TIDMSHIP
RNS Number : 9319Z
Tufton Oceanic Assets Ltd.
24 September 2020
24 September 2020
TUFTON OCEANIC ASSETS LIMITED
("Tufton Oceanic Assets" or the "Company")
Final Results and Notice of AGM
Tufton Oceanic Assets Limited announces its final results for
the period ended 30 June 2020. A copy of the Annual Report and
Audited Financial Statements has been submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. A copy of
the Annual Report and Audited Financial Statements will also
shortly be available on the Company's website in the Investor
Relations section under Company Documents at
www.tuftonoceanicassets.com/financial-statements.
Printed copies of the Company's Annual Report and Audited
Financial Statements together with Notice of the 2020 Annual
General Meeting will be posted to investors shortly. The annual
general meeting will be held at the Company's registered office at
3(rd) Floor, 1 Le Truchot, St Peter Port, Guernsey on 23 October
2020 at 9.30 am BST. Due to continuing Covid-19 restrictions,
specifically regarding the period of self-isolation required for
any incoming travellers to Guernsey, members are reminded that they
may appoint a Guernsey-based proxy.
For further information, please contact:
Tufton Investment Management Ltd (Investment Manager)
Andrew Hampson +44 (0) 20 7518
Paulo Almeida 6700
N+1 Singer
James Maxwell, Alex Bond (Corporate Finance) +44 (0) 20 7496
Alan Geeves, James Waterlow, Sam Greatrex (Sales) 3000
Hudnall Capital LLP +44 (0) 20 7520
Andrew Cade 9085
Highlights
-- The Company has performed reasonably well on a NAV basis,
benefiting from the diversification of its fleet, although its
share price, like that of many others, has suffered as a result of
the impact of the Covid-19 pandemic.
-- The Company had an overall loss for the financial year of US$1.2m, or US$0.0049 per Share.
-- Despite strong portfolio operating profit(1) , the Company
suffered non-cash, fair value losses as asset values fell due to
the impact of Covid-19 on the value of vessels in the shipping
market. Please see the Investment Manager's Report (page 7) for
more details.
-- The Company benefited from sector diversification as the
negative impact of the demand shock from Covid-19 lockdowns on
containership and bulker markets, was partly offset by the strong
performance in tankers.
-- The Company declared dividends of US$0.0175 per Share each
quarter and continues to target a total annual dividend of US$0.07
per Share.
-- The NAV per Share decreased from US$1.005 as at 30 June 2019
to US$0.931 as at 30 June 2020 net of share issue costs, after
dividends. The NAV total return for the financial year was
-0.7%.
-- The Company's Shares traded at an average discount of 0.96%
to NAV during the financial year.
-- Net proceeds of US$30.4m were raised in September 2019
pursuant to the Placing Programme described in the Company's
prospectus published 25 September 2018.
-- The Company took the opportunity to sell three general cargo
vessels in the financial year. This was the Company's first
divestment. The resulting realised yield and IRR exceeded the
targets expressed in the Company's prospectuses.
-- During the financial year, the Company acquired five vessels
for US$77.2m, bringing the total number of vessels to sixteen after
the divestment of the three general cargo vessels.
-- All sixteen vessels are employed on fixed rate charters(2) .
Vessels coming off charter in the second half of 2020 represent
circa ("c.")17% of NAV, so the portfolio remains largely insulated
from geopolitical and macroeconomic shocks.
-- EBITDA-weighted average length of charter is c. 2.5 years
based on expected charter duration.
-- The Company's fleet had only c.0.5% (26 ship-days(3) ) of
commercial idle time across the fleet over the financial year and
had no commercial idle time between 1 July and 22 September
2020.
1. Portfolio operating profit refers to profit and comprehensive
income for the year excluding v aluations gains/losses
2. Bear's charter has a fixed rate component plus a profit-share
mechanism.
3. Ship-days: Total number of days owned in the Company's fleet
for all the ships over the financial year.
Chairman's Statement
Introduction
On behalf of the Board, I present the Company's Annual Report
and Audited Financial Statements for the year ended 30 June 2020.
During the financial year, we raised additional funds (net proceeds
of US$30.4m) from a Placing on 20 September 2019, bringing the
total gross funds raised to US$250.4m.
The proceeds of the Placing were largely invested during the
financial year and we made the first divestment from the Company in
February 2020 through the sale of three general cargo vessels for
US$19.3m. As a result of a change in market conditions from March
onwards, following the first divestment, the Company slowed its
deployment of capital and therefore its subsidiaries had investible
cash of c.US$19m at the end of the financial year.
The Company currently has sixteen vessels in its fleet
consisting of three handysize bulkers, seven containerships and six
tankers with EBITDA-weighted average charter length of 2.5 years.
There is a further breakdown of the portfolio in the Investment
Manager's Report set out on pages 7 and 8.
Covid-19
Despite strong portfolio operating profit and cash flows, the
Company suffered non-cash, fair value losses as asset values fell
largely due to the impact of Covid-19 on the shipping market. The
Company benefited from sector diversification as the negative
impact on the containership and bulker markets during the financial
year was partly offset by the stronger performance of tankers. The
Investment Manager's Report provides a more detailed breakdown of
the impact that Covid-19 has had on the fleet and the overall
performance of the Company.
Performance
As at the end of 30 June 2020, the Company's NAV was US$237.7m
being US$0.931 per Share. The Company declared a loss of US$1.2m or
US$0.0049 per Share for the financial year.
The dividend cover* for the financial year was c.1.4x, despite
the market backdrop in the first half of 2020 and that the Company
is not currently fully invested. The Company forecasts that
dividend cover will continue to average 1.4x for the next 12-18
months based on current market conditions. The EBITDA-weighted
average charter length c.2.5 years and the Company continues to
target a total annual dividend of US$0.07 per Share.
During the financial year, the Company's listed share price
decreased from US$0.99 per Share as at 30 June 2019 to US$0.915 per
Share as at the close of business 30 June 2020. The Company's
Shares traded at an average discount of 0.96% to NAV during the
financial year.
Discount Management
During the financial year, the Company moved from a healthy
premium up until 29 February 2020 to a discount as markets
plummeted around the world and the impact of Covid-19 took effect
on the shipping sector. The discount levels reduced significantly,
from 19.98% on 31 March to 1.70% as at 30 June 2020.
* EBITDA less capex (excluding the scrubber retrofit for Parrot)
less debt service, divided by dividends for the period
Following the end of the financial year, the discount to NAV
although initially narrow, widened to more than 10% in August and
the Board utilised its powers to buy back Shares.
Although none were purchased during the accounting period, the
Company bought 150,000 of its own Shares at an average price of
US$0.824 per Share after the end of the financial year. There are
currently 150,000 Shares held in Treasury and 255,337,638 Shares in
issue as at the date of approval of these accounts.
Dividends
During the financial year, the Company declared and/or paid
dividends to shareholders as follows:
Period end Dividend per Ex div date Record date Paid date
Share (US$)
30.06.19 0.0175 08.08.19 09.08.19 23.08.19
30.09.19 0.0175 07.11.19 08.11.19 22.11.19
31.12.19 0.0175 06.02.20 07.02.20 21.02.20
31.03.20 0.0175 07.05.20 11.05.20 26.05.20
30.06.20 0.0175 06.08.20 07.08.20 21.08.20
The dividend for the prior quarter (ending 30 June 2019) was
paid during the financial year on 23 August 2019. A dividend was
declared on 29 July 2020 of US$0.0175 per Share for the quarter
ending 30 June 2020 and paid on 21 August 2020 to holders of Shares
on record date 7 August 2020 with an ex-dividend date of 6 August
2020.
Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held
on 23 October 2020 at 9.30 am BST the details of which are set out
in the AGM notice and Proxy on from pages 88 to 98. Under the
current travel restrictions in place in Guernsey we would recommend
that Shareholders appoint either the Chairman or an alternative
proxy to represent their votes at the AGM as Shareholders will not
be permitted at this time to attend the meeting in person.
At the last AGM held on 25 October 2019 there were four
resolutions with a significant number of votes against, the details
of which were set out in the Interim Financial Statements as at 31
December 2019.
There were votes against the approval of the accounts based on
the fact that the Company did not offer Shareholders the
opportunity to approve the dividend policy of the Company. We have
included a resolution to approve the dividend policy at the
forthcoming AGM and will do so in future years.
The votes against the re-appointment of the Auditors and the
re-appointment of Mr Le Page were as a result of a deemed conflict
between PwC and Mr Le Page as Chairman of the Audit Committee.
Following consultation with the shareholder representatives, I
would like to believe that the Shareholders consider Mr Le Page to
be an independent director without any conflicts of interest with
the Company's Auditors and in any event the Board have determined
that by the date of the AGM on 23 October 2020, Mr Le Page will
have exceeded a seven year period since being a partner of PwC CI
LLP and thus will satisfy the voting agents' criteria.
There were also a number of votes against me owing to the number
of listed appointments which I hold, which has now been
addressed
Where Shareholders or their appointed agent 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 part of our annual board evaluation held on 25 October 2019,
the Board considered it appropriate to introduce a new board member
with knowledge and experience of the shipping sector with an
emphasis on Environmental, Social and Governance ("ESG") matters. I
am pleased to confirm, during a difficult time to engage with
potential candidates, that we have appointed, Christine Rødsæther,
whose details are set out on page 33.
I would like to welcome Christine to the Board and following her
appointment, the Board has reviewed the roles and responsibilities
of the individual Directors. Christine will join the Audit
Committee with effect from 1 October 2020 and I will step down from
that Committee on the same date, ensuring the Audit Committee is
independent of the Chairman.
It is not intended at this time the Company would form any other
committees, with remuneration, nominations and management
engagement being the responsibility of the whole board. The
evaluation of the Chairman will be undertaken by the independent
directors, led by the Audit Committee Chair, as part of the annual
board evaluation process. Shareholders are also encouraged to
contact the Audit Committee Chair if they feel unable to approach
the Chairman directly, and consequently, the Company has no plans
to appoint a Senior Independent Director at this time.
As discussed above and set out in greater detail in the
Investment Manager's Report, this has been one of the most
challenging periods for the shipping sector and global economies in
general. The performance of the fleet has been strong with the
tanker sector significantly outperforming bulkers and
containerships. Although we see continued divergence between
sectors, the diversity of our fleet has allowed the Company to
provide some insulation against the under-performing sectors.
The Board are greatly encouraged by the Investment Manager's
ability to manage the diversified portfolio of vessels and also
continue to obtain new opportunities to increase the fleet size. It
is likely that the remaining part of 2020 will not be any easier
and the uncertain future in global markets, will lead to new
challenges. We saw a reduction in charter period renewal and
charter rates fall in the first half of 2020 primarily due to the
impact of Covid-19.
Towards the end of the financial year, we noted a significant
improvement in the shipping market as global lockdowns to contain
Covid-19 were relaxed. Please see the Investment Manager's Report
for more details on the shipping market. We are optimistic for the
Company's prospects as the global shipping markets return to
growth.
Outlook
I would like to thank my fellow directors for their commitment
and support during these difficult times, the Investment Manager
and their team for their diligence in dealing with complex and
challenging operational matters which have greatly increased due to
the impact of Covid-19. I would also like to take this opportunity
to thank our Shareholders for their support and continued belief in
our strategy.
Rob King
Non-executive Chairman
Investment Manager's Report
Highlights of the Financial Year
The portfolio operating profit from the fleet remained strong at
US$29.1m but this was outweighed by a US$30.3m decline in fair
value of fleet. Approximately 74% of the capital value decline was
in the second half of the financial year, mainly as containership
and bulker values declined due to the impact of Covid-19 on
shipping demand. The Company's loss for the financial year was
US$1.2m or US$0.0049 per Share based on the weighted average number
of shares (note 9).
The Investment Manager believes the Company's strong portfolio
operating profit and performance in the Covid-19 crisis, both on an
absolute basis and relative to other asset classes, demonstrates
that it can be an attractive high income and low correlation
investment.
-- The Company declared quarterly dividends of US$0.0175 per Share.
-- During the year, the Company acquired two containerships
(Parrot and Vicuna), one crude tanker (Bear), a product tanker
(Dachshund) and a handysize bulker (Antler) for a total of
US$77.2m.
-- Three general cargo vessels (Hongi, Darwin and Java) were
sold in the financial year when the opportunity arose to realise a
good return for Shareholders. This was the Company's first
divestment. The realised yield and IRR exceeded the targets
expressed in the Company's prospectus published on 25 September
2018 .
