Untitled

KERNEL HOLDING S.A.

Société Anonyme

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

ANNUAL ACCOUNTS AS AT

AND FOR THE YEAR ENDED

30 JUNE 2023

AND REPORT OF THE RÉVISEUR

D’ENTREPRISES AGRÉÉ

Table of

contents

Report of the Board of Directors to the shareholders 3-8

Report of the réviseur d’entreprises agréé 9-13

Statement of the Board of Directors’ responsibilities for the preparation and approval of

annual accounts 14

Balance sheet as of 30 June 2023 15-16

Profit and loss account for the year ended 30 June 2023 17

Notes to the annual accounts 18-33

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the Board of Directors to the shareholders

Annual

accounts for the year ended

30 June 2023

Dear Shareholders,

The Board of Directors is pleased to present its report, which constitutes the Board of Directors report or management

report as defined by Luxembourg Law, together with audited annual accounts as of December 31, 2023, and for the year

than ended.

Kernel Holding S.A., (the “Company”) was incorporated in Luxembourg on 15 June 2005 as a Société Anonyme (“S.A.”)

subject to the Luxembourg law for an unlimited period of time.

The Company is registered with the “Registre de Commerce et des Sociétés” in Luxembourg under the number

B 109173.

The subsidiaries of Kernel Holding S.A. (forming together with the Company, the “Group”) hold assets primarily in Ukraine

and operate across the agricultural value chain.

The Group operates in farming, grain origination, storage, transport, and the production, refining, bottling and marketing

of sunflower oil.

The Group’s goal is the continuous development of a profitable and sustainable business that enhances its position as a

leader in the field of low-cost production, sourcing, processing, and handling of agricultural commodities, bridging the

resource-rich Black Sea region with large international consumer markets.

In preparing these annual accounts, the Board of Directors is responsible for assessing both 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.

Performance overview

Kernel Holdings S.A. being a holding company with limited activities, mainly related to financing of its subsidiaries through

equity or debt. The Company intends to continue carrying out these activities in the foreseeable future.

Other operating income of the Company was USD 9,999,000.00 (2022: USD 22,374,004.93). The profit for the year was

USD 121,198,956.75 (2022: USD 10,385,435.50), which was mainly driven by income from sale of its subsidiaries and

dividend income from its subsidiaries.

Key performance indicators, both financial and non-financial are integrated within the Group and are not managed

separately. For more details, please refer to the Group annual report which is available on the official website of the

Group: www.kernel.ua.

The Company did not undertake any research and development activities in 2023 and 2022.

Developments over acquisitions/ disposals of the fixed assets

On 26 April 2022, the Company entered into a legally binding sale and purchase agreement of selling all of its participation

in Enselco Agro LLC and Agropolis LLC for a total consideration of USD 209,973,920.00 to the related party. The

transaction was completed on 3 March 2023 and gain on disposal of USD 208,885,258.84 was recognised.

On 31 August 2022, the Company entered into a sale and purchase agreement of shares in the authorised capital,

whereby, as a buyer, the Company purchased part of the participation shares (24.00%) in Transshipservice LLC for an

amount of USD 6,435,522.21.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the Board of Directors to the shareholders

Annual

accounts for the year ended

30 June 2023

As of 30 June 2023, based on a comprehensive evaluation of the distressed financial conditions of the Company’s

subsidiaries, the Board has decided to record value adjustment in respect of shares in affiliated undertakings amounting

to USD 99,265,514.02 (2022: USD 216,154,216.83). Details of value adjustments further disclosed in annual accounts

in Note 3.

Other developments

On 13 April 2023, the Board of Directors announced the decision to withdraw the Company's shares from trading on the

Warsaw Stock Exchange's regulated market. However, as of 30 June 2023 and the date of these annual accounts, the

delisting process has not been completed.

As of 30 June 2023, and 30 June 2022 the Company does not have any branch and does not hold any of its own shares.

Allocation of results

The Company’s financial year as of 30 June 2023 ends with a profit of USD 121,198,956.75.

The board of directors of the Company intends to propose to the Annual General Meeting of the Shareholders of the

Company the following allocation of this result:

Result brought forward (before dividends)

USD

436,056,034.52

Statutory dividends for year end 30 June 2023

USD

---

Result brought forward (after dividends)

USD

436,056,034.52

Profit for the financial year 2023

USD

121,198,956.75

Result carried forward

USD

557,254,991.27

Principal risks and uncertainties

The principal risks and uncertainties which the Company is facing relate to the recoverability of shares in affiliated

undertakings and amounts owed by affiliated undertakings.

As the Company itself has limited activity, the principal risks and uncertainties are integrated with the Group’s risk and

uncertainties and not managed separately.

The Group’s Board of Directors (“Board”) defines the Group’s risk as an event, action or lack of action, which can lead to

non-achievement of the Group’s objectives. As a result of the latest review cycle, the Board approved Top-10 risks faced

by the Group for FY2023.

Strategic (Business) risks:

1. Logistics disruption.

2. Loss of critical infrastructure.

3. Low global soft commodities prices.

4. Loss of inventories.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the Board of Directors to the shareholders

Annual

accounts for the year ended

30 June 2023

Financial risks:

5. Liquidity associated risk which is the risk that the Company will encounter difficulties in meeting

obligations arising from its financial liabilities as they fall due, mainly related to Eurobonds.

Market risks, including:

- Currency risk. The presentation currency of the Company is US Dollar ("USD"). Currency risk is

the risk which arises due to the assets and liabilities of the Company held in foreign currencies,

which will be affected by fluctuations in foreign exchange rates and limited to balances of cash in

bank and in hand.

- Interest rate risk. Interest rate risk is the risk that the Company does not receive adequate interest

from the Loans to secure interest payments on the Notes. The Company is not exposed to any

interest risk since both the Loans and Notes bear almost the same terms and conditions.

Operational risks:

6. Trade position management issues.

7. Credit and counterparty risks which is the risk of the financial loss to the Company if counterparty

fails to meet its contractual obligations and arises principally from the Company's credit linked

assets. The Company's principal financial assets are amounts owed by affiliated undertakings, other

debtors, other investments and cash at bank and in hand, which represent the Company's maximum

exposure to credit risk.

8. Information security and IT.

9. Investment projects management.

10. Human capital risk.

Other risks identified (but are not limited to):

 Weak harvest in Ukraine;

 Failure to maintain the integrity of the leasehold farmland bank;

 Fraudulent activities;

 A shortfall of proceeds from sales of renewable energy;

 Increase in competition;

 Sustainability-related risks: non-compliance with environmental standards; undermined profitability due to more

severe environ-mental requirements applicable to farming and oilseed processing related to the implementation of

the European Green Deal; low sustainability rating of Kernel may increase the cost of capital;

 Weak economic growth, either globally or in the Group’s key markets;

 Economic policy, political, social, and legal risks and uncertainties in countries other than Ukraine in which the

Group operates;

 Any loss or diminution in the services of Mr. Andrii Verevskyi, Kernel Holding S.A.’s chairman of the Board of

Directors;

 The risk that changes in the assumptions underlying the carrying value of certain assets, including those

occurring as a result of adverse market conditions, could result in the impairment of tangible and intangible assets,

including goodwill;

 The risk of fluctuations in the exchange rate of the Ukrainian hryvnia to the US dollar;

 The risk of disruption or limitation of natural gas or electricity supply;

 The risk of disruptions in Kernel Holding S.A.’s manufacturing operations;

 The risk of product liability claims;

 The risk of potential liabilities from investigations, litigation, and fines regarding antitrust matters;

 The risk that Kernel Holding S.A.’s governance and compliance processes may fail to prevent regulatory

penalties or reputational harm, both at operating subsidiaries and in joint ventures; and

 The risk that Kernel Holding S.A.’s insurance policies may provide inadequate coverage.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the Board of Directors to the shareholders

Annual

accounts for the year ended

30 June 2023

The report of the Board of Director’s gives a true and fair view of the position as per 30 June 2023 and the developments

during the financial year of the Company and describes the principal risks the Company is facing.

