C 91228Annual Report andConsolidated Financial Statements 31 December 2021
Tum Finance plc
Pages
General information
1
Directors' report
2-3
Statement of compliance with the principles of good corporate governance
4-14
Statements of profit or loss and other comprehensive income
15
Statements of financial position
16 – 17
Statement of changes of equity - Group
18
Statement of changes in equity - Company
19
Statements of cash flows
20
Notes to the financial statements
21 – 54
Independent auditor's report
55 – 63
1
General information
Registration
Tum Finance plc (‘the Company’) is registered in Malta as a public limited liability company under the Companies Act (Cap. 386, Laws of Malta). The Company was registered on 26 March 2019 and its registration number is C 91228.
Board of Directors
Mr. Anthony Fenech
Mr. Matthew Fenech
Mr. Silvan Fenech
Mr. Stanley Portelli
Mr. Mario Vella
Mr. William Wait
Company Secretary
Dr. Malcolm Falzon
Registered Office
Tum Invest Head Office
Zentrum Business Centre
Mdina Road
Qormi, QRM9010
Malta
Bankers
Lombard Bank Malta plc
67, Republic Street
Valletta VLT1117
Malta
Bank of Valletta plc
45, Republic Street
Valletta VLT1113
Malta
Auditor
Ernst & Young Malta Limited
Fourth Floor
Regional Business Centre
Achille Ferris Street
Msida MSD1751
Malta
2
Directors’ report
The Board of Directors of Tum Finance p.l.c. (the “Company”) submit their annual report and the annual financial statements of the Company (on a separate and consolidated basis) for the year ended 31 December 2021.
Principal activity
Performance review
The statement of comprehensive income is set out on page 15. During the year, the Group generated a profit before tax of EUR1,978,097 (2020: EUR6,396,121). The results for the prior year were influenced by the fair value gain registered on investment property held by the Group which amounted to EUR4,855,047. The Company generated a profit before tax of EUR72,940 (2020: EUR20,292).
Dividends
During the year ended 31 December 2021, the Company did not declare any dividends.
Financial risk management
The Company's activities expose it to a variety of financial risks, including credit risk and liquidity risk. Please refer to Note 26 in these financial statements.
Events after the end of reporting year
Events after the reporting period are disclosed in Note 27 to the financial statements.
Future developments
The Directors are confident that the worst effect on the business of the Covid pandemic has passed and failing unforeseeable events, look to 2022 with optimism.
A wholly owned subsidiary of the Company, Tum Operations Limited (C-91301) (“TOL”), and Center Parc Holdings Limited (C-72342) (“CPHL”), in which TOL holds 75% of the issued share capital, together with the other shareholder of CPHL, has entered negotiations with third parties unrelated to the Company, in connection with a possible joint venture whose principal activity will be the development and operation of properties already owned by each of the joint venture parties as well as investment in further properties for the development and, or operation thereof. The Board has already issued a company announcement (TMF16) informing the market of this potential transaction and will be keeping the market informed of developments through the issuance of further announcements as and when appropriate.
Directors
The names of the Directors of the Company who held office during the year to date are set out on page 1. In accordance with the Company’s Memorandum and Articles of Association, the present Directors shall remain in office for a period of three (3) years from their date of appointment.
Auditor
Ernst & Young Malta have expressed their willingness to continue in office and a resolution for their re-appointment will be proposed at the Annual General Meeting.
3
Directors’ report - continued
Statement of directors’ responsibilities pursuant to Capital Markets Rule 5.68
The Directors are required by the Companies Act (Cap. 386) of the laws of Malta (the “Companies Act”) to prepare financial statements in accordance with generally accepted accounting principles and practice which give a true and fair view of the state of affairs of the Company at the end of each financial period and of the profit or loss of the Company for the period then ended.
In preparing the financial statements, the Directors should:
•Select suitable accounting policies and apply them consistently;
•make judgements and estimates that are reasonable; and
•prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Company will continue in business as a going concern.
•account for income and charges relating to the accounting period on the accrual basis;
•value separately the components of asset and liability items;
•report comparative figures corresponding to those of the preceding accounting period.
The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and which enable the Directors to ensure that the financial statements comply with the Companies Act and the International Financial Reporting Standards as adopted by the EU. This responsibility includes designing, implementing and maintaining such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Directors are also responsible for safeguarding the assets of the Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Going Concern Statement Pursuant to Capital Markets Rule 5.62
The Directors have assessed the appropriateness of the going concern on the basis of cash forecasts prepared by management. These projections indicate that the Group will have sufficient resources to meet its obligations as they fall due. The shareholders have furthermore confirmed their commitment to support the Group financially or otherwise should this be required.
At the time of approving these financial statements, the Directors have determined that there is a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future and continue adopting the going concern basis in preparing the financial statements.
Signed on behalf of the Company’s Board of Directors on 22 April 2022 by Silvan Fenech and Anthony Fenech as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report 2021.
4
Statement of compliance with the principles of Good Corporate Governance
1.Introduction
The Capital Markets Rules issued by the Malta Financial Services Authority (MFSA) require companies listed on the Official List of the Malta Stock Exchange to endeavour to adopt and observe The Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules (the “Code”).
Although the Code sets out (non-mandatory) recommended principles of good practice, the Board of Directors of the Company (the “Board” or the “Directors”) consider that such practices are generally in the best interests of the Company, its shareholders, its bondholders, and other stakeholders, and that compliance with the Code evidences the Company’s and the Directors’ commitment to high standards of good corporate governance.
This Corporate Governance Statement (the “Statement”) sets out the organisational structures, controls practices and processes in place within the Company and explains how these effectively achieve the goals set out in the Code. For this purpose, the Statement will make reference to the pertinent provisions and principles of the Code and set out the manner in which the Directors believe these have been adhered to. Where the Company has not complied with any of the principles of the Code, this Statement provides an explanation for such non-compliance. Reference in this Statement to compliance with the principles of the Code means compliance with the Code’s main principles and provisions.
The Board has carried out a review of the Company’s compliance with the Code during the period under review and is hereby reporting on the extent of its adoption of the provisions and principles of the Code for the financial year being reported, as required in terms of Capital Markets Rule 5.97.
2.Compliance
The Company has adopted a corporate decision-making and supervisory structure that is tailored to suit its requirements and designed to ensure the existence of adequate controls and procedures within the Company, whilst retaining an element of flexibility essential to allow the Company to react promptly and efficiently to circumstances arising in respect of its business, taking into account its size and the economic conditions in which it operates.
The Directors are of the view that the Company has employed structures which are most suitable and complementary for the size, nature, operations and level of complexity of the Company. Accordingly, in general the Directors believe that the Company has adopted appropriate structures to achieve an adequate level of good corporate governance, together with an adequate system of control in line with the Company’s requirements.
In particular, it is pertinent to note that the Company has no employees of its own and its principal purpose is to act as a financing and holding vehicle for the Tum Finance Group (as defined hereunder), consisting of the Company and its direct subsidiary Tum Operations Limited (C91301) and indirect subsidiaries Center Parc Holdings Limited (C72342) and Easysell Limited (C9778) (hereinafter the “Guarantor”) (collectively referred to as the “Tum Finance Group”), in view of which, the Directors deem some of the principles and provisions of the Code to be disproportionate or inapplicable to the Company, as explained further below.
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Statement of compliance with the principles of Good Corporate Governance – continued
Principle 1: The Board
The Directors believe that for the period under review, the Company has generally complied with the requirements of this principle and the relative Code provisions.
The Board is composed of members who are fit and proper to direct and manage the business of the Company with honesty, competence and integrity. All the members of the Board are aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company and its status as a listed company and the Board is cognisant of its accountability for its own performance and that of its delegates. The Board of Directors is primarily responsible for:
•devising the corporate and business strategy of the Company;
•setting and reviewing internal policies, procedures and controls of the Company;
•the overall management and supervision of the Company;
•reviewing and evaluating internal control procedures, financial performance and business risks and opportunities facing the Company.
Throughout the period under review, the Board has maintained systems designed to ensure that the Directors obtain timely information at regular intervals or when the need arises.
The Board has delegated specific responsibilities to the Audit Committee, under formal terms of reference approved by the Board. Further detail in relation to the Audit Committee may be found in the sections headed ‘Principles 4 and 5’ of this Statement hereunder.
Principle 2: Chairman and Chief Executive Officer
Given that the Company acts as the holding and financing arm of the Tum Finance Group and does not carry out other operations of its own, the Company has not appointed a Chief Executive Officer. Nevertheless, it has appointed a Chairperson, whose role is to lead the Board. During the period under review, Mr Anthony Fenech (an executive director of the Company) occupied the post of Chairperson.
Principle 3: Composition of the Board
In terms of the Articles of Association of the Company, the Board of Directors of the Company shall consist of a minimum of three (3) directors and a maximum of six (6) directors.
In terms of the Articles of Association of the Company, the Directors of the Company (save for the managing director, if any) shall retire from office every three (3) years. Retiring Directors shall, however, be eligible for re-appointment. The Company shall give its shareholders, having voting rights, at least fourteen (14) days written notice to submit candidates for the election to Directors, and the appointment (and removal) of Directors shall be made by an ordinary resolution.
The Board of Directors of the Company is comprised of six (6) directors, three (3) of whom are executive directors, and three (3) of whom are independent non-executive directors. All of the present Directors of the Company were originally appointed with effect from the date of registration of the Company, and their tenure was extended for a further period of three years by virtue of a shareholders’ resolution passed on 24 March 2022.
Director
Capacity
Date of Appointment
Mr. Anthony Fenech
Executive Director (Chairperson)
26th March 2019
Mr. Matthew Fenech
Executive Director
26th March 2019
Mr. Silvan Fenech
Executive Director
26th March 2019
Dr. Stanley Portelli
Independent and Non-Executive Director
26th March 2019
Mr. Mario Vella
Independent and Non-Executive Director
26th March 2019
Mr. William Wait
Independent and Non-Executive Director
26th March 2019
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Statement of compliance with the principles of Good Corporate Governance - continued
Principle 3: Composition of the Board (continued)
For the purpose of Code Provision 3.2, three (3) of the Directors are considered by the Board to be independent within the meaning of the Capital Markets Rules, such independent Directors being Dr. Stanley Portelli, Mr. Mario Vella, and Mr. William Wait.
The non-executive Directors contribute to the strategic development of the Company and the creation of long-term growth of the Company and are responsible for:
•constructively challenging and developing strategy;
•monitoring reporting of performance;
•scrutinising performance of management; and
•ensuring the integrity of financial information, financial controls and risk management systems.
