AC S.A. — Interim / Quarterly Report 2018

May 17, 2018

IMC S.A. and its subsidiaries

Condensed consolidated interim financial statements For the three months ended 31 March 2018

CONTENTS

	Pages
Statement of Management responsibilities	3
Management statement	4
Management report	5
Condensed consolidated interim financial statements
for the three months ended 31 March 2018
Condensed consolidated interim statement of comprehensive income	10
Condensed consolidated interim statement of financial position	11
Condensed consolidated interim statement of changes in equity	12
Condensed consolidated interim statement of cash flows	13
Notes to the Condensed consolidated interim financial statements	15

Statement of Management responsibilities for preparation and approval of condensed consolidated interim financial statements for the three months ended 31 March 2018

Management of the Group of companies "IMC" (the Group) is responsible for preparing the Condensed consolidated interim financial statements which reflect in all material aspects the financial position of the Group as at 31 March 2018, as well as the results of its activities, cash flows and changes in equity for the three months then ended in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

In preparing condensed consolidated interim 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 condensed consolidated interim financial statements;

• preparing condensed consolidated interim 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 condensed consolidated interim financial statements all the relations and transactions between related parties;

• accounting and disclosing in the condensed consolidated interim 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 condensed consolidated interim 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 from fraud and other irregularities.

These condensed consolidated interim financial statements as at 31 March 2018 prepared in compliance with IFRS as approved by the European Union are approved on behalf of the Group's Management on 17 May 2018.

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 Condensed consolidated interim financial statements for the three months ended 31 March 2018, and the comparable information, have been prepared in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board 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______

Management report

1. Operational and Financial Results 2. Selected Financial Data

1. Operational and Financial Results

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

(in thousand USD)		For the three months ended
	Notes	31 March 2018	31 March 2017	Change in %
CONTINUING OPERATIONS
Revenue	5	30 758	36 986	-17%
Gain from changes in fair value of biological assets and agricultural produce, net	6	3 179	3 178	-
Cost of sales	7	(33 964)	(36 879)	-8%
GROSS PROFIT		(27)	3 285	-101%
Administrative expenses	8	(2 941)	(1 939)	52%
Selling and distribution expenses	9	(3 161)	(3 214)	-2%
Other operating income	10	158	362	-56%
Other operating expenses	11	(1 023)	(879)	16%
Write-offs of property, plant and equipment		(415)	(730)	-43%
OPERATING PROFIT		(7 409)	(3 115)	138%
Financial expenses, net	14	(950)	(1 783)	-47%
Effect of additional return	27	(889)	(1 019)	-13%
Foreign currency exchange gain, net	15	1 054	238	343%
PROFIT BEFORE TAX FROM CONTINUING OPERATIONS		(8 194)	(5 679)	44%
Income tax expenses, net	16	(36)	(2)	1683%
NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS		(8 230)	(5 681)	45%

For the purposes of their analyses, the Company's management use Normalised Net profit, being Net profit adjusted for some expense items that are deemed to be substantially beyond their control, such as write-offs of property, plant and equipment and foreign currency exchange gains and losses, as well as items believed to be non-recurring. The non-recurring expenses currently include the effect of additional return on warrants (Note 30 to the Condensed consolidated interim financial statements), as it is assumed that similar transactions will not be occurring in the foreseeable future.

The Normalised Net profit for the periods presented is calculated based on historical information derived from the Condensed consolidated interim financial statements.

The reconciliation to Normalised Net profit for the period (from continuing operations) is presented as follows:

(in thousand USD)	For the three months ended
	31 March 2018	31 March 2017	Change in %
CONTINUING OPERATIONS
Net profit for the period	(8 230)	(5 681)
Write-offs of property, plant and equipment	415	730
Foreign currency exchange gain, net	(1 054)	(238)
Non recurring items:
Effect of additional return	889	1 019
Normalised Net profit	(7 980)	(4 170)	91%

The Company also uses normalised Earnings before interest and taxes (EBIT) and normalised Earnings before interest, taxes, depreciation and amortisation (EBITDA) as key measures of its performance.

Earnings before interest and taxes (EBIT) is an indicator of a company's profitability, calculated as revenue less expenses, the latter excluding tax and interest. To external users, EBIT provides information on the Company's ability to generate earnings directly from its operations, disregarding its cost of capital and the tax burden and thus making the Company's results comparable to similar companies across the industry where those companies may have varying capital structures or tax environments. To the management, EBIT provides a performance measure additionally adjusted for expenses that may be deemed fixed (i.e. stemming from the given capital structure) or externally imposed by the environment (i.e. the tax burden).

The Company calculates Normalised EBIT 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 EBIT for the periods presented is calculated based on historical information derived from the Condensed consolidated interim financial statements. The reconciliation to Normalised EBIT for the period (from continuing operations) is presented as follows:

(in thousand USD)		For the three months ended
	31 March 2018	31 March 2017	Change in %
CONTINUING OPERATIONS
Net profit for the period	(8 230)	(5 681)
Write-offs of property, plant and equipment	415	730
Foreign currency exchange gain, net	(1 054)	(238)
Financial expenses, net	950	1 783
Income tax expenses, net	36	2
Non recurring items:
Effect of additional return	889	1 019
Normalised EBIT	(6 994)	(2 385)	193%

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, to 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 measures comparable to similar companies regardless of varying tax environments, capital structures or depreciation accounting policies.

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 Condensed consolidated interim financial statements. The reconciliation to Normalised EBITDA for the period (from continuing operations) is presented as follows:

(in thousand USD)	For the three months ended
	31 March 2018	31 March 2017	Change in %
CONTINUING OPERATIONS
Net profit for the period	(8 230)	(5 681)
Write-offs of property, plant and equipment	415	730
Foreign currency exchange gain, net	(1 054)	(238)
Financial expenses, net	950	1 783
Income tax expenses, net	36	2
Depreciation and amortization	3 246	2 209
Non recurring items:
Effect of additional return	889	1 019
Normalised EBITDA	(3 748)	(176)	2029%

Company's Normalised Net profit, as well as Normalised EBIT and EBITDA decreased in 1Q2018 in comparison with 1Q2017 mainly due to decrease in sales in 2018.

Revenue

The Company's revenue from sales of finished products decreased by 17% in 1Q2018 in comparison with previous period.

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

(in thousand USD)

	For the three months ended
	31 March 2018	31 March 2017	Change in %
Corn	27 335	34 696	-21%
Soy beans	1 632	826	98%
Potatoes	703	326	116%
Milk	318	446	-29%
Cattle	42	169	-75%
Wheat	1	-	-
Other	440	386	14%
	30 471	36 849	-17%

The most significant portion of the Company's revenue comes from selling corn, which represented 89,7% in 1Q2018 and 94,2% in 1Q2017 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:

(in thousand USD)

	For the three months ended
	31 March 2018	31 March 2017
Corn
Sales of produced corn (in tonnes)	176 869	223 008
Realization price (U.S. \$ per ton)	155	156
Revenue from produced corn (U.S. \$ in thousands)	27 335	34 696
Soy beans
Sales of produced soy beans (in tonnes)	4 047	2 202
Realization price (U.S. \$ per ton)	403	375
Revenue from produced soy beans (U.S. \$ in thousands)	1 632	926
Potatoes
Sales of produced potatoes (in tonnes)	6 365	5 498
Realization price (U.S. \$ per ton)	110	59
Revenue from produced potatoes (U.S. \$ in thousands)	703	326
Other (produced only)
Total sales volume (in tonnes)	5 026	4 341
Total revenues (U.S. \$ in thousands)	440	386
Total sales volume (in tonnes)	192 308	235 050
Total revenue from sale of crops (U.S. \$ in thousands)	30 110	36 234

Revenue relating to sales of corn decreased by 21% to USD 27,3 million in current period from USD 34,7 million in previous period, due to decrease in sales volume (tons) in 2018 as a result of Group's sale strategy.

