Ros Agro S Regulatory News (AGRO)

ROS AGRO PLC

Parent company financial statements and Independent Auditor's Report

31 December 2021

 http://www.rns-pdf.londonstockexchange.com/rns/0049D_1-2022-2-28.pdf

Contents

Board of Directors and other officers............................................................................................ 1

Management report...................................................................................................................... 2

Directors' Responsibility Statement............................................................................................. 7

Independent Auditor's Report...................................................................................................... 8

Statement of comprehensive income for the year ended 31 December 2021................................ 12

Balance sheet as at 31 December 2021........................................................................................ 13

Statement of changes in equity for the year ended 31 December 2021........................................ 14

Statement of cash flows for the year ended 31 December 2021................................................... 15

Notes to the financial statements

1 General information

2 Summary of significant accounting policies

3 Financial risk management

4 Critical Accounting Estimates and Judgements

5 Interest Income

6 Other operating gains/(losses) - net

7 Expenses by nature

8 Income tax expense

9 Financial assets at amortised cost

10 Cash and cash equivalents32

11 Investments in subsidiaries

12 Financial assets at fair value through other comprehensive

13 Share capital and share premium

14 Other reserves

15 Trade and other payables

16 Contingencies

17 Related party transactions

18 Events after the balance sheet date

Board of Directors and other officers

Mr. Vadim Moshkovich

Chairman of the Board of Directors

President of LLC Group of Companies Rusagro

Mr. Anastassios Televantides

Chairman of the Audit Committee

Non-executive Director

Mr. Richard Andrew Smyth

Member of the Audit Committee

Non-executive Director

Mrs. Ganna Khomenko

Member of the Audit Committee

Non-executive Director

Mr. Maxim Basov 

Executive Director

Board support

The Company Secretary is available to advise all Directors to ensure compliance with the Board procedures.

Company Secretary

Fiduciana Secretaries Limited

8 Mykinon Street

CY-1065, Nicosia

Cyprus

Registered office

25 Aphrodite Street,

3rd floor, Office 300,

CY-1060 Nicosia,

Cyprus 

The Board of Directors presents its report together with the audited parent company financial statements of ROS AGRO PLC (hereafter also referred as the "Company") for the year ended 31 December 2021. The parent company financial statements have been prepared in accordance with International Financial Reporting Standards (hereafter also referred as "IFRS") as adopted by the European Union ("EU") and the requirements of the Cyprus Companies Law, Cap. 113.

Principal activities and nature of operations of the Company

The Company's principal activity, which is unchanged from last year, is the holding of investments, including any interest earning activities.

Changes in Group structure

The Company has interests in direct and indirect subsidiaries as disclosed in Note 11 to the financial statements (together with the Company, the "Group").

The Company's changes in direct subsidiaries are disclosed in Note 11 to the financial statements.

Review of developments, position and performance of the Company's business

The profit of the Company for the year ended 31 December 2021 was RR 18,978,117 thousand (2020: RR 14,852,249 thousand), arising primarily from dividend income (Note 17). On 31 December 2021 the total assets of the Company were RR 42,615,507 thousand (2020: RR 41,525,749 thousand) and the net assets were RR 39,854,751 thousand (2020: RR 40,403,166 thousand). The increase in total assets is mainly attributable to dividends receivable that was higher from the settlement of short-term financial asset at amortized cost (Note 9). The financial position, development and performance of the Company as presented in these parent company financial statements are considered satisfactory.

Future developments of the Company

The Board of Directors does not expect any significant changes or developments in the operations, financial position and performance of the Company in the foreseeable future.

Results

The Company's results for the year are set out on page 12.

Human resources management and environmental protection

The Group offers its employees opportunities to realize their professional potential, improve their knowledge and skills, work on interesting innovative projects and be part of a cohesive team. Group management believes that one of the keys to a successful business is maintaining a balance between the high quality and efficient work of all employees who share common values and principles on one hand, and the Company's commitment to providing opportunities for career growth on the other. Group business divisions annually prepare and implement employee training and development plans based on the business's strategic and current objectives, as well as needs identified by comprehensive assessment. Based on the results of a comprehensive assessment, every employee draws up an individual development plan for a period of one to two years that lists all training and development activities that are intended to advance the employee's skills or pass on the knowledge they have gained.

The Group is committed to protecting the environment and minimizing the environmental impact of its operations in regions where it has a presence. All of the Group's divisions constantly monitor wastewater runoff and air quality,and are equipped with treatment facilities that meet all the standards of applicable environmental legislation. The Group has implemented guidelines for maximum allowable emissions and guidelines for waste generation and established sanitary buffer zones for warehouses storing crop protection agents. The Group also returns packaging from crop protection agents and fertilizer to counterparties and performs soil deacidification efforts on farmland.

Principal risks and uncertainties

The Company`s financial risks are disclosed in Note 3 to the parent company financial statements. The Company`s contingencies are disclosed in Note 16 to the parent company financial statements.

Dividends

Pursuant to its Articles of Association the Company may pay dividends out of its profits. In August 2013 the Board of Directors has approved a new dividend policy with payout ratio of at least 25% of the Group's profit for the year applicable starting from the year ended 31 December 2013. To the extent that the Company declares and pays dividends, owners of Global Depositary Receipts (hereafter also referred as "GDRs") on the relevant record date will be entitled to receive dividends payable in respect of Ordinary Shares underlying the GDRs, subject to the terms of the Deposit Agreement.

The Company is a holding company and thus its ability to pay dividends depends on the ability of its subsidiaries to pay dividends to the Company in accordance with the relevant legislation and contractual restrictions. The payment of such dividends by its subsidiaries is contingent upon the sufficiency of their earnings, cash flows and distributable reserves. The maximum dividend payable by the Company`s subsidiaries is restricted to the total accumulated retained earnings of the relevant subsidiary, determined according to the Russian law.

In 2021 the Company distributed RR 10,770,584 thousand of remaining dividends for 2020 and RR 8,755,947 thousand of interim dividends for 2021. The remaining dividends for 2020 amounted to RR 400.30 (gross) per share and interim dividends for 2021 amounted to RR 325.42 (gross) per share.

Subsequent to the year ended 31 December 2021, the Board of Directors recommends the payment of additional dividends out of the profits for 2021 in the amount of RR 11,928,542 thousand. Given that the Company has already paid interim dividends for the 2021 in the amount of RR 8,755,947 thousand, the total dividend out of the profits for 2021 and prior years' undistributed reserves amounts to RR 20,684,489 thousand.

