Annual Report (ESEF) • Aug 31, 2022
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Download Source File54930054O2GINV8PPT28-2021-12-31-en.xhtml 54930054O2GINV8PPT28 2021-01-01 2021-12-31 54930054O2GINV8PPT28 2020-01-01 2020-12-31 54930054O2GINV8PPT28 2021-12-31 54930054O2GINV8PPT28 2020-12-31 54930054O2GINV8PPT28 2019-12-31 54930054O2GINV8PPT28 2020-01-01 2020-12-31 ifrs-full:IssuedCapitalMember 54930054O2GINV8PPT28 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 54930054O2GINV8PPT28 2019-12-31 ifrs-full:IssuedCapitalMember 54930054O2GINV8PPT28 2020-12-31 ifrs-full:IssuedCapitalMember 54930054O2GINV8PPT28 2021-12-31 ifrs-full:IssuedCapitalMember 54930054O2GINV8PPT28 2019-12-31 ifrs-full:SharePremiumMember 54930054O2GINV8PPT28 2020-12-31 ifrs-full:SharePremiumMember 54930054O2GINV8PPT28 2021-12-31 ifrs-full:SharePremiumMember 54930054O2GINV8PPT28 2019-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 54930054O2GINV8PPT28 2020-01-01 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 54930054O2GINV8PPT28 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 54930054O2GINV8PPT28 2021-01-01 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 54930054O2GINV8PPT28 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 54930054O2GINV8PPT28 2019-12-31 ovo:RetainedEarningsExcludingProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2020-01-01 2020-12-31 ovo:RetainedEarningsExcludingProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2020-12-31 ovo:RetainedEarningsExcludingProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2021-01-01 2021-12-31 ovo:RetainedEarningsExcludingProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2021-12-31 ovo:RetainedEarningsExcludingProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2019-12-31 ovo:RetainedEarningsProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2020-01-01 2020-12-31 ovo:RetainedEarningsProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2020-12-31 ovo:RetainedEarningsProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2021-01-01 2021-12-31 ovo:RetainedEarningsProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2021-12-31 ovo:RetainedEarningsProfitLossForReportingPeriodMember 54930054O2GINV8PPT28 2019-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 54930054O2GINV8PPT28 2020-01-01 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 54930054O2GINV8PPT28 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 54930054O2GINV8PPT28 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 54930054O2GINV8PPT28 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 54930054O2GINV8PPT28 2019-12-31 ifrs-full:NoncontrollingInterestsMember 54930054O2GINV8PPT28 2020-01-01 2020-12-31 ifrs-full:NoncontrollingInterestsMember 54930054O2GINV8PPT28 2020-12-31 ifrs-full:NoncontrollingInterestsMember 54930054O2GINV8PPT28 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 54930054O2GINV8PPT28 2021-12-31 ifrs-full:NoncontrollingInterestsMember xbrli:shares iso4217:USD iso4217:USD xbrli:shares OVOSTAR UNION AANNUALL REPORT FINANCIAL YEAR ENDED 31 DECEMBER 2021 5 10 12 13 16 18 19 20 Corporate summary Market Overview Key Financials Segment Activities Financial Results Outlook for 202Ϯ Human Resources Risk Management and Internal Control Shareholders and Share Information 26 C CONTENTS The Board of Directors 28 Committees of the Board of Directors 32 Meetings with Shareholders 33 Corporate Governance and Control 35 Non-financial Informaon 37 MANAGEMENT REPORT C ORPORATE GOVERNANCE F INANCIAL STATEMENTS Consolidated financial statements 40 Company financial statements 85 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 3 Dear Shareholders, While reporng on the results of the fi- nancial year 2021 we have to at all mes bear in mind the tragedy that befell Ukraine on February 24, 2022. Once a peaceful flourishing country was bla- tantly aacked by the Russian military forces who ever since keep bringing cha- os and destrucon to our homes and taking lives of our people. On the back- ground of these horrible events Ovostar Union strives to make its modest contri- buon to the common effort aimed at defending Ukraine. As a producer of basic foods like eggs and egg products, we realize how important our work is for the country’s food security. Since the beginning of the invasion our produc- ons sites never stopped operang pro- ducing and delivering nutrion to the people. I want to thank everyone from Ovostar team for their dedicaon and courage that has been leading the com- pany through the hardest of mes. I also want to say words of appreciaon to our suppliers and customers and, of course, to the brave men and women who are fighng for our victory over the enemy. Back in 2021 Ovostar had many plans for the year ahead. The company had progress in terms of operaonal efficiency that together with favorable market condions laid solid basis for further development. The Group became #1 egg producer in Ukraine and remained one of the biggest exporters to Europe. Today, however, like most Ukraine-located businesses we have to shi focus and adjust the strategy to the new business environment full of risks and uncertain- es. We believe that the day is close when the jusce will be restored and the enemy defeated. Sincerely, Borys Bielikov C CEO’s Statement M MANAGEMEN T T REPOR T T C CORPORAT E E SUMMAR Y Y COMPANY OVERVIEW Ovosta r r Unio n n Publi c c Compan y y Limite d d is a holding enty originally incorporated under the laws of the Netherlands in 2011 and re- domiciled to Cyprus in 2018. It consolidates companies with producon assets located in Ukraine and non-Ukrainian trading compa- nies in Latvia, Brish Virgin Islands and Unit- ed Arab Emirates (hereinaer referred to as “we, us”). Our shares have been quoted on the Warsaw Stock Exchange since June 2011. Our goal has been to produce ecologically clean and healthy food for our clients in Ukraine and abroad. We are growing organi- cally by gradually increasing the volume of eggs produced and expanding the range of egg products offered. For over a decade Ovostar Union has been one of leaders of the local egg industry belonging to the top 3 pro- ducers in Ukraine. With focus on developing the export mar- kets, we are expanding our sales geography supplying shell eggs and egg products of con- sistently high quality around the countries of Europe, Middle East, Africa and Asia. Within the egg segment, we possess shell egg porolio of over 20 sub-brands and sup- ply our branded eggs to the largest retail chains in Ukraine. As a result of export mar- kets development we are gradually increas- ing the deliveries of shell eggs outside of Ukraine. Within the egg products segment, we offer the full range of egg products of both liquid and dry forms. We enjoy loyalty of the larg- est food processing companies in Ukraine and abroad by adjusng our products to the clients’ needs while maintaining the superior quality. 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 5 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 6 C CORPORAT E E SUMMAR Y Y BUSINESS GEOGRAPHY We are a vercally integrated agricultural holding with key producon facilies and supporng infrastructure concentrated within Kyiv region of Ukraine in close proximity to one another other. Two poultry farms with total flock of 8 million hens (including parents, young hens and layers) ensure producon of nearly 1.8 eggs per year. Two egg pro- cessing plants have manufacturing capaci- ty for yearly output of 3.5 tons of dry and 14 tons of liquid egg products. The state-of-the-art equipment installed at our producon sites comes from the best experts such as Big Dutchman, Sal- met, MOBA and others. Combined with the innovave technology soluons and best pracces deployed it makes us a rec- ognized industry leader. K 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 7 We employ the most up-to-date poultry and processing equipment and progressive technological concepts at our producon sites in order to ensure efficiency of producon processes and superior quality of final products. Having inially adopted a large-scale producon approach, we have built up a vercally integrated business model with full producon cycle spanning from parent flock to egg processing. Alongside our core business we maintain our own fodder producon, rapeseeds processing and grain storage, which secure the high quality of fodder for our poultry flock. Our products are compliant with internaonal quality standards ISO 9001:2015 and FSSC 22000 v.5 as well as applicable naonal Ukrainian standards and sanitary norms. We also possess the Halal Cerficate to export internaonally and are cerfied to export both shell eggs of class “A” and egg products to the European Union. C CORPORAT E E SUMMAR Y Y BUSINESS MODEL 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 8 We supply Ukrainian market with the widest range of packaged shell eggs under brand name Yasensvit™. Key customers of egg segment are large local and internaonal retail chains in Ukraine. Price for branded packaged eggs is tradionally higher than the average egg price on the market. Having YasensvitTM for over 15 years on the Ukrainian market, the price premium is jusfied by consumers’ recognion of consistently high quality of products under YasensvitTM brand and the wide range of assortment adjusted to specific consumer preferences. In 2021 we kept the posion of one of the major producers of private label eggs in Ukraine. Our eggs branded by retail network labels are supplied to Auchan, Silpo, Metro, Novus, ATB, Velyka Kyshenya and a number of smaller regional retail chains. In 2019 new design and logo of YasensvitTM was introduced in response to the fast changing market condions and consumer needs. These steps, as a part of the upgraded markeng strategy, are aimed at building up the exisng customer loyalty and aracng new clientele. In 2020 a free range poultry house was completed and cerfied for producon of shell eggs marked as “Free Range”. The Company is one and only among local industrial egg producers who launched free range egg producon. P S Over 15 years the most recognizable trade mark on the Ukrainian market; Consistently high product quality; Supplier to the largest retail chains in Ukraine; Whole product porolio of premi- um, standard, economy and private label categories. CORPORAT E E SUMMAR Y Y OUR BRANDS - - SHELL EGGS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 9 We offer a wide range of separated and whole egg products in dry and liquid form under the OVOSTAR brand. The demand for egg products mainly comes from food processing companies in Ukraine and abroad. The segment is mainly B2B-oriented as the egg products are used for producon of confeconary, mayonnaise, meat products etc. Each client requests the egg product with certain characteriscs needed for the final good. Our flexibility to adjust to clients’ needs maintains the loyalty of our major clients as well as our posion of market maker of liquid egg products in Ukraine. Among our key local customers are Roshen, Schedro, Mondelez Ukraine, Volyn Holding, Kharkiv Biscuit and others. We are also the exclusive supplier of eggs and egg products to McDonalds Ukraine. Inspired by the success of boled liquid egg white and liquid whole egg, offered to our customers in 2018, in 2019 we introduced a new egg product in retail segment - boled scrambled eggs. Further, in 2020 we launched producon of liquid white, liquid eggs and omelets in pure-pak cartons, that are now available in most retail-chains all over the country. Brand-new liquid egg products in pure- pak cartons are now available to retail customers under TM YASENSVIT and OVOSTAR CORPORAT E E SUMMAR Y Y OUR BRANDS - - EGGS PRODUCTS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 10 Ukraine is an emerging free-market economy, with many of the components of a major European economy including a well-educated and well- trained workforce, a solid industrial base, and rich farmlands. Following a polical and economic crisis in 2014- 2015 and a cumulave economic decline of 16%, Ukraine’s economy began slowly growing in 2016 with two percent year-over-year growth. While the country’s turn-around was primarily aributable to reforms implemented by Ukraine’s first technocrac government, growth in 2016 was driven by a rebound in domesc investment acvity and a modest recovery in household consumpon. Domesc demand and strong agricultural harvests connued to fuel the economic growth of 3.3 % in 2018 and 3.2 % in 2019. In 2021, Ukraine’s economy recovered mildly at 3.6%, which is faster than ancipated and the growth rate rose to 3.8% in 2022 as the spread of Covid-19 slows. Ukraine’s global trade grew with imports tradionally significantly outpacing exports, resulng in a trade deficit of $6.2 billion, which is a $4.2 billion improvement in comparison with the previous year. Import of goods and services increased by 8.8% in 2021, while export by 5.6%. Trade balance surplus in services is increased by approximately 6 % to $16.4 billion, reflecng Ukraine’s growing role as an informaon technology (IT) leader. Despite its slow past economic growth and expanding trade deficit, Ukraine’s economy has several bright spots, most notably agriculture, which generated approximately 9.3% of GDP in 2020. Ukraine harvested about 76 million tons of grain in 2021, up from 65 million tons in 2020. Ukraine ranks among the world’s top producers of grain crops including wheat, corn, and barley. Stable agricultural growth presents significant opportunies for U.S. exporters of agricultural machinery, as well as other inputs like seeds and ferlizers. Ukraine’s economic recovery and macroeconomic stabilizaon since 2016 are supported by the Internaonal Monetary Fund (IMF). In June 2020, Ukraine and the IMF entered into an 18-month $5 billion stand-by arrangement. At that me, the IMF disbursed the first tranche of $2.1 billion in concessionary loans to help the Ukrainian economy to weather the coronavirus pandemic. Due to reform setbacks, Ukraine has not yet qualified for a second disbursement as of September 2021. On August 23, 2021, Ukraine received $2.7 billion worth of IMF Special Drawing Rights under a worldwide program to support the global economy during the pandemic. Future IMF disbursements will depend on fulfilling reform commitments in the areas of an-corrupon, judicial reform and fiscal discipline. According to the IMF, per capita GDP in Ukraine is just 13% of the EU average in 2020 and the lowest level of all Eastern European countries. Faster, sustainable, and inclusive growth is needed to recover lost ground and improve living standards. The populaon of Ukraine has undergone a major decline since the 1990s, due primarily to the low birth rate and emigraon. Ukraine’s populaon totaled 41.4 million people as of July 2021. Approximately 15.2% of the populaon is age 0-14, 59.5% is 16-59, and 17.4% is 65 years and over. M MARKET OVERVIEW MACROECONOMIC INDICATORS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 11 L H F Ukrainian egg market is characterized by significant share of laying hens farmed by households from April to September, therefore, it can be assumed that the number of laying hens provided by State Stascs Service of Ukraine as at the end of the year presents the industrial flock. As December 31, 2021 the industrial laying hens flock decreased by 5% YoY and amounted to 28.8 million heads (2020: 30.4 million heads). Ovostar Union share in total laying hens flock as of December 31, 2021 made up 24% (2020: 22%). S Total volume of eggs produced in Ukraine in 2021 fell by 13% in comparison to the previous year and reached 14 bln (2020: 16.2 bln eggs). The Ukrainian shell egg market is historically divided into industrial and household producon. The volume of eggs produced in industrial format in 2021 decreased by 22% YoY to 6.9 bln eggs, or 50% of total producon volume (2020: 8.9 bln eggs, or 55%). Ovostar Union share in industrial shell eggs producon in 2021 was 24% (2020: 19%). In 2021 egg consumpon rate in Ukraine amounted to approximately 280 eggs per capita according to the data of Ukrainian Poultry Farmers Union (2020: 282 eggs per capita). E In 2021 esmated producon volume of dry egg products market in Ukraine decreased by 36% YoY to 5.5 thous. tons, output of liquid egg products grew by 8% to 17.4 thous. tons. Ovostar Union esmated share in total volume of dry egg products output in 2021 equals 54% (2020: 43%); share in total liquid egg products produced - 83% (2020: 85%). L H F: U O U 36.1 30.5 6.7 6.6 19% 22% 24% 2019 2020 2021 Total Laying Flock, mln heads Ovostar Union, mln heads Ovostar Union share, % MARKE T T OVERVIE W W COMPETITIVE POSITION 28.8 7.0 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 12 B S (mUSD) 31-Dec-2020 31-Dec-2021 ∆ YY, % Assets 131.3 141,0 7% Non-current assets 88.2 91,5 4% Current assets 43.1 49,5 15% - Equity and Liabilies 131.3 141,0 7% Equity 104.4 109,9 5% Non-current liabilies 5.5 7,5 36% Current liabilies 21.4 23,7 11% C F (mUSD) 2020 2021 ∆ YY, % Net cash generated by operang acvies 15.0 18.2 21% Net cash used in invesng acvies (17.2) (20.2) 17% Net cash generated by financing acvies (0.8) 2.6 (425%) D P (mUSD) 31-Dec-2020 31-Dec-2021 ∆ YY, % Total debt 10.8 12.9 19% Cash and cash equivalents 1.6 2.4 50% Net debt 9.1 10.4 14% I S (mUSD) 2020 2021 ∆ YY, % Revenue 98.9 133.3 35% Gross profit 13.4 13.6 1% EBITDA 8.0 5.7 (29%) Profit before tax 2.8 1.6 (43%) Net profit 2.6 1.6 (38%) K KE Y Y FINANCIAL S S 202 1 1 UPDATE 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 13 S P As of 31 December 2021 the Company’s total flock equaled 8.4 mln hens. The number of laying hens was 7.0 mln heads which represents a 7% increase as compared to December 31, 2020. The producon volume, however, remained at the level of the previous year—1 691 mln eggs (2020: 1 672 mln eggs). S In the reporng period the sales volume in shell eggs segment increased by 8% to 1 150 mln eggs (2020: 1 067 mln). The volume of eggs exported was 264 mln that makes up 23% of the total sales in the segment (2020: 349 mln or 32%). . S Average price of eggs in UAH terms rose by 35% YoY and reached 2.178 UAH/egg, while in USD terms it rose to 0.080 USD/egg (2020: 1.608 UAH/egg or 0.060 USD/egg respecvely). 525 349 756 622 Local Sales, mln eggs Export Sales, mln eggs 2019 2020 2021 Branded Unbranded Export 2020 2021 20 21 32% 46% 22% S SEGMEN T T ACTIVITIE S S EGG SEGMENT 264 886 23% 55% 22% 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 14 L E P SD E P S Dry egg products local sales, thous. tons Average price, USD/kg net of VAT 4.15 4.11 P In 2021 the volume of eggs processed was 501 mln, which represents a 15% decrease as compared to the previous year (2020: 589 mln eggs). The volume of dry egg products output decreased by 15% YoY and reached 2 699 tons (2020: 3 161 tons). The output of liquid egg products decreased by 8% YoY to 14 136 tons (2020: 15 371 tons). S The volume of dry egg products sold fell by 1% and equaled to 3 237 tons (2020: 2 270 tons), out of which 2 064 tons, or 64%, were exported (2020: 2 268 tons or 69%). The volume of liquid egg products sales fell by 5% YoY and totaled 14 391 tons (2020: 15 165 tons), 4 098 tons, or 28%, of which were exported (2020: 4 647 tons or 31%). Average sales price of dry egg products increased by 23% YoY in UAH terms to 136.85 UAH/kg and by 22% in USD terms to 5.02 USD/kg (2020: 110.84 UAH/kg or 4.11 USD/kg). Average price of liquid egg products rose by 36% in UAH terms and was 47.07 UAH/kg, while in USD terms it was 1.73 USD/kg (2020: 34.71 UAH/kg, 1.29 USD/kg). 2.1 0.7 2.3 1.0 6.5 7.2 4.6 8.6 1.44 1.22 Dry egg products export sales, thous. tons 2019 2020 2021 Liquid egg products local sales, thous. tons Average price, USD/kg net of VAT Liquid egg products export sales, thous. tons 2019 2020 2021 SEGMEN T T ACTIVITIES EGG PRODUCTS SEGMENT 2.1 1.2 5.02 4.1 10.3 1.73 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 15 E The Group exports eggs and egg products under the brand name OVOSTAR to around 50 coun- tries of the world through its representave offices in Latvia and UAE. Key export markets are Europe and Middle East. In 2021 28% of the total revenues of the Company came from export acvies. Export revenues totaled to USD 37.7 million. Sales to Middle East contributed 13% to the total revenues (2020: 19%), sales to European Union made up 10% of total revenues (2020: 16%). S SEGMENT ACTIVITIES SALES GEOGRAPHY BY SEGMENT 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 16 G The cost of sales increased in 2021 by 36% YoY from USD 81.7 mln to USD 111.2 mln mainly as a result of the larger sales volume of shell eggs. The other factor was connuing growth of feed mix components prices in the 1st half of the year. Gross profit totaled to USD 13.6 mln (2020: USD 13.4 mln). N Net profit for the year amounted to USD 1.7 mln (2020: USD 2.6 mln). EBITDA In 2021 EBITDA fell to USD 5.7 due to significant negave change in revaluaon of biological assets (2020: USD 8.0 mln). R S S P D, USD Shell eggs, local Shell eggs, export Egg Products, local Egg Products, export EBITDA, mUSD Net profit/loss, mUSD -15.5 -20.0 R In 2021total revenues increased by 35% as compared to the previous year and amounted to USD 133.4 mln (2020: USD 98.9 mln). The main factors accounng for the increase are larger sales volumes in egg segment and higher prices of shell eggs and egg products, mostly on the local markets. The contribuon of shell egg segment to the total revenues in 2021 was USD 92.2 mln, or 69% (2020: USD 68.8 mln, or 70%). Egg products segment contributed USD 41.2 mln, or 301 (2020: USD 30.1, or 30%). 2020 2021 2019 2020 2022 17% 47% 13% 23% 8.0 2.6 F FINANCIA L L RESULT S S FINANCIAL PERFORMANCE 13% 54% 18% 15% 5.7 1.7 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 17 A, As of December 31, 2021 the total assets amounted to USD 141 mln, which represents a 7% increase YoY (2020: USD 131.3 mln). The total equity increased by 5% YoY and amounted to USD 109.9 mln (2020: USD 104.4 mln), mainly due to the change in foreign currency translaon reserve. L As of December 31, 2021 the total amount of interest-bearing loans and borrowings was USD 12.9 mln, represenng a 20% growth YoY (2020: USD 10.8 mln). Net debt as of December 31, 2021 totaled to USD 10.4 mln (2019: USD 9.1 mln). C In 2021 Net cash flows from operang acvies was USD 18.2 mln (2020: USD 15.0 mln). Net CF used in investment acvies was USD 20.2 mln (2020: 17.2 mln) Net CF from financing acvies was USD 2.6 mln (2020: (0.8) million). mln USD 2019 2020 2021 Operang CF 17.3 15.0 18.2 Invesng CF (21.8 ) (17.2) (20.2) Financing CF (5.9) (0.8) 2.6 C F F FINANCIA L L RESULT S S FINANCIAL POSITION 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 18 S Our organic growth strategy has been aimed at strengthening the Company’s market posion and expanding the presence its products in and outside of Ukraine simultaneously maintaining the customer loyalty. The focus on consistently high quality of our products and long-term relaonships with our clients offset any external challenges that the egg industry may face. The results we deliver are based on commitment of every employee. The cooperaon across departments results in higher producvity of day- to-day operaons and stronger synergy effect. In 2022 we intend to connue advancing employee skills to be more compeve and efficient. O 2022 The Company makes all efforts to adjust its strategy to the changing business environment and to respond to the new challenges. Being a part of crical infrastructure in Ukraine, the Company keeps operang, having introduced even stricter rules of producon safety and control at its producon sites in order to minimize risks for the employees and consumers. Under the circumstances we expect that in 2022 the focus will be placed on maintenance of the exisng producon facilies and increasing operang efficiency. The management makes steps to secure the supply chain which is vital for the operaons connuity. Acvies in the export markets have not suffered, however, further developments are subject to the success of measures taken locally and internaonally to curb the crisis and migate its effects. I The CAPEX of 2022 is expected to be moderate with focus on maintenance and infrastructure. . 