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.
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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