Save as disclosed above, none of the non-executive Directors of the Company:
a)are or have been employed in any capacity by the Company;
b)receive significant additional remuneration from the Company;
c)have close family ties with any of the executive members of the Board;
d)have been within the last three (3) years an engagement partner or a member of the audit team of the present or past external auditor of the Company; and
e)have a significant business relationship with the Company.
In terms of Code Provision 3.4, each non-executive Director has declared in writing to the Board that he undertakes:
•to maintain in all circumstances his/her independence of analysis, decision and action;
•not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and
•to clearly express his opposition in the event that he finds that a decision of the Board may harm the Company.
Each non-executive Director has complied with the aforementioned undertaking for the period under review.
Principle 4 and 5: The Responsibilities of the Board and Board Meetings
The Board of Directors is entrusted with the overall direction, administration and management of the Company and meets on a regular basis to discuss and take decisions on matters concerning the strategy, operational performance and financial performance of the Company.
In fulfilling its mandate, the Board assumes responsibility to:
a)establish appropriate corporate governance standards;
b)review, evaluate and approve, on a regular basis, long-term plans for the Company;
c)review, evaluate and approve the Company’s budgets, forecasts and financial statements;
d)review, evaluate and approve major resource allocations and capital investments;
e)review the financial and operating results of the Company;
f)ensure appropriate policies and procedures are in place to manage risks and internal control;
g)review, evaluate and approve the overall corporate organisation structure;
h)review, evaluate and approve compensation to Directors;
i)ensure effective communication with shareholders, bondholders, other stakeholders and the market.
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Statement of compliance with the principles of Good Corporate Governance - continued
Principle 4 and 5: The Responsibilities of the Board and Board Meetings (continued)
In fulfilling its responsibilities, the Board continuously assesses and monitors the Company’s present and future operations, opportunities, threats, and risks in the external environment, and its current and future strengths and weaknesses in its internal environment.
Audit Committee
The Board delegates certain specific responsibilities to the Audit Committee. The Board of Directors of the Company has established an Audit Committee and has formally set out Terms of Reference governing the scope of its composition, role, functions, powers, duties and responsibilities, as well as the procedures and processes to be complied with in its activities.
The Audit Committee is a sub-committee of the Board and fulfils an oversight role in connection with the quality and integrity of the Company’s financial statements. Towards this end, the over-arching objective of the Audit Committee is that of assisting the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal controls, the audit process and the process for monitoring compliance with applicable laws and regulations.
The Audit Committee is expected to deal with and advise the Board on issues of financial risk, control and compliance, and associated assurance of the Company, including:
i.ensuring that the Company adopts, maintains and, at all times, applies appropriate accounting and financial reporting processes and procedures;
ii.monitoring of the audit of the Company’s management and annual accounts;
iii.facilitating the independence of the external audit process and addressing issues arising from the audit process and ensuring good communication between internal and external audit activities, as applicable;
iv.reviewing of the systems and procedures of internal control implemented by management and of the financial statements, disclosures and adequacy of financial reporting;
v.making of recommendations to the Board in relation to the appointment of the external auditors and the approval of the remuneration and terms of engagement of the external auditors, following the relative appointment by the shareholders in the annual general meeting;
vi.monitoring and reviewing of the external auditors’ independence and, in particular, the provision of additional services to the Company;
vii.ensuring that the Company, at all times, maintains effective financial risk management and internal financial and auditing control systems, including compliance functions; and
viii.assessing any potential conflicts of interests between the duties of Directors and their respective private interests, or their duties and interests unrelated to the Company.
In addition, the Audit Committee has the role and function of evaluating any proposed transaction to be entered into by the Company and a related party (which term shall have the same meaning as in the International accounting standards adopted in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council) to ensure that the execution of any such transaction is at arm’s length, on a commercial basis and ultimately in the best interests of the company.
Any proposed transaction which the Company wishes to enter into and which satisfies either of the following conditions shall be referred to the Audit Committee for its consideration and approval:
(i)transactions which clearly fall within the ambit of the Capital Markets Rules as related party transactions and which are not the subject of an exemption therefrom;
(ii)transactions in respect of which management is not certain as to whether they fall within the ambits of the Capital Markets Rules as related party transactions or in respect of which there is uncertainty as to whether any one or more exemptions should apply to the proposed transactions.
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Statement of compliance with the principles of Good Corporate Governance – continued
Principle 4 and 5: The Responsibilities of the Board and Board Meetings (continued)
At the meeting convened for this purpose, the Audit Committee shall consider the proposed transaction and first determine whether it is a transaction that falls within the ambit of the applicable Capital Markets Rules and, if it so determines, shall then consider the merits of the proposed transaction.
The Audit Committee is made up entirely of non-executive Directors, all of whom are independent of the Company. Audit Committee members are appointed for as long as they remain independent non-executive Directors, unless terminated earlier by the Board. During the period under review, the Audit Committee was composed of:
Mr. Mario Vella
Chairperson of the Audit Committee
Dr. Stanley Portelli
Member of the Audit Committee
Mr. William Wait
Member of the Audit Committee
The Chairperson of the Audit Committee, appointed by the Board, is entrusted with reporting to the Board on the workings and findings of the Audit Committee. Mr Mario Vella occupied the post of Chairperson of the Audit Committee during the period under review.
Mr. Mario Vella and Mr. William Wait are considered by the Board to be competent in accounting and/or auditing in terms of the Capital Markets Rules, based on their respective extensive experience occupying financial management and auditing roles within various private and public entities, as well as their respective skills and competencies in financial reporting, financial management, financial auditing and general financial advisory.
In performing its duties, the Audit Committee is to maintain effective working relationships with the Board of Directors, management and the external auditors of the Company.
The Audit Committee has also met on ten (10) occasions during the financial period ended 31 December 2021, which meetings were attended by all its members. The Audit Committee is scheduled to meet at least five (5) times in 2022.
The Board believes that it has systems in place to fully comply with Principle 5 and the relative Code Provisions, in that it has systems in place to ensure reasonable notice of meetings of the Board and ensuring that the Directors receive discussion papers in advance of meetings, to the extent possible.
The Directors are assisted by the company secretary, who is consulted to ensure compliance with statutory requirements and with continuing listing obligations. The company secretary keeps minutes of all meetings of the Board and of its committees, which minutes are subsequently circulated to the Board as soon as practicable after the meeting.
The Company also maintains detailed records of all dealings by Directors of the Company and its subsidiaries, as well as senior executives thereof in the Company’s bonds, and assists the Board and senior management in being duly informed of and conversant with their obligations emanating from the Market Abuse Regulation (EU Regulation 596/2014) (“MAR”) and ensuring compliance therewith, to ensure the prevention and detection of insider dealing, unlawful disclosure of inside information and, or market abuse. In particular, cognisant of the material consequences of non-compliance with MAR and the effects thereof on investor confidence and market integrity, the Board has in place written policies and procedures relating to the keeping of insiders’ lists, dealing in bonds of the Company, and procedures for persons in possession of inside information.
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Statement of compliance with the principles of Good Corporate Governance - continued
Principle 4 and 5: The Responsibilities of the Board and Board Meetings (continued)
The Directors have access to independent professional advice on any aspect of their duties and responsibilities, or the business and activities of the Company, at the Company’s expense should they so require.
The Board of Directors of the Company met formally eleven times during the period under review either in its offices in Malta or by video conference. The number of board meetings attended by the individual Directors for the period ended 31 December 2021 is as follows:
Name
Capacity
Meetings attended while in office
Mr. Anthony Fenech
Executive Director (Chairperson)
6/11
Mr. Matthew Fenech
Executive Director
8/11
Mr. Silvan Fenech
Executive Director
11/11
Dr. Stanley Portelli
Independent and Non-Executive Director
11/11
Mr. Mario Vella
Independent and Non-Executive Director
11/11
Mr. William Wait
Independent and Non-Executive Director
11/11
Principle 6: Information and Professional Development
The Directors receive periodic information on the Company’s and Tum Finance Group’s financial performance and position, and the company secretary is available for the provision of training programmes as and when necessary.
Principle 7: Evaluation of the Board’s Performance
The Board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the Board’s performance is evaluated on an ongoing basis by, and is subject to the constant scrutiny of, the Board itself, the Company’s shareholders, the market and the rules by which the Company is regulated as a listed company.
Principle 8: Committees
The Directors believe that, due to the Company’s size and operations, it is not necessary to establish committees regarding remuneration, board evaluation and nominations as suggested by the Code and the Directors have formulated the view that these functions can efficiently and effectively be undertaken by the Board itself.
In view of the above, the Board undertakes an annual review of the remuneration structure applicable to Directors and carries out a self-evaluation of the performance of the Board. The aggregate remuneration that may be paid by the Company to its Directors is subject to the approval of the shareholders at the annual general meeting of the Company.
In this respect, it is pertinent to note that the remuneration that may be paid to the Directors is fixed and the Directors are not entitled to any performance based or variable remuneration. Furthermore, the Directors of the Company are not entitled to profit-sharing, share options or pension benefits.
Remuneration statement
In terms of Rule 8A.4 of the Code, the Company is to include a remuneration statement in its annual report which shall include details of the remuneration policy of the Company and the financial packages of the Board of Directors.
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Statement of compliance with the principles of Good Corporate Governance - continued
Principle 8: Committees (continued)
Remuneration statement (continued)
In terms of Article 96 of the Articles of Association of the Company, it is the shareholders of the Company in the General Meeting who determine the maximum annual aggregate remuneration payable to the Directors. The aggregate amount to be proposed for approval for this purpose at the next Annual General Meeting is EUR36,000.
None of the Directors of the Company is employed by the Company. The Non-Executive Directors are party to service contracts with the Company.
No part of the remuneration paid to the Directors is performance-based. None of the Directors, in their capacity as a director of the Company, is entitled to profit sharing, share options or pension benefits.
The Non-Executive Directors received EUR36,000 (2020: EUR36,000), in aggregate for services rendered during the year ended 31 December 2021.
Principle 9: Relations with shareholders (and bondholders) and the market
The Company is committed to ensuring an open channel of communication with its shareholders, bondholders, other stakeholders and the wider market. The publication of interim and annual financial statements, together with ongoing company announcements, keep the market informed of developments relating to the Company and, in the case of bondholders, of developments pertinent to their investment in the Bonds. The Board feels that such communication provides the market with adequate information about its activities.
In addition, the Company’s website (http://tumfinance.com/index.php/investor-relations/) acts a central source of information about the Company, its business, and developments relating thereto.
Principle 10: Institutional shareholders
The Company has no institutional shareholders; therefore Principle 10 of the Code does not apply to the Company.