-- Parrot Limited, the SPV of Parrot, entered into a US$13.0m
5-year non-recourse senior secured loan. The first tranche of
US$7.8m was drawn in April 2020 and the second tranche of US$5.2m
was drawn in June. The blended fixed rate for the facility is
5.05%. The loan facility proceeds were used to fund the planned
capital expenditure for Parrot and to release cash for new
investments.
-- As at 30 June 2020, all sixteen vessels were employed on
fixed rate charters (Bear's charter has a fixed rate floor and a
profit sharing mechanism) and vessels coming off charter in the
second half of 2020 represent only c.17% of NAV so the portfolio
remains largely insulated from short term geopolitical and
macroeconomic shocks.
-- The Company's fleet had only c.0.5% (26 ship-days) of
unplanned commercial idle time across the fleet during the
financial year and had no commercial idle time between 1 July and
22 September 2020.
-- The dividend cover(*) for the financial year was c.1.4x,
despite the market backdrop in the first half of 2020 and that the
Company is not currently fully invested.
-- EBITDA-weighted average length of charter was 2.5 years as at
30 June 2020.This has declined during the period partly due to the
passage of time but also because recent charter renewals were
generally for shorter periods due to the impact of Covid-19.
-- Net proceeds of US$30.4m were raised in September 2019
pursuant to the Placing Programme described in the Company
prospectus published on 25 September 2018.
-- As at 30 June 2020, the expected cash-on-cash run-rate yield
from the fleet is c.13.8% after management fees and capex.
Much of the market volatility resulting from Covid-19 was
mitigated by strong operating performance and we believe the
Company stands to benefit from a recovery as asset values rebound
with demand, albeit with a lag. The Investment Manager's
proprietary system for analysis of shipping satellite data (Tufton
Real Time Activity Capture System "TRACS") shows a strong recovery
in demand, back to trendline, for bulker and containership markets
after Covid-19 related lockdowns were lifted in the latter half of
the second quarter of 2020.
* EBITDA less capex (excluding the scrubber retrofit for Parrot)
less debt service, divided by dividends for the period
The Assets
As at 30 June 2020, the Company owned sixteen vessels. 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. All other vessels operate
on time charter contracts, under which the Company provides fully
operational and insured vessels for use by the charterers.
As at 30 June 2020
SPV(+) Vessel Type Acquisition Earliest Latest end Expected
and Year of Date end of charter of charter end of charter
Build period period period**
Swordfish 1700-TEU containership February September December December
built 2008 2018 2020 2020 2020
----------------------- ------------ ---------------- ------------ ----------------
Kale 1700-TEU containership February October September September
built 2008 2018 2020 2021 2021
----------------------- ------------ ---------------- ------------ ----------------
Patience 2500-TEU containership March April October October
built 2006 2018 2021 2022 2022
----------------------- ------------ ---------------- ------------ ----------------
Riposte 2500-TEU containership March March March October
built 2009 2018 2020 2021 2020
----------------------- ------------ ---------------- ------------ ----------------
Neon Mid-sized LPG July August August August
carrier 2018 2025 2025 2025
built 2009
----------------------- ------------ ---------------- ------------ ----------------
Aglow Handysize bulker July May October October
built 2011 2018 2020 2020 2020
----------------------- ------------ ---------------- ------------ ----------------
Dragon ^ Handysize bulker September August October August
built 2010 2018 2020 2020 2020
----------------------- ------------ ---------------- ------------ ----------------
Citra 2500-TEU containership November November January November
built 2006 2018 2020 2021 2020
----------------------- ------------ ---------------- ------------ ----------------
Sierra Medium-range December January January January
product tanker 2018 2021 2022 2022
built 2010
----------------------- ------------ ---------------- ------------ ----------------
Octane Medium-range December January January January
product tanker 2018 2021 2022 2022
built 2010
----------------------- ------------ ---------------- ------------ ----------------
Pollock Handysize December February February February
product tanker 2018 2023 2024 2023
built 2008
----------------------- ------------ ---------------- ------------ ----------------
Parrot 8200-TEU containership July May May May
built 2006 2019 2025 2025 2025
----------------------- ------------ ---------------- ------------ ----------------
Bear Crude oil tanker September October October October
Built 2005 2019 2021 2021 2021
----------------------- ------------ ---------------- ------------ ----------------
Vicuna 2500-TEU containership October October October October
built 2006 2019 2022 2024 2022
----------------------- ------------ ---------------- ------------ ----------------
Dachshund Handysize February March March March
product tanker 2020 2023 2024 2023
built 2008
----------------------- ------------ ---------------- ------------ ----------------
Antler Handysize bulker March September December December
built 2012 2020 2020 2020 2020
----------------------- ------------ ---------------- ------------ ----------------
(Notes:)
(+ SPV that owns the vessel)
** These may differ from the Interim Report (31 March 2020)
following the re-assessment by the Investment Manager of the
prevailing market conditions
^ Charter renewed on 4 August 2020 for 2-4 months, ending
October 2020 (earliest)/ December 2020 (latest)
The Company divested three general cargo vessels for US$19.3m.
The realised yield and IRR exceeded the targets expressed in the
Company's prospectus published on 25 September 2018. This was the
Company's first divestment. As a result of the change in market
conditions from March onwards the Company slowed its deployment of
capital and therefore had investible cash of c.US$19m (held by LS
Assets Ltd) at the end of the financial year. While the Investment
Manager aims to hold investments over the longer term, it will
continue to consider sale opportunities that generate additional
value for shareholders.
Operating and Investment Highlights
During the financial year, the Company acquired five vessels for
US$77.2m, bringing the total number of vessels to sixteen vessels
after the divestment of the three general cargo vessels. The
Company's fleet had only c.0.5% (26 ship-days) of commercial idle
time across the fleet over the financial year and had no commercial
idle time between 1 July and 22 September 2020. This is a good
result over the period which included the impact of Covid-19 on
shipping demand, resulting in c.10.6% of the global containership
fleet being idle for much of second quarter of 2020 .
Containerships
Despite the disruptions to the Containership market from
Covid-19 (please see the Shipping Market discussion on page 13 for
the details), the seven containerships operate on time charter
contracts, under which the Company provides fully operational and
insured vessels for use by the charterers.
-- Swordfish is on a short-term charter to a public shipping
company based in Asia after a small gap following its previous
charter in May 2020.
-- Kale, Patience, Riposte and Vicuna are chartered to a major
investment grade container shipping group. Kale's charter was
extended in March 2020. Vicuna was acquired for US$8.75m in October
2019 and is on a 3 to 5 year charter.
-- Citra is chartered to a leading private operator of
containerships specialising in fresh fruit transportation.
-- The total investment in Parrot, a 2006 built 8200-TEU
containership, was US$28.3m. The vessel was delivered in July 2019
and is on a 5.5-year charter to a leading global container shipping
group. The vessel had its planned third special survey and scrubber
retrofit completed in May 2020. The SPV of Parrot drew down
US$13.0m in two tranches under a non-recourse loan facility at a
blended, fixed rate off 5.05%. The loan proceeds were used to fund
the planned capital expenditure for Parrot and release cash back to
the Company for new investments.
Bulkers
The market for bulkers weakened after a strong third quarter of
2019 and was further impacted by Covid-19. The Investment Manager
has employed the Company's bulkers on short term charters to
position the vessels for a market recovery.
-- Dragon and Aglow (handysize bulkers) operate under time
charters to two private European operators. After the financial
year, Dragon had its charter extended for several months,
minimising the likelihood of idle time during the second half of
2020.
-- Antler, a 2012 built handysize bulker, was acquired in March
2020 for US$7.0m. It is on a fixed rate time charter for 6 to 8
months to a major agricultural commodity trading and logistics
company.
Tankers
-- Four product tankers (Sierra, Octane, Pollock and Dachshund)
operate under time charters to a major commodity trading and
logistics company. Pollock's charter was extended at a fixed rate
(previously floating) for 3 to 4 years starting February 2020.
Dachshund, a 2008 built product tanker, was acquired in February
2020 for US$13.25m and was delivered to the Company in March. It is
on a fixed rate time charter for 3 to 4 years.
-- Bear, a 2005 built crude oil tanker, was acquired in
September 2019 for US$19.9m and operates under a 2-year time
charter with a fixed floor rate and profit-sharing mechanism to a
major tanker operator.
-- The gas carrier Neon operates on a bareboat charter, under
which the Company provides only the vessel to the charterer, who is
responsible for crewing, maintaining, insuring and operating
it.
The vessels in the fleet are well maintained and have performed
to expectations. Some events over the financial year worth noting
include:
-- Dragon had its scheduled second special survey;
-- Swordfish and Riposte had minor machinery issues which were promptly rectified;
-- Patience was struck by another vessel (which was at fault) in
October 2019, resulting in 12 days of unplanned off-hire (repair
costs minus deductible were covered by insurance);
-- Vicuna had its planned remedial maintenance and survey in first quarter of 2020; and
-- Parrot had its scheduled special survey and retrofit of a scrubber in China in May 2020.
All the vessels in the portfolio transitioned to low sulphur
fuel at the end of 2019 to comply with the International Maritime
Organization's (IMO) new sulphur cap. The Investment Manager
continues to identify an attractive pipeline of opportunities
across the shipping segments.
Investment Performance
NAV per Share was US$0.931 at 30 June 2020. Portfolio operating
profit from the fleet contributed US$0.117 per Share. There was an
unrealised loss in the charter-adjusted fleet value of US$0.122 per
Share during the financial year. The unrealised loss arose mainly
because of the fall in capital values of containerships and bulkers
during the second half of the financial year due to the impact of
Covid-19 on demand for these vessel types. Tankers proved to be an
effective diversifier, contributing to performance through strong
portfolio operating profit and higher asset values as the segment
benefited from demand for floating storage. NAV total return over
the financial year was -0.7%.
The fleet performance during the financial year was strong with
gross profit/ time weighted capital employed increasing to 14.2%,
compared to 12.3% in the previous financial year. The dividends for
first and second quarter of 2020 were paid in May 2020 and August
2020 respectively, both of US$0.0175 per Share. The Company's
dividend cover* for the financial year was c.1.4x, despite the
market backdrop and that the Company is not fully invested.
Portfolio performance by segment
Portfolio operating profit was strong except for the bulkers.
The three bulkers in the fleet are on short-term charters at
relatively low rates in a poor market and represent only c.9.5% of
the portfolio NAV. The short-term charters position the vessels
well for longer term charters at higher rates as demand recovers.
Much of the negative impact on capital values came from fair value
losses in containerships as demand in that segment saw the worst
impact from Covid-19. TRACS data show a recovery in containership
and bulker demand back to trendline at the end of the second
quarter of 2020 . Please see the Shipping Market section for more
details on TRACS.
As at 30 June 2020, vessels corresponding to more than 60%, by
value, of the portfolio (i.e. excluding investible cash) have
charter coverage greater than one year. Fixed employment in the
portfolio was across ten different charterers. Exposure to tankers
totalled 47.9%, containerships represented 32.8% and bulkers 9.5%
of the portfolio.
The shipping market was expected to encounter an impactful
regulatory change ("IMO2020") in early 2020 as the global fuel
sulphur cap was reduced to 0.5% by the IMO. The last six months
proved to be eventful but for very different reasons. The impact of
IMO2020 paled before the twin impacts of Covid-19 and OPEC policy
changes. Covid-19 quickly developed into a global pandemic over the
first quarter of 2020 . Travel restrictions and shutdowns to limit
the contagion had a negative impact on global GDP growth. In June,
the IMF forecast 2020 World GDP to shrink by 4.9%. The IMF
forecasts a return to 5.4% growth in 2021 as governments around the
globe put in place unprecedented fiscal and monetary stimulus to
support the economic recovery. Shipping demand growth is
historically linked to the growth in GDP. Clarksons Research
forecasts global trade (tons) to shrink by 4.4% in 2020 and return
to 5% growth in 2021.
This section includes data from the Investment Manager's
proprietary TRACS system which analyses satellite data to track the
international shipping fleet. By monitoring the overall levels of
cargo on water, TRACS enables the Investment Manager to have a
close to real-time measure of shipping demand. Other statistics on
demand and supply are from Clarksons Research.
Some notable highlights of the shipping market (based on
Clarksons Research) include
-- Global seaborne trade is forecast to contract by 5%
(ton-miles) in 2020 after a slowdown to 1% growth in 2019. Seaborne
trade grew by 3.3% CAGR in the two decades leading up to 2019.
