AC S.A. — Annual Report 2019

Apr 30, 2020

IMC S.A. and its subsidiaries

Consolidated financial statements For the year ended 31 December 2019

and Report of the réviseur d'entreprises agréé

IMC S.A. AND ITS SUBSIDIARIES Consolidated financial statements

CONTENTS

	Pages
Statement of Management responsibilities	3
Management statement	4
Single management report	5
Corporate governance statement	20
Report of the Réviseur d'entreprises agréé	25
Consolidated financial statements For the year ended 31 December 2019
Consolidated statement of comprehensive income	31
Consolidated statement of financial position	32
Consolidated statement of changes in equity	33
Consolidated statement of cash flows	34
Notes to the Consolidated financial statements	36

Statement of Management responsibilities for preparation and approval of Consolidated financial statements for the year ended 31 December 2019

Management of the Group of companies "IMC" (the Group) is responsible for preparing the Consolidated financial statements which reflect in all material aspects the financial position of the Group as at 31 December 2019, as well as the results of its activities, cash flows and changes in equity for the year then ended in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

In preparing Consolidated financial statements the Group's Management is responsible for:

• selecting appropriate accounting policies and their consistent application;

• making reasonable measurement and calculation;

• following principles of IFRS as adopted by the European Union or disclosing all considerable deviations from IFRS in the notes to Consolidated financial statements;

• preparing Consolidated financial statements of the Group on the going concern basis, except for the cases when such assumption is not appropriate;

• accounting and disclosing in the Consolidated financial statements all the relations and transactions between related parties;

• accounting and disclosing in the Consolidated financial statements all subsequent events that would result in an adjustment or a disclosure;

• disclosing all claims related to previous or potential legal proceedings;

• disclosing in the Consolidated financial statements all the loans or guarantees to the Management.

The Group's Management is also responsible for:

• development, implementation and control over effective and reliable internal control system in the Group;

• keeping accounting records in compliance with the legislation and accounting standards of the respective country of the Group's registration;

• taking reasonable steps within its cognizance to safeguard the assets of the Group;

• detecting and preventing fraud and other irregularities.

These Consolidated financial statements as at 31 December 2019 prepared in compliance with IFRS as approved by the European Union are approved on behalf of the Group's Management on 30 April 2020.

On behalf of the Management:

Chief Executive Officer	ALEX LISSITSA	__signed______
Chief Financial Officer	DMYTRO MARTYNIUK	__signed______

Management statement

This statement is provided to confirm that, to the best of our knowledge, the Consolidated financial statements for the year ended 31 December 2019, and the comparable information, have been prepared in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union and give a true, fair and clear view of Group's assets, financial standing and net results, and that the directors' report on the operations truly reflects the development, achievements and position of the Group, including a description of the key risk factors and threats.

On behalf of the Management:

Chief Executive Officer	ALEX LISSITSA	__signed______
Chief Financial Officer	DMYTRO MARTYNIUK	__signed______

Single management report

• 1. Business and General Conditions
• 1. Operational and Financial Results
• 1. Risk report
• 1. Selected Financial Data

1. Business and General Conditions

Macro-economic development

World economy

Wheat

According to USDA report, March 2020, in 2019/20 total world wheat production and ending stocks reached its record level for last five consecutive years. In comparison with MY 2018/19 world wheat production grew by 4.5% and ending stocks increased by 3.0%. This had negative effect on prices which decreased by 5-7% during harvesting period vs. previous year (July 2019 vs. July 2018) and were approximately 10% lower at the end of the year (December 2019 vs. December 2018).

in ths tonnes

Wheat	2018/19	2019/20	2019/20 vs.2018/19
World Production	731 460	764 493	4,5%
World Consumption	737 050	754 926	2,4%
World Ending Stocks	278 097	287 138	3,0%

Corn

According to USDA report, March 2020, in 2019/20 total world corn production decreased insignificantly (-1%) while ending stocks went down third year in a row and reduced vs. MY 2018/19 by 7.3%. Due to such trends average corn prices in 2019 marginally but upped (1-2%) compared to 2018.

in ths tonnes

Corn	2018/19	2019/20	2019/20 vs.2018/19
World Production	1 123 648	1 112 006	-1,0%
World Consumption	1 144 303	1 135 471	-0,8%
World Ending Stocks	320 940	297 341	-7,3%

Soybean

Forecast of record soybean crop in Brazil, trade tensions between the USA and China, and African swine fever in China had negative effect on soybean prices at the beginning of marketing year in September 2019 (prices decreased by 5-10% vs. September 2018.

But closer to the end of 2019 USDA's forecasts of some decline in world soybean production and ending stocks in MY 2019/20 supported soybean prices, which resulted in 5-7% soybean prices growth (December 2019 vs. September 2019.

in ths tonnes

Soybean	2018/19	2019/20	2019/20 vs.2018/19
World Production	358 646	341 763	-4,7%
World Crush	297 846	303 446	2,0%
World Ending Stocks	110 813	102 439	-7,6%

Ukrainian economy

According to State Statistics Service of Ukraine inflation slowed to 4.1% in 2019 compared to 9.8% in 2018 (13.7% in 2017, 12.4% in 2016, 43.3% in 2015 and 24.9% in 2014).

In 2019, the national currency (hryvnia) strengthened significantly against both the US dollar and the basket of currencies of its main trading partners. The revaluation of the hryvnia, with the exception of seasonal fluctuations and short post-crisis episodes of exchange rate correction in the past, is a new phenomenon for Ukraine.

In 2019, hryvnia strengthened by 16,9% as at the end of the year (vs. insignificant revaluation in 2018 by 1.4% and devaluation by 3.1% in 2017, 11.7% in 2016, 34.3% in 2015 and 49.3% in 2014), 5,3% of revaluation for the average rate 2019/2018 in comparison with 2,2% of devaluation for the average rate 2018/2017.

Based on Economic Activity Overview (2019) prepared by Ministry for Development of Economy, Trade and Agriculture of Ukraine economic activity in 2019 remained at a rather high level - the pace of GDP growth is estimated at 3.3%, which is almost the same as in 2018 (3.4%).

According to preliminary data, in 2019, the agricultural production index increased by 1.1%, which was supported by growth in crop production by 1.3% and in livestock production by 0.5%. In 2019 the record harvest of grain crops (over 75 million tonnes -maximum harvest for the years of Ukraine's independence) and sunflower (more than 15 million tonnes) was achieved. Livestock development formed by stable external and internal demand for poultry products and improvement epidemiological situation in pig production. Although, milk production continued to decline (observed since 2014) due to the high cost of keeping cows in households.

Ukraine was ranked as #1 sunflower producer, #4 corn producer, #7 wheat producer, #9 milk producer, #10 cheese producer in the world in 2019.

According to State Fiscal Service of Ukraine export of agricultural products from Ukraine in 2019 increased by 19% to 22.2 billion USD (\$18.6 billion in 2018). Agricultural products export mix in 2019: 58% - crop production, 21% - plant oil, 15% - finished product, 6% - animal produce. Asia and European Union were main export destinations for Ukrainian agricultural products.

Business owerview of IMC S.A. and its Subsidiaries (the hereinafter "the Group" or "IMC")

Business model

Today IMC is the vertically integrated and high-technology group of companies operating in Sumy, Poltava and Chernihiv region (northern and central Ukraine) in three segments: crop farming, dairy farming, elevators and warehouses.

Crop farming

The land bank of the company consists of five clusters within which the fields are situated close to each other. This allows increasing extensively the operational efficiency, and decreasing the expenditure through optimizing of human and technical resources involvement, as well as promoting of effective operational management.

IMC applies modern manufacturing and management practice in agriculture, and constantly invests in acquisition of new farming machinery and equipment of the leading world brands.

On the fields of IMC the system of different depth soil cultivation is applied: deep ripping, ploughing, disking, and cultivation. Rotation of these cultivation methods allows creating the optimal conditions for growing and development of agricultural crops.

The IMC technology for crop farming anticipates using of seeds, fertilizers, and crop-protecting products only from the best national and foreign manufacturers.

The elements of precision farming are tested and introduced, such as: systems for GPS-monitoring of the machinery, auto-piloting, satellite monitoring, variable norms for seeding, and differentiated fertilization.

Dairy farming

Dairy farming supplies high quality milk for customers-processing enterprises and ensures working places in the regions.

The major portion of milk which IMC produces is rated as a milk of Extra category and the rest – as category I. IMC is one of the few industrialized milk producers which has an Operational permit for Baby Food Products, allowing it to sell milk to baby-food processing plants. This is another evidence of the high quality of the produced milk by the Company.

Elevators and warehouses

IMC owns and operates storage facilities with significant storage capacity situated in close proximity to its operations in each of its clusters.

The Company utilizes only its own storage facilities. The existing storage capacities satisfy 100% of the Company's storage needs with sufficient capacity to meet its projected increased production in the short-term.

The existing storage capacities enable IMC to sell its produce throughout the marketing season, to reduce negative impact of crop pressure on prices at harvest time and at the same time to mitigate risks related to physical security of stocks.

Corporate structure

The parent company of the Group of companies "IMC" is IMC S.A. It is a limited company registered in accordance with the legislation of Luxembourg.

Unigrain Holding Limited is a direct subsidiary company of IMC S.A. and the parent company of Burat-Agro LLC, Burat LLC, Chernihiv Industrial Milk Company LLC, PJSC Mlibor. In addition, PJSC PKZ belongs directly to Burat LLC.

In 2011 IMC S.A. purchased (indirectly, through its direct subsidiary company Unigrain Holding Limited) the silo PJSC Vyryvske HPP and the following agrarian companies:

• PAE Slavutich
• PE Progress 2010
• PAE Promin
• AF Kalynivska-2005, Ltd
• AF Zhovtneva, Ltd
• AF Shid-2005, Ltd
• AIE Vyrynske, Ltd
• Pisky, Ltd
• SE Vyry-Agro

On November 30, 2011 to decrease expenses and to improve management quality the agrarian companies PAE Slavutich and PE Progress 2010 were joined to Chernihiv Industrial Milk Company LLC, and PAE Promin was joined to Burat-Agro LLC.

On August 30, 2011 owing to increase of volumes of export sales of the Group the direct subsidiary company Unigrain Holding Limited established Aristo Eurotrading Ltd (BVI).

During the 12-month period ended 31 December 2012 IMC S.A. purchased (indirectly, through its direct subsidiary company Unigrain Holding Limited and Burat-Agro LLC belongs directly to Unigrain Holding Limited) the following agrarian companies:

• Ukragrosouz KSM, Ltd
• PAC Slobozhanschina Agro
• Bluerice Limited. The following companies became the part of the Group, as their owner is Bluerice Limited: Agroprogress Holding Ltd, Agroprogress PE, Bobrovitsky Hlebzavod Ltd, Plemzavod Noviy Trostyanets Ltd, PJSC ''Bobrovitske HPP", Losinovka-Agro Ltd, Parafiyivka-Progress Ltd, Nosovsky Saharny Zavod Ltd.

In November 2013 owing to increase of volumes of export sales of the Group IMC established Negoce Agricole S.A. (Luxembourg).

In December 2013 IMC S.A. purchased (indirectly, through its subsidiary companies Unigrain Holding Limited and PAC Slobozhanschina Agro) the agrarian company AgroKIM Ltd.

During 2014-2016 Group's structure was optimized by mergering of some companies.

On 26 April 2017 IMC S.A. (formally Industrial Milk Company S.A., hereinafter the Company) informs that official name of the Company has been changed from Industrial Milk Company S.A. to IMC S.A.

In June 2019 trading company Aristo Eurotrading HK Limited was formed (through Unigrain Holding Limited).

Group strategy

On 13 February 2018 the Board of Directors of IMC S.A. (hereinafter "the Company") published the updating of the Company's strategy for 2016 – 2020:

• Before the introduction of the agricultural land market in Ukraine, the Company does not plan to expand the land bank in large scale, as it was planned earlier in the strategy 2016-2020, published on 15 February 2016 (see current report 3/2016 as of 15 February 2016).
• Other strategic goals published on 15 February 2016 concerning storage capacities and crop mix are unchanged: 1) Storage capacity modernization; 2) Growing of limited number of highly profitable export-oriented crops (corn, sunflower, soybean, wheat). Corn is a key crop with the share in crop mix about 50%.
• Taking into account a strong focus on business efficiency, the Company has defined additional strategic goal till 2020 achievement of a leading position among agricultural companies in Europe in introduction of innovations.
• Profit received in 2017-2020, the Company plans to invest mainly in projects on operational efficiency improvement, debt reduction and payment of dividends to its shareholders.

Likely future development

Further likely development of the Group in 2020 is planned in accordance with the adopted strategy:

• preservation of the land bank of the Group by prolonging land lease agreements with landlords;
• corn remains a key crop about 56% of the crop mix in 2020;
• further reduction of debt to a level of USD 35 million at the end of 2020 (USD 47 million at the end of 2019);
• storage capacity modernization and purchase of new machinery CAPEX forecast of USD 5 million;
• distribution of profit for interim dividends in 2020 will be considered at a meeting of the Board of Directors in the second half of the year;
• strong focus on business efficiency we expect that implementation of our Research & Development department results will increase production efficiency in 2020.

Risk management and internal control system, anti-corruption measures

Risk management at IMC

Risk management is the process of reducing the possibility of adverse consequences either by reducing the likelihood of an event or its impact or taking advantage of the upside risk. The goal of the risk management at IMC is to provide a reasonable assurance that Group's business objectives will be achieved. This process encompasses such stages as risk identification, risk assessment, risk respond and risk mitigation, monitoring.

Risk identification. Managers of every department are responsible for tracking of potential risks concerning theirs functions. Risks must obviously be identified before they can be managed.

Risk assessment. List of risks should be prioritised according to the the likelihood of occurrence and impact on the organization (department) goals. The most essential risks need urgent attention.

Risk respond and risk mitigation. Management has to construct effective plan to deal with each significant risk identified. Tools aiming to mitigate risks are established at internal documents (instructions, rules, methods, etc.).

Monitoring. Risks are monitored on an ongoing basis. Where risks change or new risks are identified then those risks are added to the risk assessment for appropriate categorisation and action. Internal audit process is the main tool for risk monitoring.

IMC's management is responsible for day-to-day monitoring, identification, assessment and planning mitigation activities concerning operational risks in the course of its ordinary performance. Internal controls at IMC are the main tools of operational risks mitigation process. Established internal policies and internal regulatory documents are the primary mediums of internal controls implementation.

The Board of Directors currently maintains responsibility for overseeing enterprise risk management process and strategic risks. Major risk exposures are regularly discussed at the board meetings.

IMC's control system relies on daily resource planning analyses which are detailed by cost center and cost article, department, thus providing all the necessary information for controlling inventories and products.

IMC established internal controlling instruments to secure proper accounting in compliance with legal requirements.

IMC's accounting procedures are governed by standardized guidelines and rules as well as a clearly defined course of action in different situation. Therefore, standard account parameters and booking directions for various production operations were established. Another control tool is the clear allocation of functions regarding various accounting processes. For Group consolidation and accounting purposes all bookkeeping data of the consolidated companies may be accessed automatically.

The internal control system of IMC is based on the accounting database thus integrating all controlling processes. Accounting processes are carried out on a high-level basis and are monitored and adjusted by specialists.

IMC's accounting-related risk management system is set up in a way that the risk of misrepresentation could mainly ensue from new business processes or amendments to legal provisions. Risks are contained by transferring decisions on accounting-relevant data resulting from new business processes to the management level. Ongoing continuation training regarding the applicable accounting provisions from time to time is provided to the management.

The Group's internal control and risk management system in relation to the process for preparing consolidated financial statements is closely related to control mechanisms of accounting procedures. Consolidated accountes are prepared on the basis of verified and approved accounting system data, which cannot be corrected. Consolidated accounts are carried out by specialists, the level of which is maintained annually by training. The accounts are verified by the management by comparing of control points with management reports.

The Internal Control and Risk Management Department

The Internal Control and Risk Management Department was established as the separate unit in a corporate governance structure of the Group.

The Department is created with the aim of the regular independent monitoring and estimation of effectiveness of the IMC corporate governance, efficiency of separate business processes at the level of group and separate structural subdivisions, assessing of adequacy of the risk management process, providing with recommendations and participation during an improvement process. The Department participates in improvement of internal control, risk management and governance processes.

The Department regularly provides the management of IMC and the Audit Committee with independent and objective valuations and consultations. This involves an objective analysis of actual data with the aim of estimation and expression of an opinion on reliability of systems, processes, operations.

IMC Corporate Misconduct Hotline

Corporate hotline was launched at IMC to prevent and inform possible breaches of internal regulations, such as cases of discrimination, dishonest conduct, harassment, thefts, any type of corruption and bribery, etc. The hotline encompasses several anonymous channels for whistleblowers – call-center, email box, web-interface. IMC guarantees anonymity and protection for all informants, if this does not contradict the current legislation. All reasonable masseges via hotline are processed and feedback is sent to whistleblowers. More information concerning the hotline for stakeholders is available via web-link https://imc.ethicontrol.com/web/en/pages/about.

Anti-corruption and bribery matters

It is the policy of the Group not to engage in bribery or corruption and comply with applicable anti-corruption laws.

We adhere to the UN Global Compact principles of bribery and anti-corruption:

• We shall work against corruption in all its forms, including extortion and bribery.
• Making, promising or offering any payments, gifts or inducements with the purpose of influencing someone (incl. government officials, suppliers, clients, etc.) to act improperly is strictly forbidden; the same applies to accepting payments, gifts or inducements.
• All payments should be reasonable and fall within the acceptable commercial practice.
• All such expenses have to be properly recorded in the accounts.
• We do not tolerate so-called facilitating payments (for example small unofficial payments to officials in order to speed up processes).
• The Group does not make political contributions.
• When engaging in business relationships the Group chooses its partners with the same zero tolerance approach to corruption and bribery.
• The Group appreciates the risk of corruption and bribery in the countries it operates and continues to take measures to minimize this risk.
• All funds received and paid by the Group and its subsidiaries during the course of business are strictly accounted and handled via bank transfers exclusively to minimize the possibilities of cash being taken in or out for the purposes of bribery. In 2019, the Group continued to ensure its adherence to such cash management.

Personnel

For more than a decade, IMC has been proud of its stable and well-coordinated team – professionals with valuable skills, knowledge and experience. Respect to employees' rights and needs, application of future-oriented approaches, continuous learning and training programs provision are all at the core of IMC's personnel management.

In 2016 IMC implemented crucial policies that are extremely important for staff to understand that the company they work in is respectful to its employees and human rights. IMC employs people based on principles of equal opportunity, without distinction to race, color, gender, sexual orientation, religion, descent or origin. IMC standards related to employees and human rights are declared in the following documents:

• Non-discrimination and equal opportunities in employment Policy
• Non-discrimination on grounds of sexual orientation and gender identity Policy
• Policy of collective bargaining
• Policy on freedom for workers to form or join trade unions
• Policy of nursing and expectant mothers
• Policy on working hours and overtime
• Employment of young person under the age of 18 Policy.

Policies are freely available to all employees and guests of IMC. The company policy prohibits discrimination based on color, ethnic or social origin, sex, pregnancy, civil, family status or status of a person caring for, language, religion or other opinion, political or other opinion, national or social origin, citizenship, economic status, association with a national minority, gender identity, age, disability, state of health, genetic characteristics of a person, and other signs or combinations of any of these attributes, actual or imaginary, as well as prohibited discrimination on the basis of association for any of the above listed features. The number of IMC staff by gender in 2019: men – 1291; women – 812; total – 2103. About 38% of the company's staff consists of women and 62% – men, reflecting the specifics of the agrarian sector in general, and crop farming, as a key area of the IMC, in particular.

In 2018, the IMC introduced a new format for working with proposals and complaints about the company's activities. Employees and shareholders can send their application in writing to e-mail address cs@imcagro.com.ua. Also, the IMC began to work with the Ethicontrol portal (imc.ethicontrol.com), which makes the appeal to the company absolutely confidential.

Education's Regulations defines the process of planning, implementing, administering and evaluating the effectiveness of learning. IMC provides its personnel with training and learning opportunities aligned with strategic goals and values (professionalism, responsibility, teamwork, effectiveness, initiative, honesty, respect) of the Company. Employees obtain knowledge and improve their skills through specialized training programs conducted by internal and external providers. Our learning and development offerings cover range of learnings goals: starting a career, expanding knowledge, personal growth and leadership's development.

IMC is proud of its stable and well-coordinated team of professionals with valuable skills, knowledge and experience. That is why maintaining high level of motivation among the employees of the IMC and preventing main threats of staff (internal and external migration, engagement of young people to work in rural areas and their retention) are important challenges for company executives. A number of non-financial factors have helped to form a new level of staff loyalty to IMC:

• Activation of corporate events (team building, sports tournaments, corporate events)
• Expansion of motivational trips abroad and within the country for different levels of employees (production/non-production departments, top/regional managers, workers)
• Stimulating contacts between clusters in various forms (work meetings, team building, training programs);
• Proactive communication policy through media platforms (corporate website, company's pages on Facebook, corporate newspaper "Visnyk IMC"), personal contacts with IMC headquarter and management vertical
• Active trainings
• Development of targeted help to employees
• Іmplementation of the program of provision of housing for employees
• Granting vouchers for children to children's camps

In 2019, 320 employees of IMC's production departments, including precision farming technologies and R&D specialists, were trained by representatives of world's leading agribusiness companies. Also 509 linear managers took part in different development training programs of leadership, effective communication, emotional intelligence and people management skills.

The Company spent a total of around UAH 1,2 million on training program in 2019.

In 2019 IMC improved Policy "On targeted help to employees", which allows to receive and fix the amount of financial support to employees, in the case of difficult life circumstances, births of children, weddings, reimbursement of expenses for treatment of employees and close relatives.

The IMC spent UAH 5,32 million on motivational events for staff in 2019: motivational trips abroad – UAH 3,29 million, targeted help to employees – UAH 0,92 million, corporate events - UAH 0,93 million, summer camp for children of employees - UAH 0,18 million. 144 employees of the enterprises of the IMC participated in motivational trips in 2019.

	2019	2018	Change in %
Total number of employees	2 103	2 309	-9%
operating personnel	1 503	1 632	-8%
administrative personnel	580	655	-11%
sales personnel	18	19	-5%
non-operating personnel	2	3	-33%
Wages and salaries and related charges per employee (USD, for 12 months ended 31 December)	11 362	8 188	39%

Personnel structure and wages and related charges were the following:

Management Incentive plan

The Extraordinary shareholders meeting approved on 4 July 2017 a management incentive plan providing to Management Team Members and Eligible Employees as defined in the Management Incentive Plan an option to purchase in aggregate up to 1 878 000 new shares of IMC S.A., such number being equal to 6% of the issued stock of IMC S.A. as at the adoption date of such plan, at the price decided at the discretion of the Board of Directors of the Company which shall be equal to at least one euro cent EUR 0.01.

Performance period of the Management Incentive Plan is 3 years, starting from January 1, 2017 and ending on December 31, 2019. During the performance period, the Board of Directors of the Company may discretionarily decide when the shares shall be issued by the Company to the Participants at the Subscription Price.

As a part of this incentive plan, 1 878 000 new ordinary shares were issued with subscription price USD 0.00115. As at 31 December 2017 the purchase option was fully exercised, market share price was USD 2.73.

Health, Safety and Environment (HSE) management system

Based on the experience of the world's leading companies, in 2016 IMC has started formation of the Health, Safety and Environment (HSE) management system. HSE department was formed at IMC's headquarter, designed to assist top-management of IMC in development and implementation of the company's strategy in these areas. On June 10, 2016 IMC approved a 5-year strategy of the company on Occupational Health and Safety and Environmental Protection in 2016-2020, which determines the priority directions of development of the company in this area.

