
High Watermark Per Share
|
the higher of: (i) US$1.00
increased by the Hurdle; and (ii) if a Performance Fee has
previously been paid, the Total Return Per Share on the Calculation
Day for the last Calculation Period (if any) by reference to which
a Performance Fee was paid.
|
High Performance Fee Amount
|
in respect of any Calculation
Period, an amount equal to the Performance Fee Pay-Out Amount for
the previous Calculation Period where a Performance Fee was
payable.
|
Historic Performance Fee Amount
|
in respect of any Calculation
Period, an amount equal to be Performance Fee Pay-Out Amount for
the previous Calculation Period where a performance fee was
payable.
|
IASB
|
International Accounting Standards
Board
|
IFRIC
|
International Financial Reporting
Interpretations Committee
|
IFRS Accounting Standards
|
International Financial Reporting
Standards Accounting Standards
|
IMO
|
International Maritime
Organisation
|
Investment Manager
|
Tufton Investment Management
Ltd.
|
IPO
|
Initial public offering
|
Issue Price
|
An issue price refers to the
initial cost of a security when it first becomes available for
purchase by the public.
|
Listing Rules
|
the listing rules made by the UKLA
pursuant to Part VI of FSMA
|
London Stock Exchange or LSE
|
London Stock Exchange
plc
|
LPG Carrier
|
a vessel used to transport
liquefied petroleum gas.
|
LS Assets Limited or LSA
|
the Guernsey holding company
owning the SPVs through which the Company investment into
vessels.
|
LSE Admission Standards
|
the rules issued by the London
Stock Exchange in relation to the admission to trading of, and
continuing requirements for, securities admitted to the
SFS.
|
Main Market
|
the main market for listed
securities operated by the London Stock Exchange.
|
Market Abuse Regulation or MAR
|
Regulation (EU) No 596/2014 of the
European Parliament and of the Council of 16 April 2014 on market
abuse.
|
Memorandum
|
the memorandum of association of
the Company.
|
Net Asset Value or NAV
|
the value, as at any date, of the
assets of the Company after deduction of all liabilities of the
Company and in relation to a class of shares in the Company, the
value, as at any date of the assets attributable to that class of
shares after the deduction of all liabilities attributable to that
class of shares determined in accordance with the accounting
policies adopted by the Company from time-to-time.
|
Performance Fee Amount
|
20%. of the excess in Total Return
Per Share and the High Watermark Per Share multiplied by the time
weighted average number of shares in issue during the Calculation
Period.
|
Performance Fee Pay-Out Amount
|
in respect of the relevant
Calculation Period, an amount equal to "A", where:
A = (0.5 x B) + C;
B = the Performance Fee Amount;
and
C = an amount equal to the High
Performance Fee Amount.
|
POI Law
|
the Protection of Investors
(Bailiwick of Guernsey) Law, 2020, as amended.
|
Portfolio
|
the Company's portfolio of
investments from time to time.
|
Paris Agreement
|
The Paris Agreement is
a legally binding international treaty on climate
change.
|
Prospectus
|
The Placing and Offer for
Subscription document for the Company dated 8 December
2017.
|
Redemption
|
The one-off capital return of
US$31.5m completed by the Company via a compulsory redemption of
20,326,211 ordinary shares at a price of US$1.550 per
share.
|
Register
|
the register of members of the
Company.
|
Relevant Number of Shares
|
for any Calculation Period the time
weighted average number of ordinary shares in issue during such
Calculation Period.
|
Responsible Investment
|
A strategy and practice to
incorporate environmental, social and governance (ESG) factors in
investment decisions and active ownership.
|
SFS or Specialist Funds Segment
|
the Specialist Funds Segment of the
Main Market (previously known as the Specialist Fund Market or
SFM).
|
Segment
|
classifications of vessels within
the shipping industry including, inter alia, Tankers, General
Cargo, Containerships and Bulkers.
|
SOFR
|
Secured Overnight Financing
Rate.