2020 YoY (21/20) 2021 YoY (22/21) 2022F Laying hens flock, mln heads 6,6 7% 7,0 2% 7,2 Eggs produced, mln 1 671 1% 1 691 14% 1 921 Dry egg products produced, tons 3 161 -15% 2 699 85% 5 000 Liquid egg products produced, tons 13 504 5% 14 136 -8% 13 000 O OUTLOO K K FO R R 202 2 2 STRATEGY AND OUTLOOK 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 19 The majority of our employees are involved in pro- ducon processes on the premises located in Kyiv and Cherkasy regions. We recruit, employ and pro- mote employees on the sole basis of their qualifica- on and abilies. Equal employment opportunies and career perspecves are provided for all em- ployees, regardless of their gender, age, naonality or religious views. Our personnel policy is aimed to create and retain a well consolidated and highly professional team of individuals that are able to respond effecvely to changing market environment. We strive to ensure a posive, producve and successful work environ- ment. The level of sasfacon is, among other cri- teria, confirmed by high employee retenon rates (97% on average for the last 5 years). We aim to maintain a fair and comprehensive sys- tem of remuneraon. Overall remuneraon of our employees is divided into material and non- material porons. Material remuneraon consists of a basic fixed salary plus a variable component like bonuses that depend on achievement of corpo- rate and personal targets. Non-material remuneraon consists of professional trainings, corporate team-building events and free use of corporate gym. Legal relaonships between the Company and its employees are regulated by the Labor Code of Ukraine and executed in the form of term and termless labor agreements. We cooperate with the State Pension Fund making monthly social insur- ance contribuons. A corporate pension schedule has not been established. Our employees other than some of the Board members do not have any shareholdings in Ovostar Union PCL, to our knowledge; nor do they hold any stock opons or other rights to shares nor parci- pate in any other way in the capital of Ovostar Un- ion PCL. Currently, no arrangements relang to such parcipaon are planned in the short-term perspecve. Q 31 D 2019 2020 2021 Employees, EoY, incl. 1 590 1 543 1 525 ProducƟon 1 374 1 353 1 352 AdministraƟve 216 190 173 HUMA N N RESOURCE S S OVERVIEW 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 20 R Risk management is an essenal part of the deci- sion-making process providing reasonable assur- ance that risks are controlled to the furthest extent possible. Risk management and internal control systems are being regularly discussed with the ex- ecuve management and the Audit Commiee. In their review of our risk profile, the main focus is placed on principal risks that could significantly de- teriorate our operaonal and financial results. It has to be noted that proper idenficaon of risks significantly reduces but does not completely elimi- nate the possibility of human error, poor judgment in decision making, fraud or occurrence of unfore- seeable events. The risks that we face in the course of regular operaons are not limited to the risks described above, but those above are regarded as the most significant in the short-term perspecve. No an-takeover measures are in place. Some risks are yet unknown and some risks that are insignifi- cant at the moment could become material in the future. The Board of Directors is ulmately responsible for establishing, controlling and enhancing our internal control system. We consider risk management to be a connuous process of monitoring, assessing and migang risks through internal control sys- tems and procedures at each level within the or- ganizaon. We use guidelines, instrucons and procedures ap- plied to operaons, financial reporng, planning, human resource and customer management etc.; these are being reviewed and updated on a regular basis. Our employees are trained to implement and comply with these guidelines, instrucons and pro- cedures. Key elements of the internal control system are budgeng, investment management, operaonal management and financial reporng. They monitor the progress and the actual results of the compa- ny’s operang acvies. We also use a staff evalua- on and appraisal system. The process of enhance- ment of the internal control system will be conn- ued in 2021. For more informaon on risks please refer to Note 27 of the 2020 Consolidated Financial Statements. D In 2020, we did not idenfy any material weakness- es of the internal control system that might ad- versely impact our operaonal acvity, financial results and financial posion. The risks are clearly idenfied and controlled to the highest possible extent by our top management within their rele- vant funcon. R RISK MANAGEMENT & INTERNAL CONTROL OVERVIEW 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 21 I M 2021 S / N B R Outbreaks of highly- pathogenic avian influenza in Europe and in the south of Ukraine may severely limit our ability to perform normal operaons and reduce the possibility to export Adherence to biosecurity standards in line with the best internaonal pracces. Egg producon and egg pro- cessing facilies are compli- ant with ISO 9001: 2015 and FSSC 22000 v.5 and Halal. Di- versificaon of sales channels No occurrences of dangerous poultry diseases have been ever registered on our prem- ises. We control all the pro- cesses along the full produc- on cycle in order to provide the highest quality and ability to react fast in case of need Depreciaon of Ukrainian Hryvnia leads to deteriora- on of income per household and change in consumer preferences Worsening economic condi- ons has lile effect on con- sumpon of eggs per capita because eggs remain the most affordable source of animal-based protein In 2021 egg consumpon amounted to 280 eggs per capita, demonstrang stable growth over the last five years. M R Poor economic condions result in lack of debt financ- ing available Historically, we have been reliant primarily on own posi- ve cash flow and debt fi- nancing is used only for im- plementaon of long-term investment programs. To off- set he effects of the current instability of Ukrainian econ- omy, we accumulated the cash on our bank accounts in foreign-owned banks in Ukraine and outside We use export financing with comparavely low effecve interest rate. However, excel- lent credit history allows to borrow funds from Ukrainian banks on favorable terms. R RISK MANAGEMENT & INTERNAL CONTROL IDENTIFIED RISKS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 22 I M 2021 S / N P R Devaluaon of Ukrainian Hryvnia leads to lower price per item in USD terms and thereby decreases periodic financial results Increase of export sales is a natural hedge against curren- cy rate fluctuaons. Higher cost incurred in UAH is being steadily transferred to the final consumer through an increase of UAH-based prices for shell eggs and egg prod- ucts on the local market In 2021 share of export reve- nue was 28% (2020: 40%). YoY change of prices in UAH terms: for shell eggs +33%, for dry egg products +23%, for liquid egg products +43%. Current capital restricons of Naonal Bank of Ukraine, although parally weakened in 2019, may limit the possi- bility to meet the financial obligaons when due We strictly control our work- ing capital As at December 31, 2021 all payment obligaons were met on me. Part of revenues are accumulated on the bank accounts of the subsidiaries outside of Ukraine L R Excessive concentraon of sales may lead to financial instability in case of loss of key customer Our customer base is mixed in terms of size and industry. We are building a balanced cus- tomer porolio In 2021 we had no clients generang more than 10% of our total revenue C R RISK MANAGEMENT & INTERNAL CONTROL IDENTIFIED RISKS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 23 I M 2021 S / N C Offering from the exisng competors or new market entrants may weaken our compeve posion We have a unique for Ukraine vercally integrated business model with facilies in close proximity to each other, what results in high producon effi- ciency. Having been offering products of consistently supe- rior quality and adjusng to the market demands, we achieved the recognion and loyalty of our customers Yasensvit TM brand holds the posion of the most- recognized brand of shell eggs in Ukraine. We also have a possibility to effecvely diversify our sales to desnaons outside Ukraine C Extreme weather condions can have a detrimental effect on the well-being of poultry flock and their pro- ducon efficiency Our egg producon facilies are equipped with an auto- mac climate-control system Opmal climate condions for laying hens include 40-60% humidity and ambient tem- perature within 20-25 o C. Our producon facilies are equipped with sophiscated venlaon systems to keep all vial indicators at normal levels throughout the year. R RISK MANAGEMENT & INTERNAL CONTROL IDENTIFIED RISKS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 24 Having examined the exisng and potenal impli- caons of the war for the Ukraine located busi- nesses, the management of the Group have iden- fied several points of specific concern that require careful analysis and assessment. They idenfied risks include, but are not limited to, the following: x risks related to the personnel safety; x risk of physical destrucon of the produc- on assets; x risks of disrupon of the supply and distri- buon chains; x risk of liquidity and limited access to financ- ing; The Group places top priority on the personnel’s health and safety issues. All possible acon has been taken to minimize the exisng threats and support the staff during this dramac period. The HR department on a daily basis keeps record of the locaon of each employee to make sure that everyone is in a safe place. All administrave staff has been granted the opon to work remotely. The Group closely monitors the needs of the team and promptly reacts to them within the limits of its capabilies. Forty men from the company’s staff were called up to the military service. The Group’s management connue to fulfill their dues without interrupons. The Group fully complies with all sancons rules and regulaons regarding russia and belarus, in- cluding those introduced or published by various countries and organizaons. In addion, the Group refrains from contacng individuals or enes on the sancons list. In this situaon, the Group does not expect any impact on the supply chain and payment flow. The currently known impacts of the War on the Group The Group’s major producon facilies are lo- cated in Kyiv region, in Fasvskyi and Bi- lotserkivskyi districts, where no severe hoslies took place. The poultry houses in Vasilkiv and Stavyshche, as well as the egg-processing factory in Vasilkiv, remain physically undamaged and keep operang. The egg-processing factory in Makariv (Buchanskiy district) had been temporarily shut down unl the city was de- occupied by the Ukrainian military forces in the end of March. The subsequent inspecon of the factory showed signs of crical damages to buildings not involved in the manufacturing process (waste, packing materials storages, not engaged ice-cream producon facility), while main pro- ducon facilies are intact and operang, ad- ministrave building sustained minor surficial damage. The management expect to put the fac- tory back in operaon once the repairing works of the premises are completed. The esmated cost of damage is UAH 2 500 thousand. The supporng facilies accommodang hatchery, poultry houses for parent flock and young layers have not been affected and are being used in ac- cordance with the technological process. All Group inventory is in good condion and in safe storage. R RISK MANAGEMENT & INTERNAL CONTROL WAR-RELATED RISKS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 25 The Group has historically relied on the suppliers located in the central part of Ukraine, which im- plies efficient logiscs and reasonably prompt deliveries to the producon sites. Major con- tractors have not been affected by the hosli- es and connue to fulfill their contractual obli- gaons. The military acon had no crical impact on the local distribuon. The main distribuon channel for the egg segment is the large naonal retail chains. Geographically the sales are concentrat- ed in the central part of the country. The share of sales in the most affected regions does not exceed 10%; export sales reduced significantly. Since the start of the military campaign, the Group faced signifi- cant obstacles to export acvies due to the se- rious disrupons in logiscs. In parcular, sei- zure of Odessa port operaons cut access to the Middle East markets, where the commodies were shipped by sea. Overland deliveries to the EU countries resumed in early April aer the specific license had been issued to the company. The Group’s producon companies depend on imports in terms of certain feed mix supple- ments, vaccines, spare parts of producon equipment. These items are included in the list of “crical imported goods” (as defined in the Cabinet of Ministers of Ukraine’s Resoluon No. 153 dated 24 February 2022) and there are no restricons for their delivery to Ukraine. The management also take steps to select adequate substutes in the local market. As of date of this report there are no signs of material deterioraon of the payment discipline. The Group has sufficient recourses to meet its contractual obligaons. Interest bearing liabili- es towards the banks are served mely. The Group has taken the following acons in re- sponse to the current situaon: x opmized ulizaon of producon facilies to meet domesc demand and export or- ders; x the group has enough inventory for the producon and sale of its products, as well as human resources in the foreseeable fu- ture; x selling, general and administrave and other operang expenses, as well as CAPEX, have been reduced to the minimum required to meet the primary needs of the Group’s core business; x the Directors have decided not to declare a final dividend for the 2021 financial year; x the loss of the market in the east and south of the country is expected to be offset by increased demand in central and western Ukraine, where a large number of internally displaced persons temporarily reside; x the prescheduled repayments of main debt have been planned to be rescheduled to a later dates based on mutual agreements with the banks. R RISK MANAGEMENT & INTERNAL CONTROL WAR-RELATED RISKS 1 MANAGEMENT REPORT 2021 ANNUAL REPORT 26 At 31 December 2021 total share capital of Ovostar Union PCL was 6 000 000 shares. Each share has a nominal value of one vote at the General Meeng of Shareholders. According to publicly available informaon as at 31 December 2021, shareholders of Ovostar Union PCL with substanal parcipaon of at least 5% of all votes at the General Meeng of Ovostar Union PCL shareholders are listed in the table “S 31 D “. No substanal changes in shareholders' structure of Ovostar Union PCL took place in 2021. Free float remained at the level of 32.07%. Shareholders 2021 2020 2019 Prime One Capital Ltd 68% 68% 68% Generali 11% 11% 11% Fairfax Financial Holdings Ltd 10% 5% 5% Aviva 5% 5% 5% Others 6% 11% 11% Total 100% 100% 100% S 31 D S 2021 O OV O O WIG- Share price, PLN 2021 2020 2019 Opening 83 75 113 Maximum 88 89 113 Minimum 66 60 70 Closing 68 83 75 K Q1’21 Q2’21 Q3’21 Q4’21 SHAREHOLDER S S & & SHAR E E INFORMATIO N N SHARE CAPITAL STRUCTURE Q1 Q1 Q1 ’2 ’2 ’2 1 1 1 1 Q2 ’2 1 1 Q3 3 3 ’2 ’2 ’2 2 1 1 1 Q4 ’2 1 OVO WIG Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitali i i Veresenk o o Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer C CORPORAT E E GOVERNANC E E REPOR T T 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 28 The Company is headed by the Board of Directors, whose main funcon is to lead and control the company. The number of the directors of the Company is four, the majority of whom are non-execuve, out of whom two are independent within the meaning of Annex II of the European Commission Recommendaon no 2005/162/WE of 15 February 2005 on the role of non- execuve or supervisory directors of listed companies and on the commiees of the (supervisory) board. The only execuve director performs dues of the Chief Execuve officer. The following composion of the Board of the Company was approved by the General Meeng on July 16, 2021: Mr. Borys Bielokov Execuve Director, Chief Execuve Officer — Mr. Vitalii Veresenko Non-Execuve Director, Chairman of the Board — Mr. Karen Arshakyan Non-Execuve Independent Director — Mr. Sergey Karpenko Non-Execuve Independent Director — B BOARD OF DIRECTORS COMPOSITION OF THE BOARD 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 29 Mr. Arshakyan joined the Board of Directors of Ovostar Union in June 2019. Mr Arshakyan acted as an external adviser to the Board during the Compa- ny’s re-domiciliaon from the Netherlands to Cyprus. Mr Arshakyan has a de- gree in Economics and Management of Agriculture from Instute of Agricul- ture of Armenia. His work record includes companies in Armenia, Canada and Cyprus. Mr. Veresenko is at GC "Ovostar Union" since 1999. Till 2001 – General Di- rector at CJSC "Malynove", and since 2001 up to now – Head of the Supervi- sory Board of "Malynove" CJSC. Mr. Veresenko has diploma as automated management systems engineer of Kiev Air Defense Radio Technical Engi- neers College (1990). Mr.Bielikov founded GC "Ovostar Union" in 1999 (ll 2011 – LLC "Borispol Agro Trade"). Since 2007 and up to now he has been holding the posion of group Chief Execuve Officer. Mr. Bielikov gained the educaon as an air- cras operaon mechanic engineer at Naonal Aviaon University (1994). Mr. Karpenko served as a Deputy Head of investment policy and agrarian business in Ministry of agrarian policy of Ukraine from 1997 to 2003. Aer that Mr. Karpenko worked at «Union of Poultry Farmers of Ukraine» and since 2006 has been acng as an Execuve Director of Union. Mr. Karpenko graduated from Naonal agrarian university majoring in Agricultural manage- ment (1997). B B E D, CEO V V N-E D, C B K A N-E D, H A C S K N-E D B BOAR D D O F F DIRECTOR S S COMPOSITION OF THE BOARD 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 30 R Members of the Board represent Ovostar Union Group and the Board has the authority to appoint any official as a representave, and to determine the list of his/her powers. The execuve director is authorized to represent the Group on his own and to sign documents on behalf of the Group. In case of a conflict of interest between the Group and one of the directors, the conflicted director may not parcipate in the decision-making process concerning the maer causing the conflict. Members of the Board are appointed and may be suspended or dismissed from their posion by the General Meeng of Shareholders. At each annual general meeng of the Company one -third of the directors (or if their number is not a mulple of three, the number nearest to three but not exceeding one-third) shall rere by rotaon. No person (including a director rering by rotaon) shall be appointed (or reappointed) a director at a general meeng of the Company unless: (a) that individual is recommended by the board of directors or by a commiee duly authorised by the board for the purpose; or (b) not less than seven nor more than 42 days before the date appointed for holding the meeng, noce executed by a Qualified Member has been given to the Company of that member’s intenon to propose that individual for appointment (or reappointment) as director (stang the parculars which would, if he were so appointed, be required to be included in the Company’s register of directors) together with a noce executed by that individual stang that he is willing to act as director. S B Securies Rules have been established, which apply to the Board members in relaon to the acquision of securies share and transacons with them. Furthermore, the condions and requirements of the EU Market Abuse Direcve and the company’s Insider Trading Rules, reflecng the essence of EU Market Abuse Direcve, are applicable to the Board members (and other persons related to Board Members) in relaon o the acquision of shares and equity parcipaon. S B D The Board of Directors of Ovostar Union PCL hereby confirms that (1) none of the Board members is a member of any supervisory board of - or holds the posion of non-execuve director at more than two listed companies; (2) none of the Board members holds the posion of chairman of any supervisory board - or of the board of directors, in case such board consists of execuve and non-execuve directors - of other companies, except for our enterprises. B BOARD OF DIRECTORS TERMS OF REFERENCE 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 31 22-Apr-2021 The Company’s external auditors, Messrs. BAKER TILLY KLITOU & PARTNERS were invited to inform the Board on the results of the audit of the 2020 fi- nancial statements. The auditors confirmed their content with the annual report. An unqualified auditor’s opinion for the 2020 financial statements was issued. During the meeng the Board of Directors approved the Compa- ny’s 2020 annual report. 12-May-2021 During the meeng the Board approved the Company’s unaudited consoli- dated financial statements for the three months ended on March 31, 2021. 26-Aug-2021 During the meeng the Board approved the Company’s unaudited consoli- dated financial statements for the six months ended on June 30, 2021. 12-Nov-2021 During the meeng the Board approved the Company’s unaudited consoli- dated financial statements for the nine months ended on September 30, 2021. In 2021 the Board of Directors held four (4) meengs. Due to the restricons imposed on public gather- ings and internaonal travelling the meengs were arranged in the form of teleconferences on condi- ons that the minutes of the meengs in all cases were taken by the secretary of that meeng at the registered office of the company, or other premises on the territory of Cyprus and subsequently duly signed by the Head of the Board. The main issues that were included in the agenda of the meengs of the Board during 2021 were as fol- lows: B BOARD OF DIRECTORS BOARD OF DIRECTORS MEETINGS 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 32 The Board of Directors has established an Audit Commiee in order to meet the necessary corporate governance requirements and to ensure the Company’s financial transparency. The Audit Commiee is responsible for advising and monitoring the acvies of the Board of Directors in the areas of, among other things, the completeness of financial reporng, our financial strategy, tax planning, including: (i) funconing of control and internal risk management systems; (ii) provision of financial informaon (including choice of the accounng policy, applicaon of new rules and evaluaon of their impact on our performance, interacon with internal and external auditors, etc.); (iii) monitoring the compliance of our acvies with the recommendaons of internal and external auditors; (iv) interacon with external auditors, including control of the auditor’s independence, their remuneraon and provision of any services outside the audit scope; (v) our tax planning policy; (vi) sources of our funding; (vii) review of the annual budget and capital investments of the Group. At least one of the commiee members must be a financial expert as defined in the CSE Corporate Governance Code, and all commiee members must be financially literate. Our Audit Commiee sasfies these requirements. Mr. Karen Arshakyan, a non-execuve independent director of the Company acted as the Head of the Audit Commiee and Mr. Karpenko connued as the second independent member of the Audit Commiee. A In 2021 the Audit Commiee of Ovostar Union PCL held three (3) meengs. 16-Apr-2021 During the meeng the Audit Commiee reviewed the auding process for the year of 2020 and discussed the Group’s Annual Report for 2020. 01-Jul-2021 Agenda of this meeng included discussion on 2021 audit process. 05-Nov-2021 During the meeng the Audit Commiee discussed potenal risks for the business and their possible impact on the Group’s operaons and results in the year of 2021. R P On 16 July 2021, by a resoluon of the General Meeng, the limit for the total accumulated amount of remunerang payable to the members of the Board of Directors of the company for the year 2021 was set at EUR 400 thousand. B BOARD COMMITTEES AUDIT COMMITTEE 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 33 The Company shall in each year hold a general meeng as its annual general meeng. The annual general meeng shall be held at such me and place as the directors shall appoint, taking into account that place and date of a general meeng should be set so as to enable the parcipaon of the highest possible number of members. The directors may, whenever they think fit, convene an extraordinary general meeng in the same manner or in a manner as near as possible as that in which meengs may be convened by the directors. N G M An annual general meeng shall be called by twenty-one days' noce at the least. The noce shall, specify the following: (a) the proposed agenda for the meeng; (b) the procedures in respect of the parcipaon and vong in the meeng required to be complied with by the members entled to aend and vote at the meeng, including: (i) the right of the member to add items on the agenda of the general meeng, to table dra resoluons and to ask quesons related to items on the agenda and the deadlines by which any of those rights may be exercised; (ii) the right of a member which is entled to aend, to speak, ask quesons and vote, to appoint a proxy; (c) the procedure for vong by proxy, including the forms to be used and the means by which the Company is prepared to accept electronic noficaon of the appointment of the proxy; (e) the Record Date and that only the members registered as holders of shares conferring the right to aend and vote at the meeng, as at the close of business on the Record Date, shall be entled to aend and vote at the meeng; (f) where and how the full unabridged text of the documents to be submied to the meeng may be obtained; and (g) the internet site at which the informaon which is required to be provided to members as well as the resoluons (if any) proposed by members shall be made available, subject always to the provisions of the Law. The accidental omission to give noce of a meeng to, or the non-receipt of noce of a meeng, by any person entled to receive noce, shall not invalidate the proceedings at that meeng. S SHAREHOLDERS MEETINGS GENERAL MEETINGS 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 34 P G M All business shall be deemed special that is transacted at an extraordinary general meeng, and also all that is transacted at an annual general meeng, with the excepon of declaring a dividend, the consideraon of the accounts, balance sheets, and the reports of the directors and auditors, the elecon of directors in the place of those rering, if any, and the appointment of, and the fixing of the remuneraon of the auditors. No business shall be transacted at any general meeng unless a quorum of members is present at the me when the meeng proceeds to business. Three or more members present in person or by proxy and entled to vote shall be a quorum. All noces and other communicaon relang to any general meeng which every member is entled to receive must also be sent to the auditors and the directors of the Company. The directors and auditors shall be entled to aend and speak at any meeng of the members. One or more directors if necessary to answer quesons asked at the general meeng parcipate in a general meeng. The chairman, if any, of the board of directors shall preside as chairman at every general meeng of the Company. At any general meeng any resoluon put to the vote of the meeng shall be decided by poll. V M Every member shall have one vote for each share of which he is the holder. On a poll a member entled to more than one vote need not use all of his votes or cast all the votes he uses in the same way On a poll votes may be given either personally or by proxy and any member and any proxy appointed by a member shall have the right to cast all or some of the votes to which such member or proxy, as the case may be, is entled in favour of and /or against the resoluon in queson and/or abstain from vong on the resoluon in queson in respect of all or some of his votes. The chairman of a general meeng shall not have a second or casng vote. S SHAREHOLDERS MEETINGS G ENERAL MEETINGS 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 35 The objecve of corporate governance is to develop tools supporng efficient management, effecve supervision, respect for shareholders’ rights, and transparent communicaons between companies and the market. As a public company that is domiciled in Cyprus and whose shares are admied to trading on a regulated market in Poland, Ovostar Union PCL has undertaken to adhere to Cyprus Stock Exchange Corporate Governance Code and the Code of Best Pracce for WSE Listed Companies. CSE C G C The Code as updated in 2019 replaces the Corporate Governance Code issued by the Cyprus Stock Exchange Council in March 2011 and is amended in September 2012. The aim of the proposed regulaons is to strengthen the monitoring role of the Board of Directors in listed companies, protect small shareholders, adopt greater transparency and provide mely informaon as well as sufficiently safeguard the independence of the Board of Directors in its decision-making. The Code includes the following secons: Α. BOARD OF DIRECTORS ; Β. DIRECTORS’ REMUNERATION; C. ACCOUNTABILITY AND AUDIT ;D. RELATIONSHIP WITH SHAREHOLDERS. This Code proposes the establishment of three Commiees of the Board of Directors, namely the Nominaon Commiee, the Remuneraon Commiee, the Audit Commiee and the Risk Management Commiee. When the Board of Directors of each company, given the parcularies thereof, considers it expedient to establish more commiees, it may proceed therewith. The terms of reference as well as the acvies of each Commiee of the Board of Directors should be included in the Annual Report on Corporate Governance. Annual Report on Corporate Governance Listed companies have an obligaon to include in their Annual Report, a Report by the Board of Directors on Corporate Governance as follows: In the first part of the Report, the Company should report whether it complies with the Code and the extent to which it implements its principles. In the second part of the Report, the Company should confirm that it has complied with the Code provisions and in the event that it has not, should give adequate explanaon. S CSE C G C The Company confirms that in 2021 it complied with most provisions of the Code, except Provision Β.1.1. that requires a Remuneraon Commiee to be established. The Company undertakes to eliminate this discrepancy during 2022. G GOVERNANCE & CONTROL CORPORATE GOVERNANCE C ODE 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 36 WSE C G R Companies listed on the Warsaw Stock Exchange are guided