Tufton Oceanic Assets : 4Q20 Factsheet

Tufton Oceanic Assets Limited (SHIP)

4Q20 Factsheet

KEY STATISTICS

as at 31 Dec 2020

(unless otherwise stated)

No. of Shares outstanding	255.04m
Share Price	$0.925
NAV	$250.43m
NAV per share	$0.982
Premium/Discount to NAV	-5.8%
Target IRR (long-term)	12% p.a.
Target Dividend / Share	$0.075

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

Albemarle House, 1 Albemarle Street

London, W1S 4HA, UK

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 is a signatory to the UN Principles for Responsible Investment since December 2018.

Fund Managers:

• Andrew Hampson: 43 years of experience in banking and shipping finance. Joined Tufton in 2001.
• Paulo Almeida: 26 years of experience in fund management, investment banking and the shipping industry. Joined Tufton in 2009.

Signatory to

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

Encouraged by the Company's performance in 2020 and newly increased charter coverage, the Company has raised its target annual dividend to $0.075 per share from $0.07 per share. The Company has therefore declared a 4Q20 dividend of $0.01875 per share, payable on 12 February 2021. After the increase, the Company is forecast to have a 2021 dividend cover of c.1.5x.

PORTFOLIO HIGHLIGHTS

The Company acquired a Handysize Bulker and agreed to acquire two Containerships. The Company sold its Crude Tanker Bear with returns exceeding the Company's targets. After the end of the quarter, the Company agreed to acquire a Chemical Tanker which will be employed in a leading chemical tanker pool with strong contract coverage. The acquisitions take the Company's fleet to twenty-one vessels and the average charter cover to c.2.8 years. The portfolio benefited from fair value gains as Containership values continued to recover. Operating profit for the quarter was slightly higher than 3Q20. NAV total return for the quarter was 5.0%.

INVESTMENT OUTLOOK

While the recovery in Containership values was expected, the speed of the recovery in 2H20, supported by strong demand, was surprising. From c.12% of the global Containership capacity being idle in May, the market tightened rapidly as demand recovered. In December, time charter rates rose to their highest levels since 2009. Longer term, the Regional Comprehensive Economic Partnership ("RCEP") in Asia-Pacific and the underinvestment in capacity bode well for the Containership market. The Company agreed to acquire two small Containerships during the quarter.

In contrast, the market for Crude Tankers remains under pressure from the combined effects of OPEC production cuts, the impact of the pandemic on oil market demand and the unwinding of capacity in floating storage. This drove Tufton's decision to exit the Crude Tanker segment. The Company's Product and Chemical Tankers are on charter for an average duration of c.2.8 years, insulating it from short term volatility.

The strong industry tailwind of supply side recovery was accelerated in 2020. New orders fell c.29% and the orderbook dropped to 7% of fleet, the lowest in more than three decades. Tufton believes the reduction in new orders will result in lower fleet growth and support higher rates. Please see pages 3 and 4 for more details on the shipping market and insights from Tufton Real Time Activity Capture System ("TRACS"). Tufton continues to seek attractive investment opportunities.

FUND MANAGERS INCREASE STAKE IN TUFTON

The Company announced on 5 January 2021 that a European family office acquired shares from a number of Tufton's longstanding financial shareholders and the Fund Managers substantially increased their stakes in the business.

All Rights Reserved. Published 21 Jan 2021

Tufton Oceanic Assets Limited (SHIP)

4Q20 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 / SEDOL	GG00BDFC1649 / BDFC164

PORTFOLIO PERFORMANCE

NAV total return for the quarter was 5.0%. There was a fair value gain of $0.023/Share as Containership values continued to recover. Operating profit after costs and fees was slightly higher than 3Q20 at $0.024/Share. Vessels coming off charter over 4Q20, representing c.12% of NAV, commenced new charters at significantly higher rates than their previous charters. Only one vessel (c.5% of NAV) is expected to come off charter in 1Q21. Tufton is negotiating an extension of the charter which is expected to increase the fleet yield as the Containership market continues to be strong.