In accordance with the Luxembourg law, the Board confirms that to the best of its knowledge; the annual accounts for

the year ended 30 June 2022 give a true and fair view of the assets, liabilities, financial position and profit and loss of the

Company.

The Company does not hedge risks related to financial instruments.

Financial Reporting Process

The Board is responsible for establishing and maintaining adequate internal control and risk management systems of

the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate

the risk of failure to achieve the Company's financial reporting objectives and can only provide reasonable and not

absolute assurance against material misstatement or loss.

Powers of Directors

The Board is responsible for managing the business affairs of the Company in accordance with the Articles of

Association. The Board may delegate certain functions to other parties, subject to the supervision and direction by the

Directors in accordance with article 441-1 of the law of 10 August 1915.

Internal control

The Board is responsible for the establishment and adequate functioning of internal control in the Company.

Consequently, the Board has implemented a range of processes designed to provide control by the Board of Directors

over the Company's operations. These processes and procedures include measures regarding the general control

environment as well as specific internal control measures. All these processes and procedures are aimed at ensuring a

reasonable level of assurance that the Board has identified and managed the significant risks of the Company and that

it meets the operational and financial objectives in compliance with applicable laws and regulations.

Corporate governance statement

The Company is subject to and complies with the relevant applicable laws and regulations, including the Luxembourg

Law of 10 August 1915 on commercial companies as amended, and the regulations applied by the relevant trading

venues and Stock Exchange and the Listing Rules of the Warsaw Stock exchange. The Company does not apply

additional requirements in addition to those required by the above. Each of the service providers engaged by the

Company is subject to its own corporate governance requirements.

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association,

the relevant applicable laws and regulations, including the Luxembourg Law of 10 August 1915 on commercial

companies as amended, and the regulations applied by the relevant trading venues and Stock Exchange and the Listing

Rules of the Warsaw Stock exchange.

Details on corporate governance, including the corporate governance code are available on the official website of the

Group and in the annual report of the Group for the year ended 30 June 2023, available on the Group’s website:

www.kernel.ua.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the Board of Directors to the shareholders

Annual

accounts for the year ended

30 June 2023

Board of Directors

The board of Directors is formed of eight Directors, of whom two are independent directors. All eight Directors were

elected to the Board by the Shareholders at General Meetings of the Shareholders:

(1) Mr. Andrii Verevskyi, chairman of the board of directors and member of the remuneration and numeration committee,

was reappointed for a five-year term at the general meeting of shareholders held on 11 December 2020. Mr. Verevskyi

founded the Group’s business in 1995, holding various executive positions within the Group. Presently, he oversees the

strategic development and overall management of the Group.

(2) Mr. Andrii Miski-Oglu, chairman of the audit committee and member of the remuneration and numeration committee

was appointed as independent non-executive director until ratification thereto by the next general meeting of

shareholders of the Company, and with effect as of 15 April 2022. Mr. Miski-Oglu has 20 years’ experience in public

accounting and audit in Ernst&Young, involved in major EY Global audit-related initiatives. Mr. Miski-Oglu is Certified

Public Accountant in the US since 2011 and a member of The American Institute of Certified Public Accountants (AICPA).

(3) Mrs. Daria Danilczuk, chairwoman of the sustainability committee and member of the audit committee appointed as

non-executive director until ratification thereto by the next general meeting of shareholders of the company, and with

effect as of 22 May 2022. Mrs. Danilczuk experienced in agricultural commodity brokerage, specialized in Black Sea

commodity markets, experienced in international trade and biofuels trade and regulatory framework.

(4) Mr. Mykhaylo Mishov. chairman of the remuneration and member of the numeration committee, member of the audit

committee and member of the sustainability committee was appointed as independent non-executive director until

ratification thereto by the next general meeting of shareholders of the company, and with effect as of 14 September 2022.

Mr. Mishov has over 17 years’ experience in consulting, including Ernst & Young, Deloitte and KPMG, leading numerous

strategy and performance improvement projects for agribusiness clients.

(5) Mrs. Viktoriia Lukianenko was re-elected to the Board for a one-year term at the general meeting of shareholders

held on 20 December 2022. Mrs. Lukianenko is responsible for providing legal advice and counselling in all aspects of

Group’s business operations.

(6) Mr. Yevgen Osypov was re-elected to the Board for a one-year term by the shareholders at the general meeting of

the shareholders held on 20 December 2022. Mr. Osypov is responsible for the day-to-day management of the

Company’s subsidiaries, execution of strategy, budgets, and the Board decisions and also member of the sustainability

committee

(7) Mrs. Anastasiia Usachova was re-elected to the Board for a one-year term by the shareholders at the general meeting

of the shareholders held on 20 December 2022. Mrs. Usachova has served the Group since 2003, and today oversees

the Group’s financial reporting, auditing, budgeting, financial planning and risk assessment.

(8) Mr. Yuriy Kovalchuk was re-elected to the Board for a one-year term by the shareholders at the general meeting of

the shareholders held on 20 December 2022. Mr. Kovalchuk oversees investor relations and new investment

opportunities for the Group.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the Board of Directors to the shareholders

Annual

accounts for the year ended

30 June 2023

Looking ahead:

For a detailed outlook for the Group’s financial year ending 30 June 2023, please refer to the annual report of the Group

which is available on the official website of the Group: www.kernel.ua.

There are subsequent events as disclosed in Note 21.

The Board of Directors

By:

Mr. Andrii Verevskyi

By:

Mr. Andrii Miski-Oglu

By:

Mrs. Daria Danilczuk

By:

Mr. Mykhaylo Mishov

By:

Mrs. Viktoriia Lukianenko

By:

Mr. Yevgen Osypov

By:

Mrs. Anastasiia Usachova

By:

Mr. Yuriy Kovalchuk

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Statement of the Board of Directors’ responsibilities for the

preparation and approval of annual accounts

For the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

The Board of Directors is responsible for the preparation, publish and fair presentation of the annual accounts in

accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the

annual accounts, and for such internal control as the Board of Directors determines is necessary to enable the

preparation of annual accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts, 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 the Board of Directors either intends to liquidate the Company or to cease

operations, or has no realistic alternative but to do so.

We confirm that to the best of our knowledge and belief:

- The annual accounts of Kernel Holding S.A. for the year ended 30 June 2023 presented in this report and

established in accordance with Luxembourg legal and regulatory requirements under the historical cost convention

give a true and fair view of the assets, liabilities, financial position and results of the Company; and

- The Management report or Board of Director’s report as of 30 June 2023 includes a fair review of the

development and performance of the business and position of the Company, together with a description of the

principal risks and uncertainties it faces.

27 October 2023

On behalf of the Board of Directors

Andrii Verevskyi Anastasiia Usachova

Chairman of the Board of Directors Director

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Balance sheet as of 30 June 2023

Annual

accounts for the year ended

30 June 2023

The accompanying notes form an integral part of the annual accounts

ASSETS

Notes

30.06.2023

30.06.2022

USD

FIXED ASSETS

1,010,431,838.25

1,104,350,491.22

III. Financial assets

1,010,431,838.25 1,104,350,491.22

Shares in affiliated undertakings

1,003,996,298.76 1,104,350,473.94

Participating interests

6,435,522.21

---

Investments held as fixed assets

17.28

CURRENT ASSETS

759,903,843.92

545,400,027.43

II.

