Global Ports Holding Plc
Annual Report 2020

Plain-text annual report

Annual Report 2020 DEMONSTRATING RESILIENCE, ACHIEVING RESULTS Global Ports Investments PLC KEY STRENGTHS No. container terminal operator in Russia1 and multipurpose terminals in Russia marine container and Finland The only player with a network of terminals in key container gateways of Russia Unique partnership of strategic shareholders: a global leader and a strong local player, APM Terminals and Delo Group each with of total share capital GDR listed on the Main Market of the LSE (free-float of 20.5%) Sustainable and responsible business: MSCI ESG rating at BB level, Sustainalytics estimated Global Ports' risk of material financial impacts driven by ESG factors at medium level 1 In terms of container throughput and container handling capacity, based on ASOP data for 2020. GLOBAL PORTS TODAY Despite the unparalleled challenges that both Russia and the world faced in 2020, Global Ports proved that its business is fundamentally stable, sustainable and cash generative. Over the year the Group continued to deliver excellent quality of operations, launching a range of new services and supporting its clients in this uncertain time, increased its market share and decreased leverage level. In 2020 the Group outperformed the Russian container market for the third year in a row with outstanding growth of 6.6% against a market decline of 0.8%. The Group demonstrated strong financial results in 2020 achieving like-for-like2 Adjusted EBITDA Margin growth of 65.2% and stable high Free Cash Flow at USD 157.1 million. The Group continued its deleveraging strategy and decreased Net Debt / EBITDA by 0.4 to 2.9x supporting its eventual path towards resumption of dividends once targets have been achieved. Credit ratings by all rating agencies that rate the Group and its financial instruments with stable outlook were reaffirmed in 2020: Fitch Ratings at BB+, Moody’s at Ba2, RA Expert at RuA+. 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. Certain financial information is derived from the management accounts. 2020 RESULTS The lowest on record for the Group LTIFR Consolidated Marine Container Throughput vs –0.8% Russian container market in 2020 Consolidated Marine Bulk Throughput increased to 5.1 million tonnes Adjusted EBITDA mln The lowest level of Net Debt to Adjusted EBITDA in 8 years Like-for-like2 Adjusted EBITDA Margin Free Cash Flow mln 2 Like-for-like is an adjusted growth metric calculated on management accounts: cash cost and revenue for 2020 and 2019 adjusted for VSC transportation services. As a result of the new terms of certain sales agreements, in 2020 VSC acted as a principal vs as an agent at the beginning of 2019: previously the net result of revenue from transportation services and associated costs was included in the consolidated revenue. Since the middle of 1H 2019 full revenue and associated costs have been recognized in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 62.8 million to consolidated revenue (USD 11.4 million in 2019) and USD 62.8 million (USD 11.4 million in 2019) to cost of sales in 2020. 2 Global Ports Investments PLC Annual Report 2020 globalports.com 3 08 About Us. Performance 10 Key Milestones 12 Strong Presence in Russia’s Key Container and Bulk Gateways 16 Chairman’s Statement 20 Chief Executive Officer’s Statement 24 Delivering Quality and Leadership 25 Strategy 26 Business Model 28 Business Review 52 Environmental, Social and Governance 66 Corporate Governance 72 Board of Directors 78 Executive Management 81 Terminal Directors 85 Risk Management Management Report and Consolidated Financial Statements Management Report and Parent Company Financial Statements 4 Global Ports Investments PLC Annual Report 2020 globalports.com 5 GLOBAL PORTS AT A GLANCE 8 10 12 About Us. Performance Key Milestones Strong Presence in Russia’s Key Container and Bulk Gateways 6 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com 1 Global Ports at a Glance 2 Strategic Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Parent Company Financial Statements 6 Additional Information 7 Ownership Structure, % Consolidated Marine Container Throughput, mln TEU Consolidated Marine Bulk Throughput, mln tonnes +6.6% 1.53 1.44 +38.7% 5.1 3.7 2019 2020 2019 2020 Net Debt / Adjusted EBITDA 2020 2.9X 3.3X 2019 1 2 3 4 5 6 ABOUT US. PERFORMANCE In a very challenging 2020, the Group’s clear strategy proved to be the right one enabling Global Ports, with its well equipped terminals and ready infrastructure for handling full export containers, to take advantage of its strategic position in the two key marine gateways of Russia. A continued focus on driving efficiency, productivity, and innovation across all operations was matched by a relentless focus on clients’ needs through providing technological solutions and the highest service standards in the industry. Supported by our co-controlling shareholders, a unique partnership of an international industry leader and a strong domestic player: APM Terminals and Delo Group each with 30.75% of total share capital. These attributes and strategic decisions enabled the Group to demonstrate resilience, increase container and bulk throughput to protect market share as well as increase like-for-like Adjusted EBITDA Margin and continue deleveraging. Delo Group 30.75% APM Terminals 30.75% Ilibrinio Establishment Limited 9% Polozio Enterprises Limited 9% Free float (LSE listing) 20.5% Delo Group is one of the largest transportation and logistics holding companies in Russia1. The Group’s stevedore business includes DeloPorts stevedore holding, the leading operator of port container terminals Global Ports and TransContainer, leading rail operator in Russia, owner of 38 railway container terminals, more than 32,000 containers and 86,000 flatcars. APM Terminals operate a global terminal network of 20,000 professionals with 75 operating port facilities. APM Terminals is a part of A.P. Moller- Maersk, the world’s largest integrator of container and ports logistics. Ilibrinio Establishment Limited and Polozio Enterprises Limited (former owners of NCC Group) each own 9% of the share capital of Global Ports. Free Cash Flow, USD mln –1.1% Like-for-like Adjusted EBITDA Margin,2 % 158.8 157.1 64.8% 65.2% Key consolidated financial and operational data Selected IFRS financial information, USD mln Revenue 384.4 361.9 22.6 6.2% 2020 2019 Change Change, % 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 units Cars, thousand units Balance sheet and cash statement, USD mln Total assets Cash and cash equivalents Net cash from operating activities Selected non-IFRS financial information, USD mln Like-for-like Revenue Total Operating Cash Costs Like-for-like Total Operating Cash costs Adjusted EBITDA Like-for-like Adjusted EBITDA Margin Free Cash Flow Net Debt Net Debt to Adjusted EBITDA -225.0 184.1 157.4 50.0 1.53 5.1 20.3 82.0 1,327.2 207.0 190.9 321.7 -176.0 -113.2 209.7 65.2% 157.1 612.1 2.9x -187.3 210.1 144.8 67.7 1.44 3.7 20.0 103.3 1,454.3 124.4 185.4 350.5 -136.7 -125.3 226.9 64.8% 158.8 747.0 3.3x -37.7 -25.9 12.6 -17.7 0.1 1.4 0.3 20.1% -12.4% 8.7% -26.1% 6.6% 38.7% 1.3% -21.3 -20.6% -127.1 82.6 5.5 -28.8 -39.3 12.1 -17.2 -1.8 -134.9 -0.4 -8.7% 66.4% 3.0% -8.2% 28.7% -9.7% -7.6% -1.1% -18.1% -11.3% 9 2019 2020 2019 2020 1 According to Delo Group data. 2 As a result of the new terms of certain sales agreements, in 2020 VSC acted as a principal vs as an agent at the beginning of 2019: previously the net result of revenue from transportation services and associated cost was included in the consolidated revenue. Since the middle of 1H2019 full revenue and associated costs have been recognized in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 62.8 million to consolidated revenue (USD 11.4 million in 2019) and USD 62.8 million (USD 11.4 million in 2019) to cost of sales in 2020. 8 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com KEY MILESTONES March Global Ports launched its updated corporate website, which combines the key digital resources of the holding company and the terminals of the Group and aims to optimise interaction with all stakeholders. In order to prevent the spread of COVID-19, Global Ports took all necessary measures to ensure the absolute safety of personnel and maintain all terminals, as a part of "critical infrastructure" to the Russian Federation, at 100% operability to deliver high- quality service. FCT and VSC began servicing an АЕ19 Eastbound transit intermodal service to deliver containers from Europe to Asia via Russia. The АЕ19 Eastbound service was launched by Maersk to extend its АЕ19 service from Asia to Europe that was launched in August 2019. January VSC launched a service to form and ship container trains bound to the Elektrougli Station of the Moscow Railways. The new service is available both for the cargo shipped from ports in the South-Eastern Asia via VSC, and cargo originating in the Russian Far East. February ULCT introduced a regular fast container service bound to Vorsino (Tascom terminal) into its timetable. The service is focused on conventional container cargo, with the cargo mix to include consumer goods and construction materials. April Global Ports started the reporting of quarterly operational trading on an ongoing basis. An important step in keeping with the Group’s continuing focus on increasing transparency with the market and aiming to achieve best practice communication and engagement with all stakeholders. May Global Ports joined a pilot project by the Russian Ministry of Transport to control the multi-modal transit of goods banned for import using electronic navigation seals that work on the basis of the GLONASS system. This was the first test for using electronic navigation seals in Russia for the transportation of containers carrying sanctioned goods in sea ports. PLP handled the first batch of BMWs under a contract entered into with the logistics operator ROLF SCS (a NYK Group company). The contract for handling, storage and maintenance of cars shipped for BMW Group Russia is for a term of three years. A new LIEBHERR LHM 550 mobile harbour crane was put into operation at PLP as part of the Global Ports facility development and upgrade programme in Russia. 10 Global Ports Investments PLC Annual Report 2020 globalports.com June Global Ports launched a service for the digital issuance of orders for the loading of export containers at FCT, making FCT the first Russian terminal to transfer to a fully paperless export management system. Four new TOYOTA forklifts were added to the equipment fleet at VSC as part of its handling equipment and operating facility upgrade programme, designed to increase efficiency and speed of cargo handling. July Mr. Albert Likholet, Managing Director of PLP and FCT, was appointed as CEO of Global Ports Management LLC. VSC upgraded a storage yard of more than 18,000 sq. m in the area of berth 6, to mark an achievement of another milestone of its container terminal reconstruction programme. August The Group relocated six rubber-tyred gantry cranes (E-RTG) from ULCT to FCT. The redistribution ensured optimal use and flex of the Group’s equipment, taking into account the volume and direction of freight traffic at specific terminals, while providing a consistent high quality of service. September VSC and TransContainer launched regular weekly container train shipments from Nakhodka Vostochnaya station bound for Malaszevicze station in Poland via Brest (Belarus). VSC partnered with the Golden Horn service of MSC Mediterranean Shipping Company, increasing the number of serviced regular sea lines. October VSC received two new rail mounted gantry cranes (RMG) with a capacity of 50 tonnes and a span of 32 metres each. They are capable of operating 14 rows and six tiers of containers, doubling VSC’s container storage capacity. VSC started working with Japanese container line operator, OCEAN NETWORK EXPRESS (ONE), providing a new Korea Russia Express service, a weekly cargo transportation service between Nakhodka and Pousan. Mr. Marc Niederer joined the Group as Chief Operational Officer of Global Ports Management LLC. 1 2 3 4 5 6 November VSC handled 44.6 thousand TEU, marking the terminal’s historical record in container volume over one calendar month, surpassing the previous highest result of 43.5 thousand TEU that was set in April 2014. Global Ports launched a regular container train service from VSC in the Primoriye Region to Yanino in the Leningrad Region as part of the development of the Group’s railway transportation service offering. The trains depart from Nakhodka-Vostochnaya station on a weekly basis with a travel time of 11 days. December The second LIEBHERR LHM 550 mobile harbour crane was put into operation at PLP. Part of the Group’s development and upgrade programme, this equipment has expanded the operating capabilities and cargo handling efficiency of the terminal. VSC successfully priced a 5-year RUB 5 billion non- convertible interest-bearing bond with a fixed interest rate of 6.55% per annum. FCT bought 88% of the RUB 5 billion bond issue (FCT 01). Following the issue of VSC’s RUB bond, Global Ports reduced its average interest rate for issued rouble bonds and continued to optimise its debt portfolio in 2021. 11 STRONG PRESENCE IN RUSSIA’S KEY CONTAINER AND BULK GATEWAYS1 By Sea By Rail 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. 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. BALTIC SEA BASIN Finland 7 8 Sweden Baltic Sea 2 5 4 1 6 Gulf of Finland Estonia Latvia Russia Murmansk St. Petersburg FAR EAST BASIN China 1 2 3 4 5 6 Russia 3 Sea of Japan 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. Moscow Ekaterinburg Novorossiysk 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. Baltic basin share of Russia’s marine container traffic Far East share of Russia’s marine container traffic Location 1. First Container Terminal (FCT) 2. Petrolesport (PLP) 5. Moby Dik (MD) 6. Yanino (YLP) Cargo handled Container throughput berth/yard capacity2 Land total Ownership St. Petersburg Containers 1.25 mln/0.9 mln TEU per year 88.6 ha 100% St. Petersburg Containers, Ro-Ro, bulk cargo 1 mln/0.35 mln TEU per year 120.7 ha 100% Kronstadt, St. Petersburg Ro-Ro, bulk and general cargo 13.0 ha 75% St. Petersburg Containers, bulk cargo 0.2 mln TEU per year 51.3 ha 75% 3. Vostochnaya Stevedorings Company (VSC) 4. UST-LUGA Container Terminal (ULCT) Vrangel, Nakhodka Containers, bulk cargo 0.65 mln/0.65 mln TEU per year 76.6 ha 100% Ust-Luga port cluster Containers, bulk cargo 0.44 mln/0.24 mln TEU per year 54.0 ha 80% 7. MLT Kotka 8. MLT Helsinki Kotka, Finland Containers, Ro-Ro, bulk cargo 0.15 mln TEU per year 4.3 ha 75% Helsinki, Finland Containers, Ro-Ro, bulk cargo 0.27 mln TEU per year 7.0 ha 75% JV accounting 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 Entity: ULCT Partner: Eurogate Share: 20% Fully consolidated in IFRS 1 Numbers for the Group are presented on a consolidated basis. 2 Company estimates based on annual potential berth and yard throughput capacity. 12 Global Ports Investments PLC Annual Report 2020 globalports.com 13 STRATEGIC REPORT 1 Global Ports at a Glance 2 Strategic Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Parent Company Financial Statements 6 Additional Information 16 20 Chairman’s Statement CEO’s Statement 24 Delivering Quality and Leadership 25 Strategy 26 28 52 Business Model Business Review Environmental, Social and Governance 14 14 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com 15 15 CHAIRMAN’S STATEMENT SOREN SJOSTRAND JAKOBSEN Chariman of the Board of Directors 16 Global Ports Investments PLC Annual Report 2020 globalports.com 2020 was a challenging year for the company, its clients, staff and other stakeholders. Global restrictions to control the spread of COVID-19 severely disrupted the global economy, creating continued challenges for the maritime logistics industry throughout the year. However, the Group showed great resilience and weathered the crisis well. As a result, Global Ports outperformed the Russian container sector for a third straight year and maintained its strong run of financial results, underlining its position as Russia’s leading independent container terminals group. 1 2 3 4 5 6 When COVID-19 first hit last March, the Board’s goals were clear. They were to protect the health and safety of employees, maintain operational continuity and preserve financial stability. While it was a testing period for the organisation, everyone rallied together to keep our people safe, our terminals open and our customers’ supply chains moving. None of this would have been possible if not for the extraordinary efforts of the Global Ports team. On behalf of the Board, I would like to thank all of our employees for their important contributions to our performance in 2020. In 2020 7% of the company’s staff contracted the virus and unfortunately one member of staff succumbed to the virus. Operationally, much of last year’s focus concerned our response to the pandemic: how to make the rapid adjustments needed to optimise business performance and how to steer the company safely through the crisis. In this respect, we benefitted from our work over the past few years to make Global Ports more agile and resilient. The investments in new facilities, service offerings and business systems combined with great execution in the fundamentals of our business, reduced the impact of the pandemic on our operations. Our strong financial results reflect the strength of the Group’s business fundamentals and its business model, with the Group making good progress in terms of profitability, cash flow, cost control and balance sheet improvement. I would like to point out that the Group’s cash-generating qualities and the progress made in deleveraging merit particular mention. In challenging markets, the Group generated USD 157 million in Free Cash Flow, demonstrating the resilience of the Global Ports business. There has also been excellent progress in reducing leverage, a key priority for the Board and shareholders, with the Group reporting it had fallen to its lowest level since 2012. 17 Adjusted EBITDA USD209.7mln Strategy The Board Outlook Whilst the long term societal impact of the pandemic is impossible to determine at this stage, it has already provoked structural changes for many industries. While the events of 2020 certainly tested the container ports sector in Russia, what transpired was a very positive sector story that has reinforced the Board’s confidence in our company’s long term prospects. The crisis has highlighted the strategic importance of the industry and its growing economic resilience, a result of a profound shift in the industry’s underlying dynamics. Global Ports’ prospects as a critical national infrastructure business have also never been clearer. As the most diverse operator of terminals in Russia, we own a portfolio of infrastructure assets capable of delivering sustainable value to our customers and stable long-term cashflows to our shareholders. Given how 2020 unfolded, the strategic actions we took to make the Group more efficient and customer-focused coupled with our ongoing focus on debt reduction were well timed in the context of COVID-19 and its aftermath. The lessons of the pandemic for the ports industry are likely similar to those we had already absorbed and begun to act on: focusing more acutely on the customer; investing in digitalisation; automating processes; improving asset utilisation; and investing in inland logistics. We entered the pandemic already well-positioned with a clear strategy, a strong management team and a world-class terminal assets portfolio. I believe we have come out of the crisis better and stronger and that bodes well for our ability to generate greater long term value for our stakeholders. Last year was a busy year for Board succession. Having joined the Board as a Non-Executive Director in March 2018, I was appointed Chairman in April 2020 following Morten Engelstoft’s decision to step down as Chairman to concentrate full time on his executive duties at A.P.Moller- Maersk. Andrey Yashchenko joined the Board as a Non- Executive Director following the AGM in April 2020. Andrey is Senior Vice President, Strategy and Finance of Delo Group. In May 2020, Kristian Bai Hollund was appointed as a Non-Executive Director to the Board. Kristian is Operations CFO of APM Terminals. Andrey and Kristian have already made a significant positive impact on the Board work with their insights and industry experience. In June 2020, we announced that Vladimir Bychkov would be stepping down after two years as CEO. On behalf of the Board, I would like to thank Vladimir for his contribution to the Group’s development. He has done an outstanding job in transforming Global Ports, streamlining its operations, rebuilding the culture and re-establishing our leadership position, and we wish him well for the future. The Board conducted a thorough process to find the best possible successor and, as a result, appointed Albert Likholet as CEO in July 2020. As Managing Director of Petrolesport and First Container Terminal and with 20 years of experience in the industry, Albert has a deep understanding of our company and its culture, proven leadership in terminal operations, a strategic mindset and a strong commercial track record. The Board considers Albert is the right person to lead the Group through the next stage of its development and we look forward to working with him in the coming years. My focus as Chairman is on building a strong and collaborative Board that can provide the leadership and experience needed to drive the next stage of the Group’s development. The pandemic was, in many ways, a real- life test of Board effectiveness in a crisis. In our case, after simplifying our decision-making and governance mechanisms in 2019, the Board was able to react in a much more effective and decisive manner when the crisis hit. Even though proceedings faced inevitable disruption, the Board quickly adapted to the new conditions and continued to function well throughout the period. We increased the frequency of meetings both on an informal and formal basis, largely by remote means, to supervise and support the leadership team. While Board meetings inevitably focused on the impact of COVID-19, we did not lose sight of other critical areas like ESG and corporate strategy. More generally, the Board continued its commitment to an open and transparent dialogue with stakeholders with whom we maintained regular contact throughout the year. My experiences of the last twelve months as a Non-Executive director and now as Chairman have reinforced my belief that we have the right people in place to lead the Group, from our Board of Directors through to the executive team. I also wish to express the Board’s appreciation to our co- controlling shareholders, APM Terminals and Delo Group, for their unstinting support over the past year. There is no question that Global Ports has emerged from last year’s unique circumstances a stronger and more resilient enterprise. Throughout 2020, the Group consistently demonstrated its adaptability and resilience, attributes that will see the business through the transition to a «new normal» business environment. In the immediate term, given the uncertainty around the macro outlook, we expect greater short-term volatility in our markets. However, I am confident that longer term, our prospects remain very promising, as continued growth in containerisation in Russia should create solid demand for our terminals and the services we provide. 1 2 3 4 5 6 ESG Global Ports is committed to being an industry leader when it comes to environmental, social and governance matters. The Board recognises that as a company that provides critical infrastructure, the development of socially responsible business practices is critical to our long term success. Our ESG strategy focuses on maximising our positive social and environmental impact to deliver tangible outcomes that make a real difference to our stakeholders. Notwithstanding the challenging circumstances, the Group has made good progress towards its ESG goals. We continued to engage with leading ratings agencies on our ESG strategy and the improvements we have made. Our progress in this important area was recognised by Sustainalytics as medium and MSCI reaffirmed its ESG rating of BBB for the second consecutive year. Safety, which continues to be the Board’s number one priority, took on even greater urgency last year due to the rapid spread of COVID-19. The Board placed greater emphasis on our controls framework to reduce risks across our operations. I am pleased to report that we maintained our strong safety record, with the Group recording its lowest ever Lost Time Frequency Rate in 2020 and we also had no major environmental incidents in 2020. We also made improvements to the Group’s governance regime. The Board enhanced its disclosure practices by introducing the publication of quarterly operating results and accelerating disclosure under IFRS reporting. As well, a revised version of the Group’s Code of Ethics was approved by the Board, as well as the first-time introduced Conflict of Interest Policy. These incremental measures will ensure the Group continues to comply with the highest standards of corporate governance. 18 Global Ports Investments PLC Annual Report 2020 globalports.com 19 CHIEF EXECUTIVE OFFICER’S STATEMENT ALBERT LIKHOLET CEO Consolidated Marine Container Throughput 20 Global Ports Investments PLC Annual Report 2020 globalports.com 1 2 3 4 5 6 I am very proud to report that Global Ports delivered an outstanding performance in 2020. We faced huge challenges as commercial operations and supply chains were disrupted and daily work routines interrupted. However, we remained focused, and achieved outstanding results, demonstrating the resilience of our business model and showing that our strategy can deliver results for stakeholders under any conditions. None of this would have been possible without the dedicated contributions of our employees, all of whom deserve our thanks for their part in helping the Group through this challenging period. While COVID-19 will inevitably dominate any 2020 review, it should not detract from the Group’s accomplishments last year. Our results show that despite the pandemic, the business did not lose momentum, and our transformation strategy has continued to deliver positive results. For the third year in a row, we outperformed the Russian container sector while recording double-digit growth in our non-container bulk operations. The outperformance was recorded in both import and export segments and was not limited to a single region, as we saw above-market growth in the Baltic and Far East basins. I am also very pleased with last year’s financial result, which I believe sums up the core strengths of Global Ports. While comparable revenue reduced, our focus on cost discipline contributed to increased like-for-like Adjusted EBITDA Margin, strong Free Cash Flow and significantly reduced Net Debt and leverage. Our COVID Response Beyond the practical response to COVID-19, the pandemic served as a catalyst for the Group to embrace new ways of working, very much in keeping with our emphasis on greater agility, responsiveness, and resilience. As a critical national infrastructure provider we recognised early in the pandemic that we had to act decisively. We set up a COVID-19 response team to coordinate our response and ensure that appropriate measures were taken to protect colleagues, clients and the community at large. We introduced new work-from-home solutions for office-based staff to ensure that the Group continued to provide the same high-quality service. For colleagues with on-site operational duties, we introduced strict social distancing protocols and enhanced hygiene measures. And we made communicating with staff a priority, making greater use of our online channels. We also worked with our customers who faced their own challenges, providing 24-hour terminal access and support, and being as flexible as possible in our commercial arrangements. We also took measures to protect the Group’s financial health, which are discussed elsewhere, but which focused on cost management and improving cash generation. 21 Consolidated Marine Bulk Throughput growth +38.7% Our Markets Our Operating Performance The story of the global container ports industry in 2020 is one of resiliency. The onset of COVID-19 led to a sharp decline in maritime container traffic which, at its peak in the second quarter, had analysts predicting double- digit falls in global throughput. Yet by the end of the year, the sector had recovered almost all of the lost ground, wrapping up the year with global throughput down just one percent in 2019. Our 2020 operating performance was one of our strongest to date, given the challenges posed by COVID-19. Consolidated Marine Container Throughput increased by 6.6% to 1.53 million TEU in 2020, compared to a market that declined by 0.8% over the same period. We saw a 17% growth in full export containers, three times that of the market, and a 4% growth in full import containers. This theme of resilience was also applicable to the Russian market. It has undergone a radical transformation over the past decade, transitioning from an import-dominated container market model to one driven by the export requirements of Russian industry. This trend has made the sector much more resilient, significantly reducing volatility, a defining characteristic of earlier crises. Whereas in the crises of 2009 and 2015, container volumes contracted substantially, this time, with a full export to full import container ratio of 83%, double that of a decade ago, container market volumes barely budged. Throughput volumes ended the year fractionally down on 2019, at 5.05 million TEU, following a strong second half rally. Industrial cargo exports led the way, with full container exports growing by more than 5%, while container imports declined by about 2% partially recovering in the last quarter. Contrary to previous crisis periods, average capacity utilisation rates in the main container gateway basins remained firmly above 70%. During 2020, major terminal port operators like Global Ports continued to consolidate their position, taking market share from smaller terminal operators. Export cargoes require larger vessels and more terminal capacity, boosting demand for large, well-equipped and efficient terminals connected to inland road and rail systems. The pandemic will accelerate other industry trends, like the adoption of digital platforms and a move to greater automation as ports seek to improve productivity and reduce costs and avoid the sort of supply chain congestion the industry suffered in the first half of last year. We expect these market trends to accelerate in the years ahead, benefiting Global Ports with our network of large terminals key access locations. We delivered a record performance in the bulk cargo segment, driven by strong growth in coal export volumes at UCLT in the Baltic Basin and VSC in the Far East, supported by growth in newer cargo segments at PLP. Consolidated Marine Bulk Throughput rose 39% to 5.1 million tonnes, up from 3.7 million tonnes in 2019. Our car-handling volumes dropped 20% due to COVID-19, although Ro-Ro performed better than the previous year. Consistent with our strategy, we placed strong emphasis on the Group’s customer value proposition. We created a unified customer service center and call centers providing our customers with 24/7 access to our service teams. We continued to invest in our digital platform, including in a new customer-focused website, and digital documentation service for export containers at FCT and ULCT as part of a bigger initiative to digitise and standardise our documentation. We added new services including one with Maersk to tap into the growing Asia-Europe transit trade, and a joint venture with Transcontainer to export fuel pellets from Siberia. The number of block trains we operate between our terminals in the Baltic and the Far East catchments also continued to expand in 2020. We maintained our commitment to enhancing productivity by further optimising our asset base and investing in infrastructure. In 2020 the integration of FCT and PLP within a single business unit was completed and resulted in solid market share gains. We continued to invest in CAPEX projects, including new RMG cranes for our terminal in the Far East, VSC, which is seeing demand for container handling grow strongly. Financial Results Our strong financial performance reflected the resiliency of the market, our superior operating performance and our strict focus on cost containment and cash generation. We also benefitted from the efficiency measures we introduced in recent times. Consolidated revenue grew by 6.2% to USD 384.4 million, although like-for-like revenue declined by 8.2% as growth in throughput volumes was offset by a 13% decline in revenue per TEU due to changes in cargo mix, the cost of support measures we put in place for clients and the impact of rouble depreciation. Non-container revenue also decreased by 10.6% year-on-year, despite strong growth in bulk cargo volumes. Due to COVID-19, we took action to maintain cash liquidity and financial discipline, to ensure we achieved our strategic objective of further reducing leverage. The business delivered a robust cash performance, with Net Debt reducing by USD 135 million and with Net Debt to Adjusted EBITDA of 2.9x. We implemented strict cash control measures, successfully reducing Like-for-like Total Operating Cash Costs by 9.7% despite healthy growth in our overall throughput volumes. Although Adjusted EBITDA declined by 7.6% to USD 209.7 million, we maintained strong profitability and Adjusted EBITDA Margin of 65.2% was 40 basis points higher than the previous year. Our cash generation was exceptionally strong, with the Group generating USD 157 million of Free Cash Flow, allowing us to continue to prioritise reducing the balance sheet. Having upgraded the Group’s creditworthiness in 2019, we are pleased that in the tough trading of 2020 all three leading ratings agencies that rate us chose to affirm the Group’s credit status. Outlook Two years ago, the Board set Global Ports on the path to simplification, prioritisation and innovation. The strategic foundations we laid then meant when COVID-19 struck that we were largely able to contain any disruption and support our people and customers, without it affecting the underlying momentum of the business. The result was that we increased market share, upheld profitability, and delivered strong cash flows leading to a substantial reduction in borrowings and leverage, which keeps us firmly on the deleveraging path and a future resumption of dividends. 1 In terms of container throughput and container handling capacity, based on ASOP data for FY 2020. As the number one terminal operator in Russia1, we hold market leadership positions in an industry with positive structural growth. While it will be a changed world after the pandemic, I believe that how our business model creates value will remain unchanged. We take advantage of our scale and best-in-class operational execution to generate organic revenue and profits growth. This is supported by strong financial discipline and rigorous capital allocation that supports investment in the business and creates long term sustainable value for our stakeholders. 1 2 3 4 5 6 For this year, while economies are re-opening and global trade is picking up, uncertainties related to COVID-19 remain. While we are seeing encouraging signs of growth in our business, the market remains highly competitive and we are taking a prudent approach to 2021. In the medium and long term, we remain positive about the structural trends in the sector and believe there are significant opportunities for Global Ports to accelerate its growth and create greater value for all our stakeholders. 22 Global Ports Investments PLC Annual Report 2020 globalports.com 23 DELIVERING QUALITY AND LEADERSHIP GLOBAL PORTS 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. WE WILL ACHIEVE OUR FUNDAMENTAL STRATEGIC GOAL BY: providing the best services to our clients maintaining operational excellence using technology effectively attracting and retaining a workforce with the right skills Strategically we remain focused on expanding our business through both organic growth and investment projects that offer tangible opportunities to the Group. GLOBAL PORTS VISION 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. Global ports values Professionalism Respect Cooperation STRATEGY 1 2 3 4 5 6 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. TO SUCCEED, WE REMAIN FOCUSED ON: Preferred port in every location, partner of choice for all parties involved Assured healthy, safe and effective organisation Our key market: Russia. We have the strong knowledge and ability to add value to Russian container market. Our key services: terminal operations. We provide our clients with first class port and related logistics services. Integral part of import/export and transit logistics chains Our key clients: shipping lines and freight forwarders. By connecting and simplifying supply chains, we enable our customers to grow their businesses. Solid business profile and prudent capital allocation Our business focus: containers. Our non-container operations diversify our revenues and increase our terminals’ utlisation rates. 24 Global Ports Investments PLC Annual Report 2020 globalports.com 25 BUSINESS MODEL INPUT HOW WE CREATE VALUE The only player with a 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 2,800 professionals* Trained staff Advanced IT system 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 We create value When providing 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 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. Services 1. Handling of containerised 2. Cargo storage cargo | bulk | Ro-Ro Shipping lines Freight forwarders Cargo owners Our port is a platform of efficient interaction between all parties 3. 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 Federal authorities Truckers Railway operators Russian Railways 1 2 3 4 5 6 OUTPUT Clients Employees Community Shareholders › Smart, swift, efficient logistics hub › Efficient and effective services › Infrastructure to facilitate import/export and transit flows › Reliable and safe work environment › Competitive salaries › Opportunities for professional growth and development › One of the biggest employers in the region and sizeable contributor to local economy › Satisfied customers and communities › Sustainable business that limits environmental impact & delivers positive change OUTCOME | GLOBAL PORTS RESULTS IN 2020 › Shareholder value › Sustainable high Free Cash Flow generation and dividend capability Total USD 61.9 mln paid to all employees in 2020 LTIFR 0.54 down to the lowest level in 7 years +16.8% Full export containers throughput +3.6% Full import containers throughput +6.6% Consolidated Marine Container Throughput +38.7 % Consolidated Marine Bulk Throughput 2.9 x Net Debt / Adjusted EBITDA –0.4 x Decrease in Net Debt to Adjusted EBITDA supporting the path towards resumption of dividends once deleveraging targets achieved 2.8 thou. employed* RUB 400 mln of tax paid (Equivalent of 5.7 USD million) RUB 32 mln spent on charity (Equivalent of 0.4 USD million) RUB 91 mln spent on environment protective measures (Equivalent of 1.3 USD million) *As of 31 December 2020 26 26 Global Ports Investments PLC Annual Report 2020 globalports.com 27 BUSINESS REVIEW 2020 RESULTS SUMMARY Further deleverage success with Net Debt by USD 134.9 mln and Net Debt to Adjusted EBITDA reduced to 2.9x (-0.4x compared to 31 December 2019) Operational outperformance of the market continued with 2020 Consolidated Marine Container Throughput up 6.6% year-on-year to Stable credit outlook reaffirmed by all rating agencies that rate the Group and its financial instruments 1.53 mln TEU against a 0.8% year-on-year decline in the Russian container market over the same period Consolidated Marine Bulk Throughput of 5.1mln tonnes (+38.7% y-o-y) Moody’s at Ba2 Fitch Ratings at BB+ Expert RA at RuA+ 1 Like-for-like is adjusted growth metric calculated on management accounts: cash cost and revenue for 2020 and 2019 adjusted for VSC transportation services. As a result of the new terms of certain sales agreements, in 2020 VSC acted as a principal vs as an agent at the beginning of 2019: previously the net result of revenue from transportation services and associated cost was included in the consolidated revenue. Since the middle of 1H 2019 full revenue and associated costs have been recognized in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 62.8 million to consolidated revenue (USD 11.4 million in 2019) and USD 62.8 million (USD 11.4 million in 2019) to cost of sales in 2020. 1 2 3 4 5 6 ALBERT LIKHOLET CEO of Global Ports Management LLC Global Ports’ 2020 results prove that we are on the right track with our strategy implementation. We outperformed the Russian container market for the third year in a row and achieved double digit growth in bulk cargo handling. We also ensured strong cost control, resulting in consistent Free Cash Flow generation and further strong deleverage. Net Debt was reduced by almost USD 135 million, while Net Debt to Adjusted EBITDA declined to the lowest level in 8 years, proving the resilience of the business and supporting the path towards resumption of dividends once deleveraging targets achieved. Strong Free Cash Flow of USD 157.1 mln Revenue increased by 6.2% to USD 384.4 mln (-8.2% like-for-like)1 Like-for-like Total Operating Cash Costs were successfully and safely reduced by 9.7% to USD 113.2 mln despite the healthy growth in both container and non-container throughput Adjusted EBITDA of USD 209.7 mln (2019: USD 226.9 million), like-for-like Adjusted EBITDA Margin increased by 40 basis points to 65.2% Operating profit growth of 8.7% to USD 157.4 mln Profit for the period of USD 50.0 mln (2019: USD 67.7 million) 28 Global Ports Investments PLC Annual Report 2020 globalports.com 29 +6.6% Consolidated Marine Container Throughput +38.7% Consolidated Marine Bulk Throughput 1 2 3 4 5 6 Operational Highlights Financial Highlights › The Russian container market demonstrated resilience in 2020 declining by only 0.8% y-o-y supported by continuing growth in containerised export (+5.2%), which was however insufficient to offset the decline of containerised import by a moderate 1.8%, due to the global and local macroeconomic impact of COVID-19. › Outperforming the market in both export and import, the Group’s Consolidated Marine Container Throughput increased by 6.6% to 1,553 thousand TEU with growth of full export containers of 16.8% and full import containers of 3.6%. As a result, share of full export containers in the Group's Consolidated Marine Container Throughput increased from 40% in 2019 to 44% in 2020. › Consolidated Marine Bulk Throughput increased by 38.7% y-o-y, driven by strong growth in coal handling at VSC and ULCT as well as growth of fertilisers and steel handling at PLP. MARC NIEDERER COO of Global Ports Management LLC This year we succeeded in achieving the right balance between taking the necessary measures to ensure the absolute safety of our personnel to  prevent the spread of COVID-19 and maintaining a strong operational capability at all our terminals. This was crucial to handle for example the booming transsiberian rail traffic. We also delivered a strong safety performance with our lowest LTIFR ever recorded (0.54 in 2020). We will continue to build on this achievement. Market demonstrates resilience with a decline of only 0.8% y-o-y 30 30 Global Ports Investments PLC Annual Report 2020 globalports.com › Consolidated revenue increased by 6.2% to USD 384.4 million; excluding the impact of VSC transportation services1 , like-for-like revenue declined by 8.2% driven by a decrease in both Consolidated Container and Non-Container Revenue. › Like-for-like Revenue per TEU decreased by 13% to USD 155.1 as a result of depreciation of the Russian rouble against the US dollar, the growing share of full export containers in Group throughput, and additional free storage days and other incentives provided by the Group to its clients in order to support them on the back of the global and local macroeconomic turmoil following the COVID-19 outbreak. Like-for-like Revenue per TEU adjusted for FX decreased by 2.7%. maintenance projects, scheduled upgrades of existing container handling equipment and customer service improvement initiatives. › The Group generated a healthy USD 157.1 million of Free Cash Flow (-1.1% compared to 2019) demonstrating the resilience of the business model. › The Group reduced Net Debt by USD 134.9 million over the year and continues to prioritise deleveraging over dividend distribution. › In line with the Group’s focus on deleveraging, Net Debt to Adjusted EBITDA decreased from 3.3x as of 31 December 2019 to 2.9x as at the end of the reporting period, achieving the lowest level since 2012. › Operating profit increased by 8.7% to USD 157.4 million. › In response to COVID-19 conditions, cost control measures were implemented to manage and reduce the Group’s cost base. Like-for-like Total Operating Cash Costs were successfully and safely reduced by 9.7% to USD 113.2 million despite the healthy growth in both container and non-container throughput. › Adjusted EBITDA decreased by 7.6% to USD 209.7 million as cost control improvements and volume growth could not offset the decline in Revenue per TEU and US dollar equivalent of Russian rouble nominated bulk handling tariffs due to the depreciation of the Russian rouble as the result of, i.a. COVID-19. Profitability was nonetheless maintained with like- for-like Adjusted EBITDA Margin of 65.2%. › The Group’s capital expenditure in 2020 was USD 33.9 million and focused on planned 1 As a result of the new terms of certain sales agreements, in 2020 VSC acted as a principal vs as an agent at the beginning of 2019: previously the net result of revenue from transportation services and associated cost was included in the consolidated revenue. Since the middle of 1H2019 full revenue and associated costs have been recognized in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in additional USD 62.8 million to consolidated revenue (USD 11.4 million in 2019) and USD 62.8 million (USD 11.4 million in 2019) to cost of sales in 2020. Market data used in this report, as well as certain statistics, including statistics in respect of market growth, volumes of third parties and market share, have been extracted from official and industry sources and other third-party sources, such as the Association of Sea Commercial Ports (ASOP) the Central Bank of the Russian Federation and the Russian Federal State Statistics Service, among others. 