At all IMC's enterprises carry out on Monitoring in the areas: natural resource use and environmental legislation, occupational safety at production (compliance review of ІMС HSE principles against the requirements of Ukrainian regulatory documents).

IMC is committed to involving all employees in the management for issues of Environment, Health & Safety and Social Aspects at IMC and its subsidiaries.

IMC's enterprises annually implement a set of measures, where, along with traditional safety briefing instructions and control measures, the following are applied:

• Improvement of labor conditions;
• Identification and elimination of industrial hazards;
• Health and safety management systems improvement;
• Health and safety trainings in partnership with the leading training institutions;
• Provision of modern and high quality personal and mass protective equipment;
• Raising employee awareness and safe work methods promotion;
• Improvement of health care services for the employees;
• Work with contractor organizations.

All IMC's enterprises have the Emergency Preparedness and Response plans (EPRP) for localization and liquidation of emergencies and accidents. The availability of such plans is obligatory in Ukraine and is regulated by legal requirements & local legislation.

The focus of the work of IMC enterprises in 2019 was aimed at maintaining and implementing legislative requirements in the field of Health, Safety and Environment and introducing uniform corporate standards for IMC.

In January 2019, the implementation of the Corporate Standard "Safety Analysis of Work Execution" began. Key directions for the implementation of this project have been developed. The concept was approved by managers and engineers for labor protection at enterprises. Since February 2019, training of linear managers and personnel using the cascade training method began at the enterprises. Safety Analysis of Work Execution (SAWE) is a mandatory sequence of actions that is performed by an employee (group of employees) independently or with the participation of a manager before starting and periodically during the execution of work. The purpose of the SAWE is to analyze the possibility of safely performing/continuing work and taking the necessary measures to protect people and nature.

The objectives of the implementation of the Safety Analysis of Work Execution are the following:

• Regulation of the actions of each employee (group of employees) before and during the execution of work.
• Developing the skills of employees to regularly assess existing sources of danger and apply adequate measures of protection against dangerous and harmful factors.
• Developing skills for elementary risk assessment in the workplace.

• Education in employees of a serious attitude to sources of danger, maintaining the level of attention before starting and in the process of performing work.

• Algorithmization of the process; application of protective measures: Source of danger - Possible consequences - Necessary protective measures. • Education of workers in the discipline of the application of protective measures based on a constant awareness of the possibility of negative consequences for health, life and the environment.

In 2019, the HSE Motivation Program was continued. Since March of the reporting year, the process of promoting HSE projects has been launched to be awarded by the IMC CEO. 34 projects were submitted in three nominations: Occupational safety and industrial safety, Health protection and Environmental protection. Special Committees were formed to identify the best 3 projects in each nomination. In total, 27 of implemented projects were identifed, of which one winner and two prize winners in each nomination were selected. The winning projects will be implemented in companies of the Group.

In June 2019, the Procedure for the Use and Protection of Water Resources was approved at IMC enterprises.The Procedure establishes uniform requirements and applies to the processes associated with the abstraction, use and protection of water resources, which are used for their own production and household needs by enterprises and are mandatory for structural divisions and officials of the IMС Group.The procedure does not cancel the requirements of the current legislation, internal documents of the enterprises of the IMC and contracting organizations, but can establish a higher level of requirements.

In July 2019, the implementation of the Corporate Transport Security Standard began. This Standard describes the minimum requirements for the safe use, operation, maintenance and repair of vehicles at enterprises. The Standard describes the requirements for personnel, the implementation of a program to improve the culture of driving and driving skills, and also regulates the procedure for periodically conducting targeted safety audits using checklists on 2 topics: "Requirements for the technical condition of vehicles" and "Safety requirements for repairs and technical vehicle maintenance. The implementation of the requirements of this Standard will reduce potential risks during the transport of people and dangerous goods and as a result, reduce the number of accidents, the severity of their consequences, as well as improve the material and technical resources of enterprises.

Social policy

IMC's enterprises have been adhering to approved social policy.

Main principals are the following:

• The key target audience for social activities is a resident of a village living in the regions where IMC operates;
• Realization of social policy is carried out only according to certain priority directions;
• Financing of social activities is carried out exclusively within the framework of the annual budget approved;
• IMC does not provide assistance to religious organizations and political parties.

Priority directions of social policy:

• Targeted assistance to landlords of IMC's enterprises;
• Rural development and consumer services;
• Assistance to school and pre-school institutions;
• Health care, assistance in medical care of peasants (realization of medical projects);
• Assistance in the developments of the culture;
• Help in the development of sport in the countryside.

All investments and initiatives in social projects including personalized support and projects of local infrastructure maintenance and development (roads, water supply, public lighting, schools, kindergartens, FAPs and medical points etc.) that IMC conducts within the villages it operates are conducted on the principles of «IMC. Aid to People» program. The Program includes obligatory social consultations and PR efforts for all significant investments. Local communities are involved in projects prioritization, budgeting and planning of necessary actions.

The investments and initiatives for such projects in 2019 reached UAH 18,1 million (Y2018 – UAH 22 million):

• Targeted assistance to landlords UAH 12,6 mln;
• Rural development UAH 2,0 mln;
• Road repair UAH 2,8 mln;
• Cultural & Sport events sponsorship UA 0,4 mln;
• Sponsorship of school and preschool institutions UAH 0,3 mln.

Innovative technologies and R&D

In 2017 the Research and development department was formed. The elements of precision farming are tested and introduced by R&D department: systems for GPS-monitoring of the machinery, auto-piloting, satellite monitoring, variable norms for seeding, and differentiated fertilization. In 2019 extensive field experiments were carried out - testing the optimal seeding rate (different from the recommendations of the seed producer), selecting the optimal protection products.

Innovative technologies used in operating activities:

• Autopilot systems on heavy tractors allows to increase efficiency of carrying out of any field operations by 6-8% and corresponding saving of fuel.
• Systems of control of sections during sowing and spraying a technology that allows to switch off sections at overlaps and save significantly on chemicals, seed and fertilizers.
• Row Sense system and Row Vision system on spraying machines technology that avoids trampling plants when spraying industrial crops.
• Monitoring the quality of field operations each seeder and sprayer machine has a controller, which records the actual work done.
• Wialon GPS monitoring system a software product that is used to organize the traffic control of machines, control fuel and record of work done.
• Satellite monitoring periodically, during the year, satellite monitoring of all crops in the fields of the IMC is carried out to identify deviations in the growing of crops.
• Carrying aerial photography by drones each of our enterprises is equipped with drones, which provides detailed aerial survey of fields, allowing quickly identification of the nature of heterogeneity and react to any deviations in the vegetation of plants.
• Yield sensors systems on each combine for yield mapping of each field.
• Implementation of Precision Planting equipment into sowing process extremely increases quality of sowing.
• NFC field data transmition between trucks & weighing system on each grain cart to control grain movement from field to storage.
• Agrogeoportal PreAgri it acts as the only platform for collecting, storing, processing and visualizing all geospatial data from fields.

To improve the qualitative and quantitative characteristics of the activity, IMC conducts research on new technologies and products.

General amount of trials was done on winter wheat, sunflower, corn and soybean - 1724 plots.

Main types of experiments are connected with hybrids and varieties (seeding materials), plant protection products, plant fertilizer systems, precision farming systems, soil silage systems, testing of agricultural equipment (drillers, planters, sprayers etc.).

Results for Y2019:

• 17% of planned corn acreage in season 2020 IMC will sow with new hybrids, which were tested by R&D department during season 2019;
• New for IMC method of sunflower sowing by Horsch Pronto were introduced to large scale production;
• Precision planting equipment was tested on corn and sunflower and introduced to large scale production;
• Fertilization system of winter wheat was changed based on trial results 2019;
• System of herbicide protection on corn was also changed based on trial results 2019;
• In spring 2019, R&D department created separate trial field (Agropolygon) with small plots in 1 cluster of IMC (Pryluky cluster). This approach helped us to concentrate big amount of trials in one location and to analyze the results of trials in equal conditions in more scientific way than previously. Next year (2020), we will create similar Agropolygons in 4 other clusters of IMC;
• R&D department is currently testing the new approach to accounting trials using GIS technologies (joined project with OneSoil and ClimateFieldview). Basically, we had already tested this format on several fields (including Agropolygon) in the season 2019 and we are planning to continue testing this approach.

There were no development costs capitalized in the accounts, the research is done internally and is consequently captured mainly in the costs of personnel and amounted USD 216 thousand for Y2019 (USD 109 thousand for Y2018).

2. Operational and Financial Results

The following table sets forth the Company's results of operations derived from the Consolidated financial statements:

(in thousand USD)	For the year ended
	Notes	31 December 2019	31 December 2018	Change in %
CONTINUING OPERATIONS
Revenue	6	169 601	131 611	29%
Gain from changes in fair value of biological assets and agricultural produce, net	7	52 768	73 326	-28%
Cost of sales	8	(170 927)	(138 854)	23%
GROSS PROFIT		51 442	66 083	-22%
Administrative expenses	9	(13 246)	(11 928)	11%
Selling and distribution expenses	10	(21 247)	(11 794)	80%
Other operating income	11	2 708	951	185%
Other operating expenses	12	(4 176)	(5 022)	-17%
Write-offs of property, plant and equipment		(260)	(2 287)	-89%
OPERATING PROFIT		15 221	36 003	-58%
Financial expenses, net	15	(3 476)	(4 987)	-30%
Effect of lease of right-of-use assets	19	(7 640)	-	100%
Effect of additional return	30	(2 090)	(3 265)	-36%
Foreign currency exchange gain, net	16	6 049	567	967%
PROFIT BEFORE TAX FROM CONTINUING OPERATIONS		8 064	28 318	-72%
Income tax expenses, net	17	(746)	(691)	8%
NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS		7 318	27 627	-74%

Earnings before interest, taxes, depreciation and amortisation (EBITDA) is calculated as revenue less expenses, the latter excluding tax, interest, depreciation and amortisation. Being a proxy to the operating cash flow before working capital changes, EBITDA is widely used as an indicator of a company's ability to generate cash flows, as well as its ability to service debt. Consequently, the management EBITDA serves as a measure to estimate financial stability of the Company. Besides, excluding the effect of depreciation and amortisation along with cost of capital and taxation provides to external users another measure comparable to similar companies regardless of varying tax environments, capital structures or accounting policies regarding depreciation and amortization.

The Company calculates Normalised EBITDA by adjusting Net profit for the expense items that are deemed to be substantially beyond the control of management, as well as items believed to be non-recurring. The Normalised EBITDA for the periods presented is calculated based on historical information derived from the Consolidated financial statements. The reconciliation to Normalised EBITDA for the period (from continuing operations) is presented as follows:

(in thousand USD)	For the year ended
	31 December 2019	31 December 2018	Change in %
CONTINUING OPERATIONS
Net profit for the period	7 318	27 627
Write-offs of property, plant and equipment	260	2 287
Foreign currency exchange (loss)/gain, net	(6 049)	(567)
Financial expenses, net	3 476	4 987
Effect of lease of right-of-use assets	7 640	-
Income tax expenses, net	746	691
Depreciation and amortization	23 803	12 556
Non recurring items:
Effect of additional return	2 090	3 265
Normalised EBITDA	39 284	50 846	-23%

Company's Normalised EBITDA decreased in Y2019 in comparison with Y2018 mainly due to strengthening of the Ukrainian hryvnia, growth of selling expenses and lower yields compared to last year's record cropharvest, resulted in decrease in gain from changes in fair value of biological assets and agricultural produce, net in Y2019.

Revenue

The Company's revenue from sales of finished products increased by 29% in Y2019 in comparison with previous period.

The following table sets forth the Company's sales revenue by products indicated:

(in thousand USD)		For the year ended
	31 December 2019	31 December 2018	Change in %
Corn	118 806	81 576	46%
Wheat	13 480	10 637	27%
Sunflower	22 753	24 331	-6%
Soy beans	10 817	9 818	10%
Milk	1 547	1 343	15%
Cattle	115	147	-22%
Potatoes	-	885	-100%
Other	1 201	1 676	-28%
	168 719	130 413	29%

The most significant portion of the Company's revenue comes from selling corn, which represented 70,4% in Y2019 and 62,6% in Y2018 of total revenue.

The following table sets forth the volume of the Company's main crops and revenues generated from the sales of such crops:

	For the year ended
	31 December 2019	31 December 2018
Corn
Sales of produced corn (in tonnes)	711 134	495 823
Realization price (U.S. \$ per ton)	167	165
Revenue from produced corn (U.S. \$ in thousands)	118 806	81 576
Wheat
Sales of produced wheat (in tonnes)	76 542	62 978
Realization price (U.S. \$ per ton)	176	169
Revenue from produced wheat (U.S. \$ in thousands)	13 480	10 637
Soy beans
Sales of produced soy beans (in tonnes)	32 819	27 312
Realization price (U.S. \$ per ton)	330	359
Revenue from produced soy beans (U.S. \$ in thousands)	10 817	9 818
Sunflower
Sales of produced sunflower (in tonnes)	81 001	80 902
Realization price (U.S. \$ per ton)	281	301
Revenue from produced sunflower (U.S. \$ in thousands)	22 753	24 331
Potatoes
Sales of produced potatoes (in tonnes)	-	8 290
Realization price (U.S. \$ per ton)	-	107
Revenue from produced potatoes (U.S. \$ in thousands)	-	885
Other (produced only)
Total sales volume (in tonnes)	9 738	18 694
Total revenues (U.S. \$ in thousands)	1 201	1 676
Total sales volume (in tonnes)	911 234	693 999
Total revenue from sale of crops (U.S. \$ in thousands)	167 057	128 923

Revenue relating to sales of corn increased by 46% to USD 118,8 million in current period from USD 81,6 million in previous period, mainly due to an increase in realization volume in 2019.

Revenue relating to sales of wheat increased by 27% to USD 13,5 million in current period from USD 10,6 million in previous period, due to increase in sales volume in 2019.

Cost of sales

The Company's cost of sales changed to USD 170,9 million in current period from USD 138,9 million in previous period. The following table sets forth the principal components of the Company's cost of sales for the periods indicated:

(in thousand USD)	For the year ended
	31 December 2019	31 December 2018	Change in %
Raw materials	(116 378)	(96 669)	20%
Change in inventories and work-in-progress	457	13 868	-97%
Depreciation and amortization	(20 311)	(10 210)	99%
Wages and salaries of operating personnel and related charges	(13 233)	(9 148)	45%
Fuel and energy supply	(10 676)	(13 868)	-23%
Third parties' services	(5 894)	(6 032)	-2%
Rent	(2 320)	(15 042)	-85%
Repairs and maintenance	(1 300)	(1 086)	20%
Taxes and other statutory charges	(1 172)	(589)	99%
Other expenses	(100)	(78)	28%
	(170 927)	(138 854)	23%

Raw materials increased in current period to USD 116,4 million from USD 96,7 million in previous period mainly as a result of inflation and exchange rate fluctuations.

Depreciation and amortization increased in current period to USD 20,3 million from USD 10,2 million in previous period due to impact of IFRS 16.

Wages and salaries of operating personnel and related charges increased in current period to USD 13,2 million from USD 9,1 million in previous period due to growth both in terms of salaries and additional premiums. Increase in cost of sales consists both of increase in quantity of sales and of increase of cost of several items, described above.

Gross profit

The Company's gross profit decreased to USD 51,4 million in current period from USD 66,1 million in previous period, an 22% year-on-year decrease. In relative terms, the gain from changes in fair value of biological assets and agricultural produce decreased by 28%.

Administrative expenses

Administrative expenses increased year-on-year to USD 13,2 million in current period from USD 11,9 million in previous period, reflecting an increase in wages and salaries of administrative personnel and related charges to USD 10,3 million from USD 9,4 million.

Selling and distribution expenses

Selling and distribution expenses increased year-on-year to USD 21,2 million in current period from USD 11,8 million in previous period, reflecting an increase in sales volume and delivery costs in 2019.

Foreign currency exchange, net

Foreign currency exchange gain, net increase to USD 6,0 million in current period from USD 0,6 million in previous period. This increase reflected the strengthening of UAH in 2019 in comparison with 2018 – 16,9% of revaluation as at 31 December 2019 in comparison with 1,4% of revaluation as at 31 December 2018, 5,3% of revaluation for the average rate 2019/2018 in comparison with 2,2% of devaluation for the average rate 2018/2017.

Cash flows

The following table sets out a summary of the Company's cash flows for the periods indicated:

(in thousand USD)	For the year ended
	31 December 2019	31 December 2018
Net cash flows from operating activities	54 117	28 173
Net cash flows from investing activities	(4 580)	(4 530)
Net cash flows from financing activities	(46 197)	(22 130)
Net increase in cash and cash equivalents	3 340	1 513

Net cash flow from operating activities

The Company's net cash inflow from operating activities increased to USD 54,1 million in current year from USD 28,2 million in previous year. The increase in 2019 was primarily attributable to changes in inventories.

Net cash flow from investing activities

The Company's net cash outflow from investing activities is almost equal to the previous year amount - USD 4,6 million in Y2019 and USD 4,5 million in Y2018.

Net cash flow from financing activities

Net cash outflow from financing activities increased to USD 46,2 million in current year from USD 22,1 million in previous year. The increase in 2019 outflow was due to the big repayments of bank loans and due to changes of presentation of the article lease payments (in Y2018 land lease payments were reflected in operating activities as payments to other creditors, the new IFRS 16 requires reflecting payments in financial activities).

3. Risk report

Risks relating to the Industry

Grains prices volatility

Changes in market prices for grains can adversely influence on IMC's earnings and financial results.

To decrease an influence of this risk the Group, on permanent basis, researches the international and Ukrainian agricultural markets, monitoring price fluctuations and factors affecting these fluctuations (stocks, production, consumption, export, import, forecasts). Based on an analysis of the above-mentioned information, the management of the Group makes decisions regarding crop rotation structure and production plans.

Sound control over the grains production costs at IMC allows the Group to ensure sufficient level of marginality regardless of price fluctuations. The Group cooperates with large grain traders, which allows to sell large quantities of grain at the most favorable prices of the export market.

Operational risks

Adverse weather conditions

Poor and unexpected weather conditions may disrupt the Group's production of crops.

The land cultivated by the Group is spread between different climate zones of Ukraine. This allows to reduce the possible negative impact of adverse weather conditions. Additionally, to mitigate an influence of this risk IMC uses the following practices:

• On the fields of IMC the system of different depth soil cultivation is applied: deep ripping, ploughing, disking, and cultivation. Rotation of these cultivation methods allows creating the optimal conditions for growth and development of agricultural crops;
• Cultivation of relatively small share (10%) of winter crops in the general crop rotation structure enables to decrease the risk of disruption of a general production of crops during unfavorable winter conditions.
• Increase of inputs costs

The Group's operating costs could increase and adversely affect IMC's financial performance. The risk of the Group's operating costs increase is basically connected to a possible price growth for fuel, seeds, fertilizers and crop protection materials.

To reduce the risks mentioned above the Group:

• has implemented the fuel consumption and machinery usage controlling systems using GPS-trackers;
• follows the land bank development strategy based on principle of fields' close proximity to each other that allows to reduce fuel consumption;
• is focused on limited number of crops that allows to use and purchase seeds, fertilizers and crop protection materials more efficiently;
• has built long-term and mutually benefitted relationships with suppliers of seeds, fertilizers and crop protection materials.

Customer concentration risk

Focusing on large wholesale world traders, the Group has a small pool of customers and could be influenced by customer concentration risk. But the work of the Group with a small number of customers is not due to the lack of other customers or the impossibility of entering new markets, but to the selected sales strategy - the best conditions for selling are ensured by relations with large traders. To control the risk before each sale, a tender is held among buyers to determine the best conditions of the transaction. Making a choice in the direction of the buyer, management understand the level of supply and demand for the products on the market with other participants and Group's capabilities in the event of a change of buyer.

Credit risk

Counterparties involved in transactions with IMC may fail to make scheduled payments, resulting in financial losses to IMC.

To decrease an influence of this risk the Group has implemented credit policy and monitoring practices. Police and operating guidelines include limits in respect of counterparties to ensure that there is no significant concentration of credit risk. Credit risks are managed by legal activities which include security paragraphs into agreements with customers. Also the financial department of the Group constantly carries out monitoring over payment terms deadlines according to goods selling contracts.

Risk of key personnel shortage

A lack of key personnel can threaten the overall performance of IMC.

The Group conducts series of activities to mitigate this risk. IMC offers competitive working conditions for potential employees. Performance related remuneration scheme exists to motivate and retain key staff. IMC cooperates with a number of Ukrainian educational institutions for selection and hiring talented students. Educational and professional trainings are regularly held for personnel at IMC.

Risk of land loss

Land is a key resourse in agricultural production and termination of essential number of land lease agreements can cause significant damage for the Group.

To mitigate this risk, the Group holds a number of social events for the local communities to make IMC's presence beneficial for Company's land lessors. The terms of land lease agreements have been revised and re-signed in the best interest of counterparties. As at 31 December 2019 90% of land lease agreement are valid for a period over 5 years and 40% of contracts are valid for a period of more than 10 years (as at 31 December 2018 92% and 76% correspondingly).

Risk of cybersecurity incidents

IMC's corporate information system can be corrupted by virus attack or external intrusion.

Operations of the Group are highly dependent on corporate IT system in all aspects. In 2017 companies of the Group have experienced a cybersecurity attack which has not had a material impact on our business. To prevent and mitigate this risk a series of actions has been done. The infrastructure of IMC's intranet has been improved in order to mitigate the risk of unauthorized external intrusion. A backup process was reconstructed to ensure a maximum possible safety of corporate business data. The riskiest points of unauthorized external intrusion have been isolated outside IMC's intranet.

Financial risks

Risk of capital deficiency

Failure to generate or raise sufficient capital may restrict the Group's development strategy

To decrease an influence of this risk the Group works on several sources of financing: bank crediting, financing by international financial organizations.

Risk of liquidity

It exists the risk of inability to meet financial obligations of the Group in due time.

To minimize such risk IMC maintains efficient budgeting and cash management processes to ensure that adequate funds are available to meet business requirements. IMC adopts a flexible CAPEX program enabling capital projects to be deferred if necessary.

Risk of interest rate volatility

Fluctuations of interest rates influence on the cost of IMC's borrowings.

The Group utilizes balancing strategy to mitigate interest rate risk. The portfolio of IMC's borrowings consists of 28% of float rate debt and 72% of fixed rate debt.

IMC's creditors are well-known banks with a foreign capital or international financial institutions. As result, the cost of IMC's financial resources is lower than the market average.

Fluctuation in currency exchange rates

Unfavorable movements of currency exchange rates can lead to deteriorating of company's financial results.

The main functional currencies for IMC are Ukrainian hryvnia and US dollar. Since the Group is export oriented, most of regular financial planning cash inflows are matched in US dollar, when outflows are matched both in US dollar and Ukrainian hryvnia. Stable revenue in US dollar limits the risk resulting from national currency devaluation. In 2019, the Ukrainian hryvnia strengthened against the US dollar from the beginning to the end of the year, which was reflected on the one hand, in a decrease in the Group's financial result for the year (due to the fact that the revenue was formed at a lower rate than the cost), on the other hand, net assets of the Group at the end of the year increased in US dollar terms.

Legal and regulatory risks

Risk of non-compliance

The Group's business is influenced by regulatory rules of each country where IMC operates. A breach of these rules can cause legal proceedings and additional costs for the Company.

The monitoring of legislation changes is constantly conducted by the Legal Department at IMC. Employees regularly visit specialized events on legal issues. Group's business operations are conducted in accordance with current legislation taking into account possible future regulatory development.

Risk of COVID-19 pandemic

In 2020 the global spread of COVID-19 is affecting every one of us.

