MPC Container Ships ASA

Annual Report (ESEF) • Jan 13, 2023

Untitled ANNUAL REPORT 2021 We connect local ports with global trade lanes MPC CONTAINER SHIPS ASA Operational and financial highlights FY 2021 2020 2021 16,164 290,436 EBITDA in USD thousands 2020 2021 16,502 212,187 Operating cash flow in USD thousands 2020 2021 171,898 384,71 Operating revenues in USD thousands 2021 2020 Change Number of Container Ships 1 61 57 +4 Transport capacity of container ship fleet TTEU 168,072 109,240 +58,832 Utilization rate (in%) 97.9 91.6 +6.3 Operating revenues USD thousand 384,710 171,898 +212,812 EBITDA USD thousand 290,436 16,164 +274,272 Operating result (EBIT) USD thousand 230,699 -42,486 +273,185 Net profit/loss for the period (adjusted) USD thousand 189,854 -64,491 +254,345 Cash flow from operating activities USD thousand 212,187 16,502 +195,685 Balance sheet total USD thousand 1,034,613 678,138 +356,485 Equity USD thousand 727,589 383,032 +344,557 Interest bearing loans and borrowings USD thousand 231,826 276,916 -45,090 Cash and cash equivalents USD thousand 180,329 39,254 +141,075 1 Note: number of ships includes vessels of joint ventures Annual Report 2021 MPC Container Ships 1 + Successful business year with substantial increase in revenues and earnings driven by strong demand for our charter vessels + Highly accretive vessel acquisitions and attractive vessel sales realized, which facilitate refinancing and significant distributions to shareholders + Utilization rate of container vessel fleet improved by 6.3 ppt to 97.9% + Operating revenues 384.7 USD m (+171,898 USD m) + Average Time Charter Equivalent (TCE) more than double to 16,887 USD/day + Average Operating Expenses (OPEX) increase only by 9.5% to 5,379 USD/day + Operational yield (EBITDA per day) jumped significantly to 10,268 USD + EBITDA 290.4 USD m (FY 2020: 16.2 USD m) including 65.1 USD m from asset sales + Solid balance sheet: 70%+ equity ratio, 22% leverage, 180 USD m cash + Distribution to shareholders: 200 USD m (150 USD m special and 50 USD m recurring dividend) HIGHLIGHTS 2021 Annual Report 2021 MPC Container Ships 1 CONTENT 3 Profile 4 Board of Directors 8 Vision & Mission 10 Board of Directors report 21 ESG report 22 Corporate social responsibility 38 Responsibility statement 40 Consolidated financial statements 41 Consolidated Income Statement 42 Consolidated statement of comprehensive income 43 Consolidated statement of financial position 44 Consolidated statement of changes in equity 45 Consolidated statement of cash flow 46 Notes 75 Alternative performance measures 78 Parent financial statements 79 Income statement 80 Statement of financial position 81 Statement of cash flow 82 Notes 88 Auditor’s report Annual Report 2021 MPC Container Ships 3 MPC Container Ships is a market-leading container ship company specialising in serving intra-regional trade lanes, owning and operating one of the largest feeder fleets globally. MPC Container Ships focuses on the ownership and operation of smaller container vessels deployed in regional and intra-regional services due to a combination of distance, volumes and port infrastructure restrictions as well as flexibility requirements, e.g. transhipment of containers from large vessels at deep- water ports into smaller vessels serving minor ports in the regions (hub-and-spoke supply chains). Intra-regional services support main services by connecting ports on intercontinental shipping lanes with one or more smaller ports, which are not services by the main line vessels. PROFILE Annual Report 2021 MPC Container Ships 3 BOARD OF DIRECTORS Annual Report 2021 MPC Container Ships 5 4 MPC Container Ships Annual Report 2021 Board of Directors Ulf Holländer Chairman Ulf Holländer commenced his career as an audit assistant and auditor at Dr. W Schlage & Co Wirtschaftsprüfungs- und Steuer- beratungsgesellschaft in Hamburg (1984- 1987). Succeedingly, during 1987-2000, he work at shipping group Hamburg Süd and affiliated companies in Australia and the U.S. Positions included financial control- ler at Columbus Overseas Services Pty. (1990-1992), commercial director at Colum- bus Line USA Inc. (1992-1996) and head of Hamburg Süd’s finance and accounting department (1997-2000). Mr. Holländer was CFO of MPC Münchmeyer Petersen Capital AG (2000-2015) before assuming the role as CEO in 2015. Mr. Holländer holds a commerce degree from the University of Hamburg. Laura Carballo Director Laura Carballo began her career within investment banking at Merrill Lynch (1998- 2000) before working at private equity firm Compass Partners International (2000-2004). In 2004, Mrs. Carballo joined UK-based private equity outfit STAR Capital Partners Ltd. and successor STAR Capital Partnership LLP, where she is currently partner and Head of Portfolio Manage- ment. Mrs. Carballo holds a B.S. in Eco- nomics from Duke University and an MBA from INSEAD. Dr. Axel Schroeder Director Dr. Axel Schroeder has held various posi- tions within the MPC Group since 1990, including engagements in MPC Münch- meyer Petersen Capital AG (“MPC Capital”) from its infancy in 1994. He functioned as the company’s CEO from 1999 to 2015, dur- ing which period MPC Capital was listed at the Frankfurt Stock Exchange (2000). Since 2015, Dr. Schroeder has chaired MPC Capital’s Supervisory Board. Moreover, he is managing partner of MPC Münchmeyer Petersen & Co. GmbH, MPC Participia GmbH and CSI Beteiligungsgesellschaft mbH. Dr. Schroeder studied Economics and Social Science at the University of Hamburg (1985- 1990) followed by a doctorate (1993). Ellen Hanetho Director Ellen Hanetho was an analyst and senior associate at the investment bank division of Goldman Sachs International Ltd. (1997- 2002) and subsequently investment man- ager and later partner at Credo Partners AS (2003-2012). At present, she serves as CEO of Frigaard Invest AS (part of the Frig- aard Group) and board member of Kongs- berg Automotive ASA, Fearnley Securities AS and Stokke Industri AS, among others. Mrs. Hanetho holds a BSBA in Business and Administration from Boston University and an MBA from Solvay Business School. Peter Frederiksen Director Peter Frederiksen completed several exec- utive development programmes at INSEAD and Cornell Johnson Graduate School of Management after graduating from A.P. Møller Maersk Shipping. He held manage- ment and board positions at Hamburg Süd for 9 years and at Maersk Line for 25 years. He has extensive experience in the ship- ping industry and currently serves on the board of several shipping and maritime companies. Among others, he is a board member at Uni-Tankers A/S and Bunker Holding A/S. Board of Directors Annual Report 2021 MPC Container Ships 5 4 MPC Container Ships Annual Report 2021 Vision & Mission WE DELIVER STRONG VALUE FOR OUR CUSTOMERS AND OUR STAKEHOLDERS Vision & Mission Vision As a world-leading tonnage provider with a focus on serving intra-regional trade lanes, MPC Container Ships shall be a preferred chartering partner and generate shareholder value through accretive operations and capital allocation. Mission For our shareholders: We offer an attractive investment opportunity into a pure-play company with a strategy focusing on value-accretive investment decisions and operations + Risk/return profile: Achieve double-digit equity return with moderate leverage + Offer transparent, active and stringent capital allocation + Pursue opportunities for value accretion within the defined strategy + Ensure professional asset and portfolio management For our customers: We acknowledge our customers’ individual needs and offer them a reliable partner with innovative solutions + Provide high-quality services + Add value to our customers by offering customized solutions + Maintain reliable, safe and efficient operation of our vessels + Act as a transparent and trustworthy business partner For our service providers and suppliers: We value professional, transparent and fair business relationships + Clearly communicate expectations and values + Foster cooperative relationships + Act as a transparent and trustworthy business partner VISION & MISSION Vision & Mission 8 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 9 For our employees: We are a professional and positive workplace with an inclusive working environment + Protect the health and safety of our employees + Offer personal development and motivation + Workplace free from any form of discrimination For the environment and societies in which we conduct our business: We will ensure sound corporate responsibility + Conduct business with integrity and respect laws, fundamental human rights, different cultures and human dignity + Show consideration for the local communities in which we are a part of and the environment in which we operate + Contribute to learning and distribution of knowledge + Establish long-term working relationships and utilize the shipping sector’s expertise for the further development of the industry + Meet stakeholders with insight, respect and understanding and in an open and appropriate manner + Please read our Code of Conduct and other governance documents to learn about how MPC Container Ships conduct our business. Vision & Mission 8 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 9 BOARD OF DIRECTORS REPORT Annual Report 2021 MPC Container Ships 11 10 MPC Container Ships Annual Report 2021 Board of Directors Report Business overviewand corporate development MPC Container Ships ASA (“the Company” or “MPCC”, together with its subsidiaries the “Group”) was incorporated on 9 January 2017 as a private limited liability company under the laws of Norway, and converted to a Norwegian public limited liability company on 16 January 2018. The Group’s principal business activity is to invest in and operate maritime assets in the container shipping segment. As a dedicated owner and operator of container ships, the Group has a focus on feeder vessels, mainly between 1,000 and 5,000 TEU, that are chartered out to liner shipping companies and regional carriers. With the economic recovery from the COVID-19 pandemic that began in H2 2020, especially US imports increased significantly in absolute and relative terms and triggered a historic and unprec- edented container market boom. As a result, container vessel capacity and supply of equipment became tight. Shippers started to compete for the limited number of box spots available and liner companies competed for container vessels to charter. This caused freight and time-charter rates to rise sharply in the short term, sec- ond-hand and new-build asset prices surging subsequently, result- ing in record liner and non-operating owner earnings. In light of this market boom and the new situation for liners, shippers and non-operating vessel owners, the structure of the time-charter has market changed significantly. Before the pan- demic, the charter market was characterised by spot business with reduced rates, short charter periods and wide redelivery win- dows. Within 18 months, the market turned into a forward market with extended periods, negligible redelivery windows and rates at record highs. So far, analysts expected the container vessel market to normal- ise in late 2022. Until today, however, there are no signs of such normalisation, and when the market actually starts to normalise, the question will be what the new normal might look like. In a sit- uation where charter rates, freight rates, asset prices, earnings and other market peculiarities have changed fundamentally, this question has no straightforward answer. Special attention has to be drawn to the conflict between Rus- sia and Ukraine as well as the economic and financial sanctions decided by the West to force Russia to end the conflict. The Com- pany has made an assessment of all relevant areas, i.e. operations, contracts, charter parties etc. in order to identify risks and define specific countermeasures. Regarding the commercial risks from vessels trading in the critical area, four vessels have been stopped to call ports in Ukraine and Russia. Also, no dockings are scheduled in the region. With regard to the risk exposure of the charterpar- ties, the Company assessed relevant contractual clauses, which are standard in most of todays executed charterparties. Besides these existent risk factors, our risk assessment concludes that there is no immediate holistic impact on MPCC expected, yet in a market struck by sanctions effects and other potential war-induced fall- outs, MPCC might not remain completely unaffected. Nevertheless, we remain confident that there should not be a complete disruption of the global supply chain. Furthermore, any stress or war scenario would not make the current scarcity of tonnage disappear. Financing The year 2021 was characterized by various measures to optimize the balance sheet structure and to decrease the Group’s debt. On 29 July 2021, the Group entered into a USD 70 million three- year revolving credit facility agreement with CIT Bank N.A. (now under the name First-Citizens Bank & Trust Co.), under the terms of which MPCC Second Financing GmbH & Co. KG, a subsidiary of the Company, is the borrower. The credit facility matures mid 2024. The initial drawdown of USD 55 million was made to refinance exist- ing debt. As a consequence a term loan of USD 29 million and a non-recourse senior secured term loan of USD 59.2 million were repaid in full. On 20 October 2021, the Group entered into an agreement for a USD 180 million five-year senior secured credit facility with Hamburg Commercial Bank (“HCOB”). The credit facility consists of a USD 130 million term loan and a revolving credit facility of USD 50 million. The loan and credit line matures in November 2026. The HCOB Facility was partly used to prepay the remaining bal- ance under a USD 127.5 million acquisition finance facility that had been granted under a bridge facility agreement dated 27 July 2021 by DNB Bank to MPCC Third Financing AS in connection with the acquisition of Songa Container AS (see details on the Songa Trans - action below). The DNB Bridge facility was discharged in full in Q4 2021 (USD 30 million in Q3 and USD 97.5 million in Q4). The HCOB facility was further partly used to prepay the USD 204 mil- lion bond by MPC Container Ships Invest B.V. in full in Q4 2021. The related interest rate swap utilized to hedge the bond loan was sim- ilarly terminated in December 2021. There remain three derivatives in place, whose current market value is zero, which will terminate in September 2022. Due to the construction of the hedging instru- ments (interest rate CAP), there is no risk occurring from negative market values. Board of Directors Report Annual Report 2021 MPC Container Ships 11 10 MPC Container Ships Annual Report 2021 Fleet changes On the operational side, in 2021 and in light of substantially increased second hand prices, the Group divested a number of vessels, taking chance of accretive portfolio management opportunities. The vessels AS Laguna (sold per 10 December 2020) and AS Frida were delivered to their new owners in the first half of 2021. On 18 August 2021, a subsidiary of 2. Bluewater Holding Schif- fahrtsgesellschaft GmbH & Co. KG, where the Group has a 50% interest, entered into an agreement for the sale of AS Cordelia for USD 39.0 million. The vessel was delivered to its new owner in Octo- ber 2021 and the estimated gain of approximately USD 16 million, which represents the Group’s 50% share, was recognised in Q4 2021. In Q4 2021, six vessels with an average size of 1,200 TEU were sold for total gross proceeds of USD 135 million. The disposed ves- sels were AS Anne Sibum, AS Stefan Sibum, AS Grete Sibum, AS Federica, AS Faustina and AS Riccarda with a total book value of USD 82.8 million. The total gain recognised from these vessel sales was USD 54.7 million and is included in other income in the consol- idated income statement. Furthermore, on 17 November 2021, the Group entered into an agreement for the sale of the 50% owned vessel AS Petu- lia for USD 35.8 million and the fully owned vessel AS Palatia for USD 35.8 million. At 31 December 2021, the Group has classified the vessel AS Pala- tia as held for sale since it had entered into an agreement for the delivery of this vessel after the balance sheet date (see subsequent events) and the sale being considered as highly probable as at that date. The vessel sale proceeds of USD 35.8 million is expected to result in a gain for the Group of USD 21.5 million which is expected to be recognized in Q1 2022. The vessel AS Palatia was successfully handed over to its new owners on 10 January 2022. On 13 Janu- ary 2022, also the vessel AS Petulia was handed over to its new owners. On 17 December 2021, a further agreement for the sale of the joint-venture owned vessel AS Patricia was entered into for USD 34.3 million which is expected to result in a gain of USD 23.1 mil- lion. Handover of AS Patricia is expected to take place either still in Q1 2022 or in Q2 2022. Relevant corporate changes and subsequent events On 22 June 2021, the Group entered into a share purchase agree- ment to acquire Songa Container AS (“Songa”) for an aggregate acquisition price of USD 210.25 million. The Transaction, cover- ing 100% of the shares in Songa, including a minority interest in certain Songa subsidiaries, was completed on 9 August 2021. The consideration was paid partly in cash and partly in new shares, and a total of 49,795,250 new shares were issued under the Transaction. The acquisition of Songa Containers AS has marked an important strategic milestone in the history of the Company and supports the Company to sustain its position as the largest tonnage provider in intra-regional trades. Furthermore, the Company entered into an agreement with the warrant holders MPC Capital Beteiligungsgesellschaft mbH & Co. KG on 3 September 2021, to settle the 3,740,604 warrants already vested for at a cash consideration of USD 3.5 million. On 21 Janu- ary 2022, the Company entered into an agreement with the war- rant holders MPC Capital Beteiligungsgesellschaft mbH & Co. KG, to settle the remaining 1,870,302 warrants already vested for a cash consideration of USD 2.2 million. Following this settlement agree- ment, there are no longer any outstanding warrants relating to the Company’s shares. Moreover, on 24 January 2022, Darren Maupin resigned from his position as member of the board of MPC Container Ships ASA. On 25 February 2022, Peter Frederiksen was elected as a new board member by an extraordinary general meeting of the Company. An extraordinary general meeting of the Company was held on 28 January 2022. The general meeting passed the resolution to reduce the Company’s share capital from NOK 444,051,377 to NOK 443,700,279 by cancelling the Company’s treasury shares of in total 351,098 shares. The amount of the share capital reduction of NOK 351,098 will be transferred to other equity. This resolution entails no payments to be made by the Company. The Board of Directors resolved to cancel the treasury shares on 17 March 2022. A further important step in the Company’s development took place on 2 February 2022, when MPC Container Ships ASA announced that its Board of Directors had resolved to distribute a dividend of NOK 3.00 per share, in total NOK 1.33 billion (about USD 150 million), based on the Company’s approved annual accounts for the financial year 2020. The decision was based on an authority granted by the Company’s extraordinary general meeting on 28 January 2022. The ex-dividend date of the shares was 7 February 2022. On 24 Febru- ary 2022 the board of directors resolved to distribute a further div- idend of USD 0.11 per share, amounting to USD 48.8 million, based on the financial results of Q4 2021. Payment to shares registered with Euronext VPS will be distributed in NOK. The distribution will be made from previously paid in share premium transferred from the Company’s share premium account. The dividend is scheduled to be paid out on or about 30 March 2022. Key performance indicators 2021 + Total ownership days of the fully owned vessels were 21,942 (2020: 21,616) + Total trading days of fully owned vessels were 20,909 (2020: 19,377) + The utilisation 1 in 2021 was 95.3% (2020: 91.6%) + Average time charter equivalent (“TCE”) was USD 16,887 per day in 2021 (2020: USD 8,102 per day) 1 Utilization in percentage represents the total trading days including off- hire days related to dry docks divided by the total number of ownership days during the period. Board of Directors Report 12 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 13 + Average operating expenses (“OPEX”) were USD 5,379 per day in 2021 (2020: USD 4,918 per day) + Equity ratio as at 31 December 2021 was 70.4%, the leverage ratio was 22.4% Consolidated financial statements Income statement Following the recovery in the container shipping market in 2021 after the outbreak of COVID-19 in 2020, the Group experienced sig- nificantly increased charter rates and utilisation of the fleet due to the historically good market conditions in the container shipping industry as a result of tight global vessel capacity. Due to these improvements in the charter market, the Group’s revenues and earnings increased in 2021 compared to 2020, as set out below. Additionally, the net profit for the year increased accordingly with no impairment charges in 2021 compared to USD 9.0 million in 2020 despite also higher depreciations, mainly as a result of the acquisi- tion of Songa Container and other regulatory capex. The Group’s vessels are chartered out on time charter con- tracts to global and regional liner shipping companies. Oper- ating revenues in 2021 amounted to USD 384.7 million (2020: USD 171.9 million). Vessel-related expenses were USD 154.8 million (2020: USD 147.1 million), resulting in a gross profit from vessel operations of USD 254.7 million including share of profit from joint venture (2020: USD 25.7 million). The Group’s earnings before interest, tax, depreciation and amorti- sation (“EBITDA”) was USD 290.4 million compared to USD 16.2 mil- lion in 2020. Profit before tax was USD 190.5 million (2020: loss of USD 64.4 mil- lion) and income tax expenses amounted to USD 0.7 million (2020: USD 0.1 million), resulting in a profit for the period of USD 189.9 mil- lion (2020: loss of USD 64.5 million). The Board of Directors proposes to allocate USD 190.5 million to retained earnings for 2021. Earnings per share Basic and diluted earnings per share for the year were USD 0.46 (2020: negative USD 0.27) and USD 0.46 (2020: negative USD 0.27), respectively. Financial position The Group’s total assets amounted to USD 1,034.6 million as at 31 December 2021 (USD 678.1 million as at 31 December 2020). Non-current assets in the amount of USD 803.0 million reflect the carrying amounts of the vessels operated by the Group including the equity investments in a joint venture which holds eight addi- tional vessels. Total equity was USD 727.6 million as at 31 December 2021 (USD 383.0 million as at 31 December 2020) with non-controlling interest of USD 0.9 million. The change in equity in 2021 mainly relates to the net profit for the period of USD 189.9 million included the capital increase of USD 149.5 million net of share issuance costs which took place on 9 August 2021, partly offset by settle- ments of warrants of USD 3.6 million. As at 31 December 2021, the Group had interest-bearing debt in the amount of USD 231.8 million (USD 276.9 million as at 31 December 2020). The decrease in long- term debt is due to repayments of debt also affected by new debt proceeds during the year. Cash flow The Group reports an operating cash flow of USD 212.2 million (2020: USD 16.5 million) for the year 2021. The increase is mainly due to improvements in the charter market (among others) caused by the COVID-19 pandemic and the implied effects on the supply chain combined with strong demand-supply fundamentals, as described above. The cash flow from investing activities was pos- itive by USD 43.2 million (2020 negative USD 29.4 million), mainly due to disposals of vessels totalling USD 141.4 million and dividends received from joint venture investments of USD 24.5 million, partly offset by regular capex investments and upgrades on the vessels of USD 41.1 million and cash consideration related to the acquisi- tions of Songa Container of USD 72.7 million. The cash flow from financing activities was negative by USD 114.3 million (2020: pos- itive USD 12.0 million), mainly affected by the repayment of long- term debt in the amount of USD 455.9 million, paid interest of USD 14.1 million and proceeds from the issuance of long-term debt of USD 368.5 million. Cash and cash equivalents as at 31 December 2021 were USD 180.3 million (31 December 2020: USD 39.3 million). Board of Directors Report 12 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 13 Parent financial statements Income statement Revenues during 2021 were USD 14.8 million (2020: USD 16.5 mil- lion). Payroll and other operating expenses were USD 24.2 million (2020: USD 20.3 million), resulting in a negative operating result of USD 9.4 million (2020: negative by USD 3.8 million). Net finan- cial income/expense was positive USD 22.0 million (2020: positive USD 0.2 million). Profit before tax was USD 12.6 million (2020: loss of USD 3.6 million), resulting in a net profit for the period of USD 12.7 million (2020: loss of USD 3.6 million). The Board of Directors has proposed that the net profit for the period is allocated to retained losses. Financial position The Company’s total assets amounted to USD 699.5 million as at 31 December 2021 (USD 491.5 million as at 31 December 2020). Non-current assets in the amount of USD 516.9 million (2020: USD 483.2 million) comprise mainly equity investments in affili- ated companies. Total equity was USD 447.8 million as at 31 December 2021 (2020: USD 490.0 million). Total liabilities were USD 251.8 million as at 31 December 2021 (2020: USD 1.4 million). The increase is mainly explained by proposed dividends. Cash flow During 2021, the Company generated a negative cash flow from operating activities of USD 0.7 million (2020: negative USD 3.0 mil- lion). The cash flow from investing activities into vessels and joint venture investments was positive USD 127.8 million (2020: nega- tive USD 39.2 million), reflected by proceeds from loans from sub- sidiaries and dividends from both subsidiaries and joint venture investments. The negative cash flow from financing activities of USD 28.4 million (2020: positive USD 42.2 million) is mainly due to repayment of debt of USD 25.7 million and repayment of hedging instruments of USD 1.9 million. The total net change in cash and cash equivalents in 2021 was USD 98.8 million (2020: negative USD 1.0 million). Cash and cash equivalents as at 31 December 2021 were USD 101.8 million (31 December 2020: USD 3.1 million). Dividend considerations The Company’s intention is to pay regular dividends in support of its objective of returning capital to shareholders. The timing and amount of dividends is at the discretion of the Board of Directors. Any future dividends proposed will depend upon the Group’s finan- cial position, earnings, debt covenants, distribution restrictions, capital requirements, investment opportunities and other factors. Going concern In accordance with the Norwegian Accounting Act § 3-3a, the Board of Directors confirm that the going concern assumption on which the financial statements have been prepared, is appropriate. This assumption is based on the current market perception, contracted charter backlog as well as respective budgeted future cash flows for 2022 and 2023. Work environment and equal opportunities As at 31 December 2021, the Group employed 24 people, 19 men and 5 women. The Group strives for diversity on a broad basis, includ- ing gender, age, ethnicity, personal beliefs, background, education, sexual orientation and nationality. The ESG report includes key metrics related to diversity and information regarding the Group’s efforts to promote diversity. Offshore personnel operating the Group’s vessels are not employed by the Group, but we have high focus on health and safety on board on our vessels. The working environment onshore is considered to be good, and efforts for improvements are made on an ongoing basis through, among others, employee development review and feedback ses- sions with the individual persons. No leave of absence, incidences or reporting of work-related accidents resulting in significant material damage or personal injury occurred during the year. The Norwegian Discrimination Act’s objective is to promote gender equality, ensure equal opportunities and rights and prevent dis- crimination due to ethnicity, national origin, descent, language, religion and faith. The Group is working in an active, determined and systematic way to encourage the act’s purpose within our busi - ness, and aims to be a workplace with equal opportunities. This is reflected in the Company’s Code of Conduct, applicable to all entities controlled by the Company and all employees, directors, officers and agents. Board of Directors Report 14 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 15 As at 31 December 2021, the Board of Directors consists of two women and three men. The executive management consists of two men. Internal controls and risk management In accordance with the principles underlying value-based manage- ment, the Board of Directors places great importance on system- atic risk management. This is done not only to satisfy the require- ments set out by law, but also to ensure the Company’s governance in a highly dynamic market environment by identifying existing and potential risk exposures. Through (i) quarterly reviews of the Company’s most prominent areas of risk exposure and its internal control arrangements, (ii) management guidelines and (iii) the appointment of a dedicated risk management unit to perform risk monitoring and provide regular risk management updates to the Risk & Audit Commit- tee, the Board of Directors aims to ensure that the Company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the Company’s activities. As at 1 July 2021 the Company contracted an experienced law- yer as External Compliance Officer to support the Chief Compli- ance Officer in defining and setting-up a comprehensive Compli- ance Management System (CMS) and heading the daily operative routines. As at 30 August 2021 the Company contracted Mrs. Sunniva Nising Sandvold of the Norwegian law firm CMS Kluge Advokatfirma AS as External Data Protection Officer. Corporate governance and corporate social responsibility Good corporate governance is a prerequisite for cooperation based on trust between the owners, the Board of Directors and the man- agement of the Group, with a view of achieving long-term growth. Of equal importance is the Company’s corporate social responsi- bility, which shall be reflected in our core values, the quality of our work and services and in our entire range of activities. The Com- pany shall: + operate our business with integrity and respect laws, different cultures and human dignity; + not tolerate active corruption (attempts to bribe others) or passive corruption (allowing oneself to be bribed) including our agents and representatives; + operate our business in accordance with fundamental human rights as defined in the International Bill of Rights and the UN Guiding Principles on Business and Human Rights and follow the standards of the International Labour Organization, which are guiding principles encouraged and implemented by the European Union; + show consideration for the local communities in which we operate and emphasise spin-off effects of the Company’s activities; + create an inclusive working environment and ensure that our employees are offered personal development, guidance and encouragement; + operate our business in a manner designed to protect the health and safety of our employees, seafarers, customers, public and the environment with due regard to safety requirements; + establish long-term working relationships and utilise the shipping sector’s expertise for the further development of the industry; + be knowledgeable, respectful and understanding in its dealings with public authorities and customers and communicate with them in an open and appropriate manner and treat suppliers impartially and fairly; and + carry out all recycling of vessels in accordance with applicable laws and regulations and prioritise the safeguarding of the environment and human health and safety when recycling vessels. The Board of Directors actively adheres to good corporate govern- ance standards and will ensure that the Company either complies with or explains possible deviations from the Norwegian Code of Practice for Corporate Governance (“the Code”). The Code can be found at www.nues.no. As at 31 December 2021, there are no significant deviations between the Code and how the Company complies with the Code. The cor- porate governance principles of the Company are adopted by the Board of Directors. Please see the Corporate Governance Report and our Corporate Social Responsibility Statement embedded in this Annual Report and the 2021 Sustainability Report published as a separate doc- ument on the Company’s website: www.mpc-container.com. The Corporate Governance Report, Corporate Social Responsibility Statement and the Company’s Code of Conduct may also be found on the Company’s website: www.mpc-container.com. Board of Directors Report 14 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 15 Container marketupdate Global economy is performing well, but lost its importance as market driver The global economy, the macroeconomic environment and inter- national trade numbers do not speak the language of a boom. Even though the recovery from the Covid-19-induced implications has been significant in 2021, with a global GDP growth of 5.9%, interna- tional trade numbers paint a picture of an ongoing, slightly growing globalisation, but not one of a market spike. The container market situation as an outstanding phenomenon is clearly not driven by the global economic environment. 