Final Results and AGM Notice

26 September 2024

Tufton Oceanic Assets Limited

("Tufton Oceanic Assets" or the "Company")

Final Results and Notice of AGM

Tufton Oceanic Assets announces its final results for the financial year ended 30 June 2024. A copy of the Annual Report and Audited Financial Statements will be submitted to the National Storage Mechanism https://data.fca.org.uk/#/nsm/nationalstoragemechanism and will shortly be available in the Company's website in the Investor Relations section under Company Documents at www.tuftonoceanicassets.com/financial-statements. The Company has also published its 2023 Sustainability Report which is available on the Company's website in the Investor Relations section under Company Documents. The highlights from the Sustainability Report include a c.11% improvement in emissions intensity during 2023, primarily because of capital re-allocation but also from Energy Saving Device ("ESD") retrofits.

The annual general meeting will be held at the Company's registered office at 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey on 24^th October 2024 at 11:00 BST.

For further information, please contact:

Highlights

Highlights of Tufton Oceanic Assets Limited (the "Company") for the financial year ("FY") (vs. the previous FY ending 30 June 2023):

·     NAV was US$451.1m or US$1.550 per share (FY 2023: US$412.8m or US$1.365 per share).

·     NAV Total Return Per Share 20.6% (FY 2023: -0.3%).

·     Dividends paid during the year of US$26.1m (FY 2023: US$25.4m), which from 1Q24 was at the increased target annual dividend of US$0.10 per share rate.

·     The Company bought back 11,386,000 (FY 2023: 6,160,000) shares at the weighted average price of US$1.014 (FY 2023: US$1.13) per share.

·     Consolidated Gearing Ratio of 12.0% (FY 2023: 13.8%).

·     Average Charter Length of 1.3 years (FY 2023: 1.3 years).

·     Post balance sheet date, the Company completed a one-off capital return of US$31.5m via redemption ("Redemption") of shares based on the 2Q24 NAV per share of US$1.550.

Diversified fleet*

·     8 product tankers

o  6 Medium Range ("MR") product tankers

o  2 Handysize product tankers

·     9 bulkers

o  8 Handysize bulkers

o  1 Ultramax bulker

·     2 Chemical tankers

·     1 Gas tanker

The Company owned 21 vessels as at the end of the FY. One product tanker (Dachshund) was divested on 1 July 2024 bringing the total number of vessels to 20.

^* as at 30 June 2024, adjusted for the divestment of Dachshund on 1 July 2024. Dividends include the 2Q24 dividend which was paid in August 2024.

Alternative Performance Measures ("APMs"), applied on a consolidated basis, are utilised in the Highlights and Investment Manager's Report to analyse performance. Please see the APMs definitions from page 87.

Mid-Term strategy and capital allocation highlights

·     The Company's Board has determined that the optimal strategy for SHIP through to 2030 is to continue investing in fuel-efficient secondhand vessels. This approach aims to maximize shareholder returns, with plans to begin realising the Company's asset portfolio from 2028, well before the decarbonisation of shipping accelerates.

·     Continuation votes to be held as planned in 2024 and 2027 to reconfirm the opportunity set and the strategy, before the realisation period starting in 2028.

·     SHIP's annual target dividend per share was increased by c.17.6% from US$0.085 per share to US$0.10 per share starting in 1Q24. Based on this increased target the Company is forecast to have Dividend Cover of c.1.7x over 18 months following the end of the FY, through the end of 4Q25.

·     A one-off capital return of US$31.5m via the Redemption of shares based on the 2Q24 NAV per share (being a premium to the prevailing share price) less attributable costs was completed on 26 August 2024.

·     The Company sees fleet renewal (based on age, technology, and sector outlook) as a priority. Returns from all new asset investments over a three-year holding period will be compared to the benefit from a return of capital given the prevailing share price at the time of the proposed investment and medium-term market outlook.

·     The Board will annually assess the possibility of returning additional capital to shareholders using excess investible cash, provided no suitable investment opportunities arise.

·     The current buy-back policy (as set out in the Company's listing documents) is to remain in place.

Chairman's Statement

Introduction

On behalf of The Board of Directors (the "Board"), I present the Company's Annual Report and Audited Financial Statements for the year ended 30 June 2024.

Following the divestment of Dachshund on 1 July 2024, the Company's portfolio consisted of 20 vessels (FY 2023: 22 vessels), details of which are set out in the Investment Manager's Report. Divestments completed in FY 2024 have been completed at a premium to their most recent individually reported NAVs.

Strong Performance and Target Dividend Increased

As at 30 June 2024, the Company's NAV was US$451.1m being US$1.550 per share (2023: US$412.8m being US$1.365 per share). The Company declared a profit of US$76.1m (FY 2023: loss of US$2.5m) or US$0.259 per share (FY 2023: US$0.008) for the year with the US$ NAV Total Return Per Share over the year of 20.6% (FY 2023: -0.3%).

The strong return over the FY was driven by operating performance as well as gains in charter-free values, as product tanker and bulker values rose.

The Company raised its target annual dividend from US$0.085 to US$0.1 per share, which commenced from 1Q24. With the increased dividend, the Company is forecast to have a Dividend Cover of c.1.7x over the next 18 months (through the end of 4Q25). As at 30 June 2024, the Average Charter Length was 1.3 years.

Share Price and Discount Management

During the year, the Company's share price rose from US$0.99 per share as at the close of business 30 June 2023 to US$1.21 per share as at the close of business 30 June 2024.

Following a tepid performance in the second half of 2023, the Company's share price increased by approximately 22% in the latter half of the FY. This rise was particularly notable after the announcement on 17 January 2024 of key points from the mid-term strategy review, an increased dividend policy, a one-time return of capital, and other related changes in capital allocation. The Board is encouraged to note that the discount of the Company's share to NAV has narrowed to c.14% (30 June 2023: 27.8%) as at end August 2024.

On average, the Company's shares traded at a 27% discount to NAV over the FY. During the year, the Company (in accordance with the authority granted to it by shareholders) repurchased 11,386,000 (FY 2023: 6,160,000) shares at a cost of US$11,573,679 (FY 2023: US$6,946,752). Refer to Note 7 for more details. At the end of the FY, there were 17,546,000 (FY 2023: 6,160,000) shares held in treasury. Since 1 July 2024, the Company has bought back an additional 20,326,211 shares via the compulsory Redemption with 17,546,000 Shares held in treasury and 270,756,330 shares outstanding as at 25 September 2024. As at 25 September 2024, the Company's shares traded at a 16.1% discount to the ex-dividend 30 June 2024 NAV.

Mid-Term strategy review

In January 2024, the Board reviewed the Company's performance since its inception and requested that the Investment Manager conduct a study on future opportunities and the strategy, including capital allocation, to achieve investment objectives. The Board concluded that the best strategy for SHIP through 2030 is to continue investing in fuel-efficient secondhand vessels to maximise shareholder returns, with plans to begin realising the Company's asset portfolio starting in 2028, ahead of the anticipated acceleration in shipping decarbonisation. Details of the mid-term strategy review are set out on page 2 above.

Canal Transit Disruptions and War in Ukraine

Transit through two key global shipping routes, the Panama Canal and the Suez Canal, were disrupted during the FY.

Vessel transit through the Panama Canal was disrupted from late October due to an ongoing drought in the region. While transit through the Suez Canal was disrupted as Houthi rebel attacks on vessels in the Red Sea escalated from late November. Disruption of canal transit causes re-routing of cargo via alternate routes which typically take much longer and add to shipping demand. For example, disruption of transit through the Suez Canal is estimated to add c.3% to global shipping demand growth predominantly due to re-routing around the Cape of Good Hope. As of August 2024, vessel transit through the Panama Canal is returning to normal while traffic via the Suez Canal remains at very low levels due to the ongoing risk of attacks. All of the Company's vessels remain fully insured against war perils. None of the Company's vessels have been adversely affected by the war in Ukraine or the attacks on vessels transiting the Red Sea/Gulf of Aden. The Investment Manager's policy is that Company vessels should not transit the Red Sea during this period of conflict. The Master of each vessel may refuse to allow the vessel to trade in areas where there is a heightened physical risk to the vessel or its crew. The Board and the Investment Manager remain watchful in monitoring the conflicts and their consequences for shipping in general and for the Company.

Sanctions

The Company and its vessels were compliant with all international sanctions imposed by the US, UK, EU and UN. We have had no issues to date with any vessels being blocked or otherwise affected by sanctions. The Investment Manager monitors compliance through regular inspection of vessel logs, satellite data and direct communication with the vessels. The Board and Investment Manager are monitoring for new sanctions being put in place. Where existing guidelines are unclear, the procedure ensures that the Investment Manager seeks legal advice.

Corporate Governance

The Company is a member of the Association of Investment Companies ("AIC") and has therefore elected to comply with the provisions of the current AIC Code of Corporate Governance which sets out a framework of best practice in respect of governance of investment companies ("AIC Code"). The AIC Code has been endorsed by the Financial Reporting Council and the Guernsey Financial Services Commission (the "GFSC") as an alternative means for AIC members to meet their obligations in relation to the UK Corporate Governance Code.

Where the Company's stakeholders, including shareholders and their appointed agents, have matters they wish to raise with the Board in respect to the Company, I would encourage them to contact us at [email protected].

Board Composition

As in previous years, all Directors are offering themselves for re-election in accordance with the AIC Code of Corporate Governance and the Articles of Incorporation of the Company (the "Articles").

Three of the current five members of the Board were appointed at the formation of the Company in 2017. Whilst their respective tenure is much less than the AIC Guidance figure of nine years, a succession plan has been considered by the Board. As part of the continued Board review of its composition, Trina Le Noury was appointed as a non-executive Director of the Company with effect from 1 November 2023.

Annual General Meeting

The Annual General Meeting ("AGM") of the Company will be held on 24 October 2024 at 11:00 am BST the details of which are set out in the AGM notice and Proxy form on pages 97 to 109.

Where shareholders, or their appointed agent have matters they wish to raise with the Board at the AGM, I would encourage them to contact us at [email protected] ahead of the AGM date.

Continuation Vote

The vote for the continuation of the Company is presented to the Shareholders at this year's AGM in accordance with the terms set out in the latest listing document of the Company. The Board of Directors presented the mid-term strategy to Shareholders on 17 January 2024 and this strategy is the basis for the future continuation of the Company.

If this Continuation Resolution is passed, the next continuation vote will be presented to Shareholders in October 2027. The Directors shall every three years thereafter at the annual general meeting held, following the publication of the audited accounts, propose a further Continuation Resolution.

The Board of Directors are supportive of the continuation of the Company and believe that the mid-term strategy presented to Shareholders provides a clear direction of travel beyond this year's continuation vote and therefore the Board unanimously recommends that Shareholders vote in favour of the Continuation Resolution. The Directors intend to vote the shares they control in favour of the Continuation Resolution.

Environmental, Social, Governance ("ESG")

Our Investment Manager continues to integrate ESG factors into its investment recommendations and asset ownership practices. The Investment Manager has recently published its annual Sustainability Report which contains details of ESG integration. The Board has reviewed and approved the Investment Manager's Sustainability Report for the Company which can be viewed on the Company's website (www.tuftonoceanicassets.com).

Outlook

The Investment Manager notes that global shipyard orderbook forward cover (i.e. the number of years required to deliver the orderbook at the output level of the last 12 months) was 3.4 years at the end of the FY slightly lower than 3.7 years at the end of June 2023. Despite the growth in new orders over the last few years, fleet growth in product and chemical tankers and bulkers is limited by yard slot availability. Further the current orderbook in these segments is only sufficient to replace ageing, less fuel efficient tonnage.