31 Russian container market in 2020, full export and import dynamics, % Full export Full import 20% 15% 10% 5% 0% -5% -10% -15% -20% Russian container market volumes, mln TEU –26% -0.8% 5.2 5.11 4.9 5.1 5.1 4.9 -34% 4.5 3.7 3.5 4.4 3.78 3.82 3.0 2.4 2.4 2.0 1.5 1.1 0.9 0.7 0.5 1 2 3 4 5 6 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 00 ‘01 02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 Market Overview and Operating Information Russian container market volumes, by basin in 2020, % 100 80 60 50 20 0 In 2020 the Russian container market demonstrated strong resilience and ability to adapt swiftly to challenges by declining only by 0.8%. The market was supported by continuing structural growth of containerised export (year- on-year growth of 5%) and slight recovery of containerised import in 4Q20 (year-on-year decline of 1.8% in 2020 compared to 2019) following the decline in the first half of the year as a result of the global and local macroeconomic impact of the COVID-19 outbreak. Throughput of full export containers at the Russian terminals continued its rapid growth (5.2% year-on-year), mainly due to increased exports and the wider use of containers in Russia. Full exports have almost doubled (growth of 1.96x) between 2013–2020, showing a long-term trend 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 2020, the ratio between full dry container export and full dry container import in Russia was 83%, while the Big Port of Saint Petersburg has already become export driven: dry full container export exceeded dry container import by 15% in 2020. 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 removing excess capacity from the market. 32 Total Russian container market throughput Full containers import Full containers export 5.1mln TEU -0.8% year-on-year –2% +5% Export exceeds import in the Big Port of Saint- Petersburg for dry full containers, mln TEU Dry full import / export gap is narrowing in Russian container market, mln TEU Dry import Dry export Dry import Dry export 0.88 0.80 0.74 0.85 1.72 1.71 1.35 1.42 2019 2020 2019 2020 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Containerisation in Russia remains low, TEU/thousand people Far East basin 33% Black Sea basin 16% Northern Ports 3% Baltic basin 48% North America 135 Europe 131 Turkey 134 World 104 Russia 36 Global Ports Investments PLC Annual Report 2020 globalports.com Source: Drewry; some 2020 numbers are estimated. 33 In 2020 the Group continued to outperform the market, with Consolidated Marine Container Throughput up 6.6% year-on-year to 1,553 thousand TEU against the container market decline of 0.8% year-on-year. As a result of the Group’s efforts to increase productivity and customer service standards, the Group outperformed the market in both key basins where its terminals are located. Consolidated Marine Container Throughput of the Group’s terminals located in the Baltic Basin increased by 3.5% year-on-year in 2020 against a market decline of 6.6% in the same region, while Consolidated Marine Container Throughput of the Group’s terminal located in the Far Eastern Basin increased by 14.7% year- on-year in 2020 against a market growth of 7.6%. The Group also outperformed the market in both full import and full export. Consolidated Marine Container Throughput of full export containers in 2020 increased by 16.8% year-on-year and its share in Groups’ Consolidated Marine Container Throughput increased to 44% compared to 40% in 2019. Consolidated Marine Container Throughput of full import containers in 2020 increased by 3.6% year-on-year. Consolidated Marine Bulk Throughput increased by 38.7% year-on-year to 5.1 million tonnes in 2020, driven by strong growth in coal handling at VSC and ULCT as well and growth of fertilisers and steel handling at PLP. The table on the next page 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. BRIAN BITSCH CCO of Global Ports Management LLC In a year of unprecedented uncertainty, I have been encouraged not only by the resilience of the Russian market, demonstrating its developmental transformation over time, but also by Global Ports’ own outperformance of that market, which was driven by our committed and relentless focus on our clients and our unrivalled level of service. Global Ports significantly outperformed the market Global Ports Consolidated Marine Container Throughput vs Russian container market dynamic in 2020 6.5% 6.6% 4.5% Consolidated Marine Bulk Throughput growth +38.7% Market Global Ports Market Global Ports Marine terminals Containerised cargo (thousand TEUs) PLP1 VSC FCT ULCT Non-containerised cargo Ro-Ro (thousand units) Cars (thousand units) Other bulk cargo (thousand tonnes) Consolidated Marine Container Throughput Consolidated Marine Bulk Throughput Operational statistics of joint ventures Containerised cargo (thousand TEUs) Moby Dik Finnish Ports Inland terminals Yanino Containerised cargo (thousand TEUs) Bulk cargo throughput (thousand tonnes) Total marine container throughput (thousand TEUs) Total marine container throughput in Russia (thousand TEUs) 2020 2019 Change Change, % 377 453 654 50 20.3 82.0 5,074 1,533 5,074 — 98 86 261 1,631 1,533 328 395 654 62 20.0 103.3 3,658 1,439 3,658 49 58 0 (12) 0.3 (21.3) 1,416 94 1,416 14.9% 14.7% 0.0% (19.8%) 1.3% (20.6%) 38.7% 6.6% 38.7% 1 2 3 4 5 6 11 111 (11.3) (12.9) (100.0%) (11.7%) 120 376 1,561 1,450 (33.5) (115.1) (28.0%) (30.6%) 70 83 4.5% 5.7% Strong performance in both core basins Global Ports and Russian container market dynamics for 2020 by basin, % Consolidated Marine Bulk Throughput, mln tonnes +39% 5.1 15% Baltic basin 7.6% 3.5% 2.0 3.7 +12% 2.2 –6.6% Far East basin 1H 19 1H 20 2019 2020 1 As a part of strategy to prioritise operating efficiency and optimise the Group’s asset base, the management teams of Petrolesport (PLP) and First Container Terminal (FCT) were unified in 2019. The merging of the two management teams aligns the strategic focus across the two terminals based at the Port of St. Petersburg, improving clarity and speed of decision-making to bring tangible benefits to customers in terms of planning capability and distribution of services as Group resources will be allocated more efficiently and effectively to client requirements. –0.8% 2019 2020 34 Global Ports Investments PLC Annual Report 2020 globalports.com 35 Revenue growth +6.2% Like-for-like revenue decreased by 8.2% Global Ports Investments PLC Annual Report 2020 globalports.com Cars, thousand units 103.3 –20.6% 82.0 2019 2020 Ro-Ro, thousand units 20.0 +1.3% 20.3 2019 2020 Heavy Ro-Ro handling demonstrated a continued recovery in Q4 2020 with 3.1% growth in Q4 2020 against Q4 2019, resulting in a 1.3% growth in volumes of this cargo handling for the full year 2020. Car handling was also strong in Q4 2020 with 41.1% growth but this was unfortunately not sufficient to offset the overall 20.6% decline in 2020, reflecting the slowdown in Russian consumer demand and closure of car dealers in Q2 2020 due to lockdown. As a result of the market trends mentioned above, Moby Dik no longer meets the market requirements of a modern container terminal, given the absence of a rail connection and its insufficient vessel handling equipment. Nonetheless, Moby Dik remains a business unit of the Group that offers further opportunities in bulk handling and additional services. Moby Dik handled 227 thousand tonnes of bulk cargo in 2020, generating growth of 34% compared to the 2019. 36 Results of operations of Global Ports for the year ended 31 December 2020 and 31 December 2019 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 2020 and 31 December 2019. 1 2 3 4 5 6 Selected consolidated financial information 2020, USD mln 2019, USD mln Change, USD mln Change, % Revenue Cost of sales Gross profit Administrative, selling and marketing expenses Other income Share of (loss)/profit of joint ventures accounted for using the equity method Other gains/(losses) — net Operating profit Finance income Finance costs Change in fair value of derivative instruments Net foreign exchange gains/(losses) on financial activities Finance income/(costs) — net Profit before income tax Income tax expense Profit for the period Attributable to: Owners of the Company Non-controlling interest Key non-IFRS financial information Like-for-like revenue Adjusted EBITDA Like-for-like Adjusted EBITDA margin Like-for-like Cash Cost of Sales Like-for-like Total Operating Cash Costs Free Cash Flow 384.4 (200.3) 184.1 (24.7) 1.3 (3.0) (0.3) 157.4 2.4 (71.8) 18.4 (41.8) (92.8) 64.6 (14.6) 50.0 48.4 1.6 321.7 209.7 65.2% (90.2) (113.2) 157.1 361.9 (151.8) 210.1 (35.5) 1.8 1.9 (33.4) 144.8 2.5 (85.2) (9.3) 43.8 (48.2) 96.6 (29.0) 67.7 66.6 1.1 350.5 226.9 64.8% (91.7) (125.3) 158.8 22.6 (48.5) (25.9) 10.8 (0.5) (4.9) 33.1 12.6 (0.2) 13.5 27.7 6.2% 32.0% (12.4%) (30.4%) (26.7%) (254.9%) (99.0%) 8.7% (6.6%) (15.8%) (296.8%) (85.6) (195.2%) (44.6) (32.0) 14.3 (17.7) (18.2) 0.5 (28.8) (17.2) 1.5 12.0 (1.8) 92.5% (33.1%) (49.5%) (26.1%) (27.3%) 45.7% (8.2%) (7.6%) (1.7%) (9.7%) (1.1%) 37 Revenue Cost of sales The following table sets forth the components of the consolidated revenue for 2020 and 2019. The following table sets out a breakdown by expenses of the cost of sales for 2020 and 2019: Container revenue as reported 300.6 268.1 32.5 12.1% 2020, USD mln 2019, USD mln Change, USD mln Change, % Adjusted for VCS transportation services Like-for-like container revenue Non-container Revenue Consolidated Revenue Like-for-like Revenue per TEU Like-for-like Revenue per TEU Adjusted for FX 62.8 237.8 83.8 384.4 155.1 173.6 11.4 256.7 93.8 361.9 178.4 178.4 51.4 (18.8) (10.0) 22.6 (23.3) (4.8) 450.6% (7.4%) (10.6%) 6.2% (13.0%) (2.7%) In 2020 like-for-like consolidated revenue decreased by 8.2% to USD 321.7 million from USD 350.5 million in 2019, driven by the decline in both revenue from container operations and other revenue. Like-for-like Consolidated Container Revenue decreased by 7.4%, or USD 18.8 million, to USD 237.8 million. This change was driven by an increase in Consolidated Marine Container Throughput of 6.6% which was offset by a 13.0% decrease in like-for-like consolidated Revenue per TEU. Decline in like-for-like consolidated Revenue per TEU was driven by the depreciation of the Russian rouble as well as a change in cargo and service mix (primarily through growth of full export containers and decline in full import containers) and measures taken by the Group in order to support our clients (additional free storage days for export containers and other incentives were provided) during the macro turmoil caused by COVID-19. Consolidated Non-Container Revenue decreased by 10.6%, or USD 10.0 million, to USD 83.8 million, as growth in throughput was offset by discounts given by the Group to its clients in the second half of 2019 and the first half of 2020 in response to the decline of coal prices in the global market as well as the depreciation of the Russian rouble. As a result of new terms agreed on certain sales agreements, in 2020 VSC acted as a principal versus as an agent at the beginning of 2019: previously the net result of revenue from transportation services and associated cost was included in the consolidated revenue. Since the middle of the first half of 2019 full revenue and associated cost have been recognised in consolidated revenue and transportation expenses accordingly. This Adjusted EBITDA neutral change resulted in an additional USD 62.8 million attributed to consolidated revenue (USD 11.4 million in 2019) and USD 62.8 million (USD 11.4 million in 2019) to cost of sales in 2020. 2020, USD mln 2019, USD mln Change, USD mln Change, % Depreciation of property, plant and equipment Amortisation of intangible assets Depreciation of right-of-use assets Write-off of property, plant and equipment 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 34.1 0.6 11.8 0.9 45.1 67.7 62.8 8.5 5.3 16.2 2.4 7.9 200.3 153.0 90.2 35.2 1.1 12.4 — 45.3 15.7 11.4 9.5 6.3 14.3 2.5 9.5 151.8 103.1 91.7 (1.1) (0.5) (0.6) 0.9 (0.2) 52.0 51.4 (1.0) (1.0) 1.9 (0.1) (1.7) 48.5 49.9 (1.5) 1 2 3 4 5 6 (3.2%) (46.0%) (4.6%) — (0.4%) 332.0% 450.6% (10.7%) (16.4%) 13.0% (3.2%) (18.0%) 32.0% 48.3% (1.7%) Cost of sales increased by USD 48.5 million, or 32.0%, from USD 151.8 million in 2019 to USD 200.3 million in 2020. The change was primarily driven by growth in transportation expenses at VSC, certain cost items related to the growth of coal handling at ULCT and VSC and growth in throughput and inflation. The growth in transportation expenses from USD 15.7 million to USD 67.7 million in 2020 or USD 52.0 million was driven by new terms of certain agreements that changed the recognition of revenue and costs generated by VSC from railway services for clients as described above. Like-for-like Cash Cost of Sales decreased by USD 1.5 million, or 1.7%, from USD 91.7 million in 2019 to USD 90.2 million in 2020 despite healthy growth of container and bulk throughput. Revenue, USD mln Operating Cash Costs, USD mln VSC transportation services –11.4 361.9 350.5 Container revenue –18.8 Non-container revenue –10.0 –8.2% 321.7 VSC transportation services 62.8 +6.2% 384.4 +28.7% VSC transportation services 62.8 176.0 VSC transportation services –11.4 136.7 –9.7% 125.3 113.2 2019 Like-for-like 2019 Like-for-like 2020 2020 2019 Like-for-like 2019 Like-for-like 2020 2020 38 Global Ports Investments PLC Annual Report 2020 globalports.com 39 1 2 3 4 5 6 Share of profit/(loss) of joint ventures accounted for using the equity method MLT Group CD Holding Group Total share of profit/(loss) of joint ventures 2020, USD mln 2019, USD mln Change, USD mln Change, % (2.0) (1.0) (3.0) 0.8 1.2 1.9 (2.8) (2.1) (4.9) (363.3%) (184.3%) (254.9%) The Group’s share of profit/(loss) from joint ventures changed from a profit of USD 1.9 million in 2019 to a loss of USD 3.0 million in 2020. under Gross profit, Share of profit/(loss) of joint ventures accounted for using the equity method and Other gains/(losses) — net. The share of profit from MLT Group changed from a profit of USD 0.8 million in 2019 to a loss of USD 2.0 million. This result was primarily driven by the decline of container throughput of Moby Dik due to the reasons described above. The change in the share of result from CD Holding Group, from a profit of USD 1.2 million in 2019 to a loss of USD 1.0 million, was mainly driven by the appreciation of the Russian rouble against the US dollar in 2019 that resulted in a gain from revaluation of the US dollar nominated borrowings of YLP. Whereas in 2020 YLP had most of its borrowings denominated in roubles. Other gains/(losses) — net Other gains/(losses) changed from a net loss of USD 33.4 million in 2019 to a net loss of USD 339 thousand in 2020. As a result of the disposal of VEOS in the first half of 2019, a USD 50 thousand loss is reflected within ‘other gains/(losses) – net’ in the corresponding period. 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. Finance income/(costs) — net Finance income/(costs) — net increased from a cost of USD 48.2 million in 2019 to a cost of USD 92.8 million in 2020. This move was primarily due to a foreign exchange loss from financing activities of USD 41.8 million in 2020 compared to a profit of USD 43.8 million in 2019. This was a result of the depreciation of the Russian rouble1, which in turn changed from a gain to a loss on the revaluation of intra-group US dollar-denominated borrowings in the Group’s Russian subsidiaries. This was partially offset by a change of the fair value of derivative instruments2 from a loss of USD 9.3 million 2019 to a profit of USD 18.4 million in 2020. Profit/(loss) before income tax Profit before income tax decreased to USD 64.6 million in 2020 from USD 96.6 million in 2019. This change is due to the factors described above under operating profit/(loss) and finance income/(costs) — net. Income tax expense In 2020, income tax expense was USD 14.6 million compared to USD 29.0 million 2019. Profit/(loss) for the period Operating profit/(loss) The Group’s operating profit increased from USD 144.8 million in 2019 to USD 157.4 million in 2020 due to the factors described above The Group reported a profit of USD 50.0 million in 2020, a decrease of USD 17.7 million or 26.1% compared to the profit for the period of USD 67.7 million in 2019 due to the factors described above. 1 During 2020 the exchange rate of the US dollar increased from 61.91 RUB as of 31 December 2019 to 73.88 RUB as of 31 December 2020 that represents the strengthening of the US dollar against Russian rouble by 19.3%. 2 In 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 risks associated with its USD denominated non-convertible unsecured bonds. The Group also bought several options to buy USD 87 million in 2022 in the range RUB 80-100 per US dollar. Adjusted EBITDA, USD mln 226.9 –7.6% 209.7 2019 2020 65.2% Like-for-like Adjusted EBITDA Margin in 2020 Global Ports Investments PLC Annual Report 2020 globalports.com 41 Gross profit Gross profit decreased by USD 25.9 million, or 12.4%, from USD 210.1 million in 2019 to USD 184.1 million in 2020. This decrease 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 10.8 million, or 30.4%, from USD 35.5 million in 2019 to USD 24.7 million in 2020. This was primarily due to a decrease of USD 9.3 million, or 35.6%, in staff costs as a result of measures to increase efficiency and the depreciation of the Russian rouble. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA in 2020 decreased by 7.6%, or USD 17.2 million to USD 209.7 million from USD 226.9 million in 2019. Like-for-like Adjusted EBITDA Margin was 65.2%, broadly the same as in 2019 (64.8%). 40 Liquidity and Capital Resources Cash flow General As of 31 December 2020, the Group had USD 207.0 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 costs of its operations. In the first half of 2020 the Group’s liquidity needs were met primarily by cash flows generated from its operational activities as well as borrowings. The Group expects to fund its liquidity requirements in both the short and medium term with cash generated from operational activities and borrowings. As a result of the shareholding and joint venture agreements of Moby Dik, the Finnish Ports and Yanino, the cash generated from the operational 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 2020, the Group had USD 819.1 million of total borrowings (including lease liabilities), of which USD 155.1 million comprised current borrowings and USD 664.0 million comprised non current borrowings. See also “Capital resources”. ALEXANDER ROSLAVTSEV CFO of Global Ports Management LLC 2020 has shown how our long-term focus on strong cost control and deleveraging continues to generate stable high EBITDA margin, even in today’s volatile climate. Our timely approach to hedging and refinancing has decreased our effective interest rate and reduced FX fluctuations giving us further stability and ensuring that all the rating agencies affirmed the Group’s credit ratings this year. Adjusted EBITDA USD209.7mln Free Cash Flow USD157.1mln The following table sets out the principal components of the Group’s consolidated cash flow statement for 2020 and 2019: 2020, USD mln 2019, USD mln Change, USD mln Change, % Net cash from operating activities Cash generated from operations Tax paid Net cash used in investing activities Purchases of intangible assets Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Disposal of asset held for sale Interest and loans repayments received Net cash used in financing activities Repayments of borrowings Proceeds from borrowings Interest paid on borrowings Interest paid on leases Settlements of and premiums paid on derivative financial instruments Principal elements of lease payments Free Cash Flow (net cash from operating activities — purchase of PPE) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents at the end of the period 190.9 196.6 (5.7) (32.5) (0.9) (33.9) 0.4 — 1.9 (74.3) (73.0) 72.1 (66.4) (4.2) (0.8) (2.0) 185.4 217.4 (32.0) (13.4) (1.0) (26.6) 0.5 11.8 1.9 (140.2) (131.4) 70.9 (74.4) (4.3) (0.2) (0.9) 157.1 158.8 84.2 124.4 (1.5) 31.8 91.6 0.9 207.0 124.4 5.5 (20.8) 26.3 (19.1) 0.1 (7.3) (0.1) (11.8) (0.039) 66.0 58.4 1.2 8.0 0.1 (0.6) (1.1) (1.8) 52.3 32.7 (2.5) 82.6 1 2 3 4 5 6 3.0% (9.6%) (82.3%) 143.1% (7.6%) 27.3% (11.0%) (100.0%) (2.1%) (47.0%) (44.8%) 1.7% (10.8%) (1.8%) 302.4% 125.1% (1.1%) 164.6% 35.7% (266.2%) 66.4% Net cash from operating activities Free Cash Flow, USD mln Net cash from operating activities increased by USD 5.5 million, or 3.0%, from USD 185.4 million in 2019 to USD 190.9 million in 2020. Growth in net cash from operating activities was primarily due to decrease in tax paid by USD 26.3 million, or 82.3%, partially offset by USD 20.8 million, or 9.6%, decrease in cash generated from operations due to the financial result from operations as described above. 158.8 –1.1% 157.1 2019 2020 42 Global Ports Investments PLC Annual Report 2020 globalports.com 43 Net cash from/(used in) investing activities Net Debt/Adjusted EBITDA 4.2 4.3 The following table sets out the maturity profile of the Group’s total borrowings (including lease liabilities) as of 31 December 2020. 3.7 3.6 3.2 3.6 3.3 2.9 2013 2014 2015 2016 2017 2018 2019 2020 1H 2021 2H 2021 2022 2023 2024 2025 and after Total USD mln 153.8 1.3 200.2 303.1 57.4 103.4 819.1 1 2 3 4 5 6 Net cash used in investing activities increased from USD 13.4 million in 2019 to USD 32.5 million in 2020. This change was primarily driven by proceeds from the sale of VEOS in the amount of USD 11.8 million in April 2019 being reflected as a disposal of asset held for sale in 2019. The change in net cash used in investing activities was also driven by an increase in purchases of property, plant and equipment from USD 26.6 million in 2019 to USD 33.9 million in 2020 due to the increased investment into upgrade of equipment in order to improve productivity and level of service of the Group’s terminals and in response to growing throughput. Net cash used in financing activities Net cash used in financing activities decreased by USD 66.0 million, or 47.0%, from USD 140.2 million in 2019 to USD 74.3 million in 2020 due to decrease in the repayment of borrowings by USD 58.4 million because of voluntary decline in the buy-back of the Global Ports (Finance) PLC Eurobonds in 2020 compared to 2019. In 2020, the Group cancelled previously purchased Global Ports (Finance) PLC's USD 350 million of 6.872 per cent notes due in 2022 (the “2022 Notes”) and Global Ports (Finance) PLC's USD 350 million of 6.5 per cent notes due in 2023 (the “2023 Notes”) which were held by the Group. The 2022 Notes for a total principal amount of USD 151.4 million and the 2023 Notes for a total principal amount of USD 52.0 million were purchased by the Group between 2018 and 2020 through both the tender offer and the open market. Consistent Net Debt reduction, USD mln Capital resources The Group’s financial indebtedness consists of bank borrowings, bonds and lease liabilities and amounted to USD 819.1 million as of 31 December 2020. 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 the effect of restricting the ability of the borrower to transfer assets, make loans and pay dividends to other members of the Group. The Weighted Average Effective Interest Rate of the Group’s debt portfolio is 6.7% for USD nominated borrowings and 10.5% for Russian rouble nominated borrowings. As of 31 December 2020, the Group had the leverage of Net Debt to Adjusted EBITDA ratio of 2.9x (compared to a ratio of 3.3x as of 31 December 2019). 1,350.2 1,207.7 1,047.6 947.3 865.9 –USD 738 mln –USD 134.9 mln 780.3 747.0 612.1 2013 2014 2015 2016 2017 2018 2019 2020 As of 31 December 2020, the carrying amounts of the Group’s borrowings (including lease liabilities) were denominated in the following currencies: US dollar Rouble Total Net Debt/Adjusted EBITDA 2.9X Almost RUB 10bln of bonds were successfully repaid by cash available in February and March 2021 506.4 312.7 819.1 During the 12 month-period ended 31 December 2019 the Group entered into several RUB/USD currency forward contracts to acquire US 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 2020, there are outstanding forward contracts to acquire USD 122.4 million and USD 87 million covered by option contracts. Debt maturity profile, USD mln RUB USD USD covered by derivatives 303.1 207.0 200.2 155.1 Cash 31 Dec 2020 2021 2022 2023 2024 57.4 103.4 2025 and after 44 Global Ports Investments PLC Annual Report 2020 globalports.com 45 Reconciliation of Additional data (Non-IFRS) to the Consolidated Financial Information for the Year Ended 31 December 2020 Reconciliation of Adjusted EBITDA to profit for the period Reconciliation of Cash Cost of Sales to cost of sales Profit for the year Adjusted for Income tax expense Finance costs — net Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Write-off of property, plant and equipment Other (gains)/losses — net Share of (profit)/loss of joint ventures accounted for using the equity method FY 2020, USD mln 50.0 FY 2019, USD mln 67.7 Change, USD mln (17.7) Change, % (26.1%) 14.6 92.8 35.6 11.8 0.8 0.9 0.3 3.0 29.0 48.2 37.0 12.4 1.3 — 33.4 (1.9) (14.3) 44.6 (1.4) (0.6) (0.5) 0.9 (49.5%) 92.5% (3.8%) 4.6% (38.7%) — (33.2) (99.0%) 4.9 (254.9%) Adjusted EBITDA 209.7 226.9 (17.2) (7.6%) Reconciliation of Adjusted EBITDA Margin Revenue Adjusted EBITDA Adjusted EBITDA Margin FY 2020, USD mln 384.4 209.7 54.6% FY 2019, USD mln 361.9 226.9 62.7% Change, USD mln 22.6 (17.2) Change, % 6.2% (7.6%) Reconciliation of Total Operating Cash Costs to cost of sales and administrative, selling and marketing expenses FY 2019, USD mln Change, USD mln Cost of sales Administrative, selling and marketing expenses Total Adjusted for Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Write-off of property, plant and equipment FY 2020, USD mln 200.3 24.7 225.0 (35.6) (11.8) (0.8) (0.9) 151.8 35.5 187.3 (37.0) (12.4) (1.3) — Total Operating Cash Costs 176.0 136.7 46 Change, % 32.0% (30.4%) 20.1% (3.8%) (4.6%) (38.7%) — 28.7% 48.5 (10.8) 37.7 1.4 0.6 0.5 (0.9) 39.3 Cost of sales Adjusted for Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Write-off of property, plant and equipment Cash Cost of Sales FY 2020, USD mln 200.3 FY 2019, USD mln 151.8 Change, USD mln 48.5 Change, % 32.0% (34.1) (11.8) (0.6) (0.9) (35.2) (12.4) (1.1) — 153.0 103.1 2.0 0.6 0.5 (0.9) 49.9 (3.2%) (4.6%) (46.0%) — 48.4% 1 2 3 4 5 6 Reconciliation of Cash Administrative, Selling and Marketing Expenses to administrative, selling and marketing expenses Administrative, selling and marketing expenses Adjusted for Depreciation of property, plant and equipment Amortisation of intangible assets Cash Administrative, Selling and Marketing expenses FY 2020, USD mln FY 2019, USD mln Change, USD mln Change, % 24.7 35.5 (10.8) (30.4%) (1.5) (0.18) 23.0 (1.7) (0.15) 33.6 0.3 (0.02) (10.5) (15.0%) 13.6% (31.4%) Reconciliation of Net Debt and Total Debt to borrowings and lease liabilities Non-current borrowings Current borrowings Non-current lease liabilities Current lease liabilities Total Debt Adjusted for Cash and cash equivalents Net Debt As at 31.12.2020 As at 31.12.2019 USD mln USD mln 632.9 153.3 31.1 1.8 819.1 (207.0) 612.1 738.1 99.1 33.0 1.2 871.4 (124.4) 747.0 Change, USD mln (105.2) 54.2 (1.9) 0.6 (52.3) (82.6) (134.9) Change, % (14.3%) 54.7% (5.8%) 51.6% (6.0%) 66.4% (18.1%) Global Ports Investments PLC Annual Report 2020 globalports.com 47 Reconciliation of Free Cash Flow to net cash from operating activities Net cash from operating activities 190.9 185.4 5.5 3.0% 2020, USD mln 2019, USD mln Change, USD mln Change, % Adjusted for Purchases of property, plant and equipment Free Cash Flow (33.9) 157.1 (26.6) 158.8 (7.3) (1.8) 27.3% (1.1%) Reconciliation of like-for-like revenue to consolidated revenue Consolidated revenue 384.4 361.9 22.6 6.2% 2020, USD mln 2019, USD mln Change, USD mln Change, % Adjusted for VSC transportation services Like-for-like consolidated revenue 62.8 321.7 11.4 350.5 51.4 (28.8) 450.6% (8.2%) Reconciliation of like-for-like Consolidated Container Revenue to Consolidated Container Revenue Consolidated Container Revenue 300.6 268.1 32.5 12.1% 2020, USD mln 2019, USD mln Change, USD mln Change, % Adjusted for VSC transportation services Like-for-like container revenue 62.8 237.8 11.4 256.7 51.4 (18.8) 450.6% (7.3%) Reconciliation of like-for-like Total Operating Cash Costs to Total Operating Cash Costs Total Operating Cash Costs 176.0 136.7 39.3 28.7% 2020, USD mln 2019, USD mln Change, USD mln Change, % Adjusted for VSC transportation services Total like-for-like Operating Cash Costs 62.8 113.2 11.4 125.3 51.4 (12.1) 450.6% (9.7%) Reconciliation of like-for-like EBITDA Margin 2020, USD mln 2019, USD mln Change, USD mln Change, % Like-for-like consolidated revenue Adjusted EBITDA Like-for-like EBITDA Margin 321.7 209.7 65.2% 350.5 226.9 64.8% (28.8) (17.2) (8.2%) (7.6%) 1 2 3 4 5 6 ALEKSEY ERMOLIN CIO of Global Ports Management LLC 2020 for Global Ports saw another step forward in our IT development and we continue to take advantage of technological innovations in the industry and adapt them to our terminals. We achieved the important milestone of going paperless with clients and continued to develop new IT products to increase speed, ease and efficiency: using electronic orders at customs, creating mobile apps for freight forwarders and managing safety control at the terminals, and unifying our B2B gateway amongst many other innovations. Total Operating Cash Costs USD mln 48 Global Ports Investments PLC Annual Report 2020 globalports.com 49 SUSTAINABLE AND SAFE BUSINESS 1 2 3 4 5 6 SAFETY REMAINS AT THE CORE OF THE GROUP’S VALUES AND WE WILL CONTINUE TO STRIVE TO ACHIEVE A ZERO-HARM ENVIRONMENT 50 50 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com 51 51 ENVIRONMENTAL, SOCIAL AND GOVERNANCE 1 2 3 4 5 6 As an owner and supplier of critical infrastructure, we believe it is our duty to make a positive contribution to society. We recognise that to deliver competitive returns to our shareholders, sustainable value to our customers and opportunities for our employees, Global Ports has to operate with the utmost integrity and behave in a responsible way, consistent with the broader interests of society. We consider the core components of Corporate Responsibility (CR) of Environment, Society and Governance as fundamental to the Group’s future success and not mere additions to how we operate. As such, CR has an essential place in our strategy and is a vital part of our value proposition. Our CR approach aims to embed and reinforce our industry leadership position and corporate reputation and is in line with the Group’s values. We believe that actively addressing ESG priorities helps to strengthen the business and improve corporate resilience. The impact of the pandemic crisis has led to a heightened focus on all aspects of Corporate Responsibility, especially Safety. The effectiveness of the Group’s pandemic response in 2020 in part reflects the work undertaken to improve all aspects of our corporate responsibility agenda. 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 importance of ESG has risen dramatically in the eyes of customers, investors, media and markets - and rightly so given today’s climate change challenge and the impact of the Covid pandemic. In addition, the sustainability reporting landscape is evolving rapidly, and we recognise that when it comes to reporting, we, like other companies, are on a long journey. As we develop our Sustainability Approach, our intention is to ensure that our reporting is kept at a level that we deem appropriate for the Group and also useful for our stakeholders. Society Our role in society As a critical infrastructure business we help connect Russia to the global economy and international markets and, in doing so, help local economies, provide employment and support local communities. Our seven marine container terminals handle millions of tonnes of cargo annually and employ almost 2,800 people* directly and many more indirectly. We aim to be the best at what we do, which means acting responsibly, providing sustainable services, safeguarding our employees, supporting our communities and protecting the environment. Our business ethics Our culture is built on honesty, integrity, transparency, and accountability. We expect our employees always to act fairly and ethically when dealing with colleagues, customers, contractors, suppliers, authorities and other stakeholders. We take pride in having our name associated with the highest ethical standards. At Global Ports, everyone has a responsibility to understand and abide by the ethical behaviours and standards of conduct set out in our Code of Ethics. Every officer of the Group and each employee joining the Group must acknowledge that he or she has read the Code and understood its importance. We also expect our business partners and suppliers to be aware of our publicly available Code of Ethics and apply similar ethical standards to their own business operations. The relevant anti-corruption, сonflict of interests provisions and representations and warranties in relation to good standing are included in Global Ports Group companies standard contracts. We regularly review and update the Code of Ethics to ensure Global Ports continues to meet the highest ethical standards. In 2020, a new version of the Code was approved by the Board. We believe identifying and managing Conflicts of Interest is fundamental to the conduct of our business, our relationships with clients, and the markets in which we operate. Consequently, we separately adopted a new Conflicts of Interest policy to provide clear guidance on this critical issue. Anti-bribery and anti-corruption The Group has an anti-bribery and anti-corruption framework in place. Our zero-tolerance approach to bribery and corruption is reflected in our Code of Ethics and is further supported by detailed policies on related areas. The Group’s anti-corruption framework is an important part of our risk management arrangements. The policy is there for any person working at or with Global Ports, if they face a situation that they are concerned about or 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 by or overseen by our internal audit team. 52 Global Ports Investments PLC Annual Report 2020 globalports.com BRITTA DALUNDE Independent Non-Executive Director Global Ports has a rigorous approach to governance and continues to improve its standards. In 2020 we created a new version of our Code of Ethics and adopted our Policy on Conflicts of Interest — all essential or crucial steps. Most importantly in this year where people have been the key focus in terms of ESG, we launched our new talent management system, which will strengthen our ability to attract and retain the best people in the business. Employ 2,800people* The updated Code of Ethics is available on our website www.globalports.com *As of 31 December 2020 53 53 Whistleblowing Global Ports has a group-wide whistleblowing policy that applies to all employees, contractors, suppliers and clients. The whistleblowing service, established in 2017, provides a mechanism for individuals with serious concerns about the conduct of the Group or its employees' conduct, to report those concerns. Suspected improper activities or breaches of our Code of Ethics can be reported via a confidential hotline. All hotline messages received are conveyed directly to the Head of Internal Audit and the Chairman of the Audit & Risk Committee. All reports are treated confidentially, and appropriately investigated and concluded. The Group maintains a non-retaliation policy that allows each employee to freely report their concerns. Policy on reporting allegations of suspected improper activities (Whistleblowing policy) and Anti-Fraud policy are available in the Corporate Governance section of our website www.globalport.com. Human rights As a major listed company with international stakeholders, we recognise our responsibility for upholding and protecting the human rights of our employees and other individuals with whom we deal with in our business. The Group’s approach to human rights is founded on our values and on our belief that everyone is entitled to fundamental rights and freedoms. Our Code of Ethics defines our approach which is strictly in accordance with Russian and international human rights law. Our Code of Ethics recognises the fundamental civil, political, economic and social human rights and freedoms of every individual and strives to reflect them in our business activities. Compliance with and respect for human rights is promoted throughout the organisation and reflected in our wider policies and in how we interact with our employees, customers, suppliers, and other stakeholders. Our communities Global Ports is committed to giving back to society. Our port locations are more than sources of local employment; they are part of the fabric of the community and play an essential role in everyday life. We want to support our employees and their communities and improve their quality of life. Our approach is based around supporting our communities through targeted social investment. This is the philosophy that underpins the Group’s approach to social investment. 54 54 1 2 3 4 5 6 Total spent on charity (Equivalent of 0.4 USD million) We are a significant employer in our communities and our employees are encouraged to volunteer and support our social investment schemes. The Group’s social and community investment is targeted around four principal themes: Health, Education, Welfare and Culture. In total, the Group contributed RUB 32 million (0.4m USD) in 2020 to its charitable and community support ventures. In the Health area, the Group provides support for a number of community-based sports programs. The Group’s education and welfare programs support projects that help vulnerable adults and children. The Group’s support for culture prioritises local social infrastructure projects including funding heritage restoration projects. In 2020 Global Ports Family Day was held in an online format. The event culminated with a traditional drawing competition among young participants. The Group’s charitable and social activities in 2020 included: center for minors Albatross, schools and Society of disabled people; › VSC, FCT, ULCT and PLP supported the Life Line Charitable Foundation which helps to support seriously ill children; › MD provided financial aid to Center of rehabilitation of disabled children in Kronstadt district, St. Petersburg; › VSC supported local hospital with purchase of personal protection equipment, COVID-19 tests, medical equipment, as well as the purchase of special cars for hospital use; › VSC also supported local social sector including Vrangel Cultural Centre, social rehabilitation › FCT donated tablet computers to support local school children with distance learning during lockdown. › MLT Oy supported The Association of Friends of  the University Children’s hospitals in their efforts to improve the comfort of patients during their hospital stay. Global Ports Investments PLC Annual Report 2020 globalports.com 55 In 2021, we will continue to improve the safety processes and controls we enacted last year. In addition, we are focused on the implementation of the Fatal 5 program, within which we will reduce risks in essential areas: 0.54 LTIFR, the lowest on record for Global Ports Our suppliers We rely on a range of suppliers to provide goods and services linked to our commercial operations. We aim to foster good relations with all our suppliers. We expect our suppliers to adhere to the Group’s policies and high ethical standards as defined in the Code of Ethics. We also expect our supplier and their supply chains to adhere to high operational and ethical standards and ensure proper accountability throughout the supply chain. The guidelines relating to suppliers 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: Safety under the crane Work at height Work with hazardous cargo Work with contractors Speed limit › full compliance with the legislation of the Russian Federation, and in particular law 223-FZ1; In addition, we will create and develop the work of the Safety Committees at the terminals. › competitiveness and transparency; › supplier selection based on price, quality and timeliness; › total cost of ownership. All procurement information is placed on  www.