Tufton Oceanic Assets : 3Q22 Factsheet

Tufton Oceanic Assets Limited (SHIP)

3Q22 Factsheet

KEY STATISTICS

as at 30 September 2022 (unless otherwise stated)

No. of Shares outstanding	308.63m
Share Price	$1.10 / £0.98
NAV	$456.3m / £408.8m
NAV per share	$1.479 / £1.325
Premium/(Discount) to NAV	(25.6%)
Target IRR (long-term)	12% p.a.
Target Dividend per Share	$0.085 p.a.
(to commence from 4Q22)

Management Fee: 0.85% of NAV below $250m 0.75% of NAV between $250m and $500m 0.65% of NAV above $500m (no fees on cash)

Performance Fee: 20% of excess return over 12% net hurdle, partially paid after 7 years

INVESTMENT MANAGER

Tufton Investment Management Ltd

70 Pall Mall, 1st Floor London SW1Y 5ES

The Investment Manager is Tufton Investment Management Ltd ("Tufton"). The Tufton group was founded in 1985 to provide financial services to the maritime and energy industries and since 2000 has concentrated predominately on investment and asset management. The Investment Manager is authorised and regulated by the Financial Conduct Authority and has offices in London, Isle of Man, and Cyprus. Tufton is fully dedicated to the maritime industry with an in- house research team and Asset Manager providing operational and accounting services to each vessel within the portfolio. The Investment Manager is committed to Responsible Investment by integrating ESG principles into its investment process and since December 2018 has been a signatory of the UN Principles for Responsible Investment.

Fund Managers:

• Andrew Hampson: 44 years of experience in banking and shipping finance. Joined Tufton in 2001.
• Paulo Almeida: 27 years of experience in fund management, investment banking and the shipping industry. Joined Tufton in 2009.

Signatory of

INVESTMENT OBJECTIVES AND STRATEGY

To provide investors with an attractive level of regular and growing income and capital returns through investing in a diversified portfolio of secondhand commercial sea-going vessels.

DIVIDEND INCREASE

The Company declared a 3Q22 dividend of $0.02 per share, payable on 11 November. Encouraged by strong visible cash flows from increased charter cover, diversification and continued supply-side recovery, the Company has raised its target annual dividend from $0.08 to $0.085 per share, to commence from 4Q22. After the increase, the Company is forecast to have a dividend cover of c.1.8x over the next 18 months.

PORTFOLIO HIGHLIGHTS

NAV total return was 3.3%. The Company agreed to acquire two Product Tankers below depreciated replacement cost, for $73.0m in total. Both vessels have fixed-rate time charters for three to five years with a major commodity trading and logistics company. The acquisitions are being financed by a $60m loan, with a SOFR cap of 3.5% for the first three years. The loan is being secured on the two new Product Tanker acquisitions and the two other Product Tankers acquired in 1H22. The Company will repay the loan over three to five years depending upon the future overall charter cover of the four vessels. These acquisitions will take the portfolio to twenty-three vessels. None of the Company's vessels have been impacted by the war in Ukraine and all remain fully insured against war perils. Tufton continues to prioritise crew welfare on all the Company's vessels.

INVESTMENT OUTLOOK

The Product Tanker market has strong supply-side fundamentals. The orderbook at only c.5% of fleet is expected to result in slowing supply growth. The recovery in the Product Tanker market was accelerated by additional demand for long-haul cargoes following sanctions against Russia. These market dynamics are likely to be magnified as new EU sanctions on Russian oil products become effective in 1Q23, likely outweighing negative impacts from slowing GDP growth and the supply reductions from OPEC+. Benchmark time charter rates on MR Product Tankers rose c.110% since the beginning of the year. The tightening Product Tanker market also benefits Chemical Tankers, as 25-30% of seaborne chemical trade historically takes place on Product Tankers. Some Product / Chemical Tankers have shifted away from chemicals to meet the rising Product Tanker demand. Including the new acquisitions agreed in September, vessels corresponding to c.49% of NAV benefit from these trends.

The Containership market is weakening from record highs as port congestion unwinds and consumer demand is negatively impacted by high inflation and tightening monetary policy. Seven Containerships were divested since mid- 2021, leaving only one (c.5% of NAV) in the portfolio.

Bulkers continue to have supportive supply-side fundamentals with the orderbook at only c.7% of fleet, however, the Bulker market weakened during the quarter as demand growth was impacted by slower-than-expected improvement in Chinese economic activity following the Covid-related lockdowns over the summer, coincident with the easing of port congestion. Tufton expects the market, supported by strong supply-side fundamentals, will improve.

The Company's acquisitions since 4Q21 are in the top quartile of fuel efficiency compared to their respective peer groups. Through capital re-allocation, we have improved the portfolio emissions intensity by c.44% since 3Q21. We expect to see further emissions reduction as Energy Saving Devices will be retrofitted on eight vessels by early 2023 with expected IRRs of >20%.

