ovostar union

1H'17

SEMI-ANNUAL REPORT

for the six months ended
30 June 2017

CEO Statement

DEAR SHAREHOLDERS,

Over the 1H 2017 the Company continued to further increase its production and sales volumes.

Despite the fact that a number of countries have closed their markets for import from Ukraine due to the cases of avian influenza, the Management team managed to achieve the target sales volumes of export. This factor though negatively affected the export selling prices.

Taking into consideration the current situation we are being optimistic about the results that the Group can obtain during the 2H 2017 and for the year in total.

Sincerely,

Borys Bielikov
Chief Executive Officer

Ovostar Union N.V.

Semi-Annual Report 2017 | 2

Activity in Key Segments

EGG SEGMENT

Production | As at 30 June 2017 the Company's total flock has increased by 9% y-o-y to 7.9 million hens, while the laying hens flock increased by 12% y-o-y to 6.7 million hens. Consequently, during the 1H 2017 the Company produced 815 million eggs or 22% more compared to the same period of 2016. The growth is based on the increase in the production capacities that took place last year at Stavysche production site.

Sales | Volume of shell eggs sold in 1H 2017 grew by 9% to 518 million eggs, what resulted into USD 24 million of revenue (1H 2016: USD 23 million).

EGG SALES STRUCTURE IN 1H 2017

Over the reporting period, the volume of eggs exported increased by 29% y-o-y, from 145 to 186 million eggs, representing a 36% share of export in total volume of shell eggs sold.

Average egg selling price during the six months of 2017 increased by 3% to 1.30 UAH/egg compared to 1.27 UAH/egg in the same period previous year. Average egg selling price in USD denomination was lower by 2% year-on-year.

EGG PRODUCTS SEGMENT

Production | In the 1H 2017 the volume of eggs processed increased by 19% y-o-y to 237 million units. The Company produced 1 488 tons of dry egg products and 4 986 tons of liquid egg products, a 40% and 10% increase y-o-y.

Sales | The sales volume of liquid egg products increased by 11% y-o-y to 4 863 tons, out of which 38% were exported. The sales volume of dry egg products increased by 27% y-o-y and amounted to 1 173 tons, out of which 64% were exported. During the first half of 2017 the gradually growing demand, mainly from the EU market, resulted in growth in export volumes of liquid egg products by 38% to 1 838 tons and of dry egg products by 41% to 753 tons. The average selling price of liquid egg products increased by 4% y-o-y to 30.18 UAH/kg; the average selling price of dry egg products decreased by 14% y-o-y to 108.90 UAH/kg. Average selling prices of liquid and dry egg products in USD denomination were lower by 1% and 18% y-o-y, respectively.

EGG PRODUCTS SALES STRUCTURE IN 1H 2017

Ovostar Union N.V.

Semi-Annual Report 2017

Financial Results Overview

FINANCIAL PERFORMANCE

Following the growth in sales volumes of shell eggs and egg products the Company increased its revenue by 6% year-on-year over the 1H 2017. The profitability, on the other hand, decreased partially as a result of lower by USD 1.7 million changes in fair value of biological assets and negative FX differences of USD 1.6 million, which together lowered the net profit margin by 9%.

Revenue | The Company's revenue in 1H 2017 increased by 6% to USD 36.5 million from USD 34.5 million. Egg segment contributed 68% to the total revenue (USD 24.9 million including other sales). The revenue from the egg products segment amounted to USD 10.9 million (30% of the revenue). The remaining 2% of the revenue have been contributed by the oilseed segment (USD 0.7 million).

Gross profit and cost of sales | Over the reporting period the cost of sales increased by 15% as a result of the growing sales volumes of both shell eggs and egg products. Gross profit amounted to USD 8.5 million, the 28% decrease compared to 1H 2016.

EBITDA | Export sales require additional selling expenses that mainly consist of transportations costs. Lower gross profit together with increase in export contributed to lower EBITDA that amounted to USD 7.0 million, a 33% decrease year-on-year.

Net profit | As the EUR strengthened against USD by the end of the 1H 2017, the Company recorded the amount of USD 1.6 million of foreign currency exchange loss on the long-term EUR-denominated loans. Consequently, net profit amounted to USD 3.9 million.

PROFITABILITY DYNAMICS

Ovostar Union N.V.

Semi-Annual Report 2017

Financial Results Overview

FINANCIAL POSITION

Assets | As at 30 June 2017 the value of Company's total assets amounted to USD 117.7 million. There was no significant change in value of non-current assets in 1H 2017 comparing to the respective period of 2016. On the other hand, the increase in values of biological assets and inventories contributed to the 24% growth of current assets.

Equity | The total equity increased by 15% y-o-y mainly due to the increase in retained earnings, which accumulated the 2016 net income.

Loans and borrowings | As at the end of 1H 2017 total liabilities decreased by 8% y-o-y to USD 21.0 million as a result of continuous repayment of Company's long-term loans.

The significant amount of cash in our bank accounts (USD 12.7 million as at 30 June 2017) resulted in net debt being equal to USD 2.1 million as at the end of 1H 2017, 59% lower y-o-y.

CASH FLOWS

During the reporting period operating cash flow amounted to USD 8.6 million. Cash flows used in investing activities of USD 6.6 million consist mainly of increasing biological assets. Cash flows used in financing activities amounted to USD 1.9 million.

Ovostar Union N.V.

Semi-Annual Report 2017

Key Financials

Income Statement

	1H 2017	1H 2016	YoY
Revenue	36.5	34.4	6%
Gross profit	8.5	11.8	(28%)
EBITDA	7.0	10.6	(33%)
Net profit	3.9	9.1	(57%)

Cash Flows

	1H 2017	1H 2016	YoY
Net cash generated by operating activities	8.6	12.1	(29%)
Net cash used in investing activities	(6.6)	(8.7)	(24%)
Net cash generated by financing activities	(1.9)	(1.6)	18%

Net debt position

	1H 2017	1H 2016	YoY
Total debt	14.8	17.8	(17%)
Cash and cash equivalents at 30 June	12.7	12.6	0%
Net debt	2.1	5.2	(59%)

INVESTMENT PROGRAM UPDATE

Over the 1H 2017 the Company was focusing on expanding its egg processing capacities and started the preparatory works for the upcoming units of the supporting infrastructure and for the further construction of poultry houses.

Ovostar Union N.V.

Semi-Annual Report 2017 | 6

Consolidated Financial Statements of Ovostar Union N.V.

REPRESENTATION ... 9
CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME ... 10
CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION ... 11
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY ... 12
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CASH FLOWS ... 13
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS ... 14

Ovostar Union N.V.
Semi-Annual Report 2017 | 8

Representation

REPRESENTATION

OF THE BOARD OF DIRECTORS OF Ovostar Union N.V.

ON COMPLIANCE OF THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

The Board of Directors of Ovostar Union N.V. hereby represent that to the best of their knowledge the consolidated condensed interim financial statements (unaudited) of Ovostar Union N.V. and subsidiaries for the six months ended 30 June 2017 and the comparable information are prepared in accordance with the applicable accounting standards and that they give a true, fair and clear view of the assets, financial standing and financial results of Ovostar Union N.V., and that the consolidated condensed interim financial statements for the six months ended 30 June 2017 give a true view of the developments, achievements and situation of the Company.

Board of Directors of Ovostar Union N.V.

Borys Bielikov [signed]

Vitalii Veresenko [signed]

Marc M.L.J. van Campen [signed]

Sergii Karpenko [signed]

29 August 2017

Kyiv, Ukraine

Ovostar Union N.V.

Semi-Annual Report 2017

Consolidated Condensed Interim Statement of Comprehensive Income

For the six months ended 30 June 2017
(in USD thousand, unless otherwise stated)

| | Note | 6 months ended
30 June 2017
(unaudited) | 6 months ended
30 June 2016
(unaudited) |
| --- | --- | --- | --- |
| Revenue | 8 | 36 477 | 34 452 |
| Changes in fair value of biological assets | 14 | (209) | 1 484 |
| Cost of sales | | (27 763) | (24 107) |
| Gross profit | | 8 505 | 11 829 |
| Other operating income | 9 | 71 | 341 |
| Selling and distribution costs | | (2 144) | (1 787) |
| Administrative expenses | | (731) | (666) |
| Other operating expenses | 10 | (44) | (329) |
| Operating profit | | 5 657 | 9 388 |
| Finance costs | | (2 018) | (839) |
| Finance income | | 290 | 615 |
| Profit before tax | | 3 929 | 9 164 |
| Income tax expense | 13 | (44) | (102) |
| Profit for the period | | 3 885 | 9 062 |

Other comprehensive income

Items that are or may be reclassified to profit or loss:
Exchange differences on translation to presentation currency 4 486 (3 237)
Other comprehensive income for the period, net of tax 4 486 (3 237)

Total comprehensive income for the period, net of tax 8 371 5 825

Profit for the period attributable to:
Equity holders of the parent company 3 887 8 909
Non-controlling interests (2) 153
Total profit for the period 3 885 9 062

Other comprehensive income attributable to:
Equity holders of the parent company 4 390 (3 159)
Non-controlling interests 96 (78)
Total other comprehensive income 4 486 (3 237)

Total comprehensive income attributable to:
Equity holders of the parent company 8 277 5 750
Non-controlling interests 94 75
Total comprehensive income 8 371 5 825

Earnings per share:
Weighted average number of shares 6 000 000 6 000 000
Basic and diluted, profit for the period attributable to ordinary equity holders of the parent (USD per share) 0.65 1.48

[signed]
Borys Bielikov
Chief Executive Officer, Executive Director

[signed]
Vitalii Veresenko
Chairman of the Board, Non-executive Director

[signed]
Sergii Karpenko
Non-executive Director

Notes on pages 14 - 43 form an integral part of these consolidated condensed interim financial statements
Ovostar Union N.V.
Semi-Annual Report 2017

Consolidated Condensed Interim Statement of Financial Position

As at 30 June 2017

(in USD thousand, unless otherwise stated)