-- After strong growth of 3.9% in 2019, fleet expansion is
forecast to decelerate to 2.4% in 2020 and 1.9% in 2021
-- The global orderbook is at its lowest level since 2004,
equivalent to only 7.8% of the fleet, compared to over 50% in
2008.
-- Over the twelve months leading to June 2020:
-- Average 12-month time charter rates for handysize bulkers fell 8% year on year.
-- Clarksons' containership time charter rates index fell 24% year on year.
-- Average 12-month time charter rates for handysize tankers
rose 3% year on year, while Suezmax 12-month charter rates rose
14%.
The second half of 2019 was marked by a slowdown in global GDP
growth and industrial production. As the benefits of the 2018 tax
cuts in the US faded, business confidence weakened in the face of
the uncertainties of US-China trade negotiations. Manufacturing
firms became more cautious on long term capital expenditure. The
growth slowdown was exacerbated in the first half of 2020,
primarily due to the impact of Covid-19.
Despite the impact of Covid-19, the boom in the tanker market
proved that disruption is not always negative for the global
shipping industry. Towards the end of the third quarter of 2019 ,
the tanker market received an unexpected boost when the US
sanctioned Cosco Tankers, a large Chinese operator - effectively
removing a significant portion of available tanker capacity.
Benchmark rates for large tankers hit decade highs as the effect of
US sanctions was exacerbated by ships taken out of service for
scrubber retrofits ahead of IMO2020.
The rally in tanker rates paused in early 2020 as US sanctions
were removed in January. The combined impact of Covid-19 on oil
demand and the change in OPEC policy in early March led to strong
demand for floating storage as oil production and exports greatly
exceeded demand.
TRACS data show the tremendous boost for tanker demand from
floating storage, with around 30m tons (c.210m barrels) of oil and
products being stored at sea by the end of April. On a like for
like basis, there is usually no such demand.
Benchmark rates for large tankers hit new record highs exceeding
levels achieved in the fourth quarter of 2019. Tanker demand peaked
on 1 May as OPEC cut production by 9.7m barrels per day.
The tanker market had a strong first half of 2020 supported by
demand for floating storage. Tonnage in floating storage is likely
to be gradually released back into the market over the second half
of 2020 but easing travel restrictions and tapering of OPEC
production cuts from July will support incremental demand
growth.
On the other hand, dry bulk shipping remained very volatile over
the financial year. Businesses opportunistically built inventories
in the third quarter of 2019 ahead of expected changes in tariff
regimes, resulting in record demand for many dry bulk products. The
benchmark Baltic Dry Index hit a six-year high in the third quarter
of 2019 However, bulker demand weakened in the fourth quarter of
2019 with the combined effects of slowing GDP growth, lower steel
demand growth and pullback from the inventory building of the third
quarter of 2019 being exacerbated by environmental shutdowns in
Asia. The weakness continued into the first quarter of 2020 with
the impact of seasonality over Chinese New Year amplified by travel
restrictions and business shutdowns around Covid-19. According to
TRACS data, bulker demand recovered back to trendline towards the
end of the second quarter of 2020 as Chinese iron ore imports
increased to replenish low inventories and fulfil pent-up
demand.
In the second half of 2019, consumer sentiment remained buoyant,
particularly in the US as additional easing by the US Federal
Reserve was followed by mortgage refinancing which added to
disposable income. Containership rates, led by larger vessels,
improved over the course of the third of quarter of 2019 and
consolidated at relatively high levels in the fourth quarter of
2019. TRACS data show that Covid-19 had dual impacts on the
containership segment. The initial impact was through lower Chinese
exports due to extended shutdowns and travel restrictions around
Chinese New Year. Even as the restrictions were eased in China,
they were rolled out in Europe and then the United States resulting
in a second negative impact on demand. Benchmark time charter rates
on feeder containerships fell by 24% over the 12 months leading to
June 2020. From the middle of May, TRACS data show a rebound in
containership demand back to trendline. Time charter rates
stabilised toward the end of the second quarter of 2020 and started
improving after the end of the financial year.
The supply-side adjustment across shipping subsectors has
continued and was possibly accelerated by the impact of Covid-19.
The pace of new orders continued to fall. According to Clarksons
Research, the 5.7m CGT of new orders in the first half of 2020 was
a 25-year low. The orderbook shrunk to 7.8% of the fleet, the
lowest level since 2004. Fleet growth is expected to slow from 2.4%
in 2020 to 1.9% in 2021. The supply adjustment could be further
aided by a reduction in average fleet speed. At the moment, the
speed reduction is largely an industry response to the current
commercial environment but mandatory speed reduction to lower
emissions remains under consideration. Speed reduction as a means
of optimizing voyage economics, reducing emissions and managing
fleet capacity is unique to the shipping industry.
Environment, Social and Governance
The Investment Manager endeavours to conduct its affairs
responsibly and take into consideration ESG factors regarding
investment decisions taken on behalf of the Company. The Investment
Manager recognises that its first duty is to act in the best
financial interests of the Company's shareholders and to achieve
good financial returns against acceptable levels of risk, in
accordance with the objectives of the Company. As part of its
commitment to Responsible Investment, the Investment Manager
integrates ESG factors into the investment management process and
ownership practices in the belief that this can have a positive
impact on the long-term financial performance of its investments.
The Investment Manager became a signatory to the United Nations
Principles of Responsible Investment in December 2018 and has a
Responsible Investment policy which is available on its website,
(http://www.tuftonoceanic.com).
Initial areas of focus on ESG implementation shall include
1. Assessment of the fuel efficiency and environmental impact of potential vessel acquisitions
2. Regular review of our fleet to identify opportunities for
improving fuel efficiency and reducing environmental impact across
the asset life cycle
3. Responsible vessel recycling
4. Health and safety of the crew on our vessels
5. Enhanced security to lower risk of contraband
6. Compliance with all international sanctions imposed by the US, UK, EU and the UN
7. Promoting acceptance and implementation of ESG principles with our business partners.
Over the course of 2019, the Investment Manager noted increased
incidences of contraband smuggling in the international shipping
industry and therefore prioritized enhanced security on board
vessels.
Environmental: Fuel efficiency
The Company and Investment Manager intend to contribute towards
the IMO's ambition to reduce, compared to 2008, total annual
emissions by at least 50% by 2050 and to reduce CO(2) emissions per
transport work, compared to 2008, by at least 40% by 2030.
In September 2019, the Investment Manager joined the Getting to
Zero Coalition, a partnership between the Global Maritime Forum,
the Friends of Ocean Action, and the World Economic Forum. The
ambition of the Getting to Zero Coalition is closely aligned with
the IMO's vision for greenhouse gas reduction. The Coalition is
committed to getting commercially viable deep-sea zero emission
vessels powered by zero emission fuels into operation by 2030 which
is required to ultimately align greenhouse gas emissions from
international shipping with the Paris Agreement.
Based on data from the vessels, the Company's fleet emitted
278,101 tons of CO(2) over the calendar year 2019. This includes
emissions from Bear, Parrot and Vicuna which were acquired over the
course of the year but excludes Neon and the general cargo vessels
which were on bareboat charters as charterers are fully responsible
for operating these vessels.
Total CO(2) emissions in 2019 Value
(tons CO(2) )
Containerships 196,310
Bulkers 27,268
Tankers 54,524
Company 278,101
All the vessels in the Company's fleet transitioned to very low
sulphur fuel oil (VLSFO) at the end of 2019 in order to comply with
IMO2020. Parrot was retrofitted with a scrubber in May 2020 which
allows the vessel to continue utilizing high sulphur fuel oil
(HSFO). The Company's fleet emissions in 2019 were generated from
consumption of c.89,000 tons of fuel, of which 85% was HSFO. The
Investment Manager aims to reduce emissions by increasing fuel
efficiency. The benefits from fuel efficiency usually accrue to the
charterer for vessels on time charter employment. The split
incentive means the Investment Manager has to carefully structure
investments that enhance fuel efficiency to ensure that the
investments are accretive to the Company. The charterer remains
responsible for vessel operating parameters such as speed, cargo
and routing which strongly influence fuel consumption and
emissions. While responsible for c.3% of global emissions, shipping
remains a very carbon efficient mode of transport with a much lower
carbon footprint per unit transport work compared to other modes of
transport such as air freight and trucking.
The IMO has defined a normalised measure of emissions called the
Energy Efficiency Operational Indicator (EEOI). The EEOI is defined
as the mass of CO(2) emitted per unit of transport work. The EEOI
can also provide useful information on a ship's performance
regarding fuel efficiency and emissions. All else equal, a lower
EEOI number is indicative of a more efficiently operated asset. The
European Union has established a regulatory requirement that all
vessels visiting or transiting European ports (starting 2019)
utilize relevant voyage data to calculate an annual average EEOI
per vessel which is independently verified and reported to the EU.
The resulting database from the EU Monitoring, Reporting and
Verification (EU MRV) system is publicly available. The Investment
Manager has utilized the EU MRV methodology and database to
benchmark the emissions from the Company's fleet. The value
weighted 2019 EEOI of the Company's fleet was 21.2 gm CO(2) per
ton-mile which is c. 7% lower than the peer group average of 22.7
gm CO(2) per ton-mile.
Energy Efficiency Operational Indicator (EEOI)
(gram CO(2) /ton-nautical mile)
SHIP Peer Group
Average Average
for 2019 for 2019
Containerships 25.5 28.2
Bulkers 14.9 16.8
Tankers 15.0 17.6
Company 21.2 22.7
The Company's fleet average EEOI for 2019 was c.7% better
than that of its peer group
The Investment Manager continues to closely follow developments
in this dynamic space and endeavours to make the Company's fleet
more efficient. As part of its initiative to reduce emissions, the
Investment Manager invested in an industry leading integrated
Vessel Performance (VP) system to monitor operational efficiency
and emissions.
The Investment Manager is also trialling (over 2020) a bespoke
system to obtain and analyse high frequency data on fuel
consumption and torque from onboard sensors. Using VP data, the
Company has started proactively scheduling hull and propeller
cleaning on vessels that show deteriorating fuel efficiency. Timely
hull and propeller cleaning can increase fuel efficiency by c.3-5%
and reduce emissions by the same amount.
The average age of the vessels in the portfolio at the end of
June 2020 was c.11.5 years. The Investment Manager therefore does
not expect any recycling candidates in the Company's fleet in the
near future, as the normal life of vessels in the fleet is at least
twenty years. The Company will however follow industry best
practices with regards to recycling as and when the situation
occurs.
Social: Crew Health and Safety
International shipping is responsible for the carriage of around
90% of world trade. Around 50,000 commercial, ocean-going vessels
crewed by more than a million seafarers transport goods around the
globe. Ship crews have a challenging task in being responsible for
high value, complex machinery on the high seas. The challenges
faced by seafarers have been recognized internationally and their
working conditions are governed by strict guidelines from the
International Labor Organization (ILO) and the IMO. The Investment
Manager considers crew health and safety to be a priority and works
closely with the vessels' technical managers to promote best
practices.
Covid-19 had a significant impact on crew health and safety in
the second half of the financial year. The Investment Manager
worked with technical managers to ensure that all regulations
including IMO protocols for provision of personal protective
equipment were followed and is pleased to note that no infections
were reported in the crew of any of the Company's vessels. National
regulations limiting travel and disembarkation of crew in order to
contain Covid-19 had the effect of delaying crew changes (referred
to in the industry as rotations). Typically, 150,000 seafarers
around the world participate in crew rotations every month.
Responsibility for crewing lies primarily with each vessel's
technical manager. As at mid-July, c.40% of the crew members on
board the Company's vessels were overdue for rotation. Based on a
survey of our technical managers (managing more than 1,000 ships
across multiple owners) this was slightly better than the industry
average of crew overdue for rotation which was in the range of 45 -
50%.
The Investment Manager has engaged with each vessel's technical
manager to address crew issues and facilitate rotations, in some
cases with additional costs. Webinars and counselling sessions are
being offered to crew members and their families.
The following strategies are being employed to facilitate
rotations:
-- Undertaking deviation voyages to safe ports that allow crew changes;
-- Approving delays to existing schedules to facilitate rotation; and
-- Organizing chartered flights for crew members.
The additional measures will result in some additional costs as
well as a one-time increase in operating expenses (c. 5% higher
opex similar to an inflationary increase over 1-2 years).
