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SHIP Tufton Oceanic Assets Limited

1.09
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Tufton Oceanic Assets Limited LSE:SHIP London Ordinary Share GG00BDFC1649 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 1.09 1.08 1.10 1.09 1.085 1.09 219,229 08:00:13
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Finance Services -33.95M -2.47M -0.0084 -102.68 254.25M

Tufton Oceanic Assets Ltd. Final Results and Notice of AGM (1717L)

08/09/2021 5:00pm

UK Regulatory


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RNS Number : 1717L

Tufton Oceanic Assets Ltd.

08 September 2021

8 September 2021

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 2021. 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 2021 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 20 October 2021 at 11.00 am BST. In light of the on-going COVID-19 situation and travel restrictions that may be in-place from time-to-time, 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 
 
Singer Capital Markets (Joint Broker) 
 James Maxwell, Alex Bond (Corporate Finance)           +44 (0) 20 7496 
 Alan Geeves, James Waterlow, Sam Greatrex (Sales)       3000 
 
Hudnall Capital LLP (Joint Broker)                      +44 (0) 20 7520 
 Andrew Cade                                             9085 
 

Highlights

- Tufton Oceanic Assets Limited (the "Company") had a profit for the year of US$79.5m, or US$0.307 per Share.

- Encouraged by the resilient performance in 2020 and the increased charter coverage, in January 2021 the Company raised its target annual dividend to US$0.075 per Share from US$0.070 per Share. The Company paid a dividend of US$0.0175 per Share for 3Q20 and a quarterly dividend of US$0.01875 per Share for the following three quarters.

- With continued strong performance, the Company has further raised its target annual dividend from US$0.075 to US$0.08 per share, commencing 3Q21. After the increase, the Investment Manager's forecasted dividend cover over the next 12-18 months will average c.1.7x despite not being fully invested following the divestment of the containership Kale.

- The NAV per Share increased from US$0.931 as at 30 June 2020 to US$1.158 as at 30 June 2021. The NAV total return for the financial year was 33.3%.

- As at 24 August 2021, the Company's Shares traded at a premium of c.13% to the ex-dividend 30 June 2021 NAV.

- During the financial year, the Company agreed to divest four vessels and to acquire nine vessels. The overall return from the agreed divestments greatly exceed the Company's targets. Of the nine agreed acquisitions, seven vessels were delivered during the financial year and two after the end of the year.

- After the financial year end, in July 2021 the Company agreed to divest the containership Citra with a realised net IRR of 47% and agreed to acquire the bulker Idaho at below depreciated replacement cost ("DRC").

- As at 30 June 2021, all delivered vessels except Candy and Golding were employed on fixed rate charters. Candy is on a floating rate time charter, subject to a floor and a ceiling. Golding is employed in a chemical tanker pool .

   -      As at 30 June 2021, the average expected charter length (EBITDA weighted) was c.2.3 years. 

- The Company's fleet had no unplanned commercial idle time (voids) during the financial year .

- The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only c.16% of the crew on board the Company's vessels were overdue for rotation at the end of July 2021 compared to c.40% in July 2020. The International Maritime Organisation ("IMO") estimates that globally 250,000 seafarers (c.25%) were overdue for rotation as at July 2021 .

- The average energy efficiency of the Company's fleet in 2020, as measured by the Energy Efficiency Operational Indicator ("EEOI"), improved by c.2% compared to 2019. Based on 2020 EU Monitoring, Reporting and Verification ("MRV") data, the Company's fleet EEOI is c.6% better than its peer group.

- On 5 January 2021, the Company announced that the long-planned ownership change at the Investment Manager, where senior management took a larger stake and a family office bought out most other shareholders, was completed.

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 2021.

Since I last communicated with you in March 2021 there has been a great deal of change in the global economic markets which have largely had a positive impact on shipping, although this has varied between individual sectors which is discussed in the Investment Manager's Report.

The Investment Manager continues to manage the Company in order to produce superior risk adjusted returns. During the financial year, the Company agreed to acquire nine vessels of which seven were delivered during the year and two were delivered after the year end. The Company also agreed to divest four vessels. The overall return from the divested vessels greatly exceeded the Company's targets. The fleet as at the end of the financial year consisted of four handysize bulkers, nine containerships and eight tankers, with one handysize bulker and one chemical tanker pending delivery to the Company. There is a further breakdown of the portfolio in the Investment Manager's Report. After the financial year, in July 2021, the Company also agreed to acquire a bulker and divest a containership, which will complete in 2H21, bringing the total number of vessels to twenty-one.

The NAV per Share increased from US$0.931 as at 30 June 2020 to US$1.158 as at 30 June 2021. The NAV total return for the financial year was 33.3%.

Covid-19

The global economy started recovering from the impacts of Covid-19 from the end of 1H20. The market for containerships and bulkers has recovered but an ongoing recovery in oil demand growth and capacity in floating storage returning to the market remains an overhang for tankers.

The Company benefited from diversification between the different segments of shipping. The tanker market was strong in the first half of 2020 while the containership market was weak. The roles were reversed over the second half of 2020 and first half of 2021.

As noted previously, the Investment Manager has, where possible, mitigated the impact of the global humanitarian crisis of crew members stranded on board commercial vessels due to Covid-19 related travel restrictions. The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only c.16% of the crew on board the Company's fleet were overdue for rotation at the end of July 2021 compared to c.40% in July 2020. The IMO estimates that globally 250,000 seafarers (c.25%) were overdue for rotation as at July 2021.

Performance

As at 30 June 2021, the Company's NAV was US$312.6m being US$1.158 per Share (US$0.931 per Share as at 30 June 2020). The Company declared a profit of US$79.5m or US$0.307 per Share for the year with the NAV total return over the year of 33.3%.

Encouraged by the Company's performance in 2020 and increased charter coverage, we approved that the Company raise its target annual dividend to US$0.075 per Share from US$0.07 per Share in January 2021. In 1H21, the Company fixed several vessels on charters at higher rates compared to their previous charters, agreed to divest vessels on low rate charters with returns exceeding targets and also agreed to acquire several vessels with charters at higher rates compared to the previous year. After the financial year, following the continued strong performance and increased portfolio cash flow, we approved that the Company further raise its target annual dividend from US$0.075 to US$0.080 per Share, commencing from 3Q21. After the increase, the Investment Manager's forecasted dividend cover over the next 12-18 months will average c.1.7x despite not being fully invested following the divestment of the containership Kale.

During the year, the Company's share price increased from US$0.915 per Share as at the close of business 30 June 2020 to US$1.150 per Share as at the close of business 30 June 2021.

In terms of performance drivers, containership values in particular rebounded strongly as the market benefited from pent-up demand and inventory re-stocking after the 1H20 lockdowns, as well as shifts in consumer activity towards goods. Along with strong portfolio operating profit and cash flows, the Company benefited from non-cash fair value gains as asset values recovered.

Tap Issues

On 25 March 2021, the Company announced the results of its tap issue of 15,000,000 Shares at US$0.98 per tap issue share , which raised gross proceeds of US$14.7m. 14,700,000 new Ordinary Shares were admitted to trading on the Specialist Funds Segment of the Main Market of the London Stock Exchange plc. The balance of 300,000 Ordinary Shares under the tap issue were issued out of Treasury and represent all of the Company's shares that were held in Treasury.

The total number of voting rights of the Company as at 30 June 2021 is 270,037,638.

After the end of the financial year, on 30 July 2021, the Board announced a tap issue of 10,533,763 new Ordinary Shares at a price of US$1.18 per tap issue share. The tap issue shares will be eligible for the dividend to be paid in November 2021.

Discount Management

During the first half of the financial year, the Company's Shares traded at a discount to NAV. The discount to NAV, although initially narrow, widened to more than 10% at the end of August 2020. In August and September 2020, the Company (in accordance with the authority granted to it by Shareholders) repurchased 300,000 shares at a cost of US$247,125. Refer to note 6 for more details.

The repurchased shares were held in Treasury and re-issued as part of the Company's tap issue in March 2021. As at the end of the financial year, no Shares were held in Treasury.

Dividends

During the year the Company declared and paid dividends to Shareholders as follows:

 
 Period end   Dividend     Announcement   Ex div     Record     Paid date 
               per share    date           date       date 
               (US$) 
 Ordinary Shareholders 
 30.06.20     0.0175       30.07.20       06.08.20   07.08.20   21.08.20 
 30.09.20     0.0175       26.10.20       05.11.20   06.11.20   20.11.20 
 31.12.20     0.01875      21.01.21       28.01.21   29.01.21   12.02.21 
 31.03.21     0.01875      22.04.21       29.04.21   30.04.21   14.05.21 
 

The dividend for the prior year (ending 30 June 2020) was paid during the financial year on 21 August 2020. A dividend was declared on 22 July 2021 for US$0.01875 per Share for the quarter ending 30 June 2021. The dividend was paid on 13 August 2021 to holders of Shares on record date 30 July 2021 with an ex-dividend date of 29 July 2021.

Corporate Governance

The Company is a member of the Association of Investment Companies (AIC) and has therefore elected to comply with the provisions of the current AIC Code of Corporate Governance which sets out a framework of best practice in respect of governance of investment companies (the "AIC Code"). The AIC Code has been endorsed by the Financial Reporting Council and the Guernsey Financial Services Commission (the "GFSC") as an alternative means for AIC members to meet their obligations in relation to the UK Corporate Governance Code .

Where the Company's stakeholders, including Shareholders and their appointed agents, have matters they wish to raise with the Board in respect to the Company, I would encourage them to contact us at SHIP@tuftonoceanicassets.com .

Annual General Meeting

The Annual General Meeting ("AGM") of the Company will be held on 20 October 2021 at 11.00 am BST the details of which are set out in the AGM notice and Proxy form. Due to continuing and evolving Covid-19 restrictions, whilst members may be permitted to physically attend the AGM in person, members are strongly encouraged to appoint a Guernsey-based proxy in order to vote on the resolutions on their behalf, in accordance with the instructions set out in the Notice and the accompanying form of proxy. The most up-to-date details of restrictions due to Covid-19 may be accessed via the States of Guernsey website, (https://covid19.gov.gg/).

At the last AGM held on 23 October 2020, the resolutions were all duly passed. There were significant votes (16.9% of the votes cast at the meeting) against the resolution to approve the authority to issue and allot Shares as if the pre-emption rights in the Articles of Association of the Company are disapplied. The Directors believe that it is in the best interest of the Company to have the ability to issue additional Shares as required and at the appropriate time.

Where Shareholders or their appointed agent have matters they wish to raise with the Board at the AGM in respect to the Company, I would encourage them to contact us at SHIP@tuftonoceanicassets.com ahead of the AGM date.

Environmental, Social, Governance ("ESG")

Our Investment Manager continues to integrate ESG factors into its investment decisions and asset ownership practices. As you will see in the Investment Manager's report there is significant focus given to the ESG aspects of the Company's operations. The Investment Manager has adopted a proactive approach to emissions reduction through a program to select Energy Saving Devices ("ESDs") for the Company's vessels in the medium term while considering investments in zero-emission capable vessels for the longer term.

Crew welfare continued to be a significant area of focus over the financial year with travel restrictions imposed during successive waves of the Covid-19 pandemic delaying crew rotations. Our Investment Manager engaged with each vessel's technical manager to address crew issues and facilitate rotations as necessary. As a result, the proportion of delayed crew members on the Company's vessels have been consistently lower than industry reported averages. The Investment Manager continues to promote best practices among its suppliers and has organised regular, independent inspections of the Company's vessels.

ESG initiatives represent an opportunity for a proactive Investment Manager with a well-capitalised fleet. Since December 2018, our Investment Manager is a signatory of the United Nations Principles of Responsible Investment ("UN PRI") which has become an industry standard and is a further step in embedding responsible investment in the Company. The Board has reviewed and approved the Investment Manager's Responsible Investment policy and implementation report for the Company. Shareholders can view the policy and the implementation report on its website, (http://www.tuftonoceanicassets.com).

Outlook

At the end of the financial year, the Company had charter cover of c.2.3 years. After the Company raised its target annual dividend from US$0.075 to US$0.080 per share, commencing from 3Q21, the Investment Manager's forecasted dividend cover over the next 12-18 months will average c.1.7x despite not being fully invested following the divestment of the containership Kale . I am encouraged by the Company's performance over the financial year and believe the strategy of diversification, strong charter cover and low leverage will enable the Company to grow profitably in the coming years. The benefit of diversification between the three main segments of shipping have particularly been proven over the Covid-19 pandemic. The strong performance of tankers in 1H20 and containerships in 1H21 have helped the Company deliver strong risk adjusted performance. Investor confidence in the Company's strategy and the shipping market was apparent from the high levels of interest in the Company's Shares and oversubscription of the tap issue concluded on 6 August 2021.

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 were 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. Although it seems old news I should also welcome Christine who joined the board during the year!!

Rob King

Non-executive Chairman

Investment Manager's Report

Highlights of the Financial Year

The portfolio operating profit was strong at US$26.3m. There was a fair value gain of US$132.7m in charter-free values in the strong containership and bulker markets. The gain in charter-free values was partially offset by a US$79.5m fall in charter value as benchmark time charter rates rose, i.e. an increase in "under-renting". The total negative charter value in the portfolio of US$71.7m will trend to zero (i.e. increase NAV) in the medium term ceteris paribus.

NAV total return for the year was 33.3%.

Encouraged by the resilient performance in 2020 and increased charter coverage, in January 2021 the Company raised its target annual dividend to US$0.075 per Share from US$0.070 per Share. After the financial year, following the continued strong performance and increased portfolio cash flow, the Company further raised its target annual dividend from US$0.075 to US$0.080 per Share, commencing from 3Q21.

The Investment Manager believes the Company's strong portfolio operating profit and performance over the year, both on an absolute basis and relative to other asset classes, demonstrates its investment thesis and the effectiveness of its strategy. The Investment Manager's strategy of diversification across the major segments, conservative leverage and strong charter cover insulated the portfolio from market volatility even at the height of the Covid-19 pandemic as evidenced by the NAV development and growing dividend.

The financial year included the following highlights:

-- As at 30 June 2021, the average expected charter length (EBITDA weighted) was c.2.3 years, insulating the portfolio from short-term volatility and offering strong cash flow visibility.

   --     The Company's fleet had no unplanned commercial idle time (voids) during the financial year. 

-- During the financial year, the Company agreed to divest four vessels and to acquire nine vessels. The overall return from the divested vessels greatly exceeded the Company's targets. Of the nine agreed acquisitions, seven vessels were delivered during the financial year and two after the end of the year.

-- In parallel with the acquisitions of the product tankers, Cocoa and Daffodil, a subsidiary of the Company completed a non-recourse debt financing of US$24.0m with an all-in cost below 5.0%. The loan is secured on four of the Company's product tankers: Cocoa, Daffodil, Pollock and Dachshund.

-- The long-term charters on all of the Company's product tankers largely insulate the Company from a weak tanker market.

-- As the containership and bulker markets strengthened, Swordfish, Kale, Riposte and Lavender were chartered at much higher rates compared to their previous charters.

-- The dividend cover for the financial year was c.1.0x. The main reasons for cover being at c.1.0x during the year were capex and off-hire for scheduled special surveys on three vessels, and the Company not being fully invested throughout the year.

-- After the financial year, following the continued strong performance and increased portfolio cash flow, the Company raised its target annual dividend from US$0.075 to US$0.080 per Share, commencing from 3Q21. After the increase, the Investment Manager's forecasted dividend cover over the next 12-18 months will average c.1.7x despite not being fully invested following the divestment of the containership Kale.

-- In July 2021, after the financial year end, the Company agreed to divest the containership Citra with a realised net IRR of 47% and agreed to acquire the bulker Idaho at below DRC.

-- The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only c.16% of the crew on board the Company's vessels were overdue for rotation at the end of July 2021 compared to c.40% in July 2020. The IMO estimates that globally 250,000 seafarers (c.25%) were overdue for rotation as at July 2021.

