KDM Shipping PLC

Annual / Quarterly Financial Statement • Jul 17, 2017

KDM SHIPPING PUBLIC LIMITED

$\sim 20$

Nijerija
Pri

REPORT AND FINANCIAL STATEMENTS

For the year ended 31 December 2016

$\frac{1}{\sqrt{2}}$

REPORT AND FINANCIAL STATEMENTS

For the year ended 31 December 2016

CONTENTS

	Page
Officers and Professional Advisors
Management Report	$2 - 4$
Independent Auditors' report	$5 - 8$
Statement of profit or loss and other comprehensive income	9
Statement of financial position	10
Statement of changes in equity	11
Statement of cash flows	12
Notes to the financial statements	$13 - 26$
Additional Information

$\sim 4$ .

$\widetilde{K}$

OFFICERS AND PROFESSIONAL ADVISORS

Board of Directors	Kostiantyn Molodkovets - Executive Director, CEO
	Denys Molodkovets - Executive Director, CFO
Secretary	Boomer Secretarial Limited
Independent Auditors	KPMG Limited
Bankers	UBS AG AS RIETUMU BANKA
Registered Office	3 Michael Koutsofta Str. 3031, Limassol Cyprus

MANAGEMENT REPORT

The Board of Directors of KDM Shipping Public Limited (the "Company") presents to the members its Annual Report together with the audited financial statements of the Company for the year ended 31 December 2016.

PRINCIPAL ACTIVITIES AND NATURE OF OPERATIONS OF THE COMPANY

The principal activity of the Company which remained the same as in the previous year is the holding of investments in ship management entities situated in Ukraine and Panama.

FINANCIAL RESULTS

The Company's financial results for the year ended 31 December 2016 are set out on page 9 to the financial statements. The net loss for the year attributable to the owners of the Company amounted to US\$181.217 (2015: US\$161.194 loss).

EXAMINATION OF THE DEVELOPMENT, POSITION AND PERFORMANCE OF THE ACTIVITIES OF THE COMPANY

The current financial position as presented in the financial statements is not considered satisfactory and the Board of Directors is making an effort to reduce the Company losses.

DIVIDENDS

The Board of Directors does not recommend the payment of a dividend.

MAIN RISKS AND UNCERTAINTIES

The main risks and uncertainties faced by the Company and the steps taken to manage these risks, are described in note 15 to the financial statements.

USE OF FINANCIAL INSTRUMENTS BY THE COMPANY

The Company is exposed to interest rate risk, credit risk and dividends from the financial instruments it holds.

INTEREST RATE RISK

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. Company's management monitors the interest rate fluctuations on a continuous basis and acts accordingly.

MANAGEMENT REPORT (continued)

CREDIT RISK

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Company has no significant concentration of credit risk. The Company has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables.

Credit risk related to trade receivables: This is managed based on established policies, procedures and controls relating to customer credit risk management. Credit limits are established for all customers based on internal ratings. Credit quality of the customer is assessed and outstanding customer receivables are regularly monitored. The Company does not hold collateral as security.

LIQUIDITY RISK

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

FUTURE DEVELOPMENTS

The Board of Directors does not expect major changes in the principal activities of the Company in the foreseeable future.

SHARE CAPITAL

There were no changes in the share capital of the Company during the year.

BRANCHES

During the year ended 31 December 2016 the Company did not operate any branches.

BOARD OF DIRECTORS

The members of the Company's Board of Directors as at 31 December 2016 and at the date of this report are presented on page 1.

In accordance with the Company's Articles of Association all directors presently members of the Board continue in office.

There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors.

EVENTS AFTER THE REPORTING PERIOD

Any significant events that occurred after the end of the reporting period are described in note 18 to the financial statements

MANAGEMENT REPORT (continued)

RELATED PARTY TRANSACTIONS

Disclosed in note 14 to the financial statements.

INDEPENDENT AUDITORS

÷,

r.