	Note	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Assets
Non-current assets
Biological assets	14	30 815	28 500	29 568
Property, plant and equipment and intangible assets	15	36 259	35 512	37 548
Deferred tax assets		22	46	140
Other non-current assets		1 085	958	-
Total non-current assets		68 181	65 016	67 256
Current assets
Inventories	16	9 148	9 123	6 695
Biological assets	14	14 937	10 679	9 458
Trade and other receivables	17	11 853	12 244	10 494
Prepayments to suppliers		951	757	643
Prepayments for income tax		7	6	0
Cash and cash equivalents	18	12 667	12 178	12 619
Total current assets		49 563	44 987	39 909
Total assets		117 744	110 003	107 165
Equity and liabilities
Equity
Issued capital	19	69	63	67
Share premium		30 933	30 933	30 933
Foreign currency translation reserve		(123 609)	(127 993)	(118 825)
Retained earnings		182 890	160 737	160 737
Result for the period		3 887	22 153	8 909
Equity attributable to equity holders of the parent		94 170	85 893	81 821
Non-controlling interests	7	2 605	2 511	2 511
Total equity		96 775	88 404	84 332
Non-current liabilities
Interest-bearing loans and other financial liabilities	20	10 661	11 445	13 770
Deferred tax liability		815	782	888
Total non-current liabilities		11 476	12 227	14 657
Current liabilities
Trade and other payables	21	4 975	5 008	3 611
Advances received		389	534	505
Interest-bearing loans and other financial liabilities	20	4 129	3 830	4 058
Total current liabilities		9 493	9 372	8 175
Total liabilities		20 969	21 599	22 832
Total equity and liabilities		117 744	110 003	107 165
[signed]		[signed]
Borys Bielikov		Vitalii Veresenko
Chief Executive Officer, Executive Director		Chairman of the Board, Non-executive Director
[signed]		[signed]
Marc Van Campen		Sergii Karpenko
Head of Audit Committee, Non-executive Director		Non-executive Director

Notes on pages 14 - 43 form an integral part of these consolidated condensed interim financial statements

Ovostar Union N.V.

Semi-Annual Report 2017

Consolidated Condensed Interim Statement of Changes in Equity

For the six months ended 30 June 2017

(in USD thousand, unless otherwise stated)

	Attributable to equity holders of the parent company						Non-controlling interests	Total equity
	Issued capital	Share premium	Foreign currency translation reserve	Retained earnings	Result for the period	Total
As at 31 December 2015 (audited)	65	30 933	(115 664)	129 783	30 954	76 071	2 436	78 507
Profit for the period	-	-	-	-	8 909	8 909	153	9 062
Other comprehensive income	-	-	(3 159)	-	-	(3 159)	(78)	(3 237)
Total comprehensive income	-	-	(3 159)	-	8 909	5 750	75	5 825
Allocation of prior period result	-	-	-	30 954	(30 954)	-	-	-
Exchange differences	2	-	(2)	-	-	-	-	-
As at 30 June 2016 (unaudited)	67	30 933	(118 825)	160 737	8 909	81 821	2 511	84 332
As at 31 December 2016 (audited)	63	30 933	(127 993)	160 737	22 153	85 893	2 511	88 404
Profit for the period	-	-	-	-	3 887	3 887	(2)	3 885
Other comprehensive income	-	-	4 390	-	-	4 390	96	4 486
Total comprehensive income	-	-	4 390	-	3 887	8 277	94	8 371
Allocation of prior period result	-	-	-	22 153	(22 153)	-	-	-
Exchange differences	6	-	(6)	-	-	-	-	-
As at 30 June 2017 (unaudited)	69	30 933	(123 609)	182 890	3 887	94 170	2 605	96 775

[signed]

Borys Bielikov

Chief Executive Officer, Executive Director

[signed]

Marc Van Campen

Head of Audit Committee, Non-executive Director

[signed]

Vitalii Veresenko

Chairman of the Board, Non-executive Director

[signed]

Sergii Karpenko

Non-executive Director

Notes on pages 14 - 43 form an integral part of these consolidated condensed interim financial statements

Ovostar Union N.V.

Semi-Annual Report 2017

Consolidated Condensed Interim Statement of Cash Flows

For the six months ended 30 June 2017
(in USD thousand, unless otherwise stated)

| | Note | 6 months ended
30 June 2017
(unaudited) | 6 months ended
30 June 2016
(unaudited) |
| --- | --- | --- | --- |
| Operating activities | | | |
| Profit before tax | | 3 929 | 9 164 |
| Non-cash adjustment to reconcile profit before tax to net cash flows: | | | |
| Depreciation of property, plant and equipment and amortisation of intangible assets | 11 | 1 376 | 1 160 |
| Net change in fair value of biological assets | 14 | 209 | (1 484) |
| Disposal of biological assets | | 694 | 378 |
| Finance income | | (290) | (613) |
| Finance costs | | 2 018 | 614 |
| Recovery of assets previously written-off | 9 | (44) | (185) |
| Impairment of doubtful accounts receivable and prepayments to suppliers | 10 | - | 138 |
| VAT written off | 10 | - | 151 |
| Working capital adjustments: | | | |
| Decrease/(Increase) in trade and other receivables | | 752 | (558) |
| Decrease/(Increase) in prepayments to suppliers | | (118) | (260) |
| Decrease/(Increase) in other non-current assets | | (127) | - |
| Decrease/(Increase) in inventories | | 434 | 3 457 |
| Decrease/(Increase) in trade and other payables, advances received | | (270) | 164 |
| | | 8 563 | 12 123 |
| Income tax paid | | - | (5) |
| Net cash flows from operating activities | | 8 563 | 12 118 |
| Investing activities | | | |
| Purchase of property, plant and equipment | | (852) | (4 171) |
| Increase in biological assets | 14 | (5 716) | (4 487) |
| Net cash flows used in investing activities | | (6 568) | (8 658) |
| Financing activities | | | |
| Repayment of borrowings | | (2 026) | (1 707) |
| Interest received | | 290 | 613 |
| Interest paid | | (212) | (550) |
| Net cash flows used in financing activities | | (1 948) | (1 644) |
| Net (decrease)/increase in cash and cash equivalents | | 47 | 1 816 |
| Effect from translation into presentation currency | | 442 | (159) |
| Cash and cash equivalents at 01 January | | 12 178 | 10 962 |
| Cash and cash equivalents at 30 June 2017 | | 12 667 | 12 619 |

[signed]
Borys Bielikov
Chief Executive Officer, Executive Director

[signed]
Marc Van Campen
Head of Audit Committee, Non-executive Director

[signed]
Vitalii Veresenko
Chairman of the Board, Non-executive Director

[signed]
Sergii Karpenko
Non-executive Director

Notes on pages 14 - 43 form an integral part of these consolidated condensed interim financial statements

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

1. CORPORATE INFORMATION

Ovostar Union N.V. (referred to herein as the "Company"), a limited liability company registered under the laws of the Netherlands, was incorporated on 22 March 2011 in Amsterdam. Ovostar Union N.V. was formed to serve as the ultimate holding company of LLC "Ovostar Union" and its subsidiaries. Hereinafter, LLC "Ovostar Union" and its subsidiaries are referred to as the "Ovostar Union Group" or the "Group". The registered office and principal place of business of the Company is Jan van Goyenkade 8, 1075 HP Amsterdam.

Principal activities of the Group include egg production, distribution, egg products manufacturing and production of sunflower oil, rapeseed oil and related products. The largest shareholder is Prime One Capital Ltd., Cyprus. Its principal activity is the holding of ownership interests in its subsidiary and strategic management.

The Group operates through a number of subsidiaries in Ukraine and British Virgin Islands (the list of the subsidiaries is disclosed in Note 7) and has a concentration of its business in Ukraine, where its production facilities are located. Subsidiary companies are registered under the laws of Ukraine and British Virgin Islands. The registered office and principal place of business of the subsidiary companies in Ukraine is 34 Petropavlivska Street, Kyiv, Ukraine.

Information on other related party relationships of the Group is provided in Note 22.

The company is listed on Warsaw Stock Exchange.

The Group is controlled by the Beneficial Owners – Mr. Borys Bielikov and Mr. Vitalii Veresenko (hereinafter, the "Beneficial Owners")

The consolidated condensed interim financial statements for the six months ended 30 June 2017 were authorized by the Board of Directors on 29 August 2017.

2. BASIS OF PREPARATION

2.1. Statement of compliance and basis of measurement

The consolidated condensed interim financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS EU" hereinafter).

The companies of the Group maintain their accounting records under Ukrainian Accounting Standards ("UAS" hereinafter). UAS principles and procedures may differ from those generally accepted under IFRS EU. Accordingly, the consolidated condensed interim financial statements, which have been prepared from the Group entities' UAS records, reflect adjustments necessary for such financial statements to be presented in accordance with IFRS EU.

The consolidated condensed interim financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

Items	Measurement bases
Biological assets	Fair value less costs to sell

Details of the Group accounting policies are included in Note 5.

2.2. Going concern basis

The consolidated condensed interim financial statements are prepared on a going concern basis, under which assets are sold and liabilities are repaid in the ordinary course of business. The accompanying consolidated condensed interim financial statements do not include adjustments that would need to be made in case if the Group was unable to continue as a going concern.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

2.3. Functional and presentation currency

The functional currency of the Company is U.S. dollar (USD). The consolidated condensed interim financial statements are presented in the company's functional currency, that is, U.S. dollar (USD). The operating subsidiary have Ukrainian hryvnia (UAH) as their functional currency. All values are rounded to the nearest thousands, except when otherwise is indicated.

The USD has been selected as the presentation currency for the Group as: (a) management of the Group manages business risks and exposures, and measures the performance of its businesses in the USD; (b) the USD is widely used as a presentation currency of companies engaged primarily in agricultural; and (c) the USD is the most convenient presentation currency for non-Ukrainian users of these IFRS consolidated condensed interim financial statements.

The Group translates its results and financial position into the presentation currency as the follows:

assets and liabilities for each statement of financial position presented (ie including comparatives) shall be translated at the closing rate at the date of that statement of financial position;
income and expenses for each statement of comprehensive income or separate income statement presented (ie including comparatives) shall be translated at exchange rates at the dates of the transactions; and
all resulting exchange differences shall be recognised in other comprehensive income.