The Investment Manager expects that the delayed rotations will
be resolved on the Company's vessels by the end of the third
quarter of 2020. As at mid-September, only c.16% of the crew on
board the Company's vessels were overdue for rotation.
Governance: Sanctions Compliance and Security
The Investment Manager closely monitors and adapts to sanctions
regimes from the US, UK, EU and the UN. During 2019 there were
rapid changes in international sanctions regimes so we have
instituted internal procedures to ensure that charter contracts
exclude sanctioned regions. If existing guidelines are unclear, our
internal procedure ensures that we seek legal advice. The
Investment Manager regularly monitors vessel positioning using
satellite data to verify compliance.
In 2019, the Investment Manager noted several high-profile
contraband seizures in international shipping and instituted
security measures to minimize the risk of such situations. The
measures include:
-- Crew briefings before entry into high risk ports where
narcotics smuggling is reputedly more prevalent;
-- Increased seaside deck watch to prevent unauthorized entry from boats;
-- Regular and around the clock deck inspections conducted by the vessel crew; and
-- Thorough stowaway and narcotics checks before and immediately after port departure.
Principal and Emerging Risks and Uncertainties
The Board of Directors receives periodic updates on principal
risks at their meetings and have adopted their own control review
to ensure that, where possible, risks are monitored appropriately,
mitigation plans are in place, and that emerging risks have been
identified and assessed . The Directors also carry out a regular
check on the completeness of risks identified, including a review
of the risk register. The Board believes that the risk register is
comprehensive and addresses all risks that are currently relevant
to the Company. While the Investment Manager monitors and puts in
place controls to mitigate risks, please note that risk or
uncertainty cannot be completely eliminated.
The Board has carried out a robust assessment to identify the
principal and emerging risks that could affect the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. Principal risks are those which
the Directors consider have the greatest chance of materially
impacting the Company's objectives. The Board has adopted a
"controls" based approach to its risk monitoring requiring each of
the relevant service providers including the Investment Manager to
establish the necessary controls to ensure that all identified
risks are monitored and controlled in accordance with agreed
procedures where possible.
The Board of the Company, together with the Investment Manager,
have carefully considered the potential impact of the Covid-19
pandemic, considered to be both an emerging risk and an emerging
cause of risk, on the activities of the Company and its
subsidiaries. As an emerging risk, Covid-19 could impact the
ability of technical managers appointed by the Asset Manager to
supply crew for the Company's vessels. The Investment Manager and
Asset Manager have taken appropriate steps to ensure the Company's
fleet is properly serviced (as set out in the ESG section above. To
date the fleet has not experienced any crewing difficulties and
none are expected.
Aa an emerging cause of risk, the negative impact of Covid-19 on
GDP growth could result in lower demand for shipping. The Group
presently has no exposure to the spot market for vessels, but lower
demand has resulted in some charters being renewed or replaced at
lower rates and for shorter periods. A weaker shipping market may
cause charter counterparties to be unable to pay the Group when due
as well as have a negative impact on vessel and charter values. It
is the Board's opinion that all these potential consequences are
already managed and monitored as part of the Group's ongoing
approach to risk in respect of counterparties, values and service
providers. The Board will of course continue to reassess the
position as more information about the impact of Covid-19 becomes
available.
The Company's activities are primarily dependent upon global
seaborne trade flows and as seaborne trade activities between
mainland Europe and the UK are not significant to the Company's
fleet, Brexit is not expected to have a material impact on the
Company or the Investment Manager.
The Board would like to highlight in the following table, some
principal and emerging risks (not limited to Covid-19 causes only)
to the business and efforts to mitigate the risks. The Board
considers that no additional mitigation steps are required at this
time.
Underlying cause of risk or Objective Control or mitigation implemented
uncertainty impacted
(in what
way)
Demand for shipping may decline, Capital growth This risk cannot be controlled,
either because of a reduction Vessel values but is mitigated by:
in international trade (e.g. * Diversification to reduce reliance on any particular
"trade wars") or because of sector or geography;
general GDP growth slowing
(e.g. impact of Covid-19)
* Focus on fleet vessel quality and specifications to
improve utilisation;
* Longer term employment strategy to reduce market
exposure; and
Ultimately, lower charter
rates would be accepted
in order to ensure employment
of the vessels.
--------------- ---------------------------------------------------------------
Failure of, or unwillingness Liquidity Charter counterparty creditworthiness
of, a vessel charterer to Vessel values is subjected to extensive
meet charter payments checks prior to and throughout
a charter. In the event
of default, the generic
nature of the ships in
the portfolio should enable
alternative employment
to be found, though possibly
at lower rate.
--------------- ---------------------------------------------------------------
Vessel maintenance or capital Capital growth The Company has engaged
expenditure may be more costly Dividends experienced technical managers
than expected due to delays Liquidity to monitor maintenance
or resource constraints arising Vessel values and capital expenditure.
from the impact of Covid-19 Capex provisions are made
or other causes prior to investing in a
vessel.
--------------- ---------------------------------------------------------------
A vessel may be lost or Capital growth Measures to mitigate operational
significantly Vessel values risks include:
damaged * avoiding conflict areas
* daylight sailing, naval escort, route planning to
avoid higher risk areas; and
* detailed best practice operating procedures to be
followed by crew and technical staff.
Comprehensive Insurance
protection is in place
at all times to cover inter
alia significant damages
to or loss of vessels.
--------------- ---------------------------------------------------------------
The Company may not have Liquidity The Company has engaged
enforceable Vessel values a very experienced Investment
title to the vessels purchased Manager who is responsible
for establishing such title.
This is then monitored
by the Board using publicly
available information.
--------------- ---------------------------------------------------------------
Underlying cause of Objective Control or mitigation implemented
risk or uncertainty impacted (in
what way)
Failure of, or unwillingness Capital Growth
of other non-charterer Loss of invested * The Investment Manager and Asset Manager rely on
counterparties to meet cash third party service providers for performance of
their obligations services integral to the operation of the Company.
* The Asset Manager is constantly monitoring the
performance of all its key operational service
providers and especially the technical managers.
* SPV operating accounts are held with one or more
unrated banks, because those banks' systems are
better suited for shipping company operations.
Exposure to such banks are limited to US$10m per
bank.
* Surplus funds are invested with banks of a single A-
(or equivalent) or higher credit rating as determined
by an internationally recognised rating agency.
* Credit ratings, monthly sweeps and overall limits are
monitored by the Administrator, who reports
exceptions to the Board.
------------------ ------------------------------------------------------------------
Failure of systems or Capital Growth This risk cannot be directly
controls in the operations Loss of assets, controlled but the Board and
of the Investment Manager, reputation its Audit Committee regularly
Asset Manager or the or regulatory review reports from its Service
Administrator and thereby permissions Providers on their internal controls.
of the Company and resulting
fines
------------------ ------------------------------------------------------------------
The Company may be exposed Liquidity,
to substantial risk Vessel values, * The Investment Manager arranges for environmental due
of loss from environmental Loss of assets, diligence in respect of all vessels considered for
claims arising in respect reputation acquisition by the Company to identify potential
of vessels owned by or regulatory sources of pollution, contamination or environmental
its SPVs, in particular permissions hazard for which that vessel may be responsible and
if a vessel owned by and resulting to assess the status of environmental regulatory
the Company's SPVs were fines compliance.
to be involved in an
incident with the potential
risk of environmental * The Asset Manager maintains a detailed manual that
damage, contamination documents best practice operating procedures to be
or pollution. followed by crew and technical staff. The Asset
Manager reviews environmental performance of key
service providers on a quarterly basis.
* Protection and Indemnity Club mutual insurance
provides cover of up to US$1 billion for oil
pollution damage compensation.
------------------ ------------------------------------------------------------------
Corporate Summary
The Company is a closed-ended investment company, limited by
shares, registered and incorporated in Guernsey under the Companies
Law on 6 February 2017, with registered number 63061.
The Company is a Registered Closed-ended Collective Investment
Scheme regulated by the GFSC pursuant to the Protection of
Investors (Bailiwick of Guernsey) Law 1987, as amended and the
Registered Closed-ended Investment Scheme Rules 2018.
As at 30 June 2020, the Company has 255,337,638 Shares in issue,
all of which are admitted to the Specialist Fund Segment of the
Main Market of the London Stock Exchange under the ticker "SHIP".
ISIN: GG00BDFC1649, SEDOL: BDFC164. After the end of the financial
year , the Company bought 150,000 of its own Shares which are held
in treasury as at 18 September 2020.
The Company makes its investments through LS Assets Limited and
other underlying SPVs, which are ultimately wholly owned by the
Company. LS Assets Limited is registered and was incorporated in
Guernsey in accordance with the Companies Law on 18 January 2018
with registered number 64562. The underlying SPVs owned by LS
Assets Limited were incorporated in the Isle of Man, in accordance
with the Isle of Man Companies Act 2006 (the "IOM Companies
Act").
The Company controls the investment policy of each of LS Assets
Limited and the wholly owned SPVs to ensure that each will act in a
manner consistent with the investment policy of the Company. The
Company refers to each vessel by the underlying SPV's 'name' rather
than the actual name of the respective vessel for confidentiality
purposes.
The Investment Manager is Tufton Investment Management Limited
(formerly Tufton Oceanic Limited), a company incorporated in
England and Wales with registered number 1835984, which is
regulated by the UK FCA and has been authorised to act as a Small
Registered UK AIFM under the AIFMD. Tufton Investment Management
Limited has been a specialist fund 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 Company is a member of the 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 (the "AIC Code"). The AIC
Code has been endorsed by the Financial Reporting Council and the
Guernsey Financial Services Commission (the "GFSC") as an
alternative means for members to meet their obligations in relation
to the UK Corporate Governance Code ("the Code") and the AIC Code
is that the matters set out in section 172. The Companies Act 2006
(UK) are reported on by all companies, irrespective of domicile,
provided this does not conflict with local company law.
The AIC Code was updated in February 2019 for accounting periods
commencing on or after 1 January 2019 ("AIC Code 2018"). The AIC
Code 2018 came into effect for the Company from 1 July 2019. The
Directors are committed to high standards of corporate governance
and for this reason have implemented all of provisions of the AIC
Code. In place of the previous 21 principles, the AIC Code 2018
adapts the Principles and Provisions set out in the UK the Code to
make them relevant for investment companies under the new AIC Code.
The Board has considered the principles and provisions of the
existing AIC Code, produced by the Association of Investment
Companies ("AIC"). The Company has complied with the
recommendations of the AIC Code (except as set out below) and
associated disclosure requirements of the Listing Rules (to the
extent applicable to the Company).
As disclosed in the Listing documents, the Company, being an
externally advised investment company with an entirely
non-executive board of directors does not consider the following
provisions of the AIC Code applicable:
-- the role of the chief-executive,
-- executive directors' remuneration, and
-- the need for an internal audit function
Considering that the Board comprises of only four independent
Directors, they have agreed not to appoint a Senior Independent
Director . The Audit Committee Chairman fulfils the role of the
Senior Independent Director.
The Board has formulated policies and procedures to assist them
to comply with the AIC Code:
Independence
All the Directors are currently considered by the Board to be
independent of the Company and the Tufton Group and have been
Directors for less than 4 years. The Board's current policy on
tenure is that continuity and experience are considered to add
significantly to the strength of the Board and, as such, no limit
on the overall length of service of any of the Company's Directors,
including the role of Chairman, has been imposed. New Directors
receive an induction from the Investment Manager and the
Administrator on joining the Board, and all Directors will receive
other relevant training as necessary on their on-going
responsibilities in relation to the Company.
Diversity Policy
The Company supports the AIC Code provision that Boards 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 Company's aim as regards the
composition of the Board is that it should have a balance of
experience, skills and knowledge to enable each Director and the
Board as a whole to discharge their duties effectively.
Whilst the Board of the Company agrees that it is entirely
appropriate that it should seek diversity, it does not consider
that this can be best achieved by establishing specific quotas and
targets and appointments will continue to be made based wholly on
merit. Accordingly, when changes to the Board are required, due
regard is given to both the need for diversity and to a comparative
analysis of candidates' qualifications and experience. A
pre-established, clear, neutrally formulated and unambiguous set of
criteria would be utilised to determine the most suitable candidate
for the specific position sought.