Debtors

695,925,190.86

481,569,418.76

Trade debtors

--- 3,016,624.19

a) becoming due and payable within one year

--- 3,016,624.19

Amounts owed by affiliated undertakings

602,726,546.63

476,369,159.07

becoming due and payable within one year

556,972,046.43

111,721,994.30

becoming due and payable after more than

one year

45,754,500.20 364,647,164.77

Other debtors

93,198,644.23 2,183,635.50

a) becoming due and payable within one year

93,198,644.23 1,183,635.50

becoming due and payable after more than

one year

--- 1,000,000.00

III. Investments

63,280,324.35 63,280,324.35

Other Investments

63,280,324.35

IV.

Cash at bank and in hand

698,328.71

550,284.32

PREPAYMENTS

3,687,479.82

4,859,872.77

TOTAL ASSETS

1,774,023,161.99

1,654,610,391.42

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Balance sheet as of 30 June 2023

Annual

accounts for the year ended

30 June 2023

The accompanying notes form an integral part of the annual accounts

LIABILITIES

Notes

30.06.2023

30.06.2022

USD

CAPITAL AND RESERVES

1,066,764,856.13

945,565,899.38

Subscribed capital

2,218,928.64

II.

Share premiums and similar premiums

507,069,043.22

IV.

Reserves

221,893.00

Legal reserve

221,893.00

Profit or loss brought forward

436,056,034.52

425,670,599.02

VI.

Profit or loss for the financial year

121,198,956.75

10,385,435.50

CREDITORS

707,213,538.66

708,904,724.86

Debenture loans

607,611,973.07

Non-convertible loans

607,611,973.07

becoming due and payable within one year

607,611,973.07

Trade creditors

964,448.78

1,264,094.08

becoming due and payable within one year

964,448.78

1,264,094.08

Amounts owed to affiliated undertakings

57,087,991.91

8,577,825.11

becoming due and payable within one year

41,988,011.91

27,845.11

becoming due and payable after more than one year

15,099,980.00

8,549,980.00

Other creditors

41,549,124.90

91,450,832.60

tax authorities

938,632.36

400,270.20

social securities authorities

20,267.44

3,010.61

other creditors

40,590,225.10

91,047,551.79

becoming due and payable within one year

40,590,225.10

91,051,197.63

ii)

becoming due and payable after more than one year

---

(3,645.84)

DEFERRED INCOME

44,767.20

139,767.18

TOTAL LIABILITIES

1,774,023,161.99

1,654,610,391.42

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Profit and loss account for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

The accompanying notes form an integral part of the annual accounts

PROFIT AND LOSS ACCOUNT

Notes

From 01.07.2022

to 30.06.2023

From 01.07.2021

to 30.06.2022

USD

OTHER OPERATING INCOME

9,999,000.00

22,374,004.93

RAW MATERIALS AND CONSUMABLES AND OTHER EXTERNAL EXPENSES

(9,066,529.05)

(7,281,534.19)

Other external expenses

(9,066,529.05)

(7,281,534.19)

STAFF COSTS

(12,828,351.44)

(160,257.72)

Wages and salaries

(12,810,342.58)

(142,481.20)

Social security costs

(17,973.97)

(17,441.90)

Other staff costs

(34.89)

(334.62)

VALUE ADJUSTMENTS

---

(5,976,000.00)

in respect of current expenses

---

(5,976,000.00)

OTHER OPERATING EXPENSES

(2,975,223.87)

(3,062,237.36)

INCOME FROM PARTICIPATING INTERESTS

241,911,167.84

250,203,000.00

derived from affiliated undertakings

241,911,167.84

250,203,000.00

10.

INCOME FROM OTHER INVESTMENTS AND LOANS FORMING PART OF THE

FIXED ASSETS

--- 6,474,609.42

other income not included under a)

---

6,474,609.42

11.

OTHER INTEREST RECEIVABLE AND SIMILAR INCOME

35,749,452.56

39,957,845.40

derived from affiliated undertakings

35,345,602.39

38,865,256.23

other interest and similar income

403,850.17

1,092,589.17

VALUE ADJUSTMENTS IN RESPECT OF FINANCIAL ASSETS AND OF

INVESTMENTS HELD AS CURRENT ASSETS

3 (99,265,514.02) (216,154,216,83)

14.

INTEREST PAYABLE AND SIMILAR EXPENSES

(42,328,932.89)

(75,048,612.76)

derived from affiliated undertakings

(1,238,460.30)

(22,359,182.22)

other interest and similar expenses

(41,090,472.59)

(52,689,430.54)

15.

TAX ON PROFIT OR LOSS

---

(935,669.11)

16.

PROFIT OR LOSS AFTER TAXATION

121,195,069.13

10,390,931.78

17.

OTHER TAXES NOT SHOWN UNDER ITEMS 1 TO 16

3,887.62

(5,496.28)

18.

PROFIT OR (LOSS) FOR THE FINANCIAL YEAR

121,198,956.75

10,385,435.50

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 1 – General information

Kernel Holding S.A. (the “Company”) was incorporated on 15 June 2005 and organized under the laws of Luxembourg in

the form of a “Société Anonyme” (“S.A.”) for an unlimited period of time.

The registered office is established at 9, rue de Bitbourg, L-1273 Luxembourg.

The Company’s financial year starts on 1 July and ends on 30 June of each year.

The Company is the holding company for a group of entities which together form the Kernel Group (the “Group”). The

subsidiaries of the Group own assets primarily in Ukraine and operate across the agricultural value chain.

The Company’s object is the acquisition, the management, the enhancement and the disposal of participations in whichever

form in domestic and foreign companies. The Company may also finance the Group entities via granting all kinds of support,

loans, advances and guarantees.

It may open branches in Luxembourg and abroad. Furthermore, the Company may acquire and dispose of all other

securities by way of subscription, purchase, exchange, sale or otherwise.

It may also acquire, enhance and dispose of patents and licenses, as well as rights deriving therefrom or supplementing

them.

In addition, the Company may acquire, manage, enhance and dispose of real estate located in Luxembourg or abroad.

On the basis of the offering prospectus (the “Prospectus”) approved on 25 October 2007 by the Commission de Surveillance

du Secteur Financier, shares in the Company were delivered to investors in either through a public offering in Poland or an

international offering by way of private placements to selected institutional investors in certain jurisdictions outside of Poland.

On 23 November 2007, the Company made a listing on the Warsaw Stock Exchange (“WSE”).

As of 12 May 2023, the Company had received notification from its major shareholder Namsen Limited Liability Company

(‘Namsen LLC'), a notification of major holding about crossing the 66 2/3% threshold of voting rights, pursuant to the

provisions of articles 8 and 9 of the Law of 11 January 2008 on Transparency Requirements for Issuers of Grand Duchy of

Luxembourg. This event stemmed from share purchase transactions executed by Namsen LLC on 9 May 2023

(subsequently settled on 12 May 2023), when Namsen LLC acquired 30,248,449 shares of the Company, representing

approximately 36.00% shares in the share capital of the Company, and gained control over the Group. As of 30 June 2023

and 2022, 100% of the beneficial interest in Namsen LLC was held by Mr. Andrii Verevskyi.

As of 30 June 2023, the Company’s shares were allocated as follows: 74.05% (30 June 2022: 38.05%) held by

Namsen LLC, 18.10% (30 June 2022: 54.09%) are in free-float, and 7.85% are treasury shares (held by the Company’s

subsidiary), whereas, in prior year, 7.86% were own shares purchased by other Group’s entity.

The Company also prepares Group consolidated financial statements which are published on the basis of the law dated

10 August 1915, as amended. The consolidated annual report of the Company for the year ended 30 June 2023 available

at the Company website, http://www.kernel.ua.

The figures for the year ended 30 June 2022 relating the outstanding payables for legal claims have been reclassified to

ensure comparability with the figures for the year ended 30 June 2023 (Note 8).