2 After a remarkable recovery, (manufacturing) PMIs 3 are currently softening slightly, but still stand at around 57 points in the US and 58 points in the European Union. In China, business is not as con- fident, with the manufacturing PMI currently moving around the 50 point benchmark. Consumer sentiment is softening. New Covid-19 lockdowns, more supply chain disruptions and raw material short- ages add to the momentum. Regarding international trade flows, we can assume that the Asian market will grow relatively strong. The RCEP (an Asian trade pact including China, Japan, South Korea, SEA economies and others) started officially at the beginning of 2022. Forecasts for intra-Asia trade flows are robust and strong, with the interlinkages with China being of crucial importance. A future threat for the global economy, but also for the container ves- sel industry, is inflation. Fiscal and monetary policies are most likely not able to continue the stimulus packages in the future. Meanwhile, inflation has risen to numbers between 5% and 7% in Europe and the US. The Bank of England already reacted and increased interest rates. The ECB states that Russia’s invasion of Ukraine exacerbates uncertainties in the medium-term inflation outlook and that it would be unwise to commit prematurely to future policy steps until the effects of the current crisis become clearer. Record spot rates and structural shift in the charter market towards forward fixtures Despite this global environment, the container market experienced a historic boom. The tight supply of charter vessels induced record time charter rates as liners were competing for tonnage to satisfy 2 International Monetary Fund, World Economic Outlook, January 2022 Update. 3 Purchase Manager Index. their clients. In November 2021, the market softened slightly, what got hastily interpreted as the start of a normalisation. But this was misleading. Port congestions are still very high in the US and reached record numbers in Europe and Asia. Vessel supply con- tinues to be tight and the commercial idle statistics are negligi- ble. The market continued its surge in December with the upward momentum still unbroken. At the end of February 2022, spot time charter rates (6–12 months) are at around USD 62,000 per day for a 1,700 TEU vessel, USD 82,000 per day for a 2,700 TEU vessel and around USD 103,000 for a 4,300 TEU vessel. 4 With the time charter rates, chartered periods also increased sig- nificantly. While a vessel was fixed for between six and nine months on average in the years before the pandemic, the average period on the time charter market increased to up to 30 months. Rede- livery windows, by contrast, have become tight. While they have amounted to five months on average before the pandemic, they are currently around one month. 5 In addition to the prolonged periods and record rates, charter contracts are now being concluded well in advance, even months before delivery of the vessel. The average share of fixtures that were concluded minimum 30 days in advance increased from below 10% to around 50 or 60%. 6 The charter market today is thus very different compared to the market two years ago. The former spot market with low rates, short periods and a large redelivery window developed into a market with record rates, longer periods, tight redelivery windows and with fixtures concluded well in advance. The market power shifted in favour of vessel owners. 4 Harper Petersen, HARPEX, February 2022. 5 Clarksons Research, Shipping Intelligence Network, February 2022. 6 ibid. FIG. 1: HARPEX (Time-Charter Rate Development, 6-12 Months) 1,100 TEU 2,700 TEU 4,250 TEU 1,700 TEU 3,500 TEU 120 100 80 60 40 20 0 0,000000 17142,857143 34285,714286 51428,571429 68571,428571 85714,285714 102857,142857 120000,000000 0,000000 17142,857143 34285,714286 51428,571429 68571,428571 85714,285714 102857,142857 120000,000000 0,000000 17142,857143 34285,714286 51428,571429 68571,428571 85714,285714 102857,142857 120000,000000 0,000000 17142,857143 34285,714286 51428,571429 68571,428571 85714,285714 102857,142857 120000,000000 0,000000 17142,857143 34285,714286 51428,571429 68571,428571 85714,285714 102857,142857 120000,000000 Jan 2016 Jan 2017 Jan 2018 Jan 2019 Jan 2020 Jan 2021 Jan 2022 Jan 2023 103.0 91.0 82.0 62.0 37.0 Board of Directors Report 16 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 17 It has to be monitored closely which characteristics of the current time charter market will persist when moving to a more normal sup- ply-demand situation in the mid-term. Industry fundamentals are encour- aging, especially for intra-regional trades and smaller vessels Container vessel market fundamentals are in good shape, especially for smaller tonnage. For 2022, analysts expect an increase in total TEU demand of 4.2%, whereas supply (the total container vessel fleet) is expected to grow by 4.3%. 7 Thus, the momentum switches to an excess supply situation at the aggregated market level and we can expect supply growth to outperform total demand growth also in the coming years. The reason behind that is the sharp increase in new-build orders that have been mainly placed for vessels with more than 12,000 TEU. 2021 saw 4.3 million TEU new-build con- tracting and the orderbook increased to 6 million TEU, that is 24% of the total container fleet. Contracting and orderbook are, how- ever, strongly biased towards larger tonnage. While the orderbook- to-fleet ratio currently stands at 70% for vessels between 12,000 and 17,000 TEU and at 36% for vessels with more than 17,000 TEU, the feeder orderbook-to-fleet ratio (1,000–3,000 TEU vessels) is still at 15%. The orderbook-to-fleet ratio in the classic Panamax segment (3,000–6,000 TEU) is still at 8%. 8 Consequently, the supply-demand balance is much more encour- aging for smaller vessels and intra-regional trades. Demand for intra-regional trades is expected to increase in 2022 by 6.7% (relatively strong compared to total trade). Vessels smaller than 5,200 TEU (that mainly serve intra-regional markets) are expected to grow only 2.5% in 2022. 9 Adopting a mid-term perspective, analysts expect that the excess demand situation intensifies in 7 Maritime Strategies International, Horizon, February 2022. 8 Clarksons Research, Shipping Intelligence Network, February 2022. 9 Maritime Strategy International, Horizon, February 2022. 0 10 20 30 40 50 60 70 0 10000 20000 30000 40000 50000 60000 70000 FIG. 2: Increase in forward fixtures 70 60 50 40 30 20 10 0 70 60 50 40 30 20 10 0 Jan 2019 Jan 2020 Jul 2019 Jul 2020 Jan 2021 Jul 2021 Jan 2022 Avg. Rate (RHS) Forward Fixtures > 30 Days Fig. 3: Supply / Demand Growth for the Total and Intra Regional Market (A) Total, B) Intra-regional -2,500000 -0,714286 1,071429 2,857143 4,642857 6,428571 8,214286 10,000000 2.6 Supply growth (TEU capacity) Demand growth (TEU throughput) 10 7,5 5 2,5 0 –2,5 2018 2019 2020 2021 2022 (f) 2023 (f) 4.4 2.2 –1.9 7.1 4.2 3.3 5.8 4.0 3.5 4.3 4.5 4.5 5.4 -2,500000 -0,714286 1,071429 2,857143 4,642857 6,428571 8,214286 10,000000 2.9 3.6 4.2 Supply growth (TEU capacity <5.2k TEU) Demand growth (intra-regional TEU throughput) 10 7,5 5 2,5 0 –2,5 2018 2019 2020 2021 2022 (f) 2023 (f) 5.2 4.1 –1.8 5.2 6.7 3.9 0.9 0.2 1.6 2.5 2.3 0.3 3.4 Board of Directors Report 16 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 17 the coming years, at least until 2026. The manageable orderbook for smaller tonnage and the relative old age of those vessels is expected to lead to negative fleet growth in 2023 and the following years. The orderbook spike will start to be delivered in 2023 and the mar- ket will then see an increase in new-build deliveries of larger-sized vessels. It will then become important to monitor possible cascad- ing flows closely. As 45% of vessels (in terms of TEU) are older than 14 years with a strong bias towards smaller tonnage, a significant increase in scrapping numbers is to be expected when the current market surge eases and when environmental regulations enter into force in 2023. In 2023 and 2024, a total of 1.6 million TEU are expected to leave the fleet. In 2021, by contrast, only 12,000 TEU were scrapped. 10 With the current container market boom, second-hand transac- tions also increased and, consequently, the price for second-hand tonnage. As at February 2022, USD 21 million need to be paid for a 15-year-old 1,000 TEU vessel (+425% yoy), USD 30 million for a similarly aged 1,700 TEU vessel (+275% yoy), USD 52 million for a 2,800 TEU vessel (+373% yoy) and USD 83 million for a 4,500 TEU vessel (+349% yoy). New building prices increased as well, but did not see such a strong improvement. They are currently around USD 24 million for 1,000 TEU vessels (+24% yoy), USD 41 million for 2,800 TEU vessels (+34% yoy) and USD 73 million for 5,300 TEU vessels (+32% yoy). 11 A temporary new normal: The chaos induced by bottleneck, congestions and disruptions The main drivers of the current container vessel market spike are port and hinterland congestions, disruptions and equipment short- ages. Those disruptions have been caused by an extraordinary US import boom and a strong increase in transpacific eastbound TEU volumes and have led to very tight supply capacities, driving rates and prices up. Varying by size cluster, time charter rates are cur- rently up around 300% on a year-on-year basis. And it is important to keep in mind that the situation one year ago was already lifted. Freight rates are also significantly elevated, still around 100% year on year. 12 Also, commercial idle numbers decreased to record low levels. 13 10 Maritime Strategies International, Horizon, February 2022; Clarksons Research, Shipping Intelligence Network, February 2022. 11 Clarksons Research, Shipping Intelligence Network, February 2022. 12 Harper Petersen, February 2022; Clarksons Research, Shipping Intelligence Network, February 2022. 13 Alphaliner, Weekly Newsletter, February 2022. Transpacific rates as well as charter rates for smaller feeder vessels saw some downward correction in November 2021; however, this was more a short correction. Record increases and record levels followed immediately. Regarding disruptions and congestions, we do not see any relief. Rather, bottleneck problems have not dis- appeared and port and hinterland congestion climbed to record- high numbers over the past months. Over the past weeks, they softened slightly, but are still at very high levels. 14 Normalisation has not started yet. Market momentum in 2022 and market threats Analysts and industry specialists meanwhile argue that the surge may continue for months, well into late 2022. Network pressures will persist well into the middle of next year and perhaps beyond. Port congestion may indeed get worse before it improves. It is not possible to solve issues like port capacity and lack of infrastructure including a lack of truck drivers, train and warehouse capacity over- night. And even when the pressure and the logistic problems ease, demand remains strong. Freight rates are still at elevated levels and charter rates are expected to stay at historically high levels as demand continues to outstrip supply by far. Some analysts even argue that it is unlikely that the main problems are solved before 2023. The market outlook for 2022 thus remains very positive. The main macroeconomic challenge is inflation. If the market starts to normalise and consumer spending shifts back to regional non-tradable services, a significant increase in prices could addi- tionally dampen demand for consumer goods. For smaller vessels, the strong new-build deliveries in the larger segments and conse- quently following cascading flows will pose a future threat starting in 2023. From a geopolitical angle, the Ukraine crisis and the devel- opments regarding currently imposed and discussed sanctions are one main threat. Direct effects on the container vessel market may be low, but indirect macroeconomic effects like additional price increases, especially in the energy and fuel sector, could induce severe follow-up effects. 14 Clarksons Research, Shipping Intelligence Network, February 2022. Board of Directors Report 18 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 19 Outlook and strategy In view of the very compelling current market momentum and fundamentals, the outlook for 2022 is very positive for the Group. As at mid-March, the Group has fixed 94% of the total trading days in 2022, reflecting an approximate USD 543 million on con- tracted charter revenue. Also, for the year of 2023, the Group has already fixed about 75% of the total trading days and approximate USD 485 million on contracted charter revenue. Forward fixing activity with very limited discounts is expected to continue dur- ing the next months. As such, the Group is accumulating a sizea- ble charter backlog with an increased duration and high earnings visibility going forward. The year 2021 has been characterised by strong market momentum, providing MPCC with various opportu- nities for prudent capital allocation decisions that contributed very positively to the corporate development of the Company. With the above mentioned positive market dynamics, the Group also takes pre-emptive measures by maintaining a low and sensi- ble cash break-even, prudent leverage profile and stringent capi- tal allocation to ensure manoeuvrability under current conditions and to benefit from the sustained positive charter market. During 2021, MPCC has captured market opportunities by leveraging the difference between asset prices and charter values (e.g. buying the Songa fleet and immediately generating value by chartering the vessels out at better rates and/or sale of certain Songa vessels). As this previous gap between asset values and charter values of assets had been closed, MPCC decided to place an emphasis on returning capital to investors through a significant dividend com- ponent going forward (possibly complemented by additional divi- dends and/or SBB ). For MPCC, it is inevitable that growth should always follow the investment principles to achieve double-digit full-cycle returns on assets and limit residual value risk. Further- more, potential growth opportunities will be carefully selected if they meet these basic investment criteria. Future opportunities may arise from opportunistic second-hand transactions when a value dislocation may be observed (i.e. such as the Songa Container acquisition), but going forward also from opportunities arising in the context of the ongoing energy transi- tion. We firmly believe that the flexible vessel sizes and regional trades are particularly interesting due to the predictability of trade routes reducing the risk of unavailability of new fuels at ports, round trips allowing for limited port infrastructure investments (dedicated new fuel tanks), the highest potential of cost pass- through to consumers and increasing demand. Risk factors The Board of Directors aims to ensure that the Company has sound internal controls and systems for risk management that are appro- priate in relation to the extent and nature of the Company’s objec- tives and activities. Together with the management, the Board of Directors has identified approximately 57 risk factors divided into eight categories. The Risk Inventory is quantified and monitored taking a probabili- ty-impact approach. Each risk is assigned a Risk Owner within the Company’s organisation and a defined set of countermeasures and control frequencies. A summary of the Company’s risk categories is outlined below. Descriptions are not exhaustive, and the sequence of risk catego- ries is not set out according to importance or priority. Market and industry risks As a supplier of ocean-going container vessels to the international sea trade, the Company is exposed to changes in trade patterns and the supply/demand for (imports/exports of) containerised goods caused for example by macroeconomic and geopolitical events, as evidenced by the trade tensions between the US and China in 2018/19 and the outbreak of the COVID-19 pandemic in 2020. This in turn necessitates risk surveillance and mitigation procedures related to the charter market, fluctuation in vessel values and competitors, among others. The Company strives to maintain a dynamic chartering strategy, a reliable fleet and a close dialogue with the shipping market intelligence community so as to proac- tively adjust operations according to prevailing and future market environments. The conflict between Russia and Ukraine as well as the economic and financial sanctions decided by the West to force Russia to end the conflict receives special attention by the Company. The very conflict and the ensuing international response, have generated the most significant disruption to geo-political norms for decades The Company has made an assessment of all relevant areas, i.e. operation, contracts, charter parties etc. in order to identify risks and define specific countermeasures. Regarding the commercial risks from vessel trading in the critical area, four vessels have been stopped to call ports in Ukraine and Russia. Also, no dockings are scheduled in the region. Operational risks might arise on the crew- ing side, as MPCC`s crew manager is hiring Ukrainian and Russian seafarers. The Company is taking direct countermeasures with its crewing manager to mitigate potential crewing scarcities. Besides these existent risk factors, our risk assessment concludes that there is no immediate holistic impact on MPCC expected. We remain confident that if there is no complete disruption of the global supply chain, MPCC’s business and operations should be able to continue. Furthermore, any stress or war scenario would not make the current scarcity of tonnage disappear. Board of Directors Report 18 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 19 Environmental, social and governance risks Risks related to e.g. climate change impacts, mitigation and adap- tation, environmental management practices and duty of care, working and safety conditions, respect for human rights, gender diversity, anti-bribery and corruption practices and compliance with relevant laws, regulations and best practices. Responsible business operations should also consider the impacts of megatrends (e.g. climate change), emerging regulations, voluntary guidelines as well as the transparency requirements of wider stakeholders. Sustainability-related topics are gaining foothold amongst stake- holders not due to specific laws or regulations mandating a new level of disclosure but as the result of a broader understanding of the reputational and financial impact of poorly handling such issues. While developments in the ESG (“Environmental, Social and Govern- ance”) reporting and regulatory environment are outside the control of the Company, our attentiveness and adherence to ESG initiatives, reporting standards, etc. is of strategic relevance within the Com- pany’s scope of business. Performance risks The Company’s performance depends heavily on technical, oper- ational, environmental and reputational factors that carry both risks and opportunities. The Company addresses these risk and opportunities by assigning responsibilities, monitoring and report- ing routines to dedicated teams within its organisation (e.g. asset management, treasury and owner controlling), utilising and con- tinuously developing portfolio management tools and by engaging subject matter consultants to conduct routine compliance and quality management assessments. The Company’s vessels have insurance covering (where applicable) P&I, hull and machinery, loss of hire and crew negligence. However, risks remain as to whether the vessels are covered under all con- ditions. Vessels carry loss prevention, safety and quality manuals to ensure sound HSE routines. Third party contracting related to the Company’s performance shall comply with applicable laws and regulations, for instance, and where applicable, with the Interna- tional Maritime Organization’s ISM Code and the SOLAS, STCW and Maritime Labour conventions. Legal risks The Company is exposed to changes in legal, tax and regulatory regimes within relevant jurisdictions as well as potential private litiga- tion and public prosecution. The Company seeks to mitigate legal risks by maintaining a well-functioning risk management system, manage- ment guidelines and dedicated compliance and legal functions. Especially in the current geopolitical situation with e.g. newly introduced and further strengthened sanction regimes, legal risk exposure is elevated. The Company mitigates this situation by a) even closer monitoring current business activities and all involved parties, b) the introduction of a comprehensive Sanctions Compli- ance Policy and c) seeking advice from seasoned sanction experts. Personnel risks The continued progress of the Company depends heavily on the knowledge and network of key personnel as well as on access to new talent. Personnel risk mitigation procedures include pre- and post-hire preparations, regular employee development reviews, jour fixes and a methodical expansion of internal resources on business-critical processes. IT risks IT and cyber risks make up an increasing share of a company’s risk universe. The Company purchases IT services from third parties that offer comprehensive security strategies which closely match the Company’s business objectives. Financial risks The Company seeks to actively manage its financial risk expo- sures through the use of dedicated finance, treasury and owner controlling teams within its organisation. Liquidity and covenant risks are monitored on an ongoing basis, also considering latest macroeconomic events such as the COVID-19 pandemic and its implications for container shipping. Currency and interest rate risks are mitigated via financial instruments where deemed appro- priate. The compliance with certain debt covenants, including cov- enants in relation to the market value of the Group’s fleet, may be beyond the control of the Group. Outstanding interest-bearing debt on the balance sheet as at 31 December 2020 was USD 276.9 mil- lion, net of debt issuance costs, which will be repaid through the cash flow generated from the vessels or through refinancing. As at 31 December 2020, the Group had no outstanding off-balance sheet capital commitments in relation to the scrubber contracts. This compared to USD 39.3 million in available liquidity as cash and cash equivalents. Climate risks The Company divided climate-related risks into two major catego- ries: (1) risks related to the transition to a lower-carbon economy and (2) risks related to the physical impacts of climate change. Transitioning to a lower-carbon economy implies extensive changes in the political, legal, technological and market environ- ment. It is the goal of the MPCC Risk Management to identify the specific risks for our business model and to address mitigation and adaptation requirements related to climate change. Depending on the speed and focus of these changes, transition risks may pose varying levels of financial and reputational risk to our organisation. Board of Directors Report 20 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 21 Physical risks resulting from climate change can be event-driven (acute) or longer-term shifts (chronic) in climate patterns. Phys- ical risks may have financial implications for the company, such as direct damage to assets and indirect impacts from disruptive operations. Other risks From time to time, the Company will be required to consider major business initiatives which – if implemented – entail a considera- ble amount of costs and resources. Moreover, if executed with- out due care and planning, such strategic initiatives may have a material adverse impact on the Company. The need to consider major initiatives may arise from strategic considerations, from shifts in market dynamics or from regulatory changes outside the Company’s control. The Company will seek to mitigate risks arising from such initiatives, as well as all other risks not assorted into the above-mentioned six risk categories, on a case-by-case basis by implementing e.g. project steering committees comprising rele- vant stakeholders/expertise, be it internal or external. Members of the Board of Directors, the CEO and the management team are covered by insurance policies (D&O) against potential lia- bility towards the Company and third parties. Forward-looking statements Forward-looking statements presented in this report are based on various assumptions. The assumptions are subject to uncertainties and contingencies that are difficult or impossible to predict. MPC Container Ships ASA cannot give assurances that expectations regarding the outlook will be achieved or accomplished. Oslo, 24 March 2022 The Board of Directors of MPC Container Ships ASA ESG report The Company’s ESG report for 2021 can be found on the Company’s website: www.mpc-container.com. Ulf Holländer (Chairman) Dr. Axel Schroeder Peter Frederiksen Ellen Hanetho Laura Carballo Board of Directors Report 20 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 21 CORPORATE SOCIAL RESPONSIBILITY Annual Report 2021 MPC Container Ships 23 22 MPC Container Ships Annual Report 2021 Corporate social responsibility In order to achieve the Company’s objectives, it is essential that we are trusted by society. As a corporation, we must be able