To prevent the spread of COVID-19 coronavirus since mid-February, the company has taken proactive preventative measures in accordance with an approved program of action aimed primarily at protecting the health of its employees and their families, our suppliers and consumers.

Management forecasts on the impact of the COVID-19 pandemic on IMC's future business are the following:

2020 sowing campaign

Firstly, the sowing plan for 2020 is slightly changed compared to 2019 - the area under soybean in 2019, which was almost 11 thousand hectares, was given for winter wheat (8 thousand hectares) in 2019 and for corn (3 thousand hectares) in 2020. This means that 8,000 hectares of sowing have already been carried out in autumn 2019, which reduces the load on the spring sowing campaign 2020.

Secondly, the favorable weather conditions allowed us to increase significantly the area where carbamide was applied. For comparison, the area with carbamide applied in 2018 amounted to 15 thousand hectares, while in 2019 - 33 thousand hectares, that making the fields more prepared for further sowing.

Thirdly, we have the necessary materials and technical support - seeds and fertilizers have already been purchased and are in stock. We work with big suppliers and predict that there will be no significant disruption in the supplying of materials. We are also ready for sowing in terms of machinery - new productive machinery was leased for field works: 20 new harvesters in 2019 and 10 new tractors in 2020.

Field sowing works being carried out. We have minimized the number of employees involved and provided them with protective equipment. In general, the sowing campaign runs as usual.

Future revenues

The available inventories at stock as at 31 December 2019 are already contracted and are awaiting its turn for shipment. There are no problems with the availability of wagons to deliver grain to the port. There are no restrictions on freight traffic. We expect that the shipment of corn harvested in 2019 will run without problems.

We understand that the quarantine will weaken the overall rate of goods consumption, but we do not expect it will apply to basic foodstuffs, including the grain of the future 2020 harvest. So we do not anticipate difficulties in sales of future crops.

Financing

Bank loans are represented by long-term loans and revolving credit lines. Long-term loans are paid as usual on a schedule, revolving credit lines are used to replenish operating funds and are renewed annually. As at 31 December 2019 such credit lines were opened in the amount of USD 28.5 million. As at 07 April 2020 credit lines in the amount of USD 18.5 million were updated, the new rates are lower than last year by 0.5- 1.0%%. A credit line in the amount of USD 10 million will be updated in May according to the schedule. There are no problems with financing, we are paying off our debts, the necessary credit lines were updated.

4. Selected Financial Data

(in thousand USD)

	For the year ended 31 December 2019		31 December 2018
I.	Revenue	169 601	131 611
II.	Operating profit/(loss)	15 221	36 003
III.	Profit/(loss) before income tax	8 064	28 318
IV.	Net profit/(loss)	7 318	27 627
V.	Net cash flow from operating activity	54 117	28 173
VI.	Net cash flow from investing activity	(4 580)	(4 530)
VII.	Net cash flow from financing activity	(46 197)	(22 130)
VIII.	Total net cash flow	3 340	1 513
IX.	Total assets	298 408	198 206
X.	Share capital	59	59
XI.	Total equity	133 193	120 670
XII.	Non-current liabilities	93 641	18 816
XIII.	Current liabilities	71 574	58 720
XIV.	Weighted average number of shares	33 178 000	33 178 000
XV.	Net profit/(loss) per ordinary share (in USD)	0,22	0,83
XVI.	Book value per share (in USD)	4,01	3,62

On behalf of the Management:

DMYTRO MARTYNIUK	__signed______

IMC S.A.

Société anonyme Registered office: 16 rue Erasme L-1468Luxembourg, Grand Duchy of Luxembourg R.C.S Luxembourg: B 157843 (the Company)

Corporate governance statement

Corporate governance

Corporate governance within the Company is based on the Luxembourg law and the listing requirements of the Warsaw Stock exchange where the trading in the Company shares takes place. The Company follows New Code of Best Practices for WSE Listed Companies that entered into force on 1 January 2016 (the "2016 WSE Code", as amended on 13 October 2015).

The Company's corporate governance rules are based on the Company's Articles of Association (the "Articles"), and the corporate governance charter (the "Corporate Governance Charter"), and the Company's internal regulations.

Board of Directors

According to the Articles of Association, the Company shall be managed by the Board of Directors composed of at least five members, their number being determined by the general meeting of shareholders. Directors need not be shareholders of the Company. The Board of Directors is composed of executive and non-executive directors. At least two directors shall be independent non-executive directors.

The directors shall be elected by the general meeting of shareholders for a period not exceeding six (6) years and until their successors are elected, provided, however, that any director may be removed at any time by a resolution taken by the general meeting of shareholders. The directors shall be eligible for reappointment.

In the event of vacancy in the office of a director because of death, resignation or otherwise, the remaining directors elected by the general meeting of shareholders may elect a director to fill such vacancy until the next general meeting of shareholders.

Directors:

Name	Initial date of appointment	End of mandate
1.Mr. Alex Lissitsa, executive director, CEO	29 March 2012	2022
2.Mr. Dmytro Martyniuk, executive director, CFO	09 March 2011	2022
3. Mr. Oleksandr Petrov, executive director, Chairman	09 March 2011	2022
4. Mr. Alfons Balman, non-executive director	10 September 2013	2022
5.Mr. Kamil Jan Gaworecki, non-executive director	01 June 2016	2022

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association and Luxembourg Companies Law 1915. The Articles of Association may be amended from time to time by a general meeting of the shareholders under the quorum and majority requirement provided for by the law of 10 August 1915 on commercial companies in Luxembourg, as amended.

The present Board is composed of two independent directors and three directors who either are employed by subsidiaries of the Company or hold over 5% of votes in the Company.

Independency is assessed taking into consideration the criterias stated in Annex II of the European Commission Recommendation of 15 February 2005.

Powers of Directors

The Board is responsible for managing the business affairs of the Company within the clauses of the Article of Association. The directors may only act at duly convened meetings of the Board of Directors or by written consent in accordance with article 12 of Articles of Association.

The Board of Directors is vested with the broadest powers to act on behalf of the Company and to perform or authorize all acts of administrative or disposal nature, necessary or useful for accomplishing the Company's object. All powers, not expressly reserved by the Law to the sole shareholder or, as the case may be, to the general meeting of shareholders, fall within the competence of the Board of Directors.

Meetings of the Board of Directors

The Board of Directors meets upon notice given by the Chairman. A meeting of the Board of Directors must be convened if any two directors so require. The Chairman presides at all meetings of the Board of Directors. In case of chairman's absence, the Board of Directors may appoint another director as chairman pro tempore by vote of the majority present or represented at such meeting. Except in cases of urgency or with the prior consent of all those entitled to attend, there should be given a written notice of at least twenty-four hours before the meeting of the Board of Directors. Any such notice shall specify the place, the date, time and agenda of the meeting. The notice may be waived by unanimous written consent by all the directors at the meeting or otherwise. No separate notice is required for meetings held at times and places specified in a time schedule previously adopted by resolution of the Board of Directors.

Every board meeting shall be held in Luxembourg or at such other place indicated in the notice.

Decisions will be taken by a majority of the votes of the directors, present or represented at the relevant meeting. Each director has one vote. In case of a tied vote, the Chairman has a casting vote.

One or more directors may participate in a meeting by means of a conference call, by video conference or by any similar means of communication enabling several persons participating therein to simultaneously communicate with each other. Such methods of participation are to be considered equivalent to a physical presence at the meeting.

A written decision passed by circular means and transmitted by cable, facsimile or any other similar means of communication, signed by all the directors, is proper and valid as though it had been adopted at a meeting of the Board of Directors, which was duly convened and held. Such a decision can be documented in a single document or in several separate documents having the same content and each of them signed by one or several directors. Except as far as a written decision passed by circular means is concerned, the minutes of the meeting of the Board of Directors shall be signed by the Chairman of the relevant meeting or any two directors or as resolved at the relevant board meeting or a subsequent board meeting. Any proxies will remain attached thereto.

The Board has established processes regarding internal control and risk management systems to ensure its effective oversight of the financial reporting process. These include appointing an independent administrator (the "Administrator") to maintain the accounting records of the Company independent of IMC S. A. The Administrator has a duty of care to maintain proper books and records and prepare for review and approval by the Board the annual accounts intended to give a true and fair view. The Board has appointed LGL Corporate Services (Luxembourg) S.A. as Administrator. (previously known as Totalserve Management (Luxembourg) S.a.r.l.).

Committees

Audit Committee

The Audit committee has been established by the Board to assist the Board of directors with independent verifying and safeguard of the integrity of the company's financial reporting; and oversee the independence of the external auditors

The Committee has responsibility for the following:

• (a) Monitoring the establishment of an appropriate internal control framework;
• (b) Monitoring corporate risk assessment and compliance with internal controls;
• (c) Overseeing business continuity planning and risk mitigation arrangements;
• (d) Reviewing reports on any material defalcations, frauds and thefts from the Group;

(e) Monitoring compliance with relevant legislative and regulatory requirements (including continuous disclosure obligations) and declarations by the Secretary in relation to those requirements;

(f) Reviewing the nomination, performance and independence of the external auditors;

(g) Liaising with the external auditors and ensuring that the annual audit is conducted in an effective manner that is consistent with Committee members' information and knowledge and is adequate for shareholder needs;

(h) Reviewing management processes supporting external reporting;

(i) Reviewing annual accounts and consolidated financial statements and other financial information distributed externally; and

(j) Reviewing external audit reports to ensure that, where major deficiencies or breakdowns in controls or procedures have been identified, appropriate and prompt remedial action is taken by management.

The Committee has an advisory role, consistent with its purpose of assisting the Board in relation to the matters with which it is charged with responsibility, and does not have any power to commit the Board to any recommendation or decision made by it except for matters relating to the appointment, oversight, remuneration and replacement of the external auditors.

The Committee has unrestricted access to management and the external auditors as it may consider appropriate for the proper performance of its function.

The Board of Directors shall appoint the chairman and members of the Audit Committee from among the non-executive directors and external members which must be independent. The Audit Committee will comprise a minimum of two members. In any case the chairman of the Audit Committee must be appointed from among non-executive directors.

As of 31 December 2019 Audit committee consisted of two members, Alfons Balmann (chairman), a non-executive director and Kamil Jan Gaworecki (member), non-executive director. In the year 2019 the work of the Audit Committee was confined to reviewing the consolidated audit report and appointment of external auditor. In addition, Audit Committee had held meetings as it is determined in the Corporate governance chart.

Remuneration Committee

The role of the Committee is to advise on remuneration and issues relevant to remuneration policies and practices for senior management.

The Responsibility of the Remuneration Committee includes issues regarding salaries, bonus programs and other employments terms of the CEO and senior management in conjunction with the Board.

Notably, the Remuneration Committee is responsible for:

• submitting proposals to the Board regarding the remuneration of directors and managers, ensuring that these proposals are in accordance with the remuneration policy adopted by the Company (not adopted yet)

• discussing with the chief executive officer the performance of executive management and of the individual executives at least once a year based on evaluation criteria clearly defined. The chief executive officer should not be present at the discussion of his own evaluation;

• ensuring that the remuneration of non-executive directors is proportional to their responsibilities and the time devoted to their functions.

The Board of Directors shall appoint the chairman and members of the Remuneration Committee from among the non-executive directors and external members which must be independent. The Remuneration Committee will comprise a minimum of two members. In any case the chairman of the Remuneration Committee must be appointed from among non-executive directors.

As of 31 December 2019 the Company hadn't adopted a remuneration policy. Principles of remuneration of the Board members shall be determined by the General Meeting of Shareholders and Board of Directors shall determine the remuneration of the Executives. Remuneration of the Board is related to the Company's financial results.

Personnel

IMC employs people based on principles of equal opportunity, without distinction to race, color, gender, sexual orientation, religion, descent or origin. IMC standards related to employees and human rights are declared in the following documents:

• Non-discrimination and equal opportunities in employment Policy
• Non-discrimination on grounds of sexual orientation and gender identity Policy
• Policy of collective bargaining
• Policy on freedom for workers to form or join trade unions
• Policy of nursing and expectant mothers
• Policy on working hours and overtime
• Employment of young person under the age of 18 Policy.

Policies are freely available to all employees and guests of IMC. The company's policy prohibits discrimination based on color, ethnic or social origin, sex, pregnancy, civil, family status or status of a person caring for, language, religion or other opinion, political or other opinion, national or social origin, citizenship, economic status, association with a national minority, gender identity, age, disability, state of health, genetic characteristics of a person, and other signs or combinations of any of these attributes, actual or imaginary, as well as prohibits discrimination on the basis of association for any of the above listed features.

Internal control and risk management

The Company's internal control over financial reporting includes those policies and procedures that pertain to the maintenance of financial records that, in reasonable detail, accurately and fairly reflect the transactions and disposals of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of annual accounts and consolidated financial statements. In accordance with Luxembourg legal and regulatory requirements, that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposals of the Company's assets that could have a material effect on the financial statements.

External audit

In accordance with the Luxembourg law on commercial companies, an external auditor appointed by the annual general meeting of shareholders certifies the Company's annual and consolidated accounts.

The external audit functions for consolidated financial statements for Y2019 and Y2018 were carried by BDO Audit S.A.

Takeover bids Law statement

• The structure of the capital of the Company is represented in Note 29. The Company is a publicly listed company whose shares are owned primarily by investors and Agrovalley Limited whose beneficial owner is Mr. Oleksandr Petrov, chairman of the Board of Directors. As of 31 December 2019, Mr. Oleksandr Petrov held 24 605 935 shares in the Company, what is equal to 74,16%;
• The Company has no securities which are not admitted to trading on a regulated market;
• The Company has no restrictions on the transfer of securities, such as limitations on the holding of securities or the need to obtain the approval of the company or other holders of securities, without prejudice to article 46 of Directive 2001/34/EC;
• The details of those shareholders with an interest of 5% or more in the issued share capital of the Company, as notified to the Company, are set out in Note 29. The Company has no other significant direct or/and indirect shareholdings (including indirect shareholdings through pyramid structures and cross-shareholdings);
• The Company has no holders of any securities with special control rights. Transfer of shares is governing by the Articles of Association of the Company;
• The Company has no adopted system of control of any employee share scheme where the control rights are not exercised directly by the employees;
• The Company has no adopted restrictions on voting rights, such as limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the company's cooperation, the financial rights attaching to securities are separated from the holding of securities;
• All of the issued and outstanding shares in the Company have equal voting rights and there are no special control rights attaching to the shares;
• The Company didn't receive the information about existence of any agreements between shareholders that may result any restrictions within the meaning of Directive 2001/34/EC;
• The Company has no any agreements to which the company is a party and which take effect, alter or terminate upon a change of control of the company following a takeover bid, and the effects thereof, except where their nature is such that their disclosure would be seriously prejudicial to the Company;
• The Company grants non-availability of any agreements between the company and its board members or/and employees providing for compensation if they resign or are made redundant without valid reason or if their employment ceases because of a takeover bid.

Insider Dealing

The Company follows Luxembourg Stock Exchange, Warsaw Stock Exchange and insider trading policy rules in regards to the disclosure of insider dealing, which require all Board Members to notify the Company with regards to all transactions in the shares in the Company. Following the rules of the notification, the Company notifies both stock exchanges via appropriate regulatory filings.

On behalf of the Management:

Chief Executive Officer	ALEX LISSITSA	__signed______
Chief Financial Officer	DMYTRO MARTYNIUK	__signed______

REPORT OF THE REVISEUR D'ENTREPRISES AGREE

To the Shareholders of tMc s.A. 16, rue Erasme L-1468 Luxembourg

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of IMC SA and its subsidiaries (the "Group"), which comprise the consotidated statement of financiaI position as at 31 December 2019, and the consotidated statement of comprehensive income, consotidated statement of changes in equity and consolidated statement of cash ftows for the year then ended, and notes to the consotidated financiaI statements, including a summary of significant accounting poticies.

ln our opinion, the accompanying consotidated financial statements present fairty, in all material respects, the consolidated financial position of the Group as at 31 December 2019, and of its consotidated financial performance and its consotidated cash ftows for the year then ended in accordance with lnternational Financial Reporting Standards (lFRSs) as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with the EU Regutation N' 537/2014, the Law of 23 Juty 2016 on the audit profession (Law of 23 Juty 2016)and with lnternationat Standards on Auditing (lSAs) as adopted for Luxembourg by lhe "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibitities underthe EU Regulation N' 537/2014, the Lawof 23 Juty 2016 on the audit profession (Law of 23 Juty 2016) and the lSAs are further described in the .Responsibitities of "Rrlviseur d'Entreprises Agrdd" for the audit of the consotidated financia[ statements " section of our report. We are atso independent of the Company in accordance with the lnternationat Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethicat requirements that are retevant to our audit of the annual accounts, and have futfitted our other ethicaI responsibitities under those ethicaI requirements. We betieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consotidated financiaI statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whote, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

BDO Audit, a sociite ononyme incorporated in Luxembourg, is a member of BDO lnternational Limited, a UK company timited by guarantee, and forms part of the internationat BDO network ofindependent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

Existence and valuation of biological assets (notes 3, 7, 21 and 24 to the consolidated financial statements)

Biotogicat assets (non-current and current) are vatued at initiat recognition and at each batance sheet date at fair vatue less estimated point-of-sale costs.

Estimating the fair vatue is a complex process as it is based on discounted cash ftows and invotves various inputs requiring significant judgments and estimates. As a consequence, we have determined the existence and the vatuation of biotogical assets as a key audit matter.

Our procedures were as follows:

• Considering the appropriateness of the model used by the Group and its consistency with prior periods;
• Reviewing the existence of Biotogicat assets on a sampte basis
• Reviewing the inputs used in the calculation, such as yietds, prices through comparison with internaI supporting documentation inctuding prior years' actuaI data and external data;
• Verifying whether the model is arithmeticalty correct;
• Reviewing the disclosures in the consolidated financiaI statements, inctuding disclosures of key assumptions, judgments and sensitivity analysis.

Existence and valuation of inventories - Work in progress - (notes 3, 8 and 23 to the consolidated financial statements)

lnventory contains a significant portion of work in progress tinked to preparation of the lands for future harvest.

Estimating the costs to be attocated to the work in progress is a comptex process as it is based on judgments of management using the recommendations of scientific sources and agronomic catcutations of the internal services of the Group.

As a consequence, we have determined the existence and vatuation of work in progress as a key audit matter.

Our procedures were as fottows:

• Confirming the existence of lands in preparation for future harvest through year end observation on a sampte basis;
• Reviewing the main assumptions undertying the costs altocation used by the Group (standard direct and indirect costs altocated to hectares of land on the basis of different factors such as the type of crop and the geographical location of the tand);
• Apptying a control on a sampte basis of the input data used by the Group in their costs attocation model to internat supporting information and documents;
• Reviewing the disctosures in the consolidated financiaI statements, inctuding disctosures of key assumptions and judgments.

Going concern (note 2 - going concern and note 4 - operating environment)

As mentioned in note 4 to the consotidated financial statements, the Group is mainty active in Ukraine.

ln 2014, Ukraine was faced with potitical and economic turmoit, inctuding the annexation by the Russian Federation of Crimea and separatist movements in Lugansk and Donetsk regions.

Even though the Group has no assets in the regions mentioned above, the Group suffered from the consequences of these events on the Ukrainian economy.

The Group is to a significant extent financed by banks and financial institutions, through loan contracts with covenants. Loans and borrowings (exctuding tease tiabitities) represent as at 31 December 2019,15.76% of total liabitities and equity.

Assessment on going concern is targety dependent on forecasts and estimates made by management.

We therefore have considered going concern as a key audit matter.

Our procedures were as fottows:

• Obtaining and evaluating the assessment made by management on going concern;
• Chattenging the reasonabteness of the key assumptions underlying the business ptan and cash ftow forecasts, through a review of past performance and comparison with prior forecasts, a review of the sensitivity anatyses of the modets, where possibte ^a comparison of the assumptions with externaI data ;
• Verifying that based on the conditions of the contracts, the bank covenants are met as at 31 Decembe r 2019, and that these are expected to be met based on the forecast prepared by the management unti[ 31 December 2020;
• Evatuating whether events and devetopments since the beginning of the year 2020 may have an impact on the business ptan and forecasts;
• Obtaining assessment of management and evatuating the impact of the Covid ¹⁹ outbreak on the going abitity of the Group.

IFRS 16- Right of use of assets and lease liabilities (notes 5 and 19)

As mentioned in note 5 to the consolidated financial statements, the Group has adopted lFRS16 from 1 January 2019. The Group had adopted a modified retrospective approach for the apptication of IFRS 16.

The Group recognizes tease tiabitities in retation to leases which had previously been classified as operating [eases under the principtes of IAS 17 and evatuated the right-of-use assets. Lease tiabititiei as to right-of-use assets were measured at the present vatue of the remaining tease payments, discounted using the Group's average borrowing rate.

Apptication of IFRS 16 is a complex accounting process as it invotves several assumptions and management's estimates in the determination of the average's borrowing rate and the application of the practical expedients.

Extensive disclosures are atso required as per IFRS 16 in respect of the first apptication.

As a consequence, we have considered IFRS 16 as a key audit matter

Our procedures were as fottows:

• Reviewing the memo prepared by management on the apptication of IFRS 16;
• Performing other substantive procedures inctuding the assessment of the information received from the management in relation with the identification of atl the tease agreements in ptace and the appropriateness of the Management's interpretation of accounting in the context;
• Reviewing the catcutations of net present value (future discounted leases payments), depreciation and interest based on requirements of IFRS 16;
• Reviewing the disclosures made to the consotidated financial statements and ensuring assumptions used and expedients apptied are ctearty disctosed.

Other information

The Board of directors is responsibte for the other information. The other information comprises the information stated in the singte management report and the Corporate Governance Statement but does not include the consotidated financiat statements and our report of "R6viseur d'Entreprises A9166" thereon.

Our opinion on the consotidated financiat statements does not cover the other information and we do not express any form of assurance conclusion thereon.

ln connection with our audit of the consolidated financial statements, our responsibitity is to read the other information and, in doing so, consider whether the other information is materiatty inconsistent with the consotidated financia[ statements or our knowtedge obtained in the audit or otherwise appears to be materiatly misstated. lf, based on the work we have performed, we conctude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and Those Charged with Governance for the consolidated financial statements

The Board of Directors is responsibte for the preparation and fair presentation of the consotidated financiat statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enabte the preparation of consotidated financiaI statements that are free from materiat misstatement, whether due to fraud or error.

ln preparing the consotidated financial statements, the Board of Directors is responsible for assessing the Group's abitity to continue as a going concern, disctosing, as appticabte, matters retated to going concern and using the going concern basis of accounting untess the Board of Directors either intends to tiquidate the Group or to cease operations, or has no reatistic atternative but to do so.

Those charged with governance are responsibte for overseeing the Group's financiaI reporting process.

Responsibilities of the "R6viseur d'Entreprises A9166" for the audit of the consolidated financial Statements

The objectives of our audit are to obtain reasonabte assurance about whether the consolidated financial statements as a whote are free from materiaI misstatement, whether due to fraud or error, and to issue a report of "R6viseur d'Entreprises A9166" that includes our opinion. Reasonabte assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the EU Regutation N' 537/2014, the Law of 23 Juty 2016 and with lSAs as adopted for Luxembourg by the CSSF wit[ always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered materiat if, individuatty or in the aggregate, they coutd reasonabty be expected to inftuence the economic decisions of users taken on the basis of these consotidated financial statements.