-- The average energy efficiency of the Company's fleet in 2020, as measured by the EEOI, improved by c.2% compared to 2019. Based on 2020 EU MRV data, the Company's fleet EEOI is c.6% better than its peer group of more than 1,500 vessels.

The Assets

As at 30 June 2021, the Company owned twenty-one 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 or in pools, under which the Company provides fully operational and insured vessels.

Containerships

-- Kale, Patience, Riposte and Vicuna are chartered to a major investment grade container shipping group. During the year the Company agreed to divest Kale for US$21.5m with a realised IRR of 31%. The divestment will complete shortly after the expiry of the current charter in October 2021.

   --     Parrot is chartered to another leading global container shipping group. 

-- Citra was chartered to a leading private operator of containerships specialising in fresh fruit transportation. Citra's charter was extended for 12-13 months from December 2020. After the end of the financial year, the Company agreed to divest Citra for US$33m with a realised net IRR of 47%.

-- Swordfish is on a time charter to the subsidiary of a listed company based in Asia for 15-17 months from May 2021 at a much higher rate compared to its previous charter.

-- The Company acquired Echidna and Candy, which are chartered to a major investment grade container shipping group. Both vessels are fitted with exhaust gas scrubbers. Echidna has a fixed rate charter and Candy has a floating rate time charter, subject to a floor and a ceiling. Both charters will continue until November 2023 (earliest) - February 2025 (latest).

Tankers

-- The Company divested Bear, a crude oil tanker, for US$19.0m just before the vessel's next major capex event. The return greatly exceeded the Company's target. The crude oil tanker market was very strong in 1H20 as a result of high demand for floating storage but weakened in 2H20 following OPEC production cuts and the negative impact from Covid-19 on oil demand.

-- Cocoa and Daffodil were acquired during the year for US$23.0m. In parallel with the acquisitions, a subsidiary of the Company completed a non-recourse debt financing of US$24.0m with an all-in cost below 5.0%. The loan is secured on Pollock, Dachshund, Cocoa and Daffodil.

-- Octane and Sierra commenced new charters in 2Q21 to an investment grade oil major for at least 36 months.

-- The Company agreed to acquire two chemical tankers. Golding was acquired in April 2021 for US$15.2m. Towards the end of the financial year, the Company agreed to acquire Orson for US$9.8m. The acquisition was completed in July 2021. Both Orson and Golding are employed in a leading chemical tanker pool. As described in the Company's Prospectus, a pool is a revenue sharing structure run by a specialist third party or another shipowner, together with other similar vessels.

-- 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.

Bulkers

-- The Company acquired Lavender during the financial year for US$10.6m and the vessel was delivered to the Company in January 2021. The vessel is on a time charter which was recently extended for 14-17 months from February 2022 at a much higher rate compared to its current charter.

-- Mayflower was delivered to the Company in June 2021. Upon its delivery, the vessel commenced its 11-13 month time charter.

-- The Company agreed towards the end of the financial year to divest Aglow and Antler, which were acquired for less than 70% of DRC in 2018 and early 2020, at 100% of DRC with returns materially exceeding targets. The Company agreed to acquire a more fuel-efficient bulker, Laurel, for US$13.35m. Laurel is already fuel-efficient versus its peer group and will be retrofitted with Energy Saving Devices ("ESDs") in 3Q21. It is on a two-year charter from September 2021.

The vessels in the fleet are well maintained and have performed to expectations. Octane, Sierra and Aglow had their scheduled special surveys during the financial year.

After the end of the financial year:

In July 2021, the Company agreed to acquire an ultramax bulker, Idaho, which will be delivered to the Company in October 2021. Upon its delivery, the vessel will have its planned special survey and ESDs retrofit, after which it will be employed on a 15-19 month time charter. The vessel is being acquired with the proceeds of the sale of the containership Kale, as announced in early July 2021.

The Company agreed to divest the containership Citra for US$33m. The realised net IRR will be 47%. Citra was acquired in December 2018 for US$13.1m.

The Investment Manager continues to identify an attractive pipeline of opportunities across a range of the Company's target sectors. While the Investment Manager aims to hold investments over the longer term, it will continue to consider divestment opportunities that generate additional value for Shareholders.

As at 30 June 2021:

 
 SPV (+)     Vessel Type              Acquisition   Earliest end   Latest      Expected 
              and Year of              Date          of charter     end of      end of charter 
              Build                                  period         charter     period** 
                                                                    period 
 Swordfish   1700-TEU containership   February      August         October     October 
              built 2008               2018          2022           2022        2022 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Kale*       1700-TEU containership   February 
              built 2008               2018           Vessel divested (pending closing) 
            -----------------------  ------------  ------------------------------------------- 
 Patience    2500-TEU containership   March         July           October     October 
              built 2006               2018          2021           2022        2022 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Riposte     2500-TEU containership   March         February       July        July 
              built 2009               2018          2023           2023        2023 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Neon        Mid-sized LPG            July          August         August      August 
              carrier                  2018          2025           2025        2025 
              built 2009 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Dragon      Handysize bulker         September     October        February    February 
              built 2010               2018          2021           2022        2022 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Citra       2500-TEU containership   November      December       January     January 
              built 2006               2018          2021           2022        2022 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Sierra      Medium-range             December      June           August      August 
              product tanker           2018          2024           2024        2024 
              built 2010 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Octane      Medium-range             December      May            July        July 
              product tanker           2018          2024           2024        2024 
              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 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Vicuna      2500-TEU containership   October       October        October     October 
              built 2006               2019          2022           2024        2024 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Dachshund   Handysize                February      March          March       March 
              product tanker           2020          2023           2024        2023 
              built 2008 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Antler*     Handysize bulker         March 
              built 2012               2020           Vessel divested (closed in July 
                                                      2021) 
            -----------------------  ------------  ------------------------------------------- 
 Cocoa       Handysize                October       October        October     October 
              product tanker           2020          2023           2024        2023 
              built 2008 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Daffodil    Handysize                October       October        October     October 
              product tanker           2020          2023           2024        2023 
              built 2008 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Lavender    Handysize bulker         October       April          July        July 
              built 2010               2020          2023           2023        2023 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Echidna     2500-TEU containership   December      November       February    February 
              built 2003               2020          2023           2025        2025 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Candy       2500-TEU containership   December      November       February    February 
              built 2004               2020          2023           2025        2025 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Golding     25,600 DWT stainless     April 
              steel chemical           2021           NA - vessel is employed in a pool 
              tanker 
              built 2008 
            -----------------------  ------------  ------------------------------------------- 
 Mayflower   Handysize bulker         June          April          July        July 
              built 2011               2021          2022           2022        2022 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Laurel++    Handysize bulker         July          May            September   September 
              built 2011               2021          2023           2023        2023 
            -----------------------  ------------  -------------  ----------  ---------------- 
 Orson++     20,000 DWT stainless     July 
              steel chemical           2021           NA - vessel is employed in a pool 
              tanker 
              built 2007 
            -----------------------  ------------  ------------------------------------------- 
 

(Notes:)

(+ SPV that owns the vessel)

** Based on assessment of the prevailing market conditions (as at 30 June 2021) by the Investment Manager

(++) (Pending delivery as at the end of the financial year)

(* Details excluded for vessels agreed to be divested during, but with closings after, the financial year)

Investment Performance

NAV per Share was US$1.158 at 30 June 2021. Portfolio operating profit contributed US$0.101 per Share and there was a gain in fair value of US$0.206 per Share. Containership and bulker values rebounded strongly as the market benefited from pent-up demand and inventory re-stocking after the 1H20 lockdowns, as well as shifts in consumer activity towards goods. The effect of strong demand was accentuated by ongoing regional port congestion caused by Covid-19 related restrictions. NAV total return over the financial year was 33.3%. The lower year-on-year portfolio operating profit (defined as gross operating profit and interest income less loan interest & fees less Company level fees & expenses) was impacted mainly by the smaller contribution of the divested crude tanker (Bear) in the current financial year after its very strong performance in the previous financial year, and charters for bulkers and containerships which were agreed when the market impact of Covid-19 was most significant. During the financial year, the Company secured charters for several of its vessels at significantly higher rates than their previous charters.

Encouraged by the resilient performance in 2020 and increased charter coverage, the Company in January 2021 raised its target annual dividend to US$0.075 per Share from US$0.070 per Share. The Company therefore paid a 3Q20 dividend of US$0.0175 and a quarterly dividend of US$0.01875 per Share thereafter during the financial year.

The dividend cover for the financial year was c.1.0x. The main reasons for cover being at c.1.0x during the period were capex and off-hire for scheduled special surveys on three vessels and the Company not being fully invested throughout the year. After the financial year, following the continued strong performance and increased portfolio cash flow, the Company further raised its target annual dividend from US$0.075 to US$0.080 per Share, commencing from 3Q21. After the increase, the Investment Manager's forecasted dividend cover over the next 12-18 months will average c.1.7x despite not being fully invested following the divestment of the containership Kale.

Portfolio performance by segment

Containership time charter rates rose to their highest levels since 2009 and asset values followed resulting in a gain in capital value of US$50.2m despite the adverse impact of a US$67.6m fall in charter value. Product tankers had strong operating profit as the long-term charters on all of the Company's product tankers largely insulated the Company from a weak tanker market. The performance of the crude tanker (Bear) in the financial year was negative as asset values fell after its strong performance in the preceding financial year. Ongoing weakness in the tanker market since the divestment vindicates the timing of the divestment. The bulkers in the fleet completed their short-term charters at relatively low rates and commenced new charters during 2H20 at a higher average rate compared to their previous charters.

As at 30 June 2021, vessels corresponding to more than 73%, by value, of the portfolio have charter coverage greater than one year. The vessels in the portfolio were chartered to twelve different counterparties. Exposure to tankers totalled c.35%, containerships represented c.42% and bulkers c.15% of NAV.

The Shipping Market

The shipping market had a broad recovery from the impact of Covid-19 from the beginning of the financial year, with rates and asset values in many segments surprising positively towards the end of the year. The Clarksea Index, a broad indicator of weighted average earnings from Clarksons Research across the main commercial vessel types, ended the year at c.US$28,484 per day (+145% from the end of June 2020), with large gains in the containership and bulker segments.

Some notable highlights of the shipping market, based on Clarksons Research, include:

-- Global seaborne trade is expected to grow by 4.6% (ton-miles) to a new record high in 2021 after contracting by 1.7% in 2020. Seaborne trade grew by c.3.3% CAGR in the two decades leading up to 2020.

-- Fleet growth decelerated to 3.0% in 2020 and is expected to slow further to 2.4% in 2021 and 1.2% in 2022 as the global orderbook is close to its lowest levels in more than three decades, at only c.8.5% of the fleet compared to over 50% in 2008.

   --     Over the year ending 30 June 2021, compared to the previous 12 months: 

o Average 12-month time charter rates for handysize bulkers rose c.26% YoY.

o Average 12-month time charter rates for 2500-TEU containerships rose c.50% YoY.

o Average 12-month time charter rates for handysize product tankers fell c.24% YoY.

Shipping markets benefited from a recovery in global GDP growth. For the full year 2020, the IMF estimated that world GDP contracted by c.3.2% compared to its previous forecast of a 4.9% contraction. World GDP growth recovered from the end of 1H20, supported by unprecedented fiscal and monetary stimulus measures. As of July 2021, the IMF forecasts global real GDP growth of 6% in 2021 and 4.9% in 2022.

The Company targets acquisition candidates from the three main shipping segments of tankers, containerships and bulkers. This market review utilises data from the Investment Manager's Tufton Real Time Activity Capture System ("TRACS") which analyses satellite data to track the international shipping fleet by the major segments. TRACS data utilises the draught of each vessel as a proxy for its loading or utilisation and thereby enables the Investment Manager to have a close to real-time measure of shipping demand. Unless otherwise specified, research data used in the section is from Clarksons Research.

Tankers

According to the US EIA, global oil demand fell by c.8.5% in 2020 led by declines in OECD countries. Global oil demand is forecast to recover to pre-pandemic levels only in 2022. TRACS data shows that tanker demand peaked in early May 2020 and declined until end of 2020 and has remained lacklustre until the end of the financial year. OPEC production declined by c.4m barrels per day over the same period, and tanker capacity contracted for floating storage was slowly released back into the market. As of July 2021, the tanker market remains weak. However, our expectation of a tanker market recovery in 2022 is supported by the ongoing improvement in global oil demand growth following the Covid-19 vaccine rollout, as well as the recent decision from OPEC and allies to increase production from August 2021. Supply side dynamics for tankers also look very supportive with the total product tanker orderbook at only c.6% of fleet at the end of the financial year. The Investment Manager also noted a recent increase in tanker recycling globally. In 1H21, 43 product tankers of 1.9m dwt were sold for recycling, equal to the total capacity scrapped in 2019 and 2020 combined. The Investment Manager believes the

combination of demand recovery and slowing supply growth bodes well for the tanker market in 2022. All the Company's product tankers are on fixed rate, long term charters with an average duration of c.2.3 years as at the end of the financial year. Therefore, the Company's product tankers have been insulated from the market weakness over the financial year and are well positioned to benefit from a market recovery in 2022.

Bulkers

In contrast to tankers, the market for bulkers was weak in 1H20 but recovered in 2H20 as Covid-19 related restrictions were relaxed and demand for seaborne iron ore imports into China grew with the restart of the steel industry. The bulker market was also supported by strong demand for seaborne grain and, towards the end of the financial year the effect of strong demand was accentuated by ongoing regional port congestion in Asia caused by Covid-19 related restrictions. Towards the end of June 2021, the benchmark Baltic Dry Index (the index of average prices paid for the transport of dry bulk materials across more than 20 routes) rose to its highest levels since 2010.

Containerships

As expected, the containership market remained strong in 1H21. The effect of strong consumer demand and limited fleet growth was accentuated by regional port congestion. The Clarksons Research basket of average containership earnings rose to a record high at the end of June 2021.

The improvement in the shipping market has encouraged new orders from 4Q20. New ship orders over the year ending June 2021 were 58% higher than the previous twelve months. Growth has been driven by orders for large containerships and gas carriers. Despite the increase in new orders, the orderbook at c.8.5% of fleet remains close to 30-year lows. Uncertainty over future environmental regulations continues to play an important role in the limited ordering of newbuild vessels. According to Clarksons Research, an increasing array of technologies are being added to newbuild designs to meet new emissions reduction regulations from the IMO. The combination of rising commodity prices, tightening environmental regulations and lower shipyard capacity results in rising newbuild prices which in turn supports higher prices for second-hand vessels. The Clarksons Newbuilding Price Index rose c.9% over the year ending June 2021.

Asset values and time charter rates have started reflecting the Investment Manager's thesis of supply-side adjustment to varying degrees across the main segments. The increase in asset values and rates has been the highest in containerships. In a presentation dated 21 July 2021, the British International Freight Association noted that although current high rates may not be sustainable in the long term, "high levels will be maintained until the end of 2021 and possibly until Chinese New Year 2022". The Association supported the growing consensus that the "new normal" rates will be at a higher level than they were before the pandemic. Whilst the increase in bulker asset values and rates, supported by strong demand for commodities, has not been as dramatic as in containerships, the supply side looks supportive for bulkers with orderbook at only c.6% of fleet.

The tanker market remained weak over the year. Time charter rates remained close to multi-year lows as oil demand recovered slowly from the negative impact of Covid-19 and capacity tied up in floating storage from 1H20 re-entered the market. The Investment Manager expects that the tanker market will recover in 2022 as oil demand recovers to pre-pandemic levels. The recent decision from OPEC and allies to increase production from August 2021 will support the tanker market recovery.

The Investment Manager believes the shipping market is in the early stages of a multi-year upcycle because of the relative lack of investment in new capacity (supply) relative to strong demand growth. Investment in new capacity is discouraged by uncertainty over future environmental regulations. In addition, the combination of commodity price inflation and reduced shipyard capacity is increasing newbuild vessel prices and therefore supporting higher prices for second-hand vessels.

