Tufton Oceanic. Regulatory News (SHIP)

28 August 2018

TUFTON OCEANIC ASSETS LIMITED

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

Final Results

Tufton Oceanic Assets Limited announces its final results for the period ended 30 June 2018. A copy of this announcement will shortly be available on the Company's website in the Investor Relations section under Company Documents at www.tuftonoceanicassets.com/company-documents.

Printed copies of the Company's Annual Report and Audited Financial Statements together with Notice of 2018 Annual General Meeting will be posted to investors shortly. The annual general meeting will be held at the Company's registered office at 3rd Floor, 1 Le Truchot, St Peter Port, Guernsey on 24 October 2018 at 11 am GMT.

For further information, please contact:

Highlights

· The Company successfully completed an IPO issuing Shares on 18 December 2017, (listing the Shares on 20 December 2017) and raised gross proceeds of US$91m.

· During the period ended 30 June 2018 the Company produced a NAV Total Return of 1.61%

· The NAV per Ordinary Share increased from US$1.00 at IPO to US$1.016 as at 30 June 2018 after taking into account US$0.02 of share issue costs.

· The profit of the Company for the period from IPO to 30 June 2018 was US$3.3m, or US$0.036 per Ordinary Share.

· The Company's mid-market share price as at 30 June 2018 was US$1.06 representing a premium of 4.3% to the NAV.

· On 27 July 2018, the Company declared its first dividend of US$0.015 per Ordinary Share

· The Company completed its first four investments within three months after the IPO totalling US$43.6m.

· Two further investments were completed after the period end which results in c. 85% of IPO proceeds being invested as at the date of these accounts.

· An unlevered cashflow run rate of US$8.7m p.a. after capital expenditure and management fees has been established.

· Average charter length is between 4.3 and 4.9 years.

· With five of the six vessels acquired employed on medium to long term charters, the portfolio is largely insulated from geopolitical and macroeconomic shocks.

Chairman's Statement

Introduction

I am pleased to present the Company's first annual report and audited financial statements for the period ended 30 June 2018.

I would like to thank our Shareholders for their support in the initial fund raising where we were able to raise US$91m with the Shares being issued on 18 December 2017 and listed on 20 December 2017. Since then the Investment Manager and its advisors have been busy sourcing opportunities for the Company and as at 30 June 2018 we had invested US$43.6m in four container ships. Subsequent to the period end we have committed a further US$21.8m to acquire a 75% stake in a LPG carrier and US$10m to acquire a handysize bulk carrier. As at the date of the accounts we have invested approximately 85% of the IPO proceeds.

The Company remains on target to fully deploy the proceeds of the initial fund raising within the timescales set out at launch, and together with our advisers we are now considering a future fundraising plan to take advantage of a number of opportunities available to the Company. There are further details on the current portfolio in the Investment Managers Report on page 11.

Performance

The Company's NAV as at the end of 30 June 2018, was US$1.016 per Share. During the period the Share Price increased from the initial launch price of US$1 per Share to US$1.06 per Share as at the close of business 30 June 2018.  I have been encouraged that the Company's Shares have traded at an average premium of 4.32% to NAV which will aid us in raising further capital in the coming year.

During the period, the Company's NAV total return was 1.61% since inception (net of issue costs).

Share Buy Backs or Discount Control

The Company has not made any Share buy backs during the period. As set out in the Prospectus the Company has the ability to buy back Shares at the discretion of the Directors up to 14.99% of the Shares in issue. The Directors will monitor this position closely and take the appropriate action where necessary.

Dividends

There were no dividends declared in the period, with the first dividend of US$0.015 per Ordinary Share being declared on 27 July 2018 and duly paid on 17 August 2018. It is the Company's intention to pay future dividends following each quarter end with the next dividend due for payment in November 2018.

Corporate Governance

The Company will comply with the UK Code of Corporate Governance where applicable but we have also joined the AIC to ensure that the Directors are kept up to date with matters concerning listed investment companies like ours. The Board of Directors take their fiduciary and corporate governance responsibilities seriously and I would encourage Shareholders to contact us at SHIP@tuftonoceanicassets.com should there be any matters of concern that they feel need to be addressed.

Rob King

Non-executive Chairman

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 registered 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 1987, as amended and the Registered Closed-ended Investment Scheme Rules 2015.

The Company has 91,000,000 shares in issue, all of which are admitted to the Specialist Fund Segment of the Main Market of the London Stock Exchange under the ticker "SHIP". ISIN: GG00BDFC1649 SEDOL: BDFC164

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

· Swordfish Limited incorporated on 26 January 2018 with registered number 015751V

· Kale Limited incorporated on 26 January 2018 with registered number 015752V

· Patience Limited, incorporated on 1 March 2018 with registered number 015842V

· Riposte Limited incorporated on 1 March 2018 with registered number 015843V

· Neon Limited incorporated on 21 June 2018 with registered number 016200V

· Aglow Limited incorporated on 20 July 2018 with registered number 016301V

(together the "SPVs", individually an "SPV")

The Company controls the investment policy of each of LS Assets Limited and it's wholly owned SPVs to ensure that each will act in a manner consistent with the investment policy of the Company.

The Investment Manager is Tufton Oceanic Ltd, a company incorporated in England and Wales with a registered number 1835984 and is regulated by the UK FCA and has been authorised to act as a Small Registered UK AIFM under the AIFMD.

Tufton Oceanic Ltd has been a specialist fund manager in the maritime and energy markets since 2000 and has been focused on financial services to these industries since its inception in 1985.