|
SPV or Special Purpose Vehicle
|
Corporate entities, formed and
wholly owned (directly or indirectly) by the Company, specifically
to hold one or more vessels, and including (where the context
permits) any intermediate holding company of the
Company.
|
£
or Sterling
|
the lawful currency of the United
Kingdom.
|
Tufton
|
the Investment Manager
|
Tufton Group
|
Tufton Investment Management
Holding Ltd and its subsidiaries.
|
UK Corporate Governance Code
|
the UK Corporate Governance Code as
published by the Financial Reporting Council from
time-to-time.
|
UK Listing Authority
|
the FCA acting in its capacity as
the competent authority for the purposes of Part VI of
FSMA.
|
United Kingdom or UK
|
the United Kingdom of Great Britain
and Northern Ireland.
|
VesselsValue
|
VesselsValue Limited, a third party
provider of vessel valuations to the Company and Investment
Manager.
|
WACC
|
the weighted average cost of
capital.
|
VLCC
|
Very large crude
carrier.
|
Notice of
AGM
Tufton Oceanic Assets
Limited
Registered Office Address: 1
Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1
2HL
Registration Number:
63061
This document is important and requires your immediate
attention. If you are in doubt as to any aspect of the proposals
referred to in this document or the action you should take, you
should seek your own advice from a stockbroker, solicitor, or other
independent professional adviser. If you have recently sold or
transferred all your shares in Tufton Oceanic Assets Limited,
please forward this document, together with the accompanying
documents, as soon as possible either to the purchaser or
transferee or to the person who arranged the sale or transfer so
they can pass these documents to the person who now holds the
shares.
Dear Shareholder,
I am pleased to send you the notice
of the 2024 Annual General Meeting ("AGM") of the members of Tufton Oceanic
Assets Limited (the "Company" or "SHIP"), to be held at 1 Royal Avenue,
St Peter Port, Guernsey GY1 2HL on Thursday, 24 October 2024 at
11.00 am BST time. Explanatory notes on all resolutions accompany
the notice of the AGM (the "Notice").
Re-Election of
Directors
As in previous years, all Directors
are offering themselves for re-election or election in accordance
with the AIC Code of Corporate Governance and the Articles of
Incorporation of the Company (the "Articles"). Please note for your
information that biographical details of all the Directors offering
themselves for re-election are set out in the explanatory notes to
the resolutions that follow this Notice.
Continuation
Vote
Alongside the ordinary business of
the 2024 AGM, a resolution for the continuation of the Company is
included in the Notice.
As set out in the Prospectus, the
Directors will propose an ordinary resolution at the 2024 AGM that
the Company continues its business (the "Continuation Resolution"). If the
Continuation Resolution is passed at the 2024 AGM, the Directors
will put a further resolution to Shareholders at the 2027 AGM and
every three years thereafter.
The Board unanimously recommends
that Shareholders vote in favour of the Continuation Resolution and
the Board intend to vote the shares they control in
favour.
The
Board, in consultation with the Investment Manager, undertook a
review of the Company's mid-term strategy the highlights of which
were announced on 17 January 2024 including:
·
Since its IPO in December 2017, the Company has
delivered strong results in line with its original objectives,
despite the very challenging economic and operational backdrop
during Covid, ongoing geopolitical events and the impact of
inflation.
·
The Investment Manager anticipates the investment
opportunity set for fuel-efficient secondhand vessels to be very
strong for the next decade as the shipping industry slowly
transitions to net-zero carbon fuels to meet tightening regulations
and decarbonisation targets.
·
The Board and the Investment Manager believe that
strong supply-side fundamentals will continue to support high
yields and secondhand values in the medium term, resulting in
future IRRs being higher than the Company's published
target.
Acknowledging the discount of the
share price to the Company's NAV, the Board also announced changes
to the Company's capital allocation policy and use of investible
cash as follows:
-
With effect from 1Q24, SHIP's annual target
dividend was increased by c.17.6% from US$0.085/share to
US$0.10/share.