Environment, Social and Governance

The Investment Manager emphasises the principles of Responsible Investment in the management of clients' assets through awareness and integration of ESG factors into its investment process in the belief that these factors can have a positive impact on long term financial performance. 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. Since December 2018, the Investment Manager is a signatory of the United Nations Principles of Responsible Investment and has a Responsible Investment policy which is available on its website, (http://www.tuftonoceanicassets.com).

Current areas of focus on ESG implementation 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 (e.g. pollution prevention) with our business partners.

The Investment Manager devotes more than 4 Full Time Equivalent (FTE) to ESG integration related analysis and implementation across the firm in aggregate . Senior Management (i.e. the CEO and the CIO) of the Investment Manager are committed to Responsible Investment and oversee the implementation of the Company's Responsible Investment policy. The policy statement itself is reviewed at least annually and approved by the Company's Board of Directors. The Board also reviews implementation progress against the policy statement and issues an implementation review report which is also publicly available on the Company's website.

Environmental

Shipping is a relatively efficient form of transport, producing much lower emissions per ton-mile of cargo transported than most other forms of transport. The industry facilitates c.90% of global trade but is responsible for only c.3% of global greenhouse gas emissions. Despite being relatively efficient, the industry is making efforts to reduce greenhouse gas emissions further. International shipping is regulated by the IMO, a specialised agency of the United Nations. The IMO has declared an ambition to reduce, compared to 2008, total annual emissions from shipping by at least 50% by 2050 and to reduce greenhouse gas emissions per unit of transport work, compared to 2008, by at least 40% by 2030 and ultimately align the industry with the Paris Agreement. Recently, the European Commission announced a package of proposals to make the EU's climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030. The package proposes to include emissions from shipping in the EU Emissions Trading Scheme.

The Investment Manager is committed to reducing greenhouse gas emissions and aligning the Company to the Paris Agreement. In the medium term, the Investment Manager aims to reduce emissions from its existing fleet through investment in Energy Saving Devices ("ESDs") and promoting best operational practices such as regular hull and propeller cleaning and optimal use of auxiliary engines. While there is uncertainty as to the longer-term path to decarbonisation, the Investment Manager is exploring the usage of low-carbon and zero carbon fuels. Recently, the Investment Manager partnered with Stolt Tankers and GoodFuels on a testing program for sustainable biofuels. Sustainable biofuels are expected to be a part of the long-term fuel mix on the path to decarbonisation. The Investment Manager is a member of the Getting to Zero Coalition. The Coalition is committed to getting commercially viable zero emission vessels in operation by 2030 which is required to align the industry with the Paris Agreement.

The Investment Manager has engaged a consulting firm of marine architects to conduct energy efficiency studies on the Company's vessels and select the appropriate ESDs for retrofit. The selection of ESDs, investment required, timing of retrofit and commercial arrangements around fuel savings will vary by each vessel depending upon results of the energy efficiency studies, prevailing market conditions and commercial considerations. On average, the Investment Manager expects to invest c.US$1m per vessel for ESDs with an IRR of c.15% from fuel savings at current fuel prices, with further potential upside in future from carbon pricing. ESDs will be retrofitted on the Laurel when the vessel goes through its scheduled second special survey in 3Q21 and on Idaho in 4Q21.

The previously described initiatives from the IMO and the EU to reduce greenhouse gas emissions may include market based measures such as carbon taxes or mandatory fuel levies to reduce emissions, which could represent an opportunity for the Company. There is a cubic relationship between emissions from fuel consumption and speed, so small reductions in speed produce large reductions in greenhouse gas emissions . Operationally, the industry has employed speed adjustment or "slow steaming" to optimise voyage economics. The market based measures are likely to incentivise speed reduction to reduce emissions. Speed reduction will reduce available capacity of the global fleet and exacerbate the effect of slowing fleet growth to support shipping charter rates at higher levels. The Investment Manager expects that relatively energy efficient vessels will benefit from this trend.

Total emissions from the Company's fleet in 2020 was c.346,000 tons CO2. With a growing portfolio of vessels, this measure is less relevant to the Company than the normalised measure of emissions: the Energy Efficiency Operational Indicator ("EEOI"), defined as the mass of CO2 emitted per unit of transport work in a given time period. The EEOI provides 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 Investment Manager has utilised the EU MRV methodology for calculating the EEOI to report on total emissions from and total cargo transported by the Company's fleet for the calendar year. The Company's fleet average EEOI was c.2% better compared to 2019 due to higher utilisation of the bulkers as well as a full year's contribution from the larger vessels (Parrot and Bear) in the fleet. Larger vessels tend to have better EEOIs. Containership segment EEOI increased mainly as a result of higher speeds, established by our charterers rather than by the Company or Investment Manager, in a strong market over 2H20. Seven in-water hull and propeller cleanings were performed over 2020 in addition to scheduled dockings, also contributing to lower emissions. Compared to a peer group of more than 1,500 vessels from the 2020 EU MRV database, the Company's EEOI is c.6% better than its peer group. In general, the Investment Manager believes this is the result of higher quality assets being operated well.

 
 Energy Efficiency Operational Indicator (EEOI) 
  (gram CO(2) /ton-nautical mile) 
                                SHIP                 SHIP 
                                 Average              Average 
                                 for 2020             for 2019 
 Containerships                 26.3                 25.5 
 Bulkers                        12.6                 14.9 
 Tankers                        17.8                 15.0 
 Company                        20.7                 21.2 
 
     The Company's fleet average EEOI for 2020 was c.2% better than 
                                  2019 
 

The Investment Manager has implemented a program to reduce plastic consumption on the Company's vessels by replacing plastic bottles with complimentary, refillable metal bottles for drinking water. Where plastic bottles cannot be eliminated, they will be substituted with environmentally friendlier tetrapacks. Based on its investment horizon, current portfolio, and target segments, the Investment Manager does not expect the Company to have recycling candidates in its portfolio in the near future. When recycling situations do arise, the Company will follow best practices of industry leaders in adopting the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships.

Social

The Investment Manager considers crew health and safety to be a priority and works closely with the vessels' technical managers to promote best practices.

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 recognised internationally and their working conditions are governed by strict guidelines from the International Labour Organisation and the IMO. Covid-19 had a significant impact on crew health and safety in 2020. 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. The Investment Manager engaged with each vessel's technical manager to address crew issues and facilitate rotations, in some cases with additional costs. The following strategies are being employed to expedite crew relief:

   --     undertaking deviation voyages to safe ports that allow crew changes; 
   --     approving delays to existing schedules to facilitate rotation; and 
   --     organising chartered flights for crew members. 

As a result, crew members overdue for rotation onboard the Company's vessels decreased from c.40% as at the end of July 2020 to only c.16% as at the end of July 2021. The latter figure compares favourably to the c.25% of crew members reported by the IMO to be overdue for rotation globally, as of July 2021. As at the end of July 2021, no crew members onboard any of the Company's vessels were overdue by more than three months. The additional measures to expedite crew relief 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 became a signatory to the Neptune Declaration in January 2021, supporting measures to ensure timely relief of crew and putting measures in place to manage any pandemic related travel restrictions.

The Investment Manager also worked with technical managers to put in place the following measures during the pandemic to enhance crew welfare and is pleased to note that no infections were reported in the crew of any of the Company's vessels:

   --     webinars and counselling are offered to all crew members and families; 

-- all regulations including IMO protocols are followed, including the provision of additional personal protective equipment and disinfectants;

   --     Covid-19 test protocols were enhanced to minimise chances of infected crew embarking; 

-- pre-employment medical tests were enhanced to a standard exceeding the minimum requirements. These tests allow seafarers to be able to monitor and improve their fitness levels;

   --     Covid-19 rapid test kits were supplied to all ships to improve testing; 

-- additional steroidal medication and equipment such as pulse oximeters were supplied to respond to any infection onboard;

   --     all crew have access to enhanced wi-fi on board to assist in mental well-being onboard; 
   --     crew are provided access to free mental health hotlines; and 
   --     extensions to crew contracts are obtained in cases where delays are unavoidable. 

The Investment Manager has proactively rolled out a vaccination program for all the crew members on the Company's vessels. As at the time of publication of this report, all the crew members on three of the Company's vessels have been fully vaccinated. Over the remainder of 2021, the Company plans to provide personal gym equipment to promote fitness, where communal facilities may be restricted due to Covid-19 related protocols, and personal fitness trackers to promote crew welfare.

Governance

The Investment Manager aims to promote acceptance and implementation of ESG principles with business partners through an annual survey and feedback. The Investment Manager completed a survey of all the Company's technical managers which included Key Performance Indicators to assess their performance on numerous metrics including ESG. The results from the survey will be analysed and feedback given to the technical managers to ensure best practices are shared. The Investment Manager has a strict reporting policy for its technical managers and employs a third party to conduct independent inspections of the Company's vessels on a regular basis to check on the performance of the technical managers. Independent inspection includes assessment of key aspects of the vessel condition as well as regulatory compliance and crew health and safety. Thirteen of the Company's vessels were inspected over the financial year and all of them were confirmed to be in good condition. The Investment Manager updates the Board of Directors on the progress of the Company's investments every quarter with additional updates where significant events have occurred.

The Investment Manager continues to closely monitor adherence to sanctions regimes from the US, UK, EU and the UN. The employment contracts for the Company's vessels are typically structured to exclude sanctioned regions. Additionally, the Investment Manager monitors compliance through regular inspection of vessel logs and satellite data.

The Investment Manager has a zero-tolerance policy towards bribery and adheres to the UK Bribery Act with the following policies in place:

   --     payment controls requiring dual sign-off/authorisation of all payments; 
   --     gifts and entertainment policies that restrict staff from giving and receiving gifts; 

-- recruitment policies and ongoing monitoring of the fitness and propriety of staff including their honesty, integrity, and financial soundness; and

-- a Code of Ethics and FCA Conduct rules which require staff to conduct themselves appropriately.

Principal Risks and Uncertainties

The Board has carried out a robust assessment to identify the principal and emerging risks that could affect the Company, including those that would threaten its business model, future performance, solvency or liquidity. Principal risks are those which the Directors consider have the greatest chance of materially impacting the Company's objectives. The Board has adopted a "controls" based approach to its risk monitoring 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 Directors receive 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 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. Covid-19 has impacted, and continues to do so, the ability of technical managers appointed by the Asset Manager to supply or change crew for the Company's vessels. The Investment Manager and Asset Manager have taken, and will continue to take, appropriate steps to ensure the Company's fleet is properly serviced. To date the fleet has not experienced any crewing difficulties and none are expected.

The negative impact of Covid-19 on GDP resulted in lower demand for shipping during 2020, although this recovered somewhat by the end of the year. Lower demand in 1H20 did result in some charters being renewed at lower rates and for shorter periods. A weaker shipping market caused by the pandemic could have caused charter counterparties to be unable to pay the Group when due as well as having 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. Although vessel and charter values have been impacted, to date the Company has not suffered any other adverse consequences in its counterparties or 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 was not expected to have a material impact on the Company or the Investment Manager. Six months after the United Kingdom having left the European Union, this view is unchanged.

The Board would like to highlight in the following table, the principal 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        Objective impacted      Control or mitigation implemented 
 of risk or               (in what way) 
 uncertainty 
 Demand for shipping     Capital growth                     This risk cannot be controlled, 
 may decline, either      Vessel values                     but is mitigated by: 
 because of a                                                *    diversification to reduce reliance on any particular 
 reduction                                                        sector or geography; 
 in international 
 trade (e.g. "trade 
 wars") or because                                           *    focus on fleet vessel quality and specifications to 
 of general GDP growth                                            improve utilisation; 
 slowing (e.g. impact 
 of Covid-19) 
                                                             *    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           Liquidity               Charter counterparty creditworthiness 
  unwillingness            Dividends               is subjected to extensive checks 
  of, a vessel                                     prior to and throughout a charter. 
  charterer                                        In the event of default, the generic 
  to meet charter                                  nature of the ships in the portfolio 
  payments                                         should enable alternative employment 
                                                   to be found, though possibly at 
                                                   lower rates. 
                        ----------------------  ---------------------------------------------------------------------- 
 
  Vessel maintenance       Capital growth          The Company has engaged experienced 
  or capital               Dividends               technical managers to monitor 
  expenditure              Liquidity               maintenance and capital expenditure. 
  may be more costly       Vessel values           Capex provisions are made prior 
  than expected due                                to investing in a vessel. 
  to delays or                                     It is important to note that no 
  resource                                         significant issues have been experienced 
  constraints arising                              to date. 
  from the impact of 
  Covid-19 or other 
  causes 
                        ----------------------  ---------------------------------------------------------------------- 
 
  A vessel may be lost     Capital growth              Measures to mitigate operational 
  or 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      Liquidity               The Company has engaged a very 
  have enforceable         Vessel values           experienced Investment Manager 
  title to the vessels                             who is responsible for establishing 
  purchased                                        such title. 
                                                   This is then monitored by the 
                                                   Administrator on behalf of the 
                                                   Board using publicly available 
                                                   information. 
                        ----------------------  ---------------------------------------------------------------------- 
 
  Failure of, or           Capital Growth               The Investment Manager and Asset 
  unwillingness            Loss of invested             Manager rely on third party service 
  of other                 cash                         providers for performance of services 
  non-charterer                                         integral to the operation of the 
  counterparties to                                     Company. 
  meet their 
  obligations                                           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. Exposures 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 cash sweeps 
                                                        from SPVs and overall limits are 
                                                        monitored by the Administrator, 
                                                        who reports exceptions to the 
                                                        Board. 
                        ----------------------  ---------------------------------------------------------------------- 
 
   Failure of systems     Capital Growth           This risk cannot be directly controlled 
   or controls in the     Loss of assets,          but the Board and its Audit Committee 
   operations of the      reputation or            regularly review reports from 
   Investment Manager,    regulatory               its Service Providers on their 
   Asset Manager or       permissions              internal controls. 
   the Administrator      and resulting 
   and thereby of the     fines 
   Company 
                        ----------------------  ---------------------------------------------------------------------- 
 
  The Company may be      Liquidity                The Investment Manager arranges 
  exposed to              Vessel value             for environmental due diligence 
  substantial             Loss of income,          in respect of all vessels considered 
  risk of loss from       reputation or            for acquisition by the Company 
  environmental claims    regulatory               to identify potential sources 
  arising in respect      permissions              of pollution, contamination or 
  of vessels owned        and resulting            environmental hazard for which 
  by its SPVs, in         fines                    that vessel may be responsible 
  particular                                       and to assess the status of environmental 
  if a vessel owned                                regulatory compliance. 
  by the Company's 
  SPVs were to be                                  The Asset Manager maintains a 
  involved                                         detailed manual that documents 
  in an incident with                              best practice operating procedures 
  the potential risk                               to be followed by crew and technical 
  of environmental                                 staff. The Asset Manager reviews 
  damage,                                          environmental performance of key 
  contamination                                    service providers on a quarterly 
  or pollution.                                    basis. 
 
                                                   Protection and Indemnity Club 
                                                   mutual insurance provides cover 
                                                   of up to US$1 billion for oil 
                                                   pollution damage compensation. 
 
                                                   The Investment Manager is committed 
                                                   to Responsible Investment and 
                                                   has identified ESG risk factors 
                                                   relevant to the industry in its 
                                                   Responsible Investment Policy. 
                                                   The Board reviews the policy and 
                                                   the implementation of the policy 
                                                   at least annually. Please see 
                                                   the ESG section of the Investment 
                                                   Manager's Report for details. 
 
                                                   The Company also follows its own 
                                                   Responsible Investment, Sustainability 
                                                   and ESG Policy which was implemented 
                                                   by the Board in July 2021 and 
                                                   is published on the Company's 
                                                   website, (http://www.tuftonoceanicassets.com). 
 
