Kenya Ports Authority Annual Report and Financial Statements for the year ended 30 June 2021 (first page header reads 2018/2019 but the content is 2020/21). PDF page 27: the first three Lamu berths add 1.2 million TEU of capacity; PDF page 30: the Mombasa cruise terminal completed but not yet operational; PDF page 47: Lamu port launch and planned 23 berths. Downloaded from https://portal.kpa.co.ke/web-uploads/financial-documents/bbccf9ea-f79f-40f9-9417-9f7b34c13238.pdf

Contributed as a source for Relocation of Container Operations to Lamu Port.

Also cited by Mombasa International Cruise Terminal.

Contents of the file

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CORPORATE CONTACTS KENYA PORTS AUTHORITY Administration Block, Kipevu P.O. Box 95009 - 80104 Mombasa Telephone: +254-412112999 +254-412113999 Mobile: +254-70909299 9 +254-709093999 Annual Report & +254-730653999 www.kpa.co.ke Financial Statements FY 2020 | 2021 Prepared in accordance with accrual basis of accounting, under the International Financial Reporting Standards (IFRSs) KPA • ANNUAL REPORT & FINANCIAL STATEMENTS 2018 / 2019 1

| | Annual Report & Financial Statements FY 2020 | 2021 |

|---|---|

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Key highlights THE FY 2020-2021 LAUNCH OF PORT OF LAMU

• Operationalization of the First Berth CONTINUED PORT EXPANSION / INVESTMENT Acquired 4 New Eco-Hoppers Ongoing projects; - MPDP II
• Relocation of KOT
• Consultancy on Dongo Kundu SEZ
• Consultancy on Shimoni Fishing Port INVESTMENT IN HUMAN CAPITAL;
• Recruitment of 43 interns
• Trained 5,108 staff
• Conducted Ethics and Integrity Awareness campaign FINANCE
• Strong financial performance recorded Profit before tax of Kshs 13.818 Billion
• Total Asset of Kshs. 304 Billion
• Remitted Special Dividend of Kshs. 4.95 Billion GROWING PORT THROUGHPUT Continued growth with 36 Million MTs handled in the year CONTINUED MANAGEMENT OF BIODIVERSITY AND ENVIRONMENT
• Adopted the Green Port Policy
• Planted 10,000 trees CORPORATE SOCIAL INVESTMENTS (CSI)
• Kshs. 311 Million on CSI
• Rehabilitated the Lamu jetties 2 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Contents Page ENTITY INFORMATION 1 Who we are 5 Authority Information 7 GOVERNANCE & SUSTAINABILITY The Board of Directors 9 Management Team 16 Chairperson’s Statement 22 Managing Director’s Port Review 26 Statement of Performance against 2 Predetermined Objectives 29 Statement of Corporate Governance 31 Year in Review 34 Management Discussion and Analysis on Port 41 Performance Environmental and Sustainability Reporting 47 FINANCIAL STATEMENTS Report of The Directors 66 Statement of Directors’ Responsibilities 67 Report of the Auditor General 68 Statement of Profit or Loss and Other 3 Comprehensive Income 84 Statement of Financial Position 85 Statement of Changes in Equity 86 Statement of Cashflow 87 Statement of Comparison of Budget and Actual Amounts 88 Notes to the Financial Statements 89 ADDITIONAL DISCLOSURES Notes to the Statement of Comparison of Budget and Actual Amounts 134 Progress on Follow-up of Auditor 4 recommendations 135 Inter-Entity Transfers from Other Government Entities 142 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 3

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Abbreviations AG Attorney General NBV Net Book Value AD Alternate Director NEMA National Environment Management Authority Ag. Acting NT National Treasury Amb. Ambassador OSHA Occupational Safety and Health Act C Chairman PAT Profit After Tax CBS Chief of Burning Spear PBT Profit Before Tax CoK Constitution of Kenya PFM Act Public Finance Management Act CT2 Second Container Terminal PPE Property Plant & Equipment D Director Rtd. Retired DB Defined Benefit SDT State Department of Transport DC Defined Contribution TEUs Twenty Feet Equivalent units DWT Dead Weight Tonnage TMEA TradeMark East Africa EGH Elder of the Order of the Golden Heart WIP Works in Progress EXCOM Executive Management Committee FVOCI Future Value Through Comprehensive Income FVTPL Future Value Through Profit & Loss Gen. General GM General Manager GoK Government of Kenya HOMS Home Ownership Mortgage Scheme IAOs Integrity Assurance Officers ICDK Inland Container Depot Kisumu ICDN Inland Container Depot Nairobi ICT Information Communication Technology IFRSs International Financial Reporting Standards ISPS International Ship & Port Facility Security ISS Integrated Security System JICA Japan International Cooperation Agency JPY Japanese Yen KFS Kenya Ferry Services KMA Kenya Maritime Authority KOT Kipevu Oil Terminal KRC Kenya Railways Cooperation KTNL Kenya Transport & Logistics Network LAPSSET Lamu Port South Sudan Ethiopia Transport MD Managing Director MoH Ministry of Health MoTIHUD Ministry of Transport and Infrastructure, Housing, Urban Development and Public Works MPDP Mombasa Port Development Project MTs Metric tonnes or tons 4 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| AG |

|---|

| AD |

| Ag. |

| Amb. |

| C |

| CBS |

| CoK |

| CT2 |

| D |

| DB |

| DC |

| DWT |

| EGH |

| EXCOM |

| FVOCI |

| FVTPL |

| Gen. |

| GM |

| GoK |

| HOMS |

| IAOs |

| ICDK |

| ICDN |

| ICT |

| IFRSs |

| ISPS |

| ISS |

| JICA |

| JPY |

| KFS |

| KMA |

| KOT |

| KRC |

| KTNL |

| LAPSSET |

| MD |

| MoH |

| MoTIHUD |

| MPDP |

| MTs |

| NBV |

|---|

| NEMA |

| NT |

| OSHA |

| PAT |

| PBT |

| PFM Act |

| PPE |

| Rtd. |

| SDT |

| TEUs |

| TMEA |

| WIP |

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Who We Are Establishment • Increasing productivity of our resources Kenya Ports Authority (KPA) is a statutory body under • Increasing and modernizing our port(s) the ministry of National Treasury and Planning. It was capacity established by an Act of Parliament Cap 391 on 20th January 1978 with the mandate to develop, maintain, • Reducing operational costs operate, improve and regulate all seaports along the • 24/7 service coastline and inland waterways in Kenya. At the cabinet Customer Service Excellence level, KPA is represented by the Cabinet Secretary KPA is consistently delivering superior customer for National Treasury and Planning. KPA is domiciled experience by; in Kenya with liaison offices in Uganda, Rwanda and Burundi. Enhanced effective customer relations and service programs Vision “World Class Ports of choice” Enhancing regional presence and Knowledgeable, collaborative, consultative relationships that Meet Mission customer expectations “To Provide Efficient and Competitive Port Services to Business Growth Facilitate Global Trade” KPA is focused on; • Increasing throughput Strategic Objectives • Growing market share • Ensuring financial stability and • Ensuring strong partnerships Good Governance Improve port services KPA is undertaking the following strategic approaches: • Compliance with international standards and guidelines, all statutory laws and regulations Improve customer satisfaction • Ensuring social and environmental sustainability • Building a strong, competent, cohesive, Sustain business growth engaged and multi skilled workforce • Promoting a performance culture that is guided by structured planning and enabling policies, Improve labour productivity accountability, transparency, responsiveness, equity, inclusiveness, effectiveness, efficiency and participation Enhance risk management and environmental sustainability • Ensuring a conducive environment that promotes good work ethics and • Ensuring structured enterprise risk KPA Strategy is focused on 4 (four) strategic themes. management • Having well developed ICT systems that are integrated with other cargo facilitating systems to transform our ports into e-ports KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 5

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Who We Are (continued) Principal Activities KPA’s mandate is to develop, maintain, operate, improve, and regulate all scheduled seaports along Kenya’s coastline and inland waterways. Core activities include: - i. Pilotage ii. Towage iii. Mooring iv. Dockage v. Provision of navigational aids and maintenance of the channel vi. Stevedoring and shore handling services: cargo handling services for containers, general cargo, dry bulk and bulk liquid vii. Reception of cruise passengers viii. Storage of cargo awaiting onward shipment 6 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Authority information Directors Name Position Appointed/Exit Gen. (Rtd) Joseph. R. E. Kibwana Chairman Exited on 5th June 2021 Eng. Rashid K. Salim Ag. Managing Director Exited on 1st July 2021 Amb. John Mwangemi Ag. Managing Director Appointed on 1st July 2021 Delilah Ngala Director Ukur Yatani Director (CS National Treasury) Paul K. Kariuki Director (Attorney General) Solomon Kitungu Director (PS SDT) Philip J. Mainga Director (KRC) Nilfat Kassim Ali Director Appointed-November 2020 Peter K. Gibendi Director Exited - August 2020 Lydia J. Yator Director Exited on 5th June 2021 Mary W. Ngari Director Exited on 5th June 2021 Alice M. Mwaisaka Director Exited - August 2020 Conrad Thorpe Director Exited on 5th June 2021 Dr. Peter N. Muracia Director Exited - August 2020 Darius Mobe Director Exited on 5th June 2021 Addraya E. Dena GM, Board & Legal Services Exited - June 2021 Turasha Kinyanjui Ag. GM, Board & Legal Services Appointed June 2021 Alex Mbuvi Alternate Director to AG Oscar Iredi Alternate Director to AG Beatrice Nyamoita Alternate Director to MoTIHUD KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 7

| Name | Position | Appointed/Exit |

|---|---|---|

| Gen. (Rtd) Joseph. R. E. Kibwana | Chairman | Exited on 5th June 2021 |

| Eng. Rashid K. Salim | Ag. Managing Director | Exited on 1st July 2021 |

| Amb. John Mwangemi | Ag. Managing Director | Appointed on 1st July 2021 |

| Delilah Ngala | Director | |

| Ukur Yatani | Director (CS National Treasury) | |

| Paul K. Kariuki | Director (Attorney General) | |

| Solomon Kitungu | Director (PS SDT) | |

| Philip J. Mainga | Director (KRC) | |

| Nilfat Kassim Ali | Director | Appointed-November 2020 |

| Peter K. Gibendi | Director | Exited - August 2020 |

| Lydia J. Yator | Director | Exited on 5th June 2021 |

| Mary W. Ngari | Director | Exited on 5th June 2021 |

| Alice M. Mwaisaka | Director | Exited - August 2020 |

| Conrad Thorpe | Director | Exited on 5th June 2021 |

| Dr. Peter N. Muracia | Director | Exited - August 2020 |

| Darius Mobe | Director | Exited on 5th June 2021 |

| Addraya E. Dena | GM, Board & Legal Services | Exited - June 2021 |

| Turasha Kinyanjui | Ag. GM, Board & Legal Services | Appointed June 2021 |

| Alex Mbuvi | Alternate Director to AG | |

| Oscar Iredi | Alternate Director to AG | |

| Beatrice Nyamoita | Alternate Director to MoTIHUD | |

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Authority information (continued) Registered Office: Principal Bankers: Kenya Ports Authority Citibank N. A Administration Block, Kipevu Citibank House, Nkrumah Road P.O Box 95009-80104 P.O. Box 83615-80100 Telephone: +254-41-2112999, +254-41-2113999 Mombasa Mobile: +254-709092999,709093999, 730653999 Website: www.kpa.co.ke Equity Bank Ltd Mombasa UTC Building, Moi Avenue P.O. Box 84628-80100 Corporate Secretary Mombasa Turasha Kinyanjui Ag. General Manager, Board & Legal Services National Bank of Kenya Kenya Ports Authority Administration Block, Portway House, Moi Avenue P.O Box 95009-80104 P.O. Box 87770-80100 Mombasa Mombasa Independent Auditor Kenya Commercial Bank Ltd Auditor General Treasury Square Branch Office of The Auditor General P.O. Box 90254-80100 Anniversary Towers, University way Mombasa P.O. Box 30084-00100 Nairobi Kenya Commercial Bank Ltd Avenue Pierre NGENDANDUMWE Principal Legal Adviser P.O. Box 6119 The Attorney General Bujumbura State Law office Burundi Harambee Avenue P.O. Box 40112-00100 Stanbic Bank Nairobi Crested Towers Plot 17, Hannington Rd P.O Box 7131 Kampala Uganda 8 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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The Board of Directors Gen. (Rtd) Joseph. R. E. Kibwana, EGH, CBS Amb.Ukur Yatani Kanacho (born 1947) CS, National Treasury He is the immediate former Chairman and was (born 1967) appointed the Chairman of the Board of Directors of He has Master of Arts in Public Administration and Kenya Ports Authority in June 2018. Public Policy, University of York, United Kingdom and A career Naval officer, he rose through the ranks upto Bachelor of Arts in Economics, Egerton University. his retirement as a General in 2005. During his military He has served as Assistant Minister for Science & service, he served as Chief of the General Staff of Technology and has also served in different positions the Kenya Armed Forces (2000-2005); Commandant in Kenya’s Public Administration including a District of the National Defense College (1998-2000); Commissioner. Commander of the Kenya Navy (1988-1998); Chief of He has over 27-year experience in public Military Intelligence (1982-1985) among other senior administration, politics, diplomacy and governance appointments. in public sector since 1992. He is the 1st Governor Upon retirement from the armed forces, he was of Marsabit County , has been the MP for North appointed Chairman of the Board of Directors of Horr Constituency (2006-2007), served as Kenya’s Kenya Ports Authority (2005-2008). He has also Ambassador to Austria with accredition to Hungary & served as Chairman of Kenya Trade Network Agency Slovakia and Permanent Representative to the United (KENTRADE) (2011-2014 and 2015-2018); and also Nations in Vienna. as Non-Executive Director on the Boards of KCB He held senior leadership positions at various Bank group Plc. (2012-2017); KCB Bank Burundi diplomatic and international agencies such as (2013-2015) and is currently Chairman of KCB Bank International Atomic Energy Agency (IAEA), United South Sudan. Nations Organization on Drugs and Crimes (UNODC), He is an alumni of the Britannia Royal Naval college United Nations Industrial Development Organization (UK); Farady House Engineering College (UK); the US (UNIDO), Vice Chairperson of United Nations Naval Staff College and the US Naval War College. Convention Against Transnational Organized Crime (UNTOC), Vice President of Convention on Crime Prevention and Criminal Justice (CCPJ), and chair of African Group of Ambassadors among others. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 9

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The Board of Directors (continued) Solomon Kitungu, Ps State Department of Nilfat Kassim Ali, Transport, MoTIHUD & PW (born 1989) (born 1961) She joined the Board in November 2020. A graduate of the University of Nairobi and Manchester She is an advocate of the High Court of Kenya with University (UK). Prior to his appointment he served a Masters of Laws (LLM) degree in International as an Investment Director at the National Treasury, an Economic Law from the Chinese University of Executive Director of the Privatization Commission Hong Kong and a Bachelor of Laws (LLB) from Moi from 2009 – 2017 and Investment Director at the University, Kenya. She is soon to be a certified Islamic National Treasury from 2003 – 2009. He is currently Finance Expert. the alternate director for the CS National Treasury in She is a member of the Law Society of Kenya and also the Board of Directors of the Insurance Regulatory the Association of Young Arbitrators. Authority, Postbank and Kenyatta University Teaching, Referral & Research Hospital. Previously while at She has both a legal and finance background the National Treasury he served in other Boards having worked in the legal sector and advised such as the Agricultural Finance Corporation, KCB, financial institutions in Kenya on compliance and risk NBK, KENGEN, KPLC, KPRL and Kenya National management. Assurance (2001). Nilfat has also published on sustainable development He has attended the Advanced Management in the African Journal of International Commercial Law. Programme at Strathmore Business School and University of Navara Barcelona, Spain, and has extensive experience in public sector investments and reforms, privatizations and Public Private Partnerships 10 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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The Board of Directors (continued) Delilah K. Ngala Lydia J. Yator (born 1960) (born 1978) She was appointed to the Board in February 2019. She joined the Board in August 2020. She holds an MBA (Strategic Management) and She is a final year Doctorate of Philosophy student in B.Com, (Business Administration) both from the Business Administration at the University of Nairobi. University of Nairobi. Currently pursuing diploma She has an MBA and a Bachelor of Commerce in counselling psychology at Amani counselling and degree both from the University of Nairobi. An alumni training centre. She has served in various Board of Kenya Utalii College and an Associate Member memberships including Maseno University council (CIM & CIMA), she is also undergoing Breakthrough member as chairperson executive committee, Pwani Leadership Transformation Programme. university council member as chairperson of the Audit She is the GM Lake Bogoria Group and also committee, Kenya Tourist Development Corporation serves as a board member of Lord Errol Gourmet as chairperson of the operations committee, Kenya and Restaurant and Kabarak University Business Institute of Bankers as chairperson Mombasa local Enterprise Ltd. A member of Women in Tourism, center, amongst many others. Hotel Managers Association, a Vice Chair North Rift She is a strategic thinker with over 27 years experience Tourism Association, a Mentor at Global Women in banks’ branch management, operations and unit Mentorship Programme, a trainer and aspiring leadership. leadership coach and also actively involved in uplifting She was a member of the IAAF world under 18 years girl child from the less privileged society in the rural youth championships, 2017 and has lean six sigma- areas through awarding scholarships, motivational yellow belt certification from KIM (2014). talks and spearheads fight against FGM. She is a visionary and experienced leader in handling various functions, from managing hotels supply chain, designing, organizing, stewarding and evaluating operations in retail and hospitality establishments. She has a vast wealth of experience in the role of senior management of over 15 years within East Africa. She has been accredited in turning around organizations to profitable institutions leading to growth and expansion of its operations, she believes in leading and elevating others sustainably for higher purpose. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 11

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The Board of Directors (continued) Darius Mobe Mary W. Ngari HSC, CBS (born 1978 ) (born 1956) He joined the Board in August 2020. She joined the Board in June 2018. He has Bachelor of Arts in Business Management She holds a Bachelor of Arts Degree (Hons) in (BABM) from University of Sunderland (UK). Political Science and Sociology from the University of Nairobi and a Master`s Degree in Psychotherapy He is the Country Director (South Sudan) of Lukiza and Counseling from Daystar University. She has Group of Companies. over 30 years of Administrative work experience in He has served as a franchise director of Punctureseal the Public Service rising through the ranks to serve Sudan Ltd (2007-2009), MD of Saphyre Onyx as PS Ministry of Medical Services 2010-2013 and Investments (2006-2008), Harrow Wield Investments PS Ministry of State for the Development of Northern (2004-2006) amongst other positions. and Other Arid Lands. She has served as a Director He has excellent Business acume skils, leadership on the boards of various State Corporations. She skills, an excellent Board Room Negogiator amongst also previously worked at the East African Portland other key skills. Cement Company as Acting MD. She holds a Presidential Commendation Award for sterling contribution towards the commemoration of 25 years of Kenya’s Independence.He is immediate former Ambassador to the Republic of Djibouti and previously Ambassador to the Republic of Rwanda. Previously, he held senior executive positions in the corporate world both locally and internationally. Amb. Mwangemi studied Agronomy at the institute of Agronomy, University of Clermont Ferrand France. He is fluent in French Language and alumnus of Liverpool University School of Business where he undertook his Master of Business Administration (MBA). 12 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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The Board of Directors (continued) Conrad Thorpe Philip J. Mainga (born 1964) Managing Director KRC He joined the Board in June 2018. (born 1966) An industry leader with 15 years of experience of He holds a Masters in Project Planning and leading a multi-national, pan-African and Asian risk Management (MAPM) from the University of Nairobi, management business. He founded Salama Fikira, an a Master of Arts in Economics (M.A.) and a Bachelor enterprise risk management company in Kenya. Today of Arts (B.A.) both from University of Mysore, India. the company has offices in seven countries and a He also holds a certificate from Harvard University in presence in eight others. The Group has management Driving Government Performance. He is a member of certification of ISO9001, 28007, 18001 and 14001, Certified Finance Management for Project Managers as well as ABC certification through Trace®. It is also (FMPM), Associate member MEGADEV Consultants the only African Risk Management company with the and member Kenya Institute of Management (KIM). German Police Licence. The Group operates across Before being appointed the Acting MD, he was the 80% of Africa with increased service delivery in Asia GM Business and Operations, a role that covered the and parts of Europe. In addition to his core duties at operations of the Madaraka Express, SGR Freight the Board of the KPA, he is also the Chairman of the services and Estates management. Board of a London-listed company, as well as being He has over 20 years in the Planning and Research on the Board of a Kenya conservation Not-for-Profit. profession and has worked in several capacities He also served in HM Royal Marines and attended the holding Corporate Planning and Research Manager Advanced Command and Staff Course with an MA Position. in War Studies and Defence Technology. As a youth he excelled at sport, playing rugby for the 1st XV for Mr. Mainga is author of Economics and Ethics first Kenya Schools and representing his country as the edition 2010 – (Book), doing business in Kenya 2006 Captain of the national swimming team. – Hand book (UNDP –Kenya). KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 13

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The Board of Directors (continued) Amb. John Mwangemi Turasha Kinyanjui Ag. Managing Director Ag. General Manager, Board and Legal Services (born 1959) (born 1972) He is the immediate former Ambassador to the He is the acting Board Secretary Republic of Djibouti and also served as the He holds a Bachelor of laws LLB degree from the Ambassador to the Republic of Rwanda. Previously, University of Nairobi and a diploma from Kenya School he held senior executive positions in the corporate of Law.He is an advocate of the High Court of Kenya world both locally and internationally. and is a Certified Public Secretary Kenya,CPS (K) Ambassador Mwangemi studied Agronomy at the and a member of the Institute of Credit Management Institute of Agronomy, University of Clermont Ferrand Kenya. France. He is fluent in french language and alumnus He is also a former lecturer of Kenya School of Credit of Liverpool University School of Business where Management, a former Credit Officer at Co-operative he undertook his Master of Business Administration Bank of Kenya and has served as a legal officer at (MBA). Industrial and Commercial Development Corporation (ICDC) and as a manager legal services at Agricultural Finance Corporation(AFC). He oversees the Contracts & Conveyance department, Litigation & Disputes, Ethics and Integrity including Insurance & claims and Archives and Maritime Museum. 14 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| The Board of Directors (continued) Amb. John Mwangemi Turasha Kinyanjui Ag. Managing Director Ag. General Manager, Board and Legal Services (born 1959) (born 1972) He is the immediate former Ambassador to the He is the acting Board Secretary Republic of Djibouti and also served as the He holds a Bachelor of laws LLB degree from the Ambassador to the Republic of Rwanda. Previously, University of Nairobi and a diploma from Kenya School he held senior executive positions in the corporate of Law.He is an advocate of the High Court of Kenya world both locally and internationally. and is a Certified Public Secretary Kenya,CPS (K) Ambassador Mwangemi studied Agronomy at the and a member of the Institute of Credit Management Institute of Agronomy, University of Clermont Ferrand Kenya. France. He is fluent in french language and alumnus He is also a former lecturer of Kenya School of Credit of Liverpool University School of Business where Management, a former Credit Officer at Co-operative he undertook his Master of Business Administration Bank of Kenya and has served as a legal officer at (MBA). Industrial and Commercial Development Corporation (ICDC) and as a manager legal services at Agricultural Finance Corporation(AFC). He oversees the Contracts & Conveyance department, Litigation & Disputes, Ethics and Integrity including Insurance & claims and Archives and Maritime Museum. | | ices the hool |

|---|---|---|

| | | enya (K) ment redit ative |

| | | er at ation tural |

| | e Contracts & Conveyance departm sputes, Ethics and Integrity inclu claims and Archives and Mar | |

| | | ent, ding itime |

Page 15

Management team KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 15

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Management team Amb. John Mwangemi Eng. Rashid K. Salim, IEng. IMarEng Ag. Managing Director Former Ag. Managing Director He is immediate former Ambassador to the Republic He is also the current GM Engineering Services of Djibouti and also served as the Ambassador to He holds an HND in Marine Engineering (UK) and the the Republic of Rwanda. Previously, he held senior Chief Engineer Certificate of Competency(CoC) from executive positions in the corporate world both locally South Shields Marine College(now South Tyneside and internationally. College) UK. Amb. Mwangemi studied Agronomy at the institute of He is a Registered Incorporated Marine Engineer and Agronomy, University of Clermont Ferrand France. He the Engineering Council(UK). He is also a Member is fluent in French Language and alumnus of Liverpool with the Institute of Marine Engineering, Science and University School of Business where he undertook Technology(UK). his Master of Business Administration (MBA). His docket included Marine Engineering, Terminal Engineering and Mechanical Engineering as well as Head of Inland Waters. 16 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Management team (continued) CPA Patrick W. Nyoike Turasha Kinyanjui General Manager, Finance Ag. General Manager, Board and Legal Services He holds a Masters degree in Business Administration He holds a Bachelor of laws LLB degree from the (MBA) and a Bachelor of Commerce Degree University of Nairobi and a diploma from Kenya School (Accounting) both from the University of Nairobi. He of Law.He is an advocate of the High Court of Kenya is a member of the Association of Financial Analysts and is a Certified Public Secretary Kenya,CPS (K) (AFA), a Certified Public Accountant, CPA(K) and a member of the Institute of Credit Management and a member of the Institute of Certified Public Kenya. Accountants of Kenya (ICPAK). He is also a former lecturer of Kenya School of Credit He is responsible for Financial Accounting, Management, a former Credit Officer at Co-operative Management Accounting, Commercial services and Bank of Kenya and has served as a legal officer at Procurement & Supplies functions. Industrial and Commercial Development Corporation (ICDC) and as a manager legal services at Agricultural Finance Corporation(AFC) Is the acting Board Secretary and oversees the Contracts & Conveyance department, Litigation & Disputes, Ethics & Integrity including insurance & claims and Archives and Maritime Museum. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 17

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Management team (continued) Eng. Vincent S. Esyepet Daniel O. Ogutu, MBS, EBS General Manager, Infrastructure Development General Manager, Human Resources and Administration He holds a Master of Arts in Project Planning and Management from the University of Nairobi, a Bachelor of Science in Civil He holds Masters in Business Administration (MBA) from Engineering from the Jomo kenyatta University of Agriculture Eastern & Southern Africa Management Institute (ESAMI) and Technology. He also holds a Postgraduate in Program TZ and Maastricht School of Management, Bachelors for Management Development from Strathmore University of Education Arts (Kenyatta University), Higher National and Gordon Institute of Business Science, Diploma in Diploma in Human Resources Management – KNEC, Advanced Concrete Technology from the Institute of Kisumu Polytechnic. Concrete Technology in the UK and a Certificate in Concrete He has undertaken various professional training in Strategic Technology from the Cement & Concrete Institute in South Leadership Program, Quality Management Systems (KBS), Africa. He’s a Registered Consultant and Professional Civil Kenya Labour laws(IHRM), Human Resources Management Engineer with the Engineers Board of Kenya and a Fellow of and Development (ESAMI), Diploma in Marketing (Institute of the Institution of Engineers of Kenya. Commercial Management) and in Management (University of He has over Twenty-One (21) years of progressive Witwatersrand Johannesburg. professional experience in the construction industry, He has vast experience in HR profession having served business planning and logistical management, corporate in various Government Ministries in different capacities governance and has interpersonal skills gained through namely; at the Directorate of Personnel Management and working with various organizations both in the public and Ministry of State for Provincial Administration and Internal corporate sector including but not limited to, Egis International Security as the Principal Human Resources Management / Kenya Consulting Engineers, Bamburi Cement Limited, Officer and went on to work for the Ministry of State for Howard Humphreys East Africa Limited, Gibb Africa Limited Public Service on the same capacity and later joined and Norconsultant A.S. National Water Conservation and Agricultural Finance Corporation (AFC) as the General Pipeline Corporation. Manager Human Resources and Administration and most Eng Sidai has also reserved as Members of the Board of notably as a Commissioner and Vice Chair at the Salaries the National Water Conservation and Pipeline Corporation and Remuneration Commission (SRC). and Joint Secretary, National Concrete Pavements Steering His docket covers Human Resources, Employee Relations, Committee – Kenya. Administration and Medical services Departments. His docket covers Civil Engineering, Project Development & Management and Port Electrical Engineering Departments 18 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Management team (continued) Captain William K. Ruto, MNI Sudi Mwasinago General Manager, ICD Kisumu General Manager, Operations He holds a Master Mariner Certificate of Competency He Holds a Masters Degree in Maritime Affairs (UK), an MBA in Strategic Management from Jomo Science with a bias in Port Management from the Kenyatta University of Agriculture & Technology World Maritime University in Malmo, Sweden. He has (JKUAT) and various professional qualifications also attended the African Development Programme including the Global Maritime Distress and Safety and studied Container Terminal Operations course System General Operator’s Certificate (GMDSS at the University of Montana, School of Business GOC-UK). He is also a member of the Nautical Administration in the United States of America. Institute (MNI), a member of the International Harbour His docket includes all operations in the Conventional Master’s Association (IHMA) and has served as the Cargo, Marine, Inland Container Depots and chair of the Inter-Agency Committee comprising of Container Terminal, Marine Operations, Logistics Government Agencies working in the port and with and Safety with a focus on overseeing development stakeholders and implementation of port cargo operations, marine, His docket includes all operations in ICD Kisumu. logistics and Port safety policies and procedures. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 19

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Management team (continued) Edward Kamau Eng. Abdullahi Samatar General Manager, Corporate Services General Manager, Lamu port He holds a Master of Business Administration and He holds a BSc. in Civil Engineering from the Bachelors of Commerce Degree (Marketing) both University of Nairobi. He is a registered Engineer from the University of Nairobi, a postgraduate Diploma with the Engineers Registration Board of Kenya and a from the UK’s Diageo Academy. member of the Institute of Engineers of Kenya.. He is in charge of Corporate Development (Corporate He is incharge of the Lamu port project. Planning, Statistics & Research), Marketing (including Liaison offices of Uganda, Burundi & Rwanda) Corporate affairs (Corporate Communication, Media & CSR) and ICT. 20 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Management team (continued) Edward Kamau Eng. Abdullahi Samatar General Manager, Corporate Services General Manager, Lamu port He holds a Master of Business Administration and He holds a BSc. in Civil Engineering from the Bachelors of Commerce Degree (Marketing) both University of Nairobi. He is a registered Engineer from the University of Nairobi, a postgraduate Diploma with the Engineers Registration Board of Kenya and a from the UK’s Diageo Academy. member of the Institute of Engineers of Kenya.. He is in charge of Corporate Development (Corporate He is incharge of the Lamu port project. Planning, Statistics & Research), Marketing (including Liaison offices of Uganda, Burundi & Rwanda) Corporate affairs (Corporate Communication, Media & CSR) and ICT. | | the neer nd a |

|---|---|---|

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Chairperson’s statement KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 21

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Despite the unprecedented challenges posed by the global Covid-19 pandemic, the Board remained focused providing strategic guidance to ensure attainment of goals for business continuity and stability. 22 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Chairperson’s statement Introduction Risk Management I am delighted to present the Annual Report and KPA’s business strategy is based on taking precautions Financial Statements of the Kenya Ports Authority, of calculated risks to ensure they do not jeopardize for the financial year ended 30th June 2021. Despite the direct interests of different stakeholders. Sound the unprecedented challenges posed by the global assessment of risk enables us to anticipate and Covid-19 pandemic, the Board remained focused respond to changes in our business environment, as providing strategic guidance to ensure attainment of well as make informed decisions under conditions of goals for business continuity and stability. Indeed, our uncertainty. efforts during the period have borne fruit based on our performance. Corporate Social Investment The Authority is committed to providing solutions to the Operational Performance benefits of the society and therefore CSI is an integral During the FY 2020/2021, the Port cumulatively part of our business. ‘Care’ is one of our core values handled total throughput of 36.054 million tons because we care for our staff, the communities around representing a growth of 2.433 million tons or 7.2% us and are sensitive to the environment within which compared to 33.621 million tons handled in 2019/20. we operate. The performance surpassed the forecasted target of The Authority’s CSI Policy is rooted in the organization’s 35.770 million tons by 0.8%. Similarly, during the period values, guided by international standards and best under review, total container traffic recorded 1,458,944 practices that are driven by the spirit of excellence in TEUs against the forecasted target of 1,444,147 TEUs overall performance of business. exceeding by 14,787 TEUs or 1.0%. This shows an increase of 74,506 TEUs or 5.4% when compared to The Authority spent at least Kshs 311 million in the 1,384,438 TEUs handled in the same period in FY various CSI initiatives in the FY 2020/2021, aimed at 2019/20. Transshipment containers also improved by impacting positively on the lives of communities within 6.5% from 207,168 TEUs in FY 2019/20 to 220,690 and beyond the Coast region. These CSI activities TEUs in FY 2020/21. However, Transit traffic declined were mainly focused on sports, education services, marginally by 0.9% to record 9.902 million tons during religious initiatives, charity events, humanitarian Aid and the period under review compared to 9.991 million tons relief, response to distress calls and various community handled in the previous FY 2019/20, largely because projects. of the Covid 19 pandemic. To enhance environmental conservation, the Authority The growth is evident that the Authority has adopted an elaborate Green Port Policy (GPP). continued playing its role in facilitation of trade, as Through the GPP policy, the Authority acquired four well as significantly contributing to the Government’s new Eco- hoppers which are environment friendly. economic blueprint Vision 2030 and the Big Four The equipment helps to improve dust containment Development Agenda, focusing on Food Security, when dealing with dry bulk materials thus eliminating Affordable Housing, Manufacturing and Access to environmental pollution. Universal Healthcare. Future Outlook Dividends To enhance capacity, improve competitiveness and The directors recommend a dividend payout of Kshs support the Government development agenda, the 587.9 million which is 7.5% of the PAT to the National Authority will endeavor to continuously improve its Treasury in line with the Dividend policy. However, KPA services and invest in infrastructure development has intentions to seek an exemption on the payment and capacity expansion programs ahead of demand. due to the huge cash outflows required to fund critical The Authority has progressed development of Phase ongoing projects. During the year under review, the II of the Second Container Terminal which involves Authority remitted to the National Treasury Kshs 4,950 construction of Berth 22 with a depth of 15m, a length million as special Dividends totaling to Kshs 18,000 of 300m and a capacity of 450,000 TEUs. The overall million for the two FYs. project progress is at 81.5 percent and is expected to be completed in 2022. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 23

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Chairperson’s statement (continued) The relocation of Kipevu Oil Terminal from its present location between berths 19 and 20, towards the far eastern side of the Tsunza headland opposite Berth 16, has progressed to 90 percent. Once completed, the new terminal will have 4 berths able to accommodate tanker vessels of 170,000 DWT. To catalyze implementation of Mombasa Special Economic Zones, construction of the first berth at Dongo Kundu is in progress with detail design expected to be completed in 2021. As part of the contribution to the country’s Blue Economy initiatives, the Authority has also progressed the development of Shimoni Fishing Port. The Environmental and Social Impact Assessment (ESIA) has been completed and the Bathymetric and Geotechnical surveys are at 98 percent and 85 percent respectively. Similarly, arising from the Presidential Directive on revival of the regional shipping industry to enhance transport across Lake Victoria, the revitalization programme for Kisumu is complete, awaiting commissioning of the Port. Conclusion Finally, I take this opportunity to thank my colleagues in the Board and the management team for their considerable contribution. I also commend staff for working tirelessly to achieve the level of business growth that we have witnessed despite the challenges that came with the Covid 19 Pandemic. Equally, many thanks to the Government, our stakeholders, and the community for their support. I am confident that we will continue to do our very best to attain and surpass the targets set for the new financial year. Let us remain united in our journey to world class ports of choice. Together we make the economy! God bless us all. God bless us all. Nilfat Kassim Ali DIRECTOR 24 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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We have remained visionary and resilient in our commitment to operational excellence despite the challenges of the Covid-19 pandemic. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 25

