Global Ports Holding Plc
Annual Report 2019

Plain-text annual report

Delivering Quality & Leadership Global Ports Investments PLC Annual Report 2019 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Global Ports Today In 2019, the Group strengthened its leadership position in the Russian container market, posting solid growth in its non-container business, achieving double-digit growth in Free Cash Flow and success in further deleveraging, and making tangible progress in laying the foundations to ensure its leading status going forward. The Group outperformed the container market for the second year in a row, with consolidated marine container throughput up 6.5% to 1,439 thousand TEU, against 4.5% growth in the Russian container market over the same period. For more information, please, visit our corporate website: www.globalports.com The Group continued to deliver impressive growth in bulk throughput, posting a 17.1 % year-on-year increase. In 2019, the Group achieved 4.0% growth in like-for-like revenue and 4.4 % growth of Adjusted EBITDA compared to 2018. Net Debt to Adjusted EBITDA decreased to 3.3x as of 31 December 2019. Improved Free Cash Flow generation and a continued focus on deleveraging led to upgraded credit ratings while all debt maturities in 2020-22 were fully hedged into local currency. KEY STRENGTHS No.1 Container Terminal Operator in Russia Industry leader in Russia, in terms of container throughput and capacity, handling almost one in every three containers coming in and out of Russia Management Report and Consolidated Financial Statements Management Report and Parent Company Financial Statements Additional Information 12 Chairman’s Statement 54 Corporate Governance 60 Board of Directors 66 Executive Management 67 Terminal Directors 69 Risk Management 15 Chief Executive Officer’s Statement 20 Delivering Quality and Leadership 21 Strategy 22 Business Model 24 Business Review 42 Corporate Social Responsibility 04 About us Performance 06 Key Milestones 08 Strong Presence in Russia’s Key Container and Bulk Gateways 2019 RESULTS 323hectares of land 7marine container 1.44mln TEU (equivalent to more than 450 football fields) and 5 km of quay wall in key sea basins with nearly 75% of land in ownership and multipurpose terminals in Russia and Finland, covering the two main sea basins Consolidated Marine Container Throughput in 2019 3.7mln tonnes Consolidated Marine Bulk Throughput — a record result for the Group 4.4% Growth in Adjusted EBITDA 18.9% Growth in Free Cash Flow 6.5% Growth in Consolidated Marine Container Throughput 17.1% Growth in Consolidated Marine Bulk Throughput 0.55 LTIFR, the lowest on record for Global Ports1. 3.3x Net Debt/ Adjusted EBITDA, the lowest level achieved in last 5 years Rounding adjustments have been made in calculating some of the financial and operational information included in this report. As a result, numerical figure and percentages shown as totals in some tables may not be exact arithmetic aggregations and other calculations of the figures that precede them. Information (including non-IFRS financial measures) requiring additional explanation or terms which begin with capital letters and the explanations or definitions thereto are provided at the end of this report. 1. While our LTIF for 2019 is the lowest on record for GPI, we unfortunately suffered a fatality at PLP. We strengthened focus on hierarchy of controls to reduce risks across our processes LTIFR started to be measured in 2014. 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 03 Global Ports Investments PLC Annual Report 2019 02 Global Ports at a Glance Global Ports is the leading container terminal operator serving Russian cargo flows.1. The Group’s main business is container handling. In addition, the Group handles a number of other types of cargo, including cars and other types of roll-on roll-off cargo and bulk cargoes. No.1 Container Terminal Operator in Russia1. 7marine container and multipurpose terminals in Russia and Finland 1.44mln TEU 3.7mln tonnes Consolidated Marine Container Throughput in 2019 Consolideted Marine Bulk Throughput in 2019 1. Based on throughput and containers capacity. Source: company estimates based on ASOP data and public sources. Global Ports Investments PLC Annual Report 2019 About us Performance 04 In 2019, Global Ports Delivered Quality and Leadership Our share on the container market in Russia continued to grow as the non-container segment produced a solid performance enabling Adjusted EBITDA growth of 4.4% and double-digit growth in Free Cash Flow. As a Group, we continued to increase the quality and efficiency of our operations and launched new value-adding services for our clients. [Ownership Structure] % 20.5% 30.75% 9% 9% 30.75% APM Terminals Delo Group Ilibrinio Establishment Limited Polozio Enterprises Limited Free float (LSE listing) APM Terminals operates a global terminal network of 78 operating port facilities, giving the company a global presence in 58 countries. APM Terminals is a part of A.P. Moller-Maersk, the world’s largest integrator of container and ports logistics. Delo Group is the largest Russian transportation and logistics holding company.1. The Group’s stevedore business includes DeloPorts stevedore holding and the leading operator of port container terminals Global Ports. The transportation and logistics business of Delo Group includes TransContainer — intermodal operator with the largest fleet of flat cars and multimodal operator Ruscon Group. Ilibrinio Establishment Limited and Polozio Enterprises Limited (former owners of NCC Group) each own 9% of the share capital of Global Ports. 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information [Revenue] USD million | Consolidated financial and operational data | 343.6 361.9 5.3% Selected IFRS Financial Information, USD million Revenue 343.6 361.9 18.3 5.3% 2018 2019 Change Change, % 05 2018 2019 [Operating profit] USD million 144.8 10.0% 131.6 2018 2019 [Adjusted EBITDA] USD million 217.3 226.9 4.4% Cost of sales and administrative, selling and marketing expenses Gross profit Operating profit Net profit / (loss) Selected operational information Consolidated Marine Container throughput, mln TEU Consolidated Marine Bulk throughput, mln TEU Ro-Ro, thousand unit Cars, thousand unit -174.9 -187.3 207.6 131.6 -58.3 210.1 144.8 67.7 -12.4 2.5 13.2 7.1% 1.2% 10.0% 126.0 -216.0% 1.35 1.44 0.1 6.5% 3.1 20.3 121.1 3.7 20.0 103.3 Balance sheet and cash statement, USD million Total assets Cash and cash equivalents Net cash from operating activities 1,288.3 1,454.3 91.6 174.3 124.4 185.4 Selected non-IFRS financial information, USD million Total Operating Cash Costs Free Cash Flow Like-for-like Revenue2. Like-for-like Total Operating Cash Costs2. Adjusted EBITDA Adjusted EBITDA Margin Net Debt -126.3 133.6 336.9 -119.7 217.3 63.2% 780.3 3.6x -136.7 158.8 350.5 -125.3 226.9 62.7% 747.0 3.3x 0.5 -0.3 -17.7 165.9 32.7 11.1 -10.4 25.3 13.6 -5.6 9.6 -33.3 -0.3x 17.1% -1.3% -14.7% 12.9% 35.7% 6.4% 8.3% 18.9% 4.0% 4.7% 4.4% -4.3% -8.3% 2018 2019 Net Debt to Adjusted EBITDA 1. According to Delo Group. 2. As a result of new terms of certain sales agreement, in 2019, VSC acted as a principal vs as an agent in 2018: previously, the net result of revenue from transportation services and associated cost was included in the consolidated revenue, in 2019, full revenue and associated cost are recognised in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 11.4 million to consolidated revenue and USD 11.4 million to Cost of sales.   Global Ports Investments PLC Annual Report 2019 06 Key Milestones 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information APRIL Charity fund “Atmosphere” created to finance social and environmental projects in Nakhodka area. The Group sold its effective share ownership in AS Vopak E.O.S. (VEOS). JANUARY By the end of January, Global Ports launched a new ERP system in all of the marine terminals in Russia, as well as in certain other companies across the Group. This will result in better management and further integration of business processes and therefore improved levels of efficiency and productivity. ULCT coal handling facility completes first full month of operations. Project closes out its first year with 90% utilisation rate, generating healthy returns. Unified customer care and call-centers created, to provide customer service and support with the aim of delivering the best possible experience to each customer. JUNE Key step towards further improvement in governance at all levels as the number of directors on the Board was reduced to 11. Share of INEDs in the board therefore increased from 3/15 to 3/11. Additionally, the Strategy committee was formed to create a swifter strategic planning process and enhanced oversight over strategy execution. MAY As part of the ongoing strategy to prioritise operating efficiency and optimise the Group’s asset base, the management teams of Petrolesport and First Container Terminal were unified. This development is the latest step in the integration of the Group’s container terminal operations in the Port of St. Petersburg. Over the last few years the Group has centralised its commercial, legal, financial and other team functions in order to effectively manage the Group’s resources. The merger of the two management teams further aligned the strategic focus across the two key terminals (Superterminal), improved clarity and speed of decision- making and brought tangible benefits to customers in terms of planning capability and distribution of services as Group resources were allocated more efficiently and effectively to client requirements. AUGUST Alexey Pavlenko appointed as the Managing Director of VSC. Mr. Pavlenko has almost 25 years of experience in transportation and worked all of his career at the Port Vostochny and VSC. Tapped into growing Asia-Europe transit via Russia — launching a new multimodal service, offered jointly by Maersk Line (shipping), Modul (railway) and Global Ports terminals (stevedoring). The Group’s FX risk exposure decreased substantially due to entering into several hedging transactions with highly reputable banks. As a result of these operations as well as other hedging transactions in the second half of the year all debt maturities for 2020–2022 are either in local currency or hedged into RUB. The Group continued to upgrade terminals and equipment to provide customers with best quality services and drive efficiency: 2 STS crane booms were extended at FCT to increase productivity when servicing bigger vessels. An additional area for empty container storage was created at FCT. 4 RTG relocated from PLP to VSC via northern sea route earlier in the year to increase storage capacity of the terminal, supporting full export growth. Mobile harbour crane was procured for PLP to increase capability for project cargo handling. 07 DECEMBER A mobile app for clients launched to drive growth in customer experience and increase standards of service. Launched additional bond buyback to decrease FX exposure, increase yield on cash balance and smooth 2022– 2023 maturities. SEPTEMBER Increased number of regular container block trains to/ from Global Ports terminals in both Baltic Basin and Far East Basin. OCTOBER Unified client web- portal launched to improve service levels. NOVEMBER PLP inaugurated its 2nd generation cross-dock facility, offering market leading cross-docking services under temperature- controlled conditions. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Strong Presence in Russia’s Key Container and Bulk Gateways1. 08 | Baltic Sea Basin | The Group’s container and multipurpose terminals in the Baltic Sea Basin offer direct access to the most populous and economically developed regions of the European part of Russia, including Moscow and St. Petersburg. Finland 8 7 Gulf of Finland 5 2 61 4 Baltic Sea Estonia Russia Sweden Lithuania 2.0 mln TEU2. Global Ports marine terminal capacity Latvia 51% Share of Baltic Basin terminals in the overall container throughput of Russian terminals By Sea The Baltic Sea Basin’s container terminals are close to key transhipment hubs for Russia’s inbound and outbound containers, such as Hamburg and Rotterdam. The basin has a strong customer base due to its economic development, access to Russia’s most populous regions and cost-effective transportation of containers to major Russian cities. 1 First Container Terminal (FCT) Location: St. Petersburg Cargo handled: Containers Container throughput berth/yard capacity3.: 1.25 mln/0.95 mln TEU per year Land total 88.6 ha Ownership: 100% 2 Petrolesport (PLP) Location: St. Petersburg Cargo handled: Containers, Ro-Ro, bulk cargo Container throughput berth/yard capacity3.: 1 mln/0.35 mln TEU per year Land total 119.0 ha Ownership: 100% 3 Vostochnaya Stevedoring Company (VSC) Location: Vrangel, Nakhodka Cargo handled: Containers, Ro-Ro, bulk cargo Container throughput berth/yard capacity3. 0.65 mln/0.65 mln TEU per year Land total 76.6 ha Ownership: 100% 4 UST-LUGA Container Terminal (ULCT) Location: Ust-Luga port cluster Cargo handled: Containers, bulk cargo Container throughput berth/yard capacity3.: 0.44 mln/0.23 mln TEU per year Land total 38.9 ha Ownership: 80% 5 Moby Dik (MD) Location: Kronstadt (St. Petersburg) Cargo handled: Containers, Ro-Ro, bulk and general cargo Container throughput berth/yard capacity3.: 0.4 mln/0.28 mln TEU per year Land total 12.9 ha Ownership: 75% 6 Yanino (YLP) Location: St. Petersburg Cargo handled: Containers, bulk cargo Container throughput yard capacity3.: 0.2 mln TEU per year Land total 51.2 ha Ownership: 75% [Fully consolidated in IFRS] [JV accounting] By Rail The Far East Basin is the fastest route for transporting containers from Asia to the European part of Russia and many CIS countries and transit to EU. The shorter transit time is a key advantage for customers shipping high-value and time-sensitive cargo. 09 Murmansk St. Petersburg Moscow Ekaterinburg Novorossiysk | Far East Basin | Nakhodka The Group’s container terminal in the Far East Basin is located in an ice-free harbour with deep-water access and a direct link to the Trans-Siberian railway. China Russia 3 Sea of Japan 0.65 mln TEU Global Ports marine terminal capacity 30% Share of Far East Basin terminals in the overall container throughput of Russian terminals 7 MLT Kotka Location: Kotka, Finland Cargo handled: Containers, Ro-Ro, bulk cargo Container throughput berth/yard capacity3.: 8 MLT Helsinki Location: Helsinki, Finland Cargo handled: Containers, Ro-Ro, bulk cargo Container throughput berth/yard capacity3.: Russian Ports segment: PLP, VSC, FCT, ULCT, Yanino, MD Finnish Ports segment: MLT Kotka and MLT Helsinki Our Partners: Entity: Moby Dik, Finnish Ports, Yanino Partner: CMA Terminals S.A.S. Share: 25% in each 0.15 mln TEU per year Land total 0.5 ha Ownership: 75% 0.27 mln TEU per year Land total 7.0 ha Ownership: 75% Entity: ULCT Partner: Eurogate Share: 20% Global Ports owns 323 ha of land and 5 km of quay wall in the key marine gateways of Russia. The Group’s modern fleet of equipment, advanced rail and road connections, skilled personnel, and advanced client-focused IT solutions underpin its strong market position in container handling and provide a solid platform for the non-container businesses. 1. Numbers for the Group are presented on a consolidated basis. 2. Based on yard capacity. Company data. 3. Company estimates based on annual potential berth and yard throughput capacity. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 10 Strategic Report We maintained our focus and delivered a solid operational performance against plan in 2019. We outperformed the Russian container market, growing our Consolidated Marine Container Throughput by 6.5% to 1.44 million TEU. Our financial results benefitted from the strong market conditions and the self-help measures we put in place during the year. Strong financial performance Operational Record USD 226.9 mln Adjusted EBITDA 3.7 mln tonnes Consolidated Marine Bulk Throughput 4.4% 17.1% 11 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 12 Chairman’s Statement Our 2019 results continued to benefit from prior year decisions to invest in our terminals, develop new revenue streams, improve operational efficiency, and focus on cash generation. Morten Engelstoft Chairman of the Board USD 361.9 mln Revenue 5.3% USD 226.9 mln Adjusted EBITDA 4.4% 13 2019 was a year of growth, change and successful strategic execution for Global Ports. In my Chairman’s statement last year, I highlighted the growing momentum within our business, so it is pleasing that upswing in activity was maintained through our 2019 financial year. We continued our run of good financial results, executed well against our strategic priorities, and met our operational goals. In doing so, we made further progress towards fulfilling our Group long-term vision, of being the partner of choice for our customers as Russia’s best-connected independent container terminals operator. Our 2019 results continued to benefit from prior year decisions to invest in our terminals, develop new revenue streams, improve operational efficiency, and focus on cash generation. More immediately, and encouragingly, the operational changes made over the last year by the CEO and the management team, with the Board’s backing, have begun to yield positive results. These changes involved improving our operational excellence, streamlining our decision-making and management structures and above all, getting closer to our customers. Our operational performance strengthened, reinforcing our leadership position in the sector. We outpaced a strong Russian container market, increasing our marine container volumes by 6.5%, against a market that grew at 4.5%. Our consolidated bulk cargo activities also advanced strongly, with throughput volumes increasing by 17.1% driven by the successful launch of our coal handling activities at our Ust-Luga terminal. Markets however seldom stand still and the environment in which we operate continues to change rapidly and become more competitive. As an ambitious company, we cannot afford to stand still either, so it is imperative — if we are to maintain our industry leadership — that we increase our agility as an organisation. That way, we can drive higher levels of profitable organic growth and create sustained value for all our stakeholders. Our financial results attest to the robustness of our operational delivery in 2019. We made progress in all our key metrics: revenue of USD 361.9 mln, up by 5.3%; Adjusted EBITDA of USD 226.9 mln, up by 4.4%; and Free Cash Flow up by almost 19%. Our Vision and Strategy Global Ports is a core infrastructure business; we own essential physical assets — our ports — that are capable of delivering resilient cash flows based on our market position as the only operator with a network of terminals in Russia’s key container gateways. This position gives us a sustainable competitive advantage and makes us strategically well placed to deliver long-term value to our shareholders, partners and customers. In recognition of this, the Board and management spent a lot of time last year reviewing our strategy and business model. We concluded that fundamentally we were well-positioned, but that we needed to become a more customer- focused, more efficient organisation. At the heart of this are our customers, and this is where much of the effort was expended, on sharpening our customer focus. In this vein, we took several crucial steps, including decisions to reorganise the Board, simplify our management structures, reconfigure our facilities, and introduce new customer-oriented initiatives, aimed at optimising our business. The full impact of these decisions is not yet apparent, but we are confident that our actions will empower Global Ports and make it a much more agile organisation which in turn will increase long-term value for all our stakeholders. Governance and the Board Our corporate governance framework continues to evolve, and in 2019 we took further positive steps to improve the effectiveness of our Board and support our belief that strong governance is a vital component in the long-term success of Global Ports. One of my principal tasks as Chairman is to ensure that the Board maintains the necessary mix of skills and experience to provide the appropriate level of oversight and to work effectively with the executive team to deliver the Group’s strategy. Having reviewed our existing corporate governance arrangements, we decided that a simpler structure was needed and that the membership of the Board also needed refreshing to ensure that we continued to operate as a dynamic, efficient and well- balanced board. Accordingly, there were a number of changes made to the Board in 2019. Firstly, we refined its size from 15 to 11 members. Secondly, we made some important changes to our board committees, merging the Nominations and Remuneration Committees, and establishing a new Strategy Committee in June to accelerate the planning and execution of the Group’s strategy. Finally, we appointed a number of new directors, who are expected to contribute valuable, fresh insights to our Board deliberations. I believe that these measures combined will create more effective lines of authority and accountability, freeing up the Board’s time to focus on priority areas. More details of the changes and the Board’s activities can be found in the Governance section of this Report. I would like to thank those directors who left the Board during the year. They have all played their part and contributed to the growth of our Company, and I want to offer my appreciation for their work. Equally, I extend a warm welcome to those who have joined the Board in 2019, and I look forward to working together over the coming year. I should also add that as a Board, we continue to benefit from the presence of two highly supportive co- controlling shareholders, APM Terminals and Delo Group. The Board’s relationship with these two companies continues to progress, and we look forward to their continued support as we embark on the next stage of the Group’s development. Strong corporate governance is not just about a set of rules, it is also about having the right values and culture in place in the organisation, such that they resonate with employees and stakeholders alike. And this is particularly the case in how we, as a company, are seen to behave in terms of our environmental activities and providing safe working conditions for our staff. Sustainability As a Board, we understand that issues around sustainability have never been higher on stakeholders’ agendas. Our industry, like many others, is under pressure to develop more sustainable practices and reduce the impact on the environment. As a core infrastructure business, the Board recognises that Global Ports has a commitment to society at large, the environment and the communities we serve, to behave responsibly. We continue to increase our engagement in this area, with the aim of becoming a more socially responsible business. Sustainability is now an area of focus for investors, partners and customers, and I am pleased to report that in 2019 we were assigned our first ESG rating (BBB) as a company by MSCI. Global Ports Investments PLC Annual Report 2019 14 19% Free Cash Flow growth 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 11 members of the Board of Directors Chief Executive Officer’s Statement 15 We outperformed the buoyant Russian container sector, delivering strong operational performance. We increased our overall marine throughput volumes, won a share in the container market, and also posted double-digit volume increases in our non-container business Vladimir Bychkov CEO Safety As I clarified before, the Board is committed to embedding a safety-led culture at Global Ports. Over the past year, the Board has paid very close attention to the issue of risk reduction within our business operations, with a particular emphasis on the Group’s risk controls and processes. In this regard, it is encouraging to report that 2019 saw the Group recording its lowest ever incidence of injuries as measured by our Lost Time Frequency Rate. However, there is absolutely no room for complacency, and we have to remain ever vigilant about the safety of our staff, a position reinforced by the tragic loss of one of our colleagues working at PLP last year. His passing is a strong reminder that nothing is more important than the health and safety of our people. There is no finish line when it comes to safety and both the Board and management aare completely committed to further improve our safety performance and culture to ensure all our staff, and others that work on our terminals, can return home safely every day. Part of our job as a Board is to assess and monitor new risks to the organisation, and I would like to share with you our views on the emerging threat of COVID-19. We are closely monitoring developments in what is a fast-moving situation which is impacting the whole world. Our priority is our employees, and we have put in place measures to ensure their health and safety. We have also taken action to minimise ongoing disruption to our operations and will take further action as appropriate to protect our people and business. Looking Forward/Outlook Global Ports made substantial progress this year on many fronts. The Board is confident that the Group has the right strategy, leadership and culture to continue delivering on its full potential. Short term, our immediate focus is to evaluate and prepare for the full consequences of COVID-19. The global economy and global trade will be negatively affected and Global Ports is not immune to these effects. Though difficult to predict the consequences, Global Ports is preparing for the expected market fluctuations. Consequently, it has made predicting the outcome for this year more challenging. However, Global Ports has a resilient business model and a strong and experienced executive team and remains well placed to continue to create value for shareholders, partners, customers and employees. While preparing for the consequences of COVID-19 we also need to maintain our momentum and continue to execute the strategy. Though the short-term outlook is negatively affected by the COVID-19 situation, our medium-term opportunities remain strong, and the long-term growth prospects remain compelling as Russia’s container market continues to grow. With a network of high-quality terminals in key gateway locations, the Group is well placed to capitalise on the growth in containerised exports, which is transforming the industry model from one reliant on imports towards one which is close to achieving equilibrium between imports and exports. Global Ports is well placed to deliver to its customers. Finally, the strength of our Company is built on the hard work and dedication of all our colleagues who work at Global Ports. Our strong results in 2019 stand testament to their hard work and determination, and I want to thank them all for their contribution to our success. Morten Engelstoft Chairman of the Board of Directors 23 April 2020 I have now completed my first full year as CEO of Global Ports, and I am encouraged by the progress we have made. It has been a year of intense activity geared to unlocking the enormous potential of this business, something I highlighted in my review last year. Creating a logistics business is a matter of having great assets, a clear strategy, and the right people ready to implement it. Maintaining leadership and sustaining competitive advantage, however, requires much more. It involves the combination of world-class operating excellence, innovation and people development. It requires a different mindset, one that puts the customer first, that challenges the status quo, and understands that operating excellence is above all about continuous improvement. Our 2019 results reflect the progress we have made in introducing this performance ethos into the Group. We outperformed the buoyant Russian container sector, delivering a strong operational performance. We increased our overall marine throughput volumes, won market share in the container market, and also posted double-digit volume increases in our non-container business. Our financial results were equally solid, with good like-for-like revenue and profits growth, healthy cash flows, and further reductions in borrowings and leverage. Our markets The container market in Russia performed well in 2019, exhibiting growth of 4.5% year-on-year, resulting in total container market throughput of 5.1 million TEU. Full container exports grew by a healthy 6%, supported by growth of 3.9% in full container imports. Substantial container volumes kept ports busy through the period, squeezing utilisation sharply higher. Average capacity utilisation climbed 7% year on year, to a robust 76%, helping to maintain a strong pricing environment. The rebound in the container market over the last two years, with volumes surging 15%, has been caused by the rapid expansion of container exports underpinned by continued growth in container imports. The Russian container market is being reshaped as it moves away from an import-driven model, built around the consumer, towards a more balanced industry model, driven by the acceleration in full exports which is also driving greater containerisation. Over the last six years, total container exports have grown exponentially, up by 86%, and at the Port of St Petersburg exports of dry full containers now exceed those of dry full imports, and the gap between the two is continuing to widen. This shift in the underlying economics of the sector explains why we are so confident in our long-term prospects. For the industry, as the market reaches equilibrium, it should create a more stable business environment, as export volumes balance out imports and reduce volatility, a feature of the industry in prior periods. There should also be beneficial effects on both revenue per TEU and utilisation levels as full exports require greater yard capacity and attract more additional services. For Global Ports, the implications are clear; the industrial cargoes that Russia is increasingly exporting globally use greater terminal capacity, require larger vessels to ship them, and typically spend more time quayside. As a result, clients will increasingly gravitate toward those marine terminal operators that have large, well-equipped, efficient terminals and good access to road and rail connections. Global Ports is uniquely well placed to serve these clients and capture an increasing share of these container flows. First, we are the only operator with the networks of terminals in key container gateways; and second, our asset base gives us the ability to scale up our operations to match the growth in demand from customers very effectively. Global Ports Investments PLC Annual Report 2019 16 1.44 million TEU Consolidated Marine Container Throughput 17.1% Consolidated Marine Bulk Throughput growth 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 9.5% Non-container revenue growth 3.3 x Net Debt to Adjusted EBITDA ratio 17 Operating performance Operational excellence is the essence of our business. Running container terminals is a service industry, involving logistical challenges, and we are the critical link in key production supply chains. High productivity — operational excellence — is therefore vital to us winning new business and to continuing to produce above- market growth and profitability. To achieve high productivity requires us to be hyper-efficient in our day to day operations; to invest in our facilities; to have the best systems and technology in place and; to invest in our people. With this in mind, management took time in 2019 to refine our strategy and business model, to understand our customers better, and to improve our operational performance. Our 2019 results provided the first evidence that the operational changes we made had started to impact our performance and filter down to the bottom line. Our operations review split into three broad categories: organisational structure; the customer; and productivity. As well as streamlining our leadership structure, which the Chairman covers in his review, we simplified our operational command structure, integrating FCT and PLP into a single operating unit, eliminating duplication of functions, and centralising decision-making under one management. As part of our decision to concentrate just on our marine container business, VEOS, the oil products terminal in Estonia was disposed of in April 2019 as this was no longer a core part of our business. We have begun redesigning our business processes with our customers firmly front of mind. We unified our customer service operations, creating a 24/7 call centre, and launching a proper customer relationship management programme. We upgraded our digital capabilities, including launching a mobile app for customers, as part of a drive to harness technology more effectively. And we launched several new services including, in conjunction with a number of partners, a multimodal service designed to tap into the growing Asia-Europe transit trade. We also increased the number of container block trains we run to and from our terminals in the Baltic and Far East basins. And finally, we focused on driving productivity: improving berth productivity and undertaking activity analyses in areas like customs inspection and train dispatch to identify bottlenecks and improve response time. And over the past 12 months, we continued to invest in new infrastructure, facilities and equipment to support our customers’ needs. These initiatives included new facilities such as our new cross-deck facility at PLP for handling refrigerated cargo. Despite all this activity, we kept our operational focus and delivered a strong operational performance against plan in 2019. We outperformed the Russian container market, growing our Consolidated Marine Container Throughput by 6.5% to 1.44 million TEU. Consolidated Marine Bulk Throughput hit a record 3.7 million tonnes in 2019, up 17.1%, despite second-half year volume weakness in certain cargoes. Our strong bulk throughput result was driven by a first full-year contribution from our coal-handling operations at ULCT, which performed very strongly. Financial results Our financial results benefitted from solid market conditions and the self- help measures we put in place during the year. Consolidated revenue grew by 5.3% to USD 361.9 million, driven by strong growth in both container and non-container revenue. Container revenue was up by 2.2% as solid growth in container throughput, was partially offset by a reduction in like for like revenue per TEU, primarily caused by changes in headline pricing, services mix and throughput by terminals. Non-container revenue increased sharply, up by 9.5%, the result of significant growth in coal volumes at ULCT. Management continued to be very focused on cash, tightly managing our costs and driving cash flow. We reduced cash overhead expenses by 10.3%, while our Like-for-like Total Operating Cash Costs increased by a creditable 4.7%, on the back of strong growth in container throughput. Adjusted EBITDA increased by 4.4% to USD 226.9 million, and the Group’s Adjusted EBITDA margin was a healthy 62.7% (2018: 63.2%). Cash generation was an especially strong feature of our results, with the Group generating USD 158.8 million of Free Cash Flow, an increase of almost 19% compared to the prior year. The Group continued to prioritise balance sheet improvement, and Net Debt fell by USD 33.3 million. Our consistent efforts to reduce our borrowings has resulted in a USD 603 million reduction in Net Debt since the transformational acquisition of NCC in 2013. Our ongoing deleveraging reduced Net Debt to Adjusted EBITDA ratio to 3.3x from 3.6x at the prior year-end. Part of this involved a USD 124.3 million bond buyback, to mitigate our FX exposure and optimise our short-term maturity profile. Our strengthening financial position was rewarded by the credit markets in 2019, with the three leading credit agencies that follow us all upgrading the Group’s creditworthiness throughout 2019. Outlook Short term, the Company is mobilising to counter the potential threat posed by COVID-19. Global Ports, as Russia’s leading ports operator, is a critical part of the nation’s infrastructure supporting the nation’s supply chains. In this regard, our actions are focused on three clear objectives: protecting the health and safety of our staff and their families; preserving the continuity of our operations and minimising disruption to customers’ supply chains; and managing our costs. We have activated business continuity plans at our terminals and are liaising closely with the authorities, our partners and our customers. We continue to monitor developments closely but, at this stage, it is difficult to predict the likely commercial impact of COVID-19 on the Group. The virus has, however, already caused a downdraft in global economic activity, which makes forecasting this year’s performance particularly challenging. Notwithstanding COVID-19 and its effects, our priorities for 2020 remain unchanged. We must focus on our operational effectiveness and improve those areas of the business that require it. We need to advance our customer service offering so that we are delivering a consistent, high quality, and responsive service to customers across the Group. We need to maintain our strict cost discipline and continue to drive cash generation and deleverage. Finally, we need to continue to focus on investing in our employees and ensuring they are safe. It has been a strong year for Global Ports, and we have successfully laid the groundwork to deliver more progress over the coming year. Global Ports has entered 2020 as a simpler, more agile and more customer-oriented business. I am confident we have the best strategy, the best assets, and the best people to deliver sustainable value for our stakeholders in 2020 and beyond. Vladimir Bychkov CEO 23 April 2020 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Global Ports outperformed the market for the second year in a row with container volumes up 6.5% 76% Average container handling capacity utilisation for the Russian market 19 86% Growth of full container export since 2013 Global Ports Investments PLC Annual Report 2019 18 Global Ports handles close to every second full export container that leave Russia’s key Far East and Baltic Basins Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 20 Delivering Quality and Leadership Strategy 21 OUR MISSION To increase long-term value for all our stakeholders by shaping and determining the trends in the container segment of the Russian transportation and logistics market, thereby driving international trade. Strategically we remain focused on expanding our business through both organic growth and investment projects that offer tangible opportunities to the Group. Using technology effectively Maintaining operational excellence We will achieve our fundamental strategic goal by: Providing the best services to our clients Attracting and retaining a workforce with the right skills OUR VALUES OUR VISION 1 Professionalism (expertise) 2 Respect 3 Cooperation (collaboration, partnership) To be the partner of choice for shipping lines and freight forwarders in our role as Russia's best-connected independent container terminal operator offering unparalleled access to international and domestic trade flows. Our strategy aims to produce value growth by offering unparalleled access to international and domestic trade flows through our network of terminals sited at Russian key marine locations. Preferred port in every location, partner of choice for all parties involved W e have the strong kno wledge and ability to add value to R ussian container m arket O ur key m arket: R ussia O w e e B a n y c n a o n b l e n e o u c ti n r c u r k e s d fr h i p e i g p i n y c li h t f g li e n t o r n e w s : s a r d e r s u s t g a n o d m si m e r s o p lif n g r y i n o g s w i n u p g t p l y c h e ir b h ai u n si n s, e s s e s. Integral part of import/export and transit logistics chains Assured healthy, safe and effective organisation W e p r o v i d a n d r e o u e l a r c li t e e n d l o t s g is w it ti c h fi r s s s e r t c l a v i c e s s s p o r t O t e r u r k m i n e y s a l o e r p e r v i c e a ti o s : n s To succeed, we remain focused on: O ur business focus: O ur non-container operations diversify our revenues containers and increase our terminals’ utlisation rates Solid business profile and prudent capital allocation Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 22 Business Model 23 INPUT Only player with network of terminals in key Russian container gateways 7 marine container and multipurpose terminals in Russia and Finland Unique asset base: 323 ha of land 5 km of quay wall Port infrastructure and perfect multimodal hinterland connections Advanced IT system >2,800 professionals1. trained staff Robust operational and financial performance, strong cash flow generation, high EBITDA margin Unique partnership of strategic shareholders: global player, APMT Terminals, and local leader, Delo Group Access to local and international capital markets HOW WE CREATE VALUE We create value by providing our clients (shipping lines and freight forwarders) with first class port and related logistics services and ensuring efficient interaction with our partners, by forming an integral part of import/export and transit logistics chains Services  Handling of containerised cargo | bulk | Ro-Ro  Cargo storage  Additional services: customs inspection, dispatch of container trains, depot of empty containers, tracking of cargo, cargo documentation, stuffing and unstuffing, container repair and other services When providing services and interacting with clients we aim to be: ޭ Preferred port in every location, partner of choice for all parties involved ޭ Healthy, safe and effective organisation Our port is a platform of efficient interaction between all parties Shipping lines Freight forwarders Cargo owners Federal authorities Truckers Railway operators Russian Railways СLIENTS OUTPUT EMPLOYEES COMMUNITY SHAREHOLDERS  Smart, swift, efficient logistics hub  Efficient  Infrastructure and effective services to facilitate import/ export and transit flows  Reliable  Opportunities and safe work environment for professional growth and development  Competitive salaries  One of the biggest employers in the region and sizable contributor to local economy  Satisfied  Sustainable business customers and communities that limits environmental impact & delivers positive change  Shareholder value  Sustainable high free cash flow generation and dividend capability OUTCOME | GLOBAL PORTS RESULTS IN 2019 9% Full export containers throughput 4% Full import containers throughput 6.5% Consolidated Marine Container Throughput 17.1% Consolidated Marine Bulk Throughput Total USD 71.4 mln paid to all employees in 2019 LTIFR 0.55 down to the lowest level in 6 years Total Total Total >2.8 K1. employed RUB 2 bln2. of tax paid RUB37mln2. spent on charity RUB101 mln2. spent on environment protective measures 71% Share price in 2019 3.3 x Net Debt / Adjusted EBITDA 1. As at 31 December 2019. 2. USD equivalents of figures:Total USD 32 mln of tax paid, Total USD 0.6 mln spent on charity, Total USD 1.6 mln spent on environment protective measures. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 24 Business Review | FY 2019 Results Summary | Improved Revenue up delivering Adjusted EBITDA and Adjusted EBITDA margin 5.3% to USD 361.9 million (+4.0% like-for-like.) USD 226.9 million 4.4% y-o-y 62.7% Return to Profit for the year of Enhanced Free Cash Flow generation Net Debt to Adjusted EBITDA decreased slightly to USD 67.7 million (compared to a loss of USD 58.3 million in 2018) up 18.9% to USD 158.8 million 3.3 x -0.3x compared to 31 December 2018 Vladimir Bychkov CEO of Global Ports Management LLC 18.9% Free Cash Flow growth 25 In 2019, Global Ports strengthened its leadership position in the growing Russian container market delivering market outperformance for the second consecutive year, notably in the Baltic Basin where our consolidated container throughput grew 12% against 5.1% growth of the Russian market. This success was driven by our ongoing efforts to deliver leadership — not only in size — but also in the quality of our services across every aspect of our activity: from berth productivity for shipping lines to the efficiency of railway and customs operations at our terminals and to advanced and innovative IT solutions. Our journey to become a more efficient logistics hub with a wide range of value- added services is an ongoing process and there is still much to be done, especially in the Far East. We believe that our dedication and commitment alongside our clear approach will achieve the required results. Financially we performed very well over the year, achieving 4.4% Adjusted EBITDA growth and an 18.9% increase in Free Cash Flow. | Operational Highlights | | Financial Highlights | The Russian container market grew 4.5% in 2019 driven by the 6.0% growth of full container export and supported by 3.9% growth in full container import, resulting in total Russian container market throughput of 5.1 million TEU. Consolidated revenue increased by 5.3% to USD 361.9 million; excluding the impact of LT and VSC transportation services2., like-for-like revenue grew by 4.0% driven by an increase in both container and non-container revenue. driven by the depreciation of the Russian rouble in 2018, which resulted in a loss on revaluation of US dollar-denominated borrowings (from Group and non-Group entities) due to the Group’s Russian subsidiaries having the Russian rouble as their functional currency. The Group’s capital expenditure in 2019 was USD 26.6 million. It was focused on planned maintenance projects, scheduled upgrades of existing container handling equipment and customer service improvement initiatives. Like-for-like Revenue per TEU decreased by 4.0% to USD 178.4. Gross profit increased 1.2% to USD 210.1 million. Adjusted EBITDA increased by 4.4% to USD 226.9 million mainly due to the growth in throughput and strict cost control. Profit before income tax for the twelve- month period was USD 96.6 million compared to a loss before income tax of USD 53.6 million in 2018. This was mainly The Group generated USD 158.8 million of Free Cash Flow, an increase of 18.9% compared to 2018. The Group reduced Net Debt by USD 33.3 million over the twelve- month period despite IFRS16 impact of USD 24.9 million3. and FX impact of USD 28.9 million. Consolidated Marine Container Throughput Consolidated Marine Bulk Throughput 1,439 thousand TEU 6.5% 3.7 million tonnes 17.1% y-o-y against 4.5% growth in the Russian container market over the same period Leading credit agencies upgraded Group credit rating in 2019 BB+ Fitch Ratings Ba2Moody’s Investors Service RuA+ Expert RA Outperforming the market, the Group’s Consolidated Marine Container Throughput increased 6.5% to 1,439 thousand TEU. Consolidated Marine Bulk Throughput increased by 17.1% to 3.7 million tonnes driven by the growth in bulk cargoes at ULCT, which was partially offset by a decline in scrap metal at PLP following the introduction of state export quotas in the third quarter of 2019. 1. Like-for-like is adjusted growth metric calculated on comparable data: revenue of 2019 compared to 2018 revenue an adjusted for JSC Logistika-Terminal (LT) 3. As a result of the adoption of IFRS 16 standards, the Group recognised USD 24.9 million of lease liabilities into Total Debt and Net Debt as at 31 December 2019. revenue and revenue from VSC railway services. This amount includes FX impact on lease liabilities recognised according to IFRS 16. 2. As a result of new terms of certain sales agreement, in 2019, VSC acted as a principal vs as an agent in 2018: previously the net result of revenue from transportation services and associated cost was included in the consolidated revenue, in 2019, full revenue and associated cost are recognised in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 11.4 million to consolidated revenue and USD 11.4 million to cost of sales. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 26 To adjust for this IFRS 16 effect, Net Debt decreased by USD 58.2 million to USD 722.1 million. The Group continues to prioritise deleveraging over dividend distribution. [Russian container market volumes] by basin, 2019 Baltic Basin 51.1% Northern Ports Basin 3.1% Black Sea Basin 15.4% [Russian container market dynamics] mln TEU CAGR 20.0% 3.7 3.5 3.0 2.4 2.4 2.0 1.5 1.1 0.9 0.7 0.5 Far East Basin 30.4% 5.2 5.1 4.9 4.5 4.9 4.4 5.1 4.5% 3.8 3.8 Net Debt to Adjusted EBITDA decreased from 3.6x in 2018 to 3.3x in 2019. Net Debt to Adjusted EBITDA adjusted for IFRS 16 was 3.2x as of 31 December 2019. The company’s outlook for 2020 may be impacted by the Coronavirus (COVID-19) outbreak in a number of countries, including Russia, which has lowered visibility on what to expect in 2020. The Management is closely monitoring the situation with the outbreak of Coronavirus (COVID-19) and is ready to act depending on the development of the situation. | Market Overview and Operating Information | The Russian container market grew 4.5% in 2019 driven by 6.0% growth of full container export and supported by 3.9% growth in full container import, resulting in total Russian container market throughput of 5.1 million TEU. After a strong double-digit recovery in 2017–2018, the growth of containerised import returned to normalised GDP-driven growth rate of 3.9%. Throughput of full export containers at Russian terminals continued its rapid growth (+6.0% year-on-year), mainly due to increased exports and the wider use of containers in Russia. Full exports increased by 86% between 2013–2019, supported by increased exports and the containerisation of export supply chains. As a result of this export growth, the gap between full dry container import and full dry container export is rapidly narrowing, thereby shifting the market towards an import-export balance. In 2019, the ratio between full dry container export and full dry container import in Russia was 78%, while the Baltic Basin has already become export driven: dry full container export exceeded dry container import by 11% in 2019. The rapid growth of full container export over the past six years, has supported the increase of capacity utilisation in the industry, due to the higher capacity requirements on container yards and berths. A key impact for terminal operators has been an overall reduction in the yard capacity of container terminals, as full export containers require significantly longer dwell time, compared to both full import containers and empty export containers, which in turn lengthens the turnover time of the container storage yard. Currently, the Group estimates, that the average container handling capacity utilisation in 2019 was approximately 76%2. for the Russian market and 67% for Global Ports on consolidated basis (excluding joint ventures). In addition, the growth of full container export, combined with the ongoing growth in vessel sizes is driving client preference for large well-equipped and efficient terminals and is withdrawing excess capacity from the market. [Full Import / export gap is narrowing in Russian container market] mln TEU [Export exceeds import in the Big Port of Saint-Petersburg. for dry full containerst] mln TEU 27 10% 86% 2.32 3% 9% 2.10 0.81 0.77 1.4 0.88 0.80 0.8 2013 2019 2018 2019 Import of full containers Export of full containers Import of dry containers Export of dry containers [Market share gain accelerated in 2h2019] % 8.0% 4.7% 4.9% 4.3% 4.5% [Consolidated Marine Bulk Throughput and share of Non-container Revenue] mln tonnes 26% 26% 23% 6.5% 19% 16% 16% 3.7 3.1 2.7 2.2 0.7 1.3 1H19 2H19 2019 2014 2015 2016 2017 2018 2019 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 2019 Source: Company estimates based on market data by ASOP. Growth of containerised export is also driving demand for empty containers. As a result, empty containers import grew by 35% in 2019, to 149 thousand TEU. Market Global Ports Share of non-container revenue, % 4.5% Russian container market growth 5.1million TEU Total Russian container market throughput 76% Average container handling capacity utilisation for the Russian market 149thousand TEU Empty containers import 1. Excluding export and import to reefer containers. 2. Company estimates throughput based on ASOP. Capacity estimated on сompanies’ websites (www.port-bronka.ru, www.deloports.ru, www.terminalspb.ru, www.nmtp.info and other public available sources). Yard capacity for Group used for calculations. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 28 FY 2019 FY 2018 Change, Abs Change, % 29 Brian Bitsch CCO of Global Ports Management LLC 6.5% Сonsolidated marine container throughput growth As a company, we continued to outperform the growth on the Russian container market, delivering consolidated marine container throughput increase of 6.5% to nearly 1,500 thousand TEU. Such continued volume growth — noticeable in the full export segment — generates not only increased capacity utilisations across container terminals in Russia, but tangibly demonstrates our strong value propositions offered to the shipping lines and forwarders, facilitating the market to become more resilient to future macroeconomy fluctuations. [Container/thousand capita in 2019] TEU/thousand people [Consolidated Marine Container Throughput] thousand TEU [Consolidated Marine Bulk Throughput] thousand tonnes 139 135 140 1,352 1,439 6.5% 3,658 17.1% 3,123 106 36 North America Europe Turkey World Russia 2018 2019 2018 2019 Marine terminals Containerised cargo (thousand TEU) PLP VSC FCT ULCT Non-containerised cargo Ro-Ro (thousand units) Cars (thousand units) Consolidated Marine Container Throughput (thousand TEU) Consolidated Marine Bulk Throughput (thousand tonnes) Operational statistics of Joint Ventures Containerised cargo (thousand TEU) Moby Dik Finnish Ports Inland terminal Yanino 328.1 394.8 654.0 62.1 20.0 103.3 246.4 419.2 617.0 68.9 20.3 121.1 81.7 (24.4) 37.0 (6.8) (0.3) (17.7) 33.1% (5.8%) 6.0% (9.9%) (1.3%) (14.7%) 1,439.0 1,351.6 87.4 6.5% 3,657.9 3,122.8 535.1 17.1% 11.3 110.9 81.7 107.1 (70.5) 3.8 (86.2%) 3.6% 17.1% Consolidated Marine Bulk Throughput growth 90% The new coal handling capacity at ULCT had a high level of utilisation in 2019 Containerised cargo (thousand TEU) Bulk cargo throughput (thousand tonnes) 119.6 376.4 122.8 542.8 (3.2) (166.4) (2.6%) (30.7%) Source: Drewry; some 2019 numbers are estimated. The table opposite sets out the container and bulk cargo throughput of the Group’s terminals for the periods indicated. Gross throughput is shown on a 100% basis for each terminal, including terminals held through joint ventures and accounted for using the equity method. The Group’s Consolidated Marine Container Throughput increased 6.5% to 1,439 thousand TEU in 2019 compared to 1,352 thousand TEU in the same period of 2018. The growth rate of the Group’s Consolidated Marine Container Throughput increased to 8.0% in the second half of 2019 compared to 4.9% in the first half of 2019 as a result of the Group’s efforts to increase of productivity and customer service standards. As a result of the market trends mentioned above, Moby Dik no longer meets the market requirements of a modern container terminal, such as absence of a railway access and insufficient vessel handling equipment. Nonetheless, Moby Dik remains a business unit of the Group with further opportunities in bulk handling and additional services. Moby Dik handled 170 thousand tonnes of bulk cargo in 2019 generating growth of 4.4x compared to 2018. In 2019, the Group continued to focus on building a strong value proposition to its clients, while maintaining the competitive pricing, in order to take advantage of the opportunities offered by the growing market. Even though capacity utilisation continues to increase, competition in the industry remains strong with headline pricing and mix of services and terminals driving a 4.0% decrease in like-for-like Revenue per TEU at the Group’s terminals. The Group continued to focus on increasing bulk cargo volumes to improve utilisation rates at its terminals. As a result, Consolidated Marine Bulk Throughput increased by 17.1% to 3,658 thousand tonnes. This growth in Consolidated Marine Bulk Throughput was primarily driven by the start of coal handling at ULCT in December 2018. The new coal handling capacity at ULCT had a high level of utilisation of 90% in 2019. Since 1 September 2019, the Russian Government introduced quotas on export of scrap metal. As a result, handling volumes of this type of bulk cargo at PLP decreased in the second half of 2019 compared to the first half of 2019. This development, combined with scheduled maintenance works at Russian Railways in the Far East, which limited the ability of VSC to accept railway delivery of coal in August 2019, led to 13.7% decrease in Group’s consolidated bulk throughput in the second half of 2019, compared to the first six months of the year. Furthermore, the Government is said to be considering the introduction of a new exchange driven mechanism of scrap metal export over the course of 2020, which therefore increases the uncertainty of potential handling volumes of this cargo during the year that lies ahead. The Group’s passenger car handling volumes and high and heavy Ro-Ro handling decreased by 14.7% and 1.3% in 2019 respectively, reflecting the slowdown in Russian consumer demand for imported cars. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 30 | Results of operations of Global Ports for the twelve-month period ended 31 December 2019 and 2018 | 31 The following table sets out the principal components of the Group’s consolidated income statement and certain additional non-IFRS data of the Group for the twelve-month period ended 31 December 2019 and 2018. FY 2019, USD mln FY 2018, USD mln Change, USD mln Change, % Selected consolidated financial information Revenue Cost of sales Gross profit Administrative, selling and marketing expenses Other income Share of profit/(loss) of joint ventures accounted for using the equity method    343.6  18.3   (136.0) (15.8) 361.9 (151.8)   210.1  (35.5) 1.8  207.6  (38.9) — 1.9    (12.4) Other gains/(losses) — net (33.4) (24.6) Operating profit Finance income Finance costs 144.8 131.7 2.5 2.6 (85.2) (85.1) Change in fair value of derivative (9.3) (27.5) Net foreign exchange gains/(losses) on financial activities 43.8 (75.2) 119.0 Finance income/(costs) — net (48.2) (185.3) 137.1 2.5 3.4  1.8  14.3  (8.9) 13.2 (0.0) (0.1) 18.2 5.3% Revenue growth 8.8% decrease of Administrative, selling and marketing expenses 5.3% 11.6% 1.2% (8.8%) — (115.5%) 36.1% 10.0% (1.4%) 0.1% (66.0%) (158.3%) (74.0%) Profit/(Loss) before income tax 96.6 (53.6) 150.3 (280.2%) Income tax expense (29.0) (4.7) (24.3) Profit/(Loss) for the period 67.7 (58.3) 126.0 Attributable to: Owners of the Company Non-controlling interest Key non-IFRS financial information Like-for-like revenue Adjusted EBITDA Adjusted EBITDA Margin 66.6 1.1  (59.3) 1.0 125.9  0.1 350.5 336.9 13.6 226.9 217.3 9.6 62.7% 63.2% Like-for-like Cash Cost of Sales (91.7) (82.3) (9.4) Like-for-like Total Operating Cash costs (125.3) (119.7) (5.6) Free Cash Flow 158.8 133.6 25.3 517.3% (216.0%) (212.3%) 10.0% 4.0% 4.4% 11.5% 4.7% 18.9% 18.9% Free Cash Flow growth Alexander Roslavtsev CFO of Global Ports Management LLC 4.4% Adjusted EBITDA growth Over the year, we saw robust financial performance, where increased revenues and disciplined cash control drove a 4.4% rise in Adjusted EBITDA, high margins, and generated 18.9% growth in free cash flow in Free Cash Flow. This performance, our continued focus on reducing net debt position and our hedging strategy not only puts us on a stronger financial footing to weather the current global challenges, but also brings the day of dividend payment resumption closer. | Revenue | The following table sets out the components of the consolidated revenue for 2018 and 2019. Container handling excluding LT and VSC transportation services Other revenue excluding LT LT VSC transportation services Like-for-like revenue Total revenue Like-for-like revenue per TEU, USD FY 2019, USD mln FY 2018, USD mln Change, USD mln Change, % 256.7 93.8 — 11.4 350.5 361.9 178.4 251.2 85.6 6.7 — 336.9 343.6 185.9 5.4 8.1 (6.7) 11.4 13.6 18.3 (7.5) 2.2% 9.5% (100.0%) — 4.0% 5.3% (4.0%) In 2019, like-for-like revenue increased by 4.0% to USD 350.5 million from USD 336.9 million in 2018 driven by higher revenue from container handling and strong growth in other revenue (both adjusted for LT). Revenue from container handling (adjusted for LT and VSC transportation services) increased by 2.2%, or USD 5.4 million, to USD 256.7 million. This change was driven by an increase in Consolidated Container Throughput of 6.5% which was partially offset by a 4.0% decrease in like-for-like consolidated Revenue per TEU driven by a low single- digit change in tariffs, as well as a change in service and terminals mix. Other revenue (adjusted for LT) increased by 9.5%, or USD 8.1 million, to USD 93.8 million, driven by growth in coal handling revenue. Other revenue in the second half of 2019 decreased by 14.4% or USD 7.3 million compared to the first half of 2019. This decrease was driven by the h-o-h decline in throughput described above as well as by discounts given by the Group to its clients in response to the decline of coal prices in the global market. As a result of new terms of certain sales agreements, in 2019, VSC acted as a principal vs as an agent in 2018: previously the net result of revenue from transportation services and associated cost was included in the consolidated revenue, in 2019 full revenue and associated cost are recognised in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 11.4 million to consolidated revenue and USD 11.4 million to Cost of sales. 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Global Ports Investments PLC Annual Report 2019 32 [Revenue] USD mln 5.3% 343.6 -6.7 4.0% 5.4 336.9 11.4 361.9 8.1 350.5 2018 LT Deconsolidation FY2018 Like- for-like Container revenue Non-container revenue FY2019 Like- for-like VSC transportation services 2019 In September 2018, the Group sold Logistika-Terminal (LT). As a result of the transaction, the Group’s consolidated revenue of 2019 does not include LT revenue (USD 6.7 million in 2018). The share of Consolidated Non-Container Revenue in consolidated revenue of the Group remained broadly flat in 2019 (25.9% in 2019 compared to 25.7% in 2018). Cost of sales The following table sets out a breakdown by expense of the Cost of sales for 2019 and 2018: Depreciation of property, plant and equipment Amortisation of intangible assets Depreciation of right-of-use assets Staff costs Transportation expenses — including VSC rail transportation costs Fuel, electricity and gas Repair and maintenance of property, plant and equipment Purchased services Taxes other than on income Other operating expenses Total Cost of Sales Cash Сost of Sales Like-for-like Cash Cost of Sales FY 2019, USD mln FY 2018, USD mln Change, USD mln Change, % 35.2 1.1 12.4 45.3 15.7 11.4 9.5 6.3 14.3 2.5 9.6 151.8 103.1 91.7 34.3 12.9 — 42.1 6.9 — 8.8 7.4 8.3 5.0 10.4 136.0 88.9 82.3 0.9 (11.8) 12.4 3.1 8.8 11.4 0.8 (1.1) 6.0 (2.5) (0.8) 15.8 14.3 9.4 2.6% (91.4%) — 7.4% 128.4% — 8.8% (14.5%) 72.1% (50.4%) (8.1%) 11.6% 16.1% 11.5% 62.7% Adjusted EBITDA Margin Cost of sales increased by USD 15.8 million, or 11.6%, from USD 136.0 million in 2018 to USD 151.8 million in 2019. The change was primarily driven by the appreciation of the Russian rouble against the USD dollar, deconsolidation of LT and the change in accounting policies as a result of adopting IFRS 16 Leases (resulted in decrease of lease expenses), which were offset by growth in certain cost items (primarily Purchased services) related to the start of coal handling at ULCT in December 2018, and growth in throughput and inflation. The growth in transportation expenses from USD 6.9 million to USD 15.7 million in 2019 or USD 8.8 million (128.4%) was driven by new terms of certain agreements impacted on recognition of revenue and costs generated by VSC from railway services for clients described above. Like-for-like Cash Cost of Sales increases by 11.5% or USD 9.4 million from USD 82.3 million in 2018 to USD 91.7 million in 2019. This growth was mainly driven by the growth in container and bulk throughput as well as inflation and appreciation of Russian rouble against US dollar. [Operating Cash Costs] USD mln 8.3% 33 4.7% 11.4 136.7 Gross profit 126.3 -6.6 125.3 Gross profit increased by USD 2.5 million, or 1.2%, from USD 207.6 million in 2018 to USD 210.1 million in 2019. This increase was due to the factors described above under Revenue and Cost of sales. Administrative, selling and marketing expenses Administrative, selling and marketing expenses decreased by USD 3.4 million, or 8.8%, from USD 38.9 million in 2018 to USD 35.5 million in 2019. This was primarily due to a decrease by USD 1.2 million, or 90.5%, in lease expenses as a result of adopting IFRS 16 Leases, USD 0.1 million or 3.7% decrease in Legal, consulting and other professional services, and a USD 2.0 million or 42.6% decrease in other administrative and selling expenses mainly. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA in 2019 increased by 4.4% or USD 9.6 million to USD 226.9 million from USD 217.3 million in 2018 mainly due to the growth in throughput and strict control over cash costs. In addition, the adoption of IFRS 16 Leases resulted in higher Adjusted EBITDA as the new treatment of leases resulted in a decrease in lease expenses. The Group estimated the impact of IFRS 16 on Adjusted EBITDA in 2019 to be approximately USD 3.7 million. Adjusted EBITDA Margin was 62.7% in 2019. 2018 LT Deconsolidation 119.7 FY2018 Like- for-like FY2019 Like- for-like VSC transportation services 2019 USD 35.5 mln Administrative, selling and marketing expenses 8.8% [Continuing growth in Adjusted EBITDA] USD mln [Healthy Free Cash Flow generation] USD mln 217.3 226.9 4.4% 158.8 18.9% 133.6 2018 2019 2018 2019 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 34 Share of profit/(loss) of joint ventures accounted for using the equity method | Liquidity and capital resources | 35 The Group’s share of profit from joint ventures changed from a loss of USD 12.4 million in 2018 to a profit of USD 1.9 million in 2019. General VEOS MLT CD Holding Total share of profit/(loss) of joint ventures In April 2019, the Group completed the disposal of its 50% holding in VEOS, one of the Group’s joint ventures and operating segments, to Liwathon. As previously announced, the proceeds from the sale went towards further deleveraging. As a result, there was no contribution to the Share of profit/(loss) of joint ventures from VEOS in 2019 compared to USD 5.0 million 2018. The share of profit from MLT changed from a loss of USD 14.3 million to a profit of USD 0.7 million. The result of 2018 was primarily driven by an impairment of USD 14 million of MLT Ltd (being the parent of Moby Dik) due to the reduction of cargo volumes at this terminal by the reasons described above. The change in the share of result from CD Holding, from a loss of USD 3.1 million in 2018 to a profit of USD 1.2 million, was mainly driven by the appreciation of the Russian rouble against US Dollar in 2019. This resulted in a revaluation of the US Dollar nominated borrowings of YLP. Other gains/(losses) — net Other gains/(losses) amounted to a net loss of USD 33.4 million 2019, compared to a loss of USD 24.6 million in 2018. As a result of the disposal of VEOS, a USD 50,000 loss is reflected within Other gains/(losses) — net. FY 2019, USD mln FY 2018, USD mln Change, USD mln — 0.7 1.2 1.9 5.0 (14.3) (3.1) (12.4) (5.0) 15.0 4.3 14.3 Change, % (100.0%) (104.7%) (137.2%) (115.5%) In addition, USD 33.5 million loss was recycled to Other gains/(losses) — net from the currency translation reserve. This is the amount related to VEOS that was previously recognised in other comprehensive income and accumulated in the equity. Operating profit/(loss) The Group’s operating profit increased from USD 131.6 million in 2018 to USD 144.8 million in 2019 due to the factors described above under Gross profit, Share of profit/(loss) of joint ventures accounted for using the equity method and Other gains/(losses) — net. Finance income/(costs) — net Finance income/(costs) — net decreased from a cost of USD 185.3 USD million in 2018 to a cost of USD 48.2 million in 2019. This move was primarily due to a foreign exchange loss from financing activities of USD 75.2 million in 2018 transferring to a profit of USD 43.8 million in 2019. This was a result of the appreciation of the Russian rouble., which in turn changed from a loss to a gain on the revaluation of US dollar-denominated borrowings in the Group’s Russian subsidiaries. In addition, the fair value of derivative instruments2. reduced from loss of USD 27.5 million 2018 to a loss of USD 9.3 million in 2019. In the second half of 2018, the Group cancelled a swap arrangement in relation to its Russian rouble bonds. In 2019, Group entered into several RUB/USD currency forward and option contracts. Profit/(loss) before income tax Profit before income tax amounted to USD 96.6 million in 2019 compared to a loss of USD 53.6 million in 2018. This change is due to the factors described above under Operating profit/ (loss) and Finance income/(costs)—net. Income tax expense In 2019, income tax expense was USD 29.0 million compared to USD 4.7 million in 2018. The difference in the effective tax rate from the normally applicable Russian statutory tax rate of 20% was largely driven by the impact of expenses and losses not deductible for tax purposes, withholding tax on undistributed profits and nontaxable results of joint ventures as well as the tax effect of a disposal of assets held for sale. Profit/(loss) for the period The company reported a profit of USD 67.7 million 2019 compared to a loss of USD 58.3 million in the 2018 due to the factors described above. 1. During 2019, the exchange rate of US Dollar decreased from 69.47 RUB as of 31 December 2018 to 61.91 RUB as of 31 December 2019 that represents the weakening of US Dollar against Russian Rouble by 10.9%. 