The Company completely exited the containership segment in early 2023 in anticipation of a weaker market due to high fleet growth. The disruption of vessel transit through the Suez Canal has added significant shipping demand growth resulting in a much stronger containership market than previously anticipated by the Investment Manager, offering some interesting opportunities.

These ongoing developments continue to support the case for a strong investment environment until the end of the decade as envisaged in our mid-term strategy review.

………………………    

Rob King

Non-executive Chairman

25 September 2024

Investment Manager's Report

Highlights of the FY

Over the FY NAV Total Return Per Share was 20.6% (FY 2023: -0.3%), meaning the NAV Total Return since inception has been 131.2%. Alternate Performance Measures ("APM"s), applied on a consolidated basis, are utilised in this section to analyse performance. Please see the APM definitions from page 87.

The main drivers for the strong return during the year were:

·     Portfolio Operating Profit was US$52.0m (FY 2023: US$56.3m): Despite strong performance from our product tankers and chemical tankers, Portfolio Operating Profit was slightly lower YoY as the bulker market started the current FY at multi-year lows and slowly recovered.

·     Charter-free value gain of US$29.7m as product tanker and bulker values rose.

·     Charter value loss of US$5.6m as the unwind of negative charter value was outweighed by the ongoing increase in benchmark time charter rates, both mainly in product tankers.

The Company paid dividends of US$26.1m during the FY (FY 2023: US$25.4m). Under the Company's discount management policy described in the IPO Prospectus, the Company repurchased 11,386,000 shares during the FY and has therefore purchased a total of 17,546,000 of its own shares from 4Q22 until the end of the FY. The Company returned a total of US$37.8 million to shareholders during the FY in the form of dividends and share buybacks ($145.5 million since inception).

Portfolio Operating Profit was lower compared to the previous FY because:

·     Gross Operating Profit, an indicator of the underlying profit from operating activity, was lower YoY mainly due to the lower contribution from our bulkers. The bulker market started the FY with rates at multi-year lows and slowly improved.

·     Loan interest and fees were higher compared to the previous FY due to the full year impact of the US$60m loan for the acquisitions of the two MR product tankers, Mindful and Courteous (completed in November 2022).

Following our December 2023 update in the Interim Report, the divestment of Pollock closed on 16 May 2024. The divestment of Dachshund closed on 1 July 2024, shortly after the FY end. Ahead of the divestments, the loan outstanding on the product tankers (within two separate Holdco facilities) was refinanced with six vessels within one Holdco at a lower margin of 3.2% (vs. 3.9% previously). The Consolidated Gearing Ratio at the end of the FY was 12% (FY 2023: 13.8%). There was no debt prepayment in connection with the divestment. Interest rate caps mitigate interest rate risk through the end of 2025.

Performance summary*

*Performance summary is unaudited and presented on a look through basis

Note: Please see from page 87 for definitions of the APMs used in the table above.

The product and chemical tanker markets strengthened during the FY. The capital value gain of US$24.1m was due to higher charter-free values, in product tankers and bulkers, outweighing the increase in negative charter values largely attributable to the strong product tanker market. The bulker market started the FY with rates at multi-year lows and slowly improved with rising rates and values.

At the end of the FY, the portfolio had a total negative charter value of US$50.5m (FY 2023: US$49.5m). Ceteris paribus, the negative charter value is expected to unwind (i.e. increase NAV) in the medium term as the current charters are completed. From the end of July 2023, four bulkers Anvil, Awesome, Auspicious and Charming were fixed on index-linked charters in order to benefit from the improving market.

Towards the end of the FY, the Company switched one bulker, Auspicious, from an index-linked charter back to a high fixed-rate charter to commence from the end of July 2024. The Investment Manager expects continued improvement in the bulker market and may switch employment strategies to opportunistically capture strong yields on a risk-adjusted basis.

Across the main segments, Gross Operating Profit contribution during the FY, compared to the previous FY comprised the following factors:

·     Product tankers - higher because:

o  full period contribution from all vessels including Mindful and Courteous which were acquired during the previous FY;

o  Exceptional's charter was extended starting January 2024 at a higher rate; and

o  Higher rate periods commenced on Cocoa's and Daffodil's charters during the FY.

·     Chemical tankers - higher as both our chemical tankers, operating in a pool, benefited from the rising market.

·     Bulkers - lower as the market recovered slowly from the very low levels at the beginning of the FY and our vessels were on short-term charters.

 Segment performance summary*

*Segment analysis is unaudited and presented on a look through basis

**The Company divested its last containership in 1Q23. Closing adjustments reflected here.

At the end of the FY, the Company's diversified portfolio had high cash flow visibility from long-term charters on product tankers (33.9% of NAV). The Company's two chemical tankers, which represent 8.6% of NAV, benefit from exposure to the strong spot market as they operate in a pool. The Forecast Net Yield on our chemical tankers is based on our expectation of continued market strength. The yield on the Company's bulkers (37.5% of NAV) rose to 11.6%, from 8.4% at the end of June 2023, as the market improved during the FY.

Segment exposure and forecast net yields*

*Segment analysis is unaudited

** Based on the market values at 30 June 2024, post divestment of Dachshund

As at 30 June 2024, the Company's vessels (post divestment of Dachshund) had an average age of 12.2 years (FY 2023: 11.4 years) and were chartered to nine different counterparties.

Review of performance since inception

Since inception, the Company has delivered on its original investment objectives including:

·     Diversified portfolio.

·     Provided investors a strong and growing dividend. Target annual dividend increased by c.21% from US$0.070 per share to US$0.085 per share through the end of 2023. This was further increased by 17.6% to US$0.10 per share starting 1Q24. Please see the charts below.

·     Total capital raised: US$316.5m gross through primary and secondary issuances. Since inception, the Company has returned US$145.5m in the form of dividends and share buybacks.

·     Net Company IRR is 14.4%, ahead of its 12% IRR target published in its prospectus documents.

·     Acquired 39 vessels with low leverage and divested 19 vessels (including Dachshund) at c.6% above NAV in aggregate. Aggregate realised net IRR on all divestments is c.24%.

·     Low NAV volatility due to diversification, limited use of leverage and high charter cover.

·     Capital re-allocation based on rigorous fundamental analysis, industry knowledge and ESG: divested containerships and older bulkers to re-allocate capital into less emission-intensive bulkers and tankers.

·     The operating emissions intensity of the portfolio was reduced by c.41% between 2019 and 2023.

·     Further emissions reduction expected from Energy Saving Device ("ESD") retrofits, completed on nine vessels and planned for four other vessels during their next docking. Eight other vessels are already fuel-efficient relative to their peers.

As per the Company's share price discount management policy, the Company repurchased 11,386,000 shares during the FY and has therefore purchased a total of 17,546,000 of its own shares from 4Q22 until the end of the FY.

Tufton Investment Management Holding Limited Group ("Tufton Group") Stakeholders held ~4.9% of the issued share capital in the Company at the end of June 2024 (FY 2023: ~3.7%).

Mid-Term strategy review

In January 2024, the Board reviewed the Company's performance since inception and requested the Investment Manager to conduct a study of the opportunity set and strategy for the Company.

The review concluded that the correct strategy for SHIP over the medium term through to 2030 is to continue investing in fuel-efficient secondhand vessels to maximise shareholder returns. In addition, the review concluded to start divesting the Company's portfolio of assets from 2028, well before the decarbonisation of shipping accelerates. The review highlights are documented on page 2.

Compulsory Redemption

On 15 August 2024, the Company announced the return of approximately US$31.5m by way of the compulsory Redemption of up to 20,326,211 Shares. The Redemption was effected at a price of US$1.550 per Share, being the NAV per Share as at 30 June 2024, pro-rata to holdings of Shares on the Company's register of members at close of business on 14 August 2024 (the "Redemption Record Date"), being the record date for the Redemption. The record date for the Company's quarterly dividend for the three months ending 30 June 2024 (the "2Q24 Dividend") was 26 July 2024 (the "Dividend Record Date"), which precedes the record date for the Redemption. Accordingly, Shareholders were eligible to receive both the 2Q24 Dividend and proceeds from the Compulsory Redemption on the basis they continue to own Shares on each of the 2Q24 Dividend Record Date and the Redemption Record Date respectively.

Amendments to Investment Policy

Before June 2024, the Company's existing Investment Policy restricted it from making new investments that would result in any shipping Segment (i.e. Tankers, General Cargo, Containerships and Bulkers) accounting for more than 50% of NAV.

The Board sought and obtained Shareholder approval to ease the above investment restriction such that:

·     the restriction on making further investments that would result in a shipping Segment accounting for more than 50% of NAV will only apply where the Company is invested in at least three shipping Segments; and

·     where the Company is only invested in two shipping Segments: (i) no further investment may be made that results in any shipping Segment accounting for more than 75% of NAV; and (ii) if the Tankers shipping Segment accounts for more than 50% of NAV and exposure is only to a single Tanker sub-segment (i.e. crude tankers, product tankers, chemical tankers, gas tankers), no further investment may be made in such tankers sub-segment.

The Company's share price has increased by c.37% between the beginning of 2024 and the end of August 2024. The Investment Manager believes the strong performance signals investor endorsement of the Company's performance as well as its disciplined approach to capital allocation.

The Assets

The Company's portfolio as at 30 June 2024:

Notes:

+ SPV that owns the vessel.

** Based on our assessment of the prevailing market conditions at 30 June 2024.

The market for secondhand ships is liquid with >US$40 billion worth of annual transactions in 2022 and 2023. The charter-free and associated charter values of the Company's standard vessels are calculated using the online valuation platform provided by VesselsValue which utilises transaction data as well as other market data to estimate charter-free values. The Company's NAV is, in effect, proven by recent market transactions. During the FY, the Company agreed to divest Pollock and Dachshund at a 3.1% premium to the two vessels' most recent holding NAV. Divestments to date have been in aggregate c.6% above NAV.

As at 30 June 2024, the Company owned twelve tankers as follows:

As at 30 June 2024, the Average Charter Length of the tankers (excluding Orson and Golding) was 1.80 years (FY 2023: 2.0 years).

As at 30 June 2024, the Company owned nine bulkers, as follows:

At 30 June 2024, the Average Charter Length on our bulkers was 0.35 years (FY 2023: 0.22 years). We have chosen to employ many of our bulkers on index-linked charters in anticipation of ongoing market improvement. Please see the Shipping Market section of this Report.

The Company's fleet across all segments performed well. Marvelous, Mindful, Courteous, Exceptional, Awesome, Auspicious, Masterful and Charming are in the top quartile of fuel efficiency in their market segments.

The Shipping Market

The Company aims to provide investors with an attractive level of regular and growing income and capital returns through investing in secondhand commercial sea-going vessels, with the portfolio diversified across the main segments of shipping including tankers, bulkers, general cargo and containerships. The ClarkSea Index, a broad vessel earnings indicator from Clarksons Research, ended the FY at US$28,325/day, c.31% higher than at the end of June 2023.

The combination of price inflation (commodity, wage), reduced shipyard capacity and tightening environmental specifications continue to boost newbuild prices leading to higher values for secondhand vessels. The Clarksons Research Newbuilding Price Index rose 9.5% during the FY and has risen c.49% since the end of 2020. Shipyard capacity fell by ~35% in the 2010s and is now expanding only incrementally (mainly in China). Slot availability is very tight. Shipyard orderbook forward cover (i.e. the number of years required to deliver the orderbook at the output level of the last 12 months) was 3.4 years at the end of the FY (FY 2023: 3.7 years). Global seaborne trade is expected to grow by c.5% in 2024, exceeding the long-term trend rate of c.3% CAGR between 2003 and 2023 mainly due to the effect of disruption of traditional trade routes.