Cost of sales

The Company's cost of sales decreased by 8% to USD 34,0 million in current period from USD 36,9 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 three months ended
	31 March 2018	31 March 2017	Change in %
Raw materials	(13 019)	(18 517)	-30%
Change in inventories and work-in-progress	(11 622)	(9 705)	20%
Rent	(2 745)	(3 082)	-11%
Depreciation and amortization	(2 658)	(1 851)	44%
Wages and salaries of operating personnel and related charges	(1 564)	(1 292)	21%
Fuel and energy supply	(1 299)	(1 834)	-29%
Third parties' services	(606)	(320)	89%
Repairs and maintenance	(320)	(167)	91%
Taxes and other statutory charges	(106)	(102)	4%
Other expenses	(25)	(9)	179%
	(33 964)	(36 879)	-8%

Decrease in cost of sales mainly consists of decrease in volume of realization – 18% of decrease y-o-y.

Gross profit

The Company's gross loss decreased to USD 27 thousand in current period from USD 3 285 thousand of gross profit in previous period, an 101% year-on-year decrease. In relative terms, the total sales went down 17% year-on-year.

Administrative expenses

Administrative expenses increased year-on-year to USD 2,9 million in current period from USD 1,9 million in previous period, reflecting an increase in wages and salaries of administrative personnel and related charges to USD 2,4 million from USD 1,3 million.

Other operating income

The Company's other operating income decreased by 56% to USD 0,2 million in current period from USD 0,4 million in previous period due to decrease in income from write-offs of accounts payable.

Other operating expenses

Other operating expenses increased by 16% to USD 1,0 million in current period from USD 0,9 million in previous period reflecting an increase in depreciation expenses and loss on disposal of property, plant and equipment.

Financial expenses, net

The Company's financial expenses, net decreased by 47% to USD 1,0 million in current period from USD 1,8 million in previous period. This decrease was related to the repayment of loans and borrowings in 2017.

Foreign currency exchange gain, net

Foreign currency exchange gain, net increase to USD 1,1 million in current period from USD 0,2 million in previous period. This increase reflected the strengthening of UAH in 1Q2018 in comparison with 1Q2017 – 5,7% of revaluation as at 31 March 2018 in comparison with 0,8% as at 31 March 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 three months ended
	31 March 2018	31 March 2017
Net cash flows from operating activities	5 945	12 296
Net cash flows from investing activities	(3 465)	(1 464)
Net cash flows from financing activities	2 644	(71)
Net increase in cash and cash equivalents	5 124	10 761

Net cash flow from operating activities

The Company's net cash inflow from operating activities decreased to USD 5,9 million in current period from USD 12,3 million in previous period. The decrease in 1Q2018 was primarily attributable to decrease in sales.

Net cash flow from investing activities

The Company's net cash outflow from investing activities increased to USD 3,5 million in current period from USD 1,5 million in previous period. The increase in 1Q2018 was attributable to increase in purchase of property, plant and equipment for the beginning of the sowing campaign.

Net cash flow from financing activities

Net cash inflow from financing activities increased to USD 2,6 million in current period from USD 0,1 million of cash outflow in previous period. The increase in 1Q2018 was due to receiving of new loans for purchase of property, plant and equipment.

2. Selected Financial Data

(in thousand USD)

	For the three months ended	31 March 2018	31 March 2017
I.	Revenue	30 758	36 986
II.	Operating profit/(loss)	(7 409)	(3 115)
III.	Profit/(loss) before income tax	(8 194)	(5 679)
IV.	Net profit/(loss)	(8 230)	(5 681)
V.	Net cash flow from operating activity	5 945	12 296
VI.	Net cash flow from investing activity	(3 465)	(1 464)
VII.	Net cash flow from financing activity	2 644	(71)
VIII.	Total net cash flow	5 124	10 761
IX.	Total assets	196 586	169 358
X.	Share capital	59	56
XI.	Total equity	103 889	60 234
XII.	Non-current liabilities	33 429	55 230
XIII.	Current liabilities	59 268	53 894
XIV.	Weighted average number of shares	33 178 000	31 300 000
XV.	Profit/(loss) per ordinary share (in USD)	(0,25)	(0,18)
XVI.	Book value per share (in USD)	3,12	1,94

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

Dmytro Martyniuk

__________signed____________

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the three months ended 31 March 2018

(in thousand USD, unless otherwise stated)
	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
CONTINUING OPERATIONS
Revenue	5	30 758	36 986
Gain from changes in fair value of biological assets and agricultural produce, net	6	3 179	3 178
Cost of sales	7	(33 964)	(36 879)
GROSS PROFIT		(27)	3 285
Administrative expenses	8	(2 941)	(1 939)
Selling and distribution expenses	9	(3 161)	(3 214)
Other operating income	10	158	362
Other operating expenses	11	(1 023)	(879)
Write-offs of property, plant and equipment		(415)	(730)
OPERATING PROFIT		(7 409)	(3 115)
Financial expenses, net	14	(950)	(1 783)
Effect of additional return	27	(889)	(1 019)
Foreign currency exchange gain/(loss), net	15	1 054	238
PROFIT BEFORE TAX FROM CONTINUING OPERATIONS		(8 194)	(5 679)
Income tax expenses, net	16	(36)	(2)
NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS		(8 230)	(5 681)
Net profit/(loss) for the period attributable to:
Owners of the parent company		(8 233)	(5 748)
Non-controlling interests		3	67
Weighted average number of shares		33 178 000	31 300 000
Basic profit per ordinary share (in USD)		(0,25)	(0,18)
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss
Effect of foreign currency translation		8 012	821
Items that will no be reclassified to profit or loss
Deferred tax charged directly to amortization of revaluation reserve		69	37
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)		8 081	858
TOTAL COMPREHENSIVE PROFIT		(149)	(4 823)
Comprehensive income/(loss) attributable to:
Owners of the parent company		(164)	(4 886)
Non-controlling interests		15	63

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

__________signed____________ Dmytro Martyniuk

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As at 31 March 2018

(in thousand USD, unless otherwise stated)

	Note	31 March 2018	31 December 2017	31 March 2017	31 December 2016
		Unaudited	Audited	Unaudited	Audited
ASSETS
Non-current assets
Property, plant and equipment	17	86 669	81 948	65 043	64 650
Intangible assets	18	2 712	2 918	3 839	4 061
Non-current biological assets	19	2 347	2 343	1 754	1 432
Prepayments for property, plant and equipment		968	800	607	1 817
Total non-current assets		92 696	88 009	71 243	71 960
Current assets
Inventories	20	71 707	62 161	61 219	55 110
Current biological assets	21	10 889	15 348	10 488	18 202
Trade accounts receivable, net	22	264	321	162	276
Prepayments and other current assets, net	23	13 262	8 153	11 206	9 208
Prepayments for income tax		6	10	17	9
Cash and cash equivalents	25	7 762	6 092	15 023	4 180
Total current assets		103 890	92 085	98 115	86 985
TOTAL ASSETS		196 586	180 094	169 358	158 945
LIABILITIES AND EQUITY
Equity attributable to the owners of
parent company
Share capital	26	59	59	56	56
Share premium		29 512	29 512	24 387	24 387
Revaluation reserve		56 480	58 825	41 667	43 217
Retained earnings		142 034	147 853	122 664	126 825
Effect of foreign currency translation		(124 700)	(132 700)	(128 051)	(128 876)
Total equity attributable to the owners of parent company		103 385	103 549	60 723	65 609
Non-controlling interests		504	489	(489)	(552)
Total equity		103 889	104 038	60 234	65 057
Non-current liabilities
Deferred tax liabilities	28	3 344	3 198	2 477	2 498
Long-term loans and borrowings	29	30 085	27 725	52 753	55 185
Total non-current liabilities		33 429	30 923	55 230	57 682
Current liabilities
Current portion of long-term borrowings	29	11 617	10 629	13 286	9 846
Short-term loans and borrowings	30	26 200	26 113	18 478	18 547
Trade accounts payable		15 387	1 303	15 132	2 104
Other current liabilities and accrued expenses	31	6 064	7 088	6 998	5 708
Total current liabilities		59 268	45 133	53 894	36 205
Total liabilities		92 697	76 056	109 124	93 888
TOTAL LIABILITIES AND EQUITY		196 586	180 094	169 358	158 945