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. All tender requests are published on the websites stated above to ensure fairness and transparency in the tendering process. The Group’s Procurement team closely monitors global best practices, drawing on its relationship with APM Terminals and Delo Group. Health & Safety We have a fundamental duty of care to ensure the safety and wellbeing of all our people. We are committed to achieving the highest standards of Health & Safety, ensuring that appropriate resources are available to meet our objectives of a zero-harm work environment. The paramount importance of health and safety was a key imperative behind the measures successfully introduced by the Group to mitigate the risks posed by COVID-19 to our people. These included regular medical check-ups, restrictions on travel, social distancing protocols, stringent hygiene measures and the provision of personal protective equipment (PPE). Our approach to developing a sustainable safety culture is based on three principles: › providing a safe working environment; › providing comprehensive implementation plans built around best practice safety and compliance standards; › offering comprehensive training focused on risk awareness and reduction. Our approach The nature of our work and working environments means that our employees and contractors are regularly exposed to risk. We are constantly monitoring and identifying health and safety risks to ensure that our risk controls and working practices are the safest they can be. We believe our stringent approach, which involves continually updating our work protocols and risk controls to effectively manage safety-related risks leads to better safety outcomes. Our safety management framework covers all aspects of safety compliance, monitoring, and training. Our safety management system focuses on ensuring compliance with our safety standards to provide a safe work environment. It is structured around: Governance 1 2 3 4 5 6 › critical minimum safety standards that are aligned with industry best practice (Global Minimum Requirements); › regular safety audits that benchmark our facilities’ compliance in implementing our GMRs; › regular safety and risk awareness briefings and information updates for our staff and contractors; › regular and high quality daily safety walks organised at each terminal; › regular health and safety training for line management and employees staff; › regular training drills covering general safety issues; › specialised training programmes for employees that need it, for instance for those involved in handling hazardous materials; › regular monitoring of the health and wellbeing of our employees aimed at improving and maintaining their wellbeing and reducing the incidence of occupational illnesses. LTIFR 1.51 1.28 1.10 0.55 0.54 The Board has overall responsibility for health and safety matters and is committed to continuous improvement in our safety culture and systems. The Board sets Heath and Safety policy, agrees on safety standards and reviews performance. The Chief Operating Officer is the senior executive responsible for health and safety compliance and performance monitoring. The Chief Operating Officer regularly reviews feedback and performance reports supplied by the individual business units and the Board receives quarterly performance reports. The Group’s safety performance is regularly reviewed by the Board and any decisions taken are discussed and agreed with the executive team. Performance in 2020 The pandemic and the health risks posed by COVID-19 made it imperative that we redouble our efforts to safeguard the health and safety of our employees and achieve a zero-harm working environment. Our focus was on ensuring compliance not just with COVID-related measures but with our fundamental health and safety standards and controls, so significant attention was paid to improving all aspects of health and safety communications. During the year we continued to focus on our Lost Time Injury Frequency Rate (LTIFR) measure, a key safety metric. It is very reassuring to report that despite the disruption caused to our operations by the pandemic and notwithstanding the fact that our facilities continued to run uninterrupted throughout 2020, we achieved our best ever LTIFR at 0.54 incidents per 1 million exposure hours, making further progress on the prior period’s strong result. This improvement was due to ongoing commitment from the senior leadership, positive support from all management levels, strong employee engagement and allocation of appropriate resources. 57 1 223-FZ on Procurement of goods, works and services by certain types of legal entities 2016 2017 2018 2019 2020 56 Global Ports Investments PLC Annual Report 2020 globalports.com Over the course of the year, we made significant progress in specific focus areas: Our People › safety walks — we organised regular and high quality daily safety walks. By the end of the year, the required frequency of audits had reached almost 100%; › introduction of mobile safety app — to improve the audit process and ensure that all safety incidents are promptly processed and recorded, we developed a unique mobile telephone application that has been installed on the mobile phones of the responsible employees of the terminals; › staff involvement — the involvement of personnel in safety issues. In this direction, all terminal employees have access to a light version of the above mobile application, which allows any employee to promptly make an appeal on security issues; › systemised training — in the implementation of regular training programs at terminals on the response and action of personnel and emergency services in the event of a fire, incidents with dangerous goods, people falling into the water, etc. As a result, the personnel training processes have been given a systemic and non-formalized character; › safe movement of staff — we focused on improving the lay-out of routes and paths used by our employees at our terminals to ensure their safe movement; › safety procedures — to improve how we educate our personnel on safe working methods, we developed and introduced a series of short visual reminders for employees on the main handling processes. Safety remains at the core of the Group’s values and we will continue to strive to achieve a zero- harm environment. The Group’s 2,800 employees* are fundamental to its successful development and performance. We believe in empowering and engaging with our employees, promoting a positive culture where people of all backgrounds are treated with respect and given equal opportunity to develop. Having a well-motivated and well-supported workforce means that we are able to provide a better service to our customers. We are determined to make Global Ports an even better place to work for all our staff and this continues to be an important focus for the Board and senior management. Employee engagement The Board takes its responsibilities for workforce engagement seriously. Our people play a key role in the success of our business, which is why we make it a priority to involve, consult and inform employees. We believe that an engaged workforce is a source of competitive advantage in a service-led industry. We use several of channels to interact with our employees including: formal and informal briefings, internal communications, strategy workshops, training courses, via our new intranet platform and our Annual Report. The impact of COVID-19 saw much of our employee engagement, especially around issues to do with health, safety and wellbeing move to our online platform. Employees and their representatives are consulted regularly on a variety of matters affecting their interests. We hold regular feedback sessions with staff as well as periodic employee surveys. Our most recent staff survey showed that satisfaction levels among our staff are high. Building on the positive response of employees, this year we have focused on: › building a shared sense of unity and teamwork among employees; › building cross-functional working and reducing complexity; › 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. *As of 31 December 2020 Diversity data Females as a percentage of total30% 26% of production staff 66% of administrative staff Length of average service (years) 1 2 3 4 5 6 Less than 5 years 44% 5–10 years 18% 11–20 years 31% More than 20 years 7% Performance and development Recruitment and people development are critical parts of our long-term growth strategy, ensuring that we have the right people to deliver for our customers. We recognise the need to invest in the training and development of our people to fill our pipeline of talent, identify high potential candidates and provide our people with opportunities to grow and progress their careers within the business. We offer fast-track development opportunities to our high potential employees. We are also intent on developing our next generation of senior executives. We support them with coaching, mentoring and development programs alongside practical management. In 2020, we worked hard to continue our commitment around learning and development, moving many of our training and development programs online, thus ensuring that we continued to support the development of our people. Diversity & inclusion We continue to focus on diversity and inclusion. We see diversity as a positive and we value, encourage and support difference. We want to ensure that we have access to the broadest pool of talent available, selecting the best candidates based on their ability to do the job. We aim to offer equal opportunities for all our staff regardless of race, religious or political beliefs, marital status, age, gender, sexual orientation or disability. Our approach is set out in our Code of Ethics 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. We aim to recruit and retain the best employees in our sector, offering a competitive benefits package that incentivises our people to succeed and recognises and rewards outstanding performance and behaviours. 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. As at the year-end, 30% of our total workforce was female, including 26% of production staff and 66% of administrative staff. On our Board of Directors, women account for 27% of the membership and two out of the three independent directors. We continue to look at ways further to promote diversity at all levels of the organisation. 58 Global Ports Investments PLC Annual Report 2020 globalports.com 59 RUB91mln on various environmental protection measures (Equivalent of 1.3 USD million) Environment Protecting the environment 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 continue to examine 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 2021. 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. Water Usage As a ports business, water is fundamental for our operations and the communities around them. We are committed to managing our water resources more effectively. We have a particular focus on minimising the impact of negative water quality on the natural environment. As part of our natural resource management, all accumulated rainwater and wastewater is treated before being returned to waterways. Energy usage 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 2018 2019 2020 kWh 2.14 2.08 1.69 l/t 0.45 0.46 0.44 USD 119 120 108 As the leading container ports business in Russia, we recognise that there is a balance to be struck between enabling trade flows whilst protecting the environment. We consider ourselves stewards of the places where we operate charged with looking after the environment with diligence and care. We aim to make sure that not only do we minimise the environmental impact of our activities, but that we make a positive difference to the environmental outcomes. Our environmental work is focused on many priority areas: reducing energy consumption; optimising our water usage and, improving our waste management and recycling performance. To address these issues the Group has invested in installing energy efficiency schemes, environmentally-beneficial waste management solutions and enhanced environmental protection measures. Over the last year this has involved projects to upgrade wastewater treatment facilities; install more energy efficient lighting; install energy-efficient heating systems; upgrade our stormwater drainage systems; and construct pollution monitoring systems. In 2020 we spent RUB 91 million (USD 1.3 million) on various environmental protection measures at our terminals, mainly at ULCT and VSC, as part of our overall environmental investment programme (2018–2021) in conjunction with regional administrations. We are also determined that our environmental activities are transparent and accountable and that we comply with all applicable environmental regulations and requirements in each of the regions where we operate. 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. 60 1 1 2 2 3 3 4 4 5 5 6 6 Waste Management We aim to minimise the amount of waste our terminals produce, reuse 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 review 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 practice development in areas such as compliance, energy usage, recycling and waste management. WE AIM TO MAKE SURE THAT NOT ONLY DO WE MINIMISE THE ENVIRONMENTAL IMPACT OF OUR ACTIVITIES, BUT THAT WE MAKE A POSITIVE DIFFERENCE TO THE ENVIRONMENTAL OUTCOMES. Global Ports Investments PLC Annual Report 2020 globalports.com 61 ENVIRONMENT Electricity used Fuel used (diesel, petrol) Water recycled 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) 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 Length of service (years) Less than 5 years 5–10 years 11–20 years More than 20 years Number of sites Political donations 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 Employee average age 62 Units 2018 2019 2020 Units 2018 2019 2020 thousand MWh mln l % kWh l/t USD % % % % % % % % number number number % % % % number number yes / no yes / no number number % % % USD mln number 41.9 9.1 0 2.14 0.45 119 67 33 35 65 73 27 87 13 1.28 0 0 26% 23% 30% 21% 7 0 yes yes 42.0 9.6 0 2.08 0.46 120 68 32 35 65 73 27 87 13 0.55 1 0.35 40% 19% 28% 12% 7 0 yes yes 39.8 10.6 0 1.69 0.44 108 70 30 34 66 74 26 100 0 0.54 0 0 44% 18% 31% 7% 7 0 yes yes 2,700 2,870 2,7971 х х х х х х 5 12% 9% 2% 0.1 х 52 14% 8% 5% 0.1 43.3 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 the Board Tenure of the Board < 1 year 1–4 years > 4 years number number % number number % % % % Number of Board meetings for the year number Board meeting attendance Board meeting attendance by Independent Directors 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 % % % % % % number number number number number number 1 2 3 4 5 6 15 3 20 1 14 11 3 27 0 11 11 3 27 0 11 93.3 100.0 100.0 47 33 20 21 92.4 98.4 73 27 33 67 4 33 71 38 49 3 36 64 0 18 96.0 98.1 73 27 33 67 3 31 66 35 52 3 9 91 0 13 100.0 100.0 73 27 33 67 3 32 62 30 50 3 Total Board of Directors compensation paid Total salaries and bonuses paid to executives Auditor ratification USD thou. USD thou. yes / no 1,188 10,041 yes 818 8,311 yes 245 3,743 yes 1as of the end of period *The full list of ESG disclosure metrics can be found in our latest databook on www.globalports.com/en/investors/reports-and-results. Global Ports Investments PLC Annual Report 2020 globalports.com 63 CORPORATE GOVERNANCE EFFECTIVE GOVERNANCE IS CENTRAL TO GLOBAL PORTS’ LONG-TERM SUCCESS 1 Global Ports at a Glance 2 Strategic Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Parent Company Financial Statements 6 Additional Information 64 64 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com 65 65 CORPORATE GOVERNANCE 3Independent directors 3Committees 50Board average age 30Board of Directors age range 11 members of the Board of Directors USD245 thou. The total remuneration of the members of the Board of Directors Board independence, % Tenure of the Board, % Non-Executive Directors 73% 8 Independent Non-Executive Directors 27% 3 < 1 year 18% 2 1–4 years 82% 9 Board diversity: the whole Board, % Board diversity: Independent Directors, % Superior mix of knowledge and experience International business International taxation 7 1 Business administration Transport & logistics 4 Finance 5 Audit & accounting 1 Law 2 Technology 2 9 Investment banking 2 1 2 3 4 5 6 Code of Ethics Global Ports’ Code of Ethics 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 Group is determined to adhere to the highest standards of corporate governance; a revised version of the Code aimed at simplifying and updating the Group’s mission, values and standards of corporate engagement was adopted by the Board on 18 August 2020. 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. In 2020 all employees were tested for knowledge of the updated Сode. 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. The Code is accessible to all staff via the Group’s website (under the 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. Role of the Board of Directors 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 the value and importance of good governance in creating and sustaining a strong corporate culture. The Board acknowledges that its role is to lead by example and set the right tone in terms of the behaviours expected of the Group. The Board’s composition ensures 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. Male 73% 8 Female 27% 3 Male 33% 1 Female 67% 2 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. 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. 66 Global Ports Investments PLC Annual Report 2020 globalports.com 67 Members of the Board of Directors 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 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 comprises of 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. Profiles of each Director are set out on pages 72-77 of this Annual Report. There were some changes to the composition of the Board during 2020. Mr Soren Sjostrand Jakobsen was appointed as Chairman of the Board on 24 April 2020 succeeding Mr. Morten Engelstoft. On 16 April 2020, Mr Ivan Besedin resigned as a Director from the Board and was replaced by Mr Andrey Yashchenko on the same date. Mr Kristian Bai Hollund joined the Board as a Director on 29 May 2020 replacing Mr Morten Engelstoft who resigned from the Board on the same date. Both new Board members were reviewed and recommended for appointment by the Nomination and Remuneration Committee. There were no significant changes in the responsibilities of the Directors during 2020 except for membership in the committees as described above. 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 ensure 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 management, and Independent and Non-Independent Directors, with a view to encourage 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 appropriate segregation of roles and responsibilities. Board Committees 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. Further details on the Board committees can be found in the Management Report on pages 16-23. 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. CORPORATE GOVERNANCE STRUCTURE Board of Directors members Chairman SOREN SJOSTRAND JAKOBSEN Leads the Board and ensures its effectiveness 3Independent Directors 1 2 3 4 5 6 Chaired by Independent Director Chaired by Non-Executive Director AUDIT AND RISK COMMITTEE NOMINATION AND REMUNERATION COMMITTEE STRATEGY COMMITTEE 5 members, including 3 Independent Directors 3 members, including 1 Independent Director 5 members, 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 68 Global Ports Investments PLC Annual Report 2020 globalports.com 69 General Manager Internal audit Shareholder Engagement Alexander Iodchin occupies the position of General Manager of the Company 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 and is the Chief Strategy and Business Development Officer at Global Ports Group pursuant to Board's decision on 29 October 2020. 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 participating in any incentive plans operated by the Group. The Chairwomen of the Audit and Risk and Nomination and Remuneration Committees receive additional remuneration. The shareholders of the Company approved the remuneration of the members of the Board on 29 June 2018, 30 December 2019, 16 April 2020 and 29 May 2020. The total remuneration of the members of the Board of Directors paid by the Group and its subsidiaries in 2020 amounted to USD 245 thousand (2019: USD 818 thousand), including EUR 75 thousand paid to Mrs. Britta Dalunde, EUR 75 thousand to Mrs. Inna Kuznetsova and EUR 65 thousand to Mr. Lambros Papadopoulos1. The Group’s centralised Internal Audit Service (IAS) provides independent, objective assurance, advice and insight designed to protect, add value to and improve Global Ports’ operations. The scope of its audit activities include reviewing and reporting on the effectiveness of the Group’s corporate, financial controls, and IT controls. The independence and objectivity of IAS is 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 2020, the shareholders of Global Ports reappointed PricewaterhouseCoopers as the independent external auditor for the purposes of auditing the Group’s IFRS financial statements for 2020. As of 2021, KPMG Ltd will be proposed to take over from PricewaterhouseCoopers Limited as the independent external auditor. A resolution approving the appointment of KPMG as the external auditor for the purposes of auditing the Group’s IFRS financial statements for 2021 and authorising the Board of Directors to fix their remuneration will be proposed at the next Annual General Meeting that will take place in 2021. 1 USD Equivalents: USD 85.5 thousand, USD 85.5 thousand and USD 74 thousand respectively. The Company’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 rules 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. Shareholders are a key consideration in Board decision-making and the Group has an active approach to shareholder engagement. Members of the executive management team meet regularly with investors, investment analysts, debt investors and ESG analysts to discuss with and seek their views on a range of issues including strategy, business performance, corporate governance and ESG matters. This is undertaken through a structured programme of roadshows, meetings, investor conferences, industry events and site-visits. Although the pandemic meant that shareholder meetings were largely conducted on-line or by telephone, it did not affect the Group’s ability to engage with shareholders. Management conducted over 180 online meetings and participated in 9 virtual investor conferences and roadshows in 2020. In 2020 the Group commenced quarterly reporting of our operational results, increased IFRS and management reporting speed and an updated corporate website with a developed investor section. Shareholders can access up-to-date information on Global Ports through the Company’s website, which has 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. 1 1 2 2 3 3 4 4 5 5 6 6 MIKHAIL GRIGORIEV Head of Capital Markets and Investor Relations of Global Ports Management LLC Our focus this year has been on improving transparency for investor audiences and other stakeholders. Our efforts have delivered quarterly reporting of our operational results, increased IFRS and management reporting speed and an updated corporate website with a developed investor section. 70 Global Ports Investments PLC Annual Report 2020 globalports.com 71 BOARD OF DIRECTORS 100% Meeting participation SOREN SJOSTRAND JAKOBSEN Chairman of the Board of Directors since 24 April 2020, Non-Executive Director, Member of Nomination and Remuneration and Strategy Committees Mr. Jakobsen was appointed as a Non-Executive Member of the Board of  Directors of Global Ports in March 2018. Mr. Jakobsen brings extensive international experience in the maritime industry as well as port development and operation as a result of his 41- year career at A.P. Moller — Maersk Group, having spent the last 16 years with APM Terminals. Mr. Jakobsen has been based in Dubai, UAE since 2013, and until 2019 as Portfolio Manager for APM Terminal’s Africa, Middle East and South Asia joint venture portfolio. Since early 2019, Mr. Jakobsen focused on APM Terminal’s Russia portfolio as well its joint venture interests globally. Mr. Jakobsen also serves on the board of various APM Terminals joint venture companies including two 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 of executive education courses at IMD in Lausanne, Switzerland and INSEAD Business School in Fontainebleau, France. External Appointments Mr. Jakobsen holds a number of other Board positions including: Sogester S.A., Angola; Salalah Port Services Company SOAG, Oman; APM Terminals Bahrain B.S.C.; LCB Container Terminal 1 Ltd, Thailand; South East Asia Gateway Terminal Pvt. Ltd, Sri Lanka; Abidjan Terminal SETV, Ivory Coast; and Meridian Port Services, Ghana. BRITTA DALUNDE Senior Independent Non-Executive Director, Chairwoman of Audit and Risk Committee Mrs. Dalunde was appointed as an Independent Non-Executive Member of the Board of Directors of the Company in May 2017. Mrs. Dalunde has over 30 years’ experience as an executive and a board member of various companies. She held the role of CFO at SJ AB, the Swedish national rail operator, from 2009 until 2013. She has almost 25 years’ experience working as a CFO while working in different industries including transportation, engineering and IT. 1 2 3 4 5 6 Mrs. Dalunde’s prior board engagements include Projektengagemang Sweden AB and Boule Diagnostics AB, both listed on NASDAQ Stockholm as well as HANZA Group AB and Oniva Online Group Europe AB both listed on Nasdaq First North, where she served as Independent Non- Executive Director and chairwoman of audit committees. Mrs. Dalunde owns 21,000 ordinary shares of Global Ports Investments PLC (7,000 GDRs)1. External Appointments Mrs. Dalunde currently also serves an Independent Non-Executive Director of ForSea Ferries AB, Nordion Energy AB, Arlandabanan Infrastructure AB and as Chairman of Chorus AB. ALEXANDRA FOMENKO Non-Executive Director, Member of Nomination and Remuneration Committee Ms. Alexandra Fomenko was appointed as a Non-Executive Member of the Board of Directors of Global Ports in June 2019. 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 the 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. 100% Meeting participation 100% Meeting participation 72 Global Ports Investments PLC Annual Report 2020 globalports.com 73 In alphabetical order 1 Only direct holding of Global Ports Investments PLC is disclosed. For more details see Management report. KRISTIAN BAI HOLLUND Non-Executive Director Mr. Hollund was appointed as a Non-Executive Member of the Board of Directors of Global Ports in May 2020. Mr. Hollund is an experienced finance leader and CFO with 16 years’ global experience in a highly international environment. He was appointed as Operations CFO of APM Terminals in December 2018. Prior to this, he was Commercial CFO at Maersk Line for four years and has held a number of senior financial roles at the company since he joined in 2007 including CFO China, CFO Netherlands and Finance Manager Central Europe, demonstrating an ability to lead large transformations in different geographies. He first joined A.P Moller — Maersk Group in 2005 as a financial controller. Mr. Hollund holds an Executive MBA from IMD in Lausanne, Switzerland as well as an MSc in Finance and BSc in International Business from the University of Aarhus, Denmark. External Appointments Operations CFO of APM Terminals. DEMOS KATSIS Non-Executive Director Mr. Katsis was appointed as a Non-Executive Member of the Board of Directors of Global Ports in May 2018. Mr. Katsis is the founder, partner and managing director of Cyprus-based Katsis LLC law firm, 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, M&A and advanced mitigation. Prior to founding Katsis LLC in 2010, he worked at the George Georgiou LLC firm from 1999 to 2003 and at other international law firms between 2003 and 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. Mr. Katsis graduated with honours from the University of Bristol with a Bachelor of Law and a Master of Laws. Additionally, he was awarded a full E.U. scholarship to pursue a Masters’ degree in Human Rights & Democratisation at the University of Malta. He is also an active author of various articles in relation to corporate and commercial issues and is a Professor at Pericles ABLE Project in Moscow. External Appointments Partner and managing director of Katsis LLC. 100% Meeting participation 100% Meeting participation 100% Meeting participation 100% Meeting participation 74 Global Ports Investments PLC Annual Report 2020 globalports.com 1 2 3 4 5 6 SHAVKAT KARY-NIYAZOV Non-Executive Director Mr. Shavkat Kary-Niyazov was appointed as a Non-Executive Member of the Board of Directors of Global Ports in June 2019. A mathematician and academic, 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 became Managing Director of SL Capital Services Ltd (Cyprus), an international financial company and portfolio company of the merged group from 2002 to 2005. Mr. Kary-Niyazov has 15 years’ experience in the transport industry, becoming President of Marine Façade, St. Petersburg, and a 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 this role, he served as President of 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 State University with a Masters degree in Mathematics (with honours), which he followed up with a PhD in topology and geometry at the same university. External Appointments President of First Quantum Group. INNA KUZNETSOVA Independent Non-Executive Director, Chairwoman of Nomination and Remuneration Committee, Member of Audit and Risk Committee Mrs. Kuznetsova was appointed an Independent Non-Executive Member of the Board of Directors of Global Ports in December 2017 effective January 2018. Mrs. Kuznetsova is the CEO and Board member 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 this, 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 FTSE 100 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. External Appointments CEO, 1010data. 75 LAMBROS PAPADOPOULOS Independent Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Papadopoulos was appointed as an Independent Non-Executive Member of the Board of Directors of Global Ports in December 2017, effective January 2018. Mr. Papadopoulos has over 28 years’ experience as an executive and a board member of various companies. In 2013, Mr. Papadopoulos founded PenteP Advisors Ltd. Prior to this, 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. 100% Meeting participation Mr. Papadopoulos studied Accounting with Computing (B.A.(Hons)) at the University of Kent in Canterbury, UK. He is a Member of the Institute of Chartered Accountants in England and Wales. 100% Meeting participation External Appointments Mr. Papadopoulos also currently 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). MOGENS PETERSEN Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Petersen was appointed as an Independent Non-Executive Member of the Board of Directors of Global Ports in June 2019. Mr. Petersen has over 13 years’ experience in the transport, seaports and shipping industries. He has held the position of APM Terminals’ Portfolio Manager, Russia and the Baltics since November 2018. He first joined APM Terminals in 2007 and held various finance roles globally before becoming Senior Advisor in Finance, Strategy, Audit & Risk at Global Ports Investments Plc from 2014 to 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 in Economics from the University of Aarhus, Denmark and a degree in Finance and Economics (DEA) from the Université Louis Pasteur, Strasbourg. External Appointments Portfolio Manager in APM Terminals Russia and the Baltics, Member of the Board of Directors at APM Terminals — Aarhus A/S. 100% Meeting participation 100% Meeting participation 76 Global Ports Investments PLC Annual Report 2020 globalports.com SERGEY SHISHKAREV Non-Executive Director, Chairman of Strategy Committee Mr. Shishkarev was appointed as a Non- Executive Member of the Board of Directors of Global Ports in May 2018. 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. He returned 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. External Appointments Mr. Shishkarev is the President of Delo Group, the Chairman of the Board of Directors of PJSC Transcontainer and the President of the Handball Federation of Russia. 1 2 3 4 5 6 ANDREY YASHCHENKO Non-Executive Director, Member of Audit and Risk and Strategy Committees Mr. Yashchenko was appointed as a Non-Executive Member of the Board of Directors of Global Ports in April 2020. He serves as the Senior Vice President, Strategy and Finance of Delo Group, having joined the group in 2018 as CEO of the Management Company Delo, a position he held between 2018 and 2019. Between 2013 and 2018, Mr. Yashchenko held the position of the Chief Financial Officer in En+ Group, the leading global vertically integrated producer of aluminium and power. Prior to this, he was the First Vice President and CFO at Russian Platinum (2011–2012), held the positions of Deputy CFO and Corporate Finance Director at Basic Element (2006–2010) and was Capital Markets Director at Rusal (2000–2006). Earlier in his career, Mr. Yashchenko held various corporate finance and strategic development positions at the Tyumen Oil Company, worked as an auditor at Deloitte, and then as an investment analyst in MC Securities and Montes Auri. He has wide experience of corporate activity including equity and debt financing in international and Russian markets, financial strategy development and capital structure optimisation, as well as international M&A, corporate restructuring and holding structure development. Mr. Yashchenko graduated from the Moscow State University with a degree in Economics with honours. He is also a CFA Charterholder and a Member of the CFA Institute. External Appointments Senior Vice-President on Strategy and Finance, Management Company “Delo”. 77 EXECUTIVE MANAGEMENT ALBERT LIKHOLET CEO of Global Ports Management LLC, Managing Director of Petrolesport and First Container Terminal Mr. Likholet was appointed CEO of Global Ports Management LLC in July 2020. He has also held the positions of Managing Director of Petrolesport since August 2018 and Managing Director of First Container Terminal since May 2019. Prior to joining Global Ports, Mr. Likholet was CEO of 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 began 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 holding a number of management positions. Under his management, NLE was converted into a modern container terminal through several stages of investment, while retaining historic bulk and general cargoes. He holds a degree in Management & Economics from the Novorossiysk State Maritime Academy. BRIAN BITSCH Chief Commercial Officer of Global Ports Management LLC Mr. Bitsch was appointed Chief Commercial Officer of Global Ports Management LLC in July 2017. Before his appointment, he was Chief Commercial Officer at Sogester S.A. in Angola between 2011 and 2017. Prior to this, he was a management consultant in Denmark for several years, and between 2006 and 2008 served in various senior executive roles at MSC Scandinavia Holding A/S. Mr. Bitsch started his career in 1990 as a trainee at Maersk and worked there for 16 years, holding various departments and regions, progressing to Senior General Manager. During his time at Maersk, Mr. Bitsch worked in Denmark, the US, Bulgaria and Angola. Mr. Bitsch has completed A.P. Møller Shipping School and holds a Graduate Diploma in Business Administration from Copenhagen Business School as well as a YMP from INSEAD. In alphabetical order 78 Global Ports Investments PLC Annual Report 2020 globalports.com 1 2 3 4 5 6 ALEKSEY ERMOLIN Chief Information Officer, Global Ports Management LLC Mr. Ermolin was appointed as Chief Information Officer of Global Ports Management LLC in June 2020. He has had a pivotal role in the technological transformation of the Group. He began as Director of IT at First Container Terminal in 1988, contributing to the transformation project across the business, successfully leading the project to implement the first terminal operation system (TOS) in Russia. From 2007, he then headed the IT department of National Container Company (NCC), managing the development of information technology across the group and led the digitalisation projects at NCC’s terminals. Following the merger of Global Ports and National Container Company in 2014, Mr. Ermolin took on the position of Chief of IT Department for the enlarged Global Ports Group. Mr. Ermolin is a graduate of the Physics Department of St. Petersburg State University and holds a PhD in Theoretical Physics ALEXANDER IODCHIN Chief Strategy and Business Development Officer of Global Ports Mr. Iodchin was appointed Chief Strategy and Business Development Officer of Global Ports in October 2020. He first joined Global Ports in 2008, serving as an Executive Member of the Board of Directors of the Company from 2008 to 2019 as well as holding the position of Secretary of the Board of Directors of Global Ports Investments PLC since 2008. Mr. Iodchin currently also serves as the Chairman of the Board of Directors First Container Terminal Inc and JSC Ust-Luga Container Terminal and other companies of the Group, as well as the General Manager of Global Ports Investments Plc. Mr. Iodchin is responsible for development and implementation of the Group Strategy, business development projects as well as relations with the joint-venture partners. Mr. Iodchin is also responsible for corporate governance matters and supervises the activities of holding and finance companies within the Group. He has taken an active role in all major financing and M&A transactions of the Group during his tenure. Mr. Iodchin obtained both a Master’s degree and a PhD in Economics from the Moscow State University. He also completed a postgraduate programme at the Moscow Institute for Economics and Linguistics and has a diploma in international finance, reporting standards and corporate finance. 79 MARC NIEDERER Chief Operational Officer of Global Ports Management LLC Mr. Niederer was appointed Chief Operational Officer of Global Ports Management LLC in October 2020. Mr. Niederer has over 26 years of experience in infrastructure management, most recently, as a Vice President at AP Møller Maersk. He has also held the position of Managing Director Americas for Svitzer (one of the largest towage companies in the world, part of AP Møller Maersk Group) where he focused on growing the business in Latin America. Mr. Niederer began his career in 1993 with P&O Nedlloyd, part of Royal Nedlloyd Group, holding various sales and trade manager roles across Europe, Australia and Africa before becoming Managing Director of Russia, Ukraine, Georgia and the Baltics in 2002. Once the company was bought by Maersk in 2006, Mr. Niederer took up managing roles in the Mediterranean, Northern Europe and North America before being based in the UK, managing Svitzer Europe from 2012. Educated in the Netherlands, he holds a BBA from Nyenrode and an MSc Economics from the University of Groningen. He also holds an MBA with High Honors from Chicago Booth Business School and continues his management training on an ongoing basis through the Harvard & IMD Lausanne Executive Training programme. ALEXANDER ROSLAVTSEV Chief Financial Officer of Global Ports Management LLC Mr. Roslavtsev was appointed Chief Financial Officer of Global Ports Management LLC in September 2017. Mr. Roslavtsev has over 15 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. Prior to this, he was CFO of Hewlett-Packard Russia and CIS from 2010 to 2016 and CFO and Vice-President of Rosinter Restaurants Holding from 2006 to 2010. Mr. Roslavtsev also has a track record of international experience having worked for Intel Corporation, Ford Motor Company, KPMG UK and KPMG Russia. 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. He is a member of the Association of Chartered Certified Accountants (ACCA). TERMINAL DIRECTORS 1 2 3 4 5 6 DIRK VAN ASSENDELFT General Manager of Multi-Link Terminals 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. 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. ANDREY BOGDANOV Managing Director of Ust-Luga Container Terminal Mr. Bogdanov was appointed Managing Director of the Ust-Luga Container Terminal in 2018, where he had served as General Manager since 2012. Prior to joining Ust-Luga, for five years Andrey Bogdanov 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, Mr. Bogdanov held the position of Chief Executive Officer of MCT PORT. From 1993, he served as Head of Department of MCT PORT, 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. 81 80 Global Ports Investments PLC Annual Report 2020 globalports.com In alphabetical order ILIA DOLGIY Acting Managing Director of VSC Mr. Dolgiy was appointed as acting Management Director of VSC in April 2021. Mr. Dolgiy joined Global Ports in 2019 as Head of Department for operational efficiency and strategic projects and subsequently became Deputy Chief Operating Officer in May 2020. In both of these roles, Mr. Dolgiy made a significant contribution to the improvement in operational efficiency across the Group’s terminals. Mr. Dolgiy was appointed Executive Director of VSC in January 2021. Between 2007 and 2018, Mr. Dolgiy held various positions at Ruskon, one of Russia's leading container rail transportation companies, commencing his career there as Chief Engineer and last holding the position of Deputy CEO. Prior to this, Mr Dolgiy held various positions at Novorossiysk Commercial Sea Port between 2000 and 2007. Mr. Dolgiy graduated with honours from the South-Russian State Polytechnic University. Mr. Dolgiy was appointed as acting Management Director of Vostochnaya Stevedoring Company (VSC) after Mr. Alexey Pavlenko stepped down 6 April 2021 to pursue other opportunities outside the Group. IVAN RADCHENKO General Manager of Moby Dik terminal and Yanino Logistics Park Ivan Radchenko was appointed General Manager of Yanino Logistics Park in September 2018 and General Manager of Moby Dik in November 2020. 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 was the manager of Global Ports’ Moby Dik container terminal, and a Senior Sales Manager at Yanino Logistics Park between 2010 and 2011. Ivan Radchenko began his career as Head of Analysis and Forecast Division at Commercial Port of Vladivostok JSC in 2006. Mr. Radchenko holds a bachelor’s degree with honors from Russia’s Far Eastern State Technical Fisheries University. 1 2 3 4 5 6 MORTEN ENGELSTOFT Former Chairman of the Board of Directors, Non-Executive Director Mr. Engelstof served as the Chairman of the Board of Directors from October 2016 until April 2020. 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. VLADIMIR BYCHKOV Former Chief Executive Officer of Global Ports Management LLC Mr. Bychkov served as the Chief Executive Officer of Global Ports Management LLC from July 2018 until July 2020. 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. 82 Global Ports Investments PLC Annual Report 2020 globalports.com 83 RISK MANAGEMENT 1 2 3 4 5 6 Risk Management Process, Principal Risks and Uncertainties Global Ports is exposed to various 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. Therefore, effective management of risk is critical to achieving the corporate objective of delivering long-term growth and added value to our shareholders. 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 (ERM) processes are 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. 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 strategy. Where a risk has been identified and assessed, the Group selects the most appropriate risk measure available to reduce the likelihood of its occurrence and mitigate any potential adverse impact. 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 enterprise risk management (ERM) system. 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. 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. Further information on our risk management system, including a detailed description of identified risk factors is contained in the notes to the Consolidated Financial Statements attached to this report. The Group’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the consolidated financial statements. The Board delegates to the Chief Executive Officer of LLC Global Ports Management The Group’s contingencies are disclosed in Note 28 to the consolidated financial statements. 