These annual accounts were authorized for release by the Board of Directors of Kernel Holding S.A. on 26 October 2023.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 2 – Significant accounting policies

2.1 General principles

These annual accounts have been prepared in accordance with Luxembourg legal and regulatory requirements under the

historical cost convention. Accounting policies and valuation rules are, besides the ones laid down by the Law of 19

December 2002 and 10 December 2010, determined and applied by the Board of Directors.

The preparation of these annual accounts requires the use of certain critical accounting estimates. It also requires the Board

of Directors to exercise significant judgment in the process of applying the accounting policies. Changes in assumptions

may have a significant impact on the annual accounts in the period in which the assumptions changed. The Board of

Directors believes that the underlying assumptions are appropriate and that the annual accounts therefore present the

financial position and results fairly.

The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities in the next

financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors,

including expectations of future events that are believed to be reasonable under the circumstances.

These annual accounts have been prepared under the assumption that the Company will continue as a going concern

further discussed in Note 20.

2.2 Significant accounting policies

The following are the significant accounting policies and valuation rules adopted by the Company in the preparation of

these annual accounts.

2.2.1 Financial assets

Historical cost model

Shares in affiliated undertakings are valued at the lower of the purchase price including the expenses incidental thereto

or the market value. Investments held as fixed assets (“Investments”) shown under “Financial assets” are recorded at their

nominal value. Where, in the opinion of the Board of Directors, a dura le diminution in value of financial asset has occurred,

a value of adjustment is established. These value adjustments are not continued if the reasons for which the value

adjustments were made have ceased to apply.

2.2.2 Debtors

Debtors are valued at their nominal value. They are subject to value adjustments where their recovery is compromised.

These value adjustments are not continued if the reasons for which the value adjustments were made have ceased to

apply.

2.2.3 Investments

Transferable securities are valued at the lower of the purchase price including the expenses incidental thereto or at the

market value. The market value or recovery value corresponds to:

• For securities listed on a stock exchange or traded on another regulated market, the fair value is based on the

last available quote.

• For unlisted securities or securities that are not traded on another regulated market or where the last quote is

not representative, the fair value is based from the most probable market value estimated with due care and in good

faith by the Board of Directors.

2.2.4 Cash at bank and in hand

Cash is valued at its nominal value.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 2 – Significant accounting policies (continued)

2.2.5 Foreign currency translation

The Company maintains its books and records in United-States dollar (“USD”). The balance sheet and the profit and

loss account are expressed in USD.

Transactions expressed in currencies other than USD are translated into USD using the exchange rates prevailing at

the dates of the transactions.

Financial assets expressed in currencies other than USD are translated into USD at the exchange rate effective at the

time of the transaction. At the balance sheet date, these assets remain translated at their historical exchange rates.

Cash at bank and in hand are translated at the exchange rate effective at the balance sheet date. Exchange losses

and gains are recorded in the profit and loss account of the year.

Other assets and liabilities are translated separately respectively at the lower or at the higher of the value converted at

the historical exchange rate or the value determined on the basis of the exchange rates effective at the balance sheet

date. The unrealized exchange losses are recorded in the profit and loss account. The realized exchange gains are

recorded in the profit and loss account at the moment of their realization.

Where there is an economic link between an asset and a liability, these are valued in total according to the method

described above and the net unrealized loss is recorded in the profit and loss account and the net unrealized gains are

not recognized.

2.2.6 Prepayments

Prepayments include expenditure items incurred during the financial year but relating to a subsequent financial year.

Loan issue costs included as part of prepayments is capitalized and amortized to the profit and loss account over the

period of the related loan.

2.2.7 Provisions

Provisions are intended to cover losses or debts which originate in the financial year under review or in the previous

financial year, the nature of which is clearly defined and which, at the date of the balance sheet, are either likely to be

incurred or certain to be incurred but uncertain as to their amount or the date they will arise.

Provisions may also be created to cover charges which originate in the financial year under review or in a previous

financial year, the nature of which is clearly defined and which at the date of the balance sheet are either likely to be

incurred or certain to be incurred but uncertain as to their amount or the date on which they will arise. Provisions for

taxation corresponding to the tax liability estimated by the Company for the financial years for which the tax return has

not yet been filed are recorded under the caption “Creditors becoming due and payable within one year”. The advance

payments are shown in the assets of the balance sheet under the “Debtors becoming due and payable within one year”

item.

2.2.8 Creditors

Creditors are valued at their reimbursement value.

2.2.9 Deferred income

Deferred income includes income items received during the financial year but relating to a subsequent financial period.

KERNEL HOLDING S.A.

9, rue de Bitbourg

L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 3 – Financial assets

For assets following the historical cost model the movements of the year are as follows:

Share in affiliated

undertakings

Participating

interests

Investments held

as fixed assets

Total

2023

USD

Gross book value – opening

balance

1,373,888,607.63 --- 49.00 1,373,888,656.63

Additions for the year

---

6,435,522.21

---

6,435,522.21

Disposals for the year

(1,088,661.16)

---

(1,088,661.16)

Transfers for the year

---

Gross book value – closing

balance

1,372,799,946.47 6,435,522.21 49.00 1,379,235,517.68

Accumulated value adjustment –

opening balance

(269,538,133.69) --- (31.72) (269,538,165.41)

Allocation for the year

(99,265,514.02)

---

(99,265,514.02)

Reversals for the year

---

Transfers for the year

---

Accumulated value adjustment –

closing balance

(368,803,647.71) --- (31.72) (368,803,679.43)

Net book value – opening balance

1,104,350,473.94

---

17.28

1,104,350,491.22

Net book value – closing balance

1,003,996,298.76

6,435,522.21

17.28

1,010,431,838.25

Disposals of shares in affiliated undertakings

On 26 April 2022, the Company entered into a legally binding sale and purchase agreement of selling all of its participation

in Enselco Agro LLC and Agropolis LLC for a total consideration of USD 209,973,920.00 to related party (“sale transaction”).

The transaction was completed on 3 March 2023 and gain on disposal of USD 208,885,258.84 was recognised.

On 31 August 2022, the Company entered into a sale and purchase agreement of a shares in the authorised capital,

whereby, as a buyer, the Company purchased part of the participation shares (24.00%) in Transshipservice LLC for an

amount of USD 6,435,522.21.

Value adjustments

As of 30 June 2023, based on a comprehensive evaluation of the distressed financial conditions of the Company’s

subsidiaries, management has decided to record impairments for certain subsidiaries and reflect these adjustments in

the Company's annual accounts:

• USD 97,762,995.48 in relation to its participation held in Estron Corporation Limited reducing the net book

value of investment from USD 97,762,995.48 to zero.

• Remaining value adjustments amounted to USD 1,502,518.54 related to various subsidiaries and individually

are immaterial.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 3 – Financial assets (continued)

Undertakings in which the Company holds a percentage in their share capital or in which it is a general partner are as

follows:

Name of undertakings

Registered office

Direct

Ownership

Net Book Value,

USD

Inerco Trade S.A.