__________signed____________

Alex Lissitsa

Chief Executive Officer Chief Financial Officer

__________signed____________

Dmytro Martyniuk

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the three months ended 31 March 2018

(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 2016 (Audited)	56	24 387	43 217	126 825	(128 876)	65 609	(552)	65 057
Сomprehensive income/(loss) for the year
Profit (loss) for the period	-	-	-	(5 748)	-	(5 748)	67	(5 681)
Amortization of revaluation reserve	-	-	(1 587)	1 587	-	-	-	-
Deferred tax charged directly to amortization of revaluation reserve	-	-	37	-	-	37	-	37
Other comprehensive income/(loss)	-	-	-	-	825	825	(4)	821
Total comprehensive profit/(loss)	-	-	(1 550)	(4 161)	825	(4 886)	63	(4 823)
31 March 2017 (Unaudited)	56	24 387	41 667	122 664	(128 051)	60 723	(489)	60 234
31 December 2017 (Audited)	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	-	-	-	(8 233)	-	(8 233)	3	(8 230)
Amortization of revaluation reserve	-	-	(2 414)	2 414	-	-	-	-
Deferred tax charged directly to amortization of revaluation reserve	-	-	69	-	-	69	-	69
Other comprehensive income/(loss)	-	-	-	-	8 000	8 000	12	8 012
Total comprehensive profit/(loss)	-	-	(2 345)	(5 819)	8 000	(164)	15	(149)
31 March 2018 (Unaudited)	59	29 512	56 480	142 034	(124 700)	103 385	504	103 889

__________signed____________

Alex Lissitsa

__________signed____________ Dmytro Martyniuk Chief Executive Officer Chief Financial Officer

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the three months ended 31 March 2018

(in thousand USD, unless otherwise stated)

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit/(loss) before tax from continuing operations		(8 194)	(5 679)
Adjusted to reconcile profit before tax with net cash used
in operating activities: Gain from changes in fair value of biological assets and
agricultural produce, net	6	(3 179)	(3 178)
Disposal of revaluation of biological assets and agricultural	7	12 611	15 882
produce in the cost of sales, net
Depreciation and amortization	12	3 250	2 213
Interest expenses and other financial expenses	14	991	1 828
Effect of additional return		889	1 019
Write-offs of property, plant and equipment		415	730
Gain on recovery of assets previously written off	10	(112)	(165)
Deferred expenses on options		413	-
Foreign currency exchange loss/(gain), net		(1 814)	(234)
Lost crops	11	97	73
Loss on disposal of property, plant and equipment	11	245	70
Shortages and losses due to impairment of inventories	11	56	190
Interest income	14	(41)	(46)
Gain on disposal of inventories	10	(5)	(10)
Income from write-offs of accounts payable	10	(3)	(160)
Accruals for unused vacations		(86)	(55)
Write-offs of VAT	11	16	8
Income from the exchange of property certificates	10	(16)	-
Allowance for doubtful accounts receivable	11	48	4
Cash flows from operating activities before changes in working capital		5 581	12 490
Changes in trade accounts receivable		(59)	109
Changes in prepayments and other current assets		(764)	(1 881)
Changes in inventories		(17 068)	(20 843)
Changes in current biological assets		7 071	9 923
Changes in trade accounts payable		13 614	13 036
Changes in other current liabilities and accrued expenses		(2 012)	693
Cash flows from operations		6 363	13 527
Interest paid		(416)	(1 217)
Income tax paid		(2)	(14)
Net cash flows from operating activities		5 945	12 296

__________signed____________

Alex Lissitsa Chief Executive Officer Chief Financial Officer

__________signed____________

Dmytro Martyniuk

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (continued)

For the three months ended 31 March 2018

(in thousand USD, unless otherwise stated)

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(3 472)	(1 544)
Purchase of intangible assets		(4)	(21)
Proceeds from disposal of property, plant and equipment		11	99
Net cash flows from investing activities		(3 465)	(1 464)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term and short-term borrowings		3 108	581
Repayment of long-term and short-term borrowings		(464)	(652)
Net cash flows from financing activities		2 644	(71)
NET CASH FLOWS		5 124	10 761
Cash and cash equivalents as at the beginning of the period	25	6 092	4 180
Effect of translation into presentation currency		(3 454)	82
Cash and cash equivalents as at the end of the period	25	7 762	15 023

__________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 Lu 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 agricultural companies. 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.

All companies comprising the Group were under the control of the same beneficial owner Mr. Petrov A.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 March 2018	31 March 2017
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	72,85	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	100	100
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

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 133,4 thousand ha (129,6 thousand ha under processing of high quality arable land). As at 31 March 2018 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 Condensed consolidated interim financial statements are public and available at:

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

(in thousand USD, unless otherwise stated)

2. Basis of preparation of the Condensed consolidated interim financial statements

Statement of compliance

These condensed consolidated interim 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. The interim condensed consolidated financial statements for the three months ended 31 March 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2017.

These condensed consolidated interim 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 condensed consolidated interim 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 condensed consolidated interim 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 Condensed consolidated interim 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 Condensed consolidated interim financial statements do not include any adjustments should the Group be unable to continue as going concern.

Basis of measurement

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

The Group's management has decided to present and measure these Condensed consolidated interim 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 Condensed consolidated interim 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 Condensed consolidated interim financial statements are presented in the thousands of United States Dollars ("USD"), unless otherwise indicated.

(in thousand USD, unless otherwise stated)

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. All exchange differences are taken to the statement of comprehensive income with the exception of all monetary items that provide an effective hedge for a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are recognised in the statement of comprehensive income. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in equity.

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.

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

Currency	31 March 2018	Average for the three months ended 31 March 2018	31 December 2017	31 March 2017	Average for the three months ended 31 March 2017	31 December 2016
UAH/ USD	26,543493	27,32034	28,067223	26,976058	26,59473	27,190858

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 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 Condensed consolidated interim 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.

(in thousand USD, unless otherwise stated)

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.

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 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 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.

(in thousand USD, unless otherwise stated)

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 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 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 statement of comprehensive income.

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 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 statement of comprehensive income as Gain (loss) from changes in fair value of biological assets and agricultural produce, net.

(in thousand USD, unless otherwise stated)

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 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.

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 statement of comprehensive income.

(in thousand USD, unless otherwise stated)

Financial assets

The Group's financial assets include cash and cash equivalents, trade and other accounts receivable, other receivables.

Management determines the classification of financial assets at initial recognition and re-evaluates this designation at every balance sheet date. Financial assets are classified in the following category at the time of initial recognition based on the purpose for which the financial assets were acquired:

"Loans and receivables" that are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This category includes landings given that appeared owing to issuance of facilities to debtor. Receivables include trade and other accounts receivables.

Financial assets are recognized initially at fair value plus directly attributable transaction costs.

The category of financial assets "Loans and receivables" is subsequently measured as follows:

• Receivables are measured at amortized cost using the effective interest method, less allowance for impairment.
• Borrowings issued are measured at amortized cost less impairment losses.

Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership.

Financial assets of the Group are assessed for indications of impairment at each reporting date. Allowance for impairment is acurred using forwardlooking expected credit loss (ECL) approach. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the assets's original effective interest rate.

The Group applies the standard's simplified approach and calculates ECLs based on lifetime expected credit losses. The Group establishes a provision matrix that is based on the Group's historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

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.