Trade routes tend to be optimised across the industry, so disruption of traditional trade routes often results in diversion through longer routes which reduces the available vessel capacity. During the FY, transit through two key global shipping routes, the Panama Canal and the Suez Canal, faced disruption. Vessel transit through the Panama Canal was disrupted from late October due to an ongoing drought while transit through the Suez Canal was disrupted as Houthi rebel attacks on vessels in the Red Sea escalated from late November. Disruption of canal transit causes re-routing of cargo via alternate routes which typically take much longer and add to shipping demand. For example, disruption of transit through the Suez Canal is estimated to add c.3% to global shipping demand growth predominantly due to re-routing around the Cape of Good Hope. Impact of disruption of transit through the Panama Canal is harder to measure with a larger variety of alternate (often land-based) routes.

As of June 2024, vessel transit through the Panama Canal is returning to normal while traffic via the Suez Canal remains at very low levels due to the ongoing risk of attacks. This section utilises data from the Tufton Real-Time Activity Capture System ("TRACS") which analyses satellite data to track the international shipping fleet by the major segments.

TRACS uses the draught of each vessel as a proxy for its utilisation and thereby enables us to have a close to real-time measure of shipping demand. Other research data used in this section is from Clarksons Research, unless specified otherwise.

Tankers

Product tanker demand growth is benefiting from refinery capacity expansions in Asia and the Middle East. Additionally, demand growth accelerated from mid-2022 as the war in Ukraine partially replaced some demand for short-haul product tanker cargoes with demand for long-haul cargoes: increasing Russian exports to Asia and increasing European imports from non-Russian suppliers including the Middle East, the US and Asia.

Over the FY, demand growth was further boosted by the disruption of vessels transiting the Suez Canal because of attacks by the Houthi rebels on vessels In the Gulf of Aden. The disruption of normal traffic through the Suez Canal resulted in vessel re-routing around the Cape of Good Hope, increasing voyage duration. The longer voyage time added to tonne-mile demand and further tightened the Product Tanker market.

The strong fundamentals in the product tanker segment have attracted capital to newbuild investments. The product tanker orderbook rose from c.9% of fleet as at the end of June 2023 to 16% of fleet at the end of the FY. A significant portion of the new orders are focused on the larger Long Range segment. The orderbook for crude tankers remained relatively low at c.9% of fleet at the end of the FY. Despite the increase in the orderbook, the supply side for product tankers remains supportive as c.15% of the product tanker fleet is >20 years old.

Older vessels are typically less fuel-efficient and less flexible operationally so tend not to be favoured by top-tier charterers such as oil majors and global trading firms. Further, due to limitations in available yard capacity at quality yards the delivery cadence of the recent new orders is distributed over 3+ years resulting in manageable fleet growth relative to demand growth. Over the FY, 1-year time charter rates for MR product tankers rose c.17% to c.US$34,100/day.

The chemical tanker market also benefits from good supply-side fundamentals with an orderbook c.10% of fleet and strong demand growth forecast compared to c.18% of the fleet >20 years old. 25-30% of MR product tankers can engage in the chemicals/vegetable oil trade. The chemical tanker market benefits as MR product tankers shift to the tight product tanker market. The Company's chemical tankers benefit from this trend as they are employed in a revenue-sharing pool and have spot market exposure. 2Q24 Chemical tanker pool earnings for 19.9k dwt vessels averaged c.$23,800/day.

Bulkers

The bulker market strengthened during the FY due to a combination of improving demand growth and the impact of reduced transit through the Panama Canal. Variations in Chinese demand continue to present a near term downside risk as Chinese demand is an important part of the bulker market.

From the end of July 2023, we chose to employ some of our bulkers on index-linked charters in anticipation of market improvement. Over the FY, 1-year time charter rates for Handysize bulkers rose c.34% to c.US$14,360/day. The bulker orderbook rose from the very low level of c.8% of fleet in June 2023 to 9.5% of fleet at the end of the FY. Despite the increase in the orderbook, the supply side for bulkers and small bulkers (10k-69.9k dwt) in particular looks supportive with c.8.5% of the total Bulker fleet and c.12% of the small bulker fleet >20 years old. Also, due to limitations in available yard capacity at quality yards the delivery cadence of the recent new orders is distributed over 3+ years resulting in manageable fleet growth relative to demand growth.

Across the major segments, the combination of tightening environmental regulations and low shipyard capacity suggests newbuild prices of bulkers and tankers will remain high thereby also supporting secondhand prices in the medium term. Global shipyard capacity started increasing from recent lows but remains c.30% below the 2011 peak. Newbuild prices are supported by wage inflation for skilled labour in the major shipbuilding nations.

Further, latest newbuild designs incorporate more flexible machinery and storage systems to handle multiple fuel types to reduce emissions. These further increase newbuild prices. Environmental regulations from the IMO to measure and improve vessel carbon emission intensity incentivise lower speeds resulting in reduced shipping capacity, aiding the supply-side adjustment. The combination of supply constraints and high replacement costs creates an attractive investment environment for fuel-efficient secondhand vessels in the medium term. The Company's fuel-efficient vessels are likely to benefit.

Environmental, Social and Governance Report

The Investment Manager, Tufton, emphasises the principles of Responsible Investment in the management of the Company's assets through awareness and integration of ESG factors into our investment process in the belief that these factors have a positive impact on long-term financial performance. We recognise that our first duty is to act in the best financial interests of the Company's Shareholders and to generate attractive financial returns against acceptable levels of risk, in accordance with the objectives of the Company. We have been a signatory of the United Nations Principles of Responsible Investment ("UN PRI") since December 2018 and have a Responsible Investment policy statement which is available on Tufton's website. In the 2023 UN PRI signatory assessment, Tufton achieved scores higher than our peer group in all three assessment categories. Please see the 2023 UN PRI scoring methodology for details.

The Company's Board does not have a separate ESG committee but collectively reviews progress against the policy statement as part of the Company's annual Sustainability Report which will be publicly available on the Company's website (www.tuftonoceanicassets.com).

ESG highlights of the financial period include:

·     The Company's operating emissions intensity, as measured by the Energy Efficiency Operating Index ("EEOI") improved by c.11 % during 2023 primarily because of capital re-allocation but also from ESD retrofits.

·     ESDs retrofits have been completed or substantially completed on nine vessels. We have started receiving the efficiency hire rate premia on eight of the vessels and expect to start receiving the premium on one vessel from 2H24.

We aim to minimise coal carriage on the Company's vessels. In June 2023, Tufton committed to limiting revenues from transportation of thermal coal to 5% of the Company's total consolidated revenues. In 2H23, one bulker (Anvil) carried thermal coal during one voyage and in 1H24, Idaho and Anvil had voyages with coal carriage. Over the FY, revenues from thermal coal carriage corresponded to c.1.2% of SHIP consolidated revenues.

Principal Risks and Uncertainties

The Board has carried out a robust assessment to identify the principal and emerging risks that could affect the Company, including those that would threaten its business model, future performance, solvency or liquidity. Principal risks are those which the Directors consider have the greatest chance of materially impacting the Company's objectives. The Board has adopted a "controls" based approach to its risk monitoring which requires each of the relevant service providers, including the Investment Manager, to establish the necessary controls to ensure that all identified risks are monitored and controlled in accordance with agreed procedures where possible.

The Board of Directors receives periodic updates on principal risks at their meetings and has adopted its own control review to ensure that risks are monitored appropriately, mitigation plans are in place, and that emerging risks are identified and assessed. The Directors also carry out a regular check on the completeness of risks identified, including a review of the risk register. The Board believes that the risk register is comprehensive and addresses all risks that are currently relevant to the Company. Whilst the Investment Manager monitors and puts in place controls to mitigate risks, risk and uncertainty cannot be eliminated.

In addition to the established principal risks, in the current period, the Board considered the conflict in the Middle East and the actions of the Houthi rebels in the Red Sea in the context of whether this situation indicated the existence of an emerging risk for the Company. After proper consideration of the situation and its possible economic impacts, the Board concluded that given the nature of the vessels currently held it was unlikely to materially impact the Company's results or operations.

The Board consider that the above risk and the emerging risks identified in prior periods are adequately addressed by the overall risk control and monitoring processes in place.

The following table shows the Board's view of the principal risks to the business and efforts to mitigate those risks. The Board considers that no additional mitigation steps are required at this time.

Corporate Summary

The Company is a closed-ended investment company, limited by shares, registered and incorporated in Guernsey under the Companies Law on 6 February 2017, with registration number 63061. The Company is a Registered Closed-ended Collective Investment Scheme regulated by the GFSC pursuant to the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended and the Registered Closed-ended Investment Scheme Rules 2021.

As at 30 June 2024, the Company had 291,082,541 shares in issue, all of which are admitted to the Specialist Funds Segment of the Main Market of the London Stock Exchange under the ticker "SHIP", ISIN: GG00BDFC1649, and SEDOL: BDFC164. During the FY, the Company bought back 11,386,000 shares. Effective 15 August 2024, the Company trades under new ISIN: GG00BSFVPB94, and SEDOL: BSFXP71 post completion of the compulsory Redemption.

The Company makes its investments through LS Assets Limited ("LSA") and other underlying SPVs, which are ultimately wholly owned by the Company. LSA is registered and was incorporated in Guernsey in accordance with the Companies Law on 18 January 2018 with registered number 64562. The underlying SPVs owned by LSA are incorporated in the Isle of Man, in accordance with the Isle of Man Companies Act 2006 (the "IOM Companies Act").

The Company controls the investment policy of each of LSA and the wholly owned SPVs to ensure that each will act in a manner consistent with the investment policy of the Company. The Company refers to each vessel by the underlying SPV name rather than the actual name of the respective vessel for confidentiality purposes.

The Investment Manager is Tufton Investment Management Ltd, a company incorporated in England and Wales with registered number 1835984, which is regulated by the FCA and has been authorised to act as a Full Scope Registered UK AIFM under AIFMD. Tufton Investment Management Ltd has been a specialist investment manager in the maritime and energy markets since 2000 and has been focused on financial services to these industries since its inception in 1985.

Corporate Governance Statement

The Board of Tufton Oceanic Assets Limited has considered the Principles and Provisions of the AIC Code. The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the "UK Code"), as well as setting out additional Provisions on issues that are of specific relevance to the Company.

The Board considers that reporting in accordance with the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council and the Guernsey Financial Services Commission, provides more relevant information to shareholders. The Company has complied with the Principles and Provisions of the AIC Code (except as set out below).

The Board confirms that it has reviewed the Company's systems of risk management and internal control for the year ended 30 June 2024, and to the date of the approval of this annual report and audited financial statements. The main features of these systems are segregation of activity between service providers and critical review and cross checking by both those service providers and the Board. For further details of the key risks and uncertainties the Directors believe the Company is exposed to together with the policies and procedures in place to monitor and mitigate these risks, please refer to pages 20 to 23 of the annual report and audited financial statements.

The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.

Areas of Exception

Considering that the Board comprises solely of independent Directors, it has decided not to appoint a senior independent director. The Chairman of the Audit Committee fulfils the role of the senior independent director, which includes the following:

·    supporting the Chairman in his role;

·    acting as an intermediary for other Directors where necessary;

·    being available for shareholders and other non-executives to discuss any questions or concerns; and

·    assisting with the performance evaluation and succession planning of the Chairman's role.