During sex months ended 30 June 2017 and 2016, the exchange rate had significant fluctuations. Consistent with IAS 21, if exchange rates fluctuate significantly, the use of the average rate for a period is inappropriate. Considering significant depreciation of Ukrainian currency against major foreign currencies and seasonality of sales, Management of the Group decided to translate income and expense items at average quarterly rates. On consolidation, the assets and liabilities of the Subsidiaries are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average quarterly rates, unless the exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in "Other comprehensive income" and accumulated in the "Foreign currency translation reserve".

Relevant exchange rates are presented as follows:

	Closing rate as at 30 June 2017	Closing rate as at 31 December 2016	Closing rate as at 30 June 2016
USD/UAH	26.0990	27.1909	24.8544
EUR/UAH	29.7868	28.4226	27.5635
USD/PLN	3.7080	4.1975	3.9762
USD/EUR	0.8755	0.9510	0.9006
	Average rate for the 1-st quarter 2017	Average rate for the 2-nd quarter 2017	Average rate for the 1-st quarter 2016
---	---	---	---
USD/UAH	27.0598	26.4627	25.6537
EUR/UAH	28.8073	29.0640	28.2764
USD/PLN	4.0607	3.8395	3.9594
USD/EUR	0.9387	0.9098	0.9069

3. BASIS OF CONSOLIDATION

The consolidated condensed interim financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2017. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

Ovostar Union N.V.

Semi-Annual Report 2017 | 15

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

Exposure, or rights, to variable returns from its involvement with the investee
The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed for the period are included in the consolidated condensed interim financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

4. USE OF ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, due to uncertainty about these estimates, actual results recorded in future periods may differ from such estimates.

These consolidated condensed interim financial statements include management’s estimates regarding the value of assets, liabilities, revenues, expenses, and recognized contractual obligations. These estimates mainly include:

4.1. Impairment of property, plant and equipment

In accordance with IAS 36 "Impairment of Assets" the Group reviews the carrying amount of non-current tangible assets (mainly property, plant and equipment) to identify signs of impairment of these assets.

If there is an indication that an asset may be impaired, the Group uses a model of strategic planning in order to calculate the discounted cash flows (using the "value in use" method, as defined in IAS 36) and, thus, assess the recoverability of the carrying amount of property, plant and equipment. The model was based on budgets and forecasts approved by the management for the next 5 years.

Expected future cash flows reflect long-term production plans formed on the basis of past experience and market expectations. The plans take into account all relevant characteristics of poultry farming, including egg production, volume of egg processing, prices for main components of mixed fodder. Thus, the production capacity is the basis for forecasting the future production volume for each subsequent year and related production costs.

Ovostar Union N.V.

Semi-Annual Report 2017 | 16

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

Levels of costs included in projected cash flows are based on current long-term production plans. When conducting impairment testing, recent levels of costs are taken into account, as well as the expected cost changes based on the current condition of operating activities and in accordance with the requirements of IAS 36. IAS 36 provides a number of restrictions on future cash flows, which may be recognized in respect of future restructuring and capital modernization expenses.

Below are the key assumptions that formed the basis for forecasting future cash flows in the models:

prices for main components of mixed fodder are based on internal forecasts of the Group's management;
production data (production of eggs, safety of livestock, meat production volume, production of egg products) based on internal forecasts of the Group's management from past experience;
selling prices for eggs, egg products and poultry meat are based on forecasts of the Group's management and market expectations.

Management believes that calculations of the recoverable amount are most sensitive to changes in such assumptions as the price of poultry meat, price of eggs and eggs product, price of poultry fodder and production data. Management believes that any reasonably possible change in key assumptions on which the recoverable amount of the Group is based will not cause the excess of carrying amount of the Group over its recoverable amount.

Application of IAS 36 requires extensive judgments by the management regarding estimates and assumptions related to future cash flows and discount rate. Given the nature of the current global economic environment, such assumptions and estimates have a high degree of uncertainty. Therefore, other similar assumptions may lead to significantly different results.

4.2. Fair value of biological assets

Estimation of fair value of biological assets is based on the discounted cash flow model. The fair value of biological assets might be affected by the fact that the actual future cash flows will differ from the current forecast, which typically occurs as a result of significant changes in any factors or assumptions used in the calculations.

Among such factors are:

differences between actual prices and price assumptions used in estimating net realizable value of eggs;
changes in productivity of laying hens;
unforeseen operational problems inherent in the branch specificity;
age of hens at the end of the reporting period;
changes in production costs, costs of processing and products sales, discount and inflation rates and exchange rates that could adversely affect the fair value of biological assets.

The key assumptions concerning biological assets based on discounted cash flow approach are presented as follows:

cost planning at each stage of poultry farming will remain constant in future periods;
egg production volume will not be significantly changed;
egg sale price in future periods;
long-term inflation rate of Ukrainian UAH in future periods;
discount rate for determining the present value of future cash flows expected from the biological assets (Note 14).

Management determined that calculations of the fair value of biological assets are the most sensitive to changes in such assumptions as the volume of egg production, cost planning and prices of eggs, eggs product and poultry meat. Management believes that any reasonably possible change in key assumptions will not cause any significant change in the fair value of biological assets.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized 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:

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

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.

Although some of these assumptions are obtained from published market data, the majority of these assumptions are estimated based on the Group’s historical and projected results.

Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed, are summarized in Notes 14.

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

4.3. Allowances for doubtful debts

The Group forms allowances for doubtful debts to cover any potential losses arising in case of buyer’s insolvency. In assessing the adequacy of the allowance for doubtful debts the management takes into account overall current economy conditions, terms of balances for outstanding receivables, the Group’s experience to write-off liabilities, customers’ solvency and changes in the conditions of payment. Changes in the economy, industry or financial position of individual buyers may cause adjustment to the amount of allowance for doubtful debts reflected in the consolidated condensed interim financial statements.

4.4. Useful lives of property, plant and equipment

The Group estimates useful lives of property, plant and equipment at least at the end of each financial year and, if expectations differ from previous estimates, changes are recorded as changes in accounting estimates in accordance with IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors". These estimates can have a significant impact on the carrying amount of property, plant and equipment and depreciation expenses during the period.

4.5. Deferred tax assets

Deferred tax assets are recognized for all unused tax losses to the extent that the inflow of taxable profit is possible, at the expense of which these losses may be implemented. Significant judgments are required from the management in determining the amount of deferred tax assets that can be recognized on the basis of the possible terms of receipt and the level of future taxable profit together with the future tax planning strategy.

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1. Recognition and measurement of financial instruments

Financial assets and financial liabilities are recorded in the Group’s consolidated condensed interim statement of financial position when the Group becomes a contractual party regarding the corresponding financial instrument. The Group records the acquisition and sale of financial assets and financial liabilities at the settlement date.

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

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Fair value of investments that are actively traded in organized financial markets is calculated on the basis of current market value at the close of trading on the reporting date. Regarding investments in securities for which there is no active market, fair value is calculated using other methods of valuation of financial instruments. Such valuation methods include the use of information on recent market transactions between well informed, willing to commit such transaction, independent parties, or data about the current market value of another similar instrument, discounted cash flow analysis or other pricing models.

Accounting policy for subsequent revaluation of these items is disclosed below in the appropriate sections of accounting policy.

5.2. Financial assets

Initial recognition and measurement

Financial assets are recognised initially at transaction costs that are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset

5.3. Effective interest rate method

The effective interest rate method is used to calculate the amortized cost of a financial asset and distribute interest income during the relevant period. The effective interest rate is the rate that enables discounting of estimated future cash receipts through the expected life of a financial asset or a shorter period, if applicable.

Revenues relating to debt instruments are recorded using the effective interest rate method, except for financial assets at fair value through profit or loss.

Financial assets at fair value through profit or loss - a financial asset is classified as at fair value through profit or loss if it is held for trading or designated at fair value through profit or loss.

A financial asset is classified as held-for-trading if it is:

purchased originally for the purpose of sale / repayment within a short period of time; or
a part of the portfolio of identified financial instruments that are managed together, and structure of which demonstrates the intention of profit earning in the short term; or
a derivative that is not classified as a hedging instrument and is not effective for these purposes.

A financial asset that is not a financial asset held-for-trading may be classified as a financial asset at fair value through profit or loss at the time of recognition in the accounting records if:

application of such classification eliminates or significantly reduces discrepancies in valuation or accounting, that otherwise might arise, or
a financial asset is a part of a group of financial assets, financial liabilities or both groups, which are managed and controlled on the basis of fair value in accordance with a documented risk or investment management strategy, and information about this group is provided internally on that basis, or
it exists in the framework of the contract containing one or more embedded derivatives, and IAS 39 "Financial Instruments: Recognition and Measurement" permits to classify the whole contract (asset or liability) as at fair value through profit or loss.

Financial assets at fair value through profit or loss are measured at fair value with arising gains or losses recognized in the consolidated condensed interim statement of comprehensive income. Net gains or losses recognized in the income statement include dividends and interest received on the relevant financial asset.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

Held-to-maturity investments - investments held to maturity are measured at amortized cost using the effective interest rate method, less impairment, and income is recognized using the effective yield method. During the reporting periods presented in these financial statements, the Group had no investments of this category.

Loans and receivables - accounts receivable regarding principal activities, loans, borrowings and other receivables with fixed or determinable payments that are not quoted in an active market are classified as "loans and receivables". Loans and receivables are measured at amortized cost using the effective interest rate method less impairment and uncollectible debts. Interest income is recognized by applying the effective interest rate, except for short-term receivables for which the amount of such interest income is insignificant.

Unquoted investments available for sale are accounted for at cost if their fair value cannot be reliably measured.

5.4. Cash and cash equivalents

Cash and cash equivalents include cash on hand and cash in bank accounts and deposits with an original maturity date of three months or less and are stated at fair value.

5.5. Cash deposits

Cash deposits in the statement of financial position are held for the investment activities. For the purpose of the consolidated condensed interim financial statement of cash flows, short-term deposits are included in the investing activities.

5.6. Impairment of financial assets

Financial assets, except for financial assets at fair value through profit or loss, at each reporting date are assessed for signs indicating impairment. Impairment loss is recognized when there is objective evidence of reduction of the estimated future cash flows on this asset as a result of one or more events that occurred after the financial asset was recorded in the accounting. For financial assets at amortized cost, the amount of impairment is calculated as the difference between the asset's carrying amount and present value of the expected future cash flows discounted using the effective interest rate.

