Tufton Oceanic Assets : Final Results for the period ended 30 June 2022

Tufton Oceanic Assets Limited

Annual Report and Audited Financial Statements

For the year ended 30 June 2022

Tufton Oceanic Assets Limited

Contents
	Page
Highlights	1
Chairman's Statement	2
Investment Manager's Report	7
Principal Risks and Uncertainties	30
Corporate Summary	34
Corporate Governance Statement	35
Statement of Directors' Responsibilities	40
Report of Directors	42
Audit Committee Report	59
Auditor's report	63
Statement of Comprehensive Income	72
Statement of Financial Position	73
Statement of Changes in Equity	74
Statement of Cash Flows	75
Notes to the financial statements	76
Corporate Information	103
Definitions	105
Notice of AGM	111
Form of Proxy - Annual General Meeting 2022	120

Tufton Oceanic Assets Limited

Highlights

• Tufton Oceanic Assets Limited (the "Company") had a profit for the year of US$107.3m, or US$0.362 per weighted average share.
• With continued strong performance, the Company raised its target annual dividend from US$0.075 to US$0.08 per share, commencing 3Q21. The Investment Manager's forecasted Dividend Cover1 through to the end of 2023 was c.1.8x.
• The NAV per share increased from US$1.158 at 30 June 2021 to US$1.450 (£1.1942) at 30 June 2022. The US$ NAV Total Return for the financial year was 32.5%.
• As at 22 August 2022, the Company's shares traded at a 13% discount to the ex-dividend 30 June 2022 NAV.
• As at 30 June 2022, the EBITDA-Weighted Average Charter Length was 0.9 years. The Investment Manager expects the portfolio charter length to increase as it shifts to chartering the Company's product tankers for longer terms at higher rates. Including the transactions announced on 20 September 2022 and the new charter for Marvelous, the pro forma portfolio average charter length is 1.4 years.
• The Company's fleet had no commercial idle time (voids) during the financial year.
• As at 30 June 2022, all the Company's vessels except Orson, Golding and Marvelous were employed on fixed-rate charters. Orson and Golding are employed in a chemical tanker pool while Marvelous is employed in a product tanker pool.
• During the financial year, the Company agreed to divest nine vessels and to acquire nine vessels. The overall return from the agreed divestments greatly exceeds the Company's targets. Of the nine agreed acquisitions, eight vessels were delivered during the financial year and one after the end of the year.
• The Investment Manager's commitments to capital re-allocation and ESG are the key drivers for the significant investment and divestment activity. With these transactions, the Investment Manager has re-allocated capital to reduce risk and position the portfolio for greater upside potential, which is apparent from the reduction in portfolio Price/Depreciated Replacement Cost ("P/DRC") from 125% at the end of 3Q21 to less than 100% at the end of the financial year.
• Following the announced transactions, the emissions intensity of the Company's fleet as measured by the Energy Efficiency Existing Ship Index ("EEXI") improved by more than 40% compared to the end of 2021.
• The Investment Manager expects further improvement in the portfolio emissions intensity as more of the Company's vessels are retrofitted with Energy Saving Devices ("ESDs") and expects to complete ESD retrofits on at least eight vessels by early 2023.
• The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only 0.2% of the crew members were overdue by more than 1 month against an average of 4.3% for the top ten ship managers3.

• Based on the pro forma fleet for all transactions announced through 30 June 2022
  2 30 June 2022 closing mid-rate of USD/GBP 0.8234. Source: Morningstar

• The top ten ship managers are signatories of the Neptune Declaration and are responsible for more than 90,000 seafarers across all the major segments

1

Tufton Oceanic Assets Limited

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 2022.

It has been an active year during which the Company agreed to acquire nine vessels of which eight were delivered during the year and one was delivered after the year end. The Company also agreed to divest nine vessels. The fleet as at the end of the financial year consisted of eight handysize bulkers, an ultramax bulker, one containership and ten tankers, and one tanker pending delivery. There is a further breakdown of the portfolio on pages 12 to 13.

The NAV per share increased from US$1.158 at 30 June 2021 to US$1.450 at 30 June 2022. The US$ NAV Total Return for the financial year was 32.5%.