Rue Jules Gachet 9, CH1260 Nyon, Switzerland

100.00%

3,532,673.50

Kernel Capital LLC

3 Tarasa Shevchenka lane,Kyiv, 01001 Ukraine

99.97%

352,939,677.46

Kernel Trade LLC 3 Tarasa Shevchenka lane, Kyiv, 01001 Ukraine 15.87% 181,639,607.79

Ukragrobusiness LLC 3 Tarasa Shevchenka lane, Kyiv, 01001 Ukraine 100.00% 896,417.35

Estron Corporation Ltd 29A, Annis Komninis, P.C. ,1061 Nicosia, Cyprus 100.00% ---

Etrecom Investments LTD

13, Agiou Prokopiou, 2406 Egkomi Cyprus

100.00%

164,884,549.90

Bilovodskyi Kombinat

Khliboprodyktiv

2, Bilovodska Street, Romny district, Sumy region,

Bilovod village, 42065, Ukraine

91.12% 2,754,557.60

Avere Commodities SA 15 bis Rue des Alpes, 1201 Geneva, Switzerland 100.00% 64,696,199.64

Filstar Limited

Prosfygon, 4, Agia Varvara, 2560, Nicosia, Cyprus

100.00%

---

Sentix Polska

Chmielna 73, 00-8021, Warsaw, Poland

100.00%

---

Prydniprovskyi Krai ALLC

52/3 Obuhova str, Zolotonosha, Cherkasʹka region,

19700 Ukraine

99.99% 7,512,088.26

Agroservise LLC

66410, Odessa region, Ananyev district, village

Stallions, STREET PRIVOKZALNA, building 4

99.99% 1,170,213.96

Ahrofirma Khliborob LLC

Nalyvayka, Holovanivsʹkyy district, Kirovohradsʹka

region, 26512 Ukraine

99.99% 21,460,728.58

Hovtva Agricultural LLC

38400, Poltava oblast, Reshetilovsky district,

Reshetilovka city, POLTAVSKA STREET, building 96

99.99% 4,478,278.36

Druzhba-Nova Agricultural

LLC

59 Komarova str., Varva, Varvynskyi district,

Chernihiv region, 17600 Ukraine

100.00% 76,452,610.43

Cherkaskyi Public Joint

Stock Company

Retsyukivshchyna, Drabivsʹkyy district, Cherkasʹka

region, 19836 Ukraine

65.08% 319,070.85

Mriia Agricultural LLC

Petrivka, Krasnohradsʹkyy district, Kharkivsʹka region,

63340 Ukraine

99.97% 9,361,531.52

Ahro Lohistyka Ukraina LLC

24 Pavlenkivska square, Poltava, Poltava region,

36014 Ukraine

100.00% 4,374,000.00

Starokonstiantynivskyi OEZ

LLC

31100, Khmelnytskyi oblast, Starokostiantyniv city,

VESNYANSKE SHOSE STREET, building 5

78.54% 60,204,180.73

Prydniprovskyi

Oliinoekstraktsiinyi Zavod

LLC

Murmanska street, building 53, Kropyvnytskyi city,

Kirovohrad oblast, 25014

34.92% 37,000,000.00

Transgrainterminal

Investments

Odessa region, Chernomorsk city, Transportna street,

house 44

22.82% 10,319,912.83

Transshipservice LLC 10 Pushkinska str., Kyiv, 01001 Ukraine 24.00% 6,435,522.21

JV TransBulkTerminal LLC

Ukraine, 68000, Odesskaya district, city Illichivsk, 58,

Sukhomlinskaya str.

<0.01% 17.28

Total, USD

1,010,431,838.25

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 4 – Debtors

Debtors are mainly composed of:

becoming due

and payable

within one year

becoming due and

payable after more

than one year

Total

30.06.2023

Total

30.06.2022

USD

Amounts owed by affiliated undertakings

556,972,046.43

45,754,500.20

602,726,546.63

476,369,159.07

Loans provided to affiliated undertakings

456,200,409.44

45,754,500.20

501,954,909.64

476,342,052.40

Advance for increase of share capital of

affiliated undertaking

100,000,000.00

---

100,000,000.00

---

Other receivables from affiliated undertakings

771,636.99

---

771,636.99

27,106.67

Trade debtors

---

3,016,624.19

Other debtors

93,198,644.23

---

93,198,644.23

2,183,635.50

Receivable from the related party

90,181,767.38

---

90,181,767.38

---

Loans provided to the related party

1,798,986.28

---

1,798,986.28

1,783,986.29

VAT receivable

1,137,792.43

---

1,137,792.43

387,563.34

Other

80,098.14

---

80,098.14

12,085.87

Total

650,170,690.66

45,754,500.20

695,925,190.86

481,569,418.76

Loans provided to affiliated undertakings

As of 30 June 2023, the outstanding amount of the loans denominated in USD was 498,385,798.49 and denominated

in UAH was 3,569,111.15 (2022: 476,432,052.40 and nill respectively) and the rates for USD denominated loans were

in a range from 5.0% to 9.8% and for UAH denominated loan – 6.5% (2022: 5.0% to 9.8% for USD denominated loans).

Advance for increase of share capital of affiliated undertaking

During year ended 30 June 2023, the Company issued advance for the increase of share capital in one of its affiliated

undertakings. Increase of share capital of the subsidiary is subject of the registration in the government bodies of

Ukraine.

Other debtors

As of 30 June 2023, the Company had an outstanding balance of USD 89,973,920.00 in consideration for the sale of

participation in its affiliated undertakings to the related party (Note 3). During July 2023 the outstanding amount was

fully repaid.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 5 – Investments

Other investments are composed of the following:

30.06.2023

30.06.2022

USD

Investment certificates

63,280,324.35

Total

63,280,324.35

As of 30 June 2023, the Company holds investments certificates (debt instrument) of one of its affiliated undertakings,

which were issued under the ISIN code UA4000179790.

Note 6 – Prepayments

Prepayments are composed of:

30.06.2023

30.06.2022

USD

Issuance Cost/Discount on Eurobonds ($300m)

7,274,151.50

Issuance Cost/Discount - Amortisation

(3,586,671.68)

(2,414,278.73)

Total

3,687,479.82

4,859,872.77

The above prepayments originated on the Eurobonds issued by the Company, disclosed in Note 8.

Note 7 – Capital and Reserves

Subscribed

Capital

premiums and

similar

premiums

Legal

reserve

Profit or loss

brought

forward

Result for the

financial

year

Total

USD

As of 30 June 2022

2,218,928.64

507,069,043.22

221,893.00

425,670,599.02

10,385,435.50

945,565,899.38

Movements for the year:

• Allocation of prior year's

result

--- --- --- 10,385,435.50 (10,385,435.50) ---

• Profit for the year

---

121,198,956.75

As of 30 June 2023

2,218,928.64

507,069,043.22

221,893.00

436,056,034.52

121,198,956.75

1,066,764,856.13

The allocation of prior year’s results was approved by the General Shareholders’ Meeting of 20 December 2022.

Subscribed capital

As of 30 June 2023 and 2022, the Company’s share capital amounts to USD 2,218,928.64 divided into 84,031,230 shares

without indication of a nominal value.

Share premium and similar premiums

As of 30 June 2023 and 2022, the share premium account amounts to USD 507,069,043.22.

Legal reserve

Under Luxembourg law, the Company is obliged to allocate to a legal reserve a minimum of 5% of its annual net profit

until this reserve reaches 10% of the subscribed share capital. This reserve is not available for distribution.

As of 30 June 2023 and 2022, the legal reserve of the Company amounts to USD 221,893.00, and is fully allocated.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 8 – Creditors

Amounts due and payable for the accounts shown under “Creditors” are as follows:

Due and

payable within

one year

Due and

payable after

more than

one

year

Total

30.06.2023

Total

30.06.2022

USD

Non-convertible loans

607,611,973.07

---

607,611,973.07

Eurobonds - Guaranteed notes (Principal amount)

600,000,000.00

---

600,000,000.00

Eurobonds - Guaranteed notes (Accrued interest) 7,611,973.07 ---

7,611,973.07 7,611,973.07

Amounts owed to affiliated undertakings

41,988,011.91

15,099,980.00

57,087,991.91

8,577,825.11

Trade creditors

964,448.78

---

964,448.78

1,264,094.08

Tax authorities

938,632.36

---

938,632.36

400,270.20

Other creditors

40,610,492.54

---

40,610,492.54

91,050,562.40

Total 692,113,558.66 15,099,980.00

707,213,538.66 708,904,724.86

Non-convertible loans

In the table below presented aggregate information on guaranteed notes issued on the Irish stock exchange and

principal outstanding amounts as at the reporting dates:

Date of

issue

Initial

contractual

maturity

ISIN code

30.06.2023

(USD)

30.06.2022

(USD)

Guaranteed

Notes – 6.75% Eurobonds

Principal

27 October

2020

27 October

2027

XS2244927823 300,000,000.00 300,000,000.00

Guaranteed

Notes – 6.50% Eurobonds

Principal

17 October

2019

17 October

2024

XS2010040983 300,000,000.00 300,000,000.00

Accrued interest on Eurobonds

7,611,973.07

Total

607,611,973.07

As of 30 June 2023, and as of 30 June 2022, the Group did not have an unconditional right to defer settlement of its

bonds for 12 months or longer from the reporting date as a result of cross default provisions and accelerated maturity

of certain bank loans held by the Company’s subsidiaries. Therefore, Eurobonds balance is classified in the line “due

and payable within one year” as of both 30 June 2023 and 30 June 2022. Notwithstanding such classification, the Group

remained in full compliance with the terms of the bonds.