-
Towards the end of August 2024, the Company
returned US$31.5m by way of a one-time compulsory Redemption of
shares at a price of US$1.550 / share (being the NAV per share as
at 30 June 2024).
-
The Company sees fleet renewal (based on age,
technology, and sector outlook) as a priority. Returns from all new
asset investments over a three-year holding period will be compared
to the benefit from a further return of capital given the
prevailing share price at the time of the proposed investment and
medium-term market outlook.
-
The Board will annually evaluate a further return
of capital using excess investible cash if no suitable investment
opportunities are presented.
-
The current buy-back policy is to remain in place
i.e. excess cash may be used, at the discretion of the directors,
to repurchase shares should they trade at a >10% discount to
NAV, as set out in the Company's listing documents.
The Board therefore believes the
correct strategy for SHIP over the medium term through to 2030 is
to continue investing in fuel-efficient secondhand vessels to
maximise shareholder returns, intending to realise the Company's
current portfolio of assets starting from 2028, well before the
decarbonisation of shipping accelerates.
Company Name
Change
The Board is proposing that the
name of the Company be changed to Tufton Assets Limited as of 1
November 2024.
At the time of IPO, the Investment
Manager was called Tufton Oceanic Limited ("TOL"). TOL was a
professional investment manager with activities in the maritime
industry involving both real maritime asset investments as well as
financial asset (equity and derivative) investments. In late 2020,
TOL informed the Company's Board of a reorganisation of its
activities whereby the financial asset investment side of the
business had been subject to a management buy-out under
the subsequent name of Oceanic Investment
Management Limited ("OIM") and that the real maritime asset investment activities of the Investment Manager would remain in place but
with a name change to Tufton Investment Management Ltd ("TIM").
This change was notified to SHIP stakeholders on 5 January 2021.
It is proposed to
remove "Oceanic" from the
name of the Company and to re-name it Tufton Assets Limited thereby
confirming that there is no ongoing connection between TIM and OIM.
There is no change of any sort to the Investment Manager or any of
the services provided by TIM to the Company.
Voting
The Board of Directors of the
Company believe that the proposed resolutions set out in this
Notice are in the best interests of the Company and its
members.
If you would like to vote on the
resolutions, please appoint a proxy by no later than Tuesday, 22
October 2024 at 11.00 am BST time. A form of proxy accompanies the
Notice.
All resolutions will be put to a
poll in reflection of best practice and to ensure that all members
have their votes considered, proportional to their shareholdings in
the Company.
The results of the AGM will be
announced to the market as soon as practicable after the conclusion
of the AGM. Should you wish to discuss anything ahead of the AGM,
please see the contact details below:
Tufton Investment Management Ltd, the Investment
Manager
andrew.hampson@tufton.com
nicolas.tirogalas@tufton.com
Hudnall Capital, the Joint Broker
ac@hudnallcapital.com
Singer Capital Markets, the Joint Broker
James.Maxwell@singercm.com
Alex.Bond@singercm.com
Jalini.kalaravy@singercm.com
Apex Administration (Guernsey) Limited, the Company Secretary
& Chairman
shipadmin@apexgroup.com
Yours faithfully,
Robert King
Independent Non-Executive
Chairman
NOTICE OF ANNUAL GENERAL
MEETING 2024
Notice is hereby given that the
eight Annual General Meeting of the members of Tufton Oceanic
Assets Limited (the
"Company") will be held at 1 Royal Avenue, Royal Plaza, St
Peter Port, Guernsey GY1 2HL on Thursday, 24 October 2024 at
11.00am BST time to transact the business set out in the
resolutions below.
ORDINARY RESOLUTIONS
1. To receive the
Company's Annual Report and Audited Financial Statements for the
year ended 30 June 2024.
2. To re-appoint
PricewaterhouseCoopers CI LLP as auditor to the Company until the
conclusion of the next general meeting at which accounts are laid
before the Company.