The Board has not deemed it necessary to appoint a separate nomination committee and therefore the role typically undertaken by such a committee is currently conducted by the Board as a whole. The rules governing the appointment and replacement of Directors are set out in the Company's Articles.

The Directors have overall responsibility for reviewing the size, structure and skills of the Board and considering whether any changes are required, or new appointments are necessary to meet the requirements of the Company's business or to maintain a balanced Board.

Similarly, the Company does not have a separate remuneration committee, as the Board as a whole fulfils the function of a remuneration committee, which includes the review on at least an annual basis of the remuneration of the Directors in accordance with the Company's remuneration policy and market information.

The Listing Rules regarding diversity do not directly apply to the Company since it is a member of the Specialist Fund Segment, however, the Board is currently 40% female. It is important to preserve the current knowledge and experience of the Board but further consideration will be given on a voluntary basis to diversity guidelines during the course of implementing any future succession plans.

The Board has additionally formulated the following policies and procedures to assist them to comply with the AIC Code:

Independence

All the non-executive Directors are currently considered by the Board to be independent of the Company, Investment Manager and the Tufton Group and have been Directors for eight years or less. The Board's current policy on tenure, including that of the Chairman, is that continuity and experience are considered to add significantly to the strength of the Board. New Directors receive an induction from the Investment Manager and the Administrator on joining the Board, and all Directors receive other relevant training as necessary on their on-going responsibilities in relation to the Company.

Environmental, Social and Governance

For further details of the Company's approach to ESG matters, please see the Report of the Directors and the Investment Manager's Report, together with the Company's Sustainability Report which is published on its website, (www.tuftonoceanicassets.com).

Diversity and Inclusion Policy

The Company supports the AIC Code provision that the Board should consider the benefits of diversity when making appointments and is committed to ensuring it receives information from the widest range of perspectives and backgrounds. The Board is committed to creating a diverse and inclusive environment where all individuals feel respected, and where their voices are heard. The Board believes that diversity of gender, age, ethnicity and personal attributes, amongst others, contribute to a balanced and more productive Board.

The Board is committed to being non-discriminatory and firmly believes in equal opportunities for all, with board appointments being made on merit against a set of objective criteria.

However, while the Board agrees diversity should be sought when making appointments, it does not consider that this can be best achieved by establishing specific quotas and targets and appointments are therefore based wholly on merit. Accordingly, when changes to the Board are required, due regard is given to both the need for and importance of diversity and to a comparative analysis of candidates' qualifications and experience.

A pre-established, clear, neutrally formulated and unambiguous set of criteria are utilised during the appointment process to determine the most suitable candidate for the specific position sought. In each case, the Board ensures that candidates are considered from a wide range of backgrounds.

UK Companies Act 2006 - Section 172 Statement

Whilst directly applicable only to UK domiciled companies, the intention of the AIC Code which is followed by the Company is that the following matters set out in section 172 of the UK Companies Act, 2006 are reported on by all companies, irrespective of domicile, provided this does not conflict with local company law.

Therefore, through adopting the AIC Code, the Board acknowledges its duty to apply and demonstrate compliance with section 172 of the UK Companies Act 2006 and to act in a way that promotes the success of the Company for the benefit of its shareholders as a whole, having regard to (amongst other things):

·    the consequences of any decision in the long term;

·    the need to foster business relationships with suppliers, customers and others;

·    the impact of the Company's operations on the community and the environment;

·    the desirability of the Company maintaining a reputation for high standards of business conduct; and

·    the need to act fairly as between members of the Company.

The Board regularly reviews the Company's principal stakeholders and how the Company engages with them. Stakeholder voices are considered at Board level and reflected in board decision making through reporting provided to the Board by the Brokers and the Investment Manager, together with engagement with stakeholders themselves either directly or through the above-mentioned parties.

The Company is an externally managed investment company, has no employees, and as such is operationally quite simple. The Board does not believe that the Company has any material stakeholders other than those set out in the following table.

Engagement processes are kept under regular review. Investors and other interested parties are encouraged to contact the Company via the Company Secretary or [email protected] on these or any other matters.

Statement of Directors' Responsibilities

The Directors are responsible for preparing an Annual Report and Audited Financial Statements for each FY which give a true and fair view, in accordance with applicable law and regulations, of the state of affairs of the Company and of the profit or loss of the Company for that year.

Companies Law requires the Directors to prepare financial statements for each FY. Under that law the Directors have elected to prepare the financial statements in accordance with IFRS accounting standards as issued by the International Accounting Standards Board ("IASB").

In preparing financial statements the Directors are required to:

·     select suitable accounting policies and then apply them consistently;

·     make judgements and estimates that are reasonable and prudent;

·     state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·     prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Company's website is maintained by the Investment Manager in co-operation with Hudnall Capital. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time, the financial position of the Company and enabling them to ensure that financial statements comply with the Companies Law. The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the Directors confirms that, to the best of their knowledge:

·     they have complied with the above requirements in preparing the financial statements;

·     there is no relevant audit information of which the Company's Auditor is unaware;

·     all Directors have taken the necessary steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditor is aware of said information;

·     the financial statements, prepared in accordance with IFRS Accounting Standards and applicable laws, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

·     the Annual Report includes a fair and balanced review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.

The AIC Code, as adopted by the Company, also requires Directors to ensure that Annual Reports and Audited Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter the Board has requested that the Audit Committee advises on whether it considers that this Annual Report and Audited Financial Statements fulfil these requirements. The process by which the Audit Committee has reached these conclusions is set out in the Audit Committee Report on pages 47 to 49.

Furthermore, the Board believes that the Annual Report and Audited Financial Statements provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

Having taken into account all matters considered by the Board and brought to the attention of the Board for the year ended 30 June 2024, as outlined in the Corporate Governance Statement and the Audit Committee Report, the Board has concluded that the Annual Report and Audited Financial Statements for the year ended 30 June 2024, taken as a whole, are fair, balanced and understandable and provide the information required to assess the Company's performance, business model and strategy.

…………………………                         …………………………

Rob King                                              Stephen Le Page

Director                                                Director

Report of Directors

The Directors present their Annual Report and the Audited Financial Statements of the Company for the year ended 30 June 2024.

The Company was registered in Guernsey on 6 February 2017 and is a registered closed-ended investment scheme under the POI Law. The Company's shares were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange on 20 December 2017 under the ticker SHIP.

Investment Objective and Policy

The Company's investment objective is to provide investors with an attractive level of regular and growing income and capital returns through investing in secondhand commercial sea-going vessels. The Board monitors the Investment Manager's activities through strategy meetings and discussions as appropriate. The Company has established a wholly-owned subsidiary that acts as a Guernsey holding company for all its investments, LSA, which is governed by the same Directors as the Company.

On 17 January 2024 the Company announced the results of a strategy review carried out by the Board in conjunction with the Investment Manager. This review did not result in any change to the above Objective or Policy, but did clarify the basis on which capital allocation decisions would be made through to the end of the decade.

All vessels acquired, vessel-related contracts and costs will be held by SPVs domiciled in the Isle of Man or other jurisdictions considered appropriate by the Company's advisers. The Company conducts its business in a manner that results in it qualifying as an investment entity (as set out in IFRS 10: Consolidated Financial Statements) for accounting purposes and as a result applies the investment entity exemption to consolidation. The Company therefore reports its financial results on a non-consolidated basis.

Subject to the solvency requirements of the Companies Law, the Company intends to pay dividends on a quarterly basis. The Directors expect the dividend to grow, in absolute terms, modestly over the long term. The Company raised its target annual dividend to US$0.10 per share starting 1Q24 (previously US$0.085 per share).

The Company aims to achieve an IRR of 12% or above (net of expenses and fees) on the Issue Price over the long term.

Shareholder information

Up to date information regarding the Company, including the quarterly announcement of NAV, can be found on the Company's website, which is www.tuftonoceanicassets.com and is maintained by the Investment Manager.

The Company has a 30 June financial year end.

Share issues and buybacks

The Company has not issued any shares in the year ended 30 June 2024 nor in the period to 25 September 2024. On various occasions during the year ended 30 June 2024 the Company purchased a total of 11,386,000 shares at a weighted average price of US$1.014. Since 1 July 2024 to 25 September 2024, 20,326,211 shares have been bought back via a compulsory Redemption at an effective price of US$1.550.

Accordingly, the Company had 270,756,330 shares in issue on 15 August 2024 and as at the date of signing these financial statements. All shares repurchased are held in treasury.

Results and dividends

The Company's performance during the year is discussed in the Chairman's Statement on page 3. The results for the year are set out in the Statement of Comprehensive Income on page 57.

The Directors of the Company who served during the year and to date are set out on pages 35 to 36.

Directors' interests

The Directors held the following interests in the share capital of the Company either directly or beneficially as at 30 June 2024, and as at the date of signing these financial statements:

1      Further to the announcement on 15 August 2024 in relation to the compulsory Redemption of the Company's ordinary shares, the Directors have each had Shares redeemed.

The Directors fees are as disclosed below:

Directors' Attendance

Attendance of Directors at each meeting held during the year:

Other Interests

Tufton Group related stakeholders including current & former shareholders, employees, and non-executive directors directly or beneficially held ~4.9% of the issued share capital as at 30 June 2024 (FY 2023: ~3.7%). Refer to note 15 for details on ordinary shares held and note 7 for rights and obligations of the Company's shares.

Share buyback and discount management

Subject to working capital requirements, and at the absolute discretion of the Board, excess cash may be used to repurchase shares. The Directors may implement share buybacks at any time before the 90-day guideline set out in the Prospectus where they feel it is in the best interest of the Company and all shareholders. The Board will consider repurchasing the Company's ordinary shares in the market if they believe it to be in shareholders' interests as a whole and as a means of correcting any imbalance between supply of and demand for the shares.

The Company purchased 11,386,000 of its own shares at a weighted average price of US$1.014 per share during the FY, for a total consideration of US$11,573,679. The purchased shares are held in treasury. Refer to Note 7 for more details. There were 17,546,000 shares held in treasury and 291,082,541 shares outstanding as at the end of the FY.

Companies Law allows companies to hold shares acquired by way of market purchase as treasury shares, rather than having to cancel them. These treasury shares may be subsequently cancelled or sold for cash. Therefore, it is agreed that any shares repurchased pursuant to the general authority referred to above may be held by the Company in treasury, to the extent permitted by Companies Law.

The Company wishes to operate a buyback programme that is effective and also adds value for shareholders. As such, unless authorised by shareholders, no shares will be sold from treasury at a price less than the NAV per share at the time of the sale unless they are first offered pro rata to existing shareholders. 

Change of Articles and Compulsory Redemption

The Directors to allot and issue shares, to grant rights to subscribe for or to convert any security into shares and to make offers or agreements to allot and issue equity securities (as defined in Article 5.1(a) of the Articles) for cash and/or to sell Ordinary Shares held by the Company as treasury shares as if the pre-emption rights contained in Article 5.2 of the Articles.

A resolution was passed by the Company's shareholders at its Extraordinary General Meeting on 11 June 2024 to enable compulsory Redemptions of the Company's ordinary shares. On 14 August 2024 the Company compulsorily redeemed 20,326,211 shares at a price of US$1.550 per share for close of business for cancellation, returning US$31.5m to shareholders, paid on 28 August 2024. The Company had 270,756,330 shares outstanding as at the date of approval of these accounts.

Board Responsibilities and Corporate Governance

Please note the Corporate Governance Statement on pages 25 to 29 forms part of this report.