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Managing Director’s port review Introduction Financial Performance Over time, the Authority has transformed itself towards The Authority realized total revenues (including finance becoming a world class institution, in line with the vision income and gains) amounting to Kshs 53,520 million ‘World Class Ports of Choice’. We have continued during the year under review compared to Kshs to aim higher towards greater competitiveness and 50,164 million in FY 2019/2020, which represents a efficiency in port operations. The Authority is keen growth of Kshs 3,356 million or 6.69%. In terms of on positioning the Port as a competitive regional hub expenditure, the Authority recorded a decrease of Kshs and remains committed to operational excellence and 2,284 million or 5.44 % on total operating expenditure quality services that exceed customer expectations. (including finance cost and other losses) from Kshs 41,986 million recorded in the last FY to Kshs 39,702 The Port of Mombasa remains the primary Gateway to million in the reporting FY. Eastern and Central Africa with direct connectivity to over 80 ports worldwide. This port plays a key role in Profit before tax increased by Kshs 5,640 million or facilitating international seaborne trade and is a driving 68.97 % from Kshs 8,178 million to Kshs 13,818 million. force in the region’s economy. The Authority remains The Authority maintained a healthy Balance Sheet with committed to facilitating and promoting the delivery of an increased Net Asset base of Kshs 304,216 million quality port related services. up from Kshs 294,769 last FY. The operationalization of the first berth of the Port of Investments and Strategic Plan Lamu by H.E President Uhuru Kenyatta, on May 20,2021 The Authority is alive to the dynamic key trends in the marked another major milestone by the Authority. The global ports and maritime industry, and we must keep port, which is Kenya’s second commercial seaport is abreast with the changes to remain competitive. planned to not only serve the transshipment market, but all kinds of cargo destined for the hinterland and The Shipping industry has brought about innovations transit markets. We are glad since its operationalization and new inventions such as ships sizes having the facility which has a wider channel that can grown, smart and green port operations, sustainable accommodate post-panamax ships has during the year infrastructure development, private sector participation, under review received two vessels. creation of hubs and matters of cooperation as opposed to competition etc. Operational Performance The KPA strategic plan 2018-2022 was developed Over the past five years, the port has steadily grown with a focus on the customer and thus we concentrate with a compound annual growth rate of 5.7 percent on strategic investments to modernize existing facilities from 27.364 million tons in FY2016/2017 to 36.054 in tandem with future industry demands. This entails million tons in FY2020/2021. During the period, the developing new port infrastructure, acquisition, and Port handled 36.054 million tons in cargo throughput modernization of equipment, and devising innovative against 33.621 million tons registered in the ideas to improve and sustain efficiency. corresponding period in 2019/2020 representing a notable growth of 7%. Container traffic registered 1.45 Projects are prioritized based on the following key million TEUs during the period under review against considerations: - 1.38 million TEUs handled in the corresponding period i. Realignment to Vision 2030 and the 3rd Medium in 2019/2020, a growth of 5%. This was due to a Term Plan (MTP 111) notable increase of imports by 5.0%, export by 5.3% ii. Alignment to the sustainable Development and transshipment by 6.5% an indication of economic Goals (SDGs) resurgence. iii. Improving KPA’s core services to the customer iv. Alignment to the “BIG FOUR” National Agenda, earmarked for implementation namely; • Food Security • Affordable Housing • Manufacturing, and • Access to Universal Healthcare. 26 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Managing Director’s port review (continued) Second Container Terminal management for all staff, management and the Board Construction of the Second Phase of the Second and each department developed a risk register, which Container Terminal which consists of construction has been incorporated in its respective quality operating of Berth No. 22 (300 meters and 350 meters deep) system processes and continues with periodic reviews is ongoing. Upon completion, it will give the Port of to incorporate emerging business trends. Mombasa an additional annual capacity of 450,000 ISO Certification TEUs. We are committed to complying with the requirements Relocation of Kipevu Oil Terminal (KOT) of ISO 9001:2015 Quality Management System To create additional handling capacity, the Authority (QMS) and ISO 27001:2013 Information System embarked on the project to relocate the KOT to a safer Management System (ISMS) Standards, applicable location with capacity to handle post panamax vessels. statutory regulations, and aligning our management The new modern and bigger oil terminal consisting of system policies and processes with Risk management. four Berths will be able to handle bigger vessels of This in the long run will enable the Authority to effectively up to 17,000 DWT. The facility will be able to handle implement and continually improve our management four bigger tankers at once and serve LPG needs. It system policies, processes, and capabilities. will improve on the capacity and efficiency of handling Safety, Health, and Environment energy products. The Authority is committed to guaranteeing Health and Lamu Port Project Safety of all port users in accordance with Safety and Upon completion of the construction of the first three Health Act (OSHA) 2007 and other legal requirements. berths (container, general and bulk) and corresponding To achieve this goal, KPA has implemented programs storage yard on reclaimed land of a total area of such as safe work person, safe working environment approximately 113 ha, it will create an additional and workplace occupational health programs. As is capacity of 1.2 M TEUs and 13.5 M DWT. The first the norm, businesses are responsible for achieving berth is complete 100% and is now operational. good environmental practice and operating in a safe The superstructures of the three berths have been sustainable environment. The Authority is therefore completed. Yard 1 is complete while Yards 2 and 3 committed to reducing environmental impact and are scheduled to be ready by November 2021. The continually improving environmental performance as an Authority is responsible for the construction of the mega integral and fundamental part of business strategy and port which is expected to have a total of 23 Berths with operating methods. It is our priority to encourage our a depth of 17.5 m to 18 m. customers, suppliers, and all business associates to do the same. Kipevu Road To ensure safe work practices in compliance with The project entailed the expansion of Kipevu Road from IMO standards, the maintenance of appropriate health Gate 18 to Changamwe Roundabout into six lanes with and safety standards remains a key responsibility provision for pedestrian walkways. of all employees and the Authority is committed to The completed road has improved the speed of the proactive management of health and safety risks evacuation of cargo and reduced congestion at the associated with operations. Our objective is to identify, gates while reducing the turnaround times. reduce and control material risks relating to fires, accidents or injuries to employees, customers, and Risk Management cargo. In view of the nature of work undertaken by the Authority and the size of its operations, there are risks that are Conclusion peculiar to the Authority’s business. The risks relate to The Authority continues to develop new port potential revenue loss, low throughput and profitability infrastructure, acquire, and modernize its equipment arising from negative externalities. The purpose of and devise innovative ideas that will improve and Risk Management is to identify such risks early and sustain efficiency. We continue to rely on our Human develop strategies to mitigate them. The Authority Resources to attain the set goals and targets. has undertaken capacity building and training on risk KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 27

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Managing Director’s port review (continued) Conclusion (cont’d) I thank our customers, the Board of Directors, our dedicated and talented staff for their support as well as their efforts in making sure the Authority achieves its goals and objectives. I also appreciate our service providers, the national & regional Governments, and all other stakeholders for their respective contributions to the Authority during the year. I look forward to continued support as we strive to transform Mombasa Port to the port of choice in East and Central Africa. Amb. John Mwangemi Ag. MANAGING DIRECTOR 28 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Statement of performance against predetermined objectives Section 81 Subsection 2 (f) of the Public Finance Management Act, 2012 requires the accounting officer to include in the financial statements, a statement of the National Government entity’s performance against predetermined objectives. The Authority has 4 strategic themes and 5 strategic objectives within the current Strategic Plan 2018-2022. The Strategic Plan 2018-2022 defines the Authority’s Vision to be “World Class Ports of Choice”, and Mission to “Provide Efficient and Competitive Port Services to Facilitate Global Trade”. The strategic plan is anchored on Vision 2030, the 3rd medium Term Plan, the Big 4 agenda, among other policy documents. Working towards realization of the vision and mission, KPA’s strategic model is premised on four Strategic themes. These strategic themes are as follows: • Theme 1: Operational Excellence • Theme 2: Customer Service Excellence • Theme 3: Business Growth • Theme 4: Good Governance The five (5) key Strategic Objectives addressing the stated themes are:- • Improve Port Services • Improve Customer Satisfaction • Sustain Business Growth • Improve Labour Productivity • Enhancing Risk Management and Environmental Sustainability Kenya Ports Authority develops its annual work plans based on the above Five (5) strategic objectives. Assessment of the Board’s performance against its annual work plan is done on a quarterly basis. The actual performance compared to the targets set for the FY 2020/2021 for the 4 strategic pillars are summarized below: Strategic Objective Key Performance Activities Remarks Theme Indicators Operational Improve Port Ship Turnaround time (Hrs.): Review and implement a There was a delay in progressing Excellence Services new Terminal Operating the tender process due to Target: 65 Actual: 80 System inadequacy of funds. Truck turnaround time (Hrs.): Develop business plan for Draft report has been submitted ICDs by the consultant Target:4.5 Actual: 6.4 Construction of Lamu Port Construction progressed to Crane productivity (Moves First Three Berths 91.6% by 30th June 2021 per hour): Mombasa Port Construction progressed to Target: 21 Actual:17.7 Development Project 81.5% by 30th June 2021 Phase II Gross Train Productivity Relocation of Kipevu Oil Construction progressed to (Moves per train per hour) Terminal 89.6% by end of 30th June 2021 Target: 32 Actual: 32.2 Construction of 1st Berth Detailed designs for the first berth at Dongo Kundu (DK1) are ongoing Full Implementation of the ISS fully Implemented at CT2; it ISS at the CT2, ICDN, will be implemented in phases Lamu and all Port facilities. for ICDN, Lamu and other port facilities. Enforce compliance to the The Authority is 99.9% compliant ISPS code to the requirements of the ISPS Code. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 29

| Strategic Theme | Objective | Key Performance Indicators | Activities | Remarks |

|---|---|---|---|---|

| Operational Excellence | Improve Port Services | Ship Turnaround time (Hrs.): Target: 65 Actual: 80 Truck turnaround time (Hrs.): Target:4.5 Actual: 6.4 Crane productivity (Moves per hour): Target: 21 Actual:17.7 Gross Train Productivity (Moves per train per hour) Target: 32 Actual: 32.2 | Review and implement a new Terminal Operating System | There was a delay in progressing the tender process due to inadequacy of funds. |

| | | | Develop business plan for ICDs | Draft report has been submitted by the consultant |

| | | | Construction of Lamu Port First Three Berths | Construction progressed to 91.6% by 30th June 2021 |

| | | | Mombasa Port Development Project Phase II | Construction progressed to 81.5% by 30th June 2021 |

| | | | Relocation of Kipevu Oil Terminal | Construction progressed to 89.6% by end of 30th June 2021 |

| | | | Construction of 1st Berth at Dongo Kundu | Detailed designs for the first berth (DK1) are ongoing |

| | | | Full Implementation of the ISS at the CT2, ICDN, Lamu and all Port facilities. | ISS fully Implemented at CT2; it will be implemented in phases for ICDN, Lamu and other port facilities. |

| | | | Enforce compliance to the ISPS code | The Authority is 99.9% compliant to the requirements of the ISPS Code. |

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Statement of performance against predetermined objectives (continued) Strategic Objective Key Performance Activities Remarks Theme Indicators Customer Improve Customer Service Index (%): Develop KPA Mobile KPA Mobile Application Service Customer Application developed and deployed to Target: 67 Actual: 71 Excellence Satisfaction Google Play store. Compliance to Service Manage communication to Communication Strategy Charter (%): customers and media for 2021-2024 is under implementation Target: 100% Actual: 100% Business Sustain Port Throughput (Mn Dwt): Develop a marketing KPA Marketing strategy 2018- Growth Business strategy 2022 under implementation Target:35.4 Actual:36.1 Growth Identify and explore new The cruise terminal construction Container Traffic (Mn TEUs): revenues streams was completed but is yet to be Target: 1.45 Actual: 1.38 operationalized. Develop statistical policy A draft of the statistical manual and manual to enhance developed. Profits before Tax (Kshs Mn): accuracy in throughput Target: 13,785 million reporting Actual: 13,818 million Curb Revenue leakages 90% of manual processes and and Wastages operations automated to curb revenue leakages Undertake automation of processes and operations Development of Shimoni Tendering process for port construction has begun Good Improve Labour Percentage of workforce Facilitate Development of All management staff have Governance Productivity meeting performance Performance Plans for all been put under performance standards (%): staff management System. Target:100 Actual:66 Improve/Redesign the The old appraisal system was Performance management reviewed and improvements done Number of Industrial system. through automation. Disputes: Carry out a skills gap Skills gap analysis done for staff Target: 0 Actual: 0 analysis and implement the recommendations Alignment of organization The structure developed and structure to the strategy forwarded to State Corporation Advisory Committee (SCAC) for approval Enhance Risk Compliance to Embed risk management in Risk Management has been Management Environmental Audits (%): all processes and systems adopted across the entire and organization through profiling of Target:100 Actual: 70 Environmental risks, documenting, monitoring Productivity Corruption Perception Index and reporting Implement policy on All reported corruption cases Target: <4 Actual: 4.15 handling corruption cases are completed and closed as per Anti-corruption Policy and procedures Implement ISO 14001 and Policy manual and procedures ISO 45001 developed. Review of KPA ACT Draft Kenya Ports Authority Bill has been prepared. Public consultations to follow Development of alternative A total of 1,060 kilowatts capacity and renewable energy solar power plants have been installed 30 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Strategic Theme | Objective | Key Performance Indicators | Activities | Remarks |

|---|---|---|---|---|

| Customer Service Excellence | Improve Customer Satisfaction | Customer Service Index (%): Target: 67 Actual: 71 Compliance to Service Charter (%): Target: 100% Actual: 100% | Develop KPA Mobile Application | KPA Mobile Application developed and deployed to Google Play store. |

| | | | Manage communication to customers and media | Communication Strategy for 2021-2024 is under implementation |

| Business Growth | Sustain Business Growth | Port Throughput (Mn Dwt): Target:35.4 Actual:36.1 Container Traffic (Mn TEUs): Target: 1.45 Actual: 1.38 Profits before Tax (Kshs Mn): Target: 13,785 million Actual: 13,818 million | Develop a marketing strategy | KPA Marketing strategy 2018- 2022 under implementation |

| | | | Identify and explore new revenues streams | The cruise terminal construction was completed but is yet to be operationalized. |

| | | | Develop statistical policy and manual to enhance accuracy in throughput reporting | A draft of the statistical manual developed. |

| | | | Curb Revenue leakages and Wastages | 90% of manual processes and operations automated to curb revenue leakages |

| | | | Undertake automation of processes and operations | |

| | | | Development of Shimoni port | Tendering process for construction has begun |

| Good Governance | Improve Labour Productivity | Percentage of workforce meeting performance standards (%): Target:100 Actual:66 Number of Industrial Disputes: Target: 0 Actual: 0 | Facilitate Development of Performance Plans for all staff | All management staff have been put under performance management System. |

| | | | Improve/Redesign the Performance management system. | The old appraisal system was reviewed and improvements done through automation. |

| | | | Carry out a skills gap analysis and implement the recommendations | Skills gap analysis done for staff |

| | | | Alignment of organization structure to the strategy | The structure developed and forwarded to State Corporation Advisory Committee (SCAC) for approval |

| | Enhance Risk Management and Environmental Productivity | Compliance to Environmental Audits (%): Target:100 Actual: 70 Corruption Perception Index Target: <4 Actual: 4.15 | Embed risk management in all processes and systems | Risk Management has been adopted across the entire organization through profiling of risks, documenting, monitoring and reporting |

| | | | Implement policy on handling corruption cases | All reported corruption cases are completed and closed as per Anti-corruption Policy and procedures |

| | | | Implement ISO 14001 and ISO 45001 | Policy manual and procedures developed. |

| | | | Review of KPA ACT | Draft Kenya Ports Authority Bill has been prepared. Public consultations to follow |

| | | | Development of alternative and renewable energy | A total of 1,060 kilowatts capacity solar power plants have been installed |

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Statement of corporate governance The Board is committed to ensuring that the Port is controls which allow risk to be assessed and run in a professional, transparent, effective, efficient managed. and equitable manner so as to protect and enhance • Strategy formulation and ensuring that there shareholder value and satisfy the interest of stakeholders. are adequate policies, systems, and structures The principles and standards adhered to by the Board to successfully implement the Port strategy. have been developed with close reference to the Mwongozo code of governance for state corporations • Monitoring Port performance against strategic and guidelines on corporate governance issued by the plans and objectives on a going concern State Corporations and Advisory Committee (SCAC). basis, as well as holding mandatory quarterly meetings. • Approval for publication of financial statements. Kenya Ports Authority’s governance structure, by appointment is summarized in the chart below; • Selection, appointment, and appraisal of Senior Managers. The Government of Kenya Finance and Asset Committee The Board of Office of the Directors Auditor General Strategy & Operations Committee Human Resource Committee Human Resource Internal Audit and Management Committee Risk Management • Approve the risk management framework and The Board Charter ensuring that there are adequate structures Board protocols are regulated by a Board Charter as and systems to identify measure and monitor well as provisions of Schedule 1 of the Kenya Ports key risks facing the Port. Authority Act (KPA Act) Chapter 391 of the Laws of • Reviewing the effectiveness of systems for Kenya, including the State Corporations Act where the monitoring and ensuring compliance with laws constitutive statute is silent. and regulations. The Board’s principal duty is to promote the long-term • Reviewing and monitoring the Port’s corporate success of the Port and delivering sustainable value governance’s policies and practices. to the shareholder. The Board Charter defines the governance parameters within which the board exists • Reviewing the Port Capital levels to ensure and operates, sets out specific responsibilities of the that there is adequate capital for the planned board, its committees, and directors collectively, as growth and expansion within the strategic well as certain roles and responsibilities incumbent cycle. upon directors as individuals. • Approval of among other things major capital A summary of the Board responsibilities are as follows: expenditure, borrowings, budget, write offs, • Providing entrepreneurial leadership to the Port acquisition of land etc. within a framework of prudent and effective KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 31

| | Finance and Asset Committee | | |

|---|---|---|---|

| | Strategy & Operations Committee | | |

| | Human Resource Committee | | |

| | Human Resource Committee | | |

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Statement of corporate governance (continued) The Board Size, Composition, and Independence The Board has ownership over the Authority’s strategic The Board consists of Eleven (11) directors out of direction. It regularly reviews reports on progress whom seven are independent non-executive directors toward the target of the approved business plan, including the Chairman. The Board composition draws progress against financial objectives and business a good mix of skills, experience, and proficiencies in development. The chairpersons of board committees various fields. The directors’ biographies are shown on report at each meeting of the board on the activities of pages 9 to 14. the committee since the previous Board meeting. The board receives regular reports from the Ag. Managing The non-executive Directors are independent of Director on the maritime trade environment, strategy, Management. Their role is to advise, constructively business development and financial performance of the challenge and monitor the success of Management in port. delivering the agreed strategy within the risk appetite and control framework set by the board. The Board gets regular reports on the port risk appetite profile, top and emerging risk, risk management, liquidity, Chairman and Managing Director litigations, compliance, and any emerging issues. The roles of the Chairman of the Board and the Members of the executive management are regularly Managing Director remain distinct and separate. The invited to attend board and committee meetings as Chairman gives overall leadership to the Board without required to make presentations that give directors an limiting the principles of collective responsibility for the insight into specific technical business areas. Board decisions. The Managing Director is responsible to the Board and takes responsibility for the effective and efficient running of the port on day-to-day basis. Board and Strategy Meetings The Board and its committees meet regularly in accordance with business requirements. All directors participate in discussing strategy, performance, financial and risk management of the Port. Meetings of the board are structured to allow sufficient time for consideration of the matters to be discussed. The board work plan together with the calendar of meeting for 2020/2021 were fixed in advance and provided to all the directors. Adequate notice was given for each meeting and the agenda and supporting papers were distributed in advance to all the board and committee members to allow time for appropriate review. 32 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Statement of corporate governance (continued) Board Meetings During the year under review, the Authority had 11 regular Board meetings, 5 Special Board meetings and 1 Strategic Board meeting with several meetings of the Committees of the Board. Full Board/Special Strategy Meetings Finance & Asset Operations Audit & Risk Human Resource No. of No. of No. No. of No. of No. of Mtgs No. of Mtgs No. of No. of Mtgs No. of Mtgs of Mtgs No. of No. of Mtgs Director Name Designation Mtgs attended Mtgs attended Mtgs attended Mtgs attended Mtgs attended Mtgs attended Gen. (Rtd) 11 (11 Regular) Joseph R. Chairman 1 1 5 (5 Special) Kibwana 11 (5 Regular) Rashid Salim Ag. MD 5 (4 special) Conrad 11 (11 Regular) Director 1 1 7 7 4 4 Thorpe 5 (5 Special) Festus 11 (11 Regular) AD (NT) 7 7 4 4 5 3 King’ori 5 (5 Special) Director 11 (11 Regular) Mary Ngari 1 1 4 4 5 5 5 (5 Special) Director 11 (11 Regular) Delilah Ngala 1 1 5 5 4 4 5 (5 Special) Director 11 (11 Regular) Darius Mobe 1 1 3 2 2 1 5 (4 Special) Director 11 (10 Regular) Lydia Yator 1 1 4 4 3 3 5 (3 special) Director 11 (6 Regular) Nilfat K Ali 1 1 2 2 2 2 5 (3 Special) Solomon Director 11 (7 Regular) 1 1 7 3 1 1 4 1 Kitungu 5 (4 Special) Beatrice AD 11 (5 Regular) 7 6 4 4 1 1 4 3 Nyamoita (MoTIHUD) 5 (3 Special) 11 (11 Regular) Oscar Eredi AD (AG) 1 1 5 4 4 4 5 (5 Special) Phillip 11 (0 Regular) MD (KRC) 7 2 Mainga 5 (1 Special) 11 (4 Regular) David Njogu AD (KRC) 7 2 4 3 5 (1 Special) Peter 11 (0 Regular) Director 1 1 1 1 Gibendi 5 (1 Special) Alice Director 11 (0 Regular) 1 1 1 1 Mwaisaka 5 (1 Special) Peter Director 11 (0 Regular) 1 1 1 1 Muracia 5 (1 Special) Ngalaah 11 (4 Regular) Director 1 1 Chuphi 5 (1 Special) Insp. Gen. 11 (10 Regular) Chrisologus State 5 (4 Special) 1 1 Makokha Corps. 5 (1 Special) KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 33

| | | Full Board/Special | | Strategy Meetings | | Finance & Asset | | Operations | | Audit & Risk | | Human Resource | |

|---|---|---|---|---|---|---|---|---|---|---|---|---|---|

| Director Name | Designation | No. of Mtgs | No. of Mtgs attended | No. of Mtgs | No. of Mtgs attended | No. of Mtgs | No. of Mtgs attended | No. of Mtgs | No. of Mtgs attended | No. of Mtgs | No. of Mtgs attended | No. of Mtgs | No. of Mtgs attended |

| Gen. (Rtd) Joseph R. Kibwana | Chairman | 11 | (11 Regular) | 1 | 1 | | | | | | | | |

| | | 5 | (5 Special) | | | | | | | | | | |

| Rashid Salim | Ag. MD | 11 | (5 Regular) | | | | | | | | | | |

| | | 5 | (4 special) | | | | | | | | | | |

| Conrad Thorpe | Director | 11 | (11 Regular) | 1 | 1 | 7 | 7 | | | | | 4 | 4 |

| | | 5 | (5 Special) | | | | | | | | | | |

| Festus King’ori | AD (NT) | 11 | (11 Regular) | | | 7 | 7 | 4 | 4 | 5 | 3 | | |

| | | 5 | (5 Special) | | | | | | | | | | |

| Mary Ngari | Director | 11 | (11 Regular) | 1 | 1 | | | 4 | 4 | 5 | 5 | | |

| | | 5 | (5 Special) | | | | | | | | | | |

| Delilah Ngala | Director | 11 | (11 Regular) | 1 | 1 | | | | | 5 | 5 | 4 | 4 |

| | | 5 | (5 Special) | | | | | | | | | | |

| Darius Mobe | Director | 11 | (11 Regular) | 1 | 1 | | | 3 | 2 | | | 2 | 1 |

| | | 5 | (4 Special) | | | | | | | | | | |

| Lydia Yator | Director | 11 | (10 Regular) | 1 | 1 | | | | | 4 | 4 | 3 | 3 |

| | | 5 | (3 special) | | | | | | | | | | |

| Nilfat K Ali | Director | 11 | (6 Regular) | 1 | 1 | 2 | 2 | 2 | 2 | | | | |

| | | 5 | (3 Special) | | | | | | | | | | |

| Solomon Kitungu | Director | 11 | (7 Regular) | 1 | 1 | 7 | 3 | | | 1 | 1 | 4 | 1 |

| | | 5 | (4 Special) | | | | | | | | | | |

| Beatrice Nyamoita | AD (MoTIHUD) | 11 | (5 Regular) | | | 7 | 6 | 4 | 4 | 1 | 1 | 4 | 3 |

| | | 5 | (3 Special) | | | | | | | | | | |

| Oscar Eredi | AD (AG) | 11 | (11 Regular) | 1 | 1 | | | | 5 | 4 | | 4 | 4 |

| | | 5 | (5 Special) | | | | | | | | | | |

| Phillip Mainga | MD (KRC) | 11 | (0 Regular) | | | 7 | 2 | | | | | | |

| | | 5 | (1 Special) | | | | | | | | | | |

| David Njogu | AD (KRC) | 11 | (4 Regular) | | | 7 | 2 | 4 | 3 | | | | |

| | | 5 | (1 Special) | | | | | | | | | | |

| Peter Gibendi | Director | 11 | (0 Regular) | | | 1 | 1 | | | | | 1 | 1 |

| | | 5 | (1 Special) | | | | | | | | | | |

| Alice Mwaisaka | Director | 11 | (0 Regular) | | | | | 1 | 1 | | | 1 | 1 |

| | | 5 | (1 Special) | | | | | | | | | | |

| Peter Muracia | Director | 11 | (0 Regular) | | | | | 1 | 1 | 1 | 1 | | |

| | | 5 | (1 Special) | | | | | | | | | | |

| Ngalaah Chuphi | Director | 11 | (4 Regular) | | | | | 1 | 1 | | | | |

| | | 5 | (1 Special) | | | | | | | | | | |

| Chrisologus Makokha | Insp. Gen. State Corps. | 11 | (10 Regular) | 1 | 1 | | | | | | | | |

| | | 5 | (4 Special) | | | | | | | | | | |

| | | 5 | (1 Special) | | | | | | | | | | |

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Statement of corporate governance (continued) Compliance with Mwongozo Code granted no loans to its directors during the year. The The Authority has endeavored to comply with the Directors’ remuneration has been disclosed under note Mwongozo Code of Governance for State Corporations 8. No bonuses were paid to the Directors during the in the discharge of its mandate through the Board. It is year. The Directors are also provided with personal however recognized that the code will be implemented insurance cover. on a ‘comply or explain’ basis and organizations will be Directors’ External Activities and Conflict of allowed time to fully comply at a pace that is realistic in Interest their circumstances and to learn from the experience of Directors have a statutory duty to avoid situations in others. The Authority discloses the following instances which they have interests which may conflict with the of noncompliance; - interests of the Authority. A conflict-of-interest register Competitive recruitment of Board members: The is signed at every meeting and any emerging interest Authority is not privy to any interview process recorded. undertaken by the Cabinet Secretary in appointment of Board Directors. The power to appoint is vested in the Board Structure Cabinet Secretary and this remains a policy issue. The Board operates under a comprehensive structure made up of committees established to assist in Governance Audits: The Government policy requires discharging its responsibilities and obligations as that governance audits to be undertaken by States guided by the State Corporation Act Cap 446, section Corporation Advisory Committee. However, SCAC has 9 and Mwongozo Code of Conduct Chapter 1 Section not yet rolled out this exercise. They have indicated that 1.7. These committees assist the board in carrying out they are still training and compiling list of accredited its functions and ensuring that there is independent Governance Audit Auditors and thereafter roll out the oversight of internal controls and risk management. same. The proposal is to outsource due to capacity constraints. The Board has determined the purpose and the number of committees required to support it in Succession Plan: Board has not formalized the carrying out its duties and responsibilities and in succession plan but has in place a structure that guiding Management. These committees have been ensures business continuity in the absence of the Chief established with specific terms of reference, which are Executive Officer where any of the General Managers continually reviewed and updated. The appointment of can perform the duties of the office of the Managing members to these committees draws on the skills and Director. experience of individual directors. The role played by There is no financial expert among the independent board committees forms the principal point of contact members of the Board. However, one independent between the Directors and Management. Constitution director has vast experience in the financial sector. of the Committees are also rotated from time to time. Appointment is by the Cabinet Secretary and the The Mwongozo Code of Conduct further provides for Authority has no influence over this. the establishing of not more than four committees of the Board Remunerations Board and for the Authority these are namely; Finance The non–executive Board members are paid sitting & Assets Committee, Audit & Risk Committee, Human allowances of Kshs 12,000 for every meeting Resources Committee and Strategy & Operations attended as provided by GoK circulars. Director’s Committee. fees are paid to directors subject to approval by the All committees have at least four non- executive National Treasury. Non-executive Board members not directors as members. The chair of the committees is representing any Government institutions are paid a non- executive director. The chairman of the Board Directors’ fees directly while Directors’ fees for those does not sit in any of the committees. representing the Government and/or its institutions are At every meeting of the full board, the chair of each paid to the Cabinet Secretary, National Treasury as a committee presents a report on its activities, decisions, body corporate. Director’s fee of Kshs 600,000 per and recommendations of their respective committees annum or pro rata for any part served thereof, for each since the date of the previous meeting for further eligible Director has been provided for. The Authority consideration and approval where necessary. 34 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Statement of corporate governance (continued) Details of the committees are given below: Finance and Assets Committee The core functions of the Finance and Asset Committee is to ensure that the undertakings of the Authority are operated efficiently, according to sound commercial principles in accordance with Part V and VI of the Kenya Ports Authority Act 1978. Meetings Director Held Attended % Attendance Conrad Thorpe Chairperson 7 7 100% Nilfat Kassim Member 2 2 100% Festus King’ori Member 7 7 100% Beatrice Nyamoita Member 7 6 86% Eng. Phillip Mainga Member 7 2 29% Solomon Kitungu Member 7 3 43% David Njogu Member 7 2 29% Peter Gibendi Member 1 1 100% Strategy & Operations Committee The Committee focuses on ensuring that productivity is maintained according to international standards. It also identifies obstacles that may hamper smooth operations and formulates policies on improvement of port performance. It also focuses on the implementation of the Authority’s Strategic Plan and any emerging challenges and makes recommendations to the Board. Meetings Director Held Attended % Attendance Mary Ngari Chairperson 4 4 100% Festus King’ori Member 4 4 100% Beatrice Nyamoita Member 4 4 100% David Njogu Member 4 3 75% Peter Muracia Member 1 1 100% Alice Mwaisaka Member 1 1 100% Ngalaah Chuphi Member 1 1 100% Darius Mobe Member 3 2 67% Nilfat Kassim Member 2 2 100% KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 35

| Director | | Meetings | | % Attendance |

|---|---|---|---|---|

| | | Held | Attended | |

| Conrad Thorpe | Chairperson | 7 | 7 | 100% |

| Nilfat Kassim | Member | 2 | 2 | 100% |

| Festus King’ori | Member | 7 | 7 | 100% |

| Beatrice Nyamoita | Member | 7 | 6 | 86% |

| Eng. Phillip Mainga | Member | 7 | 2 | 29% |

| Solomon Kitungu | Member | 7 | 3 | 43% |

| David Njogu | Member | 7 | 2 | 29% |

| Peter Gibendi | Member | 1 | 1 | 100% |

| Director | | Meetings | | % Attendance |

|---|---|---|---|---|

| | | Held | Attended | |

| Mary Ngari | Chairperson | 4 | 4 | 100% |

| Festus King’ori | Member | 4 | 4 | 100% |

| Beatrice Nyamoita | Member | 4 | 4 | 100% |

| David Njogu | Member | 4 | 3 | 75% |

| Peter Muracia | Member | 1 | 1 | 100% |

| Alice Mwaisaka | Member | 1 | 1 | 100% |

| Ngalaah Chuphi | Member | 1 | 1 | 100% |

| Darius Mobe | Member | 3 | 2 | 67% |

| Nilfat Kassim | Member | 2 | 2 | 100% |

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Statement of corporate governance (continued) Human Resources Committee The committee reviews the Human Resources policies and procedures and ensures that they support the strategy of the Authority. It ensures that the Authority maintains a policy of providing remuneration packages that fairly reward staff for their contribution to the business, whilst considering the need to attract, retain and motivate staff of the highest caliber. The committee also ensures successions plans are in place for senior managers of the Authority. Meetings Director Held Attended % Attendance Delilah Ngala Chairperson 4 4 100% Peter Gibendi Member 1 1 100% Conrad Thorpe Member 4 4 100% Beatrice Nyamoita Member 4 3 75% Solomon Kitungu Member 4 1 25% Darius Mobe Member 2 1 50% Lydia Yator Member 3 3 100% Oscar Eredi Member 4 4 100% Darius Mobe Member 2 1 50% Alice Mwaisaka Member 1 1 100% Audit and Risk Committee The committee plays a vital role in ensuring the integrity of financial statements prior to their review and approval by the board. To this end, the committee reviews the accounting policies financial reporting and regulatory compliance of the Authority. The committee also continually evaluates the effectiveness of risk management programs. The committee receives reports of the Internal and External Auditors and management’s corrective response to the findings. The committee also reviews the overall scope, annual plans for the internal audit function’s activities and oversees the alignment of risk management programs and internal audit activities. The committee reviews all key internal audit reports and has regular direct access to the Head of Internal Audit and Risk Management. Meetings Director Held Attended % Attendance Delilah Ngala Chairperson 5 5 100% Mary Ngari Member 5 5 100% Lydia Yator Member 4 4 100% Festus King’ori Member 5 3 60% Solomon Kitungu Member 1 1 100% Oscar Eredi Member 5 4 80% Beatrice Nyamoita Member 1 1 100% Peter Muracia Member 1 1 100% Lilian Kamau Secretary 5 5 100% 36 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Director | | Meetings | | % Attendance |

|---|---|---|---|---|

| | | Held | Attended | |

| Delilah Ngala | Chairperson | 4 | 4 | 100% |

| Peter Gibendi | Member | 1 | 1 | 100% |

| Conrad Thorpe | Member | 4 | 4 | 100% |

| Beatrice Nyamoita | Member | 4 | 3 | 75% |

| Solomon Kitungu | Member | 4 | 1 | 25% |

| Darius Mobe | Member | 2 | 1 | 50% |

| Lydia Yator | Member | 3 | 3 | 100% |

| Oscar Eredi | Member | 4 | 4 | 100% |

| Darius Mobe | Member | 2 | 1 | 50% |

| Alice Mwaisaka | Member | 1 | 1 | 100% |

| Director | | Meetings | | % Attendance |

|---|---|---|---|---|

| | | Held | Attended | |

| Delilah Ngala | Chairperson | 5 | 5 | 100% |

| Mary Ngari | Member | 5 | 5 | 100% |

| Lydia Yator | Member | 4 | 4 | 100% |

| Festus King’ori | Member | 5 | 3 | 60% |

| Solomon Kitungu | Member | 1 | 1 | 100% |

| Oscar Eredi | Member | 5 | 4 | 80% |

| Beatrice Nyamoita | Member | 1 | 1 | 100% |

| Peter Muracia | Member | 1 | 1 | 100% |

| Lilian Kamau | Secretary | 5 | 5 | 100% |

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Statement of corporate governance (continued) Board and Committee Evaluation results; Term Raw % Name Position Start End Score Score Gen. (Rtd) Joseph R E Kibwana Chairman 06/06/2018 05/06/2021 4.6389 92.78% Conrad Thorpe Member 06/06/2018 05/06/2021 4.4154 88.31% Mary Ngari Member 06/06/2018 05/06/2021 4.4092 88.18% Delilah Ngala Member 08/02/2019 07/02/2022 4.3297 86.59% Festus King’ori Alt. Member - - 4.4836 89.67% Beatrice Nyamoita Alt. Member - - 4.4885 89.77% David Njogu Alt. Member - - 3.9816 79.63% Oscar Mmene Eredi Alt. Member - - 4.2738 85.48% Board Trainings The trainings conducted for the Directors and their attendance is as below; Board Training session in undergoing interviewing Audit & Risk Committee induction workshop held skills training & related Issues held on 22nd on 24th & 25th May 2021 at the Vipingo Ridge Golf February 2021 at Crowne Plaza Hotel, Upperhill, & Resort, Kilifi Nairobi Gen (Rtd) Joseph R Kibwana Delilah Ngala Mary Ngari Mary Ngari Lydia Yator Lydia Yator Festus King’ori Oscar Eredi Darius Mobe Conrad Thorpe Delilah Ngala Nilfat Ali Beatrice Nyamoita Process of appointment and removal of Removal of directors is guided by the provisions of directors, roles and functions of the Board the State Corporations Act. The power to appoint also The KPA Act vests the mandate to appoint members of envisages the inherent power to remove or fire, and the Board in the Cabinet Secretary Ministry of Transport. as long the power to appoint is vested in the Cabinet The KPA Board of Directors comprises 11 members Secretary, members of the Board can only recommend out which Seven (7) are independent Directors, well removal. above the 1/3 requirement. The Managing Director of The Independent directors are not in the service of KPA is also a member of the Board in tandem with the the National or County Governments and do not hold Mwongozo Code of Governance and the KPA Act. The positions in more than two state corporations. composition of the Board has met the parameters of Article 27 of the Constitution of Kenya 2010 regarding equal opportunities. Out of the 7 independent directors, three (3) are female. It has also captured a diversity of skills and competencies required for the achievement of the organization’s long-term goals, as evidenced by the Director’s data submitted herein. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 37

| | | Term | | Raw | % |

|---|---|---|---|---|---|

| Name | Position | Start | End | Score | Score |

| Gen. (Rtd) Joseph R E Kibwana | Chairman | 06/06/2018 | 05/06/2021 | 4.6389 | 92.78% |

| Conrad Thorpe | Member | 06/06/2018 | 05/06/2021 | 4.4154 | 88.31% |

| Mary Ngari | Member | 06/06/2018 | 05/06/2021 | 4.4092 | 88.18% |

| Delilah Ngala | Member | 08/02/2019 | 07/02/2022 | 4.3297 | 86.59% |

| Festus King’ori | Alt. Member | - | - | 4.4836 | 89.67% |

| Beatrice Nyamoita | Alt. Member | - | - | 4.4885 | 89.77% |

| David Njogu | Alt. Member | - | - | 3.9816 | 79.63% |

| Oscar Mmene Eredi | Alt. Member | - | - | 4.2738 | 85.48% |

| Board Training session in undergoing interviewing skills training & related Issues held on 22nd February 2021 at Crowne Plaza Hotel, Upperhill, Nairobi | Audit & Risk Committee induction workshop held on 24th & 25th May 2021 at the Vipingo Ridge Golf & Resort, Kilifi |

|---|---|

| Gen (Rtd) Joseph R Kibwana | Delilah Ngala |

| Mary Ngari | Mary Ngari |

| Lydia Yator | Lydia Yator |

| Festus King’ori | Oscar Eredi |

| Darius Mobe | |

| Conrad Thorpe | |

| Delilah Ngala | |

| Nilfat Ali | |

| Beatrice Nyamoita | |

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Statement of corporate governance (continued) Management Committees Ethics and Integrity Statement A significant factor in the Authority’s success is the KPA has adopted risk-based approach in mitigating strength of the Management team. Members of the against integrity and unethical issues. The approach Management team bring together vital leadership skills is consistent with ISO-37001, which the Authority is and extensive maritime trade experience from both local working towards and will enhance good corporate and international exposure. To harness their strength, governance as per the Authority’s strategic plan. the Managing Director has established the Executive Consequently, during the year, several measures were Management Committee (EXCOM). This committee employed to inculcate ethical climate such as, ethics meets regularly and at least monthly to discuss strategy and integrity risk assessment, intelligence based formulation and implementation, policy matters and advisory opinion, ethics and integrity risk-based training financial performance. and role-based training to meet specific risks of job It is also responsible for ensuring compliance with the cadres. Additionally, the following ethics and integrity regulatory framework and guidelines and adherence risk-based policies were approved by the Board: to the Authority’s policies and procedures. The • Procurement and asset disposal anti-fraud committee also serves as the link between the board policy, and management. The Managing Director has also established other standing committees to execute • Conflict of Interest policy and various mandates and to support the EXCOM in • Public Complaint Policy. realization of its objectives. Some of the committees The Authority continues to comply with performance include Information Technology Steering Committee, contracting (PC) indicators by coordinating corruption Port Productivity Committee, Change Management prevention, mainstreaming of national values and Committee, Corporate Training committee, Tariff management of public complaints and access to Committee among others. information as illustrated below; Ethics and integrity programs Activities carried out in the year were under the following thematic areas. i. Facilitated departmental corruption prevention committees’ meetings Including Corporate corruption prevention committee ii. Coordinated development of Corruption Risk Assessment register as per EACC guidelines with focus on the following areas. a. Core mandate: cargo handling- ship operations b. Information communication technology c. Payroll management d. Procurement and financial management 38 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Statement of corporate governance (continued) Training and sensitization Investigation reports and advisories Staff trainings and sensitizations were conducted as A total of 41 reports touching on unethical issues and part of implementation of risk mitigation measures other complaints against 18 report for the previous year which included; were received by the Ethics and Integrity department, • Board and senior management training twenty-five (25) advisory opinions were issued to the management as a precautionary measure against • Head of departments were trained. occurrence of some of the unethical issues in the • Staff sensitization program at ICDN where Organization. staff were sensitized and newly employed staff at Lamu port were sensitized on ethics and Accrued benefits integrity principles. Adoption of ethics and integrity risk-based approach during the year led to improved customer satisfaction • Staff Sensitization which targeted the waivers which is evidenced by compliments from clients and committees and commercial staff was general safeguard to risks that may injure corporate conducted. image and loss of revenue. Capacity building on promotion of good The Authority also has other policies in place in the governance fight against corruption, namely. During the period, 27 new Integrity Assurance Officers • The Anti-Corruption Policy (IAO) based in ICDN were trained to enhance efficiency • The Whistle-Blowing Policy and in carrying out ethics and integrity activities at the ICD. Additionally, the 27 IAOs were also trained on public • The Code of Ethics and Conduct complaints management and National values and Additionally, unethical corrupt practices are reported principles of governance. through [email protected] Strengthening business process integrity Controls Generally, the following milestones have been covered in strengthening integrity of our business processes. a. Ethics and Integrity risk assessment for ICDN b. Ethics and Integrity risk assessment for commercial branch, security and procurement and supplies services and management accounting were conducted. c. Revised integrity pact form for procurement adhoc committees KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 39