2. During 2015 and 2016, the Group entered into three cross-currency swap arrangements to exchange its RUB-denominated liabilities related to the newly issued bonds (3 issues of RUB 5,000 million each) with fixed interest rate of approximately 13% in the amount RUB 15,000 million to USD-denominated debt with the lower fixed interest rate. As at 31 December 2019, the Group had USD 124.4 million in cash and cash equivalents. The Group’s liquidity requirements arise primarily in connection with repayments of principal and interest payments, capital investment programmes and ongoing operating costs of its operations. In 2019 the Group’s liquidity needs were met primarily by cash flows generated from its operating activities. The Group expects to fund its liquidity requirements in both the short and medium term with cash generated from operating activities and borrowings. As a result of the shareholding or joint venture agreements at Moby Dik, the Finnish Ports and Yanino, the cash generated from the operating activities of each of the entities in those businesses is not freely available to fund the other operations and capital expenditures of the Group or any other businesses within the Group and can only be lent to an entity or distributed as a dividend with the consent of the other shareholders to those arrangements. As of 31 December 2019, the Group had USD 871.4 million of total borrowings (including lease liabilities), of which USD 100.3 million comprised current borrowings and USD 771.1 million comprised noncurrent borrowings. As a result of adoption of IFRS 16, the lease liabilities increased to the total amount of USD 34.2 million, which were recognised in the balance sheet as of 31 December 2019. As at 31 December 2019, the Group had no material undrawn borrowing facilities. USD 124.4 mln Cash and cash equivalents [Consistent Net Debt reduction] USD mln USD 603 mln 1,350 1,208 1,048 947 866 780 747 33.3 2013 2014 2015 2016 2017 2018 2019 [Debt maturity profile as at 31 December 2019] USD mln 307.9 Cash and cash equivalents as at 31 December 2019 124.4 203.0 162.5 100.3 97.7 2020 2021 2022 2023 2024 RUB USD USD covered by derivatives Global Ports Investments PLC Annual Report 2019 36 Cash flow 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information The following table sets out the principal components of the Group’s consolidated cash flow statement for 2019 and 2018: FY 2019, USD mln FY 2018, USD mln Change, USD mln Net cash from operating activities Cash generated from operations Tax paid Net cash from operating activities before dividends received from joint ventures and adjusted for income tax Dividends received from joint ventures Net cash used in investing activities Purchases of intangible assets Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Loans granted to related parties Loan repayments received from related parties Disposal of asset held for sale (2018: subsidiary and assets held for sale) Interest received Net cash used in financing activities Repayments of borrowings Proceeds from borrowings Interest paid on borrowings (2018: Interest paid on borrowings and finance leases) Interest paid on leases liabilities Proceeds from/(settlement of) derivative financial instruments Principal elements of lease payments (2018: Finance lease principal payments to third parties) Free Cash Flow (Net cash from operating activities — Purchase of PPE) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period 185.4 217.4 (32.0) 185.4 — (13.4) (1.0) (26.6) 0.5 — 0.3 11.8 1.6 (140.2) (131.4) 70.9 (74.4) (4.3) (0.2) (0.9) 158.8 31.8 91.6 174.3 208.0 (35.4) 172.6 1.7 (13.5) (2.6) (40.8) 0.5 (1.4) 0.3 28.8 1.6 (196.2) (155.5) 0.1 (83.0) — 43.1 (0.8) 133.6 (35.3) 130.4 Change, % 6.3% 4.5% (9.7%) 7.4% (100.0%) (0.7%) (62.3%) (34.7%) 5.8% (100.0%) 23.1% (59.0%) 0.0% (28.5%) (15.5%) 70793.0% (10.3%) — (100.5%) 11.0 9.3 3.4 12.8 (1.7) 0.1 1.6 14.1 0.0 1.4 0.1 (17.1) (0.0) 55.9 24.1 70.8 8.6 (4.3) (43.3) (0.1) 12.4% 25.2 67.1 (38.8) 18.9% (190.0%) (29.8%) Net cash from operating activities Net cash from operating activities increased by USD 11.0 million, or 6.3%, from USD 174.3 million in 2018 to USD 185.4 million 2019. Growth in Net cash from operating activities was primarily due to a USD 9.3 million, or 4.5%, increase in Cash generated from operations due to the growth of financial result from operations as described above, and USD 3.4 million dollars, or 9.7% decrease in tax paid. There were no Dividend payments received from joint ventures due to a decline in throughput at Moby Dik, which partially offset growth in Cash from operations. Net cash used in investing activities Net cash used in investing activities decreased from USD 13.5 million 2018 to USD 13.4 million in 2019. This change was driven by a decrease in Purchases of property, plant and equipment by USD 14.1 million from USD 40.8 million in 2018 to USD 26.6 million in 2019. This decrease was primarily driven by the completion of the majority of the investment at the coal handling facility in ULCT that commenced operations in December 2018. Disposal of asset held for sale mainly reflects the proceeds from the sale of VEOS in the amount of USD 11.8 million in April 2019. Net cash used in financing activities [Net Debt] USD mln 37 Net cash used in financing activities decreased by USD 55.9 million, or 28.5%, from USD 196.2 million 2018 to USD 140.2 million in 2019 due to the reduction in the repayment of borrowings by USD 24.2 million as there were less early voluntary repayment and no borrowings due in the reporting period. In 2019, the Group bought back some of its own Eurobonds. In August 2019, financial arrangements were made to purchase an aggregate principal amount of USD 52.8 million of Global Ports (Finance) PLC’s USD 350 million of 6.872 per cent notes due 2022, which were issued on 18 April 2016. The purchase was funded by the Group’s cash flow from operations. In December 2019, financial arrangements have been made to purchase additional 2022 notes for an aggregate principal amount of USD 69.48 million. The purchase was funded by a bilateral fixed rate amortising Russian rouble nominated loan with final maturity at 60 months in the amount equivalent to USD 70.84 million at the exchange rate at the date of borrowing. The 2022 notes purchased by the Group will be held, and there is no current intention for them to be reissued, resold or cancelled. The aggregate principal amount of the 2022 Notes outstanding after the purchases is USD 203.6 million. Capital resources The Group’s financial indebtedness consists of bank borrowings, bonds and lease liabilities and amounted to USD 871.4 million as at 31 December 2019. As of that date, all of the Group’s borrowings were secured by guarantees and suretyships granted by certain Group members. Certain of these borrowings contain covenants requiring the Group and the borrower to maintain specific indebtedness to Adjusted EBITDA and other ratios, as well as covenants having 5.8 28.9 -32.7 780.3 3.6x 31.12.18 -60.1 Net Debt/Adjusted EBITDA 3.2x Net Debt Adjusted for IFRS 16 / Adjusted EBITDA 31.12.19 24.9 747.0 3.3x 31.12.19 2018 Interest charged/ paid (net) Exchange difference Cash & equivalents Bonds buyback and repayments IFRS 16 impact 2019 the effect of restricting the ability of the borrower to transfer assets, make loans and pay dividends to other members of the Group. The Group is in full compliance in the reporting period. 3.3 x Net Debt / Adjusted EBITDA As a result of the adoption of IFRS 16, lease liabilities for the total amount of USD 34.2 million were recognised in the balance sheet as of 31 December 2019. As at 31 December 2019, the carrying amounts of the Group’s borrowings (including lease liabilities) were denominated in the following currencies: The weighted average effective interest rate of the Group’s debt portfolio is 6.65%* for USD nominated borrowings and 12.18%* for Russian Rouble nominated borrowings. Rouble US dollar Total USD mln 354.6 516.8 871.4 As 31 December 2019, the Group had leverage of Net Debt to Adjusted EBITDA ratio of 3.3x (compared to a ratio of 3.6x as at 31 December 2018). The Group’s Net Debt to Adjusted EBITDA adjusted for adoption of IFRS 16 would be approximately 3.2x as of 31 December 2019. The following table sets out the maturity profile of the Group’s total borrowings (including lease liabilities) as at 31 December 2019. 1H 2020 2H 2020 2021 2022 2023 2024 and after Total USD mln 18.7 81.6 162.5 203.0 307.9 97.7 871.4 During the 12-month period ended 31 December 2019, the Group entered into several RUB/USD currency forward contracts to acquire USD dollars in the period 2019–2022 in order to hedge part of foreign exchange risk associated with its USD denominated non-convertible unsecured bonds (which have been provided as loans to the Russian operating subsidiaries). The Group bought several options to buy USD 87 million in 2022 in the range RUB 80–100 per US dollar. As of 31 December 2019, there are outstanding forward contracts to acquire USD 130 million and USD 87 million covered by option contracts. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 38 | Reconciliation of additional data (non-IFRS) to the consolidated financial information for the twelve-month period ended 31 December 2019 | Reconciliation of Adjusted EBITDA to profit for the period Reconciliation of Cash Costs of Sales to Cost of Sales FY 2018, USD mln (58.3) Change, USD mln 126.0 Change, % (216.0%) Profit for the year Adjusted for Income tax expense Finance costs—net Amortisation of intangible assets Depreciation of property, plant and equipment Depreciation of right-of-use assets Other gains/(losses)—net Share of (profit)/loss of joint ventures accounted for using the equity method Adjusted EBITDA FY 2019, USD mln 67.7 29.0 48.2 1.3 37.0 12.4 33.4 (1.9) 226.9 4.7 185.3 12.9 35.8 24.6 12.4 217.3 24.3 (137.1) (11.7) 1.2 8.9 (14.3) 9.6 Reconciliation of Adjusted EBITDA to Adjusted EBITDA Margin for the period Revenue Adjusted EBITDA Adjusted EBITDA Margin FY 2019, USD mln FY 2018, USD mln Change, USD mln 361.9 226.9 62.7% 343.6 217.3 63.2% 18.3 7.9 Reconciliation of Total Operating Cash Costs to Cost of sales and administrative, selling and marketing expenses FY 2019, USD mln FY 2018, USD mln Change, USD mln Cost of sales Administrative, selling and marketing expenses Total Adjusted for Depreciation of property, plant and equipment Amortisation of intangible assets Depreciation of right-of-use assets Total Operating Cash Costs 151.8 35.5 187.3 (37.0) (1.3) (12.4) 136.7 136.0 38.9 174.9 (35.8) (12.9) — 126.3 15.8 (3.4) 12.4 (1.2) 11.7 (12.4) 10.4 517.3% (74.0%) (90.3%) 3.3% 36.1% (115.5%) 4.4% Change, % 5.3% 3.6% Change, % 11.6% (8.8%) 7.1% 3.3% (90.3%) — 8.3% 39 Change, % 11.6% 2.6% (91.4%) — 16.1% Change, % (8.8%) 20.3% 185.2% Cost of Sales Adjusted for FY 2019, USD mln 151.8 FY 2018, USD mln 136.0 Change, USD mln 15.8 Depreciation of property, plant and equipment Amortisation of intangible assets Depreciation of right-of-use assets Cash Cost of Sales (35.2) (1.1) (12.4) 103.1 (34.3) (12.9) — 88.9 (0.9) 11.8 (12.4) 14.3 Reconciliation of Cash Administrative, Selling and Marketing Expenses to administrative, selling and marketing expenses FY 2019, USD mln Administrative, selling and marketing expenses 35.5 Adjusted for Depreciation of property, plant and equipment Amortisation of intangible assets Cash Administrative, Selling and Marketing Expenses (1.7) (0.15) 33.6 FY 2018, USD mln 38.9 Change, USD mln (3.4) (1.5) (0.05) (0.3) (0.10) 37.4 (3.8) (10.3%) Reconciliation of Net Debt and Total Debt to borrowings and lease liabilities As at 31.12.2019, USD mln As at 31.12.2018, USD mln Change, USD mln Change, % Non-current borrowings Current borrowings Non-current lease liabilities Current lease liabilities Total Debt Adjusted for Cash and cash equivalents Net Debt 738.1 99.1 33.0 1.2 871.4 (124.4) 747.0 850.8 21.2 — — 871.9 (91.6) 780.3 (112.7) 77.9 33.0 1.2 (0.6) (32.7) (33.3) Reconciliation of Free Cash Flow to net cash from operating activities Net cash from operating activities Adjusted for Purchases of property, plant and equipment Free Cash Flow FY 2019, USD mln 185.4 FY 2018, USD mln 174.3 (26.6) 158.8 (40.8) 133.6 Change, USD mln 11.0 14.1 25.2 (13.2%) 367.8% (0.1%) 35.7% (4.3%) Change, % 6.3% (34.7%) 18.9% Global Ports Investments PLC Annual Report 2019 40 Sustainable and Safe Business 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information At Global Ports, Corporate Social Responsibility (CSR) is an integral part of executing our core strategic priorities. The objectives for our business and CSR strategies are the same — to generate sustainable shareholder value over the long term. OUR CSR ACTIVITY EMBRACES 41 5key objectives THAT SUPPORT THE DELIVERY OF THE GROUP’S OVERALL COMMERCIAL STRATEGY 2 1 Operate with integrity 3 Deliver economic and social benefits to the communities we serve Build employee advocacy for the Group and its role in the community 4 5 Manage the environmental impacts of our business operations Communicate our commitment to corporate responsibility openly and transparently Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 42 Corporate Social Responsibility The long-term success of Global Ports is inextricably linked to our responsibility towards our people, our communities, the society and environment in which we operate. As a core infrastructure business, being a sustainable and responsible organisation is a critical component of Global Ports’ strategy and value proposition. To be a sustainable organisation means we have to manage our impact on stakeholders, by which we mean the environment, our people, the communities in which we operate, and our clients. We must ensure that we do all this to the highest standards of integrity and honesty possible. Our approach to Corporate Responsibility (CR) underpins our long-term vision to be the partner of choice for our customers in our role as Russia’s best connected independent container terminal operator and is supported by our values and behaviours as an organisation. Sustainability approach We are deeply committed to being a responsible organisation and an active participant in the community, which means ensuring responsible environmental stewardship, promoting safe working conditions for our employees, supporting our local communities and creating long-term economic value for all our stakeholders. The sustainability reporting landscape is evolving rapidly, and we recognise that as far as reporting is concerned we, like other companies, are on a long journey. Our intention is to ensure that our reporting is kept at a level which we believe is appropriate for the Group and also helpful for our stakeholders. Britta Dalunde Chairman of the Audit and Risk Committee Senior Independent Director In a time of such unprecedented change and disruption, responsible business practices have never been more important and the core pillars of governance, safety and social responsibility continue to drive our performance and our approach with our stakeholders and the wider communities in which we operate. SOCIETY Our role in society Global Ports is a core infrastructure business that connects Russia’s economy to international markets and global trade flows. We play a positive role in society, with our seven marine container terminals handling millions of tonnes of cargo every year, supporting more than 2,800. jobs directly and many more indirectly. We believe our efforts are helping to widen prosperity, linking Russian companies to global customers, linking Russian consumers to global markets, providing employment and supporting local communities. We aim to be the best at what we do, acting responsibly at all times to ensure delivery of sustainable services to our customers, protection of the environment, support and safe working conditions for our employees, and social wellbeing. Our business ethics Our culture is one of honesty, integrity, transparency and accountability. We expect our employees to behave fairly and ethically at all times in their dealings with fellow employees, customers, contractors, suppliers, authorities and other stakeholders. Upholding high ethical standards is fundamental to maintaining our reputation. Everyone at Global Ports has 1. As at 31 December 2019. a responsibility to understand and fulfil the ethical behaviours and standards of conduct set out in our Code of Ethics and Conduct. Every officer of the Group and employee who joins the Group is required to acknowledge that they have read the Code and understood its importance. The Group also expects its business partners and suppliers to be aware of our Code of Ethics and Conduct and to apply similar ethical standards to their own business operations. Anti-bribery and anti-corruption The Code of Ethics and Conduct is supported by detailed policies on related areas, including anti-bribery and corruption. Our Anti-Corruption Policy sets out our zero-tolerance policy on bribery and corruption in whatever form, and the Group’s anti-corruption framework is an important part of our risk management arrangements. This policy is there for any person working at or with Global Ports if they face a situation that they are concerned about or which contradicts the Code. Employees are encouraged to seek help from line managers and our legal team if they are concerned about what to do in difficult situations. Issues to do with known breaches of our anti-bribery policy are dealt with in accordance with our Investigation Policy that defines thorough process either performed or overseen by our internal audit team. 43 Whistleblowing Global Ports has a group-wide whistleblowing policy that applies to all employees, contractors, suppliers and clients. The whistleblowing service which was established in 2017 enables people to report any suspected breaches of our Code of Ethics and Conduct or any other improper activities through our confidential hotline that delivers the message directly to the Audit & Risk Committee as well as the Head of Internal Audit. All reports are treated confidentially, and appropriately investigated and concluded. The Company maintains a non-retaliation policy that allows every employee to freely report their concerns. Human rights As a large company with international clients, we recognise our responsibility for upholding and protecting the human rights of our employees and other individuals with whom we deal in our business. We believe that all people are entitled to fundamental rights and freedoms, including those that relate to forced labour, child labour, freedom of association and the right to collective bargaining. Compliance with and respect for human rights are integrated throughout the Group. We support standards of fair treatment and non-discrimination, and we promote the importance of human rights throughout our operations and strive to prevent non-compliance and protect our employees’ rights. Our approach to human rights is based upon our Code of Ethics and Conduct and underpinned by our values and being in strict accordance with local and international human rights law. 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 3. VSC has established the public support ޭ the purchase of educational 45 Under the theme of Health, the Group provides support for a number of community-based sports programmes. The Group’s education and welfare programmes are aimed principally at supporting projects that help vulnerable adults and children. Under the Culture banner, Global Ports prioritises social infrastructure projects in the communities where it operates, including funding heritage restoration projects. In 2019, the Group committed over RUB 37 mln supporting social programmes and local communities, including: 1. VSC, FCT, ULCT and PLP supported the Life Line Charitable Foundation which helps to support severely ill children; ޭ PLP helped to refurbish and equip the facility "Charity Hospice" in Saint Petersburg; ޭ ULCT also contributed to the renovation and modernisation of the playing park with a ground for skateboarders and improvement of the pedestrian area and construction of a new “Dockworkers Alley” in the same city; initiatives fund "Atmosphere" to implement environmental, social, and cultural programmes on the territory of the Nakhodka city district and Vrangel village. In 2019, the fund sponsored: ޭ the creation of a public gardens in ޭ MD provided financial aid to the Vrangel village; Centre for rehabilitation of disabled children in Kronstadt district, Saint Petersburg; ޭ the renovation of premises in nursery school No. 65; Total RUB37mln spent on charity. ޭ ULCT supported various groups 2. VSC sponsored the purchase of ޭ local football club Okean, Nakhodka; including a children’s football club, a singing team and the Kingisepp orphanage; medical equipment for Vostochny Hospital in the city of Nakhodka; equipment and literature for Nakhodka branch of Maritime State University; ޭ New Year decoration of Vrangel and the purchase of New Year's gifts to the socially vulnerable residents of the village; ޭ renovation of the premises for various sports and other activities` clubs; 4. MLT donated to a charity for supporting fight against cancer of children. On October 20, Global Ports held a Family Day for our employees and their children to visit FCT and PLP terminals. After the tour, our young guests participated in a drawing competition at our headquarters — this picture is one of their creations. Global Ports Investments PLC Annual Report 2019 44 Our communities Global Ports is committed to supporting the local communities where we operate and to improving the quality of life for our employees and their communities by supporting community-driven social investment. This is the philosophy that underpins the Group’s approach to social investment. Through our community and social investment schemes, we invest in our communities and encourage our employees to get involved in order to make a bigger societal impact. The causes we focus our funding and support on, all under the themes of Health, Education, Culture, and Welfare. 1. Equivalent of USD 0.6 mln. Global Ports Investments PLC Annual Report 2019 46 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Our suppliers We enjoy good relations with our suppliers and we encourage them to operate with the high ethical standards that are set out in our Code of Ethics and Conduct. We also work closely with them to establish high operating standards and proper accountability through the supply chain. The guidelines are covered in the Group’s Procurement Policy. The Procurement Department of Global Ports Management LLC has purchasing responsibility for the terminals of the Group based on the following principles: ޭ Full compliance with the legislation of the Russian Federation, and in particular 223-FZ; ޭ Competitiveness and transparency; ޭ Supplier selection based on price, quality and timeliness; ޭ Total cost of ownership. All procurement information is placed on http://eng.etprf.ru and www.fabrikant.ru electronic marketplaces. All necessary information is also shared on the EIS (Electronic Information System) website www.zakupki.gov.ru We publish all requests for tenders on websites mentioned above in order to ensure fairness and transparency in the tendering process. The Group’s procurement team monitors global best practice closely drawing on its relationship with APM Terminals. 0.55 LTIFR, the lowest on record for Global Ports 47 ޭ Regular safety audits that benchmark Performance in 2019 HEALTH & SAFETY Nothing is more important to us than the safety and wellbeing of our people. Safety is our number one goal and part of the culture of who we are and how we work. We are committed to zero fatalities and a zero harm work environment meaning that all of our employees and visitors return home safely every day. Our aim is to build and embed a sustainable safety culture based on three core principles: our facilities’ compliance in implementing our GMRs. ޭ Regular safety and risk awareness briefings and information updates for our staff and contractors. ޭ Regular health and safety training for line management and employees. ޭ Regular training sessions covering ޭ Providing a safe working environment; general safety issues. ޭ Providing comprehensive implementation of plans built around best practice safety and compliance standards; ޭ Specialised training programmes for employees that need it, for instance, for those involved in handling hazardous materials. ޭ Offering comprehensive training focused on risk awareness and reduction. Our approach ޭ Regular monitoring of the health and wellbeing of our employees aimed at improving and maintaining their wellbeing and reducing the incidence of occupational illnesses. Our working environments by their nature expose our employees and contractors to risk. This is why our objective is to identify those risks and implement controls. We constantly review and update our working practices and controls to ensure that they are the safest they can be. We believe having the right practices and controls in place to effectively manage those risks that have safety impacts leads to improved safety outcomes. We have an established safety management framework that covers all aspects of safety compliance, monitoring, and training. Our safety management system is focused on ensuring compliance with our safety standards to provide a safe work environment. It is built on: ޭ Critical minimum safety standards which are aligned with industry best practices (Global Minimum Requirements). Governance We continually look to improve our safety culture, and key to this is improving leadership, as well as monitoring and simplifying our safety systems. The Board has overall responsibility for health and safety at the Group, including setting policy, agreeing safety standards and reviewing performance. The Chief Operating Officer is the top-manager responsible for Global Ports’s health and safety compliance and performance monitoring. The Chief Operating Officer regularly reviews commentary and performance reports supplied by the individual business units and the Board receives quarterly performance reports. Regular reviews of the Group’s safety performance are conducted by the Board, with the resulting actions discussed and agreed with the executive team. In 2019, we continued our efforts to safeguard the health and safety of our employees. We focused on continuing to provide strong visible leadership, to drive compliance, tighten our risk controls and improve communication. The Board conducted a thorough review of our safety management systems and risk controls and processes in order to reduce the overall risk profile of the Group. We use the Lost Time Injury Frequency Rate (LTIFR) to measure our safety performance. It is pleasing to report that, despite the introduction of new services for example at ULCT, our LTIFR performance was the lowest on record at 0.55 (2018: 1.28). Sadly, however, we had a fatal incident at our PLP terminal early in the year, which underlines the critical importance of always safeguarding our people and providing the safest possible working conditions. Safety continues to be a core value for the Group and a focus for the Board as we redouble our efforts to achieve a zero-harm environment. [LTIFR] 2.30 1.51 1.28 1.10 0.55 2015 2016 2017 2018 2019 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 48 OUR PEOPLE ENVIRONMENT 49 Global Ports employs a workforce of more than 2,800 people.. Having a professional, motivated, well-managed, and supported workforce is critical to our success and to delivering value for all stakeholders in the business. We aspire to be a culture where professionals of all backgrounds are welcomed and encouraged to give their best and develop their full potential. ޭ Improving information-sharing about the Company’s strategy and priorities; ޭ Building a shared sense of unity and teamwork among employees; ޭ Building cross-functional working and reducing complexity; ޭ Reviewing rewards and benefit Employee engagement packages; The Board takes its responsibilities for workforce engagement seriously. We believe that an engaged workforce is a source of competitive advantage in a service-led industry. We place considerable value on transparency with our employees, and keeping them informed on matters affecting them and the performance of the Group. This is achieved through a variety of means including: formal and informal briefings, internal communications, strategy workshops, training courses, via our new intranet platform and our Annual Report. Employees and their representatives are consulted regularly on a variety of matters affecting their interests. We also conduct regular staff surveys and feedback sessions. The results of our most recent staff survey show that levels of satisfaction among our staff are high. Building on the positive response of employees, this year we have focused on: [Length of average service] % 12% 40% 28% 19% less than 5 years 5–10 years 11–20 years more than 20 years ޭ Improving human resource management processes via implementing best practices and automating routine processes; ޭ Our new intranet communications platform provides a space for employees across the Group to connect, build networks, and share best working practices. Performance and development To underpin and sustain our long-term growth, we must ensure that we have the right people to deliver for our customers, both today and in the future. This means that the recruitment and development of our people is a critical part of our business strategy. We want to provide a dynamic and exciting workplace that is attractive to both existing employees and new recruits. We are committed to providing opportunities for personal growth and career development to all our employees. We offer fast-track development opportunities to our high potential employees. At the same time, we continue to work on developing our next Diversity data Diversity of staff Administration staff Production staff 1. As at 31 December 2019. generation of leaders, empowering and involving them into business issues and supporting them with coaching, mentoring and development programmes. We offer a fair and competitive reward package which ensures our people feel incentivised to succeed, encourages high individual and team performance and helps the Group to attract and retain new talent. We have detailed performance management systems in place across the Group to ensure that our rewards packages are aligned and clearly linked to our corporate goals. Diversity & inclusion We see diversity as a positive advantage. As a business, it is imperative that we ensure access to the widest pool of talent available, selecting the best candidates based on their ability to do the job. Our approach is set out in our Code of Ethics and Conduct and underpinned by our values. Global Ports operates in a sector that has traditionally employed many more men than women. At Global Ports we continue to work to change this. Women are well represented at all levels in the business including in senior management and on the Board. As at the year end, 32% of our total workforce was female, including 27% of production staff and 65% of administrative staff. Out of our eleven-strong Board, women represent 27% of its membership and two out of the three independent directors. At senior and upper management levels a quarter is female. We continue to examine ways to increase the diversity of our organisation both at the group level and at the operating level. male 68% 35% 73% female 32% 65% 27% Protecting the environment The nature of the logistics industry means that it can have a substantial impact on the environment. At Global Ports, we are committed to doing everything we can to minimise our impact. Our first priority is to minimise the environmental impact of our activities. Key environmental impacts have been identified as energy consumption, CO2 emissions, water consumption and waste management. Hence our key priorities are to reduce our energy consumption, optimise our water usage, and improve our waste management and recycling performance. Key themes include investing in energy efficiency schemes; providing environmentally beneficial waste management solutions and investing in environmental protection. Over the last year this has involved projects to upgrade waste water treatment facilities; install more energy-efficient lighting; install energy-efficient heating systems; upgrade our storm water drainage systems; and construct pollution monitoring systems. In 2019, we spent over RUB 100 mln on environmental protection measures mainly at VSC, our terminal in the Far East Basin is in the midst of a major environmental investment programme (2018–2021) in conjunction with regional administrations, and at ULCT. Our second priority is to be fully accountable, transparent and compliant with regard to the Group’s environmental activities. The Group aims to comply Energy usage strictly with all applicable requirements of environmental laws in the regions where it operates. Compliance with environmental rules and regulations at our terminals is an ongoing operational focus for the business. Compliance protects the business legally, reassures our customers, and protects our reputation as an environmentally friendly and sustainable business. Comprehensive sustainability plans are in place at all our terminals and are embedded in all of Global Ports’ investment programmes. Carbon footprint The Group is committed to reducing its carbon footprint but we recognise the challenge of reducing energy consumption while at the same time growing our business operations. We are examining ways to increase our energy efficiency and also reduce air emissions. We comply with all mandatory energy and CO2 compliance, and reporting requirements. In terms of carbon reporting, our environment management system tracks our operational emissions performance and that data is captured annually for the purposes of reporting our greenhouse gas emissions. We have successfully reduced our electricity consumption per tonne of cargo handled in the last three years. We are targeting a further reduction in electricity consumption in the year 2020. We also continue to collaborate with our customers to try to find ways to reduce the impact that visiting vessels have on the ports’ air quality. Electricity consumption per 1 tonne of cargo handled by Russian Ports’ marine terminals Fuel consumption per 1 tonne of cargo handled by Russian Ports’ marine terminals Energy intensity of Russian Ports’ marine terminals (MWh per million of sales revenue in USD) Units 2017 2018 2019 kWh 2.15 2.14 2.08 l/t 0.44 0.45 0.67 USD 117 119 120 Water usage Global Ports also makes strenuous efforts to manage water resources effectively and minimise the impact of negative water quality on the environment. As part of our natural resource management, all accumulated rainwater and waste water is treated before being returned to waterways. Waste management Global Ports aims to minimise the amount of waste that its terminals produce, re-use resources where possible and dispose of waste in a way that minimises the environmental impact, while also maximising operational and financial efficiency. Generally the activities of the Group do not lead to the formation of any solid or dangerous waste products. However, the Group does monitor and analyse its waste management activities, and each facility regularly reviews opportunities for waste recycling and reuse of materials. Global Ports is also continuing to work with its industry partners to reduce the impact of shipping and port operations on water quality at its port terminals. All non-recyclable waste such as waste oil is carefully stored in ways designed to prevent any harmful substances escaping into the environment. Future priorities We will continue to focus strongly on environmental compliance. We will continue to focus on improving the environmental sustainability of our operations, focusing on training and best practices development in areas such as compliance, energy usage, recycling and waste management. Global Ports Investments PLC Annual Report 2019 50 | Environment | Electricity used Fuel used (diesel, petrol) Electricity consumption per 1 tonne of cargo handled by Russian Ports’ marine terminals Fuel consumption per 1 tonne of cargo handled by Russian Ports’ marine terminals Energy intensity of Russian Ports’ marine terminals (MWh per million of sales revenue in USD) Units Thousand MWh Thousand m3 kWh l/t USD 2018 41.9 9.1 2.14 0.45 119 | Social | Diversity Diversity of staff male female Administration staff male female Production staff male female Executive management male female Health and Safety LTIFR Fatalities Fatalities / Thousand employees Sustainability Governance Business Ethics Policy Anti-Bribery Ethics Policy Number of employees — CSR Number of part-time employees Employee turnover % Employee voluntary turnover % Employee involuntary turnover % Employee training cost Units 2018 % % % % % % % % Units number number number Units yes / no yes / no number number % % % USD mln 67% 33% 35% 65% 73% 27% 87% 13% 2018 1.28 0 0 2018 yes yes 2,700 х х х х х 2019 42.0 13.9 2.08 0.67 120 2019 68% 32% 35% 65% 73% 27% 87% 13% 2019 0.55 1 0.35 2019 yes yes 2,870 5 12% 9% 2% 0.1 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information | Governance | Board of Directors The Board of Directors size Number of independent directors Independent directors % Number of executive directors Number of non-executive directors Percentage of non-executive directors on Board Tenure of Board < 1 year 1–4 year > 4 years Number of Board meetings for the year Board meetings attendance % Independent Directors Board meetings attendance % Diversity Board diversity male female Independent directors diversity male female Number of women on Board Age of the youngest director Age of the oldest director Board of Directors age range Board average age Board Committee Number of Board committees Other Director average compensation Total Board of Director compensation paid Total salaries and bonuses paid to executives Auditor ratification Source: Company data. 51 Units number number % number number % % % % number % % 2018 15 3 20% 1 14 2019 11 3 27% 0 11 93.3% 100.0% 47% 33% 20% 21 92.4% 98.40% 36% 64% 0% 18 96.0% 98.10% Units 2018 2019 % % % % number number number number number Units number Units USD thou. USD thou. USD thou. yes / no 73% 27% 33% 67% 4 33 71 38 49 2018 3 2018 79.2 1,188 10,041 yes 73% 27% 33% 67% 3 31 66 35 52 2019 3 2019 74.4 818 8,311 yes Global Ports Investments PLC Annual Report 2019 52 Corporate Governance 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 53 Effective governance is central to Global Ports’ long-term success Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 54 Corporate Governance The Board of Directors is committed to ensuring that the highest standards of governance, values and behaviours are in place and consistently applied in the boardroom and across the Group. USD 74.4 thousand Director average compensation The Board believes that effective governance is essential to protecting shareholder value and the sustainable growth of the Group. Although the Company is not subject to the provisions of the UK Corporate Governance Code, it actively seeks to align itself with international recognised governance best practices customary for public companies listed on the London Stock Exchange. For other corporate governance policies, see the Group’s website: www.globalports.com 52 years Director average age 31— 66 Board age ranges [Board independence] % [Tenure of Board] % 27% 36% 73% 64% Non-Executive Director Independent Non-Executive Director 8 3 1–4 year < 1 years [Superior mix of knowledge and experience] members 9 Transport & Logistics 7 International Business 4 Finance 7 4 4 Business Administration | Role of the Board of Directors | | Code of Ethics and Conduct | | Members of the Board of Directors | 55 Global Ports is governed by its Board of Directors (“the Board”), which is collectively responsible to the Group’s shareholders for the long-term success of the Group. The Board is responsible for setting the Group’s strategic objectives and ensuring that the necessary governance, structure, financial, and management resources are in place to deliver its objectives. The Board recognises that strong governance supports a healthy company culture and that it is important that the Board leads by example and sets the right tone in championing the behaviours we expect to see. The Board compositions ensure the right blend of skills, experience, industry knowledge and independence of judgement appropriate to the Group’s needs and its ongoing progress. The Board ensures that the Group maintains a sound system of internal control and enterprise risk management to safeguard the Group’s assets and shareholders’ and bondholders’ investments. The latest version of the Terms of Reference of the Board of Directors was approved by the shareholders on 18 June 2019 and came into force on the same day. It is available on the Company’s website. Global Ports’ Code of Ethics and Conduct outlines the general business ethics and acceptable standards of professional behaviour expected of all directors, employees and contractors. The Code was approved by the Board of Directors on 8 December 2016 and introduced throughout the Group companies during 2017. The Code, handed to all new staff as part of their induction, means that everyone at Global Ports is accountable for their own decisions and conduct. As well as general standards of behaviour, the Code, together with the relevant policies, covers fraud and corruption (including approaches on acceptance of gifts and benefits), ethics and conflicts of interest. Employees and third parties are encouraged to report any suspected breaches using various channels including the Group’s dedicated confidential hotline service which was established in 2017. During 2019, management continued to promote awareness of the service to employees as an appropriate mechanism for voicing any concerns around violations of the Group’s Code of Ethics and Conduct or suspected fraud. The Code is accessible to all staff via the Group’s website (under Corporate Governance section) and available in the HR department at every operating facility. There are also other more detailed rules concerning our anti-corruption, anti-fraud and whistleblowing policies. The Board is regularly updated regarding any breach of policies with a specific focus on incidents involving fraud and resulting actions. Significant breaches must be reported to the Board immediately. The Board of Directors leads the process in making new Board member appointments and makes recommendations on new appointments to shareholders. All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment, and to re- election at intervals of no more than one year. Any term beyond six years for a Non-Executive Director is subject to particularly rigorous review, and takes into account the need to refresh the Board on a regular basis. The Board currently has 11 members. The Board reviews the size of the Board annually and considers the current size of the Board as appropriate for the current scope and nature of the Group’s operations. 11 members of the Board of Directors [Board diversity — whole Board] % [Board diversity Independent Directors] % 2Law The latest version of the Terms of Reference of the Board of Directors is available on the Company’s website 27% 33% 73% 67% Male Female 8 3 Male Female 2Investment Banking Technologies 1International Taxation Audit & Accounting 1 2 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 56 The composition of the Board changed during the year, with a reduction in the size of the Board from 15 to 11 directors and the appointment of a number of new directors. The purpose of the changes was to refresh the composition of the Board and increase its effectiveness. Mr. Mogens Petersen, Ms. Alexandra Fomenko and Mr. Shavkat Kary Niyazov were appointed as directors on 18 June 2019, replacing Mr. Michalakis Christofides, Mr. Alexander Iodchin, Ms. Laoura Michael, Mr. Stavros Pavlou, Mr. Nicholas Charles Terry and Mr. George Yiallourides who resigned from the Board on the same day. Mr. Anton Chertkov resigned from the Board on 11 November 2019 and was replaced by Mr. Ivan Besedin who joined the Board on 16 December 2019. There were no significant changes in the responsibilities of the Directors during 2019 except for the establishment and membership of the committees as described in the Management Report in the Consolidated Financial Statement. | Chairman of the Board of Directors | The role of the Chairman of the Board of Directors is to ensure that Board meetings are held as and when necessary, lead the directors, ensure their effectiveness and review the agenda of Board meetings. The Chairman together with the Secretary of the Board review Board materials before they are presented to the Board and ensures that Board members are provided with accurate, timely and clear information. Members of the management team who have prepared the materials, or who can provide additional insights into the issues being discussed, are invited to present materials or attend the Board meeting at the relevant time. Board members regularly hold meetings with the Group’s management to discuss their work and evaluate their performance. The Chairman monitors communications and relations between the Group and its shareholders, the Board and the management, and independent and non- independent directors, with a view to encouraging dialogue and constructive relations. The Chairman also works closely with non-executive directors. The Group separates the positions of the Chairman and CEO to ensure an appropriate segregation of roles and responsibilities. The purpose of the changes was to refresh the composition of the Board and increase its effectiveness. Further details on the Board committees can be found in the Management Report see 16 | Board committees | [CORPORATE GOVERNANCE STRUCTURE] Reporting lines 57 There are three committees: the Audit and Risk Committee; the Nomination and Remuneration Committee; and the Strategy Committee. The composition of the Board committees was changed by the Board of Directors in June 2019: the Nomination Committee and the Remuneration Committee were merged into a single committee, and a new Strategy Committee was established. | Non-executive and independent directors | There are eleven non-executive directors (including the Chairman). Mrs. Britta Dalunde (Senior Independent Director), Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos are independent directors, and have no relationship with the Group, its related companies or their officers. This means they can exercise objective judgment on corporate affairs independently from management. The independent directors bring external perspectives and insight to the deliberations of the Board and its Committees, providing a range of business knowledge and other experience from different sectors. They play a particularly important role in the formulation and progression of the Board’s agreed strategy. In reviewing and monitoring the performance of the executive management in the implementation of this strategy, they ensure that the interests of all stakeholders, shareholders, bondholders, employees, customers, suppliers and the communities where the Company operates, are considered. Board of Directors members, including 11 Independent Directors 3 Chairman Morten Engelstoft Leads the Board and ensures its effectiveness Chaired by Independent Directors Chaired by Non-Executive Director AUDIT AND RISK COMMITTEE NOMINATION AND REMUNERATION COMMITTEE STRATEGY COMMITTEE 5members, including 3 Independent Directors 3members, including 1 Independent Director 4members, including 1 Independent Director Secretary of the Board of Directors Ensures that Board procedures are respected and that information flows between the Board and the management team Executive management Internal audit Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 58 | General Manager | | Shareholder engagement | 59 Alexander Iodchin occupies the position of General Manager and the Board granted him the powers to carry out all business related to the Group’s business up to a total value as established by the Authority Matrix. The Board has also granted him powers to discharge other managerial duties related to the ordinary course of business of the Company, including representing the Company before any government or government- backed authority. The decisions for all other matters are reserved for the Board. The Authority Matrix contains the list of such reserved matters. In addition, Mr. Iodchin also acts as the Board Secretary and has done since December 2008. | Board remuneration | Non-executive directors serve on the Board pursuant to letters of appointment, which specify the terms of their appointment and remuneration. Levels of remuneration for non- executive directors reflect the time commitment, responsibilities of the role and membership of the respective committees of the Board. Directors are also reimbursed for expenses associated with the discharge of their duties. Non-executive directors are not eligible for bonuses, retirement benefits or to participate in any incentive plans operated by the Group. The Chairwomen of the Audit and Risk and Nomination and Renumeration Committees receive additional remuneration. The shareholders of the Company approved the remuneration of the members of the Board on 12 May 2017, 11 December 2017, 29 January 2018, 2 March 2018, 14 May 2018, 29 June 2018, 18 June 2019, 16 December 2019 and 30 December 2019. The total remuneration of the members of the Board of Directors paid by the Group and its subsidiaries in 2019 amounted to USD 818 thousand (2018: USD 1,188 thousand). | Internal audit | The internal audit function is carried out by Group’s centralised Internal Audit Service (IAS). Its mission is to enhance and protect organisational value by providing risk-based, independent and objective assurance, advice and insight. Independence and objectivity of IAS are carefully safeguarded and monitored by the Audit and Risk Committee. The Head of the IAS, Mr. Ilya Kotlov, reports directly to the Audit and Risk Committee. | External auditors | An external auditor is appointed at the Global Ports Annual General Meeting on an annual basis to review the Group’s financial and operating performance. This follows proposals drafted by the Audit and Risk Committee for the Board of Directors regarding the reappointment of the external auditor of the Group. While drafting its proposals, the Audit and Risk Committee is guided by the following principles: ޭ Qualifications of the external auditor and its professional reputation; ޭ Quality of services; ޭ Compliance with requirements for external auditor independence. In 2019, the shareholders of Global Ports re-appointed PricewaterhouseCoopers as the independent external auditor for the purposes of auditing the Group’s IFRS financial statements for 2019. The Group’s shares are listed on the London Stock Exchange (LSE) in the form of Global Depository Receipts (GDRs), and the Group’s communications with shareholders are consistent with international best practice in line with the information disclosure standards set out by the London Stock Exchange. The main principles of the Group’s information and disclosure policy are regularity, efficiency, availability, reliability, completeness, balance, equality and safety of information resources. There is an active engagement programme with the Company’s shareholders. The members of the executive management team meet regularly with institutional investors and analysts to discuss and obtain feedback on a range of issues including strategy, performance, management, and governance. This is undertaken through a combination of roadshows, group or one-on-one meetings, attendance at industry and investor conferences and by hosting site-visits at the Company’s facilities. In 2019, the executive management attended investor meetings in Boston, Frankfurt, Helsinki, London, Los Angeles, Moscow, New York, Stockholm, Tallinn and other locations. In all, Global Ports held over 150 investor meetings during 2019. Shareholders can access up-to-date information on Global Ports through website, which has the Company’s been recently relaunched and updated. All material information on the Company can be found there, together with copies of annual and interim results, company presentations, press releases, annual reports, and webcasts. The Investor Relations team has day to day responsibility for managing investor communications acting in close consultation with the Board and the executive management team. The Board is kept informed of significant discussions with shareholders and changes in the shareholder register and investor relations reports are regularly circulated to the members of the Board of Directors. USD 818 thousand The total remuneration of the members of the Board of Directors A resolution approving the reappointment of PricewaterhouseCoopers Limited as the auditor for 2020 will be proposed at the next Annual General Meeting. As of 2021, the Board will propose, subject to shareholders’ approval, the replacement of PricewaterhouseCoopers Limited by KPMG Limited. THE MAIN PRINCIPLES OF THE GROUP’S INFORMATION AND DISCLOSURE POLICY:  regularity  reliability  equality  efficiency  completeness  availability  balance and safety of information resources >150 investor meetings during 2019 All material information on the Company can be found there, together with copies of annual and interim results, company presentations, press releases, annual reports, and webcasts is available on the Company’s website Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information COMMITTEES MEMBERS COMMITTEES MEMBERS 60 Board of Directors A Audit and Risk Committee N Nomination and Remuneration Committe S Strategy Committee Chairman of a Committee Morten Engelstoft Chairman of the Board of Directors, Non-Executive Director N Skills and Experience Mr. Engelstoft was appointed as CEO of APM Terminals in November 2016 and to the Executive Board of A.P. Moller-Maersk A/S on 1 December 2017. In addition, he was appointed as Head of Maersk Safety, Security and Crisis Management as of 1 January 2020. Prior to that he was the CEO of APM Shipping Services from 2014, a role that included responsibilities as CEO of Maersk Tankers and the Chairman of DAMCO, Svitzer and Maersk Supply Services. From 2007 until 2014, he was Chief Operating Officer of Maersk Line, where he was responsible for global operations, procurement, fleet, technical vessel management and sustainability strategy. He joined Maersk in 1986 and has three decades of experience in the container shipping industry. He has held various senior executive positions at Maersk in Singapore, Italy, Taiwan and Vietnam. Mr. Engelstoft holds an Executive MBA from IMD in Lausanne, Switzerland. Year of Appointment Mr. Engelstoft was appointed as a non-executive member of the Board of Directors of Global Ports in October 2016. External Appointments Chief Executive Officer of APM Terminals, The Hague, the Netherlands. Executive Board member of A.P. Moller-Maersk A/S, Copenhagen, Denmark. Chairman of Svitzer, Copenhagen, Denmark. Chairman of Maersk Training, Svendborg, Denmark. Board member of TT Club Mutual Insurance Ltd (Director). Meeting Participation 94% . Ivan Besedin Member of the Board of Directors, Non-Executive Director Skills and Experience Ivan Besedin has extensive experience in the Russian railway industry where he worked for more than 35 years. He held a number of high-level managerial positions at the Russian Railways and within the Ministry of the Railway Transport and was Head of the Moscow Metro between 2011 and 2014. Today Mr. Besedin holds the position of adviser to the President of Delo Group, a role that he has fulfilled since April 2019. Mr. Besedin has served on several Boards, most notably having been Chairman of the Board of Directors of PJSC Transcontainer and Chairman of the rail freight operator OJSC Railtransavto. He is a graduate of Moscow Institute of Engineers of Railway Transport and holds a PhD in Technical Science. Adding to his distinguished academic career, he was Head of the All-Russia Research Institute of Railway Transport of the Ministry of Railways between 2003 and 2006. He has received multiple awards for his contribution to the railways industry of the USSR and the Russian Federation. Year of Appointment Mr. Ivan Besedin was appointed as a non- executive member of the Board of Directors of Global Ports in December 2019. External Appointments Adviser to the President of Delo Group. Britta Dalunde Member of the Board of Directors, Independent Non-Executive Director Skills and Experience Mrs. Dalunde has over 25 years of experience as an executive and a board member of various companies. Ms. Dalunde was CFO at SJ AB, the Swedish national rail operator, from 2009 until 2013. She has almost 20 years of experience working as a CFO while working in different industries including transportation, engineering and IT. Mrs. Dalunde graduated from the University of Uppsala with a Bachelor’s degree in Business Administration and International Business. She has also earned an Executive MBA degree with a specialism in Strategic Planning from the Edinburgh Business School at Herriot Watt University. Mrs. Dalunde owns 21,000 ordinary shares of Global Ports Investments PLC (7,000 GDRs). A Year of Appointment Mrs. Dalunde was appointed as an Independent non-executive member of the Board of Directors of the Company in May 2017. External Appointments Mrs. Dalunde currently also serves an Independent Non-Executive Director of Projektengagemang Sweden AB, which is listed on NASDAQ Stockholm Stock Exchange. She also serves as an Independent Non-Executive Director of ForSea Ferries AB, Nordion Energy AB, Arlandabanan Infrastructure AB and as Chairman of Chorus AB. Meeting Participation 94% 1. On 16th of April 2020 Mr. Besedin stepped down from the Board and Mr. Yashchenko was elected. Board of Directors Alexandra Fomenko Member of the Board of Directors, Non-Executive Director A N Year of Appointment Ms. Alexandra Fomenko was appointed as a non-executive member of the Board of Directors of Global Ports in June 2019. Soren Sjostrand Jakobsen Member of the Board of Directors, Non-Executive Director S Year of Appointment Mr. Jakobsen was appointed as a non- executive member of the Board of Directors of Global Ports in March 2018. A Audit and Risk Committee N Nomination and Remuneration Committe S Strategy Committee Chairman of a Committee 61 Skills and Experience Ms. Alexandra Fomenko has undertaken a number of commercial and managerial roles in Ukraine, France, the UAE and Russia. Her international career commenced in 2014 at Vermillon SARL (France) where she held the position of assistant export manager. She then moved on to Solaris Commodity DMCC (Dubai, UAE) to become the commercial and later general manager of the company between 2015 and 2018. Ms. Fomenko joined Delo Group in September 2018 where she currently holds a position of Head of Portfolio Investments. Ms. Alexandra Fomenko graduated with both bachelor’s and master’s degrees in International Economics from Donetsk National Technical University in Donetsk, Ukraine. She also holds an MSc (Management) from IAE Aix Graduate School of Management, France, with a specialisation in Management of International Business. External Appointments Head of Portfolio Investments in Delo Group. Meeting Participation 100% Skills and Experience Mr. Jakobsen brings extensive international experience in the maritime industry as well as port development and operation due to his 39-year career in A.P. Moller – Maersk Group, having spent the last 14 years with APM Terminals. Since 2013, Mr. Jakobsen has been based in Dubai, United Arab Emirates, until 2019 as Portfolio Manager for APM Terminal’s Africa, Middle East and South Asia joint venture portfolio. Since early 2019 Mr. Jakobsen has focussed on APM Terminal’s Russia portfolio as well as Joint Venture management globally for APM Terminals. Mr. Jakobsen also serves on the board of various APM Terminals joint venture companies including 2 other stock listed entities. His APM Terminals career has included roles as the Regional Manager for Latin America, based in Panama and as Global Head of Project Implementation, based in The Hague, the Netherlands. Prior to joining APM Terminals, Mr. Jakobsen worked at Maersk Line and Svitzer. Mr. Jakobsen is a graduate of the A.P. Moller – Maersk International Shipping Education and executive education courses at IMD in Lausanne, Switzerland and INSEAD Business School in Fontainebleau, France. External Appointments Portfolio Manager, APM Terminals, Africa, Middle East & South Asia region. Mr. Jakobsen holds a number of other Board positions including: Sogester S.A. , Angola; Douala International Terminal S.A. , Cameroon; Cai Mep International Terminal Co. Ltd. , Vietnam; Aqaba Container Terminal Company Ltd. , Jordan; Salalah Port Services Company SOAG, Oman; APM Terminals Bahrain B.S.C.; LCB Container Terminal 1 Ltd, Thailand; Poti Sea Port Corporation, Georgia; South East Asia Gateway Terminal Pvt. Ltd, Sri Lanka; and Meridian Port Services, Ghana. Meeting Participation 100% Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information COMMITTEES MEMBERS COMMITTEES MEMBERS 62 Board of Directors A Audit and Risk Committee N Nomination and Remuneration Committe S Strategy Committee Chairman of a Committee Demos Katsis Member of the Board of Directors, Non-Executive Director Skills and Experience Mr. Katsis is the founder, partner and managing director of Katsis LLC law firm which is based in Cyprus with offices in Limassol, Nicosia Athens and Malta and associated offices worldwide. As managing director of the firm, Mr. Katsis leverages his broad legal experience in trusts, tax, corporate litigation, corporate finance, commercial law mergers and acquisitions and advanced mitigation. Prior to founding Katsis LLC in 2010, Mr. Katsis worked at the George Georgiou LLC firm between 1999 and 2003 and other international law firms from 2003 to 2009. He served as a Partner at an International Law Firm between 2009 and 2010, having established and managed the firm’s new affiliate office in Athens between 2006 and 2009. He graduated with honors from the University of Bristol with a Bachelor of Law and a Master of Law. Additionally, he was awarded a full E.U. scholarship to pursue a Master’s degree in Human Rights & Democratisation at the University of Malta. During the period 2006 to 2008 Mr Katsis was a rapporteur of the European Union in the Republic of Cyprus in respect of issues related to consumer protection. Mr. Katsis is an active author of various articles in relation to corporate and commercial issues and he holds the position of Professor at Pericles Able Project in Moscow. Year of Appointment Mr. Katsis was appointed as a non-executive member of the Board of Directors of the Company in May 2018. External Appointments Partner and managing director of Katsis LLC. Meeting Participation 100% Shavkat Kary-Niyazov Member of the Board of Directors, Non-Executive Director Skills and Experience A mathematician and academician, Mr. Kary-Niyazov began his corporate career in 1995 as CFO of Academservice Ltd, the Russian tour operator, before moving to Sovlink LLC, the boutique investment-banking firm, in 1997. After the merger of Sovlink with Aljba Alliance Bank in 2000, he then became Managing Director of SL Capital Services Ltd (Cyprus), an international financial company and portfolio company of the merged group from 2002–2005. Mr. Kary-Niyazov has 14 years of experience in the transport industry, becoming President of Marine Façade, St. Petersburg, member of First Quantum Group in 2005. This project is focused on land reclamation and development in Saint Petersburg, Russia and has so far reclaimed more than 250 ha. of land and completed the construction of the Passenger Port “Marine Façade of St. Petersburg”. In addition to his role as President of Marine Façade, he served as President of the National Container Company in 2006 before taking on his current role as President of First Quantum Group which he has held since 2011. Mr. Kary-Niyazov graduated from Moscow M.V.Lomonosov State University with Masters in Mathematics (with honours), which he followed up with a Ph.D in topology and geometry at the same institution. Year of Appointment Mr. Shavkat Kary-Niyazov was appointed as a non-executive member of the Board of Directors of Global Ports in June 2019. External Appointments President of First Quantum Group Meeting Participation 100% Board of Directors Inna Kuznetsova Member of the Board of Directors, Independent Non-Executive Director N A A Audit and Risk Committee N Nomination and Remuneration Committe S Strategy Committee Chairman of a Committee 63 Skills and Experience Inna Kuznetsova is the interim CEO of 1010data, the leading provider of cross-enterprise data analytics tools. Until its recent acquisition by E2open, Mrs Kuznetsova was the President and Chief Operating Officer of INTTRA, the largest digital network for ocean shipping industry, processing over a quarter of containers in global trade. Before joining INTTRA she was the Chief Commercial Officer and member of the Executive Board at CEVA Logistics. Prior to that Mrs. Kuznetsova spent 19 years at IBM, starting in Russia and later in the US headquarters in a variety of global roles, primarily focused on fast growth opportunities and business transformation. In her last role she was global VP, Marketing & Sales, IBM Systems Software. Mrs Kuznetsova’s prior board engagements include Sage Plc (LSE: SGE), a FTSE100 software company where she served as Independent Non-Executive Director, and Avantida, a privately- owned SaaS company in Belgium in container repositioning space. Mrs. Kuznetsova completed her MS and PhD. study at Moscow State University and later earned an Executive MBA from Columbia Business School. Year of Appointment Mrs. Kuznetsova was appointed an Independent non-executive member of the Board of Directors of Global Ports in December 2017 effective January 2018. External Appointments Interim CEO, 1010data Meeting Participation 100% Lambros Papadopoulos Member of the Board of Directors, Independent Non-Executive Director Skills and Experience Mr. Papadopoulos has over 26 years of experience as an executive and a board member of various companies. In 2013, Mr. Papadopoulos founded PenteP Advisors Ltd. Prior to that he was with Citigroup (London), where as a Managing Director was Head of Greece/ Cyprus Equity Research and Head of Continental European Country and Small and Mid-Cap Companies. He started his career with Ernst & Young in London. Mr. Papadopoulos studied Accounting with Computing (B.A.(Hons)) at the University of Kent at Canterbury in the United Kingdom. He is a Member of the Institute of Chartered Accountants in England and Wales. A S Year of Appointment Mr. Papadopoulos was appointed as an Independent non-executive member of the Board of Directors of Global Ports in December 2017 effective January 2018. External Appointments Mr. Papadopoulos currently also serves as the Chairman of the Board of Directors at KEDIPES, the Cyprus Asset Management Company and the Chairman of the Board of Directors at Trastor Real Estate Investment Company which is listed on the Greek Stock Exchange. He is the Founder and General Manager of PenteP Advisors Ltd (Cyprus). Meeting Participation 100% Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 64 Board of Directors Audit and Risk Committee A Nomination Committe N R Remuneration Committee Chairman of a Committee COMMITTEES MEMBERS The following persons served as members of the Board of Directors during the reporting year but are resigned as of the date of this report publication: 65 Mogens Petersen Member of the Board of Directors, Non-Executive Director A S Skills and Experience Mr. Petersen has over 12 years of experience in the transport industry, sea ports and shipping. He has held the position of APM Terminals’ Portfolio Manager, Russia and the Baltics since November 2018. He joined the company in 2007 and held various finance roles globally before becoming Senior Advisor in Finance, Strategy, Audit & Risk at Global Ports Investments Plc from 2014–2017, following APM Terminals’ acquisition of its shareholding in the company. Between 2017 and 2018 he managed the Capital Investments Program at APM Terminals focusing on improving customer relations, cost leadership and portfolio management. He began his career in 1996 at Energinet, a Danish energy company, before spending seven years at utility Hofor, where he focused on renewable energy. Mr. Petersen has an MBA from Henley Business School, UK as well as an MSc. (Economics) from the University of Aarhus, Denmark and a degree in Finance and Economics (DEA) from the Université Louis Pasteur, Strasbourg. Year of Appointment Mr. Mogens Petersen was appointed as an Independent non-executive member of the Board of Directors of Global Ports in June 2019. External Appointments Portfolio Manager in APM Terminals Russia and the Baltics, Member of the Board of Directors at APM Terminals — Aarhus A/S. Meeting Participation 100% Sergey Shishkarev Member of the Board of Directors, Non-Executive Director S Skills and Experience Mr. Shishkarev founded the Delo Group in 1993 and remained at the helm of the company until 1999. He was then elected to the State Duma of the Russian Federation where he held various executive positions within the Committee on International Affairs, the Committee on Energy, Transport and Communications. Until 2011 Mr. Shishkarev was the Head of the Committee on Transport, before returning to Delo Group in 2014 as President. Mr. Shishkarev is an author of over 50 bills in the field of transportation. Mr. Shishkarev graduated with Honours from the Military Red Banner Institute of the Ministry of Defense in 1992. In 2003 he graduated from the Russian Academy of Public Administration cum laude, with a degree in State and Municipal Management. In 2010, he became a Doctor of Law. Year of Appointment Mr. Shishkarev was appointed as a non-executive member of the Board of Directors of the Company in May 2018. External Appointments Mr. Shishkarev is the President of Delo Group and the President of the Handball Federation of Russia. Meeting Participation 100% Iana Boyd Alexander Iodchin Nicholas Charles Terry Mr. Terry was appointed as a non- executive member of the Board of Directors of the Company in October 2016, resigned on 18 June 2019. George Yiallourides Mr. Yiallourides was appointed as a non-executive member of the Board of Directors of the Company in May 2018, resigned on 18 June 2019. Mrs. Boyd was appointed as a non- executive member of the Board of Directors of the Company in January 2018, resigned on 19 April 2019. Anton Chertkov Mr. Chertkov was appointed as a non- executive member of the Board of Directors of the Company in May 2018, he steped down from his role on 11 November 2019. Michalakis Christofides Mr. Christofides was appointed as a non-executive member of the Board of Directors of the Company in July 2014, resigned on 18 June 2019. Mr. Iodchin was appointed as an executive member of the Board of Directors of the Company and has been Secretary of the Board of Directors since 2008, resigned on 18 June 2019. On the same day Mr. Iodchin was appointed as the General Manager of the Company and continued in his role as the Secretary of the Board of Directors. Laura Michael Mrs. Michael was appointed as a non- executive member of the Board of Directors of the Company in January 2013, resigned on 18 June 2019. Stavros Pavlou Mr. Pavlou was appointed as a non- executive member of the Board of Directors of the Company in May 2018, resigned on 18 June 2019. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 66 Executive Management Terminal Directors 67 Vladimir Bychkov Chief Executive Officer of Global Ports Management LLC Year of Appointment Mr. Bychkov was appointed as Chief Executive Officer of Global Ports Management LLC in July 2018. Andrey Bogdanov Managing Director of Ust-Luga Container Terminal Year of Appointment Mr. Bogdanov was appointed as the Managing Director of the Ust-Luga Container Terminal in 2018, before he served as its General Manager since 2012. Skills and Experience Mr. Bychkov has worked at Delo Group since 2000, starting with the position of freight forwarder. In 2003, he became Deputy CEO, managing procurement and bunkering services before taking on the role of CEO of Krasnodarteploset to restructure the business. During 2004–2009, he was the CEO of Delo Group where he was instrumental to M&A, strategic partnerships, attracted equity finance while successfully transforming the Group into an efficient transport business with a core focus on stevedoring and logistics. In July 2010, he became the President of Ruscon, the container and logistics segment of Delo Group that operates terminals and warehouses in the Novorossiysk and Moscow regions offering full range of handling services and storage facilities as well as sea freight transportation and turn-key logistics multimodal solutions. Mr. Bychkov is a law graduate of the Academy of Federal Security of the Russian Federation, of the Finance Academy of the Russian Federation and has successfully completed the Executive MBA programme of the School of Business of Moscow State University. Year of Appointment Mr. Bitsch was appointed as Chief Commercial Officer of Global Ports Management LLC in July 2017. Skills and Experience Prior to his appointment, he was Chief Commercial Officer at Sogester S.A. in Angola from 2011. Before that he was a management consultant in Denmark for several years. Between 2006 and 2008, Mr. Bitsch served in various senior executive roles at MSC Scandinavia Holding A/S. He started his career in 1990 as a trainee at Maersk and worked there for 16 years in various departments and regions, progressing to Senior General Manager. During his time at Maersk, Mr. Bitsch worked in Denmark, the USA, Bulgaria and Angola. Mr. Bitsch has completed A.P. Moller Shipping School and holds a Graduate Diploma in Business Administration from Copenhagen Business School as well as a YMP from INSEAD. Skills and Experience For five years prior to 2012 he was the Commercial Director of First Container Terminal. He served as Director for Operations in the Sea Port of St. Petersburg from 2003. From 2000 to 2003 he held the position of Chief Executive Officer of MCT PORT. From 1993 he served as Head of Department of MCT Petersburg, before being promoted to Chief Operations Officer. In 1984–1993 Mr. Bogdanov worked for Leningrad Sea Commercial Port (from 1992 known as the Sea Port of St. Petersburg). Mr. Bogdanov graduated from Admiral Makarov State Maritime Academy. Albert Likholet Managing Director of Petrolesport and First Container Terminal Year of Appointment Mr. Likholet was appointed as Managing Director of Petrolesport in August 2018 and First Container Terminal in May 2019. Skills and Experience Mr. Likholet has held the position of CEO at Novoroslesexport (“NLE”), the NCSP Group container terminal located on the north-east coast of the Black Sea, for seven years, having been promoted from his role as the Container Terminal Manager. Mr. Likholet commenced his career in the ports industry in 2002 working as a grain inspector for the Control Union at Novorossiysk, Temryuk and Port Kavkaz marine terminals. He joined NLE in 2003 as a berths and yards development coordinator before making his way up to hold a number of management positions. During his term NLE was converted into a modern container terminal through several stages of investment, while retaining historic bulk and general cargoes. He has a degree in Management & Economics from the Novorossiysk State Maritime Academy. Brian Bitsch Chief Commercial Officer of Global Ports Management LLC Alexander Roslavtsev Chief Financial Officer of Global Ports Management LLC Year of Appointment Mr. Roslavtsev was appointed as the Chief Financial Officer of Global Ports Management LLC in September 2017. Vitaly Mishin General Manager of Moby Dik Year of Appointment Mr. Mishin was appointed as General Manager of Moby Dik in 2015. Prior to that, from 2010 to 2014 he has served as General Manager of Logistika-Terminal. Skills and Experience Mr. Roslavtsev has over fourteen years of experience as a CFO in various industries. Before joining Global Ports, Alexander Roslavtsev was CFO of Rusagro, one of Russia’s largest agricultural companies. From January 2010 until May 2016, he was CFO of Hewlett Packard Russia and CIS. From January 2006 until January 2010 he was CFO and Vice-President of Rosinter Restaurants Holding. Previously, Mr. Roslavtsev has also worked for Intel Corporation, Ford Motor Company, KPMG UK and KPMG Russia. Mr. Roslavtsev is a Member of the Association of Chartered Certified Accountants (ACCA). In 1995, Mr. Roslavtsev graduated from the Moscow State Aviation Institute with an M.S. in Economics and Engineering and has also attended a number of business courses at Wharton Business School, Philadelphia, Pennsylvania. . Douglas Smith Chief Operational Officer of Global Ports Management LLC Year of Appointment Mr. Smith was appointed as Chief Operational Officer of Global Ports Management LLC in March 2016. Skills and Experience Mr. Smith has over 20 years of experience in port terminal management. Most recently, he was APM Terminals’ Regional Chief Operating Officer in Africa and the Middle East. Prior to that, he was Director of Global Field Safety at APM Terminals, driving the corporate safety programme across the Group’s 238 global marine and inland container facilities around the world. Mr. Smith joined AP Moller-Maersk group in 1994 and held a number of managerial positions with APM Terminals in the USA, Nigeria, UAE and the Netherlands. He is a graduate of the United States Merchant Marine Academy and also holds an MBA in Global Management. 1. On 17th of April 2020 Mr. Douglas Smith stepped down the position of the CCO Group to persuade leading opportunities outside the Group. Skills and Experience From 2006 to 2010, he served as Operations Manager and Managing Director in Sea Port of St. Petersburg. From 1999 till then, he served as Chief Executive Officer in Fourth Stevedoring Company. Between 1994 and 1999 he was Chief Executive Officer at First Stevedoring Company. He began his career in 1980 at Leningrad Sea Commercial Port (since 1992 – Sea Port of St. Petersburg). Mr. Mishin graduated from the Admiral Makarov State Maritime Academy. Global Ports Investments PLC Annual Report 2019 68 Terminal Directors 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Risk Management 69 Alexey Pavlenko Managing Director of VSC Year of Appointment Mr. Alexey Pavlenko was appointed as the Managing Director of VSC in September 2019. | Risk management process, principal risks and uncertainties | Ivan Radchenko General Manager of Yanino Logistic Park Skills and Experience Mr. Pavlenko has almost 25 years’ experience in marine terminal management. His career started in 1995 at Vostochny Port. In 1998 he was appointed Deputy Head for Commercial Operations of Handling Complex No. 2 of Vostochny Port JSC before proceeding to head up the Complex in 2001. In 2004 he joined VSC, where he held a number of managerial positions, most recently as the Director of Operations from 2013 to 2019. Mr. Pavlenko graduated from Far East State Maritime Academy, faculty of marine transport management. Year of Appointment Ivan Radchenko was appointed as the General Manager of Yanino Logistic Park in September 2018. Skills and Experience Prior to his appointment, Mr. Radchenko worked as a Business Development Manager for Maersk Line in Vladivostok. He also served as the CEO of Pacific Logistic LLC between 2015 and 2018, overseeing a 15–20% yearly increase in throughput as well as the implementation of a range of infrastructure projects. Additionally, Mr Radchenko worked as a terminal manager at Global Ports’ Moby Dik container terminal, and a Senior Sales Manager at Yanino Logistics Park between 2010 and 2011, having begun his career as Head of Analysis and the Forecast Division at JSC “Commercial Port of Vladivostok” in 2006. Mr. Radchenko was awarded an undergraduate degree with honours from Russia’s Far Eastern State Technical Fishing University. Dirk van Assendelft General Manager of Multi-Link Terminals Year of Appointment Mr. van Assendelft has served as the managing director of Multi-Link Terminals Ltd Oy since December 2004 and was the General Manager of Moby Dik from June 2004 until July 2010. Skills and Experience Mr. van Assendelft has also held a position as a member of the Board of Directors of Niinisaaren Portti Osakeyhtio Oy (NiPO) since April 2007. Prior to his appointment as the managing director of Multi-Link Terminals Ltd Oy, he worked for Container-Depot Ltd Oy as a director until December 2005. He studied at the Helsinki University of Technology and the Kotka Svenska Samskola. 1. GPI is exposed to a variety of risks and opportunities that can have commercial, financial, operational and compliance impacts on its business performance, reputation and licence to operate. The Board recognises that creating shareholder value involves the acceptance of risk. Effective management of risk is therefore critical to achieving the corporate objective of delivering long-term growth and added value to our shareholders. 2. Global Ports bases its risk management activities on a series of well- defined risk management principles, derived from experience, best practice, and corporate governance regimes. The Group’s enterprise risk management processes (ERM) is designed to identify, assess, respond, monitor and, where possible, mitigate or eliminate threats to the business caused by changes in the business, financial, regulatory and operating environment. 3. The Board has overall oversight responsibility for GPI’s risk management and for the establishment of the framework of prudent and effective controls. As such it systematically monitors and assesses the risks attributable to the Group’s performance and delivery of the GPI’s strategy. Where a risk has been identified and assessed, the Group selects the most appropriate risk measure available in order to reduce the likelihood of its occurrence and mitigate any potential adverse impact. 4. The Board delegates to the Chief Executive Officer of LLC Global Ports Management responsibility for the effective implementation and maintenance of the risk management system. Day-to-day responsibility for risk management lies with the management team. The Audit and Risk Committee is authorised by the Board to monitor, review and report on the organisation, functionality and effectiveness of the Group’s ERM system. 5. Global Ports is exposed to a variety of risks which are listed below. The order in which these risks are presented is not intended to be an indication of the probability of their occurrence or the magnitude of their potential effects. 6. Not all of these risks are within the Group’s control, and the list cannot be considered to be exhaustive, as other risks and uncertainties may emerge in a changing external and internal environment that could have a material adverse effect on the Group’s ability to achieve its business objectives and deliver its overall strategy. 7. Further information on our risk management system, including a detailed description of identified risk factors is contained in the notes to the Financial Statements attached to this report. 8. The Group’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the consolidated financial statements. 9. The Group’s contingencies are disclosed in Note 29 to the consolidated financial statements. Global Ports Investments PLC Annual Report 2019 70 Risk factor Strategic risks Market conditions: 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Risk management approach Risk factor Risk management approach 71 Global Ports’ operations are dependent on the global macroeconomic environment and resulting trade flows, including in particular container volumes. Container market throughput is closely correlated to the volume of imported goods, which in turn is driven by domestic consumer demand, and influenced by RUB currency fluctuations against USD/EUR, and exported goods, which in their turn correlate with the Russian rouble exchange rate fluctuations and global commodity markets` trends. The Group remains exposed to the risk of contraction in the Russian and world economy which, if it were to occur, could further dampen consumer demand and lead to a deterioration in the container market which could have a materially adverse impact on the Group. The Group has responded to the volatility of throughput in the container market by: ޭ Focusing on quality and value-driven services (getting closer to the customer); ޭ Greater focus on balancing export and import container flows; ޭ Offering operational flexibility to all clients; ޭ Effective cost containment; ޭ Adopting new revenue streams and attracting new cargoes. Competition: Barriers to entry are typically high in the container terminal industry due to the capital-intensive nature of the business. However, challenging market trading conditions mean that competition from other container terminals continues to be a significant factor. Further consolidation between container terminal operators and container shipping companies, the creation of new strategic alliances, the introduction of new/upgraded capacity and carrier consolidation could result in greater price competition, lower utilisation, and a potential deterioration in profitability. Strategic international investors may develop or acquire stakes in existing competitor Russian container terminals, which could bring new expertise into the market and divert clients and cargoes away from the Group. Given the historically high margins in the Russian container handling industry, this trend may continue. The Group actively monitors the competitive landscape and adjusts its strategy accordingly, i.e. the Group prioritises building close long-term relationships with its leading customers (locally, regionally and with headquarters) based on a global approach to account management and contractual agreements incentivising growth of throughput and/or share of business. The Group’s focus on service quality is a key differentiator from its competition and the Group believes this is one of its key competitive advantages. The Group has made and continues to make long-term investments in its terminals and modern equipment to ensure competitive levels of service. It operates on a long-term horizon and its terminals represent core infrastructure in Russia that will continue to operate for the next 10- 20 years or beyond. Because the Group possesses a healthy land bank it has flexibility to balance capital expenditure to at minimum maintain capacity at the existing level and support its efficient development should markets require it. The Group and its terminals have developed long-term operating masterplans that enable it to react quickly in the case of additional market demands being placed on its facilities’ infrastructure and equipment. The Group’s healthy cash flow generation and decreasing leverage allow financial flexibility in terms of timing and size of the required capital expenditure programme. Political, economic and social stability: Instability in the Russian economy as well as social and political instability could create an uncertain operating environment and affect the Group’s ability to sell its services due to significant economic, political, legal and legislative risks. Certain government policies or the selective and arbitrary enforcement of such policies could make it more difficult for the Group to compete effectively and/or impact its profitability. The Group may also be adversely affected by US, EU and other jurisdictions sanctions against Russian businesses/companies whose measures have had and may continue to have an adverse effect on the Russian economy and demand for commodities. Ongoing sanctions could also adversely impact the Group’s ability to obtain financing on favourable terms and to deal with certain persons and entities in Russia or in other countries. In light of the macroeconomic challenges faced by the ports industry in recent years, the Group has focused on improving its resilience, in particular its ability to withstand short-term economic fluctuations in Russia, as well as the wider regional and global environment. This has included a strong focus on cost containment measures, and on strengthening its financial position by refinancing all its debt switching to longer maturities at fixed rates. In addition, the Group has developed its growth strategy to embrace exports and new revenue streams to counteract the impact of any fall in consumer sentiment or any macro-economic downturn. The Group has strengthened its system to monitor compliance with restrictions posed by international sanctions and fend off the risk of secondary sanctions. The Group continues to maintain an international base of shareholders, bondholders and business partners. The Group is not aware of any specific sanctions’ risks related to its ownership or operations. Coronavirus (COVID-19): The company’s outlook for 2020 may be impacted by the Coronavirus (COVID-19) outbreak in a number of countries, including Russia, which has significantly lowered visibility on what to expect in 2020. The Management is closely monitoring the situation with the outbreak of Coronavirus (COVID-19) and is ready to act depending on the development of the situation. Operational risks Leases of terminal land: The Group leases a significant amount of the land and quays required to operate its terminals from government agencies and to a lesser extent from private entities. Any revision or alteration to the terms of these leases or the termination of these leases, or changes to the underlying property rights under these leases, could adversely affect the Group’s business. The Group believes it has a stable situation at present regarding its land leases and its terminals have been in operation for a number of years. The Group owns the freehold on 66% of the total land of its terminals and 70% of the land of its container and inland terminals in Russia. The remainder is held under short and long-term leases routinely renewable at immaterial costs. Customer Profile and Concentration: The Group is dependent on a relatively limited number of major customers (shipping lines, freight forwarders etc.) for a significant portion of its business. These customers are affected by conditions in their market sector which can result in contract changes and renegotiations as well as spending constraints, and this is further exacerbated by carrier consolidation. The Group conducts extensive and regular dialogue with key customers and actively monitors changes that might affect our customers’ demand for our services. The Group has a clear strategy to reduce its dependence on its major customers, by targeting new customers, increasing the share of business from other existing global customers, and new cargo segments. The Group is also relying on the contribution from non-container revenues through building its presence in marine bulk cargoes like coal and scrap metal (share of non-container revenue was 26% and 26% in 2018 and 2019 respectively). Global Ports Investments PLC Annual Report 2019 72 Risk factor Reliance on third parties: The Group is dependent on the performance of services by third parties outside its control, including all those other participants in the logistics chain, such as customs inspectors, supervisory authorities, railway and others, and the performance of security procedures carried out at other port facilities and by its shipping line customers. Tariff regulation: Tariffs for certain services at certain of the Group’s terminals have in the past been regulated by the Russian Federal Antimonopoly Service (FAS). As a result, the tariffs charged for such services were, and may potentially in the future be, subject to a maximum tariff rate and/or fixed in Russian roubles as PLP, VSC, and FCT, like many other Russian seaport operators, are classified as natural monopolies under Russian law. Human resources management: The Group’s competitive position and prospects depend on the expertise and experience of its key management team and its ability to continue to attract, retain and motivate qualified personnel. Industrial action or adverse labour relations could disrupt the Group’s operating activities and have an adverse effect on performance results. 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Risk management approach Risk factor Risk management approach 73 The Group strives to maintain a continuous dialogue with third parties across the supply chain. In addition, its geographic diversification provides it with some flexibility in its logistics, should bottlenecks develop in one area. Accidents involving the handling of hazardous materials at the Group’s terminals could disrupt its business and operations and/or subject the Group to environmental and other liabilities. The Group has implemented clear environmental and safety policies designed around international best practices and benchmark using such measures as GPI Global Minimum Requirements. Health, safety, security and environment: The risk of safety incidents is inherent in the Group’s businesses. The Group’s operations could be adversely affected by terrorist attacks, natural disasters or other catastrophic events beyond its control. Safety is one of the Group’s top priorities. A safety strategy and annual action plan have been developed, to build a sustainable safety culture across the whole Group. The detailed roadmap is designed to ensure sustainable implementation of safety culture over the medium term. Changes to tariff legislation (as of 14 August 2018) now require all tariffs in the new contracts to be entered into after this date to be set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the new legislation. The Group continues to monitor for any legislative proposals and regulatory actions that could lead to changes to the existing tariff regulations. It seeks a proactive dialogue with the relevant Russian federal authorities. It believes it is as well placed as any market participant to adapt to any future changes in tariff regulation. The Group annually reviews labour market and aligns salaries and benefits to employees at all levels to foster and retain skilled labour. The Group invests in the professional development of its staff, including international best practices implementation and internal development/training programmes. The Group engages in socially responsible business practices and support of local communities. The Group strives to maintain a positive working relationship with labour unions at its facilities. Moreover, it pursues overall labour policies designed to provide a salary and benefit package in line with the expectations of our employees. Information technology and security: The Group’s container terminals rely on IT and technology systems to keep their operations running efficiently, prevent disruptions to logistic supply chains, and monitor and control all aspects of their operations. Any IT glitches or incidents can create major disruptions for complex logistic supply chains. Any prolonged failure or disruption of these IT systems, whether a result of a human error, a deliberate data breach or an external cyber threat could create major disruptions in terminal operations. This could dramatically affect the Group’s ability to render its services to customers, leading to reputational damage, disruption to business operations and an inability to meet its contractual obligations. Similarly, GPI works with all its stakeholders to maintain high levels of security around port facilities and vessel operations to minimise the risk of terrorist attack. The Group has centralised its IT function in recent years which is an important step in ensuring both the efficiency and consistency of the Group’s security protocols implementation. We are continuing to align our IT strategy with the business objectives. We regularly review, update and evaluate all software, applications, systems, infrastructure and security. All software and systems are upgraded or patched regularly to ensure that we minimise vulnerabilities. Each of our business units has an IT disaster recovery plan. Our security policies and infrastructure tools are updated or replaced regularly to keep pace with changing and growing threats. Our security infrastructure is updated regularly and employs multiple layers of defence. Connectivity to our partners’ systems is controlled, monitored and logged. Regulatory and compliance risks Regulatory compliance: The Group is subject to a wide variety of regulations, standards and requirements and may face substantial liability if it fails to comply with existing regulations applicable to its businesses. The Group strives to be in compliance at all times with all regulations governing its activities and devotes considerable management and financial resources to ensure compliance. The Group’s terminal operations are subject to extensive laws and regulations governing, among other things, the loading, unloading and storage of hazardous materials, environmental protection and health and safety. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 74 Risk factor Changes in regulations: Risk management approach Changes to existing regulations or the introduction of new regulations, procedures or licensing requirements are beyond the Group’s control and may be influenced by political or commercial considerations not aligned with the Group’s interests. Any expansion of the scope of the regulations governing the Group’s environmental obligations, in particular, would likely involve substantial additional costs, including costs relating to maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of its ability to address environmental incidents or external threats. Conflict of interests: The Group maintains a constructive dialogue with relevant federal, regional and local authorities regarding existing and planned regulations. The Group does not have the power to block any or all regulations it may judge to be harmful, but this dialogue should ensure it has time to react to changes in the regulatory environment. The Group’s controlling beneficial shareholders may have interests that conflict with those of the holders of the GDRs or notes. The major implications of this risk are that (i) co-controlling shareholders pursue other businesses not related to GPI and hence may not be deeply involved with developing GPI and (ii) one of the major shareholders is also a major customer of the Group. The Group’s corporate governance system is designed to maximise the company’s value for all shareholders and ensure the interests of all stakeholders are taken into account. The Group’s LSE listing ensures our compliance with the highest international standards. In addition, the Board consists of highly experienced individuals including strong independent directors. Legal and tax risks: Adverse determination of pending and potential legal actions involving the Group’s subsidiaries could have an adverse effect on the Group’s business, revenues and cash flows and the price of the GDRs. Weaknesses relating to the Russian legal and tax system and appropriate Russian law create an uncertain environment for investment and business activity and legislation may not adequately protect against expropriation and nationalisation. The lack of independence of certain members of the judiciary, the difficulty of enforcing court decisions and governmental discretion claims could prevent the Group from obtaining effective redress in court proceedings. The Group maintains a strong and professional legal function designed to monitor legal risks, avoid legal actions where possible and carefully oversee any legal actions that may occur. The Group performs ongoing monitoring of changes in relevant tax legislation and court practice in the countries where its companies are located and develops the Group’s legal and tax position accordingly. Risk factor Financial risks FOREX risks: The Group is subject to foreign-exchange risk arising from various currency exposures, primarily the Russian rouble and the US dollar. Foreign-exchange risk is the risk to profits and cash flows of the Group arising from movement of foreign-exchange rates due to inability to timely plan for and appropriately react to fluctuations in foreign- exchange rates. Risk also arises from revaluation of assets and liabilities denominated in foreign currency. Risk management approach 75 As of 2019, the biggest proportion of the Group’s revenue is denominated in RUB as the Group has switched the currency of its tariffs to RUB, and part of the Group’s debt is denominated in USD. Most of the Group’s operating expenses, on the other hand are and will continue to be denominated and settled in RUB. In order to mitigate the possibility of foreign exchange risks arising from a significant mismatch between the currency of revenue and the currency of debt (‘open FX position’), the Group began converting its existing USD debt into RUB, the currency of revenue. In 2018, the Group cancelled cross-currency swaps on the RUB denominated bonds issued by the First Container Terminal Inc. These swaps were converting RUB debt into USD. In order to further mitigate FOREX risk between June and September 2019 the Group put in place forward hedges and currency options totalling USD 231.4 million to convert part of USD denominated debt into RUB. During 2018–2019 the Group also repurchased its Eurobonds, including USD 69.5 million of Eurobonds due to mature in 2022 which were replaced at the end of 2019 with a new 5 year/60 months RUB bank loan. This action has further reduced FOREX risk converting USD debt into RUB debt. Currently the Group owns ~27% of the total issued Eurobonds. In addition, the Group has negotiated with some of its customers the right to change its RUB tariffs should the exchange rate move by 5, 10 or 15%, however, the risk above the levels of these currency moves remains. Credit risk: The Group may be subject to credit risk due to its dependence on key customers and suppliers. The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. Debt, leverage and liquidity: The Group’s indebtedness or the enforcement of certain provisions of its financing arrangements could affect its business or growth prospects. Failure to promptly monitor and forecast compliance with loan covenants both at the Group and individual terminal levels may result in covenant breaches and technical defaults. The Group has been able to reduce its total debt level, as planned. In 2018 and 2019 the Group repurchased USD 192.5 million nominal value of 2022 and 2023 Eurobonds of which USD 69.5 million were refinanced via a new 5 year/60 month RUB bank loan. Debt reduction beyond minimum repayment requirements remains a management priority in 2020. If the Group is unable to access funds (liquidity) it may be unable to meet financial obligations when they fall due, or on an ongoing basis, to borrow funds in the market at an acceptable price to fund its commitments. Liquidity risk is carefully monitored, with regular forecasts prepared for the Group and its operating entities. The risk of liquidity shortfalls within the following 18–24 months has been significantly reduced via extensions of debt maturities through public debt issuances in 2016. The liquidity position is carefully monitored in case of further deterioration of financial performance. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Consolidated Financial Statements Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Table of Contents 01 Board of Directors and Other Officers Management Report Directors’ Responsibility Statement Consolidated Income Statement for the year ended 31 December 2019 Consolidated Statement of Comprehensive Income for the year ended 31 December 2019 Consolidated Balance Sheet as at 31 December 2019 Consolidated Statement of Changes in Equity for the year ended 31 December 2019 Consolidated Statement of Cash Flows for the year ended 31 December 2019 Notes to the Consolidated Financial Statements 1 2 3 4 5 6 7 8 9 General information Basis of preparation and summary of significant accounting policies Financial risk management Critical accounting estimates and judgements Segmental information Expenses by nature Other gains/(losses) — net Employee benefit expense Finance income/(costs) - net 10 Net foreign exchange gains/(losses) 11 12 Income tax expense Basic and diluted earnings per share 13 Dividend distribution 14 15 16 17 18 19 Property, plant and equipment Intangible assets Financial instruments by category Credit quality of financial assets Inventories Trade and other receivables 20 Cash and cash equivalents 21 Share capital, share premium 22 Borrowings 23 Lease liabilities and right-of-use assets 24 Derivative financial instruments 25 Deferred income tax liabilities 26 Trade and other payables 27 Assets held for sale 28 Joint ventures and non-controlling interests 29 Contingencies 30 Commitments 31 32 Related party transactions Events after the balance sheet date Independent Auditor’s Report 02 04 25 26 27 28 29 30 31 31 32 48 52 54 69 70 70 71 71 72 72 72 73 76 77 77 78 78 80 80 81 84 85 86 87 87 88 93 94 95 97 98 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Mr. Nicholas Charles Terry (resigned on 18 June 2019) Mr. George Yiallourides (resigned on 18 June 2019) Mr. Anton Chertkov (resigned on 11 November 2019) Board support The Company Secretary is available to advise all Directors to ensure compliance with the Board procedures. Also a procedure is in place to enable Directors, if they so wish, to seek independent professional advice at the Company’s expense. 03 | Company Secretary | Team Nominees Limited 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus Registered office 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus 02 Board of Directors and Other Officers | Board of Directors | Mr. Morten Henrick Engelstoft (appointed 31 October 2016) (Mr. Soren Jakobsen and Mr. Mogens Petersen are the alternates to Morten Henrick Engelstoft) Chairman of the Board of Directors, Non-Executive Director, Member of Remuneration and Nomination Committee Mr. Ivan Besedin (appointed 16 December 2019) (Ms. Alexandra Fomenko is the alternate to Mr. Ivan Besedin) Non-Executive Director Mrs. Britta Dalunde (appointed 12 May 2017) Senior Independent Non-Executive Director, Chairwoman of Audit and Risk Committee Ms. Alexandra Fomenko (appointed 18 June 2019) Non-Executive Director, Member of Audit and Risk and Nomination and Remuneration Committees Mr. Soren Jakobsen (appointed 02 March 2018) (Mr. Mogens Petersen and Mrs. Olga Gorbarenko are the alternates to Mr. Soren Jakobsen) Non-Executive Director, Member of Strategy Committee Mr. Shavkat Kary-Niyazov (appointed 18 June 2019) Non-Executive Director Mr. Demos Katsis (appointed 14 May 2018) Non-Executive Director Mrs. Inna Kuznetsova (appointed 01 January 2018) Independent Non-Executive Director, Chairwoman of Remuneration and Nomination Committee, Member of Audit and Risk Committee Mr. Lambros Papadopoulos (appointed 01 January 2018) Independent Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Mogens Petersen (appointed 18 June 2019) (Mr. Soren Jakobsen is the alternate to Mr. Mogens Petersen) Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Sergey Shishkarev (appointed 14 May 2018) (Ms. Alexandra Fomenko is the alternate to Mr. Sergey Shishkarev) Non-executive Director, Chairman of Strategy Committee Mrs. Iana Penkova Boyd (resigned on 19 April 2019) Mr. Michalakis Christofides (resigned on 18 June 2019) Mr. Alexander Iodchin (resigned on 18 June 2019) Mrs. Laura Michael (resigned on 18 June 2019) Mr. Stavros Pavlou (resigned on 18 June 2019) Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 04 Management Report Management Report (continued) 05 1. The Board of Directors presents its report together with the audited consolidated financial statements of Global Ports Investments Plc (hereafter also referred to as “GPI” or the “Company”) and its subsidiaries and joint ventures (hereafter collectively referred to as the “Group”) for the year ended 31 December 2019. The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (hereafter also referred as “IFRS”) as adopted by the European Union (“EU”) and the requirements of Cyprus Companies Law, Cap. 113. | Principal activities and nature of operations of the Group | 2. The principal activities of the Group are the operation of container and general cargo terminals in Russia and Finland. The Group offers its customers a wide range of services for their import and export logistics operations. There was a change in principal activities of the Group in current year as a result of sale of oil products terminal in Estonia. | Results | 14. Profit before income tax for the twelve-month period was USD 96.6 million compared to a Loss before income tax of USD 53.6 million in 2018. This was mainly driven by the depreciation of the Russian rouble in 2018, which resulted in a loss on revaluation of US dollar-denominated borrowings (from Group and non-Group entities) due to the Group’s Russian subsidiaries having the Russian rouble as their functional currency. 15. The Group’s capital expenditure in 2019 was USD 26.6 million. It was focused on planned maintenance projects, scheduled upgrades of existing container handling equipment and customer service improvement initiatives. 16. The Group generated USD 158.8 million* of Free Cash Flow, an increase of 18.9% compared to 2018. 17. The Group reduced Net Debt by USD 33.3 million* over the twelve-month period despite IFRS 16 impact of USD 24.9 million* and FX impact of USD 28.9 million*. If to adjust for this IFRS 16 effect, Net Debt decreased by USD 58.2 million* to USD 722.1 million*. The Group continues to prioritise deleveraging over dividend distribution. 3. The Group’s results for the year are set out on pages 26 and 27. 18. Net Debt to Adjusted EBITDA decreased from 3.6x* in 2018 to 3.3x* in 2019. Net Debt to Adjusted EBITDA adjusted for IFRS 16 | Changes in group structure | 4. 5. In April 2019 the Group completed the sale of its holding in 50% of AS Vopak E.O.S. and its subsidiaries, the Group’s oil products terminal in Estonia. In May 2019 the Group established “Atmosphere” charitable fund to support social and environmental initiatives in Nakhodka area in the Russian Far East. 6. There were no other material changes in the group structure. However the Board of Directors is regularly reviewing the Group structure and the possibilities to optimize it, i.e. in the second quarter of 2019 following the merger of the management teams of JSC Petrolesport and First Container Terminal Inc both terminals started to work as one unit from commercial and operational points of view, without being legally merged together and remaining the two separate legal entities. | Review of Developments, Position and Performance of the Group’s Business | 7. The Russian container market grew 4.5% in 2019 driven by the 6% growth of full container export and supported by 3.9% growth in full container import, resulting in total Russian container market throughput of 5.1 million TEU. 8. Outperforming the market, the Group’s Consolidated Marine Container Throughput increased 6.5% to 1,439 thousand TEU. 9. Consolidated Marine Bulk Throughput increased by 17.1% to 3.7 million tonnes driven by the growth in bulk cargoes at ULCT, which was partially offset by a decline in scrap metal at PLP following the introduction of state export quotas in the third quarter of 2019. was 3.2x* as of 31 December 2019. Certain non-IFRS financial measures and operational information above which is derived from the management accounts is marked with an asterisk {*}. Terms used above are defined as follows: Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance income/(costs)—net, depreciation of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/ (losses)—net and impairment of goodwill and property, plant and equipment and intangible assets. Net Debt (a non-IFRS financial measure) is defined as the sum of current borrowings, non-current borrowings, current and non- current lease liabilities (following adoption of IFRS 16) and swap derivatives less cash and cash equivalents and bank deposits with maturity over 90 days. Revenue per TEU is defined as the Global Ports Group’s Consolidated Container Revenue divided by total Consolidated Container Marine Throughput. Adjusted EBITDA Margin (a non-IFRS financial measure) is calculated as Adjusted EBITDA divided by revenue, expressed as a percentage. Consolidated Container Revenue is defined as revenue generated from containerised cargo services. Consolidated Non-Container Revenue is defined as a difference between total revenue and Consolidated Container Revenue. 10. Consolidated revenue increased by 5.3% to USD 361.9 million; excluding the impact of LT and VSC transportation services, like- for-like revenue grew by 4.0% driven by an increase in both container and non-container revenue. Consolidated Marine Bulk Throughput is defined as combined marine bulk throughput by consolidated terminals: PLP, VSC, FCT and ULCT. 11. Like-for-like Revenue per TEU decreased by 4.0% to USD 178.4*. 12. Gross profit increased 1.2% to USD 210.1 million. 13. Adjusted EBITDA increased by 4.4% to USD 226.9 million* mainly due to the growth in throughput and strict cost control. Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC, FCT and ULCT. Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchase of property, plant and equipment. Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings, current and non- current lease liabilities (following adoption of IFRS 16) and swap derivatives. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 06 Management Report (continued) | Future Developments of the Group | 19. The Board of Directors does not expect any significant changes in the activities of the Group in the foreseeable future. | Risk Management Process, Principal Risks and Uncertainties | 20. GPI is exposed to a variety of risks and opportunities that can have commercial, financial, operational and compliance impacts on its business performance, reputation and licence to operate. The Board recognises that creating shareholder value involves the acceptance of risk. Effective management of risk is therefore critical to achieving the corporate objective of delivering long-term growth and added value to our shareholders. 21. Global Ports bases its risk management activities on a series of well-defined risk management principles, derived from experience, best practice, and corporate governance regimes. The Group’s enterprise risk management processes (ERM) is designed to identify, assess, respond, monitor and, where possible, mitigate or eliminate threats to the business caused by changes in the business, financial, regulatory and operating environment. 22. The Board has overall oversight responsibility for GPI’s risk management and for the establishment of the framework of prudent and effective controls. As such it systematically monitors and assesses the risks attributable to the Group’s performance and delivery of the GPI’s strategy. Where a risk has been identified and assessed, the Group selects the most appropriate risk measure available in order to reduce the likelihood of its occurrence and mitigate any potential adverse impact. 23. The Board delegates to the Chief Executive Officer of LLC Global Ports Management responsibility for the effective implementation and maintenance of the risk management system. Day-to-day responsibility for risk management lies with the management team. The Audit and Risk Committee is authorized by the Board to monitor, review and report on the organization, functionality and effectiveness of the Group’s ERM system. 24. Global Ports is exposed to a variety of risks which are listed below. The order in which these risks are presented is not intended to be an indication of the probability of their occurrence or the magnitude of their potential effects. 25. Not all of these risks are within the Group’s control, and the list cannot be considered to be exhaustive, as other risks and uncertainties may emerge in a changing external and internal environment that could have a material adverse effect on the Group’s ability to achieve its business objectives and deliver its overall strategy. 26. Further information on our risk management system, including a detailed description of identified risk factors is contained in the notes to the Financial Statements attached to this report. 27. The Group’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the consolidated financial statements. 28. The Group’s contingencies are disclosed in Note 29 to the consolidated financial statements. Management Report (continued) 07 Risk factor Strategic risks Market conditions: Global Ports’ operations are dependent on the global macroeconomic environment and resulting trade flows, including in particular container volumes. Container market throughput is closely correlated to the volume of imported goods, which in turn is driven by domestic consumer demand, and influenced by RUB currency fluctuations against USD/Euro, and exported goods, which in their turn correlate with the Russian rouble exchange rate fluctuations and global commodity markets` trends. The Group remains exposed to the risk of contraction in the Russian and world economy which, if it were to occur, could further dampen consumer demand and lead to a deterioration in the container market which could have a materially adverse impact on the Group. Competition: Barriers to entry are typically high in the container terminal industry due to the capital-intensive nature of the business. However, challenging market trading conditions mean that competition from other container terminals continues to be a significant factor. Further consolidation between container terminal operators and container shipping companies, the creation of new strategic alliances, the introduction of new/upgraded capacity and carrier consolidation could result in greater price competition, lower utilisation, and a potential deterioration in profitability. Strategic international investors may develop or acquire stakes in existing competitor Russian container terminals, which could bring new expertise into the market and divert clients and cargoes away from the Group. Given the historically high margins in the Russian container handling industry, this trend may continue. Risk management approach The Group has responded to the volatility of throughput in the container market by: ޭ Focusing on quality and value-driven services (getting closer to the customer); ޭ Greater focus on balancing export and import container flows; ޭ Offering operational flexibility to all clients; ޭ Effective cost containment; ޭ Adopting new revenue streams and attracting new cargoes. The Group actively monitors the competitive landscape and adjusts its strategy accordingly, i.e. the Group prioritises building close long-term relationships with its leading customers (locally, regionally and with headquarters) based on a global approach to account management and contractual agreements incentivizing growth of throughput and/or share of business. The Group’s focus on service quality is a key differentiator from its competition and the Group believes this is one of its key competitive advantages. The Group has made and continues to make long-term investments in its terminals and modern equipment to ensure competitive levels of service. It operates on a long-term horizon and its terminals represent core infrastructure in Russia that will continue to operate for the next 10-20 years or beyond. Because the Group possesses a healthy land bank it has flexibility to balance capital expenditure to at minimum maintain capacity at the existing level and support its efficient development should markets require it. The Group and its terminals have developed long-term operating masterplans that enable it to react quickly in the case of additional market demands being placed on its facilities’ infrastructure and equipment. The Group’s healthy cash flow generation and decreasing leverage allows financial flexibility in terms of timing and size of required capital expenditure program. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 08 Management Report (continued) Management Report (continued) 09 Risk factor Risk management approach Political, economic and social stability: Instability in the Russian economy as well as social and political instability could create an uncertain operating environment and affect the Group’s ability to sell its services due to significant economic, political, legal and legislative risks. Certain government policies or the selective and arbitrary enforcement of such policies could make it more difficult for the Group to compete effectively and/or impact its profitability. The Group may also be adversely affected by US, EU and other jurisdictions sanctions against Russian business/companies whose measures have had and may continue to have an adverse effect on the Russian economy and demand for commodities. Ongoing sanctions could also adversely impact the Group’s ability to obtain financing on favourable terms and to deal with certain persons and entities in Russia or in other countries. In light of the macroeconomic challenges faced by the ports industry in recent years, the Group has focused on improving its resilience, in particular its ability to withstand short-term economic fluctuations in Russia, as well as the wider regional and global environment. This has included a strong focus on cost containment measures, and on strengthening its financial position by refinancing all its debt switching to longer maturities at fixed rates. In addition, the Group has developed its growth strategy to embrace exports and new revenue streams to counteract the impact of any fall in consumer sentiment or any macro-economic downturn. The Group has strengthened its system to monitor compliance with restrictions posed by international sanctions and fend off the risk of secondary sanctions. The Group continues to maintain an international base of shareholders, bondholders and business partners. The Group is not aware of any specific sanctions’ risks related to its ownership or operations. Coronavirus (COVID-19): The company’s outlook for 2020 may be impacted by the Coronavirus (COVID-19) outbreak in China, which has significantly lowered visibility on what to expect in 2020. The Management is closely monitoring the situation with the outbreak of Coronavirus (COVID-19) and is ready to act depending on the development of the situation. Operational risks Leases of terminal land: The Group leases a significant amount of the land and quays required to operate its terminals from government agencies and to a lesser extent from private entities. Any revision or alteration to the terms of these leases or the termination of these leases, or changes to the underlying property rights under these leases, could adversely affect the Group’s business. The Group believes it has a stable situation at present regarding its land leases and its terminals have been in operation for a number of years. The Group owns the freehold on 66% of the total land of its terminals and 70% of the land of its container and inland terminals in Russia. The remainder is held under short and long-term leases routinely renewable at immaterial costs. Customer Profile and Concentration: The Group is dependent on a relatively limited number of major customers (shipping lines, freight forwarders etc.) for a significant portion of its business. These customers are affected by conditions in their market sector which can result in contract changes and renegotiations as well as spending constraints, and this is further exacerbated by carrier consolidation. The Group conducts extensive and regular dialogue with key customers and actively monitors changes that might affect our customers’ demand for our services. The Group has a clear strategy to reduce its dependence on its major customers, by targeting new customers, increasing the share of business from other existing global customers, and new cargo segments. The Group is also relying on the contribution from non-container revenues through building its presence in marine bulk cargoes like coal and scrap metal (share of non-container revenue was 26% and 26% in 2018 and 2019 respectively). Risk factor Reliance on third parties: The Group is dependent on the performance of services by third parties outside its control, including all those other participants in the logistics chain, such as customs inspectors, supervisory authorities, railway and others, and the performance of security procedures carried out at other port facilities and by its shipping line customers. Tariff regulation: Tariffs for certain services at certain of the Group’s terminals have,in the past, been regulated by the Russian Federal Antimonopoly Service (FAS). As a result, the tariffs charged for such services were, and may potentially in the future be, subject to a maximum tariff rate and/or fixed in Russian roubles as PLP, VSC, and FCT, like many other Russian seaport operators, are classified as natural monopolies under Russian law. Human resources management: The Group’s competitive position and prospects depend on the expertise and experience of its key management team and its ability to continue to attract, retain and motivate qualified personnel. Industrial action or adverse labour relations could disrupt the Group’s operating activities and have an adverse effect on performance results. Risk management approach The Group strives to maintain a continuous dialogue with third parties across the supply chain. In addition, its geographic diversification provides it with some flexibility in its logistics, should bottlenecks develop in one area. Changes to tariff legislation (as of 14 August 2018) now require all tariffs in the new contracts to be entered into after this date to be set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the new legislation. The Group continues to monitor for any legislative proposals and regulatory actions that could lead to changes to the existing tariff regulations. It seeks a proactive dialogue with the relevant Russian federal authorities. It believes it is as well placed as any market participant to adapt to any future changes in tariff regulation. The Group annually reviews labour market and aligns salaries and benefits to employees at all levels to foster and retain skilled labour. The Group invests in the professional development of its staff, including international best practices implementation and internal development/ training programmes. The Group engages in socially responsible business practices and support of local communities. The Group strives to maintain a positive working relationship with labour unions at its facilities. Moreover, it pursues overall labour policies designed to provide a salary and benefit package in line with the expectations of our employees. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 10 Management Report (continued) Management Report (continued) 11 Risk factor Risk management approach Health, safety, security and environment: Risk factor Changes in regulations: Risk management approach Accidents involving the handling of hazardous materials at the Group’s terminals could disrupt its business and operations and/or subject the Group to environmental and other liabilities. The Group has implemented clear environmental and safety policies designed around international best practices and benchmark using such measures as GPI Global Minimum Requirements. The risk of safety incidents is inherent in the Group’s businesses. The Group’s operations could be adversely affected by terrorist attacks, natural disasters or other catastrophic events beyond its control. Safety is one of the Group’s top priorities. A safety strategy and annual action plan have been developed, to build a sustainable safety culture across the whole Group. The detailed roadmap is designed to ensure sustainable implementation of safety culture over the medium term. Information technology and security: The Group’s container terminals rely on IT and technology systems to keep their operations running efficiently, prevent disruptions to logistic supply chains, and monitor and control all aspects of their operations. Any IT glitches or incidents can create major disruptions for complex logistic supply chains. Any prolonged failure or disruption of these IT systems, whether a result of a human error, a deliberate data breach or an external cyber threat could create major disruptions in terminal operations. This could dramatically affect the Group’s ability to render its services to customers, leading to reputational damage, disruption to business operations and an inability to meet its contractual obligations. Similarly, GPI works with all its stakeholders to maintain high levels of security around port facilities and vessel operations to minimise the risk of terrorist attack. The Group has centralised its IT function in recent years which is an important step in ensuring both the efficiency and consistency of the Group’s security protocols implementation. We are continuing to align our IT strategy with the business objectives. We regularly review, update and evaluate all software, applications, systems, infrastructure and security. All software and systems are upgraded or patched regularly to ensure that we minimise vulnerabilities. Each of our business units has an IT disaster recovery plan. Our security policies and infrastructure tools are updated or replaced regularly to keep pace with changing and growing threats. Our security infrastructure is updated regularly and employs multiple layers of defence. Connectivity to our partners’ systems is controlled, monitored and logged. Regulatory and compliance risks Regulatory compliance: The Group is subject to a wide variety of regulations, standards and requirements and may face substantial liability if it fails to comply with existing regulations applicable to its businesses. The Group strives to be in compliance at all times with all regulations governing its activities and devotes considerable management and financial resources to ensure compliance. The Group’s terminal operations are subject to extensive laws and regulations governing, among other things, the loading, unloading and storage of hazardous materials, environmental protection and health and safety. Changes to existing regulations or the introduction of new regulations, procedures or licensing requirements are beyond the Group’s control and may be influenced by political or commercial considerations not aligned with the Group’s interests. Any expansion of the scope of the regulations governing the Group’s environmental obligations, in particular, would likely involve substantial additional costs, including costs relating to maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of its ability to address environmental incidents or external threats. Conflict of interests: The Group maintains a constructive dialogue with relevant federal, regional and local authorities regarding existing and planned regulations. The Group does not have the power to block any or all regulations it may judge to be harmful, but this dialogue should ensure it has time to react to changes in the regulatory environment. The Group’s controlling beneficial shareholders may have interests that conflict with those of the holders of the GDRs or notes. The major implications of this risk are that (i) co-controlling shareholders pursue other businesses not related to GPI and hence may not be deeply involved with developing GPI and (ii) one of the major shareholders is also a major customer of the Group. The Group’s corporate governance system is designed to maximise the company’s value for all shareholders and ensure the interests of all stakeholders are taken into account. The Group’s LSE listing ensures our compliance with the highest international standards. In addition, the Board consists of highly experienced individuals including strong independent directors. Legal and tax risks: Adverse determination of pending and potential legal actions involving the Group’s subsidiaries could have an adverse effect on the Group’s business, revenues and cash flows and the price of the GDRs. Weaknesses relating to the Russian legal and tax system and appropriate Russian law create an uncertain environment for investment and business activity and legislation may not adequately protect against expropriation and nationalisation. The lack of independence of certain members of the judiciary, the difficulty of enforcing court decisions and governmental discretion claims could prevent the Group from obtaining effective redress in court proceedings. The Group maintains a strong and professional legal function designed to monitor legal risks, avoid legal actions where possible and carefully oversee any legal actions that may occur. The Group performs ongoing monitoring of changes in relevant tax legislation and court practice in the countries where its companies are located and develops the Group’s legal and tax position accordingly. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 12 Management Report (continued) Management Report (continued) 13 Risk factor Financial risks FOREX risks: The Group is subject to foreign-exchange risk arising from various currency exposures, primarily the Russian rouble and the US dollar. Foreign-exchange risk is the risk to profits and cash flows of the Group arising from movement of foreign-exchange rates due to inability to timely plan for and appropriately react to fluctuations in foreign- exchange rates. Risk also arises from revaluation of assets and liabilities denominated in foreign currency. Risk management approach As of 2019, the biggest proportion of the Group’s revenue is denominated in Russian roubles as the Group has switched the currency of its tariffs to RUB, and part of the Group’s debt is denominated in USD. Most of the Group’s operating expenses, on the other hand are and will continue to be denominated and settled in Russian roubles. In order to mitigate the possibility of foreign exchange risks arising from a significant mismatch between the currency of revenue and the currency of debt (‘open FX position’), the Group began converting its existing USD debt into RUB, the currency of revenue. In 2018, the Group cancelled cross-currency swaps on the RUB denominated bonds issued by the First Container Terminal Inc. These swaps were converting RUB debt into USD. In order to further mitigate FOREX risk between June and September 2019 the Group put in place forward hedges and currency options totalling USD231.4 million to convert part of USD denominated debt into RUB. During 2018-2019 the Group also repurchased its Eurobonds, including USD69.5 million of Eurobonds due to mature in 2022 which were replaced at the end of 2019 with a new 5 year/60 months RUB bank loan. This action has further reduced FOREX risk converting USD debt into RUB debt. Currently the Group owns ~27% of the total issued Eurobonds. In addition the Group has negotiated with some of its customers the right to change its Russian rouble tariffs should the exchange rate move by 5, 10 or 15%, however the risk above the levels of these currency moves remains. Credit risk: The Group may be subject to credit risk due to its dependence on key customers and suppliers. The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. Debt, leverage and liquidity: The Group’s indebtedness or the enforcement of certain provisions of its financing arrangements could affect its business or growth prospects. Failure to promptly monitor and forecast compliance with loan covenants both at the Group and individual terminal levels may result in covenant breaches and technical defaults. The Group has been able to reduce its total debt level, as planned. In 2018 and 2019 the Group repurchased USD192.5 million nominal value of 2022 and 2023 Eurobonds of which USD69.5 million were refinanced via a new 5 year/60 month RUB bank loan. Debt reduction beyond minimum repayment requirements remains a management priority in 2020. If the Group is unable to access funds (liquidity) it may be unable to meet financial obligations when they fall due, or on an ongoing basis, to borrow funds in the market at an acceptable price to fund its commitments. Liquidity risk is carefully monitored, with regular forecasts prepared for the Group and its operating entities. The risk of liquidity shortfalls within the following 18-24 months has been significantly reduced via extensions of debt maturities through public debt issuances in 2016. The liquidity position is carefully monitored in case of further deterioration of financial performance. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. Risk factor Credit risk: Risk management approach The Group may be subject to credit risk due to its dependence on key customers and suppliers. The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. Debt, leverage and liquidity: The Group’s indebtedness or the enforcement of certain provisions of its financing arrangements could affect its business or growth prospects. Failure to promptly monitor and forecast compliance with loan covenants both at the Group and individual terminal levels may result in covenant breaches and technical defaults. If the Group is unable to access funds (liquidity) it may be unable to meet financial obligations when they fall due, or on an ongoing basis, to borrow funds in the market at an acceptable price to fund its commitments. The Group has been able to reduce its total debt level, as planned. In 2018 and 2019 the Group repurchased USD192.5 million nominal value of 2022 and 2023 Eurobonds of which USD69.5 million were refinanced via a new 5 year/60 month RUB bank loan. Debt reduction beyond minimum repayment requirements remains a management priority in 2020. Liquidity risk is carefully monitored, with regular forecasts prepared for the Group and its operating entities. The risk of liquidity shortfalls within the following 18-24 months has been significantly reduced via extensions of debt maturities through public debt issuances in 2016. The liquidity position is carefully monitored in case of further deterioration of financial performance. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. | Internal control and risk management systems in relation to the financial reporting process  | 29. The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and to ensure compliance with applicable laws and regulations. 30. Financial reporting and supervision are based on approved budgets and on monthly performance reporting.  31. The Audit and Risk Committee of the Board of directors of the Company reviews certain high-risk areas at least once a year, including the following: ޭ Significant accounting estimates; ޭ Material changes to the accounting policies; 32. Reporting from various Group entities to the centralised unit is supervised on an ongoing basis and procedures have been established for control and checking of such reporting. Procedures have also been set up to ensure that any errors are communicated to, and corrected by, the reporting entities. The internal controls are subject to ongoing reviews, including in connection with the regular control inspections at subsidiaries conducted by the central unit. The results from these reviews are submitted to the executive management, the Audit and Risk Committee and Board of Directors. The internal financial reporting ensures an effective process to monitor the Company’s financial results, making it possible to identify and correct any errors or omissions. The monthly financial reporting from the respective entities is analysed and monitored by the centralised department in order to assess the financial and operating performance as well as to identify any weaknesses in the internal reporting, failures to comply with procedures and the Group accounting policies. The Audit and Risk Committee follows up to ensure that any internal control weaknesses are mitigated and that any errors or omissions in the financial statements identified and reported by the auditors are corrected, including controls or procedures implemented to prevent such errors or omissions.  Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 14 Management Report (continued) Management Report (continued) 15 | Use of financial instruments by the Group | | Directors’ Interests | 33. The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value 43. The interests in the share capital of Global Ports Investments Plc, both direct and indirect, of those who were Directors as at interest rate risk), credit risk and liquidity risk. For a description of the Group’s financial risk management objectives and policies and a summary of the Group’s exposure to financial risks please refer to Note 3 of the consolidated financial statements. 31 December 2019 and 31 December 2018 are shown below: Name Type of holding | The Role of the Board of Directors | 34. The Company is governed by its Board of Directors (also referred as “the Board”) which is collectively responsible to the shareholders for the short- and long-term sustainable success of the Group, generating value to shareholders and contributing to wider society as a whole. Its responsibility is to promote adherence to best-in-class corporate governance. 