The proposed dividend is subject to approval by the shareholders at the Annual General Meeting. These consolidated financial statements do not reflect the dividends that have not been approved on the reporting date.

Share capital

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

Significant direct/indirect holdings

For the significant direct and indirect shareholdings held by the Company, please refer to Note 11 of the parent company financial statements.

The role of the Board of Directors

The Company is governed by its Board of Directors (hereafter also referred as "the Board") which is collectively responsible to the shareholders for the successful performance of the Company and the Group.

The Board sets corporate strategic objectives, ensuring that the necessary financial and human resources are in place for the Company and the Group to meet its objectives and reviewing management performance.

The Board of Directors sets the Company's and Group's values and standards and ensures all obligations to shareholders are understood and met. The Board believes it maintains a sound system of internal control to safeguard the Company's assets and shareholders' investments in the Company.

Members of the Board of Directors

The members of the Board of Directors at 31 December 2021 and at the date of this report are shown in the beginning of these parent company financial statements. All of them were members of the Board throughout the year ended 31 December 2021.

In accordance with the Company's Articles of Association, one third of the Directors shall retire by rotation and seek re-election at each Annual General Meeting.

The Company's Directors' remuneration is disclosed in Note 17. No significant changes to Directors' remuneration occurred during the year ended 31 December 2021. 

Directors' Interests

The Directors Mr. Vadim Moshkovich, Mr. Maxim Basov, Mr. Richard Andrew Smyth and Mr. Anastassios Televantides held interest in the Company as at 31 December 2021 and 31 December 2020.

Mr. Vadim Moshkovich has no direct interest in the Company as at 31 December 2021 and 2020. The number of shares held indirectly through a company controlled by him as at 31 December 2021 is 15,367,829 (31 December 2020: 19,327,829).

The number of shares held indirectly by Mr. Maxim Basov through a company controlled by him and GDRs held directly by him as at 31 December 2021 is 1,000,000 and 5,392,809 (equivalent to 1,078,562 shares) respectively (31 December 2020: 1,000,000 and 5 084 809 (equivalent to 1,016,962 shares)).

The number of GDRs held directly by Mr. Richard Andrew Smyth as at 31 December 2021 and 2020 is 31,125 (equivalent to 6,225 shares).

The number of GDRs held directly by Mr. Anastassios Televantides as at 31 December 2021 and 2020 is 10,000 (equivalent to 2,000 shares).

Audit Committee

The Board of Directors has established an Audit Committee. The Audit Committee is primarily responsible for (i) ensuring the integrity of our financial statements, (ii) ensuring our compliance with legal and regulatory requirements, (iii) evaluating our internal control and risk management procedures, (iv) assuring the qualification and independence of our independent auditors and overseeing the audit process and (v) resolving matters arising during the course of audits and coordinating internal audit functions. The Audit Committee consists of three members appointed by the Board of Directors.

The current members are Mr. Anastassios Televantides (Chairman), Mr. Richard Andrew Smyth and Mrs. Ganna Khomenko.

Corporate Governance

Since 2011, the Company adopted the following codes: Code of Conduct on insider information and Code of Business Conduct and Ethics (the "Codes"). In addition, since May 2014 the Company together with its subsidiaries and affiliates adopted a new edition of the Codes for mandatory compliance by all employees. In 2017 the Company adopted a new Code of Conduct and Business Ethics.

Internal control and risk management systems in relation to the financial reporting process

The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and to ensure compliance with applicable laws and regulations. The Audit Committee of the Board of directors of the Company reviews high-risk areas at least once a quarter. Reporting from various Group entities to the central office is supervised on an ongoing basis and procedures have been established for control and checking of such reporting. With each acquisition the Group seeks to adapt and incorporate the financial reporting system of the acquired operations quickly and efficiently.

Non-financial and diversity information

The Company will be publishing its non-financial information and Diversity Statement together with the Annual Report on the Company's website www.rusagrogroup.ru, within 6 months after balance sheet date.

The composition and diversity information of the Board of Directors of the Company

The authorities and responsibilities of the Board of Directors are described in the internal rules of the Board of Directors.

On Behalf of all shareholders and on the proposal of advice of the Management Board, the Board of Directors lays down the strategy and general policy of the Company and Group. It also sets the Company's and the Group's standards and monitors the implementation of that strategy.

It controls and gives direction to the management of the Company and the Group and provides monitoring of risks. It also ensures that the principles of good governance are respected.

The Board's acts are guided solely by a concern for the interests of the Company in relation to its shareholders, its customers and staff.

The Board of Directors is the decision-making body of our Group. Its role is to define the Group strategic vision, assisted by a specialized committee (the Audit Committee). It is composed of 5 Directors, including 2 independent Directors and 1 managing Director. The Board offers a diverse and synergistic range of experience, nationalities and cultures and enables us to consider the interests of all our shareholders.

The Board has determined that as a whole, it has the appropriate skills and experience necessary to discharge its functions. Executive and independent Directors have the experience required to contribute meaningfully to the Board's deliberations and resolutions. Independent Directors assist the Board by constructively challenging and helping develop strategy proposals.

Treasury shares

On 25 August 2011 the Board unanimously resolved that it is in the best interest of the Company to buy back GDRs from the market for the total amount of up to USD 10 million increased to up to USD 30 million via subsequent Board's decision on 17 July 2012.

At 31 December 2021 and 2020, the Company held 2,135,113 (31 December 2020: 2,135,113) of its own GDRs (approximately 427,063 shares (31 December 2020: 427,063 shares)) that is equivalent to RR 490,607 thousand, representing 1.6% of its issued share capital. The GDRs are held as 'treasury shares'.

In 2020, the Company transferred 31,000 of its own GDRs (approximately 6,200 shares) from those held as treasury shares to employees of the Group representing 0.02% of the issued share capital. No GDRs were transferred to the employees under the share option incentive scheme during 2020 or during 2021.

During 2021 and 2020 the Company did not buy back any of its own GDRs from the market.

Events after the balance sheet date

The material events after the balance sheet date are disclosed in Note 16 and in Note 18 to the financial statements. The Board considered the effects of the circumstances disclosed in Note 16 and concluded that no significant impact is expected to affect the Company's operations.

Branches 

The Company operated through its branches in the United Arab Emirates and Hong Kong during the year.