3. To authorise the
Directors of the Company (the "Directors") to determine the
remuneration of the auditor.
4. To approve the
remuneration of the Directors for the year ended 30 June 2024, as
set out in the Directors' Report.
5. To re-elect Mr Robert
King as a Director who retires by rotation in accordance with
Article 21.3 of the Articles.
6. To re-elect Mr Stephen
Le Page as a Director who retires by rotation in accordance with
Article 21.3 of the Articles.
7. To re-elect Mr Paul
Barnes as a Director who retires by rotation in accordance with
Article 21.3 of the Articles.
8. To re-elect Ms
Christine Rødsæther as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
9. To re-elect Ms Trina Le
Noury as a Director who retires by rotation in accordance with
Article 21.3 of the Articles.
8. To authorise the
Company to make market acquisitions (as defined in the Companies
(Guernsey) Law, 2008, as amended) of its own ordinary shares of no
par value ("Ordinary
Shares"), either for cancellation or to hold as treasury
shares for future resale or transfer, provided that:
a. the maximum number of
Ordinary Shares authorised to be purchased shall be up to 14.99% of
the Ordinary Shares in issue (excluding treasury shares in issue)
as at 25 September 2024 (being the last business day prior to the
publication of the Notice);
b. the minimum price
(exclusive of expenses) which may be paid for an Ordinary Share is
US$0.01;
c. the maximum price
(exclusive of expenses) which may be paid for an Ordinary Share is
an amount equal to the higher of:
i. an
amount equal to 5% above the average of the mid-market values of an
Ordinary Share taken from the London Stock Exchange Daily Official
List for the five business days before the purchase is made;
or
ii. the
higher of the price of the last independent trade or the highest
current independent bid for Ordinary Shares on the London Stock
Exchange at the time the purchase is carried out;
d. subject to paragraph
(e), such authority shall expire at the annual general meeting of
the Company to be held in 2025 (unless previously varied, revoked
or renewed by the Company in general meeting) or, if earlier, the
date falling 15 months from the passing of this resolution;
and
e. notwithstanding paragraph (d), the Company may make a contract
to purchase its Ordinary Shares pursuant to the authority hereby
conferred prior to the expiry of such authority which will or may
be executed wholly or partly after the expiry of such authority and
may make a purchase of its own Ordinary Shares in pursuance of any
such contract notwithstanding the expiry of the authority given by
this resolution.
10. To
re-approve the dividend policy of the Company as set out in the
Prospectus dated 8 December 2017.
11. To
approve the continuation of the company as set out in the
Prospectus dated 8 December 2017.
SPECIAL RESOLUTION
12. To
consider and approve the Company name change from Tufton Oceanic Assets Limited to
Tufton Assets Limited as of 1
November 2024.
EXTRAORDINARY RESOLUTION
11. To
authorise the Directors to allot and issue shares, to grant rights
to subscribe for or to convert any security into shares and to make
offers or agreements to allot and issue equity securities (as
defined in Article 5.1(a) of the Articles) for cash and/or to sell
Ordinary Shares held by the Company as treasury shares as if the
pre-emption rights contained in Article 5.2 of the Articles did not
apply to any such allotment, grant or sale, provided that such
authority shall be limited to the allotment of shares and/or grant
of rights to subscribe for or to convert any security into shares
and/or sale of treasury shares up to an aggregate number of
Ordinary Shares as equal to 27,075,633 Ordinary Shares
(representing 10% of the Ordinary Shares in issue as at 25
September 2024) (excluding any Ordinary Shares held in treasury and
after giving effect to the exercise of warrants, options or other
convertible securities outstanding as at such date).
The authority granted by this
resolution shall, unless renewed, varied or revoked by the Company,
expire on the earlier of the conclusion of the next annual general
meeting of the Company and 15 months after the passing of this
resolution, save that the Company may, before such expiry, make
offers or enter into agreements during the relevant period which
would or might require.