Strategic Report

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 second-hand commercial sea-going vessels. The Company may invest in vessels being refitted (for modification or upgrade purposes). The Company has established a wholly owned subsidiary that acts as a Guernsey holding company for all its investments. LS Assets Limited is governed by the same individuals appointed as directors of the Company.

All vessels acquired, vessel related contracts and costs will be held in Special Purpose Vehicles domiciled in the Isle of Man or other tax efficient jurisdictions. The Company will conduct its business so as to be considered an investment entity (as set out in IFRS 10: Consolidated Financial Statements) for accounting purposes and as a result will apply the investment entity exemption to consolidation. The Company will therefore report its financial results on a non-consolidated basis.

Subject to the solvency requirements of Companies Law, the Company intends to pay dividends on a quarterly basis and is targeting a dividend yield of 5% on the Issue Price in the first 12 months following Admission increasing to a target annual dividend yield of 7% on the Issue price thereafter. The Directors expect the dividend to grow, in absolute terms, modestly over the long term.

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

Corporate Group Structure

The Company is a Registered Closed-ended Collective Investment Scheme regulated by the GFSC. Further information is provided in the Corporate Summary.

The Company has a 30 June financial period-end. The updated NAV is published on a quarterly basis.

Shareholder information

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

Governance and Responsibilities

The Board of Directors

The Company's Board of Directors comprise of three 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, the operational and financial performance of the Company 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 valuations prepared by the Investment Manager and Administrator. It also maintains the risk register, which it monitors and updates on a regular basis. The structure of the Board's processes allows its members to review business controls and the choice of acquisitions to ensure they meet the stated objectives.

The Directors of the Company who served during the period and to date are:

Robert King, Chairman

A non-executive director for a number of open and closed-ended investment funds including Golden Prospect Precious Metals Limited, Weiss Korea Opportunity Fund Limited, Chenavari Capital Solutions Limited (Chairman) and CIP Merchant Capital Limited. Before becoming an independent non-executive director in 2011 he was a director of Cannon Asset Management Limited and their associated companies. Prior to this he was a director of Northern Trust International Fund Administration Services (Guernsey) Limited (formerly Guernsey International Fund Managers Limited) where he had worked from 1990 to 2007. He has been in the offshore finance industry since 1986 specialising in administration and structuring of offshore open and closed ended investment funds. Rob is British and resident in Guernsey.

Stephen Le Page

A chartered accountant and chartered tax adviser. He was a partner in PricewaterhouseCoopers CI LLP in the Channel Islands from 1994 until his retirement in September 2013. During his career his main role was as an audit partner working with a wide variety of financial services businesses and structures. Mr Le Page also led that firm's audit and advisory businesses for approximately ten years and for five of those years was the Senior Partner (equivalent to Chairman) for the Channel Islands firm. Since his retirement Mr Le Page has joined a number of boards as a non-executive director including four premium London listed funds, Highbridge Multi-strategy Fund Limited, Volta Finance Limited, MedicX Fund Limited and Princess Private Equity Holding Limited and one International Stock Exchange listed company, Channel Island Property Fund Limited, all of which he serves as Chairman of the audit committee. He is a past chairman of the Guernsey International Business Association and a past President of the Guernsey Society of Chartered and Certified Accountants. He resides in Guernsey.

The Board of Directors (continued)

Paul Barnes

An investment banker experienced in asset backed, structured and project financing with wide geographic exposure including Asia, Central/Eastern Europe, North and Latin America and Scandinavia. Between 2010 and 2015 Mr Barnes worked for BNP Paribas as managing director and co-head of its EMEA Shipping and Offshore business. He was also head of risk monitoring for Global Shipping at BNP Paribas. Prior to that, Mr Barnes had served as head of shipping (London) at Fortis Bank, head of specialised industries at Nomura International and as a corporate finance Director of Barclays Bank and as a Director of its Shipping Industry Unit. He resides in the United Kingdom.

Service Providers

The Investment Manager / AIFM

Tufton Oceanic Ltd has been a specialist fund manager in the maritime and energy markets since 2000 and has been focused on financial services to these industries since its inception in 1985.

Since 2013, the Investment Manager has invested c. US$1.1 billion of capital in 70 vessels. As at 30 June 2018, the Tufton Group had c. US$1.3 billion of assets under management and 52 employees operating from offices in London, Isle of Man, Dubai and Cyprus. The Investment Manager is fully dedicated to shipping with an in-house research team 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 39 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 acquisition opportunities, conducting necessary due diligence, making recommendations to the Board and completing the proposed investments. The Investment Manager (in conjunction with the Asset Manager) will also monitor the performance of the Company's Portfolio. The Investment Manager, which will act as the Company's AIFM under the AIFMD, is authorised and regulated by the UK FCA.

Investment Committee

The Investment Manager has established an Investment Committee.

Each investment proposal is presented to the Investment Committee which meets on a weekly basis for their approval. In reviewing each potential investment, the Investment Committee will consider a range of factors including a detailed analysis of the vessel's technical condition and other analysis from the Asset Manager, a full risk/reward analysis, downside stress testing, commercial/employment strategy, potential moderate leverage, 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.

Asset Manager

Oceanic Marine Management Limited was established in 2009 to act as the asset manager for vessels owned by funds and vehicles managed or advised by Tufton Group. The Asset Manager is based in Cyprus and employs professionals who have experience in ship management and operations.

The Asset Manager enters into an asset management agreement with each SPV and will provide the services detailed in the Prospectus.

