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C 91228Annual Report andConsolidated Financial Statements 31 December 2022
Tum Finance plc
  
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
APS Bank plc
APS Centre, Tower Street,
B’Kara, BKR 4012,
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 2022.
Principal activity
The Company and its subsidiaries (the “Group”) are involved in real estate development, investment and leasing in Malta. The Company holds investments in subsidiaries for capital growth and income generation. It also provides financing to companies forming part of the Group and to other related companies.
Performance review
The statement of comprehensive income is set out on page 15. During the year, the Group generated a profit before tax of EUR1,939,165 (2021: EUR1,978,097). Current year results were influenced by higher administrative expenses and by the share of loss of associates taken in 2022. The Company generated a profit before tax of EUR160,536 (2021: EUR72,940).
Dividends
During the year ended 31 December 2022, 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 28 in these financial statements.
Events after the end of reporting year
Events after the reporting period are disclosed in Note 29 to the financial statements.
Future developments
Reference is made to the company announcement published by the Company on 7 April, 2022 (TMF 16) in connection with a possible joint venture, the terms of which were being negotiated by and amongst: Tum Operations Limited (C 91301), a wholly owned subsidiary of the Company (“TOL”); Center Parc Holdings Limited (C 72342), in which TOL holds a 75% shareholding (“CPHL”); V.& C. Developments Limited (C 26541), being the other shareholder of CPHL; and other third party entities. As described in TMF16, the purpose of the joint venture is that of pooling and consolidating therein the joint venture parties’ existing holdings of specified immovable property, such that the said properties can be developed and, or operated, on a consolidated basis by and under such joint venture.
The joint venture company was since incorporated and registered under the laws of Malta as a public limited liability company bearing the name ‘BBT p.l.c.’, with company registration number C 101666 (“BBT”) by the following entities, namely: TOL; BT Group Limited (C 101263); Burmarrad Group Limited (C 86804); V&C Investments Limited (C 82808); and V.&C. Developments Limited (C 26541), which each respectively subscribed for shares, in varying proportions, in the issued share capital of BBT.
The transaction pursuant to the which, inter alia, the shareholders of BBT are to subscribe for additional share capital in BBT in consideration for the transfer of property assets held by them to BBT, has not as yet been completed. The Board of Directors of the Company considers that, should it be completed, such transaction would serve as an opportunity for the group of which the Company forms part to diversify its property exposure across a more diverse portfolio, while also investing in a platform to pursue further growth opportunities in the commercial property rental market. Further announcements regarding this transaction, if and when completed, will be issued by the Company in due course.
3
Directors’ report - continued
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
The Board, on the advice of the Audit Committee, will be recommending to the Annual General Meeting, the appointment of Grant Thornton as the new auditors of the Group and Company.
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 27 April 2023 by Silvan Fenech and Anthony Fenech as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report 2022.
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 deemed to be 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 met on nine (9) occasions during the financial period ended 31 December 2022, which meetings were attended by all its members. The Audit Committee is scheduled to meet at least five (5) times in 2023.
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 eight 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 2022 is as follows:
Name
Capacity
Meetings attended while in office
Mr. Anthony Fenech
Executive Director (Chairperson)
2/8
Mr. Matthew Fenech
Executive Director
5/8
Mr. Silvan Fenech
Executive Director
7/8
Dr. Stanley Portelli
Independent and Non-Executive Director
8/8
Mr. Mario Vella
Independent and Non-Executive Director
8/8
Mr. William Wait
Independent and Non-Executive Director
8/8
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 an amount not exceeding EUR60,000.
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 (2021: EUR36,000), in aggregate for services rendered during the year ended 31 December 2022.
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 as 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;
Mr. Mario Vella (an independent non-executive director of the Company) sat on the board of directors of all the companies within the Tum Finance Group until his resignation as director of said companies, with effect from the 30 April, 2022
The Executive Directors of the Company are thus susceptible to conflicts between the potentially divergent interests of the Tum Finance Group. Mr Vella was susceptible to such conflicts throughout such period during which he was also a director of the other companies within the Tum Finance Group, thus up until his resignation with effect from the 30 April, 2022, as aforesaid.
Moreover, conflicts may further arise given the 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 property co-owned by Easysell Limited at Mdina Road, Qormi (the Secured Asset”) 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 is 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.
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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.