to effi- ciently manage the challenges and requirements society imposes on our activities. The Company is engaged in the global marine transportation of containerised goods. The business activity of the Company is to invest in maritime assets with a particular focus on feeder con- tainer vessels, chartering out the vessels per time charter agree- ments, operate and sell them. This report constitutes the Company’s reporting according to the requirements of the Norwegian Accounting Act §§ 3–3c on social responsibility reporting. Corporate responsibility and our principles Corporate responsibility shall be reflected in our core values, in the quality of our work and services and in our entire range of activities. There must be coherence between what we say and what we do. The Company shall: + operate our business with integrity and respect laws, different cultures and human dignity; + not tolerate active corruption (attempts to bribe others) or passive corruption (allowing oneself to be bribed) including our agents and representatives; + operate our business in accordance with fundamental human rights as defined in the International Bill of Rights and the UN Guiding Principles on Business and Human Rights and follow the standards of the International Labour Organization, which are guiding principles encouraged and implemented by the European Union; + show consideration for the local communities in which we operate and emphasise spin-off effects of the Company’s activities; + create an inclusive working environment and ensure that our employees are offered personal development, guidance and encouragement; + operate our business in a manner designed to protect the health and safety of our employees, seafarers, customers, public and the environment with due regard to safety requirements; + establish long-term working relationships and utilise the shipping sector’s expertise for the further development of the industry; + be knowledgeable, respectful and understanding in its dealings with public authorities and customers and communicate with them in an open and appropriate manner and treat suppliers impartially and fairly; and + carry out all recycling of vessels in accordance with applicable laws and regulations and prioritise the safeguarding of the environment and human health and safety when recycling vessels. Ethics The Company adheres to a Code of Conduct which requires our employees to observe high standards of business and personal eth- ics in the conduct of their duties and responsibilities. Employees must apply fair behaviour, honesty and integrity in every aspect when dealing with other employees, business relations and cus- tomers, the public, the business community, shareholders, sup- pliers, competitors and government authorities. When acting on behalf of the Company, employees shall not take unfair advantage through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or other unfair dealing practices. The Company’s Code of Conduct prohibits unlawful discrimination against our employees, shareholders, directors, customers and suppliers on account of ethnic or national origin, age, sex or reli- gion. Respect for the individual is the cornerstone of the Company’s policy. All persons shall be treated with dignity and respect and they shall not be unreasonably interfered with in the conduct of their duties and responsibilities. No employee should be misguided by loyalty to the Company or a desire for the Company’s profitability to disobey any applicable law or Company policy. Corporate social responsibility Annual Report 2021 MPC Container Ships 23 22 MPC Container Ships Annual Report 2021 Environmental impact The international shipping industry is of great economic impor- tance, with a majority of worldwide goods transports being car- ried out by ocean-going ships. Such economic impact also comes with an environmental footprint – particularly carbon and sulphur dioxides. This poses both risks and opportunities for the shipping industry due to its significance and potential role in optimising global supply chains for its customers. As in other industries, green strategies are about seizing opportunities and creating value for customers, shareholders and other stakeholders. The industry is governed by a global and uniform regulatory frame- work created by the IMO. The framework has significantly contrib- uted to lessening the industry’s impact on the environment by enforcing the adoption of certain technical and operational meas- ures to reduce the industry’s impact on the environment. One of the basic frameworks of the IMO has been the International Convention for the Prevention of Pollution from Ships (“MARPOL”). Since its rat- ification in 1973, MARPOL has undergone numerous amendments, continuously expanding its framework to require increasing com- pliance from the shipping industry. Environmental regulation affects the ownership and operation of our vessels in a significant manner. The Company is subject to international conventions and national, state and local laws and regulations applicable to international waters and/or territorial waters of the countries in which our vessels may operate or are registered. The environmental impact of our operations relates mainly to (i) emissions from container vessel fuel consumption, (ii) the risk of major environmental accidents, (iii) waste management including ballast water and spills and (iv) the disposal of vessels at the end of their useful life. Our vessels run on ordinary heavy fuel oil or gasoil. The potential for major environmental accidents relates to the risk of a vessel acci- dentally running aground or suffering a breach, with a subsequent leak of bunker oil into the environment. Another potential impact is waste produced by the vessels, discharge of untreated ballast water and potential spills of chemicals, bilge water and sludge, etc. into the environment. Discharge of untreated ballast water may potentially introduce non-native organisms into marine environ- ments worldwide. The Company is continuously working on optimising fleet opera- tions in terms of e.g. speed/fuel consumption. The Company has retrofitted selected vessels with exhaust gas cleaning systems (“scrubbers”) as one alternative measure to com- ply with the IMO’s January 2020 sulphur emission cap regulation. Remaining vessels will operate on compliant low-sulphur fuel oils. Through participation in maritime environmental organisations such as the Clean Shipping Alliance 2020 and the Trident Alliance, MPCC aims to align our company with networks of like-minded industry peers and support efforts for sustainable shipping. All of our vessels have ballast water treatment systems in place according to the IMO’s Ballast Water Management Convention so as to prevent the spread of potentially harmful aquatic organisms and pathogens in the ships’ ballast water. The ship recycling industry supports the economy of many devel- oping countries and functions as an important contributor to global sustainability by recycling metals and other components, hence extending the useful life of these resources. MPCC is committed to sustainable and socially responsible recycling of ships, thereby safeguarding the environment, human health and safety. Any recycling of owned vessels will be conducted in accordance with applicable laws and regulations, specifically in compliance with the requirements of the 2009 Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships and, with regard to human rights, the Basel Convention on the Control of the Trans- boundary Movements of Hazardous Wastes and their Disposal and, where applicable, the EU Ship Recycling Regulation. The Company subcontracts performance of technical ship manage- ment services to firms that have environmental policies and pro- cedures in place. Our aim is to conduct operations with the utmost regard for the safety of employees, the public and the environment and to meet or exceed the industry’s and customers’ requirements. Third party managers are certified according to e.g. ISO 9001:2015 (Quality Management System) and ISO 14001:2015 (Environmental Management System) and are required to comply with applicable regulations, codes, guidelines and standards such as the IMO’s ISM Code. Corporate social responsibility 24 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 25 Quality, health and safety The Company’s policy is to operate our business in a manner designed to protect the health and safety of our employees, cus- tomers, the public and the environment, and in accordance with all applicable environmental and safety laws and regulations so as to ensure the protection of the environment, our personnel and property. Our employees should conduct themselves in a manner that is con- sistent with this policy. Any departure or suspected departure from this policy must be reported promptly. The Company shall be a professional and positive workplace with an inclusive working environment. All employees shall help to create a work environment free from any discrimination due to e.g. religion, skin colour, gender, sexual orientation, age, nationality, race and disability. We do not tolerate behaviour that can be perceived as degrading or threatening. Seafarer crewing is subcontracted to third party ship managers who comply with e.g. the IMO’s ISM Code, the Safety of Life at Sea (“SOLAS”) Convention, the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers as well as the ILO Maritime Labour Convention. Masters, officers and rat- ings must be qualified, certified and experienced in their duties. This qualification level has to be maintained by regular training and education. Accidents, incidents, near-miss incidents and non-con- forming processes are investigated and deficiencies are identified, analysed and evaluated. Anti-corruption Value creation at the Company must be achieved in compliance with our Code of Conduct and applicable legislation. The Compa- ny’s overarching goal is to develop a corporate culture character- ised by good judgement and the ability to deal with difficult situa- tions. The Company has zero tolerance for corruption, price-fixing agreements, market sharing or other practices that hamper free competition. Our Code of Conduct describes the Company’s standards and guidelines relating to key integrity issues. The management is responsible for communicating the Company’s Code of Conduct to every employee and making all employees who may be exposed to risk aware of the requirements in the anti-corruption and com- petition law manuals. As part of the Company’s due diligence procedures in connection with acquisitions and major investments, we assess the risk of becoming involved in breaches of anti-corruption and competition law. The Company will take necessary risk-mitigating actions to prevent independent business partners, including customers and joint venture partners, from participating in corruption or other illegal or unethical activities in connection with their business dealings with the Company. The Company’s anti-corruption policy includes the following principles: We do not tolerate active corruption (attempts to bribe others by e.g. offering or giving anything of value) or passive corruption (allowing oneself to be bribed by way of demanding, soliciting, receiving, accepting, etc. an offer of an improper advantage). + Gifts must be made openly. They must not be made in the form of cash, must have a clear, legitimate basis in local business relationships and must have a minimal cash value. + Expenses relating to travel, meals and events paid for customers or other persons must be clearly justified by business considerations, must be reasonable and well documented and must be paid openly. + We do not tolerate acts of corruption carried out by our agents or representatives. Agents and other representatives acting on behalf of the Company must comply with the same anti-corruption standards as the Company. + The Company must not make financial contributions to political campaigns or the like. Furthermore, additional policies on Governance and other ESG mat- ters can also be found on the Company’s website www.mpc-con- tainer.com/sustainability/esg-at-mpcc/esg-policies. Corporate social responsibility 24 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 25 FY 2021 CORPORATE GOVERNANCE REPORT Annual Report 2021 MPC Container Ships 27 26 MPC Container Ships Annual Report 2021 FY 2021 corporate governance report Good corporate governance is a prerequisite for cooperation based on trust between the owners, the Board of Directors (“the Board”) and the management of MPC Container Ships ASA (“the Company”, together with its subsidiaries “the Group”), with a view to achieving long-term growth. The Board actively adheres to good corporate governance stand- ards and will ensure that the Company either complies with or explains possible deviations from the Norwegian Code of Practice for Corporate Governance (“the Code”). The Code can be found at www.nues.no. As at 31 December 2021, there are no significant deviations between the Code and how the Company complies with the Code. Two minor deviations under Section 5 on general meetings and one deviation under Section 6 on the nomination committee have been justified and disclosed. Business The business activity of the Company is set out in article 3 of its articles of association: “The Company’s business activity is to (i) invest in maritime assets (vessels, shares in ship-owning compa- nies, loans secured by vessels and/or shares in ship-owning com- panies) with a main focus on small-size container ships between 5.000 and 5,000 TEU, (ii) chartering-out the vessels per time char- ter agreements, operate and sell them as well as (iii) working-out the acquired maritime loans in order to take over the securing assets.” As a globally active shipping company, MPC Container Ships con- siders the creation of share- and stakeholder value as the core purpose of our business activities. Yet, we believe that the ability to create long-term sustainable value lies in linking economic and financial advancements with environmental, social and governance propositions and thus following the principles of Corporate Social Responsibility. Adapting to the future and changing environment of our business and the general market as well as preparing for the challenges that those developments imply, is the key element of our long-term business strategy. Our mission is to future-proof our business and create stakeholder value through: + Being a professional and positive workplace with an inclusive working environment. Health and safety of our employees are always the main priority. + Supporting collective climate ambitions and leverage industry networks to accelerate change. + Valuing professional, transparent, and fair business relationships by acting as a transparent and trustworthy business partner. + Adopting a long-term perspective in our business strategy and decision making, that is taking economic and ecological aspects equally into account The Company is listed on the Oslo Stock Exchange under the ticker symbol “MPCC”. As set out in the risk factors section in the Board of Director’s report in the Annual Report 2021, the Board has defined clear objec- tives, strategies and risk profiles for the Company’s business activ- ities to ensure shareholder value creation. The Board will evaluate these objectives, strategies and risk profiles on a regular basis, and routinely monitors risk exposure vis-à-vis its business objectives. Deviations from the Code: none Equity and dividends Share capital All shares issued in the Company are equal in all respects. The Com- pany has one class of shares, each carrying one vote and an equal right to dividend. All shares are validly issued and fully paid. The shares are issued in accordance with the laws of Norway and reg- istered in the Norwegian Central Securities Depository (VPS) with ISIN NO0010791353. As at 31 December 2021, the Company’s share capital is NOK 444,051,377 divided into 444,051,377 shares, each with a nominal value of NOK 1.00. Any increase of the Company’s share capital must be mandated by the general meeting. If a mandate is to be granted to the Board to increase the Company’s share capital, such mandate will be restricted to a defined purpose. If the general meeting is to con- sider mandates to the Board for the issuance of shares for differ- ent purposes, each mandate will be considered separately by the general meeting. MPC Münchmeyer Petersen Capital AG (“MPC Capital”), through its subsidiary MPC Capital Beteiligungs-gesellschaft mbH & Co. KG has been granted warrants to subscribe for additional shares in the Company. Please refer to note 24 in the Company’s consolidated financial statements 2021 for additional information. On the Company’s annual general meeting held 28 April 2021, the Board was authorised to increase the Company’s share capital by up to NOK 98,564,031. Subject to this aggregate amount limitation, the Board’s authority may be used on more than one occasion and for such purposes as the Board finds to be in the interest of the Company. On 9 August 2021 the Group completed the acquisition of Songa Container AS. In connection with the acquisition of Songa Container AS, a total of 49,795,250 new shares were issued as part of the consideration paid. As at 31 December 2021, the remaining Board authority comprised a further share capital increase of up to NOK 48,768,781. FY 2021 corporate governance report Annual Report 2021 MPC Container Ships 27 26 MPC Container Ships Annual Report 2021 The Board’s authority shall remain in force until the annual gen- eral meeting in 2022, but not later than 30 June 2022. Pre-emp- tive rights of existing shareholders may be set aside. The authority covers (i) capital increases against contributions in cash and non- cash, (ii) the right to incur special obligations for the Company, (iii) resolutions on mergers and (iv) takeover situations. On the Company’s annual general meeting held 28 April 2021, the Board was authorised to carry out a reverse share split in a ratio of 10:1 so that ten shares in the Company, each with a nominal value of NOK 1.00, are consolidated to one share with a nominal value of NOK 10.00. In carrying out a reverse share split, the total number of issued shares in the Company would be reduced accordingly. The Board is authorised to determine the date and further process for carrying out the reverse share split. As at 31 December 2021, the Board has made no plans to effectuate the aforementioned reverse share split. Capital structure The Board regards its capital structure and equity ratio as appro- priate considering the Group’s objectives, strategy and risk profile. Dividend policy In support of its objective of maximizing returns to shareholders, MPC Container Ships’ intention is to pay regular dividends by way of distributing 75% of net profit after considering CAPEX and work- ing capital requirements, including liquidity reserves and one-off effects. Dividends will be declared or proposed by the Board at the sole discretion of the Board and will depend on the financial posi- tion, earnings, debt covenants, distribution restrictions, capital requirements and other factors related to MPC Container Ships and its subsidiaries. The Company cannot guarantee that its Board will declare or propose dividends in the future. Furthermore, the Com- pany may make event-driven distributions based on non-recurring proceeds, such as vessel sales, by way of extraordinary dividends or share buybacks, to be applied according to the Board’s discretion. Purchase of own shares As at 31 December 2021, the Company owned 351,098 treasury shares. On the annual general meeting held 28 April 2021, the Board was granted authorisation to acquire shares in the Company on behalf of the Company with an aggregate nominal value of up to NOK 39,425,612 and with a consideration per share of no less than NOK 1.00 and no more than NOK 200.00. The Board’s authority shall remain in force until the annual general meeting in 2022, but not later than 30 June 2022. Deviations from the Code: none Equal treatment ofshareholders Equal treatment Equal treatment of all shareholders is a core governance principle of the Company. The Company has one class of shares, and each share confers one vote at the general meeting. The articles of asso- ciation contain no restrictions on voting rights and all shares have equal rights. Transactions in own shares The Company’s transactions in own shares are carried out over the stock exchange or by other means at market price. Should there be an increase in capital which involves a waiver of the existing shareholders’ pre-emptive rights, and the Board resolves to carry out such an increase on the basis of a mandate granted by the gen- eral meeting, the Board will explain the justification for waiving the pre-emptive rights in the stock exchange announcement. Deviations from the Code: none Shares And Negotiability The Company’s shares are listed on the Oslo Stock Exchange and are freely negotiable. The Company has one class of shares, each carrying one vote at the general meeting. The shares have no trad- ing restrictions in the form of Board consent or ownership limita- tion, and the Company does not limit any party’s ability to own, trade or vote for shares in the Company. Deviations from the Code: none General meetings The general meeting of shareholders is the Company’s supreme corporate body. It serves as a democratic and effective forum for interaction between the Company’s shareholders, Board and management. FY 2021 corporate governance report 28 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 29 According to the Company’s articles of association, the annual gen- eral meeting shall be held once a year before the end of June. Fur- thermore, extraordinary general meetings may be convened either by the Board, the auditor or shareholders representing at least 5% of the Company’s share capital. Notice of meeting Notice of the general meeting is sent at the latest two weeks before the meeting. All shareholders registered in the Norwegian Central Securities Depository (VPS) will receive a notice of meeting and are entitled to submit proposals and vote directly or via proxy. Agenda papers will also be published on the Company’s website. Pursuant to the Company’s articles of association, when docu- ments concerning matters to be discussed at general meetings have been made available to the shareholders on the Company’s website, the Board may decide that the documents shall not be sent to the shareholders. If so, a shareholder may request that doc- uments concerning matters to be discussed at the general meet- ing be sent to him or her. The Company will not charge any form of compensation for sending the documents to the shareholders. The agenda papers must contain all necessary information so that the shareholders can decide on the issues to be addressed. The registration deadline for the general meeting will be as close to the general meeting as practically possible but no sooner than five days prior to the meeting, cf. the Company’s articles of association. Registration and proxy Registration should be made in writing, either via mail or e-mail. The Board will ensure so that as many shareholders as possible are able to participate. Shareholders who are unable to attend in person, are encouraged to appoint a proxy. A special proxy form is available which facilitates separate voting instructions for each issue to be considered by the general meeting and for each of the candidates nominated for election. The Company will nominate one or more persons to vote as proxy for shareholders. Representatives from the Board, management and/or the auditor will participate in the general meeting. If shares are registered by a nominee in the Norwegian Central Securities Depository (VPS) and the beneficial shareholder wants to vote for their shares, the beneficial shareholder must re-register the shares in a separate VPS account in their own name prior to the general meeting. If the holder can prove that such steps have been taken and that the holder has a de facto shareholder interest in the Company, the shareholder will be allowed to vote for the shares. Decisions regarding voting rights for shareholders and proxy hold- ers are made by the person opening the meeting, whose decisions may be reversed by the general meeting by simple majority vote. Minutes The minutes of the general meetings are made available on the Company’s website immediately after the meeting. Deviations from the Code: The Board might not make arrange- ments for an independent chairperson for general meetings as the Company believes that the Chairman of the Board can act inde- pendently and in the interests of shareholders. Similarly, the Board may not deem it appropriate for all Board members and the auditor to participate in all general meetings. Nomination committee Considering the scope of the Company’s operations, the Board con- siders it reasonable and appropriate that the Company should have two Board sub-committees: the Risk & Audit Committee and the Remuneration Committee. The Risk & Audit Committee is made up of Ulf Holländer (Chairman), Laura Carballo and Ellen Hanetho. The Remuneration Committee is made up of Ulf Holländer (Chair- man), Ellen Hanetho and Paul Gough, with Ellen Hanetho replacing Darren Maupin. Deviations from the Code: Contrary to the recommendations of the Code, the Company presently does not have a dedicated Nom- ination Committee due to the above considerations. Regardless, the Company shall account for the interests of the shareholders when considering the composition of the Board. This is done by (i) seeking a diverse and highly qualified pool of Board candidates with relevant competence and industry expertise and (ii) ensuring that shareholder input on Board member nomination, election and evaluation are properly addressed. The Board must take appropri- ate measures to avoid self-perpetuation. Board of directors: composition and independence Pursuant to the Company’s articles of association, the Board shall consist of between three to seven members who are elected by the general meeting for up to four years at a time. MPC Capital has the right to elect 40% of the members of the Board (rounded down). If the aggregate share ownership of MPC Capital and affiliates falls below 20% of the total number of shares in the Company, MPC Cap- ital shall only have the right to elect one board member. If neither MPC Capital nor any affiliates own any shares in the Company, MPC Capital shall not have the right to elect a board member. FY 2021 corporate governance report 28 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 29 Board appointments are communicated through the notice of gen- eral meetings and the members are elected by majority vote. The Board considers its composition to be diverse and competent with respect to the expertise, capacity and diversity appropriate to attend to the Company’s objectives, main risks and challenges, and the common interest of all shareholders. The Board compo- sition adheres to the requirement regarding gender equality and representation of both sexes on the board of directors of Norwe- gian public entities, as set forth in the Norwegian Public Limited Liability Companies Act Section 6-11a. Further, the Board deems its composition to be made up of individuals who are willing and able to work as a team, resulting in the Board working effectively as a collegiate body. The Board does not include executive personnel of the Company. As at 31 December 2021 the Board comprises the following members: Ulf Holländer (Chairman) Term of office: Re-elected on 28 April 2021 for a period of two years. Experience: Commerce degree from the University of Hamburg. Audit assistant and auditor at Dr. W Schlage & Co Wirtschaftsprü- fungs- und Steuerberatungsgesellschaft in Hamburg (1984-1987). Various positions at shipping group Hamburg Süd and affiliated companies in Australia and the U.S. (1987-2000) such as financial controller at Columbus Overseas Services Pty. (1990-1992), com- mercial director at Columbus Line USA Inc. (1992-1996) and head of Hamburg Süd’s finance and accounting department (1997-2000). CFO of MPC Capital (2000-2015). CEO of MPC Capital from 2015. Other matters: in 2021, Ulf Holländer participated in 19 board meetings. Dr. Axel Schroeder Term of office: Re-elected on 28 April 2021 for a period of two years. Experience: Economics and Social Science studies at the Univer- sity of Hamburg (1985-1990) followed by a doctorate (1993). Vari- ous positions within the MPC Group since 1990, including engage- ments at MPC Capital from its beginnings in 1994. CEO of MPC Capital (1999-2015), during which period the company was listed at the Frankfurt Stock Exchange (2000). Chairman of the Super- visory Board of MPC Capital since 2015. Managing partner of MPC Münchmeyer Petersen & Co. GmbH, MPC Participia GmbH and CSI Beteiligungsgesellschaft mbH. Other matters: in 2021, Dr. Axel Schroeder participated in 19 board meetings. Laura Carballo Term of office: Re-elected on 28 April 2021 for a period of two years. Experience: B.S. in Economics from Duke University. MBA from INSEAD. Merrill Lynch (1998-2000), Compass Partners International (2000-2002), STAR Capital Partners Ltd. and successor STAR Capi- tal Partnership LLP from 2004. Other matters: in 2021, Laura Carballo participated in 19 board meetings. Ellen Hanetho Term of office: Re-elected on 28 April 2021 for a period of two years. Experience: MBA from Solvay Business School. BSBA in Business and Administration from Boston University. Analyst and senior associate at the investment bank division of Goldman Sachs Inter- national