Administrator and Secretary

Maitland Administration (Guernsey) Limited (formerly R&H Fund Services (Guernsey) Limited) ("Maitland") has been appointed as administrator and secretary to the Company, pursuant to the Administration Agreement dated 27 February 2017 and LS Assets Limited, pursuant to the Administration Agreement dated 20 April 2018. Maitland was incorporated with limited liability in Guernsey on 20 January 2010 and is licensed by the Guernsey Financial Services Commission under the POI Law.

The Administrator forms part of the Maitland group established in Luxembourg in 1976. Maitland is a global advisory, administration and family office firm providing legal, fiduciary investment and fund administration services to private, corporate and institutional clients. The group employs over 1,100 staff in 16 offices across 12 jurisdictions and collectively administers in excess of £250bn in assets.

The Administrator will provide 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 Net Asset Value and maintenance of the Company's accounting and statutory records.

Registrar

Computershare Investor Services (Guernsey) Limited has been appointed as registrar to the Company pursuant to the Registrar Agreement dated 27 February 2017. In such capacity, the Registrar will be 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.

Receiving Agent

Computershare Investor Services PLC has been appointed as receiving agent to the Company for the purposes of the Offer for Subscription pursuant to the Receiving Agent Agreement dated 27 February 2017.

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 shareholding during each quarter.

Investment Manager's Report

Highlights

We are pleased to present our review for the period from inception to 30 June 2018 and our outlook for the next few years. Highlights include:

· On 27 July 2018, the first quarterly dividend was declared at US$0.015 per share versus calendar year 2018 and 2019 guidance of US$0.050 and US$0.070 per share respectively

· Four containerships acquired and US$43.6m invested in the first calendar quarter of 2018 within three months of Admission

· Two further vessels acquisitions agreed after the end of the period involving a further US$31.8m of investment

· Unlevered cash flow run rate of US$8.7m p.a. after capital expenditure provision and management fees as of 15 August 2018 with circa 85% of IPO proceeds invested

· Cash flow-weighted average length of charter is minimum 4.3 years and expected 4.9 years

The Assets

As of 30 June 2018, the Company owned two 1700-TEU containerships - Swordfish and Kale, and two 2500-TEU containerships - Patience and Riposte. They operate under time charter contracts, under which the Company provides fully operational and insured vessels for use by the charterer.

All four containerships are performing well and are each chartered to one of the major investment grade container shipping groups. Kale and Swordfish had their 10-year second special surveys completed in July and June 2018 respectively in line with expectations. All vessels are in good condition and are maintained to a high standard.

After the end of the financial period, the Company acquired a mid-sized LPG carrier (Neon) and a handysize bulker (Aglow). The gas carrier operates under a bareboat charter in which the Company provides only the vessel to the charterer, who is responsible for crewing, maintaining, insuring and operating the vessel. Aglow, which is only c. 10% of the portfolio, earns floating revenue from operating in a leading bulker pool. It will be the only spot market-linked vessel in the initial portfolio. Aglow is not expected to have material capital expenditure required until summer 2020.

Investment Performance

During the period, NAV increased to US$1.016/share, above the issue price of US$1.00 (net issue price US$0.98). Operating profit contributed $0.01/share. The charter-adjusted fleet value contributed US$0.026/share during the financial period but the contribution was negative in the quarter ending 30 June due to a transient mismatch between values and charter rates in an improving market. This is not unusual in the shipping markets, especially when the charter market is more liquid than the second-hand vessel market. All else being equal, the portfolio value will now increase as the negative charter value unwinds over time.

The Shipping Market

In their review of the first half of calendar year 2018 (published July 2018), leading global shipping intelligence provider Clarksons Research noted many positive developments in the shipping market, many of which are consistent with themes discussed in the Prospectus:

· Global seaborne trade is projected to grow by 3.6% (tonne-miles) in 2018, down from 4.9% in 2017 but close to the average since 2009

· Fleet expansion is continuing to slow; the global fleet grew by only 1.3% in 1H18

· The global order book is now equivalent to only 10.2% of the fleet, compared to over 50% in 2008

· Newbuild deliveries were down by 25% y-o-y in 1H18, with newbuild ordering volumes 28% below the trend since the financial crisis

· Second-hand transaction volumes in the first half of the year were 29% above the average since 2009, with their Second-hand Price Index up 16% y-o-y at the end of 1H18

· Bulker average 12 month time charter rates increased by 30% y-o-y in 1H18

· Containership time charter rates have been trending upwards, with the average charter rates up 34% y-o-y in 1H18

· Tanker average 12 month time charter rates fell 8% y-o-y in 1H18, with VLCC charter rates down 24%

In addition to the developments above noted by Clarksons Research on the mainstream shipping markets and the shipbuilding market, we believe:

· Bank lending continues to be very limited other than to the largest shipping companies

· Public equity and public debt markets continue to be of limited scope

· Sale leasebacks, often in industrial segments of shipping such as chemical tankers or general cargo ships, will continue to be excellent opportunities. These are often less fragmented market segments where operators have long-term contracts to move cargo, giving us visibility over a significant portion of their cash flow

· Increased regulation is a positive for well-capitalised asset owners (such as the Company) and operators, as marginal ships and operators leave the market through scrapping, asset sales or mergers

Reports of the trade war between the US and China have attracted widespread attention. As of end June 2018, Clarksons Research estimates that all the bilateral tariffs proposed and in place between the US and China are likely to affect only 1% of global seaborne trade. On specific products and trade routes, higher volumes could be affected although the tariffs are more likely to reconfigure global supply chains rather than materially reduce trade volumes. For example, higher Chinese tariffs on soya bean imports from the US could benefit Brazilian exports. On the other hand, bilateral trade pacts such as the one recently signed by Japan and the EU in July offer new areas of trade growth. The final form of the ongoing changes in international trade policies and its net effect remains hard to forecast.