Ordinary Shares to be allotted and
issued or rights to subscribe for or to convert any security into
Ordinary Shares to be granted or Ordinary Shares held in treasury
to be sold after this authority has expired and the Directors may
allot and issue equity securities and/or sell Ordinary Shares out
of treasury in pursuance of any such offer or agreement as if this
power had not expired.
By order of the Board
On behalf of Apex Administration (Guernsey)
Limited
Company Secretary
1 Royal Avenue
Royal Plaza
St Peter Port
Guernsey
GY1 2HL
EXPLANATORY NOTES -
GENERAL
The following notes explain your
general rights as a member and your right to vote at the 2024 AGM
or to appoint someone else to vote on your behalf.
A member of the Company who is
entitled to attend the AGM is entitled to appoint one or more
proxies to attend, speak and vote in their place. A proxy does not
need to be a member of the Company but must attend the AGM to
represent you. Details of how to appoint the Chairman of the AGM or
another person as your proxy using the proxy form are set out in
the notes to the proxy form. If you wish your proxy to speak on
your behalf at the AGM you will need to appoint your own choice of
proxy (not the Chairman) and give your instructions directly to
them. A member may appoint more than one proxy to attend the AGM,
provided that each proxy is appointed to exercise rights attached
to different shares. Under the current circumstances, the Board
strongly advises shareholders to appoint the Chairman of the
meeting as their proxy for all votes. Please note that appointing a
proxy who cannot attend the AGM will effectively void your
vote.
A corporation which is a member can
appoint one or more corporate representatives who may exercise, on
its behalf, all its powers as a member provided that no more than
one corporate representative exercises powers over the same share.
Corporate members are strongly encouraged to complete and return a
form of proxy appointing the Chairman of the meeting to ensure
their votes are included in the poll.
A form of proxy is enclosed which
should be completed in accordance with the instructions. To be
valid, this form of proxy and any power of attorney or other
authority under which it is executed (or a duly certified copy of
such power of attorney) must be lodged with the Company's
Registrar, Computershare Investor Services (Guernsey) Limited, c/o
The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, or by e-mail
to #UKCSBRS.ExternalProxyQueries@computershare.co.uk.
Alternatively, completed forms can be sent to the
registered office of the Company c/o Apex Administration (Guernsey)
Limited, 1 Royal Avenue, Royal Plaza, St Peter Port, Guernsey, GY1
2HL. All proxies must be received by no later than
11.00 am BST time on
Tuesday, 22 October 2024, being 48 hours before the time appointed
for the AGM. Submission of a proxy appointment will not preclude a
member from attending and voting at the AGM should they wish to do
so.
CREST offers a proxy voting service
which the Company's Registrar, Computershare are an agent
of.
Shareholders are advised that, upon
receipt of their proxy form from the Company, if they wish to
appoint a proxy or to give or amend an instruction to a previously
appointed proxy via the CREST system, the CREST message must be
received by the Company's agent (ID 3RA50) two days prior to the
date of the Company's AGM at the latest. For this purpose, the time
of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host)
from which the issuer's agent is able to retrieve the message.
After this time any change of instructions to a proxy appointed
through CREST should be communicated to the proxy by other
means.
CREST Personal Members or other
CREST sponsored members, and those CREST Members who have appointed
voting service provider(s) should contact their CREST sponsor or
voting service provider(s) for assistance with appointing proxies
via CREST.
For further information on CREST
procedures, limitations and system timings, please refer to the
CREST Manual. We may treat as invalid a proxy appointment sent by
CREST in the circumstances set out in Regulation 41 of the
Uncertificated Securities (Guernsey) Regulations 2009.
If you are an institutional
investor, you may be able to appoint a proxy electronically via the
Proxymity platform, a process which has been agreed by the Company
and approved by the Registrar. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must be lodged
by 11.00 am BST time on 22 October 2024 to be considered valid. Before you can
appoint a proxy via this process you will need to have agreed to
Proxymity's associated terms and conditions. It is important that
you read these carefully as you will be bound by them, and they
will govern the electronic appointment of your proxy.