Ticker	SHIP
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

				$1.00
		$0.023	($0.0175)	$0.98
	$0.024			$0.982
				$0.96
$0.952				$0.94
				$0.92
				$0.90
NAV	Operating	Fair value	Dividend	NAV
30 Sep 2020	profit	gain/(loss)		31 Dec 2020

CORPORATE ADVISERS

Hudnall Capital LLP

Adam House, 7-10 Adam Street

London, WC2N 6AA

Andrew Cade: [phone]

N+1 Singer

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]

CORPORATE CALENDAR

AGM	20 Oct 2021

FLEET NET YIELDS

The run rate yield on the fleet is 12.7% after management fees and capex. Average expected charter length is c.2.8 years (EBITDA weighted).

			20%
13.9%	14.7%		15%
	12.7%

11.0%

10%

6.1%

5%

0%

Product &	Gas	Containerships	Bulkers	Fleet Avg
Chemical	Tanker
Tankers*

	*Including the Chemical Tanker the Company agreed to acquire in January 2021
Reporting period end	30 Jun 2021 (FY)

Dividend Calendar				PORTFOLIO OVERVIEW+
	4Q	1Q	2Q	3Q	Vessel Type	Charter Length	Vessel Age	Vessel Charterers
	20	21	21	21
Release	21	22	22	21
date	Jan	Apr	Jul	Oct
Ex-dividend	28	29	29	28
date	Jan	Apr	Jul	Oct
Record date	29	30	30	29	Containerships			Across nine
	Jan	Apr	Jul	Oct	< 1 year 1-3 years	5-10 years
	Product Tankers	charterers
Payment	12	14	13	12	Gas Tanker	3-5 years	10-15 years
Bulkers
date	Feb	May	Aug	Nov	Other Net Assets		15-20 years
					Cash		+As at 31 December 2020

All Rights Reserved. Published 21 Jan 2021

Tufton Oceanic Assets Limited (SHIP)

4Q20 Factsheet

SHIPPING MARKET REVIEW

The strong industry tailwind of supply side recovery continued in 2020, accelerated by the Covid-19 pandemic and regulatory uncertainty. New orders fell by c.29% YoY while the orderbook dropped to c.7% of fleet at the end of the year, the lowest in more then three decades. Market developments in the three main segments over the year were asynchronous and demonstrated the benefits of diversification for the Company. Strong demand for floating storage boosted the Tanker market for most of 1H20 while the Containership and Bulker markets were negatively impacted by Covid-19 related restrictions. In 2H20, the Containership and Bulker markets recovered while the Tanker market weakened.

Containership demand

01-Jan		01-Mar		2019	01-Jun	01-Jul		2020
01-Feb	01-Apr	01-May	01-Aug	01-Sep	01-Oct	01-Nov

01-Dec

180

170

160

150

tonsm	140
	130

Source: TRACS

			Containership fleet				75%
						New orders			60%
						Orderbook		% fleet	45%
									30%
									As	15%
Dec-02	Dec-04	Dec-06	Dec-08	Dec-10	Dec-12	Dec-14	Dec-16	Dec-18	Dec-20	0%

Source: Clarksons Research, Tufton

Containership demand benefited in 2H20 from strong consumer spending in OECD countries supported by fiscal and monetary stimulus measures. Towards the end of the year, time charter rates on Containerships were at the highest levels since 2009. The demand-led windfall profits in 2H20 encouraged a small spurt in new orders towards the end of the year. The orderbook for small vessels continued to fall though and ended the year below 8% of fleet. The market for small Containerships is set to benefit from increased growth in intra-Asia trade resulting from the RCEP. The RCEP will result in the formation of the World's largest trading bloc and will accelerate intra-Asia trade from 2022. Small Containerships (<3000 TEU) account for a majority of intra-Asia Containership capacity.