Ltd. (1997-2002). Investment manager and later partner at Credo Partners AS (2003-2012). CEO of Frigaard Invest AS (2013- 2019). Founder and Chairwoman of the board at Cercis as well as board member of Kongsberg Automotive ASA, Fearnley Securities AS, Stokke Industri AS and Stor-Oslo Eiendom AS, among others. Other matters: in 2021, Ellen Hanetho participated in 18 board meetings. Darren Maupin Term of office: Re-elected on 28 April 2021 for a period of two years. Experience: BA in Economics and Finance from Boston College. Further studies at the London School of Economics and Beijing Language and Culture University. Analyst and fund manager at Fidelity Investments in Boston, London, and Hong Kong (1998- 2007). Founder and a director of the Pilgrim Global ICAV, its pre- decessors, and associated value-oriented investment funds since 2009. Founder and executive director of Anglo International Ship- ping Co. Ltd. and non-executive director of both private and pub- licly listed companies in a variety of industries. Other matters: - in 2021, Darren Maupin participated in 19 board meetings. - as a subsequent event, Darren Maupin resigned from his position as member of the board effective by 23 January 2022 FY 2021 corporate governance report 30 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 31 Peter Frederiksen (elected 28 February 2022 as new board member) Term of office: Elected 25 February 2022 as a new board member until the ordinary general meeting in 2022. Experience: Peter Frederiksen, who has served as a member of the Sounding Board of the Company since 2019, has extensive back- ground in the shipping sector and currently serves on the board for several shipping and maritime companies. Frederiksen was born in 1963 and after completion of the A.P. Møller Maersk Shipping Education attended several Executive Development Programmes at INSEAD and Cornell Johnson Graduate School of Management. He resides in Copenhagen, Denmark, and holds no shares in the Company. He has previously held management and board positions at Hamburg Süd for 9 years and at Maersk Line for 25 years. Other Matters: In 2021, Peter Frederiksen did not participate in any board meetings. Ellen Hanetho and Peter Frederiksen are considered independent of the Company’s day-to-day management, majority shareholders and major business connections. Deviations from the Code: none The work of the board of directors The duties of the Board The Board has overall responsibility for the management of the Company and for supervising the day-to-day management and the Company’s operations. This involves defining the Company’s objec- tives, strategies and risk profiles to ensure value creation for its shareholders. The Board is also responsible for following-up on the implementation of objectives and strategies, as well as for control functions to ensure that the Company has proper operations as well as asset and risk management. Instructions for the Board Pursuant to the provisions of the Norwegian Public Limited Liability Companies Act, the Board has established rules of procedure that provide detailed regulations and guidelines for the Board’s work and administrative procedures and define the functions and duties of the CEO towards the Board. Agreements with related parties The Board and the management are committed to promoting equal treatment of all shareholders. In relation to its ordinary business, the Group may enter into trans- actions with certain entities in which the Group has ownership interests or with entities otherwise deemed related parties of the Group, its shareholders, Board or executive personnel. Such trans- actions are carried out on an arm’s length basis and disclosed in Note 23 of the Company’s Annual Report 2021. Guidelines regulating loyalty, ethics, impartiality and conflict of interests are stipulated in the Company’s Code of Conduct, appli- cable to all entities controlled by the Company and all employees, directors, officers and agents. The Code of Conduct is made available on the Company’s website. Deviations from the Code: none FY 2021 corporate governance report 30 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 31 Conflicts of interest and disqualification Members of the Board and executive management cannot consider matters in which they may hold a special interest. In order to ensure that items brought to the Board’s attention can be considered in an unbiased and satisfactory way, Board members and executive management have a duty to inform the Board of any potential spe- cial interest in Board matters, and the Board must account for the individual’s interest in its consideration of the item. Instructions for the CEO A clear division of responsibilities and tasks has been estab- lished between the Board and executive management. The CEO, appointed by the Board, has a particular responsibility to ensure that the Board receives accurate, relevant and timely information that is sufficient to allow the Board to carry out its duties. Financial reporting The Board receives periodic reports with comments on the Com- pany’s financial status. In terms of the annual accounts which the Board is asked to adopt, the Board may ask the executive manage- ment to confirm that accounts have been prepared in accordance with EU IFRS (Group level) and Norwegian GAAP (parent level), that all the information included is in accordance with the actual situ- ation of the Company and that nothing of material importance has been omitted. Chairman of the Board The principal duty of the Chairman is to ensure that the Board oper- ates well and carries out its duties. In addition, the Chairman has certain specific duties in respect of the general meetings. Matters to be considered by the Board are prepared by the CEO in collabo- ration with the Chairman, who chairs the board meetings. In order to ensure an independent approach by the Board, another member should take the chair when the Board considers matters of a material nature in which the Chairman has, or has had, an active involvement. Meeting structure The Board intends to meet at least five times each year and rou- tinely receives reports on the Company’s operational and financial performance, market updates, etc. Furthermore, the Board is con- sulted on or informed about matters of special importance. Risk & Audit Committee The Risk & Audit Committee shall act as a preparatory and advisory body for the Board and support the Board in the exercise of its responsibility for financial reporting, internal control and risk man- agement. Furthermore, the Risk & Audit Committee shall review and discuss with the Company’s management and statutory audi- tor the Company’s annual and quarterly financial statements, and assess and monitor the independence of the statutory auditor. The Risk & Audit Committee shall meet at least four times a year and at such other times as the Chairman of the committee deems appropriate. A Risk & Audit Committee consisting of three members, one of them independent of the Company’s business activities and main shareholders, was established in January 2018. Remuneration Committee The Remuneration Committee shall act as a preparatory and advi- sory body for the Board and shall assist the Board in its work in rela- tion to the Company’s remuneration policies and terms of employ- ment for the CEO. A Remuneration Committee consisting of three members, one of them independent of the Company’s business activities and main shareholders, was established in March 2018. The Board’s self-evaluation The Board conducts an annual evaluation of its performance, way of working and expertise. Deviations from the Code: none FY 2021 corporate governance report 32 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 33 Risk management and internal control in accordance with the principles underlying value-based man- agement, the Board places great importance on systematic risk management. This is done not only to satisfy the requirements set out by law, but also to ensure the Company’s governance in a highly dynamic market environment by identifying existing and potential risk exposures. Through (i) quarterly reviews of the Company’s most prominent areas of risk exposure and its internal control arrangements, (ii) management guidelines and (iii) the appointment of a dedicated risk management unit to perform risk monitoring and provide reg- ular risk management updates to the Risk & Audit Committee, the Board aims to ensure that the Company has sound internal controls and systems for risk management that are appropriate in relation to the extent and nature of the Company’s activities. In view of the extent and nature of the Company’s activities, the Board considers the Company’s internal control and risk manage- ment to be sound and appropriate. It is composed of the majority shareholder’s governing elements, such as the code of conduct, business standards, whistleblowing system and other relevant pol- icies and procedures. The Board reviews the Company’s risk matrix regularly, as well as the internal control arrangements at least annually. MPC Container Ships ASA reports to the financial market on a quarterly basis. The Board performs an internal financial audit review prior to the release of quarterly results, and when other- wise required. Deviations from the Code: none Remuneration of the board of directors For financial year 2021, each Board member will receive NOK 200,000 in remuneration, covering work related to both Board representation and committee participation, as approved by the annual general meeting on 28 April 2021. The remuneration of the Board is not linked to Company perfor- mance. Board members have no options to buy shares in the Com- pany, nor do they receive compensation other than the Board remu- neration. Board remuneration is considered to be on market terms. Deviations from the Code: none Remuneration of executive personnel Pursuant to the Norwegian Public Limited Liability Companies Act, the Board prepares guidelines for the remuneration of the Compa- ny’s CEO and other executive personnel. The guidelines set out the main principles applied in determining the salary and other remu- neration of the executive personnel considered to reflect market conditions and help to ensure convergence of the financial inter- ests of the executive personnel and shareholders. The Board’s statement on executive personnel remuneration is communicated to the annual general meeting in a separate appen- dix, highlighting which guidelines are advisory and which, if any, are binding. Any performance-related remuneration such as incentive pro- grammes, share option schemes or similar shall be linked to value creation for shareholders and results delivered in the Group over time. Such arrangements aim to drive performance and be based on financial, operational and other quantifiable measures over which the employee in question can impact. Performance-related remuneration is subject to limits. For information about remuneration of the Company’s CEO and other executive personnel, see the Remuneration report and note 23 in the Company’s FY 2021 Annual Report. Deviations from the Code: None FY 2021 corporate governance report 32 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 33 Information and communications the Company seeks to treat all participants in the securities market equally through publishing interim reports, annual reports, press releases and all relevant information for the market in a timely, effi- cient and non-discriminating manner. All reports will be available on the Company’s website www.mpc-container.com and through regulatory and non-regulatory disseminations at the Oslo Stock Exchange. The Board has adapted an Investor Relations Policy to ensure that the Company’s investor relations are carried out in compliance with applicable rules, regulations and recommended practises. The pol- icy shall also ensure awareness of investor relations amongst the management and the Board. The Company’s current financial calendar with dates of important events including the annual general meeting, publishing of quar- terly reports and its presentations, etc. is publicly accessible on the Company’s website www.mpc-container.com and through regulatory and non-regulatory disseminations at the Oslo Stock Exchange. Deviations from the Code: none Takeovers The Company has implemented guidelines on how to act in the event of a takeover bid. In the event of a takeover bid being made for the Company, the Board will follow the overriding principle of equal treatment for all shareholders and will seek to ensure that the Company’s business activities are not disrupted unnecessarily. The Board will strive to ensure that shareholders are given sufficient information and time to evaluate an offer the Board considers attractive for the shareholders. The Board will not seek to prevent any takeover bid unless it believes that the interests of the Company and the shareholders justify such actions. If a takeover bid is made, the Board will issue a statement with a recommendation on whether such bid should be accepted or not by the shareholders. Such statement shall, inter alia, include informa- tion on whether the assessment of the bid is unanimous and, if not, on which basis individual Board members have made reservations regarding the Board’s statement. In the event of a takeover bid, the Board will consider obtaining a valuation from independent experts. If a major shareholder, any member of the Board or executive management, related parties or close associates of such individuals or anyone who has recently held such a position is either the bidder or has a particular personal interest in a takeover bid, the Board will arrange for an independ- ent valuation. Deviations from the Code: none Auditor Under Norwegian law the auditor of the Company is elected by the general meeting. Ernst & Young AS (org. no. 976 389 387) was elected as the Company’s auditor on 18 May 2017. The auditor participates in meetings of the Risk & Audit Committee that cover interim, quarterly and annual financial reporting, board meetings that deal with the annual accounts as well as the annual general meeting. At these meetings, the auditor reviews any devi- ations in the accounting principles applied and comments on key aspects of the audit, material accounting estimates and issues of special interest to the auditor, including possible disagreements between the auditor and the management. At least once a year the auditor and the Board meet without the members of the executive management present. The auditor presents and discusses annually with the Risk & Audit Committee the main features of their plan for the audit of the Company as well as a review of the Company’s internal control procedures. The auditor shall annually submit a written confirmation that the auditor continues to satisfy the requirements for independence and a summary of all services in addition to audit work that has been undertaken for the Company. Deviations from the Code: none FY 2021 corporate governance report 34 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 35 REMUNERATION REPORT Report on salaries and other remuneration to leading personnel in MPC Container Ships ASA for 2021 This report on salaries and other remuneration to leading personnel (“the Report”) of MPC Container Ships ASA (“the Company”) is based on the guidelines for the determination of salaries and other remu - neration of leading personnel in the Company which were approved by the Company’s general meeting on 28 April 2021 (“Guidelines”). The statement regarding remuneration for executive management was passed by 98.5% of the shares represented at the sharehold- ers’ meeting. The report is based on the requirements set out in the Norwegian Public Limited Companies Act of 13 June 1997 no. 45 (the “Compa- nies Act”) section 6-16 a and 6-16 b, as well as Regulation on guide- lines and report on remuneration for leading personnel of 11 Decem- ber 2021 No. 2730 (the “Regulation”). The report is formulated in line with the European Commission’s template for remuneration reports. 15 Information required by the Norwegian Act relating to Annual Accounts of 17 July 1998 no. 56 (“Accounting Act”) section 7-31 b is included in the Company’s annual report for 2021 in note 23. Remuneration to board members is not covered by this Report. Any remuneration to board members is determined by the general meeting in accordance with the Companies Act section § 6-10 and is available in note 23 in the annual report for 2021. Key figures for the financial year 2021 The Group in 2021 2021 was a remarkable year for the Group and the container ship- ping industry with historically good market conditions, where we continued to execute our chartering strategy by concluding 54 multi-year charter contracts at strong charter rates. Furthermore, the Group executed twelve highly accretive vessel acquisitions and successfully completed twelve highly profitable exits, in order to facilitate a refinancing in preparation of our distribution plan. Recent forward fixtures concluded during the initial weeks of 2022 illustrate the continuous strength in the container charter mar- ket. Looking ahead, the Group has a significant number of highly 15 https://ec.europa.eu/info/sites/info/files/rrg_draft_21012019.pdf profitable charters with contracted revenues of USD 1.4 billion and a projected EBITDA backlog of around USD 1.1 billion. This earn- ings visibility will not only protect a strong distribution capacity for the years ahead, but will also enable us to continue to significantly de-leverage the Group. As such, the Company will not only be per- fectly positioned for substantial distributions to shareholders, but will at the same time maintain a very high balance sheet flexibility, allowing the Company to selectively execute growth opportunities as they arise. The various steps taken underlines the Company’s commitment to rational decision making and capital allocation. Going forward we will continue to place a strong emphasis on creating shareholder value by focusing on transactions that are accretive on a per share basis. With such a compelling risk-reward profile, we look forward to the Company’s value strategy continuing for years to come.” Please also see the CEO statement in the Q4 report on page 5. The guidelines for remuneration that the Company has adopted in 2021 The overall objective of the management remuneration policy of the Company is to attract, retain and motivate employees with the skills, qualifications and experience needed to maximize value creation for the Company and its shareholders. The Company shall offer competitive terms to executive management. Subject to this, the remuneration of the Company’s executive management shall as far as possible be in line with the market level for remuneration of executive management in comparable companies. The remuneration of executive management shall not be of a size or nature which is liable to harm the Company’s reputation. The remuneration of the Company’s executive management may in addition to a fixed salary include customary benefits in kind such as car allowance or Company car, coverage of telephony and broad- band costs, newspaper subscriptions etc. The remuneration may also include pension and insurance schemes as well as severance pay entitlements. The Board may establish bonus schemes for executive management. The purpose of any such variable bonus scheme shall be to give management an incentive to contribute to value creation in the Company and its subsidiaries. There is currently no remuneration related to the share or devel- opments in the share price. The remuneration policy for executive management during 2021 has been in accordance with the principles described above. Infor- mation on remuneration to executive management during 2021 is included in note 19 to the annual accounts. FY 2021 corporate governance report 34 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 35 The Group’s performance For the full year 2021, the Group reported operating revenues of USD 384.7 million (2020: 171.9 million) and gross profit of USD 254.8 million (2020: USD 25.7 million). The increase in the gross profit compared to the previous year is mainly due to the improve- ments in the charter market following the recovery of the COVID- 19 pandemic. The Group reported a net profit of USD 189.9 million (2020: Net loss of USD 64.5 million). The Group’s total assets amounted to USD 1,034.6 million as at 31 December 2021 (USD 678.1 million as at 31 December 2020). Non-current assets of USD 803.0 million (USD 617.2 million as at 31 December 2020) reflected the carrying amounts of the vessels operated by the Group including the equity investments into a joint venture covering eight additional vessels. The growth in vessels in 2021 is mainly reflected by the acquisition of Songa Container AS which increased the total fleet by 11 vessels with a fair value of USD 296.5 million in addition to regular CAPEX and other vessel upgrades, partly offset by disposed vessels, depreciations and the reclassification of one vessels as held for sale per year-end. The increase in the joint venture investment during 2021 is reflected by USD 24.8 million in the share of profit from the joint venture partly offset by received distributions of USD 24.5 million. Total equity was USD 727.6 million as at 31 December 2021 (USD 383.0 million as at 31 December 2020) with a non-controlling interest of USD 0.9 million. The change in equity in 2021 mainly reflects the capital increase of USD 149.5 million related to the acquisition of Songa Container (see note 11) and the net profit for the period of USD 189.7 million. At 31 December 2021, the Group had total interest-bearing debt in the amount of USD 231.8 million (USD 276.9 million as at 31 Decem- ber 2020). Remuneration to leading personnel Leading personnel currently hold contract within the MPC Con- tainer Ships ASA as well as in the German entity, MPC Container Ships GmbH & Co. KG. The tables below show total remuneration in USD to the Company’s leading persons which have been earned or paid by the Company for the last 5 years since inception of the Company 16 . 16 The salaries are paid in EUR from MPC Container Ships ASA and MPC Container Ships GmbH & Co. KG Remuneration from MPC Container Ships ASA Name of Director (start/end) Financial year Fixed remuneration Variable remuneration Extra- ordinary items Pension expense Total remuneration Proportion of fixed and variable remuneration Base salary Other benefits One-year variable Multi-year variable Constantin Baack (CEO) 2021 170,585 768,562 4,711,598 17 5,650,745 Fixed/variable: 3%/97% 2020 179,773 158,244 338,018 Fixed/variable: 43%/57% 2019 173,307 148,501 321,808 Fixed/variable: 56%/44% 2018 297,554 148,777 446,332 Fixed/variable: 0%/100% Dr. Benjamin Pfeifer (CFO from 1 Janu- ary 2021) 2021 106,100 90,598 196,698 Fixed/variable: 54%/46% Harald Wilke (CFO until 30 June 2020) 2020 118,959 119,648 238,607 Fixed/variable: 49%/51% 2019 107,742 17,820 125,563 Fixed/variable: 86%/14% 2018 36,398 3,915 40,313 Fixed/variable: 90%/10% 17 Multi-year variable for the CEO based on a multi-year LTIP (Long-Term Incentive Plan) contract, agreed with the Compensation Committee and signed in 2018 between the Company and the CEO. The basic driver (KPI) for the variable compensation is (among others) the equity per share development within a respective timeframe. The original intention of the LTIP was for the CEO to receive performance rights shares or equivalent in the Company. Beginning of FY 2022, the Compensation Committee and CEO negotiated a cash settlement of the contract, as the LTIP plan terms have never been fully finalized. The cash payment was contractually fixed In February 2022. FY 2021 corporate governance report 36 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 37 Remuneration from MPC Container Ships GmbH & Co. KG Name of Director (start/end) Financial year Fixed remuneration Variable remuneration Extra- ordinary items Pension expense Total remuneration Proportion of fixed and variable remuneration Base salary Other benefits One-year variable Multi-year variable Constantin Baack (CEO) 2021 144,754 17,126 161,879 Fixed/variable: 100%/0% 2020 150,186 17,126 167,312 Fixed/variable: 100%/0% 2019 152,931 17,126 170,056 Fixed/variable: 100%/0% Dr. Benjamin Pfeifer (CFO from 1 Janu- ary 2021) 2021 171,255 12,666 22,834 206,755 Fixed/variable: 83%/17% Harald Wilke (CFO until 30 June 2020) 2020 128,441 10,275 138,717 Fixed/variable: 100%/0% 2019 171,255 10,275 181,530 Fixed/variable: 100%/0% 2018 63,290 63,290 Fixed/variable: 100%/0% Remuneration paid in relation to the Guidelines. See our guidelines in the section above. Total remuneration paid compared to the Guidelines A prerequisite for a successful implementation of the Company’s business strategy and securing the Company’s long-term interests, including sustainability, is that the Company is able to recruit and retain qualified personnel. To achieve this, it is necessary for the Company to offer competitive remuneration. The Company’s remuneration guidelines enable the Company to offer leading personnel a competitive total remuneration. Total remuneration to leading personnel during 2021 has complied with the Company’s guidelines for remuneration. FY 2021 corporate governance report 36 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 37 Annual Report 2021 MPC Container Ships 39 38 MPC Container Ships Annual Report 2021 Responsibility statement RESPONSIBILITY STATEMENT We confirm that, to the best of our knowledge, the consolidated financial statements presented in this report have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and give a true and fair view of the Group’s assets, liabilities, financial position and profit or loss as a whole. We also confirm that, to the best of our knowledge, the Board of Directors’ report includes a fair review of the development and performance of the business and the position of the Group and a description of risks and uncertainties. Ulf Holländer (Chairman) Dr. Axel Schroeder Peter Frederiksen Ellen Hanetho Laura Carballo Constantin Baack (CEO) Responsibility statement Annual Report 2021 MPC Container Ships 39 38 MPC Container Ships Annual Report 2021 CONSOLIDATED FINANCIAL STATEMENTS Annual Report 2021 MPC Container Ships 41 40 MPC Container Ships Annual Report 2021 Consolidated financial statements Consolidated Income Statement 18 18 See separate section on Alternative Performance Measures (“APM”) for a description of the APM’s applied in this Annual Report in USD thousands Notes 2021 2020 Operating revenues 5, 6 384,710 171,898 Commissions -11,741 -6,166 Vessel voyage expenditures 7 -11,982 -22,978 Vessel operation expenditures 8 -121,772 -108,915 Ship management fees -9,262 -9,065 Share of profit or loss from joint venture 9 24,794 935 Gross profit 254,747 25,710 Administrative expenses 10 -19,513 -7,874 Other expenses -3,773 -3,485 Other income 11 58,974 1,813 EBITDA 290,436 16,164 Depreciation 11 -62,049 -49,653 Impairment 11 0 -8,997 Bargain gain business combination 12 2,312 0 Operating result (EBIT) 230,699 -42,486 Finance income 13 156 733 Finance costs 13, 14 -40,325 -22,665 Profit/Loss before income tax (EBT) 190,530 -64,418 Income tax expenses 15 -676 -73 Profit/Loss for the period 189,854 -64,491 Attributable to: Equity holders of the Company 189,725 -64,456 Non-controlling interest 129 -35 Basic earnings per share – in USD 16 0.46 -0.27 Diluted earnings per share – in USD 16 0.46 -0.27 Consolidated financial statements Annual Report 2021 MPC Container Ships 41 40 MPC Container Ships Annual Report 2021 Consolidated statement ofcomprehensiveincome in USD thousands Notes 2021 2020 Profit/loss for the period 189,854 -64,491 Items that may be subsequently transferred to profit or loss 8,769 -5,058 Foreign currency effects, net of taxes -297 257 Change in hedging reserves, net of taxes 17 9,066 -5,316 Items that will not be subsequently transferred to profit or loss 0 0 Total comprehensive profit/loss 198,622 -69,549 Attributable to: Equity holders of the Company 198,494 -69,523 Non-controlling interest 129 -26 Consolidated financial statements 42 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 43 Consolidated statement offinancialposition in USD thousands Notes 2021 2020 ASSETS 1,034,613 678,138 Non-current Assets 803,018 617,179 Vessels 11 774,362 587,816 Prepayments on vessels 11 0 1,000 Investment in joint venture 9 28,656 28,362 Current assets 231,595 60,959 Vessel held for sale 11 16,304 3,900 Inventories 4,820 3,373 Trade and other receivables 18 30,141 14,432 Cash and cash equivalents 19 180,329 39,254 Unrestricted cash 156,767 27,717 Restricted cash 23,562 11,537 EQUITY AND LIABILITIES 1,034,613 678,138 Equity 727,589 383,032 Share capital 16, 20 48,630 43,047 Share premium 16, 20 597,080 456,764 Treasury shares -1,143 -1,143 Retained earnings 82,212 -108,413 Other reserves -109 -8,877 Non-controlling interest 919 1,655 Non-current liabilities 151,811 274,484 Interest bearing loans and borrowings 14, 21 148,083 274,484 Acquired TC contracts 12 3,728 0 Current liabilities 155,213 20,622 Interest bearing loans and borrowings 14, 21 83,743 2,432 Acquired TC contracts 12 18,083 0 Trade and other payables 17,628 13,275 Payables to affiliated companies 17 0 20 Deferred revenues 15,146 1,175 Other liabilities 22 20,613 3,720 Oslo, 24 March 2022 The Board of Directors and CEO of MPC Container Ships ASA Ulf Holländer (Chairman) Dr. Axel Schroeder Peter Frederiksen Ellen Hanetho Laura Carballo Constantin Baack (CEO) Consolidated financial statements 42 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 43 Consolidated statement ofchangesinequity In USD thousands Share capital Share premium Treasury shares Retained earnings Other reserves Total equity attributable to the equity holders of the Company Non-con- trolling interest Total equity Equity as at 1 Jan. 2021 43,047 456,764 -1,143 -108,413 -8,877 381,378 1,655 383,032 Result of the period 0 0 0 189,725 0 189,725 129 189,854 Other comprehensive income 0 0 0 0 8,769 8,769 0 8,769 Total comprehensive income 0 0 0 189,725 8,769 198,494 129 198,622 Change in non-controlling interest 0 0 0 900 0 900 -865 35 Capital increase 5,583 143,870 0 0 0 149,453 0 149,453 Settlement of warrants 0 -3,554 0 0 0 -3,554 0 -3,554 Equity as at 31 December 2021 48,630 597,080 -1,143 82,212 -109 726,670 919 727,589 Equity as at 1 Jan. 2020 101,121 356,566 -1,143 -43,948 -3,819 408,776 1,681 410,457 Result of the period 0 0 0 -64,465 0 -64,465 -26 -64,491 Other comprehensive income 0 0 0 0 -5,058 -5,058 0 -5,058 Total comprehensive income 0 0 0 -64,465 -5,058 -69,523 -26 -69,549 Change in nominal value -97,236 97,236 0 0 0 0 0 0 Capital increase 39,162 2,962 0 0 0 42,124 0 42,124 Equity as at 31 December 2020 43,047 456,764 -1,143 -108,413 -8,877 381,378 1,655 383,032 Consolidated financial statements 44 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 45 Consolidated statement ofcashflow in USD thousands Notes 2021 2020 Profit/Loss before income tax 190,530 -64,418 Fair value change in derivatives 0 -73 Net change inventory and trade and other receivables -3,588 8,961 Net change other current and trade and other payables 26,569 -7,615 Depreciation 11 62,049 49,654 Finance costs (net) 40,169 21,933 Share of profit or loss from joint venture -24,794 -936 Impairment 11 0 8,997 Bargain gain business combination 11, 12 -2,312 0 Gain on sale of vessels 11 -54,774 0 Amortization of TC contracts 12 -21,662 0 Cash flow from operating activities 212,187 16,502 Proceeds from disposal of vessels 11 141,444 14,525 Scrubbers, dry dockings and other vessel upgrades 11 -41,084 -44,029 Purchase of new vessel 11 -9,000 0 Interest received 65 82 Dividend received from joint venture investment 9 24,500 0 Cash from entities acquired 12 11,918 0 Cash consideration acquisition 12 -84,611 0 Cash flow from investing activities 43,233 -29,422 Proceeds from share issuance 16, 12 0 43,354 Share issuance costs 16 -190 -1,220 Proceeds from debt financing 14 368,547 0 Repayment of debt 14 -421,823 -8,326 Repayment of acquired debt 14 -34,071 0 Interest paid 14 -14,082 -12,732 Debt issuance costs 14 -7,939 -2,638 Other finance paid -1,437 -1,226 Repayment of hedging instrument 17 -3,351 -5,243 Cash flow from financing activities -114,346 11,969 Net change in cash and cash equivalents 141,074 -951 Cash and cash equivalents at the beginning of the period 39,254 40,205 Cash and cash equivalents at the end of the period 180,329 39,254 Consolidated financial statements 44 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 45 Notes Note 1 – General information MPC Container Ships ASA (“the Company”) is a public limited liability company (Norwegian: allmennaksjeselskap) incorporated and dom- iciled in Norway, with registered address at Munkedamsveien 45A, 0250 Oslo, Norway, and Norwegian enterprise number 918 494 316. The Company was incorporated on 9 January 2017 and commenced operations in April 2017, when the first vessels were acquired. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as “the Group”). The principal activity of the Group is to invest in and to operate maritime assets in the container shipping segment. The shares of the Company are listed at the Oslo Stock Exchange under the ticker symbol MPCC. MPC Container Ships ASA is the parent company in the Group. The financial statements were approved by the Company’s Board of Directors on 24 March 2022. Note 2 – Basis of preparation The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. Going concern assumption The financial statements are prepared based on the going concern assumption. Financial statement classification The Group presents assets and liabilities in the statement of financial position based on the current/non-current classification. Current assets are assets that are: + expected to be realised in the entity’s normal operating cycle; + held primarily for the purpose of trading; + expected to be realised within twelve months after the reporting period; or + cash and cash equivalents (unless restricted). The current share of long-term assets or liabilities will be classified as current. All other assets are non-current. Current liabilities are those that are: + expected to be settled within the entity’s normal operating cycle; + held for purpose of trading; or + due to be settled within twelve months; or + for which the entity does not have an unconditional right to defer settlement beyond twelve months. All other liabilities are non-current. If a liability has become payable given a breach of an undertaking under a long-term loan agreement, the liability is classified as current. The income statement of the Group is presented using the cost of sales method. The cash flow statement of the Group is prepared using the indirect method. Notes 46 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 47 Basis of measurement The consolidated financial statements were prepared on the basis of historical cost, except for assets and liabilities measured at fair value from derivative instruments. The Group’s financial year corresponds to the calendar year. Basis of consolidation The consolidated financial statements comprise the financial statements of MPC Container Ship ASA and its subsidiaries as at 31 Decem- ber 2021. The assets and liabilities, expenditure and income may only be included in the consolidated financial statements for subsidiaries over which the Group has control. Control is achieved when the Group is exposed, or has 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 general, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has control over an investee, including: + the contractual arrangement with the other vote holders of the investee; + rights arising from other contractual arrangements; and + the Group’s voting rights and potential voting rights. The consolidation of subsidiaries is carried out from the date on which the Group obtains the control over such companies and subsid- iaries continue to be consolidated until the date that such control ceases. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets, liabilities, non-controlling interest and other components of equity while any resulting gain is recognised in profit or loss. Any investment retained is recognised at fair value. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All intercompany balances, income and expenses, unrealised gains and losses as well as cash flows resulting from intercompany transactions are eliminated in full. Non-controlling interests represent the portion of comprehensive income and net assets that is not held by the Group and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from the Company’s shareholders’ equity. The Group has included the subsidiaries listed in Note 26 in the consolidated financial statements. Functional and presentation currency The consolidated financial statements are presented in US Dollar (“USD”), which is the functional currency of the parent company of the Group. All financial information presented in USD has been rounded to the nearest thousand USD, except otherwise indicated. New and amended standards and interpretations The Group’s intention is to adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued. No new standards or interpretations implemented in 2021 had a material impact on the consolidated financial statements. Standards issued but not yet effective The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s finan- cial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. Amendments to IFRS 3 –The IASB issued Amendments to IFRS 3 Business Combinations – Reference to the Conceptual Framework. The amendments are effective for annual periods beginning on or after 1 January 2022. They add an exception to the recognition principle of IFRS 3 to avoid the issue of potential “day 2” gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists as at the acquisition date. At the same time, the amendments add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. Notes 46 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 47 Amendments to IAS 37 – In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual periods beginning on or after 1 January 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. Definition of Accounting Estimates – Amendments to IAS 8. In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of “accounting estimates”. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted as long as this fact is disclosed. The amendments are not expected to have a material impact on the Group. IFRS 9 Financial Instruments – Fees in the “10%” test for derecognition of financial liabilities. As part of its 2018–2020 annual improvements to IFRS standards process, the IASB issued an amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assess- ing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The Group will apply the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. Note 3 – Significant accounting policies Foreign currency translation In accordance with IAS 21, 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 trans- lation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transaction. For those subsidiaries with functional currencies other than USD, financial position items are translated at the rate of exchange at the balance sheet date, and income statements are translated at the exchange rate prevailing at the date of the transaction. Exchange dif- ferences arising on the translation are recognised in other comprehensive income as foreign currency differences. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. Vessels and other property, plant and equipment Fixed assets are stated at historical cost, less subsequent depreciation and impairment. For vessels purchased, these costs include capitalisable expenditures that are directly attributable to the acquisition of the vessels. Upon acquisition, each component of the ves- sels, with a cost significant to the total acquisition costs, is separately identified and depreciated over that component’s useful life on a straight-line basis. Depreciation is calculated on a straight-line basis over the useful life of the assets, taking residual values into consideration, and adjusted for impairment charges, if any. Residual values of the vessels are estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. Expected useful lives of assets and residual values are reviewed at each balance sheet date and, where they differ signifi- cantly from previous estimates, depreciation calculations are altered accordingly. Notes 48 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 49 Ordinary repairs and maintenance expenses are charged to the income statement as incurred. Costs related to dry-docking or other major overhauls are recognised in the carrying amount of the vessels. The recognition is made when the dry-docking has been performed and is depreciated based on estimated time to the next class renewal. The remaining costs that do not meet the recognition criteria are expensed as repairs and maintenance. The scrubber installations are recognised in the carrying amount of the vessels, and depreciated over the remaining useful life of the vessels. Vessels and other property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from their use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period the asset is derecognised. Impairment of vessels Vessels and other fixed assets are assessed for impairment indicators each reporting period. If impairment indicators are identified, the recoverable amount is estimated; and if the carrying amount exceeds its recoverable amount an impairment loss is recognised, i.e. the asset is written down to its recoverable amount. An asset’s recoverable amount is calculated as the higher of the fair value less cost of sale and its value in use. The net realisable value is the amount obtainable from the sale of an asset in an arm’s length transaction less the costs of sale, and the value in use is the present value of estimated future cash flows expected from the continued use of an asset. Assets are grouped at the lowest level where there are separately identifiable independent cash flows. The following assumptions have been made when calculating the value in use for container vessels: + Each vessel is considered to be a separate cash-generating unit. + Future cash flows are based on an assessment of expected development in charter rates and estimated level of administrative and operating expenses (including maintenance and repair) and dry-docking over the remaining useful life of the vessel plus any residual value. + The net present value of future estimated cash flows of each cash-generating unit is based on a discount rate according to a pre-tax weighted average cost of capital (see Note 14 – Vessels). The weighted average cost of capital is calculated based on the expected long-term borrowing rate and risk-free USD LIBOR rate plus an equity risk premium. An impairment loss recognised in prior periods for an asset is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Investment in joint ventures A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group’s investments in joint ventures are accounted for using the equity method. The investment in a joint venture is initially rec- ognised at cost and thereafter adjusted for the Group’s share of post-acquisition profits or losses, movements in other comprehensive income or dividends received. The financial statements of the joint venture are prepared for the same reporting period as the Group. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is recognised through profit and loss net of any reimbursement. Trade and other payables Trade and other payables represent non-interest-bearing liabilities for goods and services provided to the Group prior to the reporting date. The amounts are unsecured and are usually paid within 30 days of recognition. They are recognised initially at fair value and subse- quently measured at amortised cost using the effective interest method. Trade and other receivables Trade receivables and other short-term receivables are measured at transaction price upon initial recognition and subsequently measured at amortised cost less expected credit losses. Notes 48 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 49 Inventories The Group values its inventories, which comprise mainly of lube oils and bunkers on board the vessels, at the lower of cost and net real- isable value. They are accounted for on a first-in/first-out basis. Cash and cash equivalents Cash and short-term deposits in the statement of financial position comprise cash at banks, on hand and short-term deposits with a maturity of three months or less. Cash equivalents represent short-term, liquid investments which are readily convertible into known amounts of cash with original maturities of three months or less. Cash and cash equivalents are recorded at their nominal values. Liquid funds denominated in foreign currencies are translated at the exchange rate on the balance sheet date. Cash not available for general use by the Group due to minimum liquidity requirements in the loan agreements are classified as restricted cash. Share issuance Costs related to share issuances are recognised directly in equity. Warrants The warrants issued by the Company are classified as equity instruments in accordance with IAS 32. Accordingly, the subscription rights are not recognised in the Group’s financial statements at the time they are granted. At the time of the execution, the Company issues shares and receives a cash contribution. The cash contribution is accounted for in share capital and capital reserves (in the amount a premium or discount to the shares’ par value). Financial liabilities All loans and borrowings are initially recognised at fair value less directly attributable transaction costs and have not been designated as at fair value through profit or loss. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amor- tised cost using the effective interest method. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Derivative financial instruments and hedging The Group may use certain hedging instruments, such as forward contracts or options, to manage foreign exchange or interest rate risk, for instance. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. At the inception of a hedge relationship, the Group formally documents the relationship between the hedge instrument and the hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment at inception and on an ongoing basis according to IFRS 9, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that ultimately could affect profit or loss. For the purpose of hedge accounting, hedges are classified as: + fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk); or + cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable transactions. Hedges which meet the criteria for hedge accounting are accounted for as follows: The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income (“OCI”) in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability. Notes 50 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 51 If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction or firm commitment occurs. Fair value estimation Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market partic- ipants at the measurement date, using assumptions that market participants would use when pricing the asset or liability. All assets and liabilities for which fair values are measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: + Level 1: Quoted market prices in active markets for identical assets or liabilities. + Level 2: Inputs other than quoted market prices included in Level 1 are directly or indirectly observable. + Level 3: Inputs are unobservable. Additional explanations of fair values can be found in Note 18 – Financial instruments. Leases as lessor The determination of whether an arrangement contains a lease element is based on the substance of the arrangement at the inception of the lease. Leases are classified as finance leases if the terms of the lease agreement transfer substantially all the risks and benefits related to ownership of the leased item. All other leases are classified as operating leases. The Group leases its assets to liner shipping companies through time charter contracts. Payments made under operating leases are charged to the profit and loss on a straight-line basis over the period of the time charter contract. Revenue recognition The Group’s time charter contract revenues are separated into a lease element accounted for in accordance with IFRS 16 Leases (see above under leases as lessor) and a service element which is accounted for in accordance with IFRS 15 Revenue from Contracts with Customers. Time charter, pool revenue and other revenue from contracts with customers is recognised when control of goods or services are trans- ferred to the customer and when each separate performance obligation in the customer contract is fulfilled following the “over-time principle”. It is recognised at an amount that reflects the consideration which the Group expects to receive in exchange for those goods or services. Revenues are presented net of indirect sales taxes. The Group acts as a participant in the pool arrangements. The performance obligation under the pool arrangements are equal as set under the time charter contracts. Revenues for the vessels employed in the pool are based on average revenues across the pool the vessels are employed in, i.e. the vessels earn the average charter rate of the pool for the respective month. The service element from the Group’s time charter contracts are recognised over time, as the performance obligation is satisfied over time. This since the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs. Revenue from bunkers and other goods and services from customers are recognised in the period the goods or services are transferred to the customer, following the “point in time principle”. Operating expenses Operating expenses are accounted for on an accruals basis. Expenses are charged to the income statement, except for those incurred in the acquisition of an investment, which are capitalised as part of the cost of the investment. Expenses arising on the disposal of invest- ments are deducted from the disposal proceeds. Operating expenses of the Group are expenses related to the operation of vessels, such as (but not limited to) crewing expenses, expenses for maintenance and repair, insurance and lube oil. Interest income Interest income is recognised as accrued and is presented in financial income in the statement of comprehensive income. Earnings per share The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share are calculated by dividing the profit for the reporting period attributable to ordinary equity holders of the Com- pany by the weighted average number of ordinary shares outstanding during the reporting period. Notes 50 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 51 Diluted earnings per share are calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Taxes Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the relevant taxation authorities. The Company is subject to tax on its income in accordance with the general tax rules pertaining to companies that are tax resident in Norway. The Company’s vessel-owning subsidiaries are subject to the Norwegian, German or Dutch tonnage tax regime, i.e. taxable income is cal- culated as a lump sum depending on the net tonnage of the respective vessels, independent of the realised earnings. Income not derived from the operation of the vessels in international waters, such as financial income, is usually taxed according the ordinary taxation rules applicable in the resident country of each respective company. Tonnage taxes are classified as “Vessel operating expenditures”. Deferred tax liabilities are classified as non-current liabilities and are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers in the Group. 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 of the Company. The Group has identified one operating segment as it employs one type of vessels: “Container vessels”. Note 4 – Significant judgements, estimates and assumptions The preparation of consolidated financial statements conforming to IFRS requires management to make judgments, estimates and assumptions that may affect assets, liabilities, revenues, expenses and information in notes to these financial statements. Estimates are management’s best assessment based on information available at the date the financial statements are authorized for issue. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods. Estimates and underlying assumptions are reviewed on an on-going basis. Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, which have significant effect on the amounts recognized in the consolidated financial statements: + Joint arrangements: The Group holds a 50% ownership interest in 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG; the Group has determined that it has joint control over the investee based on terms and conditions in the shareholder agreement and the ownership is shared with the joint venture partner. Assumptions and estimation uncertainties The following assumptions and estimation uncertainties can have a significant risk of resulting in a material adjustment to the carrying amounts of assets: + Climate risk: Future climate change measures may affect the shipping industry regarding fuel regulation, port fees and the scrap values of the vessels. Potential future fuel taxes or development of new more climate friendly fuel may increase the future operating expenses of the Group that may be only partly offset by higher time charter rates. Technological developments enabling more climate friendly container vessels may affect the ability to obtain new charters in the future, the potential useful life of the vessels and the scrap values of the vessels. The fair value of the vessels exceed their carrying amounts by a significant amount, so climate change risks does not currently lead to a risk for impairment in the foreseeable future. + Depreciation of vessels (including scrubbers): Depreciation is based on estimates of the vessels’ useful lives, residual values less scrapping costs and the depreciation method, which are reviewed by management at each balance sheet date. Any changes in estimated useful lives and/or residual values impact the depreciation of the vessels prospectively. + Impairment of vessels: Indicators of impairment of assets are assessed at each reporting date. In 2020 the Group identified impairment indicators (see Note 14 for further description). The impairment assessments demand a considerable degree of estimation. Changes in circumstances and assumptions may significantly affect the estimated recoverable amounts. The Group’s Notes 52 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 53 impairment test for operating vessels is based on the value in use as assessed by performing discounted cash flow calculations. Value in use calculations involve a high degree of estimation and a number of critical assumptions such as time charter rates, operational expenses, residual values and discount rates. + Allocation of acquisition costs in business combinations: valuation of vessels requires key input from management, such as future time charter rates, operating costs, useful life of vessels, use of external broker valuations etc. which are subject to significant estimate and judgement. The value of such assets may be influenced by changes in market conditions, such as time charter rates in the container shipping market. Note 5 – Segment information All of the Group’s vessels earn revenue from seaborne container transportation globally. The vessels exhibit similar economic, trading and financial characteristics. The Group is organised in one operating segment, i.e. the container shipping segment. The chief operating decision makers measure the financial performance based on the consolidated results for the Group’s vessels. Further, the assets and liabilities are reviewed at a consolidated basis in a consistent manner with the statement of financial position. The Group has only one customer in 2021 where the total revenues represent more than 10% of the total revenues, respectively USD 40.1 mil- lion which equals 11.1% of the total revenues in the income statement. The following customers of the Group represent more than 10% of the Group’s total charter revenue in 2021: CMA CGM S.A., France, Hap- ag-Lloyd, Germany, and Maersk Line, Denmark. The Group’s vessels trade globally and are suitable to be deployed in various global trading patterns. Therefore, there is no particular focus on a geographic region. The Company provides geographical data for revenue only, as the Group’s revenue predominantly stems from vessels that may be employed globally. Gross revenue specific foreign countries which contribute significantly to total revenue are disclosed below. in USD thousands 2021 2020 Intra-Asia 129,910 43,603 South America 87,787 52,654 Europe 29,190 10,873 Middle East 47,915 17,992 Africa 20,946 8,706 Other geographical locations (worldwide trades) 37,179 23,162 Total time charter and pool revenue 352,927 156,990 Note 6 – Revenue in USD thousands 2021 2020 Time charter revenue 308,516 123,471 Pool charter revenues 44,410 33,520 Total charter revenues 352,927 156,990 Amortisation of time charter contracts 21,663 0 Other revenues 10,121 14,908 Total operating revenue 384,710 171,898 Notes 52 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 53 The Group’s time charter contracts and pool charter revenues are separated into a lease element and service element. The lease element of the vessel represents the use of the vessel without any associated performance obligations and is accounted for in accordance with IFRS 16 Leases. Revenues from time charter services (service element) and other revenue (e.g. bunkers and other services) are accounted for in accordance IFRS 15. In accordance with IFRS 15, for each contract with a customer, the Group identifies the performance obliga- tions, determines the transaction price, allocates the transaction price to performance obligations to the extent that the contract covers more than one performance obligation, determines whether revenue should be recognised over time or at a point in time and recognises revenue when or as performance obligations are fulfilled. The Groups’ voyage charters and TC contracts qualify for recognition over time. Revenue from shipping activities is recognised over time as the performance obligation is satisfied, including a share of revenue from incomplete voyages at the balance sheet date. Invoiced revenue related to an estimated proportion of remaining voyage time and activi- ties at the destination port is deferred. Number of days of a voyage, as a percentage of the total number of days a voyage is estimated to last, is considered as a close approximation of percentage of completion. in USD thousands 2021 2020 Service element 115,833 63,548 Other revenue 10,121 14,908 Total revenue from customer contracts 125,953 78,456 Lease element 237,094 93,443 Amortization of time charter contracts 21,663 0 Total operating revenue 384,710 171,898 Reference to Note 5 for disaggregation of time charter and pool revenues on geographical regions. Contracted revenues based on fixed time charter contracts as at 31 December 2021 are set out below, based on minimum contract periods of vessels held in subsidiaries: in USD thousands < 6 months 6 – 12 months >12 months Total Time charter revenue 223,562 190,857 438,564 852,983 Contracted revenues based on fixed time charter contracts as at 31 December 2020 are set out below, based on minimum contract peri- ods of vessels held in subsidiaries: in USD thousands < 6 months 6 – 12 months >12 months Total Time charter revenue 25,451 29,164 24,774 79,389 Note 7 – Vessel voyage expenditures in USD thousands 2021 2020 Bunker consumption -9,968 -20,131 Other voyage expenses -2,014 -2,847 Total voyage expenses -11,982 -22,978 Bunker expenses relate to periods where the vessels have been idle, repositioning or under maintenance and repair. Bunker expenses are partially compensated by income from sale of bunkers upon delivery into a time charter (see Note 6 where revenue from bunker reimburse- ments are shown under other revenue). When the vessels are on time charter contracts bunker consumption is for the charterer’s expense. Notes 54 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 55 Note 8 – Vessel operation expenditures in USD thousands 2021 2020 Crew -63,597 -58,418 Lube oil -6,593 -5,487 Maintenance and repair -28,000 -24,872 Insurances -12,998 -12,273 General operating expenditures -10,583 -7,865 Total operating expenses -121,772 -108,915 Vessel operating expenditures are partially compensated by income from reimbursements from the charterer (see Note 6 where revenue from reimbursements are shown under other revenue). General operating expenses are costs related to navigation and communication, power supply, cargo handling and other consumables. Note 9 – Interest in joint ventures The Group has a 50% interest in 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG, Hamburg (Germany), a company owning seven container vessels between 2,500 - 2,800 TEU through respective fully owned subsidiaries. In view of the shared control structure in the joint venture, the Group’s interest in 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG is accounted for using the equity method. Summarized financial information of the joint venture, based on its IFRS financial statements, is set out below: The joint venture had no contingent liabilities or capital commitments. 