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The year in review Throughput (MT) 36,054 32,656 33,621 30,702 28,963 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 Container Traffic (TEUs) in ‘000 2,000 1,376 1,384 1,459 1,500 1,148 1,221 1,000 500 0 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 NO OF VESSEL CALLS 1,696 1,675 1,661 1,609 1,512 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 PBT (KSHS MILLION) 13,886 13,818 10,628 10,308 8,178 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 40 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Management discussion and analysis on port performance 1.0 Introduction Management wishes to present an analysis of the Authority’s financial performance for the period ending 30th June 2021. 1.1 End-Year Performance Overview Below is a summary of the performance as at 30th June 2021 on throughput, revenue, expenditure and profit achievements Summary of the actual performance on throughput, revenue, expenditure, and profit Actual Vs Actual Vs. Actual Budget Budget Actual Actual July-June July-June July-June % 2020/21 2020/21 % Variance 2019/20 Variance Throughput (MT ‘Thousand) 36,054 35,770 1% 33,621 7% Total Revenue (Kshs ‘M’) 53,520 53,150 1% 50,164 7% Total Cost (Kshs ‘M’) 39,702 44,296 -10% 41,986 -5% Profit Before Tax (Kshs ‘M’) 13,818 8,854 56% 8,178 69% Five-year Profit performance Overview The profit for the year of Kshs. 13,818 million was above the final budget profit of Kshs. 8,854 million by Kshs. 4,964 million or 56%. The profit recorded was also higher than last financial year’s profit of Kshs. 8,178 million by Kshs. 5,640 million or 69%. The profit increased in tandem with higher economic activities following easing of covid-19 restrictions. The growth was mainly in construction sector which led to increased importation of clinker and iron ore.In addition, the overall expenditure decreased driven by deferred or cancelled activities due to Covid-19. Also, overtime capping has led to a favourable outcome. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 41

| | Actual | Budget | Actual Vs Budget | Actual | Actual Vs. Actual |

|---|---|---|---|---|---|

| | July-June 2020/21 | July-June 2020/21 | % Variance | July-June 2019/20 | % Variance |

| Throughput (MT ‘Thousand) | 36,054 | 35,770 | 1% | 33,621 | 7% |

| Total Revenue (Kshs ‘M’) | 53,520 | 53,150 | 1% | 50,164 | 7% |

| Total Cost (Kshs ‘M’) | 39,702 | 44,296 | -10% | 41,986 | -5% |

| Profit Before Tax (Kshs ‘M’) | 13,818 | 8,854 | 56% | 8,178 | 69% |

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Management discussion and analysis on port performance (continued) 2.0 Throughput Overview The total revenue of Kshs 53,520 Million is made up During the year, the Port handled total throughput of Kshs 52,130 Million, Kshs 720 Million, Kshs 168 of 36.05 million tons representing a growth of 2.43 Million and Kshs 502 Million representing operating, million tons or 7.2% when compared to 33.62 million non-operating, finance incomes and other gains tons handled in 2019/20. It is important to note that all respectively. The performance was slightly above the categories of Cargo recorded growth with conventional budgeted figure of Kshs 53,150 million by Kshs 370 cargo being the highest segment, growing by 0.72 million or 0.70%. million tons or 36.8%. Liquid Bulk, Dry Bulk and Operating revenue improved to 52,130 million Container segments also posted positive increases of compared to Kshs.48,162 registered during the 8.5%, 4.6% and 4.2% respectively. Total throughput previous year, a growth of Kshs. 3,968 million or 8.2%, surpassed the set target of 35.77 million tons by 0.28 this correlates with the throughput increase of 7.2% million tons or 0.8%. compared to FY 2019/2020. The increase in operating Non-Containerised cargo recorded the highest volume revenue is attributed to throughput growth of 36.05 increase at 1.79 million DWTs or 9.7%. Containerised million tons compared to 33.62 million tons registered cargo increased to 15.69 million DWTs compared to in the corresponding period. 15.05 million DWTs in the previous year’s, an increase The revenue generated from Container traffic increased of 0.64 million DWTs or 4.2% percentage. The compared to the corresponding period and budget. increase was on imports, transhipment and restows During the period, container traffic recorded 1.45 cargo handled in the period. million TEUs against 1.38 million TEUs handled in FY Performance overview by broad categories is 2019/2020 reflecting a positive performance by 0.7 summarized below: million TEUs or 5%. Imports: recorded an increase from 26.93 million Conventional cargo throughput for the period under DWTs in the period 2019/2020, to 29.02 million review was 20.36 million DWTs. This was a growth from DWTs in the current period representing an increase of last financial year’s throughput of 18.57 million DWTs 2.09 million DWTs or 7.8%. This was mainly driven by by 1.79 million DWTs or 9.6%. This is demonstrated by higher imports of clinker and iron ore. the higher revenues recorded during the current period compared to last year same period. The growth was Exports: recorded an increase from 4.28 million mainly in clinker and iron ore imports. DWTs in the period 2019/2020 to 4.44 million DWTs recorded in the current period, representing a volume Improved efficiency at the ICD that has led to reduced increase of 0.16 million DWTs or 3.7%. revenue from storage and re-marshalling. Transhipments: recorded an increase in volume posting Marine revenue performed above the budget resulting 2.48 million DWTs of cargo in the period compared to favourable variance of Kshs 186 million or 4%. to 2.31 million DWTs handled in the corresponding Marine revenue performance was also better than period in 2019/2020 reflecting an increase by 0.17 last year This is driven by higher income from higher million DWTs or 7.4%. number of chargeable vessels handled. A total number of 1,675 ships were handled in the year compared to 3.0 Revenue Overview 1,661 ships recorded in same period last year. 3.1 Revenue Performance Revenue performance during the year recorded Kshs 53,520 million compared to Kshs 50,164 million recorded last financial year. This reflected an increase of Kshs 3,356 million or 6.69%. 42 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Management discussion and analysis on port performance (continued) NO. OF VESSELS VESSEL TYPE FY 2020/2021 FY 2019/2020 Barge 16 29 Bulk 326 296 Car Carrier 139 152 Container 560 538 Fishing 86 81 Gen Cargo 117 161 Passenger 2 2 Roro 41 37 Tanker 221 201 Tug 30 47 Naval 8 18 LPG 42 46 Landing Craft 62 37 Others 25 16 TOTAL 1,675 1,661 Revenue earned from finance income during the period had unfavourable variance. The decrease was mainly caused by drop in bank interest earnings, which decreased to Kshs 168 million compared to Kshs 1,310 million in FY 2019/2020. In FY2019/2020, the National Treasury directed the Authority to remit Kshs. 18 billion to the National Exchequer as Special Dividends. At the close of the year the Authority had remitted the balance of Kshs 4.95 Billion (2019/2020;Kshs 13.05 Billion) which decreased the bank interest earnings. The favorable variance under other gains was mainly due to the weakening of the Kenya shillings and the realized forex. 4.0 Total Expenditure Kshs 39,703 million 4.1 Expenditure Performance Overview Total Expenditure recorded during the period under Expenditure on Establishment expenses was below review was Kshs 39,703 million. The expenditure the budget resulting to a favourable variance. The consists of Kshs 39,320 Million, Kshs 139 Million and favourable variance was mainly from overtime. The Kshs 243 Million representing total operating expenses, total overtime expenditure during the period was Kshs finance cost and impairment losses respectively. 1,312 million against a budget of Kshs 1,725 million. It was also less than last financial year expenditure of The performance was below the final budget figure of Kshs 2,442 million by Kshs 1,130 million or 46.27%. Kshs 44,296 million resulting to a favourable variance of Kshs 4,594 million or 10.37%. It was also less than The overall expenditure on operating expenses last year’s expenditure of Kshs 41,986 million by Kshs decreased and was also below the budget. The 2,283 million or 5.44%. decrease is mainly driven by management of repairs expenses. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 43

| | NO. OF VESSELS | |

|---|---|---|

| VESSEL TYPE | FY 2020/2021 | FY 2019/2020 |

| Barge | 16 | 29 |

| Bulk | 326 | 296 |

| Car Carrier | 139 | 152 |

| Container | 560 | 538 |

| Fishing | 86 | 81 |

| Gen Cargo | 117 | 161 |

| Passenger | 2 | 2 |

| Roro | 41 | 37 |

| Tanker | 221 | 201 |

| Tug | 30 | 47 |

| Naval | 8 | 18 |

| LPG | 42 | 46 |

| Landing Craft | 62 | 37 |

| Others | 25 | 16 |

| TOTAL | 1,675 | 1,661 |

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Management discussion and analysis on port performance (continued) 5-year review of Statement of Profit or Loss 2020/2021 2019/2020 2018/2019 2017/2018 2016/2017 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Operating Revenue 52,130,085 48,161,579 52,758,959 42,738,520 39,603,677 Other Incomes 720,475 692,047 498,843 891,023 593,624 Total Revenues 52,850,560 48,853,626 53,257,802 43,629,543 40,197,301 Less Expenses: Administrative Expenses (4,429,215) (3,995,660) (4,044,431) (3,450,148) (2,924,092) Establishment Expenses (17,906,332) (19,520,491) (19,992,244) (17,789,138) (16,673,130) Other Operating Expenses (5,284,137) (6,852,267) (5,976,959) (4,899,622) (3,593,881) Depreciation &Amortization (11,700,460) (11,043,683) (10,609,168) (7,658,763) (7,499,056) Total Operating Expenses (39,320,144) (41,412,101) (40,622,802) (33,797,671) (30,690,159) Operating Profit 13,530,416 7,441,525 12,635,000 9,831,872 9,507,142 Finance Income 167,636 1,310,374 2,187,175 1,728,950 1,247,301 Finance Cost (139,391) (135,164) (166,309) (170,624) (142,237) Impairment Losses (243,118) (218,888) (646,129) (1,037,395) (111,913) Other Gains/(Losses) 502,277 (219,739) (124,232) (44,324) 127,949 Profit Before Tax 13,817,820 8,178,108 13,885,505 10,308,479 10,628,242 Tax Charge (5,978,260) (4,473,012) (4,137,870) (3,426,742) (3,928,448) Profit After Taxation 7,839,560 3,705,096 9,747,635 6,881,737 6,699,794 5.0 Financial Position Kshs 304,216 million 5.2.2 Cash & Cash Equivalents Total assets grew from Kshs 294,769 million in FY Cash in bank & at hand amounted to Kshs 2,460 million 2019/2020 to Kshs 304,216 million in FY 2020/2021 at the close of the reporting FY, down from Kshs 3,003 translating to 3.20% increase occasioned by additions/ million recorded last FY. A total of Kshs 13,950 million capitalisation of new assets. was remitted to Treasury in FY2019/20. In the reporting financial year, Kshs 4,950 million was remitted. 5.1 Non-Current Assets Non-current assets amounted to Kshs 280,791 million 5.3 Current Liabilities in the reporting period, up from Kshs 270,337 million The balance as at the end of the current period was reported last FY 2019/2020. The increase of 3.87% is Kshs 17,147 million down from Kshs 21,080 million attributed to additions of new assets. recorded last year. The drop was mainly driven by payment of special dividend to the Treasury. 5.2 Current Assets Current assets stood at Kshs 23,425 million compared 5.4 Borrowings to Kshs 24,433 million recorded last financial year, a The JICA loan for the 1st phase of the 2nd Container 4.1% decrease. Terminal stands at Kshs 22,661 million as at 30th June, 2021 with a total of Kshs 456 million being paid during 5.2.1 Receivables and Prepayments the year. The current portion for FY 2021/2022 is Receivables were Kshs 19,881 million as at close equivalent to Kshs 1,259 million. of FY2020/2021, compared to Kshs 17,378 million recorded last FY. This is mainly driven by advances to contractors. 44 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 5-year review of Statement of Profit or Loss | | | | | |

|---|---|---|---|---|---|

| | 2020/2021 | 2019/2020 | 2018/2019 | 2017/2018 | 2016/2017 |

| | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 |

| Operating Revenue | 52,130,085 | 48,161,579 | 52,758,959 | 42,738,520 | 39,603,677 |

| Other Incomes | 720,475 | 692,047 | 498,843 | 891,023 | 593,624 |

| Total Revenues | 52,850,560 | 48,853,626 | 53,257,802 | 43,629,543 | 40,197,301 |

| Less Expenses: | | | | | |

| Administrative Expenses | (4,429,215) | (3,995,660) | (4,044,431) | (3,450,148) | (2,924,092) |

| Establishment Expenses | (17,906,332) | (19,520,491) | (19,992,244) | (17,789,138) | (16,673,130) |

| Other Operating Expenses | (5,284,137) | (6,852,267) | (5,976,959) | (4,899,622) | (3,593,881) |

| Depreciation &Amortization | (11,700,460) | (11,043,683) | (10,609,168) | (7,658,763) | (7,499,056) |

| Total Operating Expenses | (39,320,144) | (41,412,101) | (40,622,802) | (33,797,671) | (30,690,159) |

| Operating Profit | 13,530,416 | 7,441,525 | 12,635,000 | 9,831,872 | 9,507,142 |

| Finance Income | 167,636 | 1,310,374 | 2,187,175 | 1,728,950 | 1,247,301 |

| Finance Cost | (139,391) | (135,164) | (166,309) | (170,624) | (142,237) |

| Impairment Losses | (243,118) | (218,888) | (646,129) | (1,037,395) | (111,913) |

| Other Gains/(Losses) | 502,277 | (219,739) | (124,232) | (44,324) | 127,949 |

| Profit Before Tax | 13,817,820 | 8,178,108 | 13,885,505 | 10,308,479 | 10,628,242 |

| Tax Charge | (5,978,260) | (4,473,012) | (4,137,870) | (3,426,742) | (3,928,448) |

| Profit After Taxation | 7,839,560 | 3,705,096 | 9,747,635 | 6,881,737 | 6,699,794 |

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Management discussion and analysis on port performance (continued) 5.4 Borrowings (continued) 5.5 Dividends Payment to National Treasury. On 15 April 2020, the G20 together with the Paris club The Authority was directed to remit to the National Treasury announced a Debt Service Suspension Initiative (DSSI) Kshs 18 billion in Fy2019/2020. A total of Kshs 13.05 in order to assist developing countries, tackle Covid 19. billion was remitted to GoK in Fy2019/2020 with the Following GoK application to the Paris club and in line with balance of Kshs 4.95 billion remitted in the reporting FY DSSI, JICA temporary suspended the obligation from 1st 2020/2021. Normal dividend of 2018/2019 and 2019/20 January 2021 to 31st December 2021 and has not issued totalling to Kshs 1.009 billion was still outstanding at the an invoice for the May 2021 instalment. The Authority is close of the year. The proposed dividend for the year awaiting conclusion of the exchange of notes between ended 2020/2021 is Kshs 587.9 million. Owing to the JICA and GoK to release the May instalment equivalent to huge commitments the Authority is facing especially on Kshs 429 million. the Lamu Port Project and the recent placement of Ferry Services under Kenya Ports Authority. Management is The JICA loan for the 2nd phase of the 2nd Container pursuing waiver of the normal dividends by the NT so that Terminal opened with Kshs 16,336 million on 1st July, the same is utilised towards Lamu Port operationalisation 2020 and closed with Kshs 18,518 million as at 30th June, and other urgent commitments. 2021 disbursements equivalent to Kshs 2,643 million contributed to the increase. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 45

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Management discussion and analysis on port performance (continued) 5-year review of Statement of Financial Position 2020/2021 2019/2020 2018/2019 2017/2018 2016/2017 Non-Current Assets: Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Property Plant and Equipment 278,119,616 267,063,658 241,554,138 144,614,772 133,409,067 Assets held for Sale 0 400 11,618 400 1,224 Intangible Assets 987,687 1,205,422 1,151,296 675,383 487,133 Leased Property 648,215 671,246 717,063 805,819 772,292 Long Term Investment 1,035,690 1,396,168 1,748,887 3,244,997 3,973,618 Retirement Benefit Asset 0 0 0 0 2,980,174 Total Non-Current Assets 280,791,208 270,336,894 245,183,002 149,341,371 141,623,508 Current Assets: Inventories 443,609 495,536 404,813 407,965 410,591 Receivables & Prepayments 19,881,232 17,377,585 15,946,216 14,500,357 8,848,612 Tax paid in advance 265,685 2,388,639 0 873,216 0 Short term deposits 374,054 1,167,706 25,099,818 17,988,504 14,928,395 Bank & Cash balances 2,459,942 3,003,068 859,114 788,363 693,457 Total Current Assets 23,424,522 24,432,534 42,309,961 34,558,405 24,881,055 TOTAL ASSETS 304,215,730 294,769,428 287,492,963 183,899,776 166,504,563 Capital and Reserves: Revaluation Reserves 93,784,610 103,132,900 111,646,031 39,881,910 43,296,547 General Reserves 97.076,196 80,874,208 90,620,573 78,426,542 73,813,608 Grants 2,015,030 3,468,561 5,318,100 5,044,052 581,153 Total Capital and Reserves 192,875,836 187,475,669 207,584,704 123,352,504 117,691,308 Non-Current Liabilities: GOK Project Funds 43,386,157 37,386,157 27,386,157 16,212,039 13,041,039 Borrowings 39,919,684 39,070,959 32,729,833 29,493,976 24,166,431 Deferred tax 7,310,667 6,650,083 5,231,256 5,281,505 4,123,829 Retirement benefit obligations 3,576,200 3,106,800 786,300 1,767,500 0 Total Non-Current Liabilities 94,192,708 86,213,999 66,133,546 52,755,020 41,331,299 Current Liabilities: Dividend Payable 0 4,950,000 0 0 0 Borrowings 1,258,939 857,934 820,134 791,109 810,331 Trade and other Payables 15,353,047 14,736,626 11,212,048 7,001,143 6,439,802 Retirement benefit obligations 535,200 535,200 535,200 0 0 Tax Payable 0 0 1,207,331 0 231,823 Total Current Liabilities 17,147,186 21,079,760 13,774,713 7,792,252 7,481,956 TOTAL CAPITAL & LIABILITIES 304,215,730 294,769,428 287,492,963 183,899,776 166,504,563 46 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 5-year review of Statement of Financial Position | | | | | |

|---|---|---|---|---|---|

| | 2020/2021 | 2019/2020 | 2018/2019 | 2017/2018 | 2016/2017 |

| Non-Current Assets: | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 |

| Property Plant and Equipment | 278,119,616 | 267,063,658 | 241,554,138 | 144,614,772 | 133,409,067 |

| Assets held for Sale | 0 | 400 | 11,618 | 400 | 1,224 |

| Intangible Assets | 987,687 | 1,205,422 | 1,151,296 | 675,383 | 487,133 |

| Leased Property | 648,215 | 671,246 | 717,063 | 805,819 | 772,292 |

| Long Term Investment | 1,035,690 | 1,396,168 | 1,748,887 | 3,244,997 | 3,973,618 |

| Retirement Benefit Asset | 0 | 0 | 0 | 0 | 2,980,174 |

| Total Non-Current Assets | 280,791,208 | 270,336,894 | 245,183,002 | 149,341,371 | 141,623,508 |

| Current Assets: | | | | | |

| Inventories | 443,609 | 495,536 | 404,813 | 407,965 | 410,591 |

| Receivables & Prepayments | 19,881,232 | 17,377,585 | 15,946,216 | 14,500,357 | 8,848,612 |

| Tax paid in advance | 265,685 | 2,388,639 | 0 | 873,216 | 0 |

| Short term deposits | 374,054 | 1,167,706 | 25,099,818 | 17,988,504 | 14,928,395 |

| Bank & Cash balances | 2,459,942 | 3,003,068 | 859,114 | 788,363 | 693,457 |

| Total Current Assets | 23,424,522 | 24,432,534 | 42,309,961 | 34,558,405 | 24,881,055 |

| TOTAL ASSETS | 304,215,730 | 294,769,428 | 287,492,963 | 183,899,776 | 166,504,563 |

| Capital and Reserves: | | | | | |

| Revaluation Reserves | 93,784,610 | 103,132,900 | 111,646,031 | 39,881,910 | 43,296,547 |

| General Reserves | 97.076,196 | 80,874,208 | 90,620,573 | 78,426,542 | 73,813,608 |

| Grants | 2,015,030 | 3,468,561 | 5,318,100 | 5,044,052 | 581,153 |

| Total Capital and Reserves | 192,875,836 | 187,475,669 | 207,584,704 | 123,352,504 | 117,691,308 |

| Non-Current Liabilities: | | | | | |

| GOK Project Funds | 43,386,157 | 37,386,157 | 27,386,157 | 16,212,039 | 13,041,039 |

| Borrowings | 39,919,684 | 39,070,959 | 32,729,833 | 29,493,976 | 24,166,431 |

| Deferred tax | 7,310,667 | 6,650,083 | 5,231,256 | 5,281,505 | 4,123,829 |

| Retirement benefit obligations | 3,576,200 | 3,106,800 | 786,300 | 1,767,500 | 0 |

| Total Non-Current Liabilities | 94,192,708 | 86,213,999 | 66,133,546 | 52,755,020 | 41,331,299 |

| Current Liabilities: | | | | | |

| Dividend Payable | 0 | 4,950,000 | 0 | 0 | 0 |

| Borrowings | 1,258,939 | 857,934 | 820,134 | 791,109 | 810,331 |

| Trade and other Payables | 15,353,047 | 14,736,626 | 11,212,048 | 7,001,143 | 6,439,802 |

| Retirement benefit obligations | 535,200 | 535,200 | 535,200 | 0 | 0 |

| Tax Payable | 0 | 0 | 1,207,331 | 0 | 231,823 |

| Total Current Liabilities | 17,147,186 | 21,079,760 | 13,774,713 | 7,792,252 | 7,481,956 |

| TOTAL CAPITAL & LIABILITIES | 304,215,730 | 294,769,428 | 287,492,963 | 183,899,776 | 166,504,563 |

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Environmental and sustainability reporting The Authority exists to transform lives. This is our The port of Lamu is envisaged to have a total of 23 purpose; the driving force behind everything we do as modern berths with a quay length of 400metres per Strategic Plan 2018-2022 implementation matrix. each and a depth of minus 17.5metres capable of It’s what guides us to deliver our strategy, putting the accommodating Panamax and new Panamax vessels customer/citizen first, delivering relevant services, and with a capacity of over 10,000 TEUs. operational excellence. Phase one of the project comprises three berths with • In fulfilling the Mwongozo code’s sustainability the first already operational and the remaining two goals & strategy, the Board; expected to be ready by October this year. • Integrated sustainability into the organization’s Phase two will have 16 berths; three bulk, three strategy and management practices container, six general cargo, one liquid bulk, one coal, • Focused on the future sustainability of the one LNG and one product oil. organization Final phase of Lamu port will see the construction of • Adopted a holistic approach to economic, four berths comprising one container and three general social and environmental issues in their core cargo berths. business strategy Accompanied by several Cabinet Secretaries, • Considered in their decision making, the Governors and Senior Government Officials, the Head impact of their organization’s operations on the of State witnessed the berthing of Lamu Port’s maiden community and the environment ship MV CAP Carmel. • Worked closely with management to ensure long-term goals are well formulated and subsequently met • Focused on long-term talent development • Ensured continuous innovation of its processes, products and services Launch of Port of Lamu The Port of Lamu roared to life with the operationalization of the first berth, presided over by His Excellency President Uhuru Kenyatta. The 310 billion port marks a major milestone as it becomes the second commercial port in Kenya which is expected to transform the shipping and maritime industry in Africa. The Port received two container vessels on the launch date with MV Cap Carmel making history as the first vessel to call the modern facility. She was followed by MV Seago Bremerhavel. As a critical pillar of the Lamu Port-South Sudan- Ethiopia Transport (LAPSSET) corridor project, Lamu port will connect Kenya to South Sudan and Ethiopia and is also expected to link northern Kenya to the Middle Belt of Africa which runs from Dakar, Senegal in the west to Lamu in the east. As the port begins operations, Kenya Ports Authority in conjunction with Kenya Revenue Authority announced a promotional tariff to encourage the use of the facility by customers KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 47

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Environmental and sustainability reporting (continued) Below is an outline of other activities that promote Health and Safety Management System (OHSMS) sustainability. based on ISO 45001:2018 standard. The two systems (EMS & OHSMS) are due for certification in December

1. Quality Management System 2021. Over the years of ISO 9001 Quality Management System (QMS) certification, the Authority has 2. Enterprise Risk Management undergone numerous surveillance and internal audits Kenya Ports Authority operates a single risk framework that have ascertained its continued compliance to manage all business risks. The framework is based to international quality standards and enhanced on ISO 31000:2018 International Risk Management service delivery and customer satisfaction. Kenya Standard and includes Committee of Control Ports Authority attained certification for her Quality Organizations control activities. This ensures our Management System (QMS) to ISO 9001:2008 in strategic and operational risks are identified, managed June 2009. The Authority’s QMS was recertified in and reported in a consistent way. March 2012 and May 2015. The revision to the ISO Our Risk Management Framework is evolving as we 9001 standard in 2015, necessitated the KPA QMS continually seek to improve and enhance our risk transition and was certified to the new standard ISO management processes and designed to be responsive 9001:2015 in May 2018. The Authority is now on its to the ever-changing environments in which we operate. 5th cycle of the QMS certification having successful The Risk landscape has for instance been altered with completed recertification in May 2021. emergent of COVID-19 Pandemic. The success of the Quality Management System has The Authority enhanced its responsiveness to the led KPA to have in its strategic plan the initiative to uncertainties by having in place contingencies implement a number of other ISO based Management and business plans as a critical service provider in Systems. These include; the region. This approach drives risk management • Information Security Management System according to business and strategic objectives, based on ISO 27001:2013; stakeholders’ needs, our desired risk culture, emerging • Environmental Management System based on risks and integrated control assurance aspirations as ISO 14001:2015; per Treasury’s guidelines and the Mwongozo code of Governance. • Occupational Health and Safety Management System based ISO 45001:2018 Identifying our Strategic risks Information Security Management System based We identified the strategic risks that may impact on ISO 27001:2013; achievement of key business objectives in line with our Framework. This represents an assessment of The standards are at various stages of implementation; overarching risks which provides the Risk Management however the implementation of an Information Committee and Board insight on the key risks facing Management System is at a more advanced stage. the Authority to enable informed risk-based decision- The standard is designed to help KPA to enhance the making. A robust enterprise risk management process Confidentiality controls on its information, improve the supports the identification and mitigation of these key Accuracy and correctness of information we share risks and exploitation of opportunities. internally and to our external stakeholders and also ensure that relevant information is available to relevant Disruption of the macro-economic landscape by personnel when required.KPA is due for recertification COVID-19 has influenced financial and business audit for ISO 27001 ISMS in December 2021. resilience risks and contingencies that had to be made. The launching of the Port of Lamu, the Inland Depot in Environment Management System and Naivasha and the collaboration under the umbrella of Occupation Health and Safety Management the KTLN, portend opportunities for growth, improved System customer experience and our competitiveness in Kenya Ports Authority has also been implementing promotion and facilitation of regional trade. We continue an Environmental Management System (EMS) based to be committed to robust risk management practices on ISO 14001:2015 standard and an Occupational as an integral part of good corporate governance. 48 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) Top business risks The heat map below depicts residual risks after implementation of the mitigating controls. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 49 tcapmI Critical 5 High 4 Moderate 3 Low 2 Minor 1 LOW 1 2 3 4 5 KEY MEDIUM Rare Unlikely Possible Likely Certain HIGH Likelihood/Probability Business Continuity and Resilience Rating: HIGH Strategic Operational Planning (BCP) Risk Category Risk Definition and The Authority is a critical service provider and is required to maintain uninterrupted Context services. KPA operates in a unique environment that calls for adequate planning and engagement with other stakeholders to ensure efficient and effective evacuation of cargo to the customers. Mitigating controls Conceptualized and updated Business Continuity and Technical Resilience Plans (BCP) clearly articulating on how to keep business running in uncertain environments. Rolled out measures on disaster preparedness including a review of critical processes Continued update of the Business Continuity and Disaster recovery preparedness across business units

| tcapmI | Critical | 5 | | | | | |

|---|---|---|---|---|---|---|---|

| | High | 4 | | | | | |

| | Moderate | 3 | | | | | |

| | Low | 2 | | | | | |

| | Minor | 1 | | | | | |

| KEY | LOW | | 1 | 2 | 3 | 4 | 5 |

| | MEDIUM | | Rare | Unlikely | Possible | Likely | Certain |

| | HIGH | | Likelihood/Probability | | | | |

| Business Continuity and Resilience Planning (BCP) | | | Rating: HIGH | Strategic Risk Category | Operational |

|---|---|---|---|---|---|

| Risk Definition and Context | The Authority is a critical service provider and is required to maintain uninterrupted services. KPA operates in a unique environment that calls for adequate planning and engagement with other stakeholders to ensure efficient and effective evacuation of cargo to the customers. | | | | |

| Mitigating controls | | Conceptualized and updated Business Continuity and Technical Resilience Plans (BCP) clearly articulating on how to keep business running in uncertain environments. Rolled out measures on disaster preparedness including a review of critical processes Continued update of the Business Continuity and Disaster recovery preparedness across business units | | | |

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Environmental and sustainability reporting (continued) Information Communication Technology Rating: HIGH Strategic Operational Risks Risk Category Risk Definition and The Authority runs on ICT infrastructure in most processes. External cyber-attacks or Context internal breaches could result in service interruption and/or the breach of confidential data. Mitigating controls Continuous legacy (systems) renewal process to phase out outdated systems and technologies Continuous implementation of systems automation strategies to streamline processes Surveillance and upscaling of our information security infrastructure to avert any attacks (cyber fusion). Continuous awareness and sensitization of staff. Enforced ICT Security Policy including the Disaster Recovery Plan to ensure a secure fall back plan. Real-time onsite and offsite data backup for all Authority systems. Ensured that the anti-malware and anti-virus software is up-to-date and is deployed as required. Limiting Virtual Private Network to staff in critical functions Financial Risks: Slowed Business Rating: HIGH Strategic Strategic/External Growth & Internal Liquidity challenges Risk Category Risk Definition and Context Negative performance in Key Performance Indicators due to disrupted trade routes, blank sailings, fewer vessel calls and reduced customer activity due to reduced purchasing power because of pandemics or other reasons. Liquidity Challenges: Stress on both short-term and long-term capital requirements due to delayed payment and reduction in business volumes would have an impact the Authority’s bottom-line. Mitigating controls Formulated both short and medium-term adjustments to the business model. Re-formulation of working capital requirements to bridge cash flow requirements Rescheduled capital investment related plans and infrastructure projects Adopted the Long-term Planning Framework as encapsulated in the Port Master Plan. Interruption of the Geo- Rating: HIGH Strategic Risk Category Strategic/ Political Supply Chain External Risk Definition and Context There is a possibility of an increase in cargo dwell time leading to congestion in the yards and pressure on storage spaces arising from travel restrictions to and in the neighboring transit markets, curfew and mandatory testing of truck drivers at borders for the transit cargo. Key Actions and Mitigating Continuous customer engagement and communication to stakeholders controls Identified peripheral storage facilities in the ICDN and Naivasha ICD for transit cargo. 50 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Information Communication Technology Risks | | | Rating: HIGH | Strategic Risk Category | Operational |

|---|---|---|---|---|---|

| Risk Definition and Context | The Authority runs on ICT infrastructure in most processes. External cyber-attacks or internal breaches could result in service interruption and/or the breach of confidential data. | | | | |

| Mitigating controls | | Continuous legacy (systems) renewal process to phase out outdated systems and technologies Continuous implementation of systems automation strategies to streamline processes Surveillance and upscaling of our information security infrastructure to avert any attacks (cyber fusion). Continuous awareness and sensitization of staff. Enforced ICT Security Policy including the Disaster Recovery Plan to ensure a secure fall back plan. Real-time onsite and offsite data backup for all Authority systems. Ensured that the anti-malware and anti-virus software is up-to-date and is deployed as required. Limiting Virtual Private Network to staff in critical functions | | | |

| Financial Risks: Slowed Business Growth & Internal Liquidity challenges | | | Rating: HIGH | Strategic Risk Category | Strategic/External |

| Risk Definition and Context | Negative performance in Key Performance Indicators due to disrupted trade routes, blank sailings, fewer vessel calls and reduced customer activity due to reduced purchasing power because of pandemics or other reasons. Liquidity Challenges: Stress on both short-term and long-term capital requirements due to delayed payment and reduction in business volumes would have an impact the Authority’s bottom-line. | | | | |

| Mitigating controls | | Formulated both short and medium-term adjustments to the business model. Re-formulation of working capital requirements to bridge cash flow requirements Rescheduled capital investment related plans and infrastructure projects Adopted the Long-term Planning Framework as encapsulated in the Port Master Plan. | | | |

| Interruption of the Geo- Political Supply Chain | Rating: HIGH | Strategic Risk Category | Strategic/ External |

|---|---|---|---|

| Risk Definition and Context | There is a possibility of an increase in cargo dwell time leading to congestion in the yards and pressure on storage spaces arising from travel restrictions to and in the neighboring transit markets, curfew and mandatory testing of truck drivers at borders for the transit cargo. | | |

| Key Actions and Mitigating controls | Continuous customer engagement and communication to stakeholders Identified peripheral storage facilities in the ICDN and Naivasha ICD for transit cargo. | | |