A given to the Management option to purchase the Group's shares 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, other short-term highly liquid investments with original maturities of three months or less.

(in thousand USD, unless otherwise stated)

Financial liabilities

The Group's financial liabilities include trade and other payables, loans and borrowings, share purchase warrant.

Financial liabilities are recognized initially at fair value minus directly attributable transaction costs.

The Group classifies its financial liabilities as subsequently measured at amortized cost using the effective interest method.

Any difference between amount of received resources and sum to repayment is recorded as interest expenses in statement of comprehensive income at effective interest rate method during the period, when borrowings were received.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

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 the income statement.

Leases

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 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 statement of comprehensive income on a straight-line basis over the lease term.

Group as a lessor

Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the statement of comprehensive income in the period in which they are earned. Costs, including depreciation, incurred in earning the lease income are recognized as an expense.

Government grants

The Ukrainian legislation provides various tax 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.

Government grants related to VAT

According to the Ukrainian tax legislation, the agricultural enterprises (whose income from sale of agricultural products is not less than 75% of the total gross income, or enterprises which sell meat and milk products irrespective of the volume of such transactions) received benefits regarding VAT payment on agricultural operations. Correspondingly above, in Y2016 one part of VAT amount was to be paid to the State budget and other part of VAT amount was transferred to the entity's special bank account and could be used to make payments relating to the agricultural activities. As a result of these operations tax amounts were recognized in the statements of comprehensive income as other operating income.

Since 01 January 2017 there were no VAT preferences for farmers.

(in thousand USD, unless otherwise stated)

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 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:

• 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. As at 31 March 2018, 5 of the companies comprising the Group were elected to pay single tax 4th group (2017: 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.

(in thousand USD, unless otherwise stated)

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 financial statements. The Group discloses information about contingent liabilities in the Notes to 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 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 financial statements as Share premium.

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 tme 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.

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 Condensed consolidated interim financial statements are authorized for issue.

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.

(in thousand USD, unless otherwise stated)

Revenue recognition

The Group recognizes revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group.

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.

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.

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.

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.

4. Critical accounting estimates and judgments

The preparation of the Group's Condensed consolidated interim 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 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 Condensed consolidated interim financial statements.

(in thousand USD, unless otherwise stated)

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) (Note 17).

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 not any changes in accounting estimates of remaining useful lives of items of property, plant and equipment in reported periods.

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.

As at 30 March 2018 and 2017 impairment of property, plant and equipment and intangible assets was not identified (Note 17, 18).

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.

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.

(in thousand USD, unless otherwise stated)

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 livestock of similar age, breed and genetic merit.

The income from recognition of biological assets at fair value for the three months ended 31 March 2018 amounted to USD 2 042 thousand (USD 2 577 thousand for the three months ended 31 March 2017) (Note 6).

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.

The income from recognition of agricultural produce at fair value for the three months ended 31 March 2018 amounted to USD 1 137 thousand (USD 601 thousand for the three months ended 31 March 2017) (Note 6).

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 investments in the future harvest. The cost of these investments is based on expenses incurred during the current year. Investment valuation model includes a number of judgments of management about the benefits to be extracted from the utilization of such investments in the future. Management's estimates of the value of investments is based on the recommendations of scientific sources and agronomic calculations of the internal services of the Group.

For the three months ended 31 March 2018 shortages and losses due to impairment of inventories amounted to USD 56 thousand (USD 190 thousand for the three months ended 31 March 2017) (Note 11).

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 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 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.

Impairment of trade and other accounts receivable

Management evaluates the recoverability of trade and other accounts receivable by estimating the likelihood of its collection. These estimations are based on an analysis of individual accounts. The amount of impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Management estimates the future cash flow by taking into consideration the following: analysis of trade and other accounts receivable in accordance with the contractual credit terms allowed to customers; the collection history of customers; the general economic conditions, the specifics of industry and the financial position of customers.

As at 31 March 2018 allowances for accounts receivable were recognized in the amount of USD 38 thousand (USD 41 thousand as at 31 March 2017) (Note 24).

Impairment of other financial and non-financial assets

Management assesses whether there are any indicators of possible impairment of other financial and 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 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 financial statements.

As at 31 March 2018 allowances for other financial and non-financial assets were recognized in the amount of USD 12 thousand (USD 8 thousand as at 31 March 2017) (Note 24).

Long-term VAT recoverable

The Group classifies the VAT recoverable balance as current or non-current based on expectations as to whether it will be realised within 12 months from the reporting date. In making this assessment, management considered past history of receiving VAT refunds from the State budget. For VAT recoverable expected to be set off against VAT liabilities in future periods, Management based its estimates on detailed projections of expected excess of VAT output over VAT input in the normal course of the business.

(in thousand USD, unless otherwise stated)

Taxation

The Group mostly operates in the Ukrainian tax jurisdiction. The Company'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.

The Group considers that it operates in compliance with tax laws of Ukraine, although, a lot of new laws about taxes and transactions in foreign currency have been adopted recently, and their interpretation is rather ambiguous.

In December 2010, the revised Tax Code of Ukraine was officially published. In its entirety, the Tax Code of Ukraine became effective on 1 January 2011, while some of its provisions took effect later.

The Group's management believes the enactment of the Tax Code of Ukraine will not have a significant negative impact on the Group's financial results in the foreseeable future.

Adoption of the Tax Code changes taxation system in Ukraine entirely. Quantity of taxes decreases almost twofold. Gradual decrease of base rates for all fiscal charges is stipulated within several years. Additional rate for tax on income of physical persons is adopted. Regulations settling procedure of taxation covered by the Tax Code are cancelled. These changes substantially increase risks of incorrect interpretation of adopted Tax Code. As a result of future tax inspections additional liabilities may be revealed, which will not comply with tax statements of the Company. Such liabilities may comprise taxes themselves, and also fines and penalties, and their amounts may be material.

The Group's management believes the enactment of the Tax Code of Ukraine will not have a significant negative impact on the Group's financial results in the foreseeable future.

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. As the practice of implementation of the new transfer pricing rules has not yet developed and the wording of some clauses of the rules is unclear, the probability that the Group's transfer pricing positions may be challenged by the tax authorities cannot be reliably estimated as of the date of authorization of these Condensed consolidated interim financial statements for issue.

Management is confident that the Group complies with all transfer-pricing rules.

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.

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.

(in thousand USD, unless otherwise stated)

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.

The Ukrainian Hryvna devalued against major foreign currencies. The National Bank of Ukraine introduced a range of measures aimed at limiting the outflow of customer deposits from the banking system, improving the liquidity of banks, and supporting the exchange rate of the Ukrainian Hryvna.

Significant external financing is required to support economic stabilization and the political situation depends, to a large extent, upon success of the Ukrainian government's efforts; yet further economic and political developments are currently difficult to predict and an adverse effect on the Ukrainian economy may continue.

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.

New and amended standards and interpretations

Applying of new standards

The Group has initially adopted IFRS 15 Revenue from contracts with customers and IFRS 9 Financial instruments from 1 January 2018.

The adoption of IFRS 9 have not material effect on the classification and measurement of the Group's financial assets and liabilities. All financial assets and financial liabilities continue to be measured at the same bases is previously adopted under IFRS 39.

The adoption of IFRS 15 have not material effect on Group's revenuea measurement and recognition.

Standards and Interpretations in issue but not effective

IFRS 16 Leases

IFRS 16 was issued in January 2016. The new standard will supersede all current lease guidance when it becomes effective. IFRS 16 is effective for the annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. The Group plans to adopt the new standard on the required effective date.

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Such approach should be applied to all leases operation except leases of low-value assets and short-term leases.

The new standard also requires to make more extensive disclosures than under IAS 17.