Impairment loss directly reduces the carrying amount of all financial assets, except for accounts receivable on principal activities, carrying amount of which is reduced due to the allowance formed. If the accounts receivable on principal activities are uncollectible, they are written-off against the related allowance. Subsequently received reimbursements of amounts previously written-off are recorded in credit of the allowance account. Changes in the carrying amount of the allowance account are recorded in the profit and loss.

Except for equity instruments available for sale, if in a subsequent period the amount of impairment loss decreases and such decrease can be objectively related to an event occurring after the impairment was recognized, the impairment loss previously recognized is recovered by adjusting the items in the income statement. In this case, the carrying amount of financial investments at the date of recovery of impairment cannot exceed its amortized cost, which would be reflected in the case, if impairment was not recognized.

In respect of equity securities available for sale, any increase in fair value after recognition of impairment loss relates directly to equity.

5.7. Writing-off of financial assets

The Group writes-off a financial asset only if rights for cash flows under the corresponding contract terminated the treaty or if a financial asset and corresponding risks and rewards are transferred to other organization. If the Group does not transfer or retain all the principal risks and rewards of ownership of the asset and continues to control the transferred asset, it shall record its share in the asset and related liability in the amount of possible payment of corresponding amounts. If the Group retains all the principal risks and rewards of ownership of the transferred financial asset, it shall continue to account for the financial asset, and reflect a secured loan on income earned.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

5.8. Financial liabilities and equity instruments issued by the Group

5.8.1. Accounting as liabilities or equity

Debt and equity financial instruments are classified as liabilities or equity based on the substance of the corresponding contractual obligations.

5.8.2. Equity instruments

Equity instrument is any contract confirming the right for a share in the company's assets remaining after deduction of all its liabilities. Equity instruments issued by the Group are recorded in the amount of generated income net of direct expenses for their issue.

5.8.3. Liabilities under financial guarantee contracts

Liabilities under financial guarantee contracts are initially measured at fair value and subsequently recorded at the higher of:

cost of contractual obligations determined in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, and
cost, less, where applicable, accumulated depreciation reflected in accordance with the principles of revenue recognition set forth below.

5.8.4. Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition as loans and borrowings, payables.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.

A financial liability is classified as held for trading if it is:

assumed mainly to be repurchased within a short period of time; or
a part of the portfolio of identified financial instruments that are managed together, and structure of which demonstrates the intention of profit earning in the short term; or
a derivative that is not classified as a hedging instrument and is not effective for these purposes.

A financial liability that is not a financial liability held-for-trading may be classified as a financial liability at fair value through profit or loss at the time of recognition in the accounting records if:

application of such classification eliminates or significantly reduces discrepancies in valuation or accounting, that otherwise might arise, or
a financial liability is a part of a group of financial assets, financial liabilities or both groups, which are managed and controlled on the basis of fair value in accordance with a documented risk or investment management strategy, and information about this group is provided internally on that basis, or
it exists within the framework of the contract containing one or more embedded derivatives, and IAS 39 “Financial Instruments: Recognition and Measurement” permits to classify the whole contract (asset or liability) as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are measured at fair value with arising gains or losses recognized in the financial results. Net gains or losses recognized in the income statement include interest paid on a financial liability.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

Other financial liabilities - other financial liabilities, including borrowings, are accounted for at fair value less transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method, with the recognition of interest expenses using the effective (actual) yield.

5.8.5. Trade and other accounts payable

Trade payables are recognized when the counterparty fulfills its contractual obligations and measured at amortized cost using the effective interest rate.

5.8.6. Loans and borrowings

Loans and borrowings are initially recognized at fair value less costs incurred in the transaction. Subsequently, loans and borrowings are stated at amortized cost; any difference between proceeds (net of transaction costs) and the amount of repayment is reflected in the income statement over the period for which loans and borrowings are issued using the effective interest rate method. Loans and borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the obligation to at least one year after the date of balance sheet preparation.

5.8.7. Writing-off of financial liabilities

The Group writes-off financial liabilities only when they are repaid, cancelled or expire.

5.9. Foreign currency transactions

Transactions in currencies other than the functional currency are initially recorded at exchange rates set on the dates of these transactions. Monetary assets and liabilities denominated in such currencies are translated at the rates applicable at the reporting date. All realized and unrealized gains and losses resulting from exchange rate differences are included in profit or loss for the period.

5.10. Biological assets

Biological assets represented by the commercial herd and herd replacements are recorded at fair value less estimated selling and distribution expenses. Estimate of fair value of biological assets of the Group is based on discounted cash flow models, according to which the fair value of biological assets is calculated using present value of the expected net cash flows from biological assets discounted at the appropriate rate.

The Group recognizes a biological asset when it controls an asset as a result of past events; it is probable that the economic benefits from the asset will flow to the Group; fair value or cost of an asset can be estimated with reasonable certainty.

Profit or loss arising on initial recognition of biological assets at fair value less estimated selling and distribution expenses is included in the consolidated condensed interim income statement as incurred.

Agricultural products collected from a biological asset are measured at fair value less estimated selling and distribution expenses. Profit or loss arising on initial recognition of agricultural products at fair value, less estimated selling and distribution expenses, is recognized in the consolidated condensed interim statement of comprehensive income.

5.11. Inventories

Inventories consist mainly of raw materials, package and packing materials, agricultural produce and finished goods. Inventories are valued at the lower of cost and net realisable value.

Cost of goods includes the cost of acquisition and, where appropriate, costs incurred in bringing inventories to their present condition and location. Cost is calculated using the weighted average method. Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in OCI, in respect to the purchases of raw materials.

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

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

5.12. Property, plant and equipment

Property, plant and equipment are recorded at historical cost or deemed cost, equal to fair value at the date of transition to IFRS, less accumulated depreciation and accumulated impairment losses. Historical cost of an asset of property, plant and equipment includes (a) the purchase price, including non-recoverable import duties and taxes net of trade and other discounts; (b) any costs directly related to bringing an asset to the location and condition, which allow its functioning in accordance with the intentions of the Group's management; (c) initial assessment of the costs of dismantling and removal in the asset of property, plant and equipment and restoring the occupied territory; this obligation is assumed by the Company either upon the acquisition of an asset, or as a result of its operation for a certain period of time for the purposes not related to the production of inventories during this period. Cost of assets created in-house includes cost of materials, direct labor costs and an appropriate proportion of production overheads.

Construction in progress includes costs directly related to the construction of property, plant and equipment, including distribution of variable overheads associated with the construction and prepayments for the property, plant and equipment. Construction in progress is not depreciated. These assets are depreciated from the moment when they are used in economic activity, on the same basis as depreciation on other assets.

Subsequently capitalised costs include major expenditures for improvements and replacements that extend the useful lives of the assets or increase their revenue generating capacity. Repairs and maintenance expenditures that do not meet the foregoing criteria for capitalisation are charged to the consolidated condensed interim financial statement of comprehensive income as incurred.

Depreciable amount is the cost of an asset of property, plant and equipment, or any other amount, less its residual value. The residual value of an asset is the estimated amount that the company would receive to date from the sale of an item of property, plant and equipment, less estimated costs of disposal if the asset reached the age and condition, in which, presumably, it will be at the end of its useful life. Assets under finance lease are depreciated over the shorter of estimated useful life on the same basis as own assets or over the period of the relevant lease.

Depreciation is provided to write-off the depreciable amount over the useful life of an asset and is calculated using the straight-line method. Useful lives of the groups of property, plant and equipment are as follows:

Buildings	10 - 40 years
Plant and equipment	5 - 25 years
Vehicles	3 - 10 years
Furniture and fittings	3 - 5 years
Construction in progress and uninstalled equipment	No depreciation

The residual value, useful life and depreciation method are reviewed at the end of each financial year. Impact of any changes arising from estimates made in prior periods is recorded as a change in an accounting estimate.

Gains or losses arising from disposal or liquidation of an asset of property, plant and equipment, are defined as the difference between sales proceeds and carrying amount of an asset and recognized in profit or loss.

5.13. Impairment of property, plant and equipment

At the end of each reporting period the Group identifies signs of possible impairment of assets. If any such indication exists, the Group reviews the carrying amount of its items of property, plant and equipment to determine whether any signs of impairment exist due to depreciation. If any such indication exists, the expected recoverable amount of an asset is estimated to determine the amount of impairment losses, if any.

In order to determine the impairment losses, assets are grouped at the lowest levels for which it is possible to identify separately the cash flows (cash generating unit).

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

The recoverable amount is the higher of fair value less selling and distribution expenses and value of an asset in use. In assessing the value of an asset in use, the estimated future cash flows associated with the asset, are discounted to their present value using pre-tax discount rate that reflects current market estimates of time value of money and the risks inherent in the asset.

If, according to the estimates, the recoverable amount of an asset (cash generating unit) is less than its carrying amount, the carrying amount of an asset (cash generating unit) is reduced to the recoverable amount. An impairment loss is recognized immediately in the income statement, except when the asset is recorded at a revalued amount. In this case the impairment loss is considered as a revaluation decrease.

In cases where impairment losses are subsequently reversed, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of recovery amount, however, in such a way that the increased carrying amount does not exceed the carrying amount that would be determined, if an impairment loss was not recognized in respect of an asset (cash generating unit) in previous years. Reversal of impairment loss is recognized immediately in the income statement, except when the asset is recorded at a revalued amount. In this case, the reversal of an impairment loss is considered as a revaluation increase.

5.14. Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its 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. Internally generated intangible assets are not capitalized and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

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 recognised in the income statement when the asset is derecognised.

Amortization is calculated on a straight line basis over the useful life of an asset, which is 10 years.

5.15. Borrowing costs

Borrowing costs directly 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 capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

5.16. Leases

Leases are classified as finance leases when according to the terms of lease the lessee assumes all principal risks and rewards incident to ownership of the leased property. Other leases are classified as operating leases. Income and expenses associated with operating leases are accrued on a straight-line basis and recorded in the income statement over the lease term.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

5.17. Group as a lessee

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the 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 recognised in the statement of comprehensive income. Operating lease payments are recognized as an expense in the income statement evenly over the lease term.

5.18. Group as a lessor

Leases where the Group does not transfer substantially all the risks and rewards 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 recognised over the lease term on the same base as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

5.19. Contingent assets and liabilities

Contingent liabilities are not recognized in the financial statements. Such liabilities are disclosed in the notes to the financial statements, except where the probability of outflow of resources embodying economic benefits is insignificant.

