Tufton Oceanic Assets : Final Results for period ended 30 June 2020

Tufton Oceanic Assets Limited

Annual Report and Audited Financial Statements

For the year ended 30 June 2020

Contents

Highlights	2
Chairman's Statement	3
Investment Manager's Report	7
Environment, Social and Governance	16
Principal and Emerging Risks and Uncertainties	20
Corporate Summary	23
Corporate Governance Statement	24
Statement of Directors' Responsibilities	27
Report of Directors	29
Audit Committee Report	42
Independent Auditor's Report	45
Financial Statements
Statement of Comprehensive Income	53
Statement of Financial Position	54
Statement of Changes in Equity	55
Statement of Cash Flows	56
Notes to the Financial Statements	57
Corporate Information	80
Definitions	82
Notice of AGM	86
Form of Proxy	95

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Highlights

• The Company has performed reasonably well on a NAV basis, benefiting from the diversification of its fleet, although its share price, like that of many others, has suffered as a result of the impact of the Covid-19 pandemic.
• The Company had an overall loss for the financial year of US$1.2m, or US$0.0049 per Share.
• Despite strong portfolio operating profit1, the Company suffered non-cash, fair value losses as asset values fell due to the impact of Covid-19 on the value of vessels in the shipping market. Please see the Investment Manager's Report (page 7) for more details.
• The Company benefited from sector diversification as the negative impact of the demand shock from Covid-19 lockdowns on containership and bulker markets, was partly offset by the strong performance in tankers.
• The Company declared dividends of US$0.0175 per Share each quarter and continues to target a total annual dividend of US$0.07 per Share.
• The NAV per Share decreased from US$1.005 as at 30 June 2019 to US$0.931 as at 30 June 2020 net of share issue costs, after dividends. The NAV total return for the financial year was -0.7%.
• The Company's Shares traded at an average discount of 0.96% to NAV during the financial year.
• Net proceeds of US$30.4m were raised in September 2019 pursuant to the Placing Programme described in the Company's prospectus published 25 September 2018.
• The Company took the opportunity to sell three general cargo vessels in the financial year.
  This was the Company's first divestment. The resulting realised yield and IRR exceeded the targets expressed in the Company's prospectuses.
• During the financial year, the Company acquired five vessels for US$77.2m, bringing the total number of vessels to sixteen after the divestment of the three general cargo vessels.
• All sixteen vessels are employed on fixed rate charters2. Vessels coming off charter in the second half of 2020 represent circa ("c.")17% of NAV, so the portfolio remains largely insulated from geopolitical and macroeconomic shocks.
• EBITDA-weightedaverage length of charter is c. 2.5 years based on expected charter duration.
• The Company's fleet had only c.0.5% (26 ship-days3) of commercial idle time across the fleet over the financial year and had no commercial idle time between 1 July and 22 September 2020.

1. Portfolio operating profit refers to profit and comprehensive income for the year excluding valuations gains/losses
2. Bear's charter has a fixed rate component plus a profit-share mechanism.
3. Ship-days:Total number of days owned in the Company's fleet for all the ships over the financial year.

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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 2020. During the financial year, we raised additional funds (net proceeds of US$30.4m) from a Placing on 20 September 2019, bringing the total gross funds raised to US$250.4m.

The proceeds of the Placing were largely invested during the financial year and we made the first divestment from the Company in February 2020 through the sale of three general cargo vessels for US$19.3m. As a result of a change in market conditions from March onwards, following the first divestment, the Company slowed its deployment of capital and therefore its subsidiaries had investible cash of c.US$19m at the end of the financial year.

The Company currently has sixteen vessels in its fleet consisting of three handysize bulkers, seven containerships and six tankers with EBITDA-weighted average charter length of 2.5 years. There is a further breakdown of the portfolio in the Investment Manager's Report set out on pages 7 and 8.

Covid-19

Despite strong portfolio operating profit and cash flows, the Company suffered non-cash, fair value losses as asset values fell largely due to the impact of Covid-19 on the shipping market. The Company benefited from sector diversification as the negative impact on the containership and bulker markets during the financial year was partly offset by the stronger performance of tankers. The Investment Manager's Report provides a more detailed breakdown of the impact that Covid- 19 has had on the fleet and the overall performance of the Company.

Performance

As at the end of 30 June 2020, the Company's NAV was US$237.7m being US$0.931 per Share. The Company declared a loss of US$1.2m or US$0.0049 per Share for the financial year.

The dividend cover* for the financial year was c.1.4x, despite the market backdrop in the first half of 2020 and that the Company is not currently fully invested. The Company forecasts that dividend cover will continue to average 1.4x for the next 12-18 months based on current market conditions. The EBITDA-weighted average charter length c.2.5 years and the Company continues to target a total annual dividend of US$0.07 per Share.

During the financial year, the Company's listed share price decreased from US$0.99 per Share as at 30 June 2019 to US$0.915 per Share as at the close of business 30 June 2020. The Company's Shares traded at an average discount of 0.96% to NAV during the financial year.

Discount Management

During the financial year, the Company moved from a healthy premium up until 29 February 2020 to a discount as markets plummeted around the world and the impact of Covid-19 took effect on the shipping sector. The discount levels reduced significantly, from 19.98% on 31 March to 1.70% as at 30 June 2020.

* EBITDA less capex (excluding the scrubber retrofit for Parrot) less debt service, divided by dividends for the period

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