The independent auditors of the Company, KPMG Limited, have expressed their willingness to continue in office. A resolution giving authority to the Board of Directors to fix their remuneration will be submitted at the forthcoming Annual General Meeting.

By order of the Board of Directors,

Boomer Secretarial Limited Secretary

Nicosia, 14 July 2017

KPMG Limited Chartered Accountants 14 Esperidon Street, 1087 Nicosia, Cyprus P.O. Box 21121, 1502 Nicosia, Cyprus T: +357 22 209000, F: +357 22 678200

INDEPENDENT AUDITORS' REPORT

to the members of

KDM SHIPPING PUBLIC LIMITED

Report on the audit of the financial statements

Opinion

We have audited the accompanying financial statements of parent company KDM Shipping Public Limited (the "Company"), which are presented on pages 9 to 26, and comprise the statement of financial position as at 31 December 2016, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2016, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and the requirements of the Cyprus Companies Law, Cap. 113, as amended from time to time (the "Companies Law, Cap. 113").

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the "Auditors' responsibilities for the audit of the financial statements" section of our report. We are independent of the Company in accordance with the Code of Ethics for Professional Accountants of the International Ethics Standards Board for Accountants ("IESBA Code"), and the ethical requirements in Cyprus that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Bountification.

S.A. London: A M. Christof fos P.G. London: A M. Gregoriades, D.S. Vakis: A A. Apostolou.

S.A. London: M.P. M. M. Disc. S.G. S.G. Schillifoods: M.M. Antonia-tos. C.V. Vas. Iou, P.E. At, parancolant

M.J.

P O Box 50161 3601
T +357 25 869000
F +357 25 363842

Lamaca
P.O. Box 40075-6300

Pachilis
| O. B. Is 0/283-8101
| +357-26 9430F0

Paralim - 7 Ayia Napa
P O Brix 33200-5311
T - 4357 23 820060 F +357 23 820084

5

P O Box 66014, 8330
F + 357 26 322 98
F + 357 26 322 722

Key audit matters

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

We have determined that there are no key audit matters to communicate in our report.

Other information

The Board of Directors is responsible for the other information. The other information comprises the information included in the Management Report, but does not include the financial statements and our auditors' report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon, except as required by the Companies Law, Cap.113.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. Our report in this regard is presented in the "Report on other legal requirements" section.

Responsibilities of the Board of Directors for the financial statements

The Board of Directors is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS-EU and the requirements of the Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless there is an intention to either liquidate the Company or to cease operations, or there is no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Company's financial reporting process.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• $\blacksquare$ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• $\bullet$ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.
• Conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting $\bullet$ and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves true and fair view.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal requirements

Pursuant to the additional requirements of the Auditors' Law of 2017, L.53(1)/2017, as amended from time to time ("Law $L.53(1)/2017$ "), we report the following:

$\bullet$ In our opinion, the Management Report, the preparation of which is the responsibility of the Board of Directors, has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information given is consistent with the financial statements.

• In the light of the knowledge and understanding of the business and the Company's environment $\bullet$ obtained in the course of the audit, we have not identified material misstatements in the management report.
• In our opinion, the information included in the corporate governance statement in accordance with $\blacksquare$ the requirements of subparagraphs (iv) and (v) of paragraph $2(a)$ of Article 151 of the Companies Law, Cap. 113, and which is included as a specific section of the Management Report, have been prepared in accordance with the requirements of the Companies Law, Cap. 113, and is consistent with the financial statements.
• In the light of the knowledge and understanding of the business and the Company's environment $\bullet$ obtained in the course of our audit, we have not identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Companies Law, Cap. 113.
• In our opinion, the corporate governance statement includes all information referred to in subparagraphs (i), (ii), (iii) and (vi) of paragraph 2(a) of Article 151 of the Companies Law, Cap. $113.$

Other matter

This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 69 of Law L.53(1)/2017, as amended from time to time and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

We have reported separately on the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2016. That report includes an emphasis of matter.