Please note that the AGM will not
be made available by way of publicly available real-time
broadcast.
As at 25 September 2024 (being the
last business day prior to the publication of the Notice), the
Company's issued share capital consists of 270,756,330 Ordinary
Shares, carrying one vote each. Therefore, the total number of
voting rights in the Company as at 25 September 2024 is
270,756,330.
EXPLANATORY NOTES - ORDINARY RESOLUTIONS 1 to
12
ORDINARY RESOLUTION 1 - The
Company must present the financial statements for the year ended 30
June 2024 and the reports of the Directors and the Auditor to the
AGM for approval.
ORDINARY RESOLUTION 2 - The
auditor of the Company must be re-appointed at each general meeting
where accounts are laid, to hold office until the conclusion of the
next such general meeting. It is proposed that
PricewaterhouseCoopers CI LLP Limited be re-appointed as the
Company's auditor, to hold office from the AGM's conclusion until
the conclusion of the next general meeting at which accounts are
laid before the Company.
ORDINARY RESOLUTION 3 - This
resolution gives authority to the Board of Directors to determine
the remuneration of the Auditor.
ORDINARY RESOLUTION 4 -
Guernsey-registered companies are not obliged to prepare and
publish a Directors' Remuneration Report. However, the Company has
included details of its Directors' remuneration within the
Financial Report and Audited Financial Statements and an ordinary
resolution will be put to shareholders seeking approval of the
Directors' remuneration, which will be advisory only.
ORDINARY RESOLUTIONS 5-9 - The
full Board of Directors are retiring. They are offering themselves
for re-election or election as appropriate in accordance with
Article 23.1 of the Articles and the Association of Investment
Companies ("AIC") Code of Corporate Governance, of which the
Company is a member. A brief biography for each of the Directors is
set out on pages 35 and 36 of the Annual Report and Audited
Financial Statements.
ORDINARY RESOLUTION 10 - This resolution
grants the Company authority to make market purchases of up to
14.99% of the Ordinary Shares in issue as at 25 September 2024
(being the last business day prior to the publication of the
Notice). The Ordinary Shares bought back will either be cancelled
or placed into treasury at the determination of the
Directors.
The maximum price which may be
paid for each Ordinary Share must not be more than the higher of
(i) 5% above the average of the mid-market values of an Ordinary
Share taken from the London Stock Exchange Daily Official List for
the five business days before the purchase is made; or (ii) the
higher of the price of the last independent trade or the highest
current independent bid for the Ordinary Shares on the London Stock
Exchange at the time the purchase is carried out. The minimum price
which may be paid for each Ordinary Share is US$0.01.
This authority shall expire at the
next annual general meeting of the Company (or, if earlier, the
date falling 15 months from the passing of this resolution), when a
resolution to renew the authority will be proposed. The Company
currently intends that any Ordinary Shares repurchased would be
held in treasury, subject to applicable law and
regulation.
ORDINARY RESOLUTION 11 -
Shareholders are being asked to approve the Company's policy with
respect to the payment of dividends. This approval will be advisory only.
The dividend policy, as set out in the Prospectus dated 25
September 2018, is summarised below:
Dividend Policy
The Company intends to pay dividends on a quarterly basis
with dividends declared in January, April, July and October. The
Company will target a quarterly dividend of 2.5 cents per Ordinary
Share for the financial year 2025.
ORDINARY RESOLUTION 12 - This
resolution grants the Company authority to continue its business.
The Continuation Resolution, as set out in the Prospectus dated 25
September 2018, is summarised below:
Continuation Resolutions
The Directors propose an ordinary resolution at the annual
general meeting to be held in 2024 that the Company continues its
business (a "Continuation Resolution"). If this Continuation
Resolution is passed, then the Directors shall every three years
thereafter at the annual general meeting held following the
publication of the audited accounts propose a further Continuation
Resolution.