Principle 11: Conflicts of Interest
The Directors are fully aware of their responsibility to always act in the best interests of the Company and its shareholders irrespective of whoever appointed or elected them to serve on the Board.
On joining the Board and regularly thereafter, Directors and officers of the Company are informed and reminded of their obligations on dealing in securities of the Company within the parameters of law and Capital Markets Rules. The Company has also established an internal code of dealing and reporting procedures.
It is the practice of the Board that when a potential conflict of interest arises in connection with any transaction or other matter, the potential conflict of interest is declared, so that steps may be taken to ensure that such items are appropriately addressed. By virtue of the Memorandum and Articles of Association, the Directors are obliged to keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with that of the Company. The Board member concerned shall not take part in the assessment by the Board as to whether a conflict of interest exists. A Director shall not vote in respect of any contract, arrangement, transaction or proposal in which he/she has a material interest. The Board believes that this is a procedure that achieves compliance with both the letter and rationale of Principle Eleven of the Code.
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Statement of compliance with the principles of Good Corporate Governance - continued
Principle 11: Conflicts of Interest (continued)
Save as stated below, the Directors are not aware of any potential conflicts of interest which could relate to their roles within the Company:
i.Mr. Anthony Fenech (an executive director and Chairperson of the Company) is the sole ultimate beneficial owner of the Company. The sole beneficial owner, and members of his family, are members of the board of directors of several entities within the Tum Finance Group. In particular, Mr. Anthony Fenech himself is a director of Tum Operations Limited (C91301) and Easysell Limited (C9778);
ii.Mr. Silvan Fenech (an executive director of the Company) is also a director on the board of directors of all companies forming part of the Tum Finance Group;
iii.Mr. Matthew Fenech (an executive director of the Company), is also a director on the board of directors of all companies forming part of the Tum Finance Group;
iv.the board of directors of the sole parent company of the Company (that is, of TUM Invest Limited, C69572), is comprised of Mr. Anthony Fenech, Mr. Silvan Fenech and Mr. Matthew Fenech;
v.Mr. Mario Vella (an independent non-executive director of the Company) sits on the board of directors of all the companies within the Tum Finance Group.
The Executive Directors of the Company and Mr Vella are thus susceptible to conflicts between the potentially divergent interests of the Tum Finance Group.
Moreover, conflicts may further arise given lender-borrower relationship subsisting between the Company and its direct subsidiary (Tum Operations Limited - C91301) and with its indirect subsidiaries (Center Parc Holdings Limited - C72342) and Easysell Limited - C9778) respectively.
Conflicts may also arise in respect of the Secured Asset (the property owned by Easysell Limited at Mdina Road, Qormi) given that the Company uses part of such property as its registered office, and the Secured Asset is one third owned by Tum Invest Limited (C69572), whose directors are also directors of the Company and the companies forming part of the Tum Finance Group.
Principle 12: Corporate Social Responsibility
The Tum Finance Group makes regular contributions to social and charitable causes and projects and adheres to accepted principles of corporate social responsibility as well as business and ethical standards.
3.Non-Compliance with the Code
The Directors have adopted a corporate governance framework within the Company that is designed to better suit the Company, its business, scale, and complexity, whilst ensuring proper checks and balances.
Taking the above into account and considering that the Code is not mandatory and that the provisions thereof may be departed from provided that reasonable and justifiable circumstances exist and are adequately explained, the Directors set out below the Code Provisions with which the Company does not comply and what are, in its view, a reasonable and justifiable basis for such departure from the recommendations set out in the Code relating to the composition of the Board.
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Statement of compliance with the principles of Good Corporate Governance - continued
3.Non-Compliance with the Code (continued)
Code Provision
Explanation
Principle 2: Chairman and Chief Executive (Code Provisions 2.1, 6.4 and 6.5)
Although the Articles of Association of the Company allow for the appointment of a Chief Executive Officer, no such officer has been appointed for the period under review. In addition, the division of responsibilities between the Chairman and Chief Executive Officer has not been set out in writing as required in terms of Code Provision 2.1. Accordingly, Code Provisions 6.4 and 6.5 which set out the responsibilities of the Chief Executive have not been complied with as these are not applicable at this point in time.
Principle 2: Chairman and Chief Executive (Code Provisions 2.3)
With respect to Code Provision 2.3, the Board notes that the Chairman is also an executive member of the Board. However, the Board is of the view that this function of the Chairman does not impinge on his ability to bring to bear independent judgement to the Board.
Principle 8A and 8B: Remuneration Committee (Code provision 8.A.1) and Nominations Committee (Code provision 8.B.1)
Principle 9: Relations with shareholders and the market (Code provision 9.3)
The Board has not established a Remuneration and/or Nominations Committee.
The Board has formulated the view that the size, structure and management of the Company are such that the establishment of an ad hoc Remuneration Committee is not warranted, and the responsibility for the establishment, review and implementation of the Company’s remuneration policies has been retained within the remit of the Board itself. In particular, the Board notes that the current remuneration policy of the Company comprises purely fixed-rate remuneration, with no entitlement to any performance-based remuneration, or any entitlement to share options, retirement pension benefits or other benefits.
Furthermore, the Board believes that the procedure for the nomination and appointment of Directors contained in the Articles of Association are commensurate to the size and operations of the Company, and does not consider the requirement to establish an ad hoc Nominations Committee to be necessary for the Company.
Instead, the Board takes on the role of periodically assessing the skills, knowledge and experience of individual directors for the Board to have the appropriate level of skill, knowledge and experience, that would endow the Board with the requisite collective competence for the proper functioning, management and oversight of the Company by the Board.
The Board intends to keep under review the utility and possible benefits of having a Remuneration Committee and Nominations Committee in due course.
There are no formal procedures in place within the Company for the resolution of conflicts between minority and controlling shareholders, nor do the Memorandum and Articles of Association of the Company contemplate any mechanism for arbitration in these instances.
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Statement of compliance with the principles of Good Corporate Governance - continued
3.Non-Compliance with the Code (continued)
Principle 9: Relations with shareholders and the market (Code provision 9.4)
The Company does not have a formal policy in place to allow minority shareholders to present an issue to the Board. In practice, however, the open channel of communication between the Company and minority shareholder, being the Chairman of the Board of Directors, is such that any issue that may merit bringing to the attention of the Board may be transmitted via the company secretary or directly by the said Chairman.
4.Internal Controls
The key features of the Company’s systems of internal controls are as follows:
The Company’s internal control system is designed to ensure proper annual reporting, implementation of the four-eyes principle to mitigate risks and compliance with local and international laws and regulations.
The Board is responsible for the Company’s system of internal controls and for reviewing its effectiveness. Such a system is designed to achieve business objectives and to manage rather than to eliminate the risk of failure to achieve business objectives and can only provide reasonable assurance against material error, losses or fraud.
The Company’s financial reporting are prepared by the finance team of the Group and the Company’s Directors.
The Company’s financial statements are subject to an audit by the independent auditors of the Company - Ernst & Young Malta. The audited and approved financial statements will be presented to the Company’s shareholders by the Board of Directors of the Company for its formal adoption at the next Annual General Meeting of shareholders of the Company.
5.General Meetings
Annual General Meeting (AGM)
The AGM is the highest decision-making body of the Company.
All shareholders registered in the shareholders’ register at the relevant registration record date, have the right to participate in the AGM and to vote thereat. A shareholder who cannot participate in at the AGM can be represented by proxy.
A general meeting is deemed to have been duly convened if at least twenty-one (21) days’ notice is given in writing to all persons entitled to receive such notice, which must specify the place, the day and the hour of the meeting, and in case of special business, the general nature of that business, and shall be accompanied by a statement regarding the effect and scope of any proposed resolution in respect of such special business. The notice period may be reduced to fourteen (14) days if certain conditions are satisfied. The quorum of shareholders required is not less than fifty percent (50%) of the nominal value of the issued and paid-up shares entitled to attend and vote at the meeting.
The agenda of the AGM will comprise of the ordinary business of the AGM, covering the presentation and approval of the Annual Report and Financial Statements, the declaration of dividends, election of Directors and the approval of their remuneration, the appointment of the auditors and the authorisation of the Directors to set the auditors’ fees, together with any special business specified in the notice calling the AGM.
14
Statement of compliance with the principles of Good Corporate Governance - continued
5.General Meetings (continued)
Extraordinary General Meetings (EGMs)
The Directors may convene an extraordinary general meeting whenever they think fit. In addition, any member/s of the Company holding at least ten per cent (10%) of the equity securities of the Company conferring a right to attend and vote at general meetings of the Company, may convene an extraordinary general meeting.
15
Consolidated and Separate Statements of profit or loss and other comprehensive income
For the year ending 31 December 2021
The
Group
The Company
The
Group
The Company
Notes
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Revenue
6
490,048
413,125
Administrative and other operating expenses
7
(864,564 )
(99,137)
(865,390 )
(100,521)
Change in fair value of investment property
11
-
-
Operating profit
390,911
312,604
Finance income
8
473,269
497,269
Finance costs
9
(801,991 )
(791,240)
(800,856 )
(789,581)
Profit before tax
72,940
20,292
Income tax (expense)/credit
10
(528,611 )
57,815
(1,043,062 )
76,241
Profit for the year
130,755
96,533
Total Comprehensive income
for the year
130,755
96,533
Attributable to:
Equity holders of the Company
-
-
Non-controlling interests
-
-
16
Consolidated and Separate Statements of financial position
As at 31 December 2021
The
Group
The
Company
The
Group
The
Company
Notes
2021
2021
2020
2020
EUR
EUR
EUR
EUR
ASSETS
Non-current assets
Investment property
11
-
-
Property, plant and equipment
12
-
-
Investment in subsidiary
13
20,074,623
20,074,623
Loans to related companies
14
17,988,890
18,794,444
38,063,513
38,869,067
Current assets
Loans to related companies
14
617,110
611,556
Due from related parties
15
1,619,614
583,222
Trade and other receivables
16
3,540
3,621
Cash and cash equivalents
17
7,202
166,832
Tax recoverable
160,171
111,311
2,407,637
1,476,542
TOTAL ASSETS
40,471,150
40,345,609
17
Consolidated and Separate Statements of financial position - continued
As at 31 December 2021
The Group
The Company
The Group
The Company
Notes
2021
2021
2020
2020
EUR
EUR
EUR
EUR
EQUITY AND LIABILITIES
Capital and reserves
Share capital
18
17,693,000
17,693,000
Retained earnings
18
282,201
151,446
Capital contribution
18
2,456,016
2,456,016
Other reserves
18
-
-
Equity attributable to
Owners of the parent
20,431,217
20,300,462
Non-controlling interests
-
-
Total equity
20,431,217
20,300,462
Non-current liabilities
Deferred tax liability
22
-
-
Lease liabilities
23
-
-
Debt securities in issue
19
19,615,643
19,572,886
19,615,643
19,572,886
Current liabilities
Trade and other payables
20
23,657
53,973
Debt securities in issue
19
389,583
391,238
Due to related parties
21
11,050
27,050
Tax payable
-
-
424,290
472,261
Total liabilities
20,039,933
20,045,147
TOTAL EQUITY AND LIABILITIES
40,471,150
40,345,609
The financial statements on pages 15 to 54 were approved and authorised for issue by the Board of Directors on 22 April 2022. The financial statements were signed on behalf of the Company’s Board of Directors by Silvan Fenech and Anthony Fenech as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report 2021.
18
Group consolidated statement of changes in equity
For the year ending 31 December 2021
Share
Retained
Other
Capital
Non-controlling
Capital
earnings
reserves
contribution
interest
Total
EUR
EUR
EUR
EUR
EUR
EUR
Balance as at 1 January 2021
Total Comprehensive Income for the year
Incorporation of subsidiary
Balance as at 31 December 2021
Balance as at 1 January 2020
Total Comprehensive Income for the year
Balance as at 31 December 2020
19
Company statement of changes in equity
For the year ending 31 December 2021
Share capital
Retained earnings
Capital contribution
Total
EUR
EUR
EUR
EUR
Balance as at 1 January 2021
17,693,000
151,446
2,456,016
20,300,462
Total comprehensive income for the year
-
130,755
-
130,755
Balance as at 31 December 2021
17,693,000
282,201
2,456,016
20,431,217
Balance as at 1 January 2020
17,693,000
54,913
2,456,016
20,203,929
Total comprehensive income for the year
-
96,533
-
96,533
Balance as at 31 December 2020
17,693,000
151,446
2,456,016
20,300,462
20
Consolidated and Separate Statements of cash flows
for the year ending 31 December 2021
The Group
The Company
The Group
The Company
Notes
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Cash flows used in operating activities
Profit before tax
72,940
20,292
Adjustments for:
Depreciation
-
-
Allowance for expected credit losses
-
-
Finance costs
791,240
789,581
Finance income
(112,149 )
(473,269)
(497,269)
Dividend income
(315,048)
(238,125)
Gain on change in fair value
of investment property
-
(4,855,047 )
-
Operating profit before
working capital movement
75,863
74,479
Movement in trade and other receivables
81
(5,241 )
(620)
Movement in due to related parties
(121,807 )
(16,000)
(220,915 )
372,213
Movement in due from related parties
(274,998)
27,050
Movement in trade and other payables
(1,146,784 )
(30,316)
(6,027)
(245,370)
467,095
Income taxes (paid) / received
(229,981 )
35,878
(98,893 )
-
Net cash flows from operating activities
(209,492)
467,095
Cash flows used in investing activities
Purchase of property, plant and equipment
12
(74,407 )
-
(1,310 )
-
Purchase of investment property
11
(590,735 )
-
(1,954,237 )
-
Loans repaid by related parties
800,000
444,479
Loans to parent
(300,000 )
-
(1,050,000 )
-
Net cash flows (used in) / from investing activities
(665,142 )
800,000
(3,005,547 )
444,479
Cash flows from financing activities
Proceeds from incorporation of subsidiary
-
-
Proceeds from debt securities issued
-
-
Repayment of bank loans
-
-
Repayment of lease liabilities
(10,565 )
-
(10,565 )
-
Finance costs
(346 )
(138)
(797 )
(73)
Bonds Interest paid
(750,000 )
(750,000)
(750,000 )
(750,000)
Net cash flows used in financing activities
(757,161 )
(750,138)
(761,362 )
(750,073)
Net movement in
cash and cash equivalents
(159,630)
(853,801 )
161,501
Cash and cash equivalents
at the beginning of the year
166,832
5,331
Cash and cash equivalents
at the end of the year
17
7,202
166,832
21
Notes to the consolidated and separate financial statements
31 December 2021
1.Company’s information and activities
The Company is 99.9 % owned subsidiary of Tum Invest Limited.
2.Basis of preparation and statement of compliance
The separate and consolidated financial statements have been prepared on the historical cost basis and in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the requirements of Cap. 386 of the Laws of Malta.
These financial statements are presented in Euro (EUR) which is the Company’s functional currency and cover the financial year ended 31 December 2021. The comparative financial statements cover the 31 December 2021.
The separate and consolidated financial statements of the Company for the year ended 31 December 2021 are authorised for issue in accordance with a resolution of the Directors on 22 April 2022.
2.1Going concern assumption
As at 31 December 2021, the Group’s current liabilities exceeded current assets by EUR2,067,985 (2020: EUR2,942,632).
The Directors have assessed the appropriateness of the going concern on the basis of cash forecasts prepared by management. These projections indicate that the Group will have sufficient resources to meet its obligations as they fall due. The shareholders have furthermore confirmed their commitment to support the Group financially or otherwise should this be required.
At the time of approving these financial statements, the Directors have determined that there is a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future and continue adopting the going concern basis in preparing the financial statements.
2.2Basis of consolidation
The consolidated financial statements incorporate the financial statements of Tum Finance plc (or the “Company”) and subsidiary entities controlled by the Company. Control exists when the Company has power over the investee, is exposed or has rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of its returns. In assessing control, potential voting rights that give the Company the current ability to direct the investee’s relevant activities are taken into account.
22
Notes to the consolidated and separate financial statements - continued
31 December 2021
2.Basis of preparation and statement of compliance (continued)
2.2Basis of consolidation (continued)
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.
The consolidated financial statements reflect the financial position and operation of the Company and its subsidiaries as listed below (together the ‘Group’).
Entities
Principal Activities
Country of Incorporation
Ownership Interest
Subsidiaries
Tum Operations Limited
Investment and holding company
Malta
100%
Easysell Limited
(indirectly through Tum Operations Limited)
Holding and management of immovable property
Malta
100%
Center Parc Holdings
(indirectly through Tum Operations Limited)
Development and operations of shopping mall
Malta
75%
Center Parc Development Limited
(indirectly through Tum Operations Limited)
Dormant
Malta
75%
The registered office of all the subsidiaries within the Group is Tum Invest Head Office, Zentrum Business Centre, Mdina Road, Qormi, Malta.
23
31 December 2021
3.Significant accounting policies
Investments in subsidiaries
A subsidiary is an entity that is controlled by the Company. The Company controls an investee when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Investments in subsidiaries, except for investments classified as held for sale, are accounted for on the basis of the direct equity interest and are stated at cost less any accumulated impairment losses. Dividends from the investment are recognised in profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised when the Group and the Company become a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially recognised at their fair value plus directly attributable transaction costs for all financial assets or financial liabilities not classified at fair value through profit or loss.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the Group and the Company have a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.
Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. The terms of financial instruments that are issued, the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument are evaluated to determine whether the financial instruments are financial liabilities, financial assets or equity instruments or whether they contain separate components, in which case such components are classified separately as financial liabilities, financial assets and equity instruments.
24
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Other financial instruments
Financial instruments issued by the Group and the Company, or any component thereof, are classified with equity instruments if both the following conditions are met:
(a)The financial instruments include no contractual obligation:
(i) to deliver cash or another financial asset to another entity; or
(ii)to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group and the Company.
(b)If the financial instruments will or may be settled in the Company’s own equity instruments, they are:
(i) non-derivatives that include no contractual obligation for the Company to deliver a variable number of its own equity instruments; or
(ii)derivatives that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments (excluding instruments that have certain stipulated features or instruments that are contracts for the future receipt or delivery of the Company’s own equity instruments.
Where any of these conditions are not satisfied, financial instruments issued by the Group and the Company, or any component thereof, are classified with financial liabilities, except for those that have certain stipulated features, which are classified as equity instruments as an exception.
Financial assets
The significant accounting policies for financial assets are as follows:
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value.
Debt instruments that meet the following conditions are subsequently measured at amortised cost.
- the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (‘FVTOCI’):
-the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and
-the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured at fair value through profit or loss (‘FVTPL’).
The Group and the Company only holds financial assets measured at amortised cost.
25
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Other financial instruments – continued
Financial assets - continued
(ii)The business models
An assessment of business models for managing financial assets is fundamental to the classification of a financial asset. The Group and the Company determines the business models at a level that reflects how groups of financial assets are managed together to achieve a particular business objective.
(iii)Debt instruments measured at amortised cost
The following financial assets are classified within this category – loans to related companies, trade and other receivables and cash at bank.
Appropriate allowances for expected credit losses (‘ECLs’) are recognised in profit or loss in accordance with the Group and the Company’s accounting policy on ECLs.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
Changes in the carrying amount as a result of foreign exchange gains or losses, impairment gains or losses and interest income are recognised in profit or loss. On derecognition, any difference between the carrying amount and the consideration received if recognised in profit or loss and is presented separately in the line item ‘Gains and losses arising from the derecognition of financial assets measured at amortised cost’.
Interest income is recognised using the effective interest method and is included in the line item ‘investment income’.
Trade receivables which do not have a significant financing component are initially measured at their transaction price and subsequently stated at their nominal value less any loss allowance for ECLs.
(iv)Interest income using the effective interest method
Interest income, included within finance income, is recognised using the effective interest method for debt instruments measured subsequently at amortised cost and at FVTOCI.
26
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Other financial instruments – continued
Financial liabilities and equity
The significant accounting policies for financial liabilities and equity are as follows:
(i)Bank borrowings
Subsequent to initial recognition, interest-bearing bank loans are measured at amortised cost using the effective interest method. Bank loans are recognised at nominal value, subsequently carried at amortised cost.
(ii)Other borrowings
Subsequent to initial recognition, other borrowings are measured at amortised cost using the effective interest method inclusive of issue costs unless the effect of discounting is immaterial.
(iii)Trade and other payables
Trade payables are classified with current liabilities and are stated at their nominal value.
(iv)Shares issued by the Company
Ordinary shares issued by the Company are classified as equity instruments.
Redemptions or refinancing of equity instruments are recognised as changes in equity.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
If not measured as a financial liability at FVTPL and if not arising from a transfer of a financial asset, financial guarantee contracts issued by the Group and the Company are subsequently measured at the higher of the following:
(a)the amount of the loss allowance determined in accordance with IFRS 9; and
(b) the amount initially recognised less, where appropriate, cumulative amount of income recognised in accordance with the revenue recognition policies. In the case of financial guarantee contracts, the maximum exposure to credit risk is the maximum amount the entity could have to pay if the guarantee is called on.
27
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Provisions
Provisions are recognised when the Company have a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Provisions are not recognised for future operating losses.
ECLs
The Group and the Company recognises a loss allowance for ECLs on the following – debt instruments measured at amortised cost and trade receivables.
The amount of ECLs is updated at each reporting date to reflect changes in credit risk since the initial recognition.
For other trade receivables that do not contain a significant financing component, the Company applies the simplified approach and recognise lifetime ECL. Under the simplified approach the Company do not track changes in credit risk, but instead recognise a loss allowance based on lifetime ECLs at each reporting date. The Group and the Company have established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
For all other financial instruments, the Company use the general approach and recognise lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measure the loss allowance for that financial instrument at an amount equal to 12-month ECL (‘12m ECL’). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset being credit-impaired at the reporting date or an actual default occurring.
Lifetime ECL represents the ECLs that will result from all possible default events over the expected life of a financial instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
The Company recognises an impairment gain or loss in profit or loss for all financial assets within administrative and other expenses with a corresponding adjustment to their carrying value.
28
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Impairment of non-financial assets
At the end of each reporting period, the carrying amount of assets is reviewed to determine whether there is any indication or objective evidence of impairment, as appropriate, and if any such indication or objective evidence exists, the recoverable amount of the asset is estimated.
An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.
In the case of other assets tested for impairment, the recoverable amount is the higher of fair value (which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date) less costs of disposal and value in use (which is the present value of the future cash flows expected to be derived, discounted using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset). Where the recoverable amount is less than the carrying amount, the carrying amount of the asset is reduced to its recoverable amount, as calculated. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those form other assets or groups of assets.
Impairment losses are recognised immediately in profit or loss. In the case of other assets tested for impairment, an impairment loss recognised in a prior year is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.
Impairment reversals are recognised immediately in profit or loss.
Revenue recognition
The Group and the Company recognise revenue from the following major sources:
•Rental income from the renting of investment property
•Interest income
29
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies – continued
Revenue recognition - continued
Revenue is measured at the fair value of the consideration received or receivable for goods sold and services provided in the normal course of business, net of value added tax and discounts, where applicable. Revenue is recognised to the extent that it is probable that future economic benefits will flow to the Group and the Company and these can be measured reliably. The following specific recognition criteria must also be met before revenue is recognised:
(i)Rental income
Rental income from investment property is recognized in profit or loss on a straight-line basis over the lease term.
(ii)Interest income
Interest income is recognised using the effective interest method
(iii)Dividend income
Dividend income is recognised on the date when the Company’s right to receive the payment is established.
Borrowing costs
Borrowing costs include the costs incurred in obtaining external financing.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised from the time that expenditure for these assets and borrowing costs are being incurred and activities that are necessary to prepare these assets for their intended use or sale are in progress. Borrowing costs are capitalised until such time as the assets are substantially ready for their intended use or sale. Borrowing costs are suspended during extended periods in which active development is interrupted. All other borrowing costs are recognised as an expense in profit or loss in the period in which they are incurred.
Leases
The Group and the Company assess whether the contract is, or contains, a lease at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The lease term is determined as the non-cancellable period of a lease, together with both (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
30
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Leases – continued
The Group as a lessee
The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, unless otherwise stated below.
For short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets, the Group applies the recognition exemption. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the pattern of the lessee’s benefit.
Lease payments included in the measurement of the lease liability comprise:
(a)Fixed lease payments (including in-substance fixed payments), less any lease incentives receivables;
(b)Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
(c)The amount expected to be payable by the lessee under residual value guarantees;
(d)The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
(e)Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest in the lease liability (using effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right-of-use assets are initially measured at the commencement date at cost, being the amount of the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets classified with investment property are subsequently measured at fair value in line with the accounting policy for investment property.
In the statement of financial position, right-of-use assets that meet the definition of investment property are presented with investment property. In the statement of financial position, lease liabilities are included separately from other liabilities.
31
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies – continued
Leases – continued
The Group as a lessee - continued
In the statement of profit or loss and other comprehensive income, interest expense on the lease liability is presented separately from the depreciation charge for the right-of-use asset within finance costs. In the statement of cash flows, cash payments for the principal portion of the lease liability are presented within financing activities and cash payments for the interest portion of the lease liability are presented within operating activities. Short-term lease payments, payments for leases of low value assets and variable lease payments not included in the measurement of the lease liability are included within operating activities.
The Group as a lessor
Leases for which the Group is a lessor continue to be classified as finance or operating leases. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases. Lease classification is made at the inception of the lease, which is the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease.
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Leased assets are presented in the statement of financial position according to their nature and are tested for impairment in accordance with the Group’s accounting policy on impairment. Depreciable leased assets are depreciated in accordance with the Group’s accounting policy on depreciation. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the leased asset.
Amounts due from lessees under a finance lease are presented in the statement of financial position as receivables at the amount of the Group’s net investment in the lease and include initial direct costs [unless the finance lease involves manufacturer or dealer lessors]. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment in the finance lease.
When a contract includes lease and non-lease components, the Group applies IFRS 15 to allocate the consideration under the contract to each component.
Fair values of assets and liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
32
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies – continued
Fair values of assets and liabilities – continued
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.
Investment property
Investment property is property held to earn rentals or for capital appreciation or both. Investment property is recognised as an asset when it is probable that the future economic benefits that are associated with the investment property will flow to the entity and the cost can be measured reliably.
Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value at the end of the reporting period. Gains or losses arising from changes in the fair value of investment property are recognised in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined by a professionally qualified architect/surveyor on the basis of market values.
Investment property is derecognised on disposal or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gains or losses on derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount and are recognised in profit or loss in the period of derecognition. The amount of consideration to be included in the gain or loss arising from the de-recognition of investment property is determined in accordance with the requirements for determining the transaction price in IFRS 15.
Property, plant and equipment
Property, plant and equipment other than right of use assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes purchase price and any directly attributable cost of preparing the asset for its intended use.
Depreciation is provided on all items of property, plant and equipment, except freehold land and assets under construction, at the rates calculated to write-off the cost less residual value over their expected useful life. The percentage rates within the various entities within the Group are as follows:
Machinery and Computer equipment 25%
33
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. The residual values and useful lives of the assets are reviewed and adjusted as appropriate, at each financial reporting date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount of the asset is greater than its estimated recoverable amount.
Subsequent costs are included in the carrying amount of the asset or recognised as separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the Group and the costs of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.
Taxation
Current and deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the current and deferred tax is also dealt with in other comprehensive income or in equity, as appropriate.
Current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit or loss because it excludes items which are non-assessable or disallowed and it further excludes items that are taxable or deductible in other periods. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets, including deferred tax assets for the carryforward of unused tax losses and unused tax credits, are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences (or the unused tax losses and unused tax credits) can be utilised.
Deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither accounting profit nor taxable profit.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.
34
Notes to the consolidated and separate financial statements - continued
31 December 2021
3.Significant accounting policies - continued
Taxation – continued
For the purposes of measuring deferred tax for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.
Current tax assets and liabilities are offset when the Group and the Company have a legally enforceable right to set off the recognised amounts and intend either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax assets and liabilities are offset when the Group and the Company have a legally enforceable right to set off its current tax assets and liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group and the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows and are presented in current liabilities on the statement of financial position.
Dividends
Dividends to holders of equity instruments are recognised as liabilities in the period in which they are declared.
Dividends to holders of equity instruments, or of the equity component of a financial instrument issued by the Group and the Company, are recognised directly in equity. Dividends relating to a financial liability, or to a component that is a financial liability, are recognised as an expense in profit or loss and are presented in the statement of profit or loss and other comprehensive income with finance costs.
4.Judgements in applying accounting policies and key sources of estimation uncertainty
In preparing the financial statements, the Directors are required to make judgements, estimates and assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and application of judgement are inherent in the formation of estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements. These estimates are reviewed on a regular basis and, if a change is needed, it is accounted for in the year the changes become known.
35
Notes to the consolidated and separate financial statements - continued
31 December 2021
4.Judgement in applying accounting policies and key sources of estimation uncertainty - continued
Except for the below, in the opinion of the Directors, the accounting estimates, assumptions and judgement made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as significant in terms of the requirements of IAS 1 (revised) - ‘Presentation of financial statements’.
Fair value of investment property
The Group uses the services of professional valuers to revalue the investment property. The professional valuers take into account market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The highest and best use of a non-financial asset takes into account the use of the asset that is physically possible, legally permissible and financially feasible, as follows:
•A use that is physically possible, takes into account the physical characteristics of the asset that market participants would take into account when pricing the asset (e.g. the location or size of a property).
•A use that is legally permissible takes into account any legal restrictions on the use of the asset that market participants would take into account when pricing the asset (e.g. the zoning regulations applicable to a property).
•A use that is financially feasible takes into account whether a use of the asset that is physically possible and legally permissible generates adequate income or cash flows (taking into account the costs of converting the asset to that use) to produce an investment return that market participants would require from an investment in that asset put to that use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimising the use of unobservable inputs. As described in Note 11, the Group uses valuation techniques that include inputs that are not always based on observable market data in order to estimate the fair value of investment property. Note 11 provides detailed information regarding these valuation methods and the key assumptions used in performing such valuations.
36
Notes to the consolidated and separate financial statements - continued
31 December 2021
Standards, interpretations and amendments to published standards as endorsed by the European Union effective in the current year
Both the Group and Company have adopted the following new and amended IFRS and IFRIC interpretations:
•Amendments to IFRS 16 Leases: Covid-19- Related Rent Concessions beyond 30 June 2021(issued on 31 March 2021) (effective for financial periods beginning on or after 1 April 2021)
•Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (issued on 27 August 2020) (effective for financial periods beginning on or after 1 January 2021)
•Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (issued on 25 June 2020) (effective for financial periods beginning on or after 1 January 2021)
The adoption of other standards or interpretations above, where applicable, did not have significant impact on the financial statements or performance of the Group or the Company.
Standards, interpretations and amendments to published standards as adopted by the European Union that are not yet effective
Up to the date of approval of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective for the current reporting period and which both the Group and Company have not adopted early but plans to adopt upon their effective date. None of these standards, interpretations and amendments is expected to have an impact on the financial position or performance of either the Group or Company. The amendments and improvements to standards are as follows:
•Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and Annual Improvements 2018-2020 (All issued 14 May 2020) (effective for annual periods beginning or after 1 January 2022)
•Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021) (effective for annual periods beginning or after 1 January 2023)
•Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on 12 February 2021) (effective for annual periods beginning or after 1 January 2023)
•IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17 (issued on 25 June 2020) (effective for annual periods beginning or after 1 January 2023)
The changes resulting from these standards are not expected to have a material effect on the financial statements of the Group or the Company.
37
Notes to the consolidated and separate financial statements - continued
31 December 2021
5.Changes in accounting policies - continued
Standards, interpretations and amendments that are not yet adopted by the European Union
•Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-Current – Deferral of Effective date (issued by IASB on 23 January 2020 and 15 July 2020 respectively)
•Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on 7 May 2021)
•Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued on 9 December 2021)
The changes resulting from these standards are not expected to have a material effect on the financial statements of the Group or Company.
6.Revenue
The Group
The Company
The Group
The Company
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Rental income
3,222,068
-
2,810,336
-
Dividend income
Ordinary shares’ dividend
-
76,923
-
-
Preference shares’ dividend
-
238,125
-
238,125
Other income
310,435
175,000
396,984
175,000
3,532,503
490,048
3,207,320
413,125
Management assesses the operations of the Group as one reporting segment on the basis that the Group has one line of activity based in one jurisdiction, being Malta. Accordingly, no segment disclosures are being presented.
38
Notes to the consolidated and separate financial statements - continued
31 December 2021
7.Administrative and other operating expenses
The Group
The Company
The Group
The Company
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Auditor’s remuneration
28,695
8,850
51,250
25,009
General and other expenses
193,512
843
192,721
3,849
Advertising and marketing
60,307
-
39,832
-
Licenses and fees
21,753
20,649
15,709
16,641
FSS and Tax
43,056
4,200
41,932
4,200
Legal and professional fees
56,548
28,475
72,640
15,812
Director's fees
36,120
36,120
35,010
35,010
Depreciation
31,977
-
14,873
-
Salaries and wages
168,647
-
159,440
-
Fine and penalties
4,292
-
1,304
-
Insurance
26,734
-
23,161
-
Water and Electricity
192,923
-
171,471
-
Allowance for expected credit losses – trade and other receivables
-
-
46,047
-
864,564
99,137
865,390
100,521
The Group had an average of 6 (2020: 5) employees during the year under review.
8.Finance income
The Group
The Company
The Group
The Company
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Interest income
112,149
473,269
-
497,269
9.Finance costs
The Group
The Company
The Group
The Company
01.01.2021 to
01.01.2021 to
01.01.2021 to
01.01.2021 to
31.12.21
31.12.21
31.12.21
31.12.21
EUR
EUR
EUR
EUR
Bank charges
346
137
798
74
Interest on debt securities in issue
791,103
791,103
789,507
789,507
Interest expense on lease liabilities
10,542
-
10,551
-
801,991
791,240
800,856
789,581
39
Notes to the consolidated and separate financial statements - continued
31 December 2021
10.Income tax expense/(credit)
The Group
The Company
The Group
The Company
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Current tax expense/(credit)
515,115
(57,815)
423,735
(76,241)
Deferred tax expense
13,496
-
619,327
-
528,611
(57,815)
1,043,062
(76,241)
The tax on the Company’s profit differs from the theoretical amount that would arise using the basis tax rate as follows:
The Group
The Company
The Group
The Company
01.01.2021 to
01.01.2021 to
01.01.2020 to
01.01.2020 to
31.12.21
31.12.21
31.12.20
31.12.20
EUR
EUR
EUR
EUR
Profit before tax
1,978,097
72,940
6,396,120
20,292
Theoretical tax charge at 35%
692,334
25,529
2,238,642
7,102
Tax effect of:
Non-deductible expenses
465,895
44,877
186,286
44,877
Refund under full imputation system
(128,221)
(128,221)
(128,220)
(128,220)
Income taxed on different basis
at difference rates (Note i)
(501,397)
-
(1,253,646)
-
Tax expense/(credit)
528,611
(57,815)
1,043,062
(76,241)
This relates to the fair value of investment property which is taxed at 8-10% on the market value and the rental income taxed at 15% final withholding tax.
11.Investment property
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Opening balance
64,363,158
-
57,553,874
-
Additions from subsequent expenditure
590,735
-
1,954,237
-
Increase in fair value of property
-
-
4,855,047
-
Closing balance
64,953,893
-
64,363,158
-
Carrying amount
64,953,893
-
64,363,158
-
40
Notes to the consolidated and separate financial statements - continued
31 December 2021
11.Investment property - continued
The Group continued development of its investment property during the year. Additions for the year consisted of modifications to current properties held. Included in the fair value of investment property is a right of use asset in respect of ground rents payable on the land over which the property is constructed. The remaining term of the lease is till 30 April 2138.
Investment property is revalued by professionally qualified architects or surveyors on the basis of assessments of the fair value of the property in accordance with international valuations standards and professional practice.
In the years where a valuation is not obtained, management verifies all major inputs to the independent valuation report, assesses any property valuation movements when compared to the prior year valuation report and holds discussions with the independent valuer, as necessary. The most recent valuation has been reflected in the 2020 financial statements.
For property held, the current use equates to the highest and best use.
Rental income derived from the investment property amounted to EUR3,222,068 (2020: EUR2,810,336). Direct operating expenses were incurred in the generation of this rental income amounted to EUR818,385 (2020: EUR755,098).
The Group has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.
The Group’s property has been determined to fall within Level 3 of the fair valuation hierarchy. The different levels in the fair value hierarchy are defined in Note 3.
The Company’s policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. There were no transfers between levels during the year.
41
Notes to the consolidated and separate financial statements – continued
11.Investment property – continued
Description of valuation techniques used and key inputs to valuation of investment properties
The valuation was determined based on the income approach (discounted projected cash flows). Using the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including a terminal value. This method involves the projection of cash flows to which a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. Rental values and rent growth rates have been determined based on contractual agreements currently in place and used as a benchmark for the calculation of the terminal value.
Valuation
Technique
Significant
unobservable
inputs
Range
Narrative
Sensitivity
Investment
Property
Income
Approach
Discount rate
6%
The higher
the discount rate, the
lower the fair value
Rental value per
square meter
EUR93-EUR166
The higher the price per square metre, the higher the fair value
Rent growth per
Annum
2.9%-4.8%
The higher the rent growth, the higher the fair value
Sensitivity analysis
Change in rate
Change in value
EUR’ million
Discount rate sensitivity
0.5%/(0.5)%
(7.4) / 9.6
Rental value per square meter sensitivity
+5%/(5)%
3.4 / (3.4)
42
Notes to the consolidated and separate financial statements - continued
31 December 2021
12.Property, Plant and equipment
The Group
Computer equipment and generator
EUR
Cost
Balance at 1 January 2021
60,802
Additions
74,407
Balance at 31 December 2021
135,209
Accumulated depreciation
Balance at 1 January 2021
29,746
Charge for the year
31,977
Balance at 31 December 2021
61,723
Carrying amount
At 31 December 2021
73,486
Cost
Balance at 1 January 2020
59,942
Additions
1,310
Balance at 31 December 2020
60,802
Accumulated depreciation
Balance at 1 January 2020
14,873
Provision for the period
14,873
Balance at 31 December 2020
29,746
Carrying amount
At 31 December 2020
31,056
The Company held no property, plant and equipment as at 31 December 2021.
43
Notes to the consolidated and separate financial statements - continued
31 December 2021
13.Investment in subsidiary
The Company
EUR
At cost
As at 1 January 2021
20,074,623
Additions
-
As at 31 December 2021
20,074,623
At cost
As at 1 January 2020
20,074,623
Additions
-
As at 31 December 2020
20,074,623
Investments in subsidiaries, except for investments classified as held for sale, are stated at cost less any accumulated impairment losses. Dividends from the investment are recognised in profit or loss.
The registered office of the subsidiary is Tum Invest Head office, Zentrum Business Centre, Mdina road, Qormi, QRM9010, Malta. The aggregate amount of capital and reserves and the results of the subsidiary for the last relevant financial year were as follows:
Capital and reserves
Profit for the year
EUR
EUR
Tum Operations Limited (audited)
20,436,655
189,596
Proportion of Ownership Interest
%
Tum Operations Limited
100
44
Notes to the consolidated and separate financial statements - continued
31 December 2021
14.Loan to related companies
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Non-current:
Loan receivable from subsidiary (Note i)
-
11,638,890
-
12,444,444
Cumulative redeemable preference
shares (Note ii)
-
6,350,000
-
6,350,000
-
17,988,890
-
18,794,444
Current:
Loan receivable from subsidiary (Note i)
-
617,110
-
611,556
Loans receivable from parent company
(Note iii)
1,350,000
-
1,350,000
-
1,350,000
617,110
1,350,000
611,556
i.The amounts owed by subsidiary are unsecured and subject to interest rate of 3.75% per annum. EUR7,250,000 is repayable in nine equal installments paid annually on the 20th of June with the first installment becoming due on 20th June 2021. The remaining portion is payable on 20 June 2029.
ii.The preference shares are entitled to a fixed cumulative preferential dividend of 3.75%. The Company may redeem any or the whole of the outstanding preference shares at any time, but not later than 30 June 2029.
iii.Loans receivable from the parent, bear interest at 5%, are unsecured, and repayable in 2022.
15.Due from related parties
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Amounts due from
parent company (Note i)
182,987
-
-
-
Amounts due from
group companies (Note i)
-
1,619,614
-
583,222
Amounts due from
other related companies (Note i)
189,100
-
138,131
-
372,087
1,619,614
138,131
583,222
The amounts owed by parent, group, and other related companies are unsecured, interest free and repayable on demand.
45
Notes to the consolidated and separate financial statements - continued
31 December 2021
16.Trade and other receivables
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Trade receivables (Note i)
328,460
-
328,355
-
Advances, deposits and prepayments
19,490
3,540
23,226
3,621
347,950
3,540
351,581
3,621
Trade receivables are non-interest bearing and are generally on terms of 30 days. As at 31 December no receivable balance was past due. Trade receivables are being stated net of an allowance for expected credit losses of EUR46,047 (2020: 46,047).