Board Members

The Company's Board of Directors comprises five independent non-executive Directors. The Board's role is to manage and monitor the Company in accordance with its objectives. The Board monitors the Company's adherence to its investment policy, its operational and financial performance and its underlying assets, as well as the performance of the Investment Manager and other key service providers.

In addition, the Board has overall responsibility for the review and approval of the Company's NAV calculations and financial statements. It also maintains the Company's risk register, which it monitors and updates on a regular basis. The Directors of the Company who served during the year are listed below.

Robert King, Chairman

Rob serves on a number of boards as an independent non-executive director which includes an International Stock Exchange listed fund, Golden Prospect Precious Metals Limited (which also has a trading listing on the LSE). 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, Chairman of Audit Committee

A chartered accountant and chartered tax adviser. He was a partner at PricewaterhouseCoopers CI LLP in the Channel Islands from 1994 until his retirement in September 2013. He 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.

Stephen serves on a number of boards as a non-executive director, including acting as chairman of the audit committee for two other London listed funds, Volta Finance Limited and Amedeo Air Four Plus Limited and one International Stock Exchange listed company, Channel Islands Property Fund Limited. Stephen is British and resident 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. Paul was managing director at BNP Paribas and co-head of its EMEA Shipping and Offshore business between 2010 and 2015. He was also head of risk monitoring for Global Shipping at BNP Paribas.

Prior to that, Paul 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. Paul Barnes is British and resident in the United Kingdom. Paul chairs the recently formed Management Engagement Committee.

Christine Rødsaether

Christine is a partner in law firm Simonsen Vogt Wiig, with more than 35 years' experience advising clients in the international shipping and offshore sectors, in relation to design, construction, operation, financing, sale and purchase of vessels and offshore installations, restructuring and reorganisation of companies and financing of assets, representing major international financiers. Previously, she was a partner in Andersen Legal ANS and a lawyer at Wikborg, Rein & Co. Christine has extensive board experience, and currently serves on the boards of OSE listed chemical tanker and tank terminals owner and operator Odfjell SE and privately owned Mosvolds Rederi and Lufttransport Adm. AS. Christine is Norwegian and is resident in Norway.

Katriona Le Noury ("Trina") - appointed 1 November 2023

Trina is a qualified chartered accountant with more than 20 years' experience working in the funds industry. Before becoming an independent non-executive director in 2023, she held senior management positions at two separate Private Equity firms, including holding directorships on the respective firms' fund General Partner boards. She currently serves on the board of JPEL Private Equity Limited and Fair Oaks Income Limited, both London listed investment companies, as well as four private companies for a leading global private equity firm and two not-for-profit organisations. Trina is British and a resident in Guernsey.

Conflicts of Interest

None of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements at the date of this report and none of the Directors has or had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company, and which was affected by the Company during the year. At the date of this report, there are no outstanding loans or guarantees between the Company and any Director.

Share Dealing Code

The Company has adopted a share dealing code, in conformity with the requirements of the Listing Rules and the EU Market Abuse Regulation and takes steps to ensure compliance by the Board and relevant senior staff with the terms of the policy.

Appointment, re-election and remuneration of Directors

As stated within the Corporate Governance Statement, due to the Board's size, the Board has not deemed it necessary to appoint a separate nomination committee and therefore the role typically undertaken by such committee is currently conducted by the Board as a whole. The rules governing the appointment and replacement of Directors are set out in the Company's Articles. The Articles also require that at each annual general meeting, all the Directors will submit themselves for re-election. The Directors have overall responsibility for reviewing the size, structure and skills of the Board and considering whether any changes are required, or new appointments are necessary to meet the requirements of the Company's business or to maintain a balanced Board.

This is formally considered annually at the time of the Board, Chairman and Directors' annual performance appraisals.

When considering new appointments, the Board ensures that a diverse group of candidates is considered and that appointments are made against objective criteria, in accordance with the Company's Diversity & Inclusion Policy. In the process to recruit Ms Trina Le Noury to the Board the services of OSA Recruitment Limited, an independent third-party consultant, were employed to compile a list of candidates for the Board's consideration. Initial interviews were carried out by the Guernsey resident directors and second interviews were carried out by the rest of the Board using video conferencing facilities. At the end of the selection process Ms Le Noury was identified as the most suitable candidate for appointment to the Board. The Board have been briefed by their legal advisers about their on-going responsibilities as directors and Ms Le Noury participated in a formal induction process. It is the Board's intention that a similar process will be followed for future appointments.

The Company does not have a separate remuneration committee as the Board as a whole fulfils the function of a remuneration committee, which includes the review on at least an annual basis of the remuneration of the Directors in accordance with the Company's remuneration policy and market information. The Company's policy is for Directors to be remunerated in the form of fees which are paid quarterly in arrears. No element of the Directors' remuneration is performance-related, and no Director is involved in setting his or her own remuneration.

Fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Board and should be sufficient to enable high calibre candidates to be recruited to the Board, ultimately contributing to a composition of the Board that is balanced and effectively discharges stewardship of the Company's affairs.

Annual performance appraisal

The performance of the Board, committees and individual Directors have been formally and rigorously evaluated by a self-assessment process coordinated by the Administrator who circulates the findings to the Board. This evaluation is performed annually. The last annual review took place in June 2024 with the next annual review taking place in June 2025. Evaluation of the Chairman is led by the Chairman of the Audit Committee, who carries out the functions of a senior independent director.

Audit Committee

The Board delegates certain responsibilities and functions to the Audit Committee. Stephen Le Page is the chairman of the Company's Audit Committee which also includes Paul Barnes, Trina Le Noury and Christine Rødsaether.

In discharging its responsibilities, the Audit Committee will review the annual and half yearly financial statements, the risks to which the Company is subject, the system of internal controls, and the terms of appointment and remuneration of the Independent Auditor. It is also the forum through which the Auditor reports to the Board. The Audit Committee is expected to meet at least twice a year.

The objectivity of the Independent Auditor will be reviewed by the Audit Committee, which will also review the terms under which the Independent Auditor is appointed to perform non-audit services. The Audit Committee will review the scope and results of the audit, its cost effectiveness, quality of work and the independence and objectivity of the Auditor, with particular regard to non-audit services and fees.

Appointment, re-election and remuneration of Directors

The members of the Audit Committee consider that they collectively have the requisite skills and experience to fulfil the responsibilities of the audit committee. Given Mr Le Page's skills and financial experience, the Board has satisfied itself that at least two members of the Audit Committee has recent and relevant financial experience.

Other Committees

The Company formed a Management Engagement Committee chaired by Paul Barnes in 2023, which also includes Stephen Le Page, Rob King, and Christine Rødsaether.

The functions of the Management Engagement Committee are to review annually the compliance by the Investment Manager with the Company's investment policy as established by the Board and with the Investment Management Agreement ("IMA") entered into between the Company and the Investment Manager; and to review annually the performance and remuneration of any other service providers to the Company.

During the year, the Committee has reviewed the contractual relationship with and the performance of all the service providers to the Company, and in particular the Investment Manager. As part of the review process, the Committee concluded that service providers are performing in accordance with the Company's expectations and contractual arrangements, and that their continued appointment is in the best interests of shareholders.

Operation of the Board

It is the responsibility of the Board to ensure that there is effective stewardship of the Company's affairs. A formal schedule of matters reserved for decision of the Board has been adopted. This includes the following items:

·    changes to the structure, size and composition of the Board,

·    the appointment of directors to specified offices of the Board, including the Chairman and senior independent director,

·    board succession planning, training, development and evaluation,

·    overall leadership of the Company and setting values and standards, and

·    on-going review of the Company's Investment strategy, investment objectives and investment policy.

The Board and Investment Manager work closely together, with the Investment Manager attending and presenting at quarterly Board meetings. At each of these meetings the Board assess, discuss and challenge the Investment Manager's performance in terms of investment performance, risk and the management and impact of operational issues within the portfolio. During the current period, the Board has not identified any issues with the Investment Manager's performance.

The Board meet at least quarterly to review the overall business of the Company and to consider the matters specifically reserved for it. The quorum at Directors' meetings is two Directors present in person or by telephone and they are held in Guernsey.

Detailed information is provided by the Investment Manager, Asset Manager and Administrator for these meetings and additionally at regular intervals to enable the Directors to monitor compliance with the investment objective and the investment performance of the Company both in an absolute and relative sense. Overall Company strategy is discussed in detail at quarterly meetings of the Board of Directors and at ad hoc board meetings when required. Directors also have the opportunity to discuss these and any other matters with the Investment Manager outside of the Board of Directors meetings as appropriate.

The Directors are provided with standard papers in advance of each quarterly meeting to allow the review of several key areas including the Company's investment activity over the quarter relative to its investment policy; the global shipping industry; the revenue and financial position; gearing, performance; share price discount or premium (both absolute levels and volatility); and relevant industry and macro-economic issues.

The Board also receive quarterly reports analysing and commenting on the composition of the Company's share register and monitoring significant changes to shareholdings.

Independent Auditor

The Audit Committee is responsible for overseeing the Company's relationship with the Independent Auditor, including making recommendations to the Board on the appointment of the Independent Auditor and their remuneration. PricewaterhouseCoopers CI LLP ("PwC") was originally appointed as the Company's Independent Auditor on 20 December 2017.

The Auditor, PwC, has indicated its willingness to remain in office. A resolution for the reappointment of PwC was proposed and approved at the AGM on 24 October 2023. Another resolution for their appointment will be proposed at the AGM on 24 October 2024.

Service Providers

The Investment Manager / Alternative Investment Fund Manager ("AIFM")

Tufton Investment Management Ltd, a specialist investment manager in maritime markets since 2000, has been appointed as the Investment Manager. Since its inception in 1985, the Investment Manager has been focused on financial services to this industry.

As of 30 June 2024, the Investment Manager manages investments of c.US$0.8 billion and mandated capital of c. US$1.5 billion. Whilst the Board has responsibility for all the strategic decision making (including acquisitions, disposals, financing, capital expenditure, charters and other material contracts) required by the Company, matters concerning the operations of the vessels (within the approved budgets and parameters set by the Board for the Company and the SPVs) are delegated to the Investment Manager.

As of 30 June 2024, the Tufton Group of which the Investment Manager is part, had 29 employees operating from offices in London, Isle of Man and Cyprus. The Investment Manager is fully dedicated to the shipping industry with in-house research and dedicated Asset Manager providing services to each vessel purchased.

As described in the Prospectus, the Investment Manager has an established track record in managing segregated mandates for pension funds with similar investment objectives to those of the Company. The Investment Manager's employees have significant experience of investing and financing in the shipping industry. Each member of their Investment Committee has between 20 and 40 years of experience in the maritime financial markets either from investment banking, commercial banking or from the vessel owning/operating perspective.

The Investment Manager's role encompasses the identification of appropriate transaction opportunities, conducting necessary due diligence, making recommendations to the Board and completing the proposed transactions on behalf of the Company.

The Investment Manager (in conjunction with the Asset Manager) will also monitor the performance of the Company's portfolio. The Investment Manager, which acts as the Company's AIFM under the AIFMD, is authorised and regulated by the FCA.

Investment Committee

The Investment Manager has established an Investment Committee.

Each investment proposal is reviewed by the Investment Committee which meets on a weekly basis. In reviewing each potential investment, the Investment Committee considers a range of factors including a detailed analysis of the vessel's technical condition and other analyses from the Asset Manager, a full risk/reward analysis, downside stress testing, commercial/employment strategy, effects of adding moderate leverage in accordance with Company policy, market outlook, credit quality of charterer, market reputation of counterparties, deal modelling, exit strategy and any macro analysis that might be necessary to fully understand the investment. The Investment Manager is committed to Responsible Investment and integrates ESG factors into its investment process. The Investment Manager reviews the environmental footprint of new vessel acquisitions as well as KPIs of technical managers on safety and fulfilling regulatory requirements. Should the Investment Committee be in favour of an acquisition, an appropriate recommendation will be made to the Board who would ultimately determine whether an acquisition should be made.