by the Rules. In 2016 the Best Pracce for GPW Listed Companies was updated according to the European Commission Recommendaon of 09 April 2014 on the quality of corporate govern- ance reporng. The “Best Pracce for GPW Listed Companies 2016” and related regulaons apply to issuers of shares admied to trading on GPW’s regulated market. The document is divided into themac sec- ons: Disclosure Policy, Investor Communicaons; Management Board, Supervisory Board; Internal Systems and Funcons; General Meeng, Share- holder Relaons; Conflict of Interest, Related Party Transacons; Remuneraon. Each secon of the Best Pracce opens with a gen- eral descripon of the goals to be pursued by listed companies through compliance with the provisions of the secon. The recommendaons that follow require the disclosure of compliance details in a statement of compliance with the corporate gov- ernance principles included in the issuer’s annual report. The detailed provisions of the Best Pracce follow the ‘comply or explain’ approach. In line with the recommendaons of the European Commission, within the limits of its powers, the Exchange will monitor the companies’ compliance with the corporate governance regulaons with a special emphasis on the quality of explanaons published by companies according to the ‘comply or explain’ approach. D WSE C G R In 2021 the Company did not comply with the fol- lowing requirements of the Code: Best Pracce Principle I.Z.1 - Currently we have no audio or video recording of a general meeng pub- lished at the company’s website as all the infor- maon related to the general meeng is available in wring at our website. Addionally, we have not published the internal rule of changing the company’s auditor as the com- pany strictly follows guidelines stated in the Di- recve 2014/56/EU the European Union that was adopted in April 2014 and enforced in June 2016. Best Pracce Principle II.Z.1 - Since we have a one- er governance structure we have not published the chart describing the division of responsibilies among the BoDi because their areas of responsibil- ity are provided in wring at the website. In 2021 the new edion of Best Pracce for GPW Listed Companies was issued hat issuers of shares listed on the WSE Main Market have been subject to since 2002 under the Stock Exchange Regula- ons. Similarly to the previous versions of the Best Pracce, developed by the experts comprising the Corporate Governance Commiee, DPSN2021 takes into account the current legal status and the latest trends in corporate governance, as well as responds to the postulates of market parcipants interested in increasingly beer corporate govern- ance in listed companies. Compared to the “Best Pracce of WSE Listed Companies 2016”, the cur- rent editorial has been shortened and simplified. The accessible and concise language and clear structure of DPSN2021 are intended to make it eas- ier for issuers and investors to interpret the princi- ples correctly, facilitang the widest applicaon and formulang the best possible explanaons. Ad- dional support in this regard is provided by guid- ance on the applicaon of the Good Pracce, edit- ed and updated by the Corporate Governance Commiee based on quesons raised and praccal issues arising on an ongoing basis. The guidance prepared in the Q&A format will help understand the intenons of the authors of the Best Pracce in formulang specific principles and will indicate to issuers and investors what condions must be met to deem a given principle applicable. G GOVERNANCE & CONTROL CORPORATE GOVERNANCE CODE 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 37 According to the Direcve 2014/95/EU of the Euro- pean Parliament and of the Council of 22 October 2014 we as a public enty with more than 500 em- ployees are obliged to make the appropriate disclo- sure, providing informaon on the environmental, social and employee maers, respect for human rights, an-corrupon and bribery maers and the way they are dealt with. The informaon provided in this statement is based on the Company’s (our) Code of Conduct (Annex 2.5 to the Corporate Governance Rules available in wring at our website. E The Company is commied to conducng its oper- aons in an environmentally sound and sustainable manner. To achieve protecon of the health and safety of employees, customers and the public, the Company has established procedures and compli- ance programs to ensure the minimum adverse impact on the environment. Such procedures and programs are periodically being reviewed and ap- praised. S The Company recruits, employs and promotes em- ployees on the sole basis of their qualificaons and abilies (including reputaon and reliability). The Company endeavors to enable each individual to develop his or her talents in various ways (including, when appropriate, through training pro- grams). The Company considers safe and healthy working condions for its employees to be fundamental. The Company believes that good communicaon with employees is essenal. R People are the key to success of any business, and this is not different with respect to the Company. The Company recognizes that Corporate Social Re- sponsibility is an integral part of its business prac- ce and strategy. The Company is therefore com- mied to running its business to ethical, legal and professional standards. We respect human rights as an absolute and uni- versal standard. In countries where the Company operates, human rights of our employees are sup- ported as appropriate in accordance with what rea- sonably can be expected from a similar commercial organizaon. Furthermore, the Company refrains from discrimi- naon on any basis. As a result of the above, re- spect for people forms a cornerstone of our Com- pany Values. N NON-FINANCIAL INFORMATION DISCLOSURE 2 CORPORATE GOVERNANCE REPORT 2021 ANNUAL REPORT 38 A- In dealing with customers and suppliers, which may include governmental bodies, the Company expects its managers and employees neither to give nor to receive bribes or anything of value in order to retain or bestow business or financial advantages. The employees of the Company are directed that any demand for or offer of such bribe or anything of value must be immediately rejected. Accepng business entertainment and providing reasonable business entertainment in the course of the Company's business is acceptable. The Company does not parcipate in party polics or makes payments to polical pares or to the funds of groups whose acvies are directed at promong a party’s polical interests. When dealing with governments or governmental agencies the Company is encouraged to promote and defend its legimate commercial objecves. The Company may do so directly or through bodies such as trade associaons. The Company is encouraged to respond to requests from governments and other agencies for legimate and relevant informaon, observaons or opinions on issues relevant to its business and to parcipate in the development of proposed legislaon or regulaons in areas which may have an effect on its legimate interests. N NON-FINANCIAL INFORMATION DISCLOSURE Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitalii Veresenko Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer F FINANCIA L L STATEMENT S S 3 CONSOLIDATED FINANCIAL STATEMENTS 2021 ANNUAL REPORT 40 01 July 2022 The Board of Directors is responsible for the preparaon of the consolidated financial statements that give a true and fair view of the financial posion of Ovostar Union Public Company Limited (the “Company”) and its subsidiaries (the “Group”) as of 31 December 2021 and of the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounng policies. S M B D Members of the Board of Directors of Ovostar Union Public Company Limited in accordance with Subsecon (3c) and (7) of the Secon (9) of the Law providing for transparency requirements in rela- on to informaon about issuers whose shares are admied to trading on a regulated market (L.190 (I)/2007 - “Transparency Law”) herewith confirms that to the best of their knowledge: a) The present annual consolidated financial statements (i) have been prepared in accordance with the applicable Internaonal Financial Reporng Standards as adopted by the European Union and in compliance with the requirements set forth in Subsecon (4) of the Secon (9) of the Transparency Law , and (ii) give a true and fair view of the assets, liabilies, financial posion and profit or loss of the issuer and the undertakings included in the consolidated accounts taken as a whole, and (b) The Management report includes a fair review of the development and performance of the business and the posion of the Group included in the consolidated accounts as a whole, to- gether with a descripon of the principal risks and uncertaines that they face. S STATEMENT OF DIRECTORS RESPONSIBILITY Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitalii Veresenko Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer 3 CONSOLIDATED FINANCIAL STATEMENTS 2021 ANNUAL REPORT 41 C CONSOLIDATE D D STATEMEN T T O F F COMPREHENSIV E E INCOM E E FOR THE YEAR ENDED 3 1 1 DECEMBER 202 1 1 (IN US D D THOUSAND , , UNLESS OTHERWISE STATED ) ) 12 months ended 12 months ended Note 31 December 2021 31 December 2020 Revenue from contracts with customers 133 366 98 907 Changes in fair value of biological assets 17 (8 529) (3 742) Cost of sales (111 223) (81 747) Gross profit 13 614 13 418 Other operang income 12 565 2 346 Selling and distribuon costs 10 (8 296) (7 621) Administrave expenses 11 (3 656) (3 625) Other operang expenses 13 (1 000) (476) Operang profit 1 227 4 042 Finance costs 14 (380) (1 320) Finance income 15 786 58 Profit before tax 1 633 2 780 Income tax expense 16 22 (188) Profit for the period 1 655 2 592 Other comprehensive income Exchange differences on translaon to presentaon currency 3 836 (19 140) Other comprehensive income for the period, net of tax 3 836 (19 140) Total comprehensive income for the period, net of tax 5 491 (16 548) Profit for the period aributable to: Equity holders of the parent company 1 690 2 702 Non-controlling interests (35) (110) Total profit for the period 1 655 2 592 Other comprehensive income aributable to: Equity holders of the parent company 4 042 (18 848) Non-controlling interests (206) (292) Total other comprehensive income 3 836 (19 140) Other comprehensive income aributable to: Equity holders of the parent company 5 732 (16 146) Non-controlling interests (241) (402) Total comprehensive income 5 491 (16 548) Earnings per share: Equity holders of the parent company 6 000 000 6 000 000 Basic and diluted, profit for the period aributable to ordinary equity holders of the parent (USD per share) 0,28 0,45 Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitali i i Veresenk o o Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer 3 CONSOLIDATED FINANCIAL STATEMENTS 2021 ANNUAL REPORT 42 C CONSOLIDATE D D STATEMEN T T O F F FINANCIA L L POSITIO N N FOR THE YEAR ENDED 3 1 1 DECEMBER 202 1 1 (IN USD THOUSAND , , UNLESS OTHERWISE STATED ) ) Note 31 December 2021 31 December 2020 Assets Non-current assets Biological assets 17 45 079 40 234 Property, plant and equipment and intangible assets 18 46 383 47 943 Deferred tax assets 16 28 11 Other non-current assets 19- 21 Total non-current assets 91 490 88 209 Current assets Inventories 20 13 022 13 216 Biological assets 17 15 459 11 138 Trade and other receivables 21 15 471 15 865 Prepayments to suppliers 22 3 114 1 233 Prepayments for income tax 23 28 27 Cash and cash equivalents 24 2 435 1 626 Total current assets 49 529 43 105 Total assets 141 019 131 314 Equity and liabilies Equity Issued capital 25 68 74 Share premium 30 933 30 933 Foreign currency translaon reserve (125 912) (129 954) Retained earnings 202 633 199 931 Result for the period 1 690 2 702 Equity aributable to equity holders of the parent 109 412 103 686 Non-controlling interests 477 718 Total equity 109 889 104 404 Non-current liabilies Interest-bearing loans and other financial liabilies 26 7 141 5 172 Deferred tax liability 16 334 311 Total non-current liabilies 7 475 5 483 Current liabilies Trade and other payables 27 14 391 12 379 Deferred income 12 2 981 3 149 Advances received 28 543 306 Interest-bearing loans and other financial liabilies 26 5 740 5 593 Total current liabilies 23 655 21 427 Total liabilies 31 130 26 910 Total equity and liabilies 141 019 131 314 Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitali i i Veresenk o o Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer 3 CONSOLIDATED FINANCIAL STATEMENTS 2021 ANNUAL REPORT 43 C CONSOLIDATE D D STATEMEN T T O F F CHANGE S S I N N EQUIT Y Y FOR THE YEAR ENDED 3 1 1 DECEMBER 202 1 1 (IN USD THOUSAND , , UNLESS OTHERWISE STATED ) ) Issued capital Share premium Foreign currency translaon reserve Retained earnings Result for the period Total Non- controlling interests Total equity As at 31 December 2019 78 30 933 (111 110) 219 945 (20 014) 119 832 1 120 120 952 Profit for the period 2 702 2 702 (110) 2 592 Other comprehensive income (18 848) (18 848) (292) (19 140) Total comprehensive income (18 848) 2 702 (16 146) (402) (16 548) Allocaon of prior period result (20 014) 20 014 Dividends- Exchange differences (4)4 As at 31 December 2020 74 30 933 (129 954) 199 931 2 702 103 686 718 104 404 Profit for the period 1 690 1 690 (35) 1 655 Other comprehensive income 4 036 4 036 (206) 3 830 Acquision of a subsidiary Total comprehensive income 4 036 1 690 5 726 (241) 5 485 Allocaon of prior period result 2 702 (2 702) Dividends- Exchange differences (6)6 As at 31 December 2021 68 30 933 (125 912) 202 633 1 690 109 412 477 109 889 Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitali i i Veresenk o o Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer 3 CONSOLIDATED FINANCIAL STATEMENTS 2021 ANNUAL REPORT 44 For translang results and financial posion into a presentaon currency, the Group applies IAS 21 "The Effects of Changes in Foreign Exchange Rates". Procedures and rules applied by the Group are specified in Note 2.3. C CONSOLIDATE D D STATEMEN T T O F F CAS H H FLOW S S FOR THE YEAR ENDED 3 1 1 DECEMBER 202 1 1 (IN US D D THOUSAND , , UNLESS OTHERWISE STATED ) ) Note 12 months ended 12 months ended 31 December 2021 31 December 2020 Operang acvies Profit before tax 1 633 2 780 Non-cash adjustment to reconcile profit before tax to net cash flows: Depreciaon of property, plant and equipment and amorsaon of intangible assets 9, 10 4 449 3 911 Net change in fair value of biological assets 17 8 529 3 742 Disposal of property, plant and equipment23 Disposal of biological assets 2 753 2 977 Finance income (786) (58) Finance costs 380 1 320 Recovery of assets previously wrien-off 12 (29) 20 Government subsidies 12 (283) (254) Impairment of property, plant and equipment 227 Impairment of doubul accounts receivable and prepayments to suppliers 10 703 373 Working capital adjustments: Decrease in trade and other receivables (174) 2 762 Decrease/(Increase) in prepayments to suppliers (1 910) 1 143 Decrease in other non-current assets 14 152 Decrease/(Increase) in inventories 535 (2 579) (Increase) in trade and other payables and advances received 2 164 (1 216) Cash generated from operang acvies 18 207 15 076 Income tax paid (5) (55) Net cash flows from operang acvies 18 202 15 021 Invesng acvies Purchase of property, plant and equipment (1 690) (2 476) Increase in biological assets 17 (18 561) (15 569) Government subsidies 826 Net cash flows used in invesng acvies (20 251) (17 219) Financing acvies Proceeds from borrowings 4 730 4 419 Repayment of borrowings (1 880) (4 936) Interest received 10 58 Interest paid (243) (292) Net cash flows used in financing acvies 2 617 (751) Net (decrease)/increase in cash and cash equivalents 568 (2 949) Effect from translaon into presentaon currency 241 97 Cash and cash equivalents at 01 January 1 626 4 478 Cash and cash equivalents at 31 December 2 435 1 626 Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. Vitali i i Veresenk o o Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 45 1. C Ovostar Union Public Company Limited (referred to herein as the “Company”) is a limited liability company incorporated on 22 March 2011 in Amsterdam under the laws of the Netherlands. Following resoluon of the Extraordinary Meeng of Sharehold- ers held in Amsterdam on 30 August 2018 the Company was redomiciled to Cyprus and on 29 November 2018 was registered with the Register of Companies of the Republic of Cyprus as a company connuing in the Republic of Cyprus. As of 31 March 2021 the Company’s registered address is 22 Ierotheou Street, Strovolos, Nicosia 2028, Cyprus. Principal activities of the Group include egg production, distribution, egg products manufacturing and production of related products. The largest shareholder of the Company is Prime One Capital Ltd., a Cyprus based company whose principal acvity is the holding of ownership interests in its subsidiary and strategic management. The Group operates through a number of subsidiaries in Ukraine, Latvia, United Arab Emirates and Brish Virgin Islands (the list of the subsidiaries is disclosed in Note 7) and has a concentraon of its business in Ukraine, where its producon facilies are located. Subsidiary companies are registered under the laws of Ukraine, Brish Virgin Islands, Latvia and United Arab Emirates. The registered address and principal place of business of the subsidiary companies in Ukraine is 34 Petropavlivska Street, Kyiv, Ukraine. Informaon on other related party relaonships of the Group is provided in Note 29. Total number of employees were presented as follows: The Group is controlled by the Beneficial Owners – Mr. Borys Bielikov and Mr. Vitalii Veresenko (hereinaer, the “Beneficial Own- ers”) The consolidated financial statements for the year ended 31 December 2021 were authorized by the Board of Directors on 01 July 2022. 2. B 2.1. Statement of compliance and basis of measurement The consolidated financial statements are prepared in accordance with Internaonal Financial Reporng Standards as adopted by the European Union (“IFRS EU” hereinaer). The companies of the Group maintain their accounng records under Ukrainian Accounng Standards (“UAS” hereinaer). UAS principles and procedures may differ from those generally accepted under IFRS EU. Accordingly, the consolidated financial state- ments, which have been prepared from the Group enes’ UAS records, reflect adjustments necessary for such financial state- ments to be presented in accordance with IFRS EU. The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternave basis on each reporng date. Details of the Group accounng policies are included in Note 5. 2.2. Going concern basis On February 24, 2022, russian troops launched a military invasion of Ukraine, which led to a full-scale war on the territory of the Ukrainian state. Focusing on the connuity and sustainability of its business and maintaining value for all stakeholders, the Group has focused on such key areas as the safety of its employees and the food security of the country, giving priority to the uninterrupted supply of the populaon of Ukraine with egg products. Having examined the exisng and potenal implicaons of the war for the Ukraine located businesses, the management of the Group have idenfied several points of specific concern that require careful analysis and assessment. They include, but are not limited to, the following: 31 December 2021 31 December 2020 Producon personnel 1 354 1 353 Administrave personnel 170 190 Total 1 524 1 543 Items Measurement bases Biological assets Fair value less costs to sell 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 46 x risks related to the personnel safety; x risk of physical destrucon of the producon assets; x risks of disrupon of the supply and distribuon chains; x risk of liquidity and limited access to financing; The Group places top priority on the personnel’s health and safety issues. All possible acon has been taken to minimize the exisng threats and support the staff during this dramac period. The HR department on a daily basis keeps record of the locaon of each employee to make sure that everyone is in a safe place. All administrave staff has been granted the opon to work remotely. The Group closely monitors the needs of the team and promptly reacts to them within the limits of its ca- pabilies. Forty men from the Group's staff were called up to the military service. The Group’s management connue to fulfill their dues without interrupons. The Group fully complies with all sancons rules and regulaons regarding Russia and Belarus, including those introduced or published by various countries and organizaons. In addion, the Group refrains from contacng individuals or enes on the sancons list. In this situaon, the Group does not expect any impact on the supply chain and payment flow. The currently known impacts of the War on the Group are: x the Group’s major producon facilies are located in Kyiv region, in Fasvskyi and Bilotserkivskyi districts, where no se- vere hoslies took place. The poultry houses in Vasilkiv and Stavyshche, as well as the egg-processing factory in Vasilkiv, remain physically undamaged and keep operang; x The egg-processing factory in Makariv (Buchanskiy district) had been temporarily shut down unl the city was de- occu- pied by the Ukrainian military forces in the end of March. The subsequent inspecon of the factory showed signs of crical damages to buildings not involved in the manufacturing process (storages for waste and used packing materials; an idle producon facility, while main producon facilies are intact and operang, administrave building sustained minor surficial damage. The management expect to put the factory back in operaon once the repairing works of the premises are completed. The esmated cost of damage is USD 92 thousand; x the supporng facilies accommodang hatchery, poultry houses for parent flock and young layers have not been affect- ed and are being used in accordance with the technological process; x all Group inventory is in good condion and in safe storage; x the Group has historically relied on the suppliers located in the central part of Ukraine, which implies efficient logiscs and reasonably prompt deliveries to the producon sites. Major contractors have not been affected by the hoslies and connue to fulfill their contractual obligaons; x the military acon had no crical impact on the local distribuon. The main distribuon channel for the egg segment is the large naonal retail chains. Geographically the sales are concentrated in the central part of the country. The share of sales in the most affected regions does not exceed 10%; x export sales reduced significantly. Since the start of the military campaign, the Group faced significant obstacles to export acvi es due to the serious disrupons in logiscs. In parcular, seizure of Odessa port operaons cut access to the Mid- dle East markets, where the commodies were shipped by sea. Overland deliveries to the EU countries resumed in early April aer the specific license had been issued to the company. Also on June, the Decision of the European Union on the abolion of dues on Ukrainian goods for a year came into force (see note 30) x the Group’s producon companies depend on imports in terms of certain feed mix supplements, vaccines, spare parts of producon equipment. These items are included in the list of “crical imported goods” (as defined in the Cabinet of Min- isters of Ukraine’s Resoluon No. 153 dated 24 February 2022) and there are no restricons for their delivery to Ukraine. The management also take steps to select adequate substutes in the local market; x as of date of this report there are no signs of material deterioraon of the payment discipline. The Group has sufficient recourses to meet its contractual obligaons. Interest bearing liabilies towards the banks are served mely. The Group has taken the following acons in response to the current situaon: x opmized ulizaon of producon facilies to meet domesc demand and export orders; x the group has enough inventory for the producon and sale of its products, as well as human resources in the foreseea- ble future; x selling, general and administrave and other operang expenses, as well as CAPEX, have been reduced to the x minimum required to meet the primary needs of the Group’ s core business; x the Directors have decided not to declare a final dividend for the 2021 financial year; x The loss of the market in the east and south of the country is expected to be offset by increased demand in central and western Ukraine, where a large number of internally displaced persons temporarily reside; x The prescheduled repayments of main debt have been planned to be rescheduled to a later dates based on mutual agreements with the banks. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 47 x as of date of this report the companies of the Group had unulized fully collateralized credit facilies in total amount of USD 5 000 thousand available on demand. One of the reasons for non-drawing of which is the reducon in lending to Ukrainian borrowers. There is a risk of breach of financial covenants under the loan agreement with the OTP for year ended December 31, 2022, based on negave financial results for February-April 2022. In the event of such a breach of the OTP's financial cove- nants, the borrower is entled to demand early repayment of the loan. Management plans to ask the OTP to provide a leer Weaver to ease its commitment to enforce financial covenants by 2022. The amount of cash flow, which ensures the absence of liquidity gaps, depends significantly on the OTP's intenon not to require early repayment. Management has prepared and reviewed, together with the directors, updated financial projecons, including cash flow projecons, taking into account the most likely and possible negave scenarios for the connued impact of the war on the busi- ness. These forecasts were based on the following key assumpons: x management will be able to use the cash from the approved credit lines to finance operaons. x the further development of the war and the military invasion of Ukraine will allow the use of most of the Group's pro- ducon capacity; x the Group will be able to purchase a sufficient amount of agricultural products for poultry feed; x remaining road logisc routes will connue to be available; x Egg producon for 2022 will be 1.452 million (1,691 million in 2021); Despite the exisng uncertaines arising from the future development of the military invasion, the management believes the above described analysis gives grounds to state that during at least 12 months aer the date of the present report the Group will be able to realize its assets and discharge its liabilies in the normal course of business, thus going concern as- sumpon is applied to the financial statements for the year ended 31 December 2021. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 48 2.3. Funconal and presentaon currency The funconal currency of the Company is U.S. dollar (USD). The consolidated financial statements are presented in the Company’s funconal currency, that is, U.S. dollar (USD). The operang subsidiaries have Ukrainian Hryvnia (UAH) as their funconal currency. All values are rounded to the nearest thousands, except when otherwise is indicated. The USD has been selected as the presentaon currency for the Group as: (a) management of the Group manages business risks and exposures, and measures the performance of its businesses in the USD; (b) the USD is widely used as a presentaon currency of companies engaged primarily in agricultural; and (c) the USD is the most convenient presentaon currency for non-Ukrainian users of these IFRS consolidated financial statements. The Group translates its results and financial posion into the presentaon currency as follows: x assets and liabilies, as well as the issued capital, for each statement of financial posion presented (i.e. including compara- ves) shall be translated at the closing rate at the date of that statement of financial posion; x income and expenses for each statement of comprehensive income or separate income statement presented (i.e. including comparaves) shall be translated at exchange rates at the dates of the transacons; and x all resulng exchange differences shall be recognized in other comprehensive income. During 2020 and 2019, the exchange rate had significant fluctuaons. Consistent with IAS 21, if exchange rates fluctuate signifi- cantly, the use of the average rate for a period is inappropriate. Considering significant depreciaon of Ukrainian currency against major foreign currencies and seasonality of sales, Management of the Group decided to translate income and expense items at average quarterly rates. On consolidaon, the assets and liabilies of the subsidiaries are translated at exchange rates prevailing on the reporng date. Income and expense items are translated at the average quarterly rates, unless the exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transacons are used. Exchange differences arising, if any, are recognized in “Other comprehensive income” and accumulated in the “Foreign currency translaon reserve”. Relevant exchange rates are presented as follows: Closing rate as at Closing rate as at 31 December 2021 31 December 2020 USD/UAH 27.2782 28.2746 EUR/UAH 30.9226 34.7396 USD/PLN 4.0447 3.7230 USD/EUR 0.8815 0.8153 Average rate for the 1st quarter 2021 Average rate for the 2d quarter 2021 Average rate for the 3d quarter 2021 Average rate for the 4th quarter 2021 USD/UAH 27.9694 27.5910 26.9110 26.6806 EUR/UAH 33.7569 33.2332 31.7388 30.5167 USD/PLN 3.7675 3.7582 3.8700 4.0367 USD/EUR 0.8296 0.8300 0.8481 0.8744 Average rate for the 1st quarter 2020 Average rate for the 2d quarter 2020 Average rate for the 3d quarter 2020 Average rate for the 4th quarter 2020 USD/UAH 25.0525 26.9143 27.5996 28.2678 EUR/UAH 27.6154 29.6028 32.2429 33.6965 USD/PLN 3.9226 4.1000 3.7995 3.7740 USD/EUR 0.9069 0.9087 0.8557 0.8386 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 49 3. B The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: x Power over the investee (i.e., exisng rights that give it the current ability to direct the relevant acvies of the investee) x Exposure, or rights, to variable returns from its involvement with the investee x The ability to use its power over the investee to affect its returns Generally, there is a presumpon that a majority of vong rights result in control. To support this presumpon and when the Group has less than a majority of the vong or similar rights of an investee, the Group considers all relevant facts and circumstanc- es in assessing whether it has power over an investee, including: x The contractual arrangement with the other vote holders of the investee x Rights arising from other contractual arrangements x The Group’s vong rights and potenal vong rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidaon of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilies, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control unl the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are aributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When nec- essary, adjustments are made to the financial statements of subsidiaries to bring their accounng policies into line with the Group’s accounng policies. All intra-group assets and liabilies, equity, income, expenses and cash flows relang to transacons between members of the Group are eliminated in full on consolidaon. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transacon. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilies, non-controlling inter- est and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recog- nized at fair value. 4. U The preparaon of the consolidated financial statements requires management to make esmates and assumpons that affect the reported amounts of revenues, expenses, assets and liabilies, and the disclosure of conngent liabilies, at the end of the re- porng period. However, due to uncertainty about these esmates, actual results recorded in future periods may differ from such esmates. These consolidated financial statements include management's esmates regarding the value of assets, liabilies, revenues, ex- penses, and recognized contractual obligaons. These esmates mainly include: 4.1. Impairment of property, plant and equipment In accordance with IAS 36 "Impairment of Assets" the Group reviews the carrying amount of non-current tangible assets (mainly property, plant and equipment) to idenfy signs of impairment of these assets. If there is an indicaon that an asset may be impaired, the Group uses a model of strategic planning in order to calculate the dis- counted cash flows (using the "value in use" method, as defined in IAS 36) and, thus, assess the recoverability of the carrying amount of property, plant and equipment. The model was based on budgets and forecasts approved by the management for the next 5 years. Expected future cash flows reflect long-term producon plans formed on the basis of past experience and market expectaons. The plans take into account all relevant characteriscs of poultry farming, including egg producon, volume of egg processing, pric- es for main components of mixed fodder. Thus, the producon capacity is the basis for forecasng the future producon volume for each subsequent year and related producon costs. Levels of costs included in projected cash flows are based on current long-term producon plans. When conducng impairment tesng, recent levels of costs are taken into account, as well as the expected cost changes based on the current condion of oper- ang acvies and in accordance with the requirements of IAS 36. IAS 36 provides a number of restricons on future cash fl ows, which may be recognized in respect of future restructuring and capital modernizaon expenses. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 50 Below are the key assumpons that formed the basis for forecasng future cash flows in the models: x prices for main components of mixed fodder are based on internal forecasts of the Group's management; x producon data (producon of eggs, safety of livestock, meat producon volume, producon of egg products) based on internal forecasts of the Group's management from past experience; x selling prices for eggs, egg products and poultry meat are based on forecasts of the Group's management and market ex- pectaons. Management believes that calculaons of the recoverable amount are most sensive to changes in such assumpons as the price of poultry meat, price of eggs and eggs product, price of poultry fodder and producon data. Management believes that any rea- sonably possible change in key assumpons on which the recoverable amount of the Group is based will not cause the excess of carrying amount of the Group over its recoverable amount. Applicaon of IAS 36 requires extensive judgments by the management regarding esmates and assumpons related to future cash flows and discount rate. Given the nature of the current global economic environment, such assumpons and esmates have a high degree of uncertainty. Therefore, other similar assumpons may lead to significantly different results. 4.2. Fair value of biological assets Esmaon of fair value of biological assets is based on the discounted cash flow model. The fair value of biological assets might be affected by the fact that the actual future cash flows will differ from the current forecast, which typically occurs as a result of sig- nificant changes in any factors or assumpons used in the calculaons. Among such factors are: x differences between actual prices and price assumpons used in esmang net realizable value of eggs; x changes in producvity of laying hens; x unforeseen operaonal problems inherent in the branch specificity; x age of hens at the end of the reporng period; x changes in producon costs, costs of processing and products sales, discount and inflaon rates and exchange rates that could adversely affect the fair value of biological assets. The key assumpons concerning biological assets based on discounted cash flow approach are presented as follows: x cost planning at each stage of poultry farming will remain constant in future periods; x egg producon volume will not be significantly changed; x egg sale price in future periods; x long-term inflaon rate of Ukrainian UAH in future periods; discount rate for determining the present value of future cash flows expected from the biological assets (Note 17). Management determined that calculaons of the fair value of biological assets are the most sensive to changes in such assump- ons as the volume of egg producon, cost planning and prices of eggs, eggs product and poultry meat. Management believes that any reasonably possible change in key assumpons will not cause any significant change in the fair value of biological assets. All assets and liabilies for which fair value is measured or disclosed in the consolidated financial statements are categorized with- in the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: x Level 1: Quoted (unadjusted) market prices in acve markets for idencal assets or liabilies. x Level 2: Valuaon techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. x Level 3: Valuaon techniques for which the lowest level input that is significant to the fair value measurement is unobserva- ble. Although some of these assumpons are obtained from published market data, the majority of these assumpons are esmated based on the Group’s historical and projected results. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed, are summarized in Notes 17, 32. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transacon between market parcipants at the measurement date. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 51 The fair value measurement is based on the presumpon that the transacon to sell the asset or transfer the liability takes place either: x In the principal market for the asset or liability. Or x In the absence of a principal market, in the most advantageous market for the asset or liability. 4.3. Expected credit losses Financial assets of the Group that are subject to IFRS 9's expected credit loss model are represented by trade receivables. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifeme expected loss allowance for all trade and other receivables and contract assets. Cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the idenfied impairment loss was immaterial. 4.4. Useful lives of property, plant and equipment The Group esmates useful lives of property, plant and equipment at least at the end of each financial year and, if expectaons differ from previous esmates, changes are recorded as changes in accounng esmates in accordance with IAS 8 "Accounng Policies, Changes in Accounng Esmates and Errors". These esmates can have a significant impact on the carrying amount of property, plant and equipment and depreciaon expenses during the period. 4.5. Deferred tax assets Deferred tax assets are recognized for all unused tax losses to the extent that the inflow of taxable profit is possible, at the ex- pense of which these losses may be implemented. Significant judgments are required from the management in determining the amount of deferred tax assets that can be recognized on the basis of the possible terms of receipt and the level of future taxable profit together with the future tax planning strategy. 5. S 5.1. Recognion and measurement of financial instruments Financial instruments: key measurement terms Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transacon between market parcipants at the measurement date. The best evidence of fair value is the price in an acve market. An acve market is one in which transacons for the asset or liability take place with sufficient frequency and volume to provide pricing informaon on an ongoing basis. Fair value of financial instruments traded in an acve market is measured as the product of the quoted price for the individual as- set or liability and the number of instruments held by the enty. This is the case even if a market's normal daily trading volume is not sufficient to absorb the quanty held and placing orders to sell the posion in a single transacon might affect the quoted price. Valuaon techniques such as discounted cash flow models or models based on recent arm's length transacons or consideraon of financial data of the investees are used to measure fair value of certain financial instruments for which external market pricing informaon is not available. Fair value measurements are analysed by level in the fair value hierarchy as follows: x Level one: Measurements at quoted prices (unadjusted) in acve markets for idencal assets or liabilies, x Level two: Valuaons techniques with all material inputs observable for the asset or liability, either directly (that is, as pric- es) or indirectly (that is, derived from prices), and x Level three: Valuaons not based on solely observable market data (that is, the measurement requires significant unobserv- able inputs). Transacon costs are incremental costs that are directly aributable to the acquision, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transacon had not taken place. Transacon costs include fees and commissions paid to agents (including employees acng as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securies exchanges, and transfer taxes and dues. Transacon costs do not include debt premiums or discounts, financing costs or internal administrave or holding costs. Amorzed cost is the amount at which the financial instrument was recognized at inial recognion less any principal repayments, plus accrued interest, and for financial assets less any write-down for incurred impairment losses. Accrued interest includes amor- zaon of transacon costs deferred at inial recognion and of any premium or discount to the maturity amount using the effec- ve interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amorzed dis- count or premium (including fees deferred at originaon, if any), are not presented separately and are included in the carrying values of the related items in the consolidated statement of financial posion. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 52 The effecve interest method is a method of allocang interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effecve interest rate) on the carrying amount. The effecve interest rate is the rate that exactly discounts esmated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the gross carrying amount of the financial instrument. The effecve in- terest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or dis- count which reflects the credit spread over the floang rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amorzed over the whole expected life of the instrument. The present value calcu- laon includes all fees paid or received between pares to the contract that are an integral part of the effecve interest rate. Financial instruments: inial recognion Financial instruments at fair value through profit or loss are inially recorded at fair value. All other financial instruments are ini- ally recorded at fair value adjusted for transacon costs. Fair value at inial recognion is best evidenced by the transacon price. A gain or loss on inial recognion is only recorded if there is a difference between fair value and transacon price which can be evidenced by other observable current market transacons in the same instrument or by a valuaon technique whose in- puts include only data from observable markets. Aer the inial recognion, an ECL allowance is recognized for financial assets measured at amorzed cost and investments in debt instruments measured at fair value through other comprehensive income, resulng in an immediate accounng loss. All purchases and sales of financial assets that require delivery within the me frame established by regulaon or market conven- on are recorded at trade date, which is the date on which the Group commits to deliver a financial asset. All other purchases are recognized when the enty becomes a party to the contractual provisions of the instrument. The Group uses discounted cash flow valuaon techniques to determine the fair value of loans to related pares that are not trad- ed in an acve market. Differences may arise between the fair value at inial recognion, which is considered to be the transacon price, and the amount determined at inial recognion using a valuaon technique with level 3 inputs. If any differences remain aer calibraon of model inputs, such differences are amorzed on a straight-line basis over the term of the currency swaps, loans to related pares. The differences are immediately recognized in profit or loss if the valuaon uses only level 1 or level 2 inputs. 5.2. Financial assets Financial assets: Classificaon and subsequent measurement: measurement categories The Group classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classificaon and subse- quent measurement of debt financial assets depends on: i. the Group's business model for managing the related assets porolio and ii. the cash flow characteriscs of the asset. As at 31 December 2020 and 31 December 2019 the Group did not hold financial assets at FVOCI. Financial assets: Classificaon and subsequent measurement: business model The business model reflects how the Group manages the assets in order to generate cash flows - whether the Group’s objecve is: i. solely to collect the contractual cash flows from the assets ("hold to collect contractual cash flows”) or ii. to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. Business model is determined for a group of assets (on a porolio level) based on all relevant evidence about the acvies that the Group undertakes to achieve the objecve set out for the porolio available at the date of the assessment. Factors considered by the Group in determining the business model include the purpose and composion of a porolio, past experience on how the cash flows for the respecve assets were collected, how risks are assessed and managed, how the assets' performance is assessed and how managers are compensated. Financial assets: Classificaon and subsequent measurement: cash flow characteriscs Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Group assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embedded de- rivaves are considered in their enrety when determining whether their cash flows are consistent with the SPPI feature. In mak- ing this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consideraon for credit risk, me value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volality that is inconsistent with a basic lending arrangement, the fi- nancial asset is classified and measured at FVTPL. The SPPI assessment is performed on inial recognion of an asset and it is not subsequently reassessed. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 53 The Group holds the trade receivables with the objecve to collect contractual cash flows and therefore measures them subse- quently at amorzed cost using the effecve interest method. Details about the Group's impairment policies and the expected credit loss measurement are provided in Note 31. Financial assets: Reclassificaon Financial instruments are reclassified only when the business model for managing the porolio as a whole changes. The reclassifi- caon has a prospecve effect and takes place from the beginning of the first reporng period that follows aer the change in the business model. The enty did not change its business model during the current and comparave period and did not make any reclassificaons. Financial assets: Credit loss allowance for ECL The Group assesses, on a forward-looking basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments and financial guarantee contracts, for contract assets. The Group measures ECL and recognizes Net impairment losses on financial and contract assets at each reporng date. The measurement of ECL reflects: x an unbiased and probability weighted amount that is determined by evaluang a range of possible outcomes, x me value of money and x all reasonable and supportable informaon that is available without undue cost and effort at the end of each reporng peri- od about past events, current condions and forecasts of future condions. Financial assets of the Group that are subject to IFRS 9's new expected credit loss model are represented by trade receivables. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifeme expected loss allowance for all trade and other receivables and contract assets. Cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the idenfied impairment loss was immaterial. Financial assets: Write-off Financial assets are wrien-off, in whole or in part, when the Group exhausted all praccal recovery efforts and has concluded that there is no reasonable expectaon of recovery. The write-off represents a derecognion event. Indicators that there is no reasona- ble expectaon of recovery include: x the counterparty experiences a significant financial difficulty as evidenced by its financial informaon that the Group ob- tains; x the counterparty considers bankruptcy or a financial reorganisaon; x there is adverse change in the payment status of the counterparty as a result of changes in the naonal or local economic condions that impact the counterparty. The Group may write-off financial assets that are sll subject to enforcement acvity when the Group seeks to recover amounts that are contractually due, however, there is no reasonable expectaon of recovery. Financial assets: Derecognion The Group derecognizes financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expire or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass- through arrangement whilst (i) also transferring substanally all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substanally all the risks and rewards of ownership but not retaining control. Control is retained if the counterparty does not have the praccal ability to sell the asset in its enrety to an unrelated third party without needing to impose addional restricons on the sale. Financial assets: Modificaon The Group somemes renegoates or otherwise modifies the contractual terms of the financial assets. The Group assesses wheth- er the modificaon of contractual cash flows is substanal considering, among other, the following factors: any new contractual terms that substanally affect the risk profile of the asset (e.g. profit share or equity-based return), significant change in interest rate, change in the currency denominaon, new collateral or credit enhancement that significantly affects the credit risk associat- ed with the asset or a significant extension of a loan when the borrower is not in financial difficules. If the modified terms are substanally different, the rights to cash flows from the original asset expire and the Group derecognizes the original financial asset and recognizes a new asset at its fair value. The date of renegoaon is considered to be the date of inial recognion for subsequent impairment calculaon purposes, including determining whether a SICR has occurred. The Group also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognized and fair value of the new substanally modified asset is recognized in profit or loss, unless the sub- stance of the difference is aributed to a capital transacon with owners. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 54 In a situaon where the renegoaon was driven by financial difficules of the counterparty and inability to make the originally agreed payments, the Group compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substanally different as a result of the contractual modificaon. If the risks and rewards do not change, the modified asset is not substanally different from the original asset and the modificaon does not result in derecognion. The Group recalcu- lates the gross carrying amount by discounng the modified contractual cash flows by the original effecve interest rate (or credit- adjusted effecve interest rate for POCI financial assets), and recognizes a modificaon gain or loss in profit or loss. 5.3. Effecve interest rate method The effecve interest rate method is used to calculate the amorzed cost of a financial asset and distribute interest income during the relevant period. The effecve interest rate is the rate that enables discounng of esmated future cash receipts through the expected life of a financial asset or a shorter period, if applicable. Revenues relang to debt instruments are recorded using the effecve interest rate method, except for financial assets at fair val- ue through profit or loss. Financial assets at fair value through profit or loss - a financial asset is classified as at fair value through profit or loss if it is held for trading or designated at fair value through profit or loss. 5.4. Cash and cash equivalents Cash and cash equivalents include cash on hand and cash in bank accounts and deposits with an original maturity date of three months or less and are stated at fair value. 5.5. Cash deposits Cash deposits in the statement of financial posion are held for the investment acvies. For the purpose of the consolidated statement of cash flows, short-term deposits are included in the invesng acvies. 5.6. Impairment of financial assets Financial assets, except for financial assets at fair value through profit or loss, at each reporng date are assessed for signs indi- cang impairment. Impairment loss is recognized when there is objecve evidence of reducon of the esmated future cash fl ows on this asset as a result of one or more events that occurred aer the financial asset was recorded in the accounng. For financial assets at amorzed cost, the amount of impairment is calculated as the difference between the asset's carrying amount and pre- sent value of the expected future cash flows discounted using the effecve interest rate. Impairment loss directly reduces the carrying amount of all financial assets, except for accounts receivable on principal acvies, carrying amount of which is reduced due to the allowance formed. If the accounts receivable on principal acvies are uncollec- ble, they are wrien-off against the related allowance. Subsequently received reimbursements of amounts previously wrien-off are recorded in credit of the allowance account. Changes in the carrying amount of the allowance account are recorded in the profit and loss. Except for equity instruments available for sale, if in a subsequent period the amount of impairment loss decreases and such de- crease can be objecvely related to an event occurring aer the impairment was recognized, the impairment loss previously rec- ognized is recovered by adjusng the items in the income statement. In this case, the carrying amount of financial investments at the date of recovery of impairment cannot exceed its amorzed cost, which would be reflected in the case, if impairment was not recognized. In respect of equity securies available for sale, any increase in fair value aer recognion of impairment loss relates directly to equity. 