If the Continuation Resolution is not passed, the Directors
will put forward proposals for the reconstruction or reorganisation
of the Company to Shareholders for their approval as soon as
reasonably practicable following the date on which the Continuation
Resolution is not passed. These proposals may or may not involve
winding up the Company and, accordingly, failure to pass the
Continuation Resolution will not necessarily result in the winding
up of the Company.
An Ordinary Resolution is a resolution passed by a simple
majority of Members.
SPECIAL RESOLUTION 13 - Company Name Change
- This resolution will, if passed, allow the
Company to change its name from Tufton Oceanic Assets Limited to
Tufton Assets Limited as of 1 November
2024.
A
Special Resolution is a resolution of the shareholders present in
person in a general meeting passed by a majority of not less than
seventy-five percent of the votes recorded on a show of hands or by
way of a poll.
EXTRAORDINARY RESOLUTION 14 - General Disapplication of
Pre-emption Rights - This
resolution will, if passed, give the Directors power to allot
shares or grant rights to subscribe for or to convert any security
into shares or sell treasury shares for cash without first offering
them to existing shareholders in proportion to their existing
holdings up to an aggregate number of Ordinary Shares as equal to
27,075,633 Ordinary Shares, which represents approximately 10% of
the Company's issued ordinary share capital (excluding treasury
shares) as at 25 September 2024.
Resolution 14 will allow the
Company to carry out one or more tap issues, in aggregate, up to
10% of the number of Ordinary Shares in issue as at the last
business day prior to publication of the Notice and thus to pursue
specific investment opportunities in a timely manner in the future
and without the requirement to publish a prospectus and incur the
associated costs.
Any new Ordinary Shares issued
under the combined authority will be at a minimum issue price equal
to the last published NAV per Ordinary Share at the time of
allotment together with a premium intended at least to cover the
costs and expenses of the relevant placing or issue of new Ordinary
Shares (including, without limitation, any placing commissions).
The issue price in respect of each relevant placing or issue of new
Ordinary Shares will be determined on the basis described above to
cover the costs and expenses of each placing or issue and thereby
avoid any dilution of the NAV of the then existing Ordinary Shares
held by shareholders.
In accordance with the Articles, an Extraordinary Resolution
is a resolution of the shareholders present in person in a general
meeting passed by a majority of not less than seventy-five percent
of the votes recorded on a show of hands or by way of a
poll.
Form of Proxy - Annual
General Meeting 2024
To be
held at 1 Royal Avenue, Royal Plaza, St Peter Port, Guernsey GY1
2HL
On
Thursday, 24 October 2024 at 11.00 am BST time and at any
adjournment thereof
I/We………………………………………..………………………………………………….………
(BLOCK LETTERS PLEASE)
of………………………………………………………………………………………………………
…………………………………………………………………………………………………………
being (a) member(s) of the
above-named Company, hereby appoint the Chairman of the meeting/
or*
………………………………………………………………………………………………………………
as my/our proxy to vote for me/us
and on my/our behalf at the Annual General Meeting of the Company
to be held at 1 Royal Avenue Royal Plaza, St Peter Port, Guernsey,
GY1 2HL on Thursday, 24 October 2024 at 11.00 pm BST time and at
any adjournment thereof.
* To allow effective constitution of the meeting, if it is
apparent to the Chairman that no shareholders will be present other
than by proxy, then the Chairman may appoint a substitute to act as
proxy in his stead for any shareholder, provided that such
substitute proxy shall vote on the same basis as the Chairman. A
proxy need not be a member of the Company.