84 Global Ports Investments PLC Annual Report 2020 globalports.com 85 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/ 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. 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, which is also supported by the existing excess capacity in the market, i.e. in the North-West of Russia. 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 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. Also, Beneficial Cargo Owners may optimise their logistics chains and decide to control them, which may lead to changes in the competitive environment. Given the historically high margins in the Russian container handling industry, this trend may continue. 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. Risk management approach Risk factor Risk management approach Coronavirus (COVID-19): The global coronavirus (COVID-19) pandemic that emerged during 2020 impacted the container ports industry and Global Ports own operations, resulting in significant interruption to global trade, disruption to supply chains, reshuffling of vessel calls, and high FX volatility. Despite the introduction of vaccination programmes, visibility remains low and there remains a risk of future outbreaks and disruptions to business operations. Risks include: › personnel shortages due to COVID-19 related illness; › inability to deliver contracted services due to regulatory or safety requirements; › loss of revenue due to business interruption, loss of customer volumes or customer withdrawals; › additional process steps or safety measures; › liquidity issues associated with delays in customer payments, potential customer failures or availability of financing. 1 2 3 4 5 6 There are no restrictions imposed by the governments on the operations of ports, since they are considered being the core transport infrastructure servicing the inbound and outbound traffic from the country. Group measures to mitigate risk are grouped under/focused on four main priorities: › protecting all employees (operations and admin) and communities: including medical examinations, restrictions on travelling and external/internal meetings, social distancing, additional disinfection according to the schedule, personal protective equipment provided for personnel, improved cleaning, and COVID-19 tests. Administrative staff was moved to work from home. The Group tried to establish the maximum comfort for its employees during remote work. The IT infrastructure was adapted to new challenges and was working without major failures. As of the date of publication of this Annual Report, the employees were not fully returned from working from home. The Group has not taken a final decision, whether some of the employees shall continue working from home going forward. Any return to the office is and will be accompanied by following the strict safety protocols including social distancing, disinfection, use of masks, limitation of external contacts; › supporting customers: uninterrupted 24/7 round the clock operations (quay, yard and gates), to support and protect customers’ supply chains in Russia, improved commercial and operational flexibility; › strengthening online channels, including maximum digitalisation of documentation and customer integration, further development of online-solutions to decrease the necessity of client’s presence at the terminal, improvement of resilience of IT systems to external shocks and cyber attacks; › ensuring financial stability and cash preservation, including pro-active management of costs, receivables and capacity for effective adaptation to crisis and its consequences, stress testing of financial performance and liquidity position, revisiting financial plans. All these measures implemented ensured that the terminals of the Group (quay, yard and gates) remained 100% operational to service vessels/handle cargoes throughout the pandemic as well as the call and service centres of the Group were working without interruption. The Group has responded to throughput volatility 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; › development of IT solutions; › 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 strategic relationships with its leading customers (locally, regionally and with headquarters). 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 continues to invest in its terminals and infrastructure to ensure competitive levels of service. It takes a long-term approach to managing its network of terminals that represent core infrastructure assets in Russia with an expected operating lifespan of 10 to 20 years and beyond. The Group owns a significant land bank giving it flexibility should market conditions require it. The Group maintains the level of capital expenditure in line with the requirements needed to maintain effective development of its existing capacity. The Group has developed long-term operating masterplans for each of its terminals 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 programme. 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 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. 86 Global Ports Investments PLC Annual Report 2020 globalports.com 87 Risk factor Operational risks Risk management approach Risk factor Risk management approach 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. 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 by building its presence in marine bulk cargoes like coal and scrap metal (share of non-container revenue was 26% and 22% in 2019 and 2020 respectively). 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. 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. Tariff regulation: Tariffs for certain services at some 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. All tariffs are set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the tariff legislation. The Group continues to monitor 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 trends and aligns employee salaries and benefits 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. Health, safety, security and environment: Accidents involving handling hazardous materials at the Group’s terminals could disrupt its business and operations and/or subject the Group to environmental and other liabilities. 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. The Group has implemented clear safety policies designed around international best practices and benchmarks using such measures as GPI Global Minimum Requirements. Safety is one of the Group’s top priorities. A safety strategy and annual action plans 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. GPI is constantly improving its safety practices by involving the employees in identifying and mitigating potential safety risks. Similarly, GPI works with all its stakeholders to maintain a high level of environmental security around port facilities and vessel operations to minimise the risk of terrorist attack. 1 2 3 4 5 6 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 significant 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 significant 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. 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 comply 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 in regulations: Changes to existing regulations or the introduction of new regulations, procedures or licensing requirements are beyond the Group’s control. They 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. 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. 88 Global Ports Investments PLC Annual Report 2020 globalports.com 89 Risk factor Risk management approach Conflict of interests: 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 employees of the Group may have interests in the companies, that may or potentially may have the business with 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. In 2020 the Group adopted the Policy on Conflicts of Interest regulating the potential conflicts of interest by the employees of the Group. 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 UK left the EU on 31 January 2020 with the prior conclusion of the EU — UK Trade and Cooperation Agreement. Although the Agreement covers the financial services in general, it is expected that the parties will further establish a framework for regulatory cooperation on financial services. Financial risks Foreign exchange 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 of fluctuations in profits and cash flows of the Group arising from movement of foreign-exchange rates. Risk also arises from revaluation of assets and liabilities denominated in foreign currency. The Group maintains a solid and professional legal function designed to monitor legal risks, avoid legal actions where possible and carefully oversee any changes in applicable legislation 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. As of 2020, all Group tariffs are denominated in Russian roubles, and part of the Group’s debt is denominated in US dollars. On the other hand most of the Group’s operating expenses, are and will continue to be denominated and settled in RUB. 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 is converting part of its existing USD debt into RUB, the currency of revenue. 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 2018–2020, the Group repurchased part of its USD denominated Eurobonds and currently/to date around 29% of the total issued Eurobonds have been canceled. New debt in 2020 was attracted/raised only in Russian rouble (VSС bonds in the amount of 5 billion RUB–USD equivalent of USD 67,681 thousand). In addition, the Group has negotiated with some of its customers the right to change its Russian rouble tariffs in conjunction with RUB/USD exchange rate fluctuations within a range of +/-15% each time when average RUB/USD exchange rate for a given month falls beyond 5% from the base exchange rate used for translating original USD tariffs to RUB, however the risk above the levels of these currency moves remains. Risk factor Credit risk: The Group may be subject to credit risk, arising primarily from trade and other receivables, loans receivable and cash and cash equivalents and derivative financial instruments. The Group’s business is also dependent on several large key customers. 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. Risk management approach The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. 1 2 3 4 5 6 The Group has been able to reduce its total debt level. During 2018–2020 the Group repurchased USD 203.5 million nominal value of 2022 and 2023 Eurobonds of which USD 69.5 million were refinanced via a 5 year/60 month RUB bank loan in 2019. FCT Series 1 Bonds were repaid in 2020 using the proceeds from VSC bonds issued in December 2020 with maturity over 5 years and lower interest rate than FCT bonds. Debt reduction beyond minimum repayment requirements remains a management priority in 2021. 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 issuance in 2020: VSС issued Russian rouble bonds in the amount of 5 billion RUB — USD equivalent of USD 67,681 thousand, which is a part of the rouble-denominated Bond Program of VSC with Moscow Exchange which provides VSC with the potential to issue additional bonds of RUB 25 billion — USD equivalent of USD 338,406 thousand over an unlimited period of time with a maturity of up to 10 years. FCT has a similar Bond Program for RUB 50 billion — USD equivalent of USD 676,813 thousand. In addition the Group has over US dollars 300 million of open uncommitted limits for credit line facilities from the banks which in combination with VSC and FCT bonds can facilitate financial flexibility and diversification of the debt portfolio of the Group and the refinancing of the existing debt of the Group and ensure all obligations of the Group falling due in the next 12 months are met. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. The liquidity position is carefully monitored in case of further deterioration of financial performance. Multi-Link Terminals Ltd Oy, a Finnish joint venture of the Group, secured a waiver from its financing bank confirming that the bank will not exercise its right for an early prepayment of the loan due to breach of financial covenants as of 31 December 2020. 90 Global Ports Investments PLC Annual Report 2020 globalports.com 91 1 Global Ports at a Glance 2 Strategic Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Parent Company Financial Statements 6 Additional Information CONSOLIDATED FINANCIAL STATEMENTS 92 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com 93 TABLE OF CONTENTS Board of Directors and Other Officers Management Report Directors’ Responsibility Statement Consolidated Income Statement for the year ended 31 December 2020 Consolidated Statement of Comprehensive Income for the year ended 31 December 2020 Consolidated Balance Sheet as at 31 December 2020 Consolidated Statement of Changes in Equity for the year ended 31 December 2020 Consolidated Statement of Cash Flows for the year ended 31 December 2020 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 Joint ventures and non-controlling interests 28 Contingencies 29 Commitments 30 Related party transactions 31 Events after the balance sheet date Independent Auditor’s Report Global Ports Investments PLC Annual Report 2020 globalports.com 1 2 3 4 5 6 02 04 27 28 29 30 31 32 33 33 34 46 50 52 67 68 68 69 69 70 70 70 71 74 75 75 76 76 78 78 79 82 83 84 85 85 90 92 92 94 95 1 BOARD OF DIRECTORS AND OTHER OFFICERS (CONTINUED) Registered office 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus Secretary Team Nominees Limited 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus 1 2 3 4 5 6 BOARD OF DIRECTORS AND OTHER OFFICERS Board of Directors Mr. Soren Jakobsen (appointed 02 March 2018) (Mr. Mogens Petersen is the alternate to Mr. Soren Jakobsen) Chairman of the Board of Directors since 24 April 2020, Non-Executive Director, Member of Nomination and Remuneration and Strategy Committees Mrs. Britta Dalunde (appointed 12 May 2017) Senior Independent Non-Executive Director, Chairwoman of Audit and Risk Committee Mr. Kristian Bai Hollund (appointed 29 May 2020) (Mr. Soren Jakobsen is the alternate to Mr. Kristian Bai Hollund) Non-executive Director Ms. Alexandra Fomenko (appointed 18 June 2019) Non-Executive Director, Member of Nomination and Remuneration 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 Nomination and Remuneration 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 Mr. Andrey Yashchenko (appointed 16 April 2020) Non-executive Director, Member of Audit and Risk and Strategy Committees Mr. Morten Henrick Engelstoft resigned 29 May 2020 Mr. Ivan Besedin resigned 16 April 2020 2 Global Ports Investments PLC Annual Report 2020 globalports.com 3 MANAGEMENT REPORT MANAGEMENT REPORT (CONTINUED) 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” or “Global Ports”) and its subsidiaries and joint ventures (hereafter collectively referred to as the “Group”) for the year ended 31 December 2020. 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 9. Consolidated revenue increased by 6.2% to USD 384.4 million. Excluding the impact of VSC transportation services, like-for-like revenue declined by 8.2% driven by a decrease in both Consolidated Container and Non-Container Revenue. 10. Like-for-like Revenue per TEU decreased by 13% to USD 155.1 million as a result of depreciation of the Russian rouble against US dollar, the growing share of full export containers in Group throughput and additional free storage days and other incentives provided by the Group to its clients in order to support them on the back of the global and local macroeconomic turmoil following the COVID-19 outbreak. Like-for- like Revenue per TEU adjusted for FX decreased by 2.7%. 1 2 3 4 5 6 2. The principal activities of the Group are the operation of container and general cargo terminals in Russia and Finland. The Group offers 11. Operating profit increased by 8.7% to USD 157.4 million. its customers a wide range of services for their import and export logistics operations. There were no changes in principal activities of the Group in current year. Results 3. The Group’s results for the year are set out on pages 28 and 29. Changes in group structure 12. In response to COVID-19 conditions, cost control measures were implemented to manage and reduce the Group’s cost base. Like-for-like Total Operating Cash Costs were successfully and safely reduced by 9.7% to USD 113.2 million despite the healthy growth in both container and non-container throughput. 13. Adjusted EBITDA decreased by 7.6% to USD 209.7 million as cost control improvements and volume growth could not offset the decline in Revenue per TEU and US dollar equivalent of Russian rouble nominated bulk handling tariffs due to the depreciation of the Russian rouble as a result of COVID-19. Profitability was nonetheless maintained with like-for-like Adjusted EBITDA Margin of 65.2%. 4. The management continues the optimization of the Group structure and elimination of the excess companies from the Group. As a part of 14. The Group’s capital expenditure in 2020 was USD 33.9 million and focused on planned maintenance projects, scheduled upgrades of simplification and streamlining of Group structure the following steps were implemented in 2020. a. On 30.01.2020 NCC Pacific Investments Ltd transferred to Global Ports Investments Plc 99.98% in Global Ports (Finance) PLC and existing container handling equipment and customer service improvement initiatives. Intercross Investments B.V. sold one share of Global Ports (Finance) PLC to LLC Global Ports Management. 15. The Group generated a healthy USD 157.1 million of Free Cash Flow (-1.1% compared to 2019) demonstrating the resilience of the business b. On 19.05.2020 Intercross Investments B.V. was dissolved. c. On 10.07.2020 Arytano Holdings Limited, Cormarys Investments Ltd and NCC Group Limited transferred their shares of Global Ports (Finance) PLC to Vostochnaya Stevedoring LLC, JSC Petrolesport and First Container Terminal Incorporated respectively (each one share). d. On 25.09.2020 Global Ports Investments Plc purchased 4.76% in Alocasia CO. Ltd from NCC Group Limited. e. Container Services LLC was merged into Farvater LLC on 03.12.2020. f. On 04.12.2020 a legal merger of Arytano Holdings Limited, Cormarys Investments Ltd and NCC Pacific Investments Ltd into National Container Holding Company Ltd was completed. As a result of the reorganisation, National Container Holding Company Ltd directly holds 100% in Vostochnaya Stevedoring Company LLC, JSC Petrolesport, Farvater LLC and Shakhovo-18 LLC and indirectly owns 100% in First Container Terminal Inc and 80% in Ust-Luga Container Terminal JSC. g. A members’ voluntary liquidation of NCC Group Limited was initiated in late 2020. These reorganisations did not have an impact on the underlying assets/liabilities and overall activities of the Group. 5. 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 and will continue its efforts in the following years. Review of Developments, Position and Performance of the Group’s Business 6. The Russian container market demonstrated resilience in 2020 declining by only 0.8%, supported by continuing growth in containerised export by 5.2%. However, this growth was not sufficient to offset the decline of containerised import by a moderate 1.8% due to the global and local macroeconomic impact of COVID-19. 7. Outperforming the market in both export and import, the Group’s Consolidated Marine Container Throughput increased by 6.6% to 1,553 thousand TEU with growth of full export containers of 16.8% and full import containers of 3.6%. As a result, share of full export containers in the Groups’ Consolidated Marine Container Throughput increased from 40% in 2019 to 44% in 2020. 8. Consolidated Marine Bulk Throughput increased by 38.7% y-o-y, driven by strong growth in coal handling at VSC and ULCT as well as growth of fertilisers and steel handling at PLP. model. 16. The Group reduced Net Debt by USD 134.9 million over the year and continues to prioritise deleveraging over dividend distribution. 17. In line with the Group’s focus on deleveraging, Net Debt to Adjusted EBITDA decreased from 3.3x as of 31 December 2019 to 2.9x as at the end of the reporting period, achieving the lowest level since 2012. 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, write-off and impairment of property plant and equipment, depreciation and impairment of right- of-use assets, amortisation, write-off and impairment of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/(losses)—net. 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. 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. 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 the sum of current borrowings, non-current borrowings, current and non-current lease liabilities (following adoption of IFRS 16) and swap derivatives. 4 Global Ports Investments PLC Annual Report 2020 globalports.com 5 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Future Developments of the Group 18. 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 19. Global Ports 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. 20. 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) are 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. 21. 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 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. 22. 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 Enterprise Risk Management (ERM) system. 23. 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. 24. 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. 25. Further information on our risk management system, including a detailed description of identified risk factors is contained in the notes to the Consolidated Financial Statements attached to this report. 26. The Group’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the consolidated financial statements. 27. The Group’s contingencies are disclosed in Note 28 to the consolidated financial statements. 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: Risk management approach The Group has responded to throughput volatility 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; — Development of IT solutions; — Adopting new revenue streams and attracting new cargoes. 1 2 3 4 5 6 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, which is also supported by the existing excess capacity in the market, i.e. in the North-West of Russia. 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. Also Beneficial Cargo Owners may optimise their logistics chains and decide to control them, which may lead to changes in the competitive environment. 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 strategic relationships with its leading customers (locally, regionally and with headquarters). 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 continues to invest in its terminals and infrastructure to ensure competitive levels of service. It takes a long-term approach to managing its network of terminals that represent core infrastructure assets in Russia with an expected operating lifespan of 10 to 20 years and beyond. The Group owns a significant land bank giving it flexibility should market conditions require it. The Group maintains level of capital expenditure in line with the requirements needed to maintain effective development of its existing capacity. The Group has developed long-term operating masterplans for each of its terminals 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. 6 Global Ports Investments PLC Annual Report 2020 globalports.com 7 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 1 2 3 4 5 6 Risk factor Risk management approach 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 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 global coronavirus (COVID-19) pandemic that emerged during 2020 impacted the container ports industry and Global Ports own operations, resulting in significant interruption to global trade, disruption to supply chains, reshuffling of vessel calls, and high FX volatility. There are no restrictions imposed by the governments on the operations of ports, since they are considered to be the core transport infrastructure servicing the inbound and outbound traffic from the country. Group measures to mitigate risk are grouped under/focused on four main priorities: Despite the introduction of vaccination programmes, visibility remains low and there remains a risk of future outbreaks and disruptions to business operations. Risks include: — personnel shortages due to COVID-19 related illness; — inability to deliver contracted services due to regulatory or safety requirements; — loss of revenue due to business interruption, loss of customer volumes or customer withdrawals; — additional process steps or safety measures; — liquidity issues associated with delays in customer payments, potential customer failures or availability of financing. — Protecting all employees (operations and admin) and communities: including medical examinations, restrictions on travelling and external/internal meetings, social distancing, additional disinfection according to the schedule, personal protective equipment provided for personnel, improved cleaning, purchasing protective masks, gloves and COVID-19 tests for the local hospital in Nakhodka, Far East. Administrative staff had been moved to work from home. The Group tried to establish the maximum comfort for its employees during remote work. The IT infrastructure was adapted to new challenges and was working without major failures. As of the date of signing the financial statements, the employees were not fully returned from working from home. The Group has not taken final decision, whether some of the employees shall continue working from home going forward. Any return to the office is and will be accompanied by following the strict safety protocols including social distancing, disinfection, use of masks, limitation of external contacts. — Supporting customers: uninterrupted 24/7 round the clock operations (quay, yard and gates), to support and protect customers’ supply chains in Russia, improved commercial and operational flexibility; — Strengthening online channels, including maximum digitalisation of documentation and customer integration, further development of online- solutions to decrease necessity of client’s presence at the terminal, improvement of resilience of IT systems to external shocks and cyber attacks; — Ensuring financial stability and cash preservation, including pro-active management of costs, receivables and capacity for effective adaptation to crisis and its consequences, Stress testing of financial performance and liquidity position, revisiting financial plans. All these measures implemented ensured that the terminals of the Group (quay, yard and gates) remained 100% operational to service vessels/handle cargoes throughout the pandemic as well as the call and service centres of the Group were working without interruption. 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. 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 22% in 2019 and 2020 respectively). 8 Global Ports Investments PLC Annual Report 2020 globalports.com 9 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 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 safety policies designed around international best practices and benchmarks using such measures as GPI Global Minimum Requirements. 1 2 3 4 5 6 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. All tariffs are set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the tariff 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. 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. The Group annually reviews labour market trends and aligns employee salaries and benefits 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. 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. Safety is one of the Group’s top priorities. A safety strategy and annual action plans 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. GPI is constantly improving its safety practices by involving the employees in identifying and mitigating potential safety risks. Similarly, GPI works with all its stakeholders to maintain high levels of environmental 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. 10 Global Ports Investments PLC Annual Report 2020 globalports.com 11 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 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. The employees of the Group may have interests in the companies, that may or potentially may have the business with the Group. In 2020 the Group adopted the Policy on Conflicts of Interest regulating the potential conflicts of interest by the employees of the Group. Risk factor Financial risks Foreign exchange 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 of fluctuations in profits and cash flows of the Group arising from movement of foreign-exchange rates. Risk also arises from revaluation of assets and liabilities denominated in foreign currency. The Group maintains a strong and professional legal function designed to monitor legal risks, avoid legal actions where possible and carefully oversee any changes in applicable legislation 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. Credit risk: The Group may be subject to credit risk, arising primarily from trade and other receivables, loans receivable and cash and cash equivalents and derivative financial instruments. The Group’s business is also dependent on several large key customers. Debt, leverage and liquidity: 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 UK left the EU on 31 January 2020 with the prior conclusion of the EU-UK Trade and Cooperation Agreement. Although the Agreement covers the financial services in general, it is expected that the parties further will establish a framework for regulatory cooperation on financial services. 1 2 3 4 5 6 Risk management approach As of 2020, all Group tariffs are denominated in Russian roubles, and part of the Group’s debt is denominated in US Dollars. 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 is converting part of its existing USD debt into RUB, the currency of revenue. 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 2018-2020 the Group repurchased part of its USD denominated Eurobonds and currently/to date ~29% of the total issued Eurobonds have been canceled. New debt in 2020 was attracted/raised only in Russian rouble (VSС bonds in the amount of 5 billion RUB-USD equivalent of USD67,681 thousand). In addition, the Group has negotiated with some of its customers the right to change its Russian rouble tariffs in conjunction with RUB/USD exchange rate fluctuations within a range of +/-15% each time when average RUB/USD exchange rate for a given month falls beyond 5% from the base exchange rate used for translating original USD tariffs to RUB, however the risk above the levels of these currency moves remains. The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. 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. During 2018- 2020 the Group repurchased USD203.5 million nominal value of 2022 and 2023 Eurobonds of which USD69.5 million were refinanced via a 5 year/60 month RUB bank loan in 2019. FCT Series 1 Bonds were repaid in 2020 using the proceeds from VSC bonds issued in December 2020 with maturity over 5 years and lower interest rate than FCT bonds. Debt reduction beyond minimum repayment requirements remains a management priority in 2021. Liquidity risk is carefully monitored, with regular forecasts prepared for the Group and its operating entities. 12 Global Ports Investments PLC Annual Report 2020 globalports.com 13 1 2 3 4 5 6 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Risk factor Risk management approach Internal control and risk management systems in relation to the financial reporting process  The risk of liquidity shortfalls within the following 18-24 months has been significantly reduced via extensions of debt maturities through public debt issuance in 2020: VSС issued Russian rouble bonds in the amount of 5 billion RUB — USD equivalent of USD67,681 thousand, which is a part of the rouble- denominated Bond Program of VSC with Moscow Exchange which provides VSC with the potential to issue additional bonds of RUB25 billion — USD equivalent of USD338,406 thousand over an unlimited period of time with a maturity of up to 10 years. FCT has a similar Bond Program for RUB50 billion — USD equivalent of USD676,813 thousand. In addition the Group has over US Dollars 300 million of open uncommitted limits for credit line facilities from the banks which in combination with VSC and FCT bonds can facilitate financial flexibility and diversification of the debt portfolio of the Group and the refinancing of the existing debt of the Group and ensure all obligations of the Group falling due in the next 12 months are met. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. The liquidity position is carefully monitored in case of further deterioration of financial performance. Multi-Link Terminals Ltd Oy, a Finnish joint venture of the Group, secured a waiver from its financing bank confirming that the bank will not exercise its right for an early prepayment of the loan due to breach of financial covenants as 31.12.2020. 28. 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. 29. Financial reporting and supervision are based on approved budgets and on monthly performance reporting.  30. 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. 31. 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 Group’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 Group 32. 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. 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. The Role of the Board of Directors 33. 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 the wider society as a whole. Its responsibility is to promote adherence to best-in-class corporate governance. 34. 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. 35. 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. 14 Global Ports Investments PLC Annual Report 2020 globalports.com 15 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Members of the Board of Directors Chairman of the Board of Directors 36. The Board of Directors leads the process in making new Board member appointments and makes recommendations on appointments 43. Mr. Soren Jakobsen is the Chairman of the Board since 24 April 2020, when he replaced Mr. Morten Engelstoft. 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. 37. The Board currently has 11 members and they were appointed as shown on page 2. 38. On 16 April 2020 Mr. Ivan Besedin resigned from the Board and Mr. Andrey Yashchenko replaced him on the same date. Mr. Morten Henrick Engelstoft resigned from the Board on 29 May 2020 and Mr. Kristian Bai Hollund was appointed on the same date. Both new Board members were reviewed and recommended for appointment by the Nomination and Remuneration Committee. 39. All other Directors were members of the Board throughout the year ended 31 December 2020, including the independent directors: Mrs. Britta Dalunde, Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos. 44. 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. 45. 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. 1 2 3 4 5 6 40. Mr. Soren Jakobsen was elected the Chairman of the Board of Directors on 24 April 2020. There were no significant changes in 46. The Group separates the positions of the chairman and CEO to ensure an appropriate segregation of roles and duties. the responsibilities of the Directors during 2020 except for membership in the committees as described below. 41. There is no provision in the Company’s Articles of Association for the 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 16 April 2020 and Extraordinary General Meeting held on 29 May 2020 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 2021. Directors’ Interests Non-executive and Independent Directors 47. All of the Board members are non-executive directors. 48. 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. 42. The interests in the share capital of Global Ports Investments Plc, both direct and indirect, of those who were Directors as at 31 December 49. Although all directors have an equal responsibility for the Group’s operations, the role of the independent non-executive directors is 2020 and 31 December 2019 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 2020 Shares held at 31 December 2019 7,000 GDRs representing 21,000 ordinary shares 7,000 GDRs representing 21,000 ordinary shares 88,769,817 ordinary shares 88,769,817 ordinary shares 34,605,183 ordinary non-voting shares 34,605,183 ordinary non-voting shares 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 the GDR holders, bondholders, other lenders, employees, customers, suppliers and the communities in which the Group conducts its business. 50. 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 51. 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 52. 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), re-elected on 24 April 2020, and its other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018, re-elected on 24 April 2020), Mr. Lambros Papadopoulos (an Independent Non-Executive Director appointed as of 01 January 2018, re-elected on 24 April 2020), Mr. Mogens Petersen (appointed as of 18 June 2019, re-elected on 24 April 2020) and Mr. Andrey Yashchenko (appointed as of 24 April 2020). Ms. Alexandra Fomenko resigned from the Audit and Risk Committee on 24 April 2020. 16 Global Ports Investments PLC Annual Report 2020 globalports.com 17 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 53. 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. 54. In 2020 the Audit and Risk Committee met 10 times (2019: 13 times) to review and discuss inter alia the following significant issues and matters in addition and on top of those listed above, among others: — 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; — Meetings with external auditors to discuss the matters related to the audit work done by them and any issues arising from their audits reviews; — Discussion of the level of clarity and completeness of disclosures in financial statements with the management and external auditors and making the recommendations to the Board; — 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. — 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 is 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; — 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; — 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; — Consideration of various reports from the management; — Review of the major risks. The Committee had meetings with Risk Management of GPM to discuss the Кеу Risks, Risk Management approach, Risk Appetite Statements and control matrices; — COVID-19 risks evaluation and management action plan; — Review of dangerous cargoes handling processes and procedures and management suggestions on improvements; — Review of tax related matters; — Review of Charity activity in 2020 and budget 2021; — Review various other compliance related matters; — Consideration and giving the recommendations to the Board of Director for the approval of the Conflicts of Interest Policy, Procurement standard of the Company, Related Parties Transaction Policy, amended and restated Charity Policy. 1 2 3 4 5 6 The Nomination and Remuneration Committee 55. The Nomination and Remuneration Committee was established in June 2019 following the merger of Nomination Committee and Remuneration Committee in order to simplify the work of the committees and Board members. 56. 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, re-elected on 24 April 2020). The other members are Ms. Alexandra Fomenko (appointed as a member of the committee on 11 November 2019, re-elected on 24 April 2020) and Mr. Soren Jakobsen (appointed as a member of the committee on 24 April 2020). Mr. Morten Henrick Engelstoft resigned from the committee on 24 April 2020. 57. The Committee is a committee of the Board of Directors which assists the Board in discharging its corporate governance 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. 58. In the year 2020 the key focus of Nomination and Remuneration Committee was on the transition of Chief Executive Officer of Global Ports Management LLC, talent management, new principles and guidelines for setting the targets and evaluation of the annual performance of the management team and Board performance evaluation. 59. In 2020 the Nomination and Remuneration Committee met 16 times (15 times in 2019): — to discuss and recommend the candidates to be elected to the Board; — to discuss and recommend the composition of the Board Committees; — to lead the process of transition of the Chief Executive Officer of Global Ports Management LLC; — to review and amend the Key Rules of Awarding and Payment of Performance Based Bonuses of GPI Group and terms of separation of the management from the Group; — to discuss and recommend to the Board the appointment of new Chief Operations Officer of Global Ports Management LLC, Chief Strategy and Development Officer of the Group, new Chief Executive Officer of Moby Dik LLC as well as remuneration of the Key Management team members of the Group companies. 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 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 five Directors, one of whom is independent. Currently the Strategy Committee is chaired by Mr. Sergey Shishkarev (appointed as of 18 June 2019 and re-elected on 24 April 2020). The other members are Mr. Mogens Petersen, Mr. Soren Jakobsen and Mr. Lambros Papadopoulos (an Independent Non-Executive Director), all appointed as of 18 June 2019 and re-elected on 24 April 2020, and Mr. Andrey Yashchenko (appointed as of 24 April 2020). 18 Global Ports Investments PLC Annual Report 2020 globalports.com 19 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 1 2 3 4 5 6 61. The Committee is a committee of the Board of Directors which assists the Board of Directors in discharging its corporate governance 67. The number of Board and Board Committee meetings held in the year 2020 and the attendance of directors during these meetings was as 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. follows: Board of Directors Nomination and Remuneration Committee Strategy Committee Audit and Risk Committee 62. In 2020 the Strategy Committee met 8 times (5 times in 2019) to consider and give recommendations for approval to the Board of: — Vision statement of the Group, — the new operating model of Moby Dik to be implemented in 2021; — Treasury policy principles, — various investment proposals, — optimization of Group structure, — Group refinancing plan, and — the Group Consolidated budget 2021. 63. In addition Strategy Committee reviewed and discussed he functional strategies, business model of the Group, strategic priorities, and corporate strategic targets and COVID-19 resilience plan. Board Performance 64. 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. In the year of COVID-19 and the transition of the Chief Executive Officer of Global Ports Managements LLC the Board had more reasons than usual for ad-hoc meetings. 65. In 2020 the Board met formally 13 times (2019: 18) to review current performance and to discuss and approve important business decisions. 