                                                   As part of their review of the 
                                                   Company's operational risks and 
                                                   controls, which takes place on 
                                                   at least an annual basis, the 
                                                   Board of Directors consider ESG 
                                                   and climate change specific risks 
                                                   and how these may be mitigated. 
                                                   This includes receiving regular 
                                                   reports and updates from the Investment 
                                                   Manager on the measures put in 
                                                   place by them to ensure the Company 
                                                   carries out its activities in 
                                                   an environmentally sustainable 
                                                   and responsible manner. 
                        ----------------------  ---------------------------------------------------------------------- 
 

Corporate Summary

The Company is a closed-ended investment company, limited by shares, registered and incorporated in Guernsey under the Companies Law on 6 February 2017, with 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 2021, the Company has 270,037,638 Shares in issue, all of which are admitted to the Specialist Funds Segment of the Main Market of the London Stock Exchange under the ticker "SHIP", ISIN: GG00BDFC1649, and SEDOL: BDFC164. During the first half of the financial year , the Company bought 300,000 of its own Shares. During the second half of the financial year, the Company issued 15 million shares, which included the 300,000 shares previously bought back.

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 Ltd, 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 Ltd 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 Association of Investment Companies ("AIC") and has therefore elected to comply with the provisions of the current AIC Code of Corporate Governance which sets out a framework of best practice in respect of governance of investment companies (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").

The AIC Code was updated in February 2019 for accounting periods commencing on or after

1 January 2019. The AIC Code came into effect for the Company from 1 July 2019. The Directors are committed to high standards of corporate governance and for this reason they have considered and implemented all of the principles and provisions of the AIC Code. The Company has complied with the recommendations of the AIC Code (except as set out below) and with any associated disclosure requirements of the Listing Rules (to the extent applicable to the Company).

As disclosed in the Prospectus dated 17 September 2019, 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, which includes the following:

   -      the support of the Chairman in his role; 
   -      acting as an intermediary for other directors where necessary; 

- being available for Shareholders and other non-executives to discuss any questions or concerns; and

   -      assisting with the performance evaluation and succession planning of the Chairman's role. 

The Board has formulated the following 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 five 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.

Environment, Social and Governance

For further details of the Company's approach to ESG matters, please see the Director's and Investment Managers Reports, together with the Company's Responsible Investment, Sustainability and ESG Policy which is published on its website, (http://www.tuftonoceanicassets.com).

Diversity and Inclusion 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 Board is committed to creating a diverse and inclusive environment where all individuals feel respected, and their voices heard. The Board believes that diversity of gender, age, ethnicity and personal attributes, amongst others, contribute to a balanced and more productive Board. The Board is committed to being non-discriminatory and firmly believes in equal opportunities for all, with board appointments being made on merit against a set of objective criteria.

However, while the Board of the Company agrees diversity should be sought when making appointments, it does not consider that this can be best achieved by establishing specific quotas and targets and appointments are therefore based wholly on merit. Accordingly, when changes to the Board are required, due regard is given to both the need for and importance of diversity and to a comparative analysis of candidates' qualifications and experience. A pre-established, clear, neutrally formulated and unambiguous set of criteria are utilised during the appointment process to determine the most suitable candidate for the specific position sought. In each case, the Board ensures that candidates are considered from a wide range of backgrounds.

UK Companies Act 2006 - Section 172 Statement

Whilst directly applicable only to UK domiciled companies, the intention of the AIC Code 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. Therefore, through adopting the AIC Code, the Board acknowledges its duty to apply and demonstrate compliance with section 172 of the UK Companies Act 2006 and to act in a way that promotes the success of the Company for the benefit of its Shareholders as a whole, having regard to (amongst other things):

   --    the consequences of any decision in the long-term; 
   --    the need to foster business relationships with suppliers, customers and others; 
   --    the impact on community and the environment; 
   --    maintaining reputation; and 
   --    acting fairly as between members of the Company. 

The Board regularly reviews the Company's principal stakeholders and how the Company engages with them. Stakeholder voices are considered at Board level and reflected in board decision making through reporting provided to the Board by the Broker and Investment Manager, together with engagement with stakeholders themselves either directly or through the above mentioned parties.

The Company is an externally managed investment company, has no employees, and as such is operationally quite simple. The Board does not believe that the Company has any material stakeholders other than those set out in the following table.

 
            Investors                   Service providers            Community and environment 
                                     Issues that matter to them 
 Performance of the shares         Reputation of the             Compliance with Law and 
  Growth of the Company             Company                       Regulation 
  Liquidity of the shares           Compliance with Law           Impact of the Company 
                                    and Regulation                and its activities on 
                                    Remuneration                  third parties 
                                  ----------------------------  ----------------------------------- 
                                         Engagement process 
 Annual General Meeting            The main two service            The Company and its 
                                    providers - T ufton             subsidiaries themselves 
  Frequent meetings with            IML and MAGL - engage           have only a very small 
  investors by brokers              with the Board in               footprint in their local 
  and the Investment Manager        face to face meetings           communities and only 
  and subsequent reports            quarterly, giving               a very small direct 
  to the Board.                     them direct input               impact on the environment. 
                                    to Board discussions. 
 
  Quarterly fact sheets 
                                    Where face to face              However, the Board acknowledges 
  Key Information Document          contact has not been            that it is imperative 
                                    possible due to the             that everyone contributes 
                                    Covid-19 pandemic,              to local and global 
                                    engagement has continued        sustainability and the 
                                    via video conferencing          activities of the Company 
                                    services such as Microsoft      in this regard are reflected 
                                    teams.                          within the Company's 
                                                                    Responsible Investment, 
                                                                    Sustainability and ESG 
                                    All service providers           Policy and the Responsible 
                                    are asked to complete           Investment Policy of 
                                    a questionnaire annually        the Investment Manager. 
                                    which includes feedback 
                                    on their interaction 
                                    with the Company, 
                                    and the Board ordinarily 
                                    undertakes an annual 
                                    visit to Tufton in 
                                    both London and the 
                                    Isle of Man. 
                                    Unfortunately, due 
                                    to Covid-19 restrictions, 
                                    this was not possible 
                                    during the year, however 
                                    regular communications 
                                    between the Investment 
                                    Manager and the Board 
                                    were maintained via 
                                    Microsoft Teams. 
                                  ------------------------------  --------------------------------- 
                                   Rationale and example outcomes 
 Clearly investors are             The Company relies              The nature of the Company's 
  the most important stakeholder    on service providers            investments is such 
  for the Company. Most             entirely as it has              that they do not provide 
  of our engagement with            no systems or employees         a direct route to influence 
  investors is about "business      of its own.                     ESG matters in many 
  as usual" matters, but                                            areas, but the Board 
  has also included discussions     No major decisions              and the Investment Manager 
  about the discount of             were made by the Board          work together to ensure 
  the share price to the            which effected service          that such factors are 
  NAV. Following discussions        providers in the year.          carefully considered 
  with investors, in order                                          and reflected in investment 
  to address the level              The Board always seeks          decisions, and that 
  of discount, the Company          to act fairly and               vessel operators are 
  purchased 300,000 of              transparently with              influenced positively. 
  its own Shares at an              all service providers, 
  average price of US$0.824         and this includes               Board members do travel, 
  per Share during August           such aspects as prompt          partly to meetings in 
  and September 2020.               payment of invoices.            Guernsey, and partly 
                                                                    elsewhere on Company 
  The major decisions                                               business, including 
  arising from this have                                            for the annual due diligence 
  been for the Board to                                             visits to London and 
  seek to ensure long                                               the Isle of Man, travel 
  term value, opportunities                                         restrictions permitting. 
  to realise value through                                          The Board considers 
  sales of vessels. A                                               this essential in overseeing 
  decision was also made                                            service providers and 
  to issue shares under                                             safeguarding stakeholder 
  the tap facility to                                               interests. Otherwise, 
  marginally reduce the                                             the Board seeks to minimise 
  Company's Total Expense                                           travel using conference 
  Ratio and improve the                                             calls whenever good 
  liquidity of the Company's                                        governance permits. 
  shares. 
                                                                    During the last eighteen 
  In addition, the Board                                            months travel restrictions 
  has focussed on valuation                                         have made travel difficult 
  of vessels, a key priority                                        and so more use has 
  for Shareholders. As                                              necessarily been made 
  a result, the Board                                               of video conference 
  placed greater emphasis                                           facilities for both 
  on reviewing the output                                           Board and due diligence 
  from the VesselsValue                                             meetings. 
  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 year which give a true and fair view, in accordance with applicable law and regulations, of the state of affairs of the Company and of the profit or loss of the Company for that year.

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") as issued by the International Accounting Standards Board ("IASB").

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 AIC 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.

Furthermore, the Board believes that the disclosures set out 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 2021, 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 2021, taken as a whole, are fair, balanced and understandable and provide the information required to assess the Company's performance, business model and strategy.

Report of Directors

The Directors present their Annual Report and the Audited Financial Statements of the Company for the year ended 30 June 2021.

The Company was registered in Guernsey on 6 February 2017 and is a registered closed-ended investment scheme under the POI Law. The Company's Shares were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange on 20 December 2017 under the ticker SHIP.

Investment Objective and Policy

The Company's investment objective is to provide investors with an attractive level of regular and growing income and capital returns through investing in second-hand commercial sea-going vessels. The Board monitors the Investment Manager's activities through strategy meetings and discussions as appropriate. The Company has established a wholly owned subsidiary that acts as a Guernsey holding company for all its investments, LS Assets Limited, which is governed by the same Directors as the Company.

All vessels acquired, vessel related contracts and costs will be held in SPVs domiciled in the Isle of Man or other jurisdictions considered appropriate by the Company's advisers. The Company conducts its business in a manner that results in it qualifying as an investment entity (as set out in IFRS 10: Consolidated Financial Statements) for accounting purposes and as a result will apply the investment entity exemption to consolidation. The Company therefore reports its financial results on a non-consolidated basis.

Subject to the solvency requirements of Companies Law, the Company intends to pay dividends on a quarterly basis. The Directors expect the dividend to grow, in absolute terms, modestly over the long term. In January 2021 the Company raised its target annual dividend to US$0.075 per Share (previously US$0.07 per Share), and will further raise it from US$0.075 to US$0.080 per Share, commencing from 3Q21.

The Company aims to achieve a NAV total return of 12% or above (net of expenses and fees) on the Issue Price over the long term. The profit for the Company in the financial year was US$79.49m, or US$0.3070 per Share.

Shareholder information

Up to date information regarding the Company, including the quarterly announcement of NAV, can be found on the Company's website, which is www.tuftonoceanicassets.com and is maintained by the Investment Manager.

The Company has a 30 June financial year-end.

Share issues

On 25 March 2021, the Company announced the results of its tap issue of 15,000,000 Shares, which raised gross proceeds of US$14.7m. 14,700,000 new Ordinary Shares were admitted to trading on the Specialist Funds Segment of the Main Market of the London Stock Exchange plc. The balance of 300,000 Ordinary Shares under the tap issue were issued out of Treasury and represent all of the Company's shares that were held in Treasury.

The Company realised a gain of c.US$47,000 from the issue of the 300,000 Ordinary Shares out of Treasury where they were held since being purchased in 3Q20, in accordance with the Company's Share Buyback and Discount Management Policy. The total number of Company shares in issue was 270,037,638 at the year end. Each share carries the right to 1 vote.

On 6 August 2021, after the year end, the Company announced that it had raised gross proceeds of US$12.4m through the tap issue of a further 10,533,763 Ordinary Shares at a price of US$1.18 per share.

The Directors set the issue price for each of the tap issues, after their costs, at a premium to the prevailing dividend adjusted NAV per Share prior to each issue respectively.

Results and dividends

The Company's performance during the year is discussed in the Chairman's Statement. The results for the year are set out in the Statement of Comprehensive Income.

The Directors of the Company who served during the year and to date are set in the Board Responsibilities and Corporate Governance.

Directors' interests

The Directors held the following interests in the share capital of the Company either directly or beneficially as at 30 June 2021, and as at the date of signing these Financial Statements:

 
                      2021     2020 
                      Shares   Shares 
-------------------  -------  ------- 
 R King               45,000   45,000 
                     -------  ------- 
 S Le Page            40,000   15,000 
                     -------  ------- 
 P Barnes             5,000    5,000 
                     -------  ------- 
 C Rødsaether    20,000   - 
                     -------  ------- 
 

The Directors fees are as disclosed below:

 
                        30 June   30 June 
                         2021      2020 
 Director               GBP       GBP 
                       --------  -------- 
 R King                 33,610    31,000 
--------------------   --------  -------- 
 S Le Page              31,500    29,000 
--------------------   --------  -------- 
 P Barnes               29,300    26,500 
--------------------   --------  -------- 
 C Rødsaether      24,064    - 
--------------------   --------  -------- 
 
 

Directors' Attendance

Attendance of Directors at each meeting held during the year:

 
 Director             Quarterly Board     Audit Committee     Ad hoc meetings 
                       meetings 
                      Held    Attended    Held    Attended    Held    Attended 
                     ------  ----------  ------  ----------  ------  ---------- 
 R King               4       4           3       2           19      19 
                     ------  ----------  ------  ----------  ------  ---------- 
 S Le Page            4       4           3       3           19      19 
                     ------  ----------  ------  ----------  ------  ---------- 
 P Barnes             4       4           3       3           19      17 
                     ------  ----------  ------  ----------  ------  ---------- 
 C Rødsaether 
  *                   3       3           2       2           14      14 
                     ------  ----------  ------  ----------  ------  ---------- 
 

*Ms. Rødsaether was appointed to the Board of Directors on 8 September 2020 and was therefore eligible to attend three quarterly meetings, 14 ad hoc meetings and 2 audit committee meetings during the remainder of the year (100% attendance).

Other Interests

Tufton Group shareholders, employees, non - executive directors and former shareholders held the following interests in the share capital of the Company either directly or beneficially.

The revised classification of Tufton related Shareholders compared to 2020 reflects the change of control of the Investment Manager as advised to investors on 5 January 2021 and the 2020 comparative whilst unchanged in total has been restated in line with these new classifications.

As at 30 June 2021

 
                                                     % of issued 
 Name                              Ordinary Shares    Share Capital 
 Tufton Shareholders               4,474,786         1.66 
 Tufton Staff                      374,668           0.14 
 Tufton Non-Executive Directors    403,279           0.15 
 Former Tufton Shareholders        2,758,168         1.02 
 

As at 30 June 2020

 
                                                     % of issued 
 Name                              Ordinary Shares    Share Capital 
 Tufton Shareholders               2,880,147         1.13 
 Tufton Staff                      314,781           0.12 
 Tufton Non-Executive Directors    403,279           0.16 
 Former Tufton Shareholders        2,350,087         0.92 
 

The Company has a Share Buyback and Discount Management Policy in place, which has been formally approved and adopted by the Board of Directors.

The Board of Directors (the "Board") will consider repurchasing the Company's Ordinary Shares (the "Shares") in the market if they believe it to be in Shareholders' interests as a whole and as a means of correcting any imbalance between supply of and demand for the Shares.

Share buyback and discount management

Subject to working capital requirements, and at the absolute discretion of the Board, excess cash may be used to repurchase the Shares should the Shares close at a, or more than a, 10% average discount to NAV for a period of 90 consecutive days. The Directors may implement Share buyback at any time before the 90 day guideline where they feel it is in the best interest of the Company and all Shareholders.

The Administrator, Maitland Administration (Guernsey) Limited ("Maitland"), is responsible for tracking the discount/premium of the share price to NAV and presents the information to the Board on an as needed basis.

The Companies (Guernsey) Law, 2008 (the "Law") allows companies to hold shares acquired by way of market purchase as treasury shares, rather than having to cancel them. These treasury shares may be subsequently cancelled or sold for cash. Therefore, it is agreed that any Shares repurchased pursuant to the general authority referred to above may be held by the Company in treasury, to the extent permitted by Law.