As part of an audit in accordance with the EU Regutation N" 537 /2014, the Law of 23 Juty 2016 and with lSAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• ldentify and assess the risks of material misstatement of the consotidated 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 resutting from fraud is higher than for one resulting from error, as fraud may invotve cottusion, forgery, intentional omissions, misrepresentations, or the override of internal controt.
• Obtain an understanding of internal control retevant 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 controt.
• a Evatuate the appropriateness of accounting poticies used and the reasonableness of accounting estimates and retated disctosures made by the Board of Directors.
• Conctude on the appropriateness of Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists retated to events or conditions that may cast significant doubt on the Group's abitity to continue as a going concern. lf we conclude that a material uncertainty exists, we are required to draw attention in our report of "R6viseur d'Entreprises A9166" to the retated disctosures in the consotidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conctusions are based on the audit evidence obtained up to the date of our report of "R6viseur d'Entreprises A9166". However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evatuate the overat[ presentation, structure and content of the consotidated financiaI statements, including the disclosures, and whether the consolidated financial statements represent the undertying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financiaI information of the entities and business activities within the Group to express an opinion on the consotidated financiat statements. We are responsibte for the direction, supervision and performance of the Group audit. We remain solely responsibte for our audit opinion. a

We communicate with those charged with governance regarding, among other matters, the ptanned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controt that we identify during our audit.

BDOAudit, asocidteonon/meincorporatedinLuxembourg,isamemberofBDOlnternationalLimited,aUKcompanytimitedbyguarantee,andformspart of the internationat BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms'

We also provide those charged with governance with a statement that we have complied with retevant ethicat requirements regarding independence, and to communicate with them atl retationships and other matters that may reasonably be thought to bear on our independence, and where appticabte, retated safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consotidated financiaI statements of the current period and are therefore the key audit matters. We describe these matters in our report untess [aw or regutation prectudes pubtic disctosure about the matter.

Report on Other Legal and Regulatory Requirements

We have been appointed as "R6viseur d'Entreprises A9166" by the General Meeting of the Shareholders on 25 Aprit 2017. As BDO Audit merged with HRT R6vision, which was appointed as "R6viseur d'Entreprises A9166" for year-end 201 6, the duration of our uninterrupted engagement is 4 years.

The singte management report is consistent with the consolidated financial statements and has been prepared in accordance with appticabte legal requirements.

The Corporate Governance Statement is presented on pages 20 to 24 of the consolidated financial statements. The information required by Articte 68ter paragraph (1) letters c) and d) of the taw of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings, as amended, is consistent with the consolidated financiat statements and has been prepared in accordance with appticabte tegaI requirements.

Other matter

The Corporate Governance Statement inctudes, when appticabte, information required by Articte 6\$ter paragraph (1) points a), b), e), f) and g) of the law of 19 December 2002 on the commerciat and companies register and on the accounting records and annual accounts of undertakings, as amended.

We confirm that the prohibited non-audit services referred to in the EU Regutation No 537/2014 were not provided and that we remained independent of the Company in conducting the audit.

Luxembourg, 30 Aprit 2020

BDO Audit Cabinet de r6vision agr66 represented by

f7'

Jean-Phitippe Barret

Consolidated financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in thousand USD, unless otherwise stated)	Notes	For the year ended 31 December 2019	For the year ended 31 December 2018
CONTINUING OPERATIONS
Revenue	6	169 601	131 611
Gain from changes in fair value of biological assets and agricultural produce, net	7	52 768	73 326
Cost of sales	8	(170 927)	(138 854)
GROSS PROFIT		51 442	66 083
Administrative expenses	9	(13 246)	(11 928)
Selling and distribution expenses	10	(21 247)	(11 794)
Other operating income	11	2 708	951
Other operating expenses	12	(4 176)	(5 022)
Write-offs of property, plant and equipment		(260)	(2 287)
OPERATING PROFIT		15 221	36 003
Financial expenses, net	15	(3 476)	(4 987)
Effect of lease of right-of-use assets	19	(7 640)	-
Effect of additional return	30	(2 090)	(3 265)
Foreign currency exchange gain, net	16	6 049	567
PROFIT BEFORE TAX FROM CONTINUING OPERATIONS		8 064	28 318
Income tax expenses, net	17	(746)	(691)
NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS		7 318	27 627
Net profit/(loss) for the period attributable to:
Owners of the parent company		7 482	27 697
Non-controlling interests		(164)	(70)
Weighted average number of shares		33 178 000	33 178 000
Basic profit per ordinary share (in USD)		0,22	0,83
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Effect of foreign currency translation		21 513	1 955
Items that will no be reclassified to profit or loss

Items that will no be reclassified to profit or loss
Deferred tax charged directly to amortization of revaluation reserve	212	259
TOTAL OTHER COMPREHENSIVE INCOME	21 725	2 214
TOTAL COMPREHENSIVE PROFIT	29 043	29 841
Comprehensive income/(loss) attributable to:
Owners of the parent company	29 149	29 903
Non-controlling interests	(106)	(62)

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

__________signed____________ Dmytro Martyniuk

Consolidated financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2019

(in thousand USD, unless otherwise stated)
	Note	31 December 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	18	75 950	72 648
Right-of-use assets	19	101 203	-
Intangible assets	20	1 934	2 099
Non-current biological assets	21	2 590	1 857
Prepayments for property, plant and equipment	22	171	566
Total non-current assets		181 848	77 170
Current assets
Inventories	23	91 850	101 578
Current biological assets	24	13 224	7 983
Trade accounts receivable, net	25	277	459
Prepayments and other current assets, net	26	6 027	7 096
Cash and cash equivalents	28	5 182	3 920
Total current assets		116 560	121 036
TOTAL ASSETS		298 408	198 206
LIABILITIES AND EQUITY
Equity attributable to the owners of parent company
Share capital	29	59	59
Share premium		29 512	29 512
Revaluation reserve		39 654	48 603
Retained earnings		172 945	172 822
Effect of foreign currency translation		(109 298)	(130 753)
Total equity attributable to the owners of parent company		132 872	120 243
Non-controlling interests		321	427
Total equity		133 193	120 670
Non-current liabilities
Deferred tax liabilities	31	3 218	3 027
Long-term loans and borrowings	32	2 998	15 789
Long-term lease liabilities as to right-of-use assets	19	87 425	-
Total non-current liabilities		93 641	18 816
Current liabilities
Current portion of long-term borrowings	32	16 502	14 467
Current portion of long-term lease liabilities as to right-of-use assets	19	15 863	-
Short-term loans and borrowings	33	27 538	28 500
Trade accounts payable	34	2 867	3 049
Other current liabilities and accrued expenses	35	8 804	12 704
Total current liabilities		71 574	58 720
Total liabilities		165 215	77 536
TOTAL LIABILITIES AND EQUITY		298 408	198 206

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

Dmytro Martyniuk

__________signed____________

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2019

(in thousand USD, unless otherwise stated)

	Share capital	Share premium	Revaluation reserve	Retained earnings	Effect of foreign currency translation	Total	Non controlling interests	Total equity
31 December 2017	59	29 512	58 825	147 853	(132 700)	103 549	489	104 038
Сomprehensive income/(loss) for the year Profit/(loss) for the period	-	-	-	27 697	-	27 697	(70)	27 627
Amortization of revaluation reserve	-	-	(10 481)	10 481	-	-	-	-
Deferred tax charged directly to amortization of revaluation reserve	-	-	259	-	-	259	-	259
Other comprehensive income	-	-	-	-	1 947	1 947	8	1 955
Total comprehensive profit/(loss)	-	-	(10 222)	38 178	1 947	29 903	(62)	29 841
Contributions by and distributions to owners
Distribution of dividends	-	-	-	(13 209)	-	(13 209)	-	(13 209)
31 December 2018	59	29 512	48 603	172 822	(130 753)	120 243	427	120 670
31 December 2018	59	29 512	48 603	172 822	(130 753)	120 243	427	120 670
Сomprehensive
income/(loss) for the year Profit/(loss) for the period	-	-	-	7 482	-	7 482	(164)	7 318
Amortization of revaluation reserve	-	-	(9 161)	9 161	-	-	-	-
Deferred tax charged directly to amortization of revaluation reserve	-	-	212	-	-	212	-	212
Other comprehensive income	-	-	-	-	21 455	21 455	58	21 513
Total comprehensive profit/(loss) Contributions by and	-	-	(8 949)	16 643	21 445	29 149	(106)	29 043
distributions to owners Distribution of dividends	-	-	-	(16 520)	-	(16 520)	-	(16 520)
31 December 2019	59	29 512	39 654	172 945	(109 298)	132 872	321	133 193

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

Dmytro Martyniuk

__________signed____________

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2019

(in thousand USD, unless otherwise stated)

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax from continuing operations		8 064	28 318
Adjusted to reconcile loss before tax with net cash used in
operating activities:
Gain from changes in fair value of biological assets and agricultural produce, net	7	(52 768)	(73 326)
Disposal of revaluation of biological assets and agricultural
produce in the cost of sales, net	8	72 193	56 460
Depreciation and amortization	13	23 803	12 556
Effect of lease of right-of-use assets	19	7 640	-
Interest expenses and other financial expenses	15	4 035	5 352
Foreign currency exchange loss/(gain), net		(6 328)	(630)
Loss/(gain) on disposal of property, plant and equipment	11	(119)	1 521
Effect of additional return		2 090	3 265
Deferred expenses on options		1 702	1 702
Write-offs of property, plant and equipment		260	2 287
Gain on recovery of assets previously written off	11	(398)	(338)
Interest income	15	(559)	(364)
Accruals for unused vacations		736	111
Accruals for audit services		87	71
Lost crops	12	-	465
Write-offs of VAT	12	101	51
Shortages and losses due to impairment of inventories	12	56	236
Income from write-offs of accounts payable	11	(83)	(19)
Income from the exchange of property certificates	11	0	(31)
Gain on disposal of inventories	11	(29)	(66)
Allowance for doubtful accounts receivable	12	72	153
Government grants recognised as income		(147)	(364)
Cash flows from operating activities before changes in		60 408	37 410
working capital
Changes in trade accounts receivable		(18)	(361)
Changes in prepayments and other current assets		2 736	4 132
Changes in inventories		3 265	(21 515)
Changes in current biological assets		(1 906)	6 870
Changes in trade accounts payable		(633)	1 781
Changes in other current liabilities and accrued expenses		(3 741)	5 656
Cash flows from operations		60 111	33 973
Interest paid on loans and borrowings		(4 104)	(5 158)
Interest paid on lease liabilities as to right-of-use assets		(1 039)	-
Income tax paid		(851)	(642)
Net cash flows from operating activities		54 117	28 173

__________signed____________

Alex Lissitsa

__________signed____________ Dmytro Martyniuk Chief Executive Officer Chief Financial Officer

CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

For the year ended 31 December 2019 (in thousand USD, unless otherwise stated)

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(6 546)	(5 222)
Purchase of intangible assets		(26)	(38)
Proceeds from disposal of property, plant and equipment		1 845	366
Proceeds from government grants		147	364
Net cash flows from investing activities		(4 580)	(4 530)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term and short-term borrowings		16 274	11 408
Repayment of long-term and short-term borrowings		(30 040)	(20 329)
Repayment of long-term and short-term lease liabilities as to right-of-use assets		(15 911)	-
Payment of dividends		(16 520)	(13 209)
Net cash flows from financing activities		(46 197)	(22 130)
NET CASH FLOWS		3 340	1 513
Cash and cash equivalents as at the beginning of the period		3 920	6 092
Effect of translation into presentation currency		(2 078)	(3 685)
Cash and cash equivalents as at the end of the period	28	5 182	3 920

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

__________signed____________

Dmytro Martyniuk

(in thousand USD, unless otherwise stated)

1. Description of formation and business

IMC S.A. (the "Parent company") is a limited liability company registered under the laws of Luxembourg on 28 December 2010 for an unlimited period of time. IMC S.A. was formed to serve as the ultimate holding company of Unigrain Holding Limited and its subsidiaries. The registered address of IMC S.A. is L-1468, 16 rue Erasme, Luxembourg, Grand Duchy Luxembourg, its register number within the Registre de Commerce et des Sociétés du Luxembourg is RCS B157843.

IMC S.A. and its subsidiaries (the "Group" or the "IMC") is an integrated agricultural company in Ukraine. The main areas of the Group's activities are:

• cultivation of grain and oilseeds crops, potato production;
• dairy farming;
• storage and processing of grain and oilseeds crops.

The Group is among Ukraine's top-10 industrial milk producers. The grain and oilseeds crops produced by the Group are sold in both the Ukrainian and export markets.

Until December 2010 there was no the holding company of the Group.

In June 2009 in the course of the corporate reorganization Unigrain Holding Limited was established as a sub-holding company of the Group. Through the series of transactions Unigrain Holding Limited became the immediate parent of Burat-Agro, Ltd., Burat, Ltd., Chernihiv Industrial Milk Company, Ltd., PRJSC Mlibor, PRJSC Poltava Kombikormoviy Zavod and Zemelniy Kadastroviy Centr SA.

In December 2010 IMC S.A. was registered as a holding company of the Group through the ownership of 100% of the voting shares in the company Unigrain Holding Limited.

In June 2011 Unigrain Holding Limited acquired 100% of the voting shares in the company PAE Promin, PE Progress 2010, PAE Slavutich. In November 2011 companies PAE Slavutich and PE Progress 2010 were merged to Chernihiv Industrial Milk Company, Ltd and the company PAE Promin was merged to Burat-Agro, Ltd.

In August 2011 trading company Aristo Eurotrading was formed.

In December 2011 Unigrain Holding Limited acquired 100% of the voting shares in the company AF Kalynivska 2005, Ltd, AF Zhovtneva, Ltd, AF Shid-2005, Ltd, APP Virynske, Ltd, Pisky, Ltd., SE "Viry-Agro" and 80,61% of the voting shares in the company PRJSC "Viryvske HPP".

In March 2012 Unigrain Holding Limited acquired 100% of the voting shares in the company Ukragrosouz KSM, Ltd.

In June 2012 Unigrain Holding Limited acquired 100% of the voting shares in the company PAC Slobozhanschina Agro.

In November 2012 the Group was restructured and 6 companies were joined to PAC Slobozhanschina Agro: AF Kalynivska-2005 Ltd, AF Zhovtneva Ltd, AF Shid-2005 Ltd, AIE Vyrynske Ltd, Pisky Ltd, SE Vyry-Agro.

In December 2012 Unigrain Holding Limited acquired 100% of the voting shares in the company Bluerice Limited. The following companies became the part of the Group, as their owner is Bluerice Limited: Agroprogress Holding Ltd, Agroprogress PE, Bobrovitsky Hlebzavod Ltd, Plemzavod Noviy Trostyanets Ltd, PRJSC "Bobrovitske HPP", Losinovka-Agro Ltd, Parafiyivka-Progress Ltd, Nosovsky Saharny Zavod Ltd.

In November 2013 trading company Negoce Agricole S.A. was formed.

In December 2013 Losinovka-Agro Ltd was joined to Agroprogress PE.

During the year 2013 the Group acquired the voting shares in the company AgroKIM Ltd and on 30 December 2013 the acquisition was completed and 100% of the voting shares were owned by the Group.

In April 2014 Parafiyivka-Progress Ltd was joined to AgroKIM Ltd.

In May 2015 Plemzavod Noviy Trostyanets Ltd was joined to AgroKIM Ltd.

In May 2016 Ukragrosouz KSM Ltd was joined to Burat-Agro Ltd.

In October 2016 Zemelniy Kadastroviy Centr PE and Agroprogress Holding Ltd left the Group.

In December 2016 Bluerice Limited left the Group.

On 26 April 2017 IMC S.A. (formally Industrial Milk Company S.A., hereinafter the Company) informs that official name of the Company has been changed from Industrial Milk Company S.A. to IMC S.A.

In June 2019 trading company Aristo Eurotrading HK Limited was formed.

All companies comprising the Group were under the control of the same beneficial owner Mr. Petrov O.L. as at all the reporting dates and have effectively operated as an operating group under common management.

(in thousand USD, unless otherwise stated)

The principal activities of the companies comprising the Group are as follows:

		Country of	Year	Cumulative ownership ratio, %
Operating entity	Principal activity	registration	established/ acquired	31 December 2019	31 December 2018
IMC S.A.	Holding company	Luxembourg	28.12.2010	100	100
Burat-Agro Ltd.	Agricultural and farming production	Ukraine	31.12.2007	100	100
Burat Ltd.	Grain elevator	Ukraine	31.12.2007	100	100
Chernihiv Industrial Milk Company Ltd.	Agricultural and farming production	Ukraine	31.12.2007	100	100
PrJSC Poltava Kombilormoviy Zavod	Granting of PPE into finance lease	Ukraine	31.12.2007	87,56	87,56
PrJSC Mlibor	Grain elevator	Ukraine	31.05.2008	74,08	72,85
Unigrain Holding Limited	Subholding company	Cyprus	02.06.2009	100	100
Aristo Eurotrading Limited	Trading company	British Virgin Islands	30.08.2011	100	100
PrJSC "Vyryvske HPP"	Grain elevator	Ukraine	28.12.2011	80,61	80,61
PAC Slobozhanschina Agro	Agricultural production	Ukraine	26.06.2012	100	100
Agroprogress PE	Agricultural and farming production	Ukraine	28.12.2012	100	100
Bobrovitsky Hlebzavod Ltd	Bakery production	Ukraine	28.12.2012	100	100
PrJSC "Bobrovitske HPP"	Grain elevator	Ukraine	28.12.2012	92,83	92,83
Nosovsky Saharny Zavod Ltd	Storage facilities	Ukraine	28.12.2012	99,9	99,9
Negoce Agricole S.a r.l.	Trading company	Luxembourg	19.11.2013	100	100
AgroKIM Ltd.	Agricultural and farming production, grain elevator	Ukraine	30.12.2013	100	100
Aristo Eurotrading HK Limited	Trading company	Hong Kong	21.06.2019	100	-

Today IMC is the vertically integrated and high-technology group of companies operating in Sumy, Poltava and Chernihiv region (northern and central Ukraine).

The Group controls 123,3 thousand ha (123,0 thousand ha under processing of high quality arable land). As at 31 December 2019 the Group operates in three segments: crop farming, dairy farming, elevators and warehouses.

The financial year of the Group begins on 01 January of each year and terminates on 31 December of each year.

The Group's Consolidated financial statements are public and available at:

http://www.imcagro.com.ua/en/investor-relations/financial-reports.

Stock information about the Company (company code name on WSE: IMCOMPANY (LU0607203980)):

https://www.gpw.pl/company-factsheet?isin=LU0607203980

Consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousand USD, unless otherwise stated)

2. Basis of preparation of the Consolidated financial statements

Statement of compliance

These Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.

These Consolidated financial statements are based on principal accounting policies and critical accounting estimates and judgments that are set out below. These accounting policies and assumptions have been applied consistently to all periods presented in these Consolidated financial statements.

Companies comprising the Group which are incorporated in Ukraine maintain their accounting records in accordance with Ukrainian regulations. Ukrainian statutory accounting principles and procedures differ from those generally accepted under IFRS. Accordingly, the Consolidated financial statements, which have been prepared from the Ukrainian statutory accounting records for the entities of the Group domiciled in Ukraine, reflect adjustments necessary for such financial statements to be presented in accordance with IFRS.

Going concern

These Consolidated financial statements have been prepared on a going concern basis, which contemplates the disposal of assets and the settlement of liabilities in the normal course of business. The recoverability of Group's assets, as well as the future operations of the Group, may be significantly affected by the current and future economic environment. Management believes that Group has reliable access to sources of financing capable to support appropriate operating activity of Group entities. These Consolidated financial statements do not include any adjustments should the Group be unable to continue as going concern.

Basis of measurement

The Consolidated financial statements are prepared under historical cost basis except for the revalued amounts of property, plant and equipment, fiar values of biological assets and agricultural produce.

The Group's management has decided to present and measure these Consolidated financial statements in United States Dollars ("USD") for the purposes of convenience of users of these financial statements.

Use of estimates

The preparation of these Consolidated financial statements involves the use of reasonable accounting estimates and requires the Management to make judgments in applying the Group's accounting policies. These estimates and assumptions are based on Management's best knowledge of current events, historical experience and other factors that are believed to be reasonable. Note 4 contains areas, related to a high degree of importance or complexity in decision-making, or areas where assumptions and estimates are important for amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the end of the reporting period.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group's companies are measured using the currency of the primary economic environment in which the company operates ("the functional currency"). For the companies of the Group operating in Ukraine the Ukrainian Hryvna ("UAH") is the functional currency. For the companies operating in Cyprus and Luxembourg the functional currency is Euro ("EUR").

These Consolidated financial statements are presented in the thousands of United States Dollars ("USD"), unless otherwise indicated.

Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

				(in thousand USD, unless otherwise stated)
--	--	--	--	--------------------------------------------	--	--

Currency	31 December 2019	Average for the year ended 31 December 2019	31 December 2018	Average for the year ended 31 December 2018	31 December 2017
UAH/USD	23,6862	25,83734	27,688264	27,20162	28,067223
EUR/USD	1,12	1,12	1,15	1,18	1,19

The principal exchange rates used in the preparation of these Consolidated financial statements are as follows:

Translation into presentation currency

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the official rate at the date of the balance sheet;

• income and expenses are translated at average exchange rate for the period, unless fluctuations in exchange rates during that period are significant, in which case income and expenses are translated at the rate on the dates of the transactions;

• all the equity and provision items are translated at the rate on the dates of the transactions;

• all resulting exchange differences are recognized as a separate component of other comprehensive income;

• in the consolidated statement of cash flows cash balances at the beginning and end of each presented period are translated at rates prevailing at corresponding dates. All cash flows are translated at average exchange rates for the periods presented. Exchange differences arising from the translation are presented as the effect of translation into presentation currency.

Principles of consolidation

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed at the date of acquisition, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statement of comprehensive income.

Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Financial statements of parent company and its subsidiaries, which are used while preparing the Consolidated financial statements, should be prepared as at the same date on the basis of consistent application of accounting policy for all companies of the Group.

3. Summary of significant accounting policies

Property, plant and equipment

Property, plant and equipment are stated at their revalued amounts that are the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Any accumulated depreciation at the date of revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount.

If there is no data about the market value of property, plant and equipment due to the nature of highly specialized machinery and equipment, such objects are evaluated according to acquisition expenses under present-day conditions, adjusted by an ageing percentage.

Property, plant and equipment of acquired subsidiaries are initially recognised at their fair value which is based on valuations performed by independent professionally appraisers.

Valuations are performed frequently enough to ensure that the fair value of a remeasured asset does not differ materially from its carrying amount as at reporting date.

Increases in the carrying amount arising on revaluation of property, plant and equipment are recognised in other comprehensive income and accumulated in equity under the line Revaluation reserve. Decreases in the carrying amount as a result of a revaluation are in profit or loss. However, the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. Decrease related to previous increase of the same asset is recognized against other reserves directly in equity.

(in thousand USD, unless otherwise stated)

The revaluation surplus included in equity in respect of an item of property, plant and equipment is transferred directly to retained earnings as the asset is used by an entity (in the amount that is the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset's original cost) and when the asset is derecognized (in the full amount).

Subsequent major costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that these replacements will materially extend the life of property, plant and equipment or result in future economic benefits. The carrying amount of the replaced part is derecognized. All other day-to-day repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred.

Property, plant and equipment or their essential component are written-off in a case of their disposal or if future economic benefits from use or disposal of such asset are not expected. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the other incomes (expenses) in the consolidated statement of comprehensive income when the asset is derecognized.

Depreciation of an asset begins when it is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by Management. Depreciation of an asset ceases when the asset is derecognized. Depreciation does not cease when the asset becomes idle or is retired from active use and held for disposal unless the asset is fully depreciated.

Depreciation on assets is calculated using the straight-line method to allocate their revalued amounts to their residual values over their estimated useful lives, as follows:

• Buildings 15-55 years - Machinery 5-30 years - Motor vehicles 5-20 years - Other assets 5-20 years

The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date.

Land is not depreciated.