Asset Manager

Tufton Management Limited was established in 2009 to act as the Asset Manager for vessels owned by funds and investment vehicles managed or advised by Tufton Group.

The Asset Manager subcontracts technical services from associated company Tufton Asset Management Limited, based in Cyprus, which employs professionals who have experience in all aspects of ship management including special surveys, maintenance, repair and negotiation of commercial agreements for vessel employment and provides the services detailed in the Prospectus.

The Asset Manager enters into an asset management agreement with each SPV and with effect from 1 July 2022 receives a fee of US$200 per vessel per day.

Administrator and Secretary

Apex Administration (Guernsey) Limited ("Apex") has been appointed as administrator and secretary to the Company, pursuant to the Administration Agreement dated 27 February 2017 and to LSA, pursuant to the Administration Agreement dated 20 April 2018. Apex was incorporated with limited liability in Guernsey on 20 January 2010 and is licensed by the Guernsey Financial Services Commission under the Protection of Investors (POI) Law. Apex is also regulated under The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020.

The Administrator forms part of the Apex Group Ltd ("Apex Group") established in Bermuda in 2003. Apex Group is a global financial services provider which delivers an extensive range of services to asset managers, capital markets, private clients and family offices. The group employs over 13,000 staff in over 100 offices worldwide and collectively administers in excess of US$200 billion in assets.

The Administrator provides day-to-day administration services to the Company and is also responsible for the Company's general administrative and secretarial functions such as the calculation of the NAV, compliance with the Code and maintenance of the Company's accounting and statutory records.

Depositary

Apex Depositary (UK) Limited has been appointed as depositary to the Company, pursuant to the Depositary Agreement dated 4 November 2022. The role of the depositary will ensure that investment instructions from the Investment Manager comply with the Law or Constitutional Documents of the Fund. Apex Depositary (UK) Limited is an active company incorporated on 25 October 2013 with the registered office located in London. The Depositary also forms part of the Apex Group noted above.

Registrar

Computershare Investor Services (Guernsey) Limited was appointed as registrar to the Company pursuant to the Registrar Agreement dated 27 February 2017. In such capacity, the Registrar is responsible for the transfer and settlement of shares held in certificated and uncertificated form. The Register may be inspected at the office of the Registrar.

Disclosure Obligations

Shareholders are obliged to comply, from Admission, with the shareholding notification and disclosure requirements set out in Chapter 5 of the Disclosure Guidance and Transparency Rules. The Administrator will monitor disclosure with reference to changes in shareholdings.

Annual Report and Financial Statements

The Board of Directors is responsible for preparing the Annual Report and Financial Statements. The Audit Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues which may arise and any specific areas which require judgement.

Anti-bribery and corruption

The Board acknowledges that the Company's international operations may give rise to possible claims of bribery and corruption. In consideration of the UK Bribery Act the Board reviews the perceived risks to the Company arising from bribery and corruption to identify aspects of the business which may be improved to mitigate such risks.

The Board has adopted a zero-tolerance policy towards both bribery and corruption and has reiterated its commitment to carry out business fairly, honestly and openly. Since April 2019, Tufton is an active member of the Maritime Anti-Corruption Network ("MACN"), a global network to eliminate corruption in the industry.

In respect of the UK Criminal Finances Act 2017 which introduced a Corporate Criminal Offence of 'failing to take reasonable steps to prevent the facilitation of tax evasion', the Board confirms that it is committed to zero tolerance towards the criminal facilitation of tax evasion.

Modern slavery

The Company, through its Investment Manager seeks to ensure that all charter counterparties have policies and procedures which prevent any possibility of slavery or similar issues on the vessels comprising the fleet. The Investment Manager has such policies and procedures in its own right which govern the ship management contracts used to appoint technical managers.

General Data Protection Regulation ("GDPR")

The Board, through enquiry of its service providers, has ensured that the requirements of GDPR and its equivalent legislation in the UK and Guernsey, are met by them when they process any data on behalf of the Company.

Alternative Investment Fund Managers Directive ("AIFMD")

The Investment Manager, Tufton Investment Management Ltd, has been authorised by the FCA as a Full Scope Registered UK AIFM under the AIFMD. The funds managed by the AIFM, including the Company, are now defined as Alternative Investment Funds and are subject to the relevant articles of the AIFMD.

The Company notes that while AIFMD no longer binds the UK in its implementation, a domestic regime has been put in place regulating the management and marketing of AIFs in the UK, which generally maintains the AIFMD rules as implemented at the end of the transition period with respect to the UK's departure from the European Union on 31 December 2020.

Internal control and financial reporting

The Board is responsible for establishing and maintaining the system of internal controls required by the Company's operations. These internal controls are undertaken by the service providers. Internal control systems are designed to meet the specific needs of the Company and the risks to which it is exposed, and, by their very nature, provide reasonable, but not absolute, assurance against material misstatement or loss.

The key procedures which have been established to provide effective internal controls include:

·     Apex Administration (Guernsey) Limited ("Apex") is responsible for the provision of administration, accounting and company secretarial duties. Apex also provides compliance oversight in respect of the Company and its activities. As the Company itself has no IT systems and relies on the IT systems of its service providers, Apex additionally has a role in cyber security and the protection of the Company's data through the operation of Information Security Protection Controls. Apex staff are also regularly trained in order to minimise the risk of an accidental data breach;

·     Tufton Investment Management Ltd is the Investment Manager and provides portfolio management and risk management services to the Company. It is also the AIFM for the purposes of AIFMD;

·     Tufton Management Limited, an affiliate of the Investment Manager, provides Asset Management services to each underlying SPV;

·     Tufton Corporate Services, an affiliate of the Investment Manager, provides administration, accounting and company secretarial services for the SPVs;

·     Computershare Investor Services (Guernsey) Limited is responsible for the provision of Registrar services;

·     the Board clearly defines the duties and responsibilities of the Company's agents and advisers in the terms of their contracts;

·     the Board receives assurances from the Company's agents and advisers that any amendments required as a result of regulatory change, are actioned accurately and promptly; and

·     the Board reviews financial information and compliance reports produced by the Administrator on a regular basis.

The Board and Audit Committee have reviewed the Company's risk management and internal control systems and believe that the controls are satisfactory given the size and nature of the Company.

Responsible Investment, Sustainability and ESG Policy

The Company's 2023 Sustainability Report can be found on the Company's website, (www.tuftonoceanicassets.com).

The Sustainability Report sets out the combined approach of the Investment Manager and the Company to the integration of sustainability risks and responsible investment principles in its investment decision making and asset ownership practices. The Investment Manager seeks to align the Company's strategy with best practices and market standards in all ESG and Responsible Investment matters.

The Investment Manager believes upholding high standards of ESG and responsible investment principles and practices are an essential tool for managing the risks presented by challenges such as climate change, social inequality and human rights issues, delivering long-term value and positive returns for the Company's shareholders as part of the Company's investment objectives, and ensuring the continued sustainability of shipping as a whole.

The Sustainability Report includes further details on the Company's approach to stakeholder engagement, human rights and anti-bribery practices, together with how the activities of the Company are aligned with recognised ESG standards such as the UN's Sustainable Development Goals. In accordance with the Policy, the Directors have requested that the Investment Manager consider the broader social, ethical and environmental issues of the vessels within the Company's portfolio, acknowledging that companies failing to manage these issues adequately run a long-term risk to the sustainability of their businesses and that this reflects stakeholders' views.

More specifically, the Board expect companies to demonstrate ethical conduct, effective management of their stakeholder relationships, responsible management and mitigation of social and environmental impacts, as well as due regard for wider societal issues.

The Directors along with the Investment Manager recognise the value of integrating principles of Responsible Investment into the investment management process and ownership practices in the belief that this can have an impact on long-term financial performance. The Sustainability Report has further information on how the Investment Manager practically implements and considers the Policy when making investment decisions.

Viability statement

The Board, in assessing the long-term viability of the Company, has paid particular attention to the Principal Risks and Uncertainties faced by the Company as disclosed on pages 20 to 23 of these financial statements. The Company is also required to hold a continuation vote at the AGM to be held 24 October 2024. Notwithstanding this, the Board have determined that a three-year viability period is the most appropriate for viability testing since they are advised by their corporate brokers that the shareholders are unlikely to vote for discontinuation. The Board has considered the cashflow-weighted average length of its charters. In addition, the Board has considered the cash flow projection for the running costs of the Company to ensure the Company retains sufficient cash to meet its operating costs until the end of the viability period and is therefore able to sustain its business model and structure, including the payment of dividends at the announced target level.

The Board has also considered the cash flow projections for the Company and its SPVs in two market stress scenarios. The Board has considered the results of a viability test wherein the primary sensitivity of an extended period of market stress results in time charter rates staying below the historic median levels over the entire three-year forecast period. The most extreme scenario modelled resulted in unrestricted cash balances being exhausted in late 2025, but in the very remote event of such a cash shortage arising this would be addressed through one or all of the following significant actions: the sale of the Gas Tanker Neon after completion of its current charter in mid-2025, the deferral of discretionary capital expenditure, and/or the deferral or reduction of any dividend payment.

These scenarios allow for consistently low charter rates and even charter default. The Directors have also assumed that given the Company's recent level of performance, it is reasonable to assume that the continuation vote will be passed. As a result, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due and that the business model will remain applicable during the viability period.

Going concern

In assessing the going concern basis of accounting the Directors have, together with discussions and analysis provided by the Investment Manager, had regard to the guidance issued by the Financial Reporting Council. They have considered the possible impact of recent market volatility and geopolitical events on the current and future operations of the Company and its investments. Cash reserves are held at the LSA and SPV levels and rolled up to the Company as required to enable expenses to be settled as they fall due.

The Company is required to hold a vote on the Continuation of the Company at the AGM on 24 October 2024. During the year the Investment Manager and Brokers engaged major shareholders regarding their voting intentions, and as a result of these discussions and given the positive performance of the Company for its life to date, the Directors hold the view that the Continuation Vote will be for the Company to continue its operations. In the event the vote does not pass, the Board have six months in which to bring forward proposals for the future of the Company.

The Directors are satisfied that, at the time of approving the financial statements, no other material uncertainties exist that may cast significant doubt concerning the Company's ability to continue for the foreseeable future concluding that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. For these reasons, the Directors continue to adopt the going concern basis in preparing the financial statements.

Further Details of Continuation Vote

In accordance with the prospectus published 25 September 2018, the Directors will propose an ordinary resolution at the annual general meeting to be held 24 October 2024 that the Company continues its business (a "Continuation Resolution"). If this Continuation Resolution is passed, then the Directors shall every three years thereafter at the annual general meeting held, following the publication of the audited accounts, propose a further Continuation Resolution.

Shareholders' significant interests

The following shareholders had notified to the Company a substantial interest of 5% or more of the issued share capital as at 30 June 2024.

The Directors place a great deal of importance on communication with shareholders. They request regular updates from the Company's Brokers and financial advisers on their communications with shareholders. They can also be contacted via the email address provided in the Chairman's Statement.

The Annual Report and Audited Financial Statements are also distributed to other parties who have an interest in the Company's performance. Additional information on the Company can be obtained through the website www.tuftonoceanicassets.com, which is maintained by the Investment Manager.