The Company wishes to operate a buyback programme that is effective and also adds value for Shareholders. As such, unless authorised by Shareholders, no Shares will be sold from treasury at a price less than the NAV per Share at the time of the sale unless they are first offered pro-rata to existing Shareholders.

The Company will not hold treasury shares in excess of 10% of the ordinary share capital of the Company.

Share Buyback Programme Terms and Conditions

-- the maximum number of Shares authorised to be purchased shall be 14.99 per cent. of the Shares in issue immediately following completion of the Issue;

   --     the minimum price which may be paid for a Share is US$0.01; 
   --     the maximum price which may be paid for a Share shall be the higher of: 

o an amount equal to 105 per cent. of the average of the middle market quotations of a Share (as taken from the Daily Official List of the London Stock Exchange) for the five business days prior to the date the purchase is made; and

o the higher of:

   (a)     the price of the last independent trade; and 

(b) the highest current independent bid for Shares on the London Stock Exchange at the time the purchase is carried out.

-- the minimum number of Shares authorised to be purchased in a single day shall be 50,000, unless otherwise agreed by the Board;

-- this authority shall expire on the conclusion of the next annual general meeting of the Company or if earlier, eighteen months from the date of passing of the resolution, save that the Directors shall be entitled to make offers or agreements before the expiry of such power which would or might require the purchase of Shares after such expiry pursuant to any such offer or agreement as if the power conferred by the resolution had not expired;

-- pursuant to Article 4.6 of the Company's Articles of Incorporation, the Company may hold any of the Shares purchased pursuant to the authority conferred by paragraph 2.6.4 as treasury shares (provided that the number of shares held as treasury shares shall not at any time exceed ten per cent of the total number of shares of that class in issue at that time or such other amount) as provided in the Law;

-- the Company may sell the Shares back to the market from treasury at the discretion of the Directors. This may only be done in the event that the Shares are trading at a premium to the prevailing NAV per share;

-- the Company may not sell shares back from treasury during a closed dealing period, as defined in the Company's Share Dealing Policy;

-- for the avoidance of doubt, sales from treasury may only be authorised by the Directors if the amount to be received by the Company for the Shares is at least the prevailing NAV per share, exclusive of commissions and dealing costs. Shares may not be sold for more than a 10% discount to market value; and

-- the minimum number of Shares authorised to be sold from treasury in a single day shall be 100,000, unless otherwise agreed by the Board.

Buybacks are conducted by Singer Capital Markets on the Company's behalf, on the instruction of the Board of Directors or a duly authorised committee thereof. Prior to giving such instruction, the Board or a duly authorised Committee of the Board shall meet and give due consideration to the Solvency of the Company to the extent provided by Law, and a duly authorised representative of the Board or such Committee shall sign a solvency certificate in respect of each buyback instructed. For the avoidance of doubt, no buyback may be performed during a period whereby the Company does not meet the statutory solvency test.

Singer Capital Markets also conduct sales of the Shares from treasury on behalf of the Company, on the instruction of the Board of Directors or a duly authorised committee thereof. Following the completion of a sale, an RNS announcement will be released by the Company to the market, which shall include the restated amount of voting rights.

The buyback programme may be suspended around key market announcements and during times where market price calculations are being made, or at any other time where the Board considers this to be appropriate.

The purchase of Shares by the Company is at the absolute discretion of the Directors and is subject to the working capital requirements of the Company and the amount of cash available to the Company to fund such purchases. Accordingly, no expectation or reliance should be placed on the Directors exercising such discretion on any one or more occasions.

Board Responsibilities and Corporate Governance

Please note the Corporate Governance Statement forms part of this report.

Board Members

The Company's Board of Directors comprises four independent non-executive Directors. The Board's role is to manage and monitor the Company in accordance with its objectives. The Board monitors the Company's adherence to its investment policy, its operational and financial performance and its underlying assets, as well as the performance of the Investment Manager and other key service providers. In addition, the Board has overall responsibility for the review and approval of the Company's NAV valuations and financial statements. It also maintains the Company's risk register, which it monitors and updates on a regular basis.

The Directors of the Company who served during the year are listed below.

Robert King, Chairman

A non-executive director for a number of open and closed-ended investment funds including two AIM listed funds, Weiss Korea Opportunities Fund Limited, CIP Merchant Capital Limited and one International Stock Exchange listed fund Golden Prospect Precious Metals Limited (which also has a trading listing on the LSE). Before becoming an independent non-executive director in 2011 he was a director of Cannon Asset Management Limited and their associated companies. Prior to this he was a director of Northern Trust International Fund Administration Services (Guernsey) Limited (formerly Guernsey International Fund Managers Limited) where he had worked from 1990 to 2007. He has been in the offshore finance industry since 1986 specialising in administration and structuring of offshore open and closed ended investment funds. Rob is British and resident in Guernsey.

Stephen Le Page

A chartered accountant and chartered tax adviser. He was a partner in PricewaterhouseCoopers CI LLP in the Channel Islands from 1994 until his retirement in September 2013. He led that firm's audit and advisory businesses for approximately ten years and for five of those years was the Senior Partner (equivalent to Executive Chairman) for the Channel Islands firm.

Mr Le Page serves on a number of boards as a non-executive director, including acting as Chairman of the Audit Committee for three premium London listed funds, Highbridge Tactical Credit Fund Limited, Volta Finance Limited and Princess Private Equity Holding Limited and one International Stock Exchange listed company, Channel Islands Property Fund Limited. Stephen is British and resident in Guernsey.

Mr Le Page was also appointed as an Independent Non-Executive Director and Chairman of the Audit Committee of Amedeo Air Four Plus Limited, a company listed on the Specialist Funds Segment of the London Stock Exchange, on 26 July 2021. In accordance with Principle 6.2-9 of the AIC Code, the appointment was discussed with the Chairman of the Company, prior to being undertaken. It was agreed that the proposed appointment would not have a significant impact on Mr Le Page's ability to fulfil his duties in relation to the Company and the appointment was therefore permitted.

Paul Barnes

An investment banker experienced in asset backed, structured and project financing with wide geographic exposure including Asia, Central/Eastern Europe, North and Latin America and Scandinavia. Mr Barnes was managing director at BNP Paribas and co-head of its EMEA Shipping and Offshore business between 2010 and 2015. He was also head of risk monitoring for Global Shipping at BNP Paribas. Prior to that, Mr Barnes had served as head of shipping (London) at Fortis Bank, head of specialised industries at Nomura International and as a corporate finance Director of Barclays Bank and as a Director of its Shipping Industry Unit . Paul Barnes is British and resident in the United Kingdom.

Christine Rødsaether

Christine is a partner in law firm Simonsen Vogt Wiig, with more than 30 years' experience working in the international shipping sector and offshore related transactions, design, vessel construction, offshore installations, restructurings, international banking and finance. Previously, she was a partner in Andersen Legal ANS and a lawyer at Wikborg, Rein & Co. Christine has extensive board experience, and currently serves on the boards of OSE listed Odfjell SE and Norwegian Finans Holding ASA as well as Bank Norwegian AS. Christine is Norwegian and is resident in Norway.

Conflicts of Interest

None of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements at the date of this report and none of the Directors has or had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company, and which was effected by the Company during the year. At the date of this Report, there are no outstanding loans or guarantees between the Company and any Director.

Share Dealing Code

The Company has adopted a share dealing code, in conformity with the requirements of the Listing Rules and the EU Market Abuse Regulation and takes steps to ensure compliance by the Board and relevant senior staff with the terms of the policy.

Appointment, re-election and remuneration of Directors

Due to the Board's size, the Board has not deemed it necessary to appoint a separate nomination committee and therefore the role typically undertaken by such committee is currently conducted by the Board as a whole. The rules governing the appointment and replacement of Directors are set out in the Company's Articles. The Directors have overall responsibility for reviewing the size, structure and skills of the Board and considering whether any changes are required, or new appointments are necessary to meet the requirements of the Company's business or to maintain a balanced Board.

This is formally considered annually at the time of the Board, Chairman and Directors' annual performance appraisal, but the Board decided during the year under review that it would be desirable to strengthen its knowledge of ship chartering and ESG matters.

Accordingly, a search for an additional director began, and given the specialist nature of the skills required, the Board elected not to use a general search agency, relying on its advisers to identify an initial list of suitable candidates. Three candidates were interviewed and Christine Rødsaether was appointed on 8 September 2020.

When considering new appointments in the future, as was the case with the recent appointment, the Board will ensure that a diverse group of candidates is considered and that appointments are made against objective criteria, in accordance with the Company's Diversity & Inclusion Policy. The Board have been briefed by their legal advisers about their on-going responsibilities as directors and newly appointed directors will be invited to participate in a formal induction process.

The Articles require that at each annual general meeting, all the Directors will submit themselves for re-election. The Company does not have a separate remuneration committee as the Board as a whole fulfils the function of a remuneration committee, which includes the review on at least an annual basis of the remuneration of the directors in accordance with the Company's remuneration policy and market information.

The Company's policy is for Directors to be remunerated in the form of fees which are quarterly in arrears. No element of the Director's remuneration is performance related, and no Director is involved in setting his or her own remuneration.

Fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Board and should be sufficient to enable high calibre candidates to be recruited to the Board, ultimately contributing to the composition of the Board that is balanced and effectively discharges stewardship of the Company's affairs.

Annual performance appraisal

The performance of the Board, committees and individual Directors is evaluated annually through a self-assessment process coordinated by the Administrator who will circulate the findings to the Board. The last evaluation took place in October 2020 with the next annual review taking place in October 2021. Evaluation of the Chairman is led by the Audit Committee Chair, who carries out the functions of a Senior Independent Director.

Audit Committee

The Board will delegate certain responsibilities and functions to the Audit Committee. Stephen Le Page is the chairman of the Company's Audit Committee which comprised the full Board until the Chairman, Rob King, stepped down from the Committee on 22 March 2021, and was replaced by Christine Rødsaether, thereby ensuring the Audit Committee is independent of the Chairman. In discharging its responsibilities, the Audit Committee will review the annual and half yearly Financial Statements, the risks to which the Company is subject, the system of internal controls, and the terms of appointment and remuneration of the independent auditor. It is also the forum through which the auditor reports to the Board. The Audit Committee is expected to meet at least twice a year.

The objectivity of the independent auditor will be reviewed by the Audit Committee, which will also review the terms under which the independent auditor is appointed to perform non-audit services. The Audit Committee will review the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditor, with particular regard to non-audit services and fees.

The members of the Audit Committee consider that they collectively have the requisite skills and experience to fulfil the responsibilities of the audit committee. Given Mr Le Page's skills and financial experience, the Board has satisfied itself that at least one member of the Audit Committee has recent and relevant financial experience.

Other Committees

The Board considered its size to be such that it would be unnecessarily burdensome to establish a separate Management Engagement Committee. However, since the appointment of Ms. Rødsaether this is now under review.

Consequently, the Board has reviewed the contractual relationship with and the performance of all the service providers to the Company, and in particular the Investment Manager. As part of the review process, the Board concluded that service providers are performing in accordance with the Company's expectations and contractual arrangements, and that their continued appointment is in the best interests of Shareholders.

Operation of the Board

It is the responsibility of the Board to ensure that there is effective stewardship of the Company's affairs. A formal schedule of matters reserved for decision of the Board has been adopted. This includes the following items:

   --    changes to the structure, size and composition of the Board, 

-- the appointment of directors to specified offices of the Board, including the Chairman and senior independent director,

   --    board succession planning, training, development and evaluation, 
   --    overall leadership of the Company and setting the values and standards, and 

-- on-going review of the Company's Investment strategy, investment objectives and investment policy.

The Board meet at least quarterly to review the overall business of the Company and to consider the matters specifically reserved for it. The quorum at Directors' meetings is two directors present in person or by telephone and they are held in Guernsey.

Detailed information is provided by the Investment Manager, Asset Manager and Administrator for these meetings and additionally at regular intervals to enable the Directors to monitor compliance with the investment objective and the investment performance of the Company both in an absolute and relative sense.

The Directors are provided with standard papers in advance of each quarterly meeting to allow the review of several key areas including the Company's investment activity over the quarter relative to its investment policy; the global shipping industry; the revenue and financial position; gearing, performance; share price discount or premium (both absolute levels and volatility); and relevant industry and macro-economic issues.

The Board also receive quarterly reports analysing and commenting on the composition of the Company's share register and monitoring significant changes to Shareholdings.

Independent Auditor

The Audit Committee is responsible for overseeing the Company's relationship with the Independent Auditor, including making recommendations to the Board on the appointment of the Independent Auditor and their remuneration. PricewaterhouseCoopers CI LLP ("PwC") was originally appointed as the Company's Independent Auditor on 20 December 2017.

The auditor, PwC, has indicated its willingness to remain in office. A resolution for the reappointment of PwC was proposed and approved at the AGM on 23 October 2020. Another resolution for their appointment will be proposed at the AGM on 20 October 2021.

Service Providers

The Investment Manager / Alternative Investment Fund Manager ("AIFM")

Tufton Investment Management Ltd, a specialist fund manager in the maritime and energy markets since 2000, has been appointed as the Investment Manager. Since its inception in 1985, the Investment Manager has been focused on financial services to these industries.

As of 30 June 2021, the Investment Manager manages investments of c. US$1.2 billion.

As of 30 June 2021, the Tufton Group of which the Investment Manager is part, had 28 employees operating from offices in London, Isle of Man and Cyprus. The Investment Manager is fully dedicated to the shipping industry with an in-house research team and dedicated Asset Manager providing services to each vessel purchased. As described in the Prospectus, the Investment Manager has an established track record in managing segregated mandates for pension funds with similar investment objectives to those of the Company.

The Investment Manager's employees have significant experience of investing and financing in the shipping industry. Each member of their Investment Committee has between 20 and 40 years of experience in the maritime financial markets either from investment banking, commercial banking or from the vessel owning/operating perspective.

The Investment Manager's role encompasses the identification of appropriate acquisition opportunities, conducting necessary due diligence, making recommendations to the Board and completing the proposed investments on behalf of the Company. The Investment Manager (in conjunction with the Asset Manager) will also monitor the performance of the Company's Portfolio. The Investment Manager, which acts as the Company's AIFM under the Alternative Investment Fund Managers Directive ("AIFMD"), is authorised and regulated by the UK FCA.

Investment Committee

The Investment Manager has established an Investment Committee.

Each investment proposal is reviewed by the Investment Committee which meets on a weekly basis. These weekly meetings continued via teleconference during the Covid-19 pandemic. In reviewing each potential investment, the Investment Committee will consider a range of factors including a detailed analysis of the vessel's technical condition and other analyses from the Asset Manager, a full risk/reward analysis, downside stress testing, commercial/employment strategy, effects of adding moderate leverage in accordance with Company policy, market outlook, credit quality of charterer, market reputation of counterparties, deal modelling, exit strategy and any macro analysis that might be necessary to fully understand the investment. The Investment Manager is committed to Responsible Investment and integrates ESG factors into its investment process. The Investment Manager reviews the environmental footprint of new vessel acquisitions as well as key performance indicators of technical managers on safety and fulfilling regulatory requirements. Should the Investment Committee be in favour of an acquisition, an appropriate recommendation will be made to the Board who would ultimately determine whether an acquisition should be made.

Asset Manager

Tufton Management Limited (formerly Oceanic Marine Management Limited) was established in 2009 to act as the Asset Manager for vessels owned by funds and vehicles managed or advised by Tufton Group. The Asset Manager subcontracts technical services from associated company Tufton Asset Management Limited, based in Cyprus, which employs professionals who have experience in all aspects of ship management including special surveys, dry dockings, maintenance, repair and negotiation of commercial agreements for vessel employment. The Asset Manager enters into an asset management agreement with each SPV and provides the services detailed in the Prospectus.