66. In 2020 the Board met to discuss and approve important business decisions, which included among others: — FY2019 financial statements, 1H2020 interim financial statements and Annual Report; — Review of segments financial and operational performance; — Consideration of 2021 financial budget, major risks and uncertainties, commercial strategy, corporate social responsibility matters, internal control framework; — Changes in Group management and the Board of Directors; — Revision and adoption of various group wide policies and regulations, namely the Code of Corporate Ethics, Treasury Policy, the Charity and Sponsorship Policy of the Company, Conflicts of Interest Policy, Procurement Standard of the Company, Operational Efficiency Improvements Project Charter; Key Rules of Awarding and Payment of Performance based Bonuses of the Group. — Consideration of various compliance matters; — Consideration and approval of the revision of external and internal financing arrangements and organizational restructurings; — Consideration and approval of new financing arrangements, e.g., issue of VSC bonds, repurchase of additional Eurobonds in 2020 and cancellation of repurchased Eurobonds; — Consideration and approval of major capital expenditures and investment projects; and — Consideration and approval of various resolutions related to the operations of the Company`s subsidiaries and joint ventures. Britta Dalunde Kristian Bai Hollund Alexandra Fomenko Soren Jakobsen Demos Katsis Inna Kuznetsova Shavkat Kary Niyazov Lambros Papadopoulos Mogens Petersen Sergey Shishkarev Andrey Yashchenko Ivan Besedin Morten Henrick Engelstoft A 13 8 13 13 13 13 13 13 13 13 10 3 5 B 13 8 13 13 13 13 13 13 13 13 10 3 5 A - - 16 11 - 16 - - - - - - 5 B - - 16 11 - 16 - - - - - - 5 A = Number of meetings attended B = Number of meetings eligible to attend during the year A - - - 8 - - - 8 8 8 6 - - B - - - 8 - - - 8 8 8 6 - - A 10 - 3 - - 10 - 10 10 - 7 - - B 10 - 3 - - 10 - 10 10 - 7 - - 68. 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 2019 and 2020. 69. In 2020 the Board conducted the self-evaluation, which results were discussed in December 2020. Board Diversity 70. The Company does not have a formal Board diversity policy with regards to matters such as age, gender or educational and professional backgrounds, but the Board has the full commitment to diversity within the Group. 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. 71. 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 50 years ranging from 32 to 62 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. 20 Global Ports Investments PLC Annual Report 2020 globalports.com 21 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 1 2 3 4 5 6 Board and Management Remuneration Corporate Governance 72. 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. Only Independent Non-Executive Directors receive remuneration. 73. Levels of remuneration for the Independent 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. Directors are not eligible for bonuses, retirement benefits or to participate in any incentive plans operated by the Group. Additional remuneration is paid for membership and chairmanship of the committees by the Independent Non-Executive Directors. 74. The shareholders of the Company approved the remuneration of the members of the Board on 29 June 2018, 30 December 2019, 16 April 2020 and 29 May 2020. 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 29 October 2020. 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 30(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 Chief Strategy and Business Development Officer at Global Ports Group pursuant to Board’s decision on 29 October 2020. Company Secretary 84. The Group has a diverse set of stakeholders, from international institutions holding our shares and bonds and bank financial institutions which provided bank borrowings to the Group, 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. 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; — Group Securities Dealing Code; — Conflicts of Interest Policy adopted on 29 June 2020; — Treasury Policy adopted on 23 April 2020; and — Procurement Standard of the Company adopted on 18 August 2020. 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 was finalised in 2020. 81. The Group maintains a company secretary, who is responsible for safeguarding the rights and interests of shareholders, including Whistle Blower function 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. 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 email 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 2019 and 2020 the Board together with the management worked on raising the awareness about the hotline among the Group workforce and stakeholders. Code of ethics and conduct 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. The 3rd revision of the Code of Ethics was adopted by the Board of Directors on 18 August 2020, aimed at simplifying and updating Group’ mission, values and standards of corporate engagement. 22 Global Ports Investments PLC Annual Report 2020 globalports.com 23 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 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, ethics and conflicts of interest principles with reference to detailed policies. Employees and external parties are encouraged to report any suspected breaches, via various channels including the dedicated hotline. 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 1 2 3 4 5 6 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 non-voting shares with a par value of US$0.10 each. 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. A colourful booklet reflecting the provisions of Code of Ethics was prepared and the first testing on the knowledge of Code of Ethics was undertaken in November-December 2020 with the purpose of raising the awareness. 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 Dividends 105. The Articles of association of the Company may be amended from time to time by the special resolution of the General Meeting of 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. 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. 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 Events after the balance sheet date 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. 107. The events after the balance sheet date are disclosed in Note 31 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 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. Going Concern 98. During the years 2019 and 2020 the Company did not declare or pay any dividends. 111. Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in 99. The Board of Directors of the Company does not recommend the payment of a final dividend for the year 2020. Share Capital 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 103 below). 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 2021 financial perspectives in the mid-term and the latest forecasts over a period of 5-10 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. 24 Global Ports Investments PLC Annual Report 2020 globalports.com 25 MANAGEMENT REPORT (CONTINUED) DIRECTORS’ RESPONSIBILITY STATEMENT 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. The Company’s Board of Directors is responsible for the preparation of 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. This responsibility includes selecting appropriate accounting policies and applying them consistently; and making accounting estimates and judgements that are reasonable in the circumstances. In preparing the consolidated financial statements, the Board of Directors is also 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. 1 2 3 4 5 6 Those charged with governance are responsible for overseeing the Group’s financial reporting process. 113. The Head of the IAS, Mr. Ilya Kotlov, reports directly to the Audit and Risk Committee. External auditors The Board of Directors’ confirmations The Board of Directors confirms that, to the best of its knowledge: 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 2020, 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 2020. (a) the consolidated financial statements, which are presented on pages 28 to 94, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and (b) the management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces/they face. 117. Starting from the year 2021, following the results of the external audit tender performed, KPMG Ltd will take over PricewaterhouseCoopers Limited. A resolution approving the appointment of KPMG as the external auditor for the purposes of auditing the Group’s IFRS financial statements for 2021 and giving authority to the Board of Directors to fix their remuneration will be proposed at the next Annual General Meeting of the Shareholders of the Company, which will take place in 2021. Further, the Board of Directors confirms that, to the best of its knowledge: (i) adequate accounting records have been maintained which disclose with reasonable accuracy the financial position of the Group and explain its transactions; (ii) all information of which it is aware that is relevant to the preparation of the consolidated financial statements, such as accounting records and all other relevant records and documentation, has been made available to the Company’s auditors; (iii) the consolidated financial statements disclose the information required by the Cyprus Companies Law, Cap.113 in the manner so required; (iv) the Consolidated Management Report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113, and the information given therein is consistent with the consolidated financial statements; (v) 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 Consolidated Management Report, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and is consistent with the consolidated financial statements; and (vi) 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. By Order of the Board Soren Jakobsen Chairman of the Board Limassol 5 March 2021 Alexander Iodchin Secretary of the Board Global Ports Investments PLC Annual Report 2020 globalports.com 27 Alexander Iodchin Secretary of the Board By Order of the Board Soren Jakobsen Chairman of the Board 5 March 2021 26 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 (in thousands of US dollars) (in thousands of US dollars) For the year ended 31 December Note 2020 2019 For the year ended 31 December Note 2020 2019 1 2 3 4 5 6 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 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 5 6 6 27(a) 7 9 9 9 9, 3(a)(i) 9 11 1,300 (2,973) (339) 157,394 2,357 (71,751) 18,380 (41,763) (92,777) 64,617 (14,631) 49,986 1,773 1,920 (33,426) 144,839 2,524 (85,234) (9,340) 43,846 (48,204) 96,635 (28,963) 67,672 384,436 (200,329) 184,107 361,873 (151,819) 210,054 Profit/(loss) for the year 49,986 67,672 Other comprehensive income/(loss) Items that may be subsequently reclassified to the income statement (24,701) (35,482) Currency translation differences 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 Cumulative other comprehensive income movement relating to assets classified as held for sale 27(a) 7 7 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 Total comprehensive income/(loss) for the year Total comprehensive income/(loss) attributable to: Owners of the Company Non-controlling interest Total comprehensive income/(loss) for the year (79,811) (2,061) — — 45,520 1,811 33,485 (257) (81,872) 80,559 (2,820) (2,820) (84,692) (34,706) 1,787 1,787 82,346 150,018 27(b) (33,473) (1,233) (34,706) 147,139 2,879 150,018 27(b) 48,399 1,587 49,986 66,580 1,092 67,672 Items in the statement above are disclosed net of tax. There is no income tax relating to the components of other comprehensive income above. 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 0.08 0.12 The notes on pages 33 to 94 are an integral part of these consolidated financial statements. The notes on pages 33 to 94 are an integral part of these consolidated financial statements. 28 Global Ports Investments PLC Annual Report 2020 globalports.com 29                   1 2 3 4 5 6 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 (in thousands of US dollars) (in thousands of US dollars) Attributable to the owners of the Company As at 31 December Note 2020 2019 Note Share capital Share premium Capital contribution Translation reserve Transactions with non- controlling interest Retained earnings* Non- controlling interest Total Total 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 Derivative financial instruments Trade and other receivables Current assets Inventories Derivative financial instruments Trade and other receivables Income tax receivable Cash and cash equivalents 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 14 23 15 27(a) 14 25 24 19 18 24 19 20 21 21 27(b) 22 23 24 25 22 23 24 26 1,059,995 417,481 530,362 12,060 23,383 2,842 50,788 9,572 13,507 267,174 7,127 627 48,882 3,570 206,968 1,265,191 499,335 639,699 13,964 27,590 5,843 61,264 — 17,496 189,088 8,306 — 45,487 10,942 124,353 1,327,169 1,454,279 361,378 345,497 57,317 923,511 101,300 (830,686) (209,122) 303,177 15,881 965,791 786,791 632,925 31,088 — 122,778 179,000 153,276 1,810 — 23,540 374 396,084 378,970 57,317 923,511 101,300 (748,814) (209,122) 254,778 17,114 1,058,195 924,271 738,113 32,987 8,839 144,332 133,924 99,098 1,194 345 33,278 9 1,327,169 1,454,279 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 Total other comprehensive income/(loss) Profit/(loss) for the year Total comprehensive income/ (loss) for the year ended 31 December 2020 — — — — — — (81,872) — — — — (81,872) (2,820) (84,692) 48,399 48,399 1,587 49,986 — — — (81,872) — 48,399 (33,473) (1,233) (34,706) Balance at 31 December 2020 57,317 923,511 101,300 (830,686) (209,122) 303,177 345,497 15,881 361,378 *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. The Board of Directors of Global Ports Investments Plc authorised these consolidated financial statements for issue on 5 March 2021. Soren Jakobsen, Chairman of the Board Britta Dalunde, Director The notes on pages 33 to 94 are an integral part of these consolidated financial statements. The notes on pages 33 to 94 are an integral part of these consolidated financial statements. 30 Global Ports Investments PLC Annual Report 2020 globalports.com 31         CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (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 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 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 Interest paid on borrowings 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 14 23 7 14 14 15 9 9 9,22 27(a) 9 14 7 30(g) 22 22 23 22 23 22, 24 (171) (7,459) (7,011) 196,603 (5,664) 190,939 (910) 2,103 (7,995) 217,414 (31,987) 185,427 (890) (963) (33,888) (26,625) 436 (2) 572 1,279 490 11,842 320 1,570 (32,493) (13,366) 72,079 (72,981) (1,961) 70,893 (131,382) (871) (66,385) (74,407) (4,192) (849) (4,271) (211) (74,289) (140,249) 84,157 124,353 (1,542) 31,812 91,613 928 20 206,968 124,353 For the year ended 31 December Note 2020 2019 1 General information Country of incorporation 64,617 96,635 35,559 11,817 — (7) 891 770 (2,357) 71,224 527 2,973 (18,380) 43,691 (81) 36,952 12,391 33,535 (293) 50 1,256 (2,524) 77,710 7,524 (1,920) 9,340 (45,956) (484) 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. 211,244 224,216 Approval of the consolidated financial statements 1 2 3 4 5 6 These consolidated financial statements were authorised for issue by the Board of Directors on 5 March 2021. 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 (MD) 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 or MLT Oy); 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 27(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 27(b)). The notes on pages 33 to 94 are an integral part of these consolidated financial statements. 32 Global Ports Investments PLC Annual Report 2020 globalports.com 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1 2 3 4 5 6 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. These policies have been consistently applied to all years presented in these consolidated financial statements, unless otherwise stated. Basis of consolidation (continued) 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 2020 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. 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 The Group adopted all new and revised IFRSs, amendments and interpretations, as adopted by the EU that are relevant to its operations and are effective for accounting periods beginning on 1 January 2020. This adoption did not have any impact on the amounts recognised in prior periods and is not expected to significantly affect the current or future periods. 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 2020 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. Basis of consolidation (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. 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. The 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. 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. 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. 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. 34 Global Ports Investments PLC Annual Report 2020 globalports.com 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Basis of preparation and summary of significant accounting policies (continued) 2 Basis of preparation and summary of significant accounting policies (continued) 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. 1 2 3 4 5 6 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. When another party is involved in providing goods or services to a customer, the Group determines whether the nature of its promise is a performance obligation to provide the specified goods or services itself (the Group is a principal and it controls the specified good or service before that good or service is transferred to a customer) or to arrange for those goods or services to be provided by the other party (the Group is an agent). The Group determines whether it is a principal or an agent for each specified good or service promised to the customer. When the Group that is a principal satisfies a performance obligation, the Group recognises revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred. When the Group that is an agent satisfies a performance obligation, the Group recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the other party to provide its specified goods or services to the customer. 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. (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. (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. (c) Dividend income Dividend income is recognised when the right to receive payment is established. Transactions with equity holders The Group may enter into financing transactions with its shareholders and other entities which are under the control of the ultimate shareholders. When consistent with the nature of the transaction, the Group’s accounting policy is to recognise any gains or losses with its shareholders and other entities which are under the control of the ultimate shareholders, 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 ultimate shareholders, are recognised in profit or loss in accordance with IFRS 9 “Financial Instruments”. 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; — 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. 36 Global Ports Investments PLC Annual Report 2020 globalports.com 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1 2 3 4 5 6 2 Basis of preparation and summary of significant accounting policies (continued) 2 Basis of preparation and summary of significant accounting policies (continued) Foreign currency translation (continued) Intangible assets 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. 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. 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. 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. (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. 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 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. 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. 38 Global Ports Investments PLC Annual Report 2020 globalports.com 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 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: Classification The Group classifies its financial assets into the following measurement categories: 1 2 3 4 5 6 — 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. 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. Sale and leaseback transactions The accounting treatment followed by the Group for sale and leaseback transactions in which the Group, as the owner of an asset, sells the asset and leases it back from the buyer, depends on whether the transaction qualifies as a sale for which revenue is recognised, or whether the transaction is a collateralised borrowing. If the transfer of an asset owned by the Group does not qualify as a sale, for example, because the Group has an obligation or a right to repurchase the asset from the buyer, the Group as the seller-lessee does not de-recognise the transferred asset, and it accounts for the cash received as a financial liability. — 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. 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. 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. 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 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. 40 Global Ports Investments PLC Annual Report 2020 globalports.com 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Basis of preparation and summary of significant accounting policies (continued) 2 Basis of preparation and summary of significant accounting policies (continued) Financial instruments (continued) Prepayments 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. 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. 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. Inventories 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 and hedging activities Non-current assets held for sale  1 2 3 4 5 6 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). 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 and currency options) 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. 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’. 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. 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. Share capital, share premium and capital contribution Ordinary shares are classified as equity. 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. 42 Global Ports Investments PLC Annual Report 2020 globalports.com 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Dividend distribution 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. 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. 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. Income taxes 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. 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. 1 2 3 4 5 6 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 Group 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 and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. 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 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. An exchange between the Group 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. 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. 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’. 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. 44 Global Ports Investments PLC Annual Report 2020 globalports.com 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 forwards and options) to manage its exposures to foreign exchange risk, for more details see Note 24. The analysis below does not cover borrowings of 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 As at 31 December 2020 2019 135,209 711 142,686 371,638 116,578 916 141,666 397,827 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: (in thousands of US dollars) Intra-group financial assets As at 31 December 2020 2019 107,329 124,367 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 2020, would have (decreased)/increased by US$25,334 thousand (2019: US$33,082 thousand) and the equity would have (decreased)/increased by US$25,334 thousand (2019: US$33,082 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. The above sensitivity does not take into account the effect of foreign currency derivatives. 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 2020 and 31 December 2019 are as follows: 1 2 3 4 5 6 (in thousands of US dollars) Assets Liabilities Capital commitments As at 31 December 2020 2019 - 673 874 7 187 5,470 Had Euro exchange rate strengthened/weakened by 20% 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 2020, would have (decreased)/increased by US$108 thousand (2019: 10% change, (decreased)/increased by US$14 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 2020 and 2019. 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) and derivative financial instruments (Note 24). 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 51% of the Group’s revenue for the year ended 31 December 2020 (year ended 31 December 2019: 59%). (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. 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. 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. 46 Global Ports Investments PLC Annual Report 2020 globalports.com 47   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 on 31 December 2020 refer to Notes 17 and 19. (d) 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$206,968 thousand (31 December 2019: US$124,353 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. 1 2 3 4 5 6 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 2020 and 2019. 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 2020 Borrowings* Lease liabilities Trade and other payables Derivative financial instruments: — payments — receipts Total As at 31 December 2019 Borrowings* Lease liabilities Trade and other payables Derivative financial instruments: — payments — receipts Total Less than 1 month 6,911 592 5,579 4,346 (3,800) 13,628 7,000 582 4,747 3,981 (3,800) 12,510 1-3 months 3–6 months 6 months — 1 year 1–2 years 2–5 years Over 5 years Total 153,830 930 9,364 — — 5,568 1,521 7 — — 22,328 236,330 478,468 — 903,435 2,945 553 5,490 — 4,428 (3,800) 110,982 (114,800) 14,853 137,600 — — — — — — 163,931 15,503 119,756 (122,400) 164,124 7,096 26,454 238,002 493,321 137,600 1,080,225 20,195 851 16,676 — — 8,770 1,425 — — — 116,732 212,628 643,356 — 1,008,681 2,919 246 5,488 — 14,111 — 5,088 (3,800) 10,471 (7,600) 132,441 (114,800) 170,510 — — — 195,886 21,669 151,981 (130,000) 37,722 10,195 121,185 220,987 675,108 170,510 1,248,217 * The Group repurchased its own Eurobonds in 2019 and 2020 (Note 22). There are 29% repurchased as of 31 December 2020 (31 December 2019: 27%). The borrowings payments presented above exclude cash flows related to the repurchased part of Eurobonds (before cancellation in 2020). 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. 48 Global Ports Investments PLC Annual Report 2020 globalports.com 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 2020 2019 819,099 1,180,477 69% 871,392 1,267,476 69% 49   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1 2 3 4 5 6 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. 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. 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 (e.g. 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 (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, other non-financial assets and investments in joint ventures for possible impairment or reversal of impairment. Because of COVID-19 outbreak the Group performed updated tests of the estimated recoverable amount for all CGUs in the course of the preparation of the consolidated financial statements for the year ended 31 December 2020. 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. For YLP and MD valuation is based on market approach based on recent sales of similar assets (Level 2). 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 as at 31 December 2020 a terminal growth rate of 3% (31 December 2019: 3%) and the discount rate 9.4% (31 December 2019: 8.8%) have been applied. For projections prepared for Finnish ports CGUs as at 31 December 2020 a terminal growth rate of 2% (31 December 2019: 2%) and the discount rate 9.7% (31 December 2019: 5.2%) have been applied. Key assumptions for Russian ports and Finnish 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. 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. For CGUs in the Russian ports segment, 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 on 31 December 2020, 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 CGUs, except ULCT, management believes that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause carrying amount to exceed the recoverable amount. In ULCT, the recoverable amount calculated based on the value in use exceeded the carrying value by US$7.6 million. A decrease in the average coal tariffs by approximately 2% each year or average container tariffs by approximately 2.5% each year or container handling volumes by approximately 4% each year or coal handling volumes by approximately 3% each year or the discount rate of 10.9%, 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. 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. Russian tax, currency and customs legislation is subject to varying interpretations (Note 28). (ii) Russian legislation 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: 50 Global Ports Investments PLC Annual Report 2020 globalports.com 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. The following items do not represent operating segments, however, are provided to the CODM together with segment information: 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 both a geographic (which is represented by different port locations managed by separate legal entities) and services 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. Holding companies (all other) The segment consists of Global Ports Investments Plc (GPI) and some intermediate managing, holding and service companies. Reconciliation adjustments Reconciliation adjustments consist of two major components: — Effect of proportionate consolidation — demonstrates the effect of proportionate consolidation of MD, YLP and Finnish ports. In the segmental reporting the financial position and financial results of these segments are incorporated using the proportionate consolidation method with the 75% proportion. MD, YLP and Finnish ports information is presented on the 100% basis in the Russian ports and Finnish ports segments and then the 25% portion which is not consolidated is deducted as a ‘Reconciliation Adjustment’. — Other adjustments — all other consolidation adjustments including but not limited to: Assets are allocated based on the operations of the segment and the physical location of the asset. — elimination of intragroup transactions (mainly intragroup sales and dividends) and balances (mainly intragroup loans and investments in 1 2 3 4 5 6 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. 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 CD Holding 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 Farvater (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. All of the above terminals represent separate CGUs, with the exception of PLP and FCT which work as one unit from commercial and operational points of view and are considered as one CGU. The two terminals have a common managing director and common senior management team and 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. 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 (MLT Oy CGU). 52 Global Ports Investments PLC Annual Report 2020 globalports.com 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5 Segmental information (continued) 5 Segmental information (continued) The segment results for the year ended 31 December 2020 are as follows: (in thousands of US dollars) The reconciliation of results for the year ended 31 December 2020 calculated with proportional consolidation to the results presented in consolidated income statement above is as follows: Reconciliation adjustments (in thousands of US dollars) Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Holdings Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures 1 2 3 4 5 6 Revenue from container operations Non-containerized cargo Inter-segment revenue Total revenue Cost of sales Administrative, selling and marketing expenses Other income 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 Russian ports Finnish ports 302,371 92,979 — 395,350 (211,585) (7,974) — (435) 7,753 973 — 8,726 (8,963) (802) — 8 Total operating segments 310,124 93,952 — 404,076 (220,548) (8,776) — (427) — — 397 397 (408) (18,744) 1,300 3,252 175,356 (1,031) 174,325 (14,203) (93,114) 2,683 (72,298) 18,380 (333) — (306) (93,447) 2,683 (493) 117 (72,604) (1,269) 34 18,414 — (2,380) (2,744) — (5,124) 5,367 637 — (30) 850 291 (4) 424 (9) (41,879) (61) (41,940) 659 (120) Profit/(loss) before income tax Income tax expense Profit/(loss) after tax 82,242 (13,790) 68,452 (1,364) 268 (1,096) 80,878 (14,696) (13,522) (507) 67,356 (15,203) 1,141 (151) 990 — — (397) (397) 6 271 — (3,037) (3,157) — (1,199) 1,199 — — (3,157) — (3,157) 307,744 91,208 — 398,952 (215,583) (26,612) 1,300 (242) 157,815 (93,649) 1,597 (72,250) 18,405 (41,401) 64,166 (14,180) 49,986 Revenue from container operations Non-containerized cargo 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 307,744 91,208 — 398,952 (215,583) (26,612) 1,300 — (242) 157,815 (93,649) 1,597 (72,250) 18,405 (41,401) 64,166 (14,180) 49,986 (7,139) (7,377) — (14,516) 15,254 1,911 — (2,973) (97) (421) 872 760 499 (25) (362) 451 (451) — 300,605 83,831 — 384,436 (200,329) (24,701) 1,300 (2,973) (339) 157,394 (92,777) 2,357 (71,751) 18,380 (41,763) 64,617 (14,631) 49,986 CAPEX* on cash basis 34,919 8,340 43,259 127 (2,375) — 41,011 CAPEX on cash basis 41,011 (7,123) 33,888 * CAPEX represents purchases of property, plant and equipment 54 Global Ports Investments PLC Annual Report 2020 globalports.com 55             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5 Segmental information (continued) 5 Segmental information (continued) The segment items operating expenses for the year ended 31 December 2020 are as follows: (in thousands of US dollars) Russian ports Finnish ports Total operating segments Holdings 36,698 11,819 331 53,266 68,936 9,449 6,043 186,542 33,017 219,559 1,530 568 3 4,620 554 493 997 8,765 1,000 9,765 38,228 12,387 334 57,886 69,490 9,942 7,040 195,307 34,017 822 404 530 14,153 — 6 15 15,930 3,222 229,324 19,152 Reconciliation adjustments Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation (873) (244) (24) (2,534) (457) (311) (404) (4,847) (1,157) (6,004) — — — — — — — — (277) (277) 38,177 12,547 840 69,505 69,033 9,637 6,651 206,390 35,805 242,195 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 The reconciliation of operating expenses for the year ended 31 December 2020 calculated with proportional consolidation to the results presented in consolidated income statement above is as follows: (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 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 38,177 12,547 840 69,505 69,033 9,637 6,651 206,390 35,805 242,195 (2,618) (730) (70) (7,602) (1,370) (932) (1,240) (14,562) (2,603) (17,165) 35,559 11,817 770 61,903 67,663 8,705 5,411 191,828 33,202 225,030 1 2 3 4 5 6 56 Global Ports Investments PLC Annual Report 2020 globalports.com 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5 Segmental information (continued) 5 Segmental information (continued) The segment assets and liabilities as at 31 December 2020 are as follows: (in thousands of US dollars) The reconciliation of total segment assets and liabilities as at 31 December 2020 calculated with proportional consolidation to the results presented in consolidated balance sheet above is as follows: Reconciliation adjustments (in thousands of US dollars) 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 and other current assets 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 Russian ports Finnish ports Total operating segments Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Holdings 442,864 15,082 457,946 532,990 4,784 537,774 868 223 (9,623) (1,909) — — 784 13,257 88,589 7,658 50,972 207,822 — 11 784 165,870 — (166,654) 13,268 3,119 (471) — 126,711 215,300 1,071,622 (33,016) (1,189,654) — 3,241 1,241 7,658 54,213 209,063 20 3,988 2,979 (138) (1,126) (1,268) — (866) — 449,191 536,088 — 15,916 64,252 7,540 56,209 210,774 1,344,936 151,070 1,496,006 1,248,689 (47,551) (1,357,174) 1,339,970 636,897 33,320 123,283 20,920 153,479 1,997 374 3,964 4,038 1,027 1,929 855 885 — 640,861 37,358 124,310 22,849 154,334 2,882 374 19,099 10 — 4,727 — 202 — (4,814) (1,570) (275) (817) (296) (318) (2) (19,099) 636,047 — (573) (664) — — — 35,798 123,462 26,095 154,038 2,766 372 970,270 12,698 982,968 24,038 (8,092) (20,336) 978,578 15,881 — 15,881 — — — 15,881 Included within ‘Russian ports’, ‘Finnish ports’ and ‘Holdings’ segments ‘Other non-current assets’ are investments in subsidiaries in the total amount of US$5,353 thousand, US$126,614 thousand and US$1,071,189 thousand respectively (fully eliminated on consolidation). 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 and other current assets 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 Group as per proportionate consolidation Equity method and other adjustments Group as per equity method consolidation of joint ventures 449,191 536,088 — 15,916 64,252 7,540 56,209 210,774 1,339,970 636,047 35,798 123,462 26,095 154,038 2,766 372 978,578 15,881 (28,868) (5,726) 23,383 (3,856) 9,615 (413) (3,130) (3,806) (12,801) (3,122) (4,710) (684) (2,555) (762) (956) 2 (12,787) — 420,323 530,362 23,383 12,060 73,867 7,127 53,079 206,968 1,327,169 632,925 31,088 122,778 23,540 153,276 1,810 374 965,791 15,881 1 2 3 4 5 6 58 Global Ports Investments PLC Annual Report 2020 globalports.com 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Holdings 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 1 2 3 4 5 6 Revenue from container operations Non-containerized cargo Inter-segment revenue Total revenue Cost of sales Administrative, selling and marketing expenses Other income 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 274,504 102,248 — 376,752 (165,475) (10,602) — 154 8,796 12,178 — 20,974 (15,839) (991) — 177 283,300 114,426 — 397,726 (181,314) (11,593) — 331 200,829 4,321 205,150 (46,921) 2,904 (85,910) (9,385) (46,624) 2,904 (85,711) (9,340) 45,523 154,205 (28,410) 125,795 (297) — (199) (45) (53) 4,024 (760) 3,264 — — 168 168 (349) (27,188) 1,773 (28,255) (53,851) (1,489) 64 (1,148) — (3,807) (5,161) — (8,968) 7,428 771 — (2) (771) 52 (29) 374 11 45,470 (405) (304) 158,229 (55,340) (29,170) (107) 129,059 (55,447) (719) 78 (641) — — (168) (168) 134 218 — (5,483) (5,299) 279,493 109,265 — 388,758 (174,101) (37,792) 1,773 (33,409) 145,229 — (48,358) (1,040) 1,040 — — (5,299) — (5,299) 1,899 (85,644) (9,374) 44,761 96,871 (29,199) 67,672 Revenue from container operations Non-containerized cargo 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 279,493 109,265 — 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 (11,416) (15,469) — (26,885) 22,282 2,310 — 1,920 (17) (390) 154 625 410 34 (915) (236) 236 — 268,077 93,796 — 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 CAPEX* on cash basis 27,662 313 27,975 70 (355) — 27,690 CAPEX on cash basis 27,690 (1,065) 26,625 * CAPEX represents purchases of property, plant and equipment 60 Global Ports Investments PLC Annual Report 2020 globalports.com 61             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Holdings 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 Total cost of sales, administrative, selling and marketing 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 7,845 404 647 991 17,979 11,421 8,836 — 8 14 143,327 32,750 15,326 1,504 158,653 34,254 23,341 4,196 (953) (131) (20) (4,341) (579) (404) (583) (7,011) (1,188) 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 1 2 3 4 5 6 62 Global Ports Investments PLC Annual Report 2020 globalports.com 63 1 2 3 4 5 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Effect of proportionate consolidation Other adjustments Group as per proportionate consolidation Holdings Reconciliation adjustments (in thousands of US dollars) 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 533,141 7,109 540,250 1,836 (9,227) 641,689 2,510 644,199 829 784 15,225 — 13 784 165,870 15,238 3,920 (1,332) — (570) — — (166,654) — 103,126 126,703 229,829 1,075,425 (33,014) (1,205,633) 532,859 643,696 — 18,588 66,607 8,762 8,915 — 8,915 59,879 1,396 61,275 122,879 7,106 129,985 — 6,071 3,757 (153) (1,634) (2,347) — (4,547) 61,165 — 131,395 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 99,098 851 365 603 744,210 16,914 2,206 121 1,738 712 346 656 37,468 154,810 29,508 99,810 1,197 1,021 323 322 11,619 — 500 1 (4,513) (1,201) (148) (962) (178) (126) (169) (18,044) 738,567 — (1,231) (4,143) — — — 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 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 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 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). The revenue of the Group mainly comprises of stevedoring services, storage and ancillary port services for container and bulk cargoes. The subsidiaries and joint ventures of the Group also provide services that are of support nature in relation to the core services mentioned above. 64 Global Ports Investments PLC Annual Report 2020 globalports.com 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5 Segmental information (continued) Revenue attributable to domestic and foreign customers for the year ended 31 December 2020 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. 6 Expenses by nature (in thousands of US dollars) (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 2020 2019 8,505 8,370 307,585 22,675 14,674 9,433 5,899 15,665 375,931 384,436 282,162 18,754 11,180 8,733 7,173 25,501 353,503 361,873 In both 2020 and 2019 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, write-off and impairment of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation, write-off and impairment of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method and other gains/(losses)-net. 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) Write-off of property, plant and equipment (Note 14) 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 Purchased services Insurance Other expenses Total cost of sales, administrative, selling and marketing expenses * As a result of new terms of certain sales agreement, VSC acted as a principal in 2020 versus as an agent in the first half of 2019. In the first half of 2019 the net result of revenue from transportation services and associated cost was included in the consolidated revenue. Starting from the middle of the first half of 2019 full revenue and associated cost are recognised in consolidated revenue and transportation expenses accordingly. This change resulted in additional US$62.8 million (2019: 11.4 million) to both consolidated revenue and cost of sales, with no effect on adjusted EBITDA. 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 2020 amounted to US$266 thousand (2019: US$260 thousand) The total fees charged by the Company’s statutory auditor for the year ended 31 December 2020 for other assurance services amounted to US$57 thousand (2019: US$56 thousand), for tax and VAT advisory services amounted to US$47 thousand (2019: US$43 thousand) and other non-audit services amounted to US$6 thousand (2019: nil). 