UK Companies Act 2006 - Section 172 Statement
Whilst directly applicable to UK domiciled companies, the
intention of the AIC Code of Corporate Governance which is followed
by the Company, is that the following matters set out in section
172 of the UK Companies Act, 2006 are reported on by all companies,
irrespective of domicile, provided that this does not conflict with
local company law.
The Company is an externally managed investment company, has no
employees, and as such is operationally quite simple. The Board
does not believe that the Company has any material stakeholders
other than those set out in the following table.
Investors Service providers Community and environment
Issues that matter
to them
---------------------------- -------------------------------------
Performance of the Reputation of the Compliance with Law and
shares Company Regulation
Growth of the Company Compliance with Law Impact of the Company
Liquidity of the shares and Regulation and its activities on
Remuneration third parties
---------------------------- -------------------------------------
Engagement process
------------------------------------------------
Annual General Meeting The main two service The Company and its subsidiaries
providers - Tufton themselves have only a
Frequent meetings IML and MAGL - engage very small footprint in
with investors by with the Board in their local communities
brokers and the Investment face to face meetings and only a very small
Manager and subsequent quarterly, giving direct impact on the environment.
reports to the Board them direct input
to Board discussions.
Monthly factsheets
The Board also considers However, the Board acknowledges
Key Information Document the interests of that it is imperative
the Corporate Broker that everyone contributes
at each of its meetings. to local and global sustainability.
All service providers
are asked to complete
a questionnaire annually
which includes feedback
on their interaction
with the Company,
and the Board undertakes
an annual visit to
Tufton in both London
and the Isle of Man.
---------------------------- -------------------------------------
Investors Service providers Community and environment
---------------------------- -------------------------------------
Rationale and example
outcomes
---------------------------- -------------------------------------
Clearly investors The Company relies The nature of the Company's
are the most important on service providers investments is such that
stakeholder for the entirely as it has they do not provide a
Company. Most of our no systems or employees direct route to influence
engagement with investors of its own. No major ESG matters in many areas,
is about "business decisions were made but the Board and the
as usual" matters, by the Board which Investment Manager work
but has also included effected service together to ensure that
discussions about providers in the such factors are carefully
the discount of the year. considered and reflected
share price to the in investment decisions,
NAV. The major decisions The Board always as outlined elsewhere
arising from this seeks to act fairly in the document.
have been for the and transparently Board members do travel,
Board to seek to ensure with all service partly to meetings in
long term value and providers, and this Guernsey, and partly elsewhere
to seek greater liquidity includes such aspects on Company business, including
for the Company's as prompt payment for the annual due diligence
shares through increasing of invoices. visits to London and the
its profile. Isle of Man. The Board
In addition, the Board considers this essential
has focussed on valuation in overseeing service
of vessels, a key providers and safeguarding
priority for shareholders. stakeholder interests.
Otherwise, the Board seeks
As a result, the Board to minimise travel using
placed greater emphasis conference calls whenever
on reviewing the output good governance permits.
from the VesselsValue
system used to value
most of the Company's
fleet and the discount
rates used in valuing
the remaining vessels.
---------------------------- -------------------------------------
Engagement processes are kept under regular review. Investors
and other interested parties are encouraged to contact the Company
via the Company Secretary or SHIP@tuftonoceanicassets.com on these
or any other matters.
Statement of Directors' Responsibilities
The Directors are responsible for preparing an annual report and
financial statements for each financial period 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 period.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have elected to prepare the Financial Statements in accordance with
International Financial Reporting Standards ("IFRS").
In preparing the 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 maintenance and integrity of the Company's website, which is
maintained by the Investment Manager, is the responsibility of the
Directors. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable them to ensure
that the Financial Statements comply with 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 auditors are 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 auditors are aware of said
information;
-- The Financial Statements, prepared in accordance with IFRS
and applicable laws, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and
-- The Chairman's Statement, Report of Directors and Corporate
Governance Statement include a fair and balanced review of the
development of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
The Corporate Governance Code, as adopted by the Company, also
requires Directors to ensure that the Annual Report 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 the
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
42 to 44
Furthermore, the Board believes that the disclosures set out on
pages 53 to 79 in the Annual Report provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
Having taken into account all matters considered by the Board
and brought to the attention of the Board for the year ended 30
June 2020, 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
2020, taken as a whole, are fair, balanced and understandable and
provide the information required to assess the Company's
performance, business model and strategy.
Statement of Comprehensive Income
For the year ended 30 June 2020
2020 2019
Notes US$ US$
Income
Net changes in fair value of Financial Assets
designated at fair value through profit or loss 4 (24,177,906) 17,776,829
Dividend income 8 25,626,377 -
___________ ___________
Total net income 1,448,471 17,776,829
Expenditure
Aborted deal costs - (21,293)
Administration fees (144,812) (120,680)
Audit fees (128,450) (91,358)
Corporate Broker fees (150,000) (130,511)
Directors' fees 18 (118,038) (109,264)
Foreign exchange gain / (loss) 1,246 (2,507)
Insurance fee (28,971) (62,803)
Investment management fee 14 (2,070,834) (1,294,621)
Legal fees (10,165) -
Professional fees (53,571) (48,753)
Sundry expenses (23,062) (48,870)
___________ ___________
Total expenses (2,726,657) (1,930,660)
___________ ___________
Operating (loss) / profit (1,278,186) 15,846,169
Finance income 60,106 574,331
___________ ___________
(Loss) / Profit and comprehensive
(loss) / income for the year (1,218,080) 16,420,500
___________ ___________
IFRS Earnings per ordinary share (cents) 9 (0.49) 11.94
___________ ___________
Adjusted Earnings per ordinary share (cents) 9a (0.49) 10.00
___________ ___________
There were no potentially dilutive instruments in issue at 30
June 2020.
All activities are derived from continuing operations.
There is no other comprehensive income or expense apart from
those disclosed above and consequently a Statement of Other
Comprehensive Income has not been prepared.
The accompanying notes are an integral part of these financial
statements.
Statement of Financial Position
At 30 June 2020
2020 2019
Notes US$ US$
Non-current assets
Financial assets designated at fair value
through profit or loss (Investments) 4 232,441,142 220,998,073
___________ ___________
Total non-current assets 232,441,142 220,998,073
___________ ___________
Current assets
Trade and other receivables 6 5,839,928 32,248
Cash and cash equivalents 20,441 5,500,139
___________ ___________
Total current assets 5,860,369 5,532,387
___________ ___________
___________ ___________
Total assets 238,301,511 226,530,460
___________ ___________
Current liabilities
Trade and other payables 633,418 687,781
___________ ___________
Total current liabilities 633,418 687,781
___________ ___________
___________ ___________
Net assets 237,668,093 225,842,679
___________ ___________
Equity
Share capital 7 245,392,016 215,012,016
Retained reserves 7 (7,723,923) 10,830,663
___________ ___________
Total equity attributable to ordinary shareholders 237,668,093
225,842,679
___________ ___________
Net assets per ordinary share (cents) 11 93.08 100.53
___________ ___________
The accompanying notes are an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on 23 September 2020 and signed on its
behalf by:
Rob King Steve Le Page
Director Director
Statement of Changes in Equity
For the year ended 30 June 2020
Ordinary
share Retained
capital earnings Total
US$ US$ US$
Shareholders' equity at
30 June 2018 89,180,000 3,283,443 92,463,443
Share issue 50,000,016 - 50,000,016
Share issue costs (1,000,000) - (1,000,000)
C-Class share issue conversion 76,832,000 - 76,832,000
Profit and comprehensive
income for the year - 16,420,500 16,420,500
Dividends paid - (8,873,280) (8,873,280)
_________ _________ _________
Shareholders' equity at
30 June 2019 215,012,016 10,830,663 225,842,679
Share issue 31,000,000 - 31,000,000
Share issue costs (620,000) - (620,000)
Loss and comprehensive
loss for the year - (1,218,080) (1,218,080)
Dividends paid - (17,336,506) (17,336,506)
_________ _________ _________
Shareholders' equity at
30 June 2020 245,392,016 (7,723,923) 237,668,093
_________ _________ _________
Statement of Cash Flows
For the year ended 30 June 2020
2020 2019
Notes US$ US$
Cash flows from operating activities
(Loss) / Profit and comprehensive
(loss) / income for the year (1,218,080) 16,420,500
Adjustments for:
Purchase of investments 4 (35,620,975) (153,598,985)
Change in fair value on investments 4 24,177,906 (17,776,829)
___________ ___________
Operating cash flows before movements in
working capital (12,661,149) (154,955,314)
Changes in working capital:
Movement in trade and other receivables 6 (5,807,680) 2,548
Movement in trade and other payables (54,363) 463,433
___________ ___________
Net cash used in operating activities (18,523,192) (154,489,333)
___________ ___________
Cash flows from financing activities
Net proceeds from issue of shares 7 30,380,000 125,832,016
Dividends paid to Ordinary shareholders 10 (17,336,506) (8,481,280)
Dividends paid to C shareholders 10 - (392,000)
___________ ___________
Net cash generated from financing activities 13,043,494
116,958,736
___________ ___________
Net movement in cash and cash equivalents
during the year (5,479,698) (37,530,597)
Cash and cash equivalents at the beginning
of the year 5,500,139 43,030,736
___________ ___________
Cash and cash equivalents at the end of the year 20,441
5,500,139
___________ ___________
The accompanying notes are an integral part of these financial
statements.
Notes to the financial statements
For the year ended 30 June 2020
1. General information
The Company was incorporated with limited liability in Guernsey
under the Companies (Guernsey) Law, 2008, as amended, on 6 February
2017 with registered number 63061, and is regulated by the GFSC as
a registered closed-ended investment company. The registered office
and principal place of business of the Company is 1 Le Truchot, St
Peter Port, Guernsey, Channel Islands, GY1 1WD.
On 11 October 2018, the Company announced that it had raised
gross proceeds of US$78,400,000 pursuant to the Placing and Offer
for Subscription of C-Class Shares. The Company's C-Class Shares
were listed on the Specialist Funds Segment of the Main Market of
the London Stock Exchange effective 16 October 2018.
On 31 January 2019 , the Company announced that the C-Class
Share conversion had been completed . The resulting 84,624,960
ordinary shares were listed on the Specialist Funds Segment of the
Main Market of the London Stock Exchange effective 12 February 2019
.
On 11 March 2019 , the Company announced the results of its
Placing and Offer for Subscription of 49,019,608 Ordinary Shares,
which raised gross proceeds of US$50 million. These ordinary shares
were listed on the Specialist Funds Segment of the Main Market of
the London Stock Exchange effective 14 March 2019.
On 20 September 2019 , the Company announced the results of its
Placing and Offer for Subscription of 30,693,070 Ordinary Shares,
which raised gross proceeds of US$31 million. These ordinary shares
were issued on the Specialist Funds Segment of the Main Market of
the London Stock Exchange effective 24 September 2019.
2. Significant accounting policies
(a) Basis of Preparation
Compliance with IFRS
The financial statements have been prepared on a going concern
basis in accordance with International Financial Reporting
Standards, which comprise standards and interpretations approved by
the International Accounting Standards Board and International
Financial Reporting Interpretations Committee, Listing rules and
applicable Guernsey law.
Historical cost convention
The financial statements have been prepared on a historical cost
basis modified by the revaluation of investments at fair value
through profit or loss. The principal accounting policies adopted
and which have been consistently applied (unless otherwise
indicated) are set out below.
Basis of non-consolidation
The directors consider that the Company meets the investment
entity criteria set out in IFRS 10. As a result, the Company
applies the mandatory exemption applicable to investment entities
from producing consolidated financial statements and instead fair
values its investments in its subsidiaries in accordance with IFRS
13. The criteria which define an investment entity are, as
follows:
-- An entity that obtains funds from one or more investors for
the purpose of providing those investors with investment services;
and
-- An entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both (including having an exit
strategy for investments); and
-- An entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The directors consider that the Company's objective of pooling
investors' funds for the purpose of generating an income stream and
capital appreciation is consistent with the definition of an
investment entity, as is the reporting of the Company's net asset
value on a fair value basis.
(b) New and amended standards
At the reporting date of these Financial Statements, the
following standards, interpretations and amendments, which have not
been applied in these Financial Statements, were in issue but not
yet effective:
Amendments to IFRS 3 Definition of a business (Effective 1 January 2020)
Amendments to IAS 1 and IAS 8 Definition of material (Effective 1 January 2020)
Conceptual Framework Amendments to References to the Conceptual
Framework in IFRS Standards (Effective 1 January 2020)
The Company expects that the application of the abovementioned
amendments in the future will not have an impact on the Company's
Financial Statements.