35. The Board of Directors’ role is to provide entrepreneurial leadership to the Group through establishing the Group’s purpose, values and strategy, setting out the corporate governance standards, satisfying itself that these and its culture are aligned, ensuring that the necessary financial and human resources are in place for the Group to meet its objectives and reviewing management performance. The Group seeks directors who bring strong track records and a deep understanding of the industry. The Board sets the Group’s values and standards and ensures all obligations to shareholders are understood and met. The Board ensures the Group establishes a framework of prudent and effective controls, which enables risk to be assessed and managed and maintains a sound system of internal control, corporate compliance and enterprise risk management to safeguard the Group’s assets and shareholders’ investments in the Group. 36. The roles and responsibilities of the Chairman, Senior Independent Director, board and committees’ members are set out in writing in the Terms of Reference of the Board and committees. The latest version of the Terms of Reference of the Board of Directors was approved by the shareholders on 18 June 2019. It is available on the Company`s website. | Members of the Board of Directors | Britta Dalunde Through holding of the GDRs Sergey Shishkarev Through shareholding in LLC Management Company “Delo” and other related entities Shares held at 31 December 2019 Shares held at 31 December 2018 7,000 GDRs representing 21,000 ordinary shares 7,000 GDRs representing 21,000 ordinary shares 88,769,817 ordinary shares 126,814,024 ordinary shares 34,605,183 ordinary non- voting shares 49,435,976 ordinary non- voting shares | Chairman of the Board of Directors | 44. Mr. Morten Engelstoft was the Chairman of the Board throughout the year 2019. 45. The role of the Chairman of the Board of Directors is to ensure that Board meetings are held as and when necessary, lead the directors, ensure their effectiveness and review the agenda of Board meetings. The Chairman together with the Secretary of the Board review Board materials before they are presented to the Board and ensure that Board members are provided with accurate, timely and clear information. The members of the management team who have prepared the papers, or who can provide additional insights into the issues being discussed, are invited to present papers or attend the Board meeting at the relevant time. Board members regularly hold meetings with the Group’s management to discuss their work and evaluate their performance. 37. The Board of Directors leads the process in making new Board member appointments and makes recommendations on 46. The Chairman monitors communications and relations between the Group and its shareholders, the Board and management, and appointments to shareholders. In accordance with the Terms of Reference of the Board, all Directors are subject to election by shareholders at the first Annual General Meeting after their appointment, and to re-election at intervals of no more than one year. Any term beyond six years for a Non-Executive Director is subject to particularly rigorous review, and takes into account the need to refresh the Board on a regular basis. 38. The Board currently has 11 members and they were appointed as shown on pages 2 and 3. 39. On 19 April 2019 Ms. Iana Penkova Boyd resigned from the Board. On 18 June 2019 Mr. Michalakis Christofides, Mr. Alexander Iodchin, Ms. Laoura Michael, Mr. Stavros Pavlou, Mr. Nicholas Charles Terry and Mr. George Yiallourides resigned from the Board. Mr. Mogens Petersen, Ms. Alexandra Fomenko and Mr. Shavkat Kary Niyazov were appointed on the same day. Mr. Anton Chertkov resigned from the Board on 11 November 2019 and Mr. Ivan Besedin replaced him on 16 December 2019. All new Board members were reviewed and recommended for appointment by Nomination and Remuneration Committee. 40. All other Directors were members of the Board throughout the year ended 31 December 2019, including the independent directors: Mrs. Britta Dalunde, Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos. 41. Mr. Morten Henrick Engelstoft was elected the Chairman of the Board of Directors on 26 February 2018 and Mrs. Britta Dalunde was elected the Senior Independent Director on 31 May 2018, both re-elected on 18 June 2019. There were no significant changes in the responsibilities of the Directors during 2019 except for establishment and membership in the committees as described below. independent and non-independent directors, with a view to encouraging dialogue and constructive relations. The Chairman should demonstrate objective judgement and promote a culture of openness and debate. In addition, the Chairman facilitates constructive board relations and the effective contribution of all non-executive directors. 47. The Group separates the positions of the chairman and CEO to ensure an appropriate segregation of roles and duties. | Non-executive and Independent Directors | 48. All of the Board members are non-executive directors. 49. Mrs. Britta Dalunde, Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos are independent directors, and have no relationship with the Group, its related companies or their officers. This means they can exercise objective judgment on corporate affairs independently from management. 50. Although all directors have an equal responsibility for the Group’s operations, the role of the independent non-executive directors is particularly important in ensuring that the management’s strategies are constructively challenged. As well as ensuring the Group’s strategies are fully discussed and examined, they must take into account the long-term interests, not only of the major shareholders, but also of bondholders, employees, customers, suppliers and the communities in which the Group conducts its business. 42. There is no provision in the Company’s Articles of Association for retirement of Directors by rotation. However, in accordance with the Terms of Reference of the Board of Directors and the resolutions adopted by the Shareholders at the Annual General Meeting held on 18 June 2019 and Extraordinary General Meeting held on 16 December 2019 all present directors are subject to re-election at the next Annual General Meeting of the Shareholders of the Company, which will take place in 2020. 51. Mrs. Britta Dalunde was appointed as the Senior Independent Director on 31 May 2018. The role of Senior Independent Director is to provide a sounding board for the Chairman and serve as an intermediary for the other directors and shareholders. Led by the senior independent director, the non-executive directors should meet without the Chairman present at least annually to appraise the Chairman’s performance, and on other occasions as necessary. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 16 Management Report (continued) | The Board Committees | 52. Since December 2008 the Board of Directors established the operation of three committees: an Audit and Risk Committee, a Nomination Committee and a Remuneration Committee. The composition of the committees was changed by the Board of Directors in June 2019: Nomination Committee and Remuneration Committee were merged into one and a new Strategy Committee was established. | The Audit and Risk Committee | 53. The Audit and Risk Committee comprises of five Non-Executive Directors, three of whom are independent, and meets at least four times a year. The Audit and Risk Committee is chaired by Mrs. Britta Dalunde (an Independent Non-Executive Director) and its other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Lambros Papadopoulos (an Independent Non-Executive Director appointed as of 01 January 2018), Ms. Alexandra Fomenko (appointed as of 18 June 2019) and Mr. Mogens Petersen (appointed as of 18 June 2019). Mr. Soren Jakobsen and Mr. George Yiallourides resigned from the Audit and Risk Committee on 18 June 2019. 54. The Committee is responsible for: ޭ monitoring the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance, and reviewing significant financial reporting judgements contained in them; ޭ providing advice (where requested by the board) on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the company’s position and performance, business model and strategy; ޭ reviewing the company’s internal financial controls and internal control and risk management systems; ޭ monitoring and reviewing the effectiveness of the company’s internal audit function; ޭ making recommendations to the board, about the appointment, reappointment and removal of the external auditor, and giving the recommendations in relation to remuneration and terms of engagement of the external auditor for audit and non-audit services; ޭ reviewing and monitoring the external auditor’s independence and objectivity; ޭ reviewing the effectiveness of the external audit process; ޭ developing and implementing policy on the engagement of the external auditor to supply non-audit services; ޭ and reporting to the Board on how it has discharged its responsibilities. Management Report (continued) 17 f. Review of internal control framework and its deficiencies, consideration of management proposals on its further development and improvement. The Committee concentrated on the integration of automatic controls into the ERP system and on further development and integration of authority matrix framework into day-to-day processes; g. Consideration of various reports from the management; h. Meetings with external auditors to discuss the matters related to the audit work done by them and any issues arising from their audits; i. Meetings with internal auditors to discuss the results of their audits and ad-hoc reviews, working plans and progress in execution of internal audit recommendations; j. Consideration and approval of the engagement of external auditors for rendering of non-audit services. In each particular case the Committee was assessing the impact of non-audit services on the independence and objectivity of the external auditor. The Committee reviewed the scope of services on compliance with the list of permitted non-audit services, the potential impact of the services on the audit work and financial statements and discussed with the external auditor how their internal compliance procedures were performed and whether all internal compliance requirements were met. The Committee monitors the share of non-audit service in relation to its compliance with the standards. k. Assessment of efficiency of external auditor by discussing the audit approach and audit plan, monitoring of compliance with the plan, receiving the feedback from the members of the management team, involved in the audit process, assessing the internal resources allocated by the external auditor, the key risks to the audit process and their mitigation measures, review of the auditor`s management letter, consideration of the level and quality of communication between the external auditor and Committee during the audit process; l. Conducting a tender for external audit services for the reporting period ending 31 December 2021 and onwards. The Committee members performed a tender and made their recommendations to the Board, which approved the results of the tender. The winner of the tender, KPMG Ltd, will be offered for appointment by the shareholders; m. Discussion of the term of tenure of the current audit partner – Mr. Tasos Nolas and making the recommendations to extend it from six to seven years; n. Review of IT security setup, corporate social responsibility report, legal matters report, differences between Russian GAAP and IFRS, site visits to the Group terminals located in Saint-Petersburg area and Finland, discussion with the Board of the results of these site-visits; o. Discussion of the training requirements of the Committee members and conducting Corporate Governance Masterclass for the Board members and senior management. | The Nomination and Remuneration Committee | 55. In 2019 the Audit and Risk Committee met 13 times (2018: 17) to review and discuss inter alia the following significant issues and Remuneration Committee in order to simplify the work of the committees and Board members. 56. The Nomination and Remuneration Committee was established in June 2019 following the merger of Nomination Committee and matters in addition and on top of those listed above: a. Consideration and approval of Policy on assessment of independence and objectivity of the external auditor; b. Review of the public materials containing financial information in relation to compliance with the financial statements, the disclosure and transparency requirements and Board`s view on mid and long-term development of the Group; c. Discussion of the level of clarity and completeness of disclosures in financial statements with the management and external auditors and making the recommendations; d. Consideration and approval of audit schedules and review of the impairment models and the impact of the new IFRS standards on the Company`s financial statements. The Committee`s task was to align the impairment models with the short-, mid- and long-term forecasts and to understand what impact the new standards would have on the financial statements and Group`s compliance with the covenants; e. Review of the major risks. The Committee discussed the approach to establishment and monitoring of the risk appetite of the Group and recommended the risk appetite statement to be approved by the Board in 2020; 57. The Nomination and Remuneration Committee as of the date of this report comprises three Directors, one of whom is independent. The Committee meets at least once each year. Currently the Nomination and Remuneration Committee is chaired by Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as the Chairwoman of the merged Nomination and Remuneration Committee as of 18 June 2019, Chairwoman of both former committees as of 14 May 2018). The other members are Mr. Morten Henrick Engelstoft (appointed on 18 June 2019 to the new Committee and member of the former committees since 2016) and Ms. Alexandra Fomenko (appointed as a member of the committee on 11 November 2019). Mr. Soren Jakobsen and Mr. Stavros Pavlou resigned from their positions as members of the former committees on 18 June 2019. Mr. Anton Chertkov stepped down from the Board and the merged committee on 11 November 2019. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 18 Management Report (continued) Management Report (continued) 19 58. The Committee is a committee of the Board of Directors which assists the Board in discharging its corporate governance 65. In 2019 the Board met to discuss and approve important business decisions: responsibilities in relation to nomination, appointment and remuneration of all Directors and the Chairman / Chairwoman of the Board of Directors and of the senior executive management of the Company and its subsidiaries and joint venture companies, and oversee the development of a diverse pipeline for succession as well as to evaluate the performance of the Board of Directors, its committees, the Chairman / Chairwoman of the Board of Directors and individual directors. The main objective of the Committee is to determine the framework and policy for the nomination and remuneration of Independent Non-Executive Directors, Executive Directors, the Chairman / Chairwoman of the Board of Directors, and senior company executives ensuring the consistency with the company talent strategy, remuneration policy and market trends. 59. In 2019 the Nomination and Remuneration Committee met 15 times (11 times for Nomination and 13 times for Remuneration in 2018) to discuss and recommend to the Board the appointment of Key Management of the Group companies, to recommend the Directors the candidates to the Board, to discuss and recommend the composition of the Board Committees and to review and amend annual bonus regulations for the management. The Nomination and Remuneration Committee met also to discuss and recommend to the Board the Group the remuneration of the new Board members and the Key Management of the Group. In determining the level of remuneration of the key senior management of the Group the Committee referred to the level of skills and expertise, the position and scope of work and responsibilities as well as to the market levels for similar positions. The recommendations were approved by the Board in full. The Committee did not engage any external remuneration consultants. In the year 2019 one of the key focuses of the work of Nomination and Remuneration Committee was the succession planning and refreshment of the composition of the Board and the Key Management and Board performance evaluation. In the year 2020 one of the focus areas will be the talent management. | The Strategy Committee | 60. The Strategy Committee was established in June 2019. As per its terms of reference, the Committee meets at least once each year. The Strategy Committee as of the date of this report comprises four Directors, one of whom is independent. Currently the Strategy Committee is chaired by Mr. Sergey Shishkarev (appointed as of 18 June 2019). The other members are Mr. Mogens Petersen, Mr. Soren Jakobsen and Mr. Lambros Papadopoulos (an Independent Non-Executive Director) and Mr Anton Chertkov, all appointed as of 18 June 2019. Mr. Anton Chertkov stepped down from the Board and resigned from his position as a member of the Strategy Committee in November 2019. 61. The Committee is a committee of the Board of Directors which assists the Board of Directors in discharging its corporate governance responsibilities in relation to the setting and oversight of the strategy and strategic initiatives of the Company and its subsidiaries and joint venture companies (the Group) to be approved by the Board of Directors from time to time, and providing oversight over the implementation and development of those by executive management. The Committee has been formed to foster a cooperative, interactive strategic planning process between the Board and executive management. 62. In 2019 the Strategy Committee met 5 times to discuss the schedule and agenda of the meetings of the Committee, to recommend to the Board of Directors different investment proposals, to consider and to give the recommendations to the Board regarding the functional strategies, the revised targets of the Corporate Strategy, and also to consider and to give the confirmation to the Board of Directors that the Group Consolidated budget 2020 corresponds to the Corporate Strategy. | Board Performance | 63. The Board meets at least five times a year. Fixed meetings are scheduled at the start of each year. Ad hoc meetings are called when there are pressing matters requiring the Board’s consideration and decision in between the scheduled meetings. Starting from 2020 the Board agreed the schedule of ad-hoc meetings on a monthly basis. 64. In 2019 the Board met formally 18 (2018: 21) times to review current performance and to discuss and approve important business decisions. a. FY2018 financial statements, 1H2019 interim financial statements and Annual Report; b. Review of segments financial and operational performance; c. Consideration of 2020 financial budget, major risks and uncertainties, commercial strategy, corporate social responsibility matters, internal control framework; d. Changes in Group management and the Board of Directors; e. Revision of various group wide policies and regulations, namely Authority Matrix and Terms of Reference of the Board and Committees; f. Consideration of various compliance matters; g. Consideration and approval of the revision of external and internal financing arrangements and organizational restructurings; h. Consideration and approval of major capital expenditures and investment projects; and i. Consideration and approval of various resolutions related to the operations of the Company`s subsidiaries and joint ventures. 66. The number of Board and Board Committee meetings held in the year 2019 and the attendance of directors during these meetings was as follows: Board of Directors Nomination and Remuneration Committee* Strategy Committee Audit and Risk Committee Iana Boyd Anton Chertkov Michalakis Christofides Britta Dalunde Morten Henrick Engelstoft Alexander Iodchin Soren Jakobsen Demos Katsis Inna Kuznetsova Laura Michael Lambros Papadopoulos Stavros Pavlou Sergey Shishkarev Nicholas Charles Terry George Yiallourides Alexandra Fomenko Shavkat Kary Niyazov Mogens Petersen Ivan Besedin A 4 15 9 17 17 9 18 18 18 9 18 4 18 9 9 9 9 9 - B 5 15 9 18 18 9 18 18 18 9 18 9 18 9 9 9 9 9 - A - 13 - - 15 - 10 - 15 - - 9 - - - 2 - - - B - 13 - - 15 - 10 - 15 - - 10 - - - 2 - - - A - 3 - - - - 5 - - - 5 - 5 - - - - 5 - B - 3 - - - - 5 - - - 5 - 5 - - - - 5 - A - - - 13 - - 5 - 12 - 13 - - - 5 8 - 8 - B - - - 13 - - 5 - 13 - 13 - - - 5 8 - 8 - A = Number of meetings attended B = Number of meetings eligible to attend during the year * These meetings relate to the meetings of former separate Nomination and former Remuneration committees and also to the meetings of the new merged Nomination and Remuneration Committee. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 20 Management Report (continued) 67. The operation of the Board, its Committees and individual Directors is subject to regular evaluation. The evaluation of the Board and individual Directors’ performance can be conducted through self-assessment, cross-assessment or by an external third party. The Non-Executive Directors, led by the Senior Independent Director, are responsible for the performance evaluation of the Chairman of the Board. The Board did not engage any external advisors for evaluation of its performance in the years 2018 and 2019. 68. In 2019 the Board conducted the self-evaluation. | Board Diversity | 69. The Company does not have a formal Board diversity policy with regard to matters such as age, gender or educational and professional backgrounds, but following the best practice while making the new appointments and considering the current composition of the Board of Directors, these aspects are taken into account. 70. As of the date of publication of these financial statements the Board has 3 females representing 27% from the total number of directors. The average age of directors is 52 years ranging from 31 to 66 years. The Board has a necessary balance of skills and expertise to run the Company and the Group. The Board members have the following educational backgrounds: port and transportation industry, accounting and financial, banking sector and legal. There are 6 nationalities present in the Board. The Board members reside in 7 countries. | Board and Management Remuneration | Management Report (continued) | Company Secretary | 21 81. The Group maintains a company secretary, who is responsible for safeguarding the rights and interests of shareholders, including the establishment of effective and transparent arrangements for securing the rights of shareholders. 82. Team Nominees Limited has been acting as the company secretary since the Group’s incorporation in February 2008. 83. The company secretary’s responsibilities include ensuring compliance by the Group, its management bodies and officers with the law and the Group’s charter and internal documents. The company secretary organises the communication process between the parties to corporate relations, including the preparation and holding of general meetings; storage, maintenance and dissemination of information about the Group; and review of communications from shareholders. | Corporate Governance | 84. The Group has a diverse set of stakeholders, from international institutions holding our shares and bonds, to our customers, employees, regulators and communities. Made up of seasoned industry professionals, the Board of Directors is committed to acting in the best interest of all stakeholders. The Company is not subject to the provisions of UK Corporate Governance Code, but follows internationally recognised best practices customary to the public companies having GDRs with standard listing and admitted to trading at London Stock Exchange. 71. Non-Executive Directors serve on the Board pursuant to the letters of appointment. Such letters of appointment specify the terms of appointment and the remuneration of Non-Executive Directors. 85. Improving its corporate governance structure in accordance with the internationally recognised best practices the Company adopted important policies and procedures. The Group is regularly reviewing and updating its policies and procedures. 72. Levels of remuneration for the Non-Executive Directors reflect the time commitment, responsibilities of the role and membership of the respective committees of the Board. Directors are also reimbursed for expenses associated with discharge of their duties. Non-executive Directors are not eligible for bonuses, retirement benefits or to participate in any incentive plans operated by the Group. The Chairwomen of the Audit and Risk and Nomination and Remuneration Committees receive additional remuneration. 73. The shareholders of the Company approved the remuneration of the members of the Board on 12 May 2017, 11 December 2017, 29 January 2018, 2 March 2018, 14 May 2018, 29 June 2018, 18 June 2019, 16 December 2019 and 30 December 2019. 74. The Directors did not waive or agreed to waive any emoluments from the company or any company of the Group during the period under review or future emoluments. 75. Neither the Board members, nor the management have long-term incentive schemes. However, the performance based part of remuneration of the senior management is aligned to the strategic goals and initiatives approved by the Board. 76. The performance based part of the remuneration of the Key Management is based on the Key Rules of Awarding and Payment of Performance Based Bonuses of GPI Group adopted by the Board on 15 June 2016 and regularly updated with the last update on 17 June 2019. The Nomination and Remuneration Committee monitors the efficiency of the Rules and makes the recommendations to the Board on their amendment and revision. 77. Refer to Note 31(f) to the consolidated financial statements for details of the remuneration paid to the members of the Board and key management. | General Manager | 78. Mr. Alexander Iodchin occupies the position of General Manager and the Board granted him the powers to carry out all business related to the Company`s operation up to a total value as established by the Authority Matrix. It has also granted him powers to discharge other managerial duties related to the ordinary course of business of the Company, including representing the Company before any government or government- backed authority. 79. The decisions for all other matters are reserved for the Board. The Authority Matrix contains the list of such reserved matters. 80. Mr. Iodchin is also acting as the Board Secretary since December 2008 and as the Head of Technical Analysis and Strategic Projects of the Group. 86. On 18 June 2019 a new Terms of Reference of the Board of Directors were adopted. As of the same date the Board merged Nomination and Remuneration Committees and established Strategy Committee. Consequently, the terms of reference of the new committees were adopted in June 2019. 87. The Company’s corporate governance policies and practices are designed to ensure that the Company is focused on upholding its responsibilities to the shareholders. They include, inter alia: ޭ Appointment policy; ޭ Terms of reference of the Board of Directors; ޭ Terms of reference of the Audit and Risk, Nomination and Remuneration and Strategy Committees; ޭ Code of Ethics and Conduct; ޭ Antifraud policy; ޭ Policy on Reporting of Improper Activities; ޭ Investigation policy; ޭ Anti-Corruption Policy; ޭ Foreign Trade Controls Policy; ޭ Insurance Standard; ޭ Charity and Sponsorship Policy; and ޭ Group Securities Dealing Code. 88. In order to further strengthen the corporate governance and clearly set the management authority limits within the Group the Board of Directors approved the Authority Matrix framework at the end of the year 2016, which was revised in June 2019 providing extended authorities to the Group management in order to simplify the decision making process. The implementation of this revised framework in the operating units started in 2019 and will be finalised in 2020. 89. In the course of the year ended 31 December 2017 in order to streamline the reporting of negligence, non-compliance or any other kind of wrongdoing the Group established a hotline mail-box and telephone line. It is an important mechanism enabling staff and other members of the Group as well as third parties to voice concerns in a responsible and effective manner. Throughout 2018 and 2019 the Board together with the management worked on raising the awareness about the hotline among the Group workforce and stakeholders. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 22 Management Report (continued) Management Report (continued) 23 | Code of ethics and conduct | | Share Capital | 90. The new Code of Ethics was approved by the Board of Directors on 08 December 2016 and was introduced in the companies of Significant direct or indirect holdings (including indirect shareholding through structures or cross shareholdings) the Group in the course of the year 2017. 91. Global Ports’ code of ethics and conduct outlines the general business ethics and acceptable standards of professional behaviour that we expect of all our directors, employees and contractors. This code, given to all new staff as part of their induction, means that everyone at Global Ports is accountable for their own decisions and conduct. As well as general standards of behaviour, the code covers fraud and corruption (including approaches on acceptance of gifts and benefits), ethics and conflicts of interest. Employees and external parties are encouraged to report any suspected breaches, via various channels including the dedicated hotline. 92. The code is available to all staff on Global Ports’ website (in the Corporate Governance section) and in the HR department at every operating facility. There are also other more detailed rules concerning our anti-fraud and whistleblowing policies. 93. The Board is updated on a regular basis on any breaches various policies with the specific focus on the fraud incidents and resulting actions, although significant breaches have to be reported to the Board immediately. | Dividends | 94. Pursuant to the Articles of Association the Company may pay dividends out of its profits. To the extent that the Company declares and pays dividends, owners of Global Depositary Receipts (hereafter also referred as “GDRs”) on the relevant record date will be entitled to receive dividends payable in respect of Ordinary Shares underlying the GDRs, subject to the terms of the Deposit Agreement. The Company expects to pay dividends in US dollars. If dividends are not paid in US dollars, they will be converted into US dollars by the Depositary and paid to holders of GDRs net of currency conversion expenses. 95. The Company is a holding company and thus its ability to pay dividends depends on the ability of its subsidiaries and joint ventures to pay dividends to the Company in accordance with the relevant legislation and contractual restrictions (shareholder agreements, bank borrowings covenants, and terms of the issuance of the public debt instruments). The payment of such dividends by its subsidiaries and joint ventures is contingent upon the sufficiency of their earnings, cash flows and distributable reserves. The maximum dividend payable by the Company’s subsidiaries and joint ventures is restricted to the total accumulated retained earnings of the relevant subsidiary or joint venture, determined according to the law applicable to each entity. 96. The Company has a Dividend Policy in place which provides for the payment of not less than 30% of any imputed consolidated net profit for the relevant financial year of the Group. Imputed profit is calculated as the consolidated net profit for the period of the Group attributable to the owners of the Company as shown in the Company’s consolidated financial statements for the relevant financial year prepared under EU IFRS and in accordance with the requirements of the Cyprus Companies Law, Cap. 113, less certain non-monetary consolidation adjustments. The Company’s dividend policy is subject to modification from time to time as the Board of Directors may deem appropriate. 97. In 2015 following the revision of current market situation, market prospects and prioritising the deleveraging strategy over dividend distribution, which should ensure the long-term robustness of the Group’s finances, the Board suspended the payment of the dividends in the mid-term. The Board continues to monitor the market for recovery as well as for levels of volatility in order to identify the appropriate timing for a resumption of the payment of a dividend, subject to maintaining conservative leverage ratios. 100. The information on significant direct and indirect shareholders is available at http://www.globalports.com/globalports/investors/ shareholder-information/major-shareholders. 101. There are no special titles that provide special control rights to any of the shareholders. There are restrictions in exercising of voting rights of shares (please refer to paragraph 104 below). Authorised share capital 102. The authorised share capital of the Company amounts to US$175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000 ordinary non-voting shares with a par value of US$0.10 each. Issued share capital 103. The issued share capital of the Company amounts to US$57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary non-voting shares with a par value of US$0.10 each. 104. The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have the right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum of any general meeting. | Rules for Amending Articles | 105. The Articles of association of the Company may be amended from time to time by the special resolution of the General Meeting of the shareholders. | Corporate Social Responsibility Report | 106. The Corporate Social Responsibility Report is drawn up as a separate report and will be made public at the Company`s website (the address of which, at the date of publication of this report, is www.globalports.com) within six months from the balance sheet date. | Events after the balance sheet date | 107. The events after the balance sheet date are disclosed in Note 32 to the consolidated financial statements. | Research and development activities | 108. The Group is not engaged in research and development activities. | Branches | 109. The Group did not have or operate through any branches during the year. | Treasury shares | 98. During the years 2018 and 2019 the Company did not declare or pay any dividends. 110. The Company did not acquire either directly or through a person in his own name but on behalf of the Company any of its own shares. 99. The Board of Directors of the Company does not recommend the payment of a final dividend for the year 2019. | Going Concern | 111. Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in preparing the consolidated financial statements based on the fact that, after making enquiries and following a review of the Group’s principle risks and uncertainties, budget for 2020, financial perspectives in the mid-term and the latest forecasts over a period of 5-7 years reflecting its business and investment cycles, including cash flows and borrowing facilities, the Directors consider that the Group has adequate resources to meet its liabilities as they fall due and to continue in operation for the foreseeable future. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Directors’ Responsibility Statement 25 The Board of Directors of Global Ports Investments Plc (“Company”) is responsible for preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and the requirements of the Cyprus Companies Law, Cap. 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Each of the Directors confirms to the best of his or her knowledge that the consolidated financial statements which are presented on pages 26 to 97 have been prepared in accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113, and give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as whole. 24 Management Report (continued) | Internal audit | 112. The internal audit function is carried out by Group’s Internal Audit Service (IAS). It is responsible for analysing the systems of risk management, internal control procedures and the corporate governance process for the Group with a view to obtaining a reasonable assurance that: ޭ risks are appropriately identified, assessed, responded to and managed; ޭ there is interaction with the various governance groups occurs as needed; ޭ significant financial, managerial, and operating information is accurate, reliable, and timely; ޭ employee’s actions are in compliance with policies, standards, procedures, and applicable laws and regulations; ޭ resources are acquired economically, used efficiently and adequately protected; ޭ programs, plans and objectives are achieved; ޭ quality and continuous improvement are fostered in the Group’s control process; and ޭ significant legislative or regulatory issues impacting the Group are recognised and addressed properly. 113. The Head of the IAS, Mr. Ilya Kotlov, reports directly to the Audit and Risk Committee. | External auditors | 114. An external auditor is appointed at the Global Ports AGM on an annual basis to review the Group’s financial and operating performance. 115. This follows proposals drafted by the Audit and Risk Committee for the Board of Directors regarding the reappointment of the external auditor of the Group. 116. In 2019, the shareholders of Global Ports re-appointed the Independent Auditors, PricewaterhouseCoopers as the external auditor for the purposes of auditing the Group’s IFRS financial statements for 2019. 117. PricewaterhouseCoopers Limited, have expressed their willingness to continue in office in 2020. A resolution approving their reappointment and giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting. 118. Starting from the year 2021 following the results of the external audit tender performed KPMG Ltd will take over PricewaterhouseCoopers Limited position subject to approval of the shareholders. By Order of the Board By Order of the Board … … … … … … … … … … . . … … … … … … … … … … . . … … … … … … … … … … . . … … … … … … … … … … . . Morten Engelstoft Chairman of the Board 5 March 2020 Alexander Iodchin Secretary of the Board Morten Engelstoft Chairman of the Board Limassol 5 March 2020 Alexander Iodchin Secretary of the Board Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 26 Consolidated Income Statement for the year ended 31 December 2019 Consolidated Statement of Comprehensive Income for the year ended 31 December 2019 (in thousands of US dollars) (in thousands of US dollars) Share of profit/(loss) of joint ventures accounted for using the equity method including impairment 28(a) Revenue Cost of sales Gross profit Administrative, selling and marketing expenses Other income Other gains/(losses) – net Operating profit/(loss) Finance income Finance costs Change in fair value of derivatives Net foreign exchange gains/(losses) on financial activities Finance income/(costs) – net Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Attributable to: Owners of the Company Non-controlling interest For the year ended 31 December Note 2019 2018 5 6 6 361,873 343,575 (151,819) (136,020) 210,054 207,555 Profit/(loss) for the year Other comprehensive income/(loss) Items that may be subsequently reclassified to the income statement (35,482) (38,925) Currency translation differences 1,773 1,920 (33,426) 144,839 2,524 (85,234) (9,340) 43,846 - (12,425) (24,561) 131,644 2,561 (85,148) (27,509) (75,185) Share of currency translation differences of joint ventures accounted for using the equity method Reclassification to income statement of translation differences due to disposal of assets classified as held for sale (2018: subsidiary and assets held for sale) Cumulative other comprehensive income movement relating to assets classified as held for sale 28(a) 7,27 27 Total items that can be reclassified subsequently to the income statement Items that may not be subsequently reclassified to the income statement Share of currency translation differences attributable to non-controlling interest Total items that cannot be reclassified subsequently to the income statement Other comprehensive income/(loss) for the year, net of tax 7 9 9 9 9, 3(a)(i) 9 (48,204) (185,281) Total comprehensive income/(loss) for the year 45,520 (85,628) 1,811 (8,003) 33,485 27,106 (257) (3,472) 80,559 (69,997) 1,787 1,787 82,346 150,018 (2,846) (2,846) (72,843) (131,172) 96,635 11 (28,963) 67,672 (53,637) (4,692) (58,329) 28(b) 66,580 1,092 67,672 (59,279) 950 (58,329) Total comprehensive income/(loss) attributable to: Owners of the Company Non-controlling interest Total comprehensive income/(loss) for the year 147,139 (129,276) 28(b) 2,879 (1,896) 150,018 (131,172) Items in the statement above are disclosed net of tax. There is no income tax relating to the components of other comprehensive income above. 27 For the year ended 31 December Note 2019 2018 67,672 (58,329) Basic and diluted earnings per share for profit/(loss) attributable to the owners of the parent of the Company during the year (expressed in US$ per share) 12 0.12 (0.10) The notes on pages 31 to 97 are an integral part of these consolidated financial statements. The notes on pages 31 to 97 are an integral part of these consolidated financial statements.               Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 28 Consolidated Balance Sheet as at 31 December 2019 (in thousands of US dollars) ASSETS Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Investments in joint ventures Prepayments for property, plant and equipment Deferred tax assets Trade and other receivables Current assets Inventories Trade and other receivables Income tax receivable Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS EQUITY AND LIABILITIES Total equity Equity attributable to the owners of the Company Share capital Share premium Capital contribution Currency translation reserve Transactions with non-controlling interest Retained earnings Non-controlling interest Total liabilities Non-current liabilities Borrowings Lease liabilities Derivative financial instruments Deferred tax liabilities Current liabilities Borrowings Lease liabilities Derivative financial instruments Trade and other payables Current income tax liabilities TOTAL EQUITY AND LIABILITIES As at 31 December Note 2019 2018 14 23, 2 15 28(a) 14 25 19 18 19 20 27 21 21 28(b) 22 23, 2 24 25 22 23, 2 24 26 1,265,191 1,133,885 499,335 639,699 13,964 27,590 5,843 61,264 17,496 460,942 - 565,238 24,795 7,513 60,499 14,898 189,088 154,453 8,306 45,487 10,942 124,353 - 6,555 40,901 3,611 91,613 11,773 1,454,279 1,288,338 396,084 378,970 57,317 923,511 101,300 (748,814) (209,122) 254,778 17,114 246,066 231,831 57,317 923,511 101,300 (829,373) (209,122) 188,198 14,235 1,058,195 1,042,272 924,271 738,113 32,987 8,839 144,332 133,924 99,098 1,194 345 33,278 9 981,202 850,766 - - 130,436 61,070 21,183 - - 38,776 1,111 1,454,279 1,288,338 Consolidated Statement of Changes in Equity for the year ended 31 December 2019 29 (in thousands of US dollars) Attributable to the owners of the Company Share capital Share premium Capital contribution Translation reserve Note Transactions with non-controlling interest Retained earnings* Non- controlling interest Total Total Balance at 31 December 2017 57,317 923,511 101,300 (759,376) (209,122) 247,477 361,107 16,131 377,238 Total other comprehensive income/(loss) Profit/(loss) for the year Total comprehensive income/ (loss) for the year ended 31 December 2018 - - - - - - - - (69,997) - - - - (69,997) (2,846) (72,843) (59,279) (59,279) 950 (58,329) - (69,997) - (59,279) (129,276) (1,896) (131,172) Balance at 31 December 2018 57,317 923,511 101,300 (829,373) (209,122) 188,198 231,831 14,235 246,066 Total other comprehensive income/(loss) Profit/(loss) for the year Total comprehensive income/ (loss) for the year ended 31 December 2019 - - - - - - - - - 80,559 - - - - 80,559 1,787 82,346 66,580 66,580 1,092 67,672 80,559 - 66,580 147,139 2,879 150,018 Balance at 31 December 2019 57,317 923,511 101,300 (748,814) (209,122) 254,778 378,970 17,114 396,084 *Retained earnings in the separate financial statements of the Company is the only reserve that is available for distribution in the form of dividends to the Company’s shareholders. On 5 March 2020 the Board of Directors of Global Ports Investments Plc authorised these consolidated financial statements for issue. Morten Engelstoft, Director Britta Dalunde, Director The notes on pages 31 to 97 are an integral part of these consolidated financial statements. The notes on pages 31 to 97 are an integral part of these consolidated financial statements.                           Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 30 Consolidated Statement of Cash Flows for the year ended 31 December 2019 (in thousands of US dollars) Cash flows from operating activities Profit/(loss) before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of right-of-use assets Loss on disposal of subsidiaries and assets held for sale (Profit)/loss on sale of property, plant and equipment Write off of property, plant and equipment Amortisation of intangible assets Interest income Interest expense and other finance costs Loss on extinguishment of financial liabilities Share of (profit)/loss in jointly controlled entities including impairment Change in fair value of derivative financial instruments Foreign exchange differences on non-operating activities Other non-cash items Operating cash flows before working capital changes Changes in working capital Inventories Trade and other receivables Trade and other payables Cash generated from operations Dividends received from joint ventures Income tax paid Net cash from operating activities Cash flows from investing activities Purchases of intangible assets Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from disposal of assets classified as held for sale (2018: subsidiary and assets held for sale) Loans granted to related parties Loan and interest repayments received from related parties Interest received from third parties, bank balances and deposits Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Principal elements of lease payments (2018: Finance lease principal payments (third parties)) Interest paid on borrowings (2018: Interest paid on borrowings and finance leases) Interest paid on lease liabilities Proceeds from/(settlement of) derivative financial instruments not used for hedging Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Exchange gains/(losses) on cash and cash equivalents  Cash and cash equivalents at end of the year The notes on pages 31 to 97 are an integral part of these consolidated financial statements. For the year ended 31 December Note 2019 2018 96,635 (53,637) 14 23 7 14 14 15 9 9 9,22 28(a) 9 14 27,7 31(g) 31(g) 22 22 23 22 23 22, 24 36,952 12,391 33,535 (293) 50 1,256 (2,524) 77,710 7,524 (1,920) 9,340 (45,956) (484) 224,216 (910) 2,103 (7,995) 217,414 - (31,987) 185,427 (963) (26,625) 490 11,842 - 320 1,570 35,764 - 24,689 (129) 3 12,909 (2,561) 83,383 1,765 12,425 27,509 76,345 663 219,128 (1,956) (9,895) 758 208,035 1,725 (35,418) 174,342 (2,554) (40,752) 463 28,909 (1,400) 260 1,619 (13,366) (13,455) 70,893 100 (131,382) (155,567) (871) (774) (74,407) (82,994) (4,271) (211) (140,249) 31,812 91,613 928 - 43,064 (196,171) (35,284) 130,434 (3,537) 91,613 20 124,353 Notes to the Consolidated Financial Statements 1 | General information | Country of incorporation 31 Global Ports Investments Plc (hereafter the “Company” or “GPI”) was incorporated on 29 February 2008 as a private limited liability company and is domiciled in Cyprus in accordance with the provisions of the Companies Law, Cap. 113. The address of the Company’s registered office is 20 Omirou Street, Ayios Nicolaos, CY-3095, Limassol, Cyprus. On 18 August 2008, following a special resolution passed by the shareholder, the name of the Company was changed from “Global Ports Investments Ltd” to “Global Ports Investments Plc” and the Company was converted into a public limited liability company in accordance with the provisions of the Companies Law, Cap. 113. During the first half of 2011, the Company successfully completed an initial public offering (“IPO”) of its shares in the form of global depositary receipts (“GDRs”). The Company’s GDRs (one GDR representing 3 ordinary shares) are listed on the Main Market of the London Stock Exchange under the symbol “GLPR”. The Company is jointly controlled by LLC Management Company “Delo” (“Delo Group”), one of Russia’s largest privately owned transportation companies, and APM Terminals B.V. (“APM Terminals”), a global port, terminal and inland services operator. Approval of the consolidated financial statements These consolidated financial statements were authorised for issue by the Board of Directors on 5 March 2020. Principal activities The principal activities of the Company, its subsidiaries and joint ventures (hereinafter collectively referred to as the “Group”) are the operation of container and general cargo terminals in Russia and Finland. The Group offers its customers a wide range of services for their import and export logistics operations. Composition of the Group and its joint ventures The Group’s terminals are located in the Baltic and Far East Basins, key regions for foreign trade cargo flows. The Group operates: ޭ five container terminals in Russia – Petrolesport (PLP), First Container Terminal (FCT), Ust-Luga Container Terminal (ULCT) and Moby Dik in the St. Petersburg and Ust-Luga port cluster, and Vostochnaya Stevedoring Company (VSC) in the Port of Vostochny; ޭ two container terminals in Finland – Multi-Link Terminals Helsinki and Multi-Link Terminals Kotka (Multi-Link Terminals); and ޭ inland Yanino Logistics Park (YLP), located in the vicinity of St. Petersburg; See also Note 5 for the description of segmental information of the Group. All entities above are fully consolidated, except for Moby Dik, Multi-Link Terminals and Yanino Logistics Park, which are joint ventures accounted for using the equity method of accounting. The Company fully owns all of the above terminals except for as described below: ޭ MLT and CD Holding groups are joint ventures with CMA Terminals where the Company has 75% effective ownership interest (Note 28(a)). Moby Dik (a container terminal in the vicinity of St. Petersburg), Multi-Link Terminals and Multi-Link Terminals Ltd constitute the MLT group. Yanino Logistics Park (an inland container terminal in the vicinity of St. Petersburg) and CD Holding constitute the CD Holding group. ޭ Ust-Luga Container Terminal (located in Ust-Luga, North-West Russia) is an 80% subsidiary where Eurogate, one of the leading container terminal operators in Europe has a 20% non-controlling interest (Note 28(b)). During the current period, the Group completed the sale of its joint venture AS Vopak E.O.S and its subsidiaries (VEOS) where the Group had a 50% effective ownership interest (Notes 27(a) and 28(a)). VEOS was involved in the ownership and management of an oil products terminal in Estonia. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 32 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 33 2 | Basis of preparation and summary of significant accounting policies | 2 | Basis of preparation and summary of significant accounting policies | (continued) The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. Apart from the accounting policy changes resulting from the adoption of IFRS 16 effective from 1 January 2019, these policies have been consistently applied to all years presented in these consolidated financial statements, unless otherwise stated. Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union (“EU”) and the requirements of the Cyprus Companies Law, Cap. 113. As of the date of the authorisation of these consolidated financial statements all International Financial Reporting Standards issued by International Accounting Standards Board (IASB) that are effective as at 1 January 2019 have been adopted by the EU through the endorsement procedure established by the European Commission. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of derivatives and measurement of assets held for sale at fair value less cost of disposal. The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. New and amended standards adopted by the Group New and amended standards adopted by the Group (continued) (in thousands of US dollars) Operating lease commitments disclosed as at 31 December 2018 (Note 30) Operating lease commitments discounted using the lessee’s incremental borrowing rate at the date of initial application Leases previously not included in operating lease commitments - discounted Operating leases classified as short-term and/or low-value and recognised on a straight-line basis as expense Adjustments as a result of a different treatment of extension and termination options of operating leases Finance lease liabilities already recognised as at 31 December 2018 according to IAS 17 (Note 22) Lease liability recognised as at 1 January 2019 (Note 23) Of which are: Current lease liabilities Non-current lease liabilities 56,808 14,184 1,253 (179) 3,405 8,140 26,803 875 25,928 The associated right-of-use assets were measured at the amount equal to the lease liability and adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application. On adoption of IFRS 16, the Group reclassified its Contractual rights with net book amount US$551,823 thousand from intangible assets to right-of-use assets (Note 23). These contractual rights were acquired as a result of business combinations and relate primarily to quay and land lease agreements. The Group adopted all new and revised IFRSs as adopted by the EU that are relevant to its operations and are effective for accounting periods beginning on 1 January 2019. The Group had to change its accounting policy on leases as a result of adopting IFRS 16 Leases. The recognised right-of-use assets relate to the following types of assets: The impact of the adoption of IFRS 16 and the new accounting policies are disclosed below. Other new standards, amendments and interpretations did not have any significant impact on the Group’s accounting policies and did not require retrospective adjustments. The Group has adopted IFRS 16 Leases retrospectively from 1 January 2019 (with the cumulative effect of initially applying the standard recognised at 1 January 2019) using the simplified transition approach, with no restatement of comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019. On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases that had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of the date of initial application 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 14.09%. For leases previously classified as finance leases the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. Reconciliation of lease liability recognised according to IFRS 16 as at 1 January 2019 to finance lease liabilities and operating lease commitments previously disclosed as at 31 December 2018: (in thousands of US dollars) Land Buildings and facilities Loading equipment Other production equipment Office equipment Total right-of-use assets (Note 23) 31 December 2019 1 January 2019 17,625 620,719 1,135 144 76 16,272 560,585 266 - - 639,699 577,123 The change in accounting policy affected the following items in the balance sheet on 1 January 2019: (in thousands of US dollars) Property, plant and equipment Right-of-use assets Intangible assets Total assets Non-current borrowings Non-current lease liabilities Current borrowings Current lease liabilities Total liabilities Retained earnings 1 January 2019 Operating leases recognised on balance sheet Reclassifications 31 December 2018 454,305 577,123 13,415 1,307,001 842,764 25,928 21,045 875 1,060,935 - - 18,663 - 18,663 - 17,926 - 737 18,663 - (6,637) 558,460 (551,823) - (8,002) 8,002 (138) 138 - - 460,942 - 565,238 1,288,338 850,766 - 21,183 - 1,042,272 -     Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 34 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 35 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) New and amended standards adopted by the Group (continued) Basis of consolidation The new treatment of leases results in an increase in non-current assets and financial liabilities as these leases are capitalised as well as a decrease in lease expenses, offset by an increase in depreciation and an increase in finance charges. This results in a higher operating profit. In general, the depreciation charge is constant over the lease period, but finance charges decrease as the remaining lease liability decreases. Cash generated from operations increased due to certain lease expenses no longer being recognised as operating cash outflows, but this is offset by a corresponding increase in cash used in financing activities due to repayments of the principal on lease liabilities. Net cash flow remains unchanged. In applying IFRS 16 for the first time, the Group has used the following practical expedients: ޭ the use of a single discount rate to a portfolio of leases with reasonably similar characteristics; ޭ reliance on previous assessments on whether leases are onerous; ޭ the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases; ޭ the new lessee accounting model is not applied to leases of low value assets which are not individually material; ޭ the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; ޭ the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and ޭ The Group has also elected to adopt the transitional practical expedient such that the IFRS 16 definition of a lease would only be applied to assess whether contracts entered into on or after the date of initial application (1 January 2019) are, or contain leases. All contracts previously assessed not to contain leases are not revisited. New standards and interpretations not yet adopted by the Group At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on these consolidated financial statements. (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully included in the consolidated financial statements from the date on which control was transferred to the Group or to the extent that the subsidiaries were obtained through a transaction between entities under common control from the date which control was transferred to its shareholders. They are derecognised from the financial statements from the date that control ceases. Business combinations involving entities under common control (ultimately controlled by the same party, before and after the business combination, and that control is not transitory) are accounted using the predecessor basis of accounting. Under this method, the financial statements of the acquiree are included in the consolidated financial statements using pre-acquisition IFRS carrying amounts using uniform accounting policies, on the assumption that the Group was in existence from the date where common control was established. For these transactions, the excess of the cost of acquisition over the carrying amount of the Group’s share of identifiable net assets acquired, including goodwill, arising at the date of acquisition by the shareholders, is recorded in equity in retained earnings at the date of the legal restructuring. The purchase method of accounting is used for acquisitions of subsidiaries that do not involve entities or businesses under common control with the Group. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Goodwill is initially measured as the excess of the aggregate of the consideration transferred over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the consolidated income statement. All intra-company transactions, balances, income, expenses and unrealised gains and losses are eliminated on consolidation. Unrealised losses are also eliminated but considered as an impairment indicator of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into compliance with those used by the Group. (b) Transactions with non-controlling interests Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (c) Joint arrangements Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using equity method of accounting. Under the equity method of accounting, interests in joint ventures are initially recognised in the consolidated balance sheet at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. The Group applies the requirements of IFRS 9 to determine whether any additional impairment loss needs to be recognised in respect of loans given to joint ventures, before taking into account the effect (if any) of the Group’s share of joint ventures’ losses applied against long-term interests in the joint ventures as detailed below. The Group’s share of losses in a joint venture is first allocated against the Group’s investment in the joint venture and then to any other long term interests that in substance form part of the Group’s net investment. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 36 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 37 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) Basis of consolidation (continued) Revenue recognition (continued) Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Investments in joint ventures are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised through profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is calculated by estimating the Group’s share of the present value of the estimated future cash flows expected to be generated from the asset, including the cash flows from the operations of the asset and the proceeds from the ultimate disposal of the asset. An impairment loss recognised in prior years is reversed where appropriate if there has been a change in the estimates used to determine the recoverable amount. (d) Contract assets and contract liabilities In case the services rendered by the Group as of the reporting date exceed the payments made by the customer as of that date and the Group does not have the unconditional right to charge the client for the services rendered, a contract asset is recognised. The Group assesses a contract asset for impairment in accordance with IFRS 9 using the simplified approach permitted by IFRS 9 which requires expected lifetime losses to be recognised from initial recognition of the contract asset. An impairment of a contract asset is measured, presented and disclosed on the same basis as a financial asset that is within the scope of IFRS 9. If the payments made by a customer exceed the services rendered under the relevant contract, a contract liability is recognised. The Group recognises any unconditional rights to consideration separately from contract assets as a trade receivable because only the passage of time is required before the payment is due. Revenue recognition Other incomes Revenue represents the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services to the customer, excluding amounts collected on behalf of third parties (for example, value-added taxes). (a) Rental income See accounting policy for leases below. The Group recognises revenue when the parties have approved the contract and are committed to perform their respective obligations, the Group can identify each party’s rights and the payment terms for the goods or services to be transferred, the contract has commercial substance, it is probable that the Group will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to customer and when specific criteria have been met for each of the Group’s contracts with customers as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. In evaluating whether collectability of an amount of consideration is probable, the Group considers only the customer’s ability and intention to pay the amount of consideration when it is due. Revenues earned by the Group are recognised on the following bases: (a) Sales of services The Group offers its customers a wide range of cargo handling services for its import and export logistics operations. These services are provided over time and usually do not exceed one month. Revenue from rendering of these services is recognised when the Group satisfies a performance obligation by transferring control over promised service to a customer over time in the accounting period in which the services are rendered. Revenue from the rendering of these services is recognised net of discounts and estimates for rebates that are in accordance with the contracts entered into with the customers. Revenue is recognised to the extent that is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty in relation to the rebates and discounts is resolved. Estimations for rebates and discounts are based on the Group’s experience with similar contracts and forecasted sales to the customer. (b) Sales of goods The Group sells unused materials and goods. Sales of goods are recognised when the Group satisfies a performance obligation by transferring a control over promised goods to a customer at a point in time at which the customer obtains control of the goods, which is usually when the customer takes the goods out of the territory of the terminal. (c) Financing component The Group does not have any material contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money. (b) Interest income Interest income on financial assets at amortised cost and financial assets at FVOCI calculated using the effective interest method. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired. For credit-impaired financial assets – Stage 3 the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance), for Stage 1 and Stage 2 – gross amount of financial assets. Interest income on derivative financial instruments (cross-currency interest rate swap arrangements) at fair value through profit or loss is calculated on nominal basis based on the difference between interest expenses on RUR-denominated bonds and lower interest rates embodied in the swap arrangements. (c) Dividend income Dividend income is recognised when the right to receive payment is established. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 38 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 39 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) Transactions with equity holders Foreign currency translation (continued) The Group enters into transactions with its shareholders. When consistent with the nature of the transaction (i.e. when these transactions are not at arm’s length prices), the Group’s accounting policy is to recognise any gains or losses with equity holders, directly through equity and consider these transactions as the receipt of additional capital contribution or the distribution of dividends. Similar transactions with non-equity holders, or parties which are not under the control of the parent company, are recognised through the income statement. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions. Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in United States dollars (US$), which is the Company’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses that relate to loans receivable, cash and cash equivalents and borrowings are presented net in the income statement within ‘net foreign exchange losses on financing activities’. All other foreign exchange gains and losses are presented in the income statement within ‘other gains/(losses) – net’. (c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: ޭ Assets and liabilities are translated at the closing rate existing at the date of the balance sheet presented; ޭ Income and expense items at the exchange rates prevailing at the date of transaction or using average rates as a reasonable approximation; On partial disposal of a subsidiary that includes a foreign operation, the Group re-attributes the proportionate share of the cumulative amount of the exchange differences recognised in other comprehensive income to the non-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of the exchange differences recognised in other comprehensive income. Impairment of non-financial assets Non-financial assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable (refer to accounting policy for intangible assets in relation to the impairment of goodwill) An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). Non- financial assets other than goodwill that suffered impairment are reviewed for possible reversal of impairment at each reporting date. Property, plant and equipment (“PPE”) Property, plant and equipment are recorded at purchase or construction cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition or construction of the items. Land is not depreciated. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost, less residual value, over their estimated useful lives, as follows: Buildings and facilities Loading equipment and machinery Other production equipment Office equipment Number of years 5 to 50 3 to 25 3 to 25 1 to 10 Assets under construction are not depreciated until they are completed and brought into use, at which time they are reclassified in the relevant class of property, plant and equipment and depreciated accordingly. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. ޭ Share capital, share premium and all other reserves are translated using the historic rate; and ޭ All exchange differences resulting from the above translation are recognised in other comprehensive income. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. On disposal of a foreign operation (including partial disposals which result in loss of control, significant influence or joint control of a subsidiary, associate or joint venture respectively, that include a foreign operation), the cumulative amount of the exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in the separate component of equity is reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss is recognised. In these cases, the cumulative amount of exchange differences relating to the foreign operation sold that have been attributed to the non-controlling interests are derecognised but are not reclassified to profit or loss. Expenditure for repairs and maintenance of property, plant and equipment is charged to the income statement of the year in which they are incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for intended use or sale are capitalised and amortised over the useful life of the asset. Other borrowing costs are recognised as an expense in the reporting period incurred. Interest is capitalised at a rate based on the Group’s weighted average cost of borrowing or at the rate on project specific debt, where applicable. Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds with carrying amount and these are included within operating income. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 40 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 41 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) Intangible assets Leases (continued) (a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/joint venture at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Goodwill on acquisition of joint ventures is included in the carrying amount of the Group’s investment in the joint venture (refer to Note 2, Basis of consolidation, (c)). Separately recognised goodwill is tested for impairment annually and whenever there is indication that goodwill may be impaired. Goodwill is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill related to the partial disposal of an entity is not derecognised unless there is loss of control. If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised exceeds the cost of the business combination, the Group reassesses the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the combination and recognises immediately in profit or loss any excess remaining after that reassessment. Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.The Group allocates goodwill to each CGU. When the Group reorganises its reporting structure in a way that changes the composition of one or more cash-generating units to which goodwill has been allocated, the goodwill is reallocated to the units affected. (b) Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. These costs are amortised using straight line method over their estimated useful lives (3 to 10 years). Costs associated with maintaining computer software programmes are recognised as an expense as incurred. (c) Contractual rights Accounting policy applied until 31 December 2018: Contractual rights acquired as a result of business combinations are shown at the cost of acquisition. Contractual rights relate primarily to quay and land lease agreements. These contractual rights are renewable. Contractual rights have a finite useful life and are carried at cost less accumulated amortisation.  Amortisation is calculated using the straight-line method to allocate the cost of contractual rights over their estimated useful lives (being up to 54 years as of 31 December 2018) which are in accordance with the underlying agreements, including renewal periods whenever renewal is at no significant cost and the Group has evidence, based on past experience that the contract will be renewed. Leases The Group is the lessor Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. Assets leased out under operating leases include insignificant portions of some properties which are not used by the Group which cannot be sold or leased out separately under a finance lease. These properties are included in property, plant and equipment in the balance sheet based on the nature of the asset. The Group is the lessee Accounting policies applied from 1 January 2019: The Group leases land, buildings and facilities, offices and loading and other production equipment. Land, buildings and facilities rental contracts are made for fixed periods of 5 to 53 years and have extension options. Other lease contracts are typically made for fixed periods of 3 to 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. The Group is the lessee (continued) Due to implementation of new accounting policy contractual rights acquired as part of business combination and previously classified as intangible assets were reclassified to right-of-use assets on 1 January 2019 (Note 23). Their remaining useful lives are up to 53 years on 31 December 2019. After the reclassification they continue to be depreciated on a straight-line basis. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: ޭ fixed payments (including in-substance fixed payments), less any lease incentives receivable; ޭ variable lease payment that are based on an index; ޭ amounts expected to be payable by the lessee under residual value guarantees; ޭ the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and ޭ payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are to be discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. According to some lease contracts lease payment can be adjusted depending on changes in consumer price indexes of Russian Federation. When such change occurs the respective lease liability is remeasured with a corresponding adjustment to the right-of-use asset. Right-of-use assets are measured at cost comprising the following: ޭ the amount of the initial measurement of lease liability; ޭ any lease payments made at or before the commencement date less any lease incentives received; ޭ any initial direct costs; and ޭ restoration costs. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture with value less than US$5 thousands. Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 42 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 43 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) Leases (continued) Financial instruments (continued) The Group is the lessee (continued) For business combinations where the acquiree is a lessee, the Group measures the lease liability at the present value of remaining lease payments as if the acquired lease were a new lease at the acquisition date. The Group measures the right-of-use asset at the same amount as the lease liability, adjusted to reflect favourable or unfavourable terms of the lease when compared with market terms. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Accounting policies applied until 31 December 2018: A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments, the right to use an asset for an agreed period of time. (a) Finance leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased assets and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the income statement over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term. (b) Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Financial instruments Classification The Group classifies its financial assets into the following measurement categories: ޭ those to be measured subsequently at fair value (either through other comprehensive income (OCI), or through profit or loss), and ޭ those to be measured at amortised cost. The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses are either recorded in profit or loss or OCI. The Group reclassifies debt investments when and only when its business model for managing those assets changes. Recognition and derecognition All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (‘regular way’ purchases and sales) are recorded at trade date, which is the date when the Group commits to deliver a financial instrument. All other purchases and sales are recognized when the Group becomes a party to the contractual provisions of the instrument. Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments: ޭ Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in ‘other gains/(losses)-net’, together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. Financial assets measured at amortised cost comprise cash and cash equivalents, loans receivable, trade receivables and other financial assets at amortised cost. ޭ FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in ‘other gains/(losses)-net’. Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in ‘other gains/(losses)-net’ and impairment expenses are presented as separate line item in the statement of profit or loss. The Group does not hold any such instruments. ޭ FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within ‘other gains/(losses)-net’ in the period in which it arises. Impairment From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI and cash and cash equivalents. The Group measures expected credit losses (‘ECL’) and recognises credit loss allowance at each reporting date. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The carrying amount of the financial assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within ‘net impairment losses on financial and contract assets’. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. For all other financial assets that are subject to impairment under IFRS 9 the Group applies a general approach – three-stage model for recognizing and measuring expected losses based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (‘12 Months ECL’). If the Group identifies a significant increase in credit risk (‘SICR’) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (‘Lifetime ECL’). Refer to Note 3, Credit risk section for a description of how the Group determines when a SICR has occurred. If the Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Additionally, for debt instruments that qualify as low credit risk, the loss allowance is limited to 12 months expected credit losses. For a description of how the Group determines low credit risk financial assets refer to Note 3, Credit risk section below. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 44 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 45 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) Derivative financial instruments and hedging activities Inventories Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognised asset or a liability or highly probable forecast transaction (cash flow hedge). Group entities usually maintain a store of spare parts and servicing equipment for critical components. These are often carried as inventory and recognised in profit or loss as consumed. Major spare parts, stand-by equipment and servicing equipment can also qualify as property, plant and equipment when they meet the definition of property, plant and equipment. Spare parts in inventory or property, plant and equipment are carried at cost, unless there is evidence of damage or obsolescence. Derivative financial instruments not designated as a hedging instrument Derivative financial instruments not designated as a hedging instrument are included within financial assets at fair value through profit or loss when fair value is positive and within financial liabilities at fair value through profit or loss when fair value is negative. They are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period. Changes in the fair value of foreign currency derivatives (currency forward contracts, currency options and cross-currency swaps) are presented in the income statement within ‘change in fair value of derivatives’ as part of ‘finance income/(costs) – net’. Derivative financial instruments designated as a hedging instrument At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its hedge transactions. Movements on the hedging reserve are shown in the statement of other comprehensive income. The full fair value of hedging derivatives is classified as a non-current asset or liability when the maturity of the hedging relationship is more than 12 months and as a current asset or liability when the remaining maturity of the hedging relationship is less than 12 months. Non-current assets held for sale Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Cash and cash equivalents In the cash flow statement cash and cash equivalents include cash in hand and deposits held at call with original maturity up to 90 days with banks. Cash and cash equivalents are carried at amortised cost using the effective interest method. Deposits with original maturity over 90 days are included in the cash flow from investing activities. Cash flow statement The cash flow statement is prepared under the indirect method. Purchases of property, plant and equipment (including prepayments for PPE) are presented within cash flows from investing activities and finance lease repayments within cash flows from financing activities are shown net of VAT. Related input VAT is included in movement in changes of working capital, within trade and other receivables. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion of cross-currency interest rate swap hedging variable rate borrowings is recognised immediately in the income statement within ‘finance costs’ and gain or loss relating to the hedging of currency risk in forecast sale is recognised in ‘other gains/(losses)-net’. Share capital, share premium and capital contribution Ordinary shares are classified as equity. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of cross-currency interest rate swap hedging variable rate borrowings is recognised in the income statement within ‘finance costs’ and gain or loss relating to the hedging of currency risk in forecast sale is recognised in ‘other gains/(losses)-net’. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. Gain or loss existing in equity is recognised immediately in the income statement if the forecast transaction is no longer expected to occur. Prepayments Prepayments are carried at cost less provision for impairment. A prepayment is classified as non-current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition. Prepayments to acquire assets are transferred to the carrying amount of the asset once the Group has obtained control of the asset and it is probable that future economic benefits associated with the asset will flow to the Group. Other prepayments are written off to profit or loss when the goods or services relating to the prepayments are received. If there is an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is written down accordingly and a corresponding impairment loss is recognised in profit or loss for the year. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recognised as share premium. Share premium is subject to the provision of the Cyprus Companies Law on reduction of share capital. Capital contribution represents contributions by the shareholders directly in the reserves of the Company. The Company does not have any contractual obligation to repay these amounts. However, these are distributable to the Company’s shareholders at the discretion of the Board of Directors subject to the shareholders’ approval. Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet 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. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 46 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 47 2 | Basis of preparation and summary of significant accounting policies | (continued) 2 | Basis of preparation and summary of significant accounting policies | (continued) Provisions and contingent liabilities Income taxes Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The tax expense for the period comprises current and deferred tax. Tax is recognised on profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Provisions are only used to cover those expenses which they had been set up for. Other possible or present obligations that arise from past events but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability, are disclosed in the notes to the financial statements as contingent liabilities. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised and amortised over the useful life of the asset. Other borrowing costs are recognised as an expense in the reporting period incurred. Interest is capitalised at a rate based on the Group’s weighted average cost of borrowing or at the rate on project specific debt, where applicable. Borrowings are removed from the consolidated balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss within ‘finance income/(costs) - net’. Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved, appropriately authorised and are no longer at the discretion of the Company. More specifically, interim dividends are recognised as liability in the period in which these are approved by the Board of Directors and in the case of final dividends, they are recognised in the period in which these are approved by the Company’s shareholders. Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the country where the entity operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting, nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. The Group considers leases as a single transaction in which the assets and liabilities are integrally linked and recognises deferred tax on net temporary differences. Value Added Tax (“VAT”) In the Russian Federation, output value added tax related to sales is payable to tax authorities on the earlier of (a) collection of the receivables from customers or (b) delivery of the goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the VAT invoice except for export sales related input VAT that is reclaimable upon confirmation of export. The tax authorities permit the settlement of VAT on a net basis. Where provision has been made for impairment of receivables, impairment loss is recognised for the gross amount of the debtor, including VAT. The lease liabilities are disclosed net of VAT. While the leasing payment includes VAT, the amount of VAT from the lease payment made is reclaimable against sales VAT. VAT related to sales and purchases is recognised in the balance sheet on a gross basis and disclosed separately as an asset and liability. Employee benefits Wages, salaries, contributions to state pension and social insurance funds, paid annual leave and sick leave, bonuses and other benefits (such as health services) are accrued in the year in which the associated services are rendered by the employees of the Group. These are included in staff costs and the Group has no further obligations once the contributions have been paid. Staff costs of the Group mainly consists of salaries. The Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 48 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 49 3 | Financial risk management | Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial results. (a) Market risk (i) Foreign exchange risk Foreign exchange risk arises on monetary items like cash in banks, short-term investments, trade and other receivables, borrowings and trade and other payables denominated in currency other than functional currency of each of the entities of the Group. The analysis below demonstrates the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be noted that these sensitivities are usually non- linear, and larger or smaller impacts should not be interpolated or extrapolated from these results. The sensitivity analysis does not take into consideration that the Group’s assets and liabilities are actively managed. Additionally, the financial position of the Group may vary at the time that any actual market movement occurs. Other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential risk that only represent the Group’s view of possible near-term market changes that cannot be predicted with any certainty; and the assumption that all interest rates move in an identical fashion. Currently the long-term debt of the Group is denominated in US dollars and Russian roubles. The US dollar interest rates are relatively more attractive compared to the Russian rouble interest rate. The revenues of Russian operations are mainly priced in Russian roubles and most of expenses are denominated and settled in Russian roubles. The Group uses from time to time derivatives (foreign currency swaps, forwards and options) to manage its exposures to foreign exchange risk, for more details see Note 24. The analysis below does not cover borrowings in joint ventures as they are not included in the financial position of the Group. The carrying amount of financial assets and liabilities of the Group’s components that have Russian rouble as their functional currency, denominated in US dollars are as follows: (in thousands of US dollars) Assets Liabilities Intra-group financial assets Intra-group financial liabilities Capital commitments As at 31 December 2019 2018 116,578 916 141,666 397,827 - 84,842 584 156,958 637,858 575 The carrying amount of financial assets and liabilities of the Group’s components that have US Dollar as their functional currency, denominated in Russian roubles are as follows: 3 | Financial risk management | (continued) Financial risk factors (continued) (a) Market risk (continued) The carrying amount of financial assets and liabilities in Russian operations denominated in Euros as at 31 December 2019 and 31 December 2018 are as follows: (in thousands of US dollars) Assets Liabilities Capital commitments As at 31 December 2019 2018 7 187 5,470 50 - 1,227 Had Euro exchange rate strengthened/weakened by 10% against the Russian rouble and all other variables remained unchanged, the post-tax profit and the equity of the Group for the year ended 31 December 2019, would have (decreased)/increased by US$14 thousand (2018: 15% change, increased/(decreased) US$6 thousand). This is mainly due to foreign exchange gains and losses arising upon retranslation of accounts payable denominated in Euros. (ii) Cash flow and fair value interest rate risk The Group is not exposed to changes in market interest rates as its entire borrowings portfolio consists of fixed rate debt as of 31 December 2019 and 2018. However, the Group is exposed to fair value interest rate risk through market value fluctuations of loans receivable, borrowings and lease liabilities with fixed rates. Management monitors changes in interest rates and takes steps to mitigate these risks as far as practicable and economically feasible. (b) Credit risk (i) Risk management Financial assets, which potentially subject the Group to credit risk, consist principally of trade and other receivables, loans receivable (Note 19) and cash and cash equivalents (Note 20). The Group has policies in place to ensure that sales of goods and services are made to customers with an appropriate credit history. These policies enable the Group to reduce its credit risk significantly. However, the Group’s business is heavily dependent on several large key customers accounting for 59% of the Group’s revenue for the year ended 31 December 2019 (year ended 31 December 2018: 60%). (ii) Impairment of financial assets The Group has three types of financial assets that are subject to the expected credit loss model: ޭ Trade receivables for sales of goods and from the provision of services; ޭ Debt instruments and other financial assets carried at amortised cost (loans to related parties and other receivables); and ޭ Cash and cash equivalents. (in thousands of US dollars) Intra-group financial assets As at 31 December 2019 2018 124,367 - Cash and cash equivalents: The Group’s cash and cash equivalents which have investment grade credit ratings with at least one major rating agency are considered to have low credit risk, and the loss allowance to be recognised during the period was therefore limited to 12 months expected losses. The identified impairment loss for cash and cash equivalents was immaterial to be accounted for. For the split of cash and cash equivalents by credit rating refer to Note 17. Had US dollar exchange rate strengthened/weakened by 15% against the Russian rouble and all other variables remained unchanged, the post-tax profit of the Group for the year ended 31 December 2019, would have (decreased)/increased by US$33,082 thousand (2018: US$47,597 thousand) and the equity would have (decreased)/increased by US$33,082 thousand (2018: US$47,597 thousand). This is mainly due to foreign exchange gains and losses arising upon retranslation of cash and cash equivalents, accounts receivable, borrowings, leases and intra-group financial assets and liabilities denominated in US dollars and Russian roubles. Trade receivables: To measure the expected lifetime credit losses, the Group performed the assessment on an individual basis for its major customers based on days past due and the corresponding historical credit losses experienced by the Group with those customers. For those customers who are independently rated, the Group monitors their credit quality based on the external credit ratings. Otherwise, if there is no independent rating, the Group monitors the credit quality of trade receivables on the basis of past experience, identifying customers with working history with the Group of over 12 months and no losses arising and others, and also by reference to the days past due.     Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 50 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 51 3 | Financial risk management | (continued) Financial risk factors (continued) (b) Credit risk (continued) Loans and other receivables: With respect to other financial assets at amortised cost, the Group considers the probability of default upon initial recognition of the asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated: ޭ actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower’s/counterparty’s ability to meet its obligations; ޭ actual or expected significant changes in the operating results of the borrower/counterparty; and ޭ significant changes in the expected performance and behaviour of the borrower/counterparty, including changes in the payment status of counterparty and changes in the operating results of the borrower. Regardless of the analysis above, a significant increase in credit risk for loans and other receivables with a third party is presumed if a debtor is more than 30 days past due in making a contractual payment. A default on loans and other receivables with a third party is when the counterparty fails to make contractual payments within 90 days of when they fall due and/or the counterparty is assessed as unlikely to pay its obligations in full without realisation of collateral, regardless of the existence of any past-due amount or the number of days past due. Financial assets including trade and other receivables are written off when there is no reasonable expectation of recovery, such as a debtor/counterparty failing to engage in a repayment plan with the Group. Where loans or receivables have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in consolidated income statement. The Group’s loans receivable from related parties are within Stage 3 of the IFRS 9 impairment model. No material lifetime expected credit losses were identified in relation to the Group’s loans receivable from related parties. For more information on the credit risk quality of trade and other receivables of the Group at 31 December 2019 refer to Notes 17 and 19. (c) Liquidity risk Management controls current liquidity based on expected cash flows and expected revenue receipts. Cash flow forecasting is performed at the level of operating entities of the Group and at consolidated level by Group finance department. Group finance department monitors forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs as well as scheduled debt service while maintaining sufficient headroom to ensure that the Group does not breach covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration potential variations in operating cash flows due to market conditions, the Group’s debt repayments and covenant compliance. Taking into account expected levels of operating cash flows, availability of cash and cash equivalents amounting to US$124,353 thousand (31 December 2018: US$91,613 thousand) (Note 20) the Group has the ability to meet its liabilities as they fall due and mitigate risks of adverse changes in the financial markets environment. 3 | Financial risk management | (continued) Financial risk factors (continued) (c) Liquidity risk (continued) The management of the Group believes that it is successfully managing the exposure of the Group to liquidity risk. The table below summarises the analysis of financial liabilities by maturity as of 31 December 2019 and 2018. The amounts in the table are contractual undiscounted cash flows. Trade and other payables balances due within 12 months equal their carrying balances as the impact of discounting is not significant. (in thousands of US dollars) As at 31 December 2019 Borrowings* Lease liabilities Trade and other payables Derivative financial instruments: - payments - receipts Total As at 31 December 2018 Borrowings* Trade and other payables Total Less than 1 month 1-3 months 3-6 months 6 months – 1 year 1-2 years 2-5 years Over 5 years Total 7,000 582 4,747 3,981 (3,800) 12,510 11,315 5,074 16,389 20,195 851 16,676 - - 8,770 1,425 - - - 37,722 10,195 19,390 13,271 32,661 5,079 4,405 9,484 116,732 2,919 246 5,088 (3,800) 121,185 35,783 9,030 44,813 195,886 21,669 151,981 (130,000) - - - 212,628 643,356 - 1,008,681 5,488 - 14,111 170,510 - 10,471 (7,600) 132,441 (114,800) 220,987 675,108 170,510 1,248,217 143,613 882,565 50,150 1,147,895 - - - 31,780 143,613 882,565 50,150 1,179,675 * The Group repurchased its own Eurobonds in 2018 and 2019 (Note 22). There are 27% repurchased as of 31 December 2019 and 10% as of 31 December 2018. The borrowings payments presented above exclude cash flows related to the repurchased part of Eurobonds. Derivative financial instruments (currency forward and option contracts) are gross settled. (d) Capital risk management The Group’s main objective when managing capital is to maintain the ability to continue as a going concern in order to ensure the profitability of the Group, maintain optimum equity structure and reduce its cost of capital. Defining capital, the Group uses the amount of equity and the Group’s borrowings. The Group manages the capital based on borrowings to total capitalisation ratio. Borrowings include lease liabilities and loan liabilities. Total capitalisation is calculated as the sum of the total Group borrowings and equity at the date of calculation. The management does not currently have any specific target for the rate of borrowings to total capitalisation. The rate of borrowings to total capitalisation is as follows: (in thousands of US dollars) Total borrowings Total capitalisation Total borrowings to total capitalisation ratio (percentage) As at 31 December 2019 2018 871,392 1,267,476 69% 871,949 1,118,015 78%   Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 52 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 53 3 | Financial risk management | (continued) Financial risk factors (continued) 4 | Critical accounting estimates and judgements | (continued) Critical accounting estimates and assumptions (continued) (e) Fair value estimation Fair value is the amount at which a financial asset could be exchanged or a liability settled in a transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price. (i) Estimated impairment of goodwill, property, plant and equipment, right-of-use assets and investments in joint ventures The Group follows its accounting policies to test goodwill and other non-financial assets for possible impairment or reversal of impairment. The estimated fair values of financial instruments have been determined by the Group, using available market information, where it exists, and appropriate valuation methodologies and assistance of experts. However, judgment is necessarily required to interpret market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and therefore do not always represent the fair values of financial instruments. The Group has used all available market information in estimating the fair value of financial instruments. In 2019 PLP and FCT started to work as one unit from commercial and operational points of view. The two terminals have a common managing director and common senior management team. The process of unification of two facilities in terms of operations, infrastructure and equipment maintenance and development, technical matters etc. has started in 2019 and will continue in 2020. Nevertheless the Group management and the Board of Directors of the Company look at PLP and FCT as one combined terminal and monitor its performance as a single unit, without being legally merged together and remaining two separate legal entities. As a result of these processes PLP and FCT are now considered as one CGU and the goodwill has been reallocated accordingly (Note 15). The fair value of floating rate instruments is normally their carrying amount. The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received, discounted at current interest rates for instruments with similar credit risk and remaining maturity. Discount rates used depend on credit risk of the counterparty. Carrying amounts of trade and other receivables approximate their fair values. The estimated fair value of fixed interest rate instruments with stated maturity, for which a quoted market price is not available, was estimated based on expected cash flows, discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Carrying amounts of trade and other payables which are due within twelve months approximate their fair values. The disclosure of the fair value of financial instruments carried at amortised cost and the fair value of financial instruments carried at fair value is determined using the following valuation methods: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on Group’s specific estimates. Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). The Group’s financial instruments carried at fair value relate to derivative financial instruments in the form of currency option and forward contracts and are disclosed in Note 24. They are valued using Level 2 valuation techniques from the table above. There were no changes in the valuation techniques during the year. Specific valuation techniques used to value derivative financial instruments include: ޭ for currency forwards – the present value of future cash flows based on the forward exchange rates at the balance sheet date ޭ for currency options – option pricing models (eg Black-Scholes model), and ޭ for other financial instruments – discounted cash flow analysis Level 2 inputs include use of quoted market prices or dealer quotes for identical or similar instruments. Where significant adjustments to market based data are made, or where other significant inputs are unobservable, the valuation would be categorised as Level 3. Changes in Level 2 and Level 3 fair values are analysed at the end of each reporting period. 4 | Critical accounting estimates and judgements | Estimates and judgments are continually evaluated and they are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Even though no impairment or impairment reversal indications were identified for any of the Group’s cash-generating units (CGUs), an impairment test was carried out by management for all CGUs, in addition to those CGUs with allocated goodwill for which an annual impairment assessment is required to be performed, as described below. For the purposes of the preparation of the current year consolidated financial statements the Group performed a test of the estimated recoverable amount of the CGUs using the value-in-use method, compared to their carrying value, for all CGUs except for YLP and MD for which fair value less costs to sell method was used. The value-in-use assessment requires making judgments about long-term forecasts related to the CGUs subject to review for which the recoverable amount was calculated based on estimated discounted future cash flows. These forecasts are uncertain as they require assumptions about volumes, prices for the products and services, discount rates, future market conditions and future technological developments. Significant and unanticipated changes in these assumptions could require a provision for impairment in a future period. For all CGUs tested based on discounted future cash flows, cash flow projections cover a period of five years based on the assumptions of the next 12 months. Cash flows beyond that five-year period have been extrapolated using a steady terminal growth rate. The terminal growth rate used does not exceed the long-term average growth rate for the market in which entities operate. For projections prepared for CGUs in Russian ports segments a terminal growth rate of 3% has been applied (2018: 3%). The discount rate applied for Russian ports CGUs in projections prepared as at 31 December 2019 is 8.8% (2018: 10.6%). Key assumptions for Russian ports CGUs tested based on discounted future cash flows are throughput volume, price per unit, growth rates, and discount rates. The projected volumes reflect past experience adjusted by the management view on the prospective market developments. For CGUs in the Russian ports segment volume growth is estimated to be in line with the long-term market development, position of each terminal on the market and its pricing power. As supported by historical market performance and in view of relatively low containerisation level in Russia, the long-term average throughput growth rate for the Russian container market is higher than in developed markets. Based on the results of the impairment tests for CGUs carried out in 2019, the Board of Directors did not identify any impairment losses and also believes that there are no indications for reversal of impairments recognised in previous periods for non-financial assets other than goodwill. For all CGU units except for ULCT CGU management believes that any reasonably possible change in the key assumptions on which these units’ recoverable amounts are based would not cause carrying amounts of these units to exceed their recoverable amounts. In ULCT, the recoverable amount calculated based on the value in use exceeded the carrying value by US$16.2 million. A decrease in the average tariffs by approximately 4% and container handling volumes by approximately 5% each year as opposed to those used in projections would remove the headroom. Reasonable changes in other key parameters do not result in the elimination of the existing headroom. (ii) Russian legislation Russian tax, currency and customs legislation is subject to varying interpretations (Note 29). Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 54 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 55 5 | Segmental information | 5 | Segmental information | (continued) The chief operating decision-maker (CODM) has been identified as the Board of Directors. They review the Group’s internal reporting in order to assess performance and allocate resources. The operating segments were determined based on these reports. VEOS Group operations consist of several major business units that are mainly organised as separate legal entities. Segment profit is obtained directly from the accounting records of each business unit and adjustments are made to bring their accounting records in line with IFRS as adopted by the EU; therefore, there are no arbitrary allocations between segments. Certain business units are operating with one major operating company and some supporting companies. The Board of Directors considers the business from a geographic (which is represented by different port locations managed by separate legal entities) perspective regularly monitoring the performance of each major business unit. The Board of Directors assesses the performance of the operating segments based on revenue (both in monetary and quantity terms) major costs items and net profit after the accounting records of business units are converted to be in line with IFRS as adopted by the EU with the exclusion of joint ventures. For the purposes of the internal reporting, joint ventures are assessed on a 100% ownership basis. The segment consisted of AS Vopak E.O.S. , various other entities and the intermediate holding company that own and manage an oil products terminal in Muuga port near Tallinn, Estonia. VEOS is no longer reported as a separate segment in the Group’s consolidated financial statements because it was classified as assets held for sale at the end of 2018 and the Group completed the sale of VEOS in 2019, see Note 27(a) and Note 28(a). The following items do not represent operating segments, however are provided to the CODM together with segment information: Holding companies (all other) The segment consists of Global Ports Investments Plc (GPI) and some intermediate managing, holding and service companies. Reconciliation adjustments Assets are allocated based on the operations of the segment and the physical location of the asset. Reconciliation adjustments consist of two major components: For segmental reporting purposes the Group’s consolidated financial position and consolidated results are presented by using the proportionate consolidation in relation to interests in jointly controlled entities (MLT and CDH groups). There are additional disclosures to reconcile segmental information with the consolidated income statement and the consolidated balance sheet. According to this method of accounting, the Group combined its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s consolidated financial statements. The Group recognised the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other venturers. Unrealised gains on transactions between the Group and its joint venturers were eliminated to the extent of the Group’s interest in the joint venture. Unrealised losses were also eliminated unless the transaction provided evidence of an impairment of the asset transferred. The brief description of segments is as follows: Russian ports The segment consists of the following operating units: ޭ First Container Terminal (FCT), Petrolesport and Farwater (PLP) and various other entities (including some intermediate holdings) that own and manage two container terminals in St. Petersburg port, North-West Russia. FCT and PLP are engaged in handling of containers, PLP is also engaged in handling of ro-ro, general cargo and scrap metal. ޭ Ust-Luga Container Terminal (ULCT), a container terminal in Ust-Luga, near St. Petersburg, North-West Russia. ޭ Vostochnaya Stevedoring Company (VSC) and various other entities (including some intermediate holdings) that own and manage a container terminal in Port of Vostochny near Nahodka, Far-East Russia. ޭ Moby Dik (MD) and various other entities (including some intermediate holdings) that own and manage a container terminal in Kronstadt near St. Petersburg, North-West Russia. ޭ Yanino Logistics Park (YLP) being an in-land container terminal in Yanino near St. Petersburg, North-West Russia. Finnish ports The segment consists of container terminals in the ports of Vuosaari (Helsinki) and Kotka, Finland owned and operated by Multi-Link Terminals Ltd Oy. ޭ Effect of proportionate consolidation – demonstrates the effect of proportionate consolidation of MD, YLP, Finnish ports and VEOS (in 2018 only). In the consolidated financial statements the financial position and financial results of these segments are incorporated using the proportionate consolidation method (using respectively 75%, 75%, 75% and 50% proportion). In the current segment reporting the information is presented on the 100% basis and then the portion which is not consolidated is deducted as a ‘Reconciliation Adjustment’. ޭ Other adjustments – all other consolidation adjustments including but not limited to: - elimination of intragroup transactions (mainly intragroup sales and dividends) and balances (mainly intragroup loans and investments in subsidiaries and joint ventures); consolidation adjustments of results of sale or purchase of shares of subsidiaries; - - other consolidation adjustments. The Group does not have any material regular transactions between segments except for those which mainly relate to management and financing activities. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 56 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 57 5 | Segmental information | (continued) The segment results for the year ended 31 December 2019 are as follows: (in thousands of US dollars) 5 | Segmental information | (continued) The reconciliation of results for the year ended 31 December 2019 calculated with proportional consolidation to the results presented in consolidated income statement above is as follows: Russian ports Finnish ports Total operating segments Holdings Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Reconciliation adjustments (in thousands of US dollars) Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures Sales to third parties Inter-segment revenue Total revenue Cost of sales 376,752 20,974 397,726 - - - 376,752 20,974 397,726 - 168 168 (165,475) (15,839) (181,314) (349) Administrative, selling and marketing expenses (10,602) (991) (11,593) (27,188) Other income Other gains/(losses) – net Operating profit/(loss) - 154 - 177 - 1,773 331 (28,255) 200,829 4,321 205,150 (53,851) Finance income/(costs) – net (46,624) (297) (46,921) (1,489) incl. interest income incl. interest expenses incl. change in the fair value of derivative instruments 2,904 (85,711) (9,340) incl. net foreign exchange gains/(losses) on financing activities 45,523 - 2,904 64 (199) (85,910) (1,148) (45) (53) (9,385) 45,470 - (405) Profit/(loss) before income tax Income tax expense Profit/(loss) after tax 154,205 (28,410) 4,024 158,229 (55,340) (760) (29,170) (107) 125,795 3,264 129,059 (55,447) (8,968) - (8,968) 7,428 771 - (2) (771) 52 (29) 374 11 (304) (719) 78 (641) - (168) (168) 134 218 - (5,483) (5,299) - (1,040) 1,040 - - (5,299) - (5,299) 388,758 - 388,758 (174,101) (37,792) 1,773 (33,409) 145,229 (48,358) 1,899 (85,644) (9,374) 44,761 96,871 (29,199) 67,672 CAPEX* on cash basis 27,662 313 27,975 70 (355) - 27,690 * CAPEX represents purchases of property, plant and equipment Sales to third parties Inter-segment revenue Total revenue Cost of sales Administrative, selling and marketing expenses Other income Share of profit/(loss) of joint ventures accounted for using the equity method Other gains/(losses) – net Operating profit/(loss) Finance income/(costs) – net incl. interest income incl. interest expenses incl. change in the fair value of derivative instruments incl. net foreign exchange gains/(losses) on financing activities Profit/(loss) before income tax Income tax expense Profit/(loss) after tax CAPEX on cash basis 388,758 (26,885) - 388,758 (174,101) (37,792) 1,773 - (33,409) 145,229 (48,358) 1,899 (85,644) (9,374) 44,761 96,871 (29,199) 67,672 - (26,885) 22,282 2,310 - 1,920 (17) (390) 154 625 410 34 (915) (236) 236 - 361,873 - 361,873 (151,819) (35,482) 1,773 1,920 (33,426) 144,839 (48,204) 2,524 (85,234) (9,340) 43,846 96,635 (28,963) 67,672 27,690 (1,065) 26,625             Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 58 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 59 5 | Segmental information | (continued) 5 | Segmental information | (continued) The segment items operating expenses for the year ended 31 December 2019 are as follows: (in thousands of US dollars) The reconciliation of operating expenses for the year ended 31 December 2019 calculated with proportional consolidation to the results presented in consolidated income statement above is as follows: Russian ports Finnish ports Total operating segments Holdings Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Reconciliation adjustments (in thousands of US dollars) Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Staff costs Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment Total Other operating expenses 38,291 12,050 866 1,566 375 3 39,857 12,425 869 908 489 466 55,926 11,340 67,266 21,456 17,575 10,774 7,845 143,327 32,750 404 647 991 15,326 1,504 17,979 11,421 8,836 158,653 34,254 - 8 14 23,341 4,196 (953) (131) (20) (4,341) (579) (404) (583) (7,011) (1,188) Total cost of sales, administrative, selling and marketing expenses 176,077 16,830 192,907 27,537 (8,199) - - - - - - - - (352) (352) 39,812 12,783 1,315 84,381 17,400 11,025 8,267 174,983 36,910 211,893 Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Staff costs Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment Total Other operating expenses Total cost of sales, administrative, selling and marketing expenses Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures 39,812 12,783 1,315 84,381 17,400 11,025 8,267 174,983 36,910 211,893 (2,860) (392) (59) (13,026) (1,738) (1,212) (1,748) (21,035) (3,557) (24,592) 36,952 12,391 1,256 71,355 15,662 9,813 6,519 153,948 33,353 187,301 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 60 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 61 5 | Segmental information | (continued) The segment assets and liabilities as at 31 December 2019 are as follows: (in thousands of US dollars) 5 | Segmental information | (continued) The reconciliation of total segment assets and liabilities as at 31 December 2019 calculated with proportional consolidation to the results presented in consolidated balance sheet above is as follows: Russian ports Finnish ports Total operating segments Holdings Reconciliation adjustments Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation (in thousands of US dollars) Property, plant and equipment (including prepayments for PPE) 533,141 7,109 540,250 Right-of-use assets Investments in joint ventures Intangible assets Other non-current assets Inventories 641,689 784 15,225 103,126 8,915 2,510 644,199 1,836 829 (9,227) (1,332) - - - 13 784 165,870 - (166,654) 15,238 3,920 (570) - 126,703 229,829 1,075,425 (33,014) (1,205,633) - 8,915 (153) - 532,859 643,696 - 18,588 66,607 8,762 Trade and other receivables (including income tax prepayment) 59,879 1,396 61,275 Cash and cash equivalents 122,879 7,106 129,985 (1,634) (4,547) 61,165 (2,347) - 131,395 Total assets Long-term borrowings Long-term lease liabilities Other long-term liabilities Trade and other payables Short-term borrowings Short-term lease liabilities Other short-term liabilities Total liabilities Non-controlling interest 1,485,638 144,837 1,630,475 1,257,708 (48,277) (1,376,834) 1,463,072 743,607 35,262 154,689 27,770 99,098 851 365 603 2,206 121 1,738 712 346 656 744,210 37,468 154,810 29,508 99,810 1,197 1,021 16,914 323 322 11,619 - 500 1 (4,513) (1,201) (148) (962) (178) (126) (169) (18,044) - (1,231) (4,143) - - - 738,567 36,590 153,753 36,022 99,632 1,571 853 1,061,642 6,382 1,068,024 29,679 (7,297) (23,418) 1,066,988 17,114 - 17,114 - - - 17,114 Included within ‘Russian ports’, ‘Finnish ports’ and ‘Holdings’ segments ‘Other non-current assets’ are investments in subsidiaries in the total amount of US19,665 thousand, US$126,614 thousand and US$1,073,463 thousand respectively (fully eliminated on consolidation). - 6,071 3,757 Property, plant and equipment (including prepayments for PPE) Right-of-use assets Investments in joint ventures Intangible assets Other non-current assets Inventories Trade and other receivables (including income tax prepayment) Cash and cash equivalents Total assets Long-term borrowings Long-term lease liabilities Other long-term liabilities Trade and other payables Short-term borrowings Short-term lease liabilities Other short-term liabilities Total liabilities Non-controlling interest Comparative segmental information for 2018 has not been restated for the adoption of IFRS 16 on 1 January 2019. Therefore, the segmental information disclosed above for right-of-use assets, their depreciation and lease liabilities is not entirely comparable to the information disclosed below for prior year. Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures 532,859 643,696 - 18,588 66,607 8,762 61,165 131,395 1,463,072 738,567 36,590 153,753 36,022 99,632 1,571 853 1,066,988 17,114 (27,681) (3,997) 27,590 (4,624) 12,153 (456) (4,736) (7,042) (8,793) (454) (3,603) (582) (2,744) (534) (377) (499) (8,793) - 505,178 639,699 27,590 13,964 78,760 8,306 56,429 124,353 1,454,279 738,113 32,987 153,171 33,278 99,098 1,194 354 1,058,195 17,114 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 62 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 63 5 | Segmental information | (continued) The segment results for the year ended 31 December 2018 are as follows: (in thousands of US dollars) 5 | Segmental information | (continued) The reconciliation of results for the year ended 31 December 2018 calculated with proportional consolidation to the results presented in consolidated income statement above is as follows: Russian ports VEOS Finnish ports Total operating segments Holdings Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Reconciliation adjustments (in thousands of US dollars) Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures Sales to third parties Inter-segment revenue Total revenue Cost of sales 365,190 30,939 15,009 411,138 - 365,190 (171,806) - 30,939 (12,815) - 15,009 (13,039) - 411,138 (197,660) - 488 488 - Administrative, selling and marketing expenses (15,798) (7,666) Other gains/(losses) – net Operating profit/(loss) Finance costs – net incl. interest income incl. interest expenses incl. change in the fair value of derivative instruments incl. net foreign exchange gains/ (losses) on financing activities (24,477) 153,109 (187,614) 3,171 (85,851) (247) 10,211 (265) 7 (244) (1,111) 150 1,009 (314) - (63) (24,575) (25,663) (24,574) 3,838 164,329 (21,337) (188,193) 3,178 (787) 303 (86,158) (1,238) (27,509) - (189) (27,698) - (77,425) (28) (62) (77,515) 148 (24,641) - (24,641) 15,057 4,654 90 (4,840) 991 (30) 421 47 553 - 386,497 (488) (488) 285 269 (3,917) (3,851) - 386,497 (182,318) (45,315) (24,563) 134,301 - (1,508) (187,989) 1,943 1,508 (85,467) - - (27,651) (76,814) (53,688) (4,641) (58,329) Profit/(loss) before income tax Income tax expense Profit/(loss) after tax (34,505) (4,210) (38,715) 9,946 - 9,946 695 (149) 546 (23,864) (22,124) (4,359) (265) (28,223) (22,389) (3,849) (17) (3,866) (3,851) - (3,851) CAPEX* on cash basis 41,618 1,405 4,587 47,610 296 (2,140) - 45,766 * CAPEX represents purchases of property, plant and equipment Sales to third parties Inter-segment revenue Total revenue Cost of sales Administrative, selling and marketing expenses Share of profit/(loss) of joint ventures accounted for using the equity method Other gains/(losses) – net Operating profit/(loss) Finance costs - net incl. interest income incl. interest expenses incl. change in the fair value of derivative instruments incl. net foreign exchange gains/(losses) on financing activities Profit/(loss) before income tax Income tax expense Profit/(loss) for the year CAPEX on cash basis 386,497 - 386,497 (182,318) (45,315) - (24,563) 134,301 (187,989) 1,943 (85,467) (27,651) (76,814) (53,688) (4,641) (58,329) (42,922) - (42,922) 46,298 6,390 (12,425) 2 (2,657) 2,708 618 319 142 1,629 51 (51) - 343,575 - 343,575 (136,020) (38,925) (12,425) (24,561) 131,644 (185,281) 2,561 (85,148) (27,509) (75,185) (53,637) (4,692) (58,329) 45,766 (5,014) 40,752               Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 64 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 65 5 | Segmental information | (continued) 5 | Segmental information | (continued) The segment items operating expenses for the year ended 31 December 2018 are as follows: (in thousands of US dollars) The reconciliation of operating expenses for the year ended 31 December 2018 calculated with proportional consolidation to the results presented in consolidated income statement above is as follows: Russian ports VEOS Finnish ports Total operating segments Holdings Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Reconciliation adjustments (in thousands of US dollars) Depreciation of property, plant and equipment 37,621 1,033 1,863 40,517 837 (1,655) Amortisation of intangible assets 13,126 108 Reversal of impairment of property, plant and equipment Impairment of intangible assets and goodwill Staff costs Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment Total Other operating expenses Total cost of sales, administrative, selling and marketing expenses - (10,422) 18,488 55,466 9,198 10,182 - 14,593 2,542 7,188 9,892 2,971 - - - 8,516 422 640 1,064 13,234 (10,422) 18,488 78,575 12,162 18,010 13,927 7 - - 18,630 - 12 12 153,973 33,631 18,013 2,468 12,505 1,645 184,491 37,744 19,498 6,165 187,604 20,481 14,150 222,235 25,663 (110) 5,211 (1,136) (11,040) (1,962) (4,034) (2,135) (16,861) (2,850) (19,711) - - - - - - - - - (554) (554) 39,699 13,131 (5,211) 17,352 86,165 10,200 13,988 11,804 187,128 40,505 227,633 Depreciation of property, plant and equipment Amortisation of intangible assets Reversal of impairment of property, plant and equipment Impairment of intangible assets and goodwill Staff costs Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment Total Other operating expenses Total cost of sales, administrative, selling and marketing expenses Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures 39,699 13,131 (5,211) 17,352 86,165 10,200 13,988 11,804 187,128 40,505 227,633 (3,935) (222) 5,211 (17,352) (18,597) (3,344) (4,914) (3,433) (46,586) (6,102) (52,688) 35,764 12,909 - - 67,568 6,856 9,074 8,371 140,542 34,403 174,945 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 66 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 67 5 | Segmental information | (continued) The segment assets and liabilities as at 31 December 2018 are as follows: (in thousands of US dollars) 5 | Segmental information | (continued) The reconciliation of total segment assets and liabilities as at 31 December 2018 calculated with proportional consolidation to the results presented in consolidated balance sheet above is as follows: Russian ports VEOS Finnish ports Total operating segments Holdings Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Reconciliation adjustments (in thousands of US dollars) 494,794 18,958 8,492 522,244 2,433 (18,795) - 505,882 Property, plant and equipment (including prepayments for PPE) Property, plant and equipment (including prepayments for PPE) Investments in joint ventures Intangible assets Other non-current assets Inventories Trade and other receivables (including income tax prepayment) 784 566,045 106,976 - 115 - 17 784 165,861 566,177 3,773 - 126,708 233,684 1,076,084 7,193 1,967 - 9,160 - 43,752 10,527 3,900 58,179 3,600 - (166,645) - (557) (33,016) (1,143) (6,636) (3,135) - 569,393 (1,272,515) - (1,288) - 4,237 8,017 53,855 98,668 Cash and cash equivalents 95,758 2,398 1,465 99,621 2,182 Total assets Long-term borrowings Other long-term liabilities Trade and other payables Short-term borrowings Other short-term liabilities Total liabilities 1,315,302 33,965 140,582 1,489,849 1,253,933 (63,282) (1,440,448) 1,240,052 857,258 132,072 32,547 21,184 592 2,575 1,340 861,173 22,810 - 5,624 2,175 - 217 132,289 38 2,669 40,840 8,220 818 217 24,177 809 - 515 (6,095) (279) (3,961) (1,292) (56) (23,893) (61,382) 73 - - 853,995 70,666 45,172 22,885 1,268 1,043,653 10,374 5,261 1,059,288 31,583 (11,683) (85,202) 993,986 Non-controlling interest 14,235 - - 14,235 - - - 14,235 Included within ‘Russian ports’, ‘Finnish ports’ and ‘Holdings’ segments ‘Other non-current assets’ are investments in subsidiaries in the total amount of US19,665 thousand, US$126,614 thousand and US$1,075,338 thousand respectively (fully eliminated on consolidation). From 2019 the Group no longer offsets deferred tax assets against deferred tax liabilities in the segmental information. Therefore, the segmental information in 2019 is not entirely comparable to segmental information in 2018. Investments in joint ventures Intangible assets Other non-current assets Inventories Trade and other receivables (including income tax prepayment) Cash and cash equivalents Assets classified as held for sale Total assets Long-term borrowings Other long-term liabilities Trade and other payables Short-term borrowings Other short-term liabilities Total liabilities Non-controlling interest Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures 505,882 - 569,393 4,237 8,017 53,855 98,668 - 1,240,052 853,995 70,666 45,172 22,885 1,268 993,986 14,235 (37,427) 24,795 (4,155) 71,160 (1,462) (9,343) (7,055) 11,773 48,286 (3,229) 59,770 (6,396) (1,702) (157) 48,286 - 468,455 24,795 565,238 75,397 6,555 44,512 91,613 11,773 1,288,338 850,766 130,436 38,776 21,183 1,111 1,042,272 14,235 The revenue of the Group mainly comprises of stevedoring services, storage and ancillary port services for container and bulk cargoes (Russian ports and Finnish ports segments) and oil products (VEOS segment before reclassification to assets held for sale in the end of 2018, see Note 27(a)). The subsidiaries and joint ventures of the Group also provide services that are of support nature in relation to the core services mentioned above. The consolidated revenue comprises only from the services related to containers and bulk cargo since the operations of VEOS were equity accounted during 2018 up to the date of reclassification of VEOS to assets held for sale (Note 2, Basis of consolidation, (c)). Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 68 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 69 5 | Segmental information | (continued) Revenue attributable to domestic and foreign customers for the year ended 31 December 2019 is disclosed below in accordance with their registered address. Major clients of the Group are internationally operating companies and their Russian branches. Their registered addresses are usually not relevant to the location of their operations. (in thousands of US dollars) Revenue from domestic customers - Cyprus Revenue from foreign customers by countries: Russia South Korea Switzerland UK Denmark Other Revenue from foreign customers total Total revenue For the year ended 31 December 2019 8,370 282,162 18,754 11,180 8,733 7,173 25,501 353,503 361,873 2018 14,970 224,818 15,793 7,646 20,344 26,537 33,467 328,605 343,575 In both 2019 and 2018 there was one customer representing more than 10% of consolidated revenue. This customer originated from Russian ports segment and its registered address is in Russia. The management also assesses the performance of the Group based on adjusted EBITDA that is defined as profit/(loss) for the year before income tax expense, finance income/(costs)—net, depreciation and impairment of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation and impairment of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method and other gains/(losses)—net. The adjusted EBITDA of the Group is calculated as follows: (in thousands of US dollars) Profit/(loss) for the year Adjusted for: Income tax expense Finance costs - net Amortisation of intangible assets Depreciation of property, plant and equipment Depreciation of right-of-use assets Share of (profit)/loss of joint ventures accounted for using the equity method Other (gains)/losses - net Adjusted EBITDA Note For the year ended 31 December 2019 2018 67,672 (58,329) 11 9 6 6 6 28(a) 7 28,963 48,204 1,256 36,952 12,391 (1,920) 33,426 226,944 4,692 185,281 12,909 35,764 - 12,425 24,561 217,303 6 | Expenses by nature | (in thousands of US dollars) Staff costs (Note 8) Depreciation of property, plant and equipment (Note 14) Depreciation of right-of-use assets (Note 23) Amortisation of intangible assets (Note 15) Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment Taxes other than on income Legal, consulting and other professional services Auditors’ remuneration Expense relating to short-term leases and/or leases of low-value assets (2018: Operating lease rentals) Purchased services Insurance Other expenses Total cost of sales, administrative, selling and marketing expenses For the year ended 31 December 2019 2018 71,355 36,952 12,391 1,256 15,662 9,813 6,519 2,856 2,762 1,031 412 14,298 713 11,281 187,301 67,568 35,764 - 12,909 6,856 9,074 8,371 5,417 2,867 1,379 4,122 8,310 900 11,408 174,945 The total fees charged by the Company’s statutory auditor for the statutory audit of the annual financial statements of the Company for the year ended 31 December 2019 amounted to US$260 thousand (2018: US$295 thousand) The total fees charged by the Company’s statutory auditor for the year ended 31 December 2019 for other assurance services amounted to US$56 thousand (2018: US$63 thousand), for tax and VAT advisory services amounted to US$43 thousand (2018: US$1 thousand). The above expenses are analysed by function as follows: Cost of sales (in thousands of US dollars) Staff costs Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment Taxes other than on income Expense relating to short-term leases and/or leases of low-value assets (2018: Operating lease rentals) Purchased services Insurance Other expenses Total cost of sales For the year ended 31 December 2019 2018 45,255 35,203 12,391 1,102 15,662 9,549 6,324 2,455 289 14,298 537 8,754 151,819 42,133 34,310 - 12,855 6,856 8,780 7,400 4,952 2,827 8,310 549 7,048 136,020 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 70 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 71 6 | Expenses by nature | (continued) Administrative, selling and marketing expenses (in thousands of US dollars) Staff costs Depreciation of property, plant and equipment Amortisation of intangible assets Fuel, electricity and gas Repair and maintenance of property, plant and equipment Taxes other than on income Legal, consulting and other professional services Auditors’ remuneration Expense relating to short-term leases and/or leases of low-value assets (2018: Operating lease rentals) Insurance Other expenses Total administrative, selling and marketing expenses 7 | Other gains/(losses) – net | (in thousands of US dollars) Foreign exchange gains/(losses) on non-financing activities – net (Note 10) Settlement of commercial claims Gain on a disposal of a subsidiary Net loss on disposal of assets held for sale (Note 27) Charity Other gains/(losses) – net Total For the year ended 31 December 2019 2018 26,100 1,749 154 264 195 401 2,762 1,031 123 176 2,527 35,482 25,435 1,454 54 294 971 465 2,867 1,379 1,295 351 4,360 38,925 For the year ended 31 December 2019 2018 2,064 - - (33,535) (560) (1,395) (33,426) 453 (1,261) 4,558 (29,247) - 936 (24,561) In 2018 the Group disposed a subsidiary with net liabilities of US$940 thousand for a cash consideration of US$862 thousand. The main asset of the subsidiary was loading equipment. The transaction did not have any adverse effect on the operations of the Group. The transaction resulted in the overall gain of US$4,558 thousand booked within ‘Other gains/(losses) – net’, comprising of US$1,802 thousand gain from sale of the subsidiary and US$2,756 thousand foreign translation differences which were reclassified from the translation reserve to the income statement. 8 | Employee benefit expense | (in thousands of US dollars) Salaries Social insurance costs Other staff costs Total Average number of staff employed during the year For the year ended 31 December 2019 2018 58,367 10,798 2,190 71,355 2,669 52,923 12,531 2,114 67,568 2,464 Included within ‘Social insurance costs’ for 2019 are contributions made to the state pension funds in the total amount of US$7,547 thousand (2018: US$8,727 thousand). 9 | Finance income/(costs) - net | (in thousands of US dollars) Included in finance income: Interest income on bank balances Interest income on short-term bank deposits Interest income on loans to related parties (Note 31(g)) Total finance income calculated using effective interest rate method Included in finance costs: Interest expenses on bank borrowings Interest expenses on bonds Interest expenses on lease liabilities (2018: finance leases) Other finance costs Loss on extinguishment of financial liabilities (Note 22) Total finance costs Included in the change in fair value of derivatives: Interest component* Foreign currency exchange component Change in fair value of currency forwards and currency options Total change in fair value of derivatives (Note 24) Net foreign exchange gains/(losses) on financing activities Finance income/(costs) – net For the year ended 31 December 2019 1,319 254 951 2,524 (263) (72,425) (4,375) (647) (7,524) (85,234) - - (9,340) (9,340) 43,846 (48,204) 2018 562 1,060 939 2,561 (3,125) (78,253) (1,340) (665) (1,765) (85,148) 16,013 (43,522) - (27,509) (75,185) (185,281) * Interest component represents the difference between interest expenses on RUR-denominated bonds and lower interest rates embodied in swap agreements (see Note 24). 10 | Net foreign exchange gains/(losses) | The exchange differences (charged)/credited to the income statement are as follows: (in thousands of US dollars) Included in ‘finance income/(costs) - net’ (Note 9) Included in ‘other gains/(losses) – net’ (Note 7) Total For the year ended 31 December 2019 2018 43,846 2,064 45,910 (75,185) 453 (74,732) Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 72 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 73 14 | Property, plant and equipment | (in thousands of US dollars) At 1 January 2018 Cost Accumulated depreciation and impairment Net book amount Additions Transfers Disposals Depreciation charge (Note 6) Translation reserve Buildings and facilities Land Assets under construction Loading equipment and machinery Other production equipment Office equipment Total 162,451 364,718 - (127,938) 162,451 236,780 - - - - (27,758) 11,756 4,696 (161) (20,128) (40,093) 28,263 (1,243) 27,020 5,573 (2,868) - - (5,239) 203,161 (98,800) 104,361 14,649 (1,832) (97) (12,831) (17,823) 40,240 (18,595) 21,645 2,914 (1,867) 1,047 801,747 (248,443) 553,304 6,603 307 38,888 3 (79) (2,543) (4,052) 1 - (262) (184) - (337) (35,764) (95,149) Closing net book amount 134,693 192,850 24,486 86,427 21,577 909 460,942 At 31 December 2018 Cost 134,693 310,970 24,486 174,489 Accumulated depreciation and impairment - (118,120) - (88,062) Net book amount 134,693 192,850 24,486 86,427 38,184 (16,607) 21,577 2,534 (1,625) 909 685,356 (224,414) 460,942 11 | Income tax expense | (in thousands of US dollars) Current tax Deferred tax (Note 25) Total For the year ended 31 December 2019 2018 24,048 4,915 28,963 33,243 (28,551) 4,692 The tax on the Group’s profit/(loss) before tax differs from the theoretical amount that would arise using the applicable tax rate as follows: (in thousands of US dollars) Profit/(loss) before tax Tax calculated at the applicable tax rates – 20% (1) Tax effect of expenses not deductible for tax purposes Tax effect of a result of disposal of assets held for sale (2018: assets held for sale and subsidiary) Tax effect of share of profit/(loss) in jointly controlled entities Withholding tax on undistributed profits Tax charge For the year ended 31 December 2019 2018 96,635 (53,637) 19,327 1,881 6,707 (384) 1,432 28,963 (10,727) 4,109 4,938 2,485 3,887 4,692 (1) The applicable tax rate used for 2019 and 2018 is 20% as this is the income statutory tax rate applicable to the Russian ports segment, where a substantial part of the taxable income arises. Deferred tax is provided on the undistributed profits of subsidiaries and joint ventures, except when it is probable that the Group will not distribute dividends from the specific investment in the foreseeable future and the Group can control the payment of dividends. The Company is subject to corporation tax on taxable profits at the rate of 12.5%. Under certain conditions, interest may be exempt from income tax and only subject to defence contribution at the rate of 30%. In certain cases dividends received from abroad may be subject to defence contribution at the rate of 17%. In certain cases dividends received from other Cyprus tax resident Companies may also be subject to special contribution for defence. 12 | Basic and diluted earnings per share | Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number in issue during the respective period. Profit/(loss) attributable to the owners of the parent of the Company - in thousands of US dollars Weighted average of ordinary shares in issue (thousands) Basic and diluted earnings per share for profit/(loss) attributable to the owners of the parent (expressed in US$ per share) For the year ended 31 December 2019 2018 66,580 573,171 0.12 (59,279) 573,171 (0.10) 13 | Dividend distribution | During 2019 and 2018 the Company did not declare or pay dividends to the equity holders of the Company.               Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 74 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 75 14 | Property, plant and equipment | (continued) (in thousands of US dollars) 14 | Property, plant and equipment | (continued) In the cash flow statement proceeds from sale of property, plant and equipment comprise of: Buildings and facilities Assets under construction Land Loading equipment and machinery Other production equipment Office equipment Total (in thousands of US dollars) At 1 January 2019 Cost 134,693 310,970 24,486 174,489 38,184 2,534 685,356 Net book amount Accumulated depreciation and impairment - (118,120) - (88,062) (16,607) (1,625) (224,414) Less: Non-cash items - write-offs of property, plant and equipment Net book amount 134,693 192,850 24,486 86,427 21,577 909 460,942 Adjustment for change in accounting policy for leases (Note 2) Reclassification to right-of-use assets (Note 23) - (6,371) - Restated opening net book amount 134,693 186,479 24,486 Additions Transfers Disposals Depreciation charge (Note 6) Translation reserve - - - - 5,520 21,482 (48) (20,307) - (13,110) - - 16,456 23,437 2,722 (266) 86,161 19,678 11,017 (162) (15,580) 12,362 - - (6,637) 21,577 909 454,305 1,488 (19,332) (29) (765) 390 83 26,769 (57) (8) - (247) (300) (36,952) 93 55,460 Closing net book amount 151,149 216,563 14,098 113,476 3,329 720 499,335 At 31 December 2019 Cost 151,149 371,764 14,098 Accumulated depreciation and impairment - (155,201) - Net book amount 151,149 216,563 14,098 229,133 (115,657) 113,476 10,308 (6,979) 3,329 2,166 778,618 (1,446) (279,283) 720 499,335 For the year ended 31 December 2019 2018 247 (50) 197 293 490 337 (3) 334 129 463 Profit on sale of property, plant and equipment (1) Proceeds from sale of property, plant and equipment (1) Profit on sale of property, plant and equipment is included in ‘Cost of sales’ in the consolidated income statement. From 1 January 2019 leased assets are presented as a separate line item in the balance sheet, see Note 23. Refer to Note 2 for details about the changes in accounting policy. Net carrying amount of property, plant and equipment (included above) that are held under finance leases are as follows: (in thousands of US dollars) Buildings and constructions Loading equipment Total As at 31 December 2018 6,371 266 6,637 Depreciation expense amounting to US$35,203 thousand in 2019 (2018: US$34,310 thousand) has been charged to ‘cost of sales’ and US$1,749 thousand in 2019 (2018: US$1,454 thousand) has been charged to ‘administrative, selling and marketing’ expenses (Note 6). There were no capitalised borrowing costs in 2019 and 2018. Lease rentals relating to the lease of machinery and property amounting to US$289 thousand in 2019 (2018: US$2,827 thousand) have been charged to ‘cost of sales’ and US$123 thousand in 2019 (2018: US$1,295 thousand) has been charged to ‘administrative, selling and marketing expenses’. As at 31 December 2019 the amounts prepaid for equipment not delivered and prepayments for construction works not yet carried out were US$5,893 thousand (2018: US$7,513 thousand).               Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 76 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 77 Goodwill Contractual rights Computer software Total 16 | Financial instruments by category | The accounting policies for financial instruments have been applied in the line items below: 15 | Intangible assets | (in thousands of US dollars) At 1 January 2018 Cost Accumulated amortisation and impairment Net book amount Additions Amortisation charge (Note 6) Translation reserve Closing net book amount At 31 December 2018 Cost Accumulated amortisation and impairment Net book amount Adjustment for change in accounting policy for leases (Note 2) Reclassification to right-of-use assets (Note 23) Restated opening net book amount Additions Amortisation charge (Note 6) Translation reserve Closing net book amount At 31 December 2019 Cost Accumulated amortisation and impairment Net book amount 10,149 - 10,149 - - (1,734) 8,415 8,415 - 8,415 - 8,415 - - 1,028 9,443 9,443 - 9,443 804,740 (126,071) 678,669 - (12,013) (114,833) 551,823 667,742 (115,919) 551,823 (551,823) - - - - - - - - 3,118 (1,078) 2,040 4,390 (896) (534) 5,000 6,820 (1,820) 5,000 818,007 (127,149) 690,858 4,390 (12,909) (117,101) 565,238 682,977 (117,739) 565,238 - (551,823) 5,000 13,415 255 (1,256) 522 4,521 5,965 (1,444) 4,521 255 (1,256) 1,550 13,964 15,408 (1,444) 13,964 (in thousands of US dollars) Financial assets at amortised cost Trade and other receivables (1) Cash and cash equivalents Total Financial liabilities measured at amortised cost Borrowings Trade and other payables (2) Total Lease liabilities Derivative financial instruments Derivative financial instruments not used for hedging at fair value through profit or loss Total (1) Trade and other receivables do not include taxes and prepayments. (2) Trade and other payables do not include taxes and contract liabilities. 17 | Credit quality of financial assets | As at 31 December 2019 2018 47,037 124,353 171,390 837,211 21,669 858,880 34,181 9,184 9,184 43,144 91,613 134,757 871,949 43,735 915,684 - - - The credit quality of financial assets that are fully performing (i.e. neither past due nor impaired) can be assessed by reference to external and internal sources of information like business reputation, financial position and performance, prior working history records. Customers with longer history of working with the Group are regarded by management as having lower risk of default. The credit quality of financial assets that are neither past due nor impaired classified by reference to the working history of the counterparty with the Group is as follows: As at 31 December 2018 the remaining useful lives for contractual rights were up to 54 years. Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to their operating segment. An operating segment-level summary of the goodwill allocation is presented below: (in thousands of US dollars) (in thousands of US dollars) Trade and other receivables PLP and FCT (Russian ports segment)/(2018: PLP (Russian ports segment)) VSC (Russian ports segment) Total As at 31 December 2019 2018 4,084 5,359 9,443 3,640 4,775 8,415 Core customers - existing (more than one year of working history with the Group) Trade and other receivables from other customers (third parties) Other receivables from third parties with Aa1 credit rating by Moody’s Investors Service Trade and other receivables from related parties with Baa3 credit rating by Moody’s Investors Service as at 31 December 2019 and 2018* Total As at 31 December 2019 2018 15,886 2,404 1,773 6,515 26,578 12,520 3,196 - 7,809 23,525 Following the changes in management structure and operations of PLP and FCT in 2019 (Note 4(i)) these are considered by management as one single CGU. Therefore, the goodwill previously allocated to PLP CGU is now allocated to the merged CGU that includes FCT. The recoverable amount of the above CGUs is determined based on value in use calculations. These calculations are based on post-tax cash flow projections and all the assumptions in relation to growth rates are determined by reference to management’s past experience and industry forecasts. The discount rates used reflect the specific risks of each segment. See Note 4(i) for details of assumptions used. * The total gross carrying amount of trade and other receivables from related parties (including past due but not impaired portion) with Baa3 credit rating as of 31 December 2018 was US$8,414 thousand (Note 19). Trade and other receivables from other customers (third parties) are related to highly reputable counterparties with no external credit rating.             Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 78 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 79 17 | Credit quality of financial assets | (continued) Cash at bank and short-term bank deposits (Note 20): (in thousands of US dollars) Agency International rating agency Moody’s Investors Service International rating agency Moody’s Investors Service International rating agency Moody’s Investors Service Fitch Ratings * No rating Total As at 31 December Rating 2019 2018 A1 - Aa3 B1 - Baa3 Caa1 - Caa2 BBB No rating 971 87,505 - 35,716 161 124,353 3,669 52,609 156 35,008 171 91,613 * Cash in hand and cash and cash equivalents with banks for which there is no rating. These banks are highly reputable local banks in the country of operation of 19 | Trade and other receivables | (continued) According to management estimates the fair values of trade and other receivables do not materially differ from their carrying amounts. The average effective interest rate on loans receivable from related parties were 6.4% (2018: 6.4%). At 31 December 2019, trade and other receivables amounting to US$26,577 thousand were zero days past due (31 December 2018: US$23,525 thousand). Trade and other receivables amounting to US$3,770 thousand (31 December 2018: US$4,677 thousand) were past due but not impaired. These relate to a number of independent customers for whom there is no history of either non repayment in the past or renegotiation of the repayment terms due to inability of the customer to repay the balance. The analysis of past due trade and other receivables is as follows: (in thousands of US dollars) the respective Group entities. 18 | Inventories | (in thousands of US dollars) Spare parts and consumables Total All inventories are stated at cost. 19 | Trade and other receivables | (in thousands of US dollars) Trade receivables - third parties Trade receivables - related parties (Note 31(d)) Total trade receivables Other receivables Loans to related parties (Note 31(g)) VAT and other taxes recoverable Total financial assets at amortised cost Prepayments for goods and services Prepayments for goods and services - related parties (Note 31(d)) Total trade and other receivables Less non-current portion: Loans to related parties Other receivables Total non-current portion Current portion Less than 1 month overdue From 1 to 3 months overdue From 3 to 6 months overdue Over 6 months overdue Total As at 31 December 2019 2018 2,716 1,006 20 28 3,770 2,842 1,781 54 - 4,677 During 2019 no trade receivables (2018: US$549 thousand) were impaired and written off in full. In 2018 these were individually impaired trade receivables mainly related to customers, which were in a difficult economic situation. Other classes within trade and other receivables do not contain impaired assets. The fair value of receivables approximates their carrying value as the impact of the discounting is insignificant and is within Level 3 of the fair value hierarchy. The fair value is based on discounting of cash flows using 7% (2018: 7%) discount rate. The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: (in thousands of US dollars) Currency: US dollar Russian rouble Euro Total As at 31 December 2019 2018 8,234 54,426 323 62,983 24,535 31,111 153 55,799 The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Group does not hold any collateral as security for any receivables. As at 31 December 2019 2018 8,306 8,306 6,555 6,555 As at 31 December 2019 2018 19,655 6,515 26,170 4,177 16,690 10,240 31,107 4,285 1,421 62,983 16,127 8,414 24,541 3,661 14,942 7,404 26,007 5,249 2 55,799 (16,583) (913) (17,496) (14,898) - (14,898) 45,487 40,901           Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 80 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 81 20 | Cash and cash equivalents | (in thousands of US dollars) Cash at bank and in hand Short-term bank deposits (less than 90 days) Total As at 31 December 2019 2018 48,908 75,445 124,353 35,155 56,458 91,613 The effective average interest rate on short-term deposits was 1.25% in 2019 (2018: 1.93%) and these deposits have an average maturity of 26 days in 2019 (2018: 22 days). Cash and cash equivalents include the following for the purposes of the cash flow statement: (in thousands of US dollars) Cash and cash equivalents Total 21 | Share capital, share premium | As at 31 December 2019 2018 124,353 124,353 91,613 91,613 Authorised share capital The authorised share capital of the Company amounts to US$175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000 ordinary non-voting shares with a par value of US$0.10 each. Issued share capital The issued share capital of the Company amounts to US$57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary non-voting shares with a par value of US$0.10 each. The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have the right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum of any general meeting. (in thousands of US dollars) Number of shares ‘000 Share capital Share premium Total At 1 January/31 December 2018/ 31 December 2019 573,171 57,317 923,511 980,828 22 | Borrowings | Borrowings include finance lease liabilities in the figures related to 2018. Starting 1 January 2019, after the adoption of new accounting policies for leases (Note 2), lease liabilities are disclosed separately in Note 23. (in thousands of US dollars) Non-current borrowings Bank loans Non-convertible unsecured bonds Finance lease liabilities Total non-current borrowings Current borrowings Bank loans Interest payable on bank loans Interest payable on finance lease liabilities Non-convertible unsecured bonds Non-convertible unsecured bonds – interest payable Total current borrowings Total borrowings The maturity of non-current borrowings (excluding finance lease liabilities) is analysed as follows: (in thousands of US dollars) Between 1 and 2 years Between 2 and 5 years Total As at 31 December 2019 2018 71,939 666,174 - 738,113 36 115 - 80,768 18,179 99,098 97 842,664 8,005 850,766 3 - 135 - 21,045 21,183 837,211 871,949 As at 31 December 2019 2018 161,523 576,590 738,113 71,746 771,015 842,761 Bank borrowings mature until 2024 (31 December 2018: 2024) and bonds mature until 2023 (31 December 2018: 2023). Changes in liabilities and assets arising from borrowings and derivative financial instruments (refer to Note 23 for changes in lease liabilities): (in thousands of US dollars) At beginning of year Leases disclosed separately in Note 23 after adoption of new accounting policy for leases (Note 2) Restated opening balance Non-cash transactions Interest charged Loss on extinguishment of financial liabilities Change in fair value of derivative financial instruments Foreign exchange differences Cash transactions Bank loans taken Borrowings repaid during the year Interest repaid during the year and derivatives settlements At end of year * Represents net position (liabilities less assets) of derivative financial instruments For the year ended 31 December 2019 Note  Borrowings Fair value of derivative financial instruments* Total 9 9 24, 9 871,949 (8,140) 863,809 72,688 7,524 - 28,086 70,893 (131,382) (74,407) 837,211 - - 871,949 (8,140) - 863,809 - - 9,340 72,688 7,524 9,340 55 28,141 - - 70,893 (131,382) (211) (74,618) 9,184 846,395                 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 82 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 83 22 | Borrowings | (continued) (in thousands of US dollars) At beginning of year Non-cash transactions Interest charged Loss on extinguishment of financial liabilities Change in fair value of derivative financial instruments Foreign exchange differences Leases taken Cash transactions Bank loans taken Borrowings and leases repaid during the year Interest repaid during the year and swap cash settlements Net proceeds received upon termination of derivative financial instruments At end of year * Represents net position (liabilities less assets) of derivative financial instruments For the year ended 31 December 2018 Note  Borrowings and finance leases Fair value of derivative financial instruments* Total 1,074,753 (78,386) 996,367 9 9 9 24(ii) 24(ii) 82,718 1,765 - (48,328) 276 100 (156,341) (82,994) - 871,949 - - 27,509 7,813 - - - 15,350 27,714 - 82,718 1,765 27,509 (40,515) 276 100 (156,341) (67,644) 27,714 871,949 In 2015-2016 the Group partly restructured its debt portfolio with the aim of facilitating greater financial flexibility and diversification of the debt portfolio of the Group. For this purpose the Group has repaid certain bank facilities before their maturity dates, terminated the exiting swap arrangement, placed 3 issues RUR-denominated bonds of RUR 5 billion each in the total amount of RUR 15 billion and entered in swap agreements. These swap agreements were terminated in the second half of 2018 (see Note 24(ii)). In April and September 2016 the GPI group has successfully finalised issue of two tranches of Eurobonds on the Irish Stock Exchange in the total amount of US$700 million at a fixed coupon rate. Some companies within GPI group have unconditionally and irrevocably guaranteed these Eurobonds on a joint and several basis. In 2018 and 2019 the Group has repurchased some part of Eurobonds and partly derecognised the liability. In 2019 the Group obtained RUR-denominated bank loan in amount RUR 4,447 million (US$70,843 thousand) that bears fixed interest rate and matures in 2024. The proceeds from this loan were used to buy-back the Eurobonds for the total nominal amount of US$69,480. Fair value of bank loans and non-convertible unsecured bonds was as follows: (in thousands of US dollars) Non-convertible unsecured bonds Non-convertible unsecured bonds Bank loans Total Fair value hierarchy Level 1 Level 2 Level 2 As at 31 December 2019 2018 257,254 552,958 71,975 882,187 873,577 - 100 873,677 22 | Borrowings | (continued) Finance lease liabilities - minimum lease payments: (in thousands of US dollars) Under 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Total Future finance charges of finance leases Present value of finance lease liabilities The present value of finance lease liabilities is analysed as follows: (in thousands of US dollars) Under 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Total As at 31 December 2018 1,506 1,576 4,296 50,150 57,528 (49,388) 8,140 As at 31 December 2018 138 73 190 7,739 8,140 The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows (the table excludes interest payable): (in thousands of US dollars) 6-12 months 1-5 years Over 5 years Total The carrying amounts of the Group’s borrowings are denominated in the following currencies: (in thousands of US dollars) Russian rouble US dollar Total As at 31 December 2019 2018 80,676 233,554 - 314,230 - 215,738 7,807 223,545 As at 31 December 2019 2018 321,021 516,190 837,211 229,543 642,406 871,949 As of 31 December 2019 from the above amount of borrowings denominated in US$114,357 thousand were covered by RUR/US$ currency forward contracts effectively converting the US$-denominated obligation into RUR denominated one (Note 24) and US$87,000 thousand were covered by RUR/US$ currency option contracts that limit foreign exchange risk exposure to a certain level that management considers appropriate in the current economic environment. Agreements of the bank loans given to some of the subsidiaries of the Group include certain covenants which set forth certain financial ratios and other non-financial covenants that have to be complied with. The Group was in compliance with all covenants. The weighted average effective interest rate on borrowings (excluding lease liabilities – see Note 23) is 8.98% (2018: 8.5%, including finance leases).               Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 84 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 85 23 | Lease liabilities and right-of-use assets | Movements in lease liabilities are analysed as follows: (in thousands of US dollars) At beginning of period Adjustments for change in accounting policy for leases (Note 2) Reclassification from borrowings (Note 22) Operating leases recognised on balance sheet following IFRS 16 adoption Lease liability recognised as at 1 January 2019 Non-cash transactions Adjustments related to changes in the index affecting lease payments New leases Lease termination Interest charged (Note 9) Exchange differences Cash transactions Repayments of leases Repayments of interest At end of period Of which are: Current lease liabilities Non-current lease liabilities The maturity of non-current lease liabilities is analysed as follows: (in thousands of US dollars) Between 1 and 2 years Between 2 and 5 years Over 5 years Total The carrying amounts of the Group’s lease liabilities are denominated in the following currencies: (in thousands of US dollars) Russian rouble US dollar Total For the year ended 31 December 2019 - 8,140 18,663 26,803 3,798 1,251 (180) 4,375 3,276 (871) (4,271) 34,181 1,194 32,987 As at 31 December 2019 936 866 31,185 32,987 As at 31 December 2019 33,535 646 34,181 Total cash outflow for leases in 2019 is US$5,553 thousand. Major part of US$412 thousand lease expenses included in cost of sales and administrative, selling and marketing expenses is related to short-term leases. 23 | Lease liabilities and right-of-use assets | (continued) Movements in right-of-use assets are analysed as follows: (in thousands of US dollars) Buildings and facilities Land Loading equipment and machinery Other production equipment Office equipment Opening net book amount as at 1 January 2019 - - - Adjustment for change in accounting policy for leases (Note 2) Reclassification from intangible assets and property, plant and equipment (Note 2) Operating leases recognised on balance sheet following IFRS 16 adoption Restated opening net book amount Additions Adjustments related to changes in the index affecting lease payments Lease termination Depreciation (Note 6) Exchange differences 7,156 551,038 9,116 9,547 16,272 560,585 24 - (231) (402) 1,962 4 3,798 - (11,870) 68,202 Closing net book amount as at 31 December 2019 17,625 620,719 266 - 266 913 - - (112) 68 1,135 - - - 144 - - (6) 6 144 - - - 74 - - (1) 3 76 Total - 558,460 18,663 577,123 1,159 3,798 (231) (12,391) 70,241 639,699 24 | Derivative financial instruments | (i) 2019: During 2019 the Group entered into several RUR/US$ currency options and forward contracts in order to hedge part of foreign exchange risk associated with its US$ denominated non-convertible unsecured bonds (which have been provided as loans to the Russian operating subsidiaries). The Group decided not to apply hedge accounting to options and forward contracts. As a result the change in fair value is presented in the consolidated income statement under ‘change in fair value of derivatives’ as part of ‘finance income/(costs) – net’ (see Note 9). Cash collected/paid in relation to the options and forward arrangements not used for hedging is presented in the consolidated statement of cash flows as ‘proceeds from/(settlement of) derivative financial instruments not used for hedging’ as part of ‘financing activities’. During 2019 several forward contracts were settled with the resulting net cash outflow US$211 thousand. As of 31 December 2019 the net fair value of options contracts was negative US$(7,868) and net fair value of forward contracts was negative US$(1,316) thousand. As of 31 December 2019 there are outstanding forward contracts to acquire US$130,000 thousand and currency options contracts with possibility to acquire US$87,000 thousand. (ii) 2018: During 2015 and 2016 the Group entered into three cross-currency swap arrangements to exchange its RUR-denominated liabilities related to the newly issued bonds (3 issues of RUR 5,000 million each) with fixed interest rate of approximately 13% in the amount RUR 15,000 million (see Note 22) to US$-denominated debt with a lower fixed interest rate. The Group decided not to apply hedge accounting rules to the new swaps. As a result the change in fair value is presented in the income statement under “change in fair value of derivatives” as part of “finance income/(costs) – net” (see Note 9). Cash collected/paid in relation to the swap arrangements not used for hedging that relate to the swap of fixed RUR denominated interest to fixed US$ denominated interest is presented in the consolidated statement of cash flows as “proceeds from/(settlement of) derivative financial instruments not used for hedging” as part of ‘financing activities’. At the end of 2018 the Group terminated the cross-currency interest rate swap arrangements. The net proceeds received on termination of swaps amounted to US$27,714 thousand.           Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 86 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 87 25 | Deferred income tax liabilities | Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority. The offset amounts are as follows: (in thousands of US dollars) Deferred tax assets: Deferred tax asset to be recovered after more than 12 months Deferred tax liabilities: Deferred tax liability to be recovered after more than 12 months Deferred tax liabilities (net) The gross movement on the deferred income tax account is as follows: (in thousands of US dollars) At the beginning of the year Income statement charge: Deferred tax credit (Note 11) Other movements: Currency translation differences At the end of the year As at 31 December 2019 2018 61,264 60,499 (144,332) (83,068) (130,436) (69,937) For the year ended 31 December 2019 2018 (69,937) (118,413) (4,915) 28,551 (8,216) (83,068) 19,925 (69,937) 26 | Trade and other payables | (in thousands of US dollars) Trade payables - third parties Trade payables - related parties (Note 31(e)) Payables for property, plant and equipment Other payables - third parties Other payables - related parties (Note 31(e)) Payroll payable Accrued expenses Contract liabilities Taxes payable (other than income tax) Total trade and other payables Less non-current portion Current portion As at 31 December 2019 2018 4,108 22 782 416 630 2,281 13,430 7,504 4,105 33,278 3,351 109 1,339 4,777 831 1,858 18,867 3,987 3,657 38,776 - - 33,278 38,776 The increase in contract liabilities in 2019 compared to 2018 is explained by a number of contracts with customers renewed by the end of 2019 that required increased trade prepayments to be paid to the Group. During the year ended 31 December 2019, the Group recognised revenue in the amount of US$3,987 thousand (2018: US$5,007 thousand) that related to carried-forward contract liabilities at 1 January 2019. The fair value of trade and other payables approximates their carrying amount at the balance sheet date. The movement on the deferred tax assets (+) and liabilities (-) during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: 27 | Assets held for sale | (in thousands of US dollars) Property, plant and equipment Lease liabilities and right-of-use assets Withholding tax provision Intangible assets Borrowings Tax losses Other assets and liabilities Total At 1 January 2018 Income statement (Note 11) Translation differences At 31 December 2018 Income statement (Note 11) Reclassification following IFRS 16 adoption Translation differences At 31 December 2019 (60,138) 1,777 10,205 (48,156) 1,376 (301) (5,987) (53,068) - - - - (1,898) (133,838) (329) (3,197) 630 2,245 22,659 49 - 82,991 21,930 (14,008) (4,465) (108,934) (280) 90,913 2,766 (1,297) (109) 45 (8,329) (108,633) (13,200) (119,067) - 108,934 (606) (6,368) 5 (104) - - - 11,457 (235) 94,041 1,733 (83,068) (5,201) (118,413) 5,747 439 985 633 - 115 28,551 19,925 (69,937) (4,915) - (8,216) (a) Disposal of VEOS In April 2019 the Group completed the disposal of its 50% holding in VEOS, one of the Group’s joint ventures and operating segments, to Liwathon. As previously announced, the proceeds from the sale went towards the further deleveraging. The result of the disposal is a US$(50) thousand loss that is reflected within ‘other gains/(losses) – net’. In addition, US$(33,485) thousand (negative) are recycled to ‘other gains/(losses) – net’ from the currency translation reserve. This is the amount related to VEOS that was recognised in other comprehensive income and accumulated in the equity. The investment in VEOS was reclassified to assets held for sale in the end of 2018. The movement in currency translation reserve related to VEOS since reclassification to assets held for sale until the disposal was US$(257) thousand (negative). (b) Disposal of Logistika-Terminal In September 2018, upon obtaining approval of relevant regulatory authorities, the Group completed the sale of its 100% holding in JSC Logistika- Terminal (LT), one of the Group’s two inland terminals located near St. Petersburg that was included in the Russian ports segment, to PJSC TransContainer for a cash consideration of RUR 1.9 billion. As previously announced, the proceeds from the sale went towards the further deleveraging. Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The amount of unremitted earnings of certain subsidiaries and joint ventures on which no withholding tax provision was recognised amounts to US$844,515 thousand (2018: US$659,619 thousand). The result of the disposal is a US$615 thousand gain that is reflected within ‘other gains/(losses) – net’. In addition, US$(29,862) thousand (negative) are recycled to ‘other gains/(losses) – net’ from the currency translation reserve. This is the amount related to LT that was recognised in other comprehensive income and accumulated in the equity. LT assets and liabilities were reclassified to assets and liabilities held for sale in August 2017 when the sales agreement was signed. The property, plant and equipment of LT was tested for impairment based on fair value less costs of disposal using comparative market method taking into account the sales agreement. As a result, an impairment of US$11,400 thousand was recognised in 2017. The movement in currency translation reserve related to LT since reclassification to assets held for sale until the disposal was US$(3,472) thousand (negative).             Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 88 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 89 27 | Assets held for sale | (continued) 28 | Joint ventures and non-controlling interests | (continued) The following assets and liabilities were classified as held for sale in relation to LT: Set out below are the selected summarised financial information for joint ventures that are accounted for using the equity method. (in thousands of US dollars) Property, plant and equipment Trade and other receivables and other current assets Cash and cash equivalents Assets classified as held for sale Deferred tax liabilities Trade and other payables Liabilities directly associated with assets classified as held for sale Net carrying amount classified as held for sale 28 | Joint ventures and non-controlling interests | As at Time of sale 31 December 2017 28,549 759 426 29,734 1,631 671 2,302 27,432 33,713 865 835 35,413 1,867 560 2,427 32,986 (a) Joint ventures The Group has the following investments in joint ventures – VEOS (disposed in April 2019, see Note 27(a)), MLT group and CD Holding group. These entities are an integral part of operations of the Group. See Note 1 and Note 5 for more details. There are no contingent liabilities relating to the Group’s interest in the joint ventures. The Group’s share of capital expenditure contracted for at the balance sheet date but not yet incurred by the joint ventures amounted to US$4,921 thousand at 31 December 2019. Selected income statement items (in thousands of US dollars) Revenue Depreciation, amortisation and impairment Interest income Interest expense Profit/(loss) before income tax Income tax expense Profit/(loss) after tax Other comprehensive income/(loss) Total comprehensive income/(loss) Selected balance sheet items (in thousands of US dollars) The summarised investments in joint ventures accounted for using the equity method as at 31 December 2019 and 31 December 2018 are as follows: Total non-current assets Cash and cash equivalents (including current deposits with maturity over 90 days) (in thousands of US dollars) At 1 January 2019 Recognised share of profit/(loss) Share of profits of joint ventures applied against other long-term interests (Note 31(g)) Translation differences (through other comprehensive income/(loss)) At 31 December 2019 (in thousands of US dollars) At 1 January 2018 Recognised share of profit/(loss) Dividends declared by joint venture Share of losses of joint ventures applied against other long-term interests (Note 31(g)) Reclassified to assets held for sale (Note 27(a)) Translation differences (through other comprehensive income/(loss)) At 31 December 2018 * In April 2019 the Group completed the disposal of its 50% shareholding in VEOS (Note 27(a)). MLT CD Holding Total 24,795 767 - 2,028 27,590 - 1,153 (936) (217) - 24,795 1,920 (936) 1,811 27,590 VEOS* MLT CD Holding Total 7,341 5,020 - - (11,773) (588) - 48,315 (14,305) (1,618) - - (7,597) 24,795 1,262 (3,140) - 1,696 - 182 - 56,918 (12,425) (1,618) 1,696 (11,773) (8,003) 24,795 For MD following the substantial reduction of cargo volumes in 2018 the recoverable amount was determined based on the expected fair value less costs of disposal of those assets which have active market and their value could be reliably determined. As a result the investment in Multi-Link Terminals Ltd (MLT, being the parent of MD) was impaired by US$13,946 thousand in 2018. “Recognised share of profit/(loss)” for the year ended 31 December 2018 includes the impairment of MLT as described above and the Group’s share of reversal of previously recognised impairment related to VEOS in the amount of US$5,211 thousand based on its fair value less costs of disposal at 31 December 2018. Other current assets Total current assets Total assets Non-current financial liabilities Other non-current liabilities Total non-current liabilities Current financial liabilities excluding trade and other payables Other current liabilities including trade and other payables Total current liabilities Total liabilities Net assets For the year ended 31 December 2019 MLT CD Holding 25,073 (3,496) 98 (512) 1,244 (221) 1,023 2,279 3,302 10,798 (918) 18 (985) 1,629 (92) 1,537 (289) 1,248 As at 31 December 2019 MLT CD Holding 28,111 12,546 2,380 14,926 43,037 5,259 589 5,848 1,105 3,185 4,290 10,138 16,494 573 969 1,542 18,036 17,599 - 17,599 111 1,340 1,451 19,050 32,899 (1,014)       Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 90 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 91 28 | Joint ventures and non-controlling interests | (continued) Selected income statement items (in thousands of US dollars) Revenue Depreciation, amortisation and impairment Reversal of impairment of property, plant and equipment Interest income Interest expense Profit/(loss) before income tax Income tax expense Profit/(loss) after tax Other comprehensive income/(loss) Total comprehensive income/(loss) Dividends declared by joint venture Selected balance sheet items (in thousands of US dollars) Total non-current assets Cash and cash equivalents (including current deposits with maturity over 90 days) Other current assets Total current assets Total assets Non-current financial liabilities Other non-current liabilities Total non-current liabilities Current financial liabilities excluding trade and other payables Other current liabilities including trade and other payables Total current liabilities Total liabilities Net assets For the year ended 31 December 2018 VEOS MLT CD Holding 30,939 (1,141) 10,422 7 (244) 10,040 - 10,040 (1,175) 8,865 - 25,834 (8,533) - 108 (261) (548) 68 (480) (5,579) (6,059) 2,157 10,851 (789) - - (936) (4,187) - (4,187) 240 (3,947) - As at 31 December 2018 VEOS MLT CD Holding 19,073 2,352 12,495 14,847 33,920 2,575 - 2,575 2,175 5,624 7,799 10,374 25,085 7,498 5,134 12,632 37,717 2,590 1,116 3,706 819 3,595 4,414 8,120 14,272 339 992 1,331 15,603 16,639 - 16,639 - 1,226 1,226 17,865 23,546 29,597 (2,262) The information above reflects the amounts presented in the financial statements of the joint ventures adjusted for differences in accounting policies between the group and the joint ventures. Set out below is the reconciliation of the summarised financial information presented to the carrying amount of the Group interest in joint ventures. 28 | Joint ventures and non-controlling interests | (continued) (in thousands of US dollars) Opening net assets at the beginning of the year Profit/(loss) for the period Other comprehensive income/(loss) Closing net assets at the end of the year Ownership interest Interest in joint venture Share of losses of joint ventures applied against other long-term interests (Note 31(g)) Other movements Goodwill Impairment of investment Carrying value on 31 December 2019 (in thousands of US dollars) Opening net assets at the beginning of the year Profit/(loss) for the period Dividends declared Other comprehensive income/(loss) Closing net assets at the end of the year Ownership interest Interest in joint venture Reclassification to assets held for sale (Note 27(a)) Share of losses of joint ventures applied against other long-term interests (Note 31(g)) Other movements Goodwill Impairment of investment* Carrying value on 31 December 2018 For the year ended 31 December 2019 MLT CD Holding Total 29,597 (3,309) 26,288 1,023 2,279 1,537 (289) 2,560 1,990 32,899 (2,061) 30,838 75% 24,673 - - 18,567 (15,650) 27,590 75% (1,544) 23,129 760 784 - - - 760 784 18,567 (15,650) 27,590 For the year ended 31 December 2018 VEOS MLT CD Holding Total 14,681 10,040 - (1,175) 23,546 50% 11,773 (11,773) - - - - - 37,813 (480) (2,157) (5,579) 29,597 75% 22,197 - - - 16,544 (13,946) 24,795 638 (4,187) - 240 (3,309) 75% (2,480) 53,132 5,373 (2,157) (6,514) 49,834 31,490 - (11,773) 1,696 784 - - - 1,696 784 16,544 (13,946) 24,795           Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 92 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 93 28 | Joint ventures and non-controlling interests | (continued) (b) Non-controlling interests Ust-Luga Container Terminal (located in Ust-Luga, North-West Russia) is an 80% subsidiary where Eurogate, one of the leading container terminal operators in Europe, has a 20% non-controlling interest on 31 December 2019 and 31 December 2018. During 2019 and 2018 Ust-Luga Container Terminal did not declare or pay dividends to the non-controlling interest. Set out below are the selected summarised financial information for Ust-Luga Container Terminal. The amounts disclosed for the subsidiary are before inter-company eliminations. Selected income statement items (in thousands of US dollars) Revenue Profit/(loss) for the year Other comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year Profit/(loss) for the year attributable to non-controlling interest Total comprehensive income/(loss) for the year attributable to non-controlling interest Selected balance sheet items (in thousands of US dollars) Total non-current assets Total current assets Total assets Total non-current liabilities Total current liabilities Total liabilities Net assets Accumulated non-controlling interest Selected cash flow items (in thousands of US dollars) Net cash from operating activities Net cash used in investing activities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents For the year ended 31 December 2019 2018 27,018 5,462 8,933 14,395 1,092 2,879 13,541 4,749 (14,230) (9,481) 950 (1,896) As at 31 December 2019 2019 2018 59,101 32,825 91,926 5,615 741 6,356 85,570 17,114 47,481 24,731 72,212 - 1,037 1,037 71,175 14,235 For the year ended 31 December 2019 13,594 (2,312) (765) 10,517 2018 4,111 (5,986) - (1,875) 29 | Contingencies | Operating environment of the Group The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations. The Russian economy continues to be negatively impacted by ongoing political tension in the region and international sanctions against certain Russian companies and individuals. Firm oil prices, low unemployment and rising wages supported a modest growth of the economy in 2019. The operating environment has a significant impact on the Group’s operations and financial position. Management is taking necessary measures to ensure sustainability of the Group’s operations. However, the future effects of the current economic situation are difficult to predict and management’s current expectations and estimates could differ from actual results. The tariff legislation has changed as of 14 August 2018 and requires all tariffs to be set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the new legislation. The Group continues to monitor for any legislative proposals and regulatory actions that could lead to changes to the existing tariff regulations. It seeks a proactive dialog with the relevant Russian federal authorities. It believes it is as well placed as any market participant to adapt to any future changes in tariff regulation. Finland represents established market economy with more stable political systems and developed legislation based on EU directives and regulations. Tax legislation in Russia Russian tax and customs legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be challenged by the tax authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year when a decision about the review was made. Under certain circumstances reviews may cover longer periods. The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development although it has specific features. This legislation provides for the possibility of additional tax assessment in respect of controlled transactions (transactions between related parties and certain transactions with unrelated parties), if such transactions are not on an arm’s length basis. Tax liabilities arising from controlled transactions are determined using actual transaction prices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that such prices could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group. The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on the assumption that these companies are not subject to Russian profits tax, because they do not have a permanent establishment in Russia. The Controlled Foreign Company (CFC) legislation introduced Russian taxation on the profits of foreign companies and non-corporate structures (including trusts) controlled by Russian tax residents (controlling parties). The CFC income is subject to a 20% tax rate. This interpretation of the relevant legislation may be challenged but the impact of any such challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the overall operations of the Group. As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that could reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax positions and interpretations be challenged by the relevant authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 94 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 95 29 | Contingencies | (continued) Tax legislation in Russia (continued) 30 | Commitments | (continued) Operating lease commitments – Group as lessee The Group’s management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, currency legislation and customs positions will be sustained. Accordingly, as of 31 December 2019 and as of 31 December 2018 management believes that no additional tax liability has to be accrued in the financial statements. Legal proceedings and investigations From time to time and in the normal course of business, claims against the Group may be received. On the basis of its own estimates and both internal and external professional advice, management is of the opinion that no provisions should be recognised in these consolidated financial statements. Environmental matters The future minimum lease payments payable under non-cancellable operating leases (mainly port infrastructure) were as follows: (in thousands of US dollars) Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years Total 31 | Related party transactions | As at 31 December 2018 2,598 10,005 44,205 56,808 The Group is subject to laws, regulations and other legal requirements relating to the protection of the environment, including those governing the discharge of waste water and the clean-up of contaminated sites. The Group is jointly controlled by Delo Group and APM Terminals. Issues related to protection of water resources in Russia are regulated primarily by the Environmental Protection Law, the Water Code and a number of other federal and regional normative acts. Pursuant to the Water Code, discharging waste water into the sea is allowed, provided that the volume does not exceed the established standards of admissible impact on water resources. At the same time, the Environmental Protection Law establishes a “pay-to-pollute” regime, which implies that companies need to pay for discharging waste waters. However, the payments of such fees do not relieve a company from its responsibility to comply with environmental protection measures. If the operations of a company violate environmental requirements or cause harm to the environment or any individual or legal entity, environmental authorities may suspend these operations or a court action may be brought to limit or ban these operations and require the company to remedy the effects of the violation. The limitation period for lawsuits for the compensation of damage caused to the environment is twenty years. Courts may also impose clean-up obligations on offenders in lieu of or in addition to imposing fines. The enforcement of environmental regulation in the countries in which the Group operates is evolving and the enforcement posture of government authorities is continuously being reconsidered. The Group periodically evaluates its obligations under environmental regulations. As obligations are determined, they are recognised immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be estimated but could be material. In the current enforcement climate under existing legislation, management believes that there are no significant liabilities for environmental damage. 30 | Commitments | Capital commitments Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows: (in thousands of US dollars) Property, plant and equipment Total As at 31 December 2019 2018 14,998 14,998 6,540 6,540 For the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 “Related Party Disclosures”. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. The following transactions were carried out with related parties: (a) Sale of services (in thousands of US dollars) Entities under control of owners of controlling entities Joint ventures in which GPI is a venturer Other related parties Total (b) Purchases of services and incurred expenses (in thousands of US dollars) Entities under control of owners of controlling entities Other related parties Total For the year ended 31 December 2019 2018 103,270 94,757 2 30 3 45 103,302 94,805 For the year ended 31 December 2019 2018 334 1,978 2,312 330 2,334 2,664         Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 96 Notes to the Consolidated Financial Statements (continued) Notes to the Consolidated Financial Statements (continued) 97 32 | Events after the balance sheet date | The Group’s outlook for 2020 may be impacted by the Coronavirus (COVID-19) outbreak in China, which has significantly lowered visibility on what to expect in 2020. The Management is closely monitoring the situation with the outbreak of Coronavirus (COVID-19) and is ready to act depending on the development of the situation. There were no other material post balance sheet events which have a bearing on the understanding of these consolidated financial statements. 31 | Related party transactions | (continued) (c) Interest income (in thousands of US dollars) Joint ventures in which GPI is a venturer Total (d) Trade and other receivables and prepayments (in thousands of US dollars) Entities under control of owners of controlling entities Joint ventures in which GPI is a venturer Total (e) Trade and other payables (in thousands of US dollars) Entities under control of owners of controlling entities Other related parties Payroll payable and accrued expenses related to key management Total (f) Key management compensation/directors’ remuneration (in thousands of US dollars) Key management compensation: Salaries, payroll taxes and other short-term employee benefits Directors’ remuneration (included also above): Fees Emoluments in their executive capacity Total For the year ended 1 December 2019 2018 951 951 939 939 As at 31 December 2019 2018 7,926 10 7,936 8,414 2 8,416 As at 31 December 2019 2018 652 - 3,421 4,073 853 87 2,566 3,506 For the year ended 31 December 2019 2018 8,311 10,041 248 570 818 375 813 1,188 (g) Loans to related parties The details of loans provided mainly to joint ventures in which GPI is a venturer are presented below (see also Note 19): (in thousands of US dollars) At the beginning of the year Loans advanced during the year Interest charged Loan and interest repaid during the year GPI’s share of losses of joint ventures applied against other long-term interests (Note 28(a)) Foreign exchange differences At the end of the year (Note 19) For the year ended 31 December 2019 2018 14,942 - 951 (320) 936 181 16,690 14,559 1,400 939 (260) (1,696) - 14,942 The loans are not secured, bear effective interest at 6.4% (2018: 6.4%) and are repayable in 2020. However, the loans are classified as non-current because of the Group’s intention to defer repayment for more than 12 months.                 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 98 Independent Auditor’s Report To the Members of Global Ports Investments Plc Report on the Audit of the Financial Statements | Our opinion | In our opinion, the accompanying consolidated financial statements of Global Ports Investments Plc (the “Company”) and its subsidiaries and joint ventures (hereafter collectively referred to as the “Group” consistent with the consolidated financial statements) give a true and fair view of the consolidated financial position of the Group as at 31 December 2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113. What we have audited We have audited the consolidated financial statements which are presented in pages 26 to 97 and comprise: ޭ the consolidated balance sheet as at 31 December 2019; ޭ the consolidated income statement for the year then ended; ޭ the consolidated statement of comprehensive income for the year then ended; ޭ the consolidated statement of changes in equity for the year then ended; ޭ the consolidated statement of cash flows for the year then ended; and ޭ the notes to the consolidated financial statements, which include a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the consolidated financial statements is International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113. | 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 Consolidated 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 remained independent of the Group throughout the period of our appointment in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. PricewaterhouseCoopers Ltd, City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus P O Box 53034, CY-3300 Limassol, Cyprus T: +357 25 - 555 000, F:+357 - 25 555 001, www.pwc.com.cy PricewaterhouseCoopers Ltd is a private company registered in Cyprus (Reg. No.143594). Its registered office is at 3 Themistocles Dervis Street, CY-1066, Nicosia. A list of the company’s directors, including for individuals the present and former (if any) name and surname and nationality, if not Cypriot and for legal entities the corporate name, is kept by the Secretary of the company at its registered office. PwC refers to the Cyprus member firm, PricewaterhouseCoopers Ltd and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. Independent Auditor’s Report (continued) 99 Our audit approach Overview As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Board of 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. Materiality Overall group materiality: US$5,6 million, which represents approximately 2.5% of Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”). Audit scope We conducted full scope audit procedures for the parent entity, all the significant components, and the consolidation process. For the remaining non-significant components, we performed a full scope audit, or analytical procedures, and/or audit of specific account balances. Key audit matters We have identified the impairment assessment of goodwill and other non-financial assets including individual assets and cash generating units as the key audit matter. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They 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 the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements as a whole. Overall group materiality US$5,6 million How we determined it Approximately 2.5% of EBITDA We chose EBITDA as the benchmark, because, in our view: Rationale for the materiality benchmark applied ޭ It is the benchmark against which the performance of the Group is most commonly measured by the users, and ޭ It is a generally accepted benchmark. We chose 2.5% which is within the range of acceptable quantitative materiality thresholds in auditing standards. We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above US$0,57 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 100 Independent Auditor’s Report (continued) Independent Auditor’s Report (continued) 101 Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud | Reporting on other information | The Board of Directors is responsible for the other information. The other information comprises the information included in the Management Report in the consolidated financial statements, including the Corporate Governance Statement, and the Directors’ responsibility statement which we obtained prior to the date of this auditor’s report and the Annual Report, which is expected to be made available to us after that date. Other information does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Group’s complete Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members of the Company at the Company’s Annual General Meeting and we will take such other action as may be required. | Responsibilities of the Board of Directors and those charged with governance for the Consolidated Financial Statements | The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’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 Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed the Key Audit Matter Impairment assessment of goodwill and other non-financial assets We focused on this area due to: ޭ the size of the goodwill and other nonfinancial assets, ޭ the assessment of whether there is an indication for impairment/ reversal of impairment involves subjective judgements, and ޭ the assessment of the recoverable amount of the cash generating units (“CGUs”) involves complex and subjective judgements about the future results of the business and the applicable discount rates to be used. In particular, we focused our audit effort on the Board of Directors’ assessment of impairment of the following CGUs: ޭ Petrolesport and Farwater and First Container Terminal (PLP/ FCT) CGU and Vostochnaya Stevedoring Company (VSC) CGU due to the fact that these two CGUs have allocated goodwill and therefore require an annual impairment assessment, and ޭ Ust-Luga Container Terminal (ULCT) CGU due to the fact that for this CGU, an impairment test was carried by management although no impairment indications were identified, and a reasonably possible change in the key assumptions in the impairment model would cause the carrying amount of the CGU to exceed its recoverable amount. We evaluated the Board of Directors’ conclusions on their assessment of non-existence of indications for impairment or reversal of impairment which was based on external and internal sources of information. We evaluated the valuation inputs and assumptions, methodologies and calculations adopted by the Company’s Board of Directors in determining the CGUs’ recoverable amounts. In order to assist us in our audit we involved PwC valuation experts that have the knowledge and experience in the industry and country of operation to assist us in evaluating methodology, models and assumptions used in value in use calculations. With respect to the value in use models used for PLP/FCT, VSC and ULCT we challenged and evaluated the composition of the future cash flow forecasts in the model including comparing them to the latest budgets approved by the Board of Directors. We have also challenged and evaluated: ޭ the Board of Directors’ key assumptions for the long term growth rates of key inputs, such as volume and price and compared them to historical results, economic and industry forecasts, ޭ the discount rate applied to these cash flows, by assessing the weighted average cost of capital, and considering territory specific factors, and ޭ the macroeconomic assumptions used by the Board of Directors, by comparing them to market benchmarks and publicly available information. The recoverable amounts of PLP/FCT, VSC and ULCT CGUs were determined based on value in use calculations. We have also performed look-back procedures by comparing previous budgets used in value in use calculations to actual results. The expected cash flows (budgets) for the year 2020 and the remaining assumptions used for the CGUs’ value in use calculations have been approved by the Company’s Board of Directors. Certain assumptions made by the Board of Directors in the determination of the CGUs’ value in use calculations were considered to be key estimates. Based on the results of the impairment tests no impairment losses have been identified, that require recognition in the consolidated income statement of the Group. For PLP/FCT and ULCT CGUs, it was determined that despite the fact that the impairment test has shown a recoverable amount higher than the carrying amount of each CGU, there are no indications for reversal of previously recognised impairment (no observable external or internal information to support reversal as required by IAS 36 “Impairment of Assets”). In addition, it was determined that the impairment test for ULCT CGU is still sensitive to the change of certain key parameters for value in use calculations. Refer to Notes 4 and 15 to the consolidated financial statements for the related disclosures. We further challenged and evaluated the Board of Directors on the adequacy of their sensitivity calculations over ULCT CGU’s recoverable amount and determined the assumptions that created the most variability, being assumptions for average tariffs and container handling volumes. For PLP/FCT and ULCT CGUs, we have further challenged and evaluated the Board of Directors conclusion that there is no reversal of previously recognised impairment despite that certain assets (other than goodwill) of both PLP/FCT and ULCT CGUs were impaired in prior years and the current year impairment tests performed for these two CGUs have shown a recoverable amount higher than the carrying amount of each of these CGUs. We lastly evaluated the adequacy of the disclosures made in Notes 4 and 15 of the consolidated financial statements, including those regarding the Board of Directors’ conclusions on their assessment of nonexistence of indications for impairment or reversal of impairment, the key assumptions and sensitivities to changes in such assumptions. Based on the evidence obtained, we found that the methodologies, assumptions and data used within the models and the disclosures included in the consolidated financial statements, including disclosures on the non- existence of indications for impairment/reversal of impairment of the Group’s CGUs, are appropriate. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 102 Independent Auditor’s Report (continued) Independent Auditor’s Report (continued) 103 | Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements | Our objectives are to obtain reasonable assurance about whether the consolidated 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 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 consolidated 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 Group’s internal control. Consistency of the Additional Report to the Audit and Risk Committee We confirm that our audit opinion on the consolidated financial statements expressed in this report is consistent with the additional report to the Audit and Risk Committee of the Company, which we issued on 3 March 2020 in accordance with Article 11 of the EU Regulation 537/2014. Provision of Non-audit Services We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by us to the Group and which have not been disclosed in the consolidated financial statements or the management report in the consolidated financial statements. Other Legal Requirements Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: ޭ In our opinion, based on the work undertaken in the course of our audit, the management report in the consolidated financial statements has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information given is consistent with the consolidated financial statements. ޭ In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the management report in the consolidated financial statements. We have nothing to report in this respect. ޭ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures ޭ In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance made by the Board of Directors. ޭ Conclude on the appropriateness of the Board of 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 Group’s ability to continue as a going concern. 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 consolidated 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 Group to cease to continue as a going concern. ޭ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. ޭ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 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, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. statement in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and which is included as a specific section of the management report in the consolidated financial statements, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap, 113, and is consistent with the consolidated financial statements. ޭ In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. ޭ In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect. | Other Matter | This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to. The engagement partner on the audit resulting in this independent auditor’s report is Tasos Nolas. | Report on Other Legal and Regulatory Requirements | Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the following information in our Independent Auditor’s Report, which is required in addition to the requirements of International Standards on Auditing. Appointment of the Auditor and Period of Engagement We were first appointed as auditors of the Company in 2008 by shareholder resolution for the audit of the financial statements for the year ended 31 December 2008. Our appointment has been renewed annually, since then, by shareholder resolution. In 2011 the Company was listed in the Main Market of the London Stock Exchange and accordingly the first financial year after the Company qualified as an EU PIE was the year ended 31 December 2012. Since then, the total period of uninterrupted engagement appointment was 8 years. Tasos Nolas Certified Public Accountant and Registered Auditor for and on behalf of PricewaterhouseCoopers Limited Certified Public Accountants and Registered Auditors City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus Limassol, 5 March 2020 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Parent Company Financial Statements Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Table of Contents Board of Directors and Other Officers Management Report Directors’ Responsibility Statement Statement of Comprehensive Income for the year ended 31 December 2019 Balance Sheet as at 31 December 2019 Statement of Changes in Equity for the year ended 31 December 2019 Statement of Cash Flows for the year ended 31 December 2019 Notes to the Financial Statements 1. 2. 3. 4. 5. 6. General information Summary of significant accounting policies Financial risk management Critical accounting estimates and judgments Finance income — net Administrative expenses 7. Other gains/(losses) — net 8. 9. Staff costs Finance costs 10. Income tax expense 11. Financial instruments by category 12. Credit quality of financial assets 13. Property, plant and equipment 14. 15. Investments in subsidiaries Investments in joint ventures 16. Trade and other receivables 17. Cash and bank balances 18. Share capital, share premium and dividends 19. Trade and other payables 20. Contingencies and commitments 21. Related party transactions 22. Events after the balance sheet date Independent Auditor’s Report 01 03 25 26 27 28 29 30 30 30 38 41 42 42 42 43 43 43 44 44 45 45 46 47 47 48 48 48 49 53 54 Board of Directors and Other Officers 01 | Board of Directors | Mr. Morten Henrick Engelstoft (appointed 31 October 2016) (Mr. Soren Jakobsen and Mr. Mogens Petersen are the alternates to Morten Henrick Engelstoft) Chairman of the Board of Directors, Non-Executive Director, Member of Remuneration and Nomination Committee Mr. Ivan Besedin (appointed 16 December 2019) (Ms. Alexandra Fomenko is the alternate to Mr. Ivan Besedin) Non-Executive Director Mrs. Britta Dalunde (appointed 12 May 2017) Senior Independent Non-Executive Director, Chairwoman of Audit and Risk Committee Ms. Alexandra Fomenko (appointed 18 June 2019) Non-Executive Director, Member of Audit and Risk and Nomination and Remuneration Committees Mr. Soren Jakobsen (appointed 02 March 2018) (Mr. Mogens Petersen and Mrs. Olga Gorbarenko are the alternates to Mr. Soren Jakobsen) Non-Executive Director, Member of Strategy Committee Mr. Shavkat Kary-Niyazov (appointed 18 June 2019) Non-Executive Director Mr. Demos Katsis (appointed 14 May 2018) Non-Executive Director Mrs. Inna Kuznetsova (appointed 01 January 2018) Independent Non-Executive Director, Chairwoman of Remuneration and Nomination Committee, Member of Audit and Risk Committee Mr. Lambros Papadopoulos (appointed 01 January 2018) Independent Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Mogens Petersen (appointed 18 June 2019) (Mr. Soren Jakobsen is the alternate to Mr. Mogens Petersen) Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Sergey Shishkarev (appointed 14 May 2018) (Ms. Alexandra Fomenko is the alternate to Mr. Sergey Shishkarev) Non-executive Director, Chairman of Strategy Committee Mrs. Iana Penkova Boyd (resigned on 19 April 2019) Mr. Michalakis Christofides (resigned on 18 June 2019) Mr. Alexander Iodchin (resigned on 18 June 2019) Mrs. Laura Michael (resigned on 18 June 2019) Mr. Stavros Pavlou (resigned on 18 June 2019) Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 02 | Board of Directors | (continued) Mr. Nicholas Charles Terry (resigned on 18 June 2019) Management Report 03 1. The Board of Directors presents its report together with the audited financial statements of Global Ports Investments Plc (hereafter also referred to as “GPI” or the “Company”) for the year ended 31 December 2019. The Company’s’ financial statements have been prepared in accordance with International Financial Reporting Standards (hereafter also referred as “IFRS”) as adopted by the European Union (“EU”) and the requirements of Cyprus Companies Law, Cap. 113. Mr. George Yiallourides (resigned on 18 June 2019) | Principal activities and nature of operations of the Company | Mr. Anton Chertkov (resigned on 11 November 2019) Board support 2. The principal activities of the Company, which are unchanged from the previous year, is the holding of investments including any interest earning activities. The subsidiaries and joint-ventures of the Company (together with the Company the “Group”) are engaged in operation of container and general cargo terminals in Russia and Finland. The Group offers its customers a wide range of services for their import and export logistics operations. There was a change in principal activities of the Group in current year as a result of sale of oil products terminal in Estonia. The Company Secretary is available to advise all Directors to ensure compliance with the Board procedures. Also a procedure is in place to enable Directors, if they so wish, to seek independent professional advice at the Company’s expense. | Results | | Company Secretary | Team Nominees Limited 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus Registered office 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus 3. The Company’s results for the year are set out on page 26. | Changes in group structure | 4. 5. In April 2019 the Group completed the sale of its holding in 50% of AS Vopak E.O.S. and its subsidiaries, the Group’s oil products terminal in Estonia. In May 2019 the Group established “Atmosphere” charitable fund to support social and environmental initiatives in Nakhodka area in the Russian Far East. 6. There were no other material changes in the group structure. However the Board of Directors is regularly reviewing the Group structure and the possibilities to optimize it, i.e. in the second quarter of 2019 following the merger of the management teams of JSC Petrolesport and First Container Terminal Inc both terminals started to work as one unit from commercial and operational points of view, without being legally merged together and remaining the two separate legal entities. | Review of Developments, Position and Performance of the Group’s Business | 7. The Russian container market grew 4.5% in 2019 driven by the 6.0% growth of full container export and supported by 3.9% growth in full container import, resulting in total Russian container market throughput of 5.1 million TEU. 8. Outperforming the market, the Group’s Consolidated Marine Container Throughput increased 6.5% to 1,439 thousand TEU. 9. Consolidated Marine Bulk Throughput increased by 17.1% to 3.7 million tonnes driven by the growth in bulk cargoes at ULCT, which was partially offset by a decline in scrap metal at PLP following the introduction of state export quotas in the third quarter of 2019. 10. Consolidated revenue increased by 5.3% to USD 361.9 million; excluding the impact of LT and VSC transportation services, like- for-like revenue grew by 4.0% driven by an increase in both container and non-container revenue. 11. Like-for-like Revenue per TEU decreased by 4.0% to USD 178.4*. 12. Gross profit increased 1.2% to USD 210.1 million. 13. Adjusted EBITDA increased by 4.4% to USD 226.9 million* mainly due to the growth in throughput and strict cost control. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 04 Management Report (continued) 14. Profit before income tax for the twelve-month period was USD 96.6 million compared to a Loss before income tax of USD 53.6 million in 2018. This was mainly driven by the depreciation of the Russian rouble in 2018, which resulted in a loss on revaluation of US dollar-denominated borrowings (from Group and non-Group entities) due to the Group’s Russian subsidiaries having the Russian rouble as their functional currency. 