Contingent assets are not recognized in the financial statements, but disclosed in the notes to the extent that it is probable that the economic benefits will flow to the Group.

5.20. Provisions

Provisions are recognised 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 obligation amount.

The amount recognized as a provision is the best estimate of compensation necessary to repay a current liability on the reporting date, which takes into account all the risks and uncertainties inherent in this liability. In cases where the amount of provision is estimated using cash flows that can be required to repay current liabilities, its carrying amount represents the present value of these cash flows.

Where there is a possibility that one or all of the economic benefits necessary to recover the amount of provision will be reimbursed by a third party, the receivables are recognized as an asset if there is actual assurance that such reimbursement will be received and the amount of receivables can be measured reliably.

5.21. Revenue recognition

Revenues from the sale of goods are recognized when the Group has transferred to the buyer all significant risks and rewards of ownership of the goods, and it is probable that the economic benefits associated with this transaction will flow to the Group.

Revenues from rendering of services are recognized in the reporting period in which the services were provided, based on the level of completion of the specific transaction and only when the amount of revenue can be reliably measured and it is probable that the economic benefits associated with this transaction will flow to the Group.

Income and expenses relating to the same transaction or event are recognized simultaneously. Interest income is recognized using the effective interest rate method.

5.22. Income tax

Income tax is calculated in accordance with the requirements of the applicable legislation of Ukraine. Income tax is calculated on the basis of financial results for the year adjusted to items that are not included in taxable income or that cannot be attributed to gross expenses. It is calculated using tax rates effective at the reporting date.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used to calculate taxable income. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recorded taking into account the degree of certainty in sufficient taxable income, which enables to realize temporary differences related to gross expenses.

Deferred tax is calculated at tax rates, which presumably will be applied during the sale of related assets or repayment of related liabilities.

Assets and liabilities on deferred income tax are offset when: a) the Group has a legally enforceable right to offset the recognized current income tax assets and liabilities; b) the Group intends either to perform settlement by offsetting counterclaims, or simultaneously sell the asset and settle the liability; c) deferred tax assets and liabilities relate to income taxes levied by the same taxation authority in each future period in which it is intended to repay or reimburse a significant amount of deferred tax liabilities and assets.

Deferred income tax is recognized in the income statement, except when it relates to items recognized directly in equity. In this case the deferred tax is also recognized in equity.

In 30 June 2017, Ukrainian corporate income tax was levied at a rate of 18% (2016: 18%)

Fixed agricultural tax: The majority of the Group companies that are involved in agricultural production (poultry farms and other entities engaged in agricultural production) benefit substantially from the status of an agricultural producer. These companies are exempt from income taxes and pay the Fixed Agricultural Tax instead (Note 13).

5.23. Value Added Tax

For the six months ended 30 June 2017 and 2016, VAT was levied at two rates: 20% on Ukrainian domestic sales and imports of goods, works and services and 0% on export of goods and provision of works or services to be used outside Ukraine.

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

5.24. Government grants

Government grants are stated at fair value when there is reasonable assurance that the grant will be received.

Ukrainian legislation provides a variety of tax benefits and subsidies for agricultural companies. Such benefits and subsidies are approved by the Supreme Council of Ukraine, the Ministry of Agrarian Policy, Ministry of Finance, local authorities. Under the applicable legislation, agricultural producers are entitled to use VAT benefit regarding agricultural transactions.

VAT refunds and other government grants

The Group's companies are subject to special tax treatment for VAT (Note 9). The Group's enterprises, which qualify as agricultural producers, are entitled to retain the net VAT payable. VAT amounts payable are not transferred to the State, but credited to the entity's separate special account to support the agriculture activities of the Group. Net result on VAT operations, calculated as excess of VAT liability over VAT credit is charged to profit or loss. VAT receivable exceeding VAT liability is used as a reduction in tax liabilities of the next period.

Government grants are recognised as income over the periods necessary to match them with the related costs, or as an offset against finance costs when received as compensation for the finance costs for agricultural producers. To the extent the conditions attached to the grants are not met at the reporting date, the received funds are recorded in the Group's consolidated condensed interim financial statements as deferred income.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

Other government grants are recognised at the moment when the decision to disburse the amounts to the Group is made.

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.

5.25. Partial compensation of interest rates on loans raised by the agricultural companies from financial institutions

The Group companies are entitled to compensation from the government of a share of interest expenses incurred on loans which were received for agricultural purposes. The amount of interest compensation depends on the term and purpose of the loan. Due to the fact that the payment of interest compensations depends on the capabilities of the country's budget, they are recognized on a cash basis as other operating income in the period of receipt.

5.26. Related party transactions

For the purposes of these consolidated condensed interim financial statements, the parties are considered to be related if one of the parties has a possibility to control or considerably influence the operational and financial decisions of the other company. While considering any relation which can be defined as related party transactions it is necessary to take into consideration the substance of the transaction not only their legal form.

5.27. Reclassification

Certain comparative information presented in the consolidated condensed interim financial statements for the six month ended 30 June 2016 has been revised in order to achieve comparability with the presentation used in the consolidated condensed interim financial statements for the six month ended 30 June 2017. Such reclassifications and revisions were not significant to the Group financial statements.

6. NEW AND AMENDED STANDARDS

(a) New and amended standards and interpretations adopted

The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2016. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The nature and the effect of these changes are disclosed below. Although these new standards and amendments applied for the first time in 2016, they did not have a material impact on the annual consolidated condensed interim financial statements of the Group. The nature and the impact of each new standard or amendment is described below:

Amendments to IAS 1 Presentation of Financial Statements: Disclosure Initiative

The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports.

IAS 7 Disclosure Initiative – Amendments to IAS 7

The amendments to IAS 7 Statement of Cash Flows are part of the IASB's Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. Application of amendments will result in additional disclosure provided by the Group.

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements (in USD thousand, unless otherwise stated)

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.

These amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. These amendments are not expected to have any impact on the Group.

IFRS 14 Regulatory Deferral Accounts

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity's rate-regulation and the effects of that rate-regulation on its financial statements.

Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation. These amendments do not have any impact on the Group as there has been no interest acquired in a joint operation during the period.

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. Instead, IAS 16 will apply.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors' interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

Amendments to IAS 27: Equity Method in Separate Financial Statements

The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS.

Annual improvements 2012-2014 Cycle

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

This improvement adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.

IFRS 7 Financial Instruments: Disclosures (with consequential amendments to IFRS 1)

The amendment adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required.

This improvement clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements.

IAS 19 Employee Benefits

This amendment clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level).

IAS 34 Interim Financial Reporting

The amendment clarifies the meaning of 'elsewhere in the interim report' and requires a cross-reference

These changes had no significant impact on the disclosures or amounts recognised in the Group's consolidated condensed interim financial statements.

(b) New and amended standards and interpretations not yet adopted

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2

The IASB issued amendments to IFRS 2 Share-based Payment that address six main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. The Group is assessing the potential effect of the amendments on its consolidated condensed interim financial statements.

Clarifications to IFRS 15 Revenue from contracts with customers effective for annual period beginning on or after 1 January 2018

Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts effective for annual period beginning on or after 1 January 2018

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. Retrospective application is required, but comparative information is not compulsory. The Group will implement IFRS 9 per 1 January 2018. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets, but will potentially have no impact on the classification and measurement of the Group's financial liabilities.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 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. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue.

It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes and will be implemented by the Group per 1 January 2018. The Group has started the identification of the areas where IFRS 15 changes the current accounting policies. The impact of the standard will be further investigated in 2017.

IFRS 16 Leases

IFRS 16, published in January 2016, establishes a revised framework for determining whether a lease is recognised on the (Consolidated) Statement of Financial Position. It replaces existing guidance on leases, including IAS 17. The Group expects to implement IFRS 16 per 1 January 2019. In 2016, the Group has started to collect rental and lease contracts from the key operating companies. The Group is currently in the process of determining to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group's profit and classification of cash flows. Ovostar Union will further analyse the lease contracts in 2017 to prepare an initial impact assessment.

The following new or amended standards are not expected to have a significant impact on consolidated condensed interim financial statements:

Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (issued on 19 January 2016);
Amendments to IAS 7: Disclosure Initiative (issued on 29 January 2016);
Amendments to IFRS 2: Classification and measurement of Share-based Payments (issued on 20 June 2016).

7. SUBSIDIARIES AND NON-CONTROLLING INTERESTS

As at 30 June 2017, 2016 and 31 December 2016 the Group included the following subsidiaries.

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Semi-Annual Report 2017 | 30

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

The following tables summarise the information relating to each of the Group's subsidiaries that has material NCI, before any intra-group elimination:

Name of the company	Business activities	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
International Food Trade Limited	Trade company (British Virgin Islands)	100.0%	100.0%	-
Limited Liability Company “Ovostar Union”	Strategic management of subsidiary companies in Ukraine	100.0%	100.0%	100.0%
Limited Liability Company “Yasensvit”	Breeder farms, production of hatching eggs, farms for rearing and for laying flock, production and distribution of shell eggs, poultry feed production (Ukraine)	98.0%	98.0%	98.0%
Limited Liability Company “Ovostar”	Egg-products production and distribution (Ukraine)	100.0%	100.0%	100.0%
Public Joint Stock Company “Poultry Farm Ukraine”	Production of shell eggs, assets holding (Ukraine)	92.0%	92.0%	92.0%
Public Joint Stock Company “Malynove”	Production of shell eggs, assets holding (Ukraine)	94.0%	94.0%	94.0%
Public Joint Stock Company “Krushynskyy Poultry Complex”	Trading company, egg trading – non operating activity (Ukraine)	76.0%	76.0%	76.0%
Limited Liability Company “Skybynskyy Fodder Plant”	In the process of liquidation (Ukraine)	98.6%	98.6%	98.6%

The following tables summarize the information relating to each of the Group's subsidiaries that has material NCI, before any intra-group elimination:

30 June 2017 (unaudited)	LLC “Yasensvit”	PJSC “Poultry Farm Ukraine”	PJSC “Malynove”	PJSC “Krushynskyy Poultry Complex”	Intra-group eliminations	Total
NCI percentage	2,0%	8,0%	6,0%	24,0%
Non-current assets	35 745	3 036	7 481	(0)
Current assets	66 266	3 299	1 843	590
Non-current liabilities	-	-	(211)	(3)
Current liabilities	(5 423)	(1 429)	(6 825)	7
Net assets	96 588	4 906	2 288	594
Carrying amount of NCI	1 932	393	137	143	-	2 605
Revenue	33 301	2 049	905	-
Profit (loss)	4 752	(1 081)	(173)	(2)
OCI	2 913	263	100	43
Total comprehensive income	7 665	(819)	(73)	41
Profit allocated to NCI	95	(87)	(10)	-		(2)
OCI allocated to NCI	59	21	6	10		96
Cash flows from operating activities	(871)	30	535	-
Cash flows from investment activities	(6 496)	(4)	(215)	-
Cash flows from financing activities (dividend to NCI: nil)		(26)		-
Net (decrease)/ increase in cash and cash equivalents	(7 119)	1	346	-

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

30 June 2016 (unaudited)	LLC "Yasensvit"	PJSC "Poultry Farm Ukraine"	PJSC "Malynove"	PJSC "Krushynskyy Poultry Complex"	Intra-group eliminations	Total
NCI percentage	2.0%	8.0%	6.0%	24.0%
Non-current assets	33 748	2 957	7 020	0
Current assets	53 963	4 055	1 842	626
Non-current liabilities	-	(12)	(237)	(3)
Current liabilities	(5 156)	(175)	(5 896)	1
Net assets	82 555	6 825	2 729	624
Carrying amount of NCI	1 651	546	164	150	-	2 511
Revenue	31 820	3 602	1 859	-
Profit (loss)	11 255	(882)	(14)	(2)
OCI	(2 197)	(292)	(97)	(23)
Total comprehensive income	9 058	(1 174)	(111)	(25)
Profit allocated to NCI	225	(71)	(1)	-		153
OCI allocated to NCI	(43)	(23)	(6)	(6)		(78)
Cash flows from operating activities	11 375	2	1 633	1
Cash flows from investment activities	(4 691)	(1)	(1 524)	-
Cash flows from financing activities (dividend to NCI: nil)	612	-	-	-
Net (decrease)/ increase in cash and cash equivalents	7 406	1	110	1

8. SEGMENT INFORMATION

All of the Group's operations are located within Ukraine.

Segment information is analyzed on the basis of the types of goods supplied by the Group's operating divisions. The Group's reportable segments under IFRS 8 are therefore as follows:

| Egg operations segment | sales of egg
sales of chicken meat |
| --- | --- |
| Egg products operations segment | sales of egg processing products |
| Oilseed operations segment | sales of sunflower oil, rapeseed oil and related products |

The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 5. Sales between segments are mainly carried out at market prices. Operating profit before tax represents segment result. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

For the purposes of monitoring segment performance and allocating resources between segments:

All assets are allocated to reportable segments.
All liabilities are allocated to reportable segments.

The following table presents revenue, results of operations and certain assets and liabilities information regarding segments for the six months ended 30 June 2017 and 2016:

Ovostar Union N.V.

Semi-Annual Report 2017 | 32

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

6 months ended 30 June 2017 (unaudited)	Operations segment			Consolidated
	Egg	Egg products	Oilseed
Revenue	47 007	11 783	1 684	60 474
Inter-segment revenue	(22 112)	(847)	(1 038)	(23 997)
Revenue from external buyers	24 895	10 936	646	36 477
Profit before tax	1 852	2 077	-	3 929
6 months ended 30 June 2016 (unaudited)	Operations segment			Consolidated
---	---	---	---	---
	Egg	Egg products	Oilseed
Revenue	44 485	11 160	1 597	57 242
Inter-segment revenue	(20 589)	(1 344)	(857)	(22 790)
Revenue from external buyers	23 896	9 816	740	34 452
Profit before tax	7 029	2 135	-	9 164

For the six month ended 30 June 2017, 2016 no sales were settled by barter transactions.

Segment assets, liabilities and other information regarding segments as at 30 June 2017, 2016 and 31 December 2016 were presented as follows:

30 June 2017 (unaudited)	Operations segment			Consolidated
	Egg	Egg products	Oilseed
Total segment assets	112 412	5 008	324	117 744
Total segment liabilities	20 354	571	44	20 969
Addition to property, plant and equipment and intangible assets	631	221	-	852
Net change in fair value of biological assets and agricultural produce	(158)	(51)	-	(209)
Depreciation and amortization	(1 278)	(95)	(4)	(1 377)
Interest income	290	-	-	290
Interest on debts and borrowings	(460)	-	-	(460)
Income tax expense	(29)	(15)	-	(44)
31 December 2016 (audited)	Operations segment			Consolidated
---	---	---	---	---
	Egg	Egg products	Oilseed
Total segment assets	99 227	8 846	1 930	110 003
Total segment liabilities	20 613	986	-	21 599
30 June 2016 (unaudited)	Operations segment			Consolidated
---	---	---	---	---
	Egg	Egg products	Oilseed
Total segment assets	101 269	5 614	282	107 165
Total segment liabilities	21 688	1 143	1	22 832
Addition to property, plant and equipment and intangible assets	6 201	148	-	6 349
Net change in fair value of biological assets and agricultural produce	1 095	389	-	1 484
Depreciation and amortization	(1 078)	(78)	(4)	(1 160)
Interest income	613	-	-	613
Interest on debts and borrowings	(550)	-	-	(550)
Income tax expense	(33)	(69)	-	(102)

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

The following table presents information about revenue from external buyers divided by geographic location for the six months ended 30 June 2017 and 2016:

	6 months ended 30 June 2017 (unaudited)	6 months ended 30 June 2016 (unaudited)
Ukraine	21 557	21 538
Middle East	10 346	9 651
European Union	3 139	3 184
Africa	135	1
CIS	1 251	64
Other	49	14
Total	36 477	34 452

9. OTHER OPERATING INCOME

	Note	6 months ended 30 June 2017 (unaudited)	6 months ended 30 June 2016 (unaudited)
Income from refund under the special legislation:
Income from special VAT treatment	a)	8	111
Total income from refund under the special legislation		8	111
Gain on recovery of assets previously written off		44	185
Other income		19	45
Total		71	341

a) Income from special VAT treatment

In 2016 according to the Tax Code of Ukraine, companies that generated not less than 75% of gross revenues for the previous tax year from sales of own agricultural products were entitled to retain VAT on sales products, net of VAT paid on purchases, for use in agricultural production. Producers of eggs, poultry and other agriculture producers could retain VAT in a portion of 50%.

In accordance with the changes in the tax legislation of Ukraine, from 1 January 2017, specific VAT subsidies is canceled. From 1 January 2017, in order to continue state support for agricultural companies, tax legislation introduces budget subsidies. From 2017 onwards, budget subsidies will be provided until 1 January 2022. The agricultural producers shall be engaged in the production of farm animals, as well as fruit and vegetable farming. For each agricultural producer, the amount of the subsidy shall not to exceed the amount of VAT tax paid by the producers, and shall be distributed on a monthly basis.

In accordance with the Tax Code, the VAT rate is currently effective at 20%.

All members of the Group qualify for the use of VAT benefits except for Limited Liability Company "Ovostar", Open Joint Stock Company "Krushynskyy Poultry Complex", Limited Liability Company "Skybynskyy Fodder Plant", Limited Liability Company "Ovostar Union", Public Joint Stock Company "Malynove".

10. OTHER OPERATING EXPENSES

	6 months ended 30 June 2017 (unaudited)	6 months ended 30 June 2016 (unaudited)
VAT written-off	-	(151)
Impairment of doubtful accounts receivable and prepayments to suppliers	-	(138)
Fines and penalties	-	(4)
Other expenses	(44)	(36)
Total	(44)	(329)

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

11. AMORTISATION AND DEPRECIATION EXPENSES

| | 6 months ended
30 June 2017
(unaudited) | 6 months ended
30 June 2016
(unaudited) |
| --- | --- | --- |
| Depreciation and amortisation: | | |
| Cost of sales | (1 309) | (1 094) |
| Selling and distribution costs | (5) | (8) |
| Administrative expenses | (63) | (58) |
| Total | (1 377) | (1 160) |

12. EMPLOYEE BENEFITS EXPENSE

| | 6 months ended
30 June 2017
(unaudited) | 6 months ended
30 June 2016
(unaudited) |
| --- | --- | --- |
| Wages, salaries and social security: | | |
| Costs of production personnel | (1 878) | (1 353) |
| Costs of distribution personnel | (199) | (125) |
| Costs of administrative personnel | (229) | (192) |
| Total | (2 306) | (1 670) |

13. INCOME TAX

Companies of the Group that are involved in agricultural production pay the Fixed Agricultural Tax (the "FAT") in accordance with the applicable laws. The FAT is paid in lieu of corporate income tax, land tax, duties for geological survey works and duties for trade patents.

The FAT is calculated by local authorities and depends on the area and valuation of land occupied. This tax regime is valid indefinitely. FAT does not constitute an income tax, and as such, is recognized in the statement of comprehensive income in administrative expenses.

During the six months ended 30 June 2017, the Group companies which have the status of the Corporate Income Tax (the "CIT") payers in Ukraine were subject to income tax at a 18% rate (30 June 2016: at a 18% rate). The deferred income tax assets and liabilities as of 30 June 2017 were measured based on the tax rates expected to be applied to the period when the temporary differences are expected to reverse.

The major components of income tax expense for the six months ended 30 June 2017 and 2016 were:

| | 6 months ended
30 June 2017
(unaudited) | 6 months ended
30 June 2016
(unaudited) |
| --- | --- | --- |
| Current income tax | (19) | (33) |
| Deferred tax | (25) | (69) |
| Income tax (expense)/benefit reported in the income statement | (44) | (102) |

Ovostar Union N.V.