The Notice of the Annual General Meeting is included within the Annual Report and Audited Financial Statements and is sent out at least 20 working days in advance of the meeting, in accordance with the AIC Code. All shareholders have the opportunity to put questions to the Board or the Investment Manager formally at the Company's Annual General Meeting.

The Company Secretary and Investment Manager are available to answer general shareholder queries at any time throughout the year. The Company can be contacted via the Company Secretary or [email protected].

The Company confirms that there is no information that is required to be disclosed under Listing Rule 9.8.4.

Approved by the Board of Directors on 25 September 2024 and signed on behalf of the Board by:

…………………………                         …………………………

Rob King                                              Stephen Le Page

Director                                                Director

Audit Committee Report

Chairman's introduction

I am pleased to present to you the Audit Committee report prepared in accordance with the current AIC Code, which reflects the UK Corporate Governance Code to the extent that it is applicable to investment companies.

The terms of reference for the committee are available on the Company's website, www.tuftonoceanicassets.com. During the year ended 30 June 2024 and to the date of this report, the main areas of activity have been as follows:

·     reviewing and assessing the Principal Risks and Uncertainties (as set out on pages 20 to 23);

·     reviewing the accounting policies for the Company to ensure they remain appropriate for the preparation of the Company's Annual Report and Audited Financial Statements;

·     reconsidering the areas of judgment or estimation arising from the application of International Financial Reporting Standards to the Company's activities and the documentation of the rationale for the decisions made and estimation techniques selected, to ensure they remain appropriate;

·     meeting with the Independent Auditor, PwC, to review and discuss their independence, objectivity and proposed scope of work for their audit of this Annual Report;

·     meeting with the Company's principal service providers to review the controls and procedures operated by them to ensure that the Company's risks are properly managed and that its financial reporting is complete, accurate and reliable; and

·     reviewing in detail the content of this Annual Report, the work of the service providers in producing it and the results of the external audit.

Membership and Role of the Committee

The Board has delegated certain responsibilities and functions to the Audit Committee. Stephen Le Page is the chairman of the Company's Audit Committee which also includes Paul Barnes, Trina Le Noury and Christine Rødsaether. In discharging its responsibilities, the Audit Committee will review the annual and half yearly financial statements, the risks to which the Company is subject, the system of internal controls, and the terms of appointment and remuneration of the Independent Auditor. It is also the forum through which the Auditor reports to the Board. The Audit Committee is expected to meet at least twice a year.

The Committee discharges its responsibilities through a series of scheduled meetings, the agendas of which are linked to events in the financial calendar of the Company. The Committee met two times during the year ended 30 June 2024 and once more since the year end. The Independent Auditors attended all of these meetings.

Internal control

The Board reviews the internal controls of the Company's service providers, who are required to establish and maintain appropriate systems of internal control, by reviewing regular reports from the service providers. The Board also ensures segregation of duties between the service providers.

In addition, the Board seeks to make visits to certain service providers periodically to assess their organisation and culture and to meet the individuals responsible for key functions. The Audit Committee, and particularly the Chairman of the Committee, also closely monitors the financial reporting process and the tasks undertaken in the production of the Annual Report.

This has involved discussions with the Administrator of the Company, the administrator of the Isle of Man SPVs and the Investment Manager.

Review of accounting policies and areas for judgment or estimation

These financial statements reflect the application of the accounting policies and estimation techniques originally set out in the Company's Prospectus for its IPO in December 2017. The Audit Committee confirms that they are still considered to be appropriate.

In particular, the following are the significant issues that the Audit Committee considered relating to the financial statements:

·     the application of IFRS 10 - Consolidated Financial Statements ("IFRS 10") to the Company, on page 63;

·     the detailed approach to arriving at the estimate of fair value for each vessel, SPV and the Guernsey holding company, LSA; and

·     the determination of the Company's viability and the applicability of the going concern assumption, on page 44 and 45.

These financial statements reflect the outcome of those discussions. In addition, the Independent Auditor's proposed scope of work in connection with these areas and the statements in general was agreed.

Fair value estimation

The majority of the NAV of the Company is derived from the fair value of the vessels owned by the Company's indirect SPV subsidiaries, which are themselves held by the Company's subsidiary, LSA. The Company has chosen to use values provided by the Investment Manager, which uses valuation techniques appropriate to each vessel, as its best estimate of fair value. For the majority of the fleet this comprises values sourced from VesselsValue. Exact details of the valuation techniques applied to the vessels and of how the Company's NAV is derived is given in Note 12 to these financial statements.

The Committee has paid particular regard to evaluating these techniques to ensure they are in accordance with market methodology, based on accurate information, reliable and appropriate. The sensitivity of these valuations to various input assumptions is given in Note 12, to enable readers of these financial statements to make their own assessment of the carrying values.

The Committee is satisfied that these techniques are reasonable and appropriate for use in the preparation of these financial statements.

Performance fee

Per the terms of the IMA, the Company accrues performance fees based on the size of the investment and the continued performance throughout the FY. The accrual at year end is US$nil (2023: US$nil). The Board reviews and approves the calculation.

External audit

During the year ended 30 June 2024, and up to the date of this report, the Committee held formal meetings with the Independent Auditor on two occasions, and in addition the Chair of the Committee has spoken to them informally on several occasions. These informal conversations have been held to ensure the Chairman is kept up to date with the progress of the audit work, and that the Independent Auditor's formal reporting meets the Committee's needs.

The formal meetings included detailed reviews of the proposed fees and scope of the work to be performed by PwC in their audit for the year ended 30 June 2024. They also included detailed reviews of the results of this work, and the audit findings and observations. I am pleased to report that there are no matters arising from the Independent Auditor's work which should be brought to the attention of shareholders.

The Committee has also reviewed PwC's report on PwC's own independence and objectivity, including the level of non-audit services provided by them. There were no non-audit services carried out during the year.

The Committee has therefore concluded that PwC is independent and objective, carries out its work to a high standard, and provides concise but useful reporting. The committee notes, following PwC rotation rules, Ross Burne has been appointed the new engagement leader. Accordingly, the Committee has recommended a resolution for their appointment to be proposed at the AGM on 24 October 2024.

Annual report

The Committee members have each reviewed this Annual Report and earlier drafts of it in detail, comparing its content with their own knowledge of the Company, reporting requirements and shareholder expectations. Formal meetings of the Committee have also reviewed the report and its content and have received reports and explanations from the Company's service providers about the content and the financial results.

The Committee has concluded that the Annual Report, taken as a whole, is fair, balanced and understandable, and that the Board can reasonably and with justification make the Statement of Directors' Responsibilities on pages 30 to 31.

…………………………

Stephen Le Page

Chairman of the Audit Committee

Independent Auditor's report to the members of Tufton Oceanic Assets Limited

Report on the audit of the financial statements

Our opinion

In our opinion, the financial statements give a true and fair view of the financial position of Tufton Oceanic Assets Limited (the "company") as at 30 June 2024, and of its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

What we have audited

The company's financial statements comprise:

●      the statement of financial position as at 30 June 2024;

●      the statement of comprehensive income for the year then ended;

●      the statement of changes in equity for the year then ended;

●      the statement of cash flows for the year then ended; and

●      the notes to the financial statements, comprising material accounting policy information and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements of the company, as required by the Crown Dependencies' Audit Rules and Guidance. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to note 2(m) in the financial statements, which indicates that the company is due to hold a continuation vote at its Annual General Meeting in October 2024. This event or condition indicates that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Our audit approach

Overview

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Key audit matters

Key audit matters are those matters that, in the auditor's professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

This is not a complete list of all risks identified by our audit.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates, and we considered the risk of climate change and the potential impact thereof on our audit approach.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2023: 75%) of overall materiality, amounting to US$6.77 million (2023: US$6.19 million) for the company financial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above US$0.45 million (2023: US$0.41 million), as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Reporting on other information

The other information comprises all the information included in the Annual Report and Audited Financial Statements (the "Annual Report") but does not include the financial statements and our auditor's report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with IFRS Accounting Standards, the requirements of Guernsey law and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

·      Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

·      Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.

·      Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

·      Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.

·      Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Use of this report

This independent auditor's report, including the opinions, has been prepared for and only for the members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Report on other legal and regulatory requirements

Company Law exception reporting

Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

●      we have not received all the information and explanations we require for our audit;

●      proper accounting records have not been kept; or

●      the financial statements are not in agreement with the accounting records.

We have no exceptions to report arising from this responsibility.

Other voluntary reporting

Corporate governance statement

The company has reported voluntary compliance against the 2019 AIC Code of Corporate Governance (the "Code") which has been endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance Code.

 Going concern

The directors have requested that we review the statement on page 45 in relation to going concern as if the company was a UK incorporated closed-ended investment fund with equity shares listed under the Closed-Ended Investment Fund category. We have nothing to report having performed our review.

The directors' assessment of the prospects of the company and of the principal and emerging risks that would threaten the solvency or liquidity of the company

The directors have requested that we perform a review of the directors' statements on pages 20 to 23 and 44 that they have carried out a robust assessment of the principal and emerging risks facing the company and in relation to the longer-term viability of the company, as if the company was a UK incorporated closed-ended investment fund with equity shares listed under the Closed-Ended Investment Fund category.

Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge and understanding of the company and its environment obtained in the course of the audit. We have nothing to report having performed this review.

 Other Code provisions

The directors have prepared a corporate governance statement and requested that we review it as though the company was a UK incorporated closed-ended investment fund with equity shares listed under the Closed-Ended Investment Fund category. We have nothing to report in respect of our agreed responsibility to report when the directors' statement relating to the company's compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.

Ross Alexander Houlihan Burne

For and on behalf of PricewaterhouseCoopers CI LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

25 September 2024

Statement of Comprehensive Income

For the year ended 30 June 2024

There were no potentially dilutive instruments in issue at 30 June 2024 or 30 June 2023.

All activities are derived from continuing operations.

There is no other comprehensive income or loss and consequently a Statement of Other Comprehensive Income has not been prepared.

The accompanying notes are an integral part of these financial statements.

Statement of Financial Position

At 30 June 2024

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
25 September 2024 and signed on its behalf by:

________________________________                            _____________________________

Rob King                                                                              Stephen Le Page

Director                                                                                Director

Statement of Changes in Equity

For the year ended 30 June 2024

The accompanying notes are an integral part of these financial statements.

Statement of Cash Flows

For the year ended 30 June 2024

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements

For the year ended 30 June 2024

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 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.

The Company's investment objective is to provide investors with an attractive level of regular and growing income and capital returns through investing in secondhand commercial sea-going vessels.

The Company had 302,468,541 ordinary shares in issue on 1 July 2023, all of which were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange. During the current year, the Company bought back 11,386,000 ordinary shares at a weighted average price of US$1.014 for a consideration of US$11,685,409. The total number of Company's shares in issue was 291,082,541 at the end of the FY.

2.    Material accounting policies

(a)   Basis of preparation

       Compliance with IFRS Accounting Standards

The financial statements have been prepared on a going concern basis in accordance with IFRS accounting standards as issued by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC"), Listing rules and applicable Guernsey law.

Historical cost convention

The financial statements have been prepared on a historical cost basis modified by the revaluation of financial assets at fair value through profit or loss. The principal accounting policies adopted, and which have been consistently applied, (unless otherwise indicated) are set out below.

Basis of non-consolidation

The Directors consider that the Company meets the investment entity criteria set out in IFRS 10: Consolidated Financial Statements. As a result, the Company applies the mandatory exemption applicable to investment entities from producing consolidated financial statements and instead fair values its investments in its subsidiaries in accordance with IFRS 13: Fair Value measurement.