Administrator and Secretary

Maitland Administration (Guernsey) Limited ("Maitland") has been appointed as administrator and secretary to the Company, pursuant to the Administration Agreement dated 27 February 2017 and to LS Assets Limited, pursuant to the Administration Agreement dated 20 April 2018. Maitland was incorporated with limited liability in Guernsey on 20 January 2010 and is licensed by the Guernsey Financial Services Commission under the Protection of Investors (POI) Law.

The Administrator forms part of the Maitland group established in Luxembourg in 1976. Maitland is a global advisory, administration and family office firm providing legal, fiduciary investment and fund administration services to private, corporate and institutional clients. The group employs over 780 staff in 11 offices across 8 jurisdictions and collectively administers in excess of US$160bn in assets.

The Administrator provides day-to-day administration services to the Company and is also responsible for the Company's general administrative and secretarial functions such as the calculation of the NAV, compliance with the Code and maintenance of the Company's accounting and statutory records.

Registrar

Computershare Investor Services (Guernsey) Limited was appointed as registrar to the Company pursuant to the Registrar Agreement dated 27 February 2017. In such capacity, the Registrar is responsible for the transfer and settlement of shares held in certificated and uncertificated form. The Register may be inspected at the office of the Registrar.

Receiving Agent

Computershare Investor Services PLC was appointed as receiving agent to the Company for the purposes of the Offer for Subscription pursuant to the Receiving Agent Agreement dated 27 February 2017.

Disclosure Obligations

Shareholders are obliged to comply, from Admission, with the shareholding notification and disclosure requirements set out in Chapter 5 of the Disclosure Guidance and Transparency Rules. The Administrator will monitor disclosure with reference to changes in shareholdings.

Annual Report and Financial Statements

The Board of Directors is responsible for preparing the Annual Report and Financial Statements. The Audit Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues which may arise and any specific areas which require judgement.

Anti-bribery and corruption

The Board acknowledges that the Company's international operations may give rise to possible claims of bribery and corruption. In consideration of the UK Bribery Act the Board reviews the perceived risks to the Company arising from bribery and corruption to identify aspects of the business which may be improved to mitigate such risks. The Board has adopted a zero tolerance policy towards both bribery and corruption and has reiterated its commitment to carry out business fairly, honestly and openly.

In respect of the UK Criminal Finances Act 2017 which has introduced a new Corporate Criminal Offence of 'failing to take reasonable steps to prevent the facilitation of tax evasion', the Board confirms that it is committed to zero tolerance towards the criminal facilitation of tax evasion.

Modern slavery

The Company, through its Investment Manager seeks to ensure that all charter counterparties have policies and procedures which prevent any possibility of slavery or similar behaviours on the vessels comprising the fleet. The Investment Manager has such policies and procedures in its own right which govern the ship management contracts used to appoint technical managers.

General Data Protection Regulation ("GDPR")

The Board, through enquiry of its service providers, has ensured that the requirements of GDPR and its equivalent legislation in the UK and Guernsey, are met by them when they process any data on behalf of the Company.

Alternative Investment Fund Managers Directive ('AIFMD')

The Investment Manager, Tufton Investment Management Ltd, has been authorised by the UK FCA, as a Small Registered UK AIFM under the AIFMD. The funds managed by the AIFM, including the Company, are now defined as Alternative Investment Funds and are subject to the relevant articles of the AIFMD. The Company notes that while AIFMD no longer binds the UK in its implementation, a domestic regime has been put in place regulating the management and marketing of AIFs in the UK, which generally maintains the AIFMD rules as implemented at the end of the transition period with respect to the UK's departure from the European Union on 31 December 2020.

Internal control and financial reporting

The Board is responsible for establishing and maintaining the system of internal controls required by the Company's operations. These internal controls are undertaken by the service providers. Internal control systems are designed to meet the specific needs of the Company and the risks to which it is exposed, and, by their very nature, provide reasonable, but not absolute, assurance against material misstatement or loss.

The key procedures which have been established to provide effective internal controls include:

   --     Maitland Administration (Guernsey) Limited ("Maitland") is responsible for the provision of administration, accounting and company secretarial duties. Maitland also provides compliance oversight in respect of the Company and its activities. As the Company itself has no IT systems and relies on the IT systems of its service providers,  Maitland additionally has a role in cyber security and the protection of the Company's data through the operation of Information Security Protection Controls. Maitland staff are also regularly trained in order to minimise the risk of an accidental data breach; 

-- Tufton Investment Management Ltd is the Investment Manager and provides portfolio management and risk management services to the Company. They are also the AIFM for the purposes of the AIFMD;

-- Tufton Management Limited, an affiliate of the Investment Manager, provides Asset Management services to each underlying SPV;

-- Tufton Corporate Services, an affiliate of the Investment Manager, provides administration, accounting and company secretarial services for the SPVs;

-- Computershare Investor Services (Guernsey) Limited is responsible for the provision of Registrar services;

-- the Board clearly defines the duties and responsibilities of the Company's agents and advisers in the terms of their contracts;

-- the Board receives assurances from the Company's agents and advisers that any amendments required as a result of regulatory change, are actioned accurately and promptly; and

-- the Board reviews financial information and compliance reports produced by the Administrator on a regular basis.

The Board and Audit Committee have reviewed the Company's risk management and internal control systems and believe that the controls are satisfactory, given the size and nature of the Company.

Responsible Investment, Sustainability and ESG Policy

The Company published its Responsible Investment, Sustainability and ESG Policy (the "Policy"), in July 2021, a copy of which is available on the Company's website (tuftonoceanicassets.com).

The Policy sets out the combined approach of the Investment Manager and the Company to the integration of sustainability risks and responsible investment principles in its investment decision making and asset ownership practices. The policy seeks to align the Company's strategy with best practices and market standards in all ESG and Responsible Investment matters.

The Company believes upholding high standards of ESG and responsible investment principles and practices are an essential tool for managing the risks presented by challenges such as climate change, social inequality and human rights issues, delivering long term value and positive returns for the Company's Shareholders as part of the Company's investment objectives, and ensuring the continued sustainability of shipping as a whole.

The Policy includes further details on the Company's approach to diversity and inclusion, stakeholder engagement, modern slavery, human rights and anti-bribery practices, together with how the activities of the Company are aligned with recognised ESG standards such as the UN's Sustainable Development Goals.

In accordance with the Policy, the Directors have requested that the Investment Manager take into account the broader social, ethical and environmental issues of the vessels within the Company's portfolio, acknowledging that companies failing to manage these issues adequately run a long-term risk to the sustainability of their businesses and that this reflects stakeholders views. More specifically, the Board expect companies to demonstrate ethical conduct, effective management of their stakeholder relationships, responsible management and mitigation of social and environmental impacts, as well as due regard for wider societal issues.

The Directors along with the Investment Manager, recognise the value of integrating principles of Responsible Investment into the investment management process and ownership practices in the belief that this can have an impact on the long-term financial performance. The Investment Manager's Report has further information on how the Investment Manager practically implements and considers the Policy when making investment decisions.

Going concern

In assessing the going concern basis of accounting the Directors have, together with discussions and analysis provided by Tufton, had regard to the guidance issued by the Financial Reporting Council. They have considered recent market volatility and the potential impact of the Covid-19 virus on the current and future operations of the Company and its investments (as set out in more detail in the Principal Risks and Uncertainties section).

Based on these activities and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Please also refer to the Viability statement.

Viability statement

The Board, in assessing the long-term viability of the Company, have paid particular attention to the Principal Risks and Uncertainties faced by the Company as disclosed in these Financial Statements. In addition, the Board has considered the cash flow projection for the running costs of the Company to ensure the Company retains sufficient cash to meet its operating costs until the end of the viability period and is therefore able to sustain its business model and structure, including the payment of dividends at the proposed level.

The Board has also considered the cash flow projections for the Company over a range of market stress scenarios. Particularly with respect to Covid-19, the Board has considered the results of a viability test wherein the primary sensitivity of an extended period of market stress results in time charter rates staying below the historic median levels over the entire three-year forecast period along with significant void periods modelled between charters. The Board is pleased to note that in the viability test scenario, the Company will still retain sufficient cash to meet its operating costs and sustain its business model and structure.

The Board has taken into account the cash flow-weighted average length of its charters which are expected in normal circumstances to be in excess of three years and have therefore determined the appropriate viability period for the Company to be three years.

The Directors believe their assessment of the viability of the Company over the relevant period is sufficiently robust and encompassed the risks which could threaten the business model, future performance, solvency or liquidity of the Company considering a variety of severe but plausible scenarios. These scenarios allow for considerable idle time in the fleet, consistently low charter rates and even charter default. As a result, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due during the viability period.

Continuation Vote

In accordance with the prospectus published 25 September 2018, the Directors are not required to put a continuation resolution to an extraordinary general meeting in 2021 as the Company's NAV was in excess of US$250m as at the end of fourth quarter of 2020 (US$251.0m). The Directors will propose an ordinary resolution at the annual general meeting to be held in 2024 that the Company continues its business (a "Continuation Resolution"). If this Continuation Resolution is passed, then the Directors shall every three years thereafter at the annual general meeting held following the publication of the audited accounts propose a further Continuation Resolution.

Shareholders' significant interests

The following Shareholders had notified to the Company a substantial interest of 5% or more of the issued share capital as at 30 June 2021.

 
                                       % of issued share 
                                        capital 
 
 South Yorkshire Pensions Authority               10.53% 
 East Riding Pension Fund                         10.29% 
 Schroder Investment Management                    8.91% 
 West Yorkshire Pension Fund                       8.72% 
 Newton Investment Management Ltd                  5.97% 
 Pictet Asset Management                           5.59% 
 

Relations with Shareholders

The Directors place a great deal of importance on communication with Shareholders. They request regular updates from the Company's placing agents and financial advisers on their communications with Shareholders. They can also be contacted via the email address provided in the Chairman's Statement.

The Annual Report and Audited Financial Statements are also distributed to other parties who have an interest in the Company's performance. Additional information on the Company can be obtained through the website www.tuftonoceanicassets.com , which is maintained by the Investment Manager.

The Notice of the Annual General Meeting is included within the Annual Report and Audited Financial Statements and is sent out at least 20 working days in advance of the meeting, in accordance with the AIC Code. All Shareholders have the opportunity to put questions to the Board or the Investment Manager formally at the Company's Annual General Meeting.

The Company Secretary and Investment Manager are available to answer general shareholder queries at any time throughout the year. The Company can be contacted via the Company Secretary or SHIP@tuftonoceanicassets.com .

Approved by the Board of Directors on 8 September 2021 and signed on behalf of the Board by:

   Rob King                                              Stephen Le Page 
   Director                                                Director 

Audit Committee Report

Chairman's introduction

I am pleased to present to you the Audit Committee report prepared in accordance with the current AIC Code, which reflects the current edition of the UK Corporate Governance Code to the extent that it is applicable to investment companies.

The terms of reference for the committee are available on the Company's website, www.tuftonoceanicassets.com . During the year ended 30 June 2021 and to the date of this report, the main areas of activity have been as follows:

-- reviewing and assessing the Principal Risks and Uncertainties, including the continued impact of the Covid-19 pandemic on the activities and assets of the Company;

-- reviewing the accounting policies for the Company to ensure they remain appropriate for the preparation of the Company's Annual Report and Audited Financial Statements;

-- reconsidering the areas of judgment or estimation arising from the application of International Financial Reporting Standards to the Company's activities and the documentation of the rationale for the decisions made and estimation techniques selected, to ensure they remain appropriate;

-- meeting with the Independent Auditor, PwC, to review and discuss their independence, objectivity and proposed scope of work for their audit of this annual report;

-- meeting with the Company's principal service providers to review the controls and procedures operated by them to ensure that the Company's risks are properly managed and that its financial reporting is complete, accurate and reliable; and

-- reviewing in detail the content of this Annual Report, the work of the service providers in producing it and the results of the external audit.

Membership and Role of the Committee

The membership of the Audit Committee (the "Committee") is set in the Board Responsibilities and Corporate Governance and details about the responsibilities of the Committee are available in the terms of reference on the website.

The Committee discharges its responsibilities through a series of scheduled meetings, the agendas of which are linked to events in the financial calendar of the Company. The Committee met three times during the year ended 30 June 2021 and once more since the year end. The Independent Auditors attended all these meetings.

Internal control

The Company itself has no internal systems to control. Internal control lies within the services provided by Tufton Investment Management Ltd, Maitland and other service providers. These controls are monitored primarily by the Board reviewing and challenging reports from these service providers, and through segregation of duties between them.

In addition, the Board seeks to make visits to certain service providers periodically to assess their organisation and culture and to meet the individuals responsible for key functions. As a result of travel restrictions resulting from the global Covid-19 pandemic, these visits have been replaced by video conferences with key personnel. The Committee, and particularly the Chairman of the Committee, also closely monitors the financial reporting process and the tasks undertaken in the production of the annual report. This has involved discussions with Tufton Corporate Services Limited, the administrator of the Isle of Man SPVs, VesselsValue, the supplier of the information underlying the valuation of most of the vessels held by the Company, and the Investment Manager.

Review of accounting policies and areas for judgment or estimation

These financial statements reflect the application of the accounting policies and estimation techniques originally set out in the Company's Prospectus for its IPO in December 2017. These policies have been discussed with the Independent Auditor, and the Audit Committee confirms that they are still considered to be appropriate.

In particular, the following significant areas in relation to the preparation of these financial statements have been discussed:

   --     the application of IFRS 10 - Consolidated Financial Statements ("IFRS 10") to the Company; 

-- the detailed approach to arriving at the estimate of fair value for each vessel, SPV and the Guernsey Holding Company, LS Assets Limited;

-- the determination of the Company's Viability and the applicability of the Going Concern assumption.

These financial statements reflect the outcome of those discussions. In addition, the auditor's proposed scope of work in connection with these areas and the statements in general was agreed.

Fair value estimation

The majority of the NAV of the Company is derived from the fair value of the vessels owned by the Company's indirect SPV subsidiaries, which are themselves held by the Company's subsidiary, LS Assets Limited. The Company has chosen to use the value provided by VesselsValue.com as its best estimate of fair value for the majority of its fleet. Exact details of the valuation techniques applied to the vessels and of how the Company's NAV is derived is given in Note 11 to these financial statements. The Committee has paid particular regard to evaluating these techniques to ensure they are reasonably accurate, reliable and appropriate. The sensitivity of these valuations to various input assumptions is given in Note 11, to enable readers of these financial statements to make their own assessment of the carrying values. The Committee is satisfied that these techniques are reasonable and appropriate for use in the preparation of these financial statements and in the calculation of the published quarterly NAV per Share of the Company.

External Audit

During the year ended 30 June 2021, and up to the date of this report, the Committee has met formally with the Independent Auditor on four occasions, and in addition the Chair of the Committee has spoken to them informally on several occasions. These informal meetings have been held to ensure the Chairman is kept up to date with the progress of their work and that their formal reporting meets the Committee's needs.

The formal meetings included detailed reviews of the proposed fees and scope of the work to be performed by PwC in their audit for the year ended 30 June 2021. They also included detailed reviews of the results of this work, their findings and observations. I am pleased to report that there are no matters arising from their work which should be brought to the attention of Shareholders.

The Committee has also reviewed PwC's report on their own independence and objectivity, including the level of non-audit services provided by them. There were no non-audit services carried out during the year.

The Committee has also considered the potential for a conflict of interest between the Chairman of the Committee and PwC as a result of his being an ex-partner of that firm. In making this consideration the members of the Committee other than the Chairman noted that he retired from that firm more than seven years ago, three clear years before they were selected as external auditors and that he had no financial relationship with them at that or any other relevant time. It was concluded by those members that no actual conflict of interest existed.

The Committee has therefore concluded that PwC is independent and objective, carries out its work to a high standard of quality and provides concise but useful reporting. The Committee also notes that they were appointed to office less than five years ago. Accordingly, the Committee has recommended to the Board that PwC be put forward to the AGM of the Company for re-election.