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG cannot distribute its profits without the consent from the two partners. in USD thousands 31 December 2021 31 December 2020 Non-current assets 60,961 67,864 Cash and cash equivalents 11,358 5,038 Other current assets 1,526 2,166 Non-current liabilities 13,631 15,816 Current liabilities 2,947 2,538 Equity 57,267 56,725 Group’s carrying amount of the investment 28,656 28,362 Notes 54 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 55 in USD thousands 2021 2020 Revenue 44,361 27,505 Cost of sales -19,511 -19,127 Administrative expenses -777 -789 Other income 31,746 319 Other expenses -406 -478 Depreciation -5,166 -4,682 Interest income 3 1 Interest expenses -628 -831 Income tax -34 -45 Profit after tax for the period 49,587 1,872 Total comprehensive income for the period 49,587 1,872 Group’s share of profit for the period 24,794 936 Dividends received 24,500 0 The net change in the book value of the investment in joint venture in 2021 of USD 0.3 million is reflected by the Group’s share of the profit of USD 24.8 million offset by received dividends of USD 24.5 million. Note 10 – Administrative expenses in USD thousands 2021 2020 Legal and advisory services -5,211 -1,160 Auditor services -1,018 -847 Salary and employee expenses -9,710 -3,193 Other administrative expenses -3,574 -2,674 Total administrative expenses -19,513 -7,874 Other administrative expenses includes remuneration to the Board of Directors and executive management, and fees paid for corporate management services from MPC Maritime Investments GmbH and MPC Münchmeyer Petersen Capital AG see Note 19 for further descrip- tion. The Group employs 24 people as at 31 December 2021. The Group has defined contributions plan for all employees in line with estab- lished market practices and regulations. Total lease expenses under short-term leases were USD 0.3 million in 2021. The following table details the administrative expenses incurred in relation to audit and related services. in USD thousands 2021 2020 Audit fee (EY) -701 -795 Attestation services -44 -10 Tax services 0 -52 Other non-audit services 0 0 Total auditor services -745 -857 Notes 56 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 57 Note 11 – Vessels and prepayments in USD thousands 2021 2020 Acquisition cost at 1 January 707,924 697,533 Acquisition of vessels 10,000 0 Acquisition of vessel from the take-over of MPCC Box AS (formerly Songa Container AS) 296,584 0 Prepayments reclassified to vessels -1,000 1,000 Capitalized dry-docking, scrubbers and other expenses 41,084 42,569 Disposals of vessels -95,836 -25,025 Transfer to vessel held for sale -20,914 -8,153 Acquisition cost 937,841 707,924 Accumulated depreciations 1 January -119,107 -75,672 Depreciation for the year -62,049 -49,653 Impairment 0 -8,996 Disposal of vessels 13,066 10,961 Transfer to vessel held for sale 4,611 4,253 Accumulated depreciations 31 December -163,481 -119,107 Closing balance 774,362 588,816 Depreciation method Straight-line Straight-line Useful life (vessels) 25 years 25 years Useful life (dry docks) 5 years 5 years Useful life (scrubbers) Remaining useful life vessels Remaining useful life vessels As at 31 December 2021, the Group operated 61 vessels in subsidiaries (2020: 57 vessels) and 7 vessels through a joint venture arrangement (2020: 8 vessels). During 2021 the Group entered into agreements for the sale of AS Faustina, AS Federica, AS Riccarda, Stefan Sibum, Grete Sibum and Anne Sibum where the vessels were all delivered to its new owner during the year and the sales resulted in a total gain of USD 56.6 million recognised in other income in 2021. AS Palatia was classified as held for sale as at 31 December 2021 after entering into a sales agreement on 22 November 2021 where delivery of the vessel to its new owners took place on 10 January 2022. Additionally, on 22 June 2021 the Group announced that it had entered into a share purchase agreement to acquire MPCC Box AS (formerly Songa Container AS). The transaction comprised of 11 vessels with an average size of 2,250 TEU and an average age of 11.9 years. See note 11 for further description. The Transaction was completed on 9 August 2021 and resulted in an increase in the non-current assets of USD 296.6 million. Vessels with a carrying amount of USD 442 million has been pledged as security for the Group’s two long-term loans. See note 14. Impairment Given several considerations of the current time charter market, the management has not performed impairment tests on vessels in the Group on 31 December 2021 since no impairment indicators have been identified. Throughout 2021 the container shipping industry has faced historically good market conditions and charter rates including high utilization of the vessels. Time charter rates has continued to rise throughout 2021 and remains historically high into the beginning of 2022. MPCC vessel sales corroborate the corresponding increase in the fair value of the ships driven by the increase in time charter rates. Demand for container ships continues to outpace the supply of available vessels as shown by the time charter rates achieved on recent long-term contracts entered into by the Group. In addition, the Company’s market capitalization has been significantly higher than the carrying value of the Company’s equity. The Group has obtained fair value estimates on a number of vessels in connection with a new loan and credit facility obtained in Novem- ber 2021. The fair value estimates of the vessels were significantly in excess of their carrying amounts. Also, the Group completed sales of six vessels in the 4th quarter realizing a gain of USD 56.6 million, thus confirming the fair values of the Group’s vessels are well in excess of their carrying amounts. Notes 56 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 57 Note 12 – Business combination On 22 June 2021, the Group entered into a share purchase agreement to acquire Songa Container AS (“Songa”) for an aggregate purchase price of USD 210.25 million (“the Transaction”). The Transaction, covering 100% of the shares in Songa, including a minority interest in a Songa subsidiary, was completed on 9 August 2021 (“the Transaction date”). The consideration was paid partly in cash and partly in new shares, and a total of 49,795,250 new shares were issued under the Transaction. With the acquisition of Songa and its 11 container vessels which have an average size of 2,250 TEU, the Group aims to reinforce its position as the leading intra-regional container tonnage-provider with a combined fleet of 75 ships (including eight joint-venture vessels) and a total capacity of about 158,000 TEU. The Transaction will add significant scale and operating leverage to the MPCC platform in a persis- tently strong container market, with rates, charter durations and asset values strengthening on a continuous basis. The acquired Songa SPVs are subject to Norwegian tonnage taxes. It was agreed that USD 84.6 million of the purchase price would be settled in cash based on the preliminary cash and working capital of Songa. This amount includes the repayment of the outstanding bond in Songa. The remaining share issuance totalling 49,795,250 new shares in the Company was based on a financial effective date of the Transaction of 31 May 2021 when a mutual understanding of the main terms of the Transaction was reached between the parties the Company’s closing share price was NOK 17.34. The preliminary purchase price paid at closing on 9 August 2021 for the shares in Songa was USD 236.4 million. Out of the preliminary purchase price, a total of USD 84.6 million was paid in cash at the transaction date based on the preliminary cash and working capital of Songa. The remaining portion was settled through issuing 49,795,250 consideration shares in the Company and the fair value of the sub- scription price was set at USD 3.01 (NOK 26.80) per share based on the closing price of the share of the Company at the transaction date and a USD/NOK exchange rate of 8.918. The preliminary purchase price and the cash consideration were subject to customary post-closing adjustments. Based on the preliminary purchase price, the fair value of Songa’s net assets and liabilities for the Group was as follows: in USD thousands Total fair value of net identifiable assets 236,566 Estimated fair value of share consideration 149,643 Cash consideration 84,612 Bargain purchase gain 2,312 During the negotiations between the buyer and the seller, an assumed fair value of the consideration shares was set at NOK 17.34 per share equal to the opening share price at 31 May 2021. Under the IFRS 3 – Business Combinations, the fair value was set at the share price at the transaction date of NOK 26.80 per share, which was significantly above the agreed price. The main reason for the variance is assumed to be the continued positive developments in charter rates and asset prices from the financial effective date until the transaction date as described above. The bargain purchase gain of USD 2.3 million is considered as a forecast effect of the continued positive developments in assets prices and charter rates on the fair value of the net identifiable assets acquired. These were expected to exceed the impacts on the total con- sideration since only a portion of the total consideration was taken the form of consideration shares. Estimated total transaction costs related to the acquisition and the acquisition facility are USD 5.9 million, whereof the majority of the cost is related to fees for the new (acquisition) financing. The 11 vessels were valued using the discounted cash flow model and was also benchmarked against independent broker appraisals (charter free). The discounted cash flow model used the contracted fixed charter rates under existing time charter contracts when esti- mating future revenues while market forward rates are used for the period after the expiration of the contracts of the respective vessels. The ongoing time charter contracts at the time of the acquisition expires from October 2021 to July 2024, were entered into when the container shipping market had lower time charter rates than at the time of the acquisition. The Group has allocated part of the acquisition price to contract liabilities as shown in the table below. The contract liabilities are amortized to revenues over the life of the contracts. The Group amortized USD 21.8 million of the contract liabilities to revenues in 2021. As at 31 December 2021, the remaining carrying amount of contract liabilities was USD 21.8 million. Notes 58 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 59 The following tables summarise the assumed fair value of the asset and liabilities acquired at the date of the acquisition: In USD thousands Book value Songa at 9 August 2021 Adjustments PPA Songa at 9 August 2021 ASSETS 141,436 176,738 318,174 Non-current Assets 119,846 176,738 296,584 Vessels 119,846 176,738 296,584 Current Assets 21,590 0 21,590 Inventories 1,066 0 1,066 Trade and other receivables 8,605 0 8,605 Cash and cash equivalents 11,919 0 11,919 EQUITY AND LIABILITIES 141,437 -59,828 81,608 Equity 103,301 -103,301 0 Share capital 8,925 -8,925 0 Share premium 66,065 -66,065 0 Retained earnings 27,303 -27,303 0 Non-controlling interest 1,008 -1,008 0 Non-current Liabilities 34,071 7,417 41,488 Interest bearing loans 34,071 0 34,071 Contract liabilities, non-current 0 7,417 7,417 Current Liabilities 4,063 36,056 40,120 Contract liabilities, non-current 0 36,056 36,056 Trade and other payables 2,362 0 2,362 Other liabilities 1,701 0 1,701 Total net identifiable assets acquired 0 236,566 236,566 The preliminary purchase price allocation was estimated based on facts and circumstances that were known about the acquisition at the date of this report. Should any new information be obtained within one year from the transaction date, the accounting for the acquisition will be revised. From 9 August 2021 to 31 December 2021, the acquisition of Songa contributed revenues of USD 51.2 million and a net profit of USD 39.9 mil- lion. This is reflected in the consolidated income statement of the Group. Had the acquisition been completed as of 1 January 2021, management estimates that the consolidated revenues for the 12 months would have been USD 436.8 million and the consolidated net profit before tax for the same period would have been USD 215.2 million. These amounts have been determined by applying the account- ing principles of the Group and assuming that the fair values arising on the date of the acquisition would have been the same had the acquisition been completed on 1 January 2021. In relation to the cash consideration DNB Bank ASA committed to providing a USD 127.5 million acquisition facility with a two-year year tenor and an effective interest rate of 500 bps plus Libor, which was drawn down on the transaction date of 9 August 2021. This credit facility was repaid in full in December 2021. Notes 58 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 59 Note 13 – Finance income and expenses in USD thousands 2021 2020 Interest income 22 56 Other financial income 134 677 Total financial income 155 733 Interest expenses -24,810 -22,444 Bank fees on early repayment of debt -5,396 0 Loss on derivative contracts reclassified from equity -9,066 0 Other -1,053 -222 Total financial expenses -40,325 -22,665 Note 14 – Interest-bearing debt in USD thousands Ticker Currency Nominal amount Interest Maturity As at 31 Decem- ber 2021 As at 31 Decem- ber 2020 Loan & credit facility N/A USD 180,000 3 month LIBOR + 3.35% Novem- ber 2026 180,000 0 Nominal value of issued bonds MPCBV USD 0 Floating + 4.75% Septem- ber 2022 0 204,056 Senior secured credit facility N/A USD 55,000 Floating + 3.25% July 2024 55,000 0 Non-recourse senior secured term loan N/A USD 59,150 Floating + 4.75% May 2023 0 49,595 Recourse term loan N/A USD 29,000 Floating + 3.5% April 2022 0 29,000 Other long-term debt incl accrued interest 271 229 Total outstanding 235,271 282,880 Debt issuance costs -3,446 -5,960 Total interest bearing debt outstanding 231,826 276,920 On 29 July 2021, the Group entered into a USD 70 million three-year revolving credit facility agreement with CIT Group, where MPCC Second Financing GmbH & Co. KG, a subsidiary of the Company, is the borrower. The initial drawdown of USD 55 million was made to refinance the existing debt. The credit facility is secured by 9 vessels with a carrying amount of USD 116 million as at 31 December 2021. The credit line’s maturity date is in June 2024. The following main financial covenants are defined in the terms of the revolving credit facility agreement with CIT: + The consolidated liquidity in the Group shall equal the greater of 5% of the total interest-bearing debt or USD 250.000 per consolidated vessel + Total debt in the Group shall not exceed 60% of the total book capitalization + Vessel loan-to-value ratio shall not exceed: - 65% after within the 12 first months - 62.5% after 12 months until 24 months - 60% after 24 months Notes 60 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 61 On 20 October 2021, the Group entered into an agreement for a USD 180 million five-year senior secured loan and revolving credit facility with Hamburg Commercial Bank (“HCOB”). It consists of a USD 130 million term loan and a revolving credit facility of USD 50 million. The loan and credit facility is secured by 17 vessels with a carrying amount of USD 325.9 million as at 31 December 2021. The loan and credit facility matures in November 2026. The following main financial covenants are defined in the terms of the credit facility agreement with HCOP: + The Parent company (MPC Container Ships ASA) shall maintain a minimum equity ratio of 40% + Each secured vessel shall maintain a minimum liquidity of USD 125.000 The Group is in compliance with all loan and credit facility covenants as at 31 December 2021. The bridge financing provided by DNB Bank of a USD 127.5 million acquisition facility in connection with the acquisition of Songa in Q3 21 was repaid in full in Q4 21. The bond loan of USD 204 million (issued by MPC Container Invest BV) was repaid at 102% of the outstanding notional amount in Q4 21. The related derivatives utilized to hedge the loan were similarly terminated in the December 2022. The non-recourse senior secured term loan with a notional amount of USD 49.6 million outstanding at 31 December 2020 as settled early in July of 2021. The Group paid an early settlement fee of USD 1.2 million. The table below shows the reconciliation of movements in the current and non-current interest-bearing debt to cash flows from financing activities, including non-cash movements and reconciliation to total interest-bearing debt at 31 December 2021 and at 31 December 2020. (in USD thousands) 1 Jan 2021 Cash flows Additions from business combination (Gains)/losses Non-cash amorti- zation of interest 31 Dec 2021 Interest-bearing debt - current and non-current 276,916 (95,286) 34,071 5,396 10,728 231,826 Derivatives 3,823 (3,350) - (473) - - Total 280,739 -98,636 34,071 4,923 10,728 231,826 (in USD thousands) 1 Jan 2020 Cash flows Additions from business combination (Gains)/losses Non-cash amorti- zation of interest 31 Dec 2020 Interest-bearing debt - current and non-current 279,616 (10,964) - 4,017 4,251 276,920 Derivatives 3,750 (6,739) - 6,812 - 3,823 Total 283,366 -17,703 0 10,829 4,251 280,743 Note 15 – Income tax The Company’s subsidiaries in which the vessels are held are subject to German, Dutch or Norwegian tonnage tax, as applicable. Companies subject to tonnage tax are exempt from ordinary tax on income derived from operations in international waters. The subsidiaries within the tonnage tax system pay a tonnage tax based on the size of the vessels. The fee is recognised as an operating expense. The parent company (MPC Container Ships ASA) is under ordinary taxation rules in Norway. The ordinary rate of corporation tax in Norway is 22% for 2021 (2020: 22%). The parent company is a holding company with negative taxable income as per 31 December 2021. Deferred tax assets are only recognised to the extent that the future utilization within the Group can be justified as at 31 December 2021. As a con- sequence, a tax position of USD 47.7 million has not been recognised in the balance sheet. Other corporate tax of USD 0.3 million consists of corporate income tax in Netherland and Germany. Notes 60 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 61 in USD thousands 2021 2020 Basis for ordinary corporation tax expense Profit(loss) before taxes 190,529 -64,418 Income from shipping activity, tonnage tax system -230,698 42,486 Change in temporary differences and tax losses carried forward not recognised 40,169 21,932 Exchange rate differences/Other permanent differences applicable for corporate tax 1,758 0 Corporate tax payable in the balance sheet -387 0 Other corporate tax on foreign controlled entities -289 -73 Total tax expense in income statement -676 -73 Effective tax rate 0.4% -0.1% Tonnage tax (included in operating profit) -332 -207 Tonnage tax payable in the balance sheet -332 -207 Note 16 – Earnings per share in USD thousands 2021 2020 Profit/(loss) for year attributable to ordinary equity holders – in USD thousands 189,725 -64,465 Weighted average number of shares outstanding, basic 414,653,050 238,286,799 Weighted average number of shares outstanding, diluted 419,017,088 240,407,845 Basic earnings per share – in USD 0.46 -0.27 Diluted earnings per share – in USD 0.46 -0.27 Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. In the event of a loss, no dilution effect is calculated. Notes 62 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 63 Note 17 – Financial instruments Set out below is a comparison by category for carrying amounts and fair values of all of the Group’s financial instruments that are carried in the financial statements. The estimated fair value amounts of the financial instruments have been determined using appropriate mar- ket information and valuation techniques. in USD thousands 31 December 2021 31 December 2020 Debt instruments at amortized cost Trade and other receivables 30,141 14,432 Cash and cash equivalents 180,329 39,254 Total financial assets 210,471 53,686 Derivatives designed as hedging instruments Interest rate swaps including caps and collars 0 3,823 Financial liabilities at amortized cost Interest bearing debt 231,826 276,920 Trade and other payables 17,628 13,275 Total financial liabilities 249,454 294,019 Fair value of trade receivables, cash and cash equivalents and trade payables approximate their carrying amounts measured at amortized cost due to the short-term maturities of these instruments. The fair value of interest-bearing debt is estimated by discounting future cash flows using rates for debt on similar terms, credit risk and remaining maturities. Fair value of interest-bearing debt approximates the carrying amounts as there have been no significant changes in the market rates for similar debt financing between the date of securing the debt financing and the reporting date. Fair value hierarchy The Group uses a hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques. The table below shows the fair value measurements for both the Group’s assets and liabilities as at 31 December 2021 and 2020. in USD thousands Level 1 Level 2 Level 3 Total Financial liabilities not measured at fair value, but for which fair value is disclosed Bonds 0 0 0 0 Debt 0 -231,826 0 -231,826 Total liabilities 31 December 2021 0 -231,826 0 -231,826 in USD thousands Level 1 Level 2 Level 3 Total Financial liabilities not measured at fair value, but for which fair value is disclosed Bonds -200,318 0 0 -200,318 Debt 0 -76,602 0 -76,602 Derivatives used for hedging Derivatives in effective cash flow hedge 0 0 -3,823 -3,823 Total liabilities 31 December 2020 -200,318 -76,602 -3,823 -280,744 Notes 62 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 63 Cash Flow Hedges As at 31 December 2021 the Group had not entered into any new hedge agreements. The details of new hedge activities entered into by the Group and hedges with significant changes in value during the year ended 31 December 2021 are described below. For a description of the Group’s hedging strategy, see Note 3 under cash flow hedges and Note 24 for further information regarding risk. The Group uses interest rate swaps, caps and collars as hedges of its exposure to interest rate fluctuations in connection with its debt and bond financing. in USD thousands 31 December 2021 31 December 2020 Assets Liabilities Assets Liabilities Interest rate swap 0 0 - 1,749 Interest rate caps 0 0 - 2,075 Total 0 0 - 3,823 The derivatives are presented net against prepayments related to the instruments, under current liabilities. The net position as of 31 December 2021 is USD 0.0 million (31 December 2020: USD 0.3 million). In connection with repayment of the bond on 17 December 2021 the Group also terminated the related interest rate swap (see note 14 Interesting-bearing debt). Furthermore, USD 5.2 million of realized loss on a hedging instrument terminated in 2020 was reclassified to the income statement since the related hedged item was repaid in the 4th quarter 2021. There remain three (CAP) derivatives in place, whose current value is zero, which will terminate in September 2022. Note 18 – Trade and other receivables in USD thousands 31 December 2021 31 December 2020 Trade receivables 10,377 6,656 Receivables to affiliated companies 345 348 Claims related to insurance cases 4,737 1,862 Other receivables and prepayments 14,682 5,566 Total trade and other receivables 30,141 14,432 Trade receivables relate to receivables against the charterers for the Group’s time charter contracts. Insurance claims are the Group’s claims covered by insurance agreements where the virtually certain threshold are met. The Group had outstanding receivables per year end amounting to USD 10.4 million. Historically, the Group have not had any credit losses of significance. A significant part of the outstanding receivables are against larger liner companies, of which the Group have had a long business relationship with, which reduces the risk further. The Group applies the simplified approach to provide for lifetime Expected Credit Losses in accordance with IFRS 9. The invoiced amount is considered to be approximately equal to the value which would be derived under the amortized cost method. In 2021, the Group recognized USD 1.1 million as impairment losses, compared to USD 0.5 million in 2020. See Note 25 – Financial risk management regarding management of credit risk. Notes 64 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 65 Note 19 – Cash and cash equivalents in USD thousands 31 December 2021 31 December 2020 Bank deposits denominated in USD 178,108 37,342 Bank deposits denominated in EUR 1,893 1,542 Bank deposits denominated in NOK 328 370 Total cash and cash equivalents 180,329 39,254 The fair value of cash and cash equivalents at 31 December 2020 is USD 180.3 million (USD 39.2 million at 31 December 2020). USD 1.0 mil- lion under the senior secured credit facility is restricted cash for the solely use for required class-related maintenance on the vessels, compared to USD 11.5 million at 31 December 2020. Restricted cash as at 31 December 2021 was USD 23.6 million. Bank deposits earn interest at floating rates based on applicable bank deposit rates. Short-term deposits are made for varying periods, depending on the cash requirements of the Group. Note 20 – Share capital 2021 Number of shares Share capital (USD thousands) Share premium (USD thousands) 1 January 2021 394,256,127 43,047 456,764 Capital increase from equity private placement announced 9 August 2021 49,795,250 5,584 143,870 31 December 2021 444,051,377 48,630 600,634 On 9 August 2021 the Group completed the acquisition of Songa Container AS, with a total of 49,795,250 new shares were issued as part of the consideration paid. See note 12 for further details regarding the acquisition. 