5.7. Wring-off of financial assets The Group writes-off a financial asset only if rights for cash flows under the corresponding contract terminated the treaty or if a financial asset and corresponding risks and rewards are transferred to other organizaon. If the Group does not transfer or retain all the principal risks and rewards of ownership of the asset and connues to control the transferred asset, it shall record its share in the asset and related liability in the amount of possible payment of corresponding amounts. If the Group retains all the principal risks and rewards of ownership of the transferred financial asset, it shall connue to account for the financial asset, and reflect a secured loan on income earned. 5.8. Financial liabilies and equity instruments issued by the Group 5.8.1. Accounng as liabilies or equity Debt and equity financial instruments are classified as liabilies or equity based on the substance of the corresponding contractual obligaons. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 55 5.8.2. Equity instruments Equity instrument is any contract confirming the right for a share in the company's assets remaining aer deducon of all its liabili- es. Equity instruments issued by the Group are recorded in the amount of generated income net of direct expenses for their is- sue. 5.8.3. Liabilies under financial guarantee contracts Liabilies under financial guarantee contracts are inially measured at fair value and subsequently recorded at the higher of: x cost of contractual obligaons determined in accordance with IAS 37 “Provisions, Conngent Liabilies and Conngent As- sets”, and x cost, less, where applicable, accumulated depreciaon reflected in accordance with the principles of revenue recognion set forth below. 5.8.4. Financial liabilies Financial liabilies - measurement categories Financial liabilies are classified as subsequently measured at amorzed cost, except for (i) financial liabilies at fair value through profit or loss: this classificaon is applied to derivaves, financial liabilies held for trading (e.g. short posions in securies), con- ngent consideraon recognized by an acquirer in a business combinaon and other financial liabilies designated as such at ini- al recognion and (ii) financial guarantee contracts and loan commitments. As of 31 December 2020 and 31 December 2019 the Group did not have financial guarantee contracts and loan commitments or financial liabilies at fair value through profit or loss. Financial liabilies - derecognion Financial liabilies are derecognised when they are exnguished (i.e. when the obligaon specified in the contract is discharged, cancelled or expires). An exchange between the Group and its original lenders of debt instruments with substanally different terms, as well as substan- al modificaons of the terms and condions of exisng financial liabilies, are accounted for as an exnguishment of the original financial liability and the recognion of a new financial liability. The terms are substanally different if the discounted present val- ue of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effec- ve interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addion, other qualitave factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features aached to the instrument and change in loan covenants are also considered. If an ex- change of debt instruments or modificaon of terms is accounted for as an exnguishment, any costs or fees incurred are recog- nised as part of the gain or loss on the exnguishment. If the exchange or modifica on is not accounted for as an exnguishment, any costs or fees incurred adjust the carrying amount of the liability and are amorsed over the remaining term of the modified liability. Modificaons of liabilies that do not result in exnguishment are accounted for as a change in esmate using a cumulave catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is aributed to a capital transacon with owners. 5.8.5. Trade and other accounts payable Trade payables are recognized when the counterparty fulfills its contractual obligaons and measured at amorzed cost using the effecve interest rate. 5.8.6. Loans and borrowings Loans and borrowings are inially recognized at fair value less costs incurred in the transacon. Subsequently, loans and borrow- ings are stated at amorzed cost; any difference between proceeds (net of transacon costs) and the amount of repayment is re- flected in the income statement over the period for which loans and borrowings are issued using the effecve interest rate meth- od. Loans and borrowings are classified as current liabilies, unless the Group has an uncondional right to defer selement of the obligaon to at least one year aer the date of balance sheet preparaon. 5.8.7. Wring-off of financial liabilies The Group writes-off financial liabilies only when they are repaid, cancelled or expire. 5.9. Foreign currency transacons Transacons in currencies other than the funconal currency are inially recorded at exchange rates set on the dates of these transacons. Monetary assets and liabilies denominated in such currencies are translated at the rates applicable at the reporng date. All realized and unrealized gains and losses resulng from exchange rate differences are included in profit or loss for the period. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 56 5.10. Biological assets Biological assets represented by the commercial herd and herd replacements are recorded at fair value less esmated selling and distribuon expenses. Esmate of fair value of biological assets of the Group is based on discounted cash flow models, according to which the fair value of biological assets is calculated using present value of the expected net cash flows from biological assets discounted at the appropriate rate. The Group recognizes a biological asset only where it controls an asset as a result of past events; it is probable that the economic benefits from the asset will flow to the Group; fair value or cost of an asset can be esmated with reasonable certainty. Profit or loss arising on inial recognion of biological assets at fair value less esmated selling and distribuon expenses is includ- ed in the consolidated income statement as incurred. Agricultural products collected from a biological asset are measured at fair value less esmated selling and distribuon expenses. Profit or loss arising on inial recognion of agricultural products at fair value, less esmated selling and distribuon expenses, is recognized in the consolidated statement of comprehensive income. 5.11. Inventories Inventories consist mainly of raw materials, package and packing materials, agricultural produce and finished goods. Inventories are valued at the lower of cost and net realisable value. Cost of goods includes the cost of acquision and, where appropriate, costs incurred in bringing inventories to their present condi- on and locaon. Cost is calculated using the weighted average method. Inial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in OCI, in respect to the purchases of raw materials. Net realisable value is the esmated selling price in the ordinary course of business, less esmated costs of compleon and the esmated costs necessary to make the sale. 5.12. Property, plant and equipment Property, plant and equipment are recorded at historical cost or deemed cost, equal to fair value at the date of transion to IFRS, less accumulated depreciaon and accumulated impairment losses. Historical cost of an asset of property, plant and equipment includes (a) the purchase price, including non-recoverable import dues and taxes net of trade and other discounts; (b) any costs directly related to bringing an asset to the locaon and condion, which allow its funconing in accordance with the intenons of the Group's management; (c) inial assessment of the costs of dismantling and removal in the asset of property, plant and equip- ment and restoring the occupied territory; this obligaon is assumed by the Group either upon the acquision of an asset, or as a result of its operaon for a certain period of me for the purposes not related to the producon of inventories during this period. Cost of assets created in-house includes cost of materials, direct labor costs and an appropriate proporon of producon over- heads. Construcon in progress includes costs directly related to the construcon of property, plant and equipment, including distribuon of variable overheads associated with the construcon and prepayments for the property, plant and equipment. Construcon in progress is not depreciated. These assets are depreciated from the moment when they are used in economic acvity, on the same basis as depreciaon on other assets. Subsequently capitalised costs include major expenditures for improvements and replacements that extend the useful lives of the assets or increase their revenue generang capacity. Repairs and maintenance expenditures that do not meet the foregoing crite- ria for capitalisaon are charged to the consolidated statement of comprehensive income as incurred. Depreciable amount is the cost of an asset of property, plant and equipment, or any other amount, less its residual value. The re- sidual value of an asset is the esmated amount that the company would receive to date from the sale of an item of property, plant and equipment, less esmated costs of disposal if the asset reached the age and condion, in which, presumably, it will be at the end of its useful life. Assets under finance lease are depreciated over the shorter of esmated useful life on the same basis as own assets or over the period of the relevant lease. Depreciaon is provided to write-off the depreciable amount over the useful life of an asset and is calculated using the straight- line method. Useful lives of the groups of property, plant and equipment are as follows: Buildings 10 - 40 years Plant and equipment 5 - 25 years Vehicles 3 - 10 years Furniture and fings 3 - 5 years Construcon in progress and uninstalled equipment No depreciaon 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 57 The residual value, useful life and depreciaon method are reviewed at the end of each financial year. Impact of any changes aris- ing from esmates made in prior periods is recorded as a change in an accounng esmate. Gains or losses arising from disposal or liquidaon of an asset of property, plant and equipment, are defined as the difference be- tween sales proceeds and carrying amount of an asset and recognized in profit or loss. 5.13. Impairment of property, plant and equipment At the end of each reporng period the Group idenfies signs of possible impairment of assets. If any such indicaon exists, the Group reviews the carrying amount of its items of property, plant and equipment to determine whether any signs of impairment exist due to depreciaon. If any such indicaon exists, the expected recoverable amount of an asset is esmated to determine the amount of impairment losses, if any. In order to determine the impairment losses, assets are grouped at the lowest levels for which it is possible to idenfy separately the cash flows (cash generang unit). The recoverable amount is the higher of fair value less selling and distribuon expenses and value of an asset in use. In assessing the value of an asset in use, the esmated future cash flows associated with the asset, are discounted to their present value using pre-tax discount rate that reflects current market esmates of me value of money and the risks inherent in the asset. If, according to the esmates, the recoverable amount of an asset (cash generang unit) is less than its carrying amount, the carry- ing amount of an asset (cash generang unit) is reduced to the recoverable amount. An impairment loss is recognized immediately in the income statement, except when the asset is recorded at a revalued amount. In this case the impairment loss is considered as a revaluaon decrease. In cases where impairment losses are subsequently reversed, the carrying amount of the asset (cash generang unit) is increased to the revised esmate of recovery amount, however, in such a way that the increased carrying amount does not exceed the carry- ing amount that would be determined, if an impairment loss was not recognized in respect of an asset (cash generang unit) in previous years. Reversal of impairment loss is recognized immediately in the income statement, except when the asset is recorded at a revalued amount. In this case, the reversal of an impairment loss is considered as a revaluaon increase. 5.14. Intangible assets Intangible assets acquired separately are measured on inial recognion at cost. The cost of intangible assets acquired in a busi- ness combinaon is its fair value as at the date of acquision. Following inial recognion, intangible assets are carried at cost less any accumulated amorzaon and any accumulated impairment losses. Internally generated intangible assets are not capitalized and expenditure is reflected in the income statement in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amorsed over the useful economic life and assessed for impairment whenever there is an indicaon that the intangible asset may be impaired. The amorsaon period and the amorsaon method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected paern of consumpon of future economic benefits embodied in the asset is accounted for by changing the amorsaon period or meth- od, as appropriate, and are treated as changes in accounng esmates. The amorsaon expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the funcon of the intangible asset. Intangible assets with indefinite useful lives are not amorsed, but are tested for impairment annually, either individually or at the cash generang unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life connues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospecve basis. Gains or losses arising from derecognion of an intangible asset are measured as the difference between the net disposal pro- ceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. Amorzaon is calculated on a straight line basis over the useful life of an asset, which is 10 years. 5.15. Borrowing costs Borrowing costs directly aributable to the acquision, construcon or producon of an asset that necessarily takes a substanal period of me to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an enty incurs in connecon with the borrowing of funds. 5.16. Leases A lessee measures right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease liabilies similarly to other financial liabilies. As a consequence, a lessee recognises depreciaon of the right-of-use asset and interest on the lease liability. The depreciaon would usually be on a straight-line basis. In the statement of cash flows, a lessee separates the total amount of cash paid into principal (presented within financing acvies) and interest (presented within either operang or financing acvies) in accordance with IAS 7. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 58 Assets and liabilies arising from a lease are inially measured on a present value basis. The measurement includes non- cancellable lease payments (including inflaon-linked payments), and also includes payments to be made in oponal periods if the lessee is reasonably certain to exercise an opon to extend the lease, or not to exercise an opon to terminate the lease. The ini- al lease asset equals the lease liability in most cases. The lease asset is the right to use the underlying asset and is presented in the statement of financial posion either as part of property, plant and equipment or as its own line item. 5.17. Conngent assets and liabilies Conngent liabilies are not recognized in the consolidated financial statements. Such liabilies are disclosed in the notes to the consolidated financial statements, except where the probability of oulow of resources embodying economic benefits is insignifi- cant. Conngent assets are not recognized in the consolidated financial statements, but disclosed in the notes to the extent that it is probable that the economic benefits will flow to the Group. 5.18. Provisions Provisions are recognized when the Group has a present obligaon (legal or construcve) as a result of a past event, it is probable that an oulow of resources embodying economic benefits will be required to sele the obligaon and a reliable esmate can be made of the obligaon amount. The amount recognized as a provision is the best esmate of compensaon necessary to repay a current liability on the reporng date, which takes into account all the risks and uncertaines inherent in this liability. In cases where the amount of provision is esmated using cash flows that can be required to repay current liabilies, its carrying amount represents the present value of these cash flows. Where there is a possibility that one or all of the economic benefits necessary to recover the amount of provision will be reim- bursed by a third party, the receivables are recognized as an asset if there is actual assurance that such reimbursement will be received and the amount of receivables can be measured reliably. 5.19. Revenue recognion Revenue is income arising in the course of the Group's ordinary acvies. Revenue is recognized in the amount of transacon price. Transacon price is the amount of consideraon to which the Group expects to be entled in exchange for transferring con- trol over promised goods or services to a customer, excluding the amounts collected on behalf of third pares. Revenue is recognized net of discounts, returns and value added taxes, export dues, other similar mandatory payments. Group's contracts with customers are fixed-price contracts and generally include both advance payment and deferred payment for the same contracts. Generally, the sales are made with a credit term of 30-60 days, which is consistent with the market pracce and consequently trade receivables are classified as current assets. A receivable is recognized when the goods are delivered or dispatched based on delivery terms as this is the point in me that the consideraon is uncondional because only the passage of me is required before the payment is due (Note 21). Contract assets are immaterial and therefore not presented separately in the consolidated financial statements. A contract liability is an enty's obligaon to transfer goods or services to a customer for which the enty has received considera- on from the customer. The five-step model framework The core principle of IFRS 15 is that an enty will recognize revenue to depict the transfer of promised goods or services to cus- tomers in an amount that reflects the consideraon to which the enty expects to be entled in exchange for those goods or ser- vices. This core principle is delivered in a five-step model framework: x Idenfy the contract(s) with a customer x Idenfy the performance obligaons in the contract x Determine the transacon price x Allocate the transacon price to the performance obligaons in the contract x Recognize revenue when (or as) the enty sasfies a performance obligaon. Applicaon of this guidance will depend on the facts and circumstances present in a contract with a customer and will require the exercise of judgment. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 59 Step 1: Idenfy the contract with the customer A contract with a customer are exists when: x the contract has been approved by the pares to the contract; x each party’s rights in relaon to the goods or services to be transferred can be idenfied; x the payment terms for the goods or services to be transferred can be idenfied; x the contract has commercial substance; and x it is probable that the consideraon to which the enty is entled to in exchange for the goods or services will be collected. If a contract with a customer does not yet meet all of the above criteria, the Group connues as to re-assess the contract going forward to determine whether it subsequently meets the above criteria. Step 2: Idenfy the performance obligaons in the contract At the incepon of the contract, the Group assess as the goods or services that have been promised to the customer, and idenfy as a performance obligaon: x a good or service (or bundle of goods or services) that is disnct; x or a series of disnct goods or services that are substanally the same and that have the same paern of transfer to the customer. Step 3: Determine the transacon price The transacon price is the amount to which the Group expects to be entled in exchange for the transfer of goods and services. When making this determinaon, the Group considers past customary business pracces. Step 4: Allocate the transacon price to the performance obligaons in the contracts Where a contract has mulple performance obligaons, the Group will allocate the transacon price to the performance obliga- ons in the contract by reference to their relave standalone selling prices. If a standalone selling price is not directly observable, the Group will need to esmate it using an adjusted market assessment approach or the expected cost plus a margin approach. Step 5: Recognize revenue when (or as) the enty sasfies a performance obligaon Revenue is recognized as control is passed, either over me or at a point in me. Control of an asset is defined as the ability to direct the use of and obtain substanally all of the remaining benefits from the asset. These include: x using the asset to produce goods or provide services; x using the asset to enhance the value of other assets; x using the asset to sele liabilies or to reduce expenses; x selling or exchanging the asset; x pledging the asset to secure a loan; and x holding the asset. The benefits related to the asset are the potenal cash flows that may be obtained directly or indirectly. 5.20. Income tax Income tax is calculated in accordance with the requirements of the applicable legislaon of Ukraine. Income tax is calculated on the basis of financial results for the year adjusted to items that are not included in taxable income or that cannot be aributed to gross expenses. It is calculated using tax rates effecve at the reporng date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilies in the financial statements and the corresponding tax base used to calculate taxable income. Deferred tax liabilies are generally recognized for all taxable temporary differences and deferred tax assets are recorded taking into account the degree of certainty in sufficient taxable income, which enables to realize temporary differences related to gross expenses. Deferred tax is calculated at tax rates, which presumably will be applied during the sale of related assets or repayment of related liabilies. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 60 Assets and liabilies on deferred income tax are offset when: a) the Group has a legally enforceable right to offset the recognized current income tax assets and liabilies; b) the Group intends either to perform selement by offseng counterclaims, or simulta- neously sell the asset and sele the liability; c) deferred tax assets and liabilies relate to income taxes levied by the same taxaon authority in each future period in which it is intended to repay or reimburse a significant amount of deferred tax liabilies and as- sets. Deferred income tax is recognized in the income statement, except when it relates to items recognized directly in equity. In this case the deferred tax is also recognized in equity. In 2021, Ukrainian corporate income tax was levied at a rate of 18% (2020: 18%). The majority of the Group companies that are involved in agricultural producon (poultry farms and other enes engaged in agri- cultural producon) benefit substanally from the status of an agricultural producer. These companies are exempt from income taxes and pay the Fixed Agricultural Tax instead (Note 16). 5.21. Value Added Tax For the year ended 31 December 2021 and 2020, VAT was levied at two rates: 20% on Ukrainian domesc sales and imports of goods, works and services and 0% on export of goods and provision of works or services to be used outside Ukraine. In 2020 VAT rate remains at the same level. VAT output equals the total amount of VAT collected within a reporng period, and arises on the earlier of the date of shipping goods to the customer or the date of receiving payment from the customer. VAT input is the amount that a taxpayer is entled to offset against his VAT liability in the reporng period. According to Ukrainian legislaon, rights to VAT input arise on the earlier of the date of payment to the supplier or the date goods are received. 5.22. Government grants Government grants are stated at fair value when there is reasonable assurance that the grant will be received. Ukrainian legislaon provides a variety of tax benefits and subsidies for agricultural companies. Such benefits and subsidies are approved by the Supreme Council of Ukraine, the Ministry of Agrarian Policy, Ministry of Finance, local authories. Under the ap- plicable legislaon, agricultural producers are entled to use VAT benefit regarding agricultural transacons. Government grants related to VAT Upon introducon of a new agricultural support system in early 2017, Ukraine canceled specific VAT subsidies. Early in 2016, under this program, the Group’s companies are subject to special tax treatment for VAT (Note 12.b). The Group’s enterprises, which qualify as agricultural producers, are entled to retain the net VAT payable. VAT amounts payable are not transferred to the State, but credited to the enty’s separate special account to support the agriculture acvies of the Group. Net result on VAT operaons, calculated as excess of VAT liability over VAT credit is charged to profit or loss. VAT receivable exceeding VAT liability is used as a reducon in tax liabilies of the next period. In 2017, the State Budget for agricultural support envisages that support automacally distributed among agricultural producers proporonally based on sales of agricultural products by those producers on a monthly basis. The budget subsidy for a sector is calculated on a monthly basis and is proporonal to overall VAT paid. According to the Law of Ukraine On Agricultural Support, all agricultural producers that apply for the subsidy must be included in the State Registry of Budget Subsidy Recipients. An agricultur- al producer is defined as a farm or a company that derived 75% of its sales over the last 12 reporng periods (months) from sales of agricultural products. From 2017 onwards, budget subsidies will be provided unl 1 January 2022. The agricultural producers will be engaged in the producon of farm animals, as well as fruit and vegetable farmers. For each agricultural producer, the amount of the subsidy is not to exceed the amount of VAT tax paid by the producers, and will be distributed on a monthly basis (Note 12.a). Government grants are recognised as income over the periods necessary to match them with the related costs, or as an offset against finance costs when received as compensaon for the finance costs for agricultural producers. To the extent the condions aached to the grants are not met at the reporng date, the received funds are recorded in the Group’s consolidated financial statements as deferred income. Other government grants are recognised at the moment when the decision to disburse the amounts to the Group is made. Government grants are not recognised unl there is reasonable assurance that the Group will comply with the condions aached to them and that the grants will be received. 5.23. Paral compensaon of interest rates on loans raised by the agricultural companies from financial instuons The Group companies are entled to compensaon from the government of a share of interest expenses incurred on loans which were received for agricultural purposes. The amount of interest compensaon depends on the term and purpose of the loan. Due to the fact that the payment of interest compensaons depends on the capabilies of the country's budget, they are recognized on a cash basis as other operang income in the period of receipt. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 61 5.24. Related party transacons For the purposes of these consolidated financial statements, the pares are considered to be related if one of the pares has a possibility to control or considerably influence the operaonal and financial decisions of the other company. While considering any relaon which can be defined as related party transacons it is necessary to take into consideraon the substance of the transac- on not only their legal form. 5.25. Reclassificaon Certain comparave informaon presented in the consolidated financial statements for the year ended 31 December 2020 has been revised in order to achieve comparability with the presentaon used in the consolidated financial statements for the year ended 31 December 2020. Such reclassificaons and revisions were not significant to the Groups consolidated financial state- ments. 6. N The following amended standards became effecve from 1 January 2021, but did not have any material impact on the Group: x Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued x on 27 August 2020 and effecve for annual periods beginning on or aer 1 January 2021). x Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effecve for annual periods beginning on or aer 1 April 2021). New and amended standards and interpretaons adopted Below is a list of new standards, clarificaons and amendments that result in new disclosure requirements for future reporng periods: The management expects that the above standards, when effecve, will not have a material effect on the consolidated financial statements of the Group in future periods. IFRS Effecve date: IFRS 17 Insurance Contracts (including amendments to IFRS 17 issued in June 2020 and amendments to IFRS 17 Inial Adopon of IFRS 17 and IFRS 9 – comparave informaon released in December 2021) Applicable to annual reporng periods beginning on or aer 1 January 2023. Not yet endorsed for use in the EU. Amendments to IFRS 4 - Applicaon of IFRS 9 Financial Instruments together with IFRS 4 Insurance Contracts (including amendments to IFRS 4 - Extension of the temporary exempon from the applica- on of IFRS ( IFRS) 9" issued in June 2020) Annual reporng periods beginning on or aer 1 January 2023. Not yet en- dorsed for use in the EU. Amendments to IAS 1 Presentaon of Financial Statements: Classificaon of Liabilies as Current or Non-current and Classificaon of Liabilies as Current or Non-current - Deferral of Effecve Date (issued on 23 January 2020 and 15 July 2020 respecvely) Annual reporng periods beginning on or aer 1 January 2023. Not yet en- dorsed for use in the EU. Amendments to IAS 37 – Onerous Contracts – Costs to Perform a Contract (issued on 14 May 2020) Annual reporng periods beginning on or aer 1 January 2022. Amendments to IAS 16 - Property, Plant and Equipment: proceeds before Use for the Intended Use (issued on 14 May 2020) Annual reporng periods beginning on or aer 1 January 2022. Annual Improvements to IFRS 2018-2020 Period: Amendments to IFRS 1 First- Time Adopon of Internaonal Financial Reporng Standards – First-Time Adopter of Internaonal Financial Reporng Standards (issued on 14 May 2020) Annual reporng periods beginning on or aer 1 January 2022. Annual Improvements to IFRS 2018-2020 Period: Amendments to IFRS 9 Financial Instruments – Fee for the 10% test to derecognise financial liabilies (issued on 14 May 2020) Annual reporng periods beginning on or aer 1 January 2022. Annual Improvements to IFRS 2018-2020 Period: Amendments to IAS 41 Agriculture – Taxaon in Fair Value Measurement (issued on 14 May 2020) Annual reporng periods beginning on or aer 1 January 2022. Amendments to IFRS 3 – “References to the Conceptual Framework” (issued on 14 May 2020) Annual reporng periods beginning on or aer 1 January 2022. Amendments to IAS 8 Accounng policies, Changes in Accounng Esmates and Errors: Definion of Accounng Esmates (issued on 12 February 2021) Annual reporng periods beginning on or aer 1 January 2023. Amendments to IAS 1 Presentaon of Financial Statements and IFRS Pracce Statement 2: Disclosure of Accounng policies (issued on 12 February 2021) Annual reporng periods beginning on or aer 1 January 2023 Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilies arising from a Single Transacon (issued on 7 May 2021) Annual reporng periods beginning on or aer 1 January 2023 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 62 7. S N- As at 31 December 2021 and 2020 the Group included the following subsidiaries: Name of the company Business acvies 31 December 2021 31 December 2020 Limited Liability Company “Ovostar Union” Strategic management of subsidiary companies in Ukraine 100.0% 100.0% Limited Liability Company “Ovostar” Egg-products producon and distribuon (Ukraine) 100.0% 100.0% Limited Liability Company “Yasensvit” Breeder farms, producon of hatching eggs, farms for growing young laying flock and for laying flock, producon and distribuon of shell eggs, poultry feed producon (Ukraine) 100.0% 100.0% Public Joint Stock Company “Poultry Farm Ukraine” Producon of shell eggs, assets holding (Ukraine) 92.0% 92.0% Public Joint Stock Company “Malynove” Producon of shell eggs, assets holding (Ukraine) 94.0% 94.0% Public Joint Stock Company “Krushynskyy Poultry Complex” Trading company, egg trading – non operaonal acvity (Ukraine) 76.0% 76.0% Limited Liability Company “Skybynskyy Fodder Plant” In the process of liquidaon (Ukraine) 98.6% 98.6% "SIA" Ovostar Europe" Trade company (Latvia) 89.0% 89.0% SIA "Gallusman" Producon of shell eggs (Latvia) 89.0% 89.0% SIA "EPEX" Egg-products producon (Latvia) 89.0% 89.0% Internaonal Food Trade Limited Trade company (Brish Virgin Islands) 100.0% 100.0% OAE Food Trade FZE Trade company (United Arab Emirates) 100.0% 100.0% Limited Liability Company "BVV EQUIPMENT" Non-operaonal acvity (Ukraine) 0.0% 100.0% Limited Liability Company “BV TRADING” Non-operaonal acvity (Ukraine) 0.0% 100.0% *REMEDIUM FOODS B.V. Egg processing, distribuon of egg products 50.00% 50.00% 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 63 The following tables summarize the informaon relang to each of the Groups subsidiaries that has material NCI, before any intra -group eliminaon: 31 December 2021 PJSC “Poultry Farm Ukraine” PJSC “Malynove” PJSC “Krushyns kyy Poultry Complex” "SIA" Ovostar Europe" SIA "Gallusm an" SIA "EPEX" Total NCI percentage 8,0% 6,0% 24,0% 11,0% 11,0% 11,0% Non-current assets 621 14 562 36 372 62 Current assets 5 571 13 554 543 3 633 57 261 Non-current liabilies Current liabilies (3 095) (27 346) (7) (3 670) (48) (308) Net assets 3 097 770 537 (1) 381 15 Carrying amount of NCI 262 44 127 42 477 Revenue 2 601 10 756 24 532 419 Profit (loss) 738 (4 856) 430 293 380 29 OCI (2 063) (248) (435) 1 191 (413) (1) Total comprehensive income (1 325) (5 104) (5) 1 484 (33) 28 Profit allocated to NCI 63 (276) 102 32 42 (35) OCI allocated to NCI (175) (14) (103) 131 (45) (206) Cash flows from operang acvies 18 (85) (42) (11) Cash flows from investment acvies (18) (32) Effect from translaon into presenta- on currency (22) (2) Net (decrease)/ increase in cash and cash equivalents (139) (44) (11) 31 December 2020 PJSC “Poultry Farm Ukraine” PJSC “Malynove” PJSC “Krushyns kyy Poultry Complex” "SIA" Ovostar Europe" SIA "Gallusm an" SIA "EPEX" Total NCI percentage 8,0% 6,0% 24,0% 11,0% 11,0% 11,0% Non-current assets 534 20 302 365 56 Current assets 3 587 5 034 533 5 515 114 108 Non-current liabilies Current liabilies (515) (20 001) (6) (6 077) (69) (174) Net assets 3 606 5 335 527 (553) 410 (10) Carrying amount of NCI 288 320 127 (61) 45 (1) 718 Revenue 2 376 8 276 25 968 88 Profit (loss) 70 (1 953) (4) 21 (5) OCI (870) (1 148) (110) (1 178) 34 (1) Total comprehensive income (800) (3 101) (114) (1 175) 55 (6) Profit allocated to NCI (117) (1) (1) (110) OCI allocated to NCI (71) (69) (26) (130) (292) Cash flows from operang acvies (280) Cash flows from investment acvies (9) (11) Effect from translaon into presenta- on currency 18 16 Net (decrease)/ increase in cash and cash equivalents (271) 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 64 8. S All of the Group’s operaons are located within Ukraine. Segment informaon is analyzed on the basis of the types of goods supplied by the Group’s operang divisions. The Group’s re- portable segments under IFRS 8 are therefore as follows: The accounng policies of the reportable segments are the same as the Group’s accounng policies described in Note 5. Sales be- tween segments are mainly carried out at market prices. Operang profit before tax represents segment result. This is the meas- ure reported to the chief operang decision maker for the purposes of resource allocaon and assessment of segment perfor- mance. For the purposes of monitoring segment performance and allocang resources between segments: All assets are allocated to reportable segments. All liabilies are allocated to reportable segments. The following table presents revenue, results of operaons and certain assets and liabilies informaon regarding segments for the year ended 31 December 2021 and 2020: In 2021 and 2020 no sales were seled by barter transacons. Egg operaons segment sales of egg sales of chicken meat Egg products operaons segment sales of egg processing products Oilseed operaons segment sales of sunflower oil, rapeseed oil and related products 12 months ended 31 December 2021 Operaons segment Egg Egg products Consolidated Revenue 155 320 54 964 210 284 Inter-segment revenue (63 170) (13 748) (76 918) Revenue from external buyers 92 150 41 216 133 366 Profit(Loss) before tax 4 513 (2 880) 1 633 12 months ended 31 December 2020 Operaons segment Egg Egg products Consolidated Revenue 125 272 45 242 170 514 Inter-segment revenue (56 479) (15 128) (71 607) Revenue from external buyers 68 793 30 114 98 907 Profit(Loss) before tax 1 248 1 532 2 780 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 65 Segment assets, liabilies and other informaon regarding segments as at 31 December 2021 and 2020 were presented as follows: The Group presented disaggregated revenue based on the type of goods or services provided to customers and the geographical region of goods and services. Enes will need to make this determinaon based on enty-specific and/or industry-specific factors that would be most meaningful to their business. The Group presented a reconciliaon of the disaggregated revenue with the revenue informaon disclosed for each reportable segment. Set out below is the disaggregaon of the Group’s revenue from contracts with customers: Operaons segment 31 December 2021 Total Egg Egg products Total segment assets 124 768 16 251 141 019 Total segment liabilies 30 749 381 31 130 Addion to property, plant and equipment and intangible assets 398 153 551 Net change in fair value of biological assets and agricultural produce (8 529) (8 529) Depreciaon and amorzaon (3 787) (662) (4 449) Interest income 10 Interest on debts and borrowings (380) (380) Income tax expense (44) 66 22 Operaons segment 31 December 2020 Total Egg Egg products Total segment assets 113 728 17 586 131 314 Total segment liabilies 26 418 492 26 910 Addion to property, plant and equipment and intangible assets 2 181 583 2 764 Net change in fair value of biological assets and agricultural produce (3 742) (3 742) Depreciaon and amorzaon (3 468) (443) (3 911) Interest income 33 42 Interest on debts and borrowings (449) (449) Income tax expense (76) (112) (188) Operaons segment 12 months ended 31 December 2021 Total Egg Egg products Type of goods or service Goods 92 077 41 161 133 238 Services 73 55 128 Total revenue from contracts with customers 92 150 41 216 133 366 Geographical markets Ukraine 71 463 24 179 95 642 Middle East 12 026 4 862 16 888 European Union 3 854 9 658 13 512 CIS 73 73 Africa 152 711 863 Other 4 655 1 733 6 388 Total revenue from contracts with customers 92 150 41 216 133 366 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 66 Revenue from external buyers divided by geographic locaon (connued) 9. C 10. S 12 months ended 31 December 2021 12 months ended 31 December 2020 Costs of inventories recognised as an expense (87 971) (60 639) Packaging costs (9 525) (7 489) Cost of goods purchased for resale (274) (622) Wages, salaries and social security costs (7 886) (7 722) Amorsaon, depreciaon and impairment (4 088) (3 466) Other expenses (1 479) (1 809) Total (111 223) (81 747) 12 months ended 31 December 2021 12 months ended 31 December 2020 Transportaon expenses (5 302) (4 987) Wages, salaries and social security costs (1 290) (1 031) Cost of materials (999) (590) Markeng and adversing expenses (94) (143) Amorsaon, depreciaon and impairment (102) (94) Other expenses (509) (776) Total (8 296) (7 621) Operaons segment 12 months ended 31 December 2020 Total Egg Egg products Type of goods or service Goods 68 395 29 985 98 380 Services 398 129 527 Total revenue from contracts with customers 68 793 30 114 98 907 Geographical markets Ukraine 46 071 13 032 59 103 Middle East 15 621 3 231 18 852 European Union 4 347 11 365 15 712 CIS 358 22 380 Africa 714 716 Other 2 394 1 750 4 144 Total revenue from contracts with customers 68 793 30 114 98 907 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 67 11. A 12. O Recovery of assets previously wrien-off mainly represents amounts of inventory surplus idenfied in the reporng period during the stock-taking and recovery of amounts previously recognized as doubul. a) Government subsidies On 7 February 2018, the Cabinet of Ministers of Ukraine approved the procedure to obtain livestock sector state support. During the year ended 31 December 2021, the Group received government grants in accordance to the compensaon program for con- strucon and reconstrucon of livestock farms in an amount of USD 0 thousand (2020: USD 826 thousand). Government grants are presented in the statement of the financial posion as deferred income, which is recognised in profit or loss on a systemac basis over the useful life of the related assets. The unamorzed poron of the government subsidies as of 31 December 2021 is USD 2 189 thousand (31 December 2020: USD 3 149 thousand). b) Insurance compensaon In July 2020 the Company has received insurance recovery in amount of USD 1 805 thousand for the loss of fixed assets destroyed in the fire accident in August 2019. 13. O 12 months ended 31 December 2021 12 months ended 31 December 2020 Wages, salaries and social security costs (1 475) (1 352) Legal, audit and other professional fees (557) (425) Service charge expenses (886) (964) Cost of materials (262) (177) Amorsaon, depreciaon and impairment (259) (351) Other expenses (217) (356) Total (3 656) (3 625) Note 12 months ended 31 December 2021 12 months ended 31 December 2020 Income from refund under the special legislaon: Government subsidies a) 283 254 Total income from refund under the special legislaon 283 254 Gain on recovery of assets previously wrien off b) 29 20 Insurance compensaon 17 1 805 Gain on disposal of other current assets 19 Other income 217 267 Total 565 2 346 12 months ended 31 December 2021 12 months ended 31 December 2020 Wring off fixed assets (25) Impairment of doubul accounts receivable and prepayments to suppliers (930) (373) Loss on disposal of property plant and equipment (2) (3) Fines and penales (21) (20) Other expenses (47) (55) Total (1 000) (476) 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 68 14. F 15. F 16. I Companies of the Group that are involved in agricultural producon pay the Fixed Agricultural Tax (the “FAT”) in accordance with the applicable laws. The FAT is paid in lieu of corporate income tax, land tax, dues for geological survey works and dues for trade patents. The FAT is calculated by local authories and depends on the area and valuaon of land occupied. This tax regime is valid indefi- nitely. FAT does not constute an income tax, and as such, is recognized in the statement of comprehensive income in administra- ve expenses. During the year ended 31 December 2021, the Group companies which have the status of the Corporate Income Tax (the “CIT”) payers in Ukraine were subject to income tax at a 18% rate (31 December 2020: at a 18% rate). The deferred income tax assets and liabilies as of 31 December 2021 were measured based on the tax rates expected to be applied to the period when the tem- porary differences are expected to reverse. The major components of income tax expense for the year ended 31 December 2021 and 2020 were: Reconciliaon between tax expense and the product of accounng profit mulplied by Ukraine’s domesc tax rate for the years ended 31 December 2021 and 2020 was as follows: (1) Current year (income)/losses for which no deferred tax asset was recognized relate to Ovostar Union Public Company Limited, the Cyprus company and Internaonal Food Trade Limited. The income tax rate in the BVI is 0%, Cyprus is 12.5%, Latvia is 0%. 12 months ended 31 December 2021 12 months ended 31 December 2020 Interest on debts and borrowings (380) (449) Interest on financial lease Foreign currency exchange loss (871) Total (380) (1 320) 12 months ended 31 December 2021 12 months ended 31 December 2020 Interest income 10 42 Foreign currency exchange profit 776 Other financial income 16 Total 786 58 12 months ended 31 December 2021 12 months ended 31 December 2020 Current income tax 16 (52) Deferred tax (136) Income tax (expense)/benefit reported in the income statement 22 (188) 12 months ended 31 December 2021 12 months ended 31 December 2020 Accounng profit before income tax 1 633 2 780 At Ukraine’s statutory income tax rate of 18% (2020: 18%) 294 500 Tax effect of: Income generated by FAT payers (exempt from income tax) (34) 339 Current year losses for which no deferred tax asset was recognised at a rate of 0% (1) (596) 477 Effect of expenses that are not deducble in determining taxable profit 325 (1 160) Effect of translaon to presentaon currency (11) 32 Income tax expense/(benefit) (22) 188 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 69 Deferred tax As at 31 December 2021 and 2020, deferred tax assets and liabilies comprised the following: Deferred income tax assets and liabilies are offset when there is a legally enforceable right to set off current tax assets against current tax liabilies and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined aer appropriate offseng, are presented in the consolidated statement of financial posion as at 31 December 2021 and 2020: 31 December 2021 Recognized in statement of compre- hensive income Effect of trans- laon into presentaon currency 31 December 2020 Advances received and other payables (7) Prepayments to suppliers 22 20 Trade and other receivables Inventories Tax losses 1 389 819 20 550 Unrecognized deferred tax assets (1 389) (819) (20) (550) Need off against deferred tax assets 28 17 11 Property, plant and equipment and intangi- ble assets (318) (6) (11) (301) Trade and other receivables Advances received and other payables (16) (5) (11) Need off against deferred tax liabilies (334) (11) (11) (312) Net deferred tax asset/(liability) (306) (11) (301) 31 December 2020 Recognized in statement of comprehensive income Effect of trans- laon into presentaon currency 31 December 2019 Advances received and other payables (1) Prepayments to suppliers (1) (1) Trade and other receivables (5) (2) Inventories (47) (9) 56 Tax losses 550 (106) 656 Unrecognized deferred tax assets (550) 106 (656) Need off against deferred tax assets 11 (50) (13) 74 Property, plant and equipment and intangi- ble assets (301) (87) 41 (255) Trade and other receivables (1) Advances received and other payables (11) (14) Need off against deferred tax liabilies (312) (85) 43 (270) Net deferred tax asset/(liability) (301) (135) 30 (196) 31 December 2021 31 December 2020 Non-current assets 28 11 Long term liabilies (334) (312) Net deferred tax asset/(liability) (306) (301) 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 70 17. B As at 31 December 2020 and 2019 commercial and replacement poultry were presented as follows: Classificaon of biological assets into non-current and current component is based on the life cycle of a biological asset. Biological assets that will generate cash flow more than one year are classified as non-current biological assets, biological assets that will generate cash flow less than one year are classified as current biological assets. Reconciliaon of commercial and replacement poultry carrying values for the year ended 31 December 2021 and 2020 was pre- sented as follows: For the year ended 31 December 2021 the Group produced shell eggs in the quanty of 1 691 mln (31 December 2020: 1 671 mln). Fair value of biological assets was esmated by the Group's specialists which have experience in valuaon of such assets. Fair val- ue was calculated by discounng of expected net cash flow (in nominal measuring) at the moment of eggs produced, using corre- sponding discount rate which is equal to 16,91% (31 December 2020: 14.1%). Management supposes that sale price and produc- on and distribuon costs fluctuaons will comply with forecasted index of consumer price in Ukraine. The major assumpons were performed on the basis of internal and external informaon and it reflected Management's assessment of the future agricul- tural prospect. Biological assets of the Group are measured at fair value within Level 3 of the fair value hierarchy. Based on the current situaon in Ukraine that provides a high degree of uncertainty in relaon to many of the assumpons in the biological assets revaluaon model, and guided by the prudence concept, the Group used conservave approach for calculaon of fair value of biological assets as at 31 December 2021. 2021 2020 As at 01 January 51 372 50 759 Increase in value as a result of assets acquision 534 1 581 Increase in value as a result of capitalizaon of cost 18 026 13 988 Income/(Losses) from presentaon of biological assets at fair value (8 529) (3 742) Decrease in value as a result of assets disposal (2 753) (2 977) Exchange differences 1 888 (8 237) As at 31 December 60 538 51 372 31 December 2021 31 December 2020 Number, thousand heads Carrying value Number, thousand heads Carrying value Non-current biological assets Replacement poultry Hy-line 4 260 45 079 4 381 40 234 Total non-current biological assets 4 260 45 079 4 381 40 234 Current biological assets Commercial poultry Hy-line 4 111 15 459 3 612 11 138 Total current biological assets 4 111 15 459 3 612 11 138 Total biological assets 8 371 60 538 7 993 51 372 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 71 Value measurement is a maximum value exposed to the following assumpons which were used in fair value calculaons of bio- logical assets (Based on the current situaon in Ukraine): Changes in key assumpons that were used in fair value esmaon of biological assets had the following influence on the value of biological assets as at 31 December 2021 and 2020: Assumpon as at 31 December 2021 Assumpon as at 31 December 2020 Eggs sale price, USD per item (UAH per item) 0,088 (2,40) 0.071 (2.02) Discount rate, % 16,91% 14,10% Long-term inflaon rate of Ukrainian hrivnya, % 1,08 1,05 Maximum poultry life me, days 770 770 12 months ended 31 December 2021 12 months ended 31 December 2020 1% decrease in egg sale price (1 386) (1 197) 1% increase in egg sale price 1 386 1 197 1% increase in discount rate (784) (691) 1% decrease in discount rate 796 701 1% increase in long-term inflaon rate of Ukrainian hrivnya 55 61 1% decrease in long-term inflaon rate of Ukrainian hrivnya (55) (61) 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 72 18. P, As at 31 December 2021 construcon in progress and uninstalled equipment also included prepayments for the property, plant and equipment which amounted to USD 352 thousand (2020: USD 467 thousand). The impairment of prepayments for fixed-assets as of 31 December 2021 amounts to USD 227 thousand. As at 31 December 2021, included within property, plant and equipment were fully depreciated assets with the original cost of USD 4 474 thousand (2020: USD 3 821 thousand). 19. O - As of 31 December 2021 there were no loans included in Other non-current assets (USD 21 thousand as at 31 December 2020). Buildings Plant and equipment Vehicles Furniture and fings Construcon- in-progress and unin- stalled equip- ment Intangible assets Total Cost or valuaon As at 31 December 2019 25 590 42 930 2 107 859 6 906 72 78 464 Addions 636 1 248 24 839 2 748 Transfer 877 2 285 55 (3 217) Disposals (5) (57) (27) (31) (2) (122) Currency translaon difference (4 130) (6 992) (342) (140) (1 034) (12) (12 650) As at 31 December 2020 22 968 39 414 1 738 767 3 492 61 68 440 Addions 109 699 49 229 707 1 800 Transfer 157 197 17 (371) Disposals (29) (13) (10) (52) Impairment assessment (227) (227) Currency translaon difference 803 1 417 61 28 (247) 2 065 As at 31 December 2021 24 037 41 698 1 835 1 031 3 354 71 72 026 Depreciaon and amorzaon As at 31 December 2019 (6 238) (12 493) (820) (565) (23) (20 139) Charge for the year (981) (2 606) (193) (107) (24) (3 911) Disposals 56 15 30 106 Currency translaon difference 1 058 2 148 142 96 3 447 As at 31 December 2020 (6 156) (12 895) (856) (546) (44) (20 497) Charge for the year (1 058) (3 051) (198) (136) (6) (4 449) Disposals 28 13 50 Currency translaon difference (225) (469) (32) (19) (2) (747) As at 31 December 2021 (7 439) (16 387) (1 073) (692) (52) (25 643) Net book value As at 31 December 2021 16 598 25 311 762 339 3 354 19 46 383 As at 31 December 2020 16 812 26 519 882 221 3 492 17 47 943 As at 31 December 2019 19 352 30 437 1 287 294 6 906 49 58 325 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 73 20. I 21. T Trade receivables from third pares are non-interest bearing and are generally on 30-90 days credit terms. For larger customers the Group grants credit for up to 45-180 days. Trade and other receivables net of impairment loss provisions denominated in the following currencies: 22. P As at 31 December 2021 prepayments to suppliers included prepayments for the goods and services amount to USD 3 114 thou- sand (2020: USD 1 233 thousand). 23. P As at 31 December 2021 prepayments for income tax amount to USD 28 thousand (2020: USD 27 thousand). 24. C 31 December 2021 31 December 2020 Raw materials 5 504 5 430 Agricultural produce and finished goods 2 263 3 945 Package and packing materials 2 398 1 682 Work in progress 1 343 821 Other inventories 1 533 1 357 (Less: impairment of agricultural produce and finished goods) (19) (19) Total 13 022 13 216 31 December 2021 31 December 2020 Trade receivables 13 550 12 994 VAT for reimbursement 1 724 2 689 Other accounts receivable 347 443 Credit loss allowance (150) (261) Total 15 471 15 865 31 December 2021 31 December 2020 UAH 12 736 11 992 USD 1 191 1 661 EUR 1 544 2 212 Total 15 471 15 865 31 December 2021 31 December 2020 Cash in banks 2 419 1 619 Cash on hand 16 Total 2 435 1 626 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 74 a) Cash in banks by country of bank locaon denominated in the following currencies: 25. E Issued capital and capital distribuon For the year ended 31 December 2021 there were no changes in issued capital. As referred to in Note 1, the Company was incorporated on 22 March 2011. The Company's authorized share capital amounts to EUR 225 000 and consists of 22 500 000 ordinary shares with a nominal value off EUR 0.01 each. As at 31 December 2011, 6 000 000 ordinary shares were issued and fully paid. In June 2011 the shares of the Company were listed on the Warsaw Stock Exchange. As at 31 December 2021 and 31 December 2020 the shareholder interest above 5% in the Share capital of Company was as fol- lows: Foreign currency translaon reserve The Company's share capital has been converted at the exchange rate prevailing at the reporng date. The EUR 60 000 (equivalent to 6 000 000 shares) as of 31 December 2021, has been converted into USD 68 052 (31 December 2020: USD 73 382). The result arising from exchange rate differences has been recorded in the “Foreign currency translaon reserve”. The foreign currency translaon reserve is used also to record exchange differences arising from the translaon of the financial statements of foreign subsidiaries. Share premium As has been menoned previously, in June 2011 the Group’s shares have been placed on WSE. As a result of the transacon, USD 33 048 thousand was raised while the IPO costs amounted to USD 2 115 thousand. In these financial statements funds raised as a result of IPO are reflected in share premium as at 31 December 2011. For the year ended 31 December 2021 and 2020, there were no movements in share premium. 