Mhp Reg S Regulatory News (MHPC)

MHP S.A.

CONSOLIDATED MANAGEMENT REPORT OF THE BOARD OF DIRECTORS

March 9, 2016

FINANCIAL AND OPERATIONAL HIGHLIGHTS

MHP S.A. (LSE:MHPC), one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and cultivation of grain, today announces its audited results for the fourth quarter and twelve months ended December 31, 2015.

OPERATIONAL HIGHLIGHTS

Q4 2015 highlights

· Poultry production volumes reached 145,880 tonnes, up by 3% year-on-year (Q4 2014: 142,120 tonnes), due to the increasing production volumes at the Vinnytsia poultry farm

· The average chicken price increased by 25% year-on-year to UAH 29.70 per kg (Q4 2014: UAH 23.72 per kg) (excluding VAT) mainly due to the Ukrainian Hryvnia depreciation

· Chicken meat export decreased by 19% to 31,480 tonnes (Q4 2014: 38,775 tonnes) as a result of decreased exports to the CIS region

12M 2015 highlights

· Poultry production volumes increased by 4% to 566,600 tonnes (12M 2014: 546,500 tonnes)

· The average chicken price increased by 39% to UAH 27.77 per kg (excluding VAT) compared to UAH 19.99 per kg in 12M 2014 predominantly due to the Ukrainian Hryvnia depreciation

· Chicken meat export decreased by 6% to 132,080 tonnes (12M 2014: 140,920 tonnes)

· Following reconstruction of the Peremoga Nova breeding farm, the imported share of hatchery eggs halved during the year, declining to 16% of production demand in December 2015

FINANCIAL HIGHLIGHTS

Q4 2015 highlights

· Revenue of US$ 285 million, a decrease by 17% year-on-year

· Export revenue amounted for US$ 118 million, 41% of total revenue (Q4 2014: US$ 168 million, 49% of total revenue)

· Operating profit of US$ 49 million decreased by 38%; overall operating profit margin was 17%

· EBITDA margin lowered to 26%, US$ 73 million from 30%, US$ 102 million

· Net loss for the period is US$ 89 million, compared to loss US$ 110 million for the Q4 2014, including US$ 130 million (Q4 2014: US$ 217 million) related to non-cash foreign exchange translation losses

12M 2015 highlights

· Revenue of US$ 1,183 million, decreased by 14% year-on-year

· Export revenue amounted to US$ 524 million, 44% of total revenue (12M 2014: US$ 580 million, 42% of total revenue)

· Operating profit of US$ 364 million, decrease by 21% year-on-year

· EBITDA amounted to US$ 459 million, decrease by 17% year-on-year, EBITDA margin is 39%,last year 40%

· Net loss of US$ 126 million, including US$ 419 million related to non-cash foreign exchange translation losses

· Proposed dividend of US$ 0.7529 per share (last year US$ 0.47 per share), equivalent to approximately US$ 80 million (last year US$ 50 million), to be paid as an interim dividend for 2016 contingent upon completion of the due diligence required by Luxembourg law, with a decision expected by 16 March 2016

FINANCIAL OVERVIEW

* pps - percentage points

Average official FX rate for Q4 2015: UAH/US$ 22.8491 and UAH/US$ 14.4336 in Q4 2014

Average official FX rate for 12M 2015: UAH/US$21.8290 in and UAH/US$ 11.9095 in 12M 2014

Chief Executive Officer, Yuriy Kosyuk, commented:

"Our Company continues to develop positively despite all the challenges in Ukraine.

Our strategy for growth is to sustain our leading market position in Ukraine and to continue to develop our export opportunities worldwide, which will result in further growth of hard currency revenues from their current share of 44% of total revenue.

Our targets for 2016 are to complete a number of poultry production projects to increase poultry exports and to optimize our costs by achieving self-sufficiency in hatching eggs.

I am confident that our strategy of further growth both in poultry and grain will continue to deliver strong operational and financial performance in 2016 and beyond."

MHP's management will host a conference call for investors and analysts followed by Q&A on the day of the results.

The dial-in details are:

Date: Thursday, 10 March 2016

Time: 09.00 New York / 14.00 London / 16.00 Kyiv / 17.00 Moscow

Title: Financial Results for Q4 and FY 2015

International/UK Dial in: +44 (0) 1452 55 5566

USA free call: 1866 9669439

Russia free call 8108 002 097 2044

Conference ID 56711422

In order to follow the presentation together with the management, please register using the following link:

http://engage.vevent.com/rt/mhp/index.jsp?seid=29

For Investor Relations enquiries, please contact:

Anastasia Sobotiuk (Kyiv) +38 044 207 99 58 a.sobotyuk@mhp.com.ua

For Analysts enquiries, please contact:

Iryna Bublyk (Kyiv) +38 044 207 00 04 i.bublik@mhp.com.ua

Segment Performance

Poultry and related operations

Aggregate volume of chicken meat sold to third parties in 12M 2015 and Q4 2015 increased moderately by 2% and 1% respectively. Domestic sales increased by 5% and 9% year-on-year and constituted 405,210 tonnes and 98,130 tonnes in 12M 2015 and Q4 2015 respectively. Increase in sales on domestic market is mainly attributable to the increased demand for chicken meat as a result of change in consumer's preferences in favour of more affordable meats.

Export sales of Q4 2015 and 12M 2015 decreased by 19% to 31,480 tonnes and 6% to 132,080 tonnes respectively. Decrease in export sales is mainly attributable to decrease in export to the CIS market (Uzbekistan, Russia, Kazakhstan, Georgia, Kirgizstan etc.). At the same time, during 12M 2015 MHP's sales to the EU have grown by 65% compared to 12M 2014, which resulted in export of fresh and frozen chicken meat over 27,285 tonnes. Among prevailing EU export destinations there are 17 countries: the Netherlands, Germany, Romania, Ireland, Belgium, Poland, Italy, Cyprus and others.

Through the 12M 2015 the aggregate average chicken meat price was UAH 27.77, 39% higher in Hryvnia terms than the corresponding price for 12M 2014. Increase is mainly attributable to the depreciation of local currency during the reporting period as well as due to substantial part of sales denominated in hard currencies.

During 12M 2015 MHP's sales of sunflower oil have decreased by 3% compared to 12M 2014 and reached 286,745 tonnes. During 2015, MHP has started to produce soybean meal, further deepening in its strategy of vertical integration. As a result, during 2015 MHP has started to export soybeans oil. Sales of soybeans oil for 12M 2015 have amounted to 13,950 tonnes.

* pps - percentage points

Revenue of Poultry and related operations segment for Q4 2015 and 12M 2015 has decreased by 18% and 19% year-on-year respectively. Despite increase in chicken meat prices denominated in UAH, it's US$ equivalent has decreased as a result of strong devaluation of Hryvnia against US$, consequently leading to the overall decrease in US$ equivalent revenues.

Gross profit of the poultry and related operations segment for 12M 2015 decreased by 33% and amounted to US$ 289 million, mainly as a result of increase in costs, partly offset, but to a lesser extent by increase in sales prices. The main drivers of increase in cost of production are imported hatchery eggs as a result of suspension of production at Shahtarska breeder farm as well as increase in components of mixed fodder costs.

Grain growing operations

In 2015 MHP harvested around 340,000 hectares of land in Ukraine, of which 50,000 ha are newly acquired assets as a result of swap agreement with Agrokultura AB, whereby the Group has agreed to swap group of companies Voronezh Agroholding with the group of companies Agrokultura Ukraine.

In 2015 MHP's harvest constituted around 1.9 million tons of crops, 7% less compared to 2014 mainly related to lower yields on corn as a result of dry weather conditions in the southern parts of Vinnytsia and Cherkassy regions of Ukraine. Nevertheless, due to operational efficiency and employment of best practices, our yields of crops remain substantially higher than Ukraine's average.

[1] Only land of grain growing segment, including Agrokultura land;

 [2] Including barley, rye, sugar beet and other and excluding land left fallow as part of crop rotation.

 [1] MHP and Ukraine yields are net weight. Data for Ukraine yields is sourced by AgroPerspektiva;

Grain growing segment's revenue of 12M 2015 raised by 52% year-on-year and amounted toUS$ 117 million. Increase is mainly explained by increase in revenue from sale of crops (mainly corn and wheat) harvested in previous year (12M 2015 revenue from crops harvested in 2014: US$ 55 million, 12M 2014 revenue from crops harvested in 2013: US$ 24 million) as well as increase in revenue from sale of crops (wheat, rapeseed and barley) harvested in the reporting period (12M 2015 revenue from crops harvested in 2015: US$ 63 million, 12M 2014 revenue from crops harvested in 2014: US$ 54 million).

IAS 41 standard loss for 12M 2015 amounted to US$ 3 million. The loss represents the net change in effect of revaluation of agricultural produce (corn, wheat and soya) remaining in stock as of 31 December 2015 and 2014. Decrease in IAS 41 gain is mainly attributable to lower amount of crops in stock as of 31 December 2015 compared to 31 December 2014 mainly due to lower yields in 2015.

MHP has around 97,340 ha under winter crops, of which 60% is sowed with winter wheat, 23% with winter rapeseeds and 16% with winter barley. The rest is triticale and rye.

EBITDA for the 12M 2015 of grain growing segment has decreased by 3% compared to 12M 2014 and amounted US$ 94 million.

Total land bank of MHP's grain growing segment constituted 370,000 hectares as of 31 December 2015 - of which around 360,000 hectares are going to be harvested in 2016.

Other agricultural operations

Sales volume of meat processing products decreased by 4% year-on-year and amounted to 29,845 tonnes in 12M 2015 mainly as a result of change in consumer preferences in favour of more affordable products.

The average processed meat price increased by 38% year-over-year to UAH 44.84 per kg in Q4 2015 and by 54% to UAH 43.49 per kg in 12M 2015 mostly due to depreciation of local currency.

* pps - percentage points

Segment revenue of 12M 2015 decreased by 7% year-on-year, in line with the decrease in sales volume and amounted to US$ 115 million.

Current Group financial position and cash flow

Cash flow from operations before changes in working capital for 12M 2015 has decreased by 18% and amounted to US$ 336 million in 12M 2015 (12M 2014: US$ 410 million)*.

* Please refer to paragraph Poultry and related operations and Grain growing operations for details

Use of funds in working capital during Q4 2015 and 12M 2015 is mostly related to seasonal purchases of grain stock (mainly sunflower) used for poultry feed. Change in working capital includes PXF financing related to the purchase of sunflower seeds that remained in stock as of 31 December 2015 in amount of US$ 80 million.

In 12M 2015 total CAPEX amounted to US$170 million related to the reconstruction of Peremoga Nova poultry farm, expansion of Starynska breeding farm as well as rearing sites expansion on Myronivka and Oril Leader poultry farms as well as soybean oil crushing plant.

Myronivka and Oril Leader farms were being expanded during 2015 and are expected to be launched into operations in early 2016.

Debt Structure and Liquidity

As of December 31, 2015, the Company's debt structure remained relatively unchanged compared to30 September 2015: the share of long-term debt in the total outstanding debt is about 79%. The weighted average interest rate is around 8%.

At the end of 12M 2015, MHP's cash and cash equivalents amounted to US$ 59 million. Net debt increased to US$ 1,220 million, compared to US$ 1,115 million as at 31 December 2014.

The Net Debt / LTM EBITDA ratio was 2.66 as of 31 December 2015, well within the Eurobond covenant limit of 3.0.

As a hedge for currency risks, revenue from the export of grain, sunflower and soybean oil, sunflower husks, and chicken meat are denominated in US Dollars, covering debt service expenses in full. Export revenue for 12M 2015 amounted to US$ 524 million or 44% of total revenue (US$ 580 million or 42% of total sales in 12M 2014).

Dividends

The Directors propose a dividend of US$ 0.7529 per share (last year US$ 0.47 per share), equivalent to approximately US$ 80 million (last year US$ 50 million), to be paid as an interim dividend for 2016 contingent upon completion of the due diligence required by Luxembourg law, with a decision expected by 16 March 2016

Subsequent events

There are no subsequent events to mention.

Change in the group structure

In May 2015 the Group has signed an asset swap agreement with Agrokultura AB, whereby the equity ownership in Voronezh Agro Holding was swapped with the equity ownership in group of companies Agrokultura Ukraine. The transaction has been completed with effective transfer of control in June 2015.

Voronezh Agro Holding, is a grain growing business, cultivating a land bank of about 40,000 hectares in the Voronezh region of the Russian Federation, with approximately 150,000 tonnes of grain storage capacities.

Group of companies Agrokultura Ukraine is a grain growing business cultivating a land bank of about 60,000 hectares in Lviv, Ternopil and Ivano-Frankivsk regions of Ukraine, with approximately90,000 tonnes of grain storage capacities.

As of 31 December 2015, the Group has started legal reorganization of group of companies Agrokultura.The Group plans to finalise reorganization in 2016.

In July 2015 the Group acquired from third parties a 100% interest in a group of companies "Dnister-Agro", a grain growing business, cultivating a land bank of 10,000 hectares in the Vinnytsia region of Ukraine. The transaction was accounted for under the acquisition method.

Outlook

Our winter crops are in good conditions that provide the Company with a positive outlook for 2016 harvest of winter wheat and winter rapeseeds.

Our main drivers for the growth in 2016 will be the following:

- An increase in production volume of chicken meat by around 40,000 tonnes as a result of our capital investments into expansion of Myronivska and Oril Leader poultry complexes (additional rearing sites)

- An achievement of 100% self-sufficiency in hatching eggs owing to internal production at Peremoga Nova

- An expansion of landbank: in line with a strategy, MHP continues to consider a few opportunities in the regions so that by the end of 2016 the current landbank may be increased by at least 50,000 ha.

We are confident that due to our vertically integrated business model, we will deliver good financial results, supported by significant and growing share of hard currency revenues from our chicken meat, oils and grain export sales.

About MHP

MHP is the leading producer of poultry products in Ukraine with the greatest market share and highest brand recognition for its products. MHP owns and operates each of the key stages of chicken production processes, from feed grains and fodder production to egg hatching and grow out to processing, marketing, distribution and sales (including through MHP's franchise outlets). Vertical integration reduces MHP's dependence on suppliers and its exposure to increases in raw material prices. In addition to cost efficiency, vertical integration also allows MHP to maintain strict biosecurity and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale. To support its sales, MHP maintains a distribution network consisting of 15 distribution and logistical centres, within major Ukrainian cities. MHP uses its trucks for the distribution of its products, which Management believes reduces overall transportation costs and delivery times.

MHP also has a leading grain cultivation business growing corn to support the vertical integration of its chicken production and increasingly other grains, such as wheat and rape, for sale to third parties. MHP leases agricultural land located primarily in the highly fertile black soil regions of Ukraine.

Since May 15, 2008, MHP has been traded on the London Stock Exchange under the ticker symbol MHPC.

Forward-Looking Statements

This report might contain forward-looking statements that refer to future events or forecast financial indicators for MHP S.A. Such statements do not guarantee that these are actions to be taken by MHP S.A. in the future, and estimates can be inaccurate and uncertain. Actual final indicators and results can considerably differ from those declared in any forward-looking statements. MHP S.A. does not intend to change these statements to reflect actual results.

CORPORATE GOVERNANCE

MHP is registered in Luxembourg. Its shares are listed on the London Stock Exchange. The Company complies with the Ten Principles of Corporate Governance approved by the Luxembourg Stock Exchange and voluntary corporate governance regime stated in the UK Corporate Governance Code. The Company upholds and practices the highest standards of ethics and integrity in its relationships with its shareholders, directors, personnel, business community and other third parties including government and regulatory agencies.

The main aspects of the Company's corporate governance policy are described in the Corporate Governance Charter approved by the Board of Directors in May 2012 and published on the Company's corporate website at http://www.mhp.com.ua/en/investor-relations/corporate-governance.

Board of Directors

The Board is responsible for the overall conduct of the Company's business and has the powers, authorities and duties vested in it by and pursuant to the relevant Luxembourg laws and regulations and the Articles of association of the Company: http://www.mhp.com.ua/en/investor-relations/corporate-governance/articles-of-association.

Members of the Board are elected by a majority vote of shareholders at the annual general meeting "AGM", may be elected for a six-year period and may be re-elected an unlimited number of times. Of the Board's seven directors, four are independent. The Board is assisted by two Board committees: the Audit Committee and the Nominations and Remuneration Committee. These committees handle business within their respective areas and present recommendations and reports on which the Board may base its decisions and actions.

The Board has a Senior Independent Director, John Grant, which was designated by the Nominations and Remuneration Committee during the meeting, held on 11 March, 2011. The Senior Independent Director is available to shareholders if they have any concerns that they cannot resolve through the normal channels of contact. The Senior Independent Director also provides a sounding board for the Chairman, and is responsible for the evaluation of the Chairman and serves as a trusted intermediary for Non-executive Directors as and when necessary. In 2015 the Senior Independent Director received no requests from shareholders/stakeholders.

In 2015, the Board conducted an annual effectiveness review in order to evaluate its performance as well as that of its committees and individual Directors. The evaluation process was initiated by a questionnaire and then supplemented by individual interviews by the Chairman with each of the Directors. The conclusions were analyzed by the Board to further strengthen its composition and performance.

During the year, the Board comprised:

Charles E Adriaenssen, Independent Non-executive Director, Chairman

Dr John C Rich, Independent Non-executive Director

John Grant, Non-executive Director, Senior Independent Director

Philippe Lamarche, Independent Non-executive Director

Yuriy Kosyuk, Chief Executive Officer, Executive Director

Yuriy Melnyk, First Deputy CEO, COO, Executive Director

Viktoria Kapelyushnaya, Chief Financial Officer, Executive Director

During 2015 the attendance by Directors of the Board's meetings was at the level of 100%.

The term of office of each member of the Board of Directors will expire at the annual general shareholders meeting to be held on 16 June, 2016.

Each Director has signed a letter of appointment with the Company which applies for as long as he or she remains a Director. The letters do not provide for any benefits on termination of directorship and, in the case of Mr Adriaenssen, Dr Rich, Mr Grant and Mr Lamarche provide for payment of compensation and the reimbursement of certain expenses. Ms Kapelyushnaya and Mr Melnyk do not receive compensation for their service as Directors of MHP S.A. in addition to their remuneration as executive management of PJSC MHP or the relevant subsidiary.

The terms and conditions for Mr Kosyuk's appointment as Chief Executive Officer "CEO" were agreed and signed on 21 June 2006. The terms are for the duration of his office and do not provide for any benefits on termination of his directorship. Mr Kosyuk may, however, resign from his position as CEO only subject to a prior three-month' notice.

The terms contain confidentiality obligations applicable to Mr Kosyuk for a period of five years after termination of his office. The amount of remuneration and benefits paid by the Company to the persons responsible for the day-to-day management of the Company is reported by the Board of Directors to the AGM.

The amount of remuneration and benefits of all members of the Board of Directors, including the Chief Executive Officer, regardless of whether such remuneration is paid by the Company or by any other entity within the Group, is established by the Nominations and Remuneration Committee. In addition, the amount of remuneration paid to Non-executive Directors is approved by the AGM.

Nominations and Remuneration Committee

Charles E Adriaenssen, Chairman

John Grant

Dr John C Rich

The Committee's main tasks are:

• To recommend to the Board the appointment or renewal of Directors, to review remuneration and monitor performance of the Board, and to make recommendations to the Board in respect of the necessary skills and experience required to improve the functioning of the Board.

• To monitor the performance of key officers of the Company and evaluate results versus stated objectives, to monitor training needs and programmes to improve employee effectiveness, to ensure the Company develops successors for all key positions.

• To oversee the development and approval by the Board of the Company's overall compensation policy including its long-term incentive plans, to ensure that top managers are incentivized to achieve and are compensated for exceptional performance, to oversee the maintenance and continuous improvement of the Company's compensation policy with a view to aligning the interests of employees with the interests of shareholders.

• To submit for approval to the Board the compensation packages of the CEO and of the Executive Management.

• To approve all external hiring of key officers.

During 2015, the committee held 2 meetings, and all of the committee members attended.

Audit Committee

John Grant, Chairman

Dr John C Rich

Philippe Lamarche

The Committee's main tasks are:

• To review and monitor the integrity of the Company's financial statements, announcements of results and any other formal announcement relating to its financial performance, significant financial reporting issues and judgements and to make recommendations to the Board with respect to the financial statements.

• To keep under review and report to the Board on the effectiveness of the Company's financial reporting and internal control policies and procedures for the identification, management and reporting of risks.

• To review the Company's policies and procedures for the identification, management and reporting of nonfinancial risks, to review reports on the risk management process and to report to the Board on the effectiveness of the risk assurance process.

• To monitor and review the effectiveness of the Company's internal audit function in the context of the Company's overall risk management system.

• To approve appointment, reappointment, compensation and oversight of the Company's external auditors.

• To assist the Board in overseeing compliance with all legal and regulatory requirements.

During 2015, the Committee held 3 meetings, and the average attendance of the Committee members was at the level of 100%.

Remuneration of auditors

Remuneration to the auditors approximate to USD 702 thousand, USD 604 thousand and USD 1,025 thousand for the years ended 31 December 2015, 2014 and 2013, respectively. Such remuneration includes both audit and non-audit services, with the audit fees component approximating USD 430 thousand for the years ended 31 December 2015 and USD 550 thousand for each of the years ended 31 December 2014 and 2013.

The Company has rules and processes in place to ensure independence of the auditors, including non-audit fees limitation set by the Board and annual investigations by the Audit Committee of whether any services provided are incompatible with independence of the auditors.

Internal control and risk management

The Board of Directors is ultimately responsible for the Company's governance, risk management, internal control environment and processes and formally reviews their effectiveness at least annually.

There is a continuous process for identifying, evaluating and managing the significant risks the Company faces and the Board regularly monitors exposure to key business risks. The Company has an independent internal audit function whose activities are overseen by the Audit Committee.

The Board of Directors has an approved in principle MHP Anti-Bribery Policy, the document which is aimed at establishing the key principles and requirements in order to prevent corruption and bribery and ensure compliance with the applicable anti-corruption laws (to the extent applicable to MHP Group companies) enacted in the jurisdictions in which MHP Group companies operate. Also, the Board of Directors approved in principle MHP Code of Ethics and Conflict of Interest Policy.

The aim of the Code of Ethics is to ensure consistency in managers' and employees' behaviour within MHP and their interactions with third parties. To this end, certain procedures have been devised to avoid potential violations of the Code.

The Conflict of Interest Policy covers any transactions involving conflicts of interest (whether actual or potential) of: (1) MHP's management team members, including directors of subsidiaries and branches ("key management"); (2) MHP's line managers who have authority to authorize transactions on behalf of MHP ("line managers"); (3) other MHP employees who are authorized to internally approve any decisions as to significant provisions of transactions based on the internal policies and instructions ("responsible employees") or have power to influence such decisions.

Financial reporting process

MHP has in place a comprehensive financial review cycle, which includes a detailed annual budgeting process. The annual budget and the business plan, upon which the budget is based, is reviewed and approved by the Board of Directors.

Major commercial and financial risks are assessed as part of the business planning process. There is a comprehensive system of financial reporting, with monthly performance reports presented to the Board of Directors.

At the Group level, MHP has in place common accounting policies and procedures on financial reporting and closing. Management monitors the publication of the new reporting standards and works closely with the external auditors in evaluating in advance the potential impact of these standards.

Compensation of key management

Personnel

Total compensation of the Group's key management personnel amounted to USD 7,778 thousand, USD 8,895 thousand and USD 12,969 thousand for the years ended 31 December 2015, 2014 and 2013, respectively. Compensation of key management personnel consists of contractual salary and performance bonuses.

Total compensation of the Group's non-executive directors, which consists of contractual salary, amounted to USD 496 thousand, USD 591 thousand and USD 550 thousand in 2015, 2014 and 2013, respectively.

Key management personnel totaled 40, 40 and 42 individuals as of 31 December 2015, 2014 and 2013, respectively, including 4 independent directors as of 31 December 2015, 2014 and 2013.

Litigation statement on the directors and officers

No member of the Board of Directors or of MHP's senior management had, for at least five years:

1. any convictions relating to fraudulent offences;

2. been a senior manager or a member of the administrative or supervisory bodies of any company at the time of, or preceding, any bankruptcy, receivership or liquidation; or

3. been subject to any official public incrimination and/or sanction by any statutory or regulatory authority (including any designated professional body) nor had ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company, or from acting in the management or conduct of the affairs of a company.

Share options

At the date of this annual report, neither the Company nor PJSC MHP has a share option plan and no share options have been granted to members of the Board of Directors, members of MHP's senior management or employees.

Additional disclosures

At the date of this annual report, there were no takeover bids made over the Company's shares. According to the terms of the Senior Notes, the Company may be required to offer to repurchase the Senior Notes from the holders if a change in control as a result of a takeover bid occurs.

There are no agreements between the Company and its Directors or employees providing for compensation on loss of office or employment (whether through resignation, purported redundancy or otherwise) that would occur because of a takeover bid.

Dividend policy

In March 2013 the Board of Directors approved the adoption of a dividend policy which maintains a balance between the need to invest in further development and the right of shareholders to share the net profit of the Company. The new dividend policy confirms the Company's intention to pay annual dividends to the shareholders on a regular basis. The Company paid U.S.$120 million, U.S.$80 million and U.S.$50 million of dividends in 2013, 2014 and 2015 respectively.

BOARD OF DIRECTORS

Charles E Adriaenssen, 10 years on the governance body

Non-executive Chairman, Chairman of the Nominations and Remuneration Committee

Mr Adriaenssen joined the board as Chairman in 2006. He is founder and Chairman of Outhere SA, an independent European classical music producer, and Managing Director of Oaks Estate, an investment company. He serves on the board of several funds and private investee companies. Between 2000 and 2004 he was on the board of the Belgian Brewer ABInbev, then on the board of EPS SA, an ABInbev holding company. Between 1982 and 1995 he was a diplomat in Belgium's Foreign Service. Mr Adriaenssen holds a degree in philosophy from the University of Vienna and a law degree from the University of Antwerp.

John Grant

Non-executive Director, Chairman of the Audit Committee, Member of the Nominations and Remuneration Committee, Senior Independent Director

Mr Grant is Chairman of Gas Turbine Efficiency Limited, and is a non-executive director of Melrose plc, Pace plc and Wolfson Microelectronics plc. He was previously Chairman of Torotrak plc, Hasgo Group Limited and the Royal Automobile Club Motor Sports Association Limited and a non-executive director of National Grid plc, Corac Group plc and the Royal Automobile Club Limited. From 1992 to 1996, he was Finance Director of Lucas Industries plc and Lucas Varity plc, and before that was Director of Corporate Strategy for the Ford Motor Company.

Mr Grant holds a BSc in economics from Queen's University, Belfast, and an MBA from Cranfield School of Management.

Dr John C Rich

Non-executive Director, Member of the Audit Committee, Member of the Nominations and Remuneration Committee

Dr Rich joined the board in 2006.

He is the Managing Director of Australian Agricultural Nutrition and Consulting Pty Ltd (AANC) and is a specialist agri-business consultant for the IFC and IFC invested clients. From 1990 to 2003, he was an executive director of Austasia Pty Ltd, an agri-business conglomerate which has operations in Australia, South East Asia and China, and from 1995 to 2002 was a director of AN-OSI Pty Ltd, a company that specialized in supply-chain management for feedlot beef, poultry and dairy operations in Asia and Europe.

Dr Rich holds a BSc and a BVSc from the University of Sydney, is a member of the Australian College of Veterinary Scientists and a registered financial member of the Australian College of Veterinary Surgeons.

He has completed a number of post-graduate courses in agricultural and food-related industries.

Philippe Lamarche

Non-executive director, Member of the Audit Committee

Mr Philippe Lamarche joined the board in 2011.

He is the Senior Private Banker of Banque Puilaetco Dewaay, Luxembourg.

Has Degree in Law and Economics of The Catholic University of Louvain (IAG).

Philippe Lamarche is a member of the Belgian Association of Financial Analysts.

Yuriy Kosyuk

Chief Executive Officer

Mr Kosyuk founded MHP in 1998 and is also the CEO of PJSC MHP.

In 1995 he founded the Business Centre for the Food Industry (BCFI) and was President until 1999. BCFI operated in the domestic and export markets for grain and other agricultural products.

Mr Kosyuk graduated as a processing engineer in meat and milk production from the Kiev Institute of Food Industry in 1992.

Yuriy Melnyk

Chief Operational Officer

In July 2010 Yuriy Melnyk was appointed First Deputy CEO of Myronivsky Hliboproduct ("MHP").

Prior to joining MHP Yuriy held the position of Agricultural Minster for Ukraine and Deputy Prime Minister of Ukraine, as well as serving as an advisor to the Prime Minister of Ukraine. Yuriy is a Doctor of Agriculture and has been a correspondent member of National Academy of Sciences of Ukraine from 2002. In 2004 he was awarded the State Prize of Ukraine in science and technology.

He graduated from the Academy of Agriculture of Ukraine as a Zooengineer in 1985.

Viktoria Kapelyushnaya

Chief Financial Officer

Ms Kapelyushnaya, who is also Financial Director of JSC MHP, joined MHP in 1998 and was elected to the board in 2006. She was previously Deputy Chief Accountant, then Chief Accountant, of BCFI. She holds diplomas in meat processing engineering, 1992, and financial auditing, 1998, from the Kiev Institute of Food Industry.

Director's report

Principal activities and review of the business

MHP is one of the leading agro-industrial companies, and the largest producer of chicken in Ukraine. The business is run on a vertically integrated principle with the objective of making it self-sufficient and is structured into three segments: Poultry and related operations, Grain growing operations, and Other agricultural operations.

Poultry segment

This division produces and sells chicken products, vegetable oil, soybean oil, mixed fodder and convenience foods. It incorporates four chicken and two breeder farms, two sunflower oil plants and a soya crushing plant, four feed mills, and convenience food facilities.

In 2015 production of:

- four chicken meat facilities constituted 566,600 tonnes of chicken meat;

- two breeding farms constituted 320,290,000 eggs;

- two sunflower oil plants constituted 286,745 tonnes;

- one soya crushing plant constituted 13,950 tonnes;

- four feed mill plants constituted 1,564,440 tonnes;

- convenience food production constituted 11,126 tonnes.

Grain segment

This division grows crops for fodder and for sale to third parties on 360,000 hectares of land incorporating a number of arable farms in Ukraine and grain storage facilities of 1,623,842 m3 and over 410,000 tonnes capacity in plastic bags (land 'sleeves').

Other agricultural operations

This division produces and sells sausages and cooked meat, beef, goose and foie gras, and fruit. It incorporates one mixed farm, a goose farm and two facilities for producing prepared meat products.

Future developments

The Group's strategy is:

· To expand its poultry production capacity;

· To continue expansion on exports;

· To expand its land bank to around 550,000 hectares by 2022 to provide stability in the ingredients for fodder;

· To increase the efficiency of its production through modernization and innovation, improvement in cost and quality controls, use of up-to-date technology deepening vertical integration;

· To develop to higher level and improve high biosecurity standards, environmental health and safety (EHS) and animal welfare practices;

· To promote and develop its strong brands through consumer-driven innovations and introduction of new products;

· To increase its presence in value-added food products, such as processed meat and convenience food.

The management believes there are ample opportunities for growth as customers choose to buy domestically produced chicken, which is more affordable than pork and beef and fresher than imported meat.

Going concern

After reviewing the 2016 budget and longer-term plans, the Directors are satisfied that, at the time of the approval of the financial statements, it was appropriate to adopt the going concern basis in preparing the financial statements of the Group.

Directors during the year

The following served as directors of the Company during the year ended 31 December 2015:

Corporate governance statement

The Company complies with the Ten Principles of Corporate Governance approved by the Luxembourg Stock Exchange and voluntary corporate governance regime stated in the UK Corporate Governance Code.

Board meetings

During 2015, the Board of Directors held eight meetings, and the attendance of the Board of Directors members was at the level of 100 % (sometimes directors took part in the meetings via conference call).

Since 2011, the Board conducts regular effectiveness reviews in order to evaluate its performance as well as that of its committees and individual directors. The evaluation process is normally initiated by a questionnaire and then supplemented by individual interviews by the Chairman with each of the directors. The conclusions are analyzed by the Board to further strengthen its composition and performance.

Research and Development

MHP Group has not had any activities in research and development, but actively integrates new technologies throughout all activities.

Other matters

MHP S.A. does not have branches.

Internal control and Risk management 

The Board of Directors is ultimately responsible for the Company's governance, risk management, internal control environment and processes and formally reviews their effectiveness at least annually. The Company has an independent internal audit function whose activities are overseen by the Audit Committee.

The Board of Directors carries out an assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity. Some of the risks the Group faces are common to all commercial operations, some are inherent in farming in general and chicken farming in particular. The principal risks the Group faces are macroeconomic, financial and operational. The summary of key risks and their mitigation plans are presented below.

Operational risks

Risk: Fluctuations in demand and market prices

Potential Impact: A drop in demand.