Construction in progress comprises costs directly related to the construction of property, plant and equipment, as well as the relevant variable and fixed overhead costs related to the construction. These assets are depreciated from the moment when they are ready for operation.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statement of comprehensive income in other income (expenses) when the asset is derecognized.

The Group determines whether the useful life of an intangible asset is finite or indefinite.

Useful life of intangible assets is indefinite if the Group suggests that the period during which it is expected that the object of intangible assets will generate net cash inflows to the organization has no foreseeable limit. Intangible assets with indefinite useful lives are not amortized, but reviewed for impairment.

Amortisation of intangible assets is charged to the consolidated statement of comprehensive income on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use. The following estimated useful lives, which are re-assessed annually, have been determined for classes of finite-lived intangible assets:

- Land lease rights	5-15 years
------------------------	------------

• Computer software 5 years

Impairment of property, plant and equipment and intangible assets

The carrying amounts of property, plant and equipment and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Where it is impossible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of a cash-generating unit to which the asset belongs.

The recoverable amount is the higher of the fair value of an asset less costs to sell and its value in use. Value in use is the net present value of expected future cash flows, discounted on a pre-tax basis, using a rate that reflects current market assessments of the time value of money.

An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the consolidated statement of comprehensive income.

(in thousand USD, unless otherwise stated)

A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of comprehensive income unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Biological assets

The biological assets are classified as non-current and current depending on the expected pattern of consumption of the economic benefits embodied in the biological assets.

The following categories of biological assets are distinguished by the Group:

• Non-current biological assets of plant-breeding at fair value;
• Non-current biological assets of cattle-breeding at fair value;
• Current biological assets of plant-breeding measured at fair value;
• Current biological assets of cattle-breeding measured at fair value.

The Group assesses a biological asset at initial recognition and at each balance sheet date at fair value less estimated point-of-sale costs, except for the cases where the fair value cannot be determined with reasonable assurance.

Gains or losses from movements in the fair value of biological assets less estimated selling and distribution expenses of the Group are recorded in the period they are incurred in the consolidated statement of comprehensive income as Gain (loss) from changes in fair value of biological assets and agricultural produce, net.

The Group capitalizes expenses between the reporting dates into the cost of biological assets.

• Biological assets of plant-breeding

The capitalized expenses include all the direct costs and overhead costs related to the farming division. Such costs may include the following costs: raw materials (seeds, mineral fertilizers, fuel and other materials), wages and salaries expenses of production personnel and related charges, amortization and depreciation, land lease expenses and other taxes, third parties' services and other expenses related to the cultivation and harvesting of biological assets of plant-breeding.

• Biological assets of animal-breeding The capitalized expenses include all the direct costs and overhead costs related to the livestock breeding. The types of costs that are capitalized in the current biological assets of animal breeding are the following: fodder, means of protection of animals and artificial insemination, fuel and other materials, wages and salaries expenses of production personnel and related charges, amortization and depreciation, third parties' services and other expenses related to the current biological assets of animal breeding.

All expenses related to the non-current biological assets of cattle breeding are included into the cost of milk. Respectively the Note of non-current biological assets does not include any capitalized costs.

The expenses on works connected with preparation of the lands for future harvest are included into the Inventories as work-in-progress. After works on seeding on these lands the cost of field preparation is reclassified to biological assets held at fair value.

Agricultural produce

The Group classifies the harvested product of the biological assets as agricultural produce. Agricultural produce is measured at its fair value less costs to sell at the point of harvest. The difference between the cost and fair value less costs to sell at the point of harvest of harvested agricultural produce is recognized in the consolidated statement of comprehensive income as Gain (loss) from changes in fair value of biological assets and agricultural produce, net.

After the initial recognising as at the date of harvesting agricultural produce is treated as inventories. Agricultural produce measurement as at the date of harvest becomes inventories' cost to account.

Inventories

Inventories are measured at the lower of cost or net realizable value.

The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of agriculture produce is its fair value less costs to sell at the point of harvesting.

The cost of work in progress and finished goods includes costs of direct materials and labor and other direct productions costs and related production overheads (based on normal operating capacity). Costs are capitalized in work in progress for preparing and treating land prior to seeding in the next period. Work in progress is transferred to biological assets once the land is seeded.

(in thousand USD, unless otherwise stated)

The cost of inventories is assigned by using FIFO method.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

The Group periodically analyses inventories to determine whether they are damaged, obsolete or slow-moving or if their net realizable value has declined, and makes an allowance for such inventories. If such situation occurred, the sum remissive the cost of inventories should be reflected as a part of other expenses in consolidated statement of comprehensive income.

Financial instruments

Financial assets and financial liabilities are regognised in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets or financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognized on a trade date basis.

All recognized financial assets are measured subsequently in their entirety at their amortised cost or fair value, depending on the classification of the financial assets.

The Group's financial assets include cash and cash equivalents, trade receivables and other receivables and are classified as Financial assets at amortised cost.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any different between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.

The Group recognises a loss allowance for expected credit losses on financial assets and updates the allowance at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The expected credit losses are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. The expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate.

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration receives and receivable is recognised in consolidated statement of comprehensive income.

Financial liabilities

All financial liabilities are measures subsequently at amortised cost using the effective interest method or at fair value through profit or loss.

The Group's financial liabilities include trade payables and other payables, loans and borrowings, which are classified as Financial liabilities at amortised cost.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expenses over the relevant period. The effective interest rate is the rate that exactly discount estimated future cash payments (including all fees and points or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.

The Group derecognises a financial liability only when the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the sum of the consideration paid and payable is recognised in consolidated statement of comprehensive income.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in consolidated statement of comprehensive income.

(in thousand USD, unless otherwise stated)

Prepayments and other non-financial assets

Prepayments are reflected at nominal value less VAT and accumulated impairment losses, other non-financial assets are reflected at nominal value less accumulated impairment losses.

Prepayments are classified as non-current assets when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition.

An option on Management Incentive Plan is classified as deferred expenses in the amount of exceeding of quoted share price under subscription price with impact on share premium in equity. The deferred expenses are recognized as expenses of the period in the line Wages and salaries of administrative personnel and related charges during the term of exercising of the option.

If there is an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is written down accordingly and a corresponding impairment loss is recognised as a part of other expenses in statement of comprehensive income.

Cash and cash equivalents

Cash and cash equivalents include cash in bank and cash in hand, call deposits.

Leases

Applicable before 1 January 2019

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Group as a lessee

Leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are classified as finance leases. Assets held under finance lease are included in property, plant and equipment since the commencement of lease at the lower of the fair value of leased property and present value of minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in the consolidated statement of comprehensive income.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an expense in the consolidated statement of comprehensive income on a straight-line basis over the lease term.

Applicable after 1 January 2019

Refer to Note 5 – IFRS 16 Leases.

Taxation

Income tax

Income tax expense represents the amount of the tax currently payable and deferred tax.

Income tax expenses are recorded as expenses or income in the consolidated statement of comprehensive income, except when they relate to items directly attributable to other comprehensive income (in which case the amount of tax is taken to other comprehensive income), or when they arise at initial recognition of company acquisition.

i. Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date, in the countries where the Group operates and generates taxable income.

ii. Deferred income tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; - in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except:

IMC S.A. AND ITS SUBSIDIARIES Consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousand USD, unless otherwise stated)

• where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Single tax 4th group (previously Fixed agricultural tax)

According to effective legislation, the Ukrainian consolidated companies of the Group involved in production, processing and sale of agricultural products may opt for paying single tax 4th group in lieu of income tax, land tax and some other local taxes if the revenues from sale of their own agricultural products constitute not less than 75% of their total (gross) revenues. The single tax 4th group is assessed at 0,95% on the deemed value of the land plots owned or leased by the entity (0,95% in 2018). As at 31 December 2019, 5 of the companies comprising the Group were elected to pay single tax 4th group (2018: 5).

Value added tax (VAT)

VAT output equals to the total amount of VAT collected within a reporting period, and arises on the earlier of the date of shipping goods to a customer or the date of receiving payment from the customer. VAT input is the amount that a taxpayer is entitled to offset against his VAT liability in a reporting period. Rights to VAT input arise on the earlier of the date of payment to the supplier or the date goods are received.

Revenue, expenses and assets are recognized less VAT amount, except cases, when VAT arising on purchases of assets or services, is not recoverable by tax authority; in this case VAT is recognized as part of purchase costs or part of item of expenses respectively. Net amount of VAT, recoverable by tax authority or paid, is included into accounts receivable and payable, reflected in consolidated statement of financial position.

Other taxes payable Other taxes payable comprise liabilities for taxes other than above, accrued in accordance with legislation enacted or substantively enacted by the end of the reporting period.

Government grants

The Ukrainian legislation provides various benefits and grants for companies engaged in agriculture. Such benefits and grants are approved by the Supreme Council of Ukraine, the Ministry of Agrarian Policy, Ministry of Finance and local authorities. The Group recognizes this type of benefits upon the receipt of funds as other operating income in the consolidated statement of comprehensive income.

Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Contingent assets and liabilities

Contingent liabilities are not recognized in the consolidated financial statements. The Group discloses information about contingent liabilities in the Notes to the consolidated financial statements if any, except for the cases where fulfillment of contingent liabilities is unlikely; because of the remoteness of the event (possible repayment period is more than 12 months).

The Group constantly analyzes contingent liabilities to determine the possibility of their repayment. If the repayment of a liability, which was previously characterized as contingent, becomes probable, the Group records the provision for the period in which repayment of the obligation has become probable.

Contingent assets are not recognized in the consolidated financial statements, but disclosed in the Notes where there is a reasonable possibility of future economic benefits.

Share capital

Ordinary shares issued are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction. Any excess of the fair value of consideration received over the par value of shares issued is presented in consolidated financial statements as Share premium.

(in thousand USD, unless otherwise stated)

Dividends

Dividends are recognized as a liability and deducted from shareholders' equity at the balance sheet date only if they are declared before or on the balance sheet date. Dividends are disclosed when they are proposed before the balance sheet date or proposed or declared after the balance sheet date but before the Consolidated financial statements are authorized for issue.

Share based payment

Management Incentive Plan defined an option for a Management to purchase the Group's new shares under the subscription price. The issue of these new shares has an impact on Equity – it increases the line Share capital in the amount of subscription and the line Share premium in the amount that quoted share price exceeds subscription price. At the same time the deferred expenses were recognized in the amount of share premium. The deferred expenses are recognized as expenses of the period in the line Wages and salaries of administrative personnel and related charges during the term of exercising of the option.

Earnings per share

Earnings per share are determined by dividing the net profit or loss attributable to the owners of Parent company by the weighted average number of shares outstanding during the reporting period.

Income from the exchange of property certificates

When the items of property, plant and equipment are acquired in exchange for non-cash asset (property certificate), the initial value of such assets is estimated at fair value. The difference between the price paid for property certificates and the fair value of received items of property, plant and equipment is recognized as income in the period of the exchange operation.

Revenue recognition

Revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. According to the new standard a five-step model is established to account for revenue from contracts with customers.

The Group performed an analysis of five-step model as follows:

• the Group concludes contract with the customers in written form, where the parties and each party's rights are mentioned, all conditions relating goods or services, payments and delivery are described.

• the Group is in the business of crops cultivation, dairy farming and providing storage and processing services. Crops and services are sold on their own in separate identified contracts with customers. So the sale of crops and dairy farming products or providing of services is the only performance obligation in contracts with customers.

• the Group receives only short-term advances from its clients and they are presented as a part of Other current liabilities and accrued expenses. The contracts do not contain any variable considerations or warranty obligations. The transaction price is clearly stated in the contract.

• finished products and services transferred to customers at a point in time.

Therefore, the Group recognizes revenue as follows:

Sales of goods

Revenue from sales of goods is recognised at the point of transfer of all risks and rewards of ownership of the goods, normally when the goods are shipped. If the Group agrees to transport goods to a specified location, revenue is recognised when the goods are passed to the customer at the destination point. The Group uses standardised INCOTERMS which define the point of risks and reward transfers.

Rendering of services Revenue from rendering services is recognized at the moment of transfer to the customer control over the product or service.

Borrowing costs

Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. Investment income resulting from temporary investment of received borrowing costs, until their expensing for the purchase of capital construction objects, shall be deducted from the cost of raising borrowing costs that may be capitalized.

All other borrowing costs are expensed in the period they occur.

IMC S.A. AND ITS SUBSIDIARIES Consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousand USD, unless otherwise stated)

4. Critical accounting estimates and judgments

The preparation of the Group's Consolidated financial statements requires Management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Used estimates and assumptions are reviewed by the Management of the Group on a continuous basis, by reference to past experiences, current trends and all available information that is relevant at the time of preparation of consolidated financial statements. Adjustments to accounting estimates are recognized in the period in which the estimate is revised if the change affects only that period or in the period of the revision and subsequent periods, if both periods are affected.

In the process of applying the Group's accounting policies, Management has made the following judgments, estimates and assumptions which have the most significant effect on the amounts reflected in the consolidated financial statements.

Fair value of property, plant and equipment

The Group engages an independent appraiser to determine the fair value of property, plant and equipment on a regular basis.

The assessment is conducted in accordance with International Valuation Standards for property. The assessment procedure is carried out for all groups of property, plant and equipment. The fair value of items of property, plant and equipment is estimated on the basis of comparative and cost plus approaches.

The comparative approach is based on an analysis of sales prices and offers of similar items of property, plant and equipment, taking into account the appropriate adjustments for differences between the objects of comparison and assessment item. Based on the application of this approach, the fair value of property, plant and equipment is determined on the basis of their market value.

The cost approach involves the definition of present value of costs of reconstruction or replacement of the assessment item with their further adjustment by the depreciation (impairment) amount. Based on the application of this approach, the fair value of certain items of property, plant and equipment is determined in the amount of the replacement of these items. The cost plus method is adjusted by the income method data, which is based on the discounted cash flow model.

This model is most sensitive to the discount rate, as well as to the expected cash flows and growth rates used for the extrapolation purposes. Judgments of the Group in determining the indices used in the appraisers' calculations may have a significant effect on the determination of fair value of property, plant and equipment, and hence on their carrying amount.

The fair value of property, plant and equipment of all the Group's companies has been measured as at 31 December 2017 by an independent appraiser LLC "Asset Expertise" (ODS Certificate No.439/15 as of 25 May 2015 issued by State Property Fund of Ukraine).

Useful lives of property, plant and equipment

Items of property, plant and equipment owned by the Group are depreciated using the straight-line method over their useful lives, which are calculated in accordance with business plans and operating calculations of the Group's Management with respect to those assets.

The estimated useful life and residual value of non-current assets are influenced by the rate of exploitation of assets, servicing technologies, changes in legislation, unforeseen operational circumstances. The Group's management periodically reviews the applicable useful lives. This analysis is based on the current technical condition of assets and the expected period in which they will generate economic benefits to the Group.

Any of the above factors may affect the future rates of depreciation, as well as carrying and residual value of property, plant and equipment.

There were no changes in accounting estimates of remaining useful lives of items of property, plant and equipment in Y2019.

Impairment of property, plant and equipment and intangible assets

The Group carries out revaluations on a regular basis and conducts a full valuation exercise if there is an indication of impairment. An impairment review is conducted at the balance sheet date. To test property, plant and equipment and intangible assets for impairment, the Group's business is treated as three cash generating units: farming division, livestock breeding and storage and processing. The recoverable amount of the cashgenerating unit is determined on the basis of value in use. The amount of value in use for the cash-generating unit is determined on the basis of the most recent budget estimates prepared by management and application of the income approach of valuation.

Fair value of acquisition of subsidiaries

The Group engages an independent appraiser to determine the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Acquisitions often result in significant intangible benefits for the Group, some of which qualify for recognition as intangible assets. Significant judgment is required in the assessment and valuation of these intangible assets, often with reference to internal data and models.

(in thousand USD, unless otherwise stated)

The estimation of fair value of assets and liabilities is based upon quoted market prices and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Such estimates include assumptions about inputs to our discounted cash flow calculations, industry economic factors and business strategies.

Fair value of biological assets

Due to an absence of an active market for non-current biological assets for cattle-breeding and biological assets of plants-breeding in Ukraine, to determine the fair value of these biological assets, the Group used the discounted value of net cash flows expected from assets as at reporting date. Fair value is determined based on market prices and a current market-determinated pre-tax rate as at the date of valuation.

The fair value of current biological assets of cattle-breeding is measured using market prices as at reporting date. The fair value is determined based on market prices of milk, milk yields and discount rate.

Fair value of agricultural produce

The Group estimates the fair value of agricultural produce at the date of harvesting using the current quoted prices in an active market. Costs to sell at the point of harvest are estimated based on expected future selling costs that depend on conditions of sales agreements. The fair value less costs to sell becomes the carrying value of inventories at the date of harvesting.

Inventories

As at the reporting date the Group assesses the need to reduce the carrying amount of inventories to their net realizable value. The measurement of impairment is based on the analysis of market prices for similar inventories existing at the reporting date and published in official sources. Such assessments can have a significant impact on the carrying amount of inventories.

Besides, at each balance sheet date, the Group assesses inventories for surplus and obsolescence and determines the allowance for obsolete and slow moving inventories. Changes in assessment can influence the amount of required allowance for obsolete and slow moving inventories either positively or negatively.

At the reporting date the item Work-in-progress includes expenses on works connected with preparation of the lands for the future harvest obtained from the biological assets of plant growing. The cost of work in progress includes costs of direct materials and labor and other direct productions costs and related production overheads (based on normal operating capacity). Costs allocation to Work-in-progress includes a number of judgments of management based on the recommendations of scientific sources and agronomic calculations of the internal services of the Group.

Inventories as at the year-end are an estimate resulting in a surplus/decrease in inventories when stock take is performed in subsequent year.

Inventory balances at the reporting dates are confirmed by inventories. But the amount of grain at the elevators and the method of its storage do not allow weighing of the whole grain at the time of the inventory. Therefore, enterprises use other methods for determining the amount of grain at the elevator.

The method consists in the following:

• there is passport data of the volume of silo storage tanks
• the commission inventories each tank and determines the volume filled with grain
• there is an indicator "nature of grain", i.e. its weight in 1l
• the volume of grain is multiplied by its nature and the amount of grain in kg is obtained

But in fact, deviations are possible due to permissible errors in grain moisture, which resulting in a surplus/decrease in inventories when stock take is performed in subsequent year during the cleaning the elevator.

Fair value of financial instruments

The fair value of financial assets and liabilities is determined by applying various valuation methodologies. Management uses its judgment to make assumptions based on market conditions existing at each balance sheet date. Where the fair values of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. Management uses discounted cash flow analysis for various loans and receivables as well as debt instruments that are not traded in active markets. The effective interest rate is determined by reference to the interest rates of instruments available to the Group in active markets. In the absence of such instruments, the effective interest rate is determined by reference to the interest rates of active market instruments available adjusted for the Group's specific risk premium estimated by management.

(in thousand USD, unless otherwise stated)

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Group.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
• Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Provision for expected credit losses

The Group uses a provision matrix to calculate expected credit losses for financial assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns. The provision matrix is initially based on the Group's historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

Impairment of non-financial assets

Management assesses whether there are any indicators of possible impairment of non-financial assets at each reporting date. If any events or changes in circumstances indicate that the current value of the assets may not be recoverable or the assets, goods or services relating to a prepayment will not be received, the Group estimates the recoverable amount of assets. If there is objective evidence that the Group is not able to collect all amounts due to the original terms of the agreement, the corresponding amount of the asset is reduced directly by the impairment loss in the consolidated statement of comprehensive income. Subsequent and unforeseen changes in assumptions and estimates used in testing for impairment may lead to the result different from the one presented in the consolidated financial statements.

Taxation

The Group mostly operates in the Ukrainian tax jurisdiction. The Group's management must interpret and apply existing legislation to transactions with third parties and its own activities. Significant judgment is required in determining the provision for direct and indirect taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax and deferred tax provisions in the period in which such determination is made.

As a result of unstable economic situation in Ukraine, tax authorities in Ukraine pay more and more attention to the business cycles. In connection with it, tax laws in Ukraine are subject to frequent changes. Furthermore, there are cases of their inconsistent application, interpretation and execution. Non-compliance with laws and norms may lead to serious fines and penalties accruals.

Management at every reporting period reassessed the Group's uncertain tax positions. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the reporting period and any known Court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on management's best estimate of the expenditure required to settle the obligations at the reporting period.

In December 2010, the revised Tax Code of Ukraine was officially published. The Group considers that it operates in compliance with tax laws of Ukraine.

Starting from 1 September 2013, Ukrainian legislation implemented new transfer pricing rules. These rules introduce additional reporting and documentation requirements to transactions with related parties. In accordance with the new rules, the tax authorities obtain additional tools with the help of which they may claim that prices or profitability in transactions with related parties different from arm's length transactions. The Group's transfer pricing practice is built in accordance with requirements of transfer pricing legislation.

Legal proceedings

The Group's Management makes significant assumptions in estimation and reflection of the risk of exposure to contingent liabilities related to current legal proceedings and other unliquidated claims, as well as other contingent liabilities. Management's judgments are required in assessing the possibility of a secured claim against the Group or material obligations, as well as in determining probable amounts of final payment or obligations. Due to the uncertainties inherent in the evaluation process, actual expenses may differ from the initial calculations.

(in thousand USD, unless otherwise stated)

These preliminary estimates are subject to changes as new information becomes available from the Group's internal specialists, if any, or from third parties, such as lawyers. Revisions of such estimates may have a significant impact on future operating results.

Operating environment

In 2014, Ukraine was faced with political and economic turmoil. Crimea, an autonomous republic of Ukraine, was effectively annexed by the Russian Federation. Ukraine also suffered from military aggression from Russia and the collapse of law enforcement in Lugansk and Donetsk regions.

After a significant deterioration in 2014 and 2015, the current political and economic situation in Ukraine remains volatile. In 2019, the Ukrainian government continues to implement a comprehensive structural reform program aimed at eliminating existing imbalances in the economy, public finances and governance, combating corruption, and reforming the judiciary in order to provide conditions for economic recovery in the country.

The stabilization of the economy of Ukraine in the near future depends on the success of the actions taken by the government and the provision of continuous financial support to Ukraine by international donors and international financial institutions.

The National Bank of Ukraine continues to follow the policy of floating exchange rate of hryvnia. During 2019, the official exchange rate of Uktainian hryvnia to US dollar of the National Bank of Ukraine decreased by 16,9% from UAH 27,6883 for 1 January 2019 to UAH 23,6862 for 31 December 2019. During 2019, the National Bank of Ukraine reduced the discount rate from 18.0% to 13.5%.

Management is monitoring the developments in the current environment and taking actions where appropriate.

The Group does not have assets in Crimea, Donetsk and Lugansk regions.

5. New and amended standards and interpretations

Applying of new standards

IFRS 16 Leases

IFRS 16 was issued in January 2016. IFRS 16 is effective for the annual periods beginning on or after 1 January 2019.

The Group used the modified retrospective approach - IFRS 16 was adopted retrospectively from 1 January 2019, and hence has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. There was no change in the opening consolidated statement of changes in equity. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance as at 1 January 2019:

	As reported 31 December 2018	Impact of IFRS 16	As adjusted 1 January 2019
ASSETS
Non-current assets
Right-of-use assets	-	84 463	84 463
Prepayments for property, plant and equipment	566	(468)	98
	566	83 995	84 561
TOTAL ASSETS	566	83 995	84 561
LIABILITIES AND EQUITY
Non-current liabilities
Long-term lease liabilities as to right-of-use assets	-	73 202	73 202
	-	73 202	73 202
Current liabilities
Current portion of long-term lease liabilities as to right-of-use assets	-	13 210	13 210
Other current liabilities and accrued expenses	12 704	(2 417)	10 287
	12 704	10 793	23 497
TOTAL LIABILITIES AND EQUITY	12 704	83 995	96 699

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.