Interest charge on the Eurobonds classified under Interest payable and similar expenses (other interest and similar

expenses) line.

Amounts owed to affiliated undertakings

On 14 March 2022, the Company entered into a loan agreement with one of its affiliated undertaking and during the

year ended 30 June 2023, there have been several drawdowns and settlements of the respective loan.

Interest rate of the loans outstanding as of 30 June 2023 is in a range 2-3% and denominated in USD with maturity

30.06.2024 and 15.02.2025.

Guaranteed by several Company’s affiliated undertakings

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 8 – Creditors (continued)

Other creditors

On 3 March 2023, the sale transaction was completed, and therefore, the USD 20,000,000.00 previously held as an

advance for the sale of the shares in affiliated undertakings was extinguished (Note 3).

On 9 March 2022, the minority shareholders of Avere Commodities S.A. exercised put options, whereby, it obliged the

Company to acquire minority participation interest in Avere Commodities S.A. During July 2022 the unpaid amount of

USD 32,626,348.00 has been set-off against a loan payable to affiliated undertaking.

In April 2012, the Group entered into a call option agreement to acquire Stiomi Holding, a farming company located in the

Khmelnytskyi region of Ukraine. As of 30 June 2023, the outstanding liability including interest on amount due comprised

USD 40,556,112.36 (30 June 2022: USD 38,386,501.26).

Note 9 – Deferred income

Deferred income is made up as follows:

30.06.2023

30.06.2022

USD

Deferred accrued interest on loans

44,767.20

139,767.18

Note 10 – Other operating income/ Income from participating interests

Other operating income

During the financial year ended 30 June 2023, the Company received USD 9,999,000.00 (2022: nil) from an insurance

company for political violence insurance triggered by the war in Ukraine.

During the financial year ended 30 June 2022, the Company recognised recharges amounted of USD 22,260,600.00 from

one of its affiliated undertakings. The nature of these recharges is related to compensation of loss recognised on sale of its

undertaking during year ended 30 June 2022.

Income from participating interests

During the financial year ended 30 June 2023, the Company recognised income from participating interests

USD 241,911,167.84 (2022: USD 250,203,000.00), which mainly relates to:

- Gain on sale of participating interest in the affiliated undertakings USD 208,885,258.84 (2022: nil) (Note 3);

- Dividends received from affiliated undertakings USD 33,025,909.00 (2022: USD 250,203,000.00).

Note 11 – Other external expenses

The other external expenses are composed as follows:

2023

2022

USD

Donations

(2,909,602.32)

---

Business trips expenses

(2,243,558.97)

(2,660,372.39)

Legal fees

(1,713,142.64)

(1,661,785.94)

Other professional fees

(1,067,776.72)

(1,120,713.63)

Accounting and audit fees

(858,015.32)

(760,646.34)

Tax advisory fees

(56,338.31)

(76,765.74)

Other

(218,094.77)

(1,001,250.15)

Total

(9,066,529.05)

(7,281,534.19)

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

During the financial year ended 30 June 2023, the Company made donations for an amount of USD 2,909,602.32 on

social spendings, including support of the defenders of Ukraine and humanitarian aid.

Note 12 – Staff

During the financial year ended 30 June 2023, the Company had an average of 1 employee (2022: 2). On 31 December

2022, one of the employees terminated its employment with the Company.

During the financial year ended 30 June 2023, the Company had an expenses amounted of USD 12,666,642.00 in

relation to the Phantom share option and option buyback agreement dated 22 March 2021.

Note 13 – Emoluments granted to the members of the management and supervisory bodies

and commitments in respect of retirement pensions for former members of those bodies

The emoluments granted to the members of the management and supervisory bodies in that capacity are broken down

as follows:

2023

2022

USD

Directors' fees: amounts accrued during the year

364,621.24

624,601.21

During the year ended 30 June 2022, a new management incentive plan was introduced, according to which the

Company granted to management the options to sell to the Company 2,792,435 of its ordinary shares. The consideration

for each share will be a minimum of (i) USD 23.80 and (ii) operating profit before working capital changes minus interest

paid plus interest received minus interest tax paid minus maintenance capital expenditures in the fixed amount of USD

155,000,000, where all amounts, except for the maintenance capital expenditures, are specified in United States Dollars

(USD) as appropriately classified and disclosed in the consolidated statement of cash flows of the audited annual

consolidated accounts of the Company and its subsidiaries for the Financial Years 2022-2024, divided by three divided

by 12% and divided by 84,031,230. The option exercise period is set for a period commencing on 1 November 2024

and expiring on 31 December 2026. As of 30 June 2023 and 30 June 2022, the new management incentive plan

classified as off-balance sheet commitments.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 14 – Other operating expenses

2023

2022

USD

Other operating expenses

Fines, sanctions and penalties (Note 8)

(2,169,611.10)

(2,260,829.61)

Director's fees (Note 13)

(364,621.24)

(624,601.21)

Non-refundable VAT

(434,066.45)

(176,806.54)

Book value write-off of current receivables

(6,925.08)

---

Total

(2,975,223.87)

(3,062,237.36)

Note 15 – Audit fees

Audit fees are made up as follows:

2023

2022

USD

Audit fees

(565,876.79)

(430,710.57)

The fees of the PricewaterhouseCoopers Société cooperative for the audit of these annual accounts were USD 30,000

(2022: USD 25,000).

Note 16 – Off-balance sheet commitments

The financial commitments of the Company are as follows:

The Company is a Guarantor under two syndicate pre-export credit facilities with European banks for a total amount of

USD 620,000,000.00.

Also the Company guarantees all the obligations under long-term CapEX financing from European Investment Bank and

European Bank for Reconstruction and Development Bank for the total amount of USD 306,000,000.00. As of 30 June

2023, the outstanding principal amount under these financing stated USD 170,716,320.53 and USD 40,543,000.00,

respectively (30 June 2022: USD 187,388,888.04 and USD 47,040,000.00).

As of 30 June 2023, the Company has commitment as a Guarantor under agreements signed between Avere Commodities

SA and its subsidiaries and European banks for trading facility for the total amount of USD 264,000,000.00 (30 June 2022:

USD 264,000,000.00).

Additionally, as of 30 June 2023. the Company guarantees all the obligations under agreements in total amount of

USD 340,605,333.35 signed by subsidiaries of Kernel Holding S.A. with Ukrainian subsidiaries of European banks (covering

credit lines, contrguarantees, letter of credit issuance and operations with non-deliverable forwards) (30 June 2022 USD:

327,959,353.82).

