Company Registration Number: C34767
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements
31 December 2021
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
Pages
Chairman’s statement 1
Directors’ report 2 - 9
Statement of compliance with the principles of good corporate governance 10 - 21
Remuneration statement and report 20 - 24
Statement of financial position 25
Income statement, Statement of comprehensive income 26
Statement of changes in equity 27
Statement of cash flows 28
Notes to the financial statements 29 - 47
Independent auditor’s report
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
1
Chairman’s statement
I am pleased to be presenting the Main Street Complex p.l.c. annual financial report for 2021 to shareholders,
covering the third full year of operations following the official listing of the company on the Malta Stock
Exchange.
The year 2021 was another year of challenges for Main Street Complex and for business generally, as the
COVID-19 pandemic continued to severely impact the local and global economy. During 2021, the company
was also faced with the closure of the anchor Debenhams franchise outlet. Notwithstanding these difficulties, I
am proud to report that Main Street Complex continued to show remarkable resilience, with our Board and
management team stepping up to these challenges, mitigating their impact on the company, our
concessionaires, and our stakeholders.
As was the case in the previous year, in line with directives issued by Government as a result of the COVID-
19 pandemic, Main Street Complex was once again closed to the public at the beginning of March 2021. The
company continued to support concessionaires by waiving all fees during this period, and by offering fee
reductions beyond the closure period where significant restrictions remained in place. Encouragingly,
business recovered positively when the complex was re-opened at the beginning of May 2021 and, with the
exception of the Debenhams franchise, all retail outlets remained open for business for the remainder of the
year. When comparing the period from the re-opening of the complex to the same period in 2020, footfall
increased by 12%, despite the absence of the above-mentioned anchor store during the second half of 2021
and delayed opening of the entertainment and catering outlets.
The resulting upturn in business has had a direct impact on revenues. Revenues for 2021 reached €637K
compared to €517K in 2020, while profit before tax rose from €224K in 2020 to €335K in 2021. At the same
time, our management team worked hard to keep operating costs at the levels of the previous year and
continued to invest in energy-saving measures. The positive results achieved reflect the company’s
continuous efforts and its resilience to adverse situations. Our liquidity position remained sound as a result of
diligent financial management and the absence of debt on our balance sheet. While it was considered prudent
to postpone the payment of dividends in 2021, I am pleased to report that the board will be recommending a
final dividend payment for 2021 of €241,000 at the next AGM.
I am also pleased to advise that by the date of this annual financial report, the areas vacated by the
Debenhams franchisee have been leased out to two new brands. One of these opened for business in March
2022, while the larger one is expected to open in the second quarter of 2022 following extensive investment
on the part of the franchisee. We are confident that their stores will consolidate the present product offering
and enhance customer experience at Main Street Complex.
Just as we were hoping that life in general and business operations would begin to return to normality, the
unfortunate events that have unfolded in Ukraine are deeply distressing and of concern. Although the
company is not directly exposed to such events, their outcome at this time remains uncertain. The company’s
strong financial position and absence of debt has this far enabled us to manage the adverse situations the
company has faced, and, while remaining vigilant and prudent, we are encouraged by the levels of business
in early 2022 which so far indicate a gradual return to pre-COVID levels.
We remain confident that Main Street Complex will continue to be a popular shopping destination for the
southern part of the island, and our dedicated management team remains committed to continue to contribute
positively to the success of our concessionaires and to deliver a unique customer experience to our clients.
Encouraged by the results achieved in the year under review, the Board continues to look to the future with
determination and optimism.
Signed by Joseph A. Gasan (Chairman) on 25 April 2022
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
2
Directors’ report
The Directors present their annual financial report and the audited financial statements for the year ended 31
December 2021.
Principal activity
The company’s principal activity is the management of and the granting of concessions of outlets and spaces
within Main Street Complex, as a retail and entertainment complex, featuring four floors of retail outlets, a
bar/restaurant and entertainment area, and parking facilities in the heart of Paola, Malta.
Review of the business
2021 was yet another abnormal year with the COVID-19 pandemic prevailing throughout. Nevertheless, while
the pandemic brought about its challenges, 2021 was still positive when compared to 2020, the year in which
the COVID-19 first surfaced locally. Despite the substantial decrease in footfall on account of the spike in
virus numbers in Q1/2021 and towards the end of Q4/2021, the mandatory closure in 2021 (which spanned 7
weeks for non-essential retail business and extended to 3 months for leisure and gaming operators), together
with the continued mitigation and capacity limitation measures, all of which had a repressive impact on
business and the social community, the general public is slowly and cautiously easing back to its “normal’
routine. This gradual return to normality was reflected in a partial recovery in footfall figures, with the post lock
down period of 2021 registering a growth of 12% over the same period of 2020. This recovery in visitor
numbers to Main Street is encouraging when one takes to account that the Debenhams franchise closed its
doors for business at the end of June 2021 and remained vacant for the rest of the year. The positive
business sentiment also appears to be gaining momentum as the vacant Debenham’s space was leased out
in full to two separate operators – IM Home and Lindex – both of which opened for business in April 2022.