The engagement partner on the audit resulting in this independent auditors' report is Maria A. Papacosta.

Maria A. Papacosta, FCCA Certified Public Accountant and Registered Auditor for and on behalf of

KPMG Limited Certified Public Accountants and Registered Auditors 14 Esperidon Street 1087 Nicosia Cyprus

14 July 2017

j,

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2016

	Note	2016 US\$	2015 US\$
Revenue		3.098.050
Cost of sales		(3.037.250)
Gross profit		60.800
Other operating income	$\overline{\mathbf{4}}$		762
Administrative expenses		(187.836)	(149.954)
Other operating expenses	5		(17.506)
Operating loss	6	(127.036)	(166.698)
Finance income		339	9.651
Finance expenses		(54.520)	(4.147)
Net finance (expenses)/income	$\overline{7}$	(54.181)	5.504
Loss before tax		(181.217)	(161.194)
Tax	8
Loss for the year		(181.217)	(161.194)
Other comprehensive income
Total comprehensive expense for the year attributable to
owners		(181.217)	(161.194)

The notes on pages 13 to 26 are an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

	Note	2016 US\$	2015 US\$
Assets
Investments in subsidiaries	9	25.330.000	25.310.000
Total non-current assets		25.330.000	25.310.000
Receivables from own subsidiaries	14	37.991	37.991
Cash and cash equivalents	10	15.194	8.238
Total current assets		53.185	46.229
Total assets		25.383.185	25.356.229
Equity
Share capital	11	117.128	117.128
Share premium		23.571.234	23.571.234
Accumulated losses		(441.587)	(260.370)
Total equity		23.246.775	23.427.992
Liabilities
Bank overdrafts	10		40
Trade and other payables	12	269.890	102.566
Payables to own subsidiaries	14	1.783.534	1.694.645
Directors' current accounts - credit balances	14		20.000
Owners' current accounts - credit balances	14	82.986	110.986
Total current liabilities		2.136.410	1.928.237
Total equity and liabilities		25.383.185	25.356.229

On 14 July 2017 the Board of Directors of KDM Shipping Public Limited approved and authorised these financial statements for issue.

. . . . . . . . . . . . . . . .

Kostiantyn Molódkovets Executive Director, CEO

Denys Molodkovets Executive Director, CFO

The notes on pages 13 to 26 are an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

	For the year ended 31 December 2016
	Share capital USS	Share premium US\$	Accumulated losses USS	Total US\$
Balance at 1 January 2015	117.128	$-23.571.234$		$(99.176)$ 23.589.186
Comprehensive income Loss for the year Balance at 31 December 2015	117.128	23.571.234	(161.194) (260.370)	(161.194) 23.427.992
Balance at 1 January 2016	117.128	23.571.234	(260.370)	23.427.992
Comprehensive income Loss for the year Balance at 31 December 2016	117.128	23.571.234	(181.217) (441.587)	(181.217) 23.246.775

Share premium is not available for distribution.

ï

$\mathcal{A}$

$\mathcal{L}_{\mathbf{z}}$

STATEMENT OF CASH FLOWS

For the year ended 31 December 2016

		2016	2015
	Note	USS	US\$
Cash flows from operating activities
Loss for the year		(181.217)	(161.194)
Adjustments for:
Unrealised exchange loss			1.477
Cash used in operations before working capital changes		(181.217)	(159.717)
Decrease in trade and other receivables			8.079
(Increase) in directors' current accounts		(20.000)	9.427
Increase in owners' current accounts		(28.000)
Increase in trade and other payables		147.324	6.858
Increase in payables to own subsidiaries		88.889	138.538
Cash generated from operations		6.996	3.185
Tax paid			(4.203)
Net cash generated from/(used in) operating activities		6.996	(1.018)
Cash flows from investing activities
Cash flows from financing activities
Unrealised exchange profit			(1.477)
Net cash used in financing activities			(1.477)
Net increase/(decrease) in cash and cash equivalents		6.996	(2.495)
Cash and cash equivalents at beginning of the year		8.198	10.693
Cash and cash equivalents at end of the year	10	15.194	8.198

The notes on pages 13 to 26 are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

1. INCORPORATION AND PRINCIPAL ACTIVITIES

KDM Shipping Public Limited (the "Company") was incorporated in Cyprus on 2 December 1999 as a private limited liability company under the Cyprus Companies Law, Cap. 113. Its registered office is at 3 Michael Koutsofta Str., 3031, Limassol, Cyprus.