Annual Report

The Committee members have each reviewed this Annual Report and earlier drafts of it in detail, comparing its content with their own knowledge of the Company, reporting requirements and shareholder expectations. Formal meetings of the Committee have also reviewed the report and its content and have received reports and explanations from the Company's service providers about the content and the financial results. The Committee has concluded that the Annual Report, taken as a whole, is fair, balanced and understandable, and that the Board can reasonably and with justification make the Statement of Directors' Responsibilities.

Stephen Le Page

Chairman of the Audit Committee

Statement of Comprehensive Income

For the year ended 30 June 2021

 
                                      Notes           2021             2020 
                                                       US$              US$ 
 Income 
 Net changes in fair value of 
  Financial Assets 
  designated at fair value through 
  profit or loss                         4      60,723,698     (24,177,906) 
 Dividend income                        7       21,752,000       25,626,377 
 
 Total net income                               82,475,698        1,448,471 
 
 Expenditure 
 Administration fees                             (148,158)        (144,812) 
 Audit fees                                      (122,022)        (128,450) 
 Corporate Broker fees                           (150,000)        (150,000) 
 Directors' fees                       17        (162,332)        (118,038) 
 Foreign exchange (loss) / gain                    (1,429)            1,246 
 Insurance fee                                    (17,721)         (28,971) 
 Investment management fee             13      (2,269,097)      (2,070,834) 
 Legal fees                                       (21,576)         (10,165) 
 Listing fees                                     (17,476)                - 
 Professional fees                                (75,560)         (53,571) 
 Sundry expenses                                   (3,913)         (23,062) 
 
 Total expenses                                (2,989,284)      (2,726,657) 
                                             -------------  --------------- 
 Operating profit / (loss)                      79,486,414      (1,278,186) 
 Finance income                                      1,452           60,106 
                                             -------------  --------------- 
 Profit / (Loss) and comprehensive 
  income / (loss) for the year                  79,487,866      (1,218,080) 
                                             =============  =============== 
 IFRS Earnings per ordinary share 
  (cents)                               8            30.70           (0.49) 
                                             =============  =============== 
 

There were no potentially dilutive instruments in issue at 30 June 2021 or 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 2021

 
                                          Notes                  2021            2020 
                                                                  US$             US$ 
 Non-current assets 
 Financial assets designated 
  at fair value 
  through profit or loss (Investments)       4            307,728,012     232,441,142 
 
 Total non-current assets                                 307,728,012     232,441,142 
                                                 --------------------  -------------- 
 
 Current assets 
 Trade and other receivables                5               5,760,379       5,839,928 
 Cash and cash equivalents                                     29,989          20,441 
 
 Total non-current assets                                 307,728,012     232,441,142 
                                                 --------------------  -------------- 
 
   Total assets                                           313,518,380     238,301,511 
 
 Current liabilities 
 Trade and other payables                                     872,425         633,418 
 
 Total current liabilities                                    872,425         633,418 
                                                 --------------------  -------------- 
 
   Net assets                                             312,645,955     237,668,093 
                                                 ====================  ============== 
 
 Equity 
 Share capital                              6             259,657,871     245,392,016 
 Retained reserves                          6              52,988,084     (7,723,923) 
                                                 --------------------  -------------- 
 Total equity attributable to 
  ordinary Shareholders                                   312,645,955     237,668,093 
                                                 ====================  ============== 
 Net assets per ordinary share 
  (cents)                                  10                  115.78           93.08 
                                                 ====================  ============== 
 

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

8 September 2021 and signed on its behalf by:

Rob King Stephen Le Page

   Director                                                                                Director 

Statement of Changes in Equity

For the year ended 30 June 2021

 
                                     Ordinary 
                                      Share capital     Retained 
                                                        earnings       Total 
                                     US$              US$            US$ 
 
   Shareholders' equity at 30 
   June 2019                           215,012,016      10,830,663     225,842,679 
 
 Share issue                         31,000,000       -              31,000,000 
 Listing 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 
 
 Share buyback                       (247,125)        -              (247,125) 
 Share issue                         14,700,000       -              14,700,000 
 Listing costs                       (187,020)        -              (187,020) 
 Profit and comprehensive income 
  for the year                         -                79,487,866     79,487,866 
 Dividends paid                      -                (18,775,859)   (18,775,859) 
 
 
 Shareholders' equity at 30 
  June 2021                          259,657,871      52,988,084     312,645,955 
 
 
 

The accompanying notes are an integral part of these financial statements.

Statement of Cash Flows

For the year ended 30 June 2021

 
                                                2021           2020 
                                        Notes    US$            US$ 
 
 Cash flows from operating 
  activities 
 
 Profit / (Loss) and comprehensive 
  income / (loss) for the year                  79,487,866     (1,218,080) 
 
 Adjustments for: 
 Purchase of investments                4       (14,563,172)   (35,620,975) 
 Change in fair value on investments    4       (60,723,698)   24,177,906 
 
 Operating cash flows before 
  movements in working capital                  4,200,996      (12,661,149) 
 
 Changes in working capital: 
 Movement in trade and other 
  receivables                           5       79,549         (5,807,680) 
 Movement in trade and other 
  payables                                      239,007        (54,363) 
 
 Net cash generated from / 
  (used in) operating activities                4,519,552      (18,523,192) 
                                               -------------  ------------- 
 
 Cash flows from financing 
  activities 
 
 Net amount paid for share 
  buyback                               6       (247,125)      - 
 Net proceeds from issue of 
  shares                                6       14,512,980     30,380,000 
 Dividends paid to Ordinary 
  Shareholders                          9       (18,775,859)   (17,336,506) 
 
 Net cash (used in) / generated 
  from financing activities                     (4,510,004)    13,043,494 
                                               -------------  ------------- 
 
 Net movement in cash and 
  cash equivalents during the 
  year                                          9,548          (5,479,698) 
 
 Cash and cash equivalents 
  at the beginning of the year                  20,441         5,500,139 
 
 Cash and cash equivalents 
  at the end of the year                        29,989         20,441 
                                               =============  ============= 
 

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements

For the year ended 30 June 2021

   1.    General information 

The Company was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 6 February 2017 with registered number 63061, and is regulated by the GFSC as a registered closed-ended investment company. The registered office and principal place of business of the Company is 1 Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1 1WD.

The Company had 224,644,568 ordinary shares in issue on 1 July 2019 all of which were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange. 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$31m. These ordinary shares were issued on the Specialist Funds Segment of the Main Market of the London Stock Exchange effective 24 September 2019.

During the current year, the Company bought a total of 300,000 of its own ordinary shares at an average price of US$0.824 per Share. For further details refer to note 6.

On 25 March 2021, the Company announced the results of its tap issue of 15,000,000 Shares, which raised gross proceeds of US$14.7m. 14,700,000 new ordinary shares were admitted to trading on the Specialist Funds Segment of the Main Market of the London Stock Exchange plc. The balance of 300,000 ordinary shares were issued out of Treasury and represent all of the Company's shares that were held in Treasury. The total number of Company's shares in issue was 270,037,638 at the year end. Each share carries the right to 1 vote.

On 6 August 2021, after the year end, the Company announced that it had raised gross proceeds of US$12.4m through the tap issue of a further 10,533,763 ordinary shares at a price of US$1.18 per share.

   2.    Significant accounting policies 
   (a)   Basis of Preparation 

Compliance with IFRS

The financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC"), Listing rules and applicable Guernsey law.

Historical cost convention

The financial statements have been prepared on a historical cost basis modified by the revaluation of 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 IAS 1: Classification of Liabilities as Current or Non-current and Disclosure of Accounting Policies (Effective 1 January 2023).

Amendments to IAS 8: Definition of Accounting Estimates (Effective 1 January 2023).

Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract (Effective 1 January 2022).

Amendments to IFRS 9: Annual Improvements to IFRS Standards 2018 - 2020 (Effective 1 January 2022).

It is not anticipated that the revisions to the above mentioned standards will have any material impact on the Company's financial position, performance or disclosures in its financial statements.

There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Company.

   (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.

   (i)    Financial Assets and Financial Liabilities Investments 

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.

The charter-free and associated charter values of most standard vessels are calculated predominantly using an online valuation platform provided by VesselsValue or, in limited circumstances, the written valuation of a mainstream broker where elected by the Manager. For charter-free values, the VesselsValue system contains a number of algorithms that combine factors such as vessel type, technical features, age, cargo capacity, freight earnings, market sentiment and recent vessel sales.

For charter values, the platform provides a DCF (Discounted Cashflow) module where vessel specific charter details are input and measured against a platform 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.

The net adjusted valuation is subject to a minimum fair value being the present value of all current contracted charter cashflows and the current vessel scrap value at the completion of the charter. The present value of the cashflows is discounted at the specific WACC assigned to the vessel type by VesselsValue adjusted for any counterparty credit risk where appropriate.

Specialist vessels are valued on a pure DCF basis by the Investment Manager using vessel specific information and both observable and unobservable data. The VesselsValue platform is not used for these assets. Instead a DCF approach is adopted and this determines the present value of the cashflows discounted at the project cost of capital or the specific WACC assigned to the vessel type by VesselsValue, 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.

SPVs account for non-ship assets in line with the accounting policies of the Company.

   (i)    Financial Assets and Financial Liabilities Investments 

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 year in which they arise.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Financial liabilities and equity

Debt and equity instruments are classified either as financial liabilities or as equity in accordance with the substance of the contractual arrangement.

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 2021, 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 financial position date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in the Statement of Comprehensive Income in the year in which they arise. Transactions denominated in foreign currencies are translated into US Dollars at the rate of exchange 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 have 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 Risks and Uncertainties section). 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 year in which the estimates are revised and in any future years 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.

At 30 June 2021, two vessels were treated as specialist vessels (two vessels at 30 June 2020).

The first is on a long-term Bareboat Charter. The second has had scrubbers installed under an enhanced long-term contract with a charterer.

These 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.

During the current and prior years, one vessel was on a charter with a fixed rate floor and a profit-sharing mechanism from which its earnings were crystallised on an annual basis. In months prior to the completion of the annual calculation period, the vessel's earnings were accounted for based on actual earnings for the year to date and an estimate of the vessel's future earnings to the end of the calculation period. The vessel was sold in December 2020.

At the year end, the charter-free valuation of Golding was provided by written broker valuation rather than VesselsValue as elected by the Investment Manager given limited transactions in this vessel type.

There were no other material 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 to the Company's Level 3 assets only, with respect to the requirements set out in IFRS 7. The investment held at fair value is recorded under Non-Current Assets in the Statement of Financial Position as there is no current intention to dispose of 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 7) are as follows:

 
 
                                                    2021          2020 
                                                    US$           US$ 
 LSA 
 
 Brought forward cost of investment               235,360,051   199,739,076 
 Total investment acquired 
  in the year                                     14,563,172    35,620,975 
 
 Carried forward cost of investment               249,923,223   235,360,051 
 
 Brought forward unrealised (losses) 
  / gains on valuation                            (2,918,909)   21,258,997 
 Movement in unrealised gains / (losses) 
  on valuation                                    60,723,698    (24,177,906) 
                                                 ------------  ------------- 
 Carried forward unrealised gains 
  / (losses) on valuation                         57,804,789    (2,918,909) 
                                                 ------------  ------------- 
 Total investment at fair value                   307,728,012   232,441,142 
                                                 ============  ============= 
 
 
 

Note 11 - 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 value have been determined to be the charter-free valuation and charter rates for standard vessels and the Discount rate applied for specialised vessels.

The Company holds its investments through a subsidiary company which has not been consolidated in line with 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 SPV's and holding company Handy Holdco Limited are incorporated in the Isle of Man. The holding company LS Assets Limited is incorporated in Guernsey. The country of incorporation is also their principal place of business.

LSA (own net assets): Breakdown of Fair Value:

 
 Name                   2021          2020           Direct         Principal   Ownership     Ownership 
                         US$           US$            or indirect    activity    at 30 June    at 30 June 
                                                      holding                    2021          2020 
 LS Assets                                                          Holding 
  Limited               -             -              Direct          company    100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Aglow Limited           9,295,994     6,544,853     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Antler Limited          10,017,889   7,086,424      Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Bear Limited            439,204      25,159,399     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Candy Limited           9,579,537     -             Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Citra Limited           18,033,604   6,879,658      Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Cocoa Limited***        -            -              Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Dachshund 
  Limited ***            -            14,836,028     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Daffodil 
  Limited***             -            -              Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Darwin Limited**        -            1              Indirect       SPV         N/A           100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Dragon Limited          8,876,752    7,836,366      Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Echidna Limited         10,212,057    -             Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Golding Limited         16,578,058   -              Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Handy HoldCo                                                       Holding 
  Limited               29,581,968     -             Indirect        Company    100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Hongi 
  Limited 
  **                     -            1              Indirect       SPV         N/A           100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Java Limited 
  **                     -            1              Indirect       SPV         N/A           100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Kale Limited            20,680,491   5,289,398      Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Laurel Limited(+)       1,599,950    -              Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Lavender 
  Limited                13,206,424    -             Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Mayflower 
  Limited                12,762,171   -              Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Neon Limited            29,481,951    30,393,897    Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Octane Limited          17,208,816   18,462,207     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Orson Limited(++)       1,356,536    -              Indirect       SPV         100%          N/A 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Parrot Limited          28,155,312   31,865,549     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Patience 
  Limited                10,046,760   5,687,983      Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Pollock Limited***      -            15,010,226     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Riposte Limited         16,749,536    7,603,717     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Sierra Limited          17,290,472    18,765,453    Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Swordfish 
  Limited                14,340,404   4,927,358      Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Vicuna Limited          8,780,368    10,610,002     Indirect       SPV         100%          100% 
                       ------------  -------------  -------------  ----------  ------------  ------------ 
 Cash held 
  pending investment      3,776,976     29,618,568 
                       ------------  ------------- 
 Residual 
  net liabilities        (323,218)    (14,135,947) 
                       ------------  ------------- 
 *Total investment 
  at fair value         307,728,012   232,441,142 
                       ------------  ------------- 
 
 

The net change in the movement of the fair value of the investment is recorded in the Statement of Comprehensive Income

*Vessels are valued at fair value in each of the SPVs shown in the table above and combined with the residual net liabilities of each SPV to determine the fair value of the total investment attributable to LSA.

**The three companies above have been liquidated. The ships were sold during the 2020 financial year.

*** During the current year, the ownership of Dachshund Limited and Pollock Limited was transferred to Handy HoldCo Limited, which also owns Cocoa Limited and Daffodil Limited.

(+) At the year end this SPV held an Agreement with a vendor for the purchase of a vessel signed 24 May 2021. At the year end the SPV valued the incomplete contract at the difference between its fair value and costs to complete. The vessel was delivered 27 July 2021.

(++) At the year end this SPV held an Agreement with a vendor for the purchase of a vessel signed 24 May 2021. At the year end the SPV valued the incomplete contract at the difference between its fair value and costs to complete. The vessel was delivered 29 July 2021.

   5.    Trade and other receivables 
                                                                                                                      2021                         2020 
                                                                                                                       US$                           US$ 

Current assets

Prepayments 21,491 25,627

          Due from subsidiary (dividend receivable)                                   5,738,888 5,814,301 
                                                                                                         ___________           ___________ 

Total trade and other receivables 5,760,379 5,839,928

                                                                                                         ___________           ___________ 

Amounts due from subsidiaries are interest free and payable on demand. The amount due from subsidiaries in the prior year of US$5,814,301 was settled in the current year. Due to the value and short-term nature of these receivables, the directors have assessed there to be no expected credit losses associated with these outstanding balances.