(in thousand USD, unless otherwise stated)

The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option, and lease contracts for which the underlying assets is of low value.

Lease liabilities as to right-of-use assets were measured at the present value of the remaining lease payments, discounted using the Group's average borrowing rate as at 1 January 2019 – 7,6%:

	1 January 2019
Operating lease commitments disclosured as at 31 December 2018	134 111
Discounted using the borrowing rate of 7,6%	84 463
Adjusted on a difference in treatment of liability and advances for land lease	1 949
Recognised lease liabilities as to right-of-use assets	86 412

The right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised as at 31 December 2018.

The following changes in presentation of the consolidated statement of comprehensive income took place:

• In 2018 reporting period land lease expenses were included in Cost of sales as Rent, in 2019 one part was included in Cost of Sales as Depreciation and amortization and other part was recognised as Effect of lease of right-of-use assets.
• In 2018 reporting period office rent expenses were included in Administrative expenses as Third parties' services, in 2019 one part was included in Administrative expenses as Depreciation and amortization and other part was recognised as Effect of lease of right-ofuse assets (as it relates to financial interests).

The following changes in presentation of the consolidated statement of cash flow:

• In 2018 reporting period rent expenses were not included to adjustments for Cash flows from operating activities before changes in working capital. Rent payments were included in Cash flows from operating activities as Cash flows from operations.
• In 2019 reporting period lease expenses adjusted Cash flows from operating activities before changes in working capital as Depreciation and amortization and as Effect of lease of right-of-use assets. Payments were divided into Interest paid in Cash flows from operating activities and Repayment of long-term and short-term borrowings in Cash flows from financing activities.

Adoption of IFRS 16 has no impact on the Group's finance leases.

In applying IFRS 16 for the first time. The Group has used the following practical expedients permitted by the standard:

• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• The accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term;
• The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application;
• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.

The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements.

Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Group determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The Interpretation did not have an impact on the consolidated financial statements of the Group.

Amendments to IFRS 9: Prepayment Features with Negative Compensation

Under IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are 'solely payments of principal and interest on the principal amount outstanding' (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. These amendments had no impact on the consolidated financial statements of the Group.

Amendments to IAS 19: Plan Amendment, Curtailment or Settlement

(in thousand USD, unless otherwise stated)

The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event, and the discount rate used to remeasure that net defined benefit liability (asset). The amendments had no impact on the consolidated financial statements of the Group as it did not have any plan amendments, curtailments, or settlements during the period.

Amendments to IAS 28: Long-term interests in associates and joint ventures

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and JointVentures.

These amendments had no impact on the consolidated financial statements as the Group does not have longterm interests in its associate and joint venture.

Annual Improvements 2015-2017 Cycle

• IFRS 3 Business Combinations

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entirepreviously held interest in the joint operation.

An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted.

These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained.

• IFRS 11 Joint Arrangements

An entity that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3.

The amendments clarify that the previously held interests in that joint operation are not remeasured.

An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted.

These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where a joint control is obtained.

• IAS 12 Income Taxes

The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognised those past transactions or events.

An entity applies the amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.

Since the Group's current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

• IAS 23 Borrowing Costs

The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted.

Since the Group's current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

(in thousand USD, unless otherwise stated)

At the date of authorization of these Consolidated financial statements the following interpretations and amendments to the Standards, were in issue but not yet effective:

Standards and Interpretations	Effective for annual period beginning on or after
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current	1 January 2022
IFRS 17 Insurance Contracts	1 January 2021
Amendments to References to Conceptual Framework in IFRS Standards	1 January 2020
Amendments to IFRS 3 – Definition of a business	1 January 2020
Amendments to IAS 1 and IAS 8 – Definition of Material	1 January 2020
Amendments to IFRS 9, IAS 39 and IFRS17: Interest Rate Benchmark Reform	1 January 2020

The management do not expect that the adoption of the Standards listed above will have a material impact on the consolidated financial statements of the Group in future periods. An analysis of accepted amendment is given below:

Amendments to References to Conceptual Framework in IFRS Standards

Together with the revised Conceptual Framework, which became effective upon publication on 29 March 2018, the IASB has also issued Amendments to References to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.

Not all amendments, however, update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the Framework they are referencing to (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to indicate that definitions in the Standard have not been updated with the new definitions developed in the revised Conceptual Framework.

Amendments to IFRS 3 – Definition of a business

The amendments clarif y that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

Additional guidance is provided that helps to determine whether a substantive process has been acquired.

The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of acti vities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.

Amendments to IAS 1 and IAS 8 – Definition of Material

The amendments are intended to make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards. The concept of 'obscuring' material information with immaterial information has been included as part of the new definition.

The threshold for materiality influencing users has been changed from 'could influence' to 'could reasonably be expected to influence'.

The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term 'material' to ensure consistency.

Amendments to IFRS 9, IAS 39 and IFRS17: Interest Rate Benchmark Reform

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market. Recent market developments have brought into question the long-term viability of those benchmarks.

The amendments published deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and address the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, which require forward-looking analysis. (IAS 39 is amended as well as IFRS 9 because entities have an accounting policy choice when first applying IFRS 9, which allows them to continue to apply the hedge accounting requirements of IAS 39). There are also amendments to IFRS 7 Financial Instruments: Disclosures regarding additional disclosures around uncertainty arising from the interest rate benchmark reform.

(in thousand USD, unless otherwise stated)

6. Revenue

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Revenue from sales of finished products	a	168 719	130 413
Revenue from services rendered	b	882	1 198
		169 601	131 611

Disaggregation of revenue from contracts with customers

The Group presented disaggregated revenue based on the type of finished products (a) and services provided to customers (b), the type of customers (c) and the timing of transfer of goods and services (d).

a) Revenue from sales of finished products was as follows:

	For the year ended 31 December 2019	For the year ended 31 December 2018
Corn	118 806	81 576
Sunflower	22 753	24 331
Wheat	13 480	10 637
Soy beans	10 817	9 818
Milk	1 547	1 343
Cattle	115	147
Potatoes	-	885
Other	1 201	1 676
	168 719	130 413

b) Revenue from services rendered was as follows:

	For the year ended 31 December 2019	For the year ended 31 December 2018
Storage	368	313
Transport	319	310
Processing	113	189
Drying	31	248
Other	51	138
	882	1 198

c) Revenue by the type of customers was as follows:

	For the year ended 31 December 2019	For the year ended 31 December 2018
Non-residental buyer	142 674	99 706
Ukrainian buyer	26 927	31 905
	169 601	131 611

d) Finished products and services transferred to customers at a point in time.

(in thousand USD, unless otherwise stated)

7. Gain from changes in fair value of biological assets and agricultural produce, net

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Current biological assets	24	2 264	432
Non-current biological assets	21	135	(629)
Agricultural produce	24	50 369	73 523
		52 768	73 326

8. Cost of sales

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Raw materials	a	(116 378)	(96 669)
Change in inventories and work-in-progress	b	457	13 868
Depreciation and amortization	13	(20 311)	(10 210)
Wages and salaries of operating personnel and related charges	14	(13 233)	(9 148)
Fuel and energy supply		(10 676)	(13 868)
Third parties' services		(5 894)	(6 032)
Rent		(2 320)	(15 042)
Repairs and maintenance		(1 300)	(1 086)
Taxes and other statutory charges		(1 172)	(589)
Other expenses		(100)	(78)
		(170 927)	(138 854)

a) Raw materials for the year ended 31 December 2019 includes disposal of the gain recorded on initial recognition of realized agriculture produce and biological assets (both of current and non-current) in the amount of USD 72 193 thousand (USD 56 460 thousand for the year ended 31 December 2018).

b) Change in inventories and work-in-progress comprises changes in work-in-progress, agricultural produce and current biological assets.

9. Administrative expenses

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Wages and salaries of administrative personnel and related charges	14	(10 300)	(9 443)
Depreciation and amortisation	13	(614)	(335)
Professional services	a	(430)	(456)
Bank services		(331)	(283)
Third parties' services		(267)	(373)
Transport expenses		(237)	(266)
Repairs and maintenance		(235)	(200)
Other expenses		(832)	(572)
		(13 246)	(11 928)

(in thousand USD, unless otherwise stated)

a) Professional services include the following audit and related fees:

Fee Category	Fees billed by Luxembourg approved audit firm (BDO Audit SA)		Other fees billed by BDO Luxembourg (BDO)		Fees billed by other audit firms
	For the year ended 31 December 2019	For the year ended 31 December 2018	For the year ended 31 December 2019	For the year ended 31 December 2018	For the year ended 31 December 2019	For the year ended 31 December 2018
Audit fees Audit related	98	48	-	-	-	-
fees	12	36	-	-	44	110
Tax fees	-	-	2	3	-	-
	110	84	2	3	44	110

10. Selling and distribution expenses

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Delivery costs		(20 595)	(11 078)
Wages and salaries of sales personnel and related charges	14	(232)	(203)
Depreciation	13	(156)	(239)
Other expenses		(264)	(274)
		(21 247)	(11 794)

11. Other operating income

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Gain on recovery of assets previously written off		398	338
Government grants recognised as income		147	364
Gain on disposal of PPE		119	-
Income from write-offs of accounts payable		83	19
Gain on disposal of inventories		29	66
Income from the exchange of property certificates		-	31
Other income	a	1 932	133
		2 708	951

a) Other income comprises an amount USD 1 598 thousand of penalty received due to terms of the corn sale contracts.

(in thousand USD, unless otherwise stated)

12. Other operating expenses

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Depreciation	13	(2 722)	(1 752)
Charity		(504)	(416)
Wages and salaries of non-operating personnel and related charges	14	(130)	(112)
Write-offs of VAT		(101)	(51)
Allowance for doubtful accounts receivable	27	(72)	(153)
Shortages and losses due to impairment of inventories		(56)	(236)
Loss on disposal of property, plant and equipment		-	(1 521)
Lost crops		-	(465)
Other expenses		(591)	(316)
		(4 176)	(5 022)

13. Depreciation and amortisation

	Note	For the year ended 31 December 2019	For the year ended 31 December 2018
Depreciation
Cost of sales	8	(10 191)	(9 467)
Other operating expenses	12	(2 722)	(1 752)
Administrative expenses	9	(488)	(333)
Selling and distribution expenses	10	(156)	(239)
Depreciation as a part of article "Lost crops"		-	(20)
		(13 557)	(11 811)
Amortisation
Cost of sales	8	(10 120)	(743)
Administrative expenses	9	(126)	(2)
		(10 246)	(745)
		(23 803)	(12 556)

14. Wages and salaries expenses

	For the year ended 31 December 2019	For the year ended 31 December 2018
Wages and salaries	(20 483)	(16 271)
Related charges	(3 412)	(2 635)
	(23 895)	(18 906)
The average number of employees, persons	2 103	2 309
Remuneration of management	2 821	3 113

(in thousand USD, unless otherwise stated)

The distribution of wages and salaries and related charges was as follows:

		For the year ended 31 December 2019		For the year ended 31 December 2018
	Note	Wages and salaries and related charges, thousand USD	Average number of employees, persons	Wages and salaries and related charges, thousand USD	Average number of employees, persons
Operating personnel	8	(13 233)	1 503	(9 148)	1 632
Administrative personnel	9	(10 300)	580	(9 443)	655
Sales personnel	10	(232)	18	(203)	19
Non-operating personnel	12	(130)	2	(112)	3
		(23 895)	2 103	(18 906)	2 309

15. Financial expenses, net

	For the year ended	For the year ended
	31 December 2019	31 December 2018
Interest income on bank deposits	559	364
Interest expenses on loans and borrowings	(3 932)	(5 243)
Other expenses	(103)	(108)
	(3 476)	(4 987)

16. Foreign currency exchange gain/(loss), net

During the Y2019 the strengthening of Ukrainian Hryvnia took place – 16,9% of revaluation as at 31 December 2019 in comparison with 1,4% of revaluation as at 31 December 2018, 5,3% of revaluation for the average rate 2019/2018 in comparison with 2,2% of devaluation for the average rate 2018/2017. As a result, during the Y2019 the Group recognised net foreign exchange gain in the amount of USD 6 049 thousand (USD 567 thousand of gain for the Y2018) in the Consolidated statement of comprehensive income.

17. Income tax expenses

The corporate income tax rate for the year ended 31 December 2019 was: 18% in Ukraine, 12,5% in Cyprus, 17% in Luxemburg.

The components of income tax expenses were as follows:

	For the year ended 31	For the year ended 31
	December 2019	December 2018
Current income tax	(830)	(651)
Deferred tax	84	(40)
Income tax benefit (expenses) reported in the statement of comprehensive income	(746)	(691)
Consolidated statement of other comprehensive income Deferred tax related to item charged or credit directly to other comprehensive income during

year: Net gain on revaluation of property, plant and equipment 212 259

(in thousand USD, unless otherwise stated)

Reconciliation between tax expenses and the accounting value multiplied by tax rate was as follows:

	For the year ended 31 December 2019	For the year ended 31 December 2018
01 January	(3 027)	(3 198)
Income tax benefit (expenses) for the period recognized in other comprehensive income	212	259
Income tax benefit (expenses) for the period recognized in profit or loss	84	(40)
Effect of foreign currency translation	(487)	(48)
31 December	(3 218)	(3 027)

	For the year ended 31 December 2019	For the year ended 31 December 2018
Profit before tax from continuing operations	8 064	28 318
Profit before tax from continuing operations of companies non-payers of incom tax	(4 468)	25 892
Profit before tax from continuing operations of companies payers of income tax	12 532	2 425
Profit before tax from continuing operations of companies payers of income tax:
Ukraine	(985)	(1 145)
Cyprus	428	54
Luxembourg	(6 890)	(9 042)
BVI	13 638	12 558
Hong Kong	6 341	-
	12 532	2 425
Tax at statutory tax rate:
Ukraine 18%	-	-
Cyprus 12,5%	53	7
Luxembourg 17%	-	-
BVI 0%	-	-
Hong Kong 0%	-	-
	53	7
Non-taxable items	693	684
Income tax benefit	746	691

(in thousand USD, unless otherwise stated)

18. Property, plant and equipment

	Land and buildings	Machinery	Motor vehicles	Other	Construction in progress	Total
INITIAL COST
31 December 2017	56 736	40 919	22 941	586	1 543	122 725
Additions	662	3 522	1 040	108	47	5 379
Disposals	(5 004)	(2 324)	(2 337)	(30)	-	(9 695)
Transfer	577	45	-	16	(638)	-
Effect from translation into presentation currency	836	534	332	6	31	1 739
31 December 2018	53 807	42 696	21 976	686	983	120 148
31 December 2018	53 807	42 696	21 976	686	983	120 148
Additions	771	3 017	3 419	48	55	7 310
Disposals	(1 905)	(8 017)	(2 397)	(498)	-	(12 817)
Transfer	592	430	-	-	(1 022)	-
Effect from translation into presentation currency	9 040	6 803	3 811	76	77	19 807
31 December 2019	62 305	44 929	26 809	312	93	134 448
ACCUMULATED DEPRECIATION 31 December 2017	(11 196)	(17 107)	(11 925)	(549)	-	(40 777)
Depreciation for the period	(2 610)	(5 682)	(3 418)	(101)	-	(11 811)
Disposals	1 973	1 659	1 872	30	-	5 534
Effect from translation into presentation currency	(141)	(163)	(136)	(6)	-	(446)
31 December 2018	(11 974)	(21 293)	(13 607)	(626)	-	(47 500)
31 December 2018	(11 974)	(21 293)	(13 607)	(626)	-	(47 500)
Depreciation for the period	(4 368)	(6 134)	(3 045)	(9)	-	(13 556)
Disposals	1 626	6 489	2 220	497	-	10 832
Effect from translation into presentation currency	(2 272)	(3 566)	(2 374)	(62)	-	(8 274)
31 December 2019	(16 988)	(24 504)	(16 806)	(200)	-	(58 498)
Net book value
31 December 2017	45 540	23 812	11 016	37	1 543	81 948
31 December 2018	41 833	21 403	8 369	60	983	72 648
31 December 2019	45 317	20 425	10 003	112	93	75 950

As at 31 December 2017 an independent valuation of the Group's land, buildings, Machinery and vehicles was performed in accordance with International Valuation Standards by an independent appraiser LLC "Asset Expertise" (ODS Certificate No.631/16 as of 28 November 2016 issued by State Property Fund of Ukraine).

Most buildings and constructions were valued using cost approach. Other items of PPE were valued using the market approach. Market approach uses prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets.

Cost approach either determines the cost to construct the assets in their present state and considers their remaining useful life or identifies fair value as a depreciated replacement cost. Cost approach was used only in the cases where there was no possibility to use market approach.

(in thousand USD, unless otherwise stated)

The following factors were considered in determining the fair values of buildings under the depreciated replacement cost approach:

• the cost to construct the asset is based on the cost of the necessary materials and construction work as at the date of valuation;

• expected usage of the asset is assessed by reference to the asset's expected capacity or physical output;

• technical or commercial obsolescence arising from changes or improvements in production for the product or service output of the asset as well as physical deterioration.

Impairment test

As at 31 December 2019 and 31 December 2018 an impairment review was conducted by the management of the Group. Impairment test has been performed for the following Cash Generating Units: Crop farming, Dairy farming, Storage and processing. According to the results of the test impairment of PPE was not identified.

If PPE were measured at cost their book value would be the following:

Net book value	Land and buildings	Machinery	Motor vehicles	Other	Construction in progress	Total
31 December 2017	6 988	12 106	4 764	78	1 543	25 479
31 December 2018	7 185	13 964	5 084	87	983	27 303
31 December 2019	9 008	15 197	7 899	143	93	32 340

PPE in finance lease

Leased assets, where the Group is a lessee under finance lease agreements, comprise the following items:

	31 December 2019	31 December 2018
Machinery	33	683
Motor vehicles	-	278
	33	961

Pledged PPE

The amount of property, plant and equipment pledged to secure bank loans was as follows:

	31 December 2019	31 December 2018
Land and buildings	28 667	24 427
Machinery	9 979	5 127
Motor vehicles	5 048	1 506
Other	12	3
	43 706	31 063

Capitalized cost

There were no borrowing costs capitalized as a part of costs of property, plant and equipment during the year ended 31 December 2019 and 2018.

Assets under construction

Included in property, plant and equipment as at 31 December 2019 was an amount of USD 93 thousand (USD 983 thousand as at 31 December 2018) relating to expenditure for property, plant and equipment in the course of construction.

Capital commitments

As at 31 December 2019 the Group had capital commitments in the amount of USD 2 349 thousand (USD 4 063 thousand as at 31 December 2018).

(in thousand USD, unless otherwise stated)

19. Right-of-use assets

Amounts recognised in the consolidated statements of financial position:

	31 December 2019	31 December 2018
Right-of-use assets
Land	94 775	-
Office	171	-
Machinery	6 257	-
	101 203	-
Lease liabilities as to right-of-use assets
Long-term	87 425	-
Current portion	15 863	-
	103 288	-

Amounts recognised in the consolidated statements of comprehensive income:

	Note	For the year ended 31	For the year ended 31
		December 2019	December 2018
Amortisation of right-of-use assets
Land	8	(8 800)	-
Office	9	(126)	-
Machinery	8	(819)	-
		(9 745)	-
Effect of lease of right-of-use assets		(7 640)	-

Following changes took place in the right-of-use assets:

	Land	Office	Machinery	Total
Deemed cost as at 1 January 2019	84 199	264	-	84 463
Additions	10 405	-	6 555	16 960
Amortisation	(8 800)	(126)	(819)	(9 745)
Disposals	(4 952)	-	-	(4 952)
Cost disposals	(5 256)	-	-	(5 256)
Accumulated amortisation disposals	304	-	-	304
Effect from translation into presentation currency	13 923	33	521	14 477
Cost as at 31 December 2019	104 042	308	7 151	- 111 501
Accumulated amortisation as at 31 December 2019	(9 267)	(137)	(894)	(10 298)
Net book value as at 31 December 2019	94 775	171	6 257	101 203

(in thousand USD, unless otherwise stated)

20. Intangible assets

	Computer software	Property certificates	Land lease rights	Total
INITIAL COST
31 December 2017	16	355	9 187	9 558
Additions	12	27	-	39
Disposals	-	(169)	-	(169)
Effect from translation into presentation currency	-	7	125	132
31 December 2018	28	220	9 312	9 560
31 December 2018	28	220	9 312	9 560
Additions	25	2	-	27
Effect from translation into presentation currency	5	37	1 575	1 617
31 December 2019	58	259	10 887	11 204
ACCUMULATED DEPRECIATION
31 December 2017	(15)	(1)	(6 624)	(6 640)
Amortisation for the period	(1)	(1)	(743)	(745)
Effect from translation into presentation currency	-	-	(76)	(76)
31 December 2018	(16)	(2)	(7 443)	(7 461)
31 December 2018	(16)	(2)	(7 443)	(7 461)
Amortisation for the period	-	(1)	(501)	(502)
Effect from translation into presentation currency	(2)	-	(1 305)	(1 307)
31 December 2019	(18)	(3)	(9 249)	(9 270)
NET BOOK VALUE
31 December 2017	1	354	2 563	2 918
31 December 2018	12	218	1 869	2 099
31 December 2019	40	256	1 638	1 934

Property certificates represent deeds supporting ownership right for property units of members of agricultural entity, which are intended for exchange by the Group companies on the property objects of this agricultural entity.

(in thousand USD, unless otherwise stated)

21. Non-current biological assets

	31 December 2019	31 December 2018
Non-current biological assets - animal-breeding
Cattle	2 528	1 830
Non-current biological assets - plant-breeding
Perennial grasses	62	27
Total non-current biological assets	2 590	1 857

As at the reporting dates non-current biological assets of animal-breeding were presented as follows:

	31 December 2019	31 December 2018
Cattle
Cattle, units	835	845
Live weight, kg	336 026	328 690
Book value	2 528	1 830

Following changes took place in the non-current biological assets of animal-breeding:

	Cattle
31 December 2017	2 334
Transfer (from (to) current biological assets)	286
Change in fair value	(629)
Effect from translation into presentation currency	(161)
31 December 2018	1 830
31 December 2018	1 830
Transfer (from (to) current biological assets)	288
Change in fair value	135
Effect from translation into presentation currency	275
31 December 2019	2 528

As at the reporting dates non-current biological assets of plant-breeding were presented as follows:

	31 December 2019	31 December 2018
Perennial grasses
Area, ha	324	363
Book value	62	27

(in thousand USD, unless otherwise stated)

Following changes took place in the non-current biological assets of plant-breeding:

	Perennial grasses
31 December 2017	9
Capitalized expenses	24
Harvesting failure	(6)
31 December 2018	27
31 December 2018	27
Capitalized expenses	28
Effect from translation into presentation currency	7
31 December 2019	62

22. Prepayments for property, plant and equipment

	31 December	31 December
	2019	2018
Prepayments for property, plant and equipment	171	566

As at 31 December 2019 an amount of USD 162 thousand or 95% of the total amount of prepayments for property, plant and equipment is due from the 10 most significant counterparties (as at 31 December 2018 – USD 550 thousand or 97%).

23. Inventories

	Note	31 December 2019	31 December 2018
Agricultural produce	a	75 137	87 100
Agricultural materials		2 921	2 556
Work-in-progress	b	12 336	10 129
Fuel		601	892
Spare parts		536	509
Raw materials		242	324
Finished goods		11	11
Other inventories		66	57
		91 850	101 578

As at 31 December 2019 cost value of inventories amounts to USD 67 966 thousand (USD 60 858 thousand as at 31 December 2018).