31 December 2020 31 December 2019 Prime One Capital Ltd. 67,93% 67,93% Generali Otwarty Fundusz Emerytalny 10,93% 9,94% FAIRFAX FINANCIAL Holdings Limited 10,39% 5,35% AVIVA Otwarty Fundusz Emerytalny Aviva BZ WBK 5,02% 5,02% Currency 31 December 2021 31 December 2020 Ukraine UAH 1 430 522 Ukraine USD 83 119 Ukraine EUR 447 379 Total in Ukraine 1 960 1 020 Cyprus EUR Total in Cyprus Latvia USD 107 51 Latvia EUR 135 385 Total in Latvia 242 436 United Kingdom USD 18 United Kingdom EUR United Kingdom PLN Total in United Kingdom 18 United Arab Emirates AED 53 47 United Arab Emirates USD 155 72 United Arab Emirates EUR 26 Total in United Arab Emirates 209 145 Total cash in banks 2 419 1 619 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 75 26. I- The Interest-bearing loans from AKA Ausfuhrkredit-Gesellscha mbH has been covered of Euler Hermes AG. Covenants The Group’s loan agreements contain a number of covenants and restricons, which include, but are not limited to, financial raos and other legal maers. Covenant breaches generally permit lenders to demand accelerated repayment of principal and interest. As at 31 December 2021 and 2020 the Group was not in breach of any financial covenants which allow lenders to demand immediate repayment of loans. ReconciliaƟon of liabiliƟes arising from financing acƟviƟes. The table below details changes in the Group’s liabilies arising from financing acvies, including both cash and non–cash changes. Liabilies arising from financing acvies are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing acvies: Currency Effecve inter- est rate, % Maturity 31 December 2021 31 December 2020 Current interest-bearing loans and other financial liabili- AKA Ausfuhrkredit-Gesellscha mbH EUR 2.25%+ EURIBOR (6m) 30.06.22 607 2 556 UkrSibbank EUR 2,65% 17.08.22 2 780 3 013 Prime One Capital Limited EUR 3,00% 10.07.24 2 353 Other current loans UAH 24 Total current interest-bearing loans and other financial liabilies 5 740 5 593 Non-current interest-bearing loans and other financial liabilies OTP Bank EUR 2,65% 02.10.24 7 141 2 703 Prime One Capital Limited EUR 3,00% 10.07.24 2 469 Total non-current interest-bearing loans and other financial liabilies 7 141 5 172 Total interest-bearing loans and other financial liabilies 12 881 10 765 31 December 2020 Financing cash flow Financial cash flow received Increase (as a result of accruals and other) Exchange differences 31 December 2021 Interest-bearing loans 10 777 (1 880) 4 730 (836) 12 791 Interest expenses (40) (243) 380 (7) 90 Other borrowings 28 - (25) (3) Total 10 765 (2 123) 4 730 355 (846) 12 881 31 December 2019 Financing cash flow Financial cash flow received Increase (as a result of accruals and other) Exchange differences 31 December 2020 Interest-bearing loans 10 586 (4 936) 4 419 708 10 777 Interest expenses (224) (292) 449 27 (40) Other borrowings 28 - 28 Total 10 390 (5 228) 4 419 449 735 10 765 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 76 27. T 28. A As at 31 December 2021 advances received amount to USD 543 thousand (2020: USD 306 thousand). 29. R For the purposes of these consolidated financial statements, the pares are considered to be related, if one of the pares has the ability to exercise control over the other party or influence significantly the other party in making financial and operang deci- sions. Considering the transacons with each possible related party, parcular aenon is paid to the essence of relaonships, not merely their legal form. Related pares may enter into transacons, which may not always be available to unrelated pares, and they may be subject to such condions and such amounts that are impossible in transacons with unrelated pares. According to the criteria menoned above, related pares of the Group are divided into the following categories: The following companies and individuals are considered to be the Group's related pares as at 31 December 2021 and 2020: (A). Key management personnel (A). Key management personnel; (B). Companies which acvies are significantly influenced by the Beneficial Owners; (C). Other related pares. 31 December 2021 31 December 2020 Trade payables 12 373 10 561 Employee benefit liability 600 540 Liability for unused vacaon 863 797 Taxes payable 257 234 VAT liabilies 200 139 Income tax payables 21 Other payables 98 87 Total 14 391 12 379 Key management personnel 2021: Posion: Borys Bielikov Execuve Director / CEO Vitalii Veresenko Non-execuve director Sergii Karpenko Non-execuve director Vitalii Sapozhnik Chief Financial Officer Arnis Veinbergs Deputy CEO in charge of Producon acvity Karen Arshakyan Non-execuve director Yuliya Flyorova Producon director Key management personnel 2020: Posion: Borys Bielikov Execuve Director / CEO Vitalii Veresenko Non-execuve director Sergii Karpenko Non-execuve director Vitalii Sapozhnik Chief Financial Officer Arnis Veinbergs Deputy CEO in charge of Producon acvity Karen Arshakyan Non-execuve director Vitalii Voron Producon director 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 77 (B). Companies which acvies are significantly influenced by the Key management personnel Aleksa LTD LLC 2021/2020 Prime One Capital Limited 2021/2020 As at 31 December 2021 and 2020 trade accounts receivable from related pares and advances issued to related pares were pre- sented as follows: Debt with Prime One Capital Limited is disclosed in note 26 For the year ended 31 December 2021 and 2020 the transacons with related pares amounted to: Compensaon of key management personnel of the Group The amount of remuneraon of key management personnel of the group for the year ended 31 December 2021, and 2020 was presented as follows: (C). Other related pares: For the year ended 31 December 2021, and 2020 the Group has no other related pares. 31 December 2021 31 December 2020 Salaries and contribuon to social security fund (short-term employ- ee benefits) Vitalii Voron 917 Vitalii Sapozhnik 17 16 Karen Arshakyan 24 22 Other key management personnel 266 246 Total 316 301 31 December 2021 31 December 2020 Prepayments to related pares (B). Companies which acvies are significantly influenced by the Beneficial Owners: Aleksa LTD LLC 47 43 Total 47 43 31 December 2021 31 December 2020 (B). Companies which acvies are significantly influenced by the Beneficial Owners: Interest on debts and borrowings: Prime One Capital Limited 71 41 General and administrave expenses: Aleksa LTD LLC 24 24 Total 95 65 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 78 30. C Operang environment All producon facilies of the Company are located in Ukraine and its operaons are highly dependent on the developments in this jurisdicon. In 2021, Ukraine faced significant public debt repayments, which required mobilising substanal domesc and external financing in an increasingly challenging financing environment for emerging markets. On February 24, 2022, Russian troops launched a military invasion of Ukraine, which led to a full-scale war on the territory of the Ukrainian state. The ongoing military aack has caused and connues to cause significant casuales, populaon displacement, infrastructure damage and disrupon to economic acvity in Ukraine Seaports and airports are closed and damaged. Export through seaports was completely frozen. The situaon remains highly volale and the outlook highly uncertain. The economic con- sequences are already very serious. As a result, the government has imposed maral law throughout the country, as well as other relevant emergency measures to stabilize markets and the economy, but the country is facing large budgetary and external finan- cial deficits. The Ukrainian authories connue to service their external debt obligaons, and the country's payment system con- nues to operate, banks are open and mostly liquid. Most Ukrainian companies sll pay taxes. At the me of reporng, the occu- pied territories of central Ukraine, where the producon of the Ovostar Union group of companies is concentrated, were liberated from the invaders, but hoslies connue in the eastern and southern parts of Ukraine, and the enre territory is subjected to rocket aacks. Internaonal organizaons (IMF, EBRD, EU, World Bank), along with individual countries and charies, have provided Ukraine with financing, donaons and material support. In total, internaonal support has reached more than USD 15 billion. In view of the large-scale armed assault in Ukraine by Russian forces, the Naonal Bank of Ukraine (‘NBU’) decided to postpone a decision on the discount rate, leaving it unchanged at 10% and, when the war started, moved to a fixed exchange rate of UAH 29.25 to the US Dollar. As a result, commercial interbank quotes remain close to the officially imposed by NBU. The NBU has also said that once the economy and financial system return to operaon, it will revert to the tradional format of inflaon targeng with a floang exchange rate. Despite the current unstable situaon, the banking system remains stable, with sufficient liquidity even as maral law connues, all banking services are available to its customers, both legal enes and individuals. In the face of the invasion, the Ukrainian gov- ernment has imposed export restricons for meat and livestock, rye, oats, millet, buckwheat, sugar and dietary salt. Furthermore, the Ukrainian Ministry of Economy will issue export permits for the group of products, subjected for licensing: wheat, chicken meat and eggs. As of May 2022, the Verkhovna Rada of Ukraine has approved a package of amendments to taxaon to support Ukrainian busi- nesses during the war. The law establishes a special economic regime for the period of maral law. The key innovaon is that all companies can now waive VAT and income tax (CIT) by switching to a 2% sales tax. Physically lost goods are not subject to VAT. VAT refunds for exporters are frozen. Private entrepreneurs (group 1 and group 2) are allowed to pay no taxes at all (and they are not required to pay a single social contribuon for 1 year aer the end of maral law). For automove fuel, the excise tax is reset to zero, and the VAT rate is reduced from 20% to 7%. In addion, support for naonal military acon is exempt from taxaon. According to the IMF, GDP growth was 3.2% in 2021 (from -7.2% in 2020), and is expected to fall by -35% in 2022 (for 2023, the IMF has so far refrained from forecasng). Due to the war on the territory of Ukraine, the budget deficit in 2022 will increase to -17.8% of GDP (IMF). Public debt fell significantly from 60.8% of GDP in 2020 to 51.1% of GDP in 2021, but is expected to increase significantly in 2022 (86.2% of GDP) and remain high in 2023 (78% of GDP) (IMF) . In 2021, the hryvnia appreciated by 3.5% against the US dollar (Ministry of Finance), but inflaon rose to 10% in 2021 (from 5% in 2020) due to higher energy prices and other producon costs for a wide range of goods and services. The IMF does not undertake to predict inflaon in Ukraine for 2022. On June 4, the Decision of the European Union on the abolion of dues on Ukrainian goods for a year came into force: x dues on industrial products, suspension of the entry price system for fruits and vegetables and all tariff quotas for agri- cultural products; x all an-dumping dues on imports of goods originang from Ukraine and the applicaon of global protecve measures in relaon to Ukrainian goods are suspended. The liberalizaon of trade relaons also implies that Ukraine will abide by European rules of origin and related procedures under the Associaon Agreement, will refrain from any new restricons on imports from the EU, and will ensure respect for demo- crac principles, human rights and fundamental freedoms, the rule of . rights, fight against corrupon. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 79 Taxaon Ukrainian legislaon regarding taxaon and other operaonal issues connues to evolve as a result of the transion economy. Legislaon and regulaons are not always clearly defined and their interpretaon depends on the views of local, regional and oth- er government authories. Cases of conflicng opinions are not unusual. Ukraine has a corporate income tax system, under which taxable profit of companies (i.e. financial profit adjusted by tax differ- ences) is subject to 18% tax rate. Transfer pricing rules apply to transacons with related non-residents and “low-tax” non-residents (i.e. non-residents, taxed do- mescally at a significantly lower corporate income tax rate than the Ukrainian tax rate of 18%), subject to a company’s minimum income threshold of UAH 150 million and transacons volume threshold with each individual non- resident of UAH 10 million. Domesc supplies of goods and services, as well as imports of goods and certain services, are subject to value added tax at a standard rate of 20%, except for supplies of wheat and rye (meslin), barley, corn, soybeans, colza or rapeseed, sunflower. They are taxed at a rate of 14%. A reduced tax rate of 0% applies to the export of goods from Ukraine. Payment of passive income (i.e. interest, royales, dividends etc.) to non-residents of Ukraine is subject to withholding tax at a standard 15% rate unless double tax treaes or the Tax Code of Ukraine provide another tax rate. Agrarian producers of raw materials are allowed to apply a simplified tax system, given that at least 75% of their income is aributable to sales of agricultural raw materials produced by such company. Under the simplified tax system, companies are subject to a fixed tax, which depends on the type, locaon and monetary value of farmland used by such companies. Changes were made to the Tax Code and from January 1, 2022, egg producers, in parcular, ceased to fall under this category. On July 1, 2021, the Law on the abolion of the moratorium on the sale of agricultural land came into force, but it provides for a number of restricons related to the maximum size of land that can be sold to an individual buyer, restricons on the sale of land in certain territories and certain categories of buyers. Aer a full-scale Russian invasion of Ukraine on February 24, 2022, the sale was suspended, but at the end of May, the sale resumed. The Group's operaons and financial posion will connue to be affected by polical developments in Ukraine, including the appli- caon of current and future legislaon and tax regulaons. Management believes that the Group has complied with all applica- ble tax laws and has paid or accrued all applicable taxes. Legal issues The Group is involved in ligaons and other claims that are in the ordinary course of its business acvies. As at 31 December 2021, Group is involved in ligaons in the amount of USD 2 394 thousand (2020: USD 1 518 thousand). Management believes that based on the past history of court resoluons of similar lawsuits by the Group, it is unlikely that a significant selement will arise out of such lawsuits and therefore no respecve provision is required in the Group’s financial statements as of the reporng date. 31. F The Group manages its capital to ensure that enes in the Group will be able to connue as a going concern while maximizing the return to shareholders through a combinaon of debt and equity capital. The management of the Group reviews the capital structure on a regular basis. Based on the results of this review, the Group takes steps to balance its overall capital structure through the issue of new debt or the redempon of exisng debt. The capital structure of the Group consists of debt, which includes the borrowings and cash and cash equivalents disclosed in Notes 24 and 26 respecvely, and equity aributable to the equity holders of the parent, comprising issued capital, share premi- um, reserves and retained earnings. Gearing rao The Group’s management reviews quarterly the capital structure of the Group. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. 31 December 2021 31 December 2020 Debt liabilies 12 881 10 765 Cash and cash equivalents and deposits (2 435) (1 626) Net debt 10 446 9 139 Equity** 109 889 104 404 Gearing rao 9,5% 8,8% * Debts include short-term and long-term borrowings. ** Equity includes the share capital, share premium, retained earnings and foreign currency translaon reserve. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 80 Financial risk management The main risks inherent to the Group’s operaons are those related to credit risk exposures, liquidity risk, market movements in currency rates and interest rates and potenal negave impact of livestock diseases. Credit risk The Group is exposed to credit risk which is the risk that one party to a financial instrument will fail to discharge an obligaon and cause the other party to incur a financial loss. The Group's exposure to credit risk regarding trade accounts receivable is primarily dependent on specific characteriscs of each client. The Group's policy for credit risk management provides systemac work with debtors, which includes: analysis of solvency, determinaon of maximum amount of risk related to one customer or a group of customers and control over meliness of debt repayment. The majority of Group's clients are longstanding clients, there were no significant losses during 2021 and 2020 resulng from non-fulfillment of obligaons by clients. Concentraon of credit risk on trade accounts receivable is characterized by the following indicators: For the year ended 31 December 2021 USD 50 913 thousand or 38% of Group's sales revenue is related to sales transacons, realized with 5 major cus- tomers of the Group. As at 31 December 2021 USD 5 844 thousand or 44% of trade accounts receivable relates to 5 major debtors. The credit quality of the gross trade receivables from related and third pares was as follows: As at 31 December 2021 and 2020 the ageing of trade account receivables that were not impaired was as follows: Liquidity risk Liquidity risk is the risk of the Group's failure to fulfill its financial obligaons at the date of maturity. The Group's approach to li- quidity management is to ensure, to the extent possible, permanent availability of sufficient liquidity for the Group to fulfill its fi- nancial obligaons in due me (both in normal condions and in non-standard situaons), by avoiding unacceptable losses or the risk of damage to the reputaon of the Group. In accordance with plans of the Group, its working capital needs are sasfied by cash flows from operang acvies, as well as by use of loans if cash flows from operang acvies are insufficient for liabilies to be seled. The table below represents the expected maturity of components of working capital: 31 December 2021 31 December 2020 Fully performing 12 392 11 502 Past due but not impaired 1 013 1 231 Impaired 145 261 Total trade receivables (gross) 13 550 12 994 % 31 December 2021 31 December 2020 0-30 days - 12 520 11 411 31-90 days - 778 1 106 91-180 days - 70 171 181-360 days 0% 37 45 more than 360 days 100% Total 13 405 12 733 31 December 2021 Carrying value Contractu- al cash flows Less than 3 months 3-6 months 6-12 months Over 1 year Non-derivave financial liabilies: Trade and other payables 14 391 14 391 13 528 863 - - Current interest-bearing loans and other finan- cial liabilies 5 740 5 740 - 5 133 607 - Non-current interest-bearing loans and other financial liabilies 7 141 7 141 - 7 141 Total 27 272 27 272 13 528 5 996 7 141 31 December 2020 Carrying value Contractu- al cash flows Less than 3 months 3-6 months 6-12 months Over 1 year Non-derivave financial liabilies: Trade and other payables 12 379 12 379 11 582 797 - Current interest-bearing loans and other finan- cial liabilies 5 593 5 593 - 3 013 2 580 - Non-current interest-bearing loans and other financial liabilies 5 172 5 172 - 5 172 Total 23 144 23 144 11 582 3 810 2 580 5 172 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 81 Currency risk Currency risk – Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group undertakes certain transacons denominated in foreign currencies. The Group does not use any derivaves to manage foreign currency risk exposure, at the same me the management of the Group sets limits on the level of exposure by currencies. Exposure to foreign currency risk The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilies as of 31 December 2021 and 2020 were as follows: This sensivity rate represents the management’s assessment of the reasonably possible change in foreign exchange rates. The sensivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translaon at the period end for expected change in foreign currency rates. Effect in USD thousand: Increase in curren- cy rate against UAH Effect on profit before tax 31 December 2021 USD 15% 191 EUR 15% (2 040) 31 December 2020 USD 15% 233 EUR 15% (1 497) 31 December 2021 PLN AED USD EUR UAH Total (in conversion to USD thousand) Assets Cash and cash equivalents 53 346 590 1 446 2 435 Trade receivables 1 196 1 235 10 974 13 405 Liabilies Current interest-bearing loans and other financial liabilies 5 740) (5 740) Non-current interest-bearing loans and other financial liabili- es 7 141) (7 141) Trade accounts payable (266) 2 478) (9 629) (12 373) Other payables (67) (31) (98) Net exposure to foreign currency risk 53 1 276 (13 601) 2 760 (9 512) 31 December 2020 PLN AED USD EUR UAH Total (in conversion to USD thousand) Assets Cash and cash equivalents 47 259 791 529 1 626 Trade receivables 1 660 1 830 9 243 12 733 Liabilies Current interest-bearing loans and other financial liabilies 5 569) (24) (5 593) Non-current interest-bearing loans and other financial liabili- es 5 172) (5 172) Trade accounts payable (368) 1 790) (8 403) (10 561) Other payables (72) (15) (87) Net exposure to foreign currency risk 47 1 551 9 982) 1 330 (7 054) 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 82 The effect of foreign currency sensivity on shareholders’ equity is equal to that on profit or loss. Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect the value of the financial instruments. The ma- jor part of the Group’s borrowings bear variable interest rates which are linked to EURIBOR. Other borrowings are presented at fixed interest rates. The below details the Group’s sensivity to increase or decrease of floang rate by 1%. The analysis was applied to interest bear- ing liabilies (bank borrowings under facility agreements) based on the assumpon that the amount of liability outstanding as of the balance sheet date was outstanding for the whole year. The effect of interest rate sensivity on shareholders’ equity is equal to that on profit or loss. Livestock diseases risk The Group’s agro-industrial business is subject to risks of outbreaks of various diseases. The Group faces the risk of outbreaks of diseases, which are highly contagious and destrucve to suscepble livestock, such as avian influenza or bird flu for its poultry op- eraons. The diseases could result in mortality losses. Disease control measures were adopted by the Group to minimize and man- age this risk. The Group’s management is sasfi ed with its current exisng risk management and quality control processes are effecve and sufficient to prevent any outbreak of livestock diseases and related losses. 32. F Esmated fair value disclosure of financial instruments is made in accordance with the requirements of Internaonal Financial Reporng Standard 7 “Financial Instruments: Disclosure”. Fair value is defined as the amount at which the instrument could be exchanged in a current transacon between knowledgeable willing pares in an arm’s length transacon, other than in forced or liquidaon sale. As no readily available market exists for a large part of the Group’s financial instruments, judgment is necessary in arriving at fair value, based on current economic condions and specific risks aributable to the instrument. The esmates pre- sented herein are not necessarily indicave of the amounts the Group could realize in a market exchange from the sale of its full holdings of a parcular instrument. The Group uses the following hierarchy for determining the fair value of financial instruments: Level 1 ("L1") - quoted (unadjusted) prices in acve markets for idencal assets or liabilies; Level 2 ("L2") - other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3 ("L3") - techniques which use inputs that have a significant effect on the recorded fair value that are not based on observ- able market data. The Group does not acquire, hold or issue derivave fi nancial instruments for trading purposes. 31 December 2021 31 December 2020 EURIBOR EURIBOR Profit/(loss) 6/(6) 26/(26) 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes on pages 45-83 form an integral part of these financial statements 2021 ANNUAL REPORT 83 The following table presents the classificaon, subsequent measurement, carrying values and fair values of the Group's financial assets: The following methods and assumpons were used to esmate the fair values: a) The Group's short-term financial instruments, comprising trade and other receivables, current interest-bearing loans and borrowings, trade and other payables are carried at amorzed cost which, due to their short term nature, approximates their fair value. b) The fair values of other financial assets and financial liabilies (excluding those described above) are determined in accord- ance with generally accepted pricing models based on discounted cash flow analysis. c) Fair value of available-for-sale financial assets is derived from quoted market prices in acve markets, if available. d) Fair value of unquoted available-for-sale financial assets is esmated using appropriate valuaon techniques. 