Research and development activities

The Company is not engaged in research and development activities

Going Concern

Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in preparing the financial statements based on the fact that, after making enquiries and following a review of the Group's budget for 2022, including cash flows and borrowing facilities, the Directors consider that the Company has adequate resources to continue in operation for the foreseeable future.

Independent Auditors

On 13 August 2021 it was agreed by the board that rotation of the auditors would take place every 5 years for the purpose of getting objective and fresh view over Company's performance and business processes, especially in terms of rapid growth. On 26 November 2021 EGM approved replacement of the independent auditor from PricewaterhouseCoopers Limited to KPMG Limited Chartered Accountants.

By Order of the Board

Vadim Moshkovich

Chairman of the Board of Directors

Larnaca

25 February 2022

The Company's Board of Directors is responsible for the preparation of the parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. This responsibility includes selecting appropriate accounting policies and applying them consistently; and making accounting estimates and judgements that are reasonable in the circumstances.

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

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Each of the Directors confirms to the best of his or her knowledge that the parent company financial statements, which are presented on pages 12 to 41, have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company.

Further, the Board of Directors confirms that, to the best of its knowledge:

(i) adequate accounting records have been maintained which disclose with reasonable accuracy the financial position of the Company and explain its transactions;

(ii) all information of which it is aware that is relevant to the preparation of the parent company financial statements, such as accounting records and all other relevant records and documentation, has been made available to the Company's auditors;

(iii) the parent company financial statements disclose the information required by the Cyprus Companies Law, Cap.113 in the manner so required;

(iv) the Management Report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113, and the information given therein is consistent with the parent company financial statements;

(v) the information included in the corporate governance statement in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and which is included as a specific section of the Management Report, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap, 113, and is consistent with the parent company financial statements; and

(vi) the corporate governance statement includes all information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.

By Order of the Board

Vadim Moshkovich

Chairman of the Board of Directors

Larnaca, 25 February 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS

OF

ROS AGRO PLC

Report on the audit of the parent company financial statements

Opinion

We have audited the accompanying financial statements of the parent company ROS AGRO PLC (the ''Company''), which are presented on pages 12 to 41 and comprise the balance sheet as at 31 December 2021, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2021, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (''IFRS-EU'') and the requirements of the Cyprus Companies Law, Cap. 113, as amended from time to time (the ''Companies Law, Cap.113'').

Basis for opinion

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

Key audit matters

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

Other information

The Board of Directors is responsible for the other information. The other information comprises the Management Report, which we obtained prior to the date of this report, and the Company's Annual Report, other than the financial statements and our auditors' report thereon, which is expected to be made available to us after that date.

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

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

With regards to the management report, our report in this regard is presented in the ''Report on other legal requirements'' section.

When we read the Company's Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members of the Company at the Company's Annual General Meeting and we will take such other action as may be required. 

Responsibilities of the Board of Directors and those charged with governance for the financial statements

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

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

The Board of Directors and those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditors' responsibilities for the audit of the financial statements

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

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

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

· Conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report.

Report on other legal requirements

Pursuant to the additional requirements of the Auditors Law 2017, L.53(Ι)/2017, as amended from time to time (''Law L.53(I)/2017''), and based on the work undertaken in the course of our audit, we report the following:

· In our opinion, the management report, the preparation of which is the responsibility of the Board of Directors, has been prepared in accordance with the requirements of the Companies Law, Cap 113, and the information given is consistent with the financial statements.

· In the light of the knowledge and understanding of the business and the Company's environment obtained in the course of the audit, we have not identified material misstatements in the management report.

Other Matters

Reporting responsibilities

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

Comparative figures

The financial statements of the Company for the year ended 31 December 2020 were audited by another auditor who expressed an unmodified opinion on those financial statements on 14 March 2021.

Consolidated financial statements

We have reported separately on the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2021.

The engagement partner on the audit resulting in this independent auditors' report is Antonis I. Shiammoutis.

Antonis I. ShiammoutisCertified Public Accountant and Registered Auditorfor and on behalf of

KPMG Limited

Certified Public Accountants and Registered Auditors14 Esperidon Street

1087 Nicosia Cyprus 

25 February 2022

The notes on pages 16 to 41 are an integral part of these parent company financial statements.

On 25 February 2022, the Board of Directors of ROS AGRO PLC authorized these parent company financial statements for issue.

Vadim Moshkovich Ganna Khomenko

Director Director

The notes on pages 16 to 41 are an integral part of these parent company financial statements.

1. The only reserve which is available for distribution in the form of dividends to the Company's shareholders is retained earnings.

2. In 2020 the Company distributed RR 3,216,350 of remaining dividends for 2019 and RR 1,922,033 of interim dividends for 2020. The remaining dividends for 2019 amounted to RR 119.54 per share and interim dividends for 2020 amounted to RR 71.43 per share.

3. In 2021 the Company distributed RR 10,770,584 thousand of remaining dividends for 2020 and RR 8,755,947 thousand of interim dividends for 2021. The remaining dividends for 2020 amounted to RR 400.30 (gross) per share and interim dividends for 2021 amounted to RR 325.42 (gross) per share.

Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, during the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 17% will be payable on such deemed dividend to the extent that the ultimate owners at the end of the period of two years from the end of the year of assessment to which the profits refer are both Cyprus tax resident and Cyprus domiciled. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is paid by the company for the account of the owners.

The notes on pages 16 to 41 are an integral part of these parent company financial statements.

The notes on pages 16 to 41 are an integral part of these parent company financial statements.

1 General information

Country of incorporation

ROS AGRO PLC (hereinafter the "Company") was incorporated and domiciled in Cyprus on 1 December 2009 as a private limited liability company in accordance with the provisions of the Companies Law, Cap. 113. Its registered office is at 25 Aphrodite Street, 3rd floor, Office 300, CY-1060 Nicosia, Cyprus. It was converted into a public company in February 2011.

During the first half of 2011 the Company has successfully completed an initial public offering ("IPO") of its shares in the form of global depositary receipts ("GDRs"). The Company's GDRs (one ordinary share representing 5 GDRs) are listed on the Main Market of the London Stock Exchange under the symbol "AGRO". The IPO included an offering by the Company of 20,000,000 GDRs. During 2014, GDRs of the Company have been admitted to trading on the Moscow Stock Exchange. In 2016, the Company has successfully completed a secondary public offering ("SPO").