As at 31 December 2017 the Group has operating land lease commitments in the amount USD 82 159 thousand and operating machinery lease commitments in the amount USD 206 thousand. IAS 17 does not require the recognition of any right-of-use asset or liability for future payments for these leases, but relating information is disclosed in Note 38. A preliminary assessment indicates that these arrangements will meet the definition of a lease under IFRS 16 and the Group will recognise a right-of-use asset and a liability in respect of these leases.

The Management is assessing the potential impact of the new standard and does not have the accurate estimation of such impact, but anticipates that the application of IFRS 16 will have a significant impact on the financial statements of the Group.

(in thousand USD, unless otherwise stated)

At the date of authorization of these Condensed consolidated interim 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 28: Long-term Interests in Associates and Joint Ventures	1 January 2019
Amendments to IFRS 9: Prepayment Features with Negative Compensation	1 January 2019
IFRIC Interpretation 23: Uncertainty over Income Tax Treatment	1 January 2019
Annual improvements to IFRS 2015-2017 Cycle	1 January 2019
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	Deferred indefinitely
IFRS 17 Insurance Contracts	Deferred indefinitely

The Board of Directors is currently analyzing the impact of the adoption of these financial reporting standards on the financial statements of the Group.

(in thousand USD, unless otherwise stated)

5. Revenue

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Revenue from sales of finished products	a	30 471	36 849
Revenue from services rendered	b	287	137
		30 758	36 986

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

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
	Unaudited	Unaudited
Corn	27 335	34 696
Soy beans	1 632	826
Potatoes	703	326
Milk	318	446
Cattle	42	169
Wheat	1	-
Other	440	386
	30 471	36 849

b) Revenue from services rendered was as follows:

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
	Unaudited	Unaudited
Drying	103	-
Storage	89	19
Transport	30	44
Processing	27	6
Other	38	68
	287	137

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

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Agricultural produce	21	1 137	601
Current biological assets	21	2 174	2 273
Non-current biological assets	19	(132)	304
		3 179	3 178

(in thousand USD, unless otherwise stated)

7. Cost of sales

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Raw materials	a	(13 019)	(18 517)
Change in inventories and work-in-progress	b	(11 622)	(9 705)
Rent		(2 745)	(3 082)
Depreciation and amortization	12	(2 658)	(1 851)
Wages and salaries of operating personnel and related charges	13	(1 564)	(1 292)
Fuel and energy supply		(1 299)	(1 834)
Third parties' services		(606)	(320)
Repairs and maintenance		(320)	(167)
Taxes and other statutory charges		(106)	(102)
Other expenses		(25)	(9)
		(33 964)	(36 879)

a) Raw materials for the three months ended 31 March 2018 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 12 611 thousand (USD 15 882 thousand for the three months ended 31 March 2017).

b) Change in inventories and work-in-progress comprises changes in work-in-progress, agricultural produce and current biological assets. Book values of agricultural produce and biological assets as at the end of the reporting periods comprise fair value component stemming from revaluation conducted for the purposes of initial recognition of agricultural produce and biological assets at fair value.

8. Administrative expenses

,

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Wages and salaries of administrative personnel and related charges	13	(2 405)	(1 283)
Professional services		(33)	(179)
Third parties' services		(91)	(80)
Depreciation and amortisation	12	(78)	(44)
Bank services		(72)	(67)
Transport expenses		(58)	(53)
Repairs and maintenance		(52)	(73)
Other expenses		(152)	(160)
		(2 941)	(1 939)

(in thousand USD, unless otherwise stated)

9. Selling and distribution expenses

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Delivery costs		(2 915)	(3 028)
Depreciation	12	(98)	(83)
Wages and salaries of sales personnel and related charges	13	(59)	(44)
Other expenses		(89)	(59)
		(3 161)	(3 214)

10. Other operating income

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Gain on recovery of assets previously written off	a	112	165
Income from the exchange of property certificates	b	16	-
Gain on disposal of inventories		5	10
Income from write-offs of accounts payable		3	160
Other income		22	27
		158	362

a) Gain on recovery of assets previously written off is represented by amounts of inventory surplus identified during the stocktaking, recovery of amounts previously recognized as doubtful and insurance compensations.

b) Income from the exchange of property certificates represents the difference between the price paid for property certificates and the fair value of received items of property, plant and equipment and recognized as income in the period of the exchange operation.

11. Other operating expenses

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Depreciation	12	(407)	(227)
Loss on disposal of property, plant and equipment		(245)	(70)
Lost crops		(97)	(73)
Shortages and losses due to impairment of inventories		(56)	(190)
Allowance for doubtful accounts receivable	24	(48)	(4)
Charity		(47)	-
Wages and salaries of non-operating personnel and related charges	13	(25)	(20)
Write-offs of VAT		(16)	(8)
Other expenses		(82)	(287)
		(1 023)	(879)

(in thousand USD, unless otherwise stated)

12. Depreciation and amortisation

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
		Unaudited	Unaudited
Depreciation
Cost of sales	7	(2 447)	(1 576)
Other operating expenses	11	(407)	(227)
Selling and distribution expenses	9	(98)	(83)
Administrative expenses	8	(78)	(44)
Depreciation as a part of article "Lost crops"		(9)	(8)
		(3 039)	(1 938)
Amortisation
Cost of sales	7	(211)	(275)
		(211)	(275)
		(3 250)	(2 213)

13. Wages and salaries expenses

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
	Unaudited	Unaudited
Wages and salaries	(3 542)	(2 244)
Related charges	(511)	(400)
	(4 053)	(2 644)
The average number of employees, persons Remuneration of management	2 336 970	2 337 112

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

		For the three months ended 31 March 2018		For the three months ended 31 March 2017
		Unaudited		Unaudited
	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	7	(1 564)	1 663	(1 292)	1 707
Administrative personnel	8	(2 405)	650	(1 283)	608
Sales personnel	9	(59)	19	(44)	19
Non-operating personnel	11	(25)	4	(20)	3
As a part of article "Construction in progress"		-	-	(5)	-
		(4 053)	2 336	(2 644)	2 337

(in thousand USD, unless otherwise stated)

14. Financial expenses, net

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
	Unaudited	Unaudited
Interest income on bank deposits	41	46
Interest expenses on loans and borrowings	(981)	(1 809)
Other expenses	(10)	(20)
	(950)	(1 783)

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

During the three-month period ended 31 March 2018 the strengthening of Ukrainian Hryvnia took place - 0,8% of revaluation as at 31 March 2017 in comparison with 5,7% of revaluation as at 31 March 2018. As a result, during the three-month period ended 31 March 2018 the Group recognised net foreign exchange gain in the amount of USD 1 054 thousand (USD 238 thousand of gain for the three-month period ended 31 March 2017) in the condensed consolidated interim statement of comprehensive income.

16. Income tax expenses

The corporate income tax rate for the three months ended 31 March 2018 was: 18% in Ukraine, 12,5% in Cyprus, 19% in Luxemburg (for the three months ended 31 March 2017 - 18% in Ukraine, 12,5% in Cyprus, 21% in Luxemburg).