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 (income)/costs-net Amortisation of intangible assets Depreciation of property, plant and equipment Depreciation of right-of-use assets Write-off of property, plant and equipment 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 2020 2019 49,986 67,672 11 9 6 6 6 14 27(a) 7 14,631 92,777 770 35,559 11,817 891 2,973 339 28,963 48,204 1,256 36,952 12,391 — (1,920) 33,426 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 Write-off of property, plant and equipment (Note 14) Transportation expenses Fuel, electricity and gas Repair and maintenance of property, plant and equipment 209,743 226,944 Taxes other than on income Expense relating to short-term leases and/or leases of low-value assets Purchased services Insurance Other expenses Total cost of sales 1 2 3 4 5 6 For the year ended 31 December 2020 2019 61,903 35,559 11,817 770 891 67,663 8,705 5,411 2,496 2,191 993 374 16,162 936 9,159 225,030 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 For the year ended 31 December 2020 2019 45,083 34,073 11,817 595 891 67,663 8,528 5,287 2,376 113 16,162 712 7,029 200,329 45,255 35,203 12,391 1,102 — 15,662 9,549 6,324 2,455 289 14,298 537 8,754 151,819 67 66 Global Ports Investments PLC Annual Report 2020 globalports.com             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 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) Net loss on disposal of assets held for sale Charity Other gains/(losses) — net Total other gains/(losses) — net For the year ended 31 December 2020 2019 16,820 1,486 175 177 124 120 2,191 993 261 224 2,130 24,701 26,100 1,749 154 264 195 401 2,762 1,031 123 176 2,527 35,482 For the year ended 31 December 2020 2019 209 — (412) (136) (339) 2,064 (33,535) (560) (1,395) (33,426) 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 30(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 Other finance costs Loss on extinguishment of financial liabilities (Note 22) Total finance costs 1 2 3 4 5 6 For the year ended 31 December 2020 2019 1,327 — 1,030 2,357 (6,066) (61,059) (4,099) — (527) (71,751) 1,319 254 951 2,524 (263) (72,425) (4,375) (647) (7,524) (85,234) Change in fair value of currency forwards and currency options (Notes 22 and 24) 18,380 (9,340) Net foreign exchange gains/(losses) on financing activities Finance income/(costs) — net 10 Net foreign exchange gains/(losses) The exchange differences (charged)/credited to the income statement are as follows: (in thousands of US dollars) (41,763) (92,777) 43,846 (48,204) For the year ended 31 December 2020 2019 (41,763) 209 (41,554) 43,846 2,064 45,910 In April 2019 the Group completed the disposal of its 50% holding in VEOS, one of the Group’s joint ventures and operating segments that was classified as held for sale at the end of 2018. The result of the disposal was a US$(50) thousand loss that is reflected within ‘net loss on disposal of assets held for sale’. In addition, US$(33,485) thousand (negative) were recycled to ‘net loss on disposal of assets held for sale’ from the currency translation reserve. This was the amount related to VEOS that was recognised in other comprehensive income and accumulated in the equity. Included in ‘finance income/(costs) — net’ (Note 9) Included in ‘other gains/(losses) — net’ (Note 7) Total 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 2020 2019 47,610 12,121 2,172 61,903 2,556 58,367 10,798 2,190 71,355 2,669 Included within ‘Social insurance costs’ for 2020 are contributions made to the state pension funds in the total amount of US$7,127 thousand (2019: US$7,547 thousand). 68 Global Ports Investments PLC Annual Report 2020 globalports.com 69         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14 Property, plant and equipment (in thousands of US dollars) Buildings and facilities Land Assets under construction Loading equipment and machinery Other production equipment Office equipment Total 1 2 3 4 5 6 At 1 January 2019 Cost Accumulated depreciation and impairment 134,693 — 305,711 (119,232) 24,486 — 174,456 (88,295) 38,184 (16,607) 2,534 (1,625) 680,432 (226,127) Net book amount 134,693 186,479 24,486 86,161 21,577 909 454,305 Additions Transfers Disposals and write-offs Depreciation charge (Note 6) Translation reserve — — — — 16,456 5,520 21,482 (48) (20,307) 23,437 — (13,110) — — 2,722 19,678 11,017 (162) (15,580) 12,362 1,488 (19,332) (29) (765) 390 83 (57) (8) (300) 93 26,769 — (247) (36,952) 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 14,098 229,133 Accumulated depreciation and impairment — (155,201) — (115,657) Net book amount 151,149 216,563 14,098 113,476 10,308 (6,979) 3,329 2,166 (1,446) 720 778,618 (279,283) 499,335 11 Income tax expense (in thousands of US dollars) Current tax Effect of change in withholding tax rate (Note 25) Deferred tax (Note 25) Total For the year ended 31 December 2020 2019 12,261 3,230 (860) 14,631 24,048 — 4,915 28,963 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%* Tax effect of expenses not deductible for tax purposes Tax effect of a result of disposal of assets held for sale Tax effect of reduced tax rates of entities in Russian ports segment Tax effect of share of profit/(loss) in jointly controlled entities Tax credit claimed by entities in Russian ports segment Effect of change in withholding tax rate Withholding tax on undistributed profits Tax charge For the year ended 31 December 2020 2019 64,617 96,635 12,924 2,645 — (2,907) 595 (3,922) 3,230 2,066 14,631 19,327 1,881 6,707 — (384) — — 1,432 28,963 * The applicable tax rate used for 2020 and 2019 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) 13 Dividend distribution During 2020 and 2019 the Company did not declare or pay dividends to the equity holders of the Company. For the year ended 31 December 2020 2019 48,399 573,171 0.08 66,580 573,171 0.12 70 Global Ports Investments PLC Annual Report 2020 globalports.com 71                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14 Property, plant and equipment (continued) (in thousands of US dollars) Buildings and facilities Land Assets under construction Loading equipment and machinery Other production equipment Office equipment Total At 1 January 2020 Cost 151,149 371,764 14,098 229,133 Accumulated depreciation and impairment — (155,201) — (115,657) Net book amount 151,149 216,563 14,098 113,476 10,308 (6,979) 3,329 2,166 778,618 (1,446) (279,283) 720 499,335 Additions Transfers Disposals Write-offs Depreciation charge (Note 6) Translation reserve — — — — — 13,159 701 (186) — (19,118) 8,543 (732) — (891) — (24,488) (34,858) (2,938) 12,869 1,230 331 36,132 143 (231) — (15,401) (18,179) (111) (9) — (759) (529) (1) (3) — — (429) (891) (281) (115) (35,559) (81,107) 14 Property, plant and equipment (continued) In the cash flow statement proceeds from sale of property, plant and equipment comprise of: (in thousands of US dollars) Net book amount Less: Non-cash items — write-offs of property, plant and equipment Profit on sale of property, plant and equipment (1) Proceeds from sale of property, plant and equipment 1 2 3 4 5 6 For the year ended 31 December 2020 2019 1,320 (891) 429 7 436 247 (50) 197 293 490 (1) Profit on sale of property, plant and equipment is included in ‘Cost of sales’ in the consolidated income statement. Depreciation expense amounting to US$34,073 thousand in 2020 (2019: US$35,203 thousand) has been charged to ‘cost of sales’ and US$1,486 thousand in 2020 (2019: US$1,749 thousand) has been charged to ‘administrative, selling and marketing’ expenses (Note 6). Closing net book amount 126,661 176,261 18,080 92,677 3,151 651 417,481 There were no capitalised borrowing costs in 2020 and 2019. At 31 December 2020 Cost 126,664 323,066 18,080 197,989 Accumulated depreciation and impairment (3) (146,805) — (105,312) Net book amount 126,661 176,261 18,080 92,677 9,527 (6,376) 3,151 2,155 677,481 (1,504) (260,000) 651 417,481 Lease rentals relating to the lease of machinery and property amounting to US$113 thousand in 2020 (2019: US$289 thousand) have been charged to ‘cost of sales’ and US$261 thousand in 2020 (2019: US$123 thousand) has been charged to ‘administrative, selling and marketing expenses’. As at 31 December 2020 the amounts prepaid for equipment not delivered and prepayments for construction works not yet carried out were US$2,842 thousand (2019: US$5,893 thousand). 72 Global Ports Investments PLC Annual Report 2020 globalports.com 73                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15 Intangible assets (in thousands of US dollars) At 1 January 2019 Cost Accumulated amortisation and impairment 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 Additions Amortisation charge (Note 6) Translation reserve Closing net book amount At 31 December 2020 Cost Accumulated amortisation and impairment Net book amount Goodwill Computer software 8,415 — 8,415 — — 1,028 9,443 9,443 — 9,443 — — (1,530) 7,913 7,913 — 7,913 6,820 (1,820) 5,000 255 (1,256) 522 4,521 5,965 (1,444) 4,521 890 (770) (494) 4,147 6,087 (1,940) 4,147 Total 15,235 (1,820) 13,415 255 (1,256) 1,550 13,964 15,408 (1,444) 13,964 890 (770) (2,024) 12,060 14,000 (1,940) 12,060 16 Financial instruments by category The accounting policies for financial instruments have been applied in the line items below: (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 — assets Derivative financial instruments not used for hedging at fair value through profit or loss — liabilities 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 1 2 3 4 5 6 As at 31 December 2020 2019 40,901 206,968 247,869 47,037 124,353 171,390 786,201 15,503 801,704 837,211 21,669 858,880 29,319 34,181 10,199 — 10,199 — 9,184 9,184 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. 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: 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: (in thousands of US dollars) (in thousands of US dollars) PLP/ FCT (Russian ports segment) VSC (Russian ports segment) Total As at 31 December 2020 2019 3,422 4,491 7,913 4,084 5,359 9,443 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. Trade and other receivables 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 Trade and other receivables from other related parties Total As at 31 December 2020 2019 15,498 1,085 1,300 7,077 911 25,871 15,886 2,404 1,773 6,515 — 26,578 Trade and other receivables from other customers (third parties) are related to highly reputable counterparties with no external credit rating. 74 Global Ports Investments PLC Annual Report 2020 globalports.com 75               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Rating Aa2-Aa3 A3 International rating agency Moody’s Investors Service / Standard & Poor’s / Fitch Ratings Baa3 / BBB- / BBB International rating agency Moody’s Investors Service International rating agency Moody’s Investors Service Ba1-Ba3 B3 * No rating Total As at 31 December 2020 2019 593 4,565 160,714 40,905 137 54 347 624 75,218 47,738 265 161 206,968 124,353 * 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% (2019: 6.4%). At 31 December 2020, trade and other receivables amounting to US$25,871 thousand were zero days past due (31 December 2019: US$26,577 thousand). 1 2 3 4 5 6 Trade and other receivables amounting to US$1,357 thousand (31 December 2019: US$3,770 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 30(d)) Total trade receivables Other receivables Loans to related parties (Note 30(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 30(d)) Total trade and other receivables Less non-current portion: Loans to related parties Other receivables Total non-current portion Current portion 76 As at 31 December 2020 2019 7,127 7,127 8,306 8,306 Less than 1 month overdue From 1 to 3 months overdue From 3 to 6 months overdue Over 6 months overdue Total During 2020 no trade receivables (2019: nil) were impaired and written off in full. Other classes within trade and other receivables do not contain impaired assets. As at 31 December 2020 2019 1,107 204 9 37 1,357 2,716 1,006 20 28 3,770 As at 31 December 2020 2019 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% (2019: 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 2020 2019 5,010 57,201 178 62,389 8,234 54,426 323 62,983 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. 16,501 7,988 24,489 2,739 13,673 8,219 24,631 5,073 8,196 62,389 (13,507) — (13,507) 19,655 6,515 26,170 4,177 16,690 10,240 31,107 4,285 1,421 62,983 (16,583) (913) (17,496) 48,882 45,487 Global Ports Investments PLC Annual Report 2020 globalports.com 77             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 2020 2019 53,952 153,016 206,968 48,908 75,445 124,353 The effective average interest rate on short-term deposits was 1.5% in 2020 (2019: 1.25%) and these deposits have an average maturity of 19 days in 2020 (2019: 26 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 2020 2019 206,968 206,968 124,353 124,353 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 2019/ 31 December 2020 573,171 57,317 923,511 980,828 22 Borrowings (in thousands of US dollars) Non-current borrowings Bank loans Non-convertible bonds Total non-current borrowings Current borrowings Bank loans Interest payable on bank loans Non-convertible bonds Non-convertible bonds — interest payable Total current borrowings 1 2 3 4 5 6 As at 31 December 2020 2019 62,845 570,080 632,925 746 96 135,363 17,071 153,276 71,939 666,174 738,113 36 115 80,768 18,179 99,098 Total borrowings 786,201 837,211 The maturity of non-current borrowings is analysed as follows: (in thousands of US dollars) Between 1 and 2 years Between 2 and 5 years Total As at 31 December 2020 2019 198,745 434,180 632,925 161,523 576,590 738,113 Bank borrowings mature until 2025 (31 December 2019: 2024) and bonds mature until 2025 (31 December 2019: 2023). Changes in liabilities and assets arising from borrowings and derivative financial instruments: (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 Cash transactions Borrowings received during the year 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 2020 Note  Borrowings Fair value of derivative financial instruments* Total 837,211 9,184 846,395 9 9 24,9 67,125 527 — (51,375) 72,079 (72,981) (66,385) 786,201 — — (18,380) (154) — — (849) (10,199) 67,125 527 (18,380) (51,529) 72,079 (72,981) (67,234) 776,002 79 78 Global Ports Investments PLC Annual Report 2020 globalports.com               1 2 3 4 5 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 22 Borrowings (continued) (in thousands of US dollars) 22 Borrowings (continued) For the year ended 31 December 2019 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): 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 Cash transactions Borrowings received during the year 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 Note  Borrowings Fair value of derivative financial instruments* 9 9 24,9 863,809 72,688 7,524 — 28,086 70,893 (131,382) (74,407) 837,211 — — — 9,340 55 — — (211) 9,184 Total 863,809 72,688 7,524 9,340 28,141 70,893 (131,382) (74,618) 846,395 In December 2020 the Group repaid US$60,500 thousand (RUB4,415 million) RUB-denominated bonds using the proceeds from new RUB- denominated bonds in the amount of US$67,878 thousand (RUB5 billion) issued with maturity over 5 years and a lower interest rate. 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 2018-2020 the Group has repurchased some part of Eurobonds and partly derecognised the liability. In 2020 the Group cancelled those Eurobonds that were previously purchased by the Group. The aggregate principal amount of the outstanding 2022 and 2023 Eurobonds as of 31 December 2020 is US$198,557 thousands and US$297,975 thousand respectively. In 2019 the Group obtained RUB-denominated bank loan in amount US$70,843 thousand (RUB4,447 million) 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 thousand. Fair value of bank loans and non-convertible bonds was as follows: (in thousands of US dollars) Non-convertible bonds Non-convertible bonds Bank loans Total Fair value hierarchy Level 1 Level 2 Level 2 As at 31 December 2020 2019 209,945 536,645 63,591 810,181 257,254 552,958 71,975 882,187 (in thousands of US dollars) 6 months or less 6-12 months 1-5 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 2020 2019 135,332 — 138,977 274,309 — 80,676 233,554 314,230 As at 31 December 2020 2019 280,330 505,871 786,201 321,021 516,190 837,211 As of 31 December 2020, from the above amount of borrowings denominated in US$114,400 thousand were covered by RUB/US$ currency forward contracts effectively converting the US$ denominated obligation into RUB denominated one and US$87,000 thousand were covered by RUB/US$ currency option contracts (Note 24) 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 must be complied with. All of the Group’s subsidiaries were in compliance with all covenants. The weighted average effective interest rate on borrowings is 7.99% (2019: 8.98%). 80 Global Ports Investments PLC Annual Report 2020 globalports.com 81       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Non-cash transactions Adjustments related to changes in the index affecting lease payments New leases Leases 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 2020 2019 34,181 26,803 294 5,797 — 4,099 (5,320) (1,961) (4,192) 32,898 1,810 31,088 3,798 1,251 (180) 4,375 3,276 (871) (4,271) 34,181 1,194 32,987 As at 31 December 2020 2019 1,416 3,251 26,421 31,088 936 866 31,185 32,987 As at 31 December 2020 2019 32,343 555 32,898 33,535 646 34,181 Total cash outflow for leases in 2020 is US$6,527 thousand (2019: US$5,553 thousand). Major part of US$374 (2019: US$412 thousand) thousand lease expenses included in cost of sales and administrative, selling and marketing expenses is related to short-term leases. 1 2 3 4 5 6 23 Lease liabilities and right-of-use assets (continued) Movements in right-of-use assets are analysed as follows: (in thousands of US dollars) Land Buildings and facilities Loading equipment and machinery Other production equipment Office equipment Total Opening net book amount as at 1 January 2019 16,272 560,585 266 Additions Adjustments related to changes in the index affecting lease payments Leases termination Depreciation (Note 6) Exchange differences 24 — (231) (402) 1,962 4 3,798 — (11,870) 68,202 913 — — (112) 68 Closing net book amount as at 31 December 2019 17,625 620,719 1,135 Additions Adjustments related to changes in the index affecting lease payments Leases termination Transfers Depreciation (Note 6) Exchange differences — 39 — — 120 255 — — (399) (2,856) (10,647) (100,420) 5,677 — (17) 66 (697) (286) — 144 — — (6) 6 144 — — — — (74) (22) — 577,123 74 — — (1) 3 1,159 3,798 (231) (12,391) 70,241 76 639,699 — — — (66) — (10) 5,797 294 (17) — (11,817) (103,594) Closing net book amount as at 31 December 2020 14,409 510,027 5,878 48 — 530,362 24 Derivative financial instruments During 2019 the Group entered into several RUB/US$ currency options and forward contracts in order to hedge part of foreign exchange risk associated with its US$ denominated non-convertible 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 2020 several forward contracts were settled and options premiums were paid with the resulting net cash outflow US$849 thousand (2019: net cash outflow US$211 thousand). As of 31 December 2020, the net fair value of options contracts was positive US$753 thousand (31 December 2019: negative US$(1,316) thousand) and net fair value of forward contracts was positive US$9,446 thousand (31 December 2019: negative US$(7,868) thousand). As of 31 December 2020, there are outstanding forward contracts to acquire US$122,400 thousand (31 December 2019: US$130,000 thousand) and currency options contracts with possibility to acquire US$87,000 thousand (31 December 2019: US$87,000 thousand). 82 Global Ports Investments PLC Annual Report 2020 globalports.com 83   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 charge (Note 11) Other movements:  Currency translation differences At the end of the year As at 31 December 2020 2019 50,788 61,264 (122,778) (71,990) (144,332) (83,068) For the year ended 31 December 2020 2019 (83,068) (69,937) (2,370) (4,915) 13,448 (71,990) (8,216) (83,068) 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: (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 At 1 January 2019 Income statement (Note 11) Reclassification following IFRS 16 adoption Translation differences At 31 December 2019 Income statement (Note 11) Translation differences At 31 December 2020 (48,156) 1,376 (301) (5,987) (53,068) 1,383 8,631 — 2,766 (108,633) (13,200) (119,067) 1,472 19,271 (43,054) (98,324) (4,465) (108,934) (280) 90,913 (1,297) (109) — 108,934 (606) (6,368) (4,506) 1,062 (9,812) 5 (104) 28 13 (63) 45 — — (235) (126) (8,329) — 11,457 94,041 (715) 1 (15,147) (360) 78,179 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$701,664 thousand (2019: US$844,515 thousand). Total (69,937) (4,915) — (8,216) 985 633 — 115 1,733 (83,068) 94 (383) 1,444 (2,370) 13,448 (71,990) 26 Trade and other payables (in thousands of US dollars) Trade payables — third parties Trade payables — related parties (Note 30(e)) Payables for property, plant and equipment Other payables — third parties Other payables — related parties (Note 30(e)) Payroll payable Accrued expenses Contract liabilities Taxes payable (other than income tax) Total trade and other payables Less non-current portion Current portion 1 2 3 4 5 6 As at 31 December 2020 3,011 237 461 1,328 2,257 1,700 6,509 5,174 2,863 23,540 2019 4,108 22 782 416 630 2,281 13,430 7,504 4,105 33,278 — — 23,540 33,278 During the year ended 31 December 2020, the Group recognised revenue in the amount of US$7,504 thousand (2019: US$3,987 thousand) that related to carried-forward contract liabilities at the beginning of the year. The fair value of trade and other payables approximates their carrying amount at the balance sheet date. 27 Joint ventures and non-controlling interests (a) Joint ventures The Group has the following investments in joint ventures — 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. At 31 December 2020 there is zero capital expenditure contracted for at the balance sheet date but not yet incurred by the joint ventures (31 December 2019: US$4,921 thousand). The summarised investments in joint ventures accounted for using the equity method as at 31 December 2020 and 31 December 2019 are as follows: (in thousands of US dollars) At 1 January 2020 Recognised share of profit/(loss) Share of losses of joint ventures applied against other long-term interests (Note 30(g)) Translation differences (through other comprehensive income/(loss)) At 31 December 2020 (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 30(g)) Translation differences (through other comprehensive income/(loss)) At 31 December 2019 MLT CD Holding Total 27,590 (1,980) — (2,227) 23,383 — (993) 827 166 — 27,590 (2,973) 827 (2,061) 23,383 MLT CD Holding Total 24,795 767 — 2,028 27,590 — 1,153 (936) (217) — 24,795 1,920 (936) 1,811 27,590 85 84 Global Ports Investments PLC Annual Report 2020 globalports.com             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 27 Joint ventures and non-controlling interests (continued) 27 Joint ventures and non-controlling interests (continued) Set out below are the selected summarised financial information for joint ventures that are accounted for using the equity method. Selected income statement items (in thousands of US dollars) 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) 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 2020 MLT CD Holding Revenue 11,570 (3,473) 11 (604) (3,242) 602 (2,640) (2,339) (4,979) 8,926 (1,088) 5 (1,092) (1,324) — (1,324) 222 (1,102) As at 31 December 2020 MLT CD Holding 34,263 4,884 4,113 8,997 43,260 10,013 1,098 11,111 1,887 2,342 4,229 15,340 13,845 190 875 1,065 14,910 15,524 — 15,524 570 932 1,502 17,026 27,920 (2,116) 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) 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 1 2 3 4 5 6 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) 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. 86 Global Ports Investments PLC Annual Report 2020 globalports.com 87             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 27 Joint ventures and non-controlling interests (continued) 27 Joint ventures and non-controlling interests (continued) Set out below is the reconciliation of the summarised financial information presented to the carrying amount of the Group interest in joint ventures. (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 2020 and 31 December 2019. During 2020 and 2019 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. 1 2 3 4 5 6 For the year ended 31 December 2020 MLT CD Holding Total 32,899 (2,640) (2,339) 27,920 75% 20,940 — — 15,558 (13,115) 23,383 (2,061) (1,324) 222 (3,163) 75% (2,371) 1,587 784 — — — 30,838 (3,964) (2,117) 24,757 18,569 1,587 784 15,558 (13,115) 23,383 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 (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 30(g)) Other movements Goodwill Impairment of investment Carrying value on 31 December 2020 (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 30(g)) Other movements Goodwill Impairment of investment Carrying value on 31 December 2019 For the year ended 31 December 2019 MLT CD Holding Total Selected balance sheet items (in thousands of US dollars) 29,597 1,023 2,279 32,899 75% 24,673 — — 18,567 (15,650) 27,590 (3,309) 1,537 (289) (2,061) 75% (1,544) 760 784 — — — 26,288 2,560 1,990 30,838 23,129 760 784 18,567 (15,650) 27,590 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 from/(used in) investing activities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents For the year ended 31 December 2020 2019 20,493 8,044 (13,994) (5,950) 1,609 (1,189) 27,018 5,462 8,933 14,395 1,092 2,879 As at 31 December 2020 2019 40,653 41,093 81,746 548 1,575 2,123 79,623 15,925 59,101 32,825 91,926 5,615 741 6,356 85,570 17,114 For the year ended 31 December 2020 2019 6,795 3,100 (743) 9,152 13,594 (2,312) (765) 10,517 89 88 Global Ports Investments PLC Annual Report 2020 globalports.com     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 28 Contingencies Operating environment of the Group 28 Contingencies (continued) Tax legislation in Russia (continued) 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. Further, on 12 March 2020, the World Health Organisation declared the outbreak of COVID-19 a global pandemic. In response to the pandemic, the Russian authorities implemented numerous measures attempting to contain the spreading and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders and limitations on business activity, including closures. These measures have, among other things, severely restricted economic activity in Russia and have negatively impacted, and could continue to negatively impact businesses, market participants, clients of the Group, as well as the Russian and global economy for an unknown period of time. Management is taking necessary measures to ensure sustainability of the Group’s operations and support its customers and employees: — Medical examinations have been reinforced at the terminals and offices. Restrictions on travelling and external/internal meetings, social distancing, additional disinfection according to the schedule, personal protective equipment provided for personnel, improved cleaning, purchasing protective masks, gloves and COVID-19 tests for the local hospital in Nakhodka, Far East; — Only critical employees stay at the terminals and in offices. The Group tried to establish the maximum comfort for its employees during remote work. The IT infrastructure was adapted to new challenges and was working without major failures; — A mobile application has been developed to monitor the health status of employees; — Unhindered operational performances 24/7 (quay, yard and gates), to support and protect customers’ supply chains in Russia; — Improved commercial and operational flexibility to support customers; — Maximum digitalisation of documentation and customer integration continued. Further development of online solution to decrease necessity 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. 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 2020 and as of 31 December 2019 management believes that no additional tax liability has to be accrued in the financial statements. of client’s presence at the terminal; Legal proceedings and investigations 1 2 3 4 5 6 — Discipline in spending: strict and careful management of funds, including pro-active management of costs, receivables and capacity for effective adaptation to crisis and its consequences, stress testing of financial performance and liquidity position, revisiting financial plans. All these measures implemented ensured that the terminals of the Group (quay, yard and gates) remained 100% operational to service vessels/ handle cargoes throughout the pandemic as well as the call and service centres of the Group were working without interruption. The future effects of the current economic situation and the above measures 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. The Finnish authorities implemented numerous measures attempting to contain the spreading and impact of COVID-19. Management is taking necessary measures to ensure the safety of employees and ensure sustainability operations. Recommendation to use face masks has been given to employees. Separation of shifts was reinstated from October 2020. 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. 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 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. 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. 90 Global Ports Investments PLC Annual Report 2020 globalports.com 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 29 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 30 Related party transactions As at 31 December 2020 2019 9,207 9,207 14,998 14,998 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 consolidated 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. 30 Related party transactions (continued) (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 Joint ventures in which GPI is a venturer Other related parties Payroll payable and accrued expenses related to key management Total (f) Key management compensation/directors’ remuneration (in thousands of US dollars) 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* Joint ventures in which GPI is a venturer Other related parties Total (c) Interest income (in thousands of US dollars) Joint ventures in which GPI is a venturer Total 92 For the year ended 31 December 2020 2019 Key management compensation: Salaries, payroll taxes and other short-term employee benefits 92,912 103,270 271 17 2 30 93,200 103,302 Directors’ remuneration (included also above): Fees Emoluments in their executive capacity Total For the year ended 31 December (in thousands of US dollars) (g) Loans to related parties The details of loans provided to joint ventures in which GPI is a venturer are presented below (see also Note 19): 2020 52,065 1,466 1,636 55,167 2019 334 — 1,978 2,312 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 27(a)) Foreign exchange differences At the end of the year (Note 19) For the year ended 31 December 2020 2019 The loans are not secured, bear effective interest at 6.4% (2019: 6.4%) and are repayable in 2021. However, the loans are classified as non- current because of the Group’s intention to defer repayment for more than 12 months. 1,030 1,030 951 951 The fair value of loans to related parties approximates their carrying value, as the impact of discounting is not significant. Global Ports Investments PLC Annual Report 2020 globalports.com 93 * In the end of 2019 one of the previously existed counterparties became a related party as a result of investing activity of owners of controlling entities. Purchases from this new related party amounted to US$51,580 thousand in 2020. 1 2 3 4 5 6 As at 31 December 2020 2019 16,048 136 16,184 7,926 10 7,936 As at 31 December 2020 2019 2,310 122 62 876 3,370 652 — — 3,421 4,073 For the year ended 31 December 2020 2019 3,743 8,311 245 — 245 248 570 818 For the year ended 31 December 2020 2019 16,690 14,942 — 1,030 (572) (827) (2,648) 13,673 — 951 (320) 936 181 16,690                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GLOBAL PORTS INVESTMENTS PLC REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS 31 Events after the balance sheet date In February 2021, the Group repaid US$67,520 thousand (RUB5 billion) RUB-denominated bonds from its cash balances. Our opinion There were no other material post balance sheet events which have a bearing on the understanding of these consolidated financial statements. 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 2020, 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 28 to 94 and comprise: — the consolidated balance sheet as at 31 December 2020; — 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. 1 2 3 4 5 6 94 Global Ports Investments PLC Annual Report 2020 globalports.com 95 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) INDEPENDENT AUDITOR’S REPORT (CONTINUED) 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. 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. 1 2 3 4 5 6 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. Overall group materiality How we determined it Rationale for the materiality benchmark applied US$5 million Approximately 2.5% of EBITDA We chose EBITDA as the benchmark, because, in our view: — 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. Overall group materiality: US$5 million, which represents approximately 2.5% of Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”). We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above US$0,5 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Materiality Audit scope We conducted full scope audit procedures for the parent entity, all the significant components, and the consolidation process. Key audit matters For the remaining non-significant components, we performed a full scope audit, or analytical procedures, and/ or audit of specific account balances. We have identified the impairment assessment of goodwill and other non-financial assets and investments in 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 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. Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud 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 and investments in joint ventures Because of COVID-19 related uncertainties, the Company’s Board of Directors considered that there are impairment indications and has performed an impairment test for all cash generating units (“CGUs”). We focused on this area due to: — the size of the goodwill and other non- financial assets, and investments in joint ventures, and — the assessment of the recoverable amount of the CGUs involves complex and 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 valuation experts that have the knowledge and experience in the industry and country of operation of the underlying CGUs to assist us in evaluating the methodology, models and assumptions used in value in use calculations, as well as evaluating the fair value less cost to sell calculations. For MD and YLP CGUs, we evaluated whether the fair value less costs to sell approach is more appropriate than value in use approach to determine the CGUs’ recoverable amounts 96 Global Ports Investments PLC Annual Report 2020 globalports.com 97 INDEPENDENT AUDITOR’S REPORT (CONTINUED) INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter How our audit addressed the Key Audit Matter Key Audit Matter How our audit addressed the Key Audit Matter subjective judgements about the future results of the business and the applicable discount rates where value in use models were used and about the estimation of the fair value less costs to sell of the CGUs. In particular, we focused our audit effort on the Board of Directors’ assessment of impairment of the following CGUs: — Petrolesport and Farvater 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 given the specific circumstances of each CGU. We further evaluated the work of the management’s expert involved for the valuation of MD and YLP CGUs’ assets by assessing the competence, capabilities and objectivity of the independent appraiser and the methodology, models and inputs used by the management’s expert. With respect to the value in use models used for PLP/FCT, VSC, ULCT and MLT Oy CGUs, we challenged and evaluated the composition of the future cash flow forecasts in the models including comparing them to the latest budgets approved by the Board of Directors. — Ust-Luga Container Terminal (ULCT) CGU, Yanino Logistics Park (YLP) We have also challenged and evaluated: CGU and Moby Dik (MD) and Multi-Link Terminals (MLT Oy) CGUs, both being components of the Company’s joint venture Multi-Link Terminals Limited (MLT), due to the fact that for these CGUs, an impairment test was performed by the Board of Directors due to identified impairment indications as a result of the COVID-19 outbreak. The recoverable amounts of MD and YLP CGUs were determined by the Board of Directors based on the fair value less costs to sell approach. In determining the fair values of MD and YLP CGUs, the Board of Directors involved an independent appraiser (the management’s expert). The recoverable amounts of PLP/FCT, VSC, ULCT and MLT Oy CGUs were determined based on value in use calculations. The expected cash flows (budgets) for the year 2021 and the remaining assumptions used for each CGU’s 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’ — 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. We have also performed look-back procedures by comparing previous budgets used in value in use calculations to actual results. We further challenged and evaluated the adequacy of the Board of Directors’ sensitivity calculations over ULCT CGU’s recoverable amount and determined the assumptions that created the most variability, being assumptions for average tariffs, volumes and the discount rate. We lastly evaluated the adequacy of the disclosures made in Notes 4 and 15 of the consolidated financial statements, including those regarding the key assumptions and value in use calculations were considered to be key assumptions (Note 4). sensitivities to reasonably possible changes in such assumptions. 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. Based on the evidence obtained, we found that the methodologies, assumptions and data used within the models and the related disclosures included in the consolidated financial statements, are appropriate. For ULCT CGU, it was determined that the impairment test is sensitive to reasonably possible changes in certain key assumptions for value in use calculations. Refer to Notes 4 and 15 to the consolidated financial statements for the related disclosures. 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 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. 1 2 3 4 5 6 98 Global Ports Investments PLC Annual Report 2020 globalports.com 99 INDEPENDENT AUDITOR’S REPORT (CONTINUED) INDEPENDENT AUDITOR’S REPORT (CONTINUED) 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. 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. — 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. 1 2 3 4 5 6 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Report on Other Legal and Regulatory Requirements — 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. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. 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 period 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 2011. Since then, the total period of uninterrupted engagement appointment was 10 years. 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 1 March 2021 in accordance with Article 11 of the EU Regulation 537/2014. 100 Global Ports Investments PLC Annual Report 2020 globalports.com 101 INDEPENDENT AUDITOR’S REPORT (CONTINUED) INDEPENDENT AUDITOR’S REPORT (CONTINUED) Provision of Non-audit Services Other Matter 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. 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. Other Legal Requirements The engagement partner on the audit resulting in this independent auditor’s report is Tasos Nolas. 1 2 3 4 5 6 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 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. 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 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. 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 2021 102 Global Ports Investments PLC Annual Report 2020 globalports.com 103 1 Global Ports at a Glance 2 Strategic Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Parent Company Financial Statements 6 Additional Information PARENT COMPANY FINANCIAL STATEMENTS 104 Global Ports Investments PLC Annual Report 2020 Global Ports Investments PLC Annual Report 2020 globalports.com globalports.com 105 TABLE OF CONTENTS Board of Directors and other officers Management report Directors’ Responsibility Statement Statement of comprehensive income for the year ended 31 December 2020 Balance sheet as at 31 December 2020 Statement of changes in equity for the year ended 31 December 2020 Statement of cash flows for the year ended 31 December 2020 Notes to the financial statements 1. 2. 3. 4. 5. 6. 7. 8. 9. General information Summary of significant accounting policies Financial risk management Critical accounting estimates and judgments Finance income – net Administrative expenses Other gains/(losses) – net 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. Investments in subsidiaries 15. 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 26 27 28 29 30 31 31 31 38 41 42 42 43 43 43 43 44 45 45 46 47 48 48 49 49 50 51 54 55 BOARD OF DIRECTORS AND OTHER OFFICERS Board of Directors Mr. Soren Jakobsen (appointed 02 March 2018) (Mr. Mogens Petersen is the alternate to Mr. Soren Jakobsen) Chairman of the Board of Directors since 24 April 2020, Non-Executive Director, Member of Nomination and Remuneration and Strategy Committees 1 2 3 4 5 6 Mrs. Britta Dalunde (appointed 12 May 2017) Senior Independent Non-Executive Director, Chairwoman of Audit and Risk Committee Mr. Kristian Bai Hollund (appointed 29 May 2020) (Mr. Soren Jakobsen is the alternate to Mr. Kristian Bai Hollund) Non-executive Director Ms. Alexandra Fomenko (appointed 18 June 2019) Non-Executive Director, Member of Nomination and Remuneration 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 Nomination and Remuneration 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 Mr. Andrey Yashchenko (appointed 16 April 2020) Non-executive Director, Member of Audit and Risk and Strategy Committees Mr. Morten Henrick Engelstoft resigned 29 May 2020 Mr. Ivan Besedin resigned 16 April 2020 Global Ports Investments PLC Annual Report 2020 globalports.com 1 BOARD OF DIRECTORS AND OTHER OFFICERS (CONTINUED) MANAGEMENT REPORT Registered office 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus Secretary Team Nominees Limited 20 Omirou Street Ayios Nicolaos CY-3095 Limassol Cyprus 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” or “Global Ports”) for the year ended 31 December 2020. 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. Principal activities and nature of operations of the Company 1 2 3 4 5 6 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 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 were no changes in principal activities of the Group in current year. Results 3. The Company’s results for the year are set out on page 27. Changes in group structure 4. The management continues the optimization of the Group structure and elimination of the excess companies from the Group. As a part of simplification and streamlining of Group structure the following steps were implemented in 2020. a. On 30.01.2020 NCC Pacific Investments Ltd transferred to Global Ports Investments Plc 99.98% in Global Ports (Finance) PLC and Intercross Investments B.V. sold one share of Global Ports (Finance) PLC to LLC Global Ports Management. b. On 19.05.2020 Intercross Investments B.V. was dissolved. c. On 10.07.2020 Arytano Holdings Limited, Cormarys Investments Ltd and NCC Group Limited transferred their shares of Global Ports (Finance) PLC to Vostochnaya Stevedoring LLC, JSC Petrolesport and First Container Terminal Incorporated respectively (each one share). d. On 25.09.2020 Global Ports Investments Plc purchased 4.76% in Alocasia CO.Ltd from NCC Group Limited. e. Container Services LLC was merged into Farvater LLC on 03.12.2020. f. On 04.12.2020 a legal merger of Arytano Holdings Limited, Cormarys Investments Ltd and NCC Pacific Investments Ltd into National Container Holding Company Ltd was completed. As a result of the reorganisation, National Container Holding Company Ltd directly holds 100% in Vostochnaya Stevedoring Company LLC, JSC Petrolesport, Farvater LLC and Shakhovo-18 LLC and indirectly owns 100% in First Container Terminal Inc and 80% in Ust-Luga Container Terminal JSC. g. A members’ voluntary liquidation of NCC Group Limited was initiated in late 2020. These reorganisations did not have an impact on the underlying assets/liabilities and overall activities of the Group. 