Note 17 – Tax Status

The Company is fully taxable under Luxembourg tax regulations.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 18 – Contingencies

The international tax environment is becoming more complex in terms of tax administration, which could increase tax

pressure on taxpayers. In particular, a key part of the OECD/G20 BEPS Project is addressing the tax challenges arising

from the digitalization of the economy. The Glob-al Anti-Base Erosion Rules (GloBE) are a key component of this plan

and ensure large multinational enterprises pay a minimum level of tax on the income arising in each of the jurisdictions

where they operate. More specifically, the GloBE Rules provide for a coordinated system of taxation that imposes a

top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below

the minimum rate. It is expected that the final legislation will be enacted before 31 December 2023, in line with the

requirements of the EU Directive, and will be effective for the Group from 1 July 2024. The Kernel Group estimates that

the introduction of Pillar 2 could potentially result in an increase in income tax at the level of the parent company, which

may be obliged to pay the top-up tax on low-taxed income of the Group companies. In general, the increase in the tax

burden will depend on the actual level of the effective tax rate in the jurisdictions in which the Group operates.

Note 19 – Operating environment

As main investments of the Company are operating assets located in Ukraine, the operating environment of Ukraine

has the most significant impact on the Group’s operations and therefore on the Company as well.

On 24 February 2022, Russia launched a full-scale military invasion of Ukraine. As a response, Ukraine declared martial

law which is still in place as of the date of signing of annual accounts as the military actions are still ongoing in the

Eastern and Southern parts of Ukraine along the frontline, some towns and cities in these regions remain temporarily

occupied while Russia conducts sporadic bombardments throughout the whole Ukrainian territory.

After the commencement of the Russian invasion, the National Bank of Ukraine (“NBU”) abandoned its inflation targeting

policy and effective from 14 September 2023 decreased its key policy rate to 20%.

In order to stabilize the Ukrainian financial system during the war, the NBU fixed the official hryvnia exchange at UAH

36.57 per USD from 21 July 2022. In July 2023 the NBU announced the plans regarding easing of foreign currency

restrictions and the return to floating exchange rate and inflation targeting, which will be done gradually and subject to

some preconditions being in place. At the date of this annual accounts, the official NBU exchange rate of Hryvnia against

US dollar remained at the level of UAH 36.57 per USD 1. In September 2023, the NBU announced that the economy

and financial system of Ukraine return to normal operation regime therefore the floating exchange rate will be restored.

Moreover, the NBU has determined that the ban on transactions in Ukraine using the accounts of residents of Russia

or Belarus and legal entities whose ultimate beneficial owners are based in Russia or Belarus, does not apply to social

benefits, wages, utilities, taxes, fees, and other required payments. Despite the current unstable situation, the banking

system remains stable, with sufficient liquidity even as martial law continues, and all banking services are available to

its customers, both legal entities and individuals. Companies operating in Ukraine are paying taxes and money is still

flowing through its financial system.

During March - July 2022 the Black Sea and Azov Sea ports in Ukraine suspended their operations being blocked or

occupied by Russia as a result of military actions while limited railway capacity with Western countries has restricted

the ability to replace seaborne throughput. This has prevented most seaborne imports and exports. On 22 July 2022,

the representatives of Ukraine, Türkiye and the UN Secretary-General signed in Istanbul the Initiative on the Safe

Transportation of Grain and Foodstuffs from Ukrainian Ports, which allowed only for exports of grain and related food

products from the ports of Odesa Chornomorsk and Pivdennyi (“Grain deal”). On 17 July 2023 the Grain deal wasn`t

renewed, following the refusal of Russia to extend the agreement. Since then, Russia has launched a series of air

attacks on Ukraine, focused, among others, on destroying Danube ports infrastructure as well as Black Sea ports

infrastructure.

Starting in late 2022 and in early 2023, the situation on the energy market was substantially affected by the Russia`s

extensive campaign of illegal aerial bombardment, which targeted Ukraine’s power generation and transmission

facilities, stabilized due to the measures implemented such as the balancing of the energy system, the increase in the

production of electricity by nuclear power and the establishment of electricity imports from abroad as well as a decrease

of the intensity of the attacks on the energy infrastructure by Russia.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 19 – Operating environment (continued)

As of October 2023, the full-scale military attack continues. Russian attacks are targeted for destroying civilian

infrastructure all over Ukraine. At the same time, logistics routes in occupied territories were damaged and there is no

access to them. Other railway and car logistic routes are available for usage as Ukraine has an extensive road and

railway network. Assets belonging to different businesses, except those located on temporary occupied territory, were

not destroyed materially, based on available information, as air attacks and missile strikes primarily destroyed military

infrastructures, objects, airfields, and civilian buildings.

In May 2023, the World Health Organization declared the end of the pandemic status effective since early 2020 for the

coronavirus disease Covid-19, which emerged and rapidly spread all over the world. Starting from 1 July 2023, the

government of Ukraine lifted the quarantine and the state of emergency related to COVID-19. The Board assessed that

COVID-19 had a low effect on the Company’s operations during the year ended 30 June 2023.

Note 20 – Going concern

On 24 February 2022, the Russian Federation started a military invasion of Ukraine, leading to significant disruption

within Ukraine and triggering both economic and humanitarian crises. The business activities of Kernel group have been

changed and focused on continuity and safekeeping.

The Group considers the impact arising from the war on the business, as mentioned below:

• For the period after the Russian invasion of Ukraine 1,478 employees joined Ukrainian military forces and

territorial defence, approximately 634 of them were demobilized. Personnel mostly work in the same place as

before the war.

•

Several of the Group's facilities and infrastructure have suffered from missile attacks. Since 19 July 2023,

immediately following the termination of the Grain Deal, Russia intensified missile and drone attacks on

Ukrainian ports, transshipment, and agricultural infrastructure in the Odesa and Danube River regions aiming

to suspend the export of agricultural products from Ukraine. These attacks caused significant damage to the

grain export infrastructure at Ukrainian ports, specifically Odesa and Chornomorsk, including critical assets

owned by the Group. The attacks resulted in substantial harm to storage facilities, intake capacities, and loading

equipment, with a total estimated value of equipment loss of USD 11.2 million and a total value of commodity

inventories loss of USD 10.3 million, respectively.

•

The Vovchansk and Prykolotne oil extraction plants previously operated by the Group were liberated in

September 2022 but remain in high-risk zone in the Kharkiv region and currently inaccessible.

•

Two of the Kernel crushing plants reduced operations from November 2022 to January 2023 due to electricity

outages caused by the Russian missile strikes targeting the Ukrainian electricity generation and distribution

system. Four remaining crushing plants of the Group are equipped with cogeneration heat and power units,

which enables them to function relatively stable. The Ukrainian officials assume that Russia will also intensify

attacks on the Ukrainian electricity generation and distribution system during the winter of 2023/2024.

•

During the second and third quarters of the 2023 financial year the Grain Deal achieved relatively high volumes

of grain export, which allowed the Group to secure cash inflows from a decrease of working capital. The Group

resumed grain trading activity at a minimum level to ensure a stable flow of commodities at the Group’s export

terminals. Since the middle of spring, the Grain corridor had been operating unreliably and inefficiently.

However, despite these, the Group managed to export products through alternative routes including the Danube

River, railways, and trucks. On 17 July 2023, the Grain Deal was not renewed due to Russia’s refusal to extend

the agreement. The Group is developing alter-native export channels though with significantly higher logistics

costs compared to the Black Sea ports routes.

• Closer to the end of the 2023 financial year, the European Commission enacted temporary import restrictions

within its five member states on selected agricultural commodities originating from Ukraine, encompassing

wheat, maize, rapeseed, and sunflower seed. These measures defined that these products of Ukrainian origin

could solely pass through EU member states via a unified customs transit process or when en route to a non-

EU territory. Nevertheless, on 15 September 2023, the European Commission lifted the previously enforced

restrictions in response to Ukraine's commitment to enhancing its oversight of agricultural exports.

• Procurement of grain remains at low levels as Kernel continues to focus on exporting its own harvest and

maintaining low inventories while the availability of the export channels remains limited.