(c) Standards, amendments and interpretations effective during the year
The New and revised Standards and Interpretations adopted in the
current year did not have any significant impact on the amounts
reported in these financial statements.
(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 second-hand 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.
Interest Income
Interest income is accounted for on an accruals basis.
(f) Expenses
Expenses are accounted for on an accruals basis. Any performance
fee liability is calculated on an amortised cost basis at each
valuation date, with the respective expense charged through the
Statement of Comprehensive Income. The Company's investment
management and administration fees, finance costs and all other
expenses are charged through the Statement of Comprehensive
Income.
(g) Dividends to Shareholders
Dividends are accounted for in the Statement of Changes in
Equity in the year in which they are declared.
(h) 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
for the current year. Exemption is applied and granted annually and
subject to the payment of a fee, currently GBP1,200.
(i) Financial Assets and Financial Liabilities Investments
The Company classifies its investment in LS Assets Limited
("LSA") as a financial asset at fair value through profit or loss
("FVTPL").
The Company measures and evaluates the net assets of LSA on a
fair value basis. The net assets include those of the underlying
SPVs which themselves own and value all vessels on a fair value
basis.
The Investment Manager reports fair value information to the
Directors who use this to evaluate the performance of
investments.
Recognition of financial assets and liabilities
Financial assets and financial liabilities are recognised in the
Company's Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument. Financial
assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in the Statement of Comprehensive Income.
Financial assets at fair value through profit or loss
Financial assets are classified at FVTPL when the financial
asset is either held for trading or it is designated at FVTPL.
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 designated as 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, and information about the investment is
provided internally on that basis. The Company measures and
evaluates the performance of the entire investment into LSA on a
fair value basis by using the net asset value of LSA including, in
particular, the underlying SPVs and the fair value of the SPVs'
investments into their respective vessel assets as well as the
residual net assets and liabilities of both the SPVs and LSA
itself. The investment in LSA consists of both equity and debt
instruments.
In estimating the fair value of each underlying SPV (as a
constituent part of LSA's net asset value at fair value), the Board
has approved the valuation methodology for valuing the shipping
assets held by the SPVs. The carrying value of a standard shipping
asset consists of its charter-free value plus or minus the value of
any charter lease contracts attached to the vessel, plus or minus
an adjustment for the capital expenditure associated with the
vessel.
There are Time Charter contracts in place for standard vessels.
Such Charters will vary in length but would typically be in the 2 -
8 years' range. As the shipping markets can be volatile over time,
the value of such Charters will therefore either add to or detract
from the open market Charter-Free value of the vessel. Under a time
charter, the vessel owner provides a fully operational and insured
vessel for use by the charterer. There is a fluid Charter market
reported daily by freight brokers based on time charter rates.
The charter-free and associated charter values of standard
vessels are calculated using an on-line valuation platform provided
by VesselsValue Ltd. For charter free values the system contains a
number of algorithms that combine factors such as vessel type,
technical features, age, cargo capacity, freight earnings, market
sentiment and recent vessel sales.
For charter values, the platform provides a DCF (Discounted
Cashflow) module where vessel specific charter details are input
and measured against a platform provided market benchmark to obtain
a premium or discount value of the charter versus the typical
prevailing market for that type of vessel.
The adjustment for the capital expenditure associated with the
dry docking of the vessel is time apportioned on a straight line
basis over the period between the vessel's last visit to dry dock
and the date of its next expected visit, by reference to the actual
cost of the last visit and the budgeted cost of the next. This
adjustment is an addition to value when the valuation date is
nearer to the vessel's last dry docking than to its next expected
visit to dry dock, and vice versa.
Specialist vessels are valued on a pure DCF basis by the
Investment Manager using vessel specific information and both
observable and unobservable data. The VesselsValue Ltd platform is
not used for these assets. Instead a DCF approach is adopted and
this determines the present value of the cashflows discounted at
the project cost of capital or the specific WACC assigned to the
vessel type by Vessels Value Ltd, 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.
Once a contracted time charter is known this is compared to the
market benchmark and the
difference is discounted using an industry weighted average cost
of capital to establish a negative or positive value of the
charter.
The value of the Charter is added to the Charter-Free value to
ascertain a value with Charter.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest method,
less any expected credit losses.
Derecognition of financial assets
The Company derecognises 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 of the asset to another entity.
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 an associated liability for amounts it may have to
pay.
On derecognition of a financial asset in its entirety, gains and
losses on the sale, which is the difference between initial cost
and sale value, will be taken to the profit or loss in the
Statement of Comprehensive Income in the period 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.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or when
they expire.
(j) 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. As at 30 June
2020, the carrying amount of cash and cash equivalents approximate
their fair value.
(k) Foreign currency translation
i) Functional and presentation currency
The financial statements of the Company are presented in US
Dollars, which is also the currency in which the share capital was
raised and investments were purchased and is therefore considered
by the Directors' to be the Company's functional currency.
ii) Transactions and balances
At each balance sheet 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 Statement of Comprehensive Income in the period in
which they arise. Transactions denominated in foreign currencies
are translated into US Dollars at the rate of exchange ruling at
the date of the transaction.
(l) Going concern
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council and considered recent market volatility and the potential
impact of the Covid-19 virus on the Company's investments (as set
out in more detail in the Principal and Emerging Risks and
Uncertainties section on pages 20 and 22). After making enquiries
and bearing in mind the nature of the Company's business and
assets, the Directors consider that the Company has adequate
resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements. For
this reason, they continue to adopt the going concern basis in
preparing the financial statements.
(m) Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments is recognised
and deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the
Company's own equity instruments.
3. Critical Accounting Judgements and Estimates
The preparation of financial statements requires management to
make estimates and judgements that affect the amounts reported for
assets and liabilities as at the statement of financial position
date and the amounts reported for revenue and expenses during the
year. The nature of the estimation means that actual outcomes could
differ from those estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised and
in any future periods affected.
Critical judgements in applying the Company's accounting
policies - IFRS 10: Consolidated Financial Statements
The audit committee considered the application of IFRS 10, and
whether the Company meets the definition of an investment
entity.
In the judgement of the directors, the Company meets the
investment criteria set out in IFRS 10 and they therefore consider
the Company to be an investment entity in terms of IFRS 10. As a
result, as required by IFRS 10 the Company is not consolidating its
subsidiary but is instead measuring it at fair value in accordance
with IFRS 13.
The criteria which define an investment entity are documented in
Note 2a.
The Company's objective of pooling investors' funds for the
purpose of generating an income stream and capital appreciation is
consistent with the definition of an investment entity.
Critical judgements and estimates in applying the Company's
accounting policies - financial assets at fair value:
Further to the information mentioned in note 2 (i) there are
specific capital adjustments considered as part of the valuation
process for standard vessels, mainly the adjustment for ballast
water treatment systems installed on vessels is considered an
enhancement to the charter-free value, initially recognised at cost
and straight line depreciated from the commissioning date to 31
December 2021.
For specialist vessels, there are two remaining vessels at 30
June 2020 (four vessels at 30 June 2019) treated as specialist
vessels.
The first is on a long-term Bareboat Charter (four vessels at 30
June 2019). The second has had scrubbers installed under an
enhanced long-term contract with a charterer.
Specialist vessels are valued on a pure DCF basis by the
Investment Manager using vessel specific information and both
observable and unobservable data. Project cost of capital discount
rates are reviewed on a regular basis to ensure they remain
relevant to prevailing project and market risk parameters. The
prospectus sets out the basis on which non-typical and specialist
vessels would be valued.
There is one vessel which is operating in a pool, from which its
earnings are crystallised on an annual basis. In months prior to
the completion of the annual period, the vessel's reported earnings
are based on actual earnings for the period to date, and an
estimate of the pool's future earnings to the end of the
calculation period.
There were no other areas of estimation in the current year for
the Company.
4. Financial Assets designated at fair value through profit or loss (Investments)
The Company owns the Investment Portfolio through its investment
in LSA. The investment by LSA comprises the NAVs of the SPVs. 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 the Company's level 3 assets only, with respect to the
requirements set out in IFRS 7. The investment held at fair value
is recorded under Non-Current Assets in the Statement of Financial
Position as there is no current intention to dispose of any of the
assets.
The changes in Financial Assets designated at fair value through
profit or loss (Investments) which the Company has used Level 3
inputs to determine fair value, after considering dividends
declared (see note 8) are as follows:
2020 2019
US$ US$
LSA
Brought forward cost of investment 199,739,076 46,140,091
Total investment acquired in the year 35,620,975 153,598,985
___________ ___________
Carried forward cost of investment 235,360,051 199,739,076
Brought forward unrealised gains on valuation 21,258,997 3,482,168
Movement in unrealised (losses) / gains on valuation
(24,177,906) 17,776,829
___________ ___________
Carried forward unrealised (losses) / gains on valuation
(2,918,909)
21,258,997
___________ ___________
Total investment at fair value 232,441,142 220,998,073
___________ ___________
Note 12 - Price risk in the shipping industry, presents the
valuation techniques used by the underlying SPV's in determining
the value of the vessels held (based on assumptions that are not
supported by prices or other inputs from observable current market
transactions).
The unobservable inputs which significantly impact the fair have
been determined to be the charter-free valuation and charter rates
for standard vessels and the Discount rate applied for specialised
vessels.
LSA (own net assets): Breakdown of Fair Value:
2020 2019
US$ US$
Aglow Limited 6,544,853 9,962,674
Antler Limited 7,086,424 -
Bear Limited 25,159,399 -
Citra Limited 6,879,658 12,930,529
Dachshund Limited 14,836,028 -
Darwin Limited ** 1 7,283,389
Dragon Limited 7,836,366 11,200,383
Hongi Limited ** 1 7,214,554
Java Limited ** 1 6,655,732
Kale Limited 5,289,398 12,056,392
Neon Limited 30,393,897 31,375,694
Octane Limited 18,462,207 20,170,969
Parrot Limited 31,865,549 5,736,394
Patience Limited 5,687,983 11,528,670
Pollock Limited 15,010,226 15,189,286
Riposte Limited 7,603,717 14,303,930
Sierra Limited 18,765,453 20,620,297
Swordfish Limited 4,927,358 11,916,570
Vicuna Limited 10,610,002 -
Cash held pending investment into vessels 29,618,568 34,606,314
Residual net liabilities (14,135,947) (11,753,704)
___________ ___________
*Total investment at fair value 232,441,142 220,998,073
___________ ___________
The net change in the movement of the fair value of the
investment is recorded in the Statement of Comprehensive
Income.
*Vessels are valued at fair value in each of the SPVs shown in
the table above and combined with the residual net (liabilities) or
assets of each SPV to determine the fair value of the total
investment attributable to LSA.
**The three companies above are currently in voluntary
liquidation. The ships were sold during the current year, and
therefore, these companies no longer hold any assets.
5. Subsidiaries
The Company holds its investment through a subsidiary company
which has not been consolidated as a result of the adoption of IFRS
10: Consolidated Financial Statements. Below is the legal entity
name for the Holding Company which owns 100% of the shares in the
SPVs.
The remaining legal entities are owned indirectly through the
investment in the Holding Company. The country of incorporation is
also their principal place of business.
Name Country of Direct Principal Ownership Ownership
incorporation or indirect activity at 30 June at 30 June
holding 2020 2019
Holding
LS Assets Limited Guernsey Direct company 100% 100%
---------------- -------------- ----------- ------------ ------------
Aglow Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Antler Limited Isle of Man Indirect SPV 100% N/A
---------------- -------------- ----------- ------------ ------------
Bear Limited Isle of Man Indirect SPV 100% N/A
---------------- -------------- ----------- ------------ ------------
Citra Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Dachshund Limited Isle of Man Indirect SPV 100% N/A
---------------- -------------- ----------- ------------ ------------
Darwin Limited
* Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Dragon Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Hongi Limited
* Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Java Limited
* Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Kale Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Neon Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Octane Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Parrot Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Patience Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Pollock Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Riposte Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Sierra Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Swordfish Limited Isle of Man Indirect SPV 100% 100%
---------------- -------------- ----------- ------------ ------------
Vicuna Limited Isle of Man Indirect SPV 100% N/A
---------------- -------------- ----------- ------------ ------------
*The three companies above are currently in voluntary
liquidation. The ships were sold during the current year, and
therefore, these companies no longer hold any assets.