Semi-Annual Report 2017 | 35

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

14. BIOLOGICAL ASSETS

As at 30 June 2017, 2016 and 31 December 2016 commercial and replacement poultry were presented as follows:

| | 30 June 2017
(unaudited) | | 31 December 2016
(audited) | | 30 June 2016
(unaudited) | |
| --- | --- | --- | --- | --- | --- | --- |
| | Number,
ths heads | Carrying
value | Number,
ths heads | Carrying
value | Number,
ths heads | Carrying
value |
| Non-current biological assets | | | | | | |
| Replacement poultry | | | | | | |
| Hy-line | 4 040 | 30 815 | 4 365 | 28 500 | 4 343 | 29 568 |
| Total non-current biological assets | 4 040 | 30 815 | 4 365 | 28 500 | 4 343 | 29 568 |
| Current biological assets | | | | | | |
| Commercial poultry | | | | | | |
| Hy-line | 3 848 | 14 937 | 3 195 | 10 679 | 2 873 | 9 458 |
| Total current biological assets | 3 848 | 14 937 | 3 195 | 10 679 | 2 873 | 9 458 |
| Total biological assets | 7 888 | 45 752 | 7 560 | 39 179 | 7 216 | 39 026 |

Classification of biological assets into non-current and current component is based on the life cycle of a biological asset. Biological assets that will generate cash flow more than one year are classified as non-current biological assets, biological assets that will generate cash flow less than one year are classified as current biological assets.

Reconciliation of commercial and replacement poultry carrying values for the six months ended 30 June 2017 and 2016 was presented as follows:

| | 6 months ended
30 June 2017
(unaudited) | 6 months ended
30 June 2016
(unaudited) |
| --- | --- | --- |
| As at 01 January | 39 179 | 34 450 |
| Increase in value as a result of assets acquisition | 732 | 152 |
| Increase in value as a result of capitalization of cost | 4 984 | 4 335 |
| Income/(Losses) from presentation of biological assets at fair value | (209) | 1 484 |
| Decrease in value as a result of assets disposal | (694) | (378) |
| Exchange differences | 1 760 | (1 017) |
| As at 30 June 2016 | 45 752 | 39 026 |

For the six months ended 30 June 2017 the Group produced shell eggs in the quantity of 815 127 thousand items (30 June 2016: 669 578 thousand).

Fair value of biological assets was estimated by the Group's specialists which have experience in valuation of such assets. Fair value was calculated by discounting of expected net cash flow (in nominal measuring) at the moment of eggs produced, using corresponding discount rate which is equal to $29.87\%$ (30 June 2016: $29.78\%$). Management supposes that sale price and production and distribution costs fluctuations will comply with forecasted index of consumer price in Ukraine. The major assumptions were performed on the basis of internal and external information and it reflected Management's assessment of the future agricultural prospect.

Biological assets of the Group are measured at fair value within Level 3 of the fair value hierarchy.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

Value measurement is a maximum value exposed to the following assumptions which were used in fair value calculations of biological assets:

	Assumption as at 30 June 2017 (unaudited)	Assumption as at 30 June 2016 (unaudited)
Eggs sale price, USD per item (UAH per item)	0.049 (1.279)	0.060 (1.529)
Discount rate, %	29.88%	29.78%
Long-term inflation rate of Ukrainian hryvnia, %	101.60%	114.39%

Based on the current situation in Ukraine that provides a high degree of uncertainty in relation to many of the assumptions in the biological assets revaluation model, and guided by the prudence concept, the Group used conservative approach for calculation of fair value of biological assets as at 30 June 2017.

Changes in key assumptions that were used in fair value estimation of biological assets had the following influence on the value of biological assets as at 30 June 2017 and 2016:

	6 months ended 30 June 2017 (unaudited)	6 months ended 30 June 2016 (unaudited)
1% decrease in egg sale price	(864)	(989)
1% increase in discount rate	(545)	(519)
1% increase in long-term inflation rate of Ukrainian hryvnia	514	453

15. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

During the six months ended 30 June 2017, the Group's additions to property, plant and equipment amounted to USD 852 thousand (2016: USD 6 349 thousand). In particular the Group acquired equipment for poultry houses in the amount equal to USD 370 thousand (2016: USD 6 242 thousand) and capital expenditures in amount of USD 482 thousand (2016: 583 thousand) were incurred in connection with the reconstruction and improvement of the existing facilities and reconstruction of poultry buildings.

For the six months ended 30 June 2017 and 2016 respectively the Group has put into operation fixed assets of book value equal to USD 1 431 thousand and USD 1 423 thousand respectively.

As at 30 June 2017 net book value of property plant and equipment which was used as collateral for bank loans is nil and property, plant and equipment via finance lease amounted to USD 127 thousand (2016: nil and USD 170 thousand, respectively).

As at 30 June 2017 construction-in-progress and uninstalled equipment also included prepayments for the property, plant and equipment which amounted to USD 321 thousand (2016: USD 1 688 thousand).

As at 30 June 2017, included within property, plant and equipment were fully depreciated assets with the original cost of USD 2 525 thousand (2016: USD 2 696 thousand).

Impairment assessment

The Group reviews its property, plant and equipment each period to determine if any indication of impairment exists. Based on these reviews, there were no indicators of impairment as of 30 June 2017, 2016 and 31 December 2016.

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Semi-Annual Report 2017 | 37

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

16. INVENTORIES

	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Raw materials	3 579	5 656	2 917
Agricultural produce and finished goods	3 742	1 563	1 979
Package and packing materials	851	795	652
Work in progress	210	120	70
Other inventories	772	994	1 128
(Less: impairment of agricultural produce and finished goods)	(6)	(5)	(51)
Total	9 148	9 123	6 695

17. TRADE AND OTHER RECEIVABLES

	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Trade receivables	9 414	11 425	8 827
VAT for reimbursement	2 609	1 028	1 933
Receivables for securities sold but not yet settled	-	-	68
Other accounts receivable	35	13	48
Provision for doubtful accounts receivable	(205)	(222)	(382)
Total	11 853	12 244	10 494

18. CASH AND CASH EQUIVALENTS

	Note	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Cash in banks	a)	12 657	9 596	12 612
Cash in deposit		-	2 574	-
Cash on hand		10	8	7
Total		12 667	12 178	12 619

a) Cash in banks by country of bank location denominated in the following currencies:

	Currency	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Ukraine	UAH	1 492	7 903	10 817
Ukraine	USD	3 530	2 375	541
Ukraine	EUR	1 365	733	169
Ukraine	PLN	-	-	50
Total in Ukraine		6 387	11 011	11 577
Poland	USD	10	475	196
Poland	EUR	11	340	478
Poland	PLN	-	1	13
Total in Poland		21	816	687
Netherlands	EUR	26	32	34
Total in Netherlands		26	32	34
Denmark	USD	1	110	314
Denmark	EUR	-	-	-
Total in Denmark		1	110	314
United Kingdom	USD	6 197	79	-
United Kingdom	EUR	25	122	-
Total in United Kingdom		6 222	201	-
Total cash in banks		12 657	12 170	12 612

Ovostar Union N.V.

Semi-Annual Report 2017 | 38

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

19. Equity

Issued capital and capital distribution

For the six months ended 30 June 2017 there were no changes in issued capital.

As referred to in Note 1, the Company was incorporated on 22 March 2011.

The Company's authorized share capital amounts to EUR 225 000 and consists of 22 500 000 ordinary shares with a nominal value off EUR 0.01 each. As at 31 December 2011, 6 000 000 ordinary shares were issued and fully paid. In June 2011 the shares of the Company were listed on the Warsaw Stock Exchange.

As at 30 June 2017, 2016 and 31 December 2016 the shareholder interest above 5% in the Share capital of Company was as follows:

	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Prime One Capital Ltd.	67.93%	70.24%	70.24%
Generali Otwarty Fundusz Emerytalny	9.94%	9.94%	9.94%
FAIRFAX FINANCIAL Holdings Limited	7.35%	5.35%	5.35%
AVIVA Otwarty Fundusz Emerytalny Aviva BZ WBK	5.02%	5.02%	5.02%

Foreign currency translation reserve

According to section 373, Book 2 of the Dutch Civil Code, the Company's share capital has been converted at the exchange rate prevailing at the reporting date. The EUR 60 000 (equivalent to 6 000 000 shares) has been converted into USD 68 621 (30 June 2016: USD 66 632). The result arising from exchange rate differences has been recorded in the "Foreign currency translation reserve".

The foreign currency translation reserve is used also to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Share premium

As has been mentioned previously, in June 2011 the Group's shares have been placed on WSE. As a result of the transaction, USD 33 048 thousand was raised while the IPO costs amounted to USD 2 115 thousand. In these financial statements funds raised as a result of IPO are reflected in share premium as at 31 December 2011. For the six months ended 30 June 2017 and 2016, there were no movements in share premium.

Dividends payable of the Company

During the six months ended 30 June 2017, 2016 and 31 December 2016, no dividends have been declared and paid.

Ovostar Union N.V.

Semi-Annual Report 2017 | 39

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

INTEREST-BEARING LOANS AND OTHER FINANCIAL LIABILITIES

Currency		Effective interest rate, %	Maturity	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Current interest-bearing loans and other financial liabilities
Landesbank Berlin AG / AKA Ausfuhrkredit-Gesellschaft mbH	EUR	2.25%+ EU-RIBOR (6m)	30.12.2021	2 446	2 253	1 601
Landesbank Berlin AG	EUR	1.65%+ EU-RIBOR (6m)	30.12.2020	1 647	1 517	2 377
Other current loans	UAH	-	-	26	25	27
Short-term financial lease liabilities (a)	UAH	7.0%	28.09.2017	10	35	53
Total current interest-bearing loans and other financial liabilities				4 129	3 830	4 058
Non-current interest-bearing loans and other financial liabilities
Landesbank Berlin AG / AKA Ausfuhrkredit-Gesellschaft mbH	EUR	2.25%+ EU-RIBOR (6m)	30.12.2021	7 625	7 966	9 380
Landesbank Berlin AG	EUR	1.65%+ EU-RIBOR (6m)	30.12.2020	3 036	3 479	4 378
Long-term financial lease liabilities (a)	UAH	7.0%	28.09.2017	-	-	12
Total non-current interest-bearing loans and other financial liabilities				10 661	11 445	13 770
Total interest-bearing loans and other financial liabilities				14 790	15 275	17 828

Covenants

The Group's loan agreements contain a number of covenants and restrictions, which include, but are not limited to, financial ratios and other legal matters. Covenant breaches generally permit lenders to demand accelerated repayment of principal and interest.

As at 30 June 2017 and 2016 the Group was not in breach of any financial covenants which allow lenders to demand immediate repayment of loans.