In the light of the above-mentioned recovery and the resultant improvement in business levels of most of the
tenants operating at Main Street Complex, the company’s revenues for 2021 increased by 23% to €637,517
over those of the previous year. This was mainly due to the tapering off of discounts that were still being
granted to assist tenants during this difficult period by the company’s Board up to Q3/2021. The Debenhams
closure did not impact revenues due to termination conditions that protected the company’s income during the
period under review. The company’s operating and administrative costs were well managed throughout the
year, and operating costs of €192,737 represent a 1% increase over the same costs in 2020. The increase in
revenues, stable cost base and negligible finance costs resulted in the company’s net profits before tax for the
year increasing to €335,416 from the €224,102 in 2020. The healthy EBITDA of €444,780 generated during
the year, tight control on debt collection, absence of loan repayment commitments and the prudent decision
not to pay dividends during 2021, together comfortably absorbed total capital expenditure amounting to
€64,065. Most of this capital expense was directed towards replacing one of the Complex’s chillers for
improved efficiency. This resulted in an increase in the company’s cash balances to €579,408 from €255,228
at the end of the previous financial reporting period. The company’s balance sheet remains strong with total
equity amounting to €11,459,041 financing 88% of the company’s total assets of €13,042,745.
In the absence of an escalation of the Russia – Ukraine war and/or currently unforeseen repercussions arising
therefrom impacting the operators within the complex, Main Street Complex plc’s Board is optimistic that
further recovery will be registered during 2022 and beyond. It is worth noting that the expectation of rising
inflation, the increase in base costs of raw materials, services and finished goods, as well as the ongoing
need to adopt and embrace the ever-increasing regulatory and compliance statutory requirements, are
expected to impinge on the company’s cost base. Notwithstanding, the company remains in a strong financial
position and the Board is confident that as profitability returns to normal levels the company will return to
payment of dividends to its Shareholders.
The Directors recommend that at the forthcoming Annual General Meeting, the shareholders approve the
payment of a net final dividend of €241,000.
The statement of comprehensive income is set out on page 26.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
3
Directors’ report - continued
Our principal risk and uncertainties
Risks relating to reliance on concession agreements
In its business operations, the company enters into concession agreements with third parties pursuant to
which it grants such third parties the right to use the outlets forming part of Main Street Complex for an agreed
annual rate and, in some cases, a fee payable on the percentage of concession turnover, usually subject to a
minimum annual rent. The concessionaires of Main Street Complex are principally engaged in retail, catering
and entertainment. The company, therefore, relies on the revenues it expects to generate from the
Concessions. There can be no guarantee that the company will continue to find suitable concessionaires on
the terms it seeks from time to time. In addition, the financial stability of the concessionaires may change over
time. Defaults by concessionaires could result in a reduction in concession fee revenues, which may require
the company to contribute additional capital or obtain alternative financing. In addition, the company may incur
costs in enforcing rights under the Concession Agreements of a defaulting concessionaire, including legal
fees, re-possession of the space/s granted on concession and costs to grant a concession of the re-
possessed space to a new third-party/ies. Any adverse changes in a concessionaire’s financial condition may
negatively affect cash flows generated by the company. Furthermore, if the company’s concessionaires
decide not to renew their respective Concession Agreements upon expiration, the company may not be able
to grant concessions on the same terms, if at all. Any of the foregoing factors may adversely affect the
business, financial condition and results of operations of the company.
All the above identified risks are further accentuated by the impact that the COVID-19 and/or any other similar
pandemic will have on consumer spending and the general state of the retail market and local economy. In
addition, the impact of these risks affects the financial standing of concessionaires, the levels of business they
are able to generate, and where applicable, on their principals’ ability to continue supporting the underlying
brand operation and supply of required inventory.
Risks relating to changes in the market and economic conditions
The company’s business activities are subject to general market and economic conditions. These conditions
include, inter alia, consumer demand, financial market volatility, inflation, fluctuation in interest rates,
exchange rates, direct and indirect taxation, the health of the local retail markets, property prices, energy and
fuel costs, unemployment, wage rates, tightening of credit markets, government spending and budget
priorities, pandemics such as COVID-19 and ensuing government and/or public health authorities legislations
and/or recommendations related to but not limited to restrictions on daily activities, social distancing,
quarantine, lock-down imposition on specific or wide-spread industries and members of the society and other
general market and economic conditions. International economic and political factors, such as the Russia –
Ukraine conflict could also lead to direct or indirect impact on the local market conditions which could in turn
effect the company’s business activities.
In the event that the general market or specific sectors within it and economic conditions were to experience a
downturn and/or a complete halt, these weakened conditions may have an adverse impact to its shareholders.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
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Directors’ report - continued
Risks relating to the retail sector
The company grants Concessions to entities engaged principally in the retail sector, including the catering and
gaming sectors. The health of the retail market may have a direct or indirect effect on the ability of the
company to grant Concessions, and for the said concessionaires to continue operations. The health of the
retail market may be affected by a number of factors, including, inter alia, consumer demand, tastes, shopping
preferences, trends, online shopping, inflation, supply chain and/or shipment disruptions, fluctuation in interest
rates, exchange rates, direct and indirect taxation, regulations, mandatory closures, maximum capacity
measures, energy and fuel costs, unemployment, wage rates, availability of credit, government spending and
budget priorities, and other general market and economic conditions. These are particularly accentuated
owing to the size of the Maltese market. A significant downturn in the performance of the retail sector could
have a material adverse effect on the company’s business, financial position and results of operation.