The principal activity of the Company which remained the same as in the previous year is the holding of investments in ship management entities situated in Ukraine and Panama.

2. BASIS OF PREPARATION

(a) Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113 and are for the year ended 31 December 2016.

The Company has also prepared consolidated financial statements in accordance with IFRSs for the Company and its subsidiaries (the "Group"). The consolidated financial statements can be obtained from the registered office of the Company.

Users of these parent's separate financial statements should read them together with the Group's consolidated financial statements as at and for the year ended 31 December 2016 in order to obtain a proper understanding of the financial position, the financial performance and the cash flows of the Company and the Group.

(b) Basis of measurement

The financial statements have been prepared under the historical cost convention.

(c) Adoption of new and revised International Financial Reporting Standards and Interpretations as adopted by the European Union (EU)

During the current year the Company adopted all the changes to International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2016. This adoption did not have a material effect on the accounting policies of the Company.

At the date of approval of these financial statements, Standards, Revised Standards and Interpretations were issued by the International Accounting Standards Board which were not vet effective. Some of them were adopted by the European Union and others not yet. The Board of Directors expects that the adoption of these financial reporting standards in future periods will not have a significant effect on the financial statements of the Company.

(d) Use of estimates and judgments

The preparation of financial statements in accordance with IFRSs requires from Management the exercise of judgment, to make estimates and assumptions that influence the application of the Company's accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are deemed to be reasonable based on knowledge available at that time. Actual results may deviate from such estimates.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

2. BASIS OF PREPARATION (continued)

The estimates and underlying assumptions are revised on a continuous basis. Revisions in accounting estimates are recognised in the period during which the estimate is revised, if the estimate affects only that period, or in the period of the revision and future periods, if the revision affects the present as well as future periods.

Measurement of fair values

A number of the Company's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRSs, including the level in the fair value hierarchy in which such valuations should be classified.

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible.

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities. $\bullet$
• Level 2 inputs other than quoted prices included within Level 1 that are observable for the asset or $\bullet$ liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 inputs for the asset or liability that are not based on observable market data (unobservable $\bullet$ inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(e) Functional and presentation currency

The financial statements are presented in United States Dollars (US\$) which is the functional currency of the Company.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been applied consistently for all the years presented in these financial statements.

Consolidated financial statements

The Company has subsidiary undertakings for which section 142(1)(b) of the Cyprus Companies Law Cap. 113 requires consolidated financial statements to be prepared and laid before the Company at the Annual General Meeting.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

$3.$ SIGNIFICANT ACCOUNTING POLICIES (continued)

Consolidated financial statements (continued)

The financial statements of subsidiaries acquired or disposed of during the year are included in the statement of profit or loss and other comprehensive income from the date that control commences until the date control ceases.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring them in line with the accounting policies of the Group.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists where the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Investments in subsidiaries are stated at cost less provision for permanent diminution in value, which is recognised as an expense in the period in which the diminution is identified.

Finance income

Interest income is recognised on a time-proportion basis using the effective method.

Finance expenses

Interest expense and other borrowing costs are recognised in profit or loss using the effective interest method.

Foreign currency translation

(i) Functional currency

Items included in the Company's financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency').

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value is determined.

Tax

Tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and laws that have been enacted, or substantively enacted, by the reporting period. Current tax includes any adjustments to tax payable in respect of previous periods.

Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

$\overline{3}$ . SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

(i) Borrowings

Á

Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(ii) Trade and other payables

Trade payables are stated at their nominal values.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the contractual rights to receive cash flows from the asset have expired; $\bullet$
• $\bullet$ the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through' arrangement; or
• the Company has transferred its rights to receive cash flows from the asset and either (a) has $\bullet$ transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Any interest in such derecognized financial assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial liabilities

A financial liability is derecognised 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 recognised in profit or loss.

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of financial position.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

$\overline{3}$ . SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of non-financial assets

Assets (other than biological assets, investment property, inventories and deferred tax assets) that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash flows from continuing use that are largely independent of the cash inflows of other assets or cash generating units. Goodwill arising from a business combination is allocated to cash-generating units or groups of cash-generating units that are expected to be benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amounts of the other assets in the cash-generating unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognised.

Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise cash at bank and bank overdrafts.

Share capital

Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the Company and the nominal value of the share capital being issued is taken to the share premium account. Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction from equity.

Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed. for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

Non-current liabilities

Non-current liabilities represent amounts that are due more than twelve months from the reporting period.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

$3.$ SIGNIFICANT ACCOUNTING POLICIES (continued)

Comparatives

÷,

×.

Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

4. OTHER OPERATING INCOME

		2016 US\$	2015 US\$
	Payables written off		762
			762
5.	OTHER OPERATING EXPENSES
		2016 USS	2015 USS
	Receivables written off		17.506
			17.506
6.	OPERATING LOSS
		2016 US\$	2015 US\$
	Operating loss is stated after charging the following items:
	Directors' fees Independent auditors' remuneration for the statutory audit of annual	28.000	28.000
	accounts	5.798	5.988
	Independent auditors' remuneration for other assurance services	28.109	44.102
	Independent auditors' remuneration for tax advice	527	544
	Independent auditors' remuneration for the audit of consolidated financial statements
		65.143	50.951

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

7. NET FINANCE INCOME AND EXPENSES

	2016 US\$	2015 US\$
Exchange profit	339 339	9.651 9.651
Net foreign exchange transaction losses Sundry finance expenses	(51.252) (3.268)	(1.477) (2.670)
Finance expenses	(54.520)	(4.147)
Net finance (expenses)/income	(54.181)	5.504

8. TAXATION

Reconciliation of tax based on the taxable income and tax based on accounting losses:

2016	2016 US\$	2015	2015 USS
	(181.217		(161.194)
12,50 %	(22.652)	12,50 %	(20.149)
$(6,00)\%$	10.871	$(1,61)\%$	2.590
0.02%			26.874
$-$ %		5.78 %	(9.315)
$(6,52)$ %	11.823	$-$ %
$\%$
		(42)	$(16,67)\%$

The corporation tax rate is 12,5%.

Under certain conditions interest income may be subject to defence contribution at the rate of 30%. In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17%.

Due to tax losses sustained in the year, no tax liability arises on the Company. Tax losses may be carried forward for five years. Group companies may deduct losses against profits arising during the same tax year. As at 31 December 2016, the balance of tax losses which is available for offset against future taxable profits amounts to US\$248.657 ( $E$ 248.170) for which no deferred tax asset is recognised in the statement of financial position.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

9. INVESTMENTS IN SUBSIDIARIES

					2016 USS	2015 US\$
Balance at 1 January Additions					25.310.000 20.000	25.310.000
Balance at 31 December					25.330.000	$-25.310.000$
	The details of the subsidiaries are as follows:
Name	Country of incorporation	Principal activities	2016 Holding $\frac{9}{4}$	2015 Holding $\frac{9}{4}$	2016 USS	2015 US\$
KD Shipping Co. Limited Inc.	Panama	Freight business	100	100	25.010.000	25.010.000
LLC Danapris Ukraine		Investment holding company	99,84	99,84	300.000	300.000
Mak Agro Grains Cereals Emirates and Legumes Trading LLC	United Arab	Grain trading	51		20.000

25.330.000 25.310.000

The Company periodically evaluates the recoverability of investments in subsidiaries whenever indicators of impairment are present. Indicators of impairment include such items as declines in revenues, earnings or cash flows or material adverse changes in the economic or political stability of a particular country, which may indicate that the carrying amount of an asset is not recoverable. If facts and circumstances indicate that investment in subsidiaries may be impaired, the estimated future discounted cash flows associated with these subsidiaries would be compared to their carrying amounts to determine if a write-down to fair value is necessary.