Principal activities

The Company's principal activity, which is unchanged from last year, is the holding of investments, including any interest earning activities.

2 Summary of significant accounting policies

Basis of preparation

The separate financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU"), and the requirements of the Cyprus Companies Law, Cap. 113.

The separate financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets at fair value through other comprehensive income.

As of the date of the authorization of the financial statements, all International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) that are effective as of 1 January 2021 and are relevant to the Company's operations have been adopted by the EU through the endorsement procedure established by the European Commission.

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.

2 Summary of significant accounting policies (continued)

Going concern

In assessing the Company's status as a going concern the Directors considered the current intentions and financial position of the Company. The Company had net current assets as at 31 December 2021 of RR7,063,210 (2020:RR 7,926,146) and net asset position of RR 39,854,751 (2020: RR 40,403,166). Also, the Directors, after reviewing the Group's budget for 2022, including cash flows and borrowing facilities, considered that the Company has adequate resources to continue in operation for the foreseeable future.

Consolidated financial statements

The Company has also prepared consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113 for the Company and its subsidiaries (collectively the "Group"). A copy of the consolidated financial statements is available to the members, at the Company's registered office and at the Company's website at www.rusagrogroup.ru.

Users of these separate financial statements of the parent company should read them together with the Group's consolidated financial statements as at and for the year ended31 December 2021 in order to obtain a proper understanding of the financial position, the financial performance and the cash flows of the Company and the Group.

New Standards, interpretations and amendments adopted by the Company

During the current year the Company adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2021. This adoption did not have a material effect on the accounting policies of the Company.

New Standards, interpretations and amendments, not yet adopted by the Company

At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2021 and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company.

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented.

Revenue recognition

Revenues earned by the Company are recognised on the following bases:

(i) Interest income

Interest income on financial assets at amortised cost is calculated using the effective interest method and is recognised separately on the face of statement of comprehensive income. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired. For credit - impaired financial assets - Stage 3 the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance), for Stage 1 and Stage 2 - gross amount of financial assets.

(ii) Dividend income

Dividend income is recognised when the right to receive payment is established.

2 Summary of significant accounting policies (continued)

Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in Russian Rouble (RR) which is the Company's functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.Foreign exchange gains and losses are presented in profit or loss within "Other operating gains/ (losses) - net".

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax is calculated in the basis of the tax laws enacted or substantively enacted at the balance sheet date in the country in which the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. If applicable tax regulation is subject to interpretation, it establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is not recognised for: - temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; - temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on the Company where there is an intention to settle the balances on a net basis.

Offsetting financial instruments 

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.  

2 Summary of significant accounting policies (continued)

Investment in subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Company has control. The Company controls an entity whom the Company is exposed to or has the rights to variable returns through its involvement with the investee, power over the investee and the ability to use its power over the investee to affect the amount of the investor's return. In its parent company financial statements, the Company carries the investments in subsidiaries at cost less any impairment. Investments in subsidiaries are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised through income statement for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. An impairment loss recognised in prior years is reversed where appropriate if there has been a change in the estimates used to determine the recoverable amount.

The Company recognizes dividend income from investments in subsidiaries to the extent that the Company receives distributions from subsidiaries which constitute return on the cost of investment. Capital reductions and dividend distributions by subsidiaries which constitute return of cost of investment as opposed to return on cost of investment are recognised as a reduction in the cost of investment in subsidiary.

The difference between investment cost and the legally issued share capital and share premium of the Company is recorded in other reserves for subsidiaries which are acquired as a result of reorganization of the group structure in a manner that satisfies the following criteria:

(a) the new parent obtains control of the original parent by issuing equity instruments in exchange for existing equity instruments of the original parent;

(b) the assets and liabilities of the new group and the original group are the same immediately before and after the reorganisation;

(c) the owners of the original parent before the reorganisation have the same absolute and relative interests in the net assets of the original group and the new group immediately before and after the reorganisation; and

(d) the Company measures cost at the carrying amount of its share of the equity items shown in the separate financial statements of the original parent at the date of the reorganization.

Share-based payment transactions in subsidiary undertakings

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase/(decrease) to investment in subsidiary undertakings, with a corresponding credit/(debit) to equity in the parent entity financial statements.

Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non‑financial assets, other than goodwill, that have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2 Summary of significant accounting policies (continued)

Share capital and share premium

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Any excess of the fair value of consideration received over the par value of shares issued is recognised as share premium. Share premium account can only be resorted to for limited purposes, which do not include the distribution of dividends, and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital.

Treasury share reserve

Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. Where the Company purchases the Company's equity instruments, the consideration paid, including any directly attributable incremental costs, net of income taxes, is deducted from equity attributable to the Company's owners until the equity instruments are cancelled, reissued or disposed of. Where such equity instruments are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's owners.

Financial assets - Classification

The Company classifies its financial assets in the following measurement categories:

· those to be measured subsequently at fair value (either through OCI or through profit or loss); and

· those to be measured at amortised cost.

The classification and subsequent measurement of debt financial assets depends on: (i) the Company's business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. On initial recognition, the Company may irrevocably designate a debt financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI, at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

For investments in equity instruments that are not held for trading, classification will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). This election is made on an investment‐by‐investment basis.

All other financial assets are classified as measured at FVTPL.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

Financial assets - Recognition and derecognition

All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention ("regular way" purchases and sales) are recorded at trade date, which is the date when the Company commits to deliver a financial instrument. All other purchases and sales are recognised when the entity becomes a party to the contractual provisions of the instrument.

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

2 Summary of significant accounting policies (continued)

Financial assets - Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets.

Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI in fair value reserve and are never reclassified to profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the company's business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:

· Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is shown separately on the face of statement of comprehensive income. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the income statement. Financial assets measured at amortised cost (AC) comprise: cash and cash equivalents, bank deposits with original maturity over 3 months, loans receivables and other receivables.

· FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss.

· FVTPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and presented net within "other operating gains/(losses)-net" in the period in which it arises.

Financial assets - Impairment - credit loss allowance for ECL

The Company assesses on a forward-looking basis the ECL for debt instruments (including loans) measured at AC and with the exposure arising from loan commitments and financial guarantee contracts. The Company measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.

The carrying amount of the financial assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within "net impairment losses on financial assets".