Risks emanating from the company’s financing strategy
The company may not be able to obtain the capital it requires for development or improvement of existing or
new properties on commercially reasonable terms, or at all. The company may not be able to secure sufficient
financing for its investment requirements. No assurance can be given that sufficient financing will be available
on commercially reasonable terms or within the timeframes required by the company, also taking into account
the need from time to time for the Complex to undergo renovation, refurbishment or other improvements in the
future. Any weakness in the capital markets and, more generally, the inability to raise the necessary financing
from time to time, may limit the company’s ability to raise capital for the execution of future developments or
acquisitions. Failure to obtain, or delays in obtaining, the capital required to complete future developments
and acquisitions on commercially reasonable terms, including increases in borrowing costs or decreases in
loan availability, may limit the company’s growth and materially and adversely affect its business, financial
condition, results of operations and prospects.
Future indebtedness
The company may, from time to time, require bank credit facilities to maintain the Complex, to refinance
indebtedness as well as to fund future growth in terms of acquisition and developments. There can be no
assurance that the company will have access to sufficient capital or access to capital on terms favourable to
the company for future property acquisitions, refinancing its indebtedness, financing or refinancing of
properties, funding operating expenses or other purposes. Moreover, borrowings under bank credit facilities
are or may be at variable interest rates, which would render the company vulnerable to increases in interest
rates. The agreements regulating the company’s bank debt may impose, and are likely to impose, significant
operating restrictions and financial covenants on the company. These restrictions and covenants could limit
the company’s ability to obtain future financing, make capital expenditure, withstand a future downturn in
business or economic conditions generally or otherwise inhibit the ability to conduct necessary corporate
activities.
Key senior management and personnel
The operations and profitability of the company are dependent on the management support services provided
by Embassy Limited to the company in terms of a management support services agreement. Should either
party terminate the management support services agreement prior to the expiry of its term, or, should
Embassy Limited decide not to renew the agreement following the lapse of the term thereof, the company
would need to seek a new management support services provider or individuals to occupy the executive
management roles of the company. The company may be unable to replace the services provided by
Embassy Limited within the short term and/or on the same or similar terms. This could have a material
adverse effect on the company’s business and results of its operations.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
5
Directors’ report - continued
The company’s insurance policies
The company maintains insurance at levels determined by the company to be appropriate in light of the cost
of cover and the risk profile of the business in which the company operates. With respect to losses for which
the company is covered by its policies, it may be difficult and may take time to recover such losses from
insurers. In addition, the company may not be able to recover the full loss incurred from the insurer. No
assurance can be given that the company’s current insurance coverage would be sufficient to cover all
potential losses, regardless of the cause, nor can any assurance be given that an appropriate coverage would
always be available at acceptable commercial rates.
Risks relative to changes in laws
Various aspects of the company’s business are subject to specific laws and regulation including consumer
laws and licensing requirements. The business of the company is also subject to laws and regulations of
general application such as taxation, health and safety and employment. The timing and effects of changes in
the laws and regulations, to which the company is subject, including changes in the interpretation thereof,
cannot be predicted and could have an adverse effect on the business, financial condition and profitability of
the company.
Reputational risk
Reputational risk is the risk that negative publicity regarding the company’s business practices, whether true
or not, may cause a decline in the customer base, costly litigation, or revenue reductions. Reputational risk
could be particularly damaging for the company since the nature of its business requires maintaining the
confidence of clients and of the general marketplace.
Health and safety
The nature of the company’s business necessitates that adequate importance is given to maintaining
compliance with international health and safety standards. The failure to comply with such standards could
expose the company to third party claims, which could in turn have a material adverse effect on its business
and profitability.
Litigation risk
The company is susceptible to legal claims, with or without merit, by concessionaires and/or patrons of the
Complex. Defence and settlement costs can be substantial, even with respect to claims that have no merit.
Due to the inherent uncertainty of the litigation and dispute resolution process, there can be no assurance that
the resolution of any particular legal proceeding or dispute will not have a material adverse effect on the
company’s future cash flow, results of operations or financial condition.
Competitiveness in the commercial property market
The real estate market in Malta is very competitive in nature. An increase in supply and/or a reduction in
demand in the commercial property segments in which the company targets to grant Concessions, may cause
the Concessions to be granted at lower rates than is being anticipated by the company or may cause the
concession of the Main Street Complex spaces to take place at a slower pace than that anticipated by the
company. If these risks were to materialise, they could have an adverse impact on the company and its ability
to distribute dividends
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
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Directors’ report - continued
Material risks relating to the potential future development of real estate
The company may from time to time develop Main Street Complex further or develop other properties it may
acquire. Risks relating to real estate development may affect the economic performance and value of the
property under development. There are a number of factors that commonly affect the real estate development
industry, many of which are beyond the company’s control, and which could adversely affect the economic
performance and value of the company’s real estate property and any developments that the company may
seek to implement.