10. CASH AND CASH EQUIVALENTS

	2016 US\$	2015 USS
Cash at bank and in hand	15.194	8.238

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

10. CASH AND CASH EQUIVALENTS (continued)

For the purposes of the statement of cash flows, the cash and cash equivalents include the following:

	2016 USS	2015 USS
Cash and cash equivalents Bank overdrafts	15.194 $\bullet$	8.238 (40)
	15.194	8.198

The exposure of the Company to credit risk and impairment losses in relation to cash and cash equivalents is reported in note 15 to the financial statements.

11. SHARE CAPITAL

$12.$

	2016 Number of	2016	2015 Number of	2015
	shares	USS	shares	US\$
Authorised Ordinary shares of USD 0,01/1,75 each
(EUR 0,01/1,71 each)	20.000.000	20.000.000	20.000.000	20.000.000
Issued and fully paid
Balance at 1 January	9.296.000	117.128	9.296.000	117.128
Balance at 31 December	9.296.000	117.128	9.296.000	117.128
TRADE AND OTHER PAYABLES

2016 2015 US\$ USS Trade payables 52.382 Accruals 191.277 96.335 Other creditors $26.231$ $6.231$ 269.890 102.566

The exposure of the Company to liquidity risk in relation to trade and other payables is reported in note 15 to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

13. OPERATING ENVIRONMENT OF THE COMPANY

According to the Cyprus Statistical Service, economic growth for 2016 was estimated at $\pm 2.8\%$ compared to 2015. Even though the financial services sector showed negative growth, there has been an increase in the Gross Domestic Product which is mainly attributed to the hotels, construction, manufacturing and the wholesale and retail trade sectors. The economic growth was mainly driven by the increase in private consumption, which benefited from the reduction in unemployment and the consequent increase in disposable income. The growth was also supported by the slower pace of reductions in public spending and the increase in investments. On 17 March 2017 the credit rating of the country rose from BB to BB+.

Despite the significant steps towards economic recovery, a degree of uncertainty still exists, as certain issues remain to be resolved, such as the high index of non-performing loans, the high unemployment and the implementation of privatization and reforms of the public services sector.

The above could affect, among others, the Company's ability to obtain new loans on favorable terms and conditions or/and its ability to achieve satisfactory turnover.

The Company's management believes that it is taking all the necessary measures to maintain the viability of the Company and the development of its business in the current business and economic environment.

14. RELATED PARTY TRANSACTIONS

The majority of the Company's share capital is held by Konstiantyn Molodkovets who owns 54,86% and Denys Molodkovets who owns 12,88%. During the year ended 31 December 2016 30,11% of the Company's share capital is traded at the Warsaw Stock Exchange and is held by both institutional and retail investors.

The transactions and balances with related parties are as follows:

(i) Directors' remuneration

The remuneration of Directors and other members of key management was as follows:

	2016 US\$	2015 US\$
Directors' fees	28.000	28.000
	28.000	28,000

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

14. RELATED PARTY TRANSACTIONS (continued)

(ii) Sales of goods and services

ċ,

		2016 US\$	2015 US\$
Makro Agro Grains Cereals and Legumes Trading LLC		2.958.590	$\blacksquare$
		2.958.590
Sales to the associated undertakings and to Parent Holding Limited were made at cost.
(iii) Receivables from own subsidiaries
Name		2016 US\$	2015 US\$
LLC Danapris	Nature of transactions Finance	37.991	37.991
		37.991	37.991
The above amounts do not bear any interest and have no specified repayment date.
(iv) Payables to own subsidiaries
		2016 US\$	2015 US\$
KD Shipping Co Limited Inc		1.783.145	1.694.645
		1.783.145	1.694.645
(v) Directors'/owners' current accounts - credit balances
		2016 US\$	2015 US\$
Kostiantyn Molodkovets Denys Molodkovets Mykhailo Chubai		70.714 12.272	27.272 83.714 10.000
Konstantin Anisimov			10.000
		82.986	130.986