As highlighted in the Prospectus, the revenue earned by most of the Company's vessels is not affected by fluctuations in general shipping markets. Most of the vessels in the portfolio are employed on medium to long-term charters with carefully chosen counterparties and will not be affected by fluctuations in commodity prices, geopolitical events and other short term supply-demand factors.

Outlook

The financial stresses in shipping, traditional ship lenders and shipbuilders, which are still somewhat a result of the excesses of 2005-2008, continue to create a very attractive risk return profile. Second-hand prices in many segments continue to be significantly below Depreciated Replacement Cost ("DRC"). The supply side recovery is continuing and driven by:

· Continued lack of capital availability for shipping

· Vessel order book (forward supply growth) near a 20-year low

· Low new orders, leading to shipyard capacity reductions

We believe that DRC will increase in the medium term as shipyard consolidation and commodity/general inflation continue. Clarksons has stated that newbuild prices have begun to increase over the past year.

In addition, new and prospective environmental regulations (SOx, NOx and CO2 emissions; ballast water treatment) create further supply-side support. The Investment Manager expects that the regulatory environment will lead to both increased scrapping of older, less efficient ships and restrained new orders for vessels while technological standards are uncertain and yet to be established. The SOx regulations specifically, which are expected to lead to most ships burning more expensive cleaner fuel, as well as higher oil prices in general, are likely to lead to the global fleet sailing more slowly to reduce fuel costs. This "slow steaming" of much of the fleet will increase global utilisation, which should increase charter rates.

Opportunity set we expect to focus on:

· Containerships with time charters of at least 2 years

· Acquiring product, chemical or gas tankers from and chartering back to good counterparties

· Acquiring general cargo ships to bareboat charter to good counterparties

 Principal Risks and Uncertainties

The Board have carried out a robust assessment to identify the principal 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 to have the greatest chance of materially impacting the Company's objectives. The Board has adopted a "controls" based approach to its risk monitoring requiring each of the relevant service providers including the Investment Manager to establish the necessary controls to ensure that all known risks are monitored and controlled in accordance with agreed procedures where possible. The Company's activities are primarily dependent upon global seaborne trade flows and as seaborne trade activities between mainland Europe and the UK are relatively limited, Brexit is not expected to have a material impact on the Company or the Investment Manager. The Directors receive periodic updates at their Board meetings on principal risks and have adopted their own control review to ensure, where possible, risks are monitored appropriately. Occurrences of principal risks may have a number of underlying causes, and it is with respect to those causes that the Directors have implemented controls or mitigation as follows. Please note that risk or uncertainty cannot be eliminated.

Corporate Governance Statement

The Company has joined the AIC and has therefore elected to comply with the provisions of the AIC Code of Corporate Governance which sets out a framework of best practice in respect of governance of investment companies. A copy of the code can be viewed at the Company's registered office upon request. The AIC Code has been endorsed by the Financial Reporting Council as an alternative means for members to meet their obligations in relation to the UK Corporate Governance Code.

The Financial Sector Code of Corporate Governance issued by the Guernsey Financial Services Commission (the "GFSC Code") provides a framework that applies to all entities licensed by the GFSC or which are registered or authorised as a collective investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended). Companies reporting against the UK Corporate Governance Code or the Association of Investment Companies Code of Corporate Governance are deemed to comply with the GFSC Code.

The Board has considered the principles and recommendations of the AIC Code, produced by the Association of Investment Companies ("AIC"), by reference to the AIC Corporate Governance Guide for Investment Companies (the "AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies, such as the Company. The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to Shareholders. The Company has complied with the recommendations of the AIC Code, the relevant provisions of the UK Code (except as set out below) and associated disclosure requirements of the Listing Rules (to the extent applicable to the Company).

As disclosed in the Listing documents, the Company, being an externally advised investment company with an entirely non-executive board of directors does not consider the following provisions of the AIC Code applicable:

· the role of the chief-executive,

· executive directors' remuneration, and

· the need for an internal audit function

Considering that the Board comprises of only three Directors, no Senior Independent Director has been appointed.

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

Independence

All three of the Directors are currently considered by the Board to be independent of the Company and the Tufton Group. The Board's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of service of any of the Company's Directors, including the role of Chairman, has been imposed. New Directors will receive an induction from the Investment Manager and the Administrator on joining the Board, and all Directors will receive other relevant training as necessary on their on-going responsibilities in relation to the Company.

Diversity Policy

The Company supports the AIC Code provision that Boards should consider the benefits of diversity, including gender, when making appointments and is committed to ensuring it receives information from the widest range of perspectives and backgrounds. The Company's aim as regards the composition of the Board is that it should have a balance of experience, skills and knowledge to enable each Director and the Board as a whole to discharge their duties effectively. Whilst the Board of the Company agrees that it is entirely appropriate that it should seek diversity, it does not consider that this can be best achieved by establishing specific quotas and targets and appointments will continue to be made based wholly on merit. Accordingly when changes to the Board are required, regard is paid to both the need for diversity and to a comparative analysis of candidates' qualifications and experience. A pre-established, clear, neutrally formulated and unambiguous set of criteria would be utilised to determine the most suitable candidate for the specific position sought.

Statement of Directors' Responsibilities

The Directors are responsible for preparing an Annual Report and Audited Financial Statements for each financial period which gives 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 period.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards ("IFRS").