Such factors include: changes in general economic conditions in Malta; general industry trends, including the
cyclical nature of the real estate market; changes in local market conditions, such as an oversupply of similar
properties, a reduction in demand for real estate or change of local preferences and tastes; possible structural
and environmental problems liabilities to which the company may be exposed to in connection with the
construction of real estate including but not limited to, environmental liabilities, health and safety liabilities and
liabilities pertaining to the disposal of waste products; acts of nature, such as earthquakes and floods, that
may damage the property or delay its development; increased competition in the market segment in which the
company is undertaking the real estate development may lead to an oversupply of commercial properties in
such markets, which could lead to a lowering of concession payments and a corresponding reduction in
revenue of the company from Main Street Complex; the incurrence of cost overruns; delays in the processing
of permits for the development and construction of real estate property; and the dependence of the company
on third party contractors and the availability of same to carry out construction and structural works at the
times scheduled by, and costs agreed with, the company. In the event of real estate developments being
carried out by the company, any of the factors described above could have an adverse effect on the
company’s business, its respective financial condition and prospects and accordingly on the ability of the
company to distribute dividends.
Exposure to environmental liabilities
The company may become liable for the costs of removal, investigation or remediation of any hazardous or
toxic substances that may be located on or which may have migrated from, a property owned or occupied by
it, which costs may be substantial. The company may also be required to remove or remediate any hazardous
substances that it causes or knowingly permits at any property that it owns or may in future own. Laws and
regulations, which may be amended over time, may also impose liability for the presence of certain materials
or substances or the release of certain materials or substances into the air, land or water or the migration of
certain materials or substances from a real estate investment, and such presence, release or migration could
form the basis for liability to third parties for personal injury or other damages. These environmental liabilities,
if realised, could have a material adverse effect on its business, financial condition and results of operations.
Risks inherent in property valuations
The valuation of the Complex is based on certain assumptions, which ultimately may cause the actual values
to be materially different from any future values that may be expressed or implied by such forward-looking
statements or anticipated on the basis of historical trends, as reality may not match the assumptions. There
can be no assurance that such valuation of the Complex will reflect actual market values.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
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Directors’ report - continued
Financial risk management
The company’s activities potentially expose it to a variety of financial risks: market risk (including foreign
exchange risk, cash flow and fair value interest rate risk), credit risk, and liquidity risk. The company’s overall
risk management, covering risk exposures for all subsidiaries, focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the respective company’s financial performance.
The Board of Directors has overall responsibility for the establishment and oversight of the company’s risk
management framework. Accordingly, the company’s Board of Directors provides principles for overall risk
management, as well as risk management policies covering risks referred to above and specific areas such as
investment of excess liquidity. A detailed review of the risk management policies employed by the company is
included in Note 2 to the financial statements.
The Statement of Compliance with the Principles of Good Corporate Governance in this Annual Financial
Report describes the company’s adherence with the Principles and Code Provisions of Good Corporate
Governance set out in Appendix 5.1 of the Capital Markets Rules and the non-financial key performance
indicators relevant to the company, including information relating to environmental and employee matters.
Directors
The Directors who served on the Board during the year under review and up to the date of this report are
listed hereunder.
Joseph A. Gasan Executive Director and Chairman
Mario Camilleri Executive Director
Etienne Borg Cardona Independent Non-Executive Director
Christopher Mifsud Independent Non-Executive Director
Isabella Vella Independent Non-Executive Director
In accordance with the provisions of the Articles of Association of the company, the Directors shall hold office
until the subsequent annual general meeting, unless s/he resigns or is earlier removed in accordance with the
Articles, provided that a Director whose term of office expires shall be eligible for re-appointment.
The Directors have a service contract with the company.
Statement of Directors’ responsibilities for the financial statements
The Directors are required by the Companies Act (Cap. 386) to prepare financial statements that give a true
and fair view of the state of affairs of the company as at the end of each reporting period and of the profit or
loss for that period.
In preparing the financial statements, the Directors are responsible for:
• ensuring that the financial statements have been drawn up in accordance with International Financial
Reporting Standards as adopted by the EU;
• selecting and applying appropriate accounting policies;
• making accounting estimates that are reasonable in the circumstances;
• ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate
to presume that the company will continue in business as a going concern.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
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Directors’ report - continued
The Directors are also responsible for designing, implementing and maintaining internal control as they
determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and that comply with the Companies Act (Cap. 386). They 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.
The financial statements of Main Street Complex p.l.c. for the year ended 31 December 2021 are included in
the Annual Financial Report 2021, which is made available publicly. The Directors are responsible for the
maintenance and integrity of the Annual Financial Report on the website in view of their responsibility for the
controls over, and the security of, the website. Access to information published on the company’s website is
available in other countries and jurisdictions, where legislation governing the preparation and dissemination of
financial statements may differ from requirements or practice in Malta
Information provided in accordance with Capital Markets Rule 5.70.1
There were no material contracts to which the company was a party, and in which anyone of the company’s
Directors was directly or indirectly interested.
Going concern
The Directors, as required by the Capital Markets Rule 5.62, have considered the company’s operating
performance, the balance sheet at year-end, as well as the business plan for the coming year, also taking into
account possible impact of COVID-19 and the Russia – Ukraine conflict, and they have a reasonable
expectation that the company has adequate resources to continue in operational existence for the foreseeable
future. For this reason, in preparing the financial statements, they continue to adopt the going concern basis
in preparing the financial statements.
Auditors
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. A resolution to
re-appoint the auditors and to authorise the Directors to fix their remuneration will be proposed at the
forthcoming Annual General Meeting.
Information provided in accordance with Capital Markets Rule 5.64
The authorised share capital of the company as at 31 December 2021 and 2020 is €5,000,000 divided into
50,000,000 ordinary shares of €0.10 each. The issued share capital of the company is €1,938,462 divided into
19,384,619 ordinary shares of €0.10 each.
The Directors confirm that as at 31 December 2021 and 2020, Embassy Limited held a shareholding in
excess of 5% of the total issued share capital.
Any amendment to the company’s Memorandum and Articles of Association has to be made in accordance
with the Companies Act (Cap 386).
The company may, subject to the applicable restrictions, limitations and conditions contained in the
Companies Act (Cap 386) acquire its own shares and or Equity Securities.
Pursuant to Capital Markets Rules 5.64.2, 5.64.4, 5.64.5, 5.64.6, 5.64.7, 5.64.10 and 5.64.11 it is hereby
declared that, as at 31 December 2021 none of the requirements apply to the company.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
9
Directors’ report - continued
We, the undersigned, declare that to the best of our knowledge, the financial statements prepared in
accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and that this report includes a fair review of the
performance of the business and the position of the company together with a description of the principal risks
and uncertainties that they face.
Signed on behalf of the company's Board of Directors on 25 April 2022 by Joseph A. Gasan and Christopher
Mifsud as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the
Annual Financial Report 2021.
Registered office:
Main Street Complex
Antoine de Paule Square
Paola PLA 1262
Malta
25 April 2022
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
10
Statement of compliance with the principles of good corporate governance
1. Introduction
As a company having its entire issued share capital listed and traded on the Official List of the Malta
Stock Exchange, Main Street Complex p.l.c. (the “company”) is subject to the Capital Markets Rules
issued by the Malta Financial Services Authority (MFSA) (the “Capital Markets Rules”). Pursuant to
the Capital Markets Rules, the company should endeavour to adopt the Code of Principles of Good
Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules (the
“Code”). In terms of Capital Markets Rule 5.94, the company hereby reports on the extent of its
adoption of the principles of the Code for the financial year being reported upon.
The company acknowledges that the Code does not dictate or prescribe mandatory rules but
recommends principles of good practice. However, the Directors strongly believe that such practices
are generally in the best interests of the company and its shareholders and that compliance with the
principles of good corporate governance is not only expected by investors but also evidences the
Directors’ and the company’s commitment to a high standard of good governance.
The Board of Directors of the company (the “Board”) has carried out a review of the company’s
compliance with the Code for the financial year being reported upon.
2. General
The company’s governance principally lies with its Board, which is responsible for the overall
determination of the company’s policies and business strategies. The company’s principal activity is the
management and operation of the Main Street Complex, a shopping and entertainment mall located in
Paola, Malta.
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 it has employed structures,
which are most suitable and complementary for the size, nature and operations 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.
This corporate governance statement (the “Statement”) sets out the structures and processes in place
within the company and explains how these effectively achieve the goals set out in the Code. For this
purpose, this Statement will make reference to the pertinent principles of the Code and set out the
manner in which the Directors believe that these have been adhered to. Where the company has not
complied with any of the principles of the Code, this Statement will provide an explanation for the non-
compliance.
It is to be noted that reference in this Statement to compliance with the principles of the Code means
compliance with the Code’s main principles and provisions.
Principles One to Five
Principles One to Five of the Code deal fundamentally with the role of the Board and of the Directors.
The Directors believe that for the period under review the company has generally complied with the
requirements for each of these principles.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
11
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code
Principle One: The Board
The Board is responsible for determining the company’s strategic aims and organisational structure,
whilst ensuring that the company has the appropriate mix of financial and human resources to meet its
objectives and enhance performance. The Board is composed of a mix of executive and non-executive
directors who are fit and proper to direct the business of the company with honesty, competence and
integrity. All the members of the Board are fully aware of, and conversant with, the statutory and
regulatory requirements connected to the business of the company.
The Board has delegated specific responsibilities to senior management and committees, notably the
Nominations Committee and the Audit Committee, which operate under their respective formal terms of
reference. The company is party to a management support services agreement with Embassy Limited,
pursuant to which the company appointed Embassy Limited as the agent and representative of the
company to supervise, control, manage and direct the management and operation of the Main Street
Complex. In this respect, the company regularly liaises with the representatives of Embassy Limited to
ensure continuous dialogue on the manner in which the Main Street Complex is operated.
Principle Two: Chairman and Chief Executive
In terms of Article 13 of the Articles of Association of the company, the Board of Directors may from
time to time appoint any person to the office of Chief Executive Officer of the company, and on such
terms as they think fit. The functions and duties of Chief Executive Officer are performed by Bettina
Azzopardi, in her capacity as managing director of Embassy Limited, which, pursuant to the terms of a
management support services agreement between the latter and the company, is responsible for the
day-to-day management of the company and its business operations. see note adjacent
Joseph A. Gasan was re-appointed as the Chairman of the Board for the year under review.
The Chairman’s main function is to lead the Board and set its agenda, a function which the Board
believes has been conducted in compliance with the dictates of Code Provision 2.2. The Chairman is
also responsible to ensure that the Board receives precise, timely and objective information in order for
the Directors to take sound decisions and effectively monitor the performance of the company. The
Chairman ensures that there is effective communication with stakeholders and, during Board meetings,
that there is active engagement by all Directors for the discussion of complex and/or contentious
issues. The Board considers that notwithstanding that the Chairman is not an independent Director as
recommended by the Code, the means for addressing potential conflicts of interest are suitably
addressed in the Articles of Association of the company and terms of reference of the Audit Committee
of the company. Furthermore, the Board considers the present Chairman to be fit and proper to occupy
the role.