Debt instruments measured at AC are presented in the balance sheet net of the allowance for ECL. For loan commitments and financial guarantee contracts, a separate provision for ECL is recognised as a liability in the balance sheet.

Expected losses are recognised and measured according to one of two approaches: general approach or simplified approach.  

2 Summary of significant accounting policies (continued)

Financial assets - Impairment - credit loss allowance for ECL (continued)

For all financial assets that are subject to impairment under IFRS 9, the Company applies general approach - three stage model for impairment. The Company applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter ("12 Months ECL"). If the Company identifies a significant increase in credit risk ("SICR") since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any ("Lifetime ECL"). If the Company determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL.

Financial assets - Reclassification

Financial instruments are reclassified only when the business model for managing those assets changes. The reclassification has a prospective effect and takes place from the start of the first reporting period following the change.

Financial assets - write-off

Financial assets are written-off, in whole or in part, when the Company exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery.

Financial assets - modification

The Company sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Company assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset, significant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset or a significant extension of a loan when the borrower is not in financial difficulties.

If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Company derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. The Company also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners.

2 Summary of significant accounting policies (continued)

Financial assets - modification (continued)

In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Company compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate, and recognises a modification gain or loss in profit or loss.

Cash and cash equivalents

In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. In the balance sheet bank overdrafts are shown within borrowings in current liabilities. Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.

Financial assets at amortised cost

These amounts generally arise from transactions outside the usual operating activities of the Company. These are held with the objective to collect their contractual cash flows and their cash flows represent solely payments of principal and interest. Accordingly, these are measured at amortised cost using the effective interest method, less provision for impairment. Financial assets at amortised cost are classified as current assets if the entity expects to realise the asset within twelve months after the reporting period. If not, they are presented as non-current assets.

Credit related commitments

The Company issues commitments to provide loans. Commitments to provide loans are initially recognised at their fair value, which is normally evidenced by the amount of fees received. Such loan commitment fees are deferred and included in the carrying value of the loan on initial recognition. Loan commitments provided by the Company are measured as the amount of the loss allowance calculated under IFRS 9.

At the end of each reporting period, the commitments are measured at

(i) the remaining unamortised balance of the amount at initial recognition, plus

(ii) the amount of the loss allowance determined based on the expected credit loss model.

If the loan commitments are provided at a below-market interest rate, they are measured at the higher of:

(i) the amount of the loss allowance determined based on the expected loss model and

(ii) the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15 Revenue from Contracts with Customers.

For loan commitments (where those components can be separated from the loan), a separate provision for ECL is recognised as a liability in the balance sheet. However, for contracts that include both a loan and an undrawn commitment and the Company cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised as a provision. 

2 Summary of significant accounting policies (continued)

Financial guarantee contracts

Financial guarantee contracts are contracts that require the Company to make specified payments to reimburse the holder of the guarantee for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of third parties to secure loans, overdrafts and other banking facilities.

Financial guarantees are recognised as a financial liability at the time the guarantee is issued. Financial guarantees are initially recognised at their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life of the guarantee in other income in profit or loss.

At the end of each reporting period, the guarantee is subsequently at the higher of:

· the amount of the loss allowance determined in accordance with the expected credit loss model under IFRS 9 Financial Instruments; and

· the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15 Revenue from Contracts with Customers.

The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

Financial liabilities - measurement categories

Financial liabilities are initially recognised at fair value and classified as subsequently measured at amortised cost, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.

Transactions with equity owners/subsidiaries

The Company enters into transactions with shareholders and subsidiaries. When consistent with the nature of the transaction, the Company's accounting policy is to recognise (a) any gains or losses with equity holders and other entities which are under the control of the ultimate shareholder, directly through equity and consider these transactions as the receipt of additional capital contributions or the payment of dividends; and (b) any losses with subsidiaries as cost of investment in subsidiaries. Similar transactions with non‑equity holders or subsidiaries, are recognised through the profit or loss in accordance with IFRS 9 'Financial Instruments'.

2 Summary of significant accounting policies (continued)

Borrowings

Measurement

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset. Borrowings are classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw‑down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment (for liquidity services) and amortised over the period of the facility to which it relates.

Modification

An exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability.

Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners and is recognised directly to equity.

Derecognition

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved, appropriately authorized and are no longer at the discretion of the Company.

More specifically, interim dividend distributions to the Company's shareholders are recognised as a liability when it is both appropriately authorised and no longer at the Company's discretion (i.e. when the Company has an obligation to pay). Final dividend distributions to the Company's shareholders are recognised in the Company's financial statements in the year in which they are approved by the Company's shareholders.

3 Financial risk management

(i) Financial risk factors

The Company's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

The risk management policies employed by the Company to manage these risks are discussed below.

3 Financial risk management (continued)

· Market risk

Foreign exchange risk

The Company attracts and provides financing and receives services denominated in foreign currencies and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US dollar and Euro.

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the Company's functional currency.

At 31 December 2021, if the Russian Rouble had weakened/strengthened by 10% (2020: 10%) against the US dollar and/or against the Euro with all other variables held constant, no significant foreign exchange risks arise.

Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.

Cash flow and fair value interest rate risk

The Company's interest rate risk arises from interest-bearing assets and borrowings. Interest-bearing assets and borrowings at variable rates expose the Company to cash flow interest rate risk. Interest bearing assets and borrowings issued at fixed rates expose the Company to fair value interest rate risk due to fluctuations in the market value of balances.

At 31 December 2020, any potential change in market interest rates would not impact the carrying rate of financial instruments with fixed interest rate, and so neither the profit or loss for the year and equity, as these are carried at amortised cost.

As at 31 December 2020 there were no loans issued at variable rates. As at 31 December 2021 there were no loans issued.

Price risk

The Company is exposed to equity securities price risk because of investments held by the Company and classified on the balance sheet as at fair value through other comprehensive income.

For price risk on investments held by the Company and classified on the balance sheet as at fair value through other comprehensive income refer to Note 12.

The Company does not have formal policies to manage its price risk.

3 Financial risk management (continued)

(i) Financial risk factors (continued)

· Credit risk

The credit risk represents the risk of losses for the Company owing to default of counterparties on obligations to transfer to the Company cash and cash equivalents and other financial assets.

For minimization of credit risk related to cash and cash equivalents the Company places cash in financial institutions which at the moment of transaction have the minimum risk of a default.