I/We direct my/our proxy to vote
as follows:
ORDINARY RESOLUTIONS
|
FOR
|
AGAINST
|
VOTE WITHHELD**
|
1. To
receive the Company's Annual Report and Audited Financial
Statements for the year ended 30 June 2024.
|
|
|
|
2. To
re-appoint PricewaterhouseCoopers CI LLP as auditor to the Company
until the conclusion of the next general meeting at which accounts
are laid before the Company.
|
|
|
|
3. To
authorise the Directors to determine the remuneration of the
auditor.
|
|
|
|
4. To
approve the remuneration of the Directors for the year ended 30
June 2024, as set out in the Directors' Report.
|
|
|
|
5. To
re-elect Mr Robert King as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
|
|
|
|
6. To
re-elect Mr Stephen Le Page as a Director who retires by rotation
in accordance with Article 21.3 of the Articles.
|
|
|
|
7. To
re-elect Mr Paul Barnes as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
|
|
|
|
8. To
re-elect Ms Christine Rødsæther as a Director who retires by
rotation in accordance with Article 21.3 of the
Articles.
|
|
|
|
9. To elect
Ms Trina Le Noury as a Director who retires by rotation in
accordance with Article 21.3 of the Articles.
|
|
|
|
10. Authority to make
acquisitions of the Company's own shares.
|
|
|
|
11. To approve the
Company's dividend policy.
|
|
|
|
12. To approve the
Continuation of the Company.
|
|
|
|
SPECIAL RESOLUTION
|
|
|
|
13. To approve the
Company name change.
|
|
|
|
EXTRAORDINARY RESOLUTION
|
|
|
|
14. Authority to allot
and issue shares and to sell shares held in treasury as if the
pre-emption rights in the Articles do not apply.
|
|
|
|
Signed
this
day
of
2024
Signature
[ ] Please tick here to
indicate that this proxy instruction is in addition to a
previous instruction. Otherwise it will
overwrite any previous instruction given.
NOTES TO THE FORM OF PROXY:
i. Please
indicate with an "X" in the appropriate box how you wish the proxy
to vote.
ii. If no
"X" is marked in any of the for/against/vote withheld boxes in
respect of a resolution, the proxy will exercise their discretion
as to how they vote or whether they withhold their vote. The proxy
will also exercise their discretion as to how they vote or whether
they withhold their vote on any business or resolution considered
at the AGM other than the resolutions referred to in this form of
proxy.
iii. In
accordance with sections 222 and 223 of The Companies (Guernsey)
Law 2008, you may appoint more than one person as your proxy to
exercise all or any rights to attend and to speak and
vote.
iv. **A vote
withheld is not a vote in law and will not be counted in the
calculation of the votes "For" and "Against" a
resolution.
v. To be valid
this form of proxy and any power of attorney or of the authority
under which it is executed (or a duly certified copy of such power
of attorney) must be lodged with the Company's Registrar:
Computershare Investor Services (Guernsey) Limited, c/o The
Pavilions, Bridgwater Road, Bristol, BS99 6ZY or the registered
office of the Company c/o Apex Administration (Guernsey) Limited, 1
Royal Avenue, Royal Plaza, St Peter Port, Guernsey, GY1 2HL by no
later than 11.00 am BST time on Tuesday, 22 October 2024, being 48
hours before the time appointed for the AGM. Completing and
returning this form of proxy will not prevent you from attending
the meeting and voting in person if you so wish.
vi. In order to
revoke a proxy instruction, a member will need to send a signed
hard copy notice clearly stating their intention to revoke a proxy
appointment, together with the power of attorney or other authority
(if any) under which it is signed, or a notarially certified copy
of such power of attorney or authority, to the Company's Registrar
to the contact details noted above.
vii. A form of proxy
executed by a corporation must be either under its common seal or
signed by an officer or attorney duly authorised by that
corporation.
viii. In the case of joint
holdings, the signature of the first named member on the Register
of Members will be accepted to the exclusion of the votes of the
other joint holders.
ix. Pursuant to
Regulation 41 of the Uncertificated Securities (Guernsey)
Regulations 2009, entitlement to attend and vote at the meeting and
the number of votes which may be cast thereat will be determined by
reference to the Register of Members of the Company at close of
business on the day which is two business days before the day of
the meeting. Changes to entries on the Register of Members after
that time shall be disregarded in determining the rights of any
person to attend and vote at the meeting.