2020 Number of shares Share capital (USD thousands) Share premium (USD thousands) 1 January 2020 84,253,000 101,121 356,566 14 February 2020 7,250,000 6,920 4,751 9 July 2020 0 -97,236 97,236 13 July 2020 266,353,127 28,197 -1,644 20 August 2020 36,400,000 4,045 -156 31 December 2020 394,256,127 43,047 456,764 The share capital of the Company consists of 444,051,377 shares as at 31 December 2021, with nominal value per share of NOK 1. All issued shares are of equal rights and are fully paid up. As at 31 December 2021 the Company holds 351,098 treasury shares. The non-controlling interests as of 31 December 2021 consists of the 0.1% shares the ship managers hold in the ship-owning entities under the MPC Container Ships Invest B.V. Group including the minority interest’s share of result within these ship-owning entities, see Note 27 – Group Companies. Notes 64 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 65 The table below summarizes the changes in components in other reserves in 2021. Cash flow hedging Currency translation adjustment Change in Other comprensive income As at 1 January 2021 -9,065 188 -8,877 Change during year 445 -297 148 Reclassified to profit and loss 8,620 8,620 As at 31 January 2021 0 -109 -109 Cash flow hedging Currency translation adjustment Change in Other comprensive income As at 1 January 2020 -3,749 -69 -3,819 Change during year -5,316 257 -5,059 As at 31 January 2020 -9,065 188 -8,877 Overview of the 20 largest shareholders as at 31 December 2021: Shareholder Number of shares in % Type Star Spike Limited 71,814,143 16.2% Ordinary CSI BETEILIGUNGSGESELLSCHAFT MBH 67,552,796 15.2% Ordinary Brown Brothers Harriman & Co. 18,919,341 4.3% Nominee SONGA CAPITAL AS 17,826,890 4.0% Ordinary SPIRALEN HOLDING AS 10,447,569 2.4% Ordinary CANOMARO SHIPPING AS 9,497,541 2.1% Ordinary UBS Europe SE 9,038,406 2.0% Ordinary State Street Bank and Trust Comp 8,606,449 1.9% Ordinary CLEARSTREAM BANKING S.A. 6,521,030 1.5% Nominee The Bank of New York Mellon SA/NV 5,798,479 1.3% Nominee J.P. MORGAN BANK LUXEMBOURG S.A. 5,681,599 1.3% Nominee JPMorgan Chase Bank 5,566,761 1.3% Ordinary NORDNET LIVSFORSIKRING AS 4,306,566 1.0% Ordinary Euroclear Bank S.A./N.V. 4,139,360 0.9% Nominee KLAVENESS INVEST AS 3,953,814 0.9% Ordinary Deutsche Bank Aktiengesellschaft 3,610,726 0.8% Nominee SONGA INVESTMENTS AS 3,370,037 0.8% Ordinary State Street Bank and Trust Comp 2,791,122 0.6% Ordinary Citibank 2,693,170 0.6% Ordinary Nordnet Bank AB 2,536,529 0.6% Nominee Total 264,672,328 59.6% Dr. Axel Schroeder and Ulf Holländer hold indirect ownership interest in the Company through an indirect minority interest in CSI Beteiligungs gesellschaft mbH. Laura Carballo holds indirect ownership interest in the Company through a fund managed by STAR Cap- ital Partnership LLP. Darren Maupin holds both direct and indirect ownership interest in the Company through a minority ownership in Pilgrim Global ICAV (via a Nominee account). Peter Frederiksen, appointed as the new member of the Company’s board of directors at 25 February 2022, held no shares in the Company as at 31 December 2021. Notes 66 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 67 Note 21 – Commitments There are no off-balance sheet commitments for the Group as at 31 December 2021, compared to nil as at 31 December 2020. Note 22 – Other liabilities The following table shows the components of other liabilities as at 31 December. in USD thousands 31 December 2021 31 December 2020 Accrued expenses 12,655 2,710 Taxes payable 574 0 Accrued salaries 6,007 576 VAT, social security, etc 492 119 Other short-term liabilities 885 311 Total Other liabilities 20,613 3,720 The Group has recognised a provision of USD 0.3 million related to a legal dispute in connection with a sale of a vessel included in other short-term liabilities. Note 23 – Related party disclosure The Group has entered into a corporate service agreement to purchase administrative and corporate services from MPC Münchmeyer Petersen Capital AG and its subsidiaries. The Company is responsible for the technical ship management of the vessels owned by the Group. Performance of technical ship man- agement services is sub-contracted to Wilhelmsen Ahrenkiel Ship Management GmbH & Co. KG and Wilhelmsen Ahrenkiel Ship Manage- ment B.V., joint ventures of MPC Münchmeyer Petersen Capital AG, for 54 of the 66 vessels owned by the Group and joint venture entities at 31 December 2021. Commercial ship management of the vessels owned by the Group and associated joint ventures is contracted to Contchart GmbH & Co. KG and Harper Petersen B.V., which are joint ventures of MPC Münchmeyer Petersen Capital AG. The following table provides the total amount of service transactions that have been entered into with related parties for the relevant period: in USD thousands / 2021 Group 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG Wilhelmsen Ahrenkiel Ship Man. GmbH & Co. KG / B.V. 8,831 975 Contchart GmbH & Co. KG / Harper Petersen B.V. 19 5,352 541 MPC Maritime Investments GmbH 58 0 MPC Capital GmbH 76 0 MPC Münchmeyer Petersen Capital AG 775 0 Total 15,092 1,516 19 Included in the USD 5.4 million is also commission related to vessel sales in total of USD 0.8 million. Notes 66 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 67 in USD thousands / 2020 Group 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG Ahrenkiel Ship Man. GmbH & Co. KG / B.V. 8,406 1,032 Contchart GmbH & Co. KG / Harper Petersen B.V. 2,046 317 MPC Maritime Investments GmbH 232 - MPC Münchmeyer Petersen Capital AG 494 - Total 11,178 1,350 Directors’ and executive management’s compensation and shareholding 20 Shares at 31 December 2021 Warrants 2021 remuneration Ulf Holländer (Chairman) 12,217 - NOK 200,000 Dr. Axel Schroeder 7,294,635 - NOK 200,000 Darren Maupin 1,129,083 - NOK 200,000 Laura Carballo - - NOK 200,000 Ellen Hanetho 60,000 - NOK 200,000 Constantin Baack (CEO) - - NOK 50,937,406 Dr. Benjamin Pfeifer (CFO) - - NOK 3,464,795 Shares at 31 December 2020 Warrants 2020 remuneration Ulf Holländer (Chairman) 112,217 - NOK 200,000 Dr. Axel Schroeder 6,794,635 - NOK 200,000 Darren Maupin 508,646 - NOK 200,000 Laura Carballo - - NOK 200,000 Ellen Hanetho 60,000 - NOK 200,000 Constantin Baack (CEO) - - NOK 4,454,372 Harald Wilke (CFO) - - NOK 3,240,026 in USD thousands 2021 Base salary Variable pay Total Constantin Baack (CEO) 332 5,483 5,816 Dr. Benjamin Pfeifer (CFO) 281 115 396 in USD thousands 2020 Base salary Variable pay Total Constantin Baack (CEO) 286 129 415 Harald Wilke (CFO) 21 204 98 302 On 28 April 2021, the Company’s general meeting unanimously resolved that each member of the Board of Directors shall receive NOK 200,000 in remuneration for the financial year 2021. The total remuneration to the Board of Directors and executive management in 2020 was USD 6.3 million (2020: USD 1.0 million). Guidelines for compensation to the CEO and CFO The main purpose of the compensation to the executive management is to attract, retain and motivate employees with the skills, quali- fications and experience needed to maximise value creation for the Company and its shareholders. 20 Several of the board members hold further share through indirect shareholdings in the Company. Please refer to Note 20 for further details 21 Harald Wilke resigned the Company 31 August 2020. Accordingly the figures represents compensation for the period 1 January 2020 until 31 August 2020 Notes 68 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 69 The total compensation to the CEO and CFO consists of base salary, bonus and other benefits. The Company practices standard employ- ment contracts, with standard terms and conditions regarding notice period and severance pay for the executive management. The exec- utive management participates in a variable bonus scheme where the purpose is to provide incentive to contribute to the value creation of the Company and its shareholders. Note 24 – Warrants On 20 April 2017, the Company issued 1,700,000 warrants to MPC Capital Beteiligungsgesellschaft mbH & Co. KG as the founding shareholder, corresponding to 8.5% of the shares issued in the private placement in April 2017. Under the same warrant agreement, on 19 June 2017, the Company issued 421,046 additional warrants to MPC Capital Beteiligungsgesellschaft mbH & Co. KG considering the equity private placement in June 2017, also in connection with the equity private placement which took place on 9 July 2020 the Company issued addi- tionally 3,489,860 warrants. Each warrant gives the right, but no obligation, to subscribe for one share in the Company. The warrants are valid for a period of five years from 20 April 2017. MPC Container Ships ASA entered into an agreement on 3 September 2021 with the warrant holder to settle 3,740,604 warrants for a cash consideration of USD 3.5 million which was recognised in 2021 in other paid capital. Since the cash consideration falls due by 30 June 2022, the provision is included under current liabilities as at 31 December 2021. As at 31 December 2021 the warrant holder holds 1,870,302 which have an exercise price of USD 1.89 conditional on that the vesting criteria are met. The remaining 1,870,302 warrants held at year-end 2021 were settled for a cash consideration of USD 2.2 million on 22 January 2022. Following this settlement agreement, there are no longer any outstanding warrants relating to MPCC shares from this date on. The warrants issued to the founding shareholder are recognized as equity instruments in accordance with IAS 32 Financial Instruments. Note 25 – Financial risk management This section provides additional information about the Group’s policies that are considered most relevant in understanding the operations and management of the Group, in particular objectives and policies of how the Group manages its financial risks, liquidity positions and capital structure. The Group owns and operates vessels for worldwide transportation of containerised cargo. Through its operation, the Group is exposed to market risk, credit risk, liquidity risk and other risks that may negatively influence the value of assets, liability and future cash flows. The Group is exposed to risks affected by the ongoing COVID-19 pandemic. COVID-19 could have an adverse effect on the charter market and thereby affeect the market risk. Additionally COVID-19 could impact the credit risk with the Group’s customers and also impact the liquidity risk of the Group. Market risk from financial instruments is the risk that future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise four types of risk: interest rate risk, foreign currency risk, credit risk and price risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obliga- tions with floating interest rates, i.e. interest payable on the bond issued and the non-recourse senior secured term loan depends on the short-term LIBOR. An increase of the short-term LIBOR rate by 50 basis points would cause the Group’s annualized interest expenses to increase by USD 1.1 million or 0.6% of Profit and loss for 2021. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The functional currency of most of the entities in the Group is USD, and the Group has only minor currency risk from its operations since all income and all major vessel costs are in USD. However, the Group has exposure to EUR and NOK as parts of administration and vessel operating expenses and a portion of cash and cash equivalents, other short-term assets, trade payables and provisions and accruals are denominated in EUR and NOK. Currently, no financial instruments have been entered into to mitigate this risk. An increase of the USD/EUR exchange rate by 10% would increase cause the vessel operating expenses to increase by approx. 4% of profit and loss for 2021. The Group is subject to price risk related to the charter market for feeder container vessel which is uncertain and volatile and will depend upon, among other things, the global and regional macroeconomic developments. In addition, the future financial position of the Group depends on valuations of the vessels owned by the Group. Currently, no financial instruments have been entered into to reduce this ship- ping market risk. The Group will normally have limited exposure to risks associated with bunker price fluctuations as the bunkers are for the charterers account when the vessels are on time charter contracts. See Board of Directors’ report for further description. Notes 68 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 69 Credit risk Credit risk refers to the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The maximum credit risk exposure is related to the Group’s trade receivables of USD 10.4 million as at 31 December 2021. It is the aim of the Group to enter into contracts with creditworthy counterparties only. Prior to concluding a charter party, the Group evaluates the credit quality of the customer, assessing its financial position, past experience and other factors. Charter hire is paid in advance, effectively reducing the potential exposure to credit risk. Bank deposits are only deposited with internationally recognized financial institutions. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations when they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity and/or undrawn committed credit facilities at all times to meet its obligations. See Board of Directors’ report for further description with respect to liquidity risk. To ensure this, the Group continuously monitors projected cash flows using a liquidity planning tool. This includes furnishing management with weekly cash reporting, monthly liquidity forecasts and furnishing management and the Board of Directors with rolling 12-24 months liquidity forecasts. The following table summarises the contractual maturities of financial liabilities on an undiscounted basis as at 31 December 2021: in USD thousands < 1 year 1-3 years 4-5 years > 5 years Total Interest bearing loans and borrowings -85,000 -81,667 -41,667 -26,666 -235,000 Interest payments -6,813 -5,871 -1,086 -851 -14,621 Trade and other payables -17,628 0 0 0 -17,628 Other liabilities -19,547 0 0 0 -19,547 Total -128,988 -87,538 -42,753 -27,517 -286,796 The contractual maturities and liabilities related to interest bearing loans and borrowings are related to the senior secured bond, and do not include the amended call options under the senior secured bond, which require the bond to be paid back at 102% of the nominal amount, if settled in September 2022 or later, and at 104% of the nominal amount if settled in December 2022 or later until the maturity date in March 2023. The following table summarises the contractual maturities of financial liabilities on an undiscounted basis as at 31 December 2020: in USD thousands < 1 year 1-3 years 4-5 years > 5 years Total Interest bearing loans and borrowings -12,106 -270,545 0 0 -282,651 Interest payments -13,412 -13,084 0 0 -26,496 Trade and other payables -13,275 0 0 0 -13,275 Other liabilities -3,597 0 0 0 -3,597 Total -42,390 -283,629 0 0 -326,019 Notes 70 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 71 Note 26 – Capital management A key objective of the Group’s capital management is to ensure that the Group maintains a capital structure in order to support its busi- ness activities and maximise the shareholder value. The Group evaluates its capital structure in light of current and projected cash flows, the state of the shipping markets, new business opportunities and the Group’s financial commitments. Capital is primarily managed on Group level. The Group monitors its capital structure using the book-equity ratio, which stands at 70.4% as at 31 December 2021. The Group is mainly subject to financial covenants under the bond loan and the non-recourse secured term loan (see Note 17 – Interest-bearing debt). The Group aims at maintaining an equity ratio with adequate headroom to the respective covenant requirements. in USD thousands 31 December 2021 31 December 2020 Book equity 727,589 383,032 Total assets 1,034,613 678,138 Book-equity ratio 70.4% 56.5% In support of the Group’s objective of maximizing returns to shareholders, MPC Container Ships’ intention is to pay regular dividends by way of distributing 75% of Net Profits after considering CAPEX and working capital requirements, including liquidity reserves and one- off effects. Dividends will be declared or proposed by the Board at the sole discretion of the Board and will depend upon the financial position, earnings, debt covenants, distribution restrictions, capital requirements and other factors related to MPC Container Ships and its subsidiaries. The Company cannot guarantee that its Board will declare or propose dividends in the future. Furthermore, the Company may make event driven distributions based on non-recurring proceeds, such as vessel sales, by way of extraordinary dividends or share buybacks, to be applied according to the Board’s discretion. Notes 70 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 71 Note 27 – Group companies The Group’s consolidated financial statements include the financial statements of the Company and its subsidiaries listed in the table below. The table excludes all General partner companies and non-operating companies. in USD thousands Country Principal activity Ownership "AS SAMANTA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS SABRINA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS FREYA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS FENJA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS PAOLA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS PAULINE" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS RAFAELA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS PENELOPE" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % MPC Container Ships GmbH & Co. KG Germany Management Company 100.00 % "AS SELINA" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % Rio Teslin OpCo GmbH & Co. KG Germany Empty shelf company 80.00 % Rio Thelon OpCo GmbH & Co. KG Germany Empty shelf company 80.00 % MPCC Second Financing GmbH & Co. KG Germany Holding company 100.00 % MPCC First Financing GmbH & Co. KG Germany Holding company 100.00 % "AS Camellia" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Carlotta" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Carolina" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Christiana" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Franziska" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Leona" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Roberta" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Serafina" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Susanna" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % "AS Svenja" Schifffahrtsgesellschaft mbH & Co. KG Germany Ship-owning entity 100.00 % " AS Nadia Schifffahrtsgesellschaft mbH & Co. KG Netherlands Empty shelf company 99,90% MPC Container Ships Invest B.V. Netherlands Holding company 100.00 % "AS Angelina" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS California" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Carelia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Clara" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Clarita" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Clementina CV" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Columbia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Constantina" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Cypria" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Fabiana" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Fabrizia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Fatima" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Faustina" ShipCo C.V. Netherlands Empty shelf company 99,90% "AS Federica" ShipCo C.V. Netherlands Empty shelf company 99,90% Notes 72 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 73 in USD thousands Country Principal activity Ownership "AS Felicia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Filippa" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Fiona" ShipCo C.V. Netherlands Empty shelf company 99,90% "AS Fiorella" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Flora" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Floretta" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Floriana" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Fortuna" ShipCo C.V. Netherlands Empty shelf company 99,90% "AS Frida" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Laetitia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Laguna" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Lauretta" ShipCo C.V. Netherlands Empty shelf company 99,90% "AS Palatia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Patria" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Paulina" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Petronia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Ragna" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Riccarda" ShipCo C.V. Netherlands Empty shelf company 99,90% "AS Romina" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Rosalia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Sara" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Savanna" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Serena" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Sevillia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Sicilia" ShipCo C.V. Netherlands Ship-owning entity 99,90% "AS Sophia" ShipCo C.V. Netherlands Ship-owning entity 99,90% MPCC Third Financing AS Norway Holding company 100.00 % MPCC Box AS Norway Holding company 100.00 % Sibum II AS Norway Empty shelf company 100.00 % Sibum I AS Norway Empty shelf company 100.00 % MPCC Mipo AS Norway Ship-owning entity 100.00 % MPCC City AS Norway Ship-owning entity 100.00 % MPCC Nora AS Norway Ship-owning entity 100.00 % MPCC Emma AS Norway Ship-owning entity 100.00 % MPCC Caspria AS Norway Ship-owning entity 100.00 % MPCC Alva AS Norway Ship-owning entity 100.00 % Songa Haydn AS Norway Empty shelf company 100.00 % Ownership rights equal voting rights in all subsidiary entities. The entities domiciled in Norway come from the acquisition of MPCC Box AS (formerly Songa Container AS) effective from 9 August 2021, with the exception of MPCC Third Financing AS which was acquired as a shelf company from Advokatfirmaet Thommessen AS in the course of the transaction. Notes 72 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 73 Note 28 – Subsequent events On 10 January 2022, the Group delivered the vessel AS Palatia to its new owners. The agreement to sell the vessel for USD 35.8 million was entered into on 22 November 2021. On 13 January 2022, the Group’s joint venture, 2. Bluewater Holding Schifffahrtsgesellschaft mbH & Co. KG, delivered the vessel AS Pet- ulia to its new owners. The joint venture entered into an agreement for the sale of the vessel for USD 35.8 million on 17 November 2021. MPC Container Ships ASA entered into an agreement on 21 January 2022 with the warrant holders MPC Capital Beteiligungsgesellschaft mbH & Co. KG to settle the remaining 1,870,302 warrants already vested for a cash consideration of USD 2.2 million. The settlement has been recognised in Q1 2022 as a reduction in other paid-in equity. Since the cash consideration falls due by 30 June 2022, the provision is included under current liabilities. Following this settlement agreement, there are no longer any outstanding warrants relating to MPCC shares. On 24 January 2022, Darren Maupin resigned from his position as member of the board of MPC Container Ships ASA. On 25 February 2022, Peter Frederiksen was elected as a new board member by an extraordinary general meeting of the Company. An extraordinary general meeting of MPC Container Ships ASA was held on 28 January 2022. The general meeting passed the resolution to reduce the Company’s share capital from NOK 444,051,377 to NOK 443,700,279 by cancelling the Company’s treasury shares of 351,098 shares in total. The amount of the share capital reduction of NOK 351,098 will be transferred to other equity. This resolution entails no payments to be made by the Company. MPC Container Ships ASA announced on 2 February 2022 that its Board of Directors has resolved to distribute a dividend of NOK 3.00 per share, amounting to NOK 1.33 billion (about USD 150 million) in total, based on the Company’s approved annual financial statements for financial year 2020. The decision is based on an authority granted by the Company’s extraordinary general meeting on 28 January 2022. The ex-dividend date of the shares was 7 February 2022. On 23 February 2022 the board of directors resolved to distribute a further dividend of USD 0.11 per share, amounting to an approximate total of USD 50 million, based on the financial results of Q4 FY 20221. Payment to shares registered with Euronext VPS will be distributed in NOK. The distribution will be made from previously paid in share premium transferred from the Company’s share premium account. The dividend is scheduled to be paid out on or about the 30 March 2022. Special attention has to be drawn to the conflict between Russia and Ukraine as well as the economic and financial sanctions decided by the West to force Russia to end the conflict. The Company has made an assessment of all relevant areas, i.e. operations, contracts, charter parties etc. in order to identify risks and define specific countermeasures. Regarding the commercial risks from vessels trading in the critical area, four vessels have been stopped to call ports in Ukraine and Russia. Also, no dockings are scheduled in the region. With regard to the risk exposure of the charterparties, the Company assessed relevant contractual clauses, which are standard in most of todays executed charterparties. Besides these existent risk factors, our risk assessment concludes that there is no immediate holistic impact on MPCC expected, yet in a market struck by sanctions effects and other potential war-induced fall-outs, MPCC might not remain completely unaffected. Nevertheless, we remain confident that there should not be a complete disruption of the global supply chain. Furthermore, any stress or war scenario would not make the current scarcity of tonnage disappear. Annual Report 2021 MPC Container Ships 75 Notes 74 MPC Container Ships Annual Report 2021 ALTERNATIVE PERFORMANCE MEASURES Annual Report 2021 MPC Container Ships 75 Alternative performance measures 74 MPC Container Ships Annual Report 2021 The Group’s financial information is prepared in accordance with international financial reporting standards (“IFRS”). In addition, it is the management’s intent to provide alternative performance measures that are regularly reviewed by management to enhance the under- standing of the Group’s performance, but not instead of, the financial statements prepared in accordance with IFRS. The alternative performance measures presented may be determined or calculated differently by other companies. The Group is in the initial phase of operation and performance measures are therefore subject to change. The alternative performance measures are intended to enhance comparability of the results and to give supplemental information to the users of the Group’s external reporting. Gross profit Gross profit is a key financial parameter for the Group and is derived directly from the income statement by deducting cost of sales (vessel voyage expenditures, ship management fees, vessel operating expenditures and commissions) from the operating revenues. EBITDA Earnings before interest, tax, depreciations and amortisations (“EBITDA”) is a key financial parameter for the Group and is derived directly from the income statement by adding back depreciation and impairment to the operating result (“EBIT”). in USD thousands 2021 2020 Operating result (EBIT) 230,698 -42,486 Depreciation 62,049 49,653 Impairment 0 8,996 EBITDA 290,436 16,164 Alternative performance measures 76 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 77 Average time charter equivalent (“tce”) TCE is a commonly used Key Performance Indicator (“KPI”) in the shipping industry. TCE represents time charter revenue and pool revenue divided by the number of trading days for the consolidated vessels during the reporting period. Trading days are ownership days minus days without revenue, including commercial, uninsured technical and dry dock related off-hire days. Average operating expenses (“opex”) per day OPEX per day is a commonly used KPI in the shipping industry. OPEX per day represents operating expenses excluding tonnage taxes and operating expenses reimbursed by the charterers divided by the number of ownership days of consolidated vessels during the reporting period. Utilization Utilization in percentage is a commonly used KPI in the shipping industry. Utilization in percentage represents total trading days including off-hire days relates to dry docks divided by the total number of ownership days during the period. Leverage ratio Interest bearing long-term debt and interest bearing short-term debt divided by total assets. Equity ratio Total book equity divided by total asset. Alternative performance measures 76 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 77 PARENT FINANCIAL STATEMENTS Annual Report 2021 MPC Container Ships 79 78 MPC Container Ships Annual Report 2021 Parent financial statements Income statement in USD thousands Notes 2021 2020 Revenue 2,3 14,780 16,465 Revenue 14,780 16,465 Payroll 4 -7,181 -1,152 Other operating expenses 5 -17,025 -19,141 Operating result (EBIT) -9,426 -3,828 Finance income 5 24,673 680 Finance expense 5 -2,628 -433 Profit/Loss before income tax (EBT) 12,620 -3,580 Income tax 6 46 -41 Profit/Loss for the period 12,666 -3,621 Transfer of profit to retained earnings 7 12,666 -3,621 Dividend proposed 10 200,764 0 Earnings per share 7 0.05 -0.02 Basic earnings per share – in USD 7 0.05 -0.02 Diluted earnings per share – in USD 7 0.05 -0.02 Parent financial statements Annual Report 2021 MPC Container Ships 79 78 MPC Container Ships Annual Report 2021 Statement of financial position in USD thousands Notes 31 December 2021 31 December 2020 ASSETS 699,513 491,453 Non-current assets 516,926 483,171 Investments in Subsidiaries 8 489,855 456,063 Investments in affiliated companies 8 27,068 27,068 Other non-current assets 3 40 Current assets 182,587 8,282 Short-term receivables group 3 80,192 2,909 Other short-term receivables 561 2,247 Cash and cash equivalents 9 101,833 3,126 EQUITY AND LIABILITIES 699,513 491,453 Equity 447,807 490,005 Share capital 7, 10 48,629 43,046 Share premium 7, 10 396,316 456,764 Treasury shares 7 -1,143 -1,143 Retained earnings 7 4,004 -8,662 Current liabilities 251,706 1,448 Dividend liability 10 200,764 0 Accounts payable 846 688 Accounts payable to affiliated 40,278 0 Social security, VAT, etc. 151 111 Other short-term liabilities 9,667 649 Parent financial statements 80 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 81 Statement of cash flow in USD thousands Notes 2021 2020 Profit/Loss before income tax 12,620 -3,580 Tax refund from previous year's paid corporate tax 46 0 Net change in current assets 2,530 375 Net change in current liabilities 5,662 -1,276 Depreciation and impairment 508 1,472 Finance income (net) -22,045 0 Cash flow from operating activities -678 -3,010 Loan proceeds from subsidiaries 60,000 0 Investment in subsidiaries -4,168 -39,140 Purchase of other non-current assets 0 -11 Dividends received from subsidiaries 47,470 0 Dividends received from joint ventures 24,500 0 Cash flow from investing activities 127,802 -39,151 Repayment of debt 6 -25,700 0 Proceeds from share issuance 0 43,354 Other paid financial items 6 -610 0 Repayment of hedging instruments -1,918 0 Share issuance costs -190 -1,220 Cash flow from financing activities -28,418 42,134 Net change in cash and cash equivalents 98,706 -27 Net foreign exchange differences 0 0 Cash and cash equivalents at beginning of period 3,126 3,153 Cash and cash equivalents at the end of period 101,833 3,126 Oslo, 24 March 2022 The Board of Directors and CEO of MPC Container Ships ASA Ulf Holländer (Chairman) Dr. Axel Schroeder Peter Frederiksen Ellen Hanetho Laura Carballo Constantin Baack (CEO) Parent financial statements 80 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 81 Notes Note 1 – Significant accounting policies MPC Container Ships ASA (“the Company”) was incorporated on 9 January 2017 as a private limited liability company under the laws of Norway, and converted to a Norwegian public limited liability company (Norwegian: allmennaksjeselskap) on 16 January 2018. The financial statements are prepared in accordance with Norwegian Standards (NGAAP) for public limited liability companies. Current assets are assets that are expected to be realised in the Company’s normal circle, held primarily for the purpose of trading and that are expected to be realised within twelve months after the reporting period. Current liabilities are liabilities that are expected to be settled within the Company’s normal operating cycle. Other assets are classified as non-current assets and other liabilities are classified as non-current liabilities. Accounts receivable are recognised at fair value after provisions for bad debts. Long-term investments in shares in subsidiaries including affiliated companies are recognised at original cost, but are reduced to fair value if the decrease in value is not temporary. Revenue and expenses from operations are booked in the same period as they occur. The financial statements are presented in US Dollar (USD), which is the functional currency of the Company. 