The directors'/owners' current accounts are interest free, and have no specified repayment date.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

15. FINANCIAL INSTRUMENTS - RISK MANAGEMENT

Financial risk factors

The Company is exposed to the following risks from its use of financial instruments:

• Credit risk $\bullet$
• Liquidity risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.

The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in the Company's activities.

A. Financial risk management

(i) Credit risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Company has no significant concentration of credit risk.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	2016 US\$	2015 USS
Cash at bank Receivables from own subsidiaries	15.194 37.991	8.238 37.991
	53.185	46.229

Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer.

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

15. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (continued)

(ii) Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities

The following are the contractual maturities of financial liabilities at the reporting date. The amounts are gross and are undiscounted, and include estimated interest payments:

31 December 2016	Carrying amounts US\$	cash flows USS	Contractual 3 months or Between 3- less USS	12 months US\$	Between $1-5$ years US\$
Trade and other payables Directors'/owners' current accounts	78.613	78.613	78.613
- credit balance	82.986	82.986	82.986
	161.599	161.599	161.599
31 December 2015	Carrying amounts USS	cash flows US\$	Contractual 3 months or Between 3- less USS	12 months USS	Between $1-5$ years USS
Bank overdrafts	40	40	40
Other creditors Directors'/owners' current accounts	6.231	6.231	6.231
- credit balance	130.986	130.986	130.986
	137.257	137.257	137.257

Capital management

The Company manages its capital to ensure that it will be able to continue as a going concern while increasing the return to owners through the strive to improve the debt to equity ratio. The Company's overall strategy remains unchanged from last year.

16. FAIR VALUES

The fair values of the Company's financial assets and liabilities approximate their carrying amounts at the reporting period.

17. CONTINGENT LIABILITIES

The Company had no contingent liabilities as at 31 December 2016.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

18. EVENTS AFTER THE REPORTING PERIOD

Ŷ.

$\langle \hat{\Sigma} \rangle$

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

On 14 July 2017 the Board of Directors of KDM Shipping Public Limited approved and authorised these financial statements for issue.

KDM SHIPPING PUBLIC LIMITED

$\sim 3$

$\mathcal{B}(\mathcal{X})$

FINANCIAL STATEMENTS

For the year ended 31 December 2016

ADDITIONAL INFORMATION

$\sim 100$

$\sim$

FINANCIAL STATEMENTS

For the year ended 31 December 2016

ADDITIONAL INFORMATION

Schedule

Income statement
Cost of sales	2
Administrative expenses	3
Finance income/cost	4
Computation of corporate tax	5.
Certificate	6

$\frac{1}{\sqrt{2}}\left( \frac{1}{\sqrt{2}}\right) ^{2}$

INCOME STATEMENT

For the year ended 31 December 2016

		2016	2015
		USS	US\$
	Schedule
Revenue		3.098.050
Cost of sales	$\overline{2}$	(3.037.250)
Gross profit		60.800
Other operating income			762
Administrative expenses	3	(187.836)	(149.954)
Other operating expenses			(17.506)
Operating loss		(127.036)	(166.698)
Finance income	4	339	9.651
Finance costs	$\overline{4}$	(54.520)	(4.147)
Net finance (expenses)/income		(54.181)	5.504
Loss before tax		(181.217)	(161.194)
Tax
Loss for the year		(181.217)	(161.194)

COST OF SALES

For the year ended 31 December 2016

		2016 US\$	2015 US\$
	Schedule
of sales
iases		3.037.250	$\sim$

$3.037.250$ $\mathbf{1}$

Cost Purch

$\vec{r}$

$\sim 10$

$\frac{1}{2}$ .