17.Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows comprise the following amounts in the statement of financial position:
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Cash at bank
615,611
7,202
231,324
166,832
Cash and cash equivalent
in the statement of cash flows
615,611
7,202
231,324
166,832
46
Notes to the consolidated and separate financial statements - continued
31 December 2021
18.Equity
i.Share Capital of Group and Company
2021
2021
shares
paid up
EUR
EUR
Authorised share capital:
20,000,000 ordinary shares of EUR1.00 each
20,000,000
20,000,000
Issued and paid up capital:
17,693,000 ordinary share of EUR1.00 each
17,693,000
17,693,000
2020
2020
Shares
paid up
EUR
EUR
Authorised share capital:
20,000,000 ordinary shares of EUR1.00 each
20,000,000
20,000,000
Issued and paid up capital:
17,693,000 ordinary share of EUR1.00 each
17,693,000
17,693,000
ii.Retained earnings
The reserve represents accumulated retained profits.
iii.Capital contribution
Amounts due to the parent which are repayable exclusively at the option of the Company. These amounts are unsecured and interest free.
iv.Other reserves
Reserve emerging on the common control acquisition of Easysell Limited and Center Parc Limited on 25 April 2019.
47
Notes to the consolidated and separate financial statements - continued
31 December 2021
19.Debt securities in issue
The Group and Company 2021
The Group and Company 2020
EUR
EUR
Non-current:
Bonds in issue (Note i)
19,615,643
19,574,540
Current:
Bonds in issue (Note i)
389,583
389,584
In 2019 the Company issued an aggregate principal amount of EUR20 million Bonds (2019 – 2029), having a nominal value of EUR100 each, bearing interest at the rate of 3.75% per annum. These bonds are secured by Easysell Limited (hereafter the “Guarantor”), a subsidiary of the Company. They are subject to the terms and conditions in the prospectus dated 3 June 2019. The quoted market price as at 31 December 2021 for the 3.75% Bonds (2019 – 2029) was 101.
The Guarantor provided a corporate guarantee in favour of the Company’s bondholders to affect the due and punctual performance of all payment obligations undertaken by the Company under the Bonds if it fails to do so.
The carrying amount of the bonds is net of issue costs which are being amortised over the life of the bonds.
The Group and Company
The Group and Company
2021
2020
EUR
EUR
Proceeds
20,000,000
20,000,000
Less
Issue costs
(465,848)
(465,848)
Accumulated amortisation
81,491
40,388
19,615,643
19,574,540
Accrued interest
389,583
389,584
20,005,226
19,964,124
The maturity analysis of undiscounted loans and borrowings are presented below:
2021
2020
EUR
EUR
Within 1 year
750,000
750,000
Between two – five years
3,000,000
3,000,000
After five years
22,250,000
23,000,000
26,000,000
26,750,000
48
Notes to the consolidated and separate financial statements - continued
31 December 2021
20.Trade and other payables
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Trade and other payables
1,366,269
12,705
2,532,008
44,649
Accruals and deferred income
147,195
10,952
128,239
9,323
1,513,464
23,657
2,660,247
53,972
No interest is payable on trade and other payables.
21.Amounts due to related companies
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Amounts due to
parent company (Note i)
107,300
1,050
409,995
1,050
Amounts due to
other related companies (Note i)
1,906,437
10,000
1,055,427
26,000
Amounts due to
Ultimate shareholder (Note i)
169,019
-
115,719
-
2,182,756
11,050
1,581,141
27,050
The amounts owed to parent, group, and other related companies are unsecured, interest free and repayable on demand.
22.Deferred taxation
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Opening balance
5,741,548
-
5,122,221
-
Recognized in P&L
13,496
-
619,327
-
Closing balance
5,755,044
-
5,741,548
-
The deferred tax liability arose mainly upon the revaluation of investment property.
49
Notes to the consolidated and separate financial statements - continued
31 December 2021
23.Leases
Group as a lessee
Disclosures about right-of-use assets that meet the definition of investment property are provided in Note 11.
Lease Liabilities
EUR
EUR
2021
2020
Beginning balance
191,768
191,782
Accretion of interest
10,542
10,551
Payments
(10,565)
(10,565)
Amounts included in non-current liabilities
191,745
191,768
The total cash outflow for leases amounted to EUR10,565 (2020: EUR10,565) for the period. The amounts recognised in profit or loss as depreciation and finance expenses are disclosed in Notes 7 and 9 respectively. No other charges in relation to leases were recorded in profit or loss. The maturity analysis of undiscounted lease liabilities in presented below:
31.12.2021
31.12.2020
EUR
EUR
Within 1 year
10,565
10,565
Between two – five years
42,262
42,262
After five years
1,172,759
1,183,324
1,225,586
1,236,151
Group as a lessor
The Group has entered into operating leases on its investment property consisting of offices, warehouses and retail complex. These leases have terms of between 5 and 20 years. Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:
2021
2020
EUR
EUR
Within one year
3,283,537
3,040,843
Between one and two years
3,352,377
3,148,809
Between two and three years
3,376,313
3,214,724
Between three and four years
3,236,540
3,238,030
Between four and five year
3,304,050
3,098,257
More than five years
11,879,125
14,988,632
28,431,942
30,729,295
50
Notes to the consolidated and separate financial statements - continued
31 December 2021
24.Related party disclosures
Tum Finance plc is direct parent of the Tum operations Limited and became the ultimate parent of Center Parc Holdings Ltd and Easysell Limited (formerly Easysell KIA Limited) through its direct subsidiary, Tum Operations Limited. The registered office of these companies is Tum Invest Head Office, Zentrum Business Centre, Mdina Road, Qormi, Malta. The ultimate controlling party is Anthony Fenech.
During the course of the year, the Group and the Company entered into transactions with related parties as set out below. Other related parties are entities having the same ultimate parent.
The Group
The Group
The Company
The Company
Related activity party
Total activity
Related activity party
Total activity
EUR
EUR
%
EUR
EUR
%
Rental income:
Related party
Transactions with:
Other related parties
866,000
3,532,503
25
-
-
-
Dividend and other income:
Related party
Transactions with:
- Subsidiaries
-
-
-
490,048
490,048
100
Finance income:
Related party
Transactions with:
- Subsidiary
-
-
473,269
473,269
- Parent
112,549
112,549
-
-
112,549
112,549
100
473,269
473,269
100
Loans to:
Related party
Transactions with:
- Subsidiary
-
-
12,256,000
12,256,000
- Parent
1,350,000
1,350,000
-
-
1,350,000
1,350,000
100
12,256,000
12,256,000
100
Loans from:
Related party
Transactions with:
Parent Company
2,456,016
22,461,242
11
2,456,016
22,461,242
11
51
Notes to the consolidated and separate financial statements - continued
31 December 2021
24.Related party disclosures - continued
During 2020, the Group and the Company entered into transactions with related parties as set out below.
The Group
The Group
The Company
The Company
Related party activity
Total activity
Related party activity
Total activity
EUR
EUR
%
EUR
EUR
%
Rental income:
Related party
Transactions with:
Other related parties
754,650
3,207,320
24
-
-
-
Dividend and other income:
Related party
Transactions with:
- Subsidiaries
-
-
-
413,125
413,125
100
Finance income:
Related party
Transactions with:
- Subsidiaries
-
-
-
497,274
497,274
100
Loans to:
Related party
Transactions with:
- Subsidiary
-
-
13,056,000
13,056,000
- Parent
1,050,000
1,050,000
-
-
1,050,000
1,050,000
100
13,056,000
13,056,000
100
Loans from:
Related party
Transactions with:
Parent Company
2,456,016
22,420,140
11
2,456,016
22,420,140
11
Related party balances
At the year-end as was the case in 2020, the Company had outstanding balances with the shareholders and other related parties. The amounts due to these specific categories of related parties and shareholders at year-end and in prior year are disclosed in Notes 14 and 15. The terms and conditions in respect of these balances do not specify the nature of the consideration to be provided in settlement. No guarantees have been given or received.
Directors’ fees paid are disclosed in Note 7.
52
Notes to the consolidated and separate financial statements - continued
31 December 2021
25.Fair value of financial assets and financial liabilities
At 31 December 2021 the carrying amounts of financial assets and financial liabilities classified with current assets and current liabilities respectively approximated their fair values due to the short-term maturities of these assets and liabilities.
The fair values of non-current financial assets and non-current financial liabilities that are not measured at fair value are not materially different from their carrying amounts particularly due to re-pricing.
26.Financial risk management
The exposures to risk and the way risks arise, together with the Company’s objectives, policies and processes for managing and measuring these risks are disclosed in more detail below.
The objectives, policies and processes for managing financial risks and the methods used to measure such risks are subject to continual improvement and development. Where applicable, any significant changes in the Company’s exposure to financial risks or the manner in which the Company manages and measures these risks are disclosed below.
Where possible, the Company aims to reduce and control risk concentrations. Concentrations of financial risk arise when financial instruments with similar characteristics are influenced in the same way by changes in economic or other factors. The amount of the risk exposure associated with financial instruments sharing similar characteristics is disclosed in more detail in the notes to the financial statements.
Credit risk
Credit risk refers to the risk that a counterparty will cause a financial loss for the Company by failing to discharge an obligation.
Financial assets which potentially subject the Company to concentrations of credit risk consist principally of receivables and cash at bank.
Receivables are presented net of any required allowance for expected credit losses. The exposure to credit risk is influenced mainly by the individual characteristics of each customer. Credit risk with respect to receivables is limited due to credit control procedures and the minimal balance outstanding at year-end. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for customers with similar loss patterns (i.e. by geographical region or customer type). Allowance for expected credit losses on receivables is disclosed in Note 16.
53
Notes to the consolidated and separate financial statements - continued
31 December 2021
26.Financial risk management - continued
Credit risk – continued
Carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s and Company’s maximum exposure to credit risk, as detailed below:
The Group
The Company
The Group
The Company
2021
2021
2020
2020
EUR
EUR
EUR
EUR
Loans to related companies
1,350,000
18,606,000
1,350,000
19,406,000
Due from related parties
372,087
1,619,614
138,131
583,222
Trade and other receivables
347,950
3,540
351,581
3,621
Cash at bank on hand
615,611
7,202
231,324
166,832
2,685,648
20,236,356
2,071,036
20,159,675
Credit risk with respect to the cash at bank is limited due to the fact that the Company banks only with local financial institutions with high quality standing. Loans and receivables together with other receivables mainly comprise amounts due from related parties, (Notes 14, 15 and 16). The Company’s concentration of credit risk arising from these receivables is considered limited as there are no other indications that the related parties are unable to meet their obligations.
The carrying amount of financial assets recorded in the financial statements, which is net of any impairment losses, where applicable, represents the Company’s maximum exposure to credit risk without taking account of the value of any collateral held.
Interest rate risk
The Group has not taken out bank facilities directly from banks to finance its operations. The Group has issued bonds and terms of bonds and interest rates are disclosed in Note 19. In addition, the Group has also taken loans from shareholders and related companies, which are interest free and repayable on demand.