In preparing the 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 maintenance and integrity of the Company's website is the responsibility of the Directors. 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 which enable them to ensure that the Financial Statements comply with 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 auditors are 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 auditors are aware of said information;

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

· The Chairman's Statement, Report of Directors and Corporate Governance Statement include a fair review of the development of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Corporate Governance Code, as adopted by the Company, also requires Directors to ensure that the Annual Report 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 the 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 30 to 32. Furthermore, the Board believes that the disclosures set out on pages 43 to 61 of the Annual Report 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 period ended 30 June 2018, as outlined in the Corporate Governance Statement, Strategic Report and the Audit Committee Report, the Board has concluded that the Annual Report and Audited Financial Statements for the period ended 30 June 2018, taken as a whole, are fair, balanced and understandable and provide the information required to assess the Company's performance, business model and strategy.

Statement of Comprehensive Income

For the period from 6 February 2017 to 30 June 2018

6 February 2017

to 30 June

2018

Notes US$

Income

Net changes in fair value of Financial Assets

designated at fair value through profit and loss 5 3,482,168

___________

Total net income 3,482,168

Expenditure

Administration fees (41,949)

Audit fees (79,700)

Brokers fees (41,510)

Directors' fees 18 (84,769)

Foreign exchange loss (3,099)

Insurance fee (36,226)

Listing fees (2,312)

Management fee 14 (206,140)

Professional fees (16,022)

Sundry expenses (2,555)

___________

Total expenses (514,282)

___________

Operating profit 2,967,886

Finance income 315,557

___________

Profit and comprehensive income for the year 3,283,443

___________

Earnings per ordinary share (cents) 9 3.61

___________

There were no potentially dilutive instruments in issue at 30 June 2018.

All activities are derived from continuing operations.

There is no other comprehensive income or expense apart from those disclosed above and consequently a Statement of Other Comprehensive Income has not been prepared.

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

Statement of Financial Position

At 30 June 2018

2018

Notes US$

Non-current assets

Financial Assets designated at fair value

through profit and loss (Investment) 5 49,622,259

___________

Total non-current assets 49,622,259

___________

Current assets

Trade and other receivables 6 34,796

Cash and cash equivalents 43,030,736

___________

Total current assets 43,065,532

___________

___________

Total assets 92,687,791

___________

Current liabilities

Trade and other payables 224,348

___________

Total current liabilities 224,348

___________

___________

Net assets 92,463,443

___________

Equity

Share capital 8 89,180,000

Retained reserves 8 3,283,443

___________

Total equity attributable to ordinary shareholders 92,463,443

___________

Net assets per ordinary share (cents) 11 101.61

___________

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 24 August 2018 and signed on its behalf by:

Rob King Steve Le Page

Director Director

Statement of Changes in Equity

For the period from 6 February 2017 to 30 June 2018

Share Retained

capital earnings Total

US$ US$ US$

Shareholders' equity at incorporation - - -

Share issue 91,000,000 - 91,000,000

Listing costs (1,820,000) - (1,820,000)

Profit and comprehensive income for the year - 3,283,443 3,283,443

___________ ___________ ___________

Shareholders' equity at 30 June 2018 89,180,000 3,283,443 92,463,443

___________ ___________ ___________

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

Statement of Cash Flows

For the period from 6 February 2017 to 30 June 2018

2018

Notes US$

Cash flows from operating activities

Profit and comprehensive income for the period 3,283,443

Adjustments for:

Purchase of investment 5 (46,140,091)

Change in fair value on investment 5 (3,482,168)

___________

Operating cash flows before movements in working capital (46,338,816)

Changes in working capital:

Movement in trade and other receivables (34,796)

Movement in trade and other payables 224,348

___________

Net cash used in operating activities (46,149,264)

___________

Cash flows from financing activities

Net proceeds from issue of shares 89,180,000

___________

Net cash generated from financing activities 89,180,000

___________

Net movement in cash and cash equivalents during the period 43,030,736

Cash and cash equivalents at the beginning of the period -

___________

Cash and cash equivalents at the end of the period 43,030,736

___________

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

Notes to the financial statements

For the period from 6 February 2017 to 30 June 2018

1. General information

The Company was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 6 February 2017 with registered number 63061, and is regulated by the GFSC as a registered closed-ended investment company. The registered office and principal place of business of the Company is 1 Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1 1WD.

On 18 December 2017, the Company announced the results of its Placing and Offer Subscription of Ordinary Shares, which raised gross proceeds of US$91 million. The Company's ordinary shares were listed on the Specialist Funds Segment of the Main Market of the London Stock Exchange effective 20 December 2017.

2. Significant accounting policies

(a) Basis of Preparation

The financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards, which comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Interpretations Committee, and applicable Guernsey law. The financial statements have been prepared on a historical cost basis modified by the revaluation of investments at fair value through profit or loss. The principal accounting policies adopted are set out below.

These policies have been consistently applied.

Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.

The Company has classified its financial assets and liabilities designated at fair value through profit or loss using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurements. The hierarchy has the following levels:

 (b) Basis of non-consolidation

The Company has applied IFRS 10 and as such is not consolidating its subsidiaries in these financial statements as the Company is considered by the directors to be an investment entity. The criteria which define an investment entity are, as follows:

· An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services; and

· An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both (including having an exit strategy for investments); and

· An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company's objective of pooling investors' funds for the purpose of generating an income stream and capital appreciation is consistent with the definition of an investment entity.

The Company measures and evaluates the performance of substantially all of its investments on a fair value basis. The fair value method is used to represent the Company's performance in its communications to the market, including investor presentations. In addition, the Company reports fair value information internally to the Directors, who use fair value as a significant measurement attribute to evaluate the performance of investments and to make investment decisions for mature investments.