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Environmental and sustainability reporting (continued) Risk of Non- Rating: HIGH Strategic Risk Category Operational implementation of Capital Programmes Risk Definition and Context Capital Projects that had been earmarked for implementation may be affected due to reallocation of budgets because of the COVID-19 Pandemic. Mitigating controls Continuous alignment of the strategic plan initiatives with the budgeting cycle to utilize internal funding Continuous monitoring and evaluation of the projects’ milestones to inform prioritization of on-going projects to match reduced revenues Continuous validation business cases prior to investment decisions Focusing on to key high priority transformative Programmes/projects People Risks: Inadequate Rating: HIGH Strategic Risk Category Operational Succession Planning Risk Definition and Context To enhance employee productivity and competence by tapping the existing talent establishment, the Authority faces the risk of loss of Organizational knowledge and skills due to lack of an elaborate succession program. Mitigating controls Operationalize the succession planning policy and allied programs Work understudy programs in technical and operations business units Stakeholder and Third- Rating: HIGH Strategic Risk Category Strategic/ Party Risks External Risk Definition and Context The Authority is exposed to third party risks (environmental, operational, reputation financial, and health &safety) as a result of collaboration with other stakeholders and cargo intervention processes. Mitigating controls Continuous structured Stakeholders engagement and collaboration Continuous Corporate Social Investments to make an impact and build confidence in the Society around the Port. Insecurity and Threats Rating: HIGH Strategic Risk Strategic/External of Terrorism Category Risk Definition and Context Cases of increased general insecurity arising from COVID-19 pandemic that has contributed to slowed economic activity and possible terror threats on the Authority’s establishments e.g., at the Port of Lamu. Mitigating controls The Authority has put in place scanners at all Port entry points The Authority has embraced inter- agency approach to security enhancement in our Ports Re-organization of the Rating: HIGH Strategic Risk Strategic/External Authority’s Operating Category Structures Risk Definition and Context Ferry services have been placed under KPA, the Authority has also entered into a collaboration agreement with entities under the Kenya Transport & Logistics Network (KTLN) umbrella to enhance efficiency and effectiveness in passenger movement and cargo evacuation respectively. The restructuring program has the potential to affect efficiency and effective delivery of Port Services Opportunities Implementation plans (people, systems and processes) in the running of the Port and Ferry Services alongside the Operating Entities in the KTLN arrangement. Evaluation of the Assets base, liabilities and staffing needs of the merged entities to assure value add and operational efficiencies. Implementation of a change management program for all staff KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 51

| Risk of Non- implementation of Capital Programmes | Rating: HIGH | Strategic Risk Category | Operational |

|---|---|---|---|

| Risk Definition and Context | Capital Projects that had been earmarked for implementation may be affected due to reallocation of budgets because of the COVID-19 Pandemic. | | |

| Mitigating controls | Continuous alignment of the strategic plan initiatives with the budgeting cycle to utilize internal funding Continuous monitoring and evaluation of the projects’ milestones to inform prioritization of on-going projects to match reduced revenues Continuous validation business cases prior to investment decisions Focusing on to key high priority transformative Programmes/projects | | |

| People Risks: Inadequate Succession Planning | Rating: HIGH | Strategic Risk Category | Operational |

| Risk Definition and Context | To enhance employee productivity and competence by tapping the existing talent establishment, the Authority faces the risk of loss of Organizational knowledge and skills due to lack of an elaborate succession program. | | |

| Mitigating controls | Operationalize the succession planning policy and allied programs Work understudy programs in technical and operations business units | | |

| Stakeholder and Third- Party Risks | Rating: HIGH | Strategic Risk Category | Strategic/ External |

| Risk Definition and Context | The Authority is exposed to third party risks (environmental, operational, reputation financial, and health &safety) as a result of collaboration with other stakeholders and cargo intervention processes. | | |

| Mitigating controls | Continuous structured Stakeholders engagement and collaboration Continuous Corporate Social Investments to make an impact and build confidence in the Society around the Port. | | |

| Insecurity and Threats of Terrorism | Rating: HIGH | Strategic Risk Category | Strategic/External |

|---|---|---|---|

| Risk Definition and Context | Cases of increased general insecurity arising from COVID-19 pandemic that has contributed to slowed economic activity and possible terror threats on the Authority’s establishments e.g., at the Port of Lamu. | | |

| Mitigating controls | The Authority has put in place scanners at all Port entry points The Authority has embraced inter- agency approach to security enhancement in our Ports | | |

| Re-organization of the Authority’s Operating Structures | Rating: HIGH | Strategic Risk Category | Strategic/External |

| Risk Definition and Context | Ferry services have been placed under KPA, the Authority has also entered into a collaboration agreement with entities under the Kenya Transport & Logistics Network (KTLN) umbrella to enhance efficiency and effectiveness in passenger movement and cargo evacuation respectively. The restructuring program has the potential to affect efficiency and effective delivery of Port Services | | |

| Opportunities | Implementation plans (people, systems and processes) in the running of the Port and Ferry Services alongside the Operating Entities in the KTLN arrangement. Evaluation of the Assets base, liabilities and staffing needs of the merged entities to assure value add and operational efficiencies. Implementation of a change management program for all staff | | |

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Environmental and sustainability reporting (continued) Environment & Health and Safety The use of renewable solar energy in some parts of the The Kenya Ports Authority commits to ensuring port and biodiversity restoration activities completed in environmental compliance and integration of the last financial year are part of the Authority’s efforts environmental sustainability in the development and in in implementing the policy. operations. This is in line with our vision of becoming Compliance world class port of choice. This is demonstrated in The Authority’s environmental sustainability activities the Authority’s strategic plan 2018-2022 under the and programmes mostly complies with the National strategic objective of enhancing Risk Management and environmental Law, the Environment Management and Environmental Sustainability. Coordination Act CAP 387 and regulations under the Under this objective, KPA recognizes that Port Act. operations have a direct impact on the environment Similarly, the Authority strives to meet or exceed including carbon emissions and that climate change development partners environmental and social and its negative effects require long term planning and consideration standards such as the JICA, world bank adequate resources hence the need to comply with and EU standards. National and international environmental/maritime laws, regulations, and policy guidelines. To achieve these Environmental and Social Impact Assessment (ESIA) objectives the following initiatives have been proposed: Studies- KPA’s major projects are subjected to a full

• environmental and Social Impact Assessment and • Development of alternative and renewable the Authority complies with the all the provision of the energy sources Environmental Act and regulations with respect to the studies. • Implementation of the green port policy initiatives In FY 2020/2021, the Authority in liaison with development partners undertook social and • Implementation of an integrated waste environmental studies including Resettlement Action management plan Plan for the proposed Dongo Kundu project, Livelihood • Implementation of ISO 14001 recovery plan for the fishermen affected by development • Improvement of the quality of air projects, Environmental Social Impact Assessments for revitalization of Kisumu port and ESIA for proposed Environmental Policy Shimoni fishing port. The Authority has an environmental policy that guides Monitoring- KPA takes seriously implementation and on Environmentally friendly port operations and monitoring of Environmental Management Plans development and gives the way forward on addressing (EMPs) and EIA License Conditions for all ongoing the negative Environmental impact in infrastructure infrastructural projects. Monitoring reports for mega development and port operations. The policy also projects such as the KOT and MPDP are uploaded focusses on the significant reduction of greenhouse monthly in the KPA portal for public and regulatory emissions through adoption of green initiatives and Authorities’ access. projects. The Authority has been implementing the Green Port Policy through several projects with focus Environmental Audits- Statutory environmental audits on green energy, health, sanitation, waste management, were conducted on annual basis and reports submitted restoration of biodiversity and conservation efforts. to NEMA. In the period under review, the audits were conducted in November 2020 and the subsequent Several sanitation-related projects have been reports submitted to NEMA. completed in the form of installation of biodigesters at several locations in the port for the purpose of Stakeholder Engagement- undertaking of stakeholder managing sewage waste in an environmentally mapping and comprehensive engagement for all major sustainable manner. While challenges have been there projects are ongoing. in the maintenance of the systems, improvements and rehabilitation works on the same are currently ongoing. 52 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) Environment & Health and Safety (cont’d) These efforts by the Authority are contributing to the Waste management- Engagement of firms licensed by national tree planting campaign dubbed ‘Panda Miti, NEMA in the management and disposal of solid and Boresha Maisha” which is aimed at mitigating the sewage waste in compliance with waste management current environmental degradation and achieving a Regulations. 10% forest cover by 2022. Disposal Sites: use of approved and licensed disposal Maintenance of Uhuru Garden as part of our corporate sites especially for the disposal hazardous waste. social responsibility in environmental protection and conservation. The Authority maintains the garden on Biodiversity Management behalf of the National Museums of Kenya for the benefit The Authority has been committing resources towards of the public. This was done at a cost about Kshs. 2.5 protection and conservation of both of terrestrial and million during the year under review. marine biodiversity through restoration, maintenance, Regular monitoring of marine biodiversity especially in and rehabilitation of degraded systems. areas where KPA is undertaking marine based projects The following are some of the efforts in respect to to prevent and detect impacts of the projects to the biodiversity management. existing habitats. Planting of trees at Tudor creek where KPA has Pollution from land-based sources has been a long- adopted a site of about 6ha from 2019 to date and a standing challenge especially at berth 14 area where total of 28,000 mangrove trees planted so far. In the discharge of untreated wastewater has been polluting last financial year 10,000 trees were planted the 4th the marine environment. The malfunction of Mombasa quarter of the year. This was done in collaboration of Water Supply and Sanitation Company (MOWASCO) community-based organization who undertake regular Kipevu treatment plant has also exacerbated the monitoring and maintenance of the adopted site with a situation by releasing sewage waste into the ocean 100% survival rate of the planted trees. through the Kipevu storm drain. As part of our efforts to protect the marine biodiversity, the Authority took up the matter with the National Environment Management Authority and MOWASCO was taken to task to repair the plant. The repair works are ongoing. KPA adopted site KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 53

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Environmental and sustainability reporting (continued) Roof top Solar panels at the Cruise ship terminal A multi-Agency joint inspection of the Kipevu sewage treatment plant on June 2nd 2021 Energy Management Retrofitting of all yard Lighting Lanterns with LED ones One of the areas the Authority’s environmental policy and the solar/wind powered security lighting are other focusses on is the use of green/renewable energy energy efficiency projects that are ongoing and solar Power was identified as best alternative renewable energy source for the port. In the last financial year, a 300kW Peak solar power plant with solar water heating systems at the Cruise terminal. This can cover all the power needs for the terminal during the day and the surplus may be in nearby buildings. This is in addition to the existing two Solar Power Plants currently in operation at Kapenguria with a combined capacity of 750kW. 54 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) Waste Management The Authority’s is implementing a waste management strategy that focusses on waste reduction, waste segregation, proper waste storage, collection, transportation, and disposal. The strategy is in line with the requirements and provisions of the Waste management regulations 2006. Some of the waste categories generated in the port and management strategy in place are outlined below. Waste category Management Remarks Stored at designated waste Waste tracking sheets are used to General office waste, garden waste, collection station from where a ensure compliance food waste and sweepings licensed firm collect and transported to the disposal site. Managed through procurement Included in the corporate Scrap- machines, parts, tyres, used disposal process by selling the items procurement and asset disposal plan items through a competitive tendering for the respective year. process Selling to licensed firms through a Waste oil competitive tendering process Managed by private ship contractors. The Authority ensures the contractors The reception facilities for the waste Ship waste/sludge are licensed to handle such waste are outside the port and monitors the removal process to prevent marine pollution. Properly stored and incinerated at A bigger incinerator is currently being Biomedical waste bandari clinic incinerator installed at terminal two Transported to licenced waste Condemned cargo waste disposal facilities mainly in Mombasa for incineration This is managed through the services Sewage waste of licensed sewage waste handler. Removed by the construction Environmental site clearance Construction waste contractors. Part of the tender certificate is issued before payment requirement KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 55

| Waste category | Management | Remarks |

|---|---|---|

| General office waste, garden waste, food waste and sweepings | Stored at designated waste collection station from where a licensed firm collect and transported to the disposal site. | Waste tracking sheets are used to ensure compliance |

| Scrap- machines, parts, tyres, used items | Managed through procurement disposal process by selling the items through a competitive tendering process | Included in the corporate procurement and asset disposal plan for the respective year. |

| Waste oil | Selling to licensed firms through a competitive tendering process | |

| Ship waste/sludge | Managed by private ship contractors. The Authority ensures the contractors are licensed to handle such waste and monitors the removal process to prevent marine pollution. | The reception facilities for the waste are outside the port |

| Biomedical waste | Properly stored and incinerated at bandari clinic incinerator | A bigger incinerator is currently being installed at terminal two |

| Condemned cargo waste | Transported to licenced waste disposal facilities mainly in Mombasa for incineration | |

| Sewage waste | This is managed through the services of licensed sewage waste handler. | |

| Construction waste | Removed by the construction contractors. Part of the tender requirement | Environmental site clearance certificate is issued before payment |

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Environmental and sustainability reporting (continued) Climate Change Initiatives Health Check Campaigns The Environmental policy guides on efforts to reduce The Authority addresses wellness and diseases emissions from ship and other sources. The Authority prevention in various platforms such as: Employee has taken several initiatives in relation to climate change Assistance Program (EAP), Health Talks and Weight • Climate Change Mitigation in the Maritime Management Program (Simply Healthy). Shipping Industry- KPA in Partnership with EAP is a work-based intervention program designed to Kenya Maritime Authority and Jomo Kenyatta assist employees in resolving personal problems that University of Agriculture and Technology may be adversely affecting the employee’s performance. (JKUAT) and Kenya Maritime Authority (KMA) EAPs covers a broad range of issues such as Alcohol, is participating in climate change and emission Drug and Substance Abuse (ADSA), HIV/AIDS, reduction projects undertaken through relationship challenges, financial or legal problems, Maritime Technology Cooperation Centre wellness matters such as Non-Communicable Diseases (MTCC- Africa). (NCDs) and traumatic events like workplace violence. • The Centre which is hosted by JKUAT focusses Medical personnel address the NCDs daily. The on capacity Building intended to enable Authority also carried out bi-annual Health Week developing countries e.g., Africa, to effectively to screen and create awareness for employees, implement energy-efficiency and emissions dependents, and port users. This allows for primary reduction measures. prevention, early detection, and treatment. Despite the • The Centre is currently undertaking a project stringent measures of the Covid-19 pandemic, a total with the objective of estimating emissions from of 434 Health education talks were conducted in the ships calling at the port of Mombasa through year which were distributed into different areas. The the technical assistance of KPA and KMA staff purpose of health education is to positively influence working with the centre on part-time basis. the health behavior of employees and their dependents. • Working with the Ministry and the State A health program dubbed ‘Simply Healthy’ program Department of Transport to institutionalize was rolled out to select employees. The competitive climate change-related functions within the weight reduction program was closely monitored by department and capacity building and KPA has the medical personnel. been part of the team. Through this initiative Health and safety there are ongoing efforts to establish emission data from the maritime industry. The safety branch of the Authority takes the primary role of ensuring compliance to OSHA 2007, which • The construction at the Lamu port has provides regulations to ensure the safety of persons in integrated infrastructure for the provision of the port and safe work environment. shore power to ships. The Authority has also recently commissioned a jetty with shore To achieve this mandate the Safety Branch has put in power infrastructure at Dockyard. The use of place various Programs aimed at: electric power by marine crafts is one of best • Creating safety awareness and sensitization to ways of reducing emissions as guided by the all persons in the port. environmental policy. • Ensuring safe cargo handling including However, there are some areas where the Authority has dangerous cargo. faced challenges especially air pollution because of • Identifying workplace hazards and risks and emissions from the bulk cargo operations. The periodic recommending control measures. Air and water quality monitoring was also affected and were not undertake in the better part of the financial • Compliance with Occupational Health and year. safety (OSH) The following compliance measures have been carried out; 56 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) The Authority’s workplace has been registered in line The Authority has in place Control Measures to prevent with OSHA ACT 2007, Part V, on Registration of accident recurrence and implement recommendation Workplaces from accident investigations all within the set time limits. Annual HSE Audit and inspection of workplace was Measures taken to prevent work-related injuries carried out in the financial period 2020/2021; as Per and ill health OSHA Act 2007; Part II― General Duties, Section 11 1. Inspections of Workplaces to identify unsafe on Safety, and health audits. acts and conditions for the purpose of eradicat- ing hazard elements in work environment Annual Medical Examinations of employees is ongoing on regulations on Health Surveillance as per Medical 2. Investigations of workplace incidents & acci- Examination) Rules, 2005. dents to identify root causes and recommenda- • Risks Assessment of Workplace, Processes, tion of prevention strategies Activities, PART II ― General Duties, 6 (3). 3. Carrying out risk assessments of workplaces, (Duties of Occupiers, OSHA Act 2007). operations, processes, and activities for the pur- poses of identification, evaluation and control • Training, Induction, Awareness Programmes, PART II ― General Duties, (Duties of Occupiers, of health, safety and environmental hazards and OSHA Act 2007). their potential risks at workplaces 4. Carrying out safety training, inductions, aware- • Statutory Inspections of Equipment’s Part VII― ness and monitoring of contractors, Port Users, Machinery Safety (72―Examination and testing employees, to ensure necessary information is of plants) shared to all parties on safe work practices • Safety Committee Meetings Legal Notice 31, 5. Handling of Dangerous & Hazardous Cargo is (Safety and Health Committee Rules 2004). done in line with International Maritime Danger- ous Goods (IMDG) Code and Explosive Act of Accident occurrence Kenya. Two dangerous cargo Classes 1 and 5.1 The Authority has in place a health and safety policy in line with the requirements of the OSHA Act, 2007. The UN1942 are inspected onboard vessels before policy denotes the Authority’s commitment to ensure discharge the safety of persons and that the Port is maintained as 6. Surveys of damaged cargoes to determine the a safe work environment. extent of damages, its relationship with occurred accidents, causative, and preventive measures. Accidents Statistics 620 603 555 496 468 Fatality Personnel Cargo/Machinery 2 17 0 12 3 18 2 14 2 23 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 57

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Environmental and sustainability reporting (continued) Safety Enforcement i. Container Terminal Operations To ensure compliance with port safety rules and ii. Container Terminal Engineering regulations, Safety enforcement exercises are iii. Marine Operations continuously carried out to enforce safe practices in the iv. Marine Engineering port. These are carried out together with Port Security v. Conventional Cargo Operations Officers and Port police. These ongoing activities vi. Conventional Cargo Engineering include: Not all staff in the above departments receive the Monitoring of contractors: This is done periodically incentive. There are approved tiers and designations. during the working time of a contractor to ensure they Plans are underway to operationalize an Annual are working safe. Incentive Scheme for all staff based on individual performance. Port Roads Speed limits: Speed cameras have been installed along port roads and the same are being Performance Appraisal Policy monitored at the security control room and the safety The highlights of the policy are as captured below: - office. Over speeding motorists are flagged, and Employees will be accorded an opportunity to conduct appropriate action taken. a self-appraisal before they are appraised by their Team PPEs compliance: Enforcement PPEs compliance in leader/supervisor. operational areas is ongoing. During the mid-year evaluation discussions (appraisal Traffic Offences: Monitoring of safe road practices by interview) both the Team Leader/supervisor and motorists is a continuous activity. employee will assess and measure progress for the first 6 months against the set performance standards. Performance Management At the beginning of the Performance Management cycle At the end of the year, employee’s overall performance for the year, both management and Unionisable staff will be assessed, and new performance targets set for were trained on improved performance management the next review period. system and guided to develop their scorecards. Employee Skills & Trainings The training and facilitation for development of Cognizant of the fact that employees are the most scorecards was undertaken for staff stationed at the valuable assets, the Authority is committed to training headquarters in Mombasa, ICD Nairobi, ICD Kisumu, and developing all its employees. ICD Naivasha, Lamu Jetty and Kampala liaison office. A total of 80 training programs were conducted for a An improved appraisal system was automated so that total number of 5,108 staff during the financial year. The appraisal is aligned to the improvements made on the training programs fall under the following categories. scorecard template used for performance objective • Onboarding setting. • Technical skills development Training was conducted for 101 staff (Appraisal Support • Soft skills development Teams i.e., Performance and Change Management staff, Administrators and Balanced Scorecard Champions). • Leadership/Managerial Training These teams are expected to offer end user support in • Compliance training the performance appraisal process. • Health, Safety & Security Trainings On rewarding performance, currently, it is six Departments in Operations and Engineering which are • Mandatory programs (certifications) rewarded for performance based on surpassing the set Learning and development plays an important role performance targets under Berth Productivity Incentive in helping the Authority to run efficiently and to be Scheme (BPIS). responsive to changes in the business. 58 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) However, lack of an inhouse training facility coupled • Procurement of a cellphone for bulk SMS to with the COVID-19 containment measures made it staff for purposes of improving the training increasingly difficult to develop employees through nomination process and attendance to various classroom training. It is imperative for the Authority to training programs. adopt blended learning which includes both classroom The performance appraisal process has been training and e-learning. Therefore, the Authority will automated. The system will be used for identifying embark on implementing e-learning solution (system) employee training needs through the mid and end of during the financial year 2021/2022. year employee appraisal based on performance gaps identified. The implementation of the e-learning system will reduce the cost of conducting classroom training, improve the Internship management of employee learning and development, During the year, 43 interns were recruited for a one- provide anytime-anywhere online learning to the staff. year internship program across the Authority effective The subsequent increased reach and access to learning from May 2021. opportunities will enhance cost savings, performance, and productivity improvements. Other efforts towards improvement of employee skills development include:- • Promotion of inhouse training and upskilling of internal training facilitators KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 59

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Environmental and sustainability reporting (continued) ICT Systems During the year, the Authority ICT systems operated in a secure environment and ensured business continuity. Below are the achievements during the year. Key Activities Achievement Procurement of two Internet Service Providers (ISPs) at Port of Mombasa and ICD Nairobi. Implementation of Data Center Interconnect for primary Data center and secondary data center. New ICT systems or upgrades Upgrade of Network Access Switches at Port of Mombasa Implementation of Vehicle Portpass Module – Integration with Nice Label (Pending Training/Go-live). Automated Fuel Management System (AFMS) – Phase 2 (Bowser System Integration). Implementation of OpenDNS solution The solution is a platform for inspecting web traffic by providing first line defense against cyber security threats on the internet. Stops attacks before they launch and correlates live data by analyzing cyber security threats to identify patterns, detect anomalies and create models to uncover threat vectors. Impact of the ICT investment on KPA operations, Automated Fuel Management System (AFMS) stakeholders, and economy Management of fueling of equipment now better, transparent, and controlled. Accountability of payment now enhanced and based on actual fueling data. Increased truck turnaround time to ease cargo evacuation and improve port efficiency in ICD Nairobi Three data centers in place to provide high availability of Robustness of the IT systems to handle the information systems demand of employees, customers, suppliers etc. Two ISPs in place to guarantee uptime of 99% Internet connection KPA is part of the National CIRT receiving latest briefs on cyber KPA preparedness to cyber threat/security; any security threat landscape and how to contain and manage them. cases of leaks or loss of data and how it was Implemented two tiers/layers of security both at the perimeter managed. If not a brief statement to support the and data center. Both layers use Sandbox to contain emerging fact. threats. Automation of Lamu business processes (KWATOS/Finance/ Key achievements and challenges during the Procurement& Plant maintenance) financial year Truck booking System for ICD Nairobi 60 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Key Activities | Achievement |

|---|---|

| New ICT systems or upgrades | Procurement of two Internet Service Providers (ISPs) at Port of Mombasa and ICD Nairobi. |

| | Implementation of Data Center Interconnect for primary Data center and secondary data center. |

| | Upgrade of Network Access Switches at Port of Mombasa |

| | Implementation of Vehicle Portpass Module – Integration with Nice Label (Pending Training/Go-live). Automated Fuel Management System (AFMS) – Phase 2 (Bowser System Integration). |

| Impact of the ICT investment on KPA operations, stakeholders, and economy | Implementation of OpenDNS solution The solution is a platform for inspecting web traffic by providing first line defense against cyber security threats on the internet. Stops attacks before they launch and correlates live data by analyzing cyber security threats to identify patterns, detect anomalies and create models to uncover threat vectors. |

| | Automated Fuel Management System (AFMS) Management of fueling of equipment now better, transparent, and controlled. Accountability of payment now enhanced and based on actual fueling data. |

| | Increased truck turnaround time to ease cargo evacuation and improve port efficiency in ICD Nairobi |

| Robustness of the IT systems to handle the demand of employees, customers, suppliers etc. | Three data centers in place to provide high availability of information systems Two ISPs in place to guarantee uptime of 99% Internet connection |

| KPA preparedness to cyber threat/security; any cases of leaks or loss of data and how it was managed. If not a brief statement to support the fact. | KPA is part of the National CIRT receiving latest briefs on cyber security threat landscape and how to contain and manage them. Implemented two tiers/layers of security both at the perimeter and data center. Both layers use Sandbox to contain emerging threats. |

| Key achievements and challenges during the financial year | Automation of Lamu business processes (KWATOS/Finance/ Procurement& Plant maintenance) |

| | Truck booking System for ICD Nairobi |

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Environmental and sustainability reporting (continued) Stakeholder Engagement CORPORATE SOCIAL RESPONSIBILITY The Authority engaged stakeholders in several forums The Authority is committed to uplifting the standards of as part of business collaborations geared towards living of communities. This commitment is entrenched sustainability. Stakeholders’ engagement is very important in and supported by our CSI Policy. It is rooted in the in the business world for growth and resolving challenges organization’s values, guided by international standards and and finding permanent solutions to make the port efficient. best practices, and driven by its aspiration for excellence in the overall performance of the business. The Authority engaged with stakeholders in Lamu county for the support of initiatives aimed at uplifting the community. The Authority’s CSI plan was founded on three basic The Authority donated Kshs 6 million for the construction principles: of a safe center at Mokowe, that will provide a haven • Kenya Ports Authority was the single largest for women and girls escaping gender-based violence. employer within the Coast Province and thus the It also donated to the Football Kenya Federation (FKF) need to invest in various community projects in development program that will support the implementation each of the districts. of a proposed Vijana cup Tournament. The adoption of • The Coast region was largely lacking in education the Vijana Cup tournament will improve sporting activity in facilities, especially for primary schools and thus Lamu and grow talent at the grassroot level. The Authority there was a need for the Authority to invest in believes that successful relationships with stakeholders promoting this area. This has since extended to are essential to the organization’s success. include secondary schools as well. The Authority also held discussions with Lamu • The Authority also incorporated healthcare as a focus for fishermen stakeholders meeting was held at the County the outreach program through construction of healthcare Commissioners office in Lamu County by Kenya Ports facilities and holding of medical camps. Authority with the goal of engaging with the critical The Authority’s CSI Policy is rooted in the organization’s stakeholders to ensure their interests are taken care of values, guided by international standards and best and the project has a positive impact on the community. practices, and driven by its aspiration for excellence in the The meeting’s agenda was to finalize the process of overall performance of the business. Through the efforts compensating Lamu fishermen affected by the construction of each of the employees, KPA is determined to take pride of the Lamu Port. KPA cares about the community and is in being responsible, respected, and welcomed in every dedicated to uplifting the communities in which it operates. place where it has its presence. Additionally, the Authority as the project proponent facilitated and embarked on a two-week exercise running from 25th April to 8th May 2021 that entailed verifying and validating 4,734 fisher folks to be compensated. The meeting involved verifying and validating the fishermen list and deliberations of the mode of payment. The Authority held an opinion leader’s meeting on 17th May 2021, prior to the main event which was the official commissioning of the first three berths at the Port of Lamu on 20th May 2021. Some of the key stakeholders invited in the meeting include Lamu members of Parliament, Lamu civil society, Lamu youth representatives, religious leaders, and the Lamu County government. The Authority also met with other stakeholders from neighboring countries, the shipping industry including representatives of Shipping Lines, Clearing and Forwarding agents and transporters in Lamu. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 61

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Environmental and sustainability reporting (continued) CORPORATE SOCIAL RESPONSIBILITY (Cont’d) The Authority donated Kshs 5 million to the school, Kajiwe Primary School in Rabai sub-county, Kilifi County Education to go towards the project’s labor costs. The school was Dr. Kraft Library Block. able to secure funds, therefore, the donation will go towards labor costs of their ongoing school projects- Dr. Kraft Secondary School is in Mazeras, Kilifi County construction of classrooms administration block and and the school had a need of library block for its washrooms. The construction at the moment is still on students. going. This gesture will not only be a good opportunity for KPA to be involved in this major school project but also go a long way in cementing the already good relations that the Authority enjoys with the community. Gozani Primary School Kajiwe Primary School 62 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) CORPORATE SOCIAL RESPONSIBILITY (cont’d) Donation to Mumbuni Primary School Mumbini primary school in Machakos sub county Donation to Riambase DEB Primary school received a donation of 50 desks from Kenya Ports The Authority donated Kshs 5 million that went towards Authority as part of the Authority’s Corporate Social the construction of 8 classrooms to the school. The Investment initiative. The desks were valued at a cost of project is still on going. Supporting the above course will Kshs 0.2 million will see 100 pupils in the school seat not only go a long way in assisting the school achieve its comfortably while observing social distancing to curb goal of providing adequate learning infrastructure to its the spread of Covid-19. The donation is consistent with students but also initiate a cordial relationship between the CSI focus areas of education and health. the Authority, the school institution and community at large. It will also enable the Authority to realize one of its (Community Directed Intervention) CDI strategy goals to reach out to the larger community beyond the coastal region. Donation to Machakos rescue center The Machakos rescue center benefited from food donation worth Kshs 0.1 million. The school carters for children who are lost and separated from their parents as well as those who are mentally challenged. The school, which has a student body of 49 girls, is subsidized by the government. The donation is in line with the KPA core value “We care” and the CSI core focus area “Humanitarian & Aid”. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 63

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Environmental and sustainability reporting (continued) Donation of Computers to Port Reitz School for Abuse NACADA, the Authority comes on board to the Physically Handicapped support government effort to fight drug and substance The Authority, through its Corporate Social Investment abuse: a major challenge affecting the youth. The program, donated new computers to Mombasa’s Port donation is part of an empowerment plan for the youth Reitz School for the Physically Handicapped. The which the Authority supports. Kshs 1.2 million worth computers will be crucial in implementing ICT and digital learning at the school. The donation is in line with one of the CSI policy’s core focus areas, which is education. Donation to NEMA KPA collaborated with Kenya’s National Environment Management Authority (NEMA) to commemorate this year’s World Environment Day, which was hosted at the Lamu Medical Camp County of Garissa. The focus of the day was primarily The Authority in partnership with Lamu County on the UN’s recently launched Decade on Ecosystem conducted its first medical camp in Hindi Ward, Restoration, which promotes reversal of the status quo. Lamu county at a cost of Kshs 2.4 million. The free The Authority donated Kshs 500,000 to this cause. medical exercise included free screening, diagnosis In support of emergency household relief and nutrition and treatment of various diseases including cancer, project for COVID-19, the Authority complemented the non- communicable diseases eye checkups, ear, nose, County Government of Mombasa program and donated and throat (ENT). The medical camp which was held in Kshs 2 million to support the people of Mombasa during Hindi Ward at Hindi Primary school saw more than 800 the period of the pandemic and economic slowdown. patients benefit from free consultants, diagnosis, free The Authority also donated Kshs 1.5 million to support medicine, and treatment. orphans at Our Lady of Perpetual Help Education Centre (OLPHEC). The orphanage home caters for about 185 destitute children. Engagement with the Kenya Defense Forces (KDF), Mariakani Garrison The Authority held talks with the KDF in regards towards the construction of a community borehole. The KDF had requested for partnership to tackle a water shortage challenge that they, together with its environs are experiencing. They had proposed sinking of a water borehole which will be used by the soldiers and the Donation to National Authority for the Campaign against Drug Abuse (NACADA) local population. The Authority donated Kshs 2.22 The Authority donated Kshs 1 million to the Miritini million which will be used in the funding of the Water Rehabilitation center in Mombasa to support treatment Borehole Project. and rehabilitation programs. This is a partnership with the National Authority for the Campaign against Drug 64 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Environmental and sustainability reporting (continued) Long and Short Rain Tree Planting Exercise The Authority adopted 4 sites within Mkupe and Ganahola in Tudor Creek with combined area of 31.5 hectares. These sites have open patches, caused by ecological imbalances due to human activities and requires incessant tree replacement. To attain the intended goal of replenishing the adopted sites and the objective of planting the quantity of tress envisioned, the Authority donated Kshs 3.35 million detailing the activities and program to be undertaken in line with the important national tree planting exercise. As reported in the last Financial Year (FY), the Authority was requested by the State Department of Public Works under the parent ministry to make a contribution for the rehabilitation and construction of Mokowe, Mtangawanda Lamu Terminal and Manda jetties. An expenditure of Kshs 140 million was incurred in this FY. Reconstruction of Mokowe jetty is still ongoing while the other jetties have been completed. The Authority’s men’s volleyball team participated in the African Volleyball Club Championships held in Tunis,Tunisia. Environment The Authority continues to maintain and landscape the Uhuru gardens in Mombasa County collaborating with the County government in beautifying Mombasa which is a major tourist site in the world map considering Moi Sports Avenue is where the large, monumental elephant tasks The Authority continues to support Bandari FC in are situated. the Kenya Premier League, basketball teams (men & women), volleyball teams, and netball teams amongst other sporting activities The Authority’s basketball teams recorded an impressive performance in the Annual basketball competitions held in Malawi. The Dockers lifted trophies after topping in the tournament where the ladies were unbeaten with the men losing only one game in the entire tournament. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 65

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Report of the directors The Board of Directors submit the annual report Directors together with the audited financial statements for the The directors’ who held office during the year and to year ended 30 June 2021 which show the state of the date are shown on page 7. Authority’s affairs. Auditors Principal Activities The Auditor General is responsible for the statutory KPA’s mandate is to develop, maintain, operate, audit of the Authority in accordance with Article 229 improve, and regulate all scheduled seaports along of the Constitution of Kenya and the Public Audit Act Kenya’s coastline and inland waterways. Core activities 2015. In accordance with section 23 of the Public include pilotage, towage, mooring, dry docking, Audit Act 2015, the Auditor General is empowered to navigational aids, and maintenance of the channel, nominate another Auditor to carry out the audit on their stevedoring and shore handling and reception of cruise behalf. vessels in accordance with KPA Act CAP 391. By order of the Board Results for the year 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Profit Before Tax 13,817,820 8,178,108 Turasha Kinyanjui Tax (5,978,260) (4,473,012) Net Profit 7,839,560 3,705,096 Ag. GENERAL MANAGER, BOARD & LEGAL SERVICES Dividend The Directors recommend dividends of Kshs 587.967 million for the year 2020/2021. Dividends for the year 2019/2020 was Kshs 277.882 million. The dividends are supposed to be paid in conformity with the Authority’s policy on dividends. However, due to the huge cash outflows required to fund critical ongoing projects, KPA has intentions to seek an exemption on the payment of the dividends and plough back the funds to fund the operationalization of the Lamu Port. During the year, the Authority also remitted Kshs 4,950 million (Kshs 13,050 million FY2019/2020) to the National Exchequer as Special Dividends. 66 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| | 2020/2021 | 2019/2020 |

|---|---|---|

| | Kshs ‘000 | Kshs ‘000 |

| | 13,817,820 | |

| | (5,978,260) | |

| | 7,839,560 | |

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Statement of directors’ responsibilities Section 81 of the Public Finance Management Act 2012, Section 14 of the State Corporations Act, 1986 and Section 20 of Kenya Ports Authority Act, 1978 requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Authority as at the end of the financial year and of the operating results. It also requires the directors to ensure that the Authority keeps proper records which disclose, with reasonable accuracy at any time, the financial position of the Authority. The directors are also responsible for safeguarding the assets of the Authority. The Directors are responsible for the preparation of Financial Statements that give a true and fair view of the state of affairs of the Authority for and as at the end of the financial year ended on 30 June 2021. The responsibility includes: i. Maintain adequate financial management arrangements and ensure that these continue to be effective throughout the reporting period ii. Maintaining proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Authority iii. Design, implementing and maintain internal controls relevant to the preparation and presentation of the financial statement and ensuring that they are free from material misstatements, whether due to error or fraud iv. Safeguarding the assets of the Authority v. Selecting and applying appropriate accounting policies, and vi. Making accounting estimates that are reasonable in the circumstances The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with the International Financial Reporting Standards and in the manner required by the Public Finance Management Act and the State Corporations Act. The Directors are of the opinion that the Authority’s financial statements give a true and fair view of the state of financial affairs of the Authority’s transactions during the financial year ended 30 June 2021 and of the Authority’s financial position as at that date. The directors further confirm the completeness of the accounting records maintained for the Authority, which have been relied upon in the preparation of the Authority’s financial statement as well as the adequacy of the systems of internal financial control. Nothing has come to the attention of the Directors to indicate that the Authority will not remain a going concern for the next twelve months from the date of this statement. The Authority’s financial statements were approved by the Board of Directors on 16 September 2021 and signed on its behalf by: Nilfat Kassim Ali Amb. John Mwangemi Director Ag. Managing Director KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 67

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Statement of profit or loss and other comprehensive income For the year ended 30 June 2021 2020/2021 2019/2020 Note Kshs ‘000 Kshs ‘000 Operating Revenue 6 52,130,085 48,161,579 Other Incomes 7 720,475 692,047 Total Revenues 52,850,560 48,853,626 Less Expenses: Administrative Expenses 8 (4,429,215) (3,995,660) Establishment Expenses 9 (17,906,332) (19,520,491) Operating Expenses 10 (5,284,137) (6,852,267) Depreciation Property, Plant and Equipment 11,12 (11,277,393) (10,742,418) Amortization of Intangible Assets 13 (423,067) (301,265) Total Operating Expenses (39,320,144) (41,412,101) Operating Profit 13,530,416 7,441,525 Finance Income 14 167,636 1,310,374 Finance Cost 15 (139,391) (135,164) Impairment Loss 16 (243,118) (218,888) Other Gains/(Losses) 17 502,277 (219,739) Profit Before Tax 13,817,820 8,178,108 Tax Charge 18 (5,978,260) (4,473,012) Profit for the Year 7,839,560 3,705,096 Other Comprehensive Income (OCI) OCI not to be reclassified to Profit or Loss in subsequent years Deficit resulting from Pension Valuation 32 (4,111,400) (3,642,000) OCI to be reclassified to Profit or Loss in subsequent years Unrealized Foreign Exchange Gain/(Loss) 26 (766,610) 1,132,129 Forex Gain/(Loss) from Valuation of JICA Loan 29 964,169 (1,760,734) Earning /(Loss) reported after above adjustments 3,925,719 (565,509) 84 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 52,130,085 |

| 720,475 |

| 52,850,560 |

| (4,429,215) |

| (17,906,332) |

| (5,284,137) |

| (11,277,393) |

| (423,067) |

| (39,320,144) |

| 13,530,416 |

| 167,636 |

| (139,391) |

| (243,118) |

| 502,277 |

| 13,817,820 |

| (5,978,260) |

| 7,839,560 |

| (4,111,400) |

| (766,610) |

| 964,169 |

| 3,925,719 |

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Statement of financial position As at 30 June 2021 2020/2021 2019/2020 Non-Current Assets: Note Kshs ‘000 Kshs ‘000 Property Plant and Equipment 11 278,119,616 267,063,658 Assets Held for Sale 19 0 400 Intangible Assets 13 987,687 1,205,422 Leased Property 12 648,215 671,246 Long Term Investment 20 1,035,690 1,396,168 Total Non- Current Assets 280,791,208 270,336,894 Current Assets: Inventories 21 443,609 495,536 Receivables and Prepayments 22 19,881,232 17,377,585 Tax paid in advance 23 265,685 2,388,639 Short Term deposits 24 374,054 1,167,706 Bank & Cash Balances 24 2,459,942 3,003,068 Total Current Assets 23,424,522 24,432,534 TOTAL ASSETS 304,215,730 294,769,428 Capital and Reserves: Revaluation Reserves 25 93,784,610 103,132,900 General Reserves 26 97,076,196 80,874,208 Grants 27 2,015,030 3,468,561 Total Capital and Reserves 192,875,836 187,475,669 Non-Current Liabilities: GOK Project Funds 28 43,386,157 37,386,157 Borrowings 29 39,919,684 39,070,959 Deferred tax Liability 30 7,310,667 6,650,083 Retirement Benefit Liability 32 3,576,200 3,106,800 Total Non- Current Liabilities 94,192,708 86,213,999 Current Liabilities Dividend Payable 38 0 4,950,000 Borrowings 29 1,258,939 857,934 Trade and Other Payables 31 15,353,047 14,736,626 Retirement Benefit Liability 32 535,200 535,200 Total Current Liabilities 17,147,186 21,079,760 TOTAL CAPITAL & LIABILITIES 304,215,730 294,769,428 The financial statements were approved by the Board of Directors on 16 September 2021 and signed on its behalf by Nilfat Kassim Ali CPA Geoffrey Kavate Amb. John Mwangemi DIRECTOR Ag. GM. FINANCE Ag. MANAGING DIRECTOR ICPAK M/No: 6399 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 85

| 2020/2021 |

|---|

| Kshs ‘000 |

| 278,119,616 |

| 0 |

| 987,687 |

| 648,215 |

| 1,035,690 |

| 280,791,208 |

| 443,609 |

| 19,881,232 |

| 265,685 |

| 374,054 |

| 2,459,942 |

| 23,424,522 |

| 304,215,730 |

| 93,784,610 |

| 97,076,196 |

| 2,015,030 |

| 192,875,836 |

| 43,386,157 |

| 39,919,684 |

| 7,310,667 |

| 3,576,200 |

| 94,192,708 |

| 0 |

| 1,258,939 |

| 15,353,047 |

| 535,200 |

| 17,147,186 |

| 304,215,730 |

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Statement of changes in equity For the year ended 30 June 2021 Revaluation General Reserves Reserves Grants Total Note Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 01.07.2020 103,132,900 80,874,208 3,468,561 187,475,669 Profit After Tax 0 7,839,560 0 7,839,560 Other Comprehensive Income; Unrealized Foreign Exchange Loss 0 (766,610) 0 (766,610) Others; Revaluation Effect/Adjustments 25 (9,348,290) 9,348,290 0 0 Other Adjustments 0 16,366 0 16,366 Increase in Pension Deficit 0 (1,004,600) 0 (1,004,600) Grants 27 0 1,475,217 (1,453,531) 21,686 Revaluation effect of JICA Loan 26 0 964,169 0 964,169 Transfers due to Disposal 0 (1,670,404) (1,670,404) Balance as at 30.06.2021 93,784,610 97,076,196 2,015,030 192,875,836 Revaluation General Reserves Reserves Grants Total Note Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 01.07.2019 111,646,031 90,620,573 5,318,100 207,584,704 Profit After Tax 0 3,705,096 0 3,705,096 Other Comprehensive Income; Unrealized Foreign Exchange Gain 26 0 1,132,129 0 1,132,129 Others; Revaluation Effect/Adjustments 25 (6,405,984) 6,423,494 0 17,510 Adjusting of Dep. write back on Revaluation (2,107,147) 0 0 (2,107,147) Increase in Pension Deficit 0 (2,855,700) 0 (2,855,700) Grants 27 0 2,125,480 (1,849,539) 275,941 Revaluation Effect of JICA Loan 26 0 (1,760,734) 0 (1,760,734) GoK Dividends 0 (18,516,130) 0 (18,516,130) Balance as at 30.06.2020 103,132,900 80,874,208 3,468,561 187,475,669 86 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Total |

|---|

| Kshs ‘000 |

| 187,475,669 |

| 7,839,560 |

| (766,610) |

| 0 |

| 16,366 |

| (1,004,600) |

| 21,686 |

| 964,169 |

| (1,670,404) |

| 192,875,836 |

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Statement of cash flow For the year ended 30 June 2021 2020/2021 2019/2020 OPERATING ACTIVITIES: Notes Kshs ‘000 Kshs ‘000 Cash Generated from Operations 33 23,251,045 21,446,996 Interest Received 14 167,636 1,310,374 Interest Paid 15 (18,119) (42,717) Tax Paid 23 (3,194,722) (6,650,155) Dividends Paid 38 0 (516,130) Special Dividend paid 38 (4,950,000) (13,050,000) Pension paid (535,200) (535,200) Pension reimbursement 39,277 48,254 Net cash generated from Operating Activities 14,759,917 2,011,422 INVESTING ACTIVITIES: Purchase of Property, Plant and Equipment 36 (24,048,019) (38,570,386) Direct Acquisitions Property, Plant and Equipment (255,339) (223,282) Proceeds from Disposal of Assets 4,769 36,611 Purchase of Long-Term Investment 20 (360,478) (21,335) Transfer of SBM deposits to short term deposits 374,054 374,054 Proceeds from sale of Surveyed Stock 1,000 2,230 Net Cash used in Investing Activities (24,284,013) (38,402,108) FINANCING ACTIVITIES: Receipt of GoK Project Funds 37 6,000,000 10,000,000 Payment of JICA I Loan 29 (455,548) (835,798) Receipt of JICA II Loan 29 2,642,866 5,438,326 Net Cash generated from Financing Activities 8,187,318 14,602,528 Net decrease in Cash and Cash Equivalent (1,336,778) (21,788,158) Cash and Cash Equivalents as at 1 July 4,170,774 25,958,932 Cash and Cash Equivalents as at 30 June 24 2,833,996 4,170,774 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 87

| 2020/2021 |

|---|

| Kshs ‘000 |

| 23,251,045 |

| 167,636 |

| (18,119) |

| (3,194,722) |

| 0 |

| (4,950,000) |

| (535,200) |

| 39,277 |

| 14,759,917 |

| (24,048,019) |

| (255,339) |

| 4,769 |

| (360,478) |

| 374,054 |

| 1,000 |

| (24,284,013) |

| 6,000,000 |

| (455,548) |

| 2,642,866 |

| 8,187,318 |

| (1,336,778) |

| 4,170,774 |

| 2,833,996 |

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Statement of Comparison of Budget and Actual Amounts For the year ended 30 June 2021 Actual on Performance Final Budget Comparable Basis Difference % 2020/2021 2020/2021 2020/2021 Revenue Kshs ‘000 Kshs ‘000 Kshs ‘000 Operating Revenue 52,640,884 52,130,085 (510,799) -0.97% Other Incomes 466,170 720,475 254,305 54.55% Total Revenues 53,107,054 52,850,560 (256,494) Expenses: Administrative Expenses (4,805,632) (4,429,215) 376,417 7.83% Establishment Expenses (19,906,265) (17,906,332) 1,999,933 10.05% Operating Expenses (8,061,981) (5,284,137) 2,777,844 34.46% Depreciation & Amortization (11,280,000) (11,700,460) (420,460) -3.73% Total Operating Expenses (44,053,878) (39,320,144) 4,733,734 Operating Profit 9,053,176 13,530,416 4,477,240 Finance Income 43,000 167,636 124,636 289.85% Finance cost (132,300) (139,391) (7,091) -5.36% Impairment Loss (110,000) (243,118) (133,118) -121.02% Other Gains 0 502,277 502,277 100.00% Profit Before Tax 8,853,876 13,817,820 4,963,944 56.07% Note: PFM Act section 81(2) ii and iv requires Kenya Ports Authority, a national government entity, to present appropriation accounts showing the status of votes compared with the appropriation for the vote. IFRS does not require entities complying with IFRS standards to prepare budgetary information because most of the entities that apply IFRS are private entities that do not make their budgets publicly available. However, for public sector entities, the PSASB has considered the requirements of the PFM Act, 2012 which these statements comply with, the importance that the budgetary information would provide to the users of the statements and the fact that the public entities make their budgets publicly available and decided to include this statement under the IFRS compliant financial statements and a statement explaining any variations between actual expenditure and the sums voted. Explanation of variations of 10% over/under between actual and final budgeted amounts are provided under additional disclosures I. 88 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Final Budget |

|---|

| 2020/2021 |

| Kshs ‘000 |

| 52,640,884 |

| 466,170 |

| 53,107,054 |

| (4,805,632) |

| (19,906,265) |

| (8,061,981) |

| (11,280,000) |

| (44,053,878) |

| 9,053,176 |

| 43,000 |

| (132,300) |

| (110,000) |

| 0 |

| 8,853,876 |

Page 89

Notes to the Financial statements For the year ended 30 June 2021

1. General Information opinion that the Authority is well placed to continue Kenya Ports Authority is established by and derives its business in the foreseeable future. The financial report authority and accountability from Cap 391 of the laws of is therefore prepared on the going concern basis, Kenya. The entity is wholly owned by the Government of which contemplates the continuity of normal business Kenya and is domiciled in Kenya. The entity’s principal activities, the realization of assets and the settlement of activity is to develop, maintain, operate, improve, and liabilities in the ordinary course of business. regulate all scheduled seaports along Kenya’s coastline
2. Application of New and Revised International and inland waterways in Kenya. Financial Reporting Standards (IFRS)
3. Statement of Compliance and Basis of i. Relevant new standards and amendments Preparation to published standards effective for the year Statement of Compliance & Basis of Preparation ended 30 June 2021 The financial statements have been prepared in At the reporting date certain new standards, accordance with the PFM Act, the State Corporations amendments to the existing standards and Act and the International Financial Reporting Standards interpretations have become mandatory. No standard, (IFRSs). The preparation of financial statements in amendments or interpretations are expected to have a conformity with International Financial Reporting material impact. Standards (IFRSs) allows the use of estimates and IAS 39-Financial Instruments: Recognition and assumptions. It also requires management to exercise Measurement judgment in the process of applying the Authority’s Description: IAS 39 “Financial Instruments: Recognition accounting policies. and Measurement” outlines the requirements for the Where necessary the comparative figures for the recognition and measurement of financial assets, previous financial year 2019/2020 have been stated financial liabilities, and some contracts to buy or sell in the financial statements to conform to changes in non-financial items. Financial instruments are initially presentation. recognized when an entity becomes a party to the contractual provisions of the instrument and are The financial statements were approved by the Board classified into various categories depending upon of Directors on 16 September 2021. the type of instrument, which then determines the The accounting policies applied in the preparation subsequent measurement of the instrument (typically of these financial statements are set out below. The amortized cost or fair value). Special rules apply to Authority adopted all the new and revised IFRS as embedded derivatives and hedging instruments. adopted by the PSASB and IASB that are relevant to Effective date: The amendments are effective for annual its operations and are effective for accounting periods periods beginning on or after January 1, 2020. Earlier beginning on 1 January 2020. The adoption of the application is permitted. standards did not have a material effect in the financial statements. IFRS 7- Financial Instrument Disclosures The financial statements are prepared and presented Description: IFRS 7 “Financial Instruments: in Kenya Shillings (Kshs), which is the functional and Disclosures” requires disclosure of information about reporting currency of the Authority, and all values the significance of financial instruments to an entity, are rounded to the nearest thousand (Kshs ‘000). and the nature and extent of risks arising from those The financial statements are prepared on historical financial instruments, both in qualitative and quantitative cost basis except for the recognition at fair value of terms. Specific disclosures are required in relation financial instruments, impaired assets at their estimated to transferred financial assets and a number of other recoverable amounts and actuarially determined assets matters. at their present value. Effective date: The amendments are effective for annual periods beginning on or after January 1, 2020. Earlier Going concern application is permitted. Based on the financial performance of the Authority and the risk management policies, the Board is of the KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 89

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Notes to the Financial statements For the year ended 30 June 2021 (continued) IFRS 16- Leases Effective Date: Earlier application is permitted. The Description: IFRS 16 specifies how to recognize, amendments are effective for annual reporting periods measure, present and disclose leases. The standard beginning on or after January 1, 2023. Early adoption provides a single lessee accounting model, requiring is permitted the recognition of assets and liabilities for all leases, IAS 16 — Property, Plant and Equipment unless the lease term is 12 months or less or the Description: IAS 16 “Property, Plant and Equipment” underlying asset has a low value. Lessor accounting outlines the accounting treatment for most types of however remains largely unchanged from IAS 17 and property, plant and equipment. Property, plant and the distinction between operating and finance leases equipment is initially measured at its cost, subsequently is retained. measured either using a cost or revaluation model, and Effective date: The amendments are effective for annual depreciated so that its depreciable amount is allocated periods beginning on or after January 1, 2020. Earlier on a systematic basis over its useful life. application is permitted. Effective Date: The amendments are effective for ii. New and amended standards and annual periods beginning on or after January 1, 2022. interpretations in issue but not yet effective in Early application is permitted. the year ended 30 June 2021 IAS 37 — Provisions, Contingent Liabilities and IAS 1 — Presentation of Financial Statements. Contingent Assets Description: IAS 1 “Presentation of Financial Description: IAS 37 “Provisions, Contingent Liabilities Statements” sets out the overall requirements for and Contingent Assets” outlines the accounting for financial statements, including how they should be provisions (liabilities of uncertain timing or amount), structured, the minimum requirements for their content together with contingent assets (possible assets) and overriding concepts such as going concern, the and contingent liabilities (possible obligations and accrual basis of accounting and the current/non- present obligations that are not probable or not reliably current distinction. The standard requires a complete measurable). set of financial statements to comprise a statement Effective Date: The amendments are effective for of financial position, a statement of profit or loss and annual periods beginning on or after January 1, 2022. other comprehensive income, a statement of changes Early application is permitted. in equity and a statement of cash flows. IFRS 1 — First-time Adoption of International Effective Date: The amendments are effective for Financial Reporting Standards annual periods beginning on or after January 1, 2023. Description: IFRS 1 “First-time Adoption of International Earlier application is permitted. Financial Reporting Standards” sets out the procedures IAS 12 — Income Taxes that an entity must follow when it adopts IFRS for Description: IAS 12, “Income Taxes” implements a the first time as the basis for preparing its general- so-called ‘comprehensive balance sheet method’ of purpose financial statements. The IFRS grants limited accounting for income taxes which recognizes both the exemptions from the general requirement to comply current tax consequences of transactions and events with each IFRS effective at the end of its first IFRS and the future tax consequences of the future recovery reporting period. or settlement of the carrying amount of an entity’s Effective Date: The amendments are effective for assets and liabilities. Differences between the carrying annual periods beginning on or after January 1, 2022. amount and tax base of assets and liabilities, and Early application is permitted. carried forward tax losses and credits, are recognized, with limited exceptions, as deferred tax liabilities or iii. Early adoption of standards deferred tax assets, with the latter also being subject to The Authority did not early – adopt any new or amended a ‘probable profits’ test. standards in the year. 90 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Notes to the Financial statements For the year ended 30 June 2021 (continued) 4. Summary of Significant Accounting Policies b. Property, Plant and Equipment The significant accounting policies adopted in the All categories of property, plant and equipment are preparation of these Financial Statements are set initially recognized at cost and subsequently carried at below; cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure directly a. Revenue Recognition attributable to the acquisition of the assets. Computer IFRS 15 replaced the previous revenue recognition software, including the operating system that is an requirements in IAS 18 Revenue and applies to integral part of the related hardware is capitalized as all revenue arising from contracts with customers. part of the computer equipment. All items in an asset According to the new standard, revenue is recognized category are re-valued every 5 years. when a customer obtains control of the goods or The categories of assets listed below were re-valued services. during the financial year 2018/2019: - Revenue represents the fair value of consideration received or receivable for the sale of services in the Land and Buildings Services and systems course of the Authority’s activities. It is recognized Plant and Equipment Intangible Assets when it is probable that future economic benefits will Basic Constructions flow to the Authority and the amount of revenue can be measured reliably. Determining the timing of the The exercise was undertaken by M/s Sec & M Limited. transfer of control – at a point in time or over time – Details and qualification for the director of M/s Sec & requires judgment. M Ltd are; • Director Name; H.M. Kaburu, • M.A. (Valn & Ppty Mgmt.) University of Nairobi, It is stated net of Value Added Tax (where applicable), MRICS No. 1280168 rebates and trade discounts. Discounts are included as part of finance costs. • B.A Land Econ (Hons) University of Nairobi, MISK No. 690, REA The Authority’s revenue mainly consists of revenue from port related services and lease rentals. Where the • NEMA EIA/EA Lead Expert No 1025 Authority is an agent between a service provider and the • Chartered Valuation Surveyor/RV 405 end customer, an administrative fee is recognized as The methodology, basis of valuation and significant revenue on satisfaction of the performance obligation. assumptions made were in accordance with the Revenues earned by the Authority are recognized on procedures and guidelines as laid down by the the following basis; international Assets Valuation Standards Committee. M/s Sec & M Co. Ltd valuations and appraisals are Sale of services are recognized upon performance of carried out in accordance with the RICS Appraisal the services and customer acceptance. The Authority and Valuation Standards and are Uniform Standards only bills once the consignee for the cargo has been of Professional Appraisal Practice (USPAP) complaint. determined and upon lodgment of customs approved The valuer therefore considers all the three approaches documents. It is only then that it is probable that future to valuation. economic benefits will flow to the Authority and the amount of revenue can be measured reliably. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, Rental income is recognized at the time of billing as appropriate, only when it is probable that future as per the effective lease agreements. Where lease economic benefits associated with the item will agreements are under preparation, billing is based on flow to the Authority and the cost of the item can be letters of offers, signed, and accepted by the tenants. measured reliably. Repairs and maintenance expenses A signed letter of offer is a commitment from the tenant. are charged to the profit or loss account in the year in Finance income comprises of Interest receivable from which they are incurred. bank deposits and investments in securities and is recognized in profit or loss on a time proportion basis using the effective interest rate. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 91

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Notes to the Financial statements For the year ended 30 June 2021 (continued) Property, Plant and Equipment (continued) Depreciation is charged from the date of asset Increases in the carrying amount arising on revaluation recognition and ceases on the date of asset disposal. are recognized in other comprehensive income and Items of property, plant and equipment are reviewed accumulated in equity under the heading of revaluation annually for impairment. Where the carrying amount surplus. Decreases that offset previous increases of of an asset is assessed as greater than its estimated the same asset are recognized in other comprehensive recoverable amount, an impairment loss is recognized income. so that the asset is written down immediately to its All other decreases are charged to the Statement of estimated recoverable amount. Profit or Loss and Other Comprehensive Income. Gains and losses on disposal of property, plant and Annually, the difference between depreciation charge equipment are determined by reference to their carrying based on the valued carrying amount of the asset amount and are considered in determining operating charged to the Statement of Profit or Loss and Other profit. On disposal of revalued assets, amounts in the Comprehensive Income and depreciation based on the revaluation surplus reserve relating to that asset are asset’s original cost is transferred from the revaluation transferred to retained earnings. surplus reserve to retained earnings. d. Impairment of non-financial assets c. Depreciation and impairment of property, plant Non-financial assets that are carried at amortized cost and equipment are reviewed at the end of each reporting period for any Freehold land and capital works in progress are not indication that an asset may be impaired. depreciated. Capital works in progress relates mainly to the costs of ongoing but incomplete works on buildings If any such indication exists, an impairment loss is and other civil works and installations. recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Depreciation on property, plant and equipment is calculated using the straight-line method to write down The recoverable amount is the higher of an asset’s fair the cost or the revalued amount of each asset to its value less costs to sell and value in use. residual value over its estimated useful life using the e. Intangible Assets following annual rates; Intangible assets comprise purchased computer Rate software licenses and other software, which are Dredging/reclamation 2.5% capitalized based on costs incurred to acquire and bring Building commercial and non-commercial 2.5% to use the specific software. These costs are amortized over the estimated useful life of the intangible assets Rail lines 2.5% from the year that they are available for use, usually over Roads and Bridges 2.5% three years. Quays/wharves 2.5% Berthing Tugs 5% f. Amortization and impairment of intangible assets Pilot & Mooring Boats and Navigational 10% Amortization is calculated on the straight-line basis Aids over the estimated useful life of computer software of Cranes 10% three years. Forklifts/Reach takers 20% All computer software is reviewed annually for Tractors/Trailers 20% impairment. Where the carrying amount of an intangible Vehicles 20% asset is assessed as greater than its estimated Equipment 20% recoverable amount, an impairment loss is recognized Furniture 20% so that the asset is written down immediately to its Data processing equipment 33.33% estimated recoverable amount. Software/ Intangibles 33.33% 92 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Rate |

|---|

| 2.5% |

| 2.5% |

| 2.5% |

| 2.5% |

| 2.5% |

| 5% |

| 10% |

| 10% |

| 20% |

| 20% |

| 20% |

| 20% |

| 20% |

| 33.33% |

| 33.33% |

Page 93

Notes to the Financial statements For the year ended 30 June 2021 (continued) g. Assets Held for Sale liabilities. Where there is a deficit, KPA increases its Non-current assets held for sale (or disposal) are contribution to the scheme to offset the actuarial deficit. classified as assets held for sale when their carrying Where there is a gain, KPA stops payment of additional amount is to be recovered principally through a sale contributions to the scheme. transaction and a sale is considered highly probable. The scheme is assessed annually by independent They are stated at Net Book Value. actuaries using the actuarial assumptions adopted. The valuation method used is known as the ‘’Attained h. Leased Property Age Method’’. Under this method, the future service Standalone properties for which lease rentals are contribution rate is calculated as the level percentage received are treated in the Statement of Financial of payroll which would be adequate to fund the cost of Position according to the nature of the asset. future benefits of existing members arising over the full i. Retirement Benefits period to their normal retirement date. Allowances have The Authority operates a defined benefit and defined been made for assumed future salary increase and contribution plans for eligible employees. The Authority pension increase, mortality, and investment returns. is running the two schemes in parallel with intention of The objective of this method of funding is to aim for facing out the defined benefit scheme in the long run. a funding level equal to 100% and then accumulate The defined benefit scheme was closed effectively sufficient surplus in the earlier years to maintain the on 31st December 2012 to new entrants and future contribution rate even though the average age of the accrual of benefits for members below age 45 as at membership will increase. 31st December 2011 and also those above age 45 who As at 30 June 2021, the scheme had an actuarial deficit opted to accrue their future service benefits in the new of Kshs 4,111.4 million (Kshs 3,642 million deficit FY defined contribution scheme. 2019/20). The actuarial report as at 31 December In addition, the Authority’s makes contributions to the 2020 showed an actuarial deficit of Kshs 4,379 million. Social Security Fund for employees other than those Within the year the Authority made additional payments covered under the retirement benefit scheme and those of Kshs 44.6 million monthly as part of the remedial plan in other countries of operation, which are statutory, to fund the deficit revealed in the actuarial valuation as defined. KPA’s obligations under these schemes are at 31 December 2017. The remedial plan as per the limited to specific contributions as legislated from time amortization schedule runs for six (6) years. to time. The last discretionary pension increase was awarded as of 31 December 2017 and effected in November Defined Benefit 2018 in line with Rule 17, the next pension increase The Scheme is established and governed by a trust shall be actuarially determined. There were no pension deed with effect from 1 January 1998. The scheme’s increases granted to pensions in payments and is administered by Zamara Actuaries, Administrators deferred pensions during the inter-valuation period. and Consultants Ltd. The scheme’s investments were Rule 17 of the Deed of Amendments dated 12 May managed by Britam Asset Manager (K) Ltd and Co-op 2020 stipulates that ‘The Founder and the Trustees Trust Investment Services Ltd. Employees contribute to shall once every (3) years review the level of pensions the fund at the rate of 7.5% of their respective basic in payment. salary while the employer’s current contribution rate is 14.7% of the basic salary. The Scheme was underfunded as at 31 December 2020. The assets taken at market value represented KPA recognizes actuarial gains and deficit in its books 84% of the accrued liabilities at this date. of accounts whenever an actuarial valuation of the scheme is done. Actuarial gains are recognized as non- current asset (excess of accrued scheme assets less liabilities) while deficits are recognized as long term KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 93

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Notes to the Financial statements For the year ended 30 June 2021 (continued) Retirement Benefits (continued) Amortized cost; Defined Contribution A financial asset is measured at amortized cost if The Authority started a defined contribution scheme for it meets both of the following conditions and is not her employees who were below the age of 45 as at 31st designated as at FVTPL: December 2012. The employees contribute 10% of • it is held within a business model whose their basic salary while the employer contributes 20% objective is to hold assets to collect contractual of the employee’s basic salary. cash flows; and The employer’s contribution is charged to the Statement • Its contractual terms give rise on specified of Profit or Loss and Other Comprehensive Income for dates to cash flows that are solely payments of the period it relates. Both the employee and employer principal and interest on the principal amount contribution are paid to an independent scheme which outstanding. manages the resources pooled. Employees will benefit Gains and losses are recognized in profit or loss when from the employer’s contributions on meeting specific the asset is derecognized or impaired. The Authority’s criteria set out in the pension scheme trust deed. financial assets measured at amortized cost includes trade receivables, other receivables and cash and cash The employer’s contributions payable for DC scheme equivalents. of Kshs 1,227 million (FY 2019/2020 Kshs 1,470 million) have been recognized in the Statement of Profit Trade receivables are amounts due from customers or Loss and Other Comprehensive Income. for or services performed in the ordinary course of business. They are generally due for settlement within j. Inventories 90 days and therefore are all classified as current. Inventories are stated at cost which include the Trade receivables are recognized initially at the amount purchase price, import duty, transport and handling of consideration that is unconditional. The Authority charges. Inventories are managed using FIFO method. holds the trade receivables with the objective to Just in Time (JIT) strategy is applied by the Authority to collect the contractual cash flows. Details about the increase efficiency and decrease wastage. Authority’s impairment policies and the calculation of A provision for obsolete inventories has been made in the loss allowance are provided in Risk Management. accordance with the Authority policy. The Authority has Fair value through other comprehensive income lodged a request for approval of write off of obsolete (‘FVOCI’) – inventories from the books with the GoK. Debt instrument: A debt investment is measured at k. Trade and other receivables FVOCI if it meets both of the following conditions and Trade receivables are stated at their nominal value is not designated as at FVTPL: and reduced by appropriate allowances for estimated • it is held within a business model whose irrecoverable amounts. objective is achieved by both collecting contractual cash flows and selling financial Objective evidence of impairment of the receivables assets; and is when there is significant financial difficulty of the counterparty or when there is a default or delinquency • Its contractual terms give rise on specified in payment according to agreed terms. When a trade dates to cash flows that are solely payments of receivable is considered uncollectible, it is written principal and interest on the principal amount off against the Statement of Profit or Loss and Other outstanding. Comprehensive Income while adjusting the impairment Equity instrument: On initial recognition of an equity provision. investment that is not held for trading, the Authority may irrevocably elect to present subsequent changes in the l. Financial Instruments investment’s fair value in OCI. This election is made on On initial recognition a financial asset is classified and an investment-by-investment basis. measured at: 94 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Notes to the Financial statements For the year ended 30 June 2021 (continued) Financial Instruments (continued) general economic factors. Loss events include financial difficulty or bankruptcy of the debtor, and breaches of Fair value through profit or loss (‘FVTPL’). contracts. All financial assets not classified as measured at Trade and other receivables are written off against amortized cost or FVOCI as described above are the allowance for ECL when there is no reasonable measured at FVTPL. expectation of recovery. Subsequent recoveries of In addition, on initial recognition, the Authority may amounts previously written off are recognized in the irrevocably designate a financial asset that otherwise Profit and Loss. The Authority assumes that the credit meets the requirements to be measured at amortized risk on a financial asset increases significantly if it is cost or at FVOCI as at FVTPL if doing so eliminates more than 90 days past due. or significantly reduces an accounting mismatch that Non-derivative financial liabilities Classification, would otherwise arise. initial recognition, and measurement Financial assets are not reclassified subsequent to The Authority’s non-derivative financial liabilities consist their initial recognition unless the business model of loans and borrowings, amounts due to related changes for managing financial assets, in which case parties, and trade and other payables. All non-derivative all affected financial assets are reclassified on the first financial liabilities are recognized initially at fair value day of the first reporting period following the change in less any directly attributable transaction costs. The the business model. At the reporting date, the Authority Authority classifies all its non-derivative financial has not identified a change in its business model. liabilities as financial liabilities to be carried at amortized Derecognition of financial assets cost using effective interest method. The Authority derecognizes a financial asset when the The subsequent measurement of non-derivative contractual rights to the cash flows from the asset expire, financial liabilities is carried at their amortized cost or it transfers the rights to receive the contractual cash using the effective interest method. flows on the financial asset in a transaction in which The Authority derecognizes a financial liability when substantially all the risks and rewards of ownership of its contractual obligations are discharged or cancelled the financial asset are transferred and it does not retain or expired. The Authority also derecognizes a financial control of the financial asset. liability when its terms are modified and the cash Impairment of non-derivative financial assets flows of the modified liability are substantially different, in which case a new financial liability based on the The financial assets at amortized cost consist of trade modified terms is recognized at fair value. receivables and cash and cash equivalents. • Offsetting Trade and other receivables are initially recognized at fair values and subsequently measured at amortized Financial assets and liabilities are offset, and the net cost using the effective interest method, less an amount reported in the Statement of Financial Position allowance for Expected Credit Loss (“ECL”). only when there is a legally enforceable right to set off the recognized amounts and there is an intention to The Authority applied the ‘simplified approach’ for settle on a net basis or realize the asset and settle the determining the allowance for ECL for trade receivables, liabilities simultaneously. where lifetime ECL are recognized in the Profit and Loss at initial recognition of receivables and updated at each m. Cash and cash equivalents reporting date. Lifetime ECL represents the expected Cash and cash equivalents comprise cash on hand and credit losses that will result from all possible default cash at bank, short-term deposits on call and highly events over the expected life of the receivable. When liquid investments which are readily convertible to determining the allowance for ECL, the Authority’s known amounts of cash and are subject to insignificant considers reasonable and supportable information risk of changes in value. Bank account balances include that is relevant and available for customer types. This amounts held at various commercial banks at the end of includes both qualitative and quantitative information the financial year. based on the Authority’s historical experience and KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 95

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Notes to the Financial statements For the year ended 30 June 2021 (continued) Deferred Tax n. Borrowing Interest bearing bank loans are recorded at the Deferred income tax assets are recognized only to the proceeds received, net of direct issue costs. Finance extent that it is probable that future taxable profits will charges, including premiums payable on settlement or be available against which temporary differences can redemption, are accounted for on an accrual basis and be utilized. Recognized and unrecognized deferred tax are added to the carrying amount of the instrument to assets are reassessed at the end of each reporting the extent that they are not settled in the year in which period. The recognized amount is adjusted to reflect the they arise. extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. o. Borrowing Costs Borrowing costs that are attributable to acquisition, r. Translation of Foreign Currencies construction or production of a qualifying asset are On initial recognition, all transactions are recorded capitalized as part of the asset. The costs refer to all in the functional currency, which is Kenya Shillings. costs incurred in the acquisition and management Transactions in foreign currencies during the year of the borrowed funds during the qualifying asset are converted into the functional currency using the construction. exchange rate prevailing at the transaction date. Monetary assets and liabilities at the Statement In the case of general borrowings, the borrowing cost of Financial Position date denominated in foreign is charged to the Statement of Profit or Loss and Other currencies are translated into the functional currency Comprehensive Income. using the exchange rate prevailing as at that date. Capitalization of borrowing costs ceases when all The resulting foreign exchange gains and losses from activities necessary to prepare the qualifying asset for the settlement of such transactions and from year- its intended use are complete. All other borrowing end translation are recognized on a net basis in the costs are recognized in the profit or loss in the year in Statement of Profit or Loss and Other Comprehensive which they are incurred. Income in the year in which they arise. p. Trade and other payables s. Short term employee benefits Trade and other payables are non-interest bearing and The estimated monetary liability for employees accrued are carried at cost, which is consideration to be paid at the Statement of Financial Position date is recognized in future in respect of goods and services supplied, as an employment cost accrual. Gratuity earned at whether billed to the Authority or not. Statement of Financial Position date is accrued and q. Taxation recognized as an employee cost in the Statement of Income Tax Profit or Loss and Other Comprehensive Income. Income tax expense is the aggregate amount charged/ t. Dividends (credited) in respect of current tax and deferred tax Dividends are charged to equity in the period in which in determining the profit or loss for the year. Tax is they are paid. The dividends are supposed to be paid recognized in the Statement of Profit or Loss and Other in conformity with the Authority’s policy on dividends. Comprehensive Income except when it relates to items However, due to the huge cash outflows required to recognized in other comprehensive income, in which fund critical ongoing projects, KPA has intentions to case it is also recognized in other comprehensive seek an exemption on the payment of the dividends and income, or to items recognized directly in equity, in plough back the funds to fund the operationalization which case it is also recognized directly in equity. of the Lamu Port. During the year, the Authority also remitted Kshs 4,950 million (Kshs 13,050 million Current Tax FY2019/2020) to the National Exchequer as Special Current income tax is the amount of income tax payable Dividends. on the taxable profit for the year, and any adjustment to tax payable in respect of prior years, determined in accordance with the Kenyan Income Tax Act. 96 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Notes to the Financial statements For the year ended 30 June 2021 (continued) u. Grants from donors and the National 5. Significant Judgements and Sources of Government Estimation Uncertainty The grants are received inform of direct payments The preparation of financial statements in conformity to suppliers or contractors for the construction of with IFRS requires management to make judgments, specific capital projects of the Authority. The grants estimates and assumptions that affect the application are recognized in the Statement of Financial Position of policies and reported amounts of assets and and realized in the Statement of Profit or Loss and liabilities, income and expenses. The estimates and Other Comprehensive Income over the useful life of the the associated assumptions are based on historical assets. experience and various other factors that are believed to be reasonable under the circumstances that prevailed v. Comparative figures during the period. Where necessary the comparative figures for the The Board has reassessed its assumptions and previous financial year 2019/2020 have been amended estimates used in the measurement of assets and to conform to changes in presentation. liabilities at the reporting date against the background w. Subsequent events of the effects of COVID-19 pandemic. There is no There have been no events subsequent to the financial indication of any significant impairment or valuation risks year end with a significant impact on the financial for existing receivables and other assets or liabilities. statements for the year ended 30 June 2021. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. In the process of applying the Authority’s accounting policies, management has made judgment in determining. • The depreciation rates and impairment of property, plant and equipment, • Property, plant and equipment balances represent a significant component of the Authority’s assets. Property, plant and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the assets. The management reviews the estimated useful lives of property, plant and equipment on an annual basis based on factors such as expected level of usage, forecasts, and assumptions. It is possible that future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. • Basis of Valuation and fair value measurement – in estimating the fair value of assets and liabilities, management uses market observable data where available. Where not available the management uses value of identical assets and liabilities or engages a third party to perform the valuation. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 97

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Notes to the Financial statements For the year ended 30 June 2021 (continued) 5. Significant Judgements and Sources of Revenue Recognition Estimation Uncertainty (continued) As stated in Note 4 (a) on Sales of services Revenue • Expected Credit Loss of Trade receivables, represents the fair value of consideration received • At each reporting date, the Authority assesses or receivable for the sale of services in the course of whether trade receivables are credit- impaired. the Authority’s activities. It is recognized when it is Management makes judgement on the probable that future economic benefits will flow to the collectability of individual customer accounts Authority and the amount of revenue can be measured taking into consideration the credit worthiness reliably. Determining the timing of the transfer of control and financial condition of those customers. – at a point in time or over time – requires judgment. The Authority also records an allowance for On rental income, where lease agreements are under receivables based on management’s collective preparation, billing is based on letters of offers, signed assessment of their collectability taking into and accepted by the tenants. A signed letter of offer is consideration e factors such as including a commitment from the tenant. historical experience of credit losses, and the aging of the receivables with allowances Contingent Liabilities generally increasing as the receivable ages. The management consults with its legal counsel on • The amortization of Intangible assets matters related to litigation, and other experts both within and outside the Authority with respect to matters • The impairment of long-term investments in in the ordinary course of business. As at the reporting Kenya National Shipping Line, Consolidated date, the Authority was involved in various legal Bank, deposits in Chase Bank Ltd in proceedings where it has been vigorously defending receivership (CBLR) and Kenya Ferry Services, its claims. Assessment on whether the risk of loss • Provisions for obsolete inventory, is remote, possible or probable requires significant judgment given the complexities involved. • Deferred tax liabilities Accounting for leases • The recognition of Retirement Benefit Asset/ Liability, Accounting for leases under IFRS 16 involves the use of judgements, estimates and assumptions that impact • Judgments required by actuaries in respect the amounts recognized as right-of-use assets and of discount rates, future salary increments, lease liabilities. The Authority does not also recognize mortality rates and inflation rates used for leases of low-value assets and or leases it has no right computation of defined benefit liability. of control on the Statement of Financial Position, but Chase Bank (IR) and SBM Bank Deposits instead recognizes an expense on a straight-line basis. Chase Bank Ltd was placed under receivership on 7th April 2016. Based on the Kenya Gazette notice No 6833 dated 6th July 2018, a transfer of 75% of the deposits moved to SBM (Kenya) Ltd while 25% was retained by Kenya Deposit Insurance Corporation. The transition process was completed on 17th August 2018 and SBM Kenya Ltd transferred a total of Kshs. 1,175 million in FY2018/19. In line with Kenya Gazette notice, the first and second equal instalments of cash deposits previously held with Chase Bank Kenya (In Receivership) were received by the Authority from SBM Kenya Ltd. The remaining deposits (last instalment) are on fixed deposit account earning interest at 6.3% p.a with restricted access; and will be released in August 2021. 98 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

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Notes to the Financial statements For the year ended 30 June 2021 (continued) 6. Operating Revenue 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Pilotage 646,397 596,018 Tug Services Dues 1,885,204 1,752,147 Mooring 351,310 319,864 Navigational Dues 279,262 260,397 Port Dues 625,946 583,788 Dockage 718,800 640,933 Fresh Water - Normal 3,394 1,350 Laid Up Vessels 0 1,206 Security 168,257 157,688 Stevedoring 16,200,328 13,926,760 Hire of Labor/Equipment 235,622 196,374 Handling of Empty Containers 2,576,609 2,434,564 Handling of Full Containers 0 11 Shore handling 5,917,993 5,336,676 Re Marshaling Charges 978,029 1,498,388 Container Stripping/Stuffing 1,902 1,619 Verification Charges 26,736 16,384 Storage of General Cargo 148,063 122,625 Storage - Empty Containers 331,038 561,383 Storage-Full Containers 4,519,604 5,612,671 Jetty Fees 553 3,987 Licenses 251,192 176,143 Other Revenue 61,114 126,528 Wharfage 16,137,540 13,764,414 Sale of Fresh Water 159 199 Other Miscellaneous Revenue 65,033 69,462 TOTAL 52,130,085 48,161,579 Operating revenue improved to 52,130 million compared to Kshs.48,162 registered during the previous year, a growth of Kshs. 3,968 million or 8.2%, this correlates with the throughput increase of 7.2% compared to FY 2019/2020. The increase in operating revenue is attributed to throughput growth to 36.05 million tons compared to 33.62 million tons registered in the corresponding period. Conventional cargo throughput was 20.36 million DWTs being a growth (1.79 million DWTs or 9.7%) from last year’s 18,57 million DWTs. The increased revenue was mainly driven by higher import clinker and iron ore. Container traffic recorded 1.45 million TEUs against 1.38 million TEUs handled in FY 2019/2020 reflecting a positive performance of 5%. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 99

| 2020/2021 |

|---|

| Kshs ‘000 |

| 646,397 |

| 1,885,204 |

| 351,310 |

| 279,262 |

| 625,946 |

| 718,800 |

| 3,394 |

| 0 |

| 168,257 |

| 16,200,328 |

| 235,622 |

| 2,576,609 |

| 0 |

| 5,917,993 |

| 978,029 |

| 1,902 |

| 26,736 |

| 148,063 |

| 331,038 |

| 4,519,604 |

| 553 |

| 251,192 |

| 61,114 |

| 16,137,540 |

| 159 |

| 65,033 |

| 52,130,085 |

Page 100

Notes to the Financial statements For the year ended 30 June 2021 (continued) 7. Other Income: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Rent & Rates Receivable 221,263 272,492 Bandari College 414 19,729 Recovery from Housed Employees 115,681 109,743 Sale of Passes 133,331 99,784 Sundry Income 249,786 190,299 TOTAL 720,475 692,047 8. Administrative Expenses: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Telephone/Telex/Fax Services 11,485 8,737 Water Supply Services 282,569 321,660 City & Municipal Council Rates 57,011 55,654 Office Rental-Kampala 9,656 9,827 Library & Archives 2,622 5,106 Nursery Schools 2,739 4,607 Laundry 47 881 Provisions & Catering 13,077 26,030 Cleaning of Carpets & Curtains 345 384 Directors Allowances 42,751 54,119 Furniture & Equipment 4,680 3,583 Printing & Stationery 65,345 72,962 Postage & Courier Services 3,312 8,998 Office Incidentals & Consumables 28,581 34,581 Entertainment Allowance 5,178 4,102 Club Membership Fees 1,901 2,225 Police Services 13,368 12,842 Security Guards Services 62,150 64,500 Port Passes 15,649 3,555 Publicity & Advertising 171,921 195,401 Subscriptions & Donations 10,720 8,026 Hire of Commuter Bus Service 183,218 138,131 Agricultural Society of Kenya Shows 2,201 53,335 Sports 87,623 72,299 Welfare 28,159 33,206 Industrial Relations Costs 15,400 7,405 Development Studies 101,587 150,070 Consultant Fees 30,309 34,196 Training 317,350 289,752 Curriculum Development 0 16,654 100 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 221,263 |

| 414 |

| 115,681 |

| 133,331 |

| 249,786 |

| 720,475 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 11,485 |

| 282,569 |

| 57,011 |

| 9,656 |

| 2,622 |

| 2,739 |

| 47 |

| 13,077 |

| 345 |

| 42,751 |

| 4,680 |

| 65,345 |

| 3,312 |

| 28,581 |

| 5,178 |

| 1,901 |

| 13,368 |

| 62,150 |

| 15,649 |

| 171,921 |

| 10,720 |

| 183,218 |

| 2,201 |

| 87,623 |

| 28,159 |

| 15,400 |

| 101,587 |

| 30,309 |

| 317,350 |

| 0 |

Page 101

Notes to the Financial statements For the year ended 30 June 2021 (continued) Administrative Expenses (continued) 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Trade Testing Materials 0 1,643 Recruitment Costs 7,448 30,661 Retirees Expenses 22,401 16,065 Survey Fees 5,366 4,661 Computer & Network Maintenance 561,827 182,130 Website 0 2 Licenses & Computers 989,730 805,840 Insurance Premiums 490,620 449,592 Un-Insured Loss 17,892 124,758 Car Registration & Licenses 268 313 Stock Take Expenses 1,728 1,733 Corporate Social Responsibility 311,151 313,320 Victuals & Snacks 23,397 41,583 Wajibika 11,318 21,186 Professional Education 47,245 38,197 WHT Imported Services 9,502 30,397 Audit Fees 8,050 8,050 Bank Charges & Commission 8,938 10,740 Legal Fees 303,617 221,961 Revaluation Fees 37,763 0 TOTAL 4,429,215 3,995,660 The Authority is the single largest employer within the Coast Province and thus it continues to contribute to worthy causes such as education, rehabilitation/construction of jetties in Lamu County, sponsorships & donations and is also a sponsor of Bandari FC. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 101

| 2020/2021 |

|---|

| Kshs ‘000 |

| 0 |

| 7,448 |

| 22,401 |

| 5,366 |

| 561,827 |

| 0 |

| 989,730 |

| 490,620 |

| 17,892 |

| 268 |

| 1,728 |

| 311,151 |

| 23,397 |

| 11,318 |

| 47,245 |

| 9,502 |

| 8,050 |

| 8,938 |

| 303,617 |

| 37,763 |

| 4,429,215 |

Page 102

Notes to the Financial statements For the year ended 30 June 2021 (continued) 9. Establishment Expenses: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Basic Salary 6,909,758 7,473,722 Overtime 1,311,988 2,441,884 Staff Allowances 1,936,771 2,228,097 Normal Staff Housing 2,603,301 2,678,496 Leased Staff Housing 14,000 11,933 Special Accommodation 25,157 11,535 Duty Travel 308,927 300,208 Leave Travel 235,991 249,304 Transport Allowance 1,546,553 1,588,144 Intern Allowances 1,075 0 Staff Pension-DC 1,226,937 1,469,606 Staff Pension-DB 123,657 145,970 Staff Gratuity 29,350 15,668 Social Security 17,307 178 Medicines 338,840 306,467 Hospital/Referral Bills 730,481 564,015 First Aid 5,950 7,950 Medical Education Expenses 17,585 12,524 Incentive Scheme 522,704 14,790 TOTAL 17,906,332 19,520,491 At the close of the FY the staff strength was 6,511 (FY 2019/20 6,654) of which male were 5,111 (78.50%) and women 1,400 (21.50%). In as much as port operations & related activities are Labour intensive, the Authority progressively and deliberately continues working towards having a workforce satisfying the 1/3 gender rule. The overall expenditure on cost of employment decreased in the reporting year. The favourable variance was mainly from overtime. The total overtime expenditure during the period was Kshs 1,312 million against last financial year expenditure of Kshs 2,442 million a decrease of Kshs 1,130 million or 46.27%. 102 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 6,909,758 |

| 1,311,988 |

| 1,936,771 |

| 2,603,301 |

| 14,000 |

| 25,157 |

| 308,927 |

| 235,991 |

| 1,546,553 |

| 1,075 |

| 1,226,937 |

| 123,657 |

| 29,350 |

| 17,307 |

| 338,840 |

| 730,481 |

| 5,950 |

| 17,585 |

| 522,704 |

| 17,906,332 |

Page 103

Notes to the Financial statements For the year ended 30 June 2021 (continued) 10. Operating Expenses: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Operational / Running Supplies 584,194 749,801 Marine Spares 403,001 372,543 Buoys 1,232 25,970 Flowers & Plants 148 1,075 Crane Spares 417,647 471,072 Fuel 1,022,610 905,470 Oils and Lubricants 75,517 63,705 Cleansing Agents 5,129 6,655 Uniforms & Clothing 164,919 324,391 Cleaning Implements/ Detergents 24,255 37,552 Workshop Tools and Equipment 59,439 81,323 Comm./ Equipment Spares 133,287 26,251 Medical Equipment 7,297 50,082 Repairs: Port Infrastructure 1,414,815 2,541,375 Electricity Services 465,655 415,801 Mobile Plant Spares 296,737 329,711 Electrical Spares 72,310 217,809 Tyres and Tubes 93,305 172,570 Refrigeration/ Air Conditioning 27,937 44,290 Batteries Charges and Clocks 14,703 14,821 TOTAL 5,284,137 6,852,267 The overall expenditure on operating expenses decreased by 22.88%. The decrease is mainly driven by management of repairs expenses. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 103

| 2020/2021 |

|---|

| Kshs ‘000 |

| 584,194 |

| 403,001 |

| 1,232 |

| 148 |

| 417,647 |

| 1,022,610 |

| 75,517 |

| 5,129 |

| 164,919 |

| 24,255 |

| 59,439 |

| 133,287 |

| 7,297 |

| 1,414,815 |

| 465,655 |

| 296,737 |

| 72,310 |

| 93,305 |

| 27,937 |

| 14,703 |

| 5,284,137 |

Page 104

Notes to the Financial statements For the year ended 30 June 2021 (continued) 11. Property, Plant& Equipment Land Leased Land and Equipment, Services and Basic Balance as at Out Buildings Motor Systems Constructions 30 June,2021 Vehicles and COST / VALUATION Furniture Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 01.07.2020 15,190,900 76,030,139 40,848,370 10,049,049 72,659,429 214,777,887 Additions 0 1,184,150 1,333,261 825,562 8,760,017 12,102,990 Disposals 0 0 (77,683) 0 0 (77,683) Transfer to Bandari Maritime 0 (1,298,640) (611,056) (168,352) (18,340) (2,096,388) Re-classification Adj. 0 (86) 0 0 86 0 Balance as at 30.06.2021 15,190,900 75,915,563 41,492,892 10,706,259 81,401,192 224,706,806 DEPRECIATION Balance as at 01.07.2020 0 1,313,775 7,664,776 3,521,223 16,461,426 28,961,200 Charge for the year 0 506,581 3,716,027 592,295 6,439,459 11,254,362 Eliminated on Disposal 0 0 (26,087) 0 0 (26,087) Transfer to Bandari Maritime 0 (32,229) (302,080) (83,500) (8,174) (425,983) Re-classification Adj. 0 (1) 157 0 1 157 Balance as at 30.06.2021 0 1,788,126 11,052,793 4,030,018 22,892,712 39,763,649 N.B.V as at 01.07.2020 15,190,900 74,716,364 33,183,594 6,527,826 56,198,003 185,816,687 NBV as at 30.06.2021 15,190,900 74,127,437 30,440,099 6,676,241 58,508,480 184,943,157 W.I.P as at 01.07.2020 0 1,812,899 2,174,621 18,691,215 58,885,146 81,563,881 W.I.P as at 30.06.2021 0 328,300 646,446 33,473,712 59,120,480 93,568,938 Sub totals 15,190,900 74,455,737 31,086,545 40,149,953 117,628,960 278,512,095 Impairment 0 (304,541) (40,070) (1,854) (46,014) (392,479) Grand Total 15,190,900 74,151,196 31,046,475 40,148,099 117,582,946 278,119,616 At the end of the FY, Bandari College assets were transferred to Bandari Maritime College and derecognized by the Authority, the costs of affected assets are as shown below; Cost of Assets 0 1,298,640 602,368 177,039 18,340 2,096,387 Accumulated Dep. 0 32,229 293,505 92,075 8,174 425,983 104 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Balance as at 30 June,2021 |

|---|

| Kshs ‘000 |

| 214,777,887 |

| 12,102,990 |

| (77,683) |

| (2,096,388) |

| 0 |

| 224,706,806 |

| 28,961,200 |

| 11,254,362 |

| (26,087) |

| (425,983) |

| 157 |

| 39,763,649 |

| 185,816,687 |

| 184,943,157 |

| 81,563,881 |

| 93,568,938 |

| 278,512,095 |

| (392,479) |

| 278,119,616 |

| Cost of Assets | 0 | 1,298,640 | 602,368 | 177,039 | 18,340 | 2,096,387 |

|---|---|---|---|---|---|---|

| Accumulated Dep. | 0 | 32,229 | 293,505 | 92,075 | 8,174 | 425,983 |

Page 105

Notes to the Financial statements For the year ended 30 June 2021 (continued) Property, Plant& Equipment For the Year Ended 30 June 2020 Equipment, COST / Land Leased Land and Services and Basic Balance as at Motor Vehicles VALUATION Out Buildings Systems Constructions 30 June, 2020 and Furniture Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 15,190,900 74,455,828 39,243,097 9,982,596 70,468,164 209,340,585 01.07.2019 Additions 0 1,574,311 1,752,284 53,313 2,683,863 6,063,771 Disposals 0 0 (148,083) 0 (492,598) (640,681) Revaluation 0 0 1,072 13,140 0 14,212 Adjustment Balance as at 15,190,900 76,030,139 40,848,370 10,049,049 72,659,429 214,777,887 30.06.2020 DEPRECIATION Balance as at 0 815,684 2,239,316 2,920,743 10,518,489 16,494,232 01.07.2019 Charge for the 0 448,124 3,628,490 595,184 6,024,803 10,696,601 year Eliminated on 0 0 (25,258) 0 (311,523) (336,781) Disposal Revaluation 0 49,967 1,822,228 5,296 229,657 2,107,148 Adjustments Balance as at 0 1,313,775 7,664,776 3,521,223 16,461,426 28,961,200 30.06.2020 N.B.V as at 15,190,900 73,640,144 37,003,781 7,061,853 59,949,675 192,846,353 01.07.2019 NBV as at 15,190,900 74,716,364 33,183,594 6,527,826 56,198,003 185,816,687 30.06.2020 W.I.P as at 0 1,657,538 2,669,498 3,676,553 41,198,141 49,201,730 01.07.2019 W.I.P as at 0 1,812,899 2,174,621 18,691,215 58,885,146 81,563,881 30.06.2020 Sub totals 15,190,900 76,529,263 35,358,215 25,219,041 115,083,149 267,380,568 Impairment 0 (199,819) (70,460) (617) (46,014) (316,910) Grand Total 15,190,900 76,329,444 35,287,755 25,218,424 115,037,135 267,063,658 Fully depreciated. 0 22,790 1,106,009 353,724 133,113 1,615,636 Assets Would have 0 570 221,202 70,745 3,327 295,844 been Dep. At the end of the FY, the transition process of transferring Bandari College to Bandari Maritime College was still ongoing, the costs of affected assets are as shown below; Cost of Assets 0 1,298,640 601,057 168,352 18,340 2,086,388 Accumulated Dep. 0 24,318 235,927 70,912 7,351 338,508 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 105

| COST / VALUATION | Land Leased Out | Land and Buildings | Equipment, Motor Vehicles and Furniture | Services and Systems | Basic Constructions |

|---|---|---|---|---|---|

| Balance as at 01.07.2019 | 15,190,900 | 74,455,828 | | 9,982,596 | 70,468,164 |

| Additions | 0 | 1,574,311 | 1,752,284 | 53,313 | 2,683,863 |

| Disposals | 0 | 0 | (148,083) | 0 | (492,598) |

| Revaluation Adjustment | 0 | 0 | 1,072 | 13,140 | 0 |

| Balance as at 30.06.2020 | 15,190,900 | 76,030,139 | 40,848,370 | 10,049,049 | 72,659,429 |

| DEPRECIATION | | | | | |

| Balance as at 01.07.2019 | 0 | 815,684 | 2,239,316 | 2,920,743 | 10,518,489 |

| Charge for the year | 0 | 448,124 | 3,628,490 | 595,184 | 6,024,803 |

| Eliminated on Disposal | 0 | 0 | (25,258) | 0 | (311,523) |

| Revaluation Adjustments | 0 | 49,967 | 1,822,228 | 5,296 | 229,657 |

| Balance as at 30.06.2020 | 0 | 1,313,775 | 7,664,776 | 3,521,223 | 16,461,426 |

| N.B.V as at 01.07.2019 | 15,190,900 | 73,640,144 | 37,003,781 | 7,061,853 | 59,949,675 |

| NBV as at 30.06.2020 | 15,190,900 | 74,716,364 | 33,183,594 | 6,527,826 | 56,198,003 |

| W.I.P as at 01.07.2019 | 0 | 1,657,538 | 2,669,498 | 3,676,553 | 41,198,141 |

| W.I.P as at 30.06.2020 | 0 | 1,812,899 | 2,174,621 | 18,691,215 | 58,885,146 |

| Sub totals | 15,190,900 | 76,529,263 | 35,358,215 | 25,219,041 | 115,083,149 |

| Impairment | 0 | (199,819) | (70,460) | (617) | (46,014) |

| Grand Total | 15,190,900 | 76,329,444 | 35,287,755 | 25,218,424 | 115,037,135 |

| Fully depreciated. Assets | 0 | 22,790 | 1,106,009 | 353,724 | 133,113 |

| Would have been Dep. | 0 | 570 | 221,202 | 70,745 | 3,327 |

| Cost of Assets | 0 | 1,298,640 | 601,057 | 168,352 | 18,340 |

|---|---|---|---|---|---|

| Accumulated Dep. | 0 | 24,318 | 235,927 | 70,912 | 7,351 |

Page 106

Notes to the Financial statements For the year ended 30 June 2021 (continued) 12. Leased Property Basic Services and Bal. as at 30 As at 30 June 2021 Buildings Construction Systems June 2021 Cost/Valuation Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 01.07.2020 183,579 502,261 18,474 704,314 Balance as at 30.06.2021 183,579 502,261 18,474 704,314 Depreciation: Balance as at 01.07.2020 15,246 15,153 2,669 33,068 Charge for the year 5,002 17,072 957 23,031 Balance as at 30.06.2021 20,248 32,225 3,626 56,099 N.B.V as at 01.07.2020 168,333 487,108 15,805 671,246 N.B.V as at 30.06.2021 163,331 470,036 14,848 648,215 Basic Services and Bal. as at 30 As at 30 June 2020 Buildings Construction Systems June 2020 Cost/Valuation Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 01.07.2019 183,579 502,261 18,474 704,314 Balance as at 30.06.2020 183,579 502,261 18,474 704,314 Depreciation: Balance as at 01.07.2019 10,244 (24,568) 1,575 (12,749) Charge for the year 5,002 39,721 1,094 45,817 Balance as at 30.06.2020 15,246 15,153 2,669 33,068 N.B.V as at 01.07.2019 173,335 526,829 16,899 717,063 N.B.V as at 30.06.2020 168,333 487,108 15,805 671,246 2020/2021 2019/2020 13. Intangible Assets: Kshs ‘000 Kshs ‘000 Cost: Balance as at 1 July 2,105,015 1,749,624 Additions 205,332 355,391 Balance as at 30 June 2,310,347 2,105,015 Amortization: Balance as at 1 July 899,593 598,328 Charge for the year 423,067 301,265 Balance as at 30 June 1,322,660 899,593 Net Book Values as at 30 June 987,687 1,205,422 106 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Bal. as at 30 June 2021 |

|---|

| Kshs ‘000 |

| 704,314 |

| 704,314 |

| 33,068 |

| 23,031 |

| 56,099 |

| 671,246 |

| 648,215 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 2,105,015 |

| 205,332 |

| 2,310,347 |

| 899,593 |

| 423,067 |

| 1,322,660 |

| 987,687 |

Page 107

Notes to the Financial statements For the year ended 30 June 2021 (continued) 14. Finance Income: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Bank Interest Earnings 167,636 1,310,374 TOTAL 167,636 1,310,374 The reduction in finance income was as a result of remittance of funds to the National Treasury in form of special dividends. 15. Finance Costs: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Interest Charges - Long Term Loans 18,119 42,717 Price Difference Gain (519) (2,422) Discounts 119,161 92,840 Fringe Benefit Tax 2,137 1,281 Compensation Cargo Claims 493 748 TOTAL 139,391 135,164 16. Impairment Losses/(Gains): 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Prov. Impairment Loss Debtors 167,549 395,922 Prov. Impairment Loss/(Gain) on PPE 75,569 (177,034) TOTAL 243,118 218,888 17. Other Gains/(Losses) 2020/2021 2019/2020 Note Kshs ‘000 Kshs ‘000 Loss on Disposal of Non-Financial Assets 17(a) (44,336) (276,276) Inventory difference Gain 0 34 Realized exchange Gain 546,613 56,503 TOTAL 502,277 (219,739) 17. a. Gain/(Loss) on Disposal of Non-Financial Assets: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Loss on sale of fixed assets (47,224) (278,506) Profit on sale of surveyed stock 2,888 2,230 TOTAL (44,336) (276,276) KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 107

| 2020/2021 |

|---|

| Kshs ‘000 |

| 167,636 |

| 167,636 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 18,119 |

| (519) |

| 119,161 |

| 2,137 |

| 493 |

| 139,391 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 167,549 |

| 75,569 |

| 243,118 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| (44,336) |

| 0 |

| 546,613 |

| 502,277 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| (47,224) |

| 2,888 |

| (44,336) |

Page 108

Notes to the Financial statements For the year ended 30 June 2021 (continued) 18. Income Tax Expense 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 (a) Current Taxation Current taxation based on the adjusted profit for the year 5,317,676 3,054,185 Current year deferred tax charge 660,584 1,418,827 Tax charge for the year 5,978,260 4,473,012 (b) Reconciliation of tax expense to the expected tax based on accounting profit Profit before taxation 13,817,820 8,178,108 Tax at the applicable tax rate 4,145,346 2,044,527 Tax effects of expenses not deductible for tax purposes 1,270,100 666,055 Tax effects of income not taxable (360,785) (924) Tax effects of excess capital allowances over depr. / amort. 263,015 344,527 Current taxation based on adjusted profit 5,317,676 3,054,185 At the close of the year, KRA was undertaking a Tax compliance audit for FY2015/2016 to FY2017/18. 19. Non-Current Assets Held for sale Item of non-current assets held for sale as 30th June 2021 are as below indicated; 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 G section tractor TR 55 0 400 Total 0 400 20. Long Term Investment 2020/2021 2019/2020 As at 30 June 2021 Note Kshs ‘000 Kshs ‘000 Fixed Deposits: (a) Housing Scheme Backup Funds- HFCK 279,626 263,666 Fixed Deposits- HFCK 290,996 296,457 KCB Mortgage 414,925 412,200 Eco-Bank Kenya Ltd 21,043 20,691 SBM Bank Ltd. 0 374,054 Subtotal 1,006,590 1,367,068 Equities: (b) Kenya National Shipping Line 54,346 54,346 Kenya Ferry Services 100,000 100,000 Impairment of Trade Investment (154,346) (154,346) Consolidated Bank of Kenya 29,100 29,100 Subtotal 29,100 29,100 Other Investment: (c) KDIC -Chase bank Deposits 748,108 748,108 Impairment (748,108) (748,108) Subtotal 0 0 TOTAL 1,035,690 1,396,168 108 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 5,317,676 |

| 660,584 |

| 5,978,260 |

| 13,817,820 |

| 4,145,346 |

| 1,270,100 |

| (360,785) |

| 263,015 |

| 5,317,676 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 0 |

| 0 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 279,626 |

| 290,996 |

| 414,925 |

| 21,043 |

| 0 |

| 1,006,590 |

| 54,346 |

| 100,000 |

| (154,346) |

| 29,100 |

| 29,100 |

| 748,108 |

| (748,108) |

| 0 |

| 1,035,690 |

Page 109

Notes to the Financial statements For the year ended 30 June 2021 (continued) Long Term Investment (continued) Chase Bank Ltd was placed under receivership on 7th April 2016. Based on the Kenya Gazette notice No 6833 dated 6th July 2018, a transfer of 75% of the deposits moved to SBM (Kenya) Ltd while 25% was retained by Kenya Deposit Insurance Corporation. The transition process was completed on 17th August 2018 and SBM Kenya Ltd transferred a total of Kshs. 1,175 million in FY2018/19. In line with Kenya Gazette notice, the first and second equal instalments of cash deposits previously held with Chase Bank Kenya (In Receivership) were received by the Authority from SBM Kenya Ltd. The remaining deposits (last instalment) are on fixed deposit account earning interest at 6.3% p.a with restricted access; and will be released in August 2021. a. Fixed Deposits Details and movement of the fixed deposits are shown below; Inter Balance 1 Account Balance 30 July 2020 Charges Interest Transfer June 2021 Kshs ‘000 Kshs’000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Housing Scheme Backup- HFCK 263,666 (1) 0 15,961 279,626 Fixed Deposits- HFCK 296,457 0 10,500 (15,961) 290,996 KCB Mortgage 412,200 0 2,725 0 414,925 Eco-Bank Kenya Ltd 20,691 0 352 0 21,043 SBM Bank Ltd 374,054 0 0 (374,054) 0 TOTAL 1,367,068 (1) 13,577 (374,054) 1,006,590 i. Funds invested with Housing Finance amounted to Kshs 571 million out of which Kshs 280 million is held as lien on loans advanced to staff under the HOMS and earns interest at 2% pa. The balance of Kshs 291 million is held in a fixed deposit account and earns interest of 7% pa. ii. Funds invested with Kenya Commercial Bank amounting to Kshs 415 million is held as security on loans advanced to staff under HOMS. They earn interest at 2% p.a. iii. Funds invested with ECO-Bank amounting to Kshs 21 million are held as security on loans advanced to staff under HOMS. They earn interest at 2% p.a. iv. SBM Bank Ltd. funds represent the remaining investment in Chase Bank Ltd. (in receivership) and continue to earn interest at 6.3% per annum. The first portion was released in August 2019 & second portion was released in August 2020. The remaining instalment will be released in August 2021. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 109

| Balance 30 June 2021 |

|---|

| Kshs ‘000 |

| 279,626 |

| 290,996 |

| 414,925 |

| 21,043 |

| 0 |

| 1,006,590 |

Page 110

Notes to the Financial statements For the year ended 30 June 2021 (continued) Long Term Investment (continued) b. Equities: Details of the equities are shown below. Nominal Value of Value of Direct Effective Entities value of shares less shares less shareholding shareholding shares impairment impairment 2020/2021 2019/2020 % % Kshs ‘000 Kshs ‘000 Kshs ‘000 Kenya National Shipping Line 45% 0%* 54,346 0 0 Kenya Ferry Services 20% 0%* 100,000 0 0 Consolidated Bank of Kenya 2.60% 2.60% 29,100 29,100 29,100 TOTAL 29,100 29,100 *The effective shareholding is 0% because the investments were fully impaired. c. Other Investment: Chase Bank Ltd. was placed under receivership in April 2016 by Central Bank of Kenya. The Authority’s Board made a 25% impairment provision on the deposits during the 336th regular meeting held in December 2017. Cash deposits including interest amounting to Kshs 1,175 million previously held with Chase Bank Kenya (In Receivership) were remitted to the Authority in FY 2018/2019. The remaining balance is classified as short-term deposits and continues to earn interest at 6.3% per annum. The first portion was released in August 2019 while the second portion in August 2020. The remaining instalment will be released in August 2021. 21. Inventories 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Engineering stores 414,885 417,966 Fuel, oil and lubricants 532 1,809 Motor vehicle spare parts 6,370 19,808 Stationery and general stores 17,366 47,600 Medicines 39,902 43,799 Sub-Total 479,055 530,982 Provision for Write-off (35,446) (35,446) Totals 443,609 495,536 Inventories are stated at cost which include the purchase price, import duty, transport and handling charges. Inventories are managed using FIFO method. Just in Time (JIT) strategy is applied by the Authority to increase efficiency and decrease wastage. A provision for obsolete inventories has been made in accordance with the Authority policy. The Authority has lodged a request for approval of write-off of obsolete inventories from the books with the GoK. 110 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Value of shares less impairment |

|---|

| 2020/2021 |

| Kshs ‘000 |

| 0 |

| 0 |

| 29,100 |

| 29,100 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 414,885 |

| 532 |

| 6,370 |

| 17,366 |

| 39,902 |

| 479,055 |

| (35,446) |

| 443,609 |

Page 111

Notes to the Financial statements For the year ended 30 June 2021 (continued) 22. Receivables & Prepayments 2020/2021 2019/2020 Trade Receivables Note Kshs ‘000 Kshs ‘000 Trade Cargo 4,379,053 4,086,190 Trade Marine 695,417 477,751 Rental 133,554 151,598 Subtotals (i) (a) 5,208,024 4,715,539 Railways Debtors 504,482 497,147 Misc. A/C Receivables 13,185 12,961 Subtotals (ii) 517,667 510,108 Less; Provision for Impairment (iii) (2,274,084) (2,106,536) Subtotals (i+ii-iii) 3,451,607 3,119,111 KNSL 1,507 1,507 National Treasury (Dredgco) 287,231 287,231 Impairment of Other Debtors (288,738) (288,738) Subtotals 0 0 Other Receivables: Staff Advances 33,412 38,536 Advance Imprest & Subsistence 120,202 21,895 Prepayments & Accrued Income (b) 507,506 313,970 Advance Creditors (c) 6,031,411 5,213,997 Deposit Others 97,983 97,787 Valuation Adjustment 708,001 1,416,160 Tax Recoverable (d) 7,406,853 6,224,394 VAT in 521,939 453,214 Others 1,002,318 478,520 Subtotals 16,429,625 14,258,474 TOTAL 19,881,232 17,377,585 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 111

| 2020/2021 |

|---|

| Kshs ‘000 |

| 4,379,053 |

| 695,417 |

| 133,554 |

| 5,208,024 |

| 504,482 |

| 13,185 |

| 517,667 |

| (2,274,084) |

| 3,451,607 |

| 1,507 |

| 287,231 |

| (288,738) |

| 0 |

| 33,412 |

| 120,202 |

| 507,506 |

| 6,031,411 |

| 97,983 |

| 708,001 |

| 7,406,853 |

| 521,939 |

| 1,002,318 |

| 16,429,625 |

| 19,881,232 |

Page 112

Notes to the Financial statements For the year ended 30 June 2021 (continued) Receivables & Prepayments (continued) a. As at June 30, the ageing analysis of the Trade and Rental receivables was as follows; Ageing Analysis 2020/2021 2019/2020 Period Kshs ‘000 Kshs ‘000 From 0 To 90 2,252,521 1,840,684 From 91 To 120 241,557 193,259 From 121 To 150 183,357 157,546 From 151 To 180 112,330 126,430 From 181 To 365 495,359 666,908 1 To 2 Years 571,138 734,219 Over 2 years 1,351,762 996,493 Total 5,208,024 4,715,539 In compliance with the Authority’s impairment policy and IFRSs, all overdue debts have been impaired. The Authority assumes that the credit risk on a financial asset increases significantly if it is more than 90 days past due. Debts over 2 years old have been impaired 100%. b. Prepayments & Accrued Income 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Accrued income 41,328 48,868 Rents & rates – prepaid 26,101 26,159 Insurance – prepaid 250,170 210,867 Prepayments Others 189,907 28,076 Total 507,506 313,970 c. Advance Creditors 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Advance Other Creditors 2,954,710 1,306,940 2nd Terminal Suppliers 2,651,787 1,987,229 Lamu Port Project Suppliers 424,914 1,919,828 Total 6,031,411 5,213,997 d. Tax Recoverable 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Balance as at 01 July 6,224,394 2,538,069 Total Output VAT (2,864,645) (3,312,572) Total Input VAT and Withheld output VAT 4,047,104 6,998,897 Total 7,406,853 6,224,394 112 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 2,252,521 |

| 241,557 |

| 183,357 |

| 112,330 |

| 495,359 |

| 571,138 |

| 1,351,762 |

| 5,208,024 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 41,328 |

| 26,101 |

| 250,170 |

| 189,907 |

| 507,506 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 2,954,710 |

| 2,651,787 |

| 424,914 |

| 6,031,411 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 6,224,394 |

| (2,864,645) |

| 4,047,104 |

| 7,406,853 |

Page 113

Notes to the Financial statements For the year ended 30 June 2021 (continued) 23. Tax Payable/ (Paid in Advance) 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Balance as at 1st July (2,388,639) 1,207,331 Income tax charge for the year 5,317,676 3,054,185 Income tax paid during the year (3,163,998) (4,536,221) Final Tax paid 0 (2,041,943) Overpaid tax utilized (30,724) (71,991) Total (265,685) (2,388,639) 24. Cash and Cash Equivalents 2020/2021 2019/2020 Note Kshs ‘000 Kshs ‘000 Short Term Deposits (a) 374,054 1,167,706 Bank and Cash Balances (b) 2,459,942 3,003,068 Total 2,833,996 4,170,774 a. Short Term Deposits: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Citibank T/Bills 0 754,743 Discount on Treasury Bills 0 38,909 SBM Bank Ltd. 374,054 374,054 Total 374,054 1,167,706 As stated under note 20, cash deposits including interest amounting to Kshs 1,175 million previously held with Chase Bank Kenya (In Receivership) were remitted to the Authority between February 2019 and April 2019 by SBM Bank Kenya Ltd. In August 2019, in line with Kenya Gazette notice, the first of the three equal instalments of cash deposits previously held with Chase Bank Kenya (In Receivership) were received by the Authority from SBM Kenya Ltd. The remaining investment in Chase Bank Ltd. (in receivership) continues to earn interest at 6.3% per annum. The first portion was released in August 2019 and the second portion was released in August 2020. The portion for August 2021 has been classified as a current asset. b. Bank and Cash Balances 2020/2021 2019/2020 Name of Bank Kshs ‘000 Kshs ‘000 National Bank of Kenya 325,028 507,284 Kenya Commercial Bank 6 (10) Citibank N. A 1,963,736 1,653,864 Equity 149,628 815,530 Stanbic Bank 2,939 4,691 Petty Cash 3,264 3,243 Safaricom Mpesa 15,341 18,466 Total 2,459,942 3,003,068 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 113

| 2020/2021 |

|---|

| Kshs ‘000 |

| (2,388,639) |

| 5,317,676 |

| (3,163,998) |

| 0 |

| (30,724) |

| (265,685) |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 374,054 |

| 2,459,942 |

| 2,833,996 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 0 |

| 0 |

| 374,054 |

| 374,054 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 325,028 |

| 6 |

| 1,963,736 |

| 149,628 |

| 2,939 |

| 3,264 |

| 15,341 |

| 2,459,942 |

Page 114

Notes to the Financial statements For the year ended 30 June 2021 (continued) Cash and Cash Equivalents (continued) Details of cash and cash equivalents are as follows; Financial Institution Bank Account 2020/2021 2019/2020 i) Current account Nos. Curr. Kshs ‘000 Kshs ‘000 1003057307400 Kshs 1,400 260,220 National Bank of Kenya 2003057307400 USD 158,904 245,664 1003000909000 Kshs 164,724 1,400 1107638127 Kshs 1 1 1146962908 USD 0 0 Kenya Commercial Bank 6690361829 BIF 0 (14) 6690361837 USD 5 3 300046401 Kshs 832,590 68,888 Citibank N, A 300046428 USD 1,131,146 1,584,976 1560267794795 Kshs 95,353 457,672 Equity 1560261552619 USD 54,269 357,858 4002200349395 RWF 6 0 Stanbic bank 9030008175933 USD 2,639 4,498 9030005614383 UGX 300 193 Sub-total 2,441,337 2,981,359 ii) Others; Petty Cash Kshs 3,264 3,243 Safaricom Mpesa 929929 Kshs 15,341 18,466 Sub-Total 18,605 21,709 iii) Fixed Deposit Account Treasury Bills Kshs 0 754,743 Discount on Treasury Bills Kshs 0 38,909 Sub-Total 0 793,652 0223305760001/ 0043305760011/ iv) SBM Bank Ltd. 0043305760014/ 0043305760015/ Kshs 374,054 374,054 Grand-Total Kshs 2,833,996 4,170,774 25. Movement in Revaluation Reserves 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Opening Balance 103,132,900 111,646,031 Transfers to General Reserves: Effects on Revaluation (9,348,290) (8,513,131) Closing Balance 93,784,610 103,132,900 Effects on Revaluation resulted from revaluation of the Authority’s non-current assets conducted by M/s Sec & M Ltd. 114 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 1,400 |

| 158,904 |

| 164,724 |

| 1 |

| 0 |

| 0 |

| 5 |

| 832,590 |

| 1,131,146 |

| 95,353 |

| 54,269 |

| 6 |

| 2,639 |

| 300 |

| 2,441,337 |

| 3,264 |

| 15,341 |

| 18,605 |

| 0 |

| 0 |

| 0 |

| 374,054 |

| 2,833,996 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 103,132,900 |

| (9,348,290) |

| 93,784,610 |

Page 115

Notes to the Financial statements For the year ended 30 June 2021 (continued) 26. Movement in General Reserves 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Opening Balance 80,874,208 90,620,573 Adjustments for: Profit After Tax 7,839,560 3,705,096 Revaluation Effects 9,348,290 6,420,196 Grants 1,475,217 2,125,480 Other Adjustments 16,366 1,443 Increase in Pension Deficit (1,004,600) (2,855,700) Transfers due to Disposal (1,670,404) 0 Unrealized Foreign Exchange Gain/(Loss) (766,610) 1,132,129 Other Valuation Gain 0 1,855 Dividends Paid 0 (516,130) Special Dividends 0 (18,000,000) JICA Loan Revaluation Effects 964,169 (1,760,734) Closing Balance 97,076,196 80,874,208 27. Grants Grants represent funds provided by donors, in this case TMEA, either directly or via a sponsor for the purposes of financing specific capital projects of the Authority. They are in the form of assets. Such assets include Eco Terracing, expansion of gate 18 among others. Capitalized/ Received Adjusted Cumulative 1/7/2020 2020/21 2020/21 to 30/6/2021 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Trade Mark East Africa 1,392,751 21,686 (1,162,733) 251,704 SGR 2,075,810 0 (312,484) 1,763,326 Total 3,468,561 21,686 (1,475,217) 2,015,030 28. Government Project Funds GoK project funds are disbursed to the Authority for specific GoK projects not in direct control of the Authority. During the year, the movement was as below: 1/7/2020 Received Cumulative 2020/21 to 30/6/2021 Kshs ‘000 Kshs ‘000 Kshs ‘000 Infrastructure Kisumu Port 50,000 0 50,000 Lamu Port Development 37,336,157 6,000,000 43,336,157 Total 37,386,157 6,000,000 43,386,157 During the year Kenya Ports Authority received Kshs 6 Billion from the parent Ministry for the Lamu Port development project. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 115

| 2020/2021 |

|---|

| Kshs ‘000 |

| 80,874,208 |

| 7,839,560 |

| 9,348,290 |

| 1,475,217 |

| 16,366 |

| (1,004,600) |

| (1,670,404) |

| (766,610) |

| 0 |

| 0 |

| 0 |

| 964,169 |

| 97,076,196 |

| Cumulative |

|---|

| to 30/6/2021 |

| Kshs ‘000 |

| 251,704 |

| 1,763,326 |

| 2,015,030 |

| Cumulative |

|---|

| to 30/6/2021 |

| Kshs ‘000 |

| 50,000 |

| 43,336,157 |

| 43,386,157 |

Page 116

Notes to the Financial statements For the year ended 30 June 2021 (continued) Lamu Port Project Statement of Financial Position As at 30 June 2021 Notes Kshs’000 Kshs’000 Non-Current Assets a 43,572,351 43,572,351 Financed By: Government funds 42,720,252 Interest on GoK funds 195,647 KPA funds* 2,042,473 Funds for Dongo Kundu utilized on PAPs 431,374 Unutilized Funds (4,245,123) 41,144,623 Current Liabilities c 2,427,728 43,572,351 *The Authority contributed Kshs 2.04 Billion towards the Lamu port project. a. Non-current Assets Kshs’000 Boundary wall – National youth service 20,000 Police station &staff quarters (Vaghjiyani Enterprises- up to certificate 16) 619,816 Works in progress;

1. Civil works 1st Three Berths – China Communications (Forex, Taxes Included) 39,888,363
2. Consultancy 1st Three berths – Yooshin Engineering (Forex, Taxes Included) 1,000,026
3. PAPs Kenya Forestry Services 64,939 Lamu Municipal council – Approval fee 35,000 National Land Commission 1,925,348 Compensation for local fishermen 18,859 43,572,351 b. Currents Assets Kshs Unrecovered advance up to certificate no 22 (China Communications) 0 0 c. Current liabilities Kshs China Communications (Retention up to certificate 23); Kshs & USD portion 2,381,979 Yooshin Engineering 45,749 2,427,728 116 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Kshs’000 | Kshs’000 |

|---|---|

| | 43,572,351 |

| | 43,572,351 |

| 42,720,252 | |

| 195,647 | |

| 2,042,473 | |

| 431,374 | |

| (4,245,123) | 41,144,623 |

| | 2,427,728 |

| | 43,572,351 |

| Kshs’000 |

|---|

| 20,000 |

| 619,816 |

| 39,888,363 |

| 1,000,026 |

| 64,939 |

| 35,000 |

| 1,925,348 |

| 18,859 |

| 43,572,351 |

| Kshs |

| 0 |

| 0 |

| Kshs |

| 2,381,979 |

| 45,749 |

| 2,427,728 |

Page 117

KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 117 stnemetats laicnaniF eht ot setoN 1202 enuJ 03 dedne raey eht roF )deunitnoc( :sgniworroB .92 1202 enuJ 03 ta sA secnalaB gnisolC stnemyapeR noitaulaV -esrubsiD gninepO tnerruC-noN tnerruC latoT stceffe tseretnI niaG xeroF lapicnirP stnem yluJ 10 secnalaB 000’shsK 000’shsK 000’shsK 000’shsK 000’shsK 000’shsK 000‘ shsK 000‘ shsK 000‘ shsK snaoL 669,104,12 939,852,1 509,066,22 )713,305( 698,22 185,62 )845,554( 0 981,395,32 1-ACIJ 817,715,81 0 817,715,81 )258,064( 0 0 0 668,246,2 407,533,61 2-ACIJ 486,919,93 939,852,1 326,871,14 )961,469( 698,22 185,62 )845,554( 668,246,2 398,829,93 latoT 0202 enuJ 03 ta sA secnalaB gnisolC stnemyapeR noitaulaV xeroF -esrubsiD gninepO tnerruC-noN tnerruC latoT stceffe tseretnI niaG lapicnirP stnem yluJ 10 secnalaB 000’shsK 000’shsK 000’shsK 000’shsK 000’shsK 000’shsK 000‘ shsK 000‘ shsK 000‘ shsK snaoL 552,537,22 439,758 981,395,32 515,930,1 209,24 466,51 )897,538( 0 808,373,32 1-ACIJ 407,533,61 0 407,533,61 912,127 0 0 0 623,834,5 951,671,01 2-ACIJ 959,070,93 439,758 398,829,93 437,067,1 209,24 466,51 )897,538( 623,834,5 769,945,33 latoT

| tnerruC-noN | 000’shsK | 669,104,12 | 817,715,81 | 486,919,93 |

|---|---|---|---|---|

| tnerruC | 000’shsK | 939,852,1 | 0 | 939,852,1 |

Page 118

Notes to the Financial statements For the year ended 30 June 2021 (continued) Borrowings (continued) JICA Loan 1 (KE-P25, KE-P25A) Japan International Cooperation Agency funded the implementation of the Mombasa Port Development Project phase I. The principal value of the loan is JPY 26,711 million, interest rate is 0.2% paid per annum paid semi-annually. The loan disbursements were completed. Total amounts disbursed was JPY 26,329 million translated to Kshs 24,359 million as at 30th June 2017. The Loan repayment will be for thirty (30) years, paid semi-annually on 20th May and 20th November. The loan repayment commenced on 20th November 2017 and the last instalment will be repaid on 20th November 2047. As at 30 June ,2021 the outstanding balance for JICA loan was JPY 23,302 million translated to Kshs 22,661 million. On 15 April 2020, the G20 together with the Paris club announced Debt Service Suspension Initiative (DSSI) to assist developing countries tackle Covid 19. Following GoK application to the Paris club and in line with DSSI, JICA temporary suspended the obligation from 1st January 2021 to 31ST December 2021 and has not issued an invoice for the May 2021 instalment. The Authority is awaiting conclusion of the exchange of notes between JICA and GoK to release the May instalment equivalent to Kshs 429 million. The loan was for the purchase of goods and services from suppliers, contractors of consultants as the case may be to facilitate the implementation of the Mombasa Port Development Project Phase I (berth 20 and 21). JICA Loan 2 (KE-P30) Japan International Cooperation Agency funded the implementation of the Mombasa Port Development Project phase II. The principal value of the loan is JPY 32,116 million, interest rate is 0.1% paid per annum paid semi-annually. As at 30 June 2021 amounts disbursed and which was also the outstanding balance for JICA loan at the time was JPY 18,697 Million translated to Kshs 18,518 Million. The Loan agreement became effective on 24 August 2016 and the final disbursement shall be made not later than 24 August 2023. The Loan repayment will be for thirty (30) years, paid semi-annually on 20 March and 20th September commencing on 20 March 2025 to 20 March 2055. The loan is for the purchase of goods and services from suppliers, contractors of consultants as the case may be to facilitate the implementation of the MPDP Phase II. 30. Deferred Tax: The net deferred tax liability movement at year end is as shown below; 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Balance as at 1 July 6,650,083 5,231,256 Movement for the year 660,584 1,418,827 Total 7,310,667 6,650,083 118 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 6,650,083 |

| 660,584 |

| 7,310,667 |

Page 119

Notes to the Financial statements For the year ended 30 June 2021 (continued) 31. Trade & Other Payables 2020/2021 2019/2020 Note Kshs ‘000 Kshs ‘000 Trade Payables: General Trade 1,518,235 2,474,214 General Foreign Suppliers 428,038 56,419 Payroll 657,229 417,063 Accrued Expenditure 3,455,799 2,263,706 Other Payables National Treasury/Dredgco 287,231 287,231 2nd Terminal Suppliers 0 184,481 Creditors Valuation 38,644 0 Stock accruals 2,822,846 1,452,820 Contractors Deposit 3,243,369 4,569,072 KOT Project Suppliers 1,983,769 2,390,342 SOT Port Project Suppliers 62,487 0 KRC 273,868 87,619 Advance Receipts (a) 91,781 144,166 KPA Directors 118 506 KCHS Provident Fund 0 6,426 Down Payment Cargo Customers 11,772 11,772 VAT Payable 253,552 204,602 Verification Payable 54,502 41,707 Others 169,807 144,480 Total 15,353,047 14,736,626 a. Advance Receipts 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Marine 11,621 18,283 Cargo 57,556 86,876 Rentals 22,604 39,007 Total 91,781 144,166 Trade and other payables increase were mainly due to port expansion and ongoing modernization projects. 32. Retirement Benefits The Authority operates a Defined Benefit and Defined Contribution scheme for its employees. The assets of the two schemes are held in a separate trustee administered funds which are funded by both contributions from the Authority and employees. The schemes are administered by Zamara Actuaries, Administrators and Consultants Ltd. While Britam Asset Managers (K) Ltd, African Alliance (K) Ltd, Investment Bank Ltd and Stanlib (K) Ltd, provides custodial services to the Scheme. The Authority’s contribution to the Defined contribution scheme is the final obligation. The employer’s contributions payable for DC scheme was Kshs 1,227 Million (FY 2019/2020 Kshs 1,470 Million) and has been recognized in the Statement of Profit or Loss and Other Comprehensive Income. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 119

| 2020/2021 |

|---|

| Kshs ‘000 |

| 1,518,235 |

| 428,038 |

| 657,229 |

| 3,455,799 |

| 287,231 |

| 0 |

| 38,644 |

| 2,822,846 |

| 3,243,369 |

| 1,983,769 |

| 62,487 |

| 273,868 |

| 91,781 |

| 118 |

| 0 |

| 11,772 |

| 253,552 |

| 54,502 |

| 169,807 |

| 15,353,047 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 11,621 |

| 57,556 |

| 22,604 |

| 91,781 |

Page 120

Notes to the Financial statements For the year ended 30 June 2021 (continued) Retirement Benefits (continued) The Authority Defined Benefit retirement scheme was closed to new entrants and future accrual of benefits effectively on 31st December 2012. The Authority only makes contribution to the scheme in respect of those members who opted to remain in the Defined Benefit scheme. The actuarial report as at 31 December 2020 showed an actuarial deficit of Kshs 4,379 million. The Authority as the sponsor contributes Kshs 44.6 Million per month as part of the remedial plan to clear the deficit. A total of Kshs 535.2 million was remitted in FY 2020/2021. As at 30 June 2021, the scheme had an actuarial deficit of Kshs 4,111.4 million (Kshs 3,642 million deficit FY 2019/20), out of which Kshs 535.2 million is classified as current. 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Valuation at beginning 3,642,000 1,321,500 Payments (535,200) (535,200) Changes in valuation (Increase) 1,004,600 2,855,700 Valuation at end 4,111,400 3,642,000 33. Reconciliation of operating profit to cash generated from operations Note 2020/2021 2019/2020 Cash Flow from Operating Activities: Kshs ‘000 Kshs ‘000 Operating profits before tax 13,817,820 8,178,108 Add/(Deduct): Interest income (167,636) (1,310,374) Interest expense 18,119 42,717 Non-Cash Items: Depreciation of Property Plant and Equipment 11,12 11,277,393 10,742,418 Amortization of Intangible Assets 13 423,067 301,265 Increase in Provision for impairment of debts 167,549 395,922 Increase/(Decrease) in Impairment of Asset-PPE 75,569 (177,034) Loss on sale of assets 47,224 278,506 Profit on sale of Surveyed stock (2,888) (2,230) Net foreign Gain (519) (2,456) Operating Profit before working capital changes 25,655,698 18,446,842 (Increase)/Decrease in Inventories 21 51,927 (90,723) Increase in Prepayments 22(b) (193,536) (43,074) Increase in Trade & other receivables 34 (2,857,096) (376,745) Increase in Trade & other payables 35 594,052 3,510,696 Cash generated from operations 23,251,045 21,446,996 120 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 3,642,000 |

| (535,200) |

| 1,004,600 |

| 4,111,400 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 13,817,820 |

| (167,636) |

| 18,119 |

| 11,277,393 |

| 423,067 |

| 167,549 |

| 75,569 |

| 47,224 |

| (2,888) |

| (519) |

| 25,655,698 |

| 51,927 |

| (193,536) |

| (2,857,096) |

| 594,052 |

| 23,251,045 |

Page 121

Notes to the Financial statements For the year ended 30 June 2021 (continued) 34. Reconciliation of Accounts Receivables: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 30 June 19,881,232 17,377,585 Add/(Less): Vendor adjustment (161,174) Prepayment (507,506) (313,970) Subtotal 19,212,552 17,063,615 Less: Valuation Adjustment (708,001) (1,416,160) Reconciled Movement Amount 18,504,551 15,647,455 2,857,096 35. Reconciliation of Accounts Payables: 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Kshs ‘000 Balance as at 30 June 15,353,047 14,736,626 Add/(Less): Adjusted KCHS fund 6,426 Subtotal 15,359,473 14,736,626 Less: Creditors Valuation Adjustment (38,644) (9,849) Reconciled Movement Amount 15,320,829 14,726,777 594,052 36. Purchase of PPE 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Purchase of PPE 24,048,019 38,570,386 37. GoK Project Funds 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Lamu Port Development 6,000,000 10,000,000 During the year Kenya Ports Authority received Kshs 6 Billion from the parent Ministry for the Lamu Port development project. 38. Dividends 2020/2021 2019/2020 Dividends (Special) Kshs ‘000 Kshs ‘000 Special Dividends 4,950,000 18,000,000 Paid during the year (4,950,000) (13,050,000) Balance at end of the year 0 4,950,000 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 121

| 2020/2021 |

|---|

| Kshs ‘000 |

| 4,950,000 |

| (4,950,000) |

| 0 |

Page 122

Notes to the Financial statements For the year ended 30 June 2021 (continued) Dividends (continued) 2020/2021 2019/2020 Normal Dividends Kshs ‘000 Kshs ‘000 FY 2017/18 0 516,130 FY 2018/19 731,073 731,073 FY 2019/20 277,882 277,882 FY 2020/21 587,967 0 Paid within the year: Dividends 0 (516,130) Balance as 30 June 1,596,922 1,008,955 The Authority was directed to remit to the National Treasury Kshs 18 billion in Fy2019/2020. A total of Kshs 13.05 billion was remitted to GoK in Fy2019/2020 with the balance of Kshs 4.95 billion remitted in the reporting FY 2020/2021. Normal dividend of 2018/2019 and 2019/20 totalling to Kshs 1.009 billion was still outstanding at the close of the year. The proposed dividend for the year ended 2020/2021 is Kshs 587.9 million. Owing to the huge commitments the Authority is facing especially on the Lamu Port Project and the recent placement of ferry services under Kenya Ports Authority. Management is pursuing waiver of the normal dividends by the NT so that the same is utilised towards Lamu Port operationalisation and other urgent commitments. 39. Related Party Transactions The Government of Kenya is the principal shareholder of the Authority, holding 100% of the KPA equity interest. Included in debtors and investments are balances owing or receivable from the following related parties: 2020/2021 2019/2020 Description Kshs ‘000 Kshs ‘000 Kenya Ferry Services (Investment) 100,000 100,000 Ministry of Transport 287,231 287,231 Kenya National Shipping Line (Debtor) 28,178 28,178 Kenya National Shipping Line (Investment) 54,347 54,347 Impairment provision (469,756) (469,756) Total 0 0 DB Retirement Benefit Liability 4,111,400 3,642,000 Total 4,111,400 3,642,000 Kenya Railway Corporation • SGR The Authority expected full reimbursement of actual costs from the Railway Development Levy Fund. In the reporting year, the Joint Boards from KPA and KRC deliberated and shelved the matter. As at 30 June 2021, a total of 1,301 containers were erroneously railed to ICD Nairobi. The anticipated loss is USD 692,265. 122 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 0 |

| 731,073 |

| 277,882 |

| 587,967 |

| 0 |

| 1,596,922 |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 100,000 |

| 287,231 |

| 28,178 |

| 54,347 |

| (469,756) |

| 0 |

| 4,111,400 |

| 4,111,400 |

Page 123

Notes to the Financial statements For the year ended 30 June 2021 (continued) Kenya Railway Corporation (continued) • Take or Pay Arrangement The TOPA places the Authority as guarantor for minimum traffic and commits to pay KRC any shortfall. This arrangement increases the level of commitment and hence the risk on KPA cash flows. The agreement provides for a possible crystallization of the liability, relating to the SGR project. In this event, the liability will be charged to the Statement of Profit or Loss during the period of occurrence and the agreement does not provide for reversal of such realized payment. The minimum tonnage for the calendar year 2021 is 5,723,333 tones, while for the calendar year 2020 was 6,000,000 tones. If these tonnages are prorated for conversion into the reporting financial year 2020/2021, it means that for the financial year 2020/2021, KPA should have railed 5,861,667 tones. However, 5,145,677 tones were railed and USD 101,521,801 remitted to the SGR escrow account, against the expected USD 118,377,194. The maximum reduction of profit or the contingent liability for the year 2020/2021 is therefore USD 16,855,393. There is however a moratorium up to December 2021. • Transfer of Naivasha ICD assets to KPA At the close of the FY, KRC was still in the process of transferring facilities at the Naivasha ICD to the Authority. • Transfer of Lake Victoria Ports to KPA At the close of the FY, KRC was still in the process of transferring facilities at the Lake Victoria Ports to the Authority. • Transfer of SGR assets at Port Reitz to KPA A joint Committee of Kenya Ports Authority, Kenya Railways and the Operator (CRBC) undertook a technical audit of the SGR loading and offloading equipment located at Port Reitz yard with the aim of officially handing over the same to KPA, together with the associated SGR loan component. The Equipment in question and the associated loan and Grant element is broken down in the below table; Initial Cost per Initial Total Initial Total Cost KPA Treatment of Description Qty. Unit US$ Cost US$ Kshs @106 the Funds. Rail Mounted Gantry (RMG Cranes) 2 2,597,509 5,195,018 550,671,908 n/a Reach Stacker 8 576,100 4,608,800 488,532,800 n/a Total Cost 9,803,818 1,039,204,708 n/a Proposed Loan Take-over by KPA. Loan Amount 8,333,245 883,324,002 KPA to pay KPA Take-over-KPA to treat GOK Funds GOK Funds 1,470,573 155,880,706 as Grant money. • Kenya Transport and Logistics Network (KTLN) Kenya Transport and Logistics Network (KTLN) was established following an Executive Order No. 5 of 2020 with the objective of creating a framework for the management, coordination and integration of the Public Port, Railway Network and Pipeline services. The Network brings together Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC) and Kenya Pipeline Company Limited (KPC) under the coordination of the Industrial and Commercial Development Corporation (ICDC). The three State agencies KPA, KPC an KRC entered into a joint operations agreement, on 8th September 2020, to reorganize individual entity structures, resources, operations, and services. The reorganization is meant to help in the establishment of a seamless and coordinated national transport and logistics network. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 123

| Description | Qty. | Initial Cost per Unit US$ | Initial Total Cost US$ | Initial Total Cost Kshs @106 | KPA Treatment of the Funds. |

|---|---|---|---|---|---|

| Rail Mounted Gantry (RMG Cranes) | 2 | 2,597,509 | 5,195,018 | 550,671,908 | n/a |

| Reach Stacker | 8 | 576,100 | 4,608,800 | 488,532,800 | n/a |

| Total Cost | | | 9,803,818 | 1,039,204,708 | n/a |

| Loan Amount | | | 8,333,245 | 883,324,002 | Proposed Loan Take-over by KPA. KPA to pay |

| GOK Funds | | | 1,470,573 | 155,880,706 | KPA Take-over-KPA to treat GOK Funds as Grant money. |

Page 124

Notes to the Financial statements For the year ended 30 June 2021 (continued) Kenya Ferry Services Limited A business and assets transfer agreement between the Government of Kenya, Kenya Ports Authority (KPA) and Kenya Ferry Services Limited (KFS), was signed on 18th June, 2021, effectively placing the operations of the ferry services and the Likoni floating pedestrian bridge under Kenya Ports Authority. The two entities operated as one for only 12 days during the year 2020/2021 and a summarized financial performance of the defunct Kenya Ferry Services Limited is detailed below. Kenya Ferry Services Limited Statement of Financial Position For the year ended 30 June 2021 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Non-current assets Property, plant, and equipment 4,322,315 4,311,179 Capital work in progress 399,501 336,527 Investment property 299,019 306,888 Prepaid operating lease rentals 1,462 1,728 Software 22,857 0 Total Non-current assets 5,045,155 4,956,321 Current assets Inventories 88,488 107,754 Trade and other receivables 412,617 403,110 Cash and cash equivalents 336,795 621,554 Total Current assets 837,899 1,132,419 TOTAL ASSETS 5,883,055 6,088,741 EQUITY AND LIABILITIES Shareholders Funds Share capital 499,904 499,904 Revaluation reserve 542,280 542,280 Retained earnings (911,097) (677,101) Deferred income 5,310,331 5,395,280 Total Current assets 5,441,419 5,760,363 Current liabilities Trade and other payables 441,635 328,376 5,883,055 6,088,741 From 1st July 2021, all the transactions of the ferry services and the Likoni floating pedestrian bridge will be reported under KPA as per the relevant IFRS/IAS. 124 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 2020/2021 |

|---|

| Kshs ‘000 |

| 4,322,315 |

| 399,501 |

| 299,019 |

| 1,462 |

| 22,857 |

| 5,045,155 |

| 88,488 |

| 412,617 |

| 336,795 |

| 837,899 |

| 5,883,055 |

| 499,904 |

|---|

| 542,280 |

| (911,097) |

| 5,310,331 |

| 5,441,419 |

| 441,635 |

| 5,883,055 |

Page 125

Notes to the Financial statements For the year ended 30 June 2021 (continued) Key Management Compensation Kenya Ports Authority Pension Scheme During the year, the senior management team comprising The Authority operates Defined Benefit (DB) scheme of divisional and departmental heads, and the MD were alongside the Defined Contributory (DC) scheme. The DB paid Kshs 336 million as salaries and other allowances. scheme is valued by Zamara Actuaries, Administrators and The non-executive directors are entitled to receive Kshs 48 Consultants Ltd. The actuarial report as at 31 December million as director fees out of which Kshs 14.4 million is 2020 indicated a funding level of 84.0% resulting in an payable to the National Treasury for directors representing actuarial deficit of Kshs 4,379 Million. The Authority as the the Government and its agencies. sponsor contributes Kshs 44.6 million per month as part of the remedial plan to fund the deficit. A total of Kshs 535.2 Kenya National Shipping Line million was contributed in FY 2020/2021. As at 30 June KNSL enjoyed secretarial services from the Authority on 2021, the scheme had an actuarial deficit of Kshs 4,111.4 the understanding that this would be paid for. The line has million (Kshs 3,642 million deficit FY 2019/20), with Kshs however operated under difficulties and has been unable 535.2 million being classified as current. The Authority as to pay. The Authority has fully impaired the investment the sponsor decided to let the schemes be autonomous and the debt as per the impairment policy. Negotiations and run as a separate entity from the sponsor. The handing on the revival of operations and the restructuring of the over process was implemented in phases. At the close of shareholding of KNSL are ongoing with the GoK. the year, the scheme had been delinked with no further support by the sponsor on the administration costs. The Concession of 2nd Container Terminal schemes have reimbursed the Authority Kshs 39 million The GoK and other Stakeholders are in negotiations being staff administration cost. to concession the terminal to a third party to operate. The expected transaction fees from the concession are Bandari College expected at a minimum to cover the JICA loan repayment Bandari College was transferred to Bandari Maritime and have a reasonable return to the KPA investment. The Academy, as per Executive Order No. 1/2018. Assets terminal has Land, buildings, and equipment’s with a total amounting to Kshs 1.67 billion were transferred. Revenue NBV of Kshs 26.117 billion. After series of negotiations, earned and recognized in the Authority’s books of accounts the Technical Committee has closed discussions on the from the college was Kshs 414,250 in FY 2020/21 (Kshs Revenue Share Whereas Equipment lease is still under 19.7 million FY 2019/20). Expenditure incurred courtesy negotiations. of the college was Kshs 160 million in FY 2020/21 (Kshs 191 million FY 2019/20). KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 125