Russian Invasion of Ukraine

On 24 February 2022, Russia invaded Ukraine. None of the Company's vessels have been directly impacted by the war in Ukraine and all remain fully insured against war perils. The Investment Manager is monitoring the movements of all the Company's vessels and will prohibit the entry of any vessel into conflict zones, a right established in all the Company's charters. The Board and the Investment Manager are also monitoring the new sanctions being put in place. The Company and its vessels will remain compliant with all international sanctions imposed by the US, UK, EU and UN. The Board and the Investment Manager remain watchful in monitoring the war and its consequences for shipping and the Company.

Covid-19

The global economy started recovering from the impacts of Covid-19 ("Covid") from the end of 1H20. Over the financial year, containership asset values and time charter rates hit record highs while the Baltic Dry Index ("BDI"), the index of average prices paid for the transport of dry bulk materials across more than 20 routes, rose to its highest levels since 2009 in October 2021. The Investment Manager had expected the product tanker market to improve in 2022 with global oil demand but the market has also benefited from short-haul demand for cargoes being partially replaced by long-haul demand.

As noted previously, the Investment Manager has, where possible, mitigated the impact of the global humanitarian crisis of crew members' extended stay on board commercial vessels due to Covid-related travel restrictions. The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only c.0.2% of crew members were overdue for relief by more than 1 month at the end of 2021 compared to 4.3% for the top ten ship managers.

Performance

As at 30 June 2022, the Company's NAV was US$447.5m being US$1.450 per share (US$312.6m and US$1.158 per share as at 30 June 2021). The Company declared a profit of US$107.3m or US$0.362 per share for the year with the US$ NAV Total Return over the year of 32.5%. Based on the announced transactions as at 30 June 2022, the Investment Manager's forecasted Dividend Cover to the end of 2023 was c.1.8x.

2

Tufton Oceanic Assets Limited

Chairman's Statement (continued)

Performance (continued)

Along with strong Portfolio Operating Profit and cash flows, the Company benefited from non-cash fair value gains as asset values rose. Containership and bulker values rose strongly as the market benefited from strong demand and inventory re-stocking in 2H21. Despite a slowdown in global GDP growth in 1H22, the containership market remained resilient due to port congestion and supply-side constraints while the bulker market benefited from short-haul demand for cargoes being partially replaced by long-haul demand. Please see the Shipping Market section within the Investment Manager's Report for further details.

During the year, the Company's share price increased from US$1.08 per share as at the close of business 30 June 2021 to US$1.230 per share as at the close of business 30 June 2022.

Tap Issues

On 6 August 2021, the Company announced the results of its tap issue of 10,533,763 shares at US$1.18 per tap issue share, which raised gross proceeds of US$12.4m. On 12 November 2021, the Company announced the results of its tap issue of 28,057,140 shares at US$1.39 per tap issue share, which raised gross proceeds of US$39.0m. Over the financial year, 38,590,903 new ordinary shares were admitted to trading on the Specialist Funds Segment of the Main Market of the London Stock Exchange.

The total number of voting rights of the Company as at 30 June 2022 is 308,628,541.

Discount Management

On average, the Company's shares traded at a 0.5% premium to NAV over the financial year. As at 22 August 2022, the Company's shares traded at a 13% discount to the ex-dividend 30 June 2022 NAV. Over 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 per	Announcement	Ex div	Record	Paid date
	share (US$)	date	date	date
Ordinary Shareholders
30.06.21	0.01875	22.07.21	29.07.21	30.07.21	13.08.21
30.09.21	0.02000	21.10.21	28.10.21	29.10.21	12.11.21
31.12.21	0.02000	18.01.22	27.01.22	28.01.22	11.02.22
31.03.22	0.02000	27.04.22	05.05.22	06.05.22	20.05.22
30.06.22	0.02000	19.07.22	28.07.22	29.07.22	12.08.22

A dividend was declared on 19 July 2022 of US$0.02 per share for the quarter ending 30 June 2022. The dividend was paid on 12 August 2022 to holders of shares on record date 29 July 2022 with an ex-dividend date of 28 July 2022.

3