33. S On 24 February 2022, Russian forces commenced a military invasion of Ukraine resulng in a fullscale war across the Ukrainian state. Many Ukrainian cies suffered substanal damage as a consequence of the connuous missile and arllery strikes, resulng in thousands of deaths and injuries, including among civilians. As a result of hoslies, some areas of Kharkov, Zaporozhye, Kher- son, Donetsk and Lugansk regions were under occupaon; The Black Sea ports in Ukraine have suspended their work, which tem- porarily made exports through sea terminals unavailable. As of the date of this report, the Group connues to operate. The management of the Group controls all its operaons. Office staff work remotely, while producon staff perform their dues at their sites. About 40 employees of the Group were mobilized into the Armed Forces of Ukraine. At the end of the 1st quarter of 2022, the company recognized a loss from the revaluaon of biological assets in the amount of $17.5 million, which is associated with a revision of the valuaon approach, as well as the events of February 24. The Group has determined that the above events are not adjusng subsequent events. Accordingly, the financial posion and re- sults of operaons for the year ended 31 December 2021 have not been adjusted for their impact. The duraon and consequences of the war in Ukraine are currently unclear. It is not possible to reliably esmate the duraon and severity of these consequences, as well as their impact on the financial posion and results of the Group in future periods. Aer considering all available evidence and the acons taken and planned by the Group to offset the adverse impact of the ongoing military intervenon on the business up to the date these financial statements are authorized for issue, management has concluded that it is appropriate to prepare the financial statements on a going concern basis, recognizing that this material uncertainty in it, as indicated in Note 2. Based on Resoluon 3 of the Annual General Meeng held on July 16, 2021, Mr Sergiy Karpenko resigned from the posion of the non-execuve director of Ovostar Union PCL on January 1, 2022. Mr Markiyan Markevich became a non- execuve director on the same date. 31 December 2021 31 December 2020 Subsequent measurement Carry- ing value Fair value Carry- ing value Fair value Financial assets: Trade and other receivables (a) Amorzed cost 15 471 15 471 15 865 15 865 Cash and cash equivalents 2 435 2 435 1 626 1 626 Total 17 906 17 906 17 491 17 491 Financial liabilies: Current interest-bearing loans and borrowings (a) Amorzed cost 5 740 5 740 5 593 5 593 Non-current interest-bearing loans and borrowings (b) Amorzed cost 7 141 7 141 5 172 5 172 Trade and other payables (current) (a) Amorzed cost 14 391 14 391 12 379 12 379 Total 27 272 27 272 23 144 23 144 OVOSTAR UNION PUBLIC COMPANY LIMITED COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 3 INDIVIDUAL FINANCIAL STATEMENTS 2021 ANNUAL REPORT 86 S STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 ( IN USD THOUSAND, UNLESS OTHERWISE STATED) Note 12 months ended 12 months ended 31 December 2021 31 December 2020 Dividend income 4 525 1 980 Administrave expenses (232) (203) Operang profit 4 293 1 777 Finance costs (181) (635) Finance income 370 35 Profit before tax 4 482 1 177 Income tax expense (20) (6) Profit for the period 4 462 1 171 3 INDIVIDUAL FINANCIAL STATEMENTS 2021 ANNUAL REPORT 87 S STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2021 (IN USD THOUSAND, UNLESS OTHERWISE STATED) Note 31 December 2021 31 December 2020 Assets Non-current assets Investment in subsidiaries 46 097 46 097 Loan receivable 10 5 835 Total non-current assets 51 932 46 097 Current assets Cash and cash equivalents 12 14 Prepayments to suppliers Other accounts receivables 11 11 3 395 Total current assets 26 3 414 Total assets 51 958 49 511 Equity and liabilies Equity Issued capital 13 68 74 Share premium 14 30 933 30 933 Foreign currency translaon reserve 17 11 Retained earnings 13 357 12 186 Result for the period 4 462 1 171 Total equity 48 837 44 375 Non-current liabilies Interest-bearing loans and other financial liabilies 15 2 469 Total non-current liabilies 2 469 Current liabilies Trade and other payables 16 161 111 Interest-bearing loans and other financial liabilies 15 2 960 2 556 Total current liabilies 3 121 2 667 Total liabilies 3 121 5 136 Total equity and liabilies 51 958 49 511 3 INDIVIDUAL FINANCIAL STATEMENTS 2021 ANNUAL REPORT 88 S STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 (IN USD THOUSAND, UNLESS OTHERWISE STATED) Issued capital Shar e premi- um Foreign currency translao n reserve Re- tained earn- ings Total equity As at 31 December 2019 78 30 933 12 186 43 204 Profit for the period 1 171 1 171 Exchange rate differences (4) As at 31 December 2020 74 30 933 11 13 357 44 375 Profit for the period 4 462 4 462 Exchange rate differences (6) As at 31 December 2021 68 30 933 17 17 819 48 837 3 INDIVIDUAL FINANCIAL STATEMENTS 2021 ANNUAL REPORT 89 S STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 (IN USD THOUSAND, UNLESS OTHERWISE STATED) 12 months ended 12 months ended 31 December 2021 31 December 2020 Cash flows from operang acvies Profit before tax 4 482 1 177 Non-cash adjustment to reconcile profit before tax to net cash flows: Dividend income (4 525) (1 980) Interest income (370) (35) Interest expense 181 635 Working capital adjustments: Decrease/(Increase) in receivable balances (3 018) 1 519 Decrease/(Increase) in prepayments to suppliers (2) (5) Decrease/(Increase) in payable balances 38 (61) Cash used in operaons Dividends received 5 135 1 980 Income tax paid (5) (9) Net cash flows from operang acvies 1 916 3 221 Cash flows from invesng acvies Payment for purchase of investment in subsidiaries Interest received 35 Net cash flows used in invesng acvies 35 Cash flows from financing acvies Proceeds from borrowings 397 1 810 Repayment of borrowings (2 275) (4 936) Interest paid (43) (161) Net cash flows used in financing acvies (1 921) (3 287) Net (decrease)/increase in cash and cash equivalents (5) (31) Cash and cash equivalents at 01 January 14 45 Cash and cash equivalents at 31 December 14 3 NOTES TO INDIVIDUAL FINANCIAL STATEMENTS Notes on pages 90-95 form an integral part of these financial statements 2021 ANNUAL REPORT 90 1. GENERAL Ovostar Union Public Company Limited (referred to herein as the “Company”) is a public limited company incorporated in the Netherlands in 2011 and re-domiciled to Cyprus in 2018. Ovostar Union PCL was formed to serve as the ulmate holding company of LLC “Ovostar Union” and its subsidiaries. Hereinaer, “Ovostar Union” and its subsidiaries are referred to as the “Ovostar Union Group” or the “Group”. The registered office and principal place of business of the Company is Ierotheou, 22, 4th floor, Strovolos, 2028 Nicosia, Cyprus. Principal acvies of the Group include producon and distribuon of shell eggs and egg products. The largest share- holder of the Company is Prime One Capital Ltd., Cyprus. Its principal acvity is the holding of ownership interests in its sub- sidiary and strategic management. Use of esmates The preparaon of financial statements under IFRS requires esmates to be used and assumpons to be made that affect the amounts shown in these financial statements. These esmates assume the operaon is a going concern and are drawn up on the basis of the informaon available at the me. Esmates may be revised if the circumstances on which they were based change or if new informaon becomes available. Actual results may be different from these esmates. Basis of preparaon The financial statements for the year ended 31 December 2021 have been prepared using the IFRS. The IFRS individual financial statements were approved by the Board of Directors on 30 June 2022 For informaon on the companies belonging to Ovostar Union Group please refer to Note 1 of the Consolidated financial statements. Going concern For going concern, see note 2(2.2) of the consolidated financial statements 2. SIGNIFICANT ACCOUNTING POLICIES Investment in subsidiaries Investment in subsidiaries is measured at cost less provision for impairment in value, which is recognised as an expense in the period in which the impairment is idenfied. 3. FUNCTIONAL AND PRESENTATION CURRENCY The funconal currency of the Company is U.S. dollar (USD). The financial statements are presented in the company’s funconal currency, that is, U.S. dollar (USD). 4. DIVIDEND INCOME 12 months ended 12 months ended 31 December 2021 31 December 2020 Dividend income from Internaonal Food Trade 230 Dividend income from OAE Food Trade FZE 4 525 1 750 Total 4 525 1 980 3 NOTES TO INDIVIDUAL FINANCIAL STATEMENTS Notes on pages 90-95 form an integral part of these financial statements 2021 ANNUAL REPORT 91 5. ADMINISTRATIVE EXPENSES 6. FINANCE COSTS 7. FINANCE INCOME 8. CORPORATE INCOME TAX Tax recognized in profit or loss: The taxaon on the Company's profit/(loss) before taxaon differs from theorecal amount that would arise using the applicable tax rates as follows: 12 months ended 12 months ended 31 December 2021 31 December 2020 Wages, salaries and social security costs 29 23 Legal, audit and other professional fees 181 149 Service charge expenses 22 26 Other expenses Total 232 203 12 months ended 12 months ended 31 December 2021 31 December 2020 Interest on debts and borrowings 181 309 Foreign currency exchange 326 Total 181 635 12 months ended 12 months ended 31 December 2021 31 December 2020 Interest income 45 19 Foreign currency exchange 325 Other financial income 16 Total 370 35 12 months ended 12 months ended 31 December 2021 31 December 2020 Corporaon tax 19 Corporaon tax – prior years Charge for the year 20 3 NOTES TO INDIVIDUAL FINANCIAL STATEMENTS Notes on pages 90-95 form an integral part of these financial statements 2021 ANNUAL REPORT 92 9. INVESTMENT IN SUBSIDIARIES 10. LOAN RECEIVABLE Loan receivable as of December 31, 2021 consist of a loan and interest accrued by Yasensvit LLC, issued at 1% per annum, with a maturity date of May 2029 in USD. 11. OTHER ACCOUNTS RECEIVABLES 12. CASH AND CASH EQUIVALENTS The Company’s cash balances are available upon demand. 13. ISSUED CAPITAL The authorized share capital amounts to EUR 225,000 divided into 22 500 000 ordinary shares of EUR 0.01 nominal value each. During 2011, 6 000 000 shares have been issued. Using an exchange rate of 1 EUR = 1.198 USD. For the movement schedule of issued capital, share premium, foreign currency translaon reserve and profit for the year please refer to the specificaon of the Consolidated statement of changes in equity ncluded in the Consolidated financial statements. Legal reserve subsidiary as at 31 December 2021 was in the amount of USD 68 064 (in 2020: USD 73 582). 12 months ended 12 months ended 31 December 2021 31 December 2020 Profit before tax 4 482 1 177 Applicable tax rates 12,50% 12,50% Tax calculated at the applicable tax rates 560 147 Tax effect of expenses not deducble for tax purposes 92 176 Tax effect of allowances and income not subject to tax (635) (317) 10% addional charge Charge for the year 19 31 December 2021 31 December 2020 LLC “Ovostar Union” 45 345 45 345 GALLUSMAN SIA 344 344 LLC “Yasensvit” 313 313 Ovostar Europe LLC 63 63 OAE Food Trade FZE 28 28 EPEX SIA Internaonal Food Trade Limited Total 46 097 46 097 31 December 2021 31 December 2020 LLC Yasensvit 5 835 Total 5 835 31 December 2021 31 December 2020 Internaonal Food Trade Limited 19 OAE Food Trade FZE 11 602 LLC Yasensvit 2 774 Total 11 3 395 3 NOTES TO INDIVIDUAL FINANCIAL STATEMENTS Notes on pages 90-95 form an integral part of these financial statements 2021 ANNUAL REPORT 93 14. SHARE PREMIUM As has been menoned previously, in June 2011 the Group’s shares have been placed on WSE. As a result of the transac- on, USD 33 048 thousand was raised while the IPO costs amounted to USD 2 115 thousand. In these financial statements funds raised as a result of IPO are reflected in share premium as at 31 December 2011. For the year ended 31 December 2021 and 2020, there were no movements in share premium. 15. LOANS AND BORROWINGS i) As at 31 December 2021 and 2020 loan and borrowings comprised loans received from AKA Ausfuhrkredit-Gesellscha mbH. AKA Ausfuhrkredit-Gesellscha mbH loan are guaranteed by subsidiaries and has been covered of Euler Hermes AG. For detail informaon about loans and borrowings refer to Note 24 in the Consolidated financial statements. As part of loans and borrowings, there is a loan received from a related party Prime One Capital Limited. 16. TRADE AND OTHER PAYABLES 17. DIRECTORS The Company is managed by the Board of Directors which consists of four members: one Execuve Director and three Non-Execuve directors. The Board of Directors as at 31 December 2021 comprised: Currency Effecve inter- est rate, % Maturity 31 December 2021 31 Decem- ber 2021 Current interest-bearing loans and other financial liabilies Landesbank Berlin AG/AKA Ausfuhrkredit- Gesellscha mbH EUR 2.25%+ EURI- BOR (6m) 30.06.2022 607 2 556 Prime One Capital Limited EUR 3,00% 10.07.2022 2 353 Total current interest-bearing loans and other financial liabilies 2 960 2 556 Non-current interest-bearing loans and other financial liabilies Prime One Capital Limited EUR 3,00% 10.07.2022 2 469 Total non-current interest-bearing loans and other financial liabilies 2 469 Total interest-bearing loans and other financial liabilies 2 960 5 025 31 December 2021 31 December 2020 Baker Tilly Ukraine, LLC 50 25 Baker Tilly Klitou & Partners Ltd 35 17 Ovostar Europe LLC 57 61 Other 19 Total 161 111 Borys Bielikov Chief Execuve Officer, (non-independent) Vitalii Veresenko Chairman of the Board, Non-Execuve Director (non-independent) Sergii Karpenko Non-Execuve Director (independent) Karen Arshakyan Non-Execuve Director (independent) 3 NOTES TO INDIVIDUAL FINANCIAL STATEMENTS Notes on pages 90-95 form an integral part of these financial statements 2021 ANNUAL REPORT 94 18. AUDIT FEE Audit fees disclosed in the financial statements include the fees for professional services rendered by Baker Tilly Ukraine and Baker Tilly Klitou & Partners Ltd and relate to the audit of the Company’s Consolidated and Company’s fi- nancial statements and its subsidiaries. 19. RELATED PARTY DISCLOSURES As at 31 December 2021 and 2020 other receivables and payables from related pares are presented as follows: 31 December 2021 31 December 2020 Baker Tilly Ukraine: Audit and review of financial statements 50 49 Baker Tilly Klitou & Partners Ltd Audit fees 36 34 Total 86 83 31 December 2021 31 December 2020 (A). Companies which acvies are significantly influenced by the Beneficial Owners: Other non-current assets LLC Yasensvit 5 835 Other accounts receivables to related pares OAE Food Trade FZE 11 602 LLC Yasensvit 2 774 Internaonal Food Trade Limited 19 Total 5 846 3 395 Trade and other payables to related pares Ovostar Europe LLC 57 61 Total 57 61 12 months ended 12 months ended 31 December 2021 31 December 2020 (B). Companies which acvies are significantly influenced by the Beneficial Owners: Interest on debts and borrowings: Prime One Capital Limited 71 41 Total 71 41 Interest income: LLC Yasensvit 44 19 Total 186 101 3 NOTES TO INDIVIDUAL FINANCIAL STATEMENTS Notes on pages 90-95 form an integral part of these financial statements 2021 ANNUAL REPORT 95 20. SUBSEQUENT EVENTS For events subsequent to the reporng date refer to note 33 of the consolidated financial statements Borys Bielikov Chief Execuve Officer, Execuve Director ………………………………. V Vitalii Veresenko Chairman of the Board, Non-execuve Director ………………………………. Karen Arshakyan Head of Audit Commiee, Non-execuve Director Vitalii Sapozhnik Chief Financial Officer G bakertilly Corner C. Hatzopoulou & 30 Griva Digheni Avenue 1066, Nicosia P.O Box 27783, 2433 Nicosia, Cyprus T: +357 22 458500 F: +357 22 751648 Independent Auditor's Report [email protected] www.bakertilly.com.cy To the Members of Ovostar Union Public Company Limited Report on the Audit of the Consolidated and Individual Financial Statements Opinion We have audited the consolidated financial statements of Ovostar Union Public Company Limited (the parent Company, herein referred as the "Campany") and its subsidiaries (the "Group"), and the individual financial statements of Ovostar Union Public Company Limited (the parent Company, herein referred as the "Company"), which are presented in pages 39 to 95 and comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and the individual statement of financial position as at 31 December 2021, and the individual statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the individual financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated and individual financial statements give a true and fair view of the consolidated and individual financial position of the Group as at 31 December 2021, and of its consolidated and individual financial performance and its consolidated and individual cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financiat Statements" section of our report. We remained independent of the Group throughout the period of appointment in accordance with the "International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants" {including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Cyprus, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 2.2 and Note 33 of the consolidated financia! statements which refer to the ongoing Russian military invasion of Ukraine since 24 February 2022. Due to conditions that exist during the military invasion, a material uncertainty exists which may cast significant doubt about the Group's ability to continue as a going concern. Our opinion is net modified in respect of this matter. ADVISORY - ASSURANCE - TAX 96 Baker Tilly Klitou & Partners Ltd trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. 96 Independent Auditor's Report (continued) G ba kertilly To the Members of Ovostar Union Public Company Limited Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and individual financial statements of the current period. These matters were addressed in the context of our audit in the consolidated and individual financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matter How the matter was addressed in our audit Biological Assets Valuation The Group's biological assets are measured at fair value less costs to sell. As at 31 December 2021 the biological assets in the consolidated financial statements are presented at a carrying value of USD 60.538.006 (2020: USD 51.372.000). We refer to Note 5 and 17 in the consolidated financial statements for the related disclosures. The Group estimates the fair value of the biological assets based on the discounted cash flow technique. The Group determines the fair value internally, applying inputs from mostly internal sources which require estimates and assumptions, including the future value of the produced eggs, the costs to maintain the laying hens until the end of their production period and the discount rate. Due to the level of judgment and complexity involved in the valuation of biological assets, as well as the significance of biological assets to the Group's financial position, this is considered to be a key audit matter. We obtained an understanding of management's biolagical assets' valuation process and evaluated the design and tested the operating effectiveness of internal controls related to biological assets. Our audit procedures over the valuation of biological assets included, among others: ¢ Testing of the design of, and validity of the input data used in, the valuation model of biological assets; * Testing the completeness and accuracy of the data used through recalculation and testing of inputs; « Assessment of the methodology adopted by management for the valuation; e Assessment of the key valuation assumptions used in the mode] against prevailing market conditions; « Assessment of the assumptions used to derive to the discount rate applied in the valuation model; e Testing of the mathematical accuracy of the model used for valuation; e Assessment of the adequacy and appropriateness of disclosures for compliance with the applicable accounting standards. Reporting on other information The Board of Directors is responsible for the other information. The other information comprises the information included in the Management Report and the Corporate Governance Statement, but does not include the consolidated and individual financial statements and our auditor's report thereon. Our opinion on the consolidated and individual financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated and individual financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information Is materially inconsistent with the consolidated and individual financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 97 97 Independent Auditor's Report (continued) G ba kerti lly To the Members of Ovostar Union Public Company Limited Responsibilities of the Board of Directors and those charged with governance for the Consolidated and Individual Financial Statements The Board of Directors is responsible for the preparation of consolidated and individual financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated and individual financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and individual financial statements, the Board of Directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group's financial reporting process. Auditor's Responsibilities for the Audit of the Consolidated and Individuai Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and individual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and individual financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We alse: ® Identify and assess the risks of material misstatement of the consolidated and individual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. e Obtain an understanding of Internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. ° Conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. Tf we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and individual financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. . Evaluate the overall presentation, structure and content of the consolidated and individual financial statements, including the disclosures, and whether the consolidated and individual financial Statements represent the underlying transactions and events in a manner that achieves a true and fair view. 97 98 Independent Auditor's Report (continued) G bakerti lly To the Members of Ovostar Union Public Company Limited e Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated and individual financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit, We also provide those charges with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated and individual financial statements of the current period and are therefore the key audit matters. Report on Other Legal and Regulatory Requirements Pursuant to the requirements of Article 10(2} of the EU Regulation 537/2014 we provide the following information in our Independent Auditer's Report, which is required in addition to the requirements of International Standards on Auditing. Appointment of the Auditor and Period of Engagement We were first appointed as auditors of the Group on 30 November 2018 by the General Meeting of the Company's members to audit its financial statements for the year ended 31 December 2018, Our appointment has been renewed annually by resolution at the shareholder's Annual General Meeting representing a total period of uninterrupted engagement appointment of 4 years. Consistency of the Additional Report to the Audit Committee We confirm that our audit opinion on the consolidated and individual financial statements expressed in this report is consistent with the additional report to the Audit Committee of the Company, which we issued on O1 July 2022 in accordance with Article 11 of the EU Regulation 537/2014, Provision of Non-audit Services We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by us to the Group and which have net been disclosed in the consolidated and individual financial statements or the management report. European Single Electronic Format The Board of Directors of Ovostar Union Public Company Limited Is responsible for preparing and submitting the consolidated and the individual financial statements for the year ended 31 December 2021 in accordance with the requirements set out in the EU Delegated Regulation 2019/815 of 17 December 2018 of the European Commission (the "ESEF Regulation'). Our responsibility is to examine the digital files prepared by the Board of Directors of Ovostar Union Public Company Limited. According with the Audit Guidelines issued by the Institute of Certified Public Accountants of Cyprus (the "Audit Guidelines"), we are required to plan and perform our audit procedures in order to examine whether the content of the consolidated and the individual financial statements included in the digital files correspond to the consolidated and the individual financial statements we have audited, and whether the digital files have been prepared in all material respects, in accordance with the requirements of the ESEF Regulation. 97 99 Independent Auditor's Report (continued) G bakerti lly To the Members of Ovostar Union Public Company Limited The consolidated and the individual financial statements for the year ended 31 December 2021 in accordance with the ESEF Regulation have not yet been submitted to us at the date of this report. A separate report will be issued accordingly. If the digital files will not be submitted to us within a reasonable timeframe, we will be required to adjust this report in order to state this. Other Legal Requirements Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: ° In our opinion, based on the work undertaken in the course of our audit, the management report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information given ts consistent with the financial statements. ° In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the management report. We have nothing to report in this respect. ® In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance statement in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and which is included as a specific section of the management report, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap, 113, and is consistent with the financial statements. * In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information referred to in subparagraphs (i), (il), (iii), (vi) and (vii) of paragra ph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect. Other Matter This report, inclu in accordalice wi r no}pther ose orto g the opinion, has been prepared for and only for the Company's members as a body Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors Law of 2017 . We do not, in giving this opinion, accept or assume responsibility for any other riperson to whose knowledge this report may come to. ha endagémen e audit resulting in this independent auditor's report is Maria Kaffa. Maria Kaffa Certified Public Accountant and Registered Auditor for and on behalf of Baker Tilly Klitou and Partners Ltd Certified Public Accountants and Registered Auditors Corner C Hatzopoulou & Griva Digheni 30 Avenue 1066 Nicosia Cyprus Nicosia, 01 July 2022 97 100 F- All forward-looking statements contained in this annual report with respect to our future financial and operaonal performance and posion are, unless otherwise stated, based on the beliefs, expec- taons, projecons and the esmates of our management repre- senng their judgment as at the dates on which the statements have been made. Forward-looking statements are generally iden- fiable by the use of the words “may”, “will”, “should”, “plan”, “forecast”, “expect”, “ancipate”, “esmate”, “believe”, “intend”, “project”, “goal” or “target” or the negave of these words or oth- er variaons on these words or comparable terminology. Our actu- al operaonal and financial results or the same of our industry in- volve a number of known and unknown risks, uncertaines and other factors and they are not guaranteed to be similar to the for- ward-looking statements, although our management makes all effort to make forward-looking statements as accurate as possible. We do not undertake publicly to update or revise any forward- looking statement that may be made herein, whether as a result of new informaon, future events or otherwise. Legal address: Ovostar Union PCL 22 Ierotheou Street 2028 Nicosia , Cyprus Correspondence address: 34 Petropavlivska street 04086 Kyiv, Ukraine For Investor Relaons inquiries: Investor Relaons Department Anna Tews [email protected] Cell: +38 050 439 05 05 Landline: +38 044 354 29 60
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