The composition of the Board, in line with the requirements of Principle 3 of the Code, is composed of
executive and non-executive Directors, including independent non-executives, as follows:
Director Title Director since
Joseph A. Gasan Executive Director and Chairman 1 December 2009
Mario Camilleri Executive Director 13 May 2010
Etienne Borg Cardona Independent Non-Executive Director 11 April 2018
Christopher Mifsud Independent Non-Executive Director 11 April 2018
Isabella Vella Independent Non-Executive Director 19 July 2018
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Annual Financial Report and Financial Statements - 31 December 2021
12
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Three: Composition of the Board
Appointment and Removal of Directors
Pursuant to generally accepted practices, as well as the company’s Articles of Association, the
appointment of Directors to the Board is reserved exclusively to the company’s shareholders, except in
so far as an appointment is made to fill a vacancy on the Board, which vacancy may be filled by co-
option by the Board on the recommendation of the Nominations Committee.
The Articles of Association provide for two mechanisms by virtue of which Directors may be appointed:
(i) holders of 17% or more of the voting rights in the company have the right to appoint one (1) Director
for each and every block of shares representing 17% of the issued share capital of the company having
voting rights, by way of letter addressed to the company (“A Director”); (ii) any one or more
shareholders who in aggregate hold not less than 5% in nominal value of shares having voting rights,
may nominate fit and proper persons having the appropriate level and mix of skills, knowledge and
experience required for appointment to the Board, such nominations being subject to the approval of
the Nominations Committee (“B Director”). In addition, nominations may also be made by the Board or
the Nominations Committee, for consideration by the shareholders at the annual general meeting of the
company.
An A Director may be removed by the members who appointed him or her by letter to the company and
a B Director may be removed by an ordinary resolution of those members who are entitled to vote for
their election at a general meeting. Directors may be removed at any time by ordinary resolution of the
shareholders of the company, or in any other specific instances set out in the Articles of Association of
the company.
Independence of Non-Executive Directors
In line with supporting principle 3 (iii) of main principle three, at least one third of the Board consists of
non-executive Directors. The non-executive Directors are Etienne Borg Cardona, Christopher Mifsud
and Isabella Vella. Non-executive Directors play an important role in overseeing executive Directors
and management, ensuring a system of checks and balances and contributing to the strategic direction
of the company in an objective manner.
For the purposes of Code Provision 3.2, the Board considers each of the non-executive Directors as
independent within the meaning of the Code. None of the non-executive Directors:
(a) have been an executive officer or employee of the company or a subsidiary or parent of the
company, as the case may be, within the last three years;
(b) has or has had within the last three years, a significant business relationship with the company
either directly, or as a partner, shareholder, director or senior employee of a body that has such a
relationship with the company;
(c) receive significant additional remuneration from the company;
(d) have close family ties with any of the executive members of the Board or senior employees;
(e) has served on the Board of the company for more than twelve consecutive years; or
(f) have been within the last three years an engagement partner or a member of the audit team of the
present or past external auditor of the company.
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13
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Three: Composition of the Board - continued
In terms of Code Provision 3.4, each non-executive Director 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/her independence; and
• to clearly express his/her opposition in the event that he/she finds that a decision of the Board
may harm the company.
Principle Four: The Responsibilities of the Board
In terms of Principle Four, it is the Board’s responsibility to ensure a system of accountability,
monitoring, strategy formulation and policy development.
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. The Board may also
delegate specific responsibilities to ad-hoc Committees as may be required from time to time, and in the
year under review, the Board has established and maintained an Audit Committee and a Nominations
Committee.
Senior management of the company is composed of the following members who are employees of
Embassy Limited and provide their services to the company pursuant to the terms of the management
support services agreement between the company and Embassy Limited:
Bettina Azzopardi - Chief Executive Officer (CEO)
Simon DeMarco - Financial Controller
Chris Borg - Assistant to CEO
Role and Responsibilities of the Board
The role of the Board is exercised in a manner designed to ensure that it can function independently of
management and effectively supervises the operations of the company. At each of its meetings, the
Board is presented by the Financial Controller of Embassy Limited (the contracted management
company) with monthly management accounts covering the period since the preceding Board meeting.
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 and forecasts;
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, the assignment of
management responsibilities and plans for senior management development including succession;
h) review, evaluate and approve compensation to senior management; and
i) review periodically the company’s objectives and policies relating to social, health and safety and
environmental responsibilities.
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Annual Financial Report and Financial Statements - 31 December 2021
14
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Four: The Responsibilities of the Board - 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. The Board evaluates and reviews the implementation of the business
and financial strategy of the company.
In ensuring compliance with other statutory requirements and with continuing listing obligations, the
Board is advised directly, as appropriate, by its appointed legal advisor and other advisors. Directors
are entitled to seek independent professional advice at any time on any aspect of their duties and
responsibilities, at the company’s expense.
This Code Provision recommends the development of a succession policy for the future composition of
the Board of Directors and particularly the executive component thereof, for which the Chairman should
hold key responsibility.