As at 30 June 2017 net book value of property plant and equipment which was used as collateral for bank loans is nil and property, plant and equipment via finance lease amounted USD 133 thousand (2016: nil and plant and equipment via finance lease USD 170 thousand).

(a) Finance lease liabilities

	30 June 2017 (unaudited)		31 December 2016 (audited)		30 June 2016 (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
Amounts payable under finance lease:
Within a year	11	10	36	35	55	52
From 1 to 5 years	-	-	-	-	13	13
Above 5 years	-	-	-	-	-	-
	11	10	36	35	68	65
Less: financial expenses of future periods	(1)		(1)		(3)
Present value of lease liabilities	10	10	35	35	65	65
Less: amount to be paid within a year		(10)		(35)		(52)
Amount to be paid after one year		-		-		13

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

Finance lease obligations represent amounts due under agreements for lease of poultry cage equipment with Ukrainian companies.

Net carrying value of property, plant and equipment acquired via finance lease as at 30 June 2017, 2016 and 31 December 2016 was as follows:

	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Plant and equipment	127	139	170
Total	127	139	170

As at 30 June 2017, 2016 and 31 December 2016 there were no restrictions imposed by lease arrangements, in particular those concerning dividends, additional debt or further leasing.

21. TRADE AND OTHER PAYABLES

	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Trade payables	4 239	4 091	2 882
Employee benefit liability	270	221	202
Liability for unused vacation	220	211	145
Taxes payable	113	89	72
VAT liabilities	46	335	77
Income tax payables	23	22	24
Other payables	64	39	209
Total	4 975	5 008	3 611

22. RELATED PARTY DISCLOSURES

For the purposes of these consolidated condensed interim financial statements, the parties are considered to be related, if one of the parties has the ability to exercise control over the other party or influence significantly the other party in making financial and operating decisions. Considering the transactions with each possible related party, particular attention is paid to the essence of relationships, not merely their legal form.

Related parties may enter into transactions, which may not always be available to unrelated parties, and they may be subject to such conditions and such amounts that are impossible in transactions with unrelated parties.

According to the criteria mentioned above, related parties of the Group are divided into the following categories:

(A). Key management personnel;
(B). Companies which activities are significantly influenced by the Beneficial Owners;
(C). Other related parties.

The following companies and individuals are considered to be the Group's related parties as at 30 June 2017, 2016:

(A). Key management personnel:

Borys Bielikov

Vitalii Veresenko

Marc van Campen

Sergii Karpenko

Vladimir Polishchuk

Natalia Malyovana

Arnis Veinbergs

Vitalii Voron

Lilia Chernyak

Forsion:

Executive Director / CEO

Non-executive director

Chief Financial Officer

First Deputy CEO / Commercial director

Deputy CEO in charge of Production activity

Production director

HR director

(B). Companies which activities are significantly influenced by the Key management personnel:

Agrofirma Boryspilsky Hutir LLC

Aleksa LTD LLC

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

As at 30 June 2017, 2016 and 31 December 2016 trade accounts receivable from related parties and advances issued to related parties were presented as follows:

	30 June 2017 (unaudited)	31 December 2016 (audited)	30 June 2016 (unaudited)
Prepayments to related parties
(B). Companies which activities are significantly influenced by the Beneficial Owners:
Aleksa LTD LLC	56	50	56
Total	56	50	56

(C). Other related parties:

For the six months ended 30 June 2017, 2016 the Group has no other related parties.

COMMITMENTS AND CONTINGENCIES

Contingent liabilities

Operating environment. During 2016 and six months 2017, the continued political and economic turmoil in Ukraine. During 2016 and six months 2017, Ukraine has also continued to suffer from the separatist movements in the Lugansk and Donetsk regions. (The Group does not have any assets in Crimea, Donetsk or Luhansk regions).

These events resulted in devaluation of the Ukrainian hryvnia against major foreign currencies, increase in annual inflation rate 12% (2015: 43%) and other negative influences on the economic environment of Ukraine. Unfavorable conditions on markets where Ukraine's primary commodities where traded also influenced further devaluation of the Ukrainian hryvnia against major foreign currencies. Ukrainian companies and banks continued to suffer from the lack of funding from domestic and international financial markets. However, in 2016 Ukraine economy has signs of stabilization, what also resulted in decrease devaluation of the national currency against major foreign currencies in comparison with the previous year and GDP growth around 1%. In 2016 National Bank of Ukraine canceled restriction about decrease of the required share of foreign currency proceeds sale to 65% and permission of dividends remittance.

From 2015, political and economic relationships between Ukraine and the Russian Federation remained strained, leading to a significant reduction in trade and economic cooperation. On 1 January 2016, the free-trade section of Ukraine's Association Agreement with the European Union came into force. As a result, the Russian Federation implemented a trade embargo or import duties on key Ukrainian export products. In response, Ukraine implemented similar measures against Russian products.

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. During 2015 and 2016, Ukraine received the first tranches of extended fund facilities agreed with the IMF. Further economic and political developments are currently difficult to predict and an adverse effect on the Ukrainian economy may continue.

Taxation. Ukrainian tax authorities are increasingly directing their attention to the business community as a result of the overall Ukrainian economic environment. In respect of this, the local and national tax environment in Ukraine is constantly changing and subject to inconsistent application, interpretation and enforcement. Non-compliance with Ukrainian laws and regulations can lead to the imposition of severe penalties and interest. Future tax examinations could raise issues or assessments which are contrary to the Group companies' tax filings. Such assessments could include taxes, penalties and interest, and these amounts could be material. While the Group believes it has complied with local tax legislation, there have been many new tax and foreign currency laws and related regulations introduced in recent years which are not always clearly written.

From 1 January 2017 Tax Code of Ukraine was changed in part which regulates the privileged VAT regime for agricultural companies as a result, specific VAT subsidies is canceled. However, from 1 January 2017, in order to continue state support for agricultural companies, tax legislation introduces budget subsidies. From 2017 onwards, budget subsidies will be provided until 1 January 2022. For each agricultural producer, the amount of the subsidy is not to exceed the amount of VAT tax paid by the producers, and will be distributed on a monthly basis.

Ovostar Union N.V.

Semi-Annual Report 2017

Notes to the Consolidated Condensed Interim Financial Statements

(in USD thousand, unless otherwise stated)

The Group is currently estimating the impact of these new changes but does not expect these to result in a significant change in the Group's effective tax rate.

Starting from 1 September 2013, the Tax Code of Ukraine introduced new rules, based on OECD transfer pricing guidelines, for determining and applying fair market prices, which significantly changed transfer pricing regulations in Ukraine. The Group exports goods and services, which may potentially fall under the scope of the new Ukrainian transfer pricing regulations. The Group submitted a controlled transaction report within the required deadline. Management believes that the Group is in compliance with transfer pricing regulation requirements.

Legal issues. As at 30 June 2017 and 2016 the Group is involved in litigations and other claims that are in the ordinary course of its business activities. Management believes that the resolution of such matters will not have a material impact on its financial position or operating results

Capital commitments. As at 30 June 2017 the Group had contract liabilities for acquisition of property, plant and equipment equal is nil (2016: USD 19 thousand).

24. SUBSEQUENT EVENTS

There were no significant events that occurred after the balance sheet date.

Ovostar Union N.V.

Semi-Annual Report 2017 | 43

AI assistant

Ovostar Union PLC — Interim / Quarterly Report 2017

5746_ir_2017-08-30_bf5ca589-85fd-4755-938a-0e179cb1e01b.pdf

1H'17

SEMI-ANNUAL REPORT

EGG SEGMENT

EGG PRODUCTS SEGMENT

FINANCIAL PERFORMANCE

FINANCIAL POSITION

CASH FLOWS

INVESTMENT PROGRAM UPDATE

Consolidated Financial Statements of Ovostar Union N.V.

Table of Contents

REPRESENTATION

Consolidated Condensed Interim Statement of Changes in Equity

1. CORPORATE INFORMATION

2. BASIS OF PREPARATION

2.1. Statement of compliance and basis of measurement

2.2. Going concern basis

2.3. Functional and presentation currency

3. BASIS OF CONSOLIDATION

4. USE OF ESTIMATES AND ASSUMPTIONS

4.1. Impairment of property, plant and equipment

4.2. Fair value of biological assets

4.3. Allowances for doubtful debts

4.4. Useful lives of property, plant and equipment

4.5. Deferred tax assets

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1. Recognition and measurement of financial instruments

5.2. Financial assets

Initial recognition and measurement

5.3. Effective interest rate method

5.4. Cash and cash equivalents

5.5. Cash deposits

5.6. Impairment of financial assets

5.7. Writing-off of financial assets

5.8. Financial liabilities and equity instruments issued by the Group

5.8.1. Accounting as liabilities or equity

5.8.2. Equity instruments

5.8.3. Liabilities under financial guarantee contracts

5.8.4. Financial liabilities

Initial recognition and measurement

5.8.5. Trade and other accounts payable

5.8.6. Loans and borrowings

5.8.7. Writing-off of financial liabilities

5.9. Foreign currency transactions

5.10. Biological assets

5.11. Inventories

5.12. Property, plant and equipment

5.13. Impairment of property, plant and equipment

5.14. Intangible assets

5.15. Borrowing costs

5.16. Leases

5.17. Group as a lessee

5.18. Group as a lessor

5.19. Contingent assets and liabilities

5.20. Provisions

5.21. Revenue recognition

5.22. Income tax

5.23. Value Added Tax

5.24. Government grants

VAT refunds and other government grants

5.25. Partial compensation of interest rates on loans raised by the agricultural companies from financial institutions

5.26. Related party transactions

5.27. Reclassification

6. NEW AND AMENDED STANDARDS

(a) New and amended standards and interpretations adopted

Amendments to IAS 1 Presentation of Financial Statements: Disclosure Initiative

IAS 7 Disclosure Initiative – Amendments to IAS 7

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12

IFRS 14 Regulatory Deferral Accounts

Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to IAS 27: Equity Method in Separate Financial Statements

Annual improvements 2012-2014 Cycle

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IFRS 7 Financial Instruments: Disclosures (with consequential amendments to IFRS 1)

IAS 19 Employee Benefits

Ovostar Union PLC Interim / Quarterly Report 2017