The components of income tax expenses were as follows:

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
	Unaudited	Unaudited
Current income tax	(3)	(6)
Deferred tax	(33)	4
Income tax benefit (expenses) reported in the statement of comprehensive income	(36)	(2)
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	69	37

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

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
01 January (Audited)	(3 198)	(2 772)
Income tax benefit (expenses) for the period recognized in other comprehensive income	69	37
Income tax benefit (expenses) for the period recognized in profit or loss	(33)	(2)
Effect of foreign currency translation	(182)	260
31 March (Unaudited)	(3 344)	(2 477)

(in thousand USD, unless otherwise stated)

17. Property, plant and equipment

	Land and buildings	Machinery	Motor vehicles	Other	Construction in progress	Total
INITIAL COST
31 December 2016 (Audited)	41 424	28 623	13 568	610	668	84 893
Additions	32	2 205	212	20	113	2 582
Disposals	(254)	(1 095)	(147)	(9)	-	(1 505)
Transfer	1	89	19	4	-	113
Effect from translation into presentation currency	327	243	115	5	5	695
31 March 2017 (Unaudited)	41 530	30 065	13 767	630	786	86 778
31 December 2017 (Audited)	56 736	40 919	22 941	586	1 543	122 725
Additions	101	2 432	894	32	253	3 712
Disposals	(575)	(715)	(332)	(9)	-	(1 631)
Transfer	-	1	1	3	(5)	-
Effect from translation into presentation currency	3 243	2 399	1 333	34	96	7 105
31 March 2018 (Unaudited)	59 505	45 036	24 837	646	1 887	131 911
ACCUMULATED DEPRECIATION
31 December 2016 (Audited)	(5 761)	(9 621)	(4 330)	(531)	-	(20 243)
Depreciation for the period	(421)	(905)	(573)	(39)	-	(1 938)
Disposals	63	455	83	9	-	610
Effect from translation into presentation currency	(47)	(78)	(37)	(2)	-	(164)
31 March 2017 (Unaudited)	(6 166)	(10 149)	(4 857)	(563)	-	(21 735)
31 December 2017 (Audited)	(11 196)	(17 107)	(11 925)	(549)	-	(40 777)
Depreciation for the period	(735)	(1 419)	(869)	(16)	-	(3 039)
Disposals	240	455	257	8	-	960
Effect from translation into presentation currency	(642)	(1 010)	(702)	(32)	-	(2 386)
31 March 2018 (Unaudited)	(12 333)	(19 081)	(13 239)	(589)	-	(45 242)
Net book value
31 December 2016 (Audited)	35 663	19 002	9 238	79	668	64 650
31 March 2017 (Unaudited)	35 364	19 916	8 910	67	786	65 043
31 December 2017 (Audited)	45 540	23 812	11 016	37	1 543	81 948
31 March 2018 (Unaudited)	47 172	25 955	11 598	57	1 887	86 669

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).

As at 31 March 2018 and 31 March 2017 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.

(in thousand USD, unless otherwise stated)

18. Intangible assets

	Computer software	Property certificates	Land lease rights	Total
Initial cost
31 December 2016 (Audited)	17	383	9 482	9 882
Additions	-	21	-	21
Disposals	-	-	-	-
Effect from translation into presentation currency	-	3	76	79
31 March 2017 (Unaudited)	17	407	9 558	9 982
31 December 2017 (Audited)	16	355	9 187	9 558
Additions	-	5	-	5
Disposals	-	(157)	-	(157)
Effect from translation into presentation currency	1	16	526	543
31 March 2018 (Unaudited)	17	219	9 713	9 949
Accumulated amortisation
31 December 2016 (Audited)	(12)	(1)	(5 807)	(5 820)
Amortisation for the period	-	-	(275)	(275)
Effect from translation into presentation currency	(1)	-	(47)	(48)
31 March 2017 (Unaudited)	(13)	(1)	(6 129)	(6 143)
31 December 2017 (Audited)	(15)	(1)	(6 624)	(6 640)
Amortisation for the period	-	-	(211)	(211)
Effect from translation into presentation currency	-	-	(386)	(386)
31 March 2018 (Unaudited)	(15)	(1)	(7 221)	(7 237)
Net book value
31 December 2016 (Audited)	5	382	3 675	4 062
31 March 2017 (Unaudited)	4	406	3 429	3 839
31 December 2017 (Audited)	1	354	2 563	2 918
31 March 2018 (Unaudited)	2	218	2 492	2 712

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.

19. Non-current biological assets

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Non-current biological assets - animal-breeding
Cattle	2 342	2 334	1 737
Non-current biological assets - plant-breeding
Perennial grasses	5	9	17
Total non-current biological assets	2 347	2 343	1 754

(in thousand USD, unless otherwise stated)

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

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Cattle
Cattle, units	831	842	1 100
Live weight, kg	315 079	318 138	409 820
Book value	2 342	2 334	1 737

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

	Cattle
31 December 2016 (Audited)	1 407
Transfer (from (to) current biological assets)	(1)
Change in fair value	304
Effect from translation into presentation currency	27
31 March 2017 (Unaudited)	1 737
31 December 2017 (Audited)	2 334
Transfer (from (to) current biological assets)	27
Change in fair value	(132)
Effect from translation into presentation currency	113
31 March 2018 (Unaudited)	2 342

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

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Perennial grasses
Area, ha	143	147	295
Book value	5	9	17

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

	Perennial grasses
31 December 2016 (Audited)	25
Harvesting failure	(1)
Effect from translation into presentation currency	(7)
31 March 2017 (Unaudited)	17
31 December 2017 (Audited)	9
Harvesting failure	(1)
Effect from translation into presentation currency	(3)
31 March 2018 (Unaudited)	5

(in thousand USD, unless otherwise stated)

20. Inventories

	Note	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Agricultural produce	a	32 183	50 789	25 022
Work-in-progress	b	14 341	8 480	12 906
Agricultural materials		22 795	1 347	21 662
Fuel		879	712	782
Spare parts		1 058	396	606
Raw materials		343	293	130
Finished goods		8	9	12
Other inventories		100	135	99
		71 707	62 161	61 219

As at 31 March 2018 cost value of inventories amounting to USD 59 233 thousand (USD 43 676 thousand as at 31 December 2017, USD 55 970 thousand as at 31 March 2017).

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

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Corn	30 287	46 847	22 972
Soya	752	2 202	691
Potato	269	884	306
Silage	223	259	460
Hay	23	33	51
Wheat	16	15	16
Sunflower	15	14	1
Other	598	535	525
	32 183	50 789	25 022

The fair value of agricultural produce was estimated based on market price as at date of harvest and is within level 1 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.

(in thousand USD, unless otherwise stated)

21. Current biological assets

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Current biological assets of animal-breeding
Cattle	1 794	1 635	1 134
Other	4	3	6
	1 798	1 638	1 140
Current biological assets of plant-breeding
Corn	-	7 577	-
Wheat	9 044	6 067	9 230
Grasses	6	32	44
Other	41	34	74
Total current biological assets of plant-breeding	9 091	13 710	9 348
Total current biological assets	10 889	15 348	10 488

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

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Cattle
Cattle, units	542	534	669
Live weight, kg	164 586	164 747	151 960
Book value	1 794	1 635	1 134
Other
Number of animals, units	46	47	59
Live weight, kg	3 794	3 874	8 489
Book value	4	3	6
Total book value	1 798	1 638	1 140

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

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Corn
Area, ha	-	7 089	-
Book value	-	7 577	-
Wheat
Area, ha	12 618	12 618	13 732
Book value	9 044	6 067	9 230
Grasses
Area, ha	127	213	377
Book value	6	32	44
Other
Area, ha	129	129	261
Book value	41	34	74
Total book value	9 091	13 710	9 348

(in thousand USD, unless otherwise stated)

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

	Cattle	Other	Total
31 December 2016 (Audited)	1 246	12	1 258
Capitalized expenses	92	-	92
Transfer (from (to) non-current biological assets)	1	-	1
Sale	(217)	(2)	(219)
Slaughter	(22)	-	(22)
Change in fair value	269	(3)	266
Effect from translation into presentation currency	(235)	(1)	(236)
31 March 2017 (Unaudited)	1 134	6	1 140
31 December 2017 (Audited)	1 635	3	1 638
Capitalized expenses	83	-	83
Transfer (from (to) non-current biological assets)	(27)	-	(27)
Sale	(235)	-	(235)
Slaughter	(18)	-	(18)
Change in fair value	243	1	244
Effect from translation into presentation currency	113	-	113
31 March 2018 (Unaudited)	1 794	4	1 798