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 management services;

·    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 its investments on a fair value basis.

The Directors consider that 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, as is the reporting of the Company's net asset value on a fair value basis.

(b)  New standards and interpretations not yet adopted

Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 30 June 2024 reporting periods and have not been early adopted by the Company. These standards, amendments or interpretations are not expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.

(c)  Standards, amendments and interpretations effective during the year

There are no standards, amendments to standards or interpretations that are effective for annual periods beginning on 1 July 2023 that have a material effect on the financial statements of the Company.

 (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 secondhand 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 the date the dividend is declared.

Finance income

Finance income is accounted for on an accruals basis.

(f)   Expenses

Expenses are accounted for on an accruals basis. The Company's investment management and administration fees and all other expenses are charged through the Statement of Comprehensive Income.

(g) Performance fees

Any performance fee liability is calculated on an amortised cost basis at each valuation date, with the respective expense or reversal charged through the Statement of Comprehensive Income. Refer to note 14.

(h) Dividends to Shareholders

Dividends are accounted for in the Statement of Changes in Equity in the year in which they are declared.

(i)    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. Exemption is applied and granted annually and subject to the payment of a fee, currently £1,600.

(j)    Financial assets and financial liabilities

The Company holds its investments through a subsidiary company which has not been consolidated in line with IFRS 10: Consolidated Financial Statements.

The Company classifies its investment in LSA as a financial asset at fair value through profit or loss ("FVTPL").

The Company measures and evaluates the net assets of LSA on a fair value basis. The net assets include those of the underlying SPVs which own and value all vessels on a fair value basis.

The Investment Manager reports fair value information to the Directors who use this to evaluate the performance of investments.

Recognition of financial assets and liabilities

At both the Company and the SPV level, financial assets and financial liabilities are recognised in the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. This is deemed to occur when the memorandum of agreement is signed for vessel acquisitions only.

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 indirectly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the Statement of Comprehensive Income.

Subsequent to initial recognition, investments at FVTPL are measured at fair value with gains and losses arising from changes in the fair value being recognised in the Statement of Comprehensive Income.

Financial assets at fair value through profit or loss

Financial assets are classified at FVTPL when the financial asset is held for trading. 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 investment in LSA has been measured at FVTPL on the basis that it is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented investment strategy.

The Company has not taken the option to irrevocably designate any investment in equity at fair value through other comprehensive income. The Company measures and evaluates the performance of the entire investment into LSA on a fair value basis by using the net asset value of LSA including, in particular, the underlying SPVs and the fair value of the SPVs' investments in their respective vessel assets, as well as the residual net assets and liabilities of both the SPVs and LSA itself. The investment in LSA consists of both equity and debt instruments.

In estimating the fair value of each underlying SPV (as a constituent part of LSA's net asset value at fair value), the Board has approved the valuation methodology for valuing the vessels held by the SPVs. The valuation methodology takes account of the indirect factors affecting the shipping industry including currency exchange rates, interest rates, the availability of credit, and climate change considerations.

Vessels sold before the period end for settlement/delivery afterwards, are carried at the sale price set out in the contract for sale less a provision for estimated costs of disposal (such as re-delivery costs) and the costs of liquidating the relevant SPV.

The fair value of a standard vessel 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 vessel. There are time charter contracts in place for standard vessels. Such charters will vary in length but would typically be in the 1 - 8 year range. As the shipping markets can be volatile over time, the value of such charters will therefore either add to or detract from the open market charter-free value of the vessel.

Under a time charter, the vessel owner provides a fully operational and insured vessel for use by the charterer. There is a fluid charter market reported daily by shipbrokers.

The charter-free and associated charter values of most standard vessels are calculated predominantly using an online valuation platform provided by VesselsValue or, in limited circumstances, based on a written valuation of a mainstream broker appointed by the Investment Manager. For charter-free values only, the VesselsValue 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.

       For charter values, the platform provides a Discounted Cashflow ("DCF") module where vessel specific charter details are input and measured against a platform or shipbroker-provided market benchmark to obtain a premium or discount value of the charter versus the typical prevailing market for that type of vessel. 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 expected date of its next visit, by reference to the actual cost of the last visit and the budgeted cost of the next. This 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.

       The net adjusted valuation is subject to a minimum fair value being the present value of all current contracted charter cashflows and the current vessel scrap value at the completion of the charter. The present value of the cashflows is discounted at the specific WACC assigned to the vessel type by VesselsValue adjusted for any counterparty credit risk where appropriate.

       Specialist vessels are valued on a DCF basis by the Investment Manager using vessel specific information and both observable and unobservable data. The VesselsValue platform is not used for these assets. Instead a DCF approach is adopted and this determines the present value of the cashflows discounted at the project cost of capital IRR, and is deemed to be a fair representation of the vessel and charter value.

Refer to Note 3 which explains in detail the judgements and estimates applied.

SPVs and LSA account for residual net assets and liabilities in line with the accounting policies of the Company.

       Derecognition of financial assets

The Company and the SPVs derecognise 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. For vessel purchase and sale transactions undertaken by the SPVs derecognition normally occurs at the point of delivery of the vessel to the purchaser at the SPV level.

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 any associated liability.

On derecognition of a financial asset in its entirety, gains and losses on the sale, which is the difference between the initial cost and sale value, will be taken to the profit or loss in the Statement of Comprehensive Income in the year in which they arise.

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 either as financial liabilities or as equity in accordance with the substance of the contractual arrangement. Trade and other payables are financial liabilities with fixed or determinable payments that are not quoted in an active market. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. However, given the nature of trade and other payables and the short time length involved between their origination and settlement, their amortised cost is considered to be the same as their fair value.

Derecognition of financial liabilities

The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or expire.

       Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. However, given the nature of receivables and the short time length involved between their origination and settlement, their amortised cost is considered to be the same as their fair value.

At each reporting date, the Company shall measure the loss allowance on other receivables at an amount equal to the lifetime expected credit losses if the credit risk has increased significantly since initial recognition. If, at the reporting date the credit risk has not increased significantly since initial recognition, the Company shall measure the loss allowance at an amount equal to 12-month expected credit losses.

       Trade and other payables           

       Trade and other payables that have fixed or determinable payments that are not quoted in an active market are classified as payables. Payables are measured at amortised cost using the effective interest rate method. Interest expense is recognised by applying the effective interest rate, except for short-term payables when the recognition of interest would be immaterial.

(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. In the current and prior years, 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 are purchased and is therefore considered by the Directors to be the Company's functional currency.

ii) Transactions and balances

At each financial position 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 year in which they arise.

Transactions denominated in foreign currencies are translated into US Dollars at the rate of exchange at the date of the transaction.

(m) Going concern

In assessing the going concern basis of accounting the Directors have, together with discussions and analysis provided by the Investment Manager, had regard to the guidance issued by the Financial Reporting Council. They have considered the possible impact of recent market volatility and geopolitical events on the current and future operations of the Company and its investments. Cash reserves are held at the LSA and SPV levels and rolled up to the Company as required to enable expenses to be settled as they fall due.

The Company is required to hold a vote on the Continuation of the Company at the AGM on 24 October 2024. During the year the Investment Manager and Brokers engaged major shareholders regarding their voting intentions, and as a result of these discussions and given the positive performance of the Company for its life to date, the Directors hold the view that the Continuation Vote will be for the Company to continue its operations. In the event the vote does not pass, the Board have six months in which to bring forward proposals for the future of the Company.

The Directors are satisfied that, at the time of approving the financial statements, no other material uncertainties exist that may cast significant doubt concerning the Company's ability to continue for the foreseeable future concluding that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. For these reasons, the Directors continue to adopt the going concern basis in preparing the financial statements.

(n)  Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all 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.

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 Statement of Financial Position date and the amounts reported for revenue and expenses during the year. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future years affected.

Critical judgements in applying the Company's accounting policies - IFRS 10

The audit committee considered the application of IFRS 10, and whether the Company meets the definition of an investment entity.

The Company owns the investment portfolio through its investment in LSA. The investment by LSA comprises the NAVs of the SPVs. The Company holds 100% voting shares in LSA and has all the characteristics of an investment company. Cash reserves are held at the LSA and SPV levels and paid up to the Company as required to enable expenses to be settled as they fall due.

In the judgement of the Directors, the Company meets the investment criteria set out in IFRS 10 and they therefore consider the Company to be an investment entity in accordance with IFRS 10. As a result, as required by IFRS 10, the Company is not consolidating its subsidiary but is instead measuring it at fair value in accordance with IFRS 13 - Fair value measurements.

The criteria which define an investment entity are disclosed in Note 2(a).

Critical Accounting Estimates

The following are the key assumptions and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next FY.

The principal critical accounting estimate in the Company's financial statements is the value of its investment in LSA, which is in turn dependent on the values of LSA's investments in the SPVs. Principal critical accounting estimates in determining the values of the SPVs comprise the fair values of their vessels, in turn comprised of the charter-free and attached charter values and capital expenditure, all of which are critical accounting estimates.

The unobservable inputs which significantly impact the fair value of the vessels have been determined to be the charter-free valuation and market charter rates for standard vessels (used to calculate charter values) and the discount rate applied for specialised vessels.

The process of calculating the charter-free and charter values of the vessels is described in Note 2(j).

At 30 June 2024 the charter-free valuations of two vessels (2023: two vessels) were provided through independent broker valuations rather than VesselsValue. These broker valuations are themselves estimates derived from the specialist knowledge of the broker, their proprietary data that considers vessel specifications and applicable market information.

Further to the information mentioned in Note 2 (j) there are specific capital adjustments considered as part of the valuation process for standard vessels, mainly the adjustments for BWTSs and scrubbers installed. BWTSs installed by the Company's SPVs are considered to be an enhancement to the charter-free value.

They are initially recognised at cost and straight-line depreciated from the commissioning date to 8 September 2024, being the date by which the IMO mandates all vessels should have installed BWTS. Scrubbers are considered an enhancement to the charter-free value using an estimated valuation from a shipbroker, and straight-line depreciated over 5 years.

At 30 June 2024, one vessel was treated as a specialist vessel (2023: one vessel). The specialist vessel was valued on a DCF basis by the Investment Manager using vessel specific information including the appropriate discount rate, which is reviewed on a regular basis to ensure it remains relevant to the project and market risk parameters, however the discount rate remains a material driver to the valuation.

There were no other material areas of estimation for the Company.

4.    Financial assets at fair value through profit or loss

The Company owns the investment portfolio through its investment in LSA, which comprises the NAV of the SPVs and residual assets and liabilities in LSA. The NAVs consist of the fair value of vessel assets and the SPVs' residual net assets and liabilities. The whole investment portfolio is designated by the Board as a Level 3 item on the fair value hierarchy because of the lack of observable market information in determining the fair value.

As a result, all the information below relates to the Company's Level 3 assets only, with respect to the requirements set out in IFRS 7: Financial Instruments: Disclosures. The investment held at fair value is recorded under Non-Current Assets in the Statement of Financial Position as there is no current intention to dispose of its investment in LSA.

The changes in the financial assets measured at fair value through profit or loss for which the Company has used Level 3 inputs to determine fair value, after considering dividends declared (see Note 7 and 8) are as follows:

The SPVs and holding companies Handy Holdco Limited and Product Holdco Limited (which are also SPVs) are incorporated in the Isle of Man. The subsidiary company LSA is incorporated in Guernsey. The country of incorporation is also their principal place of business.

  Breakdown of Fair Value: