Untitled document

Société Anonyme

L-1143 Luxembourg

R.C.S. B 156.864

ANNUAL ACCOUNTS

AND REPORT OF THE REVISEUR D’ENTREPRISES AGREE

FOR THE YEAR ENDED 31 DECEMBER 2021

Table of contents

Management report1-18

Balance sheet19-20

Profit and loss account21-22

Notes to the annual accounts23-27

Report of the Réviseur d’Entreprises Agréé28-32

Société anonyme

Registered address: 24, rue Astrid

L-1143 Luxembourg, Grand Duchy of Luxembourg

R.C.S. Luxembourg: B 156.864 (the

MANAGEMENT REPORT 2021

of the Board of directors to the annual general meeting of Shareholders of the Company

Dear Shareholders,

The Board of directors of the Company (the Board) hereby presents the annual accounts, consisting of the

balance sheet, the profit and loss account and the notes to the annual accounts for the financial year started

, 2021 and ended on December 31

, 2021 (the Annual Accounts) and submits for your

approval such Annual Accounts, which are established in accordance with the applicable Luxembourg law

The Company appears to have a balance sheet total of USD 22.308.075,06 (twenty-two million three

hundred eight thousand seventy-five

United States Dollars

and six cents), showing a profit of USD

22.157.608,56 (twenty-two million one hundred fifty-seven thousand six hundred eight

United States Dollars

and fifty-six cents) and losses brought forward of USD 41.429.661, 65 (forty-one million four hundred

twenty-nine thousand six hundred sixty-one

United States Dollars

and sixty-five cents).

The Board of Directors considers that a partial reversal of the impairment booked in prior periods against the

shares held in KSG Agricultural and Industrial Holding is justified based on the fair value of this

investment. As a consequence the shares in that company are valued as at 31.12.2021 at USD

For further information on the performance of the Group, we refer to the management report on the

consolidated financial statements as at December 31

Thus, we request your approval of the Annual Accounts and to carry forward the profit realized for the

financial year ended December 31

, 2021 to the next financial year after allocation of an amount of USD

810,- to the legal reserve according to the articles 18.2 of the Company’s articles of association.

STRATEGY IMPLEMENTATION

The Group continues to grow wheat, barley, rapeseed in the winter and sunflower, corn in the summer.

Current year harvest was exceptionally good compared to the previous year:

Crops harvested, in tonnesSeason

SunflowerSummer

Total67,88640,040

Although the weather conditions were favourable to other agricultural producers as well, higher overall

production of crops in Ukraine did not affect the local demand for the Group. For next year, an area of 6

thousand hectares is currently under winter crops and is expected to yield a total of 18.3 thousand tonnes of

wheat, barley and rapeseed at harvest.

Crop farming revenue for 2021 more than doubled as compared to 2020, while revenues from pig breeding,

less affected by the weather conditions, keep growing at a steady pace and remain the Group’s key

strategic focus:

Segment revenue, in USD

Y-O-Y decrease, in

Y-O-Y decrease, in

contract currency

As for pig breeding, pig production and sales were also in line with the previous year:

Marketable Pigs, in units

As at 1 January

Transfers to/from nucleus herd, net

As at 31 December

The construction of an additional fattening shop for 2,340 pigs and an additional sow house for 360 sows

should provide the Group with another production facility for fattening pigs and will offer an opportunity to

increase the birth rate of piglets and improve their performance even more. Construction works on both

projects are still under way.

Furthermore, in 2021 the Group purchased 900 new sows as part of its herd rejuvenation efforts and started

reconstruction of the second stage of the pig-breeding complex, which will allow the Group to further

increase its production capacity. Plans for the second stage include 10 workshops for a total of 58 thousand

Improving Key Financial Ratios

During the year 2021, the Group also worked on improving its key financial ratios, specifically the negative net

current assets and negative shareholders equity. Both goals were achieved primarily through disposal of

several subsidiaries, as disclosed in Note 7 to the consolidated financial statements.

Improvements in the Group’s net current assets and working capital are as follows:

Current Assets minus Current Liabilities

less: Other financial assets

less: Other financial liabilities

Adjusted Working Capital

In assessing day-to-day performance of the business, management excludes ‘other financial assets’ and

‘other financial liabilities’, as those mostly comprise old non-trade balances subject to restructuring, and

analyses the change in the resulting ‘adjusted working capital’. Based on management’s assessment, the

adjusted working capital is sufficient.

IMPACT OF THE WAR EVENTS IN UKRAINE

As disclosed in Note 27 to the consolidated financial statements, the Russian Invasion of Ukraine had

started in late February 2022 and is ongoing as at the date of this report. Because the Group’s key assets and

operations are in Ukraine, the Group might be significantly affected by these events. Management’s analysis

of the risks and uncertainties surrounding the Invasion, as well as management’s strategy and actions to

mitigate those risks, are outlined in Note 3 to the consolidated financial statements. The outcome of the

Invasion, however, is impossible to predict at this time.

Since the start of the Russian Invasion, no fighting occurred in close vicinity to the Group’s assets. The

Group’s pig farm and its crop fields are located in the center of Ukraine, which hasn’t seen any fighting yet.

As at the date of this report, management, therefore, does not expect significant interruptions to both its

spring sowing campaign and its harvesting of winter crops shortly after.

Additionally, the accompanying consolidated financial statements were compiled using pre-Invasion

judgments and estimates, and do not take into account the subsequent war events. Both, because the

Invasion started after the end of the reporting period and is, in itself, a non-adjusting event, and due to the

inherent uncertainty regarding its outcome.

ACTIVITY IN THE FIELD OF RESEARCH AND DEVELOPMENT

The Company is not involved in any activity in the field of research and development.

The Company has no branch.

No additional own shares were acquired during the year.

As at December 31

, 2021, the Company is the holder of thirty-two thousand one hundred seventy-two

(32,172) own shares.

During the financial period under the review, the Board was composed of:

Renewal mandate

Mr. Sergiy Kasianov – Director A

Mr. Andriy Skorokhod – Director A

Mr. Andrii Mudriievskyi – Director A

Mr. Xavier Soulard – Director B

Mr. Eric Tazzieri – Director B

October 2, 2017

August 17, 2020

August 17, 2020

August 17, 2020

August 17, 2020

August 17, 2020

We propose that you grant full discharge at the Meeting by special vote to the members of the Company’s

Board of Directors and to the Company’s independent auditor (réviseur d’entreprises agréé) on the

execution of their respective mandates.

INFORMATION WITH RESPECT TO ARTICLE 11 OF THE LAW OF 19 MAY 2006 ON TAKEOVER BIDS

Article 11 a) the structure of their capital, including securities which are not admitted to trading on a

regulated market in a Member State, where appropriate with an indication of the different classes of

shares and, for each class of shares, the rights and obligations attaching to it and the percentage of

total share capital that it represents.

According to article 5.1 of the articles of association of the Company (the “Articles”), the Company’s

subscribed share capital amounts to one hundred fifty thousand two hundred United States Dollars (USD

150,200.00) represented by fifteen million twenty thousand (15,020,000) shares having a nominal value of one

Cent (USD 0.01) each.

All the issued share capital of the Company is admitted to listing and trading on the main market of the

Warsaw Stock Exchange.

On May 23, 2013, the Company bought back thirty-two thousand one hundred and seventy-two (32,172)

own shares, representing 0.21% of share capital, that are accounted for as treasury shares.

Article 11 b) any restrictions on the transfer of securities, such as limitations on the holding of

securities or the need to obtain the approval of the company or other holders of securities, without

prejudice to article 46 of Directive 2001/34/EC.

The shares of the Company are transferred in accordance with customary procedures for the transfer of

securities in book-entry form.

Furthermore, there is no restriction in relation with the transfer of securities pursuant to article 7.5 of the

Articles. The sole requirement is that any transfer shall be recorded in the register of shares of the

In accordance with article 7.10 of the Articles, any shareholder, company or individual, who acquires or sells

shares, including certificates representing shares of the Company, shall notify to the Company the

percentage of the voting rights he/she/it will own pursuant to such acquisition or sale, in case such

percentage reaches the thresholds of 5%, 10%, 15%, 20%, 33 1/3%, 50% and 66 2/3% or supersedes or falls

under such thresholds. The shareholders shall also notify the Company should the percentage of their

respective voting rights reach the above mentioned thresholds or supersede them or fall under such

thresholds pursuant to certain events amending the voting rights repartition of the Company.

Those notification requirements apply also to certain situations as listed by article 9 of the law of 11 January

2008 on transparency obligations with respect to the information of companies which securities are listed on a

regulated market.

Article 11 c) significant direct and indirect shareholdings (including indirect shareholdings through

pyramid structures and cross-shareholdings) within the meaning of Directive 2004/109/EC.

The distribution of shares of the Company as at the reporting date is as follows:

- OLBIS Investments LTD S.A. holds eight million seven hundred and five thousand five hundred

(8,705,500) shares, representing 57.96% of the issued share capital of the Company.

- KSG Agro S.A holds thirty-two thousand one hundred seventy-two (32,172) shares, representing

0.21% of the issued share capital of the Company.

- In free float there are six million two hundred and eighty-two thousand three hundred twenty-eight

(6,282,328) shares, representing 41.83% of the issued share capital of the Company.

The distribution of shares during the reporting period has changed. See Note 15 to the consolidated

financial statements for details.

Article 11 d) the holders of any securities with special control rights and a description of those

There are no special control rights.

Article 11 e) the system of control of any employee share scheme where the control rights are not

exercised directly by the employees.

There is no employee share scheme.

Article 11 f) any restrictions on voting rights, such as limitations of the voting rights of holders of a

given percentage or number of votes, deadlines for exercising voting rights, or systems whereby,

with the company’s cooperation, the financial rights attaching to securities are separated from the

holding of securities.

Pursuant to article 7.10 of the Articles, if a shareholder breaches the thresholds mentioned in point b) and fails

to notify the Company within the period of four (4) listing days, as stated therein, the exercise of voting rights

attached to the new participation exceeding the relevant threshold will be suspended.

Article 11 g) anyagreements between shareholders which are known to the company and may result in

restrictions on the transfer of securities or voting rights within the meaning of Directive

To the best of our knowledge there are no such agreements.

Article 11 h) the rules governing the appointment and replacement of board members and the

amendment of the articles of association.

Pursuant to article 8 of the Articles, the Directors of the Company (the “Directors” or the “Board”, as

applicable) are to be appointed by the general meeting of the shareholders of the Company (the “General

Meeting”) for a period not exceeding six (6) years and until their successors are elected. Moreover, the

decision to suspend or dismiss a Director must be adopted by the General Meeting with a majority of more than

one-half (1/2) of all voting rights present or represented. When a legal person is appointed as Director, the legal

entity must designate a permanent representative (représentant permanent) in accordance with article 441-3

of the Company Law.

In accordance with article 20 of the Articles, the Articles may be amended from time to time by a General

Meeting under the quorum and majority requirements provided for by the Company Law.

Article 11 i) the powers of board members, and in particular the power to issue or buy back shares.

With respect to the acquisition of own shares, article 6 of the Articles establishes that the Company may

acquire its own Shares to the extent permitted by law. To the extent permitted by Luxembourg law, the

Board is irrevocably authorized and empowered to take any and all steps to execute any and all documents to

do and perform any and all acts for and in the name and on behalf of the Company which may be

necessary or advisable in order to effectuate the acquisition of the shares and the accomplishment and

completion of all related actions.

According to article 11.2 of the Articles, the Board is vested with the broadest powers to perform all acts of

administration and disposition in the Company’s interests and within the objectives and purposes of the

Company. All powers not expressly reserved by law or by the Articles to the General Meeting fall within the

competence of the Board.

Article 11 j) any significant agreements to which the company is a party and which take effect, alter or

terminate upon a change of control of the company following a takeover bid, and the effects

thereof, except where their nature is such that their disclosure would be seriously prejudicial to the

company; this exception shall not apply where the company is specifically obliged to disclose such

information on the basis of other legal requirements.

To the extent of our knowledge there are no such agreements.

Article 11 k) any agreements between the company and its board members or employees providing for

compensation if they resign or are made redundant without valid reason or if their employment ceases

because of a takeover bid.

To the extent of our knowledge there are no such agreements.

CORPORATE GOVERNANCE

The Board of Directors observes the corporate governance rules of the Warsaw Stock Exchange included in

the ”Code of Best Practice for WSE Listed Companies” in the form and to the extent determined by the

Resolution No. 19/1307/2012 of the Exchange Supervisory Board dated 21 November 2012. Code of Best

Practice for WSE Listed Companies is available at the official website of the Warsaw Stock Exchange.

The Board of Directors consists of five members, three of each hold an executive role (Directors A), and

two directors are non executive ones (Directors B).

Mr. Sergiy Kasianov, Chairman of the Board of Directors, has a significant indirect holding of securities in the

Company. No other person has a significant direct or indirect holding of securities in the Company. No person

has any special rights of control over the Company’s share capital.

There are no restrictions on voting rights.

Appointment and replacement of Directors and amendments to the Articles of Association

With regard to the appointment and replacement of Directors, its Articles of Association (hereinafter referred to

as the “Articles of Association”) and Luxembourg Law comprising the modified Law of August 10, 1915 on

Commercial Companies (the “Company Law”) govern the Company. A general meeting of the

shareholders under the quorum may amend the Articles of Association from time to time and majority

requirement provided for by the Company Law.

Powers of Directors

The Board is responsible for managing the business affairs of the Company within the clauses of the Articles of

Association. The Directors may only act at duly convened meetings of the Board of Directors or by written

consent in accordance with article 9 of Articles of Association.

Rights of the shareholders

Articles of Association and national laws and regulation govern the operation of the shareholders meetings

and their key powers, description of their rights.

Transfer of shares

Transfer of shares is governed by Articles of Association of the Company.

Meetings of the Board of Directors

In this regard the Company is governed by Article 9 of the Articles of Association.

Mr. Sergiy Kasianov has been appointed as Chairman of the Board of Directors.

The Board of Directors shall meet upon call by the Chairman, or any two Directors at the place and time

indicated in the notice of meeting, the person(s) convening the meeting setting the agenda.

Written notice of any meeting of the Board of Directors shall be given to all Directors at least five (5) calendar

days in advance of the hour set for such meeting, except in circumstances of emergency where 24 hours prior

notice shall suffice which shall duly set out the reason for the urgency.

The Board of Directors may act validly and validly adopt resolutions if approved by the majority of Directors

including at least one class A and one class B Director at least a majority of the Directors are present or

represented at a meeting.

Audit Committee

The audit committee is composed of three members and is in charge of overseeing financial reporting and

Internal Control

The Company’s management is responsible for establishing and maintaining adequate controls over

financial reporting process for KSG Agro S.A., which include the appropriate level of Board of Directors’

KSG Agro S.A. maintains an effective internal control structure. It consists, in particular, of organizational

arrangements with clearly defined lines of responsibility and delegation of authority, and comprehensive

systems and control procedures. An important element of the control environment is an ongoing internal

audit program. KSG Agro S.A. system also contains monitoring mechanisms, and actions taken to correct

deficiencies if they identified.

To assure the effective administration of internal controls, KSG Agro S.A. carefully selects employees,

develops and disseminates oral and written policies and procedures, provides appropriate communication

channels and fosters an environment conducive to the effective functioning of controls.

The Company’s internal control over financial reporting includes those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation

of annual accounts in accordance with Luxembourg generally adopted accounting principles;

that receipts and expenditures of the Company are being made only in accordance with

authorizations of management and directors of the Company;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,

use or disposition of the Company’s assets that could have a material effect on the annual

We believe that it is essential for the Company to conduct its business affairs in accordance with the highest

ethical standards, as set forth in KSG Agro S.A.

OPERATING ENVIRONMENT AND GOING CONCERN

In determining the appropriate basis for preparation of the consolidated financial statements, the Board of

Directors and management are required to consider whether the Group can continue in business for the

foreseeable future. Those considerations are presented below.

Key risks and uncertainties

Financial performance of the Group is naturally dependent upon weather conditions in areas of operation and

the wider economic environment of Ukraine. To mitigate these risks, the Group continues to implement its

strategy of focusing on more profitable segments, crop farming and pig breeding, and of restructuring its old

and overdue liabilities.

As at the date these consolidated financial statements are being issued, management are not aware of any

uncertainties which might jeopardize going concern, other than the outcome of the ongoing Russian

Invasion, its impact on the security of the Group’s assets and its long-lasting effects on Ukrainian economy.

Risks and uncertainties: Russia-Ukraine war

The Group’s operations are predominantly in Ukraine. Ukraine has been engaged in a lengthy war with

Russia since as early as February 2014, a war still ongoing as at the date these consolidated financial

statements are being issued.

2014-2021: Euromaidan, Annexation of Crimea, and the War in Donbas

In February 2014, after a series of anti-government protests (called ‘Euromaidan’) swept the country, the

President of Ukraine fled, and the new Interim Government had been formed. In March 2014, using this

political instability, Russia annexed the Crimean Peninsula, and then provoked and began actively

supporting a continuing armed conflict between the Ukrainian army and Russian-backed separatists in the

Donbas region of Ukraine. In May 2014, a new, pro-European, President of Ukraine was elected, and the

country slowly started to recover.

The loss of Crimea, the conflict in Donbas, all resulted in radical market shifts for key export-oriented

sectors. The Ukrainian economy suffered a deep slump throughout the whole of 2014 – 2016. As part of the

government’s stabilisation measures, the National Bank of Ukraine (“NBU”) imposed numerous

restrictions, including those on international money transfers. The Group lost a substantial chunk of its

assets as a result of Russia’s annexation of Crimea in 2014 and NBU’s restrictions imposed significant

difficulties with timely repayment of loans to the Group’s international creditors.

Most of these loans also became immediately due, and so the Group had to negotiate restructuring of the

loans to be able to make payments in the new conditions. Restructuring eventually started in 2017, when a

letter of intent was signed with the Group’s largest creditors to confirm preliminary restructuring terms. By

summer of 2020, the Group had successfully settled all of its major loans.

By summer of 2020 the economy also mostly recovered. Overall macroeconomic stabilisation was

evidenced by a rise in domestic investment, revival in household consumption, increase in agricultural and

industrial production, construction activity and improved environment on external markets. Consumer price

inflation has slowed down to, and was expected to remain around, 5% in future years.

As of 23 February 2022, political and economic situation in Ukraine remained relatively stable.

2022: Russian Invasion

On 24 February 2022, Russia started a full-scale invasion of Ukraine. After an initial series of air strikes,

which targeted key military infrastructure, Russian ground troops moved in across the whole length of the

state border between Russia and Ukraine (north-east and east), as well as south from the annexed Crimea.

Facing heavy resistance from both the regular Ukrainian Armed Forces and government-supported

Territorial Defence Forces (which include civilians), Russian ground troops failed to gain a significant

foothold in Ukraine fast enough and, after two weeks, their ground progress has essentially stalled. For

details refer to Note 27.

Due to the slow progress of the Russian troops, and because the Group’s locations are in the very center of

Ukraine, management currently estimates the risk that any fighting will reach the Group’s pig farm to be low.

The Group has also temporarily moved its headquarters from the city of Dnipro to Chernivtsi, a city close to

the western border of Ukraine and further away from the Russian aggression.

Management’s Assessment of the Impact of the War

As at the date these consolidated financial statements are being issued, the War has been going on for 8

years already. But even amidst this war, Ukraine’s economy and army have only been getting stronger.

From 2016 and onwards, the exchange rates for the Ukraine’s national currency Hryvnya have stabilised

(data below is from NBU):

202120202019201820172016201520142013

28.224.215.710.6

25.521.811.97.9

And key macro-economic indicators have also improved (data below is from World Bank):

202120202019201820172016201520142013

GDP, USD billion

164155154131112

9.52.77.810.914.4

13.948.612.1(0.3)

All of the Group’s major problems in the past 8 years were the result of the ongoing war, but despite the

difficulties, the Group still managed to overcome the odds and continues to do so.

Table 1. The Group’s total obligations under bank and other loans as at 31 December over the years were

in USD million20212020

Non-current portion27.224.5

Current portion2.52.9

Total bank and other loans29.727.4

Table 2. Improvements in the Group’s working capital as at 31 December over the years were as follows:

2016201520142013

13.920.320.688.0

Current Liabilities(22.4) (25.2)(43.9) (49.1) (42.1) (41.8) (53.5) (82.2) (112.8)

Working Capital3.5(6.3) (23.5) (26.7) (24.6) (27.9) (33.2) (61.6) (24.8)

Table 3. The Group’s annual revenue and EBITDA over the years were as follows:

2019201820172016

23.928.323.220.9

The above indicators suggest that the Group has an obvious track record of persevering through adversity.

And, from the improvement in macro-economic indicators, we may further derive that other Ukrainian

businesses exhibit the same trait. A trait that seems to be in the DNA of Ukrainian people, serving as a

testament that the victory will be eventually ours.

Ukraine already received overwhelming international support, both politically and economically. In addition to

receiving donations from sympathisers (major financial institutions and governments) across the globe, the

Government of Ukraine also issued USD 270 million worth of war bonds to finance its military. Other financial

aid packages from abroad are on their way. This aid should help the Government to stabilise and more or less

secure its pre-Invasion financial position, as well as keep key macro-economic projections at their pre-

Invasion levels.

For regions of Ukraine that are further away from the fighting, the current crisis feels in a way just like the

continuation of COVID, people got used to movement restrictions and business lockdowns.

And, drawing further comparisons with COVID, we believe that the expected financial aid packages would

serve as the much-needed vaccine booster shot, increasing the country’s financial immunity against the

devastating effects of a war.

A key priority, both for the Group and the country as a whole, is the spring sowing campaign. The Group itself

is fully prepared: it has sufficient reserves of seeds, fuel, and fertiliser. Additionally, since the Russian Invasion

started, TASCOMBANK, the Group’s main lender, has already provided two tranches of UAH 40 million and

UAH 60 million, respectively, (a total equivalent of USD 3.4 million of additional funds), to finance any cash

gaps that the Group might incur during the sowing campaign. On a larger scale, smaller agricultural

producers in Ukraine will receive financial support from the Government; and the Government already

estimates such support to be sufficient.

During the last several weeks, the prices for both crops and pork have increased substantially. As an

example of this, January 2022 prices for milling wheat futures on the Euronext exchange ranged from EUR 255

– EUR 280 per tonne, while March 2022 prices for the same futures have already increased to EUR 320 –

EUR 360 per tonne.

The recent droughts in various parts of Africa, a region which already greatly depends on imports of wheat

from Russia and Ukraine, are projected to increase the price of wheat even higher. According to the United

Nations, Russia and Ukraine produce more than a quarter of global wheat exports.

As a result, both the harvest of winter crops due around May, as well as the planned harvest of summer

crops due around September, in addition to constant supply of pork, should maintain the Group’s profitability at

a sufficient level to both support its operational needs, as well as funding any scheduled repairs and

maintenance of equipment, for at least the next twelve months from the date these consolidated financial

statements are being issued.

Risks and uncertainties: long-term financing and cash gaps

The Group had very low liquidity indicators in the past which, to a considerable extent, were a result of

unpaid and overdue loans. By August 2020, those loans had been fully settled and the new loans attracted

from TASCOMBANK now have a reasonable repayment schedule. Refer to Table 1 above which shows the

gradual reduction in both, the overall balance of loans and their short-term portion.

Most of the old loans were denominated in USD and EUR, while the Group’s main revenue streams are in

UAH. The new loans attracted from TASCOMBANK are, therefore, borrowed directly by the Group’s

Ukrainian operating subsidiaries, and are denominated in UAH.

According to management’s five-year projections, the Group is expected to generate sufficient cash flow

from operations to ensure overall repayment of the loans both in the long-term and in the next twelve-month

period, while the unutilised loan capacity will be used to cover the occasional cash gaps. For their

projections, where practical, management adopted a more conservative scenario, in order to account for

various possible adverse effects of the Russian Invasion.

Risks and uncertainties: Coronavirus pandemic

The Group created the headquarters for countering thecoronavirus at its pig breeding complex. Its functions

include providing practical assistance for the prevention of coronavirus infection to employees of the pig

complex, their families, all villagers during the quarantine period, as well as providing information and

psychological support.

Special attention is paid to the de-concentration of employees at production sites. All personnel of the pig

complex are provided with protective masks, without which transportation and passage through the sanitary

inspection room are impossible.

Employees with clinical signs of infection (fever, cough, malaise, etc.) are not allowed to work. Every day,

before the start of the working day, a clinical examination of the staff is carried out.

Development strategy: Continuing focus on crop farming and pig breeding

The Group continues to implement its simple strategy of focusing on three winter crops, two summer crops and

pigs of a single breed. The Group’s products, being basic food products, are always in demand, and remain

in especially high demand in 2022, during war time.