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

	Corn	Wheat	Grasses	Other	Total
31 December 2016 (Audited)	11 024	5 901	18	-	16 943
Capitalized expenses (harvesting 2016)	621	-	-	-	621
Revaluation at fair value at the date of harvest (harvesting 2016)	601	-	-	-	601
Harvesting (harvesting 2016)	(12 299)	-	-	-	(12 299)
Capitalized expenses (harvesting 2017)	-	1 264	26	73	1 363
Change in fair value (harvesting 2017)	-	2 007	-	-	2 007
Effect from translation into presentation currency	53	58	-	1	112
31 March 2017 (Unaudited)	-	9 230	44	74	9 348

	Corn	Wheat	Grasses	Other	Total
31 December 2017 (Audited)	7 577	6 067	32	34	13 710
Capitalized expenses (harvesting 2017)	541	-	-	-	541
Revaluation at fair value at the date of harvest (harvesting 2017)	1 137	-	-	-	1 137
Harvesting (harvesting 2017)	(9 462)	-	-	-	(9 462)
Harvest failure (harvesting 2017)	(1)	-	(32)	-	(33)
Capitalized expenses (harvesting 2018)	-	623	5	5	633
Change in fair value (harvesting 2018)	-	1 930	-	-	1 930
Effect from translation into presentation currency	208	424	1	2	635
31 March 2018 (Unaudited)	-	9 044	6	41	9 091

(in thousand USD, unless otherwise stated)

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 three months ended 31 March 2018.

Description	Fair value as at 31 March 2018	Valuation technique	Unobservable inputs	Range of unobservable inputs
Crops in fields - wheat	9 044	Cash flows	Crops yield - tonnes per hectare	5,9
		Crops price	per ton 169
			Milk yield - kg per cow	7300-8400 per year
Cattle	4 136	Discounted cash flows	Milk price	0,29 USD per liter
			Discount rate	19,38%

22. Trade accounts receivable, net

	Note	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Trade accounts receivable		302	357	203
Allowances for accounts receivable	24	(38)	(36)	(41)
		264	321	162

23. Prepayments and other current assets, net

	Note	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Prepayments and other non-financial assets:
Deferred expenses		3 830	4 255	-
VAT for reimbursement		5 979	1 822	8 660
Advances to suppliers		2 938	1 032	2 058
Allowances for advances to suppliers	24	(1)	(1)	(1)
		12 746	7 108	10 717
Other financial assets:
Non-bank accommodations interest free		308	295	262
Other accounts receivable		219	756	234
Allowances for other accounts receivable	24	(11)	(6)	(7)
		516	1 045	489
		13 262	8 153	11 206

Deferred expenses relate to the purchase option according to the Management Incentive Plan (see Note 26).

(in thousand USD, unless otherwise stated)

24. Сhanges in allowances made

	Note	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Allowances for trade accounts receivable	22	(38)	(36)	(41)
Allowances for advances to suppliers	23	(1)	(1)	(1)
Allowances for other accounts receivable	23	(11)	(6)	(7)
		(50)	(43)	(49)

The movements of the allowances were as follows:

	Note	For the three months ended 31 March 2018	For the three months ended 31 March 2017
As at the beginning of the period (Audited)		(43)	(46)
Accrual	11	(48)	(4)
Use of allowances		44	1
Effect from translation into presentation currency		(3)	-
As at the end of the period (Unaudited)		(50)	(49)

25. Cash and cash equivalents

	Currency	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Cash in bank and hand	USD	6 388	4 636	9 185
Cash in bank and hand	UAH	1 208	1 161	5 793
Cash in bank and hand	EUR	155	281	34
Cash in bank and hand	PLN	11	14	11
		7 762	6 092	15 023

There were no restrictions on the use of cash and cash equivalents during the three months ended 31 March 2018 and 2017.

(in thousand USD, unless otherwise stated)

26. Equity

Share capital

IMC S.A. has one class of ordinary shares. The number of authorized, issued and fully paid shares as at 31 March 2018 is 33 178 000 (31 December 2017 – 33 178 000, 31 March 2017 – 31 300 000). All shares have equal voting rights. Par value of one share is USD 0,0018.

	31 March 2018 Unaudited		31 December 2017 Audited		31 March 2017 Unaudited
	%	Amount	%	Amount	%	Amount
AGROVALLEY LIMITED	71	42	68	38	68	38
NATIONALE-NEDERLANDEN Powszechne Towarzystwo Emerytalne S.A. (previously ING PTE)	*	*	*	*	5	3
Other shareholders (each one less than 5% of the share capital)	29	17	32	21	27	15
	100	59	100	59	100	56

* The share of NATIONALE-NEDERLANDEN Powszechne Towarzystwo Emerytalne S.A. (previously ING PTE) ownership is less than 5%.

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

number of authorized, issued and fully paid shares	For the three months ended 31 March 2018	For the three months ended 31 March 2017
As at the beginning of the period	33 178 000	31 300 000
Changes for the period	-	-
As at the end of the period	33 178 000	31 300 000

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).

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.

(in thousand USD, unless otherwise stated)

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.

According to the announced Dividend Policy 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).

With regard to dividend payment in 2018 the Company announced on 13 February 2018 that it plans to revise the dividend payout ratio upwards.

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 the 31 December 2017 the purchase option was fully exercised with share price USD 2.73.

27. 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 thousand USD, unless otherwise stated)

In September 2017 new terms of payment of additional return were agreed. In accordance with new terms the amount of additional return is USD 19 742 748 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 18,46%.

28. Deferred tax assets and liabilities

The major components of deferred tax assets and liabilities were as follows:

Deferred tax liabilities

	Property, plant and equipment
31 December 2016 (Audited)	(2 498)
Considering profit (loss)	4
Considering equity	37
Effect of foreign currency translation	(20)
31 March 2017 (Unaudited)	(2 477)
31 December 2017 (Audited)	(3 198)
Considering profit (loss)	(33)
Considering equity	69
Effect of foreign currency translation	(182)
31 March 2018 (Unaudited)	(3 344)

29. Long-term loans and borrowings

	Currency	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Secured
Long-term bank loans	USD	41 110	37 579	63 101
Finance lease liabilities	UAH, USD	592	775	2 938
Total long-term loans including current portion		41 702	38 354	66 039
Current portion of long-term bank loans	USD	(11 252)	(10 213)	(10 939)
Current portion of finance lease liabilities	UAH, USD	(365)	(416)	(2 347)
Total current portion		(11 617)	(10 629)	(13 286)
Total long-term loans and borrowings		30 085	27 725	52 753

(in thousand USD, unless otherwise stated)

Essential terms of credit contracts

	Year of		Nominal interest		31 March 2018 (Unaudited)
Creditor	maturity	Currency	rate	Long-term liabilities	Including current portion
Non-resident bank*	2020	USD	6M Libor+8,00%	36 405	10 026
Ukrainian bank	2021	USD	6,00%	1 797	528
Ukrainian bank	2023	USD	5,00%	2 908	698
				41 110	11 252

		Year of		31 December 2017 (Audited)
Creditor maturity		Currency	Nominal interest rate	Long-term liabilities	Including current portion
Non-resident bank*	2020	USD	6M Libor+8,00%	35 515	9 735
Ukrainian bank	2021	USD	7,00%	2 064	478
				37 579	10 213

	Year of		Nominal interest	31 March 2017 (Unaudited)
Creditor	maturity	Currency	rate	Long-term liabilities	Including current portion
Ukrainian bank	2018	USD	9,50%	88	88
Ukrainian bank	2018	USD	12,00%	342	342
Non-resident bank	2018	USD	3M Libor+8,50%	20 000	10 000
Ukrainian bank	2019	USD	8,50%	96	51
Non-resident bank*	2020	USD	6M Libor+8,00%	40 320	-
Ukrainian bank	2021	USD	7,00%	2 255	458
				63 101	10 939

* 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 18,46% (as at 31 March 2017 - the amount of USD 21 000 thousand payable as of 19 December 2018, interest free, discounted by 17,46%).