The Company's financial assets that are subject to the expected credit loss model are as follows:

The Company's maximum exposure to credit risk at the reporting date without taking account of any collateral held is the carrying value of the financial assets carried at amortised cost.

Credit risk grading system. For measuring credit risk and grading financial instruments by the amount of credit risk, the Company applies two approaches - an Internal Risk-Based (IRB) rating system or risk grades estimated by external international rating agencies (Standard & Poor's - "S&P", Fitch, Moody's). Internal and external credit ratings are mapped on an internally defined master scale with a specified range of probabilities of default as disclosed in the table below:

Each master scale credit risk grade is assigned a specific degree of creditworthiness:

· Excellent - strong credit quality with low expected credit risk;

· Good - adequate credit quality with a moderate credit risk;

· Satisfactory - moderate credit quality with a satisfactory credit risk;

· Special monitoring - facilities that require closer monitoring and remedial management; and

· Default - facilities in which a default has occurred.

3 Financial risk management (continued)

(i) Financial risk factors (continued)

· Credit risk (continued)

The IRB system is designed internally and ratings are estimated by management. Various credit-risk estimation techniques are used by the Company depending on the class of the asset. There are three commonly used types of such systems:

· Model-based - In this system, credit risk ratings are assigned by internally developed statistical models with the limited involvement of credit officers. Statistical models include qualitative and quantitative information that shows the best predictive power based on historical data on defaults.

· Expert judgement-based - In this system, credit risk ratings are assigned subjectively by experienced credit officers based on internally developed methodology and different qualitative and quantitative factors. This approach is based on expert methodology and judgements rather than on sophisticated statistical models.

· Hybrid - This rating system is a combination of the two systems above. It is developed by using historical data combined with expert input.

The Company applies IRB systems for measuring credit risk for the following financial assets: cash and cash equivalents and bank deposits.

The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 December 2021:

The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 December 2020:

Expected credit loss measurement. Expected credit loss is a probability-weighted estimate of the present value of future cash shortfalls. An expected credit loss measurement is unbiased and is determined by evaluating a range of possible outcomes. Expected credit loss measurement is based on four components used by the Company: Probability of Default, Exposure at Default, Loss Given Default and Discount Rate.

Exposure at Default is an estimate of exposure at a future default date, taking into account expected changes in the exposure after the reporting period, including repayments of principal and interest, and expected drawdowns on committed facilities.

3 Financial risk management (continued)

(i) Financial risk factors (continued)

· Credit risk (continued)

For purposes of measuring Probability of Default, the Company defines default as a situation when the exposure meets one or more of the following criteria:

· the borrower is more than 90 days past due on its contractual payments;

· international rating agencies have classified the borrower in the default rating class;

· the borrower meets the unlikeliness-to-pay criteria listed below:

- the borrower is deceased;

- the borrower is insolvent; and

- it is becoming likely that the borrower will enter bankruptcy.

· Liquidity risk

The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

(ii) Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company does not have a quantified target level of shareholders' return or capital ratios.

(iii) Fair value estimation

The estimated fair values of financial instruments have been determined by the Company using available market information, where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and therefore not represent fair values of financial instruments. Management has used all available market information in estimating the fair value of financial instruments.

3 Financial risk management (continued)

(iii) Fair value estimation (continued)

The disclosure of the fair value of financial instruments carried at amortised cost and the fair value of financial instruments carried at fair value is determined using the following valuation methods:

· Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

· Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). 

Refer to Note 12 for the Company's financial asests carried at fair value as at 31 December 2021 and 2020.

4 Critical Accounting Estimates and Judgements

The Company makes estimates and assumptions that affect the amounts recognised in the parent company financial statements and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the parent company financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:

Fair value of investment in LLC GK Agro-Belogorie

Key inputs and assumptions used in the fair value measurement of investment in LLC GK Agro-Belogorie are disclosed in Note 12. Change in fair value of investment in LLC GK Agro-Belogorie is accounted within fair value reserve line of the Balance Sheet.

Assessment of existence of significance influence over LLC GK Agro-Belogorie

For management assessment refer to Note 12. 

5 Interest Income

6 Other operating gains - net

7 Expenses by nature

The average number of employees employed by the Company during the year ended 31 December 2021 was 4 (4 for the year ended 31 December 2020).

The total fees charged by the Company's statutory auditor for the statutory audit of the annual financial statements of the Company for the year ended 31 December 2021 amounted to RR 3,590 (2020: RR 3,545). Fees charged by the Company's statutory auditor for the year ended 31 December 2021 for tax advisory services amounted to RR nil (2020: RR 607).

8 Income tax expense

The tax on Company's profit before tax differs from the theoretical amount that would arise using the applicable tax rate as follows:

8 Income tax expense (continued)

The Company is subject to income tax on taxable profits at the rate of 12.5%. Dividend income received by the Company's investments in OJSC Rusagro Group and LLC GK Agro-Belogorie, is subject to a 5% withholding tax deducted at source. Interest income received from bank in Switzerland, is subject to a 35% withholding tax deducted at source. Brought forward losses of only five years may be utilised.

Under certain conditions, interest may be exempt from income tax and only subject to special defence contribution at the rate of 30%. In certain cases dividends received from abroad may be subject to special contribution for defence at the rate of 17%. Gains on disposal of qualifying titles (including shares, bonds, debentures etc.) are exempt from Cyprus income tax.

9 Financial assets at amortised cost

Financial assets at amortised cost include the following:

Due to the short-term nature of the current financial assets at amortised cost, their carrying amount is considered to approximates their fair value.

The carrying amounts of the Company's financial assets at amortised cost are denominated in the following currencies:

The maximum exposure to credit risk at the balance sheet date is the carrying value of each class of financial asset at amortised cost mentioned above. The Company does not hold any collateral as security.

10 Cash and cash equivalents

Cash and cash equivalents are denominated in the following currencies:

10 Cash and cash equivalents (continued)

Non-cash transactions

No non-cash transactions were made during 2021.

The principal non-cash transactions during 2020 are as follows:

§ Receivable amount of RR 2,100,000 due to the Company in relation to the capital reduction of Limeniko Invest. & Trade Ltd (Note 11) was assigned to Ros Agro Trading Limited and subsequently set off against its borrowings owed by the Company to Ros Agro Trading Limited (Note 17).

§ Receivable amount of RR 1,874,534 due to the Company in relation to the capital reduction of Limeniko Invest. & Trade Ltd (Note 11) was set off with the payable owed to Limeniko Invest & Trade Limited of the same amount.