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 income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transaction. All financial information presented in USD has been rounded to the nearest thousand USD, except otherwise indicated. Differences from currency translations are classified as financial income. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Deferred tax liabilities are classified as non-current assets and are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. Note 2 – Revenue in USD thousands 2021 2020 Ship management fees 9,003 9,291 Corporate management fees 3,049 2,383 Reimbursements 2,728 4,791 Total revenue 14,780 16,465 Parent financial statements 82 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 83 Note 3 – Group transactions In USD thousands Receivables at 31 December 2021 Payables at 31 December 2021 Revenues in 2021 Expenses in 2021 Intercompany balances/transactions 80,192 0 14,780 -3,173 In USD thousands Receivables at 31 December 2020 Payables at 31 December 2020 Revenues in 2020 Expenses in 2020 Intercompany balances/transactions 2,909 0 16,465 -3,070 Revenue is related to invoiced ship management fees and corporate management fees including other reimbursements. Note 4 – Payroll expenses, Board of Directors remuneration, compensations, etc. in USD thousands 2021 2020 Payroll 6,826 902 Social security 131 76 Other personnel expenses 67 53 Accrued Board of Directors remuneration 156 121 Total payroll expenses 7,181 1,152 In accordance with Norwegian law, the Company is required to have an occupational pension scheme. The Company’s pension scheme was in compliance with Norwegian law as at 31 December 2021. Please refer to Note 19 of the consolidated financial statements for the remuneration of the Board of Directors and key management. in USD thousands 2021 2020 Fees related to audit services 145 121 Fees related to other services 5 102 Fees recorded towards equity 0 15 Total auditor compensation 150 238 Parent financial statements 82 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 83 Note 5 – Specification of P/L records in USD thousands 2021 2020 Other operating expenses Fees from auditors -208 -223 Ship management fees -8,527 -9,004 Legal fees -4,117 -4,714 Other fees -3,173 -3,070 Impairment of subsidiaries 0 -1,475 Other operating expenses -1,001 -662 Total operating expenses -17,025 -19,147 Finance income Interest income 1 1 Income from exchange 90 662 Dividend from subsidiaries 0 17 Dividend from join venture investments 24,500 0 Other financial income 82 0 Total finance income 24,673 680 Finance expense Interest expense -725 -211 Expense from exchange -199 -222 Other financial expenses -1,704 0 Total finance expense -2,628 -433 Note 6 – Income tax The Company is subject to ordinary corporation tax in Norway: in USD thousands 2021 2020 Basis for ordinary corporation tax expense Profit(loss) before taxes 12,620 -3,580 Non-taxable income (dividend from joint-venture) 23,765 0 Net taxable income -11,145 -3,580 Expected income tax at statutory rate (22%) 2,452 788 Change in temporary differences and tax losses carried forward not recognised -2,452 -788 Corporate tax payable in the balance sheet 0 0 In Norway, the Company has an estimated tax loss carried forward amounting to USD 47.7 million. The tax loss relates mainly to transaction cost on capital increase and can be carried forward indefinitely. Currently, no convincing evidence of using the tax loss exists. Accordingly, the criteria for recognition of deferred tax assets are not met. Parent financial statements 84 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 85 Note 7 – Equity in USD thousands Share capital Treasury shares Share premium Retained earnings/ losses Total Total equity as at 1 January 2021 43,046 -1,143 456,764 -8,662 490,005 Capital increase 9 August 2021 5,583 0 143,870 0 149,453 Settlement of warrants 0 0 -3,554 0 -3,554 Dividend proposed 0 0 -200,764 0 -200,764 Profit/loss 0 -0 0 12,666 12,666 Total equity as at 31 December 2021 48,629 -1,143 396,316 4,004 447,807 The capital increase on 9 August 2021 relates to the acquisition of MPCC Box AS (formerly Songa Container AS). Please refer to note 14 in the Group’s consolidated financial statements. See also note 24 in the Group’s consolidated financial statements regarding the war- rants settlements. The proposed dividend consists of the two resolved dividends by the Board of Director’s on respectively 2 February 2022, where the Company distributed NOK 3.00 (USD 0.11) per share based on the Company’s approved annual account for 2020 in total of NOK 1.33 billion, and on 24 February 2022 where the Company will distribute USD 0.11 per share, amounting to USD 48.8 million, based on the financial results of Q4 2021. in USD thousands Share capital Treasury shares Share premium Retained earnings/ losses Total Total equity as at 1 January 2020 101,121 -1,143 356,576 -5,041 451,512 Capital increase 16 March 6,920 0 4,751 0 11,671 Change in nominal value 1 July -97,236 0 97,236 0 0 Capital increase 10 July 2020 28,197 0 -1,644 0 26,553 Capital increase 21 August 2020 4,045 0 -156 0 3,889 Profit/loss 0 0 0 -3,621 -3,621 Total equity as at 31 December 2020 43,046 -1,143 456,764 -8,662 490,005 in USD thousands 2021 2020 Profit/(loss) for year attributable to ordinary equity holders – in USD thousands 12,666 -3,621 Weighted average number of shares outstanding, basic 414,653,050 238,286,799 Weighted average number of shares outstanding, diluted 419,017,088 240,407,845 Basic earnings per share – in USD 0.05 -0.02 Basic earnings per share – in USD 0.05 -0.02 Parent financial statements 84 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 85 Note 8 – Investments in Subsidiaries and affiliated companies Investments in subsidiaries in USD thousands Country Equity Profit/loss (+/-) Book value Ownership MPC Container Ships Invest B.V. Netherlands 240,805 36,029 261,384 100.00 % MPCC Second Financing GmbH & Co KG Germany 136,070 22,949 52,837 100.00 % MPCC First Financing OpCo KG Germany 86 28 29 100.00 % MPCC First Financing Verwaltungs GmbH Germany 31 1 29 100.00 % MPC Container Ships GmbH & Co. KG Germany 164 -401 733 100.00 % MPC Container Ships Verwaltungs GmbH Germany 29 2 29 100.00 % MPC Container Ships Sourcing GmbH Germany 125 16 122 100.00 % AS Shipping OpCo 1 GmbH Germany 70 5 62 100.00 % Sao Paulo Project Holding Verwaltungs GmbH Germany 248 - 6 100.00 % MPCC Third Financing AS Norway 208,219 5,310 149,832 100.00 % AS Carolina Schiff. Mbh & Co. KG Germany 10,333 2,029 9,530 100.00 % AS Franziska Schiff. Mbh & Co. KG Germany 6,944 1,382 5,942 100.00 % AS Roberta Schiff. Mbh & CO. KG Germany 8,932 800 9,322 100.00 % Total 612,057 489,855 The major investment in subsidiaries of the Company are direct or indirect holding investments in container vessels where the fair values of the vessels exceed the book values. Accordingly, there is no identified need for impairment on the Company’s investments in subsidiaries. Included in Other operating expenses is an impairment of MPC Container Ships Sourcing GmbH & Co. KG of USD 0.5 million. Investments in affiliated companies (in USD thousands) Country Equity Profit/Loss Booked value Ownership 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG Germany 68,581 32,268 24,063 50.00 % Bluewater Holding SFG Germany 35 3 3,004 50.00 % Total 68,616 27,068 Note 9 – Cash and cash equivalents in USD thousands 2021 2020 Bank deposits denominated in USD 101,521 2,542 Bank deposits denominated in EUR 161 215 Bank deposits denominated in NOK 151 370 Total cash and cash equivalents 101,833 3,126 Parent financial statements 86 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 87 Bank deposits in NOK consists of in total USD 28 thousand in funds held for employee taxes payable to the Norwegian government. Note 10 – Shareholders As at 31 December 2021, the share capital of the Company consists of 444,051,377 shares with nominal value per share of NOK 1.00. All issued shares are of equal rights and are fully paid up. Please refer to Note 20 of the consolidated financial statements for an overview of the 20 largest shareholders of the Company as at 31 December 2021. Please also refer to Note 22 of the consolidated financial statements for information about the Group’s issued warrants. Note 11 - Guarantees The Company has guaranteed for the recourse term loan of MPCC Second Financing GmbH & Co. KG., together with the subsidiaries of MPCC Second Financing GmbH & Co. KG. Additionally, the Company has guaranteed for the senior secured term loan and revolving credit facility of MPCC Third Financing AS, together with the subsidiaries of MPCC Third Financing AS. Note 12 – Financial risk management Foreign exchange The risk that future cash flows will fluctuate because of changes in foreign exchange rates. The Company has exposure in EUR and NOK as part of administrative and operating expenses and a portion of cash and cash equivalents and trade payables are denominated in EUR and NOK. The Company do not have financial instruments in place to mitigate this risk. Credit risk Credit risk relates to loans to subsidiaries and affiliated companies, guarantees to subsidiaries, deposits with external banks and receiv- ables against related parties. Loss provisions are provided in situations of negative equity and where the companies are not expected to be able to fulfil their loan obligations from future earnings. Liquidity risk Liquidity risk is the risk that the Company will not be able to meets its financial obligations when they fall due and is managed through maintaining sufficient cash. Development in the Group’s and thereby the Company’s available liquidity, is continuously monitored through a liquidity planning tool which includes weekly cash reporting and monthly cash flow forecasts. Parent financial statements 86 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 87 AUDITOR’S REPORT Annual Report 2021 MPC Container Ships 89 88 MPC Container Ships Annual Report 2021 Auditor’s report Statsautoriserte revisorer Ernst & Young AS Dronning Eufemias gate 6a, 0191 Oslo Postboks 1156 Sentrum, 0107 Oslo Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 24 00 www.ey.no Medlemmer av Den norske Revisorforening A member firm of Ernst & Young Global Limited INDEPENDENT AUDITOR'S REPORT To the Annual Shareholders' Meeting of MPC Container Ships ASA Report on the audit of the financial statements Opinion We have audited the financial statements of MPC Container Ships ASA (the Company) which comprise the financial statements of the Company and the consolidated financial statements of the Company and its subsidiaries (the Group). The financial statements of the Company comprise the statement of financial position as at 31 December 2021, the income statement and statement of cash flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements of the Group comprise the statement of financial position as at 31 December 2021, the income statement, the statement of comprehensive income, the statement of cash flow, and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable legal requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2021 and its financial performance and cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2021 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the audit committee. 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 are independent of the Company and the Group in accordance with the requirements of the relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 5 years from the election by the general meeting of the shareholders on 23 May 2017 for the accounting year 2017. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2021. 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 Penneo Dokumentnøkkel: HL35B-U6FBW-HCOUO-E8XJE-5FKHJ-E254N 2 Independent auditor's report - MPC Container Ships ASA 2021 A member firm of Ernst & Young Global Limited opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements. Acquisition of Songa Container AS Basis for the key audit matter In August 2021, the Group acquired Songa Container AS including its subsidiaries. The transaction was partly settled with cash and partly settled with consideration shares. The fair value of the acquired assets was determined based on estimates and assumptions about the future performance of the container freight market. The most complex part of the purchase price allocation was related to the valuation of the vessels and the time-charter contracts, which was based on discounted cash flows for vessels intended for use and independent broker values for vessels intended for sale at the transaction date. Vessel values calculated from the discounted cash flow model were also supported by independent broker values. The acquisition is a key audit matter due to the significance of the transaction and due to the significant judgments and assumptions involved in the recognition and measurement of the acquired assets, assumed liabilities and the bargain gain amounting to $2.3 million from the business combination in the consolidated income statement. Our audit response We read relevant agreements and gained an understanding of the transaction and its rationale through discussions with management. We assessed the identification and valuation of the acquired assets (e.g., vessels and charter portfolio) and other assets and liabilities assumed in the acquisition. The identification of fair value adjustments was assessed based on our understanding of the acquired companies and the plans of the management that supported the acquisition. We evaluated the methodology and assumptions used in the valuation of the acquired vessels and compared these valuations with the Group’s methodology for valuations of similar vessels. For the charter portfolio, we compared key terms used in managements valuation against charter agreements. We considered the key assumptions in the cash flows projected by management through comparing the assumptions to data from comparative companies, independent broker valuations, and tested the mathematical accuracy of the valuation model. Furthermore, we compared the risk premiums in the weighted average cost of capital with external data, and considered management’s adjustments for company specific factors. Refer to note 12 Business Combination in the consolidated financial statements. Other information Other information consists of the information included in the annual report other than the financial statements and our auditor’s report thereon. Management (the board of directors and Chief Executive Officer) is responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the board of directors’ report, the statement on corporate governance and the statement on corporate social responsibility contain the information required by applicable legal requirements and whether the other information is materially inconsistent with the financial statements or Penneo Dokumentnøkkel: HL35B-U6FBW-HCOUO-E8XJE-5FKHJ-E254N 3 Independent auditor's report - MPC Container Ships ASA 2021 A member firm of Ernst & Young Global Limited our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information or that the information required by applicable legal requirements is not included, we are required to report that fact. We have nothing to report in this regard, and in our opinion, the board of directors’ report, the statement on corporate governance and the statement on corporate social responsibility are consistent with the financial statements and contain the information required by applicable legal requirements. Responsibilities of management for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of the Company in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway and of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management 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, management is responsible for assessing the Company’s and 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 management either intends to liquidate the Company or the Group, or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in 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 judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s 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 and 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 financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit Penneo Dokumentnøkkel: HL35B-U6FBW-HCOUO-E8XJE-5FKHJ-E254N 4 Independent auditor's report - MPC Container Ships ASA 2021 A member firm of Ernst & Young Global Limited evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the board of directors 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 the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirement Report on compliance with regulation on European Single Electronic Format (ESEF) Opinion As part of our audit of the financial statements of MPC Container Ships ASA we have performed an assurance engagement to obtain reasonable assurance whether the financial statements included in the annual report, with the file name MPC Container ESEF File 2021, has been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation given with legal basis in Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements included in the annual report have been prepared, in all material respects, in compliance with the ESEF Regulation. Management’s responsibilities Management is responsible for the preparation of an annual report and iXBRL tagging of the consolidated financial statements that complies with the ESEF Regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary to enable the preparation of an annual report and iXBRL tagging of the consolidated financial statements that is compliant with the ESEF Regulation. Penneo Dokumentnøkkel: HL35B-U6FBW-HCOUO-E8XJE-5FKHJ-E254N 5 Independent auditor's report - MPC Container Ships ASA 2021 A member firm of Ernst & Young Global Limited Auditor’s responsibilities Our responsibility is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in accordance with the ESEF Regulation based on the evidence we have obtained. We conducted our engagement in accordance with the International Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial information”. The standard requires us to plan and perform procedures to obtain reasonable assurance that the financial statements included in the annual report have been prepared in accordance with the ESEF Regulation. As part of our work, we performed procedures to obtain an understanding of the company’s processes for preparing its annual report in XHTML format. We evaluated the completeness and accuracy of the iXBRL tagging and assessed management’s use of judgement. Our work comprised reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Oslo, 24 March 2022 ERNST & YOUNG AS The auditor's report is signed electronically Jon-Michael Grefsrød State Authorised Public Accountant (Norway) Penneo Dokumentnøkkel: HL35B-U6FBW-HCOUO-E8XJE-5FKHJ-E254N Th is document is digitally signed using Penneo.com. The digital signature data within the document is secured and validated by the computed hash value of the original document. The document is locked and timestamped with a certificate from a trusted third party. All cryptographic evidence is embedded within this PDF, for future validation if necessary. How to verify the originality of this document This document is protected by an Adobe CDS certificate. When you open the document in Adobe Reader , you should see, that the document is certified by Penneo e-signature service penneo@penneo.com. This guarantees that the contents of the document have not been changed. You can verify the cryptographic evidence within this document using the Penneo validator, which can be found at https://penneo.com/validate The signatures in this document are legally binding. The document is signed using Penneo™ secure digital signature. The identity of the signers has been recorded, and are listed below. “By my signature I confirm all dates and content in this document.” Jon-Michael Grefsrød Partner On behalf of: Ernst & Young AS Serial number: 9578-5992-4-3016511 IP: 213.52.xxx.xxx 2022-03-24 21:53:10 UTC Jon-Michael Grefsrød Statsautorisert revisor On behalf of: Ernst & Young AS Serial number: 9578-5992-4-3016511 IP: 213.52.xxx.xxx 2022-03-24 21:53:10 UTC Penneo document key: HL35B-U6FBW-HCOUO-E8XJE-5FKHJ-E254N Statsautoriserte revisorer Ernst & Young AS Dronning Eufemias gate 6a, 0191 Oslo Postboks 1156 Sentrum, 0107 Oslo Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 24 00 www.ey.no Medlemmer av Den norske Revisorforening A member firm of Ernst & Young Global Limited INDEPENDENT AUDITOR’S ASSURANCE REPORT ON REMUNERATION REPORT To the General Meeting of MPC Container Ships ASA Opinion We have performed an assurance engagement to obtain reasonable assurance that MPC Container Ships ASA’s report on salary and other remuneration to directors (the remuneration report) for the financial year ended 31 December 2021 has been prepared in accordance with section 6-16 b of the Norwegian Public Limited Liability Companies Act and the accompanying regulation. In our opinion, the remuneration report has been prepared, in all material respects, in accordance with section 6-16 b of the Norwegian Public Limited Liability Companies Act and the accompanying regulation. Board of directors’ responsibilities The board of directors is responsible for the preparation of the remuneration report and that it contains the information required in section 6-16 b of the Norwegian Public Limited Liability Companies Act and the accompanying regulation and for such internal control as the board of directors determines is necessary for the preparation of a remuneration report that is free from material misstatements, whether due to fraud or error. Our independence and quality control We are independent of the company in accordance with the requirements of the relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Our firm applies International Standard on Quality Control 1 (ISQC 1) and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor’s responsibilities Our responsibility is to express an opinion on whether the remuneration report contains the information required in section 6-16 b of the Norwegian Public Limited Liability Companies Act and the accompanying regulation and that the information in the remuneration report is free from material misstatements. We conducted our work in accordance with the International Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial information”. We obtained an understanding of the remuneration policy approved by the general meeting. Our procedures included obtaining an understanding of the internal control relevant to the preparation of the remuneration report in order to design 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. Further we performed procedures to ensure completeness and accuracy of the information provided in the remuneration report, including whether it contains the information required by the law and accompanying regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Oslo, 24 March 2022 ERNST & YOUNG AS The auditor's assurance report is signed electronically Jon-Michael Grefsrød State Authorised Public Accountant (Norway) Penneo Dokumentnøkkel: MOZO5-CL8N2-84IK0-7G3K8-S1N0E-6UFBE Th is document is digitally signed using Penneo.com. The digital signature data within the document is secured and validated by the computed hash value of the original document. The document is locked and timestamped with a certificate from a trusted third party. All cryptographic evidence is embedded within this PDF, for future validation if necessary. How to verify the originality of this document This document is protected by an Adobe CDS certificate. When you open the document in Adobe Reader , you should see, that the document is certified by Penneo e-signature service penneo@penneo.com. This guarantees that the contents of the document have not been changed. You can verify the cryptographic evidence within this document using the Penneo validator, which can be found at https://penneo.com/validate The signatures in this document are legally binding. The document is signed using Penneo™ secure digital signature. The identity of the signers has been recorded, and are listed below. “By my signature I confirm all dates and content in this document.” Jon-Michael Grefsrød Partner Serial number: 9578-5992-4-3016511 IP: 213.52.xxx.xxx 2022-03-24 20:32:51 UTC Jon-Michael Grefsrød Statsautorisert revisor Serial number: 9578-5992-4-3016511 IP: 213.52.xxx.xxx 2022-03-24 20:32:51 UTC Penneo document key: MOZO5-CL8N2-84IK0-7G3K8-S1N0E-6UFBE Auditor’s report 90 MPC Container Ships Annual Report 2021 Annual Report 2021 MPC Container Ships 91 MPC Container Ships ASA Munkedamsveien 45 A, 0250 Oslo Postbox 1251 Vika N-0111 Oslo, Norway Org no. 918 494 316 www.mpc-container.com 213800MXS7CXYJ2Q18052021-01-012021-12-31213800MXS7CXYJ2Q18052020-01-012020-12-31213800MXS7CXYJ2Q18052021-12-31213800MXS7CXYJ2Q18052020-12-31213800MXS7CXYJ2Q18052020-12-31ifrs-full:IssuedCapitalMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:IssuedCapitalMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:IssuedCapitalMember213800MXS7CXYJ2Q18052020-12-31ifrs-full:SharePremiumMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:SharePremiumMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:SharePremiumMember213800MXS7CXYJ2Q18052020-12-31ifrs-full:TreasurySharesMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:TreasurySharesMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:TreasurySharesMember213800MXS7CXYJ2Q18052020-12-31ifrs-full:RetainedEarningsMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:RetainedEarningsMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:RetainedEarningsMember213800MXS7CXYJ2Q18052020-12-31ifrs-full:OtherReservesMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:OtherReservesMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:OtherReservesMember213800MXS7CXYJ2Q18052020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800MXS7CXYJ2Q18052020-12-31ifrs-full:NoncontrollingInterestsMember213800MXS7CXYJ2Q18052021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember213800MXS7CXYJ2Q18052021-12-31ifrs-full:NoncontrollingInterestsMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:IssuedCapitalMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:IssuedCapitalMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:SharePremiumMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:SharePremiumMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:TreasurySharesMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:TreasurySharesMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:RetainedEarningsMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:RetainedEarningsMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:OtherReservesMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:OtherReservesMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800MXS7CXYJ2Q18052019-12-31ifrs-full:NoncontrollingInterestsMember213800MXS7CXYJ2Q18052020-01-012020-12-31ifrs-full:NoncontrollingInterestsMember213800MXS7CXYJ2Q18052019-12-31iso4217:USDiso4217:USDxbrli:shares