(in thousand USD, unless otherwise stated)

a) As at the reporting dates agricultural produce was presented as follows:

	31 December 2019	31 December 2018
Sunflower	-	5
Corn	74 258	83 721
Soya	438	2 676
Wheat	31	37
Silage	206	288
Hay	34	11
Other	170	362
	75 137	87 100

The fair value of agricultural produce was estimated based on market price as at date of harvest and is within level 3 of the fair value hierarchy.

b) Work-in-progress includes expenses on works connected with preparation of the lands for the future harvest obtained from the biological assets of plant growing. The cost of work in progress includes costs of direct materials and labor and other direct productions costs and related production overheads (based on normal operating capacity).

As at the reporting dates loans and borrowings were secured by agricultural produce:

	31 December	31 December
	2019	2018
Corn	13 831	12 742

24. Current biological assets

	31 December 2019	31 December 2018
Current biological assets of animal-breeding
Cattle	1 276	920
Other	1	2
	1 277	922
Current biological assets of plant-breeding
Wheat	11 947	7 031
Other	-	30
Total current biological assets of plant-breeding	11 947	7 061
Total current biological assets	13 224	7 983

(in thousand USD, unless otherwise stated)

As at the reporting dates current biological assets of animal-breeding were presented as follows:

	31 December 2019
Cattle		2018
Cattle, units	474	448
Live weight, kg	140 294	123 594
Book value	1 276	920
Other
Number of animals, units	3	5
Live weight, kg	1 241	2 296
Book value	1	2
Total book value	1 277	922

Following changes took place in the current biological assets of animal-breeding:

	Cattle	Other	Total
31 December 2017	1 635	3	1 638
Capitalized expenses	337	-	337
Transfer (from (to) non-current biological assets)	(286)	-	(286)
Sale	(857)	(1)	(858)
Slaughter	(142)	-	(142)
Change in fair value	(6)	(1)	(7)
Effect from translation into presentation currency	239	1	240
31 December 2018	920	2	922
31 December 2018	920	2	922
Capitalized expenses	404	-	404
Transfer (from (to) non-current biological assets)	(288)	-	(288)
Sale	(920)	(2)	(922)
Slaughter	(136)	-	(136)
Change in fair value	651	-	651
Effect from translation into presentation currency	645	1	646
31 December 2019	1 276	1	1 277

As at the reporting dates current biological assets of plant-breeding were presented as follows:

	31 December 2019
Wheat		2018
Area, ha	21 170	13 080
Book value	11 947	7 031
Other
Area, ha	-	103
Book value	-	30
Total book value	11 947	7 061

(in thousand USD, unless otherwise stated)

Following changes took place in the current biological assets of plant-breeding:

	Corn	Sunflower	Wheat	Soya	Grasses	Other	Total
31 December 2017	7 577	-	6 067	-	32	34	13 710
Capitalized expenses (harvesting 2018)	48 867	14 042	4 355	6 969	280	122	74 635
Revaluation at fair value at the date of harvest (harvesting 2018)	56 502	10 229	3 533	3 259	-	-	73 523
Harvesting (harvesting 2018)	(113 112)	(24 247)	(9 875)	(10 226)	(283)	(146)	(157 889)
Harvest failure (harvesting 2018)	(8)	(24)	(20)	(2)	(15)	(57)	(126)
Capitalized expenses (harvesting 2019)	-	-	2 479	-	-	31	2 510
Change in fair value (harvesting 2019)	-	-	439	-	-	-	439
Effect from translation into presentation currency	174	-	53	-	(14)	46	259
31 December 2018	-	-	7 031	-	-	30	7 061

	Corn	Sunflower	Wheat	Soya	Grasses	Other	Total
31 December 2018	-	-	7 031	-	-	30	7 061
Capitalized expenses (harvesting 2019)	56 715	15 409	5 687	7 962	150	419	86 342
Revaluation at fair value at the date of harvest (harvesting 2019)	37 567	7 451	4 685	666	-	-	50 369
Harvesting (harvesting 2019)	(94 273)	(22 803)	(12 961)	(8 489)	(162)	(434)	(139 122)
Capitalized expenses (harvesting 2020)	-	-	4 416	-	-	-	4 416
Change in fair value (harvesting 2020)	-	-	1 613	-	-	-	1 613
Effect from translation into presentation currency	(9)	(57)	1 476	(139)	12	(15)	1 268
31 December 2019	-	-	11 947	-	-	-	11 947

As at 31 December 2019 and as at 31 December 2018 there were no pledged biological assets.

Due to the absence of an active market, the fair value of biological assets is estimated by present valuing the net cash flows expected to be generated from the assets discounted at a current market-determined rate. The fair value of biological assets is determined by the Group's own agricultural and IFRS experts. The forecast indicators of crop yields used in assessing crops are determined on the basis of the current history of crop yields. The indicators of past periods are taken as a basis and are adjusted taking into account the state of crops, climatic conditions, varietal characteristics of the crop, soil fertility, the application of new technologies.

Biological assets of the Group are measured at fair value within Level 3 of the fair value hierarchy. There were no transfers between any levels during the Y2019.

Description	Fair value as at 31 December 2019	Valuation technique	Unobservable inputs	Range of unobservable inputs
Crops in fields - Wheat	11 947	Cash flows	Crops yield - tonnes per hectare	5,9
			Crops price	per ton 177
			Milk yield - kg per cow	7065-7839 per year
Cattle	3 804	Discounted cash flows	Milk price	0,3 USD per liter
			Discount rate	20,25%

(in thousand USD, unless otherwise stated)

Changes in key assumptions used to estimate biological assets fair value would have the following effect on the fair value of biological assets:

	Increase/decrease in assumption, %	Effect on fair value of biological assets, th USD
Crops yield	10	1 991
	(10)	(1 991)
	10	1 991
Crops price	(10)	(1 991)
	10	387
Milk yield	(10)	(387)
	10	1 242
Milk price	(10)	(1 242)
	1	(37)
Discount rate	(1)	37

25. Trade accounts receivable, net

	Note	31 December 2019	31 December 2018
Trade accounts receivable		289	469
Allowances for accounts receivable	27	(12)	(10)
		277	459

As at 31 December 2019 an amount of USD 268 thousand or 96% of the total amount of trade accounts receivable is due from the 10 most significant counterparties (as at 31 December 2018 – USD 450 thousand or 96%).

Distribution of trade accounts receivable on time frames is the following:

		Past due, not impaired
	Total	Neither past due nor impaired	Within 90 days	From 90 to 360 days	More than 1 year
31 December 2019	277	213	52	12	-
31 December 2018	459	389	55	-	15

On the basis of analysis of payments for the current period Financial Department of the Group considers that there is no need to form provision for overdue, but not impaired trade accounts receivable.

(in thousand USD, unless otherwise stated)

26. Prepayments and other current assets, net

	Note	31 December 2019	31 December 2018
Prepayments and other non-financial assets:
Deferred expenses		851	2 553
VAT for reimbursement		4 129	3 169
Advances to suppliers		713	578
Allowances for advances to suppliers	27	(3)	(3)
		5 690	6 297
Other financial assets:
Non-bank accommodations interest free		237	242
Other accounts receivable		143	634
Allowances for other accounts receivable	27	(43)	(77)
		337	799
		6 027	7 096

Deferred expenses relate to the purchase option according to the Management Incentive Plan (see Note 29).

As at 31 December 2019 an amount of USD 449 thousand or 63% of the total amount of advances to suppliers is due from the 10 most significant counterparties (as at 31 December 2018 – USD 273 thousand or 47%).

As at 31 December 2019 an amount of USD 218 thousand or 92% of the total amount of non-bank accommodations interest free is due from the 10 most significant counterparties (as at 31 December 2018 – USD 197 thousand or 81%).

27. Changes in allowances made

	Note	31 December 2019	31 December 2018
Allowances for trade accounts receivable	25	(12)	(10)
Allowances for advances to suppliers	26	(3)	(3)
Allowances for other accounts receivable	26	(43)	(77)
		(58)	(90)

The movements of the allowances were as follows:

December 2018
(43)
(153)
104
3
(1)
(90)

(in thousand USD, unless otherwise stated)

28. Cash and cash equivalents

	Currency	31 December 2019	31 December 2018
Cash in bank and hand	USD	3 779	3 382
Cash in bank and hand	UAH	1 258	532
Cash in bank and hand	EUR	134	1
Cash in bank and hand	PLN	11	5
		5 182	3 920

There were no restrictions on the use of cash and cash equivalents during the reporting periods.

29. Equity

Share capital

IMC S.A. has one class of ordinary shares. The number of authorized, issued and fully paid shares as at 31December 2019 is 33 178 000 (as at 31 December 2018 – 33 178 000). All shares have equal voting rights. Par value of one share is USD 0,0018 (EUR 0,0018).

		31 December 2019		31 December 2018
	%	Amount	%	Amount
AGROVALLEY LIMITED	74	43	72	43
Other shareholders (each one less than 5% of the share capital)	26	16	28	16
	100	59	100	59

A reconciliation of the number of shares outstanding at the beginning and at the end of the period:

For the year ended 31 December 2019	For the year ended 31 December 2018
33 178 000	33 178 000
-	-
33 178 000	33 178 000

Extraordinary shareholders meeting approved on 4 July 2017 a Management Incentive Plan providing to Management Team Members an option to purchase in aggregate up to 1 878 000 new shares of IMC S.A. As a part of this incentive plan, 1 878 000 new ordinary shares were issued with subscription price USD 0.00115. As at the 31 December 2017 the purchase option was fully exercised, market share price was USD 2.73.

Share premium

In 2011 IMC S.A. completed initial public offering of own shares on Warsaw Stock Exchange. Issue of share capital of IMC S.A. brought to the increase of share capital equaling to USD 10 thousand and share premium in amount of USD 24 387 thousand.

In 2017 Management Incentive Plan was realized. Issue of new shares of IMC S.A. brought to the increase of share capital equaling to USD 3 thousand and share premium in amount of USD 5 125 thousand.

Revaluation reserve

The fair value of Group's property, plant and equipment has been measured as at 31 December 2017, 2015, 2010, 2009 by an independent appraiser. As at 31 December 2009 the related revaluation surplus of USD 14 766 thousand was initially recognized in equity, as at 31 December 2010 it was additionally recognized in the amount of USD 4 326 thousand. As at 31 December 2015 the amount of USD 40 390 thousand was recognized as increase in revaluation reserve due to revaluation of PPE. As at 31 December 2017 the amount of USD 22 659 thousand was recognized as increase in revaluation reserve due to revaluation of PPE.

The revaluation surplus included in equity in respect of an item of property, plant and equipment is transferred directly to retained earnings as the asset is used by an entity (in the amount that is the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset's original cost) and when the asset is derecognized (in the full amount).

(in thousand USD, unless otherwise stated)

Effect of foreign currency translation

Effect of foreign currency translation comprises all foreign exchange differences arising from the translation of the financial statements into presentation currency.

Dividend policy

On 8 July 2016 the Board of Directors of IMC S.A. published its Dividend Policy: The Company intends to pay annual dividends starting from FY 2016 results with a dividend payout ratio up to 10% of Consolidated Net Profit of the Company and its Subsidiaries provided that the Company succeeds to receive dividend payment waivers from its creditors.

On 27 September 2017 the Company paid the interim dividend to the Company's shareholders for an aggregate amount of EUR 1 658 900 (EUR 0.05 per share).

On 14 September 2018 the Company paid the interim dividend to the Company's shareholders for an aggregate amount of EUR 11 280 520 (EUR 0.34 per share).

On 29 August 2019 the Company paid the interim dividend to the Company's shareholders for an aggregate amount of EUR 14 930 100 (EUR 0.45 per share).

Legal reserve

From the annual net profits of the Parent company, 5% have to be allocated to the legal reserve. This allocation shall cease to be required as soon and as long as such surplus reserve amounts to 10% of the capital. This reserve may not be distributed to the shareholders.

Management Incentive Plan

The Extraordinary shareholders meeting approved on 4 July 2017 a management incentive plan providing to Management Team Members and Eligible Employees as defined in the Management Incentive Plan an option to purchase in aggregate up to 1 878 000 new shares of IMC S.A., such number being equal to 6% of the issued stock of IMC S.A. as at the adoption date of such plan, at the price decided at the discretion of the Board of Directors of the Company which shall be equal to at least one euro cent EUR 0.01.

Performance period of the Management Incentive Plan is 3 years, starting from January 1, 2017 and ending on December 31, 2019. During the Performance Period, the Board of Directors of the Company may discretionarily decide when the Shares shall be issued by the Company to the Participants at the Subscription Price.

As a part of this incentive plan, 1 878 000 new ordinary shares were issued with subscription price USD 0.00115. As at 31 December 2017 the purchase option was fully exercised, market share price was USD 2.73.

Options granted under the Plan are the following:

	For the year ended 31 December 2017
	Exercise price per share option	Number of options
01 January	-	-
Granted during the period	USD 0.00115	1 878 000
Exercised during the period	USD 2.73	(1 878 000)
31 December	-	-

(in thousand USD, unless otherwise stated)

30. Share purchase warrant

According to the Warrant Agreement entered into between the Group and International Finance Corporation (IFC) as at 20 December 2013, IFC had the right to purchase up to 3 098 700 shares of IMC S.A. (representing equivalent of 9,90% of issued share capital) for a total amount up to USD 20 000 thousand. The warrant was exercisable at any time up to 19 December 2018.

But according to the IFC Loan agreement dated 19 December 2013 if all of the warrants have not been exercised by 19 December 2018, and if only some of the warrants have been issued, the portion of the Additional return which shall be payable shall be calculated by multiplying USD 21 000 thousand by a fraction the numerator of which is equal to the number of warrant shares not subscribed for pursuant to IFC loan agreement during the exercise period and the denominator of which is equal to the total number of warrant shares. This obligation to pay the additional return is an unconditional and independent debt obligation according to the IFC loan agreement.

As at 30 June 2016 According to the Amendment to Loan agreement between IMC S.A. and International Financial Corporation the Additional Return had to be paid by IMC S.A. to International Financial Corporation. Amount of Additional Return had to be paid in a lump sum payment not later than 19 December 2018 in an amount USD 21 000 thousand or in two instalments as follows: USD 11 000 thousand on 19 December 2018 and USD 11 800 thousand on 19 December 2019. All the warrants according to the Warrant agreement dated 20 December 2013 were cancelled on 22 December 2016.

In its treatment until 2015 year-end, the Group determined fair value of the share purchase warrant by applying Black-Scholes model to determine its value as an option to purchase shares, embedded in the loan with the non-resident bank IFC of USD 30 000 thousand. The Group also treated this value separately from the host instrument, recognizing a separate loss in the amount of initial fair value of the option, and thereafter recognizing changes in that fair value at a fair value through profit and loss. At the same time, the Group considered the obligation to pay the additional return of USD 21 000 thousand, included in the Warrant Agreement, as a contingent liability since it expected the IFC to exercise its warrants to buy shares. This judgment represented an error. In its corrected treatment at year end 2016, the Group considers the additional return of USD 21 000 thousand as an obligation associated with the IFC loan. Accordingly, it has included it as an expected cash flow in calculation of the effective interest rate implicit in the loan, used in determining the amortized value of the loan instrument regarded as a whole. The effective interest rate thus determined is 17,46%.

In September 2017 new terms of payment of additional return were agreed. In accordance with new terms the amount of additional return is USD 19 742 708 and should be paid in 5 portions starting September 2017 till June 2020. The amortized value of the loan instrument was regarded with effective interest rate of 20,76% (in 2018 – 20,76%).

31. Deferred tax assets and liabilities

The major components of deferred tax liabilities were as follows:

	Property, plant and equipment
31 December 2017	(3 198)
Considering profit (loss)	(40)
Considering equity	259
Effect of foreign currency translation	(48)
31 December 2018	(3 027)
31 December 2018	(3 027)
Considering profit (loss)	84
Considering equity	212
Effect of foreign currency translation	(487)
31 December 2019	(3 218)

(in thousand USD, unless otherwise stated)

32. Long-term loans and borrowings

	Currency	31 December 2019	31 December 2018
Secured
Long-term bank loans	USD	19 488	29 889
Finance lease liabilities	UAH, USD	12	367
Total long-term loans including current portion		19 500	30 256
Current portion of long-term bank loans	USD	(16 490)	(14 110)
Current portion of finance lease liabilities	UAH, USD	(12)	(357)
Total current portion		(16 502)	(14 467)
Total long-term loans and borrowings		2 998	15 789

Essential terms of credit contracts

	Year of		Nominal interest rate	31 December 2019
Creditor	maturity	Currency		Long-term liabilities	Including current portion
Non-resident bank*	2020	USD	6M Libor+8,00%	12 871	12 871
Ukrainian bank	2021	USD	6,00%	1 056	528
Ukrainian bank	2021	USD	4,75%	2 000	2 000
Ukrainian bank	2023	USD	5,00%	1 862	699
Ukrainian bank	2024	USD	4,90%	1 699	392
				19 488	16 490

	Year of		Nominal interest rate	31 December 2018
Creditor	maturity	Currency		Long-term liabilities	Including current portion
Non-resident bank*	2020	USD	6M Libor+8,00%	25 782	12 919
Ukrainian bank	2021	USD	6,00%	1 552	496
Ukrainian bank	2023	USD	5,00%	2 555	695
				29 889	14 110

* Loan from non-resident bank consists of:

• Basic loan amount of USD 30 000 thousand with 6M Libor+8,00% interest rate;

• Additional return liabilities in the amount of USD 19 743 thousand payable in instalments till June 2020, interest free, discounted by 20,76%.

Long-term loans outstanding were repayable as follows:

(in thousand USD, unless otherwise stated)

	31 December 2019	31 December 2018
Within one year	16 490	14 110
In the second to fifth year inclusive	2 998	15 779
	19 488	29 889

The Group has committed to comply with loans covenants.

As at 31 December 2018 the Group was in compliance with all loans covenants.

As at 31 December 2019 as a result of increase in liabilities due to impact of new IFRS 16 a covenant on long-term loan in the amount USD 2 000 thousand from Ukrainian bank was violated by the Group. The Group received from the bank waiver of rights to require compliance with the breached covenant as at 31 December 2019, but after the end of reporting period. The loan was reclassified as current portion of longterm loan in the full amount.

Finance lease liabilities were presented as follows:

		31 December 2019	31 December 2018
	Minimum lease payments	Present value of minimum lease payments	Minimum lease payments	Present value of minimum lease payments
Within one year	12	12	369	357
In the second to fifth year inclusive	-	-	11	10
	12	12	380	367
Less future finance charges	-	-	(13)	-
Present value of minimum lease payments	12	12	367	367

33. Short-term loans and borrowings

	Currency	31 December 2019	31 December 2018
Secured
Short-term bank loans	USD	27 538	28 500

Essential terms of credit contracts

Creditor	Currency	Nominal interest rate	31 December 2019
Ukrainian bank	USD	5,00%	10 000
Ukrainian bank	USD	5,50%	5 538
Ukrainian bank	USD	5,25%	5 100
Ukrainian bank	USD	5,25%	5 000
Ukrainian bank	USD	5,25%	1 900
			27 538

(in thousand USD, unless otherwise stated)

Creditor	Currency	Nominal interest rate	31 December 2018
Ukrainian bank	USD	5,00%	10 000
Ukrainian bank	USD	5,25%	6 500
Ukrainian bank	USD	5,25%	5 100
Ukrainian bank	USD	5,25%	5 000
Ukrainian bank	USD	5,25%	1 900
			28 500

Loans and borrowings from Ukrainian banks are secured with property, plant and equipment in the amount USD 43 706 thousand (Note 18) and inventories in the amount USD 13 831 thousand (Note 23).

34. Trade accounts payable

	31 December 2019	31 December 2018
Trade accounts payable	2 867	3 049

As at 31 December 2019 an amount of USD 2 566 thousand or 89% of the total amount of trade accounts payable is due to the 10 most significant counterparties (as at 31 December 2018 – USD 1 694 thousand or 56%).

The table below summarizes the maturity profile of Group's liabilities on contractual payments on trade accounts payable:

	On demand	Within 30 days	From 30 to 90 days	From 90 to 180 days	From 180 to 360 days	From 1 to 5 years	Total
31 December 2019	-	1 134	66	-	1 667	-	2 867
31 December 2018	-	3 018	31	-	-	-	3 049

35. Other current liabilities and accrued expenses

	31 December 2019	31 December 2018
Other liabilities:
Advances from clients	5 394	7 773
	5 394	7 773
Other accounts payable:
Accounts payable for the lease of land and property rights	-	2 417
Wages, salaries and related charges payable	1 102	884
Interest payable on bank loans	152	330
Accruals for unused vacations	1 250	779
Accruals for audit services	87	70
Accounts payable for non-current tangible assets	289	214
Taxes payable	482	217
Other accounts payable	48	20
	3 410	4 931
	8 804	12 704

(in thousand USD, unless otherwise stated)

As at 31 December 2019 an amount of USD 5 388 thousand or 99% of the total amount of advances from clients is due from the 10 most significant counterparties (as at 31 December 2018 – USD 7 083 thousand or 99%).

Distribution of other current liabilities and accrued expenses on time frames is the following:

	On demand	Within 30 days	From 30 to 90 days	From 90 to 180 days	From 180 to 360 days	From 1 to 5 years	Total
31 December 2019	1 250	7 467	-	87	-	-	8 804
31 December 2018	779	9 639	473	604	1 209	-	12 704

36. Related party disclosures

According to existing criteria of determination of related parties, the related parties of the Group are divided into the following categories:

a) Entities - related parties under common control with the Companies of the Group; b) Key management personnel.

The Group performs transactions with related parties in the ordinary course of business. During the reporting period the Group did not perform any related parties' transactions.

Remuneration of key management personnel was as follows:

	For the year ended 31 December 2019	For the year ended 31 December 2018
Wages and salaries	2 094	2 520
Directors fees	694	566
Related charges	32	27
	2 820	3 113
The average number of employees, persons	6	6

(in thousand USD, unless otherwise stated)

37. Information on segments

A business segment is a separable component of a business entity that produces goods or provides services to individuals (or groups of related products or services) in a particular economic environment that is subject to risks and generates revenues other than risks and income of those components that are peculiar to other business segments.

For the purpose of Management, the Group is divided into the following business segments on the basis of produced goods and rendered services, and consists of the following 3 operating segments:

• Farming division a segment, which deals with cultivation and sale of such basic agricultural crops as corn and wheat;
• Livestock breeding a segment which deals with breeding and sale of biological assets and agricultural products of live farming. Basic agricultural product of live farming for sale in this segment is milk;
• Storage and processing a segment which deals with storage and processing of agricultural produce.