Cash and cash equivalents mainly relate to current accounts and their carrying amount is considered to approximate their fair value.

11 Investments in subsidiaries

* Subsidiaries liquidated during the current or prior year

During 2021, RR 314,553 were injected as share capital of Ros Agro China Limited without alloting and issuing new shares.

During 2020, Limeniko Trade & Invest. Limited has been liquidated. Liquidation proceeds amounting to RR 2,415,000 have been received in cash and the remaining have been set off with borrowings and payable with related parties (Note 10).

11 Investments in subsidiaries (continued)

The Company's interests in direct and indirect principal subsidiaries, all of which are unlisted, were as follows:

* Subsidiaries held directly from the Company.

12 Financial assets at fair value through other comprehensive income

On 3 December 2019 the Company acquired 22.5% of ownership interest in LLC GK Agro-Belogorie, one of the largest pork producers in Russia and a large landholder in Belgorod region, for a total consideration of RR 8,508,500, paid in cash during 2020. Key business areas of investee include industrial pig farming and meat processing, milk livestock, crop and feed production.

Investment in LLC GK Agro-Belogorie is classified as investment at fair value through other comprehensive income. The management considers that the Company does not have significant influence over LLC GK Agro-Belogorie due the following:

· The management has no power to appoint the members of the board of directors or equivalent governing body of LLC GK Agro-Belogorie;

· Group management does not participate in policy-making processes, including decisions about dividends or other distributions;

· There were no material transactions or interchange of managerial personnel between the Group and LLC GK Agro-Belogorie since the share acquisition date;

· No essential technical information was interchanged between the Group and LLC GK Agro-Belogorie.

The fair value of the investment determined applying the level 3 valuation model amounted to RR 8,508,500 at acquisition date.

Subsequent to the initial recognition this investment is measured at fair value through other comprehensive income. Changes in the fair value are recognised in the fair value reserve in other comprehensive income. As at 31 December 2021 the fair value of the acquired investment amounted to RR 8,556,556 (31 December 2020: RR 8,556,556) .

The fair value of the investment has been determined based on a value-in-use calculation using discounted cash flow projections based on the actual financial data and budgets of LLC GK AgroBelogorie covering a five-year period and the expected market prices for the key products for the same period according to leading industry publications. Cash flows beyond the five-year period were projected with a long-term growth rate of 1.8% per annum (2020: 1.8% per annum).

During the year, there was a total dividend income of RR 794,250 (2020: RR 590,072) from the investment in LLC GK Agro-Belogorie.

12 Financial assets at fair value through other comprehensive income (continued)

The valuation technique, significant unobservable inputs used in the fair value measurement for level 3 measurement and related sensitivity to reasonably possible changes in those inputs (holding other inputs constant) are as follows at 31 December 2021:

The valuation technique, significant unobservable inputs used in the fair value measurement for level 3 measurement and related sensitivity to reasonably possible changes in those inputs (holding other inputs constant) are as follows at 31 December 2020:

Sensitivity of fair value to valuation inputs for financial assets and financial liabilities, if changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would not be significant. For this purpose, significance was judged with respect to profit or loss, and total assets or total liabilities, or, when changes in fair value are recognised in other comprehensive income, total equity.

There were no changes in the valuation technique for level 3 recurring fair value measurements during the year ended 31 December 2021 (2020: none).

13 Share capital and share premium

All ordinary shares rank equally with regard to the Company's residual assets. At 31 December 2021 and 2020, the authorised share capital consisted of 60,000,000 ordinary shares with par value of Euro 0.01 each.

Treasury reserve

On 25 August 2011 the Board unanimously resolved that it is in the best interest of the Company to buy back GDRs from the market for the total amount of up to USD 10 million increased to up to USD 30 million via subsequent Board's decision on 17 July 2012.

At 31 December 2021 and 2020, the Company held 2,135,113 of its own GDRs (approximately 427,063 shares) that is equivalent to RR 490,607 thousand, representing 1.6% of its issued share capital. The GDRs are held as 'treasury shares'.

In 2020, the Company transferred 31,000 of its own GDRs (approximately 6,200 shares) from those held as treasury shares to employees of the Group representing 0.02% of the issued share capital. No GDRs were transferred to the employees under the share option incentive scheme during 2020 and 2021.

During 2021 and 2020 the Company did not buy back any of its own GDRs from the market. 

14 Other reserves

Under share option incentive schemes for top-management of the Group, certain employees of the Group were granted GDRs of the Company provided they remained in their position upto a specific date in the past. The increase in equity to reflect this transaction was recognised in the share based payment reserve.

15 Trade and other payables

The fair value of trade and other payables which are due within one year approximates their carrying amount at the balance sheet date.

16 Contingencies

Operating environment

Russian Federation. The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations which contribute together with other legal and fiscal impediments to the challenges faced by entities operating in the Russian Federation. The Russian economy continues to be negatively impacted by ongoing political tension in the region and international sanctions against certain Russian companies and individuals.

Starting in 2014, the United States of America, the European Union and some other countries have imposed and gradually expanded economic sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased economic uncertainty, including more volatile equity markets, a depreciation of the Russian rouble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availability of credit. As a result, some Russian entities may experience difficulties accessing the international equity and debt markets and may become increasingly dependent on state support for their operations. The longer-term effects of the imposed and possible additional sanctions are difficult to determine. In February 2022, following the recognition of self-proclaimed republics of Donetsk and Lugansk and the commencement of military operations in Ukraine by the Russian Federation, additional sanctions were introduced by the United States of America, the European Union and some other countries against Russia. Moreover, there is an increased risk that even further sanctions may be introduced. This may have significant adverse impact on Russia's economy. These events have led to depreciation of the Russian rouble, increased volatility of financial markets and significantly increased the level of economic uncertainty in the Russian business environment. Also, the COVID-19 coronavirus pandemic has continued to create additional uncertainty in the business environment. Management is taking necessary measures to ensure sustainability of the Group's operations and support its customers and employees. However, the future effects of the current economic situation and the above measures are difficult to predict, and management's current expectations and estimates could differ from actual results.