•

Group’s liquidity position is under continuous pressure due to the reduction of export volumes and revenue and

the growth of logistic costs for alternative ways of export.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 20 – Going concern (continued)

•

Considering the disruptions described above, the Group’s ability to service debt still suffers and the availability

of new facilities is extremely limited. The Group successfully negotiated with its lenders’ waivers on the

repayment of the loan principal with the requirement to make a certain portion of cash-sweep from the export

revenue for the period ending 30 June 2024, while interest payments are settled in a timely manner. As of the

date of issue of these annual accounts, the Group obtained waivers to extend the terms of repayment of the

principal of USD 777,909 thousand with the lenders and waiving of the debt covenants and some other

conditions by 30 June 2024.

•

The repayment of the bonds issued with a nominal value of USD 300,000 thousand scheduled on October 2024,

together with the repayment of the loan facilities mentioned above put significant pressure on the liquidity

position of the Group in the upcoming twelve months. The Group is scheduled to settle over USD 313 million of

financial obligations during June-October 2024.

• As of 30 June 2023, the Group continued to classify its bank borrowings with long-term initial contractual

maturity as short-term because the Group did not possess an unconditional right to defer the settlement of those

loans until their initial contractual settlement date. The extension of the waivers for the long-term loan facilities

depends on the results of further negotiations with the lenders and the conditions of the extension. In case

waivers are not extended upon expiration, it may trigger ability of bondholders to exercise their right for cross-

acceleration event of default under the Group’s outstanding bonds. As the Group did not have an unconditional

right to defer the settlement of its bonds for 12 months or longer it classified its long-term bonds as short-term

in these annual accounts.

The management of the Group has undertaken a restructuring of the business processes in response to the impacts of

the abovementioned events:

• Given the uncertain outlook for the reopening of Ukrainian Black Sea ports for agricultural product exports in

FY2024, the Group relies on Danube River ports and inland routes. While the Group has successfully secured

some capacity for exporting sunflower oil and meal, the increased logistics costs do not provide economically

viable alternatives for handling grain shipments at the current level of global commodities prices. The Group is

analysing additional investments to expand its grain export capabilities and simultaneously decrease logistics

expenses.

• Management set up logistics routes for grain and oil export through Danube River ports to Constanca, Romania

by vessels and barges, as well as through Poland, Romania, and Lithuania by trucks and railway including using

own railway wagons. This application of new logistic routes via land borders and Reni port started when the

Black Sea ports closed after 18 July 2023. The creation of alternative logistics chains for export makes it

possible to export approximately 100,000 tons of grain/oilseeds, 100,000 tons of sunflower oil, and 100,000 of

sunflower meal processing products per month. However, high logistic costs and low selling prices may result

in some of such operations being loss-making.

• The export sales volume is limited by slow railway logistics through land borders due to technical differences

between the Ukrainian and European railway networks. Therefore, during the 2023 financial year, the

management has invested USD 38,486 thousand in the purchase of one bulk carrier vessel for grain shipments,

one oil tanker for sunflower oil shipments, 2 barges, 99 rail flatcars, 100 grain containers and 400 tank-

containers to increase logistic capacity, and 30 trucks with trailers for grain transportation.

• The Group currently operates a land bank comprising 359 thousand hectares, including 340 thousand hectares

under 2022 crop to be sold, 7 thousand hectares of land under seeds and crops grown for in-house use (cattle

business), and 12 thousand hectares of fallow land. As of the date of publication of this report, the Group

completed the harvesting of winter crops, sunflower seeds, and soybeans, and is progressing with corn

harvesting.

To maintain liquidity and manage the uncertainty the Group decided to continue waiver and standstill

arrangements with the lenders and entered into new negotiations with the Lenders in May 2023 in respect of

the commercial terms for the new standstill period till 30 June 2024. As a result, the Group obtained waivers for

the pre-war borrowings of USD 777,909 thousand to defer repayment until 30 June 2024.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 20 – Going concern (continued)

• The restructuring negotiations with the lenders resulted in the complex solution of the restructuring terms

accepted by the lenders including the provisions regarding the Group’s shareholders support in the amount of

up to USD 60,000 thousand which was deemed necessary and equitable by the lenders. To satisfy the

restructuring terms, on 1 September 2023, the Group announced an additional issue of 216,000,000 shares

raising USD 59,983 thousand in proceeds. In addition, the Group repaid USD 20,264 thousand as part of the

restructuring conditions and pledged deposit as the collateral of USD 122,703 thousand.

• Additionally, conditions of the restructuring allowed the Group to settle borrowings of USD 25,319 thousand,

which were repaid by the Group in October 2023.

• Despite the disruptions caused by the war in Ukraine, as of 30 June 2023 the Group’s current assets exceeded

current liabilities and the Group generated profit for the period of USD 298,774 thousand and operating cash

flow of USD 595,839 thousand.

• The Group is exploring alternative sources of financing, such as loans from international and Ukrainian banks

and financial institutions that have committed to providing financial support to businesses in Ukraine.

Considering the above the Board of Directors and Group’s management assessed the going concern assumption based on

Company’s annual accounts (and the Group’s consolidated financial statements) have been prepared and concluded that

this assumption is appropriate for the purpose of preparation of the Company’s annual accounts (and the Group’s

consolidated financial statements).

The Group’s management prepared two scenarios of cash flow forecasts for the next 12 months from the date of the

approval of these annual accounts, assuming full operation of the Grain Corridor from January 2024 or July 2024. The

following key assumptions were made by management:

• no further significant progression of Russian troops into the territory of Ukraine and escalation of military actions

that could severely affect the Group’s assets;

• no critical damages to the Group’s infrastructure or Ukraine’s critical transport and energy infrastructure;

• “Grain Corridor” deal or similar arrangement will be in force since 1 January or 1 July 2024 and will be prolonged

further;

•

Deep water ports in Ukraine will be closed until the abovementioned dates and will continue to operate with

significant disruption afterward, allowing the Group to export only by alternative routes, which amounts to

roughly 50% capacity utilization;

• postponement of capital expenditures, which are non-essential for the operations and are not committed in the

contracts;

• pre-war investment loan facilities' principal amounts will be settled in the amounts not higher than the initial

contractual schedule and neither of these lenders will exercise their rights to request early settlement of the

outstanding borrowings;

• the Group will be able to arrange for additional financing to refinance existing indebtedness or extend the

repayment schedules and/or return to the initial contractual maturity of the existing loan facilities or bonds

issued;

• the shareholders will continue to support the Group.

If significant assumptions and judgments made by the Group’s management are not realized, the Group’s management

will continue seeking alternative ways to meet its financial obligations during 2024, including requesting additional

support from shareholders.

The Group’s Management together with the Board of Directors acknowledges that future development of military

actions, their duration represent a material uncertainty that may cast significant doubt about the Group’s and Company’s

ability to continue as a going concern and, therefore, the Group may be unable to realize its assets and discharge its

liabilities in the normal course of business. These events may adversely affect the Group’s ability to repay its debt as it

falls due. Despite the material uncertainty relating to the war in Ukraine, the Group’s management together with the

Board of Directors are continuing to take actions to minimize the impact on the Group and Company and thus believes

that the application of the going concern assumption for the preparation of these annual accounts is appropriate.

KERNEL HOLDING S.A.

R.C.S. Luxembourg B 109173

Notes to the annual accounts for the year ended 30 June 2023

Annual

accounts for the year ended

30 June 2023

Note 21 – Subsequent events

In addition to the subsequent events disclosed in Notes 19 and 20 there were the following subsequent events:

As part of loans restructuring negotiations the Group’s lenders requested shareholders support of USD 60,000,000.00 to be

provided to the Company. In response to the lenders’ requests, on 4 September 2023, the Company increased in its share

capital by USD 5,703,696.00, through the issuance of 216,000,000 new Ordinary Shares, each without indication of a

nominal value. The total offering of USD 59,983,200.02 was raised from qualified investors, with USD 54,279,504.02

allocated to share premium.