5. 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 and will continue its efforts in the following years. 2 Global Ports Investments PLC Annual Report 2020 globalports.com 3 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Review of Developments, Position and Performance of the Group’s Business 6. The Russian container market demonstrated resilience in 2020 declining by only 0.8%, supported by continuing growth in containerised export by 5.2%. However this growth was not sufficient to offset the decline of containerised import by a moderate 1.8% due to the global and local macroeconomic impact of COVID-19. 7. Outperforming the market in both export and import, the Group’s Consolidated Marine Container Throughput increased by 6.6% to 1,553 thousand TEU with growth of full export containers of 16.8% and full import containers of 3.6%. As a result, share of full export containers in the Groups’ Consolidated Marine Container Throughput increased from 40% in 2019 to 44% in 2020. 8. Consolidated Marine Bulk Throughput increased by 38.7% y-o-y, driven by strong growth in coal handling at VSC and ULCT as well as growth of fertilisers and steel handling at PLP. 9. Consolidated revenue increased by 6.2% to USD 384.4 million. Excluding the impact of VSC transportation services, like-for-like revenue declined by 8.2% driven by a decrease in both Consolidated Container and Non-Container Revenue. 10. Like-for-like Revenue per TEU decreased by 13% to USD 155.1 million as a result of depreciation of the Russian Rouble against US dollar, the growing share of full export containers in Group throughput and additional free storage days and other incentives provided by the Group to its clients in order to support them on the back of the global and local macroeconomic turmoil following the COVID-19 outbreak. Like-for- like Revenue per TEU adjusted for FX decreased by 2.7%. 11. Operating profit increased by 8.7% to USD 157.4 million. 12. In response to COVID-19 conditions, cost control measures were implemented to manage and reduce the Group’s cost base. Like-for-like Total Operating Cash Costs were successfully and safely reduced by 9.7% to USD 113.2 million despite the healthy growth in both container and non-container throughput. 13. Adjusted EBITDA decreased by 7.6% to USD 209.7 million as cost control improvements and volume growth could not offset the decline in Revenue per TEU and US dollar equivalent of Russian Rouble nominated bulk handling tariffs due to the depreciation of the Russian Rouble as a result of COVID-19. Profitability was nonetheless maintained with like-for-like Adjusted EBITDA Margin of 65.2%. 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. 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 the sum of current borrowings, non-current borrowings, current and non-current lease liabilities (following adoption of IFRS 16) and swap derivatives. 1 2 3 4 5 6 Future Developments of the Group/Company 18. The Board of Directors does not expect any significant changes in the activities of the Group/Company in the foreseeable future. Risk Management Process, Principal Risks and Uncertainties 19. Global Ports is exposed to a variety of risks and opportunities that can have commercial, financial, operational and compliance impacts on its business performance, reputation and license 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. 20. 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) are 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. 14. The Group’s capital expenditure in 2020 was USD 33.9 million and focused on planned maintenance projects, scheduled upgrades of 21. The Board has overall oversight responsibility for GPI’s risk management and for the establishment of the framework of prudent and existing container handling equipment and customer service improvement initiatives. 15. The Group generated a healthy USD 157.1 million of Free Cash Flow (-1.1% compared to 2019) demonstrating the resilience of the business model. 16. The Group reduced Net Debt by USD 134.9 million over the year and continues to prioritise deleveraging over dividend distribution. 17. In line with the Group’s focus on deleveraging, Net Debt to Adjusted EBITDA decreased from 3.3x as of 31 December 2019 to 2.9x as at the end of the reporting period, achieving the lowest level since 2012. 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, write-off and impairment of property, plant and equipment, depreciation and impairment of right- of-use assets, amortisation, write-off and impairment of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/(losses)—net. effective controls. As such it systematically monitors and assesses the risks attributable to the Group’s performance and delivery of the GPI 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. 22. 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 Enterprise Risk Management (ERM) system. 23. 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. 24. 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. 25. Further information on our risk management system, including a detailed description of identified risk factors is contained in the notes to 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. the Financial Statements attached to this report. Revenue per TEU is defined as the Global Ports Group’s Consolidated Container Revenue divided by total Consolidated Container Marine Throughput. statements. 27. The Company’s contingencies are disclosed in Note 20 to the financial statements. 26. The Company’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the financial 4 Global Ports Investments PLC Annual Report 2020 globalports.com 5 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Risk management approach Risk factor Risk management approach 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: The Group has responded to throughput volatility 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; — Development of IT solutions; — Adopting new revenue streams and attracting new cargoes. 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, which is also supported by the existing excess capacity in the market, i.e. in the North-West of Russia. 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. Also Beneficial Cargo Owners may optimise their logistics chains and decide to control them, which may lead to changes in the competitive environment. 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 strategic relationships with its leading customers (locally, regionally and with headquarters). 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 continues to invest in its terminals and infrastructure to ensure competitive levels of service. It takes a long-term approach to managing its network of terminals that represent core infrastructure assets in Russia with an expected operating lifespan of 10 to 20 years and beyond. The Group owns a significant land bank giving it flexibility should market conditions require it. The Group maintains level of capital expenditure in line with the requirements needed to maintain effective development of its existing capacity. The Group has developed long-term operating masterplans for each of its terminals 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. 1 2 3 4 5 6 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. Coronavirus (COVID-19): The global coronavirus (COVID-19) pandemic that emerged during 2020 impacted the container ports industry and Global Ports own operations, resulting in significant interruption to global trade, disruption to supply chains, reshuffling of vessel calls and high FX volatility. Despite the introduction of vaccination programmes, visibility remains low and there remains a risk of future outbreaks and disruptions to business operations. Risks include: — personnel shortages due to COVID-19 related illness; — inability to deliver contracted services due to regulatory or safety requirements; — loss of revenue due to business interruption, loss of customer volumes or customer withdrawals; — additional process steps or safety measures; — liquidity issues associated with delays in customer payments, potential customer failures or availability of financing. 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 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. There are no restrictions imposed by the governments on the operations of ports, since they are considered to be the core transport infrastructure servicing the inbound and outbound traffic from the country. Group measures to mitigate risk are grouped under/focused on four main priorities: — Protecting all employees (operations and admin) and communities: including medical examinations, restrictions on travelling and external/internal meetings, social distancing, additional disinfection according to the schedule, personal protective equipment provided for personnel, improved cleaning, purchasing protective masks, gloves and COVID-19 tests for the local hospital in Nakhodka, Far East; Administrative staff had been moved to work from home. The Group tried to establish the maximum comfort for its employees during remote work. The IT infrastructure was adapted to new challenges and was working without major failures. As of the date of signing the financial statements, the employees were not fully returned from working from home. The Group has not taken final decision, whether some of the employees shall continue working from home going forward. Any return to the office is and will be accompanied by following the strict safety protocols including 6 Global Ports Investments PLC Annual Report 2020 globalports.com 7 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Risk factor Risk management approach social distancing, disinfection, use of masks, limitation of external contacts. — Supporting customers: uninterrupted 24/7 round the clock operations (quay, yard and gates), to support and protect customers’ supply chains in Russia, improved commercial and operational flexibility; — Strengthening online channels, including maximum digitalisation of documentation and customer integration, further development of online- solutions to decrease necessity of client’s presence at the terminal, improvement of resilience of IT systems to external shocks and cyber attacks; — Ensuring financial stability and cash preservation, including pro-active management of costs, receivables and capacity for effective adaptation to crisis and its consequences, Stress testing of financial performance and liquidity position, revisiting financial plans. All these measures implemented ensured that the terminals of the Group (quay, yard and gates) remained 100% operational to service vessels/handle cargoes throughout the pandemic as well as the call and service centers of the Group were working without interruption. 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. 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 22% in 2019 and 2020 respectively). 1 2 3 4 5 6 Risk factor Reliance on third parties: Risk management approach 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. 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. All tariffs are set in Russian roubles. To the best of the knowledge of the Group’s management, the Group is in full compliance with the tariff 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 trends and aligns employee salaries and benefits 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. Health, safety, security and environment: 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 safety policies designed around international best practices and benchmarks 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 plans 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. 8 Global Ports Investments PLC Annual Report 2020 globalports.com 9 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Risk factor Risk management approach 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. GPI is constantly improving its safety practices by involving the employees in identifying and mitigating potential safety risks. Similarly, GPI works with all its stakeholders to maintain high levels of environmental 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. 1 2 3 4 5 6 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. The employees of the Group may have interests in the companies that may or potentially may have the business with the Group. In 2020 the Group adopted the Policy on Conflicts of Interest regulating the potential conflicts of interest by the employees of the Group. 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 UK left the EU on 31 January 2020 with the prior conclusion of the EU-UK Trade and Cooperation Agreement. Although the Agreement covers the financial services in general, it is expected that the parties further will establish a framework for regulatory cooperation on financial services. The Group maintains a strong and professional legal function designed to monitor legal risks, avoid legal actions where possible and carefully oversee any changes in applicable legislation 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. 10 Global Ports Investments PLC Annual Report 2020 globalports.com 11 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 1 2 3 4 5 6 Risk factor Financial risks Foreign exchange 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 of fluctuations in profits and cash flows of the Group arising from movement of foreign-exchange rates. Risk also arises from revaluation of assets and liabilities denominated in foreign currency. Credit risk: The Group may be subject to credit risk, arising primarily from trade and other receivables, loans receivable and cash and cash equivalents and derivative financial instruments. The Group’s business is also dependent on several large key customers. 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. Risk management approach Risk factor Risk management approach As of 2020, all Group tariffs are denominated in Russian roubles, and part of the Group’s debt is denominated in US Dollars. 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 is converting part of its existing USD debt into RUB, the currency of revenue. 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 2018-2020 the Group repurchased part of its USD denominated Eurobonds and currently/to date ~29% of the total issued Eurobonds have been canceled. New debt in 2020 was attracted/ raised only in Russian rouble (VSС bonds in the amount of 5 billion RUB-USD equivalent of USD67,681 thousand). In addition, the Group has negotiated with some of its customers the right to change its Russian rouble tariffs in conjunction with RUB/USD exchange rate fluctuations within a range of +/-15% each time when average RUB/ USD exchange rate for a given month falls beyond 5% from the base exchange rate used for translating original USD tariffs to RUB, however the risk above the levels of these currency moves remains. The Group closely tracks its accounts receivables overall and the creditworthiness of key customers and suppliers. The Group has been able to reduce its total debt level. During 2018–2020 the Group repurchased USD203.5 million nominal value of 2022 and 2023 Eurobonds of which USD69.5 million were refinanced via a 5 year/60 month RUB bank loan in 2019. FCT Series 1 Bonds were repaid in 2020 using the proceeds from VSC bonds issued in December 2020 with maturity over 5 years and lower interest rate than FCT bonds. Debt reduction beyond minimum repayment requirements remains a management priority in 2021. 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 issuance in 2020: VSС issued Russian Rouble bonds in the amount of 5 billion RUB — USD equivalent of USD67,681 thousand, which is a part of the Rouble-denominated Bond Program of VSC with Moscow Exchange which provides VSC with the potential to issue additional bonds of RUB25 billion — USD equivalent of USD338,406 thousand over an unlimited period of time with a maturity of up to 10 years. FCT has a similar Bond Program for RUB50 billion — USD equivalent of USD676,813 thousand. In addition the Group has over US Dollars 300 million of open uncommitted limits for credit line facilities from the banks which in combination with VSC and FCT bonds can facilitate financial flexibility and diversification of the debt portfolio of the Group and the refinancing of the existing debt of the Group and ensure all obligations of the Group falling due in the next 12 months are met. The Group regularly stress tests scenarios when different negative trends that could affect cash flows are identified. The liquidity position is carefully monitored in case of further deterioration of financial performance. Multi-Link Terminals Ltd Oy, a Finnish joint venture of the Group, secured a waiver from its financing bank confirming that the bank will not exercise its right for an early prepayment of the loan due to breach of financial covenants as 31.12.2020. 12 Global Ports Investments PLC Annual Report 2020 globalports.com 13 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Internal control and risk management systems in relation to the financial reporting process  Members of the Board of Directors 28. The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding 36. The Board of Directors leads the process in making new Board member appointments and makes recommendations on appointments the reliability of financial reporting and to ensure compliance with applicable laws and regulations. 29. Financial reporting and supervision are based on approved budgets and on monthly performance reporting.  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. 30. The Audit and Risk Committee of the Board of directors of the Company reviews certain high-risk areas at least once a year, including 37. The Board currently has 11 members and they were appointed as shown on page 1. 1 2 3 4 5 6 the following: — Significant accounting estimates; — Material changes to the accounting policies; 31. 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 32. 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 33. 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 the wider society as a whole. Its responsibility is to promote adherence to best-in-class corporate governance. 34. 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. 35. 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. 38. On 16 April 2020 Mr. Ivan Besedin resigned from the Board and Mr. Andrey Yashchenko replaced him on the same date. Mr. Morten Henrick Engelstoft resigned from the Board on 29 May 2020 and Mr. Kristian Bai Hollund was appointed on the same date. Both new Board members were reviewed and recommended for appointment by the Nomination and Remuneration Committee. 39. All other Directors were members of the Board throughout the year ended 31 December 2020, including the independent directors: Mrs. Britta Dalunde, Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos. 40. Mr. Soren Jakobsen was elected the Chairman of the Board of Directors on 24 April 2020. There were no significant changes in the responsibilities of the Directors during 2020 except for membership in the committees as described below. 41. There is no provision in the Company’s Articles of Association for the 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 16 April 2020 and Extraordinary General Meeting held on 29 May 2020 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 2021. Directors’ Interests 42. The interests in the share capital of Global Ports Investments Plc, both direct and indirect, of those who were Directors as at 31 December 2020 and 31 December 2019 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 2020 Shares held at 31 December 2019 7,000 GDRs representing 21,000 ordinary shares 7,000 GDRs representing 21,000 ordinary shares 88,769,817 ordinary shares 88,769,817 ordinary shares 34,605,183 ordinary non-voting shares 34,605,183 ordinary non-voting shares 14 Global Ports Investments PLC Annual Report 2020 globalports.com 15 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) Chairman of the Board of Directors 43. Mr. Soren Jakobsen is the Chairman of the Board since 24 April 2020, when he replaced Mr. Morten Engelstoft. 44. 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. 45. 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. — 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; 1 2 3 4 5 6 — 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. 54. In 2020 the Audit and Risk Committee met 10 times (2019: 13 times) to review and discuss inter alia the following significant issues and matters in addition and on top of those listed above, among others: — 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; 46. The Group separates the positions of the chairman and CEO to ensure an appropriate segregation of roles and duties. — Meetings with external auditors to discuss the matters related to the audit work done by them and any issues arising from their audits Non-executive and Independent Directors 47. All of the Board members are non-executive directors. 48. 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. 49. 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 the GDR holders, bondholders, other lenders, employees, customers, suppliers and the communities in which the Group conducts its business. 50. 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 51. 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 52. 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), re-elected on 24 April 2020, and its other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018, re-elected on 24 April 2020), Mr. Lambros Papadopoulos (an Independent Non-Executive Director appointed as of 01 January 2018, re- elected on 24 April 2020), Mr. Mogens Petersen (appointed as of 18 June 2019, re-elected on 24 April 2020) and Mr. Andrey Yashchenko (appointed as of 24 April 2020). Ms. Alexandra Fomenko resigned from the Audit and Risk Committee on 24 April 2020. 53. 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; reviews; — Discussion of the level of clarity and completeness of disclosures in financial statements with the management and external auditors and making the recommendations to the Board; — 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. — 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 is 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; — 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; — 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; — Consideration of various reports from the management; — Review of the major risks. The Committee had meetings with Risk Management of GPM to discuss the Кеу Risks, Risk Management approach, Risk Appetite Statements and control matrices; — COVID-19 risks evaluation and management action plan; — Review of dangerous cargoes handling processes and procedures and management suggestions on improvements; — Review of tax related matters; 16 Global Ports Investments PLC Annual Report 2020 globalports.com 17 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) — Review of Charity activity in 2020 and budget 2021; — Review various other compliance related matters; — Consideration and giving the recommendations to the Board of Director for the approval of the Conflicts of Interest Policy, Procurement standard of the Company, Related Parties Transaction Policy, amended and restated Charity Policy. The Nomination and Remuneration Committee 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 five Directors, one of whom is independent. Currently the Strategy Committee is chaired by Mr. Sergey Shishkarev (appointed as of 18 June 2019 and re-elected on 24 April 2020). The other members are Mr. Mogens Petersen, Mr. Soren Jakobsen and Mr. Lambros Papadopoulos (an Independent Non-Executive Director), all appointed as of 18 June 2019 and re-elected on 24 April 2020, and Mr. Andrey Yashchenko (appointed as of 24 April 2020). 1 2 3 4 5 6 55. The Nomination and Remuneration Committee was established in June 2019 following the merger of Nomination Committee and Remuneration Committee in order to simplify the work of the committees and Board members. 61. The Committee is a committee of the Board of Directors which assists the Board of Directors in discharging its corporate governance 56. 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, re-elected on 24 April 2020). The other members are Ms. Alexandra Fomenko (appointed as a member of the committee on 11 November 2019, re-elected on 24 April 2020) and Mr. Soren Jakobsen (appointed as a member of the committee on 24 April 2020). Mr. Morten Henrick Engelstoft resigned from the committee on 24 April 2020. 57. The Committee is a committee of the Board of Directors which assists the Board in discharging its corporate governance 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. 58. In the year 2020 the key focus of Nomination and Remuneration Committee was on the transition of Chief Executive Officer of Global Ports Management LLC, talent management, new principles and guidelines for setting the targets and evaluation of the annual performance of the management team and Board performance evaluation. 59. In 2020 the Nomination and Remuneration Committee met 16 times (15 times in 2019): — to discuss and recommend the candidates to be elected to the Board; — to discuss and recommend the composition of the Board Committees; — to lead the process of transition of the Chief Executive Officer of Global Ports Management LLC; — to review and amend the Key Rules of Awarding and Payment of Performance Based Bonuses of GPI Group and terms of separation of the management from the Group; — to discuss and recommend to the Board the appointment of new Chief Operations Officer of Global Ports Management LLC, Chief Strategy and Development Officer of the Group, new Chief Executive Officer of Moby Dik LLC as well as remuneration of the Key Management team members of the Group companies. 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. 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 2020 the Strategy Committee met 8 times (5 times in 2019) to consider and give recommendations for approval to the Board of: — Vision statement of the Group, — the new operating model of Moby Dik to be implemented in 2021; — Treasury policy principles, — various investment proposals, — optimization of Group structure, — Group refinancing plan, and — the Group Consolidated budget 2021. In addition Strategy Committee reviewed and discussed he functional strategies, business model of the Group, strategic priorities, and corporate strategic targets and COVID-19 resilience plan. 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. In the year of COVID-19 and the transition of the Chief Executive Officer of Global Ports Managements LLC the Board had more reasons than usual for ad-hoc meetings. 64. In 2020 the Board met formally 13 times (2019: 18) to review current performance and to discuss and approve important business decisions. 65. In 2020 the Board met to discuss and approve important business decisions, which included among others: — FY2019 financial statements, 1H2020 interim financial statements and Annual Report; — Review of segments financial and operational performance; — Consideration of 2021 financial budget, major risks and uncertainties, commercial strategy, corporate social responsibility matters, internal control framework; — Changes in Group management and the Board of Directors; — Revision and adoption of various group wide policies and regulations, namely the Code of Corporate Ethics, Treasury Policy, the Charity and Sponsorship Policy of the Company, Conflicts of Interest Policy, Procurement Standard of the Company, Operational Efficiency Improvements Project Charter; Key Rules of Awarding and Payment of Performance based Bonuses of the Group. — Consideration of various compliance matters; — Consideration and approval of the revision of external and internal financing arrangements and organizational restructurings; — Consideration and approval of new financing arrangements, e.g., issue of VSC bonds, repurchase of additional Eurobonds in 2020 and cancellation of repurchased Eurobonds; 18 Global Ports Investments PLC Annual Report 2020 globalports.com 19 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 1 2 3 4 5 6 — Consideration and approval of major capital expenditures and investment projects; and — Consideration and approval of various resolutions related to the operations of the Company`s subsidiaries and joint ventures. Board and Management Remuneration 66. The number of Board and Board Committee meetings held in the year 2020 and the attendance of directors during these meetings was as 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. Only Independent Non-Executive Directors receive remuneration. follows: Britta Dalunde Kristian Bai Hollund Alexandra Fomenko Soren Jakobsen Demos Katsis Inna Kuznetsova Shavkat Kary Niyazov Lambros Papadopoulos Mogens Petersen Sergey Shishkarev Andrey Yashchenko Ivan Besedin Morten Henrick Engelstoft Board of Directors Nomination and Remuneration Committee Strategy Committee Audit and Risk Committee A 13 8 13 13 13 13 13 13 13 13 10 3 5 B 13 8 13 13 13 13 13 13 13 13 10 3 5 A - - 16 11 - 16 - - - - - - 5 B - - 16 11 - 16 - - - - - - 5 A - - - 8 - - - 8 8 8 6 - - B - - - 8 - - - 8 8 8 6 - - A 10 - 3 - - 10 - 10 10 - 7 - - B 10 - 3 - - 10 - 10 10 - 7 - - A = Number of meetings attended B = Number of meetings eligible to attend during the year 72. Levels of remuneration for the Independent 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. Directors are not eligible for bonuses, retirement benefits or to participate in any incentive plans operated by the Group. Additional remuneration is paid for membership and chairmanship of the committees by the Independent Non-Executive Directors. 73. The shareholders of the Company approved the remuneration of the members of the Board on 29 June 2018, 30 December 2019, 16 April 2020 and 29 May 2020. 74. 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. 75. 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 29 October 2020. The Nomination and Remuneration Committee monitors the efficiency of the Rules and makes the recommendations to the Board on their amendment and revision. 76. 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 77. 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. 78. The decisions for all other matters are reserved for the Board. The Authority Matrix contains the list of such reserved matters. 79. Mr. Iodchin is also acting as the Board Secretary since December 2008 and as the Chief Strategy and Business Development Officer at 67. The operation of the Board, its Committees and individual Directors is subject to regular evaluation. The evaluation of the Board and Global Ports Group pursuant to Board’s decision on 29 October 2020. 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 2019 and 2020. Company Secretary 68. In 2020 the Board conducted the self-evaluation, which results were discussed in December 2020. the establishment of effective and transparent arrangements for securing the rights of shareholders. 80. The Group maintains a company secretary, who is responsible for safeguarding the rights and interests of shareholders, including Board Diversity 81. Team Nominees Limited has been acting as the company secretary since the Group’s incorporation in February 2008. 69. The Company does not have a formal Board diversity policy with regards to matters such as age, gender or educational and professional backgrounds, but the Board has the full commitment to diversity within the Group. 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 50 years ranging from 32 to 62 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. 82. 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 83. The Group has a diverse set of stakeholders, from international institutions holding our shares and bonds and bank financial institutions which provided bank borrowings to the Group, 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. 20 Global Ports Investments PLC Annual Report 2020 globalports.com 21 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 84. Improving its corporate governance structure in accordance with the internationally recognised best practices the Company adopted 91. The code is available to all staff on Global Ports’ website (in the Corporate Governance section) and in the HR department at every operating important policies and procedures. The Group is regularly reviewing and updating its policies and procedures. facility. There are also other more detailed rules concerning our anti-fraud and whistleblowing policies. 85. 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. 86. The Company’s corporate governance policies and practices are designed to ensure that the Company is focused on upholding its 92. 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. A colourful booklet reflecting the provisions of Code of Ethics was prepared and the first testing on the knowledge of Code of Ethics was undertaken in November-December 2020 with the purpose of raising the awareness. 1 2 3 4 5 6 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; — Group Securities Dealing Code; — Conflicts of Interest Policy adopted on 29 June 2020; — Treasury Policy adopted on 23 April 2020; and — Procurement Standard of the Company adopted on 18 August 2020. 87. 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 was finalised in 2020. Whistle Blower function 88. 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 email 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 2019 and 2020 the Board together with the management worked on raising the awareness about the hotline among the Group workforce and stakeholders. Code of ethics and conduct 89. 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. The 3rd revision of the Code of Ethics was adopted by the Board of Directors on 18 August 2020, aimed at simplifying and updating Group’ mission, values and standards of corporate engagement. 90. 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, ethics and conflicts of interest principles with reference to detailed policies. Employees and external parties are encouraged to report any suspected breaches, via various channels including the dedicated hotline. Dividends 93. 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. 94. 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. 95. 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. 96. 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. 97. During the years 2019 and 2020 the Company did not declare or pay any dividends. 98. The Board of Directors of the Company does not recommend the payment of a final dividend for the year 2020. Share Capital Significant direct or indirect holdings (including indirect shareholding through structures or cross shareholdings) 99. The information on significant direct and indirect shareholders is available at http://www.globalports.com/globalports/investors/shareholder- information/major-shareholders. 100. 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 103 below). Authorised share capital 101. 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 102. 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. 22 Global Ports Investments PLC Annual Report 2020 globalports.com 23 MANAGEMENT REPORT (CONTINUED) MANAGEMENT REPORT (CONTINUED) 103. 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. 112. The Head of the IAS, Mr. Ilya Kotlov, reports directly to the Audit and Risk Committee. External auditors Rules for Amending Articles 113. An external auditor is appointed at the Global Ports AGM on an annual basis to review the Group’s financial and operating performance. 104. The Articles of association of the Company may be amended from time to time by the special resolution of the General Meeting of 114. This follows proposals drafted by the Audit and Risk Committee for the Board of Directors regarding the reappointment of the external 1 2 3 4 5 6 the shareholders. Corporate Social Responsibility Report 105. 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 106. The events after the balance sheet date are disclosed in Note 22 to the financial statements. Research and development activities auditor of the Group. 115. In 2020, 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 2020. 116. Starting from the year 2021, following the results of the external audit tender performed, KPMG Ltd will take over PricewaterhouseCoopers Limited. A resolution approving the appointment of KPMG as the external auditor for the purposes of auditing the Group’s IFRS financial statements for 2021 and giving authority to the Board of Directors to fix their remuneration will be proposed at the next Annual General Meeting of the Shareholders of the Company, which will take place in 2021. 107. The Company is not engaged in research and development activities. By Order of the Board Branches 108. The Company did not have or operate through any branches during the year. Treasury shares Soren Jakobsen Chairman of the Board Alexander Iodchin Secretary of the Board 109. 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. 5 March 2021 Going Concern 110. 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 Company’s and Group’s principle risks and uncertainties, budget for 2021 financial perspectives in the mid-term and the latest forecasts over a period of 5–10 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. Internal audit 111. 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. 24 Global Ports Investments PLC Annual Report 2020 globalports.com 25 DIRECTORS’ RESPONSIBILITY STATEMENT STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 (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 Total comprehensive income/(loss) for the year 1 2 3 4 5 6 For the year ended 31 December Note 21(a) 21(b) 5 6 7 4,14 9 10 2020 103 1 300 3 291 4 (3 539) (12 059) (4 884) (15 784) (1 151) (16 935) (30) (16 965) 2019 106 1 773 5 431 (37) (4 043) 1 317 — 4 547 (1 114) 3 433 — 3 433 — — (16 965) 3 433 The Company’s Board of Directors is responsible for the preparation of 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. This responsibility includes selecting appropriate accounting policies and applying them consistently; and making accounting estimates and judgements that are reasonable in the circumstances. In preparing the financial statements, the Board of Directors is also 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. The Board of Directors’ confirmations The Board of Directors confirms that, to the best of its knowledge: (a) the financial statements, which are presented on pages 27 to 54, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and (b) the management report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. Further, the Board of Directors confirms that, to the best of its knowledge: (i) adequate accounting records have been maintained which disclose with reasonable accuracy the financial position of the Company and explain its transactions; (ii) all information of which it is aware that is relevant to the preparation of the financial statements, such as accounting records and all other relevant records and documentation, has been made available to the Company’s auditors; (iii) the financial statements disclose the information required by the Cyprus Companies Law, Cap.113 in the manner so required; (iv) the Management Report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113, and the information given therein is consistent with the financial statements; (v) 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; and (vi) 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. By Order of the Board Soren Jakobsen Chairman of the Board Limassol 05 March 2021 26 Alexander Iodchin Secretary of the Board Global Ports Investments PLC Annual Report 2020 globalports.com The notes on pages 31 to 54 are an integral part of these financial statements. 27         STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 (in thousands of US dollars) Share capital Share premium Capital contribution Retained earnings/ (accumulated losses) * Total Balance at 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 / 1 January 2020 57 317 923 511 101 300 (454 650) 627 478 Comprehensive loss Loss for the year — — — (16 965) (16 965) Balance at 31 December 2020 57 317 923 511 101 300 (471 615) 610 513 * Retained earnings is the only reserve that is available for distribution. 1 2 3 4 5 6 BALANCE SHEET AS AT 31 DECEMBER 2020 (in thousands of US dollars) ASSETS Non-current assets Property, plant and equipment Right-of-use assets Investments in subsidiaries Investments in joint ventures Trade and other receivables Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Share capital Share premium Capital contribution Retained earnings/(accumulated losses) Total equity Non-current liabilities Borrowings Guarantee liabilities Total non-current liabilities Current liabilities Borrowings Lease liabilities Guarantee liabilities Trade and other payables Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES Note 13 14 15 16 16 17 18 18 21(h) 21(k) 21(h) 21(k) 19 At 31 December 2020 2019 25 — 618 994 24 847 403 644 269 2 171 580 2 751 75 92 624 347 24 847 — 649 361 2 429 150 2 579 647 020 651 940 57 317 923 511 101 300 (471 615) 610 513 19 099 16 152 35 251 — — 542 714 1 256 36 507 647 020 57 317 923 511 101 300 (454 650) 627 478 16 809 1 651 18 460 3 572 81 1 249 1 100 6 002 24 462 651 940 The Board of Directors of Global Ports Investments Plc authorised these financial statements for issue on 5 March 2021. Soren Jakobsen, Director Britta Dalunde, Director The notes on pages 31 to 54 are an integral part of these financial statements. The notes on pages 31 to 54 are an integral part of these financial statements. 28 Global Ports Investments PLC Annual Report 2020 globalports.com 29               STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE FINANCIAL STATEMENTS (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 Loss on remeasurement of financial guarantee 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 Purchase of investments in subsidiaries Repayment of original cost of subsidiaries Purchase of investments in joint ventures Purchase of property, plant and equipment 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 from/(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 2020 2019 (16 935) 3 433 142 4 884 13 371 (3 291) (1) 1 220 (1 269) (58) (1 937) 823 (387) (1 501) — (1 501) (44) 513 — — 1 563 1 033 15 921 (12 292) (90) (2 644) 895 427 150 3 580 167 — - (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 Note 6,13 14,15 7 21(b) 5 9 7 14 14 15 21(h) 21(h) 21(h) 17 1 2 3 4 5 6 1. General information Country of incorporation 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. 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. 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 2021. 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. 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. 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 2020 have been adopted by the EU through the endorsement procedure established by the European Commission. 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. The notes on pages 31 to 54 are an integral part of these financial statements. 30 Global Ports Investments PLC Annual Report 2020 globalports.com 31 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2. Summary of significant accounting policies (continued) 2. Summary of significant accounting policies (continued) Consolidated financial statements Current and deferred income tax 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. 