(c) Segmental reporting

The Chief Operating Decision Maker is the Board of Directors. The Directors are of the opinion that the Company is engaged in a single segment of business, being the investment of the Company's capital in second hand commercial vessels. The financial information used to manage the Company presents the business as a single segment.

(d) Income

Dividend Income

Dividend income is accounted for on an accruals basis from the date the dividend is declared.

Bank Interest Income

Interest income is accounted for on an accruals basis.

(e) Expenses

Expenses are accounted for on an accruals basis. The performance fee liability is calculated on an amortised cost basis at each valuation date, with the respective expense charged through the Statement of Comprehensive Income. The Company's investment management and administration fees, finance costs and all other expenses are charged through the Statement of Comprehensive Income.

(f) Dividends to Shareholders

Dividends are accounted for in the period in which they are declared.

(g) Taxation

The Company has been granted exemption from liability to income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 amended by the Director of Income Tax in Guernsey for the current year. Exemption is applied and granted annually and subject to the payment of a fee, currently £1,200.

(h) Financial Assets and Financial Liabilities

Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' ("FVTPL") and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at fair value through profit and loss

Financial assets are classified at FVTPL when the financial asset is either held for trading or it is designated at FVTPL. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in the Statement of Comprehensive Income.

The Company's investments have been designated as at FVTPL on the basis that they are managed and their performance is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the investments is provided internally on that basis.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Derecognition of financial assets

The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised and accumulated in equity is recognised in statement of comprehensive income.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Derecognition of financial liabilities

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

(i) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

(j) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and other short-term highly liquid investments with original maturities of 3 months or less and bank overdrafts. As at 30 June 2018, the carrying amount of cash and cash equivalents approximate their fair value.

(k) Foreign currency translation

i) Functional and presentation currency

The financial statements of the Company are presented in US Dollars, which is also the currency in which the share capital was raised and investments were purchased, and are therefore considered by the Directors' to be the Company's functional currency.

ii) Transactions and balances

At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in Statement of Comprehensive Income in the period in which they arise. Transactions denominated in foreign currencies are translated into US Dollars at the rate of exchange ruling at the date of the transaction.

(l) Going concern

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for at least the next twelve months. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Refer to page 28, Viability statement for key areas considered.

3. Critical Accounting Judgements and Estimates

The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that actual outcomes could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Critical judgements in applying the Company's accounting policies - IFRS 10: Consolidated Financial Statements

Prior to the Company successfully completing its IPO in December 2017, and in May 2018, the audit committee, considered the application of IFRS 10, and whether the Company meets the definition of an investment entity.

The directors concluded that the Company to have met the criteria below, and therefore, consider the Company to be an investment entity in terms of IFRS 10. The Company has applied IFRS 10 and as such is not consolidating its subsidiaries in these financial statements.

The criteria which define an investment entity are, as follows:

· An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services; and

· An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both (including having an exit strategy for investments); and

· An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company's objective of pooling investors' funds for the purpose of generating an income stream and capital appreciation is consistent with the definition of an investment entity.

Critical judgements in applying the Company's accounting policies - IFRS 10: Consolidated Financial Statements (continued)

The Company measures and evaluates the performance of substantially all of its investments on a fair value basis. The fair value method is used to represent the Company's performance in its communications to the market, including investor presentations. In addition, the Company reports fair value information internally to the Directors, who use fair value as a significant measurement attribute to evaluate the performance of investments and to make investment decisions for mature investments.

Critical judgements in applying the Company's accounting policies - financial assets at fair value:

The Company's financial assets are measured at fair value. The fair value of the investment comprises the fair value of the underlying SPV's and the Residual Net Assets of the Investment Company.

In estimating the fair value of each underlying SPV, the Board has approved the valuation methodology for valuing the shipping assets held by the SPVs. The carrying value of a shipping asset consists of its Charter-free value plus or minus the value of any charter lease contracts attached to the vessel, plus or minus an adjustment for the capital expenditure associated with the dry docking of the vessel. This latter adjustment is an addition to value when the valuation date is nearer to the vessel's last dry docking than to its next expected visit to dry dock, and vice versa. In the opinion of the Directors, the carrying value determined as set out in more detail below represents a reasonable estimate of the fair value of that shipping asset.

The Charter-free and associated Charter values of the vessel are calculated using an on-line valuation system called www.VesselsValue.com. The system contains a number of algorithms that combine factors such as vessel type, technical features, age, cargo capacity, freight earnings, market sentiment and recent vessel sales.

The adjustment for the capital expenditure associated with the dry docking of the vessel is time apportioned on a straight line basis over the period between the vessel's last visit to dry dock and the date of its next expected visit, by reference to the actual cost of the last visit and the budgeted cost of the next.

The four vessels currently held are considered to be typical vessels. The prospectus sets out basis on which non-typical and specialist vessels would be valued.

4. New and revised standards

The following accounting standards and interpretations which have not been applied in these financial statements were in issue but not yet effective:

IFRS 9 Financial Instruments (revised, early adoption permitted)

IFRS 15 Revenue from Contracts with Customers

IFRS 16 Leases

IAS 12 (amendments) Recognition of Deferred Tax Assets for Unrealised Losses

The Directors do not expect that the adoption of the accounting standards, amendments and interpretations listed above will have a material impact on the financial statements of the Company in future periods. Their rationale for this expectation is set out below.

