Ferrexpo charity review committee completes its work

Ukraine’s largest iron ore pellet exporter Ferrexpo
(FXPO LN) announced in an Aug. 30 release that the independent review committee
(IRC), established in February by its board to investigate the use of company
funds donated to the Blooming Land charity, has completed its work.

Recall, Ferrexpo’s past auditor, Deloitte, resigned on Apr. 26
because of the unfolding situation with the use of Ferrexpo’s donations and the
company’s potential undeclared links to Blooming Land,
an entity that managed Ferrexpo’s corporate social responsibility (CSR)
program.

The IRC has been unable to determine the ultimate use
of all of the funds by Blooming Land, Ferrexpo said in its statement, adding
that indications remain that some of the funds could have been misappropriated.
Ferrexpo added that it is aware of various tax and other investigations in
Ukraine in connection with matters related to Blooming Land, the company’s
committee of independent directors will monitor the situation, and Ferrexpo
will keep the market informed of any developments.

Also in today’s release, Ferrexpo announced it has
terminated its relationship with Blooming Land, and the company’s board will
ensure adherence to the highest standards of diligence, oversight, governance
and reporting should it resume any national CSR program.

However, the IRC was able to re-affirm that the
charity is not a related party to the company and to its CEO, Kostyantyn
Zhevago, under the listing rules.

Dmytro Khoroshun: The
affirmation of no links between Zhevago and Blooming Land is the most
encouraging result of the IRC’s work, in our opinion. We hope this conclusion withstands
any further inquiries into whether any funds have been misappropriated by the
charity.

If it is found in the future that Blooming Land
misappropriated some of the funds, but without any links to Zhevago or other
Ferrexpo-related persons, then it would be a minor finding, in our opinion.
Ferrexpo has learned its lesson, will be more diligent in the future, and the
markets should have all the reasons to forget this affair.

Conversely, if the conclusion of no relationship
between Ferrexpo and Blooming Land, particularly via Zhevago, is questioned in
the future (as had been done by Deloitte), it would be a major setback for
trust in the company’s corporate governance.