The carrying amounts of the Company’s financial instruments carrying a rate of interest at the end of the reporting period are disclosed in the notes to the financial statements.
Liquidity risk management
The Company is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities, which comprise principally other payables, and other financial liabilities (Notes 19, 20 and 21). Prudent liquidity risk management includes maintaining sufficient cash and committed credit lines to ensure the availability of an adequate amount of funding to meet the Company’s obligations.
Management monitors liquidity risk by means of cash flow forecasts on the basis of expected cash outflows over a twelve-month period and over a long-term period in relation to the development and completion of the shopping mall and office block extension. This approach ensures that the project is adequately financed and that no additional financing facilities are expected to be required over the coming year.
54
Notes to the consolidated and separate financial statements - continued
31 December 2021
26.Financial risk management - continued
Capital risk management
The Company’s objective when managing capital are to safeguard its ability to continue as a going concern and to maximise the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Company consists of shareholders’ loans disclosed in Note 18 and the items presented within equity in the statement of financial position.
The Company’s Directors manage the Company’s capital structure and make adjustments to it, in light of changes in economic conditions. The capital structure is reviewed on an ongoing basis. Based on recommendations of the Directors, the Company balances its overall capital structure through the new share issues as well as the issue of new debt.
27.Events after the reporting period
In February 2022, following the situation evolving between Russia and Ukraine, a number of countries imposed sanctions against certain entities and individuals in Russia. The Group regards these events as non-adjusting events after the reporting period.
The Group does not have direct exposures to related parties and/or key customers or suppliers from those countries. The Group’s management continues to monitor the situation for possible impact of changing macroeconomic conditions that may effect the Group’s financial position or operations.
A wholly owned subsidiary of the Company, Tum Operations Limited (C-91301) (“TOL”), and Center Parc Holdings Limited (C-72342) (“CPHL”), in which TOL holds 75% of the issued share capital, together with the other shareholder of CPHL, has entered negotiations with third parties unrelated to the Company, in connection with a possible joint venture whose principal activity will be the development and operation of properties already owned by each of the joint venture parties as well as investment in further properties for the development and, or operation thereof.
Ernst & Young Malta Limited
Regional Business Centre
Achille Ferris Street
Msida MSD 1751, Malta
Tel: +356 2134 2134
Fax: +356 2133 0280
ey.malta@mt.ey.com
ey.com
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
55
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc
Report on the audit of the separate and consolidated financial statements
Opinion
We have audited the separate and consolidated financial statements of TUM Finance plc [(the “Company”) and its subsidiaries (the “Group”)], set on pages 15 to 54, which comprise the separate and consolidated statements of financial position as at 31 December 2021, and the separate and consolidated statements of comprehensive income, the separate and consolidated statements of changes in equity and the separate and consolidated statement of cash flows for the year then ended, and notes to the separate and consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying separate and consolidated financial statements give a true and fair view of the separate and consolidated financial position of the Company and the Group as at 31 December 2021, and of the separate and consolidated financial performance and the separate and consolidated cash flows of the Company and the Group for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU (“IFRS”), and the Companies Act, Cap. 386 of the Laws of Malta (the “Companies Act”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and the Companies Act. Our responsibilities under those standards and under the Companies Act are further described in the Auditor’s Responsibilities for the Audit of the Separate and Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) as issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 of the Laws of Malta, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
56
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on the audit of the separate and consolidated financial statements
Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the separate and consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the separate and consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying separate and consolidated financial statements.
Valuation of Investment Property – Consolidated financial statements
The Group measures its investment property at fair value as described and disclosed in notes 3, 4 and 11. As at reporting period end the investment property represents 95% of the total assets of the Group. The valuation of the investment properties, undertaken under the income approach, involves significant judgement and is highly dependent on a range of estimates made by management and external valuers relating to rental income, discount rates and rent growth per annum.
Due to the significance of the value of the investment property to the Group, and the estimation uncertainty involved in its measurement, we have considered the valuation of investment property to be a key audit matter.
Our procedures focused on the valuation process and included the following:
-Assessed the competency and independence of the professional valuers engaged by the Group;
-Discussed the key assumptions and judgmental areas with management and understood the approach taken in determining the valuation of each investment property;
-Tested the accuracy and completeness of rental income, being the key data input used in the valuation model, against the underlying detailed accounting records and rental agreements; and
-Involved a specialist in our team to assess, the continued reasonableness from prior year, of the appropriateness of the valuation methodologies used against general accepted market practices and of the key assumptions, including discount rate, rental value per square metre and rent growth per annum, by benchmarking against comparable market data.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
57
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on the audit of the separate and consolidated financial statements
We have also assessed the relevance and adequacy of the disclosures relating to the valuation techniques and key inputs presented in note 11.
Recoverability of loans receivable from related companies – Separate financial statements
The loans receivable from related companies of the Company are classified as financial assets at amortised cost. They are measured using the effective interest method and are subject to impairment as described in notes 3, 14 and 26. As at the reporting period end the loans receivable from related companies represent 46% of the total assets of the Company.
The recoverability assessment of loans receivable considers the financial position and performance of the related borrowers for the reporting period as well as the cash flow projections for such companies.
Due to the significance of the balances of loans receivable from related companies, and the dependency of the Company on the performance and recoverability of such loans to meet its ongoing obligations, we have considered the recoverability of loans receivable as a key audit matter.
Our audit procedures over the recoverability of the loans receivables from related companies included amongst others:
-inspecting the agreements, agreeing terms and conditions and assessing compliance therewith;
-confirming the outstanding balances with related companies; and
-evaluating the Company’s assessment of the recoverability of loans receivable by reference to the underlying financial position and projected cash flows of the subsidiaries.
We have also assessed the relevance and adequacy of disclosures relating to loans receivable from related companies presented in note 14 to the financial statements.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the separate and consolidated financial statements and our auditor’s report thereon.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
58
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on the audit of the separate and consolidated financial statements
Other information - continued
Our opinion on the separate and consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon other than our reporting on other legal and regulatory requirements.
In connection with our audit of the separate and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the separate and consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors and those charged with governance for the separate and consolidated financial statements
The directors are responsible for the preparation and fair presentation of the separate and consolidated financial statements in accordance with IFRS and the requirements of the Companies Act, and for such internal control as the directors determine is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the separate and consolidated financial statements, the directors are responsible for assessing the Group and 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 directors either intend to liquidate the Group or Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group and Company’s financial reporting process.
Auditor’s responsibilities for the audit of the separate and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the separate and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate and consolidated financial statements.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
59
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on the audit of the separate and consolidated financial statements
Auditor’s responsibilities for the audit of the separate and consolidated financial statements - continued
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
•identify and assess the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
•obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;
•evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors;
•conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern;
•evaluate the overall presentation, structure and content of the separate and consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
•obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
60
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on the audit of the separate and consolidated financial statements
Auditor’s responsibilities for the audit of the separate and consolidated financial statements - continued
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
61
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on other legal and regulatory requirements
Matters on which we are required to report by the Companies Act
Directors’ report
We are required to express an opinion as to whether the directors’ report has been prepared in accordance with the applicable legal requirements. In our opinion the directors’ report has been prepared in accordance with the Companies Act.
In addition, in the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Directors’ report. We have not nothing to report in this regard.
Other requirements
We also have responsibilities under the Companies Act to report if in our opinion:
•proper accounting records have not been kept;
•the financial statements are not in agreement with the accounting records and returns;
•we have not received all the information and explanations we require for our audit.
We have nothing to report to you in respect of these responsibilities.
Appointment
We were appointed as the statutory auditor by the directors of the Company with effect from 25 November 2019. The total uninterrupted engagement period as statutory auditor, including previous renewals and reappointments amounts to 3 years.
Consistency with the additional report to the audit committee
Our audit opinion on the financial statements expressed herein is consistent with the additional report to the audit committee of the Company, which was issued on the same date as this report.
Non-audit services
No prohibited non-audit services referred to in Article 18A(1) of the Accountancy Profession Act, Cap. 281 of the Laws of Malta were provided by us to the Group and we remain independent of the Group as described in the Basis for opinion section of our report.
No other services besides statutory audit services and services disclosed in the annual report and in the financial statements, were provided by us to the Group and its controlled undertakings.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
62
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on other legal and regulatory requirements
Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6
We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the annual financial report of the Group for the year ended 31 December 2021, entirely prepared in a single electronic reporting format.
Responsibilities of the directors
The directors are responsible for the preparation of the annual financial report, including the consolidated financial statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.
Our responsibilities
Our responsibility is to obtain reasonable assurance about whether the annual financial report, including the consolidated financial statements and the relevant electronic tagging therein comply in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.
Our procedures included:
• Obtaining an understanding of the entity's financial reporting process, including the preparation of the annual financial report, in accordance with the requirements of the ESEF RTS.
• Obtaining the annual financial report and performing validations to determine whether the annual financial report has been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.
• Examining the information in the annual financial report to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the annual financial report for the year ended 31 December 2021 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
63
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of TUM Finance plc - continued
Report on other legal and regulatory requirements
Matters on which we are required to report by the Capital Market Rules
Corporate governance statement
The Capital Market Rules issued by the Malta Listing Authority (“MFSA”) require the directors to prepare and include in their annual report a statement of compliance providing an explanation of the extent to which they have adopted the Code of Principles of Good Corporate Governance and the effective measures that they have taken to ensure compliance throughout the accounting period with those Principles.
The Capital Market Rules also require the auditor to include a report on the statement of compliance prepared by the directors. We are also required to express an opinion as to whether, in the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have identified material misstatements with respect to the information referred to in Listing Rules 5.97.4 and 5.97.5.
We read the statement of compliance and consider the implication for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements included in the annual report. Our responsibilities do not extend to considering whether this statement is consistent with the other information included in the annual report.
We are not required to, and we do not, consider whether the Board’s statements on internal control included in the statement of compliance cover all risks and controls, or form an opinion on the effectiveness of the Company’s governance procedures or its risk and control procedures.
In our opinion:
•the corporate governance statement set out on pages 4 to 13 has been properly prepared in accordance with the requirements of the Capital Market Rules issued by the MFSA
•in the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit the information referred to in Capital Market Rules 5.97.4 and 5.97.5 are free from material misstatement.
Under the Capital Market Rules we also have the responsibility to review the statement made by the Directors, set out on page 3, that the business is a going concern, together with supporting assumptions or qualifications as necessary.
We have nothing to report to you in respect of these responsibilities.
The partner in charge of the audit resulting in this independent auditor’s report is
Shawn Falzon for and on behalf of
Ernst & Young Malta Limited
Certified Public Accountants
22 April 2022