6. Trade and other receivables
2020 2019
US$ US$
Current assets
Accrued income - 8,216
Prepayments 25,627 17,298
Due from subsidiaries (dividend receivable) 5,814,301
6,734
___________ ___________
Total trade and other receivables 5,839,928 32,248
___________ ___________
Amounts due from subsidiaries were interest free and payable on
demand. The amount due from subsidiaries in the prior year of
US$6,734 were settled in the current year. Due to the value and
short term nature of these receivables, the directors have assessed
there to be no expected credit losses associated with these
outstanding balances.
7. Share capital and reserves
Share issuance Number of Gross amount Issue costs Share capital
shares raised (US$) (US$) (US$)
Total issue at 30
June 2019 224,644,568 219,400,016 (4,388,000) 215,012,016
------------ -------------- ------------ --------------
Issued on 24 September
2019 30,693,070 31,000,000 (620,000) 30,380,000
------------ -------------- ------------ --------------
Total issue at 30
June 2020 255,337,638 250,400,016 (5,008,000) 245,392,016
------------ -------------- ------------ --------------
The Company currently has 255,337,638 Share in issue of no-par
value in issue. The Company bought 150,000 of its own shares at an
average price of US$0.824 per Share after the end of the financial
year. There are currently 150,000 Shares held in Treasury.
Therefore, 255,187,638 Shares will be entitled to receive dividends
as declared from time to time and 1 vote per Share at meetings of
the Company.
Retained reserves
Retained reserves comprise the retained earnings as detailed in
the Statement of Changes in Equity.
8. Dividend income
2020 2019
US$ US$
Dividend income 25,626,377 -
___________ ___________
During the current year, LS Assets Limited declared dividends of
US$25,626,377 (2019: US$nil) to the Company. At 30 June 2020, an
amount of US$5,814,301 was still outstanding (refer to note 6).
9. Earnings per share calculated in accordance with IFRS
2020 2019
US$ US$
(Loss) / Profit and comprehensive (loss) / income for the year (1,218,080) 16,420,500
Weighted average number of ordinary shares 248,125,605
137,499,622
Earnings per ordinary share (cents) (0.49) 11.94
The weighted average number of ordinary shares (248.1m shares
(2019: 137.5m shares)) is calculated in accordance with IFRS
guidelines.
9a. Adjusted Earnings per share
2020 2019
US$ US$
(Loss) / Profit and comprehensive (loss) / income for the year (1,218,080) 16,420,500
Adjusted Weighted average number of ordinary shares 248,125,605 164,134,143
Adjusted Earnings per ordinary share (cents) (0.49) 10.00
The adjusted weighted average number of ordinary shares (164.1m
shares) in the prior year is calculated as if the C Shares were
ordinary shares from the date that the C Shares were issued. This
alternate performance measure also provides a comparison to the
dividends paid, which have been paid in full on all ordinary shares
in issue at each dividend declaration date. There were no
adjustments to the shares in the current year.
10. Dividends
The Company declared the following dividends in respect of the
profit for the year ended 30 June 2020:
Quarter end Dividend Ex div date Net Dividend Record date Paid date
per share paid
30 September US$0.0175 7 November US$4,468,408 8 November 22 November
2019 2019 2019 2019
----------- ------------ ------------- ------------ ------------
31 December US$0.0175 6 February US$4,468,409 7 February 21 February
2019 2020 2020 2020
----------- ------------ ------------- ------------ ------------
31 March US$0.0175 7 May 2020 US$4,468,409 11 May 2020 26 May 2020
2020
----------- ------------ ------------- ------------ ------------
30 June 2020 US$0.0175 8 August US$4,468,409 7 August 21 August
2020 2020 2020
----------- ------------ ------------- ------------ ------------
Under the Companies (Guernsey) Law, 2008, the Company can
distribute dividends from capital and revenue reserves, subject to
a prescribed net asset and solvency tests. The net asset and
solvency tests consider whether a company is able to pay its debts
when they fall due, and whether the value of a company's assets is
greater than its liabilities.
The Board confirms that the Company passed both the net asset
and solvency test for each dividend paid.
11. Net assets per ordinary share
2020 2019
US$ US$
Shareholders' equity 237,668,093 225,842,679
Number of ordinary shares 255,337,638 224,644,568
Net assets per ordinary share (cents) 93.08 100.53
12. Financial risk management
Capital management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
shareholders. In accordance with the Company's investment policy,
the Company's principal use of cash has been to fund investments as
well as ongoing operational expenses. The Board, with the
assistance of the Investment Manager, monitors and reviews the
broad structure of the Company's capital on an ongoing basis. The
capital structure of the Company consists entirely of equity
(comprising issued capital, reserves and retained earnings).
As the Company's Ordinary Shares are traded on the LSE, the
Ordinary Shares may trade at a discount or premium to their NAV per
Share on occasion. However, the Directors and the Investment
Manager monitor the discount on a regular basis and can use share
buy backs 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 on the shipping industry
generally, being, amongst other factors, currency exchange rates,
interest rates, the availability of credit, economic or political
uncertainty and changes in law governing shipping or trade. These
factors may affect the price or liquidity of vessels held by the
Company's subsidiaries and thus the value of the subsidiaries
themselves .
Currency risk
The Company may have assets and liabilities denominated in
currencies other than United States Dollars, the functional
currency. It therefore may be exposed to currency risk as the value
of assets or liabilities denominated in other currencies will
fluctuate due to changes in exchange rates.
However, such exposure is currently, and is expected to remain,
insignificant. Consequently, no further information has been
provided.
Interest rate risk
The majority of the Company's financial assets and liabilities
are non-interest bearing. However, the Company is exposed to a
small amount of risk due to fluctuations in the prevailing levels
of market interest rates because any excess cash or cash
equivalents are invested at short-term market interest rates. The
Company's interest-bearing financial assets and liabilities expose
it to risks associated with the effects of fluctuations in the
prevailing levels of market interest rates on its financial
position and cash flows. The table below summarises the Company's
exposure to interest rate risks. It includes the Company's assets
and trading liabilities at fair values, categorised by the earlier
of contractual re-pricing or maturity dates. It does not
consolidate the US$12.45m outstanding loan (with a blended, fixed
rate of 5.05%) owed by Parrot Ltd. Interest payments on the loan
are not affected by fluctuations in interest rates.
2020 Interest bearing Non-interest Total (US$)
less than bearing (US$)
1 month (US$)
Assets
----------------- --------------- ------------
Investments - 232,441,142 232,441,142
----------------- --------------- ------------
Trade and other receivables - 5,839,928 5,839,928
----------------- --------------- ------------
Cash and cash equivalents 20,441 - 20,441
----------------- --------------- ------------
Total assets 20,441 238,281,070 238,301,511
----------------- --------------- ------------
Liabilities
----------------- --------------- ------------
Trade and other payables - 633,418 633,418
----------------- --------------- ------------
Total liabilities - 633,418 633,418
----------------- --------------- ------------
Total interest sensitivity
gap 20,441
----------------- --------------- ------------
The weighted average interest rate is 1.21% for cash and cash
equivalents in the current financial year.
2019 Interest bearing Non-interest Total (US$)
less than bearing (US$)
1 month (US$)
Assets
----------------- --------------- ------------
Investments - 220,998,073 220,998,073
----------------- --------------- ------------
Trade and other receivables - 32,248 32,248
----------------- --------------- ------------
Cash and cash equivalents 5,500,139 - 5,500,139
----------------- --------------- ------------
Total assets 5,500,139 221,030,321 226,530,460
----------------- --------------- ------------
Liabilities
----------------- --------------- ------------
Trade and other payables - 687,781 687,781
----------------- --------------- ------------
Total liabilities - 687,781 687,781
----------------- --------------- ------------
Total interest sensitivity
gap 5,500,139
----------------- --------------- ------------
The weighted average interest rate is 2.24% 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 2020 would increase or decrease by
US$204 (2019: US$55,001). This is attributable to the company's
exposure to interest rates on its variable rate deposits.
The Investment Manager is permitted to utilise overdraft
facilities towards the achievement of the Company's investment
objectives. This was not utilised during the year.
Refer to Price Risk on the following pages for a description of
the indirect impact interest rates have on the valuation of vessel
assets.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to the
Company.
The Company does not have any significant credit risk exposure
to any single counterparty in relation to trade and other
receivables. On-going credit evaluation is performed on the
financial condition of accounts receivable. As at 30 June 2020
there were no receivables considered impaired (2019: US$nil).
The Company maintains its cash and cash equivalents with various
banks to diversify credit risk. These are subject to the Company's
credit monitoring policies including the monitoring of the credit
ratings issued by recognised credit rating agencies.
30 June 2020 Credit rating Cash (US$) Short term Total as
Standard & Poor's fixed deposits at 30 June
(US$) 2020 (US$)
Barclays Bank Plc A Long Term
(Barclays) A-1 Short Term 19,062 - 19,062
-------------------- ----------- ---------------- ------------
Ravenscroft (1) A+ Long Term - 1,379 1,379
(HSBC London -
call accounts) A-1 Short Term
-------------------- ----------- ---------------- ------------
Total 19,062 1,379 20,441
----------- ---------------- ------------
1. Ravenscroft is an execution only broker that acts solely on
instruction of the Board of Directors. The Board of Directors only
invest cash in banking institutions with an -A rating or
higher.
30 June 2019 Credit rating Cash (US$) Short term Total as
Standard & Poor's fixed deposits at 30 June
(US$) 2019 (US$)
Royal Bank of Scotland A- Long Term
International (RBSI) A-2 Short Term 6,454 - 6,454
-------------------- ----------- ---------------- ------------
Barclays Bank Plc A Long Term
(Barclays) A-1 Short Term 53,913 - 53,913
-------------------- ----------- ---------------- ------------
Ravenscroft (1) AA- Long Term - 5,439,772 5,439,772
(HSBC London -
call accounts) A-1+ Short Term
-------------------- ----------- ---------------- ------------
Total 60,367 5,439,772 5,500,139
----------- ---------------- ------------
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-, medium- 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.
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 2020 Up to 3 Between 3 Between 1 Total (US$)
months and 12 months and 5 years
(US$) (US$) (US$)
Assets
---------- --------------- ------------- ------------
Trade and other - - - -
receivables
---------- --------------- ------------- ------------
Cash and cash equivalents 20,441 - - 20,441
---------- --------------- ------------- ------------
Liabilities
---------- --------------- ------------- ------------
Trade and other
payables 633,418 - - 633,418
---------- --------------- ------------- ------------
Total (612,977) - - (612,977)
---------- --------------- ------------- ------------
30 June 2019 Up to 3 Between 3 Between 1 Total (US$)
months and 12 months and 5 years
(US$) (US$) (US$)
Assets
---------- --------------- ------------- ------------
Trade and other
receivables 14,950 - - 14,950
---------- --------------- ------------- ------------
Cash and cash equivalents 5,500,139 - - 5,500,139
---------- --------------- ------------- ------------
Liabilities
---------- --------------- ------------- ------------
Trade and other
payables 687,781 - - 687,781
---------- --------------- ------------- ------------
Total 4,827,308 - - 4,827,308
---------- --------------- ------------- ------------
As described in Note 3, the Company's financial assets are
measured at fair value which comprises the fair value of the
underlying SPVs and the residual net assets of each company. The
Company values its investment in LSA and the SPVs at their
respective net asset values. The net asset values comprise shipping
vessels which are measured at fair value and other residual net
assets and liabilities of each of the entities.
All the assets and underlying vessels are considered to be level
3 assets, that price risk pertains to the level 3 investment
portfolio in its entirety, and that no other market price risk
exists.
(a) Standard Vessel valuations
The fair value of a standard vessel comprises both the
Charter-free value and the Charter valuation. The charter-free and
associated charter values of typical vessels are calculated using
an on-line valuation system provided by VesselsValue Ltd. For
charter free values the system contains a number of algorithms that
combine factors such as vessel type, technical features, age, cargo
capacity, freight earnings, market sentiment and recent vessel
sales.
For charter values, the system provides a DCF module where
vessel specific charter details are input and measured against
system provided market benchmark to obtain a premium or discount
value of the charter versus prevailing market.
(b) Specialised Vessels and arrangements
There will be cases where the Company may invest in vessels
which are (i) of a specialised nature and fall out of scope of
mainstream brokers and/or (ii) where contracted employment does not
have an available reference benchmark in the freight brokerage
community.