IFRS 9 "Financial Instruments", addressed the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

The Company's financial assets comprise equity and debt investments currently measured at fair value through profit or loss, short term loans and other receivables and cash and cash equivalents.

The Directors have determined that there will be no change in the classification or measurement of investments held at fair value through profit or loss as the assets are held within a business model with the purpose capital realisation. Furthermore, the cash flows do not derive solely from payments of principal and interest (the "SPPI" test).

The new impairment model will apply to the Company's financial assets including trade and other receivables and cash and cash equivalents. The Directors expect to apply the simplified approach to recognise lifetime expected credit losses for these current assets. As such, the Directors do not currently expect there to be any material impact on the adoption of IFRS 9.

There will also be no change in the accounting for financial liabilities.

In summary, on adoption of IFRS 9 for the first period commencing 1 July 2018, the Directors do not consider IFRS 9 will have a material impact on the financial position or performance of the Company.

IFRS 15 "Revenue from Contracts with Customers" was issued in May 2014 and became effective for periods beginning on or after 1 January 2018. The date from which the new standard applies to the Company is 1 July 2018. Since the Company has no contracts to which the new standard applies, it is not expected to have any material impact on the Company's financial position, performance or disclosures in its financial statements.

IFRS 16 "Leases" was issued in January 2016 and becomes effective for periods beginning on or after 1 January 2019. Since neither the Company nor its subsidiaries hold any assets under lease, it is not anticipated that the new standard will have any impact on the Company's financial position, performance or disclosures in its financial statements.

IAS 12 "Income Taxes" was issued in October 2015 and becomes effective for periods beginning on or after 1 January 2019. Since neither the Company nor its subsidiaries are subject to taxation on income, it is not anticipated that the new standard will have any material impact on the Company's financial position, performance or disclosures in its financial statements.

There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Company.

5. Financial Assets designated at fair value through profit and loss (Investment)

The Company owns the Investment Portfolio through its investment in LS Assets Limited. The fair value of the LS Assets Limited investment comprises the fair value of the underlying SPV's and the Residual Net Assets of LS Assets Limited. The Investment Portfolio is a Level 3 item on the fair value hierarchy. The investment held at fair value is recorded under Non-Current Assets in the Statement of Financial Position.

2018

US$

LS Assets Limited

Brought forward cost of investment -

Total investment acquired in the period 46,140,091

___________

Carried forward cost of investment 46,140,091

Brought forward unrealised (losses) / gains on valuation -

Movement in unrealised (losses) / gains on valuation 3,482,168

___________

Carried forward unrealised (losses) / gains on valuation 3,482,168

___________

Total investment at fair value 49,622,259

___________

LS Assets Limited (own net assets): Breakdown of Fair Value:

Kale Limited 11,625,057

Swordfish Limited 10,811,803

Riposte Limited 13,843,536

Patience Limited 10,818,489

Neon Limited* -

Residual net assets 2,523,374

___________

Total investment at fair value 49,622,259

___________

*Neon Limited was dormant from its inception until the period end.

The net change in the movement of the fair value of the investment is recorded in the Statement of Comprehensive Income.

6. Trade and other receivables

2018

US$

Current

Accrued income 868

Prepayments 30,561

Due from subsidiaries 3,367

___________

Total trade and other receivables 34,796

___________

Amounts due from subsidiaries are interest free and payable on demand.

7. Subsidiaries

The Company holds its investment through a subsidiary company which has not been consolidated as a result of the adoption of IFRS 10: Consolidated Financial Statements. Below is the legal entity name for the Holding Company and the remaining legal entities owned indirectly through the investment in the holding company. The country of incorporation is also their principal place of business.

8. Share capital and reserves

The Company currently has 1 class of ordinary share of no par value in issue. All the holders of the ordinary shares which totals 91,000,000, are entitled to receive dividends as declared from time to time and are entitled to 1 vote per share at meetings of the Company.

Retained reserves

Retained reserves comprise the retained earnings as detailed in the Statement of Changes in Equity.

9. Earnings per share

2018

US$

Profit and comprehensive income for the period 3,283,443

Weighted average number of ordinary shares 91,000,000

Earnings per ordinary share (cents) 3.61

10. Dividends

No dividends were declared or paid during the current period.

11. Net assets per ordinary share

2018

US$

Shareholders' equity 92,463,443

Number of ordinary shares 91,000,000

Net assets per ordinary share (cents) 101.61

12. Financial risk management

Capital management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders. In accordance with the Company's investment policy, the Company's principal use of cash (including the proceeds of the IPO) has been to fund investments as well as ongoing operational expenses.

The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis. The capital structure of the Company consists entirely of equity (comprising issued capital, reserves and retained earnings).

The Company is not subject to any externally imposed capital requirements.

Financial risk management objectives

The Board, with the assistance of the Investment Manager, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risk. These risks include market risk (including price risk and currency risk), interest rate risk, credit risk and liquidity risk.

Market risk

The value of the investments held by the Company is indirectly affected by the factors impacting on the shipping industry generally, being, amongst other factors, currency exchange rates, interest rates, the availability of credit, economic or political uncertainty and changes in law governing shipping or trade. These factors may affect the price or liquidity of vessels held by the Company's subsidiaries and thus the value of the subsidiaries themselves.

Currency risk

The Company holds assets and liabilities denominated in currencies other than United States Dollars, the functional currency. It is therefore exposed to currency risk as the value of assets denominated in other currencies will fluctuate due to changes in exchange rates.

However, such exposure is currently and is expected to remain insignificant. Consequently no further information has been provided.