Information on business segments for the year ended 31 December 2019 was the follow:

	Crop farming	Dairy farming	Elevators and warehouses	Unallocated	Total
Revenue	294 864	1 662	7 789	-	304 315
Intra-group elimination	(127 808)	-	(6 906)	-	(134 714)
Revenue from external buyers	167 056	1 662	883	-	169 601
Gain from changes in fair value of biological assets and agricultural produce, net	51 982	786	-	-	52 768
Cost of sales	(166 784)	(1 112)	(3 031)	-	(170 927)
Gross income	52 254	1 336	(2 148)	-	51 442
Administrative expenses	-	-	-	(13 246)	(13 246)
Selling and distribution expenses	-	-	-	(21 247)	(21 247)
Other operating income	-	-	-	2 708	2 708
Other operating expenses	-	-	-	(4 176)	(4 176)
Write-offs of property, plant and equipment	-	-	-	(260)	(260)
Operating income of a segment	52 254	1 336	(2 148)	(36 221)	15 221
Financial expenses, net	-	-	-	(3 476)	(3 476)
Effect of lease of right-of-use assets	-	-	-	(7 640)	(7 640)
Effect of additional return	-	-	-	(2 090)	(2 090)
Foreign currency exchange gain, net	-	-	-	6 049	6 049
Profit before tax	52 254	1 336	(2 148)	(43 378)	8 064
Income tax expenses, net	-	-	-	(746)	(746)
Net profit	52 254	1 336	(2 148)	(44 124)	7 318
Other segment information:
Depreciation and amortisation	20 693	623	2 487	-	23 803
Additions to non-current assets:
Property, plant and equipment	5 451	146	1 713	-	7 310
Intangible assets	27	-	-	-	27
Right-of-use assets	16 960	-	-	-	16 960

(in thousand USD, unless otherwise stated)

Revenues from the 10 most significant counterparties for the year ended 31 December 2019 were as follows:

	Business segment	% of revenue
Non-residental buyer	Crop farming	57,8%
Non-residental buyer	Crop farming	13,7%
Ukrainian buyer	Crop farming	8,8%
Ukrainian buyer	Crop farming	4,8%
Non-residental buyer	Crop farming	4,5%
Non-residental buyer	Crop farming	2,8%
Non-residental buyer	Crop farming	1,9%
Non-residental buyer	Crop farming	1,9%
Non-residental buyer	Crop farming	1,4%
Ukrainian buyer	Dairy farming	0,6%
		98,2%

Information on business segments for the year ended 31 December 2018 was the follow:

	Crop farming	Dairy farming	Elevators and warehouses	Unallocated	Total
Revenue	217 721	1 489	8 754	-	227 964
Intra-group elimination	(88 797)	-	(7 556)	-	(96 353)
Revenue from external buyers	128 924	1 489	1 198	-	131 611
Gain from changes in fair value of biological assets and agricultural produce, net	73 962	(636)	-	-	73 326
Cost of sales	(136 013)	(1 450)	(2 757)	-	(140 220)
Gross income	66 873	(597)	(1 559)	-	64 717
Administrative expenses	-	-	-	(11 928)	(11 928)
Selling and distribution expenses	-	-	-	(11 794)	(11 794)
Other operating income	-	-	-	2 317	2 317
Other operating expenses	-	-	-	(5 022)	(5 022)
Write-offs of property, plant and equipment	-	-	-	(2 287)	(2 287)
Operating income of a segment	66 873	(597)	(1 559)	(28 714)	36 003
Financial expenses, net	-	-	-	(4 987)	(4 987)
Effect of additional return	-	-	-	(3 265)	(3 265)
Foreign currency exchange gain/(loss), net	-	-	-	567	567
Profit before tax	66 873	(597)	(1 559)	(36 399)	28 318
Income tax expenses	-	-	-	(691)	(691)
Net profit	66 873	(597)	(1 559)	(37 090)	27 627
Other segment information:
Depreciation and amortisation	9 951	177	2 428	-	12 556
Additions to non-current assets:
Property, plant and equipment	4 109	1 026	244	-	5 379
Intangible assets	39	-	-	-	39

(in thousand USD, unless otherwise stated)

Revenues from the 10 most significant counterparties for the year ended 31 December 2018 were as follows:

	Business segment	% of revenue
Non-resident buyer	Crop farming	28,8%
Non-resident buyer	Crop farming	28,5%
Non-resident buyer	Crop farming	11,3%
Non-resident buyer	Crop farming	8,6%
Ukrainian buyer	Crop farming	4,7%
Non-resident buyer	Crop farming	4,1%
Non-resident buyer	Crop farming	2,8%
Non-resident buyer	Crop farming	1,8%
Non-resident buyer	Crop farming	1,7%
Ukrainian buyer	Crop farming	1,2%
		93,5%

38. Lease of land

The Group leases land for agricultural purposes from private individuals. Lease payments are calculated on the basis of monetary valuation of the land considering the inflation factor. The average interest rate for lease of land of the Group is 5-13%% in 2019 (5-13%% in 2018) and depends on validity of the contract.

Areas of operating leased land were as follows:

	31 December 2019	31 December 2018
Location of land	Hectare	Hectare
Poltava region
Land under processing	20 231	22 619
Land for grazing, construction, other	140	2 009
Chernihiv region
Land under processing	78 648	77 436
Land for grazing, construction, other	130	1 681
Sumy region
Land under processing	24 166	23 926
Land for grazing, construction, other	7	113
	123 322	127 784

According to the Group's strategy, during Y2017-2019 areas of fallow lands and land for grazing and construction were decreased by unrenewing of land lease agreements.

(in thousand USD, unless otherwise stated)

39. Financial instruments

Financial instruments as at 31 December 2018 were represented by the following categories:

Financial instrument	Category	Measurement
Financial assets
Accounts receivable	Financial assets at amortised cost	Amortised cost
Other financial assets	Financial assets at amortised cost	Amortised cost
Cash and cash equivalents	Financial assets at amortised cost	Amortised cost
Financial liabilities
Loans and borrowings	Financial liabilities at amortised cost	Amortised cost
Accounts payable	Financial liabilities at amortised cost	Amortised cost
Other financial liabilities	Financial liabilities at amortised cost	Amortised cost

The fair values of the Group's financial assets and financial liabilities listed hereinbefore reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date. The fair values are based on inputs other than quoted prices that are observable for the asset or liability. These inputs include foreign currency exchange rates and interest rates. The financial assets and financial liabilities are primarily valued using standard calculations/models that use as their basis readily observable market parameters. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and currency rates, with resulting valuations periodically validated through third party or counterparty quotes.

The Group's non-derivative financial instruments included cash and cash equivalents, trade accounts receivable, other financial assets, trade accounts payable, other accounts payable, loans and borrowings. As at 31 December 2019 and 2018, the carrying value of these financial instruments, excluding long-term debt, approximates fair value because of the short-term maturities of these instruments. The major part of the long-term loans and borrowings has floating interest rates and other has fixed interest rates but they are corresponded to the market rate level, so the Management of the Group believes that book value of long-term loans and borrowings approximates their fair value.

40. Management of financial risks

One of the principal responsibilities of the Financial Department of the Group is to manage the financial risks arising from the Group's underlying operations. On an annual basis, the Financial Department approves a strategic plan that takes into account the opportunities and major risks of our business and mitigation factors to reduce these risks. The Financial Department also reviews risk management policies and procedures on an annual basis and sets upper limits on the transactional exposure to be managed and the time periods over which exposures may be managed. The objective of the policy is to reduce volatility in cash flow and earnings. Risks managed include:

Type of risk	Affected by	Risk management policies
Credit risk	Ability of counterparties to financial instrument to fulfill their contractual obligations	Credit approval and monitoring practices; counterparties policies
Liquidity risk	Balance of cash flow	Preparation of detailed forecasts of cash flow
Market risk	- Market prices on products sold, materials and services for production - Changes in interest rates - Fluctuation of foreign currency exchange rates	- Long-term cooperation with reliable suppliers - Maintaining a combination of fixed and floating interest rates; USD and UAH interest rates - USD and UAH interest rates

Depending on the type of risks faced by the Group, it is possible to use a single or several methods of minimizing or levelling their negative impact on Group.

(in thousand USD, unless otherwise stated)

The use of the following risk management methods is possible at the Group's companies:

1) risk pooling is a method aimed at reducing the risk by transferring accidental losses into the relatively small fixed expenses (this method is a basis for insurance);

2) limitation is a method involving the development of detailed strategic documentation, which sets the boundary level of risk in each area of the company's activities, as well as clear allocation of functions and responsibilities of personnel;

3) diversification is a method of risk control through the selection of assets, profit on which slightly correlates, if possible;

4) hedging is a balancing transaction, minimizing the negative impact of risk (e.g., selection of assets and liabilities by timing, by currency).

Credit risk

Credit risk is a risk of financial loss to the Group, which results from failure of a buyer or a contractor under the financial instrument to fulfill its contractual obligations. The risk is primarily related to the Group's accounts receivable, cash and cash equivalent.

Book value of financial assets reflects maximal extent that is subject to credit risk of the Group. Maximal level of credit risk is the following:

	31 December 2019	31 December 2018
Trade accounts receivable, net	277	459
Other financial assets:
Non-bank accomodations interest free	237	242
Other accounts receivable, net	99	557
Cash and cash equivalents	5 182	3 920
	5 795	5 178

The Group manages credit risk through rigorous credit approval and monitoring practices. Financial and Economic Department has developed the credit policy. In accordance with it, all contractors are subjected to careful analysis on ability to pay before the Group offers its standard terms of payment and delivery. If the Group sells goods to a contractor it has never dealt before, transactions are performed on terms of prepayment. Deferred payment is offered only to contractors with work experience with the Group more than 1 year without delays in payment terms established in sale contracts.

Group's management believes that companies comprising the Group are free in their choice of the customers, have close contacts with the leading global and Ukrainian traders, and may switch without risk to other customer offering better conditions of collaboration.

The Financial Directorate of the Group constantly carries out monitoring over payment terms deadlines according to goods selling contracts. In case of delay in payment, the personnel of the commercial department deals up with the customer and the decision whether to apply penalties or slightly extend the terms (within 90 days) is taken.

The Group forms estimated provision for trade and other accounts receivable. It corresponds with estimation of amount of already suffered credit losses. The main element of the provision is an element of certain loss, determined for assets considering already suffered but not fixed losses. Estimated amount of losses is determined on the basis of statistical data for previous periods for similar financial assets.

Distribution of trade accounts receivable as at 31 December 2019 on time-frames is the following:

			Past due, not impaired
	Total	Neither past due nor impaired	Within 90 From 90 to 360 days days		More than 1 year
31 December 2019	277	213	52	12	-
31 December 2018	459	389	55	-	15

On the basis of analysis of payments for the current period Financial Director of the Group considers that there is no need to form provision for overdue, but not impaired trade accounts receivable.

Liquidity risk

Risk of liquidity - is the risk of inability to meet financial obligations of the Group in due time.

(in thousand USD, unless otherwise stated)

The way the Group manages the liquidity lies in providing the Group with constant availability of liquid facilities, enough to meet the obligation in due time, avoiding unforeseen losses and not to expose the reputation of the Group to risk.

There is system of management accounting and budgeting, which allows to plan and control covering all the expenses from operating activity and related with its financial expenses by means of profit.

The table below summarizes the maturity profile of Group's financial liabilities based on contractual payments as at 31 December 2019:

	On demand	Within 30 days	From 30 to 90 days	From 90 to 180 days	From 180 to 360 days	From 1 to 5 years	Over 5 years	Total
Bank loans and interest payable on bank loans	2 000	439	13 113	16 871	11 757	2 997	-	47 176
Finance lease liabilities	-	4	-	8	-	-	-	12
Lease liabilities as to right-of-use assets	-	809	190	2 002	12 852	46 832	40 603	103 288
Trade accounts payable	-	1 134	66	-	1 667	-	-	2 867
Other current liabilities and accrued expenses	1 250	7 467	-	87	-	-	-	8 804
	3 250	9 853	13 369	18 968	26 276	49 829	40 603	162 147

The table below summarizes the maturity profile of Group's financial liabilities based on contractual payments as at 31 December 2018:

	On demand	Within 30 days	From 30 to 90 days	From 90 to 180 days	From 180 to 360 days	From 1 to 5 years	Total
Bank loans and interest payable on bank loans	-	532	17 927	6 000	17 561	16 699	58 719
Finance lease liabilities	-	46	73	182	56	10	367
Trade accounts payable	-	3 018	31	-	-	-	3 049
Other current liabilities and accrued expenses	779	7 222	473	604	1 209	-	10 287
Accounts payable for the lease of land	-	2 417	-	-	-	-	2 417
	779	13 235	18 504	6 786	18 826	16 709	74 839

Market risk

Market risk arises from fluctuations in market factors, including exchange rates, interest rates and commodity prices. Movements in these factors may affect the Group's income and expenses, or the value of its financial instruments. The objective of the Group's management of market risk is to maintain this risk within acceptable parameters, whilst optimizing returns.

Market risk is comprised of:

• Commodity price risk
  • i) Risk of changes in market prices of products for sale

The Group Sales Department makes continuous monitoring of market prices of products sold in order to manage exposure to changes in market prices for the products. According to the results of this analysis and subsequent prediction of prices for products, management pricing policy depending on the dynamics of market prices is formed.

ii) Risk of changes in prices of materials and services

The Group is exposed to changes in prices of materials and services that are used in the process of production. The Group manages these risks by working with reliable suppliers, business relationships with whom had developed over a long time, and the search for new, more affordable supply of resources.

(in thousand USD, unless otherwise stated)

- Currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense are denominated in a different currency from the Group's functional currency) and the Group's net investments in foreign subsidiaries.

The Group's companies manage their foreign currency risk by comparing the volumes of export revenues by currencies and loan portfolio by currencies. The Group avoids borrowing and production sales for export in any currency except for USD. The comparison is carried out as a part of the annual planning and budgeting.

When the amount of the expected export revenue is below the level of USD borrowing for the financial year, the decrease in foreign currency borrowings by repayment of such loans or conversion of foreign currency loans into national currency is performed.

Group avoided realization of risk transactions that are subject to foreign currency risk.

The table below summarizes the Group's exposure to foreign currency risk as at 31 December 2019:

	Note	UAH	USD	EUR	PLN	Total
Trade accounts receivable, net	25	277	-	-	-	277
Cash and cash equivalents	28	1 258	3 779	134	11	5 182
Loans and borrowings	32, 33	12	47 026	-	-	47 038
Lease liabilities as to right-of-use assets	19	98 334	152	4 802	-	103 288
Other current liabilities and accrued expenses	35	3 172	5 633	-	-	8 804
		103 053	56 590	4 936	11	164 590

The table below summarizes the Group's exposure to foreign currency risk as at 31 December 2018:

	Note	UAH	USD	EUR	PLN	Total
Trade accounts receivable, net	25	220	239	-	-	459
Cash and cash equivalents	28	532	3 382	1	5	3 920
Loans and borrowings	32, 33	24	58 731	-	-	58 755
Other current liabilities and accrued expenses	35	4 663	8 041	-	-	12 704
		5 439	70 393	1	5	75 838

The Group's exposure to foreign currency risk, based on book value, as at 31 December 2019 was as follows:

	31 December 2019	Increase/decrease in USD exchange rate, %	Effect on profit before tax
Cash and cash equivalents	3 779	10	378
		(10)	(378)
Loans and borrowings		10	(4 703)
	47 026	(10)	4 703
		10	(15)
Lease liabilities as to right-of-use assets	152	(10)	15
		10	(24)
Other current liabilities and accrued expenses	239	(10)	24
		10	(4 364)
General effect	-	(10)	4 365

(in thousand USD, unless otherwise stated)

	31 December 2019	Increase/decrease in EUR exchange rate, %	Effect on profit before tax
Lease liabilities as to right-of-use assets	4 802	10	480
		(10)	(480)

The Group's exposure to foreign currency risk, based on book value, as at 31 December 2018 was as follows:

	31 December 2018	Increase/decrease in USD exchange rate, %	Effect on profit before tax
Cash and cash equivalents	3 382	10	338
		(10)	(338)
		10	(3 295)
Loans and borrowings	32 949	(10)	3 295
Other current liabilities and accrued expenses		10	(33)
	330	(10)	33
		10	(2 990)
General effect	-	(10)	2 990

• Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Change in interest rates influences the involved loans and borrowings and finance lease transactions. Management of the Group doesn't have formalized policy respecting proportion of interest risk's allocation between the loans with fixed interest rate and floating interest rate. However, when attracting new loans and borrowings, management solves the problem respecting which interest rate, fixed or floating, will be more profitable for the Group during the expected period till the maturity date, based on own professional judgments.

The Group's interest-bearing financial instruments were formed as follows:

	31 December 2019	31 December 2018
Loans and borrowings
Fixed rate instruments	34 155	32 607
Variable rate instruments	12 883	26 149
	47 038	58 756

The Group's exposure to interest rate risk, based on book value, as at 31 December 2019 was as follows:

	Note	31 December 2019	Increase/decrease in Libor rate, %	Effect on profit before tax
		12 882	1	(129)
Loans and borrowings	32, 33		(1)	129

The Group's exposure to interest rate risk, based on book value, as at 31 December 2018 was as follows:

	Note	31 December 2018	Increase/decrease in Libor rate, %	Effect on profit before tax
Loans and borrowings	32, 33	26 149	1	(261)
			(1)	261

(in thousand USD, unless otherwise stated)

Agro-industrial risks

Agro-industrial business is subject to risks of outbreaks of various diseases of cattle or crops. These diseases could result in losses. Disease control measures were adopted by the Group to minimise and manage this risk. The Group's management is satisfied that its current existing risk management and quality control processes are effective and sufficient to prevent any diseases and related losses.

Customer concentration risk

Focusing on large wholesale world traders, the Group has a small pool of customers and could be influenced by customer concentration risk. But the work of the Group with a small number of customers is not due to the lack of other customers or the impossibility of entering new markets, but to the selected sales strategy - the best conditions for selling are ensured by relations with large traders. To control the risk before each sale, a tender is held among buyers to determine the best conditions of the transaction. Making a choice in the direction of the buyer, management understand the level of supply and demand for the products on the market with other participants and Group's capabilities in the event of a change of buyer.

41. Capital management

The Group's objectives in the process of capital management are maintaining the Group's ability to follow the going concern principle to provide benefits to interested parties, and also maintaining the optimal structure of involved and own funds.

The management of the Group regularly analyzes the structure of its capital. On basis of results of this analysis the Group takes measures, which are aimed at maintenance of total structure of the capital balance.

The main financial liabilities of the Group are long-term loans and borrowings, current portion of long-term borrowings, short-term loans and borrowings, trade accounts payable, other current liabilities and accrued expenses. The main purpose of these financial instruments is to raise funds for the activities of the Group.

	Note	31 December 2019	31 December 2018
Long-term loans and borrowings	32	2 998	15 789
Long-term lease liabilities as to right-of-use assets	19	87 425	-
Current portion of long-term borrowings	32	16 502	14 467
Current portion of long-term lease liabilities as to right-of-use assets	19	15 863	-
Short-term loans and borrowings	33	27 538	28 500
Trade accounts payable	34	2 867	3 049
Other current liabilities and accrued expenses	35	8 804	12 704
Cash and cash equivalents	28	(5 182)	(3 920)
Net debt		156 816	70 589
Total equity		133 193	120 670
Total net debt and equity		290 009	191 259
Gearing ratio		54%	37%

The Group's gearing ratio was as follows:

The capital structure of the Group is based on management's judgments of the appropriate balancing of all key elements of its financial strategy in order to meet its strategic and day-to-day needs. The Management of the Group considers the amount of capital in proportion to risk and manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Group will take appropriate steps in order to maintain, or if necessary adjust, the capital structure.

In 2019 the gearing ratio increased to 54% from 37% in 2018 due to impact of IFRS 16 and the appearance in the consolidated fianancial positionof new assets and liabilities. These obligations are mainly related to the lease of land and existed in the Group all the time before, just should not have been reflected in the balance. For this reason, management does not believe that this increase in gearing ratio carries any risk. If the gearing rate will be calculated without taking into account new obligations comparable with the previous period, it will be 29%.

(in thousand USD, unless otherwise stated)

42. Events after the balance sheet date

Conducting its normal operating activity, the Group considers important to highlight the following:

Loans and borrowings and interests are repaid in the amount of USD11 424 thousand.

Loans and borrowings are received in the amount of USD 13 837 thousand.

VAT for reimbursement is received in the amount of USD 3 754 thousand.

As at 31 December 2019 as a result of increase in liabilities due to impact of new IFRS 16 a covenant on long-term loan in the amount USD 2 000 thousand from Ukrainian bank was violated by the Group. As at 06 April 2020 the Group received from the Ukrainian bank waiver of rights to require compliance with the breached covenant as at 31 December 2019. As the waiver was received after the end of reporting period, as at 31 December 2019 the loan was reclassified as current portion of long-term loan in the full amount with maturity date "On demand".

COVID-19 pandemic

The global spread of COVID-19 is affecting every one of us. At IMC, we do what we do with the respect to the people and land to serve the vital humanity needs in agricultural and food products of high quality.

To prevent the spread of COVID-19 coronavirus since mid-February, the company has taken proactive preventative measures in accordance with an approved program of action aimed primarily at protecting the health of its employees and their families, our suppliers and consumers.

The company has taken the following actions:

• trainings for the company employees to prevent spreading of the coronavirus by restricting movement, traveling abroad, visiting social gathering places and maintaining personal hygiene during the epidemic;
• updating of the business continuity plan during the pandemic. An action plan in case of force majeure circumstances was introduced to the company employees;
• organizing for all company employees the ability to work remotely (a remote access) using work computers and other technical devices (server equipment, etc.);
• developing of a control mechanism and establishing of a communication system in case the remote work of employees;
• the following preventive measures have been taken in premises and offices: disinfectants have been installed in sanitary areas and at entrances to office premises; daily wet cleaning with the use of disinfectants; hourly ventilated office space; dishwashing occurs only in the dishwasher with hot steam disinfection.

In connection with the introduction of intensified quarantine restrictions in Ukraine due to evolving COVID-19 situation, starting from 16.03.2020 IMC has taken more stringent safeguards and made the following changes to its operations:

• non-production staff transferred to remote work from home;
• to perform production tasks related with economic activities of the company (field works, loading-unloading works, etc.) to attract only the minimum number of workers providing them with appropriate personal protective equipment;
• cancel all foreign business trips;
• restrict business trips to the regions and to carry out them only in case of urgent necessity with the permission of the director;
• conduct conferences and meetings online;
• cancel all corporate events.

Currently there is no shortage of specialists in all departments of the company. Employees' workloads and experience make it possible to temporarily replace employees who for health reasons will not be able to work remotely in accordance with internal regulations and procedures..

Management forecasts on the impact of the COVID-19 pandemic on IMC's future business are the following:

2020 sowing campaign

Firstly, the sowing plan for 2020 is slightly changed compared to 2019 - the area under soybean in 2019, which was almost 11 thousand hectares, was given for winter wheat (8 thousand hectares) in 2019 and for corn (3 thousand hectares) in 2020. This means that 8,000 hectares of sowing have already been carried out in autumn 2019, which reduces the load on the spring sowing campaign 2020.

Secondly, the favorable weather conditions allowed us to increase significantly the area where carbamide was applied. For comparison, the area with carbamide applied in 2018 amounted to 15 thousand hectares, while in 2019 - 33 thousand hectares, that making the fields more prepared for further sowing.

Thirdly, we have the necessary materials and technical support - seeds and fertilizers have already been purchased and are in stock. We work with big suppliers and predict that there will be no significant disruption in the supplying of materials. We are also ready for sowing in terms of machinery - new productive machinery was leased for field works: 20 new harvesters in 2019 and 10 new tractors in 2020.

(in thousand USD, unless otherwise stated)

Field sowing works being carried out. We have minimized the number of employees involved and provided them with protective equipment. In general, the sowing campaign runs as usual.

Future revenues

The available inventories at stock as at 31 December 2019 are already contracted and are awaiting its turn for shipment. There are no problems with the availability of wagons to deliver grain to the port. There are no restrictions on freight traffic. We expect that the shipment of corn harvested in 2019 will run without problems.

We understand that the quarantine will weaken the overall rate of goods consumption, but we do not expect it will apply to basic foodstuffs, including the grain of the future 2020 harvest. So we do not anticipate difficulties in sales of future crops.

Financing

Bank loans are represented by long-term loans and revolving credit lines. Long-term loans are paid as usual on a schedule, revolving credit lines are used to replenish operating funds and are renewed annually. As at 31 December 2019 such credit lines were opened in the amount of USD 28.5 million. As at 07 April 2020 credit lines in the amount of USD 18.5 million were updated, the new rates are lower than last year by 0.5- 1.0%%. A credit line in the amount of USD 10 million will be updated in May according to the schedule. There are no problems with financing, we are paying off our debts, the necessary credit lines were updated.

There were no other material events after the end of the reporting date, which have a bearing on the understanding of the financial statements.