Page 126

Notes to the Financial statements For the year ended 30 June 2021 (continued) 40. Capital Commitments As at 30 June 2021 the Authority was undertaking the under listed projects with an objective of expanding capacity and modernization of equipment to increase efficiency in port services. PROJECT DESCRIPTION Estimated Cost Completion Estimated Sources Kshs % Completion date of Funds Lamu Port Project (Civil, Consultancy & PAPs) 45,000,000,000 91.6% October,2021 KPA/GoK Mombasa Port Development Project - (MPDP Phase II) 38,000,000,000 81.5% May, 2022 KPA/JICA Relocation Of Kipevu Oil Terminal 40,000,000,000 90% December, 2021 KPA Projects currently being implemented by the Authority’s and development partners include; Separate Consolidated reporting in these Project Period/ required as Project title Donor Donor commitment financial Number duration per the donor statements agreement (Yes/No) (Yes/No) Civil works, Mombasa Port Buildings, Equipment, KE-P30 JICA Ongoing No Yes Development Phase II Security system and Consulting Services Lamu Port NIL GoK Ongoing Civil works No Yes Development Project Civil works, Buildings Trade Mark East Africa NIL TMEA Ongoing No Yes and Equipment Dongo Kundu SEZ NIL JICA Ongoing Consultancy No Yes 126 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| PROJECT DESCRIPTION | Estimated Cost | Completion | Estimated | Sources |

|---|---|---|---|---|

| | Kshs | % | Completion date | of Funds |

| Lamu Port Project (Civil, Consultancy & PAPs) | 45,000,000,000 | 91.6% | October,2021 | KPA/GoK |

| Mombasa Port Development Project - (MPDP Phase II) | 38,000,000,000 | 81.5% | May, 2022 | KPA/JICA |

| Relocation Of Kipevu Oil Terminal | 40,000,000,000 | 90% | December, 2021 | KPA |

| Project title | Project Number | Donor | Period/ duration | Donor commitment | Separate reporting required as per the donor agreement (Yes/No) | Consolidated in these financial statements (Yes/No) |

|---|---|---|---|---|---|---|

| Mombasa Port Development Phase II | KE-P30 | JICA | Ongoing | Civil works, Buildings, Equipment, Security system and Consulting Services | No | Yes |

| Lamu Port Development Project | NIL | GoK | Ongoing | Civil works | No | Yes |

| Trade Mark East Africa | NIL | TMEA | Ongoing | Civil works, Buildings and Equipment | No | Yes |

| Dongo Kundu SEZ | NIL | JICA | Ongoing | Consultancy | No | Yes |

Page 127

Notes to the Financial statements For the year ended 30 June 2021 (continued) 41. Financial Risk Management Policies The Authority’s activities expose it to a variety of financial risks including credit, liquidity, and market risks. The Authority’s overall risk management policies are set out by the board and implemented by the management and focus on the unpredictability of changes in the business environment and seek to minimize the potential adverse effects of such risks on the Authority’s performance by setting acceptable levels of risk. The Authority’s financial risk management objectives and policies are detailed below; i. Credit Risk Management Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk mainly arises from financial assets and is managed on an Authority-wide basis. The Authority does not grade the credit quality of financial assets that are neither past due nor impaired. Credit risk on financial assets with banking institutions is managed by dealing with institutions with good credit ratings and placing limits on deposits that can be held with each institution, as stated in the investment policy. Credit risk on trade receivables is managed by ensuring that credit is extended to customers with an established credit history. The credit history is determined by considering the financial position, past experience and other relevant factors. Credit is managed by setting the credit limit and the credit period for each customer. The utilization of the credit limits and the credit period is monitored by management on a monthly basis. The amounts presented in the Statement of Financial Position are net of provisions for impairment. The ageing analysis of past due but not impaired trade receivables is: “if there are other categories of financial assets which are past due but not impaired, similar disclosure be provided”. The carrying amount of financial assets recorded in the financial statements that represents the Authority’s maximum exposure to credit risk obtained is as follows: Fully Performing Past due Impaired Total 30-Jun-21 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Due from related companies 0 0 469,756 469,756 Trade receivables; Marine 475,532 66,667 153,218 695,417 Cargo 1,755,598 683,958 1,939,497 4,379,053 Rental 21,391 28,833 83,330 133,554 Bank balances 2,441,337 0 0 2,441,337 Mpesa balance 15,341 0 0 15,341 Total 4,709,199 779,458 2,645,801 8,134,458 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 127

| 0 | 0 | 469,756 | 469,756 |

|---|---|---|---|

| 475,532 | 66,667 | 153,218 | 695,417 |

| 1,755,598 | 683,958 | 1,939,497 | 4,379,053 |

| 21,391 | 28,833 | 83,330 | 133,554 |

| 2,441,337 | 0 | 0 | 2,441,337 |

| 15,341 | 0 | 0 | 15,341 |

| 4,709,199 | 779,458 | 2,645,801 | 8,134,458 |

Page 128

Notes to the Financial statements For the year ended 30 June 2021 (continued) Financial Risk Management Policies (continued) Fully Performing Past due Impaired Total 30-Jun-20 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Due from related companies 0 0 469,756 469,756 Trade receivables; Marine 295,222 43,959 112,371 451,552 Cargo 1,495,047 785,477 1,805,194 4,085,718 Rental 50,414 28,320 72,864 151,598 Bank balances 2,981,359 0 0 2,981,359 Mpesa balance 18,466 0 0 18,466 Total 4,840,508 857,756 2,460,185 8,158,449 The customers are paying their debts as they continue trading. The Authority is actively pursuing this debt and holds collaterals including bank guarantees and deposits against credit and rental accounts as a means of mitigating the risk of financial loss from default. The debt that is impaired has been provided for as per the Authority Credit control policy. Debts and Investments worth Kshs 3,465 Million (2019-20; Kshs 3,298 Million) is provided for and includes at least Kshs 950 Million that is under litigation. The Authority is pursuing various measures to recover the impaired amounts including reviewing and implementing a new credit policy ii. Liquidity Risk Management Liquidity risk is the risk that the Authority will encounter difficulty in meeting obligations associated with financial liabilities. The board has developed a risk management framework for the management of the Authority’s short, medium, and long- term liquidity requirements thereby ensuring that all financial liabilities are settled as they fall due. The Authority manages liquidity risk by continuously reviewing forecasts and actual cash flows and maintaining banking facilities to cover any shortfalls. The forecast provides details of additional undrawn facilities that may be utilized by the Authority to further reduce liquidity risk. The table below analyses the Authority’s financial liabilities as at 30 June 2021 that will be settled on a net basis on maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. As at 30 June 2021 Less than Between Between Over Payables 1 month 1 – 3 months 4 - 6 months 6 months Total Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 General Trade 1,382,752 8,119 80,332 47,032 1,518,235 General Foreign 91,175 31,014 305,849 0 428,038 Payroll 327,874 46,298 90,390 192,667 657,229 Borrowings-Current portion 0 0 839,293 419,646 1,258,939 Total 1,801,801 85,431 1,315,864 659,345 3,862,441 128 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| 0 | 0 | 469,756 | 469,756 |

|---|---|---|---|

| 295,222 | 43,959 | 112,371 | 451,552 |

| 1,495,047 | 785,477 | 1,805,194 | 4,085,718 |

| 50,414 | 28,320 | 72,864 | 151,598 |

| 2,981,359 | 0 | 0 | 2,981,359 |

| 18,466 | 0 | 0 | 18,466 |

| 4,840,508 | 857,756 | 2,460,185 | 8,158,449 |

| 1,382,752 | 8,119 | 80,332 | 47,032 | 1,518,235 |

|---|---|---|---|---|

| 91,175 | 31,014 | 305,849 | 0 | 428,038 |

| 327,874 | 46,298 | 90,390 | 192,667 | 657,229 |

| 0 | 0 | 839,293 | 419,646 | 1,258,939 |

| 1,801,801 | 85,431 | 1,315,864 | 659,345 | 3,862,441 |

Page 129

Notes to the Financial statements For the year ended 30 June 2021 (continued) Liquidity Risk Management (continued) As at 30 June 2020 Less than Between Between Over Payables 1 month 1 – 3 months 4 - 6 months 6 months Total Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 General Trade 1,125,061 349,714 490,690 508,749 2,474,214 General Foreign 221 21,323 1,589 33,286 56,419 Payroll 267,836 14,524 20,270 114,433 417,063 Borrowings-Current portion 0 0 428,967 428,967 857,934 Total 1,393,118 385,561 941,516 1,085,435 3,805,630 iii. Market risk Management Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market price and comprises two types of risk: currency risk and interest rate risk. a. Currency Risk The Authority’s is exposed to foreign exchange risk arising from various transactions denominated in foreign currencies, primarily with respect to the US dollar and Japanese Yen. This results in exposures to exchange rate fluctuations. The balances impacted in this regard are the balances due to foreign suppliers, balances due from debtors, and bank balances. Exchange rate exposures are managed within approved policy parameters utilizing matching of assets and liabilities. The carrying amounts of the Authority’s main foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows; Liabilities Assets Liabilities Assets 30-Jun 30-Jun 30-Jun 30-Jun Currency (USD) 2020/21 2020/21 2019/20 2019/20 Kshs‘000 USD‘000 Kshs‘000 USD‘000 Kshs‘000 USD‘000 Kshs‘000 USD‘000 Assets Bank 1,346,963 12,497 2,163,238 20,301 Receivables 8,856,005 83,956 7,140,513 68,625 Liabilities Payables 5,222,053 49,972 4,689,746 44,952 Total 5,222,053 49,972 10,202,968 96,453 4,689,746 44,952 9,303,751 88,926 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 129

| 1,125,061 | 349,714 | 490,690 | 508,749 | 2,474,214 |

|---|---|---|---|---|

| 221 | 21,323 | 1,589 | 33,286 | 56,419 |

| 267,836 | 14,524 | 20,270 | 114,433 | 417,063 |

| 0 | 0 | 428,967 | 428,967 | 857,934 |

| 1,393,118 | 385,561 | 941,516 | 1,085,435 | 3,805,630 |

| Liabilities | | Assets | |

|---|---|---|---|

| 30-Jun | | 30-Jun | |

| 2020/21 | | 2020/21 | |

| Kshs‘000 | USD‘000 | Kshs‘000 | USD‘000 |

| | | 1,346,963 | 12,497 |

| | | 8,856,005 | 83,956 |

| 5,222,053 | 49,972 | | |

| 5,222,053 | 49,972 | 10,202,968 | 96,453 |

Page 130

Notes to the Financial statements For the year ended 30 June 2021 (continued) Currency Risk (continued) Liabilities Assets Liabilities Assets Currency 30-Jun 30-Jun 30-Jun 30-Jun (JPY) 2020/21 2020/21 2019/20 2019/20 Kshs ‘000 JPY ‘000 Kshs ‘000 JPY ‘000 Kshs‘000 JPY‘000 Kshs‘000 JPY‘000 Assets Receivables 2,651,786 2,809,884 1,979,432 2,211,582 Liabilities Borrowings- 1,258,939 1,294,539 857,934 863,026 Current Payables 100,864 111,064 214,903 211,862 Total 1,359,803 1,405,603 2,651,786 2,809,884 1,072,837 1,074,888 1,979,432 2,211,582 Foreign currency sensitivity analysis The sensitivity analysis in foreign currency arises from bank balances, trade receivables and payables denominated in foreign currency mainly US dollars (USD) and Japanese Yen. The following table demonstrates the effect on the Authority’s Statement of Profit or Loss and Other Comprehensive Income on applying the sensitivity for a reasonable possible 10% change in the exchange rate of the main foreign transaction currencies, with all other variables held constant. The reverse would also occur if the Kenya Shilling appreciated with all other variables held constant. Exchange rate Change in currency rate Effect on Profit before tax Kshs’000 2021 USD 107.78 10% 500,978 JPY 0.9725 10% 136,566 2020 USD 106.56 10% 468,591 JPY 0.9941 10% 112,999 Interest Rate Risk The Authority is exposed to interest rate risk as it borrows and invests funds. Borrowings are mainly in fixed rates thus minimizing the exposure to the interest rate risk. The interest earning financial assets that the Authority holds include short term deposits whose rates of return are predetermined. The Authority regularly monitors the interest rate movements to ensure that the optimum interest rates are obtained. Interest rate sensitivity Analysis As at 30 June 2021, an increase/decrease of 1 % change, with all other variables held constant, would have resulted in a decrease /increase in profit for the year of Kshs 25 million (2019/2020 Kshs 161 million), mainly as a result of higher/ lower interest charges on Long term investments. 130 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Liabilities | | Assets | |

|---|---|---|---|

| 30-Jun | | 30-Jun | |

| 2020/21 | | 2020/21 | |

| Kshs ‘000 | JPY ‘000 | Kshs ‘000 | JPY ‘000 |

| | | 2,651,786 | 2,809,884 |

| 1,258,939 | 1,294,539 | | |

| 100,864 | 111,064 | | |

| 1,359,803 | 1,405,603 | 2,651,786 | 2,809,884 |

| | | Kshs’000 |

|---|---|---|

| 107.78 | 10% | 500,978 |

| 0.9725 | 10% | 136,566 |

| 106.56 | 10% | 468,591 |

| 0.9941 | 10% | 112,999 |

Page 131

Notes to the Financial statements For the year ended 30 June 2021 (continued) iv. Fair value of financial assets and liabilities a. Financial instruments measured at fair value Determination of fair value and fair values hierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Authority’s market assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges. • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). • Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Authority considers relevant and observable market prices in its valuations where possible. As at 30 June 2021, the Authority held the following financial instruments measured at fair value. Level 1 Level 2 Level 3 Total At 30 June 2021 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Financial Assets Treasury Bills+ 0 0 0 0 SBM Bank Ltd* 0 0 374,054 374,054 Total 0 0 374,054 374,054 Financial Liability Borrowings - Jica 1 22,660,905 0 0 22,660,905 Jica 2 18,517,718 0 0 18,517,718 Total 41,178,623 0 0 41,178,623 Level 1 Level 2 Level 3 Total At 30 June 2020 Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 Financial Assets Treasury Bills+ 793,652 0 0 793,652 SBM Bank Ltd* 0 0 750,108 750,108 Total 793,652 0 750,108 1,543,760 Financial Liability Borrowings - Jica 1 23,593,189 0 0 23,593,189 Jica 2 16,335,704 0 0 16,335,704 Total 39,928,893 0 0 39,928,893 There were no transfers between levels during the year.

• Chase Bank Ltd was placed under receivership on 7th April 2016. Based on the Kenya Gazette notice No 6833 dated 6th July 2018, a transfer of 75% of the deposits moved to SBM (Kenya) Ltd while 25% was retained by Kenya Deposit Insurance Corporation. The transition process was completed on 17th August 2018 and SBM Kenya Ltd transferred a total of Kshs. 1,175 million in FY2018/19. In line with Kenya Gazette notice, the first and second equal instalments of cash deposits previously held with Chase Bank Kenya (In Receivership) were received by the Authority from SBM Kenya Ltd. The remaining deposits (last instalment) are on fixed deposit account earning interest at 6.3% p.a with restricted access; and will be released in August 2021. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 131

| | Level 1 | Level 2 | Level 3 | Total |

|---|---|---|---|---|

| At 30 June 2021 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 |

| Financial Assets | | | | |

| Treasury Bills+ | 0 | 0 | 0 | 0 |

| SBM Bank Ltd* | 0 | 0 | 374,054 | 374,054 |

| Total | 0 | 0 | 374,054 | 374,054 |

| Financial Liability | | | | |

| Borrowings - Jica 1 | 22,660,905 | 0 | 0 | 22,660,905 |

| Jica 2 | 18,517,718 | 0 | 0 | 18,517,718 |

| Total | 41,178,623 | 0 | 0 | 41,178,623 |

| | Level 1 | Level 2 | Level 3 | Total |

| At 30 June 2020 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 | Kshs ‘000 |

| Financial Assets | | | | |

| Treasury Bills+ | | | | |

| SBM Bank Ltd* | | | | |

| Total | | | | |

| Financial Liability | | | | |

| Borrowings - Jica 1 | | | | |

| Jica 2 | | | | |

| Total | | | | |

Page 132

Notes to the Financial statements For the year ended 30 June 2021 (continued) b. Financial instruments not measured at fair • Requirements for the reporting of operational value losses and implementation of the proposed Disclosures of fair values of financial instruments not remedial solutions and actions. measured at fair value have not been made because • Development of contingency plans the carrying amounts are a reasonable approximation of their fair values. • Training and professional development for its staff; and v. Operational Risk Management • Adherence to ethical and business standards. Operational risk is the risk of indirect loss arising from a Review of compliance with corporation standards is wide variety of causes associated with the corporation’s reviewed on an ongoing basis by senior management processes, personnel, technology and infrastructure, and the internal audit department. external factors other than credit, market and liquidity risks such as those arising from legal and regulatory 42. Capital Risk Management requirements and generally accepted standards of The corporation’s objectives when managing capital corporate behavior. are: The corporation’s objective is to manage operational i. To match the profile of its assets and liabilities, risk so as to balance the avoidance of financial losses taking account of the risks inherent in the busi- and damage to the corporation’s reputation with overall ness; cost effectiveness and to avoid any control procedures ii. To maintain financial strength to support busi- that restrict initiative and creativity in the corporation. ness growth; and The primary responsibility for the development and iii. To safeguard the corporation’s ability to contin- implementation of controls to address operational risk ue as a going concern so that it can continue to is assigned to senior management in the corporation’s provide adequate returns to its Government and departments. value to all other stakeholders. The corporation has a number of sources of capital available to This responsibility is supported by the development of overall corporation standards for the management of it and seeks to optimize its debt-to-equity struc- operational risks in the following areas: ture in order to ensure that it can consistently • Requirements for appropriate segregation of maximize returns to Government. Capital ade- duties, including the independent authorization quacy is monitored regularly by the corporation’s and approval of transactions. management and quarterly by the Board of Di- rectors. • Requirements for the reconciliation and The capital structure of the Authority consists of debt, monitoring of transactions. which includes borrowings, and capital, other reserves • Compliance with regulatory and other legal and retained earnings. The Authority monitors capital requirements. on the basis of the gearing ratio. This ratio is calculated • Documentation of controls and procedures. as total debt divided by total capital and reserves. Total debt is calculated as total non-current liabilities and • Requirements for the periodic assessment current liabilities. of operational risks faced by the entity, and the adequacy of controls and procedures to address the risks identified. 132 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

Page 133

Additional disclosures For the year ended 30 June 2021 Capital Risk Management (continued) 2020/2021 2019/2020 Description Kshs ‘000 Kshs ‘000 Non-Current Liabilities 94,192,708 86,213,999 Current Liabilities 17,147,186 21,079,760 Total Debt 111,339,894 107,293,759 Total Capital and reserves 192,875,836 187,475,669 Net debt to Equity 58% 57% Debt ratio, an alternative gearing ratio calculated as total debt divided by total assets is as shown below; 2020/2021 2019/2020 Description Kshs ‘000 Kshs ‘000 Total Debt 111,339,894 107,293,759 Total Assets 304,215,730 294,769,428 Debt to Total Asset ratio 37% 36% 43. Contingent Liabilities Claims lodged and cases filed against the Authority are estimated in the table below; Contingent Liabilities 2020/2021 2019/2020 Kshs ‘000 Kshs ‘000 Court cases against KPA 10,639,378 10,400,590 Court cases against Defunct KFS 13,125 0 Total 10,652,503 10,400,590 No provisions are provided in the financial statements as the liabilities are not expected to crystallize. At the close of the year, the Authority had no contingent asset. 44. Reporting Currency The functional and reporting currency is Kenya Shillings (Kshs). 45. Subsequent Events There have been no events subsequent to the financial year end with a significant impact on the financial statements for the year ended 30 June 2021. 46. Enactment The Authority was established through an Act of parliament Cap 391 on 20th January 1978. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 133

| 2020/2021 |

|---|

| Kshs ‘000 |

| 94,192,708 |

| 17,147,186 |

| 111,339,894 |

| 192,875,836 |

| 58% |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 111,339,894 |

| 304,215,730 |

| 37% |

| 2020/2021 |

|---|

| Kshs ‘000 |

| 10,639,378 |

| 13,125 |

| 10,652,503 |

Page 134

Additional disclosures For the year ended 30 June 2021 (continued) I. Notes to the Statement of Comparison of Total Expenditure Budget and Actual Amounts Total Expenditure has a favorable variance compared to As stated under the Statement of Comparison of Budget the budget. The overall cost decreased driven by deferred and Actual amounts variances (over/under 10%) between or cancelled activities due to Covid-19. the actual and final budgeted amounts are explained below; Cost of Employment Total Revenue Overall expenditure on cost of employment was below the Total revenue during the period was Kshs 53,520 Million budget thresholds. The favourable variance was mainly on made up of Kshs 52,130 Million, Kshs 720 Million, Kshs 168 overtime, salaries among others. Million and Kshs 502 Million representing operating, non- operating, finance incomes and other gains respectively. Operating expenses Overall expenditure under operating expenditure was Operating Revenue favourable. Mainly due to management of repairs and Operating revenue performance was marginally unfavorable deferred works. mainly due to lower revenue from storage and remarshalling charges. This was largely due to improved efficiency Administrative expenses in cargo clearance and uptake by owners. However, Administrative expenditure recorded a reduction from they was higher number of vessels handled, increased budget because some activities were deferred or cancelled container traffic and cargo throughput in tandem with due to effects of Covid 19 pandemic like ASK shows, higher economic activities following the easing of covid-19 KECOSO. restrictions. Impairment Loss Other Income The unfavorable balance was mainly due to impairment Revenue earned from Rent to staff quarters, increase of losses on disputed bills which increased trade receivables. new applications for Port passes, and sundry income had The Authority has set up a dispute resolution committee to a favorable variance compared to budget. resolve disputes. Other Gains Profit Before Tax The favorable variance under other gains was mainly due to A net operating profit of Kshs 13,818 million was realized the weakening of the Kenya shillings and the realized forex. during the period. The profit recorded was above the final budgeted profit mainly due to economic resurgence and deferred or cancelled activities due to Covid-19. 134 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

Page 135

Additional disclosures For the year ended 30 June 2021 (continued) II. Progress on Follow-up of Auditor recommendations At the close of the year, issues raised by the Office of the Auditor- General for FY 2017-2018, 2018-2019 and 2019- 2020 had yet to be deliberated on by the Parliamentary Investment Committee (PIC).The following is a summary of issues raised by the Office of the Auditor General, management comments and status; Issue/ Audit Observations Status: (Resolved/ Management Comments Report From the Not Resolved) auditor Recognition of revenue amounting to Kshs. 688,589,750 Under-Charging associated with Under-Charging of Revenue from of Revenue Storage of Containers. The amount was not billable Not Resolved from Storage of because it had not met the revenue recognition criteria Containers set out in our revenue recognition policy. Africa Oil and Gas Ltd remits to the Authority on a quarterly basis a Quarter of their annual revenue share Un-Confirmed generated from the use of the facility. Licenses Not resolved The figures of the handled units was certified by an FY Revenue independent surveyor before submitted to KPA to 2019/20 recognize the revenue. Basic Salary Paid Management was in the process of configuring the for Hours not system so that staff granted “authority to work” will only Not Resolved Worked be paid for the actual hours worked. As regards the system paying full remuneration, the Overtime system was configured to pro rate an employee’s Not Resolved Allowances remuneration for the days he/she is absent from duty. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 135

| Audit Report | Issue/ Observations From the auditor | Management Comments | Status: (Resolved/ Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Under-Charging of Revenue from Storage of Containers | Recognition of revenue amounting to Kshs. 688,589,750 associated with Under-Charging of Revenue from Storage of Containers. The amount was not billable because it had not met the revenue recognition criteria set out in our revenue recognition policy. | Not Resolved |

| | Un-Confirmed Licenses Revenue | Africa Oil and Gas Ltd remits to the Authority on a quarterly basis a Quarter of their annual revenue share generated from the use of the facility. The figures of the handled units was certified by an independent surveyor before submitted to KPA to recognize the revenue. | Not resolved |

| | Basic Salary Paid for Hours not Worked | Management was in the process of configuring the system so that staff granted “authority to work” will only be paid for the actual hours worked. | Not Resolved |

| | Overtime Allowances | As regards the system paying full remuneration, the system was configured to pro rate an employee’s remuneration for the days he/she is absent from duty. | Not Resolved |

Page 136

Additional disclosures For the year ended 30 June 2021 (continued) Progress on Follow-up of Auditor recommendations (continued) Audit Issue/Observations Status: (Resolved/ Management Comments Report From the auditor Not Resolved) Management will recover the overtime payments from Overtime Allowances the employees who benefitted irregularly and will Paid to Employees on ensure that employees on Training Grades are not Not Resolved Training Grades paid overtime as stipulated in the Human Resource Manual, 2017. Payments Made for Management undertakes to introduce system controls Work Allocated After to ensure work allocation payments are done within Not Resolved End of Employee Shift the correct time frames. The Authority is in the process of rolling out a Irregular Payment of Performance Management System for all employees. Berth Productivity Therefore, future incentive payments will be pegged on Not Resolved Incentive individual employee performance upon an achievement FY above the set performance targets. 2019/20 Unsupported Fuel is not bought to be stocked but rather the vendor Expenditure – manages their stocks and KPA pays for what it Not resolved Operating Expenses consumes. (Fuel) The matter of Kisumu Port followed a presidential directive that the Port be revived and handed over to KPA to be operated. The land owned by KR was to be Repair, Renovations handed over to KPA. The exercise involved survey and and Rehabilitation of creation of title of the land to be transferred to KPA. Not Resolved Kisumu Pier and Dock The renovation of the Port and survey of land were Infrastructure undertaken simultaneously. This is work in progress. The titles are expected to be handed over to KPA soon. 136 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Audit Report | Issue/Observations From the auditor | Management Comments | Status: (Resolved/ Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Overtime Allowances Paid to Employees on Training Grades | Management will recover the overtime payments from the employees who benefitted irregularly and will ensure that employees on Training Grades are not paid overtime as stipulated in the Human Resource Manual, 2017. | Not Resolved |

| | Payments Made for Work Allocated After End of Employee Shift | Management undertakes to introduce system controls to ensure work allocation payments are done within the correct time frames. | Not Resolved |

| | Irregular Payment of Berth Productivity Incentive | The Authority is in the process of rolling out a Performance Management System for all employees. Therefore, future incentive payments will be pegged on individual employee performance upon an achievement above the set performance targets. | Not Resolved |

| | Unsupported Expenditure – Operating Expenses (Fuel) | Fuel is not bought to be stocked but rather the vendor manages their stocks and KPA pays for what it consumes. | Not resolved |

| | Repair, Renovations and Rehabilitation of Kisumu Pier and Dock Infrastructure | The matter of Kisumu Port followed a presidential directive that the Port be revived and handed over to KPA to be operated. The land owned by KR was to be handed over to KPA. The exercise involved survey and creation of title of the land to be transferred to KPA. The renovation of the Port and survey of land were undertaken simultaneously. This is work in progress. The titles are expected to be handed over to KPA soon. | Not Resolved |

Page 137

Additional disclosures For the year ended 30 June 2021 (continued) Progress on Follow-up of Auditor recommendations (continued) Audit Issue/Observations Status: (Resolved/ Management Comments Report From the auditor Not Resolved) VAT Act does not allow for claiming/deducting of input VAT for expenses incurred not directly for generation of income, thus an amount of Kshs 1,435,372 was non Unclaimed Value- claimable. Kshs 26,893,244 was Time barred VAT not Not Resolved Added Input Tax claimable since it had surpassed the six-month period for claiming as stipulated in the VAT Act. Action has been taken to recover the time barred VAT on officers FY who caused the delay 2019/20 Bandari College is now Bandari Maritime. Through a Inclusion of Bandari special request Bandari Maritime Academy requested Maritime College KPA to support them with staff strength for some period Not resolved Expenditure before our staff are re-deployed. The request was approved, Expenditure is accrued when incurred and only reversed Unsupported Trade in the following financial year when the invoice(s)/ Not resolved and Other Payables payments are received and processed. KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 137

| Audit Report | Issue/Observations From the auditor | Management Comments | Status: (Resolved/ Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Unclaimed Value- Added Input Tax | VAT Act does not allow for claiming/deducting of input VAT for expenses incurred not directly for generation of income, thus an amount of Kshs 1,435,372 was non claimable. Kshs 26,893,244 was Time barred VAT not claimable since it had surpassed the six-month period for claiming as stipulated in the VAT Act. Action has been taken to recover the time barred VAT on officers who caused the delay | Not Resolved |

| | Inclusion of Bandari Maritime College Expenditure | Bandari College is now Bandari Maritime. Through a special request Bandari Maritime Academy requested KPA to support them with staff strength for some period before our staff are re-deployed. The request was approved, | Not resolved |

| | Unsupported Trade and Other Payables | Expenditure is accrued when incurred and only reversed in the following financial year when the invoice(s)/ payments are received and processed. | Not resolved |

Page 138

Additional disclosures For the year ended 30 June 2021 (continued) Progress on Follow-up of Auditor recommendations (continued) Status: Audit Issue/Observations Management Comments (Resolved/ Not Report From the auditor Resolved) An actuarial deficit is created when the liabilities are higher than the assets after an actuarial valuation has been undertaken. This can be as a result of many factors. One main factor that has created the deficit Accrued Liability for was the compliance of the scheme to the Treasury Defined Contribution Not resolved Circular provisions. The main provision that impacted (DC) Members the scheme’s funding level (and in effect increased the deficit) was the requirement to amend the scheme Final Pensionable Salary to be in line with the provisions of the Circular This issue was deliberated in the PIC hearings held in Property, Plant and 2019 and not yet concluded. FY Equipment (Alienated The Authority has filed several cases. In the month of 2019/20 Properties & January 2018, the National Land Commission informed Not resolved Land Without Title the Authority it has published a notice listing parcels Documents) illegally alienated from KPA and gave the registered parcel owners 90 days to vacate the parcel. Inclusion of Assets The assets will be removed from the Authority’s Donated to the Bandari asset upon getting an appropriate approval from the Not Resolved Maritime College Cabinet, Ministries and the Board are received. During revaluation the value of these properties was reached having catered for the cost of evicting the Land and Buildings - squatters. Therefore, we could not have gone ahead to Not resolved Impairment impair whereas the same had already been factored in their values 138 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Audit Report | Issue/Observations From the auditor | Management Comments | Status: (Resolved/ Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Accrued Liability for Defined Contribution (DC) Members | An actuarial deficit is created when the liabilities are higher than the assets after an actuarial valuation has been undertaken. This can be as a result of many factors. One main factor that has created the deficit was the compliance of the scheme to the Treasury Circular provisions. The main provision that impacted the scheme’s funding level (and in effect increased the deficit) was the requirement to amend the scheme Final Pensionable Salary to be in line with the provisions of the Circular | Not resolved |

| | Property, Plant and Equipment (Alienated Properties & Land Without Title Documents) | This issue was deliberated in the PIC hearings held in 2019 and not yet concluded. The Authority has filed several cases. In the month of January 2018, the National Land Commission informed the Authority it has published a notice listing parcels illegally alienated from KPA and gave the registered parcel owners 90 days to vacate the parcel. | Not resolved |

| | Inclusion of Assets Donated to the Bandari Maritime College | The assets will be removed from the Authority’s asset upon getting an appropriate approval from the Cabinet, Ministries and the Board are received. | Not Resolved |

| | Land and Buildings - Impairment | During revaluation the value of these properties was reached having catered for the cost of evicting the squatters. Therefore, we could not have gone ahead to impair whereas the same had already been factored in their values | Not resolved |

Page 139

Additional disclosures For the year ended 30 June 2021 (continued) Progress on Follow-up of Auditor recommendations (continued) Status: Audit Issue/Observations Management Comments (Resolved/ Not Report From the auditor Resolved) As per the Authority’s dividends policy, dividend liability is recognized upon completion of the statutory audit and Dividends Payable issuance of the Audit Certificate. The audit certificate for Not Resolved Variance FY 2018/2019 and 2019/2020 was yet to be issued hence the proposed dividends of Kshs 1,040,281,000 had not been recognized as a liability. Land Without The Authority has contracted KPMG consultants to Documents of Title conduct an audit of all its properties, including the status of the parcels, the accuracy of the titles, the Not Resolved existence of the parcels, regularity of use, ownership, etc. FY Key Audit Matters 2019/20 Prior Year Matters The eight employees continued to act while awaiting the Irregular Payment of substantive filling of the positions through a competitive Not Resolved Acting Allowances interview process which was at the final stages at Board level. All KPA employees are admitted to private hospitals when needing in-patient care. The room provision in Hospital/Referral Bills these hospitals is as per the grade of the employee. Not Supported by Any Not resolved Private hospitals are pre-qualified to provide medical Policy services through a procurement process. We use government institutions for some services. While varying the contracts, the Authority considered Operational/Running and was following section 103 (2) (d) of the Public Not resolved Supplies Procurement Act, 2015 KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 139

| Audit Report | Issue/Observations From the auditor | Management Comments | Status: (Resolved/ Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Dividends Payable Variance | As per the Authority’s dividends policy, dividend liability is recognized upon completion of the statutory audit and issuance of the Audit Certificate. The audit certificate for FY 2018/2019 and 2019/2020 was yet to be issued hence the proposed dividends of Kshs 1,040,281,000 had not been recognized as a liability. | Not Resolved |

| | Land Without Documents of Title | The Authority has contracted KPMG consultants to conduct an audit of all its properties, including the status of the parcels, the accuracy of the titles, the existence of the parcels, regularity of use, ownership, etc. | Not Resolved |

| | Key Audit Matters Prior Year Matters | | |

| | Irregular Payment of Acting Allowances | The eight employees continued to act while awaiting the substantive filling of the positions through a competitive interview process which was at the final stages at Board level. | Not Resolved |

| | Hospital/Referral Bills Not Supported by Any Policy | All KPA employees are admitted to private hospitals when needing in-patient care. The room provision in these hospitals is as per the grade of the employee. Private hospitals are pre-qualified to provide medical services through a procurement process. We use government institutions for some services. | Not resolved |

| | Operational/Running Supplies | While varying the contracts, the Authority considered and was following section 103 (2) (d) of the Public Procurement Act, 2015 | Not resolved |

Page 140

Additional disclosures For the year ended 30 June 2021 (continued) Progress on Follow-up of Auditor recommendations (continued) Audit Issue/Observations From Status: (Resolved/ Not Management Comments Report the auditor Resolved) Much as the current staff numbers and Non-Compliance with the composition are historical in nature i.e., the National Cohesion and dominant community may over time have Resolved Integration Act, 2008 on had more representation especially before Ethnic Composition the Act came into existence in 2008 Non-Compliance with the Authority has engaged financial institutions Public Service Commission (Cooperatives and Banks) towards having Human Resource Policies and the staff, who are their clients restructure Resolved Procedures Manual, 2016 - the terms of the loans in order to avoid the Over Commitment of Salary risks associated with over commitment Port and Shipping industry being one of the most male-dominated industries in the Non-Compliance with the world, the Authority has made great efforts Employment Act, 2007 on Not Resolved to enact the gender provisions contained FY Recruitment of Employees in the PSC HR Policy and procedural 2019/20 manual for Public Service 2015. The organization structure has since been approved by the Board of Directors Unapproved Human Resource and submitted to the State Corporations Not Resolved Policy Instruments Advisory Committee through the parent Ministry for approval. The appointment of staff to positions designated as supernumerary was on a Employees Appointed to necessity basis that was dictated by the Positions not in the Staff Not resolved circumstances of the business, notably Establishment the Port’s expansion plan, growth in cargo through-put and SGR Non-Compliance with the Two employees who were still in Human Resource Policies and employment beyond the mandatory Procedures Manual, 2015 on retirement age of 60 years because of the Not resolved Employees Above Sixty (60) unique expertise and critical pilotage skills Years required by the Authority 140 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Audit Report | Issue/Observations From the auditor | Management Comments | Status: (Resolved/ Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Non-Compliance with the National Cohesion and Integration Act, 2008 on Ethnic Composition | Much as the current staff numbers and composition are historical in nature i.e., the dominant community may over time have had more representation especially before the Act came into existence in 2008 | Resolved |

| | Non-Compliance with the Public Service Commission Human Resource Policies and Procedures Manual, 2016 - Over Commitment of Salary | Authority has engaged financial institutions (Cooperatives and Banks) towards having the staff, who are their clients restructure the terms of the loans in order to avoid the risks associated with over commitment | Resolved |

| | Non-Compliance with the Employment Act, 2007 on Recruitment of Employees | Port and Shipping industry being one of the most male-dominated industries in the world, the Authority has made great efforts to enact the gender provisions contained in the PSC HR Policy and procedural manual for Public Service 2015. | Not Resolved |

| | Unapproved Human Resource Policy Instruments | The organization structure has since been approved by the Board of Directors and submitted to the State Corporations Advisory Committee through the parent Ministry for approval. | Not Resolved |

| | Employees Appointed to Positions not in the Staff Establishment | The appointment of staff to positions designated as supernumerary was on a necessity basis that was dictated by the circumstances of the business, notably the Port’s expansion plan, growth in cargo through-put and SGR | Not resolved |

| | Non-Compliance with the Human Resource Policies and Procedures Manual, 2015 on Employees Above Sixty (60) Years | Two employees who were still in employment beyond the mandatory retirement age of 60 years because of the unique expertise and critical pilotage skills required by the Authority | Not resolved |

Page 141

Additional disclosures For the year ended 30 June 2021 (continued) Progress on Follow-up of Auditor recommendations (continued) Audit Issue/Observations Status: (Resolved/Not Management Comments Report From the auditor Resolved) The Authority selected firms through a Unconfirmed Contracts restricted tender and invited bids through for Provision of Containers Not resolved Memo No. 029/2018-19 dated 17th Storage Facilities September 2018. Report On Effectiveness Of Internal Controls, Risk Management And Governance Marine Module has been in operation and is Manual Processing of being used to generate Interim and Final Bills Not resolved Marine Bills in SAP In the current financial year 2020/2021 all payments have been synchronized to FY Manual Processing of be done online through the ESS Overtime Not resolved 2019/20 Overtime Pre-Approval system in liaison with the outer ports. Management undertakes to have same Un-Approved Time approved before the end of FY2020/2021 to Not resolved Management Policy facilitate its implementation. Lack of an Independent The matter is being addressed at the Board Not resolved ICT Function In future all POs shall be issued before Provision of Services training and should there be discrepancies on Before Issuance of Not resolved the approved numbers available for training a Purchase Orders credit note shall be sought. Amb. John Mwangemi Ag. Managing Director KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 141

| Audit Report | Issue/Observations From the auditor | Management Comments | Status: (Resolved/Not Resolved) |

|---|---|---|---|

| FY 2019/20 | Unconfirmed Contracts for Provision of Containers Storage Facilities | The Authority selected firms through a restricted tender and invited bids through Memo No. 029/2018-19 dated 17th September 2018. | Not resolved |

| | Report On Effectiveness Of Internal Controls, Risk Management And Governance | | |

| | Manual Processing of Marine Bills | Marine Module has been in operation and is being used to generate Interim and Final Bills in SAP | Not resolved |

| | Manual Processing of Overtime | In the current financial year 2020/2021 all payments have been synchronized to be done online through the ESS Overtime Pre-Approval system in liaison with the outer ports. | Not resolved |

| | Un-Approved Time Management Policy | Management undertakes to have same approved before the end of FY2020/2021 to facilitate its implementation. | Not resolved |

| | Lack of an Independent ICT Function | The matter is being addressed at the Board | Not resolved |

| | Provision of Services Before Issuance of Purchase Orders | In future all POs shall be issued before training and should there be discrepancies on the approved numbers available for training a credit note shall be sought. | Not resolved |

Page 142

Additional disclosures For the year ended 30 June 2021 (continued) III. Inter- entity transfers from other government entities Where Recorded/ recognized Name of the Nature of Total Amount MDA/Donor Develop- Statement Transfer FY Date received Transferring ment Total Amount of Financial 2020/2021 the funds Funds received Kshs ‘000 Kshs ‘000 Performance Kshs ‘000 28.08.2020 2,502,564 State 07.09.2020 497,436 Department for Lamu Port Non-Current Transport Project 30.12.2020 3,000,000 6,000,000 Liabilities 6,000,000 Total 6,000,000 6,000,000 6,000,000 142 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

| Total Transfer FY 2020/2021 Kshs ‘000 |

|---|

| 6,000,000 |

| 6,000,000 |

Page 143

Notes KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 143

Page 144

Notes 144 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021

Page 145

Notes KENYA PORTS AUTHORITY • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 145

Page 146

CORPORATE CONTACTS KENYA PORTS AUTHORITY AdminisCtrOaRtioPnO BRloAcTkE, CONTACTS Kipevu KENYA PORTS AUTHORITY P.O. Box 95009 - 80104 Administration Block, Mombasa Kipevu TelephoPn.Oe:. Box 95009 - 80104 +254-4M12o1m1b2a9s9a9 +254-412113999 Telephone: Mobile:+ 254-412112999 +254-7+0295049-249192 1913999 +254-709093999 Annual Report & Mobile: +254-730653999 254-709092999 www.kp+a2.5co4.-k7e09093999 Financial Statements +254-730653999 www.kpa.co.ke FY 2020 | 2021 146 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 Prepared in accordance with accrual basis of accounting, under the International Financial Reporting Standards (IFRSs)

| CORPORATE CONTACTS KENYA PORTS AUTHORITY AdminisCtrOaRtioPnO BRloAcTkE, CONTACTS Kipevu KENYA PORTS AUTHORITY P.O. Box 95009 - 80104 Administration Block, Mombasa Kipevu TelephoPn.Oe:. Box 95009 - 80104 +254-4M12o1m1b2a9s9a9 +254-412113999 Telephone: Mobile:+ 254-412112999 +254-7+0295049-249192 1913999 +254-709093999 Mobile: +254-730653999 254-709092999 www.kp+a2.5co4.-k7e09093999 +254-730653999 www.kpa.co.ke |

|---|

| 146 KENYA PORTS AUTHORITYA • ANNUAL REPORT & FINANCIAL STATEMENTS FY 2020 / 2021 |