Crop farming revenue for 2021 more than doubled as compared to 2020, while revenues from pig breeding,

less affected by the weather conditions, keep growing at a steady pace and remain the Group’s key

strategic focus:

Segment revenue, in

Y-O-Y increase in

Y-O-Y increase in

contract currency

Current year harvest was exceptionally good compared to the previous year:

Crops harvested, in tonnesSeason

SunflowerSummer

Total67,88640,040

Although the weather conditions were favourable to other agricultural producers as well, higher overall

production of crops in Ukraine did not affect the local demand for the Group. For next year, an area of 6

thousand hectares is currently under winter crops and is expected to yield a total of 18.3 thousand tonnes of

wheat, barley and rapeseed at harvest.

As for pig breeding, pig production and sales were also in line with the previous year:

Marketable Pigs, in units

As at 1 January

Transfers to/from nucleus herd, net

As at 31 December

The construction of an additional fattening shop for 2,340 pigs and an additional sow house for 360 sows

should provide the Group with another production facility for fattening pigs and will offer an opportunity to

increase the birth rate of piglets and improve their performance even more. Construction works on both

projects are still under way.

Furthermore, in 2021 the Group purchased 900 new sows as part of its herd rejuvenation efforts and started

reconstruction of the second stage of the pig-breeding complex, which will allow the Group to further

increase its production capacity. Plans for the second stage include 10 workshops for a total of 58 thousand

Overall, operational performance is considered satisfactory. At the date these financial statements are

being issued, management do not observe any internal or external indicators of events or circumstances

which might hinder or otherwise impede the Group’s progress in achieving its short-term operational goals.

Development strategy: improving key financial ratios

The Group had very low liquidity indicators in the past which, to a considerable extent, were a result of

unpaid and overdue loans. By August 2020, those loans had been fully settled and the new loans attracted

from TASCOMBANK now have a reasonable repayment schedule (see Note 16).

Since September 2020, management have focused their efforts on further improving the Group’s key

financial ratios, specifically its negative net current assets and negative shareholders equity. Both goals

were achieved primarily through disposal of several subsidiaries in April of 2021, as disclosed in Note 7.

Improvements in the Group’s net current assets (i.e. working capital) over the years are presented in Table 2

above. The adjusted working capital in 2021 as compared to 2020 was as follows:

Current Assets minus Current

less: Other financial assets

less: Other financial liabilities

Adjusted Working Capital

In assessing day-to-day performance of the business, management excludes ‘other financial assets’ and

‘other financial liabilities’, as those mostly comprise old non-trade balances subject to restructuring and

analyses the change in the resulting ‘adjusted working capital’. Based on management’s assessment, the

adjusted working capital is sufficient.

The Board of Directors concluded that, based on the above analysis, and except for the uncertainty

regarding the outcome of the ongoing Russian Invasion, its impact on the security of the Group’s assets and

its long-lasting effects on Ukrainian economy, there is reasonable expectation that the Group can continue

as a going concern for the next twelve months from the date these financial statements are being issued.

Therefore, these consolidated financial statements have been prepared on a going concern basis.

BUSINESS AND FINANCIAL RISKS

For more details on this matter we refer to the section “Business and Financial Risk” of the consolidated

management report included in the consolidated financial statements as at December 31, 2021.

FINANCIAL INSTRUMENTS

The Company didn’t use any financial instruments during the years 2021.

SUBSEQUENT EVENTS

On 24 February 2022, Russia started a full-scale invasion of Ukraine. After an initial series of air strikes,

which targeted key military infrastructure, Russian ground troops moved in across the whole length of the

state border between Russia and Ukraine (north-east and east), as well as south from the annexed Crimea.

More than 4.3 million Ukrainians (mostly women with children) fled the country to the neighbouring Poland,

Romania, Moldova, Hungary and Slovakia. A quarter of the Ukrainian population was internally displaced. The

UN has described it as the fastest growing humanitarian crisis since World War II.

Ukraine’s response

The President of Ukraine immediately enacted martial law and general mobilisation. Civilian volunteers who

were not drafted into the regular Ukrainian Armed Forces were able to join the Territorial Defence Forces,

which are local civilian defence militias officially recognised and supported by the Government of Ukraine. The

President of Ukraine turned to the international community for support.