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. 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 2020 in order to obtain a proper understanding of the financial position, the financial performance and the cash flows of the Company and the Group. 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 2020. This adoption did not have a material effect on the accounting policies of the Company. New standards and interpretations not yet adopted by the Company 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. 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. 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 2020, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on these financial statements. 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. 1 2 3 4 5 6 Revenue recognition Revenues earned by the Company are recognised on the following bases: Interest income (i) 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 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. Property, plant and equipment 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 % 20 50 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. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. 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. 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”. 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. 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. 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. 32 Global Ports Investments PLC Annual Report 2020 globalports.com 33 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1 2 3 4 5 6 2. Summary of significant accounting policies (continued) 2. Summary of significant accounting policies (continued) Investments in subsidiaries Financial assets (continued) 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. Investments in subsidiaries 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 income statement 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. 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. 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. The Company accounts for group reorganisations (i.e. when subsidiaries/ intermediate holding companies merge) that have no impact on the Company’s effective interest in the subsidiaries and no exposure to the total cash flow expectations from the subsidiaries involved in such reorganisations by reallocating the carrying values between investments in subsidiaries with no gain/loss being recognised in the Company’s financial statements and no impact on the total carrying amount of the Company’s investments in subsidiaries. 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. 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. 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. Impairment of non-financial assets 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. 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 ‘finance income — 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’). Transactions with equity owners and subsidiaries 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”. Financial assets a. Classification The Company classifies its financial assets into those to be measured at amortised cost. Share capital, share premium and capital contribution Ordinary shares are classified as equity. The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. 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. 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. 34 Global Ports Investments PLC Annual Report 2020 globalports.com 35 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2. Summary of significant accounting policies (continued) 2. Summary of significant accounting policies (continued) Dividend distribution Provisions and contingent liabilities (continued) 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. 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. 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. Borrowings 1 2 3 4 5 6 Leases 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. Leases (continued) 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. 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. 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. 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 and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. 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 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. 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. Borrowings are removed from the 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’. 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. 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. 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. 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. 36 Global Ports Investments PLC Annual Report 2020 globalports.com 37 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2. Summary of significant accounting policies (continued) Financial guarantee contracts (continued) 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. 3. Financial risk management (continued) Financial risk factors (continued) 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 the Company’s direct and indirect subsidiaries. At 31 December 2020 and 2019, 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, other than in respect to the issued financial guarantees over the obligations of a direct subsidiary in relation to its issued Eurobonds and outstanding forward contracts with financial institutions, as further detailed below. At 31 December 2020, issued financial guarantee liabilities with carrying amount of US$2,199 thousand are within Stage 1 of IFRS 9 general impairment model (2019: US$2,900 thousand). At 31 December 2020, issued financial guarantee liabilities with carrying amount of US$14,495 thousand are within Stage 3 of the IFRS 9 general impairment model and are measured at the amount of the loss allowance determined in accordance with the expected credit loss model under IFRS 9 “Financial Instruments” (2019: nil). 1 2 3 4 5 6 Cash and cash equivalents All of the Company’s financial assets at amortised cost are within Stage 1 of IFRS 9 general impairment model. 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. 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. Comparatives Finally, see Note 12 for credit quality of cash and cash equivalents and trade and other receivables. Comparative figures have been adjusted to conform with changes in the presentation for the current year. Changes in comparatives relate to presentation of financial guarantees (Note 21(k)). 3. Financial risk management Financial risk factors 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. a. Market risk (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities (mainly 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 20% (2019: 10%) against the US dollar and all other variables remained unchanged, the posttax loss of the Company for the year ended 31 December 2020 would have increased/decreased by US$56 thousand (2019: post-tax profit would have decreased/increased by US$305 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. 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. (in thousands of US dollars) As of 31 December 2020 Trade and other payables Financial guarantee * Borrowings Total As of 31 December 2019 Trade and other payables Financial guarantee * Lease liabilities Borrowings Total Less than 1 year 1–2 years 2–5 years Over 5 years Total 714 317 299 1 337 319 350 1 100 848 285 90 3 869 853 344 — 335 730 1 337 337 067 — 8 454 — 14 020 22 474 — 317 343 21 773 339 116 — 132 441 — 4 500 136 941 — — — — — — — — — 714 970 372 24 447 995 533 1 100 989 180 90 22 389 1 012 759 Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. * Full amount payable if the loans, bonds and forward contracts guaranteed are non-performing (Note 21(k)). (ii) Cash flow and fair value interest rate risk Management controls current liquidity based on expected cash outflows and expected receipts from dividends and interest. 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 2020 and 31 December 2019 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. 38 Global Ports Investments PLC Annual Report 2020 globalports.com 39 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Financial risk management (continued) Financial risk factors (continued) 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. 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. Critical accounting estimates and assumptions 1 2 3 4 5 6 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: (in thousands of US dollars) Total borrowings Total capitalisation Total borrowings to total capitalisation ratio (percentage) As at 31 December 2020 2019 19 099 629 612 3% 20 381 647 859 3% 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 fair values of borrowings as at 31 December 2020 and 2019 approximate their carrying value. 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). The Company 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: 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. Because of COVID-19 outbreak the Company performed updated tests of the estimated recoverable amount for all CGUs in the course of the preparation of the financial statements for the year ended 31 December 2020. 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 Russian ports consist of First Container Terminal (FCT), Petrolesport and Farvater (PLP), Ust-Luga Container Terminal (ULCT), Moby Dik (MD), Yanino Logistics Park (YLP). The Finnish ports consist of Multi-Link Terminals Ltd Oy (MLT OY). The recoverable amounts of National Container Holding Company Limited (FCT/PLP, VSC and ULCT cash generating units (“CGUs”)) 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 underlying CGUs of the Company). For the estimation of the recoverable amount of a component of Multi-Link Terminals Limited (Moby Dik CGU) the fair value less costs to sell method was used, based on the market approach based on recent sales of similar assets (Level 2) (refer to notes 14 and 15 for the definition of the underlying 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 (2019: 3%). The discount rate applied for Russian ports CGUs in projections prepared as at 31 December 2020 is 9.4% (2019: 8.8%). For projections prepared for MLT OY CGU a terminal growth rate of 2% has been applied (2019: 2%). The discount rate applied for MLT OY CGU in projections prepared as at 31 December 2020 is 9.7% (2019: 5.2%). Key assumptions for Russian ports and Finish 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. 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. For CGUs in the Russian ports segment, 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 carried out in respect of the above investments in subsidiaries and joint ventures, the Board of Directors did not identify any impairment losses as of 31 December 2020. For all of the above investments, management believes that any reasonably possible change in the key assumptions on which recoverable amounts are based, 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. 40 Global Ports Investments PLC Annual Report 2020 globalports.com 41 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Critical accounting estimates and judgments (continued) The recoverable amount of the Company’s investment in Global Ports (Finance) Plc was determined based on its net asset value which approximates its fair value less cost to sell. Based on the results of the impairment testing, an impairment amounting to US$4,783 thousand was recognised with respect to the investment in Global Ports (Finance) Plc which was fully impaired as it was in a net liability position as of 31 December 2020 (see Note 14). 7. Other gains/(losses) — net (in thousands of US dollars) Critical judgments in applying the Company’s accounting policies There were no critical judgments in applying the Company’s accounting policies. 5. Finance income — net (in thousands of US dollars) 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 For the year ended 31 December 2020 2019 1 1 3 4 2 2 (39) (37) * The total net foreign exchange loss recognised in the statement of comprehensive income amounted to US$15 thousand (2019: loss US$17 thousand). Refer also to Net foreign exchange transaction (losses)/gains on non-financing activities Loss on remeasurement of financial guarantee (Note 21(d) and (k)) Amortisation and derecognition of financial guarantee (Note 21(d) and (k)) Other gains/(losses) — net Total 8. Staff costs (in thousands of US dollars) Salaries Social insurance costs Other staff costs Total Note 7 and Note 9. 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 Average number of staff employed during the year For the year ended 31 December 2020 2019 9. Finance costs (in thousands of US dollars) 1 044 1 408 141 4 438 — 210 13 142 15 124 966 1 824 136 182 394 28 101 14 167 15 216 3 539 4 043 Interest expense on loans from related parties (Note 21(c)) Interest expense on lease liabilities Net foreign exchange (gains)/losses on related parties borrowings Total 10. Income tax expense (in thousands of US dollars) Withholding tax on dividends Defence contribution Total income tax The auditors’ remuneration stated above include fees of US$234 thousand (2019: US$229 thousand) for statutory audit services and US$57 thousand (2019: US$56 thousand) for other assurance services. The legal, consulting and other professional services stated above include fees of US$47 thousand (2019: US$39 thousand) for tax and vat consultancy services and US$4 thousand (2019: nil) for other non-audit services charged by the Company’s statutory audit firm. 42 Global Ports Investments PLC Annual Report 2020 globalports.com 1 2 3 4 5 6 For the year ended 31 December 2020 2019 (87) (13 371) 1 269 130 (12 059) 33 — 1 284 — 1 317 For the year ended 31 December 2020 2019 1 264 136 8 1 408 1 690 120 14 1 824 6 6 For the year ended 31 December 2020 1 211 9 (69) 1 151 2019 1 079 24 11 1 114 For the year ended 31 December 2020 2019 30 — 30 — — — 43                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10. Income tax expense (continued) 12. Credit quality of financial assets The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate as follows: The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available). (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 Withholding tax on dividends Utilisation of carried forward losses Tax effect of group relief Tax charge For the year ended 31 December 2020 2019 (16 935) 3 433 (2 117) 2 861 (740) 30 — (4) 30 429 646 (1 075) — (4) — — Cash at bank and short-term bank deposits: (in thousands of US dollars) Cash and bank A3 (Moody’s) Aa3 (Moody’s) B3 (Moody’s) Total As at 31 December 2020 2019 367 191 22 580 32 52 66 150 Trade and other receivables amounting to US$1,300 thousand are related to highly reputable counterparties with Aa1 credit rating by Moody’s Investors Service as at 31 December 2020 (31 December 2019: US$1,773 thousand). 1 2 3 4 5 6 The Company is subject to corporation tax on taxable profits at the rate of 12.5%. 13. Property, plant and equipment Brought forward losses of only five years may be utilized. 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. Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon, etc) are exempt from Cyprus income tax. (in thousands of US dollars) At 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 2019/1 January 2020 Cost Accumulated depreciation Net book amount Additions Depreciation charge for 2020 Closing net book amount at 31 December 2020 At 31 December 2020 Cost Accumulated depreciation Net book amount As at 31 December 2020 2019 2 363 580 2 943 489 19 099 19 588 2 198 150 2 348 912 20 381 21 293 — 81 19 588 21 374 Global Ports Investments PLC Annual Report 2020 globalports.com 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 (excluding accrued expenses) Borrowings (Note 21(h)) Total Lease liabilities Total financial liabilities (1) Trade and other receivables do not include prepayments. 44 Motor vehicles and other equipment 131 (14) 117 1 (43) 75 132 (57) 75 — (50) 25 132 (107) 25 45                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 14. Investments in subsidiaries (in thousands of US dollars) At beginning of year Additions Repayment of capital of subsidiaries Guarantees provided (Note 21(k)) Impairment charge At end of year The Company’s direct interests in subsidiaries, all of which are unlisted, were as follows: For the year ended 31 December 2020 2019 624 347 44 (2 205) 1 692 (4 884) 624 638 1 861 (3 668) 1 516 — 618 994 624 347 Name Arytano Holdings Limited Intercross Investments B.V. NCC Pacific Investments Limited NCC Group Limited Global Ports (Finance) Plc Global Ports Advisory Eesti OU Global Ports Management LLC Rolis LLC Principal activity Country of incorporation 2020 % holding 2019 % holding Holding company Cyprus Holding company Netherlands — — — 100 99.98 100 100 100 4.76 100 100 100 100 100 — 100 100 100 - 0.005 Cyprus Cyprus Cyprus Estonia Russia Russia Cyprus Cyprus Holding company Holding company Provision of loans to related parties from the proceeds raised from issued Eurobonds Consulting company Management and consulting company Software development and maintenance Alocasia CO. Ltd * National Container Holding Company Limited * Holding company Holding company * Alocasia CO. Ltd (2019: National Container Holding Company Limited) is accounted for as a subsidiary because the Company has indirect control, since its subsidiaries hold the remaining shareholding. 1 2 3 4 5 6 14. Investments in subsidiaries (continued) In January 2020, the Company acquired 99.98% direct interest in Global Ports (Finance) Plc from its 100% direct subsidiary NCC Pacific Investments Limited for a total cash consideration amounting to US$33 thousands. Upon the initial recognition of the investment in Global Ports (Finance) Plc, the Company transferred the amount of US$4,749 thousand previously capitalised as part of the cost of the investment in NCC Pacific Investments Limited to the cost of the investment in Global Ports (Finance) Plc, with no impact on the total carrying amount of investments in subsidiaries. This amount represents the capitalised guarantees issued by the Company in prior years over the obligations of Global Ports (Finance) Plc under its issued Eurobonds and various forward contracts entered with financial institutions. At 31 December 2020, the investment in Global Ports (Finance) Plc was fully impaired as the subsidiary was in a net liability position at the year-end (Notes and 21 (k)). On 19 May 2020 Intercross Investments B.V. was dissolved and part of the distributions receivable from the subsidiary as part of the liquidation process in the amount of US$901 thousand was accounted for as return of capital against the cost of the investment. On 29 June 2020 the Board of Directors of the Company approved the legal merger of Arytano Holdings Limited (and its 100% subsidiary Cormarys Investments Ltd) and NCC Pacific Investments Ltd (the “Dissolving Companies”) with National Container Holding Company Ltd (the “Absorbing Company”) as the surviving entity. The Dissolving Companies transmitted by virtue of the Court Order which approved the Merger Plan (the “Plan”), the total of their assets and liabilities to the Absorbing Company and the Dissolving Companies were dissolved without going into liquidation. In exchange for the assets and liabilities transmitted to the Absorbing Company, the Absorbing Company issued shares to Global Ports Investments Plc, which became the sole shareholder of National Container Holding Company Ltd; previously the remaining shareholding in National Container Holding Company Ltd was held by GPI’s direct subsidiary NCC Pacific Investments Ltd and the shares held by NCC Pacific Investments Limited in the share capital of the Absorbing Company were cancelled through a reduction of capital procedure as part of the merger. The merger did not affect the underlying activities and operations of the dissolving companies and the activities of the dissolving companies were continued by the Absorbing Company. The Legal Merger was completed on 4 December 2020. In accounting for the merger transaction, the Company transferred the carrying values of the investments in the Dissolving companies to the cost of the investment in National Container Holding Company Ltd, with no impact on the total carrying amount of investments in subsidiaries. On 25 September 2020 the Company purchased 4.76% direct interest in Alocasia CO. Ltd from subsidiary NCC Group Limited for a total cash consideration of US$11 thousands. A members’ voluntary liquidation of NCC Group Limited was initiated in late 2020. The Company recognised distributions receivable by NCC Group Limited as part of the liquidation process in the total amount of US$1,304 thousand as return of capital against the cost of the investment in NCC Group Limited and the remaining carrying amount of the investment of US$101 thousand was fully impaired. 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%). 15. Investments in joint ventures (in thousands of US dollars) All of the above terminals represent separate CGUs, with the exception of PLP and FCT which work as one unit from commercial and operational points of view and are considered as one CGU. The two terminals have a common managing director and common senior management team and 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. At beginning of year Additions At end of year 46 Global Ports Investments PLC Annual Report 2020 globalports.com For the year ended 31 December 2020 2019 24 847 — 24 847 24 838 9 24 847 47                       NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 15. Investments in joint ventures (continued) 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 2020 % holding 2019 % holding Holding company Holding company Holding company Finland Ireland Cyprus 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) and a container terminal in the vicinity of St. Peterburg (Moby Dik CGU) which are held through Multi-Link Terminals Limited and an inland container terminal in the vicinity of St. Peterburg (Yanino Logistics Park CGU (YLP)) which is held through CD Holding OY. 17. Cash and bank balances (continued) Non-cash transactions The following non-cash transactions were made in 2020: 1. Set-off of distributions receivable from Intercross Investments B.V. against borrowings of GPI in amount of US$3,409 thousand (Note 21(h)); and 2. Set-off of distributions receivable from NCC Group Limited against consideration payable by GPI for assignment of third party receivable in amount of US$1,393 thousand. There were no principal non-cash transactions during 2019. 18. Share capital, share premium and dividends (in thousands of US dollars) 1 2 3 4 5 6 No impairment was identified in 2020. 16. Trade and other receivables (in thousands of US dollars) Other receivables Repayment of capital from subsidiary (Note 21(i)) Prepayments Total trade and other receivables Less non-current other receivables Total current trade and other receivables As at 31 December 2020 2019 2 363 — 211 2 574 (403) 2 171 1 773 425 231 2 429 — 2 429 Share capital Share premium Total At 1 January 2019/31 December 2019/31 December 2020 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. The fair values of trade and other receivables approximate their carrying amounts as the impact of discounting is not significant. The carrying amount of the Company’s other receivables amounting to US$2,472 thousand are denominated in US dollars (31 December 2019: US$1,773 thousand). 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 48 Dividends There were no dividends declared or paid in 2020 and 2019. 19. Trade and other payables (in thousands of US dollars) Other payables Other payables to related parties (Note 21(j)) Accrued expenses Payroll payable Total trade and other payables As at 31 December 2020 182 — 225 307 714 2019 181 207 188 524 1 100 The fair value of trade and other payables which are due within one year approximates their carrying amount at the balance sheet date as the impact of discounting is not significant. The carrying amount of the Company’s trade and other payables are denominated in Euros. As at 31 December 2020 2019 580 580 150 150 As at 31 December 2020 2019 427 153 580 36 114 150 Global Ports Investments PLC Annual Report 2020 globalports.com 49       NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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. Further, on 12 March 2020, the World Health Organisation declared the outbreak of COVID-19 a global pandemic. In response to the pandemic, the Russian authorities implemented numerous measures attempting to contain the spreading and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter-in- place orders and limitations on business activity, including closures. These measures have, among other things, severely restricted economic activity in Russia and have negatively impacted, and could continue to negatively impact businesses, market participants, clients of the Group, as well as the Russian and global economy for an unknown period of time. Management is taking necessary measures to ensure sustainability of the Group’s operations and support its customers and employees: — Medical examinations have been reinforced at the terminals and offices. Restrictions on travelling and external/internal meetings, social distancing, additional disinfection according to the schedule, personal protective equipment provided for personnel, improved cleaning, purchasing protective masks, gloves and COVID-19 tests for the local hospital in Nakhodka, Far East; — Only critical employees stay at the terminals and in offices. The Group tried to establish the maximum comfort for its employees during remote work. The IT infrastructure was adapted to new challenges and was working without major failures; — A mobile application has been developed to monitor the health status of employees; — Unhindered operational performances 24/7 (quay, yard and gates), to support and protect customers’ supply chains in Russia; — Improved commercial and operational flexibility to support customers; — Maximum digitalisation of documentation and customer integration continued. Further development of online solution to decrease necessity of client’s presence at the terminal; — Discipline in spending: strict and careful management of funds, including pro-active management of costs, receivables and capacity for effective adaptation to crisis and its consequences, stress testing of financial performance and liquidity position, revisiting financial plans. All these measures implemented ensured that the terminals of the Group (quay, yard and gates) remained 100% operational to service vessels/ handle cargoes throughout the pandemic as well as the call and service centres of the Group were working without interruption. The future effects of the current economic situation and the above measures 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. The Finnish authorities implemented numerous measures attempting to contain the spreading and impact of COVID-19. Management is taking necessary measures to ensure the safety of employees and ensure sustainability operations. Recommendation to use face masks has been given to employees. Separation of shifts was reinstated from October 2020. Guarantees granted to subsidiaries Refer to Note 21(k) for details of guarantees granted to direct and indirect subsidiaries. Commitments There were no material commitments as of 31 December 2020 and 31 December 2019. 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: 1 2 3 4 5 6 a. Revenue (in thousands of US dollars) Management fees from: Subsidiaries Total b. Dividend income (in thousands of US dollars) Subsidiaries Total For the year ended 31 December 2020 2019 103 103 106 106 For the year ended 31 December 2020 3 291 3 291 2019 5 431 5 431 During 2020 the dividends receivable from Intercross Investments B.V. in amount of US$2,685 thousand were set-off against borrowings of GPI (Note 21(h)). c. Interest expenses (in thousands of US dollars) Interest expense: Subsidiaries Total interest expenses d. Other gains/(losses) — net (in thousands of US dollars) Subsidiaries (Note 7 and 21(k)) Total For the year ended 31 December 2020 2019 1 211 1 211 1 079 1 079 For the year ended 31 December 2020 2019 (12 102) (12 102) 1 284 1 284 51 50 Global Ports Investments PLC Annual Report 2020 globalports.com         NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 21. Related party transactions (continued) 21. Related party transactions (continued) 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 2020 2019 220 220 215 215 h. 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 For the year ended 31 December 2020 2019 Foreign exchange differences At end of year Set-off against distributions receivable from subsidiary (Notes 14, 17 and 21(b)) 1 2 3 4 5 6 For the year ended 31 December 2020 2019 20 381 15 921 (14 936) 1 211 (3 409) (69) 19 099 22 197 7 078 (9 985) 1 079 — 12 20 381 44 — 44 2 205 2 205 1 861 9 1 870 3 668 3 668 The borrowings from related parties at 31 December 2020 are USD-denominated, bear effective interest at the rate 7%, are unsecured and repayable in 2024. At 31 December 2019, the borrowings from related parties in amount of US$3,466 thousand were EUR-denominated, bore effective interest at the rate of 3.82%, were unsecured and were fully settled during 2020 in the form of a set-off arrangement. The fair values of borrowings as at 31 December 2020 and 2019 approximate their carrying value. As of 31 December 2020, the Company had undrawn loan facilities in the total amount of US$10,360 thousand (2019: US$26,280 thousand). g. Key management personnel compensation The compensation of key management personnel and the total remuneration of the Directors (included in the key management personnel compensation) were as follows: i. Other receivables (in thousands of US dollars) (in thousands of US dollars) Key management compensation: For the year ended 31 December 2020 2019 Salaries, fees, payroll taxes and other short-term employee benefits 1 029 1 375 Directors’ remuneration: Fees Emoluments in their executive capacity Total 244 — 244 248 570 818 Repayment of capital from subsidiaries (Note 16) Total j. Other payables (in thousands of US dollars) Payroll payable (Note 19) Entities under control of owners of controlling entities (Note 19) Total 52 Global Ports Investments PLC Annual Report 2020 globalports.com As at 31 December 2020 2019 — — 425 425 As at 31 December 2020 2019 284 — 284 470 207 677 53                                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 21. Related party transactions (continued) k. 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$148,967 thousand (including interest accrued) as at 31 December 2020 (31 December 2019: US$249,364 thousand). At inception the fair value of these guarantees was US$2,575 thousand. As at 31 December 2020 the unamortised balance of this guarantee was US$247 thousand (31 December 2019: US$618 thousand). During 2016 the Company and its indirect subsidiaries granted guarantee to an indirect subsidiary (from 2020 a direct subsidiary) of the Company, which issued the Eurobonds, in the event of default in respect of those bonds with a balance of US$507,679 thousand (including interest accrued) as at 31 December 2020 (31 December 2019: US$518,916 thousand). At inception the fair value of the guarantee was US$3,588 thousand. During 2019 the Company and its indirect subsidiaries granted additional guarantees to the indirect subsidiary (from 2020 a direct subsidiary) in respect of forward contracts to acquire US$122,400 thousand as at 31 December 2020 (31 December 2019: US$130,000 thousand). At inception the fair value of the guarantee was US$1,162 thousand. As at 31 December 2020 the aggregate unamortised balance of these guarantees was US$1,124 thousand (31 December 2019: US$1,930 thousand). At the year-end these guarantees were remeasured to US$14,495 thousand based on 100% of the amount of the loss allowance determined in accordance with the IFRS 9 ECL model which was determined to be higher than the unamortised balance of the guarantees as of 31 December 2020 by US$13,371 thousand (Note 7). 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$60,288 thousand (including interest accrued) as at 31 December 2020 (31 December 2019: US$71,945 thousand). At inception the fair value of the guarantee was US$355 thousand. As at 31 December 2020 the unamortised balance of this guarantee was US$280 thousand (31 December 2019: US$352 thousand). During 2020 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$67,948 thousand (including interest accrued) as at 31 December 2020. At inception the fair value of the guarantee was US$1,692 thousand. As at 31 December 2020 the unamortised balance of this guarantee was US$1,672 thousand. 22. Events after the balance sheet date There were no material post balance sheet events which have a bearing on the understanding of these financial statements. 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 2020, 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. 1 2 3 4 5 6 What we have audited We have audited the financial statements which are presented in pages 27 to 54 and comprise: — the balance sheet as at 31 December 2020; — 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 We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We 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. 54 Global Ports Investments PLC Annual Report 2020 globalports.com 55 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) INDEPENDENT AUDITOR’S REPORT (CONTINUED) 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 Key audit matters Overall materiality: US$6,5 million, which represents approximately 1% of total assets. We have identified the impairment 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. Overall materiality How we determined it US$6,5 million Approximately 1% of total assets Rationale for the materiality benchmark applied We chose total assets as the benchmark, because, in our view: — it is the benchmark against which the performance of the Company 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$0,5 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud 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. 1 2 3 4 5 6 Key Audit Matter How our audit addressed the Key Audit Matter Impairment assessment of investments in subsidiaries and joint ventures Because of COVID-19 related uncertainties, the Company’s Board of Directors considered that there are impairment indications and has performed an impairment test for all investments in subsidiaries and joint ventures that hold operating assets. We focused on this area due to: — the size of the Company’s investments in subsidiaries and joint ventures holding operating assets, and — the assessment of the recoverable amounts of these subsidiaries and joint ventures involves complex and subjective judgements about the future results of the business and the applicable discount rates where value in use models were used and about the estimation of fair value less costs to sell. In particular, we focused our audit effort on the Board of Directors’ test for impairment of the investments in subsidiary National Container Holding Company Limited and joint venture Multi-Link Terminals Limited (MLT), due to the fact that these are the material investments of the Company that hold operating assets and an impairment test was performed by the Board of Directors for their underlying cash-generating units (“CGUs”) (see Note 4) due to identified impairment indications as a result of the COVID-19 outbreak. The recoverable amount of the investment in joint venture MLT was determined based on the recoverable amounts of Moby Dik (MD) and Multi- Link Terminals (MLT Oy) CGUs. The recoverable amount of MD CGU was determined by the Board of Directors based on the fair value We evaluated the valuation inputs and assumptions, methodologies and calculations adopted by the Company’s Board of Directors in determining the recoverable amounts of the Company’s investments in subsidiaries and joint ventures. In order to assist us in our audit we involved valuation experts that have the knowledge and experience in the industry and country of operation of the underlying CGUs to assist us in evaluating the methodology, models and assumptions used in value in use calculations, as well as evaluating the fair value less cost to sell calculations. For MD CGU, we evaluated whether the fair value less costs to sell approach is more appropriate than value in use approach to determine the CGU’s recoverable amount given the specific circumstances of the CGU. We further evaluated the work of the management’s expert involved for the valuation of MD CGU’s assets by assessing the competence, capabilities and objectivity of the independent appraiser and the methodology, models and inputs used by the management’s expert. With respect to the value in use models used for the CGUs of National Container Holding Company Limited and MLT Oy, a component of MLT, 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. 56 Global Ports Investments PLC Annual Report 2020 globalports.com 57 INDEPENDENT AUDITOR’S REPORT (CONTINUED) INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter How our audit addressed the Key Audit Matter less costs to sell approach. In determining the fair value of MD CGU, the Board of Directors involved an independent appraiser (the management’s expert). The recoverable amount of MLT Oy CGU was determined based on value in use calculations. The recoverable amount of the investment in subsidiary National Container Holding Company Limited (FCT/PLP, VSC and ULCT CGUs) was determined based on value in use calculations for each CGU. The expected cash flows (budgets) for the year 2021 and the remaining assumptions used for each CGU’s 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 assumptions (Note 4). Based on the results of the impairment tests carried out in respect of the above investments in subsidiaries and joint ventures, no impairment losses have been identified. Refer to Notes 4, 14 and 15 to the financial statements for the related disclosures. 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. We have also performed look-back procedures by comparing previous budgets used in value in use calculations to actual results. We lastly evaluated the adequacy of the disclosures made in Notes 4, 14 and 15 of the financial statements, including those regarding the key assumptions. Based on the evidence obtained, we found that the methodologies, assumptions and data used within the models and the related disclosures included in the financial statements, 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. 1 2 3 4 5 6 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. Responsibilities of the Board of Directors and those charged with governance for the Financial Statements 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. 58 Global Ports Investments PLC Annual Report 2020 globalports.com 59 INDEPENDENT AUDITOR’S REPORT (CONTINUED) INDEPENDENT AUDITOR’S REPORT (CONTINUED) — 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 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 1 March 2021 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. 1 2 3 4 5 6 statements represent the underlying transactions and events in a manner that achieves a true and fair view. Other Legal Requirements 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. Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. 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 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 2011. Since then, the total period of uninterrupted engagement appointment was 10 years. — 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. 60 Global Ports Investments PLC Annual Report 2020 globalports.com 61 INDEPENDENT AUDITOR’S REPORT (CONTINUED) 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. We have reported separately on the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2020. 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 2021 1 2 3 4 5 6 62 Global Ports Investments PLC Annual Report 2020 globalports.com 63 ADDITIONAL INFORMATION Directors’ Responsibility Statement We confirm that to the best of our knowledge: This Annual Report includes a fair, balanced and understandable 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 1 2 3 4 5 6 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. 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, write-off and impairment of property plant and equipment, depreciation and impairment of right-of-use assets, amortisation, write-off and impairment of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/(losses)—net. 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 Cost of Sales (a non-IFRS financial measure) is defined as cost of sales, adjusted for depreciation, write-off and impairment of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation, write-off and impairment of intangible assets. Cash Administrative, Selling and Marketing Expenses (a non-IFRS financial measure) is defined as administrative, selling and marketing expenses, adjusted for depreciation, write-off and impairment of property, plant and equipment, depreciation and impairment of right-of-use assets, amortisation, write-off and impairment of intangible assets. 64 Global Ports Investments PLC Annual Report 2020 globalports.com 65 1 2 3 4 5 6 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). CD Holding Group consists of Yanino Logistics Park (an inland terminal in the vicinity of St. Petersburg) and CD Holding Group. The results of CD Holding Group 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. 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 to be established in the country. 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. Functional Currency is defined as the currency of the primary economic environment in which the entity operates. The functional currency of the Company and certain other entities in the Global Ports Group is US dollars. The functional currency of the Global Ports Group’s operating companies for the years under review was (a) for the Russian Ports segment, the Russian Rouble and (b) for the Finnish Ports segment, the Euro. 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. 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 kilometers 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. 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. 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 kilometers 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. 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. Weighted Average Effective Interest Rate is the average of interest rates weighted by the share of each loan in the total debt portfolio. 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, write-off and impairment of property, plant and equipment, less depreciation and impairment of right-of-use assets, less amortisation, write-off and impairment of intangible assets; 66 Global Ports Investments PLC Annual Report 2020 globalports.com 67 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 CY-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 Margarita Potekhina Head of Media Relations Tel: +7 812 677 15 57 ext. 2889 E-mail: media@globalports.com PR Consultants Teneo Zoë Watt Doug Campbell Tel: +44 20 7260 2700 E-mail: globalports@teneo.com Depositary J.P. Morgan Depositary Receipts 383 Madison Avenue, Floor 11 New York, NY 10179 www.adr.com/contact/jpmorgan 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 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 Google Play App Store 68 Global Ports Investments PLC Annual Report 2020 globalports.com 

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