Mitigation: Falls in demand can generally be overcome with modest price reductions. Per capita consumption of meat in Ukraine is still low in comparison with other European countries and we believe demand for chicken will continue to increase. Beef and pork are mostly produced by householders and are far more expensive to produce and purchase than chicken, kg for kg.

Risk: Avian flu and other livestock diseases

Potential Impact: In recent years, avian flu has affected wild birds and poultry flocks in a number of countries. It was first discovered in Ukraine in December 2005 and was still present in Sumy regions in 2008.

Mitigation: We operate strict biosecurity measures, including disinfectant washes and culling wild birds in the immediate vicinity of our farms.

Risk: Fluctuations in grain prices

Potential Impact: World prices could affect our poultry production costs.

Mitigation: We grow 100% of the corn we need for feed and replace expensive protein from imported soya beans with that from sunflower seeds. We also grow around 20% of the sunflowers we need and buy the rest from domestic growers. Chicken always benefits from this when compared to other kinds of meat such as pork and beef because of the lower conversion rate (amount of grain required to produce 1kg of meat).

Risk: Increased cost for, or disruptions in, gas and fuel supplies

Potential Impact: Gas and fuel, used for production and distribution, are imported. Uncertainty in supply and fluctuating prices could affect production and costs.

Mitigation: Gas and fuel represent only about 9% of our overall costs. We are increasing our use of co-generation and alternative energy technology. When we process sunflower seeds we are left with a huge amount of husks; we burn some to generate steam heat for our processing plant, and proportion is converted into briquettes for generating energy and these are exported.

Risk: Unfavorable weather conditions

Potential Impact: Inclement weather could affect crop yield.

Mitigation: Ukraine's weather is generally temperate, with plenty of sunshine in summer and adequate rainfall; this combines with extremely fertile earth to create excellent growing conditions. In addition, our management of our land and the use of modern technology enable us to achieve a yield which is significantly higher than the average for Ukraine.

Financial risks

Risk: Credit risk

Potential Impact: Debtors fail to make scheduled payments.

Mitigation: No single customer represents more than 8% of total sales. The amount of credit allowed to one customer or group of customers is strictly controlled. Credit to major groups of customers, including supermarkets and franchisees, is restricted to between five and 21 days.

Risk: Liquidity risk

Potential Impact: Lack of funds to make payments due.

Mitigation: MHP has a detailed budgeting and cash forecasting process to ensure that adequate funds are available. Our target is to maintain our current ratio, defined as the proportion of current assets to current liabilities, no less than 1.1-1.2.

Risk: Currency exchange risk

Potential Impact: Exposure to depreciation of UAH against US dollars.

Mitigation: We earn 44% of our total revenue in US dollars through the sale of sunflower oil, sunflower husk, chicken meat and grain. The amount of exports sales will continue to increase with further expansion of Vinnytsia poultry complex and strengthening of positions on export markets. This will allow us to service all our dollar-denominated loans and payments for operational purchases.

Risk: Interest rate risk

Potential Impact: Changes in interest rates affecting the cost of borrowings, the value of our financial instruments, and our profit and loss and shareholders' equity.

Mitigation: While MHP borrows on both fixed and variable rates, the majority of our debt is at fixed rates. For variable rate borrowings, interest is linked to LIBOR and EURIBOR and they are generally at lower interest rates than are available in Ukraine.

Risk: Political and country risks

Potential Impact: Decrease in profitability and impairment of assets.

Mitigation: Our operations extend throughout all regions of Ukraine with wide regional diversification. Deep vertical integration and internally developed supply chains allow our operations located in potentially distressed regions of Ukraine to remain self-sufficient with both production needs and markets, even in the case of temporary regional isolation.

Nominations and Remuneration Committee

During 2015 the committee had two meetings, on which following activities were performed:

· Preparation of report regarding the performance of the company under the current economic and political circumstances;

· Providing the Board of Directors with recommendations in relation to appointment or renewal of Directors. These recommendations were based on the due consideration of the information regarding the reappointment of Directors and the influence of such reappointment;

· Consideration of succession plan for top management and Board members.

Audit Committee

During 2015 the committee had three meetings, during which the following activities were performed:

· Review and discussion with the external auditors of their report on the 2015 financial statements;

· Review and endorsement of the risk assessment model, which describes management's assessment of the key risks facing the business and the actions in place to mitigate these risks;

· Review of the effectiveness of the Group's internal control systems and processes;

· Revision and adoption of the Internal Audit Charter;

· Approval of the Internal Audit Plan for 2015;

· Meeting with the Head of Internal Audit and discussion of results;

· Review of the independence and effectiveness of the external auditors, including consideration of the quality of their service, and the extent of the non-audit services they provided, and consideration of whether to recommend their reappointment.

Communication with the shareholders

The directors highlight the importance of effective and clear communication with the shareholders. During 2015 shareholders had a number of meetings and discussions with the Board members, predominantly with Mr Yuriy Kosyuk, Mr Yuriy Melnyk, amd Ms Victoria Kapelyushnaya, including meetings at conferences and regular conference calls.

In order to facilitate unbiased communication with independent directors, the board has introduced a direct communication channel with independent directors (details could be found on http://www.mhp.com.ua/en/investor-relations/ir-contacts).

Disclosure of information to auditors

So far as each director is aware, all information which is relevant to the audit of the Group's consolidated financial statements has been supplied to the Group's auditors. Each director has taken all steps that he/she ought to have taken in his/her duty as a director in order to make himself/herself aware of any relevant audit information, and to establish that the Group's auditors are aware of that information.