Tanker demand (crude and product)

290

270

250

230

2019

2020

tons

210

m

190

01-Jan

01-Feb

01-Mar

01-Apr

01-May

01-Jun

01-Jul

01-Aug

01-Sep

01-Oct

01-Nov

01-Dec

Source: TRACS

				Tanker fleet				75%
						New orders			60%
						Orderbook		fleet	45%
									As %	30%
										15%
Dec-02	Dec-04	Dec-06	Dec-08	Dec-10	Dec-12	Dec-14	Dec-16	Dec-18	Dec-20	0%
						Source: Clarksons Research, Tufton

After OPEC production cuts, Tanker demand peaked in early May and remained weak for rest of the year as capacity in floating storage slowly returned to the market and oil demand growth was affected by the pandemic. The orderbook was flat at c.8% of fleet. Despite the positive supply side fundamentals, the Crude Tanker market is likely to stay under pressure in early 2021 for a few reasons:TRACS data show c.4-5% of the global Tanker fleet tied up in floating storage (long term average c.3%); recent waves of Covid-19 in Europe and the United States have resulted in lockdowns and travel bans which will weigh on transportation fuel demand and Saudi Arabia announced a production cut of 1 mbpd in February and March. The Company exited the Crude Tanker segment with returns exceeding the Company's targets. Longer term, we believe the positive supply side fundamentals will prove decisive especially in the case of Product Tankers where the orderbook is only c.6% of fleet.

All Rights Reserved. Published 21 Jan 2021

All Rights Reserved. Published 21 Jan 2021

Tufton Oceanic Assets Limited (SHIP)

4Q20 Factsheet

SHIPPING MARKET REVIEW

Bulker demand remained strong over 4Q20, supported by demand for seaborne grains. Chinese demand for iron ore increased with steel output sharply towards the end of the year providing an additional boost to demand. The Bulker orderbook ended the year c.6% of fleet as new orders dropped sharply over the year. Fleet growth in Bulk carriers is expected to slow to c.1.7% in 2021.

Bulker demand

				2019				2020
01-Jan	01-Feb	01-Mar	01-Apr	01-May	01-Jun	01-Jul	01-Aug	01-Sep	01-Oct	01-Nov	01-Dec

450

420

390

360

tonsm	330
	300

Source: TRACS

Bulker fleet

						New orders			75%
						Orderbook		fleet	60%
									45%
									%	30%
									As
										15%
Dec-02	Dec-04	Dec-06	Dec-08	Dec-10	Dec-12	Dec-14	Dec-16	Dec-18	Dec-20	0%
						Source: Clarksons Research, Tufton

At its recent Marine Environment Protection Committee meeting in November, the International Maritime Organization continued to progress measures to reduce carbon intensity of shipping. Starting 2023, the decarbonization measures are likely to apply to existing ships as well. Older vessels will be able to reduce their emission intensity through measures such as limiting engine power and retrofit of energy saving devices. Market based measures such as a mandatory fuel levy are also being considered to contribute to decarbonization. A fuel levy or engine power limitation will result in speed reduction. Operationally, the industry has employed speed adjustment or "slow steaming" to optimize voyage economics. Speed reduction is a proven means of reducing emissions. TRACS data show that the reduction in average fleet speed between 2011 and 2020 corresponded to a c.13% reduction in emissions from the global fleet. Speed reduction will exacerbate the effect of slowing fleet growth and supporting shipping rates at higher levels. The Company will benefit from this supply side adjustment.

		As part of its commitment to Responsible Investment,
Average speed of global fleet	13.6	Tufton monitors and improves vessel operations as well
	as considering various energy saving devices and
	13.2	technologies to improve vessel performance and reduce
		emissions.
	12.8

										12.4	knots
											12.0
				Dec-14		Dec-16
Dec-11	Dec-12	Dec-13	Dec-15	Dec-17	Dec-18	Dec-19	Dec-20
										Source: TRACS

Tufton's commitment to crew welfare and engagement has resulted in the speedy resolution of crew members overdue for rotation on most vessels in the Company's fleet. Tufton continues to watch for delays to crew rotation from new travel restrictions imposed as a result of the recent waves of Covid-19.

Source: Clarksons Research, Alphaliner, SSY, TRACS

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: 1 Albemarle Street, London W1S 4HA