Interest rate risk

The majority of the Company's financial assets and liabilities are non-interest bearing. However, the Company is exposed to a small amount of risk due to fluctuations in the prevailing levels of market interest rates because any excess cash or cash equivalents are invested at short-term market interest rates. The Company's interest-bearing financial assets and liabilities expose it to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The table below summarises the Company's exposure to interest rate risks. It includes the Company's assets and trading liabilities at fair values, categorised by the earlier of contractual re-pricing or maturity dates.

If the interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company's profit for the period ended 30 June 2018 would decrease/increase by US$215,153. This is attributable to the company's exposure to interest rates on its variable rate deposits.

The Investment Manager is permitted to utilise overdraft facilities towards the achievement of the Company's investment objectives. As at the date of signing of these financial statements, no overdraft facility has yet been negotiated or utilised.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company.

The Company does not have any significant credit risk exposure to any single counterparty in relation to trade and other receivables. On-going credit evaluation is performed on the financial condition of accounts receivable. As at 30 June 2018 there were no receivables considered impaired.

The Company maintains its cash and cash equivalents with various banks to diversify credit risk. These are subject to the Company's credit monitoring policies including the monitoring of the credit ratings issued by recognised credit rating agencies. At the period end, significant amounts of cash was held with RBSI in a current account pending the post period settlement of the vessels acquired as described in note 19.

1. Canaccord is an execution only broker that acts solely on instruction of the Board of Directors. The Board of Directors only invest cash in banking institutions with an -A rating or higher. 

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Board of Directors has established an appropriate liquidity risk management framework for the management of the Company's short-, medium- and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate cash reserves by monitoring forecast and actual cash flows. The table below shows the maturity of the Company's non-derivative financial assets and liabilities. The amounts disclosed are contractual, undiscounted cash flows and may differ from the actual cash flows received or paid in the future as a result of early repayments.

Valuation methodology

The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation. All completed investments are held at fair value through profit or loss. Ship values are derived using observable market values calculated by the leading online valuation provider VesselsValue (www.vesselsvalue.com) with adjustments by the Investment Manager for planned dry docking. For the effect of long term charters entered, VesselsValue uses a discounted cash flow methodology comparing the contracted charter rates to observable market charter rates.

VesselsValue charterfree valuation

If the ship values quoted by Vesselsvalue.com at 30 June were 10% higher or lower, then the effect on the portfolio value would be as follows:

Discount rates

The discount rates used for valuing the charter element of each investment are based on the industry discount rate as quoted by VesselsValue.com. The risk premium in the discount rate takes into account the risks and opportunities associated with the ship's earnings.

The weighted average discount rate used for valuing the charter element of the investments in the portfolio is 7.22%

A change to the weighted average discount rate by plus or minus 0.5% has the following effect on the valuation. (Note, this calculation takes account only of the impact of the discount rate on the long term charters associated with the vessels. It does not affect the value of the vessels).

Operating costs

The table below shows the sensitivity of the portfolio value to changes in vessel operating costs.

If the ship operating costs had been 10% higher or lower than the ship operating budget, for the period ended 30th June 2018, the effect on the portfolio value would have been:

13. Financial assets and liabilities not measured at fair value

Cash and cash equivalents are Level 1 items on the fair value hierarchy. Current assets and current liabilities are Level 2 items on the fair value hierarchy. The carrying value of current assets and current liabilities approximates fair value as these are short-term items.

14. Management fee

The Investment Manager is entitled to receive an annual fee, accruing daily and calculated on a sliding scale, as follows below:

· (a) 0.85 per cent per annum of the quarter end Adjusted Net Asset Value up to US$250 million;

· (b) 0.75 per cent per annum of the quarter end Adjusted Net Asset Value in excess of US$250 million but not exceeding US$500 million; and

· (c) 0.65 per cent per annum of the quarter end Adjusted Net Asset Value in excess of US$500 million,

For the period ended 30 June 2018 the Company has incurred US$206,140 in management fees of which US$105,064 was outstanding at 30 June 2018.

15. Performance fee

Tufton ODF Partners LP, the CarryCo as defined in the Prospectus, shall be entitled to a performance fee in respect of a Calculation Period provided that the Total Return per Share on Calculation Day for the Calculation Period of reference is greater than the High Watermark per Share and such performance fee shall be an amount equal to the Performance Fee Pay-Out Amount.

If:

· the High Watermark is greater than the Total Return on any Calculation Day; and

· the prevailing Historic Performance Fee Amount (to the extent not previously adjusted pursuant to the operation of this paragraph) is greater than zero on such Calculation Day.

The prevailing Historic Performance Fee Amount shall be reduced by the lower of: (i) 20 per cent of the difference between the High Watermark and the Total Return on such Calculation Day multiplied by the Relevant Number of Shares; and (ii) the prevailing Historic Performance Fee Amount.

16. Related parties

The Investment Manager, Tufton Oceanic Ltd, is a related party due to having common key management personnel with the subsidiaries of the Company. All management fee transactions with the Investment Manager are disclosed in note 14.

The Directors of the Company and their shareholding is stated in the Report of the Directors on page 21.

17. Controlling party

In the opinion of the Directors, on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party.

18. Remuneration of the Directors

The remuneration of the Directors was US$84,769 for the period which consisted solely of short-term employment benefits (refer to the Report of the Directors on page 22).

19. Events after the reporting period

In the post year end period to date the Company has made two further investments. US$21.8m to acquire a 75% stake in a LPG carrier and US$10m to acquire a handysize bulk carrier.

On 27 July 2018, the Company declared its first dividend of US$1,365,000 which was paid to investors on 17 August 2018.

Definitions