On behalf of the Board of Directors

Yuriy Kosyuk, CEO Victoria Kapelyushnaya, CFO

MHP S.A. AND ITS SUBSIDIARIES

Consolidated Financial Statements

As of and for the year ended 31 December 2015

CONTENT

STATEMENT OF THE BOARD OF DIRECTORS' RESPONSIBILITIES FOR THE PREPARATION

AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 (a)

INDEPENDENT AUDITOR'S REPORT...................................................................................................... (i)

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

Consolidated statement of comprehensive income...................................................................................... 6

Consolidated statement of financial position............................................................................................... 7

Consolidated statement of changes in equity.............................................................................................. 8

Consolidated statement of cash flows........................................................................................................ 9

Notes to the Consolidated financial statements......................................................................................... 11

1. Corporate information...................................................................................................................... 11

2. Changes in the group structure......................................................................................................... 12

3. Summary of significant accounting policies....................................................................................... 13

4. Critical accounting judgments and key sources of estimation uncertainty............................................. 28

5. Loss on impairment of assets in Donetsk region................................................................................ 33

6. Segment information....................................................................................................................... 33

7. Revenue......................................................................................................................................... 35

8. Cost of sales.................................................................................................................................. 36

9. Selling, general and administrative expenses..................................................................................... 36

10. VAT refunds and other government grants income........................................................................... 37

11. Finance costs.............................................................................................................................. 38

12. Income tax................................................................................................................................... 38

13. Property, plant and equipment....................................................................................................... 42

14. Land lease rights.......................................................................................................................... 46

15. Biological assets.......................................................................................................................... 46

16. Inventories................................................................................................................................... 51

17. Agricultural produce...................................................................................................................... 51

18. Taxes recoverable and prepaid, net................................................................................................ 51

19. Trade accounts receivable, net....................................................................................................... 51

20. Cash and cash equivalents............................................................................................................ 53

21. Shareholders' equity..................................................................................................................... 55

22. Non-controlling interests................................................................................................................ 55

23. Bank borrowings........................................................................................................................... 58

24. Bonds issued............................................................................................................................... 59

25. Finance lease obligations.............................................................................................................. 62

26. Trade accounts payable................................................................................................................ 62

27. Other current liabilities.................................................................................................................. 62

28. Related party balances and transactions........................................................................................ 64

29. Contingencies and contractual commitments.................................................................................. 65

30. Dividends..................................................................................................................................... 68

31. Fair value of financial instruments................................................................................................... 68

32. Risk management policies............................................................................................................ 69

33. Pensions and retirement plans....................................................................................................... 75

34. Earnings per share....................................................................................................................... 75

35. Subsequent events....................................................................................................................... 75

36. Authorization of the consolidated financial statements..................................................................... 75

STATEMENT OF THE BOARD OF DIRECTORS' RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

The Board of Directors is responsible for the preparation of the consolidated financial statements that present fairly the financial position of MHP S.A. and its subsidiaries (the "Group" or the "Company") as of31 December 2015 and the results of its operations, cash flows and changes in equity for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

In preparing the consolidated financial statements, the Board of Directors is responsible for:

· properly selecting and applying accounting policies;

· presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's consolidated financial position and financial performance; and

· making an assessment of the Group's ability to continue as a going concern.

The Board of Directors, within its competencies, is also responsible for:

· designing, implementing and maintaining an effective and sound system of internal controls, throughout the Group;

· maintaining adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the consolidated financial position of the Group, and which enable them to ensure that the consolidated financial statements of the Group comply with IFRS;

· maintaining statutory accounting records in compliance with local legislation and accounting standards in the respective jurisdictions;

· taking such steps as are reasonably available to them to safeguard the assets of the Group; and

· preventing and detecting fraud and other irregularities.

The consolidated financial statements of the Group for the year ended 31 December 2015 were authorized for issue by the Board of Directors on 9 March 2016.

Board of Directors' responsibility statement

We confirm that, to the best of our knowledge, the Consolidated Financial Statements for the year ended 31 December 2015 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and results of the Company and the undertakings included in the consolidation taken as a whole. We also confirm that, to the best of our knowledge, the 2015 Director's Report and Consolidated Financial Statements include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of

MHP S.A.

5, rue Guillaume Kroll

L-1882 Luxembourg

INDEPENDENT AUDITOR'S REPORT

Report on the consolidated financial statements

Following our appointment, we have audited the accompanying consolidated financial statements of MHP S.A. and its subsidiaries (the "Group") which comprise the consolidated statement of financial position as at December 31, 2015, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Responsibility of the Board of Directors for the Consolidated Financial Statements

The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the réviseur d'entreprises agréé

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the réviseur d'entreprises agréé's judgement including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the réviseur d'entreprises agréé considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of MHP S.A. as of December 31, 2015, and 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.

Emphasis of Matter

We draw your attention to Note 29 "Contingencies and contractual commitments" to the consolidated financial statements, which describes the current political crisis in Ukraine. The impact of the continuing economic crisis and political turmoil in Ukraine and their final resolution are unpredictable and may adversely affect the Ukrainian economy and the operations of the Group. Our opinion is not qualified in respect of this matter.

Report on other legal and regulatory requirements

The directors' report, which is the responsibility of the Board of Directors, is consistent with the consolidated financial statements and includes the information required by the law of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings, as amended with respect to the corporate governance statement.

For Deloitte Audit, Cabinet de révision agréé

______________, Réviseur d'entreprises agréé

Partner

Consolidated statement of comprehensive income

for the year ended 31 December 2015

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 11 to 64 form an integral part of these consolidated financial statements

Consolidated statement of financial position

as of 31 December 2015

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 11 to 64 form an integral part of these consolidated financial statements

Consolidated statement of changes in equity

for the year ended 31 December 2015

(in thousands of US dollars, unless otherwise indicated)