In the context of the appointment of Directors being a matter reserved exclusively to the company’s
shareholders (except where the need arises to fill a casual vacancy) as explained under Principle
Three, considering that every Director retires from office at the AGM, the company does not consider it
feasible to have in place such a succession policy.
The Audit Committee
In line with the requirements of the Capital Markets Rules, the company has established an Audit
Committee whose principal role is the review and oversight of the company’s financial reporting
process, accounting policies and standards, the audit process, any related party transactions, and the
monitoring of internal systems and control. When the Audit Committee’s monitoring and review
activities reveal cause for concern or scope for improvement, it makes recommendations to the Board
on the action needed to address the issue or make improvements
Unlike the provisions of the Code, which are not mandatory in nature, the Directors acknowledge that
the requirement of having an Audit Committee in place is an obligation under the Capital Markets
Rules. The Audit Committee operates under its own terms of reference which have been approved by
its Board. The terms of reference of the Audit Committee are modelled on the recommendations of the
Capital Markets Rules and have been approved by the MFSA.
The Audit Committee is a committee appointed by the Board and is directly responsible and
accountable to the Board. In the period under review, the Audit Committee met five (5) times. The
external auditors are invited to attend specific meetings of the Audit Committee and are entitled to
convene a meeting if considered necessary.
For the period under review, the audit committee was composed of Etienne Borg Cardona
(independent non-executive Director who is competent in accounting and, or auditing matters),
Christopher Mifsud (independent non-executive Director) and Isabella Vella (independent non-
executive Director). The members of the Audit Committee are appointed for a period of three (3) years
and shall be eligible for re-appointment by the Board of Directors. Audit Committee meetings are
chaired by a non-executive Director of the Board who is independent of the company. Etienne Borg
Cardona has been appointed as chairman of the Audit Committee members in accordance with the
terms of reference of the Audit Committee.
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Annual Financial Report and Financial Statements - 31 December 2021
15
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Five: Board Meetings
The Board believes that it complies fully with the requirements of this principle and the relative Code
Provisions, in that it has systems in place to ensure the reasonable notice of meetings of the Board and
the circulation of discussion papers in advance of meetings so as to provide adequate time to Directors
to prepare themselves for such meetings.
Minutes are prepared during Board meetings by the Company Secretary recording faithfully attendance,
discussions and resolutions. These minutes are subsequently circulated to all Directors as soon as
practicable after the meeting.
The Board meets as often and as frequently as is required in line with the nature and demands of the
business of the company. Directors attend meetings on a frequent and regular basis and dedicate the
necessary time and attention to their duties as Directors of the company.
The following reports the attendance at Board meetings of each of the Directors during the period under
review:
Name Capacity Meetings attended
Joseph A. Gasan Executive Director & Chairman 8 out of 8
Mario Camilleri Executive Director 8 out of 8
Etienne Borg Cardona Independent Non-Executive Director 7 out of 8
Christopher Mifsud Independent Non-Executive Director 8 out of 8
Isabella Vella Independent Non-Executive Director 8 out of 8
Board meetings are also attended by representatives of management, principally Bettina Azzopardi
(CEO) and Simon Demarco (Financial Controller).
The Chairman ensures that all issues relevant to long-term strategic and short-term performance of the
company are placed on the agenda of Board meetings and, for the purpose of discussion thereon, are
supported by all available information, whilst encouraging the presentation of views pertinent to the
subject matter and giving all Directors every opportunity to contribute to the discussion.
Principle Six: Information and Professional Development
The Board believes that this principle has been duly complied with for the period under review. The
Board actively ensures that there is adequate training for Directors and management. The Board
ensures that all Directors are supplied with precise, timely and clear information so as to enable them to
effectively contribute to Board decisions in line with the high standards expected of them.
Directors have access to the advice and services of the Company Secretary who is also the legal
counsel to the Board and the company, in order to ensure that each Director is aware of his/her legal
and fiduciary obligations. The company also bears the expense incurred by the Directors requiring
independent professional advice should they judge it necessary to discharge their responsibilities as
Directors. During the period under review, a number of information sessions were held with a view to
ensuring that Directors and senior management are made aware of, inter alia, their statutory and
fiduciary duties and the skills and competence requirements of senior management. The company
pledges to make available to the Directors the appropriate training and advice, as required.
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Annual Financial Report and Financial Statements - 31 December 2021
16
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Seven: Evaluation of the Board’s performance
The Board is of the view that over the period under review, all members of the Board, individually and
collectively, have contributed to proceedings in line with the required levels of diligence and skill. In
addition, the Board believes that its current composition endows the Board with a cross-section of skills
and experience and achieves the appropriate balance required for it to function effectively. For this
reason, the Board has not appointed a committee for the purpose of undertaking an evaluation of the
Board’s performance in accordance with the requirements of Code Provision 7.1.
Principle Eight: Committees
Principle Eight A of the Code deals with the establishment of a Remuneration Committee aimed at
developing policies on remuneration for Directors and senior executives and devising appropriate
remuneration packages.
The Board does not consider it necessary to constitute separate committees to deal, inter alia, with the
compensation packages of Directors and senior management, as might be appropriate in a larger
company. The company relies on 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. The Board shall retain
this matter under review over the coming year.
Principle Eight B of the Code deals with the requirement of a formal and transparant procedure for the
appointment of Directors.