Long-term loans and bonds issued outstanding were repayable as follows:

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Within one year	11 252	10 213	10 939
In the second to fifth year inclusive	29 858	27 366	52 162
	41 110	37 579	63 101

The Group has committed to comply with loans covenants. As at 31 March 2018, 31 December 2017 and 31 March 2017 the Group was in compliance with all loans covenants.

(in thousand USD, unless otherwise stated)

Finance lease liabilities were presented as follows:

	31 March 2018 (Unaudited)		31 December 2017 (Audited)		31 March 2017 (Unaudited)
	Minimum lease payments	Present value of minimum lease payments	Minimum lease payments	Present value of minimum lease payments	Minimum lease payments	Present value of minimum lease payments
Within one year	416	365	482	416	2 633	2 347
In the second to fifth year inclusive	231	227	372	359	645	591
	647	592	854	775	3 278	2 938
Less future finance charges	(55)	-	(79)	-	(340)	-
Present value of minimum lease payments	592	592	775	775	2 938	2 938

30. Short-term loans and borrowings

	Currency	31 March 2018	31 December 2017	31 March 2017
		Unaudited	Audited	Unaudited
Secured
Short-term bank loans	USD	26 200	26 113	13 566
Short-term bank loans	UAH	-	-	4 912
		26 200	26 113	18 478

Essential terms of credit contracts

Creditor	Currency	Nominal interest rate	31 March 2018 (Unaudited)
Ukrainian bank	USD	5,00%	10 000
Ukrainian bank	USD	5,25%	5 100
Ukrainian bank	USD	5,25%	5 000
Ukrainian bank	USD	5,25%	4 200
Ukrainian bank	USD	5,25%	1 900
			26 200

Creditor	Currency	Nominal interest rate	31 December 2017 (Audited)
Ukrainian bank	USD	5,50%	10 000
Ukrainian bank	USD	5,25%	5 100
Ukrainian bank	USD	5,50%	5 000
Ukrainian bank	USD	5,50%	4 000
Ukrainian bank	USD	5,25%	2 013
			26 113

(in thousand USD, unless otherwise stated)

Creditor	Currency	Nominal interest rate	31 March 2017 (Unaudited)
Ukrainian bank	USD	10,20%	10 000
Ukrainian bank	USD	10,00%	3 566
			13 566
Ukrainian bank	UAH	17,00%	4 912
			18 478

31. Other current liabilities and accrued expenses

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Other liabilities:
Advances from clients	1 430	2 790	2 443
	1 430	2 790	2 443
Other accounts payable:
Accounts payable for the lease of land and property rights	1 382	1 351	852
Wages, salaries and related charges payable	928	819	725
Accounts payable for non-current tangible assets	614	740	1 229
Accruals for unused vacations	614	664	456
Taxes payable	201	377	184
Interest payable on bank loans	879	211	1 069
Accruals for audit services	-	112	-
Other accounts payable	16	24	40
	4 634	4 298	4 555
	6 064	7 088	6 998

32. 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.

Short-term remuneration of key management personnel was as follows:

	For the three months ended 31 March 2018	For the three months ended 31 March 2017
	Unaudited	Unaudited
Wages and salaries	963	83
Related charges	7	29
	970	112
The average number of employees, persons	6	4

(in thousand USD, unless otherwise stated)

33. 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 three months ended 31 March 2018 (unaudited) was the follow:

	Crop farming	Dairy farming	Elevators and warehouses	Unallocated	Total
Revenue	55 905	360	1 731	-	57 997
Intra-group elimination	(25 794)	-	(1 444)	-	(27 238)
Revenue from external buyers	30 111	360	287	-	30 758
Gain from changes in fair value of biological assets and agricultural produce, net	3 067	112	-	-	3 179
Cost of sales	(32 900)	(373)	(691)	-	(33 964)
Gross income	278	99	(404)	-	(27)
Administrative expenses	-	-	-	(2 941)	(2 941)
Selling and distribution expenses	-	-	-	(3 161)	(3 161)
Other operating income	-	-	-	158	158
Other operating expenses	-	-	-	(1 023)	(1 023)
Write-offs of property, plant and equipment	-	-	-	(415)	(415)
Operating income of a segment	278	99	(404)	(7 382)	(7 409)
Financial expenses, net	-	-	-	(950)	(950)
Effect of additional return	-	-	-	(889)	(889)
Foreign currency exchange gain/(loss), net	-	-	-	1 054	1 054
Profit before tax	278	99	(404)	(8 167)	(8 194)
Income tax expenses, net	-	-	-	(36)	(36)
Net profit	278	99	(404)	(8 203)	(8 230)
Other segment information:
Depreciation and amortisation	2 591	47	612	-	3 250
Additions to non-current assets:
Property, plant and equipment	3 427	253	32	-	3 712
Intangible assets	5	-	-	-	5

(in thousand USD, unless otherwise stated)

Information on business segments for the three months ended 31 March 2017 (unaudited) was the follow:

	Crop farming	Dairy farming	Elevators and warehouses	Unallocated	Total
Revenue	66 740	614	1 827	-	69 181
Intra-group elimination	(30 505)	-	(1 690)	-	(32 195)
Revenue from external buyers	36 235	614	137	-	36 986
Gain from changes in fair value of biological assets and agricultural produce, net	2 608	570	-	-	3 178
Cost of sales	(36 214)	(539)	(126)	-	(36 879)
Gross income	2 629	645	11	-	3 285
Administrative expenses	-	-	-	(1 939)	(1 939)
Selling and distribution expenses	-	-	-	(3 214)	(3 214)
Other operating income	-	-	-	362	362
Other operating expenses	-	-	-	(879)	(879)
Write-offs of property, plant and equipment	-	-	-	(730)	(730)
Operating income of a segment	2 629	645	11	(6 400)	(3 115)
Financial expenses, net	-	-	-	(1 783)	(1 783)
Effect of additional return	-	-	-	(1 019)	(1 019)
Foreign currency exchange gain/(loss), net	-	-	-	238	238
Profit before tax	2 629	645	11	(8 964)	(5 679)
Income tax expenses	-	-	-	(2)	(2)
Net profit	2 629	645	11	(8 966)	(5 681)
Other segment information:
Depreciation and amortisation	1 781	35	397	-	2 213
Additions to non-current assets:
Property, plant and equipment	2 532	-	50	-	2 582
Intangible assets	21	-	-	-	21

34. 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 5-11%% and depends on validity of the contract.

Future minimum lease payments for operating leases of land of agricultural designation considering existing at that date the inflation factor are as follows:

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Within one year	10 221	9 099	8 038
In the second to fifth year inclusive	38 681	34 384	30 179
Later than fifth year	48 001	38 676	25 071
	96 903	82 159	63 288

(in thousand USD, unless otherwise stated)

Areas of operating leased land were as follows:

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Location of land	Hectare	Hectare	Hectare
Poltava region
Land under processing	24 976	24 976	30 079
Land for grazing, construction, other	2 009	2 009	2 009
Chernihiv region
Land under processing	80 036	80 036	81 938
Land for grazing, construction, other	1 681	1 681	1 681
Sumy region
Land under processing	24 584	24 584	24 584
Land for grazing, construction, other	113	113	113
	133 399	133 399	140 404

According to the Group's strategy, during Y2017 areas of fallow lands were decreased by unrenewing of land lease agreements.

35. Lease of property, plant and equipment

The Group leases machinery from lease company. According to existing agreements the term of lease is 36 months, the interest rate is 1MLibor minus 0,15%.

Future minimum lease payments for operating leases of property, plant and equipment were as follows:

	31 March 2018	31 December 2017	31 March 2017
	Unaudited	Audited	Unaudited
Within one year	113	189	784
In the second to fifth year inclusive	18	17	127
	131	206	911

36. 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 USD 101 thousand.

Loans and borrowings are received in the amount of USD 800 thousand.

VAT for reimbursement is received in the amount of USD 1 073 thousand.

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