15. The Group’s capital expenditure in 2019 was USD 26.6 million. It was focused on planned maintenance projects, scheduled upgrades of existing container handling equipment and customer service improvement initiatives. 16. The Group generated USD 158.8 million* of Free Cash Flow, an increase of 18.9% compared to 2018. 17. The Group reduced Net Debt by USD 33.3 million* over the twelve-month period despite IFRS16 impact of USD 24.9 million* and FX impact of USD 28.9 million*. If to adjust for this IFRS 16 effect, Net Debt decreased by USD 58.2 million* to USD 722.1 million*. The Group continues to prioritise deleveraging over dividend distribution. 18. Net Debt to Adjusted EBITDA decreased from 3.6x* in 2018 to 3.3x* in 2019. Net Debt to Adjusted EBITDA adjusted for IFRS 16 was 3.2x* as of 31 December 2019. Certain non-IFRS financial measures and operational information above which is derived from the management accounts is marked with an asterisk {*}. Terms used above are defined as follows: Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance income/(costs)—net, depreciation of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/(losses)— net and impairment of goodwill and property, plant and equipment and intangible assets. Adjusted EBITDA Margin (a non-IFRS financial measure) is calculated as Adjusted EBITDA divided by revenue, expressed as a percentage. Consolidated Container Revenue is defined as revenue generated from containerised cargo services. Consolidated Non-Container Revenue is defined as a difference between total revenue and Consolidated Container Revenue. Consolidated Marine Bulk Throughput is defined as combined marine bulk throughput by consolidated terminals: PLP, VSC, FCT and ULCT. Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC, FCT and ULCT. Management Report (continued) | Future Developments of the Group | 05 19. The Board of Directors does not expect any significant changes in the activities of the Group in the foreseeable future. | Risk Management Process, Principal Risks and Uncertainties | 20. GPI is exposed to a variety of risks and opportunities that can have commercial, financial, operational and compliance impacts on its business performance, reputation and licence to operate. The Board recognises that creating shareholder value involves the acceptance of risk. Effective management of risk is therefore critical to achieving the corporate objective of delivering long- term growth and added value to our shareholders. 21. Global Ports bases its risk management activities on a series of well-defined risk management principles, derived from experience, best practice, and corporate governance regimes. The Group’s enterprise risk management processes (ERM) is designed to identify, assess, respond, monitor and, where possible, mitigate or eliminate threats to the business caused by changes in the business, financial, regulatory and operating environment. 22. The Board has overall oversight responsibility for GPI’s risk management and for the establishment of the framework of prudent and effective controls. As such it systematically monitors and assesses the risks attributable to the Group’s performance and delivery of the GPI’s strategy. Where a risk has been identified and assessed, the Group selects the most appropriate risk measure available in order to reduce the likelihood of its occurrence and mitigate any potential adverse impact. 23. The Board delegates to the Chief Executive Officer of LLC Global Ports Management responsibility for the effective implementation and maintenance of the risk management system. Day-to-day responsibility for risk management lies with the management team. The Audit and Risk Committee is authorized by the Board to monitor, review and report on the organization, functionality and effectiveness of the Group’s ERM system. 24. Global Ports is exposed to a variety of risks which are listed below. The order in which these risks are presented is not intended to be an indication of the probability of their occurrence or the magnitude of their potential effects. 25. Not all of these risks are within the Company’s control, and the list cannot be considered to be exhaustive, as other risks and uncertainties may emerge in a changing external and internal environment that could have a material adverse effect on the Group’s ability to achieve its business objectives and deliver its overall strategy. 26. Further information on our risk management system, including a detailed description of identified risk factors is contained in the notes to the Financial Statements attached to this report. 27. The Company’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchase of property, plant and equipment. the financial statements. 28. The Company’s contingencies are disclosed in Note 20 to the financial statements. Net Debt (a non-IFRS financial measure) is defined as the sum of current borrowings, non-current borrowings, current and non-current lease liabilities (following adoption of IFRS 16) and swap derivatives less cash and cash equivalents and bank deposits with maturity over 90 days. Revenue per TEU is defined as the Global Ports Group’s Consolidated Container Revenue divided by total Consolidated Container Marine Throughput. TEU is defined as twenty-foot equivalent unit, which is the standard container used worldwide as the uniform measure of container capacity; a TEU is 20 feet (6.06 metres) long and eight feet (2.44 metres) wide and tall. Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings, current and non-current lease liabilities (following adoption of IFRS 16) and swap derivatives. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 06 Management Report (continued) Management Report (continued) 07 Risk factor Strategic risks Market conditions: Global Ports’ operations are dependent on the global macroeconomic environment and resulting trade flows, including in particular container volumes. Container market throughput is closely correlated to the volume of imported goods, which in turn is driven by domestic consumer demand, and influenced by RUB currency fluctuations against USD/Euro, and exported goods, which in their turn correlate with the Russian rouble exchange rate fluctuations and global commodity markets` trends. The Group remains exposed to the risk of contraction in the Russian and world economy which, if it were to occur, could further dampen consumer demand and lead to a deterioration in the container market which could have a materially adverse impact on the Group. Competition: Barriers to entry are typically high in the container terminal industry due to the capital-intensive nature of the business. However, challenging market trading conditions mean that competition from other container terminals continues to be a significant factor. Further consolidation between container terminal operators and container shipping companies, the creation of new strategic alliances, the introduction of new/upgraded capacity and carrier consolidation could result in greater price competition, lower utilisation, and a potential deterioration in profitability. Strategic international investors may develop or acquire stakes in existing competitor Russian container terminals, which could bring new expertise into the market and divert clients and cargoes away from the Group. Given the historically high margins in the Russian container handling industry, this trend may continue. Risk management approach Risk factor Risk management approach The Group has responded to the volatility of throughput in the container market by: ޭ Focusing on quality and value-driven services (getting closer to the customer); ޭ Greater focus on balancing export and import container flows; ޭ Offering operational flexibility to all clients; ޭ Effective cost containment; ޭ Adopting new revenue streams and attracting new cargoes. The Group actively monitors the competitive landscape and adjusts its strategy accordingly, i.e. the Group prioritises building close long-term relationships with its leading customers (locally, regionally and with headquarters) based on a global approach to account management and contractual agreements incentivizing growth of throughput and/or share of business. The Group’s focus on service quality is a key differentiator from its competition and the Group believes this is one of its key competitive advantages. The Group has made and continues to make long-term investments in its terminals and modern equipment to ensure competitive levels of service. It operates on a long-term horizon and its terminals represent core infrastructure in Russia that will continue to operate for the next 10-20 years or beyond. Because the Group possesses a healthy land bank it has flexibility to balance capital expenditure to at minimum maintain capacity at the existing level and support its efficient development should markets require it. The Group and its terminals have developed long-term operating masterplans that enable it to react quickly in the case of additional market demands being placed on its facilities’ infrastructure and equipment. The Group’s healthy cash flow generation and decreasing leverage allows financial flexibility in terms of timing and size of required capital expenditure program. Political, economic and social stability: Instability in the Russian economy as well as social and political instability could create an uncertain operating environment and affect the Group’s ability to sell its services due to significant economic, political, legal and legislative risks. Certain government policies or the selective and arbitrary enforcement of such policies could make it more difficult for the Group to compete effectively and/or impact its profitability. The Group may also be adversely affected by US, EU and other jurisdictions sanctions against Russian business/companies whose measures have had and may continue to have an adverse effect on the Russian economy and demand for commodities. Ongoing sanctions could also adversely impact the Group’s ability to obtain financing on favourable terms and to deal with certain persons and entities in Russia or in other countries. In light of the macroeconomic challenges faced by the ports industry in recent years, the Group has focused on improving its resilience, in particular its ability to withstand short-term economic fluctuations in Russia, as well as the wider regional and global environment. This has included a strong focus on cost containment measures, and on strengthening its financial position by refinancing all its debt switching to longer maturities at fixed rates. In addition, the Group has developed its growth strategy to embrace exports and new revenue streams to counteract the impact of any fall in consumer sentiment or any macro-economic downturn. The Group has strengthened its system to monitor compliance with restrictions posed by international sanctions and fend off the risk of secondary sanctions. The Group continues to maintain an international base of shareholders, bondholders and business partners. The Group is not aware of any specific sanctions’ risks related to its ownership or operations. Coronavirus (COVID-19): The company’s outlook for 2020 is impacted by the Coronavirus (COVID-19) outbreak in China, which has significantly lowered visibility on what to expect in 2020. The Management is closely monitoring the situation with the outbreak of Coronavirus (COVID-19) and is ready to act depending on the development of the situation. Operational risks Leases of terminal land: The Group leases a significant amount of the land and quays required to operate its terminals from government agencies and to a lesser extent from private entities. Any revision or alteration to the terms of these leases or the termination of these leases, or changes to the underlying property rights under these leases, could adversely affect the Group’s business. Customer Profile and Concentration: The Group believes it has a stable situation at present regarding its land leases and its terminals have been in operation for a number of years. The Group owns the freehold on 66% of the total land of its terminals and 70% of the land of its container and inland terminals in Russia. The remainder is held under short and long-term leases routinely renewable at immaterial costs. The Group is dependent on a relatively limited number of major customers (shipping lines, freight forwarders etc.) for a significant portion of its business. The Group conducts extensive and regular dialogue with key customers and actively monitors changes that might affect our customers’ demand for our services. These customers are affected by conditions in their market sector which can result in contract changes and renegotiations as well as spending constraints, and this is further exacerbated by carrier consolidation. The Group has a clear strategy to reduce its dependence on its major customers, by targeting new customers, increasing the share of business from other existing global customers, and new cargo segments. The Group is also relying on the contribution from non-container revenues through building its presence in marine bulk cargoes like coal and scrap metal (share of non-container revenue was 26% and 26% in 2018 and 2019 respectively). Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 08 Management Report (continued) Management Report (continued) 09 Risk factor Reliance on third parties: The Group is dependent on the performance of services by third parties outside its control, including all those other participants in the logistics chain, such as customs inspectors, supervisory authorities, railway and others, and the performance of security procedures carried out at other port facilities and by its shipping line customers. Tariff regulation: Tariffs for certain services at certain of the Group’s terminals have, in the past, been regulated by the Russian Federal Antimonopoly Service (FAS). As a result, the tariffs charged for such services were, and may potentially in the future be, subject to a maximum tariff rate and/or fixed in Russian roubles as PLP, VSC, and FCT, like many other Russian seaport operators, are classified as natural monopolies under Russian law. Human resources management: The Group’s competitive position and prospects depend on the expertise and experience of its key management team and its ability to continue to attract, retain and motivate qualified personnel. Industrial action or adverse labour relations could disrupt the Group’s operating activities and have an adverse effect on performance results. Risk management approach Risk factor Risk management approach Health, safety, security and environment: The Group strives to maintain a continuous dialogue with third parties across the supply chain. In addition, its geographic diversification provides it with some flexibility in its logistics, should bottlenecks develop in one area. Accidents involving the handling of hazardous materials at the Group’s terminals could disrupt its business and operations and/ or subject the Group to environmental and other liabilities. The Group has implemented clear environmental and safety policies designed around international best practices and benchmark using such measures as GPI Global Minimum Requirements. Changes to tariff legislation (as of 14 August 2018) now require all tariffs in the new contracts to be entered into after this date to be set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the new legislation. The Group continues to monitor for any legislative proposals and regulatory actions that could lead to changes to the existing tariff regulations. It seeks a proactive dialogue with the relevant Russian federal authorities. It believes it is as well placed as any market participant to adapt to any future changes in tariff regulation. The Group annually reviews labour market and aligns salaries and benefits to employees at all levels to foster and retain skilled labour. The Group invests in the professional development of its staff, including international best practices implementation and internal development/ training programmes. The Group engages in socially responsible business practices and support of local communities. The Group strives to maintain a positive working relationship with labour unions at its facilities. Moreover, it pursues overall labour policies designed to provide a salary and benefit package in line with the expectations of our employees. The risk of safety incidents is inherent in the Group’s businesses. The Group’s operations could be adversely affected by terrorist attacks, natural disasters or other catastrophic events beyond its control. Safety is one of the Group’s top priorities. A safety strategy and annual action plan have been developed, to build a sustainable safety culture across the whole Group. The detailed roadmap is designed to ensure sustainable implementation of safety culture over the medium term. Similarly, GPI works with all its stakeholders to maintain high levels of security around port facilities and vessel operations to minimise the risk of terrorist attack. Information technology and security: The Group’s container terminals rely on IT and technology systems to keep their operations running efficiently, prevent disruptions to logistic supply chains, and monitor and control all aspects of their operations. The Group has centralised its IT function in recent years which is an important step in ensuring both the efficiency and consistency of the Group’s security protocols implementation. We are continuing to align our IT strategy with the business objectives. Any IT glitches or incidents can create major disruptions for complex logistic supply chains. We regularly review, update and evaluate all software, applications, systems, infrastructure and security. Any prolonged failure or disruption of these IT systems, whether a result of a human error, a deliberate data breach or an external cyber threat could create major disruptions in terminal operations. This could dramatically affect the Group’s ability to render its services to customers, leading to reputational damage, disruption to business operations and an inability to meet its contractual obligations. All software and systems are upgraded or patched regularly to ensure that we minimise vulnerabilities. Each of our business units has an IT disaster recovery plan. Our security policies and infrastructure tools are updated or replaced regularly to keep pace with changing and growing threats. Our security infrastructure is updated regularly and employs multiple layers of defence. Connectivity to our partners’ systems is controlled, monitored and logged. Regulatory and compliance risks Regulatory compliance: The Group is subject to a wide variety of regulations, standards and requirements and may face substantial liability if it fails to comply with existing regulations applicable to its businesses. The Group strives to be in compliance at all times with all regulations governing its activities and devotes considerable management and financial resources to ensure compliance. The Group’s terminal operations are subject to extensive laws and regulations governing, among other things, the loading, unloading and storage of hazardous materials, environmental protection and health and safety. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 10 Management Report (continued) Management Report (continued) 11 Risk factor Changes in regulations: Risk management approach Changes to existing regulations or the introduction of new regulations, procedures or licensing requirements are beyond the Group’s control and may be influenced by political or commercial considerations not aligned with the Group’s interests. Any expansion of the scope of the regulations governing the Group’s environmental obligations, in particular, would likely involve substantial additional costs, including costs relating to maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of its ability to address environmental incidents or external threats. Conflict of interests: The Group maintains a constructive dialogue with relevant federal, regional and local authorities regarding existing and planned regulations. The Group does not have the power to block any or all regulations it may judge to be harmful, but this dialogue should ensure it has time to react to changes in the regulatory environment. The Group’s controlling beneficial shareholders may have interests that conflict with those of the holders of the GDRs or notes. The major implications of this risk are that (i) co-controlling shareholders pursue other businesses not related to GPI and hence may not be deeply involved with developing GPI and (ii) one of the major shareholders is also a major customer of the Group. The Group’s corporate governance system is designed to maximise the company’s value for all shareholders and ensure the interests of all stakeholders are taken into account. The Group’s LSE listing ensures our compliance with the highest international standards. In addition, the Board consists of highly experienced individuals including strong independent directors. Legal and tax risks: Adverse determination of pending and potential legal actions involving the Group’s subsidiaries could have an adverse effect on the Group’s business, revenues and cash flows and the price of the GDRs. Weaknesses relating to the Russian legal and tax system and appropriate Russian law create an uncertain environment for investment and business activity and legislation may not adequately protect against expropriation and nationalisation. The lack of independence of certain members of the judiciary, the difficulty of enforcing court decisions and governmental discretion claims could prevent the Group from obtaining effective redress in court proceedings. The Group maintains a strong and professional legal function designed to monitor legal risks, avoid legal actions where possible and carefully oversee any legal actions that may occur. The Group performs ongoing monitoring of changes in relevant tax legislation and court practice in the countries where its companies are located and develops the Group’s legal and tax position accordingly. Risk factor Financial risks FOREX risks: The Group is subject to foreign-exchange risk arising from various currency exposures, primarily the Russian rouble and the US dollar. Foreign-exchange risk is the risk to profits and cash flows of the Group arising from movement of foreign-exchange rates due to inability to timely plan for and appropriately react to fluctuations in foreign- exchange rates. Risk also arises from revaluation of assets and liabilities denominated in foreign currency. Risk management approach As of 2019, the biggest proportion of the Group’s revenue is denominated in Russian roubles as the Group has switched the currency of its tariffs to RUB, and part of the Group’s debt is denominated in USD. Most of the Group’s operating expenses, on the other hand are and will continue to be denominated and settled in Russian roubles. In order to mitigate the possibility of foreign exchange risks arising from a significant mismatch between the currency of revenue and the currency of debt, the Group began converting its existing USD debt into RUB, the currency of revenue. In 2018, the Group cancelled cross-currency swaps on the RUB denominated bonds issued by the First Container Terminal Inc. These swaps were converting RUB debt into USD. In order to further mitigate FOREX risk between June and September 2019 the Group put in place forward hedges and currency options totalling USD231.4 million to convert part of USD denominated debt into RUB. During 2018-2019 the Group also repurchased its Eurobonds, including USD69.5 million of Eurobonds due to mature in 2022 were replaced at the end of 2019 with a new 5 year/60 months RUB bank loan. This action has further reduced FOREX risk converting USD debt into RUB debt. Currently the Group owns ~27% of the total issued Eurobonds. In addition, the Group has negotiated with some of its customers the right to change its Russian rouble tariffs should the exchange rate move by 5, 10 or 15%, however the risk above the levels of these currency moves remains. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 12 Management Report (continued) Management Report (continued) 13 Risk management approach | Internal control and risk management systems in relation to the financial reporting process  | Risk factor Credit risk: The Group may be subject to credit risk due to its dependence on key customers and suppliers. The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. Debt, leverage and liquidity: The Group’s indebtedness or the enforcement of certain provisions of its financing arrangements could affect its business or growth prospects. Failure to promptly monitor and forecast compliance with loan covenants both at the Group and individual terminal levels may result in covenant breaches and technical defaults. If the Group is unable to access funds (liquidity) it may be unable to meet financial obligations when they fall due, or on an ongoing basis, to borrow funds in the market at an acceptable price to fund its commitments. The Group has been able to reduce its total debt level, as planned. In 2018 and 2019 the Group repurchased USD192.5 million nominal value of 2022 and 2023 Eurobonds of which USD69.5 million were refinanced via a new 5 year/60 months RUB bank loan. Debt reduction beyond minimum repayment requirements remains a management priority in 2020. Liquidity risk is carefully monitored, with regular forecasts prepared for the Group and its operating entities. The risk of liquidity shortfalls within the following 18-24 months has been significantly reduced via extensions of debt maturities through public debt issuances in 2016. The liquidity position is carefully monitored in case of further deterioration of financial performance. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. 29. The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and to ensure compliance with applicable laws and regulations. 30. Financial reporting and supervision are based on approved budgets and on monthly performance reporting.  31. The Audit and Risk Committee of the Board of directors of the Company reviews certain high-risk areas at least once a year, including the following: ޭ Significant accounting estimates; ޭ Material changes to the accounting policies; 32. Reporting from various Group entities to the centralised unit is supervised on an ongoing basis and procedures have been established for control and checking of such reporting. Procedures have also been set up to ensure that any errors are communicated to, and corrected by, the reporting entities. The internal controls are subject to ongoing reviews, including in connection with the regular control inspections at subsidiaries conducted by the central unit. The results from these reviews are submitted to the executive management, the Audit and Risk Committee and Board of Directors. The internal financial reporting ensures an effective process to monitor the Company’s financial results, making it possible to identify and correct any errors or omissions. The monthly financial reporting from the respective entities is analysed and monitored by the centralised department in order to assess the financial and operating performance as well as to identify any weaknesses in the internal reporting, failures to comply with procedures and the Group accounting policies. The Audit and Risk Committee follows up to ensure that any internal control weaknesses are mitigated and that any errors or omissions in the financial statements identified and reported by the auditors are corrected, including controls or procedures implemented to prevent such errors or omissions.  | Use of financial instruments by the Company | 33. The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. For a description of the Company’s financial risk management objectives and policies and a summary of the Company’s exposure to financial risks please refer to Note 3 of the financial statements. | The Role of the Board of Directors | 34. The Company is governed by its Board of Directors (also referred as “the Board”) which is collectively responsible to the shareholders for the short- and long-term sustainable success of the Group, generating value to shareholders and contributing to wider society as a whole. Its responsibility is to promote adherence to best-in-class corporate governance. 35. The Board of Directors’ role is to provide entrepreneurial leadership to the Group through establishing the Group’s purpose, values and strategy, setting out the corporate governance standards, satisfying itself that these and its culture are aligned, ensuring that the necessary financial and human resources are in place for the Group to meet its objectives and reviewing management performance. The Group seeks directors who bring strong track records and a deep understanding of the industry. The Board sets the Group’s values and standards and ensures all obligations to shareholders are understood and met. The Board ensures the Group establishes a framework of prudent and effective controls, which enables risk to be assessed and managed and maintains a sound system of internal control, corporate compliance and enterprise risk management to safeguard the Group’s assets and shareholders’ investments in the Group. 36. The roles and responsibilities of the Chairman, Senior Independent Director, board and committees’ members are set out in writing in the Terms of Reference of the Board and committees. The latest version of the Terms of Reference of the Board of Directors was approved by the shareholders on 18 June 2019. It is available on the Company`s website. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 14 Management Report (continued) | Members of the Board of Directors | Management Report (continued) | Chairman of the Board of Directors | 15 37. The Board of Directors leads the process in making new Board member appointments and makes recommendations on 44. Mr. Morten Engelstoft was the Chairman of the Board throughout the year 2019. appointments to shareholders. In accordance with the Terms of Reference of the Board, all Directors are subject to election by shareholders at the first Annual General Meeting after their appointment, and to re-election at intervals of no more than one year. Any term beyond six years for a Non-Executive Director is subject to particularly rigorous review, and takes into account the need to refresh the Board on a regular basis. 38. The Board currently has 11 members and they were appointed as shown on pages 2 and 3. 39. On 19 April 2019 Ms. Iana Penkova Boyd resigned from the Board. On 18 June 2019 Mr. Michalakis Christofides, Mr. Alexander Iodchin, Ms. Laoura Michael, Mr. Stavros Pavlou, Mr. Nicholas Charles Terry and Mr. George Yiallourides resigned from the Board. Mr. Mogens Petersen, Ms. Alexandra Fomenko and Mr. Shavkat Kary Niyazov were appointed on the same day. Mr. Anton Chertkov resigned from the Board on 11 November 2019 and Mr. Ivan Besedin replaced him on 16 December 2019. All new Board members were reviewed and recommended for appointment by Nomination and Remuneration Committee. 45. The role of the Chairman of the Board of Directors is to ensure that Board meetings are held as and when necessary, lead the directors, ensure their effectiveness and review the agenda of Board meetings. The Chairman together with the Secretary of the Board review Board materials before they are presented to the Board and ensure that Board members are provided with accurate, timely and clear information. The members of the management team who have prepared the papers, or who can provide additional insights into the issues being discussed, are invited to present papers or attend the Board meeting at the relevant time. Board members regularly hold meetings with the Group’s management to discuss their work and evaluate their performance. 46. The Chairman monitors communications and relations between the Group and its shareholders, the Board and management, and independent and non-independent directors, with a view to encouraging dialogue and constructive relations. The Chairman should demonstrate objective judgement and promote a culture of openness and debate. In addition, the Chairman facilitates constructive board relations and the effective contribution of all non-executive directors. 40. All other Directors were members of the Board throughout the year ended 31 December 2019, including the independent 47. The Group separates the positions of the chairman and CEO to ensure an appropriate segregation of roles and duties. directors: Mrs. Britta Dalunde, Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos. 41. Mr. Morten Henrick Engelstoft was elected the Chairman of the Board of Directors on 26 February 2018 and Mrs. Britta Dalunde was elected the Senior Independent Director on 31 May 2018, both re-elected on 18 June 2019. There were no significant changes in the responsibilities of the Directors during 2019 except for establishment and membership in the committees as described below. 42. There is no provision in the Company’s Articles of Association for retirement of Directors by rotation. However, in accordance with the Terms of Reference of the Board of Directors and the resolutions adopted by the Shareholders at the Annual General Meeting held on 18 June 2019 and Extraordinary General Meeting held on 16 December 2019 all present directors are subject to re-election at the next Annual General Meeting of the Shareholders of the Company, which will take place in 2020. | Directors’ Interests | 43. The interests in the share capital of Global Ports Investments Plc, both direct and indirect, of those who were Directors as at 31 December 2019 and 31 December 2018 are shown below: Name Type of holding Britta Dalunde Through holding of the GDRs Sergey Shishkarev Through shareholding in LLC Management Company “Delo” and other related entities Shares held at 31 December 2019 Shares held at 31 December 2018 7,000 GDRs representing 21,000 ordinary shares 7,000 GDRs representing 21,000 ordinary shares 88,769,817 ordinary shares 126,814,024 ordinary shares 34,605,183 ordinary non- voting shares 49,435,976 ordinary non- voting shares | Non-executive and Independent Directors | 48. All of the Board members are non-executive directors. 49. Mrs. Britta Dalunde, Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos are independent directors, and have no relationship with the Group, its related companies or their officers. This means they can exercise objective judgment on corporate affairs independently from management. 50. Although all directors have an equal responsibility for the Group’s operations, the role of the independent non-executive directors is particularly important in ensuring that the management’s strategies are constructively challenged. As well as ensuring the Group’s strategies are fully discussed and examined, they must take into account the long-term interests, not only of the major shareholders, but also of bondholders, employees, customers, suppliers and the communities in which the Group conducts its business. 51. Mrs. Britta Dalunde was appointed as the Senior Independent Director on 31 May 2018. The role of Senior Independent Director is to provide a sounding board for the Chairman and serve as an intermediary for the other directors and shareholders. Led by the senior independent director, the non-executive directors should meet without the Chairman present at least annually to appraise the Chairman’s performance, and on other occasions as necessary. | The Board Committees | 52. Since December 2008 the Board of Directors established the operation of three committees: an Audit and Risk Committee, a Nomination Committee and a Remuneration Committee. The composition of the committees was changed by the Board of Directors in June 2019: Nomination Committee and Remuneration Committee were merged into one and a new Strategy Committee was established. | The Audit and Risk Committee | 53. The Audit and Risk Committee comprises of five Non-Executive Directors, three of whom are independent, and meets at least four times a year. The Audit and Risk Committee is chaired by Mrs. Britta Dalunde (an Independent Non-Executive Director) and its other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Lambros Papadopoulos (an Independent Non-Executive Director appointed as of 01 January 2018), Ms. Alexandra Fomenko (appointed as of 18 June 2019) and Mr. Mogens Petersen (appointed as of 18 June 2019). Mr. Soren Jakobsen and Mr. George Yiallourides resigned from the Audit and Risk Committee on 18 June 2019. 54. The Committee is responsible for: ޭ monitoring the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance, and reviewing significant financial reporting judgements contained in them; Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 16 Management Report (continued) Management Report (continued) 17 ޭ providing advice (where requested by the board) on whether the annual report and accounts, taken as a whole, is fair, balanced l. Conducting a tender for external audit services for the reporting period ending 31 December 2021 and onwards. The Committee and understandable, and provides the information necessary for shareholders to assess the company’s position and performance, business model and strategy; ޭ reviewing the company’s internal financial controls and internal control and risk management systems; ޭ monitoring and reviewing the effectiveness of the company’s internal audit function; ޭ making recommendations to the board, about the appointment, reappointment and removal of the external auditor, and giving the recommendations in relation to remuneration and terms of engagement of the external auditor for audit and non-audit services; ޭ reviewing and monitoring the external auditor’s independence and objectivity; ޭ reviewing the effectiveness of the external audit process; ޭ developing and implementing policy on the engagement of the external auditor to supply non-audit services; and ޭ reporting to the Board on how it has discharged its responsibilities. members performed a tender and made their recommendations to the Board, which approved the results of the tender. The winner of the tender, KPMG Ltd, will be offered for appointment by the shareholders; m. Discussion of the term of tenure of the current audit partner – Mr. Tasos Nolas and making the recommendations to extend it from six to seven years; n. Review of IT security setup, corporate social responsibility report, legal matters report, differences between Russian GAAP and IFRS, site visits to the Group terminals located in Saint-Petersburg area and Finland, discussion with the Board of the results of these site-visits; o. Discussion of the training requirements of the Committee members and conducting Corporate Governance Masterclass for the Board members and senior management. | The Nomination and Remuneration Committee | 55. In 2019 the Audit and Risk Committee met 13 times (2018: 17) to review and discuss inter alia the following significant issues and 56. The Nomination and Remuneration Committee was established in June 2019 following the merger of Nomination Committee and matters in addition and on top of those listed above: Remuneration Committee in order to simplify the work of the committees and Board members. a. Consideration and approval of Policy on assessment of independence and objectivity of the external auditor; b. Review of the public materials containing financial information in relation to compliance with the financial statements, the disclosure and transparency requirements and Board`s view on mid and long-term development of the Group; c. Discussion of the level of clarity and completeness of disclosures in financial statements with the management and external auditors and making the recommendations; d. Consideration and approval of audit schedules and review of the impairment models and the impact of the new IFRS standards on the Company`s financial statements. The Committee`s task was to align the impairment models with the short-, mid- and long-term forecasts and to understand what impact the new standards would have on the financial statements and Group`s compliance with the covenants; 57. The Nomination and Remuneration Committee as of the date of this report comprises three Directors, one of whom is independent. The Committee meets at least once each year. Currently the Nomination and Remuneration Committee is chaired by Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as the Chairwoman of the merged Nomination and Remuneration Committee as of 18 June 2019, Chairwoman of both former committees as of 14 May 2018). The other members are Mr. Morten Henrick Engelstoft (appointed on 18 June 2019 to the new Committee and member of the former committees since 2016) and Ms. Alexandra Fomenko (appointed as a member of the committee on 11 November 2019). Mr. Soren Jakobsen and Mr. Stavros Pavlou resigned from their positions as members of the former committees on 18 June 2019. Mr. Anton Chertkov stepped down from the Board and the merged committee on 11 November 2019. e. Review of the major risks. The Committee discussed the approach to establishment and monitoring of the risk appetite of 58. The Committee is a committee of the Board of Directors which assists the Board in discharging its corporate governance the Group and recommended the risk appetite statement to be approved by the Board in 2020; f. Review of internal control framework and its deficiencies, consideration of management proposals on its further development and improvement. The Committee concentrated on the integration of automatic controls into the ERP system and on further development and integration of authority matrix framework into day-to-day processes; g. Consideration of various reports from the management; h. Meetings with external auditors to discuss the matters related to the audit work done by them and any issues arising from their audits; i. Meetings with internal auditors to discuss the results of their audits and ad-hoc reviews, working plans and progress in execution of internal audit recommendations; j. Consideration and approval of the engagement of external auditors for rendering of non-audit services. In each particular case the Committee was assessing the impact of non-audit services on the independence and objectivity of the external auditor. The Committee reviewed the scope of services on compliance with the list of permitted non-audit services, the potential impact of the services on the audit work and financial statements and discussed with the external auditor how their internal compliance procedures were performed and whether all internal compliance requirements were met. The Committee monitors the share of non-audit service in relation to its compliance with the standards. k. Assessment of efficiency of external auditor by discussing the audit approach and audit plan, monitoring of compliance with the plan, receiving the feedback from the members of the management team, involved in the audit process, assessing the internal resources allocated by the external auditor, the key risks to the audit process and their mitigation measures, review of the auditor`s management letter, consideration of the level and quality of communication between the external auditor and Committee during the audit process; responsibilities in relation to nomination, appointment and remuneration of all Directors and the Chairman / Chairwoman of the Board of Directors and of the senior executive management of the Company and its subsidiaries and joint venture companies, and oversee the development of a diverse pipeline for succession as well as to evaluate the performance of the Board of Directors, its committees, the Chairman / Chairwoman of the Board of Directors and individual directors. The main objective of the Committee is to determine the framework and policy for the nomination and remuneration of Independent Non-Executive Directors, Executive Directors, the Chairman / Chairwoman of the Board of Directors, and senior company executives ensuring the consistency with the company talent strategy, remuneration policy and market trends. 59. In 2019 the Nomination and Remuneration Committee met 15 times (11 times for Nomination and 13 times for Remuneration in 2018) to discuss and recommend to the Board the appointment of Key Management of the Group companies, to recommend the Directors the candidates to the Board, to discuss and recommend the composition of the Board Committees and to review and amend annual bonus regulations for the management. The Nomination and Remuneration Committee met also to discuss and recommend to the Board the Group the remuneration of the new Board members and the Key Management of the Group. In determining the level of remuneration of the key senior management of the Group the Committee referred to the level of skills and expertise, the position and scope of work and responsibilities as well as to the market levels for similar positions. The recommendations were approved by the Board in full. The Committee did not engage any external remuneration consultants. In the year 2019 one of the key focuses of the work of Nomination and Remuneration Committee was the succession planning and refreshment of the composition of the Board and the Key Management and Board performance evaluation. In the year 2020 one of the focus areas will be the talent management. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 18 Management Report (continued) | The Strategy Committee | 60. The Strategy Committee was established in June 2019. As per its terms of reference, the Committee meets at least once each year. The Strategy Committee as of the date of this report comprises four Directors, one of whom is independent. Currently the Strategy Committee is chaired by Mr. Sergey Shishkarev (appointed as of 18 June 2019). The other members are Mr. Mogens Petersen, Mr. Soren Jakobsen and Mr. Lambros Papadopoulos (an Independent Non-Executive Director) and Mr Anton Chertkov, all appointed as of 18 June 2019. Mr. Anton Chertkov stepped down from the Board and resigned from his position as a member of the Strategy Committee in November 2019. 61. The Committee is a committee of the Board of Directors which assists the Board of Directors in discharging its corporate governance responsibilities in relation to the setting and oversight of the strategy and strategic initiatives of the Company and its subsidiaries and joint venture companies (the Group) to be approved by the Board of Directors from time to time, and providing oversight over the implementation and development of those by executive management. The Committee has been formed to foster a cooperative, interactive strategic planning process between the Board and executive management. 62. In 2019 the Strategy Committee met 5 times to discuss the schedule and agenda of the meetings of the Committee, to recommend to the Board of Directors different investment proposals, to consider and to give the recommendations to the Board regarding the functional strategies, the revised targets of the Corporate Strategy, and also to consider and to give the confirmation to the Board of Directors that the Group Consolidated budget 2020 corresponds to the Corporate Strategy. | Board Performance | 63. The Board meets at least five times a year. Fixed meetings are scheduled at the start of each year. Ad hoc meetings are called when there are pressing matters requiring the Board’s consideration and decision in between the scheduled meetings. Starting from 2020 the Board agreed the schedule of ad-hoc meetings on a monthly basis. 64. In 2019 the Board met formally 18 (2018: 21) times to review current performance and to discuss and approve important business decisions. 65. In 2019 the Board met to discuss and approve important business decisions: a. FY2018 financial statements, 1H2019 interim financial statements and Annual Report; b. Review of segments financial and operational performance; c. Consideration of 2020 financial budget, major risks and uncertainties, commercial strategy, corporate social responsibility matters, internal control framework; d. Changes in Group management and the Board of Directors; e. Revision of various group wide policies and regulations, namely Authority Matrix and Terms of Reference of the Board and Committees; f. Consideration of various compliance matters; g. Consideration and approval of the revision of external and internal financing arrangements and organizational restructurings; h. Consideration and approval of major capital expenditures and investment projects; and i. Consideration and approval of various resolutions related to the operations of the Company`s subsidiaries and joint ventures. Management Report (continued) 19 66. The number of Board and Board Committee meetings held in the year 2019 and the attendance of directors during these meetings was as follows: Board of Directors Nomination and Remuneration Committee* Strategy Committee Audit and Risk Committee Iana Boyd Anton Chertkov Michalakis Christofides Britta Dalunde Morten Henrick Engelstoft Alexander Iodchin Soren Jakobsen Demos Katsis Inna Kuznetsova Laura Michael Lambros Papadopoulos Stavros Pavlou Sergey Shishkarev Nicholas Charles Terry George Yiallourides Alexandra Fomenko Shavkat Kary Niyazov Mogens Petersen Ivan Besedin A 4 15 9 17 17 9 18 18 18 9 18 4 18 9 9 9 9 9 - B 5 15 9 18 18 9 18 18 18 9 18 9 18 9 9 9 9 9 - A - 13 - - 15 - 10 - 15 - - 9 - - - 2 - - - B - 13 - - 15 - 10 - 15 - - 10 - - - 2 - - - A - 3 - - - - 5 - - - 5 - 5 - - - - 5 - B - 3 - - - - 5 - - - 5 - 5 - - - - 5 - A - - - 13 - - 5 - 12 - 13 - - - 5 8 - 8 - B - - - 13 - - 5 - 13 - 13 - - - 5 8 - 8 - A = Number of meetings attended B = Number of meetings eligible to attend during the year * These meetings relate to the meetings of former separate Nomination and former Remuneration committees and also to the meetings of the new merged Nomination and Remuneration Committee. 67. The operation of the Board, its Committees and individual Directors is subject to regular evaluation. The evaluation of the Board and individual Directors’ performance can be conducted through self-assessment, cross-assessment or by an external third party. The Non-Executive Directors, led by the Senior Independent Director, are responsible for the performance evaluation of the Chairman of the Board. The Board did not engage any external advisors for evaluation of its performance in the years 2018 and 2019. 68. In 2019 the Board conducted the self-evaluation. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 20 Management Report (continued) | Board Diversity | Management Report (continued) | Company Secretary | 21 69. The Company does not have a formal Board diversity policy with regard to matters such as age, gender or educational and professional backgrounds, but following the best practice while making the new appointments and considering the current composition of the Board of Directors, these aspects are taken into account. 70. As of the date of publication of these financial statements the Board has 3 females representing 27% from the total number of directors. The average age of directors is 52 years ranging from 31 to 66 years. The Board has a necessary balance of skills and expertise to run the Company and the Group. The Board members have the following educational backgrounds: port and transportation industry, accounting and financial, banking sector and legal. There are 6 nationalities present in the Board. The Board members reside in 7 countries. 81. The Group maintains a company secretary, who is responsible for safeguarding the rights and interests of shareholders, including the establishment of effective and transparent arrangements for securing the rights of shareholders. 82. Team Nominees Limited has been acting as the company secretary since the Group’s incorporation in February 2008. 83. The company secretary’s responsibilities include ensuring compliance by the Group, its management bodies and officers with the law and the Group’s charter and internal documents. The company secretary organises the communication process between the parties to corporate relations, including the preparation and holding of general meetings; storage, maintenance and dissemination of information about the Group; and review of communications from shareholders. | Board and Management Remuneration | | Corporate Governance | 71. Non-Executive Directors serve on the Board pursuant to the letters of appointment. Such letters of appointment specify the terms of appointment and the remuneration of Non-Executive Directors. 72. Levels of remuneration for the Non-Executive Directors reflect the time commitment, responsibilities of the role and membership of the respective committees of the Board. Directors are also reimbursed for expenses associated with discharge of their duties. Non-executive Directors are not eligible for bonuses, retirement benefits or to participate in any incentive plans operated by the Group. The Chairwomen of the Audit and Risk and Nomination and Remuneration Committees receive additional remuneration. 73. The shareholders of the Company approved the remuneration of the members of the Board on 12 May 2017, 11 December 2017, 29 84. The Group has a diverse set of stakeholders, from international institutions holding our shares and bonds, to our customers, employees, regulators and communities. Made up of seasoned industry professionals, the Board of Directors is committed to acting in the best interest of all stakeholders. The Company is not subject to the provisions of UK Corporate Governance Code, but follows internationally recognised best practices customary to the public companies having GDRs with standard listing and admitted to trading at London Stock Exchange. 85. Improving its corporate governance structure in accordance with the internationally recognised best practices the Company adopted important policies and procedures. The Group is regularly reviewing and updating its policies and procedures. January 2018, 2 March 2018, 14 May 2018, 29 June 2018, 18 June 2019, 16 December 2019 and 30 December 2019. 86. On 18 June 2019 a new Terms of Reference of the Board of Directors were adopted. As of the same date the Board merged 74. The Directors did not waive or agreed to waive any emoluments from the company or any company of the Group during the period under review or future emoluments. Nomination and Remuneration Committees and established Strategy Committee. Consequently, the terms of reference of the new committees were adopted in June 2019. 87. The Company’s corporate governance policies and practices are designed to ensure that the Company is focused on upholding its 75. Neither the Board members, nor the management have long-term incentive schemes. However, the performance based part of responsibilities to the shareholders. They include, inter alia: remuneration of the senior management is aligned to the strategic goals and initiatives approved by the Board. 76. The performance based part of the remuneration of the Key Management is based on the Key Rules of Awarding and Payment of Performance Based Bonuses of GPI Group adopted by the Board on 15 June 2016 and regularly updated with the last update on 17 June 2019. The Nomination and Remuneration Committee monitors the efficiency of the Rules and makes the recommendations to the Board on their amendment and revision. 77. Refer to Note 21(g) to the financial statements for details of the remuneration paid to the members of the Board and key management. | General Manager | 78. Mr. Alexander Iodchin occupies the position of General Manager and the Board granted him the powers to carry out all business related to the Company`s operation up to a total value as established by the Authority Matrix. It has also granted him powers to discharge other managerial duties related to the ordinary course of business of the Company, including representing the Company before any government or government-backed authority. 79. The decisions for all other matters are reserved for the Board. The Authority Matrix contains the list of such reserved matters. 80. Mr. Iodchin is also acting as the Board Secretary since December 2008 and as the Head of Technical Analysis and Strategic Projects of the Group. ޭ Appointment policy; ޭ Terms of reference of the Board of Directors; ޭ Terms of reference of the Audit and Risk, Nomination and Remuneration and Strategy Committees; ޭ Code of Ethics and Conduct; ޭ Antifraud policy; ޭ Policy on Reporting of Improper Activities; ޭ Investigation policy; ޭ Anti-Corruption Policy; ޭ Foreign Trade Controls Policy; ޭ Insurance Standard; ޭ Charity and Sponsorship Policy; and ޭ Group Securities Dealing Code. 88. In order to further strengthen the corporate governance and clearly set the management authority limits within the Group the Board of Directors approved the Authority Matrix framework at the end of the year 2016, which was revised in June 2019 providing extended authorities to the Group management in order to simplify the decision making process. The implementation of this revised framework in the operating units started in 2019 and will be finalised in 2020. 89. In the course of the year ended 31 December 2017 in order to streamline the reporting of negligence, non-compliance or any other kind of wrongdoing the Group established a hotline mail-box and telephone line. It is an important mechanism enabling staff and other members of the Group as well as third parties to voice concerns in a responsible and effective manner. Throughout 2018 and 2019 the Board together with the management worked on raising the awareness about the hotline among the Group workforce and stakeholders. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 22 Management Report (continued) Management Report (continued) 23 | Code of ethics and conduct | | Share Capital | 90. The new Code of Ethics was approved by the Board of Directors on 08 December 2016 and was introduced in the companies of the Group in the course of the year 2017. 91. Global Ports’ code of ethics and conduct outlines the general business ethics and acceptable standards of professional behaviour that we expect of all our directors, employees and contractors. This code, given to all new staff as part of their induction, means that everyone at Global Ports is accountable for their own decisions and conduct. As well as general standards of behaviour, the code covers fraud and corruption (including approaches on acceptance of gifts and benefits), ethics and conflicts of interest. Employees and external parties are encouraged to report any suspected breaches, via various channels including the dedicated hotline. 92. The code is available to all staff on Global Ports’ website (in the Corporate Governance section) and in the HR department at every operating facility. There are also other more detailed rules concerning our anti-fraud and whistleblowing policies. Significant direct or indirect holdings (including indirect shareholding through structures or cross shareholdings) 100. The information on significant direct and indirect shareholders is available at http://www.globalports.com/globalports/investors/ shareholder-information/major-shareholders. 101. There are no special titles that provide special control rights to any of the shareholders. There are restrictions in exercising of voting rights of shares (please refer to paragraph 104 below). Authorised share capital 102. The authorised share capital of the Company amounts to US$175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000 ordinary non-voting shares with a par value of US$0.10 each. Issued share capital 103. The issued share capital of the Company amounts to US$57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary 93. The Board is updated on a regular basis on any breaches various policies with the specific focus on the fraud incidents and non-voting shares with a par value of US$0.10 each. resulting actions, although significant breaches have to be reported to the Board immediately. | Dividends | 94. Pursuant to the Articles of Association the Company may pay dividends out of its profits. To the extent that the Company declares and pays dividends, owners of Global Depositary Receipts (hereafter also referred as “GDRs”) on the relevant record date will be entitled to receive dividends payable in respect of Ordinary Shares underlying the GDRs, subject to the terms of the Deposit Agreement. The Company expects to pay dividends in US dollars. If dividends are not paid in US dollars, they will be converted into US dollars by the Depositary and paid to holders of GDRs net of currency conversion expenses. 95. The Company is a holding company and thus its ability to pay dividends depends on the ability of its subsidiaries and joint ventures to pay dividends to the Company in accordance with the relevant legislation and contractual restrictions (shareholder agreements, bank borrowings covenants, and terms of the issuance of the public debt instruments). The payment of such dividends by its subsidiaries and joint ventures is contingent upon the sufficiency of their earnings, cash flows and distributable reserves. The maximum dividend payable by the Company’s subsidiaries and joint ventures is restricted to the total accumulated retained earnings of the relevant subsidiary or joint venture, determined according to the law applicable to each entity. 96. The Company has a Dividend Policy in place which provides for the payment of not less than 30% of any imputed consolidated net profit for the relevant financial year of the Group. Imputed profit is calculated as the consolidated net profit for the period of the Group attributable to the owners of the Company as shown in the Company’s consolidated financial statements for the relevant financial year prepared under EU IFRS and in accordance with the requirements of the Cyprus Companies Law, Cap. 113, less certain non-monetary consolidation adjustments. The Company’s dividend policy is subject to modification from time to time as the Board of Directors may deem appropriate. 97. In 2015 following the revision of current market situation, market prospects and prioritising the deleveraging strategy over dividend distribution, which should ensure the long-term robustness of the Group’s finances, the Board suspended the payment of the dividends in the mid-term. The Board continues to monitor the market for recovery as well as for levels of volatility in order to identify the appropriate timing for a resumption of the payment of a dividend, subject to maintaining conservative leverage ratios. 104. The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have the right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum of any general meeting. | Rules for Amending Articles | 105. The Articles of association of the Company may be amended from time to time by the special resolution of the General Meeting of the shareholders. | Corporate Social Responsibility Report | 106. The Corporate Social Responsibility Report is drawn up as a separate report and will be made public at the Company`s website (the address of which, at the date of publication of this report, is www.globalports.com) within six months from the balance sheet date. | Events after the balance sheet date | 107. The events after the balance sheet date are disclosed in Note 22 to the financial statements. | Research and development activities | 108. The Group is not engaged in research and development activities. | Branches | 109. The Group did not have or operate through any branches during the year. | Treasury shares | 98. During the years 2018 and 2019 the Company did not declare or pay any dividends. 110. The Company did not acquire either directly or through a person in his own name but on behalf of the Company any of its own shares. 99. The Board of Directors of the Company does not recommend the payment of a final dividend for the year 2019. | Going Concern | 111. Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in preparing the parent company financial statements based on the fact that, after making enquiries and following a review of the Group’s principle risks and uncertainties, budget for 2020, financial perspectives in the mid-term and the latest forecasts over a period of 5-7 years reflecting its business and investment cycles, including cash flows and borrowing facilities, the Directors consider that the Group has adequate resources to meet its liabilities as they fall due and to continue in operation for the foreseeable future. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 24 Management Report (continued) | Internal audit | 112. The internal audit function is carried out by Group’s Internal Audit Service (IAS). It is responsible for analysing the systems of risk management, internal control procedures and the corporate governance process for the Group with a view to obtaining a reasonable assurance that: ޭ risks are appropriately identified, assessed, responded to and managed; ޭ there is interaction with the various governance groups occurs as needed; ޭ significant financial, managerial, and operating information is accurate, reliable, and timely; ޭ employee’s actions are in compliance with policies, standards, procedures, and applicable laws and regulations; ޭ resources are acquired economically, used efficiently and adequately protected; ޭ programs, plans and objectives are achieved; ޭ quality and continuous improvement are fostered in the Group’s control process; and ޭ significant legislative or regulatory issues impacting the Group are recognised and addressed properly. 113. The Head of the IAS, Mr. Ilya Kotlov, reports directly to the Audit and Risk Committee. | External auditors | 114. An external auditor is appointed at the Global Ports AGM on an annual basis to review the Group’s financial and operating performance. 115. This follows proposals drafted by the Audit and Risk Committee for the Board of Directors regarding the reappointment of the external auditor of the Group. 116. In 2019, the shareholders of Global Ports re-appointed the Independent Auditors, PricewaterhouseCoopers as the external auditor for the purposes of auditing the Group’s IFRS financial statements for 2019. 117. PricewaterhouseCoopers Limited, have expressed their willingness to continue in office in 2020. A resolution approving their reappointment and giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting. 118. Starting from the year 2021 following the results of the external audit tender performed KPMG Ltd will take over PricewaterhouseCoopers Limited position subject to approval of the shareholders. By Order of the Board … … … … … … … … … … . . Morten Engelstoft Chairman of the Board 05 March 2020 … … … … … … … … … … . . Alexander Iodchin Secretary of the Board Directors’ Responsibility Statement 25 The Board of Directors of Global Ports Investments Plc (“Company”) is responsible for preparation and fair presentation of these parent company financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and the requirements of the Cyprus Companies Law, Cap. 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Each of the Directors confirms to the best of his or her knowledge that these parent company financial statements which are presented on pages 26 to 53 have been prepared in accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113, and give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as whole. By Order of the Board … … … … … … … … … … . . Morten Engelstoft Chairman of the Board Limassol 05 March 2020 … … … … … … … … … … . . Alexander Iodchin Secretary of the Board Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 26 Statement of Comprehensive Income for the year ended 31 December 2019 (in thousands of US dollars) Revenue Other income Dividend income Finance income - net Administrative expenses Other gains/(losses) - net Impairment of investments in subsidiaries and joint ventures Operating profit/(loss) Finance costs Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Other comprehensive income Note 21(a) 21(b) 5 6 7 4 9 10 For the year ended 31 December 2019 106 1 773 5 431 (37) (4 043) 1 317 - 4 547 (1 114) 3 433 - 3 433 - 2018 110 - 3 892 (13) (5 506) 2 245 (83 713) (82 985) (1 197) (84 182) - (84 182) - Total comprehensive income/(loss) for the year 3 433 (84 182) Balance Sheet as at 31 December 2019 (in thousands of US dollars) ASSETS Property, plant and equipment Right-of-use assets Investments in subsidiaries Investments in joint ventures Non-current assets Trade and other receivables Cash and cash equivalents Current assets TOTAL ASSETS EQUITY AND LIABILITIES Share capital Share premium Capital contribution Accumulated losses Total equity Borrowings Non-current liabilities Borrowings Lease liabilities Trade and other payables Current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES 27 At 31 December 2019 2018 75 92 624 347 24 847 649 361 2 429 150 2 579 651 940 57 317 923 511 101 300 (454 650) 627 478 16 809 16 809 3 572 81 4 000 7 653 24 462 651 940 117 - 624 638 24 838 649 593 309 744 1 053 650 646 57 317 923 511 101 300 (458 083) 624 045 22 197 22 197 - - 4 404 4 404 26 601 650 646 Note 13 14 15 16 17 18 18 21(i) 21(i) 19 On 5 March 2020 the Board of Directors of Global Ports Investments Plc authorised these financial statements for issue. Morten Engelstoft, Director Britta Dalunde, Director The notes on pages 30 to 53 are an integral part of these financial statements. The notes on pages 30 to 53 are an integral part of these financial statements.             Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 28 Statement of Changes in Equity Statement of Cash Flows 29 for the year ended 31 December 2019 (in thousands of US dollars) Share capital Share premium Capital contribution Retained earnings* Total Balance at 1 January 2018 57 317 923 511 101 300 (373 901) 708 227 Comprehensive loss Loss for the year - - - (84 182) (84 182) Balance at 31 December 2018 / 1 January 2019 57 317 923 511 101 300 (458 083) 624 045 Comprehensive income Profit for the year - - - 3 433 3 433 Balance at 31 December 2019 57 317 923 511 101 300 (454 650) 627 478 (*) Retained earnings is the only reserve that is available for distribution. for the year ended 31 December 2019 (in thousands of US dollars) Cash flows from operating activities Profit/(loss) before tax Adjustments for: Depreciation of property, plant and equipment and right-of-use assets Impairment of investments in subsidiaries and joint ventures Dividend income Finance income Finance costs Amortisation and derecognition of financial guarantee Foreign exchange (gains)/losses and other non-monetary items Operating cash flows before working capital changes Changes in working capital: Trade and other receivables Trade and other payables Cash used in operating activities Tax paid Net cash used in operating activities Cash flows from investing activities Investments in subsidiaries Repayment of original cost of subsidiaries Purchase of investments in joint ventures Purchase of property, plant and equipment Loan repayments received from related parties Interest received Dividends received Net cash from investing activities Cash flows from financing activities Proceeds from loans from related parties Repayments of loans from related parties Lease principal and interest paid Interest paid to related parties Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents at end of the year For the year ended 31 December 2019 2018 3 433 (84 182) 167 - (5 431) (2) 1 103 (1 284) 49 (1 965) (1 696) (633) (4 294) - (4 294) (1 861) 3 242 (9) (1) - 2 5 431 6 804 7 078 (9 250) (158) (735) (3 065) (555) 744 (39) 150 13 83 713 (3 892) (7) 1 197 (2 369) 211 (5 316) (50) (90) (5 456) - (5 456) - 696 (8) (64) 50 7 3 892 4 573 - - - - - (883) 1 639 (12) 744 Note 6,13 14,15 21(b) 5 9 7 14 14 15 21(i) 21(i) 21(i) 17 The notes on pages 30 to 53 are an integral part of these financial statements. The notes on pages 30 to 53 are an integral part of these financial statements.           Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 30 Notes to the Financial Statements Notes to the financial statements (continued) 31 1 | General information | Country of incorporation 2 | Summary of significant accounting policies | (continued) Consolidated financial statements Global Ports Investments Plc (hereafter the “Company” or “GPI”) was incorporated on 29 February 2008 as a private limited liability company and is domiciled in Cyprus in accordance with the provisions of the Cyprus Companies Law, Cap.  113. The address of the Company’s registered office is 20 Omirou Street, Limassol, Cyprus. The Company has also prepared consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU for the Company and its subsidiaries (the “Group”). A copy of the consolidated financial statements is available at the Company’s registered office and at the Company’s website at www.globalports.com. On 18 August 2008, following a special resolution passed by the shareholders, the name of the Company was changed from “Global Ports Investments Ltd” to “Global Ports Investments Plc” and the Company was converted into a public limited liability company in accordance with the provisions of the Companies Law, Cap.  113. Users of these separate financial statements of the parent company should read them together with the Group’s consolidated financial statements as at and for the year ended 31 December 2019 in order to obtain a proper understanding of the financial position, the financial performance and the cash flows of the Company and the Group. During the first half of 2011 the Company has successfully completed an initial public offering (“IPO”) of its shares in the form of global depositary receipts (“GDRs”). The Company’s GDRs (one GDR representing 3 ordinary shares) are listed on the Main Market of the London Stock Exchange under the symbol “GLPR”. The Company is jointly controlled by LLC Management Company “Delo” (“Delo Group”), one of Russia’s largest privately owned transportation companies, and APM Terminals B.V. (“APM Terminals”), a global port, terminal and inland services operator. Approval of the parent company financial statements These parent company financial statements were authorized for issue by the Board of Directors on 05 March 2020. Principal activities The principal activity of the Company, which is unchanged from last year, is the holding of investments, including any interest earning activities. 2 | Summary of significant accounting policies | The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented in these financial statements unless otherwise stated. Basis of preparation The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), and the requirements of the Cyprus Companies Law, Cap. 113. The financial statements have been prepared under the historical cost convention as modified for the initial recognition of financial instruments, including intra-group financial guarantee contracts at fair value. New Standards, interpretations and amendments adopted by the Company The Company adopted all new and revised IFRSs as adopted by the EU that are relevant to its operations and are effective for accounting periods beginning on 1 January 2019. The Company had to change its accounting policy on leases as a result of adopting IFRS 16 “Leases”. The impact of the adoption of IFRS 16 and the new accounting policies are disclosed below. Other new standards, amendments and interpretations did not have any significant impact on the Company’s accounting policies and did not require retrospective adjustments. The Company has adopted IFRS 16 Leases retrospectively from 1 January 2019 (with the cumulative effect of initially applying the standard recognised at 1 January 2019) using the simplified transition approach, with no restatement of comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019. On adoption of IFRS 16, the Company recognised lease liabilities in relation to leases that had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. The associated with office lease contract right-of-use asset was measured at the amount US$215 thousand equal to the lease liability and adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of the date of initial application - 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 14.09%. The new treatment of leases results in an increase in non-current assets and financial liabilities as these leases are capitalised as well as a decrease in lease expenses, offset by an increase in depreciation and an increase in finance charges. This results in a higher operating profit. In general, the depreciation charge is constant over the lease period, but finance charges decrease as the remaining lease liability decreases. Cash generated from operations increased due to lease expenses no longer being recognised as operating cash outflows, but this is offset by a corresponding increase in cash used in financing activities due to repayments of the principal on lease liabilities. Net cash flow remains unchanged. The Company has prepared these separate financial statements of the parent company for compliance with the requirements of the Cyprus Companies Law, Cap.113 and the Disclosure Rules as issued by the Financial Conduct Authority of the United Kingdom. New standards and interpretations not yet adopted by the Company As of the date of the authorisation of the financial statements, all International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) that are effective as of 1 January 2019 have been adopted by the EU through the endorsement procedure established by the European Commission. At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on these financial statements. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 32 Notes to the financial statements (continued) Notes to the financial statements (continued) 33 2 | Summary of significant accounting policies | (continued) Revenue recognition Revenues earned by the Company are recognised on the following bases: (i) Interest income Interest income on financial assets at amortised cost is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired (Stage 3 financial assets – see below). For credit - impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance). (ii) Dividend income Dividend income is recognised when the right to receive payment is established. Employee benefits 2 | Summary of significant accounting policies | (continued) Current and deferred income tax (continued) Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on the Company where there is an intention to settle the balances on a net basis. The Company and the employees contribute to the Cyprus Government Social Insurance Fund based on employees’ salaries. The Company’s contributions are expensed as incurred and are included in staff costs. Property, plant and equipment Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in United States dollars (US$), which is the Company’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of property, plant and equipment. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values, over their estimated useful lives. The annual depreciation rates are as follows: Motor vehicles Office equipment The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. % 20 50 Foreign exchange gains and losses that relate to borrowings are presented in the statement of comprehensive income within “finance cost”. Foreign exchange gains and losses that relate to loans receivable and cash and cash equivalents are presented in profit or loss within “finance income-net”. All other foreign exchange gains and losses are presented in the statement of comprehensive income within “other gains/(losses) – net”. Expenditure for repairs and maintenance of property, plant and equipment is charged to profit or loss of the year in which they were incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Current and deferred income tax Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amount and are recognised in “other gains/(losses) – net” in profit or loss. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. Investments in subsidiaries The current income tax is calculated in the basis of the tax laws enacted or substantively enacted at the balance sheet date in the country in which the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. If applicable tax regulation is subject to interpretation, it establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities. Subsidiaries are all entities (including special purpose entities) over which the Company has control. The Company controls an entity whom the Company is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In its parent company financial statements, the Company carries the investments in subsidiaries at cost less any impairment. The Company recognizes dividend income from investments in subsidiaries to the extent that the Company receives distributions from subsidiaries which constitute return on the cost of investment. Capital reductions and dividend distributions by subsidiaries which constitute return of cost of investment as opposed to return on cost of investment are recognised as a reduction in the cost of investment in subsidiary. Investments in joint arrangements Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangements. The Company has assessed the nature of its joint arrangements and determined them to be joint ventures. In its parent company financial statements the Company carries its investments in joint ventures at cost less any impairment. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 34 Notes to the financial statements (continued) Notes to the financial statements (continued) 35 2 | Summary of significant accounting policies | (continued) Impairment of non-financial assets 2 | Summary of significant accounting policies | (continued) Transactions with equity owners and subsidiaries Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Nonfinancial assets, other than goodwill, that have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Financial assets The Company enters into transactions with shareholders and subsidiaries. When consistent with the nature of  the transaction, the Company’s accounting policy is to recognise (a) any gains or losses with equity owners and other entities which are under the control of the ultimate shareholder, directly through equity and consider these transactions as the receipt of additional capital contributions or the payment of dividends; and (b) any losses with subsidiaries as cost of investment in subsidiaries. Similar transactions with non-equity holders or subsidiaries are recognised in profit or loss in accordance with IFRS 9 “Financial Instruments”. Share capital, share premium and capital contribution Ordinary shares are classified as equity. a. Classification The Company classifies its financial assets into those to be measured at amortised cost. Any excess of the fair value of consideration received over the par value of shares issued is recognized as share premium. Share premium is subject to the provisions of the Cyprus Companies Law on reduction of share capital. The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. b. Recognition and measurement Financial assets are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. At initial recognition, the Company measures a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. For loans provided to related parties other than the Company’s direct subsidiaries, the difference between the fair value of the loans and their carrying amount on inception is recognized in profit or loss. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is calculated using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in ‘other gains/(losses)-net’, together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. Financial assets measured at amortised cost comprise cash and cash equivalents, loans receivable and trade and other receivables. c. Impairment of financial assets The Company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and cash and cash equivalents. The Company measures expected credit losses (‘ECL’) and recognises credit loss allowance at each reporting date. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The carrying amount of the financial assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within ‘net impairment losses on financial assets’. The Company applies a general approach – three stage model for recognizing and measuring expected losses based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (‘12 Months ECL’). If the Company identifies a significant increase in credit risk (‘SICR’) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (‘Lifetime ECL’). Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Capital contribution represents contributions by the shareholders directly in the reserves of the Company. The Company does not have any contractual obligation to repay these amounts. Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are appropriately authorised and are no longer at the discretion of the Company. More specifically, interim dividends are recognised as liability in the period in which these are approved by the Board of Directors and in the case of final dividends, they are recognised in the period in which these are approved by the Company’s shareholders. Leases Accounting policies applied from 1 January 2019: From 1 January 2019, leases under IFRS 16 are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: ޭ fixed payments (including in-substance fixed payments), less any lease incentives receivable; ޭ variable lease payment that are based on an index; ޭ amounts expected to be payable by the lessee under residual value guarantees; ޭ the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and ޭ payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are to be discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost comprising the following: ޭ the amount of the initial measurement of lease liability; ޭ any lease payments made at or before the commencement date less any lease incentives received; ޭ any initial direct costs; and ޭ restoration costs. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 36 Notes to the financial statements (continued) Notes to the financial statements (continued) 37 2 | Summary of significant accounting policies | (continued) 2 | Summary of significant accounting policies | (continued) Leases (continued) Borrowings (continued) Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners and is recognised directly to equity. Financial guarantee contracts Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Financial guarantees are recognised as a financial liability at the time the guarantee is issued. Financial guarantees are initially recognised at their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight-line basis over the life of the guarantee in “other gains/(losses) – net” in profit or loss. At the end of each reporting period, the guarantee is subsequently measured at the higher of: ޭ the amount of the loss allowance determined in accordance with the expected credit loss model under IFRS 9 Financial Instruments; and ޭ the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15 “Revenue from Contracts with Customers”. The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment. Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Cash and cash equivalents In the statement of cash flows, cash and cash equivalents include cash in bank, cash in hand and deposits held at call with banks, with original maturities of three months or less. Accounting policies applied from 1 January 2019 (continued): Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture with value less than US$5 thousands. Accounting policies applied until 31 December 2018: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straightline basis over the period of the lease. Provisions and contingent liabilities Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Provisions are only used to cover those expenses which they had been set up for. Other possible or present obligations that arise from past events but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability, are disclosed in the notes to the financial statements as contingent liabilities. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extend there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment and amortised over the period of the facility to which it relates. Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds, including interest on borrowings, amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowings are classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. An exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability.  Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 38 Notes to the financial statements (continued) Notes to the financial statements (continued) 39 3 | Financial risk management | Financial risk factors 3 | Financial risk management | (continued) Financial risk factors (continued) The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Company’s risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance. c. Liquidity risk The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. a. Market risk Foreign exchange risk (i) Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities (mainly loans receivable, trade and other receivables, cash and cash equivalents and borrowings) are denominated in a currency that is not the Company’s functional currency. Had Euro exchange rate strengthened/weakened by 10% (2018: 15%) against the US dollar and all other variables remained unchanged, the posttax profit of the Company for the year ended 31 December 2019, would have decreased/increased by US$305 thousand (2018: loss for the year would have increased/decreased by US$16 thousand). This is mainly due to foreign exchange gains and losses arising upon retranslation of borrowings, cash in bank, trade and other receivables and payables denominated in Euros. Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. Cash flow and fair value interest rate risk (ii) The Company is exposed to fair value interest rate risk as all of its borrowings are issued at fixed rates. As all of the Company’s fixed rate borrowings are carried at amortised cost, any reasonably possible change in the interest rates as of 31 December 2019 and 31 December 2018 would not have any significant impact on the Company’s post tax profit/(loss) for the year. The Company’s management monitors the interest rate fluctuations on a continuous basis and acts accordingly. b. Credit risk Financial assets, which potentially subject the Company to credit risk, consist principally of trade and other receivables and cash and cash equivalents. Financial liabilities, which potentially subject the Company to credit risk, consist principally of financial guarantees provided to Company’s direct or indirect subsidiaries. At 31 December 2019 and 2018, the Company did not identify any material expected credit losses with respect to the Company’s financial assets and issued guarantees that are subject to IFRS 9 impairment model. At 31 December 2019, issued financial guarantee liabilities with carrying amount of US$5,675 thousand are within Stage 1 of IFRS 9 general impairment model (2018: US$2,668 thousand). (in thousands of US dollars) As of 31 December 2019 Trade and other payables Financial guarantee * Lease liabilities Borrowings Total As of 31 December 2018 Trade and other payables Financial guarantee * Borrowings Total Less than 1 year 1-2 years 2-5 years Over 5 years Total 1 100 848 285 90 3 869 853 344 1 736 869 013 - 870 749 - 8 454 - 14 020 22 474 - - - - - 132 441 - 4 500 136 941 - - 24 591 24 591 - - - - - - - - - 1 100 989 180 90 22 389 1 012 759 1 736 869 013 24 591 895 340 * Full amount payable if the loans, bonds and forward contracts guaranteed are non-performing (Note 21(l)). Management controls current liquidity based on expected cash outflows and expected receipts from dividends and interest. d. Capital risk management The Company’s main objective when managing capital is to maintain the ability to continue as a going concern in order to ensure the profitability its operations, maintain optimum equity structure and reduce its cost of capital. The Company monitors capital based on borrowings to total capitalization ratio. Total capitalization is calculated as the sum of the total borrowings and equity at the date of calculation. The management does not currently have any specific target for the rate of borrowings to total capitalisation. The rate of borrowings to total capitalisation is as follows: Financial assets are written-off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. (in thousands of US dollars) Finally, see Note 12 for credit quality of cash and cash equivalents and trade and other receivables. Total borrowings Total capitalisation Total borrowings to total capitalisation ratio (percentage) As at 31 December 2019 20 381 647 859 3% 2018 22 197 646 242 3% Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 40 Notes to the financial statements (continued) Notes to the financial statements (continued) 41 3 | Financial risk management | (continued) Financial risk factors (continued) e. Fair value estimation Fair value is the amount at which a financial asset could be exchanged or a liability settled in a transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price. The fair value of financial liabilities and assets for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to for similar financial instruments. The estimated fair values of financial instruments have been determined by the Company, using available market information, where it exists, and appropriate valuation methodologies and assistance of experts. However, judgment is necessarily required to interpret market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and therefore do not always represent the fair values of financial instruments. The Company has used all available market information in estimating the fair value of financial instruments. The fair value of floating rate instruments is normally their carrying amount. The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received, discounted at current interest rates for instruments with similar credit risk and remaining maturity. Discount rates used depend on credit risk of the counterparty. Carrying amounts of trade and other receivables approximate their fair values. The estimated fair value of fixed interest rate instruments with stated maturity, for which a quoted market price is not available, was estimated based on expected cash flows, discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Carrying amounts of trade and other payables which are due within twelve months approximate their fair values. The disclosure of the fair value of financial instruments carried at amortised cost is determined by using the following valuation methods: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on Company’s specific estimates. Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). 4 | Critical accounting estimates and judgments | Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions Estimated impairment of investments The Company reviews investments, long-lived assets or groups of assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that can trigger assessments for possible impairments include, but are not limited to (a) significant decreases in the market value of an asset, (b) significant changes in the extent or manner of use of an asset, and (c) a physical change in the asset. Even though no impairment or impairment reversal indications were identified for the Company’s investments in subsidiaries and joint ventures, an impairment test was carried out by Management for the Company’s investments as described below. Models are prepared based on the Company’s best estimates and latest budgets available as at the year end. If the estimated recoverable amount is less than the carrying amount of the asset or group of assets, the asset is not recoverable and the Company recognises an impairment loss for the difference between the estimated recoverable amount and the carrying value of the asset or group of assets. Estimating discounted future cash flows requires making judgments about long- term forecasts of future revenues and costs related to the assets subject to review. These forecasts are uncertain as they require assumptions about volumes, prices for the products and services, future market conditions and future technological developments. Significant and unanticipated changes in these assumptions could require a provision for impairment in a future period. The recoverable amounts of Arytano Holdings Limited (FCT/PLP and ULCT cash generating units (“CGUs”)), NCC Pacific Investments Limited (VSC CGU) and a component of Multi-Link Terminals Limited (MLT OY CGU) were determined based on value in use derived from discounted future cash flows models (refer to notes 14 and 15 for the definition of the CGUs of the Company). For estimation of recoverable amounts of CD Holding OY (YLP CGU) and a component of Multi-Link Terminals Limited (Moby Dik CGU) the fair value less costs of disposal method was used (refer to notes 14 and 15 for the definition of the CGUs of the Company). For all CGUs tested based on discounted future cash flows, cash flow projections cover a period of five years based on the assumptions of the next 12 months. Cash flows beyond that five-year period have been extrapolated using a steady terminal growth rate. The terminal growth rate used does not exceed the long-term average growth rate for the market in which entities operate. For projections prepared for CGUs in Russian ports segments a terminal growth rate of 3% has been applied (2018: 3%). The discount rate applied for Russian ports CGUs in projections prepared as at 31 December 2019 is 8.8% (2018: 10.6%). Key assumptions for Russian ports CGUs tested based on discounted future cash flows are throughput volume, price per unit, growth rates, and discount rates. The projected volumes reflect past experience adjusted by the management view on the prospective market developments. For CGUs in the Russian ports segment volume growth is estimated to be in line with the long-term market development, position of each terminal on the market and its pricing power. As supported by historical market performance and in view of relatively low containerisation level in Russia, the long-term average throughput growth rate for the Russian container market is higher than in developed markets. Based on the results of the impairment testing, no impairment was recognised in 2019 with respect to the Company’s investments in subsidiaries and joint ventures. For all investments, management believes that any reasonable possible change in the key assumptions would not cause the carrying amounts to exceed the recoverable amounts. Finally, the Board of Directors believes that there are no indications for reversal of impairments recognised in previous periods. Critical judgments in applying the Company’s accounting policies There were no critical judgments in applying the Company’s accounting policies. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 42 Notes to the financial statements (continued) Notes to the financial statements (continued) 43 5 | Finance income – net | (in thousands of US dollars) 8 | Staff costs | (in thousands of US dollars) For the year ended 31 December For the year ended 31 December Interest income on cash balances Total interest income calculated using effective interest rate method Net foreign exchange gains/(losses) on cash and cash equivalents and loans receivable* Total 2019 2 2 (39) (37) * The total net foreign exchange loss recognised in the statement of comprehensive income amounted to US$17 thousand (2018: gains US$19 thousand). Refer also to Note 7. 6 | Administrative expenses | (in thousands of US dollars) Legal, consulting and other professional services Staff costs (Note 8) Travelling expenses Taxes other than on income Auditors’ remuneration Advertising and promotion Insurance Bank charges Depreciation of property, plant and equipment and right-of-use assets Operating lease rentals Other expenses Total For the year ended 31 December 2019 966 1 824 136 182 394 28 101 14 167 15 216 4 043 2018 7 7 (20) (13) 2018 2 032 1 608 532 272 584 28 87 24 13 80 246 5 506 The auditors’ remuneration stated above include fees of US$229 thousand (2018: US$254 thousand) for statutory audit services and US$56 thousand (2018: US$63 thousand) for other assurance services. Salaries Social insurance costs Other staff costs Total Average number of staff employed during the year 9 | Finance costs | (in thousands of US dollars) Interest expense on loans from related parties (Note 21(c)) Interest expense on lease liabilities Net foreign exchange losses on related parties borrowings Total 10 | Income tax expense | (in thousands of US dollars) Defence contribution Total income tax 2019 1 690 120 14 1 824 6 For the year ended 31 December 2019 1 079 24 11 1 114 For the year ended 31 December 2019 - - 2018 1 514 87 7 1 608 6 2018 1 197 - - 1 197 2018 - - The legal and consulting fees stated above include fees of US$39 thousand (2018: US$1 thousand) for tax and vat consultancy services charged by the Company’s statutory audit firm. The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate as follows: 7 | Other gains/(losses) – net | (in thousands of US dollars) Net foreign exchange transaction gains on non-financing activities Derecognition of financial guarantee (Note 21(l)) Amortisation of financial guarantee (Note 21(l)) Other gains/(losses) - net Total For the year ended 31 December 2019 33 230 1 054 - 1 317 2018 39 1 180 1 189 (163) 2 245 (in thousands of US dollars) Profit/(loss) before tax Tax calculated at the applicable corporation tax rate of 12.5% Tax effect of expenses not deductible for tax purposes Tax effect of allowances and income not subject to tax Tax effect of tax losses for which no deferred tax assets were recognised Utilisation of carried forward losses Tax charge The Company is subject to corporation tax on taxable profits at the rate of 12.5%. Brought forward losses of only five years may be utilized. For the year ended 31 December 2019 3 433 429 646 (1 075) - (4) - 2018 (84 182) (10 523) 11 303 (786) 6 - - Under certain conditions, interest may be exempt from income tax and only subject to defence contribution at the rate of 30%.                 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 44 Notes to the financial statements (continued) Notes to the financial statements (continued) 45 10 | Income tax expense | (continued) In certain cases dividends received from abroad may be subject to defence contribution at the rate of 17%. In certain cases dividends received from other Cyprus tax resident Companies may also be subject to special contribution for defence. Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon, etc) are exempt from Cyprus income tax. 11 | Financial instruments by category | (in thousands of US dollars) Financial assets at amortised cost Financial assets as per balance sheet Trade and other receivables(1) Cash and bank balances Total financial assets Financial liabilities measured at amortised cost Financial liabilities as per balance sheet Trade and other payables Borrowings (Note 21(i)) Total Lease liabilities Total financial liabilities (1) Trade and other receivables do not include prepayments. 12 | Credit quality of financial assets | As at 31 December 2019 2018 2 198 150 2 348 912 20 381 21 293 81 21 374 - 744 744 1 459 22 197 23 656 - 23 656 The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available). Cash at bank and short-term bank deposits (Note 12): (in thousands of US dollars) Cash and bank A3 (Moody’s) Aa3 (Moody’s) B3 (Moody’s) Caa1 (Moody’s) Total As at 31 December 2019 32 52 66 - 150 2018 696 42 - 6 744 13 | Property, plant and equipment | (in thousands of US dollars) At 1 January 2018 Cost Accumulated depreciation Net book amount Additions Depreciation charge for 2018 Closing net book amount at 31 December 2018 At 31 December 2018/1 January 2019 Cost Accumulated depreciation Net book amount Additions Depreciation charge for 2019 Closing net book amount at 31 December 2019 At 31 December 2019 Cost Accumulated depreciation Net book amount 14 | Investments in subsidiaries | (in thousands of US dollars) At beginning of year Additions Dividends set off against cost of investment* Repayment of capital of subsidiaries Guarantees provided (Note 21(l)) Impairment charge At end of year Motor vehicles and other equipment 67 (1) 66 64 (13) 117 131 (14) 117 1 (43) 75 132 (57) 75 For the year ended 31 December 2019 624 638 1 861 - (3 668) 1 516 - 624 347 2018 638 899 - (696) - - (13 565) 624 638 Trade and other receivables amounting to US$1,773 thousand are related to highly reputable counterparties with Aa1 credit rating by Moody’s Investors Service as at 31 December 2019. * Dividends received by a subsidiary of the Company have been recognised by the Company as a reduction of the cost of investment because the Company has asserted that those amounts constitute a return of the original cost of the Company in this subsidiary.                           Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 46 Notes to the financial statements (continued) Notes to the financial statements (continued) 47 14 | Investments in subsidiaries | (continued) 15 | Investments in joint ventures | (continued) * National Container Holding Company Limited is accounted for as a subsidiary because the Company has indirect control, since its subsidiaries hold the remaining Other receivables The Company’s direct interests in subsidiaries, all of which are unlisted, were as follows: Name Principal activity Country of incorporation 2019 % holding 2018 % holding Arytano Holdings Limited Intercross Investments B.V. NCC Pacific Investments Limited NCC Group Limited Global Ports Advisory Eesti OU Global Ports Management LLC Rolis LLC National Container Holding Company Limited* Holding company Holding company Holding company Holding company Consulting company Management and consulting company Software development and maintenance Holding company Cyprus Netherlands Cyprus Cyprus Estonia Russia Russia Cyprus 100 100 100 100 100 100 100 100 100 100 100 100 100 - 0.005 0.005 shareholding. The principal activities of the indirect subsidiaries held by the direct subsidiaries listed above, are the operation of four container terminals in Russia (Petrolesport (PLP), First Container Terminal (FCT), Ust-Luga Container Terminal (ULCT) and Vostochnaya Stevedoring Company (VSC)). All of the above terminals are 100% subsidiaries except ULCT (a subsidiary in which the Group controls 80%). All of the above terminals represent separate CGUs, with the exception of PLP and FCT which started to work in 2019 as one unit from commercial and operational points of view. The two terminals have a common managing director and common senior management team. The process of unification of two facilities in terms of operations, infrastructure and equipment maintenance and development, technical matters etc. has started in 2019 and will continue in 2020. Nevertheless the Group management and the Board of Directors of the Company look at PLP and FCT as one combined terminal and monitor its performance as a single unit, without being legally merged together and remaining two separate legal entities. As a result of these processes PLP and FCT are now considered as one CGU. In 2018 the recoverable amount of NCC Group Limited (ex-parent holding of NCC Group acquired by the Company in 2013) was determined based on its net asset value which approximated its fair value less costs of disposal. Based on the results of the impairment testing, an impairment amounting to US$13,565 thousand was recognised with respect to investment in NCC Group Limited. No impairment was identified in 2019. 15 | Investments in joint ventures | (in thousands of US dollars) At beginning of year Additions Impairment charge At end of year The Company’s interests in joint ventures, all of which are unlisted, are as follows: Name CD Holding OY Multi-Link Terminals Limited M.L.T Container Logistics Ltd Principal activity Country of incorporation Holding company Holding company Holding company Finland Ireland Cyprus For the year ended 31 December 2019 2018 24 838 94 978 9 - 24 847 8 (70 148) 24 838 2019 % holding 2018 % holding 75 75 75 75 75 75 The principal activities of the joint ventures listed above are the operation of two container terminals in Finland (MLT OY CGU), a container terminal in Russia (Moby Dik CGU) and an inland container terminal in Russia (Yanino Logistics Park CGU (YLP)). In 2018 for MD CGU (part of the investment in Multi Link Terminals Limited) following the substantial reduction of cargo volumes the recoverable amount was determined based on the expected fair value less costs of disposal of those assets which have active market and their value could be reliably determined. As a result the investment in Multi Link Terminals Limited was impaired by US$70,148 thousand. No impairment was identified in 2019. 16 | Trade and other receivables | (in thousands of US dollars) As at 31 December 2019 1 773 425 231 2 429 2018 - - 309 309 Repayment of capital from related parties (Note 21(j)) Prepayments Total trade and other receivables The fair values of trade and other receivables approximate their carrying amounts. The carrying amount of the Company’s other receivables amounting to US$1,773 thousand are denominated in US dollars. The carrying amount of the Company’s other trade and other receivables are denominated in Euros. 17 | Cash and bank balances | (in thousands of US dollars) Cash at bank Total Cash and cash equivalents are denominated in the following currencies: (in thousands of US dollars) Currency: US dollar Euro Total Non-cash transaction There were no principal non-cash transactions during 2019 and 2018. As at 31 December 2019 150 150 As at 31 December 2019 36 114 150 2018 744 744 2018 47 697 744                 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 48 Notes to the financial statements (continued) Notes to the financial statements (continued) 49 18 | Share capital, share premium and dividends | (in thousands of US dollars) Share capital Share premium Total At 1 January 2018/31 December 2018/31 December 2019 57 317 923 511 980 828 Authorised share capital The authorised share capital of the Company amounts to US$175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000 ordinary non-voting shares with a par value of US$0.10 each. Issued share capital The issued share capital of the Company amounts to US$57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary non-voting shares with a par value of US$0.10 each. All issued shares are fully paid. The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have the right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum of any general meeting. Dividends There were no dividends declared or paid in 2019 and 2018. 19 | Trade and other payables | (in thousands of US dollars) Financial guarantee (Note 21(l)) Other payables Other payables to related parties (Note 21(k)) Accrued expenses Payroll payable Total trade and other payables As at 31 December 2019 2 900 181 207 188 524 4 000 2018 2 668 438 620 277 401 4 404 The fair value of trade and other payables which are due within one year approximates their carrying amount at the balance sheet date. The carrying amount of the Company’s trade and other payables (excluding financial guarantees) are denominated in Euros. 20 | Contingencies and commitments | Operating environment Most of investments of the Company are related to the operations in Russia. The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations. The Russian economy continues to be negatively impacted by ongoing political tension in the region and international sanctions against certain Russian companies and individuals. Firm oil prices, low unemployment and rising wages supported a modest growth of the economy in 2019. The operating environment has a significant impact on the Company’s operations and financial position. Management is taking necessary measures to ensure sustainability of the Company’s operations. However, the future effects of the current economic situation are difficult to predict and management’s current expectations and estimates could differ from actual results. Finland represents established market economy with more stable political systems and developed legislation based on EU directives and regulations. 20 | Contingencies and commitments | (continued) Guarantees granted to subsidiaries Refer to Note 21(l) for details of guarantees granted to direct and indirect subsidiaries. Commitments There were no material commitments as of 31 December 2019 and 31 December 2018. 21 | Related party transactions | The Company is jointly controlled by LLC Management Company “Delo” (“Delo Group”), one of Russia’s largest privately owned transportation companies, and APM Terminals B.V. (“APM Terminals”), a global port, terminal and inland services operator. For the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 “Related Party Disclosures”. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. The following transactions were carried out with related parties: a. Revenue (in thousands of US dollars) Management fees from: Subsidiaries Total b. Dividend income (in thousands of US dollars) Subsidiaries Joint ventures Total c. Interest expenses (in thousands of US dollars) Interest expense: Subsidiaries Total interest expenses For the year ended 31 December 2019 106 106 For the year ended 31 December 2019 5 431 - 5 431 For the year ended 31 December 2019 1 079 1 079 2018 110 110 2018 2 167 1 725 3 892 2018 1 197 1 197         Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 50 Notes to the financial statements (continued) Notes to the financial statements (continued) 51 21 | Related party transactions | (continued) d. Other gains/(losses) - net (in thousands of US dollars) Subsidiaries (Note 21(l)) Total e. Purchases of services (in thousands of US dollars) Subsidiaries Total f. Acquisitions/disposals of subsidiaries/joint ventures (in thousands of US dollars) Additions/contributions: Subsidiaries Joint ventures Total Distributions of equity/repayment of capital: Subsidiaries Total For the year ended 31 December 2019 1 284 1 284 For the year ended 31 December 2019 215 215 For the year ended 31 December 2019 1 861 9 1 870 3 668 3 668 2018 2 369 2 369 2018 227 227 2018 - 8 8 696 696 21 | Related party transactions | (continued) g. Key management personnel compensation The compensation of key management personnel and the total remuneration of the Directors (included in key management personnel compensation above) were as follows: (in thousands of US dollars) For the year ended 31 December Key management compensation: Salaries, fees, payroll taxes and other short-term employee benefits Directors’ remuneration: Fees Emoluments in their executive capacity Total h. Loans to related parties Loans to joint ventures: (in thousands of US dollars) At beginning of year Loan and interest repaid during the year Foreign exchange differences At end of year 2019 1 375 248 570 818 For the year ended 31 December 2019 - - - - The loan to joint ventures beared interest at the rate of 3.8%, was unsecured and was repaid in 2018. i. Borrowings from related parties Loans from subsidiaries: (in thousands of US dollars) At beginning of year Loans advanced during the year Loan and interest repaid during the year Interest charged Foreign exchange differences At end of year For the year ended 31 December 2019 22 197 7 078 (9 985) 1 079 12 20 381 2018 1 188 375 813 1 188 2018 59 (50) (9) - 2018 21 000 - - 1 197 - 22 197 The borrowings from related parties in amount of US$16,914 thousand are USD-denominated, bear effective interest at the rate from 5.7% to 7%, are unsecured and repayable in 2021-2024. The borrowings from related parties in amount of US$3,466 thousand are EUR- denominated, bear effective interest at the rate of 3.82%, are unsecured and repayable by April 2020.The fair value of borrowings as at 31 December 2019 approximates to their carrying value. As of 31 December 2019, the Company had undrawn loan facilities in the total amount of US$26,280 thousand.                                             Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 52 Notes to the financial statements (continued) Notes to the financial statements (continued) 53 22 | Events after the balance sheet date | The Company’s outlook for 2020 may be impacted by the Coronavirus (COVID-19) outbreak in China, which has significantly lowered visibility on what to expect in 2020. The Management is closely monitoring the situation with the outbreak of Coronavirus (COVID-19) and is ready to act depending on the development of the situation. There were no other material post balance sheet events which have a bearing on the understanding of these financial statements. 21 | Related party transactions | (continued) j. Other receivables (in thousands of US dollars) Repayment of capital from subsidiaries (Note 16) Total k. Other payables (in thousands of US dollars) Payroll payable (Note 19) Entities under control of owners of controlling entities (Note 19) Total As at 31 December 2019 425 425 As at 31 December 2019 470 207 677 2018 - - 2018 325 620 945 l. Guarantees granted to subsidiaries During 2015 and 2016 the Company granted an irrevocable public offer to purchase bonds issued by an indirect subsidiary of the Company, in the event a default occurs in respect of those bonds. These bonds had a balance of US$249,364 thousand (including interest accrued) as at 31 December 2019 (31 December 2018: US$222,134 thousand). At inception the fair value of these guarantees was US$2,575 thousand. As at 31 December 2019 the unamortised balance of this guarantee was US$618 thousand (31 December 2018: US$1,098 thousand). During 2016 the Company and its indirect subsidiaries granted guarantee to an indirect subsidiary of the Company, which issued the Eurobonds in the event of default in respect of those bonds with a balance of US$518,916 thousand (including interest accrued) as at 31 December 2019 (31 December 2018: US$646,879 thousand). At inception the fair value of the guarantee was US$3,588 thousand. As at 31 December 2019 the unamortised balance of this guarantee was US$1,007 thousand (31 December 2018: US$1,570 thousand). During 2019 the Company and its indirect subsidiaries granted guarantee to an indirect subsidiary of the Company in respect of a bank loan of a balance of US$71,945 thousand (including interest accrued) as at 31 December 2019. At inception the fair value of the guarantee was US$355 thousand. As at 31 December 2019 the unamortised balance of this guarantee was US$352 thousand. During 2019 the Company and its indirect subsidiaries granted guarantee to an indirect subsidiary of the Company in respect of a forward contracts in amount of US$130,000 thousand as at 31 December 2019. At inception the fair value of the guarantee was US$1,161 thousand. As at 31 December 2019 the unamortised balance of this guarantee was US$923 thousand. During 2016 the Company granted a corporate guarantee covering the non - performance by an indirect subsidiary of the Company in respect of a bank loan, which was repaid in October 2018. The guarantee was provided free of charge and was valid until December 2020. At inception the fair value of the guarantee was US$1,011 thousand. As at 31 December 2018 following the early repayment of the loan there were no unamortised balance of these guarantees. The probability of default by the debtors in relation to the guaranteed loans is considered low.       Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 54 Independent Auditor’s Report To the Members of Global Ports Investments Plc Report on the Audit of the Financial Statements | Our opinion | In our opinion, the accompanying parent company financial statements (the “financial statements”) of Global Ports Investments Plc (the “Company”) give a true and fair view of the financial position of the Company as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113. What we have audited We have audited the financial statements which are presented in pages 26 to 53 and comprise: ޭ the balance sheet as at 31 December 2019; ޭ 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, which include a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the financial statements is International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113. | Basis for opinion | Independent Auditor’s Report (continued) 55 Our audit approach Overview 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 Board of 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. Materiality Overall materiality: US$6,5 million, which represents approximately 1% of total assets. Key audit matters We have identified the impairment/impairment reversal assessment of investments in subsidiaries and joint ventures as the key audit matter. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They 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 the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole. 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. Overall materiality US$6,5 million How we determined it Approximately 1% of total assets We chose total assets as the benchmark, because, in our view: Independence We remained independent of the Company throughout the period of our appointment in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Rationale for the materiality benchmark applied ޭ it is the benchmark against which the performance of the Company (the principal activity of the Company is the holding of investments) is commonly measured by the users, and ޭ it is a generally accepted benchmark. We chose 1% which is within the range of acceptable quantitative materiality thresholds in auditing standards. We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above US$0,57 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. PricewaterhouseCoopers Ltd, City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus P O Box 53034, CY-3300 Limassol, Cyprus T: +357 25 - 555 000, F:+357 - 25 555 001, www.pwc.com.cy PricewaterhouseCoopers Ltd is a private company registered in Cyprus (Reg. No.143594). Its registered office is at 3 Themistocles Dervis Street, CY-1066, Nicosia. A list of the company’s directors, including for individuals the present and former (if any) name and surname and nationality, if not Cypriot and for legal entities the corporate name, is kept by the Secretary of the company at its registered office. PwC refers to the Cyprus member firm, PricewaterhouseCoopers Ltd and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 56 Independent Auditor’s Report (continued) Independent Auditor’s Report (continued) 57 Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud | Responsibilities of the Board of Directors and those charged with governance for the Financial Statements | Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters 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. Key Audit Matter How our audit addressed the Key Audit Matter Impairment/Impairment reversal assessment of investments in subsidiaries and joint ventures We focused on this area due to: ޭ the size of the Company’s investments in subsidiaries and joint ventures, and ޭ the assessment of whether there is an indication for impairment/ reversal of impairment involves subjective judgements. Refer to Note 4 to the financial statements for the related disclosures. We evaluated the Board of Directors’ conclusions on their assessment of non-existence of indications for impairment or reversal of impairment of the Company’s investments in subsidiaries and joint ventures which was based on external and internal sources of information. We also evaluated the adequacy of the disclosures made in Note 4 of the financial statements regarding the Board of Directors’ assessment. Based on the evidence obtained, we concluded that the Board of Directors’ assessment and conclusions reached, as well as disclosures included in the financial statements on the non-existence of indications for impairment/ reversal of impairment of the Company’s investments in subsidiaries and joint ventures, are appropriate. | Reporting on other information | The Board of Directors is responsible for the other information. The other information comprises the information included in the Management Report, including the Corporate Governance Statement, and the Directors’ responsibility statement which we obtained prior to the date of this auditor’s report and the Annual Report, which is expected to be made available to us after that date.Other information does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not and will 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 identified above 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 on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Company’s complete Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members of the Company at the Company’s Annual General Meeting and we will take such other action as may be required. The Board of Directors is responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines 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 Board of Directors is 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 Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. | 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 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 Board of Directors. ޭ Conclude on the appropriateness of the Board of 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. 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 a true and fair view. 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, related safeguards. 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. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 58 Independent Auditor’s Report (continued) Independent Auditor’s Report (continued) 59 | Report on Other Legal and Regulatory Requirements | | Other Matter | Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide thefollowing information in our Independent Auditor’s Report, which is required in addition to the requirements of International Standards on Auditing. Appointment of the Auditor and Period of Engagement We were first appointed as auditors of the Company in 2008 by the members of the Company for the audit of the financial statements for the period from 29 February 2008 (incorporation date) to 31 December 2008. Our appointment has been renewed annually, since then, by shareholder resolution. In 2011 the Company was listed in the Main Market of the London Stock Exchange and accordingly the first financial year after the Company qualified as an EU PIE was the year ended 31 December 2012. Since then, the total period of uninterrupted engagement appointment was 8 years. Consistency of the Additional Report to the Audit and Risk Committee We confirm that our audit opinion on the financial statements expressed in this report is consistent with the additional report to the Audit and Risk Committee of the Company, which we issued on 3 March 2020 in accordance with Article 11 of the EU Regulation 537/2014. Provision of Non-audit Services We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by us to the Company and which have not been disclosed in the financial statements or the management report. Other Legal Requirements Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: ޭ In our opinion, based on the work undertaken in the course of our audit, the management report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information given is consistent with the financial statements. ޭ In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the management report. We have nothing to report in this ޭ respect. ޭ In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance statement in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and which is included as a specific section of the management report, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap, 113, and is consistent with the financial statements. ޭ In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. ޭ In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect. This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to. We have reported separately on the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019. The engagement partner on the audit resulting in this independent auditor’s report is Tasos Nolas. Tasos Nolas Certified Public Accountant and Registered Auditor for and on behalf of PricewaterhouseCoopers Limited Certified Public Accountants and Registered Auditors City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus Limassol, 5 March 2020 Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information Additional Information Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 01 Directors’ Responsibility Statement We confirm that to the best of our knowledge: This Annual Report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Board of Directors of Global Ports Investments Plc Definitions Terms that require definitions are marked with capital letters in this report and the definitions of which are provided below in alphabetical order. The non- IFRS financial measures defined below are presented as supplemental measures of the Group’s operating performance, which the Group uses as key performance indicators of the Group’s business and to provide a supplemental tool to assist in evaluating current business performance. The Group believes these metrics are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Russian market and global ports sector. These non-IFRS financial measures are measures of the Group’s operating performance that are not required by, or prepared in accordance with IFRS. All of these non-IFRS financial measures have limitations as analytical tools, and investors should not consider any one of them in isolation, or any combination of them together, as a substitute for analysis of the Group’s operating results as reported under IFRS and should not be considered as alternatives to revenues, profit, operating profit, or any other measures of performance derived in accordance with IFRS or as alternatives to cash flow from operating activities or as measures of the Group’s liquidity. In particular, the non-IFRS financial measures should not be considered as measures of discretionary cash available to the Group businesses. 02 Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance income/ (costs)—net, depreciation of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/ (losses)—net and impairment of goodwill and property, plant and equipment and intangible assets. Adjusted EBITDA Margin (a non- IFRS financial measure) is calculated as Adjusted EBITDA divided by revenue, expressed as a percentage. ASOP is “Association of Sea Commercial Ports” (www.morport.com). Baltic Sea Basin is the geographic region of northwest Russia, Estonia and Finland surrounding the Gulf of Finland on the eastern Baltic Sea, including St. Petersburg, Ust-Luga, Tallinn, Helsinki and Kotka. Cash Costs of Sales (a non-IFRS financial measure) are defined as cost of sales, adjusted for depreciation and impairment of property, plant and equipment, depreciation and impairment of right-of- use assets, amortisation and impairment of intangible assets. Cash Administrative, Selling and Marketing Expenses (a non-IFRS financial measure) are defined as administrative, selling and marketing expenses, adjusted for depreciation and impairment of property, plant and equipment, depreciation and impairment of right-of- use assets, amortisation and impairment of intangible assets. CD Holding group consists of Yanino Logistics Park (an inland terminal in the vicinity of St. Petersburg) and CD Holding. The results of CD Holding group are accounted in the Global Ports’ financial information using equity method of accounting (proportionate share of net profit shown below Adjusted EBITDA). Consolidated Container Revenue is defined as revenue generated from containerised cargo services. Consolidated Marine Bulk Throughput is defined as combined marine bulk throughput by consolidated terminals: PLP, VSC, FCT and ULCT. Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC, FCT and ULCT. Consolidated Non-Container Revenue is defined as a difference between total revenue and Consolidated Container Revenue. Container Throughput in the Russian Federation Ports is defined as total container throughput of the ports located in the Russian Federation, excluding half of cabotage cargo volumes. Respective information is sourced from ASOP (“Association of Sea Commercial Ports”, www.morport.com). Far East Basin is the geographic region of southeast Russia, surrounding the Peter the Great Gulf, including Vladivostok and the Nakhodka Gulf, including Nakhodka on the Sea of Japan. Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 03 First Container Terminal (FCT) is located in the St. Petersburg harbour, Russia’s primary gateway for container cargo and is one of the first specialised container terminals. The Global Ports Group owns a 100% effective ownership interest in FCT. The results of FCT are fully consolidated. Finnish Ports segment consists of two terminals in Finland, MLT Kotka and MLT Helsinki (in the port of Vuosaari), in each of which CMA Terminals currently has a 25% effective ownership interest. The results of the Finnish Ports segment are accounted in the Global Ports’ financial information using equity method of accounting (proportionate share of net profit shown below EBITDA). Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchases of PPE. Gross Container Throughput represents total container throughput of a Group’s terminal or a Group’s operating segment shown on a 100% basis. For the Russian Ports segment it excludes the container throughput of the Group’s inland container terminal — Yanino. Logistika Terminal (LT) is an inland container terminal providing a comprehensive range of container freight station and dry port services at one location. The terminal is located to the side of the St. Petersburg–Moscow road, approximately 17 kilometres from FCT and operates in the Shushary industrial cluster. In September 2018 the Group completed the previously announced sale of its holding in JSC “Logistika-Terminal”, one of the Group’s two inland terminals, to PJSC TransContainer for a consideration of RUB 1.9 billion. Functional Currency is defined as the currency of the primary economic environment in which the entity operates. Functional currency of the Company and certain other entities in the Global Ports Group is USD. The functional currency of the Global Ports Group’s operating companies for the years under review was (a) for the Russian Ports segment RUB and (b) for the Finnish Ports segment, EUR. MLT Group consists of Moby Dik (a terminal in the vicinity of St. Petersburg) and Multi-Link Terminals Oy (terminal operator in Vuosaari (near Helsinki, Finland) and Kotka, Finland), MLT-Ireland and some other entities. The results of MLT group are accounted in the Global Ports’ financial information using equity method of accounting (proportionate share of net profit shown below EBITDA). Moby Dik (MD) is located on the St. Petersburg ring road, approximately 30 kilometres from St. Petersburg, at the entry point of the St. Petersburg channel. It is the only container terminal in Kronstadt. The Global Ports Group owns a 75% effective ownership interest in MD, CMA Terminals currently has a 25% effective ownership interest. The results of MD are accounted in the Global Ports’ financial information using equity method of accounting (proportionate share of net profit shown below EBITDA). Net Debt (a non-IFRS financial measure) is defined as the sum of current borrowings, non-current borrowings, current and non-current lease liabilities (following adoption of IFRS 16) and swap derivatives less cash and cash equivalents and bank deposits with maturity over 90 days. Petrolesport (PLP) is located in the St. Petersburg harbour, Russia’s primary gateway for container cargo. The Group owns a 100% effective ownership interest in PLP. The results of PLP are fully consolidated. Ro-Ro, roll on-roll off is cargo that can be driven into the belly of a ship rather than lifted aboard. Includes cars, buses, trucks and other vehicles. 04 Revenue per TEU is defined as the Global Ports Group’s Consolidated Container Revenue divided by total Consolidated Container Marine Throughput. Russian Ports segment consists of the Global Ports Group’s interests in PLP (100%), VSC (100%), FCT (100%), ULCT (80%) (in which Eurogate currently has a 20% effective ownership interest), Moby Dik (75%), Yanino (75%) (in each of Moby Dik and Yanino CMA Terminals currently has a 25% effective ownership interest), as well as certain other entities. The results of Moby Dik and Yanino are accounted in the Global Ports’ consolidated financial information using equity method of accounting (proportionate share of net profit shown below EBITDA). TEU is defined as twenty-foot equivalent unit, which is the standard container used worldwide as the uniform measure of container capacity; a TEU is 20 feet (6.06 metres) long and eight feet (2.44 metres) wide and tall. Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings, current and non-current lease liabilities (following adoption of IFRS 16) and swap derivatives. Total Operating Cash Costs (a non-IFRS financial measure) is defined as Global Ports Group’s cost of sales, administrative, selling and marketing expenses, less depreciation and impairment of property, plant and equipment, depreciation and impairment of right-of-use assets, less amortisation and impairment of intangible assets. Ust Luga Container Terminal (ULCT) is located in the large multi-purpose Ust-Luga port cluster on the Baltic Sea, approximately 100 kilometres westwards from St. Petersburg city ring road. ULCT began operations in December 2011. The Global Ports Group owns an 80% effective ownership interest in ULCT, Eurogate, the international container terminal operator, currently has a 20% effective ownership interest. The results of ULCT are fully consolidated. Vopak E.O.S. (VEOS) includes AS V.E.O.S. and various other entities (including an intermediate holding) that own and manage an oil products terminal in Muuga port near Tallinn, Estonia. The Group owned a 50% effective ownership interest in Vopak E.O.S. The remaining 50% ownership interest was held by Royal Vopak. In April 2019 the Group sold its stake in the VEOS oil products terminal to Liwathon. Vostochnaya Stevedoring Company (VSC) is located in the deep-water port of Vostochny near Nakhodka on the Russian Pacific coast, approximately eight kilometres from the Nakhodka- Vostochnaya railway station, which is connected to the Trans-Siberian Railway. The Group owns a 100% effective ownership interest in VSC. The results of VSC are fully consolidated. Weighted average effective interest rate is the average of interest rates weighted by the share of each loan in the total debt portfolio. Yanino Logistics Park (YLP) is the first terminal in the Group’s inland terminal business and is one of only a few multi- purpose container logistics complexes in Russia providing a comprehensive range of container and logistics services at one location. It is located approximately 70 kilometres from the Moby Dik terminal in Kronstadt and approximately 50 kilometres from PLP. The Global Ports Group owns a 75% effective ownership interest in YLP, CMA Terminals currently has a 25% effective ownership interest. The results of YLP are accounted in the Global Ports’ financial information using equity method of accounting (proportionate share of net profit shown below EBITDA). Global Ports Investments PLC Annual Report 2019 01 Global Ports at a Glance 02 Strategic Report 03 Corporate Governance 04 Consolidated Financial Statements 05 Parent Company Financial Statements 06 Additional Information 05 Shareholder Information and Key Contacts Global Ports Investments PLC Legal Address Omirou 20 Agios Nikolaos CY-3095 Limassol, Cyprus Postal Address BG WAYWIN PLAZA, Office 302 62 Agiou Athanasiou Avenue Limassol 4102, Cyprus Investor Relations Mikhail Grigoriev Head of Capital Markets and Investor Relations Tel: +7 812 677 15 57 Mob: +7 916 991 7396 Tatiana Khansuvarova Investor Relations Analyst E-mail: ir@globalports.com Media Relations Press office Maria Kobzeva Head of Press Office Tel: +7 812 677 15 57 ext. 2889 E-mail: pressa@globalports.com PR Consultants Teneo Zoë Watt Doug Campbell Tel: +44 20 7260 2700 E-mail: globalports@teneo.com Customer Service Department Service Call Center Tel: +7 812 335 77 77 8 800 201 24 24 Е-mail: customer_service@globalports.com Client portal www.globalports.com Mobile version GOT IT ON DOWNLOAD ON THE Depositary J.P. Morgan Depositary Receipts 383 Madison Avenue, Floor 11 New York, NY 10179 www.adr.com/contact/jpmorgan J.P. Morgan 1 Chase Manhattan Plaza, Floor 58 New York, NY 10005 Tel: +1 (866) JPM-ADRS E-mail: adr@jpmorgan.com Stock Exchange London Stock Exchange PLC 10 Paternoster Square, London EC4M 7LS, UK Tel: +44 20 7797 1000 www.londonstockexchange.com Independent Auditors PricewaterhouseCoopers Limited City House, 6 Karaiskakis Street CY-3032, Limassol, Cyprus Tel: +357 25 555 000 Fax: +357 25 555 001 

Continue reading text version or see original annual report in PDF format above