Although the COVID-19 pandemic had no significant impact on business activity, the Company and the Group is taking actions to reduce COVID-19 exposure and support its personnel. The specifics of the Company's and the Group's business does not allow transferring all personnel to distance work. However, the Group did utmost to increase the share of employees handling their duties remotely. All employees were provided with personal protective equipment and antiseptics, and all surfaces and common areas at offices and enterprises were given additional disinfection. Maintaining business processes and additional focusing on occupational safety helped the Group to demonstrate strong operating and financial results in 2021.

16 Contingencies (continued)

The financial statements reflect management's assessment of the impact of the Russian business environment on the operations and the financial position of the Company. The future business environment may differ from management's assessment.

Guarantees granted to subsidiaries

Refer to Note 17 for details of guarantees granted to subsidiaries.

17 Related party transactions

Parties are generally considered to be related if the parties are under common control or if one party has the ability to control the other party, or can exercise significant influence or joint control over the other party in making financial and operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely the legal form. Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.

The Company is controlled by GRANADA CAPITAL CY LIMITED, incorporated in Cyprus, which owns 56,2% of the Company's shares. The parent entity which prepares consolidated financial statements is GRANADA CAPITAL CY LIMITED, which is incorporated in Cyprus with registered office at 205 Archiepiskopou Makariou, Victory House, Flat/Office 211 A, CY-3030, Limassol, Cyprus.

As at 31 December 2021 the ultimate controlling party of the Company is Mr. Vadim Moshkovich (the "Owner"), who ultimately controls 56,2% of the total issued shares (2020:70,7%).

As at 1 October 2021, Granada Capital CY Limited transferred to BNY Nominees Limited 2.632.167 shares amounting to 0,01 EUR each, which represents 14,5% of the total shares held by Granada Capital CY Limited.

Related parties of the Company fall into the following categories:

1. Entities controlled by the Owner and subsidiaries; and

2. Members of the Board of Directors and Key Management Personnel.

1. Entities controlled by the Owner and subsidiaries

During 2021, the Company injected RR 314,553 as share capital of Ros Agro China Limited, without alloting and issuing new shares (Note 11).

17 Related party transactions (continued)

1. Entities controlled by the Owner and subsidiaries (continued)

* cash - flows

** non-cash flows

The loan is provided at an interest rate of 5% (2020: 1,3%) per annum, is repayable on demand but not later than 31 December 2022 and is unsecured. As at 31 December 2021, the loan is denominated in RR (2020: EUR).

On 1 September 2021, the Company entered in an amendment agreement with the subsidiary and agreed to change the currency of the Loan from EUR to RR, and the Interest rate from 1.3% to 5%. Even though the amendments to the contractual terms are considered as substantially modified, the above changes did not have any material effect to the balance of the loan.

Due to the short-term nature of the current financial assets and liabilities at amortised cost, their carrying amount is considered to approximate their fair value.

During 2020, a loan to Ros Agro Trading Limited was provided at an interest rate of 3,75%. The loan was unsecured and repayable on demand but not later than 18 December 2021. As at 31 December 2021 the loan was settled.

Dividends paid to entities controlled by the Owner

During the year ended 31 December 2021 the dividends paid to entities controlled by the Owner amounted RR 14,026,673 (2020: RR 3,691,102).

17 Related party transactions (continued)

1. Entities controlled by the Owner and subsidiaries (continued)

Guarantees granted to subsidiaries

During 2015 the Company granted a corporate guarantee covering the non - performance by an indirect subsidiary of the Company in respect of a bank loan for the total amount of RR 2,780.000. The guarantee was provided free of charge and is valid until 26 November 2031.

During 2019 the Company guaranteed the punctual performance by the debtor of all the guaranteed liabilities amounting to total EUR 14 million (equivalent to RR 1,269,554 as at 31 December 2020 and RR 970,768 as at 31 December 2019). During 2020 the guarantee was released following the liquidation of the subsidiary.

During 2020 the Company guaranteed the punctual performance by the debtor of all the guaranteed liabilities amounting to total USD 36 million (equivalent to RR 2,659,525 as at 31 December 2020) until 28 February 2021. During 2021 the guarantee was released given the termination agreement.

During 2021 the Company has not granted any guarantees to its subsidiaries.

The fair value on initial recognition of the guarantees was not recognised as the Board of Directors estimates that the effect on the Company's financial statements is not significant.

2. Members of the Board of Directors and Key Management Personnel

Share-Based Remuneration

In 2017 the Group initiated a share option incentive scheme for its top-management. Under this scheme the employees were granted GDRs of the Company provided they remained in their position up to a specific date in the future. The amount of GDRs granted were dependent on the average market prices of GDRs for the period preceding this date. Vesting period of the scheme ended by 31 December 2019. No expenses or gains were recognized under the scheme for the years ended 31 December 2021 and 2020, no GDRs of the Company were transferred to the employees under the scheme in 2021 (2020: 31,000 GDRs amounting to RR 0).

As at 31 December 2021, the share-based payment reserve accumulated in equity as a result of the share-based payment transactions amounted to RR 1,313,691 (2020: RR 1,313,691).

Key management personnel compensation

In respect of the year ended 31 December 2021, key management personnel compensation included in administrative expenses comprised of Directors' fees totalling RR 27,065 and emoluments in their executive capacity totalling RR 263 (2020: Directors' fees totalling RR 26,646 and emoluments in their executive capacity totalling RR 250).

17 Related party transactions (continued)

2. Members of the Board of Directors and Key Management Personnel (continued)

Dividends paid to the Company Directors

During the year ended 31 December 2021 the dividends paid to the Company Directors amounted to RR 1,478,145 (2020: RR 383,216).

Payables to Directors

As at 31 December 2021 the total payables to Directors were nil (2020: nill). These are unsecured, bear no interest and are repayable on demand.

18 Events after the balance sheet date

Subsequent to the year ended 31 December 2021, the Board of Directors recommends the payment of additional dividends out of the profits for the year 2021 to the amount of RR 11,928,542. Given that the Company has already paid interim dividends for 2021 to the amount of RR 8,755,947, the total dividend out of the profits for 2021 would amount to RR 20,684,489. The dividend per share will be fixed at the dividend record date set on 1 April 2022. The proposed dividend is subject to approval by the shareholders at the Annual General Meeting. These financial statements do not reflect the dividends that have not been approved on the reporting date.

From 1 January 2022, Timur Lipatov became Rusagro's Chief Executive Director. Contract of Maxim Basov, previous CEO, expired on 31 December 2021.

There were no other material post balance sheet events occurring after the end of the reporting period requiring disclosure in these parent company financial statements.