Tufton Oceanic Assets : Interim Results for the period ended 31 December 2022

Tufton Oceanic Assets Limited

Interim Report and Condensed Interim Financial

Statements

For the period ended 31 December 2022

Contents

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Highlights

• Portfolio Operating Profit was strong at US$27.0m (vs. US$17.4m in the financial period ending 31 December 2021) but NAV Total Return over the financial period was negatively impacted by unrealised losses in bulkers and the remaining containership, Riposte.
• NAV Total Return was -0.6% during the financial period, 7.7% in 2022 and 91.1% since inception.
• The 31 December 2022 NAV was US$431.6m (£358.8m1) or US$1.402 (£1.165) per share.
• The Investment Manager expects the bulker market to improve from 2Q23, aided by the easing of Covid-related restrictions in China and strong supply-side fundamentals.
• After the end of the financial period, the Company agreed to divest Riposte with realised net IRR exceeding 12%. The aggregate realised net IRR on the Company's containerships over the past five years is c.27%.
• The Company agreed to acquire two product tankers, Mindful and Courteous, below DRC, financed primarily by a new US$60m loan which is secured on Mindful, Courteous, Marvelous and Exceptional.
• The Company is well positioned to benefit from the ongoing strength in the product tanker and chemical tanker markets and the expected improvement in the bulker market.
• Encouraged by strong visible cash flows from increased charter cover, diversification and continued supply-side recovery, the Company raised its target annual dividend from $0.080 to $0.085 per share, which commenced from 4Q22.
• The Company is forecast to have a dividend cover of c.1.8x over the next 18 months (through the end of 2Q24) after reinvesting the proceeds from the divestment of Riposte.
• The Company's operating emissions intensity improved by c.34% YoY in 2022 primarily because of capital re-allocation. We expect further improvement as Energy Saving Device ("ESD") retrofits on eight vessels are fully completed by mid 2023 and on another three vessels by the end of the year.
• We prioritise crew welfare and have especially taken action to improve the welfare of the Ukrainian crew members on board the Company's vessels.
• The Investment Manager's principals acquired an additional 613,000 ordinary shares during the financial period such that Investment Manager-related shareholders owned 3.2% of the issued share capital at 31 December 2022.

1 31 December 2022 closing mid-rate of USD/GBP 0.8313. Source: Morningstar

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Chairman's Statement

Introduction

On behalf of the Board, I present the Interim Financial Statements of the Company for the period ended 31 December 2022.

During the financial period, the Company acquired two product tankers and agreed to divest its last containership, Riposte, after the end of the financial period. The fleet as at 31 December 2022 consisted of eight handysize bulkers, an ultramax bulker, one containership and thirteen tankers. Full details of the investment portfolio are set out in the Investment Manager's Report.

Performance

As at 31 December 2022, the Company's NAV was US$431.6m, being US$1.402 per share (US$447.5m and US$1.450 per share as at 30 June 2022). NAV Total Return over the period was -0.6%. Despite a strong operating profit, performance was impacted by unrealised capital value losses. The bulker and containership markets weakened over the financial period. The Investment Manager expects the bulker market to improve from 2Q23, aided by the easing of Covid-related restrictions in China and strong supply-side fundamentals.

The Company is well positioned to benefit from the ongoing strength in the product tanker and chemical tanker markets and the expected improvement in the bulker market.

The Average Charter Length on the Company's product tankers at 31 December 2022 was 2.3 years. Encouraged by the strong charter coverage, the Company raised its target annual dividend from US$0.08 to US$0.085 per share, commencing from 4Q22. The Company is forecast to have a dividend cover of c.1.8x over the next 18 months (through the end of 2Q24) after reinvesting the proceeds from the divestment of Riposte.

During the year, the Company's share price decreased from US$1.230 per share as at the close of business 30 June 2022 to US$1.150 per share as at the close of business 31 December 2022.

Discount Management

On average, the Company's shares traded at an 18% discount to NAV over the financial period. As at 15 March 2023, the Company's shares traded at a 18% discount to the ex-dividend 31 December 2022 NAV. In November and December 2022, the Company (in accordance with the authority granted to it by Shareholders) repurchased 850,000 shares at a cost of US$969,451. Refer to Note 5 for more details. At the end of the financial period, there were 850,000 Shares held in Treasury and 307,778,541 Shares outstanding.

From the period end the Company has bought back an additional 710,000 shares with 1,560,000 Shares held in Treasury and 307,068,541 Shares outstanding as at 15 March 2023.

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Chairman's Statement(continued)

Dividends

During the period the Company declared and paid dividends to shareholders as follows:

A further dividend of US$0.02125 per share was declared on 17 January 2023 for the quarter ending 31 December 2022. The dividend was paid on 10 February 2023 to holders of shares on record date 27 January 2023 with an ex-dividend date of 26 January 2023.

Russian Invasion of Ukraine

None of the Company's vessels were directly impacted by the war in Ukraine and all remain fully insured against war perils. The Investment Manager has formally requested all our charterers and vessel managers to desist from trade with Russia wherever legally possible except for humanitarian purposes. Additionally, the Investment Manager monitors compliance through regular inspection of vessel logs and satellite data. The Company and its vessels will remain compliant with all international sanctions imposed by the US, UK, EU and UN. We have had no issues to date with any vessels being damaged or blocked. The Board and the Investment Manager remain watchful in monitoring the war and its consequences for shipping and the Company.

Covid-19

The global economy has largely recovered from the negative impact of Covid. The delays to crew rotation caused by national restrictions put in place to contain the spread of Covid were largely resolved by 4Q22. The introduction of Covid-related restrictions in China over the summer of 2022 impacted the bulker market and increased planned capex and off-hire for some of the Company's vessels. There is a growing consensus that the easing of Covid-related restrictions in China from January will lead to improvement in the bulker market.

Corporate Governance

The Company is a member of the Association of Investment Companies ("AIC") and complies 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 (the "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.

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