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| 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% | 1.14 | 1.13 | 1.15 | 1.145 | 1.14 | 1.14 | 1,243,784 | 08:00:24 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | -33.95M | -2.47M | -0.0084 | -108.33 | 268.25M |
From May 2019 to May 2024
TIDMSHIP
RNS Number : 5033T
Tufton Oceanic Assets Ltd.
21 March 2019
Tufton Oceanic Assets Limited
("Tufton Oceanic Assets" or the "Company")
Interim Results for the six month period ended 31 December 2018
Tufton Oceanic Assets announces its interim results for the six month period ended 31 December 2018. A copy of the Interim Report and Unaudited Financial Statements has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Interim Report and Unaudited Financial Statements will also shortly be available on the Company's website in the Investor Relations section under Company Documents at www.tuftonoceanicassets.com/company-documents.
For further information, please contact:
Tufton Oceanic Limited Tel: +44 (0) 20 7518 6700
Andrew Hampson
Paulo Almeida
N+1 Singer Tel: +44 (0) 207 496 3030
James Maxwell, Alex Bond (Corporate Finance)
Alan Geeves, James Waterlow, Sam Greatrex (Sales)
Hudnall Capital LLP Tel: +44 (0) 20 7520 9085
Andrew Cade
Highlights
-- C Share gross proceeds of US$78.4m in October 2018
-- The Ordinary Shares declared dividends of US$0.0175 per share for the third and fourth calendar quarters, and the C Shares declared a dividend of US$0.005 per share for the fourth calendar quarter
-- Three product tankers, one containership, one handysize bulker and 25% of Neon acquired and US$75.2m invested in the period
-- One further vessel acquisition agreed after the end of the period involving a further US$6.75m of investment
-- Unlevered cash flow run rate of over US$19m p.a. (c. 1.6x the target dividend of 7c per annum) after capital expenditure provision and management fees as of this report date with IPO and C Share proceeds fully invested and all the Company's vessels in operation
-- Significant unrealised capital gain from the three product tankers -- C Shares converted to Ordinary Shares in February 2019
-- Cash flow-weighted average length of charter is minimum 2.9 years and expected 3.1 years as at 31 December 2018
Chairman's Statement
Introduction
I am pleased to present the Company's interim report and unaudited financial statements for the six month period ended 31 December 2018.
As of the date of this report, the Company is invested in a diverse portfolio of twelve secondhand vessels: five containerships, two handysize bulkers, one gas/LPG carrier, three product tankers and one general cargo vessel. Eleven of the vessels are on fixed rate time charters or bareboat charters. One vessel is on an index-linked time charter.
In March 2019 the Company raised an additional US$50m gross proceeds for new investments increasing the total funds raised by the Company to US$219.4 m.
Performance
The Company's NAV per Ordinary Share as at the end of 31 December 2018 was US$0.9872, a slight decline from the 30 June 2018 NAV per Ordinary Share of US$1.016 but was up from the initial launch NAV of US$0.98 per Ordinary Share, by 0.7%.
The C Shares performed well during the short period in issue rising from initial NAV on issue of US$0.98 per share to a NAV per C share of US$1.0517 on the date of conversion. This increase was largely due to the discount obtained on the purchase of some of the vessels acquired giving a greater than expected uplift to the C Share NAV.
During the period the share price of the Ordinary Shares increased by 5% from the US$1.00 initial launch price to US$1.05 but was slightly below the US$1.06 per Share as at the close of business on 30 June 2018. The Company's Ordinary Shares have traded at an average premium of 6.2% to NAV since the launch of the Company. The Company's C Share price increased by 3.5% from the initial launch price to US$1.035 at the end of the Period.
Since inception to 31 December 2018, the Company's NAV total return was 2% (net of issue costs and with dividends reinvested) in respect of the Ordinary Shares and 5% in respect of the C Shares.
Share Buy Backs and Discount Control
The Company has not made any Share buy backs during the period. As set out in the Offering Memorandum the Company has the ability to buy back Shares at the discretion of the Directors up to 14.99% of the Shares in issue. The Directors will monitor this position closely and take the appropriate action where necessary.
Dividends
During the Period the Company declared and paid dividends to Ordinary Shareholders of US$0.015 per share which was declared 27 July 2018 and paid on 17 August 2018 and US$0.0175 per share which was declared on 25 October 2018 and paid on 15 November 2018. The Company also declared a further dividend of US$0.0175 per share to Ordinary Shareholders on 31 January 2019 which was paid on 22 February 2019 and US$0.0050 per share to C Shareholders declared on 31 January 2019 and paid on 22 February 2019. It is the Company's intention to pay quarterly dividends in line with targets set out in the original listing document.
Corporate Governance
The Company is a member of the Association of Investment Companies ("AIC") and will comply with the AIC Code of Corporate Governance as amended from time to time and will also be mindful of its commitment to adhere where applicable to the UK Code of Corporate Governance I would encourage Shareholders to contact us should there be any matters of concern that they feel need to be addressed SHIP@tuftonoceanicassets.com.
Outlook
I have been encouraged by the Investment Manager's ability to identify, execute and complete the purchase of the vessels in a timely manner. This has allowed us to invest the C Share proceeds and convert the C Shares to Ordinary Shares ahead of our anticipated timetable. There continues to be a strong pipeline of investments particularly in the tanker, general cargo and containership segments which makes it possible to invest recent future proceeds on a timely basis. I would also like to thank N+1 Singers and Hudnall Capital for their contribution in raising US$78.4m for the C Share issue and more recently their success in raising US$50m on 11 March 2019.
The Directors, Investment Manager and our advisors continue to look for new and varied opportunities and aim to increase the size of the Company further during 2019 and beyond.
Rob King
Non-executive Chairman
Board Members
The Directors have overall responsibility for the Company's activities including the review of its investments and performance.
The Directors of the Company at the date of signing the accounts, all of whom are non-executive, are listed below:
Robert King, Chairman
A non-executive director for a number of open and closed-ended investment funds including, Weiss Korea Opportunity Fund Limited, Chenavari Capital Solutions Limited (Chairman) and CIP Merchant Capital Limited. 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. During his career his main role was as an audit partner working with a wide variety of financial services businesses and structures. Mr Le Page also 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. Since his retirement Mr Le Page has joined a number of boards as a non-executive director including three premium London listed funds, Highbridge Multi-strategy Fund Limited, Volta Finance Limited and Princess Private Equity Holding Limited and one International Stock Exchange listed company, Channel Island Property Fund Limited, all of which he serves as chairman of the audit committee. He is a past chairman of the Guernsey International Business Association and a past President of the Guernsey Society of Chartered and Certified Accountants. He is British and resides in Guernsey.
Paul Barnes
An investment banker experienced in asset backed, structured and project financing with wide geographic exposure including Asia, Central/Eastern Europe, North and Latin America and Scandinavia. Between 2010 and 2015 Mr Barnes worked for BNP Paribas as managing director and co-head of its EMEA Shipping and Offshore business. 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. He is British and resides in the United Kingdom.
Investment Manager's Report
Highlights
We are pleased to present our review for the 6-month period ended 31 December 2018 and our outlook for the next few years. Highlights include:
-- C Share gross proceeds of US$78.4m in October 2018
-- The Ordinary Shares declared dividends of US$0.0175 per share for the third and fourth calendar quarters, and the C Shares declared a dividend of US$0.005 per share for the fourth calendar quarter
-- Three product tankers, one containership, one handysize bulker and 25% of Neon acquired and US$75.2m invested in the period
-- One further vessel acquisition agreed after the end of the period involving a further US$6.75m of investment
-- Unlevered cash flow run rate of over US$19m p.a. (c. 1.6x the target dividend of 7c per annum) after capital expenditure provision and management fees as of this report date with IPO and C Share proceeds fully invested and all the Company's vessels in operation
-- Significant unrealised capital gain from the three product tankers -- C Shares converted to Ordinary Shares in February 2019
-- Cash flow-weighted average length of charter is minimum 2.9 years and expected 3.1 years as at 31 December 2018
The Assets
As of 31 December 2018, the Company owned:
-- Two 1700-TEU containerships, Swordfish and Kale, and three 2500-TEU containerships, Patience, Riposte and Citra. They operate on time charter contracts, under which the Company provides fully operational and insured vessels for use by the charterers. The first four containerships are chartered to one of the major investment grade container shipping groups. Citra is chartered to a leading private operator of containerships specialising in fresh fruit transportation.
-- The gas carrier Neon operates on a bareboat charter, under which the Company provides only the vessel to the charterer, who is responsible for crewing, maintaining, insuring and operating it.
-- The two handysize bulkers Aglow and Dragon operate under time charters.
-- Three product tankers Sierra, Octane and Pollock (once acquired by the Company) will operate under time charters to a major commodity trading and logistics company. Sierra and Octane will be on fixed rate charters. Pollock will be on a floating rate time charter.
Hot Features
Premium
SPV(+) Vessel Type and Acquisition Earliest end Expected end
Year of Build Date(*) of charter of charter
period period(**)
Swordfish 1700-TEU containership February 2018 April 2020 April 2020
built 2008
----------------------- -------------- -------------- --------------
Kale 1700-TEU containership February 2018 February 2020 February 2020
built 2008
----------------------- -------------- -------------- --------------
Patience 2500-TEU containership March 2018 April 2021 October 2022
built 2006
----------------------- -------------- -------------- --------------
Riposte 2500-TEU containership March 2018 February 2020 February 2021
built 2009
----------------------- -------------- -------------- --------------
Neon Mid-sized July 2018 July 2025 July 2025
LPG carrier
built 2009
----------------------- -------------- -------------- --------------
Aglow Handysize July 2018 August 2019 August 2019
Bulker
built 2011
----------------------- -------------- -------------- --------------
Dragon Handysize September August 2020 August 2020
Bulker 2018
built 2010
----------------------- -------------- -------------- --------------
Citra 2500-TEU containership November 2018 November 2020 November 2020
built 2006
----------------------- -------------- -------------- --------------
Sierra Medium-range December 2018 January 2021 January 2021
product tanker
built 2010
----------------------- -------------- -------------- --------------
Octane Medium-range December 2018 January 2021 January 2021
product tanker
built 2010
----------------------- -------------- -------------- --------------
Pollock Handysize December 2018 February March 2021
product tanker 2020
built 2008
----------------------- -------------- -------------- --------------
All vessels are performing well and in line with expectations. All vessels are in good condition and are maintained to a high standard.
Notes:
(+) Special Purpose Vehicle that owns the vessel
* dates the Company agreed to acquire the vessel in the case of Sierra, Octane and Pollock
** these may differ from the Annual Report (30 June 2018) following the assessments of the Investment Manager of the prevailing market conditions
After the end of the financial period:
-- the Company agreed to acquire a general cargo vessel (Hongi). Once acquired by the Company, Hongi will have a bareboat charter of seven years to a leading general cargo shipping operator.
SPV(+) Vessel Type and Acquisition Earliest end Expected end
Year of Build Date(*) of charter of charter
period period
Hongi General cargo February 2019 Bareboat charter Bareboat charter
vessel to 2026 to 2026
built 2002
---------------- -------------- ----------------- -----------------
-- Sierra, Octane and Pollock were taken over by the Company and started their time charters.
Notes
(+) Special Purpose Vehicle that owns the vessel
* date the Company agreed to acquire the vessel in the case of Hongi
Investment Performance
During the period, Ordinary Share NAV decreased slightly to US$0.987 per share, slightly below the issue price of US$1.00 (net issue price US$0.98). Operating profit contributed $0.042 per share. There was an unrealised loss in the charter-adjusted fleet value of US$0.038 per share during the financial period. The unrealised loss arose because the market segments to which the Ordinary Shares are most exposed weakened during the period after strengthening in the first half of calendar year 2018. Although the Company's charter coverage offsets much of the fall in the charter-free values of the vessels, the vessels dropped slightly in value overall because the ageing effect was greater than the increase in secondhand prices.
During the period, C Share NAV increased strongly to US$1.052 per share, well above the issue price of US$1.00 (net issue price US$0.98) due to fair value gains from the product tankers committed to during the quarter. Operating profit was de minimis because the vessels delivered mostly late in or after the short period to 31 December. There was a large unrealised gain in the charter-adjusted fleet value of US$0.069 per share during the financial period.
Shipping Market
According to the 2018 Shipping Market Review published by Clarksons, the largest shipbroker in the World with extensive research capabilities:
-- Global seaborne trade grew by 3.1% (tonne miles) in 2018 decelerating from 4.2% in 2017
-- Fleet expansion is continuing to slow; the global fleet grew by only 2.6% in 2018 (3.4% in 2017), the slowest rate of growth in 18 years
-- The global orderbook is now equivalent to only 10.5% of the fleet, compared to over 50% in 2008
-- Newbuild deliveries were down by 19% year on year in 2018, with newbuild ordering volumes down 14% year on year and 21% below the trend since the financial crisis
-- Secondhand transaction volumes were down 7% year on year in 2018 but 24% above the average trend since 2009, with their secondhand price index up 4% year on year as of December
-- Bulker average 12 month time charter rates increased by 26% year on year in 2018
-- Containership time charter rates also improved, with the average time charter index +28% year on year in 2018
-- Tanker average 12 month time charter rates fell 5% year on year in 2018, with VLCC charter rates down 15%
Most shipping sectors continued to improve in 2018 as fleet growth slowed and demand remained robust although there were variations across different segments from the first half of the year to the second half. A notable new factor affecting shipping markets in 2018 was trade tariffs. Clarksons Research estimated the overall impact of US trade tariffs on global trade to be a growth headwind of 0.1% tonnes/ 0.4% tonne miles in 2018 and forecast a similar magnitude of impact in 2019. In the context of forecast demand growth in 2019 of 2.8% tonnes/ 3.2% tonne miles, this impact appears manageable. The second half of 2018 was marked by a deceleration in Global GDP growth with the International Monetary Fund (IMF) revising down previous forecasts in October. IMF's downward revisions were -0.2% to GDP growth in 2018 and 2019, due to the waning effect of the fiscal stimulus in the United States, the impact of trade tariffs, the impact of oil price volatility and tighter financial conditions on emerging markets. IMF currently forecasts 3.6% global GDP growth in 2019 and 2020 which still compares well to recent years: 3.5% in 2015 and 3.3% in 2016. Based on this, we expect the effect on trade demand to be a manageable headwind. Dry bulk and container markets were strong in the first half of the year but weakened in the second half due to tariffs and slowing growth. On the other hand, the tanker market strengthened in the second half of 2018 as it was not materially affected by the trade tariffs and instead benefited from rising oil exports from the Middle East and the United States. In summary, the shipping market in 2018 continued to support our view of a recovering and resilient shipping sector with slowly rising secondhand prices, supported by slowing fleet expansion. The second half of the year also demonstrated the benefits of a diversified fleet as incremental weakness in containers and dry bulk was offset by strength in tankers.
Outlook
We believe the recovery in shipping markets will continue. As of early 2019, the IMF forecasts global GDP growth of 3.6% in 2019 and 2020. While these forecasts have been revised down, they still reflect supportive levels for global trade growth in the historic context. Clarksons Research forecast continued moderate demand growth for shipping in 2019 (2.8% tonnes, 3.2% tonne miles). On the supply side, shipping benefits from slowing fleet expansion. The sector is capital constrained and we believe bank lending continues to be very limited other than to the largest shipping companies while public equity and public debt markets continue to be of limited scope. The financial stresses in shipping, traditional ship lenders and shipbuilders, which are still somewhat a result of the excesses of 2005-2008, continue to create a very attractive risk return profile. Secondhand prices in many segments continue to be significantly below Depreciated Replacement Cost ("DRC"). The supply side recovery is continuing and driven by:
-- Continued lack of capital availability for shipping -- Vessel orderbook (forward supply growth) near a 20-year low -- Low new orders, leading to shipyard capacity reductions
We believe that DRC will increase in the medium term as shipyard consolidation and commodity/general inflation continue. Clarksons Research newbuild price index rose by 4% in 2018 year on year.
As of 1 January 2020, the International Maritime Organization (IMO) mandates that ships are required to burn with fuel with a sulphur content of no more than 0.5% unless fitted with an exhaust gas emissions cleaner (scrubber) capable of reducing sulphur emissions to 0.5% or less. We expect ship owners and operators will begin preparations to comply with this change. Compliance will be possible by either switching the ship to low sulphur, compliant fuel (distillates or LNG) or by installing an exhaust gas cleaning system. We expect the regulatory change could accelerate the supply side adjustment in shipping by three means. Firstly, with most of the global fleet using more expensive fuel, we expect the average fleet speed will be reduced. Further, there will be increased scrapping of less efficient ships and many of the remaining ships will be taken out of service all through 2019 to prepare for fuel transition. Finally, as the sector remains capital constrained, higher newbuild costs and changing regulations may discourage large investments in new vessels for the next few years.
The Company continues to pursue a strategy of growing a diversified fleet. The revenue earned by most of the Company's vessels is not affected by short-term fluctuations in general shipping markets. Most of the vessels in the portfolio are employed on medium to long-term charters with carefully chosen counterparties and will not be affected by fluctuations in commodity prices, geopolitical events and other short-term supply-demand factors.
Condensed Statement of Comprehensive Income
For the 6 month period ended 31 December 2018
1 July 2018 to 6 February 2017
31 December to 30 June
2018 2018
Notes US$ US$
Income
Net changes in fair value of Financial Assets
designated at fair value through profit and loss 5 6,477,685 3,482,168
___________ ___________
Total net income 6,477,685 3,482,168
Expenditure
Aborted deal costs (18,316) -
Administration fees (51,878) (41,949)
Audit fees (39,115) (79,700)
Brokers fees (58,537) (41,510)
Directors' fees 15 (53,529) (84,769)
Foreign exchange loss (4,073) (3,099)
Insurance fee (50,356) (36,226)
Listing fees (12,421) (2,312)
Management fee 13 (472,948) (206,140)
Professional fees (27,003) (16,022)
Sundry expenses (6,211) (2,555)
___________ ___________
Total expenses (794,387) (514,282)
___________ ___________
Operating profit 5,683,298 2,967,886
Finance income 267,413 315,557
___________ ___________
Profit and comprehensive income for the period 5,950,711 3,283,443
___________ ___________
Earnings per share (cents) 8 3.51 3.61
Earnings per share - Ordinary Shareholders (cents) 0.36 3.61 Earnings per share - C-Class Shareholders (cents) 7.17
-
___________ ___________
There were no potentially dilutive instruments in issue at 31 December 2018.
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.
Condensed Statement of Financial Position
At 31 December 2018
31 December 30 June
2018 2018
Notes US$ US$
Non-current assets
Financial Assets designated at fair value
through profit and loss (Investment) 5 136,840,745 49,622,259
___________ ___________
Total non-current assets 136,840,745 49,622,259
___________ ___________
Current assets
Trade and other receivables 98,641 34,796
Cash and cash equivalents 35,757,640 43,030,736
___________ ___________
Total current assets 35,856,281 43,065,532
___________ ___________
___________ ___________
Total assets 172,697,026 92,687,791
___________ ___________
Current liabilities
Trade and other payables 408,372 224,348
___________ ___________
Total current liabilities 408,372 224,348
___________ ___________
___________ ___________
Net assets 172,288,654 92,463,443
___________ ___________
Equity
Share capital 7 166,012,000 89,180,000
Retained reserves 7 6,276,654 3,283,443
___________ ___________
Total equity attributable to ordinary shareholders 172,288,654 92,463,443
___________ ___________
Net assets per share (cents) 10 101.71 101.61
Net assets per share - Ordinary Shareholders (cents) 98.72 101.61 Net assets per share - C-Class Shareholders (cents) 105.17
-
___________ ___________
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 20 March 2019 and signed on its behalf by:
________________________________ _____________________________ Rob King Steve Le Page Director Director
Condensed Statement of Changes in Equity
Since Inception
C-Class Ordinary
share share Retained
capital capital earnings Total
US$ US$ US$ US$
Shareholders' equity - - - -
at incorporation
Share issue - 91,000,000 - 91,000,000
Listing costs - (1,820,000) - (1,820,000)
Profit and comprehensive
income for the period - - 3,283,443 3,283,443
_________ _________ _________ _________
Shareholders' equity
at
30-Jun-18 - 89,180,000 3,283,443 92,463,443
Share issue 78,400,000 - - 78,400,000
Listing costs (1,568,000) - - (1,568,000)
Profit and comprehensive
income for the period - - 5,950,711 5,950,711
Dividends paid - - (2,957,500) (2,957,500)
_________ _________ _________ _________
Shareholders' equity
at
31-Dec-18 76,832,000 89,180,000 6,276,654 172,288,654
__________ __________ __________ _________
The accompanying notes are an integral part of these financial statements.
Condensed Statement of Cash Flows
For the 6 month period 31 December 2018
31 December 30 June
2018 2018
Notes US$ US$
Cash flows from operating activities
Profit and comprehensive income for the period 5,950,711 3,283,443
Adjustments for:
Purchase of investment 5 (80,740,801) (46,140,091)
Change in fair value on investment 5 (6,477,685) (3,482,168)
___________ ___________
Operating cash flows before movements in working capital (81,267,775) (46,338,816)
Changes in working capital:
Movement in trade and other receivables (63,845) (34,796)
Movement in trade and other payables 184,024 224,348
___________ ___________
Net cash used in operating activities (81,147,596) (46,149,264)
___________ ___________
Cash flows from financing activities
Net proceeds from issue of shares 76,832,000 89,180,000
Dividends paid (2,957,500) -
___________ ___________
Net cash generated from financing activities 73,874,500 89,180,000
___________ ___________
Net movement in cash and cash equivalents during the period (7,273,096) 43,030,736
Cash and cash equivalents at the beginning of the period 43,030,736 -
___________ ___________
Cash and cash equivalents at the end of the period 35,757,640 43,030,736
___________ ___________
The accompanying notes are an integral part of these financial statements.
Notes to the financial statements
For the 6 month period ended 31 December 2018
1. General information
The Company was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 6 February 2017 with registered number 63061, and is regulated by the GFSC as a registered closed-ended investment company. The registered office and principal place of business of the Company is 1 Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1 1WD.
On 18 December 2017, the Company announced the results of its Placing and Offer Subscription of Ordinary Shares, which raised gross proceeds of US$91 million. The Company's ordinary shares were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange effective 20 December 2017.
On 11 October 2018, the Company announced that it had raised gross proceeds of US$78,400,000 pursuant to the Placing and Offer for Subscription of C Shares. The Company's C Shares were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange effective 16 October 2018.
This condensed interim financial information has not been reviewed or audited by an independent auditor.
2. Significant accounting policies (a) Basis of Preparation
The financial statements have been prepared on a going concern basis in accordance with IAS 34 Interim Financial Reporting, and applicable Guernsey law. 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 are set out below.
These policies have been consistently applied.
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.
The Company has classified its financial assets and liabilities designated at fair value through profit or loss using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurements. The hierarchy has the following levels:
Level 1 quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2 inputs other than quoted prices included within
level 1 that are observable for the assets or
liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
----------------------------------------------------
Level 3 inputs for the asset or liability that are not
based on observable market data (i.e. unobservable
inputs)
----------------------------------------------------
2. Significant accounting policies (continued)
(b) Basis of non-consolidation
The Company has applied IFRS 10 and as such is not consolidating its subsidiaries in these financial statements as the Company is considered by the Directors to be an investment entity. 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 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.
(c) Business model assessment
IFRS 9, Financial Instruments, has been applied for the first time in these financial statements. IFRS 9 requires that the classification and measurement of financial assets depends on the results of the solely payments of principal and interest and the business model tests.
The Company has determined the business model at a level that reflects how Company's financial assets are managed together to achieve its business objectives. This assessment included judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated.
The Company measures and evaluates the performance of substantially all of its investments on a fair value basis. The fair value method is used to represent the Company's performance in its communications to the market, including investor presentations. In addition, the Company reports fair value information internally to the Directors, who use fair value as a significant measurement attribute to evaluate the performance of investments and to make investment decisions for mature investments.
As a result, no changes were required to the accounting policies of the Company used for the preparation of the last Annual report concerning recognition of financial assets.
(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 an accruals basis from the date the dividend is declared.
Bank Interest Income
Interest income is accounted for on an accruals basis.
(f) Expenses
Expenses are accounted for on an accruals basis. The 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 period 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
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 profit or loss.
Financial assets
Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' ("FVTPL") and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at fair value through profit and 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 investments have been designated as at FVTPL on the basis that they are managed and their performance is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the investments is provided internally on that basis.
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 impairment.
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, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised and accumulated in equity is recognised in the Statement of Comprehensive Income.
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 as either 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 they expire.
(j) 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.
(k) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and other short-term highly liquid investments with original maturities of 3 months or less and bank overdrafts. As at 31 December 2018, the carrying amount of cash and cash equivalents approximate their fair value.
(l) Foreign currency translation
i) Functional and presentation currency
The financial statements of the Company are presented in US Dollars, which is also the currency in which the share capital was raised and investments were purchased, and is therefore considered by the Directors' to be the Company's functional currency.
ii) Transactions and balances
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in the Statement of Comprehensive Income in the period in which they arise. Transactions denominated in foreign currencies are translated into US Dollars at the rate of exchange ruling at the date of the transaction.
(m) Going concern
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. 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 the next twelve months. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
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 balance sheet date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that actual outcomes could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Critical judgements in applying the Company's accounting policies - IFRS 10: Consolidated Financial Statements
Prior to the Company successfully completing its IPO in December 2017, and in May 2018, the audit committee considered the application of IFRS 10, and whether the Company meets the definition of an investment entity.
The Directors concluded that the Company has met the criteria below, and therefore, considers the Company to be an investment entity in terms of IFRS 10. The Company has applied IFRS 10 and as such is not consolidating its subsidiaries in these financial statements.
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 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.
The Company measures and evaluates the performance of substantially all of its investments on a fair value basis. The fair value method is used to represent the Company's performance in its communications to the market, including investor presentations. In addition, the Company reports fair value information internally to the Directors, who use fair value as a significant measurement attribute to evaluate the performance of investments and to make investment decisions for mature investments.
Critical judgements in applying the Company's accounting policies - financial assets at fair value
The Company's financial assets are measured at fair value. The fair value of the investment comprises the fair value of the underlying SPV's and the Residual Net Assets of the Investment Company.
In estimating the fair value of each underlying SPV, the Board has approved the valuation methodology for valuing the shipping assets held by the SPVs. The carrying value of a 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 dry docking of the vessel. This latter 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. In the opinion of the Directors, the carrying value determined as set out in more detail below represents a reasonable estimate of the fair value of that shipping asset.
The Charter-free and associated Charter values of the vessel are calculated using an on-line valuation system called www.VesselsValue.com. The system contains a number of algorithms that combine factors such as vessel type, technical features, age, cargo capacity, freight earnings, market sentiment and recent vessel sales.
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.
As at the end the period, ten of the vessels held are considered to be typical vessels. One vessel (Neon) is considered to be a specialist vessel on a long-term Bareboat Charter and is valued as such on a DCF basis. The prospectus sets out the basis on which non-typical and specialist vessels would be valued.
4. New and revised standards
The following accounting standards and interpretations which have not been applied in these financial statements were in issue but not yet effective:
IFRS 16 Leases IAS 12 (amendments) Recognition of Deferred Tax Assets for Unrealised Losses
The Directors do not expect that the adoption of the accounting standards, amendments and interpretations listed above will have a material impact on the financial statements of the Company in future periods. Their rationale for this expectation is set out below.
IFRS 16 "Leases" was issued in January 2016 and becomes effective for periods beginning on or after 1 January 2019. Since neither the Company nor its subsidiaries hold any assets under lease, it is not anticipated that the new standard will have any impact on the Company's financial position, performance or disclosures in its financial statements.
IAS 12 "Income Taxes" was issued in October 2015 and becomes effective for periods beginning on or after 1 January 2019. Since neither the Company nor its subsidiaries are subject to taxation on income, it is not anticipated that the new standard 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.
New and amended IFRS Standards that are effective for the current year
Impact of initial application of IFRS 9 Financial Instruments
In the current year, the Company has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRS Standards that are effective for an annual period that begins on or after 1 January 2018. The transition provisions of IFRS 9 allow an entity not to restate comparatives. However, the Company has elected to restate comparatives in respect of the classification and measurement of financial instruments.
Additionally, the Company adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures that were applied to the disclosures for 2019 and to the comparative period.
IFRS 9 introduced new requirements for:
1) The classification and measurement of financial assets and financial liabilities, and 2) Impairment of financial assets.
Details of these new requirements as well as their impact on the Company's financial statements are described below.
The Company has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9.
(a) Classification and measurement of financial assets
The date of initial application (i.e. the date on which the Company has assessed its existing financial assets and financial liabilities in terms of the requirements of IFRS 9) is 1 July 2018. Accordingly, the Company has applied the requirements of IFRS 9 to instruments that continue to be recognised as at 1 July 2018 and has not applied the requirements to instruments that have already been derecognised as at 1 July 2018. Comparative amounts in relation to instruments that continue to be recognised as at 1 July 2018 have been restated where appropriate.
All recognised financial assets that are within the scope of IFRS 9 are required to be measured subsequently at amortised cost or fair value on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Specifically:
-- debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured subsequently at amortised cost;
-- debt instruments that are held within a business model whose objective is both to collect the contractual cash flows and to sell the debt instruments, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured subsequently at fair value through other comprehensive income (FVTOCI);
-- all other debt investments and equity investments are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Company may make the following irrevocable election at initial recognition of a financial asset:
-- the Company may irrevocably elect to present subsequent changes in fair value of an equity investment that is neither held for trading nor contingent consideration recognised by an acquirer in a business combination in other comprehensive income; and
-- the Company may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
In the current year, the Company has designated all investments at FVTPL.
The directors of the Company reviewed and assessed the Company's existing financial assets as at 1 July 2018 based on the facts and circumstances that existed at that date and concluded that the initial application of IFRS 9 has had no impact on the Company's financial assets as regards their classification or measurement:
-- there is no change in the measurement of the Company's investments that were designated at FVTPL; those instruments were and continue to be classified and measured at FVTPL;
-- loans and receivables under IAS 39 that were measured at amortised cost continue to be measured at amortised cost under IFRS 9 as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding.
(b) Impairment of financial assets
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model as opposed to the incurred credit loss model under IAS 39. As the Company's only financial assets not measured at FVTPL are receivables and cash or cash equivalents, on which no credit losses are expected, the Directors do not consider it necessary to make any credit loss provisions. In the event that the Company acquires any material financial assets not at FVTPL the Directors will apply the relevant requirements of IFRS 9.
Classification and measurement of financial liabilities
A significant change introduced by IFRS 9 in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability designated as at FVTPL attributable to changes in the credit risk of the issuer.
The Company currently has no liabilities designated as at FVTPL, and does not expect to incur any such liabilities. However, in the event that the Company does incur such liabilities, the Directors will apply the relevant requirements of IFRS 9 in full.
The application of IFRS 9 has had no impact on the classification and measurement of the Company's financial liabilities.
5. Financial Assets designated at fair value through profit and loss (Investment)
The Company owns the Investment Portfolio through its investment in LS Assets Limited. The fair value of the LS Assets Limited investment comprises the fair value of the underlying SPV's and the Residual Net Assets of LS Assets Limited. The Investment Portfolio is a Level 3 item on the fair value hierarchy. The investment held at fair value is recorded under Non-Current Assets in the Statement of Financial Position.
31 December 30 June
2018 2018
US$ US$
LS Assets Limited
Brought forward cost of investment 46,140,091 -
Total investment acquired in the period 80,740,801 46,140,091
___________ _________
Carried forward cost of investment 126,880,892 46,140,091
Brought forward unrealised gains on valuation 3,482,168 -
Movement in unrealised gains on valuation 6,477,685 3,482,168
___________ _________
Carried forward unrealised gains on valuation 9,959,853 3,482,168
___________ _________
Total investment at fair value 136,840,745 49,622,259
___________ _________
Attributable to Ordinary shareholders 90,500,065 49,622,259
Attributable to C-Class shareholders 46,340,680 -
___________ _________
Total investment at fair value 136,840,745 49,622,259
___________ _________
LS Assets Limited (own net assets): Breakdown of Fair Value:
Kale Limited 11,634,290 11,625,057
Swordfish Limited 11,266,997 10,811,803
Riposte Limited 12,942,970 13,843,536
Patience Limited 10,696,632 10,818,489
Neon Limited 29,670,048 -
Aglow Limited 10,458,990 -
Dragon Limited 12,702,600 -
Citra Limited 12,404,111 -
Octane Limited 1,325,955 -
Serena Limited 2,024,365 -
Pollock Limited 2,670,536 -
Cash held pending investment into vessels 20,550,683 913,330
Residual net (liabilities) / assets (1,507,432) 1,610,044
___________ _________
Total investment at fair value 136,840,745 49,622,259
___________ _________
The net change in the movement of the fair value of the investment is recorded in the Statement of Comprehensive Income.
6. Subsidiaries
The Company holds its investment through a subsidiary holding company which has not been consolidated as a result of the adoption of IFRS 10: Consolidated Financial Statements. Below is the legal entity name for the holding company and the remaining legal entities (Special Purpose Vehicles formed for the acquisition of each vessel) owned indirectly through the investment in the holding company. The country of incorporation is also their principal place of business.
Name Country of Direct or Principal Ownership
incorporation indirect activity at 31 December
holding 2018
LS Assets Limited Guernsey Direct Holding company 100%
---------------- ----------- ----------------- ----------------
Kale Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Swordfish Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Riposte Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Patience Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Neon Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Aglow Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Dragon Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Citra Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Octane Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Serena Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
Pollock Limited Isle of Man Indirect SPV 100%
---------------- ----------- ----------------- ----------------
7. Share capital and reserves
Share issuance Number Gross amount Issue costs Share capital
of shares raised (US$) (US$) (US$)
Ordinary shares
issued on 18 December
2017 91,000,000 91,000,000 (1,820,000) 89,180,000
----------- -------------- ------------ --------------
Total ordinary
shares in issue
at 31 December
2018. 91,000,000 91,000,000 (1,820,000) 89,180,000
----------- -------------- ------------ --------------
C Shares issued
on 16 October 2018 78,400,000 78,400,000 (1,568,000) 76,832,000
----------- -------------- ------------ --------------
Total C Shares
in issue at 31
December 2018. 78,400,000 78,400,000 (1,568,000) 76,832,000
----------- -------------- ------------ --------------
The Company had 2 classes of shares of no par value in issue. All the holders of the ordinary shares which total 91,000,000, are entitled to receive dividends as declared from time to time and are entitled to 1 vote per share at meetings of the Company. All the holders of the C Shares which total 78,400,000, are entitled to receive dividends as declared from time to time and are entitled to 1 vote per share at meetings of the Company.
Retained reserves
Retained reserves comprise the retained earnings as detailed in the Statement of Changes in Equity.
8. Earnings per share
31 December 30 June
2018 2018
US$ US$
Profit and comprehensive income for the period 5,950,711 3,283,443
Attributable to Ordinary Shareholders 328,271 3,283,443
Attributable to C-Class Shareholders 5,622,440 -
Weighted average number of shares:
Ordinary Shares 91,000,000 91,000,000
C-Class Shares 78,400,000 -
Earnings per share (cents) 3.51 3.61
Attributable to Ordinary Shareholders 0.36 3.61
Attributable to C-Class Shareholders 7.17 -
9. Dividends
The Company declared and paid dividends to Ordinary Shareholders of US$0.015 per share which was declared 27 July 2018 and paid on 17 August 2018 and US$0.0175 per share which was declared on 25 October 2018 and paid on 15 November 2018. No further dividends were declared or paid during the current period.
10. Net assets per share
31 December 30 June
2018 2018
US$ US$
Shareholders' equity 172,288,654 92,463,443
Attributable to Ordinary Shareholders 89,834,214 92,463,443
Attributable to C-Class Shareholders 82,454,440 -
Number of shares:
Ordinary 91,000,000 91,000,000
C-Class 78,400,000 -
Net assets per share (cents) 101.71 101.61
Attributable to Ordinary Shareholders 98.72 101.61
Attributable to C-Class Shareholders 105.17 -
11. Financial risk management
Financial risks and their management have not changed since the period ended 30 June 2018, and therefore, has not been disclosed. Refer to pages 55 - 58 of the 30 June 2018 financial statements signed on 24 August 2018.
Due to the level of estimation involved, the valuation methodology and potential effects thereof have been included below.
Valuation methodology
The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation. All completed investments are held at fair value through profit or loss. Ship values are derived using observable market values calculated by the leading online valuation provider VesselsValue (www.vesselsvalue.com) with adjustments by the Investment Manager for planned dry docking except for one specialist vessel on bareboat charter which is valued by the Investment manager using a discounted cashflow ("DCF") methodology.. For the effect of long term charters entered, VesselsValue uses a discounted cash flow methodology comparing the contracted charter rates to observable market charter rates.
VesselsValue charterfree valuation
If the ship values quoted by Vesselsvalue.com and the value of the vessel valued through a DCF at 31 December were 10% higher or lower, then the effect on the portfolio value of ships would be as follows:
Ship values as per VesselsValue* +10% change Gross value -10% change
US$ 000 of ships in US$ 000
portfolio US$
000
Fair value at 31 December
2018 (US$) +16,018 162,122 (16,018)
------------ --------------- ------------
Fair value - percentage
movement +10% 100% (10%)
------------ --------------- ------------
*With for one specialist vessel valued by the Investment Manager at DCF.
Discount rates
The discount rates used for valuing the charter element of each investment are based on the industry discount rate as quoted by VesselsValue.com (currently sourced from PwC). The risk premium in the discount rate takes into account the risks and opportunities associated with the ship's earnings.
The weighted average discount rate used for valuing the charter element of the investments in the portfolio is 7.67% (30 June 2018: 7.22%.
A change to the weighted average discount rate by plus or minus 0.5% has the following effect on the valuation. (Note, this calculation takes account only of the impact of the discount rate on the long term charters associated with the vessels. It does not affect the value of the vessels).
+0.5% change Gross value -0.5% change
US$ 000 of ships in US$ 000
portfolio
US$ 000
Fair value at 31 December
2018 (US$) (526) 162,122 +546
------------- ------------- -------------
Fair value - percentage
movement (0.3%) 100% 0.3%
------------- ------------- -------------
Operating costs
The table below shows the sensitivity of the portfolio value to changes in vessel operating costs.
If the ship operating costs had been 10% higher or lower than the ship operating budget, for the period ended 31(st) December 2018, the effect on the portfolio value would have been:
Operating costs for the +10% change Gross value -10% change
period US$ 000 of ships in US$ 000
portfolio US$
000
Fair value at 31 December
2018 (US$) (522) 162,122 +522
------------ --------------- ------------
Fair value - percentage
movement (0.3%) 100% 0.3%
------------ --------------- ------------
12. Financial assets and liabilities not measured at fair value
Cash and cash equivalents are Level 1 items on the fair value hierarchy. Current assets and current liabilities are Level 2 items on the fair value hierarchy. The carrying value of current assets and current liabilities approximates fair value as these are short-term items.
13. Management fee
The Investment Manager is entitled to receive an annual fee, accruing daily and calculated on a sliding scale, as follows below:
-- (a) 0.85 per cent per annum of the quarter end Adjusted Net Asset Value up to US$250 million;
-- (b) 0.75 per cent per annum of the quarter end Adjusted Net Asset Value in excess of US$250 million but not exceeding US$500 million; and
-- (c) 0.65 per cent per annum of the quarter end Adjusted Net Asset Value in excess of US$500 million,
For the period ended 31 December 2018 the Company has incurred US$472,948 (30 June 2018: US$206,140) in management fees of which US$293,292 (30 June 2018: US$105,064) was outstanding at 31 December 2018.
14. Performance fee
Tufton ODF Partners LP, the CarryCo , shall be entitled to a performance fee in respect of a Calculation Period provided that the Total Return per Share on the Calculation Day for the Calculation Period of reference is greater than the High Watermark per Share and such performance fee shall be an amount equal to the Performance Fee Pay-Out Amount.
If:
-- the High Watermark is greater than the Total Return 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.
Then 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.
15. Related parties
Related party transactions are described in the 2018 Annual Report and Accounts on page 61.
For the period ended 31 December 2018 the Company has incurred US$472,948 (30 June 2018: US$206,140) in management fees of which US$293,292 (30 June 2018: US$105,064) was outstanding at 31 December 2018.
The Directors of the Company and their shareholding is stated in the Report of the Directors in the 2018 Annual Report and Accounts on page 21.
16. Controlling party
In the opinion of the Directors, on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party.
17. Remuneration of the Directors
The remuneration of the Directors was US$53,529 (30 June 2018: US$84,769) for the period which consisted solely of short-term employment benefits.
18. Events after the reporting period
An announcement was made on 31 January 2019 confirming that the C Share conversion had been completed and that the application for 84,624,960 Ordinary Shares to be admitted to the Specialist Fund Segment of the London Stock Exchange at 8.00am on 12 February 2019.
The two product tankers, Sierra and Octane, were acquired by the Company and started their time charters on 10 January 2019 and 14 January 2019 respectively.
The Company committed to acquire a general cargo vessel (Hongi) on 21 February 2019.
The Company also announced a proposed Placing of new Ordinary Shares on 21 February 2019. The results were announced on 11 March 2019, with US$50,000,000 gross proceeds raised through the issuance of 49,019,608 new Ordinary Shares.
The product tanker Pollock was acquired by the Company on 18 March 2019 and started its time charter.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR EAXDEAAFNEFF
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