ADMINISTRATIVE EXPENSES

For the year ended 31 December 2016

	2016	2015
	US\$	US\$
Schedule
Registrar annual fee	389	404
Independent auditors' remuneration for the statutory audit of annual
accounts	5.798	5.988
Independent auditors' remuneration for other assurance services	28.109	44.102
Independent auditors' remuneration for tax advice	527	544
Other professional fees	47.050	7.985
Directors' fees	28.000	28.000
Fines	12.820
Irrecoverable VAT		11.980
Independent auditors' remuneration for audit of consolidated financial
statements	65.143	50.951
	187.836	149.954

Schedule 4

KDM Shipping Public Limited

$\sim$

FINANCE INCOME/COST

For the year ended 31 December 2016

	Schedule	2016 US\$	2015 USS
Finance income Realised foreign exchange profit		339 339	9.651 9.651
Finance expenses
Sundry finance expenses Bank charges		3.268	2.670
Net foreign exchange transaction losses Realised foreign exchange loss Unrealised foreign exchange loss		51.252 54.520	1.477 4.147
Net finance (expenses)/income	1	(54.181)	5.504

COMPUTATION OF CORPORATE TAX

For the year ended 31 December 2016

		US\$	USS
	Schedule
Net loss before tax per income statement Add:	1		(181.217)
Realised foreign exchange loss		51.252
Registrar annual fee		389
Fines		12.820
Notional profit on receivable from own subsidiaries		1.330
Other non-allowable expenses		21.181
			86.972
			(94.245)
Less:
Realised foreign exchange profit		339
			(339)
Net loss for the year
			(94.584)
			$\epsilon$
Converted into $\epsilon$ at US\$ 1,054100 = $\epsilon$ 1			(89.730)
Loss brought forward			(207.109)
Loss			(296.839)
Unutilised loss up to the year 2011 not carried forward			68.441
Net loss to be carried forward			(228.398)

CALCULATION OF TAX LOSSES FOR THE FIVE YEAR PERIOD

Tax year	Profits/(losses) for the tax year		Gains Offset		Gains Offset		Gains Offset
		Amount €	Year	Amount $\epsilon$	Year	Amount $\epsilon$	Year
2011	(68.441)
2012	191.812
$\overline{2013}$	116.546
2014	42.996
2015	(138.668)
2016	(89.730)

Net loss to be carried forward

$\overline{\chi}$

i.

$(228.398)$

$\overline{\phantom{a}}$

CERTIFICATE

For the year ended 31 December 2016

We hereby certify, to the best of our knowledge and belief, that:

• The proceeds of all sales and all other income have been properly recorded as such in the books $1)$ produced to KPMG Limited.
• All expenses for the year under review represent expenses incurred wholly and exclusively for the $2)$ Company's business and have been properly recorded as such in the books produced to KPMG Limited.
• 3) All transactions affecting the business for the year under review have been properly recorded in the books produced to KPMG Limited.
• 4) All reserves are properly shown and all necessary provisions have been duly made and shown as such in the books produced to KPMG Limited.
• 5) All assets and liabilities have been properly taken up as at 31 December 2016 in the books produced to KPMG Limited.
• All investments in non listed titles were presented to KPMG Limited at their fair value, as $6)$ determined by the Company.
• The Company had no contingent liabilities as at 31 December 2016. $7)$
• 8) No events have occurred and no facts have been discovered since the year-end, which could materially affect the true and fair view of these financial statements as at 31 December 2016.

Yours truly, ou

Kostiantyn Moledkovets Executive Director, CEO

Denys Molodkovets Executive Director, CFO

Nicosia, 14 July 2017

$\rightarrow$ $\bar{u}$