   6.    Share capital and reserves 

Share Capital

 
 Share issuance        Number of     Gross amount   Issue costs   Share capital 
                        shares        (US$)          (US$)         (US$) 
 Total issue at 
  30 June 2020         255,337,638   250,400,016    (5,008,000)   245,392,016 
                      ------------  -------------  ------------  -------------- 
 Share buyback 
  5 August 2020        (50,000)      (41,710)        -            (41,710) 
                      ------------  -------------  ------------  -------------- 
 Share buyback 
  12 August 2020       (50,000)      (41,083)        -            (41,083) 
                      ------------  -------------  ------------  -------------- 
 Share buyback 
  13 August 2020       (50,000)      (41,083)        -            (41,083) 
                      ------------  -------------  ------------  -------------- 
 Share buyback 
  24 September 2020    (100,000)     (82,166)        -            (82,166) 
                      ------------  -------------  ------------  -------------- 
 Share buyback 
  25 September 2020    (50,000)      (41,083)        -            (41,083) 
                      ------------  -------------  ------------  -------------- 
 Share issue 
  29 March 2021        15,000,000    14,700,000     (187,020)     14,512,980 
                      ------------  -------------  ------------  -------------- 
 Total issue at 
  30 June 2021         270,037,638   264,852,891    (5,195,020)   259,657,871 
                      ------------  -------------  ------------  -------------- 
 

Retained reserves

Retained reserves comprise the retained earnings as detailed in the Statement of Changes in Equity.

   7.    Dividend income 
                                                                                                                      2021                         2020 
                                                                                                                       US$                           US$ 

Dividend income 21,752,000 25,626,377

                                                                                                         ___________           ___________ 

During the current year, LS Assets Limited declared dividends of US$21,752,000

(2020: US$25,626,377) to the Company. At 30 June 2021, dividends of US$5,738,888

(2020: US$5,814,301) were outstanding (refer to Note 5).

   8.    Earnings per share calculated in accordance with IFRS 
 
                                         2021          2020 
                                          US$           US$ 
 Profit / (loss) and comprehensive 
  income / (loss) for the year           79,487,866    (1,218,080) 
 Weighted average number of ordinary 
  shares                                 258,911,885   248,125,605 
 Earnings per ordinary share (cents)     30.70         (0.49) 
 

The weighted average number of ordinary shares of 258.9m shares (2020: 248.1m shares) is calculated in accordance with IFRS guidelines.

   9.    Dividends 

The Company declared the following dividends in respect of the profit for the year ended 30 June 2021:

 
 Quarter end    Dividend     Ex div date   Net Dividend   Record date   Paid date 
                 per share                  paid 
 30 September                5 November                   6 November    20 November 
  2020          US$0.0175     2020         US$4,463,159    2020          2020 
               -----------  ------------  -------------  ------------  ------------ 
 31 December                 28 January                   29 January    21 February 
  2020          US$0.01875    2021         US$4,781,956    2021          2021 
               -----------  ------------  -------------  ------------  ------------ 
 31 March                    29 April                     30 April 
  2021          US$0.01875    2021         US$5,063,206    2021         14 May 2021 
               -----------  ------------  -------------  ------------  ------------ 
 30 June                     29 July                      30 July       13 August 
  2021          US$0.01875    2021         US$5,063,206    2021          2021 
               -----------  ------------  -------------  ------------  ------------ 
 

Under the Companies (Guernsey) Law, 2008, the Company can distribute dividends from capital and revenue reserves, subject to a prescribed net asset and solvency test. The net asset and solvency test considers whether a company is able to pay its debts when they fall due, and whether the value of a company's assets is greater than its liabilities. The Board confirms that the Company passed the net asset and solvency test for each dividend paid.

10. Net assets per ordinary share

 
                                2021          2020 
                                 US$           US$ 
 Shareholders' equity           312,645,955   237,668,093 
 
 Number of ordinary shares      270,037,638   255,337,638 
 
 Net assets per ordinary 
  share (cents)                 115.78        93.08 
 
 
 

11. 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 buyback 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 Dollar, the functional currency. It therefore may be exposed to currency risk as the value of assets or liabilities denominated in other currencies will fluctuate due to changes in exchange rates.

However, such exposure is currently, and is expected to remain, insignificant. Consequently, no further information has been provided.

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, nor the US$22.00m outstanding loan (with a variable rate capped at 4.65%) owed by Handy HoldCo Limited, in accordance with IFRS 10 and IFRS 13. Interest payments on these loans are only subject to limited change from fluctuations in interest rates due to their fixed and capped nature.

 
 2021                           Interest bearing   Non-interest     Total (US$) 
                                 less than          bearing (US$) 
                                 1 month (US$) 
 Assets 
                               -----------------  ---------------  ------------ 
 Investments                    -                  307,728,012      307,728,012 
                               -----------------  ---------------  ------------ 
 Trade and other receivables    -                  5,760,379        5,760,379 
                               -----------------  ---------------  ------------ 
 Cash and cash equivalents      29,989             -                29,989 
                               -----------------  ---------------  ------------ 
 Total assets                   29,989             313,488,391      313,518,380 
                               -----------------  ---------------  ------------ 
 
 Liabilities 
                               -----------------  ---------------  ------------ 
 Trade and other payables       -                  872,425          872,425 
                               -----------------  ---------------  ------------ 
 Total liabilities              -                  872,425          872,425 
                               -----------------  ---------------  ------------ 
 
 Total interest sensitivity 
  gap                           29,989 
                               -----------------  ---------------  ------------ 
 

The weighted average interest rate is 0.06% for cash and cash equivalents in the current financial year.

 
 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 1.12% 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 2021 would increase or decrease by US$300 (2020: US$204). 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 external 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 2021 there were no receivables considered impaired (2020: 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 2021         Credit rating         Cash (US$)   Short term        Total as 
                       Standard & Poor's                  fixed deposits    at 30 June 
                                                          (US$)             2021 (US$) 
 Barclays Bank Plc    A Long Term 
  (Barclays)           A-1 Short Term       22,495       -                 22,495 
                     --------------------  -----------  ----------------  ------------ 
 Ravenscroft (1)      A+ Long Term 
  (HSBC London - 
   call accounts)      A-1 Short Term       -            7,494             7,494 
                     --------------------  -----------  ----------------  ------------ 
 Total                                      22,495       7,494             29,989 
                                           -----------  ----------------  ------------ 
 

(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 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 
  (HSBC London - 
   call accounts)      A-1 Short Term       -            1,379             1,379 
                     --------------------  -----------  ----------------  ------------ 
 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.

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 2021                 Up to 3     Between 3        Between 1      Total (US$) 
                               months      and 12 months    and 5 years 
                               (US$)       (US$)            (US$) 
 Assets 
                             ----------  ---------------  -------------  ------------ 
 Trade and other 
  receivables                 5,738,888   -                -              5,738,888 
                             ----------  ---------------  -------------  ------------ 
 Cash and cash equivalents    29,989      -                -              29,989 
                             ----------  ---------------  -------------  ------------ 
 Liabilities 
                             ----------  ---------------  -------------  ------------ 
 Trade and other 
  payables                    872,425     -                -              872,425 
                             ----------  ---------------  -------------  ------------ 
 Total                        4,896,452   -                -              4,896,452 
                             ----------  ---------------  -------------  ------------ 
 
 
 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                 5,814,301   -                -              5,814,301 
                             ----------  ---------------  -------------  ------------ 
 Cash and cash equivalents    20,441      -                -              20,441 
                             ----------  ---------------  -------------  ------------ 
 Liabilities 
                             ----------  ---------------  -------------  ------------ 
 Trade and other 
  payables                    633,418     -                -              633,418 
                             ----------  ---------------  -------------  ------------ 
 Total                        5,201,324   -                -              5,201,324 
                             ----------  ---------------  -------------  ------------ 
 

Price risk in the shipping industry

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. Price risk sensitivity analysis was conducted on vessel and charter fair values only as these comprise the vast majority of assets.

(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 or, in limited circumstances, written mainstream broker valuations. For charter-free values, the VesselsValue system contains a number of algorithms that combine factors such as vessel type, technical features, age, cargo capacity, freight earnings, market sentiment and recent vessel sales.

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.

The charter valuation process may be bounded by a minimum value which comprises the DCF value of the current charter plus scrap value of the vessel at the end of the charter. At the year end this minimum value was applied to two vessels.

(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 model ("DCF 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 (two at 30 June 2020).

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

Alongside strong net income and cash flows, the Company also benefited from fair value increases as portfolio asset values rebounded upon market reopening after the Covid-19 related declines in the prior year. The market for containerships and bulkers has recovered but an ongoing recovery in oil demand growth and capacity in floating storage returning to the market remains an overhang for tankers.

The Company benefited from diversification between different segments of shipping. The tanker market was strong in the first half of 2020 while the containership market was weak. The roles were reversed over the final year.

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

The directors 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 and already reflect market expectations of the impact of the Covid-19 pandemic.

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 2021 
  (US$)                        +31,989       215,939            (31,989) 
                              ------------  -----------------  ------------ 
 Fair value at 30 June 2020 
  (US$)                        +14,544       154,699            (14,544) 
                              ------------  -----------------  ------------ 
 

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 
                                         * portfolio 
                           US$ 000       value             US$ 000 
                                         US$ 000 
 Fair value at 30 June 
  2021 (US$)              (16,473)      215,939           +16,438 
                         ------------  ----------------  ------------ 
 Fair value at 30 June 
  2020 (US$)              (4,095)       154,699           +4,283 
                         ------------  ----------------  ------------ 
 

(*) Please see standard vessels and specialised vessels (Price risk in the shipping industry)

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 
                                                * Vessel(*) 
                                 US$ 000        portfolio value    US$ 000 
                                                US$ 000 
 Specialised Vessel company 
  fair value at 30 June 2021 
  (US$)                         (785)          57,637             +802 
                               -------------  -----------------  ------------- 
 Specialised Vessel company 
  fair value at 30 June 2020 
  (US$)                         (1,224)        62,259             +1,263 
                               -------------  -----------------  ------------- 
 

(*) Please see standard vessels and specialised vessels (Price risk in the shipping industry)

There were two specialised vessels held at the year-end (two at 30 June 2020).

12. 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.

13 . Management fee

The Investment Manager is entitled to receive an annual fee, calculated on a sliding scale, as follows:

(a) 0.85 per cent per annum of the quarter end Adjusted Net Asset Value up to US$250m;

(b) 0.75 per cent per annum of the quarter end Adjusted Net Asset Value in excess of US$250m but not exceeding US$500m; and

(c) 0.65 per cent per annum of the quarter end Adjusted Net Asset Value in excess of US$500m.

For the year ended 30 June 2021 the Company has incurred US$2,269,097 (2020: US$2,070,834) in management fees of which US$648,233 was outstanding at 30 June 2021 (2020: US$504,842).

14. 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 year.

15. Related parties

The Investment Manager, Tufton Investment Management Ltd, 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 13.

Transactions with the subsidiary and subsidiary SPVs are not disclosed.

The Directors of the Company and their shareholding is stated in the Report of the Directors.

16. Controlling party

In the opinion of the Directors, based on shareholdings advised to them, the Company has no immediate or ultimate controlling party.

17. Remuneration of the Directors

The remuneration of the Directors was US$162,332 (2020: US$118,038) for the year which consisted solely of short-term employment benefits (refer to the Report of the Directors). At 30 June 2021, Directors' fees of US$21,161 (2020: US$nil) were outstanding.

18. Events after the reporting year

On 6 July 2021, the Company announced that it agreed to divest Kale for US$21.5m. Kale was acquired in February 2018 for US$10.25m.

On 22 July the Company declared a dividend of US$0.01875 per ordinary share for the quarter ending 30 June 2021. The dividend was paid on 13 August 2021 to holders of ordinary shares on record date 30 July 2021 with an ex-dividend date of 29 July 2021.

On 27 July 2021, the Company completed the acquisition of Laurel for US$13.35m.

On 28 July 2021, the Company announced that it agreed to divest Citra for US$33m and acquire an Ultramax bulker, Idaho, for US$21.7m. Idaho's fixed rate time charter for fifteen to nineteen months results in an annual net yield of approximately 21%. The sale of Citra was completed on 23 August 2021.

On 29 July 2021, the Company completed the acquisition of Orson for US$9.8m.

On 6 August 2021, the Company announced that it had raised gross proceeds of US$12.4m through the tap issue of 10,533,763 ordinary shares at a price of US$1.18 per share.

Corporate Information

Directors

Robert King, Chairman

Stephen Le Page

Paul Barnes

Christine Rødsaether (appointed 8 September 2020)

Registered office

3(rd) Floor

1 Le Truchot

St Peter Port

Guernsey

GY1 1WD

Investment Manager and AIFM

Tufton Investment Management Ltd ("Tufton IML")

70 Pall Mall

1st Floor London

SW1Y 5ES

Asset Manager

Tufton Management Limited

3rd Floor, St George's Court

Upper Church Street

Douglas

Isle of Man IM1 1EE

Secretary and Administrator

Maitland Administration (Guernsey) Limited ("MAGL")

3(rd) Floor

1 Le Truchot

St Peter Port

Guernsey

GY1 1WD

Joint Placing Agents and Financial Advisers

Hudnall Capital LLP

Adam House

7-10 Adam Street

London

WC2N 6AA

Singer Capital Markets

1 Bartholomew Lane

London

EC2N 2AX

Guernsey Legal Advisers

Carey Olsen (Guernsey) LLP

PO Box 98, Carey House

Les Banques

St Peter Port

Guernsey

GY1 4BZ

UK Legal Advisers

Gowling WLG (UK) LLP

4 More London Riverside

London

SE1 2AU

Registrar

Computershare Investor Services (Guernsey) Limited

1(st) Floor, Tudor House

Le Bordage

St Peter Port

Guernsey

GY1 1DB

Receiving Agent

Computershare Investor Services PLC

The Pavillions

Bridgewater Road

Bristol

BS99 6AH

Independent Auditor to the Company

PricewaterhouseCoopers CI LLP

Royal Bank Place

1 Glategny Esplanade

St Peter Port

Guernsey

GY1 4ND

Principal Bankers

Barclays Bank Plc

Guernsey International Banking

PO Box 41

St Peter Port

Guernsey, GY1 3BE

Definitions

The following definitions apply throughout this document unless the context requires otherwise:

 
 AIC                                    the Association of Investment Companies 
 AIFM 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 
  or CGT                                 is 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 or DTRs                          rules made by the Financial Conduct Authority 
                                         under Section 73A of FSMA 
 Environmental, Social, and             an evaluation of the company's collective 
  Corporate Governance (ESG)             conscientiousness for social and environmental 
                                         factors 
 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 Ltd 
 IRR                                    Internal rate of return - the Internal rate 
                                         of return is the interest rate at which 
                                         the net present value of all the cash flows 
                                         (both positive and negative) from a project 
                                         or investment equal zero, and is a common 
                                         performance indicator used in investment 
                                         funds 
 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 
 NAV total return                         the change in NAV plus distributions paid 
                                           by the Company during the period, divided 
                                           by the initial NAV 
 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 8th December 2017 
 Register                                 the register of members of the Company 
 Relevant Number of Shares                for any Calculation Period the time weighted 
                                           average number of Ordinary Shares in issue 
                                           during such Calculation Period 
 SFS or Specialist Funds Segment          the Specialist Funds Segment of the Main 
                                           Market (previously known as the Specialist 
                                           Fund Market or SFM) 
 Segment                                  classifications of vessels within the shipping 
                                           industry including, inter alia, Tankers, 
                                           General Cargo, Containerships and Bulkers 
 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                               Tufton Investment Management Holding Ltd 
                                             and its subsidiaries. 
 UK Corporate Governance Code               the UK Corporate Governance Code as published 
                                             by the Financial Reporting Council from 
                                             time-to-time 
 UK Listing Authority                       the FCA acting in its capacity as the competent 
                                             authority for the purposes of Part VI of 
                                             FSMA 
 United Kingdom or UK                       the United Kingdom of Great Britain and 
                                             Northern Ireland 
 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 
 WACC                                       the weighted average cost of capital 
 VLCC                                       Very Large Crude Carrier 
 GBP or Sterling                            the lawful currency of the United Kingdom 
 
 
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(END) Dow Jones Newswires

September 08, 2021 12:00 ET (16:00 GMT)

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