The Investment Manager will make its own assessment of Value
with Charter using a discounted cashflow ("DCF Model") model. The
DCF Model will calculate the net present value of the charter and
vessel value using the following inputs:
-- IRR/Discount rate
-- Charter Rate
-- Exit/scrappage value
There were two specialised vessels held at the year end (four at
30 June 2019).
Refer to Note 3 for further information on the valuation
methodologies applied. The Directors and Tufton believe that the
following inputs reflect those inputs where market price risk could
be significant and where there is the potential for estimate and
judgement to be used.
Covid-19
Despite strong net income and cash flows, the Company suffered
non-cash, fair value losses as asset values fell largely due to the
impact of Covid-19 on the shipping market
The Company benefited from diversification as the negative
impact of Covid-19 on the containership and bulker markets, which
were negatively impacted by the demand shock from Covid-19
lockdowns, was partly offset by the performance in tankers. The
Investment Manager believes the Company's strong operating profit
and performance in the Covid-19 crisis both on an absolute basis
and relative to other classes demonstrates it can be an attractive
high income and low correlation investment .
Price Risk Sensitivity analysis
Charter-free valuation for standard vessels
If the ship values at 30 June were 10% higher or lower, then the
effect on the standard vessel portfolio value would be as
follows:
Ship values +10% change Standard vessel -10% change
US$ 000 portfolio value US$ 000
US$ 000
Fair value at 30 June 2020
(US$) +14,544 $154,699 (14,544)
------------ ----------------- ------------
Fair value at 30 June 2019
(US$) +12,811 $139,879 (12,811)
------------ ----------------- ------------
Charter rates
If market charter rates used on VesselsValue.com to determine
Charter values were 10% higher or lower, then the effect on the
standard vessel portfolio value would be as follows
Ship values +10% change Standard vessel -10% change
US$ 000 portfolio value US$ 000
US$ 000
Fair value at 30 June 2020
(US$) (4,095) $154,699 +4,283
------------ ----------------- ------------
Fair value at 30 June 2019
(US$) (3,467) $139,879 +3,467
------------ ----------------- ------------
(* Please see page 75 for details on standard vessels and
specialised vessels)
Price Risk Sensitivity analysis
Specialised Vessels
If the discount rate factors were 0.5% higher or lower, then the
effect on the specialised vessel portfolio value would be as
follows:
+0.5% change Specialised -0.5% change
US$ 000 Vessel(*) portfolio US$ 000
value
US$ 000
Specialised Vessel company
fair value at 30 June 2020
(US$) (1,224) 62,259 +1,263
------------- --------------------- -------------
Specialised Vessel company
fair value at 30 June 2019
(US$) (1,442) 58,266 +1,402
------------- --------------------- -------------
There were two specialised vessel held at the year end (four at
the prior year end).
The directors consider that the effects of the Covid-19 crisis
are included in the benchmark rates used, therefore requiring no
separate analysis, and have concluded that use of a 10% movement in
benchmark charter rates remains a suitable sensitivity calculation,
noting that the benchmark charter rates used are for charter
periods of 1 year or more, which show lower volatility than spot
rates.
13. Financial assets and liabilities not measured at fair
value
Cash and cash equivalents and trade and other receivables are
liquid assets whose carrying value represents fair value. The fair
value of other current assets and liabilities would not be
significantly different from the values presented at amortised
cost.
(* Please see page 75 for details on standard vessels and
specialised vessels)
14 . Management fee
The Investment Manager is entitled to receive an annual fee,
calculated on a sliding scale, as follows below:
-- (a) 0.85 per cent per annum of the quarter end Adjusted Net
Asset Value up to US$250 million;
-- (b) 0.75 per cent per annum of the quarter end Adjusted Net
Asset Value in excess of US$250 million but not exceeding US$500
million; and
-- (c) 0.65 per cent per annum of the quarter end Adjusted Net
Asset Value in excess of US$500 million,
For the year ended 30 June 2020 the Company has incurred
US$2,070,834 (2019: US$1,294,621) in management fees of which
US$504,842 (2019: US$468,089) was outstanding at 30 June 2020.
15. Performance fee
Tufton ODF Partners LP, the entity holding the carried interest,
shall be entitled to a performance fee in respect of a Calculation
Period provided that the Total Return per Share on 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 on any Calculation Day; and
-- the prevailing Historic Performance Fee Amount (to the extent
not previously adjusted pursuant to the operation of this
paragraph) is greater than zero on such Calculation Day.
The prevailing Historic Performance Fee Amount shall be reduced
by the lower of: (i) 20 per cent of the difference between the High
Watermark and the Total Return on such Calculation Day multiplied
by the Relevant Number of Shares; and (ii) the prevailing Historic
Performance Fee Amount. No performance fees were accrued or paid
during the current or prior period.
16. Related parties
The Investment Manager, Tufton Investment Management Limited
(formerly Tufton Oceanic Limited), is a related party due to having
common key management personnel with the subsidiaries of the
Company. All management fee transactions with the Investment
Manager are disclosed in note 14.
The Directors of the Company and their shareholding is stated in
the Report of the Directors on page 30.
17. Controlling party
In the opinion of the Directors, based on shareholdings advised
to them, the Company has no immediate or ultimate controlling
party.
18. Remuneration of the Directors
The remuneration of the Directors was US$118,038 (2019:
US$109,264) for the year which consisted solely of short-term
employment benefits (refer to the Report of the Directors on page
30).
19. Events after the reporting period
A further dividend was declared on 29 July 2020 for US$0.0175
per ordinary share for the quarter ending 30 June 2020. The
dividend was paid on 21 August 2020 to holders of ordinary shares
on record date 7 August 2020 with an ex-dividend date of 6 August
2020.
The Company bought 150,000 of its own shares at an average price
of US$0.824 per Share after the end of the financial year. There
are currently 255,337,638 Shares in issue with 150,000 held in
Treasury as at the date of approval of these accounts.
Corporate information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsæther (appointed 9 September 2020)
Registered office
3(rd) Floor
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Investment Manager and AIFM
Tufton Investment Management Limited (formerly Tufton Oceanic
Limited)
Albemarle House
1 Albemarle Street
London
W1S 4HA
Asset Manager
Tufton Management Limited (formerly Oceanic Marine Management
Limited)
3rd Floor, St George's Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Secretary and Administrator
Maitland Administration (Guernsey) Limited
3(rd) Floor,
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Joint Placing Agents and Financial Advisers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
N+1 Singer Advisory LLP
1 Bartholomew Lane
London
EC2N 2AX
Guernsey Legal Advisers
Carey Olsen (Guernsey) LLP
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
2AX
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:
AIC the Association of Investment Companies
AIFM Directive or AIFMD the EU Directive on Alternative Investment
Fund Managers (No. 2011/61/EU)
AIF an alternative investment fund
AIFM an alternative investment fund manager
AIFM Rules the AIFM Directive and all applicable rules
and regulations implementing the AIFM Directive
in the UK
Articles of Incorporation the articles of incorporation of the Company,
or Articles as amended from time-to-time
Asset Manager Tufton Management Limited (formerly Oceanic
Marine Management Limited)
Auditor PricewaterhouseCoopers CI LLP
Board the Directors from time to time
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
Cash-on-cash run-rate yield as the total forecast EBITDA minus any capex
accruals, divided by the time-weighted capital
employed for vessels-in-operation
Companies Law the Companies (Guernsey) Law, 2008 as amended
Company Tufton Oceanic Assets Limited (Guernsey registered
number 63061) which, when the context so permits,
shall include any intermediate holding company
of the Company and the SPVs
Compensated Gross Tonnage An indicator of the amount of work that is
or CGT necessary to build a given ship and is calculated
by multiplying the tonnage of a ship by a coefficient,
which is determined according to type and size
of a particular ship.
Directors or Board the Board of Directors of the Company
Disclosure Guidance and Transparency the disclosure guidance and transparency rules
Rules or DTRs made by the Financial Conduct Authority under
Section 73A of FSMA
EBITDA Earnings before interest, taxes, depreciation
and amortisation
EBITDA-weighted average length is the total forecast EBITDA from charters
of charter in place, divided by the expected annualised
EBITDA of those charters
FCA the UK Financial Conduct Authority
Financial Reporting Council the UK Financial Reporting Council
or FRC
FSMA the Financial Services and Markets Act 2000
and any statutory modification or re-enactment
thereof for the time being in force
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.
IASB International Accounting Standards Board
IFRIC International Financial Reporting Interpretations
Committee
IFRS International Financial Reporting Standards
Investment Manager Tufton Investment Management Limited (formerly
Tufton Oceanic Limited)
IRR Internal rate of return. The I nternal rate
of return is the interest rate at which the
net present value of all the cash flows (both
positive and negative) from a project or investment
equal zero, and is a common performance indicator
used in investment funds
Listing Rules the listing rules made by the UKLA pursuant
to Part VI of FSMA
London Stock Exchange or London Stock Exchange plc
LSE
LPG Carrier a vessel used to transport liquefied petroleum
gas
LS Assets Limited 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 Regulation (EU) No 596/2014 of the European
MAR Parliament and of the Council of 16 April 2014
on market abuse
Memorandum the memorandum of association of the Company
Net Asset Value or NAV the value, as at any date, of the assets of
the Company after deduction of all liabilities
of the Company and in relation to a class of
shares in the Company, the value, as at any
date of the assets attributable to that class
of shares after the deduction of all liabilities
attributable to that class of shares determined
in accordance with the accounting policies
adopted by the Company from time-to-time
Net Asset Value or NAV per at any date, the Net Asset Value attributable
Share to the Shares of the relevant class divided
by the number of Shares of such class in issue
(other than Shares of the relevant class held
in treasury) at the date of calculation
Performance Fee Amount 20 per cent. of the excess in Total Return
per Share and the High Watermark per Share
multiplied by the time weighted average number
of Shares in issue during the Calculation Period
Performance Fee Pay-Out Amount in respect of the relevant Calculation Period,
an amount equal to "A", where:
A = (0.5 x B) + C;
B = the Performance Fee Amount; and
C = an amount equal to the High Performance
Fee Amount.
POI Law the Protection of Investors (Bailiwick of Guernsey)
Law, 1987, as amended
Portfolio the Company's portfolio of investments from
time to time
Prospectus The Placing and Offer for Subscription document
for the Company dated 8(th) December 2017
Register the register of members of the Company
Relevant Number of Shares for any Calculation Period the time weighted
average number of Ordinary Shares in issue during
such Calculation Period.
SFS or Specialist Fund Segment the Specialist Fund 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
Shares ordinary shares of no par value in the capital
of the Company of such classes (denominated
in such currencies) as the Directors may determine
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
Total Return per Share the Net Asset Value per Ordinary Share on any
Calculation Day adjusted to
(i) include the gross amount of any dividends
and/or distributions paid to an Ordinary Share
since Admission;
(ii) not take account of any accrual made in
respect of the performance fee itself for that
Calculation Period;
(iii) not take account of any accrual made in
respect of any prevailing Historic Performance
Fee Amount (as adjusted pursuant to the operation
of this paragraph below);
(iv) not take account of any increase in Net
Asset Value per Share attributable to the issue
of Ordinary
Shares at a premium to Net Asset Value per Share
or any buyback of any Ordinary Shares at a discount
to Net Asset Value per Ordinary Share during
such Calculation Period;
(v) not take account of any increase in Net
Asset Value per Share attributable to any consolidation
or sub-division of Ordinary Shares;
(vi) take into account any other reconstruction,
amalgamation or adjustment relating to the share
capital of the Company (or any share, stock
or security derived therefrom or convertible
there into); and
(vii) take into account the prevailing Net Asset
Value of any C Shares in issue
Tufton Group Oceanic Finance Group Limited (formerly Tufton
Oceanic Finance Group Limited) and its subsidiaries,
including the Investment Manager
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
Unlevered cash flow run rate EBITDA net of accruals over the remaining term
of the charters for the vessels in the portfolio,
expressed annually
VesselsValue VesselsValue Limited a third party provider of
vessel valuations to the Company and Investment
Manager
VLCC Very Large Crude Carrier
WACC the weighted average cost of capital
GBP or Sterling the lawful currency of the United Kingdom
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR UOSNRRWUKUAR
(END) Dow Jones Newswires
September 24, 2020 02:00 ET (06:00 GMT)
Tufton Oceanic Assets (LSE:SHIP)
Historical Stock Chart
From Apr 2024 to May 2024
Tufton Oceanic Assets (LSE:SHIP)
Historical Stock Chart
From May 2023 to May 2024