The Government of Ukraine issued USD 270 million worth of war bonds to finance its additional military

The National Bank of Ukraine suspended currency markets, fixed the official exchange rate of Hryvnia

against foreign currencies, limited cash withdrawals in Hryvnia and prohibited withdrawal in foreign

The Government of Ukraine also initiated several programs to support local businesses, including direct

financial aid, subsidies, and tax breaks. Most prominently, the Government:

introduced a single 2% turnover-based tax rate, as an option available to most Ukrainian

businesses, in lieu of existing value-added tax and corporate income tax, effective from 1 April

specifically committed to provide financial support to smaller agricultural producers ahead of the

spring sowing campaign, in an attempt to thwart a possible food crisis that the war could ensue.

International response

In response to Russian aggression, a large number of countries began applying sanctions with the aim of

crippling the Russian economy. The sanctions were wide-ranging, targeting individuals, banks, businesses,

monetary exchanges, bank transfers, exports, and imports.

Several countries that are historically neutral, such as Switzerland and Singapore, have agreed to

Sanctions also included cutting off major Russian banks from SWIFT and freezing assets of the Russian

Central Bank, which held USD 630 billion in foreign-exchange reserves. By 1 March 2022, the total amount of

Russian assets being frozen by sanctions amounted to USD 1 trillion.

While sanctions are intended to weaken the Russian economy, financial support from governments and

international financial institutions towards Ukraine are instead directed to support the Ukrainian economy

and help it stay afloat. For that purpose, the frozen (or otherwise ceased) Russian assets could be provided to

Ukraine as reparations.

In addition to having sanctions imposed on Russia, in addition to receiving political and financial support from

countries across the globe, Ukraine is also receiving indirect military support from other countries,

particularly its European allies, through supply of weapons to defend against the Russian aggression.

Major multinational companies from various sectors of the economy, including largest energy companies,

major credit card networks, technology companies, have disengaged from Russia in support of Ukraine.

Group’s response

The Group has increased security around the pig farm and temporarily moved its headquarters from the city

of Dnipro to Chernivtsi, a city close to the western border of Ukraine and further away from the Russian

Since most of the Group’s production processes are vertically integrated, it is only dependable on suppliers of

fertilizer, fuel, and pig feed. Therefore, as at the date these consolidated financial statements are being

issued, the Group:

fully stocked with fertilizer and fuel for both, the sowing campaign of 2022 summer crops and the

subsequent harvesting campaign of 2021 winter crops, to mitigate any potential risk of future

shortage or logistical hurdles;

procured a strategic three-month supply of raw materials for the production of compound feeds at

its feed mill, to safeguard against the risk of temporary supply chain disruptions during wartime.

All these purchases were made in Ukrainian currency, so there is no foreign currency risk.

The Group also secured two tranches of additional financing from TASCOMBANK, the Group’s main lender, in

the amounts of UAH 40 million and UAH 60 million, respectively, (a total equivalent of USD 3.4 million of

additional funds) to fund any cash gaps that the Group might incur during the spring sowing campaign.

Current situation

Facing heavy resistance from both the regular Ukrainian Armed Forces and Territorial Defence Forces,

Russian ground troops failed to gain a significant foothold in Ukraine fast enough and, after two weeks, their

ground progress has essentially stalled. As of 1 April 2022, the Russian battalions attacking the northern

regions of Ukraine ceased their assault and withdrew back to Russia, to join the other Russian forces in a

unified attack on Donbas, in the east of Ukraine.

Since the start of the Russian Invasion, no fighting occurred in close vicinity to the Group’s assets. The

Group’s pig farm and its crop fields are located in the center of Ukraine, which hasn’t seen any fighting yet.

Therefore, as at the date these consolidated financial statements are being issued, management does not

expect significant interruptions to both its spring sowing campaign and its harvesting of winter crops shortly

We invite you to approve this report following its lecture.

The Board remains at the full disposal of the shareholders for any further information in relation to the

___________________________

Name: Sergiy KASIANOV

Title: Chairman / A Director

Date: .......................

___________________________

Name: Andriy SKOROKHOD

Title: A Director

Date: .......................

___________________________

Name: Andrii MUDRIIEVSKYI

Title: A Director

Date: .......................

___________________________

Name: Xavier SOULARD

Title: B Director

Date: .......................

___________________________

Name: Eric TAZZIERI

Title: B Director

Date: .......................

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