All Rights Reserved. Published 18 October 2022

Tufton Oceanic Assets Limited (SHIP)

3Q22 Factsheet

COMPANY INFORMATION

	3rd Floor
Registered	1 Le Truchot
Address	St Peter Port
	Guernsey, GY1 1WD
Listing	Specialist Fund Segment of the
London Stock Exchange
IPO Date	20th December 2017
ISIN	GG00BDFC1649
SEDOL	BDFC164 / BMB3NJ1
Ticker	SHIP / SHPP
Dividend	Quarterly
Frequency
ISA / SIPP	Yes
eligible?
Website	www.tuftonoceanicassets.com
Email	[e-mail]

BOARD OF DIRECTORS

Robert King (Chairman)

Paul Barnes

Stephen Le Page

Christine Rødsæther

CORPORATE ADVISERS

Hudnall Capital LLP

Adam House, 7-10 Adam Street

London, WC2N 6AA

Andrew Cade: [phone]

Singer Capital Markets

1 Bartholomew Lane, London, EC2N 2AX Alan Geeves: [phone] James Waterlow: [phone] Sam Greatrex: [phone]

ADMINISTRATOR & SECRETARY

Maitland Administration (Guernsey) Limited

(per registered address above)

Wikus Van Schalkwyk: [phone]

PORTFOLIO PERFORMANCE

NAV total return for the quarter was 3.3%. Operating profit was $0.039/share. The capital value of the portfolio rose by $0.009/share. The rise in Product and Chemical Tanker capital value outweighed the fall in the capital values of Bulkers and the Containership.

																				$1.75
					$0.039					$0.011									$1.50
							($0.002)				($0.020)	($0.000)				$1.25
		$1.450		$1.450		$1.488		$1.488		$1.479		$1.479		$1.479
																				$1.00
		NAV	Operating	Change in	Change in	Dividend	Performance		NAV
	30 Jun 2022		profit	charter-free	charter value				fee accrual	30 Sep 2022
								values

FLEET NET YIELDS

The run rate yield+ on the fleet is 12%. Average expected charter length (EBITDA- weighted) increased to 1.4 years as Product Tankers, now a bigger part of the portfolio, are de-risked with longer-term charters.

	15.6%		16.5%		20%
9.9%		12.8%		12.0%	15%
					10%
					5%
					0%
Product &	Gas	Containership	Bulkers	Fleet Avg
Chemical	Tanker
Tankers

+On market value and after capex accrual and fees, pro forma for announced transactions

CORPORATE CALENDAR			PORTFOLIO OVERVIEW+
AGM		27 Oct 2022			Vessel Age		Vessel Charterers
		Vessel Type		Charter Length
Reporting period end	30 Jun 2023 (FY)
Dividend Calendar
	1Q	2Q	3Q	4Q
	22	22	22	22
Release	27	19	18	18
date	Apr	Jul	Oct	Jan
Ex-dividend	5	28	27	26	Bulkers		< 1 year 1-3 years		5-10 years		Eleven charterers
date	May	Jul	Oct	Jan
Record date	6	29	28	27	Product & Chem Tankers	3-5 years		10-15 years
	May	Jul	Oct	Jan	Gas Tanker			15-20 years
Payment	20	12	11	10	Containership
date	May	Aug	Nov	Feb					+ Pro forma
Net current assets			for announced transactions

Disclaimer: The information in this document has been prepared for information purposes only and does not constitute an offer or solicitation for the purchase or sale of any investment or financial instrument in Tufton Oceanic Assets Limited (the "Company") and should not be relied on by any person for the purpose of accounting, legal or tax advice or for making an investment decision. The payment of dividends and the repayment of capital are not guaranteed by the Company. Any forecast, projection or target is indicative only and not guaranteed in any way, and any opinions or views expressed in this document are those of Tufton Investment Management Ltd (the "Investment Manager"), and do not constitute investment advice and are subject to change without notice, and neither the Company nor the Investment Manager is under any obligation to update such opinions. Any potential investments identified by the Investment Manager are prospective only and there is no guarantee that the Company will proceed with any of them. Past performance is not a reliable indicator of future performance, and investors may not get back the original amount invested. Unless otherwise stated, the sources for all information contained in this document are the Investment Manager. Information contained in this document is believed to be accurate at the date of publication, but neither the Company nor the Investment Manager gives any representation or warranty as to the accuracy or completeness of the information in this document. This document does not contain and is not to be taken as containing any financial product advice or financial product recommendation. Neither the Company nor the Investment Manager accepts any liability whatsoever for any loss (whether direct or indirect) arising from any use of this document or its contents. Tufton Investment Management Ltd. is authorised and regulated by the FCA, registered in England & Wales (Registered Number: 01835984). Registered Office: 70 Pall Mall, 1st Floor, London SW1Y 5ES

All Rights Reserved. Published 18 October 2022