Nominations Committee
The Board believes that the main principle has been duly complied with, as the Articles of Association
establish a formal and transparent procedure for the appointment and nomination of Directors, and
provide for the establishment of the Nominations Committee.
A Nominations Committee has been appointed to lead to the process for Board appointments of B
Directors and to make recommendations to it for the said appointment. The Nominations Committee
consists of Joseph A. Gasan, Etienne Borg Cardona and Christopher Mifsud. In accordance with Code
Provision 8.B.1, the Nominations Committee is composed entirely of Directors, the majority of whom
are independent non-executive Directors.
The Nominations Committee is empowered by the Articles of Association to reject any recommendation
made to it if, in its considered opinion, the appointment of the person so recommended as a Director
could be detrimental to the company’s interests or if such person is not considered fit and proper to
occupy that position. The Nominations Committee reports to the Board on all recommendations made
to it.
The Nominations Committee also has the function of periodically assessing the skills, knowledge and
experience of individual Directors necessary for the Board to have the appropriate level of skill,
competence and experience that would endow the Board with the requisite collective knowledge and
skill necessary for the proper functioning of the company and its oversight by the Board of Directors.
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Annual Financial Report and Financial Statements - 31 December 2021
17
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principles Nine and Ten: Relations with Shareholders and with the Market, and Institutional
Shareholders
The company is highly committed to having an open and communicative relationship with its
shareholders and investors. In addition to the statutory and regulatory requirements relating to the
Annual General Meeting, the publication of interim and annual financial statements, two Interim
Directors’ statements and respective company announcements, all of which serve the purpose of
keeping the market informed, the company will seek to hold meetings with market participants and
institutional investors.
The Board serves the legitimate interests of the company, accounts to shareholders fully and ensures
that the company communicates with the market effectively and in a timely manner through a number of
company announcements that it published, informing the market of significant events relevant to the
company and its business.
At its forthcoming Annual General Meeting, the Board intends to communicate directly with
shareholders on the performance of the company over the period under review and to inform
shareholders of the challenges and opportunities that lie ahead.
Business at the company’s Annual General Meeting covers the approval of the Annual Financial Report
and Audited Financial Statements, the declaration of a final dividend, the election of Directors, the
determination of the maximum aggregate emoluments that may be paid to Directors, the appointment of
auditors and the authorisation of the Directors to set the auditors’ remuneration. Extraordinary business
may also be resolved upon at the Annual General Meeting as the case so requires. The company’s
Articles of Association allow shareholders to call special meetings on matters of importance to the
company, provided that the minimum threshold of ownership established in the Articles of Association is
met.
Apart from the Annual General Meeting, the company intends to continue with its active communication
strategy in the market, and shall accordingly continue to communicate with its shareholders and the
market by way of the Annual Financial Report and Audited Financial Statements, by publishing its
results on a six-monthly basis during the year, and by way of company announcements to the market in
general. The company recognises the importance of maintaining dialogue with the market to ensure
that its strategies and performance are well understood and disclosed to the market in a timely manner.
As a source of further information to the market, the company’s website
(http://mainstreetcomplex.com/investor-relations/) also contains information about the company, its
business and developments pertinent to the Main Street Complex.
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Annual Financial Report and Financial Statements - 31 December 2021
18
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Eleven: Conflicts of Interest
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. The steps taken will depend on the circumstances
of the particular case and may include the setting up of ad-hoc committees of independent Directors
that would assist and monitor management as appropriate in the execution of specific transactions. 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. A
director is not entitled to vote in respect of any contract, arrangement, transaction or proposal in which
he has material interest in accordance with the Memorandum and Articles of Association. The Board
believes that this is a procedure that achieves compliance with both the letter and rationale of principle
eleven. During the period under review, the company did not enter into any material agreements in
which any one of the Directors was directly or indirectly interested.
In situations giving rise to potential conflicts of interest, the conflicted Directors are to act in accordance
with the majority decision of those Directors who are not conflicted in the proposed contract, transaction
or arrangement, and in line with the advice of outside legal counsel where such is solicited.
During the period under review, the company did not enter into any material agreements in which any
one of the Directors had a conflict of interest save in the case of the concessions relative to the Bingo
and Pull & Bear outlets. Joseph A. Gasan declared his conflict and did not participate in the vote
approving the concession in relation to Bingo, whereas Mario Camilleri declared his conflict and did not
participate in the vote approving the concessions of both Bingo and Pull & Bear.
Related Party Transactions
The following are related parties to the company:
- Embassy Limited
- Gasan Group
- the company’s Directors (‘key management personnel’).
The following are related party transactions that the company has entered into during the year under
review or otherwise ensuing up until the year under review:
i. transactions with Embassy Limited;
ii. transactions with entities having significant influence over the company;
iii. transactions with the Directors of the company.
These related party transactions which were carried out with related parties related to the following:
Expenditure for services 2021 2020
€ €
Management and administration fees 40,000 32,500
Other expenses 35,814 28,626
Other than the aforesaid, the Directors are not aware of any related party transactions having been
entered into by the company up until the year under review. In particular, the company has not entered
into material transactions with key management personnel that would warrant disclosure for the
purpose of understanding the company’s financial results or financial position. Furthermore, the
company has not entered into material transactions with entities in which its key management
personnel directly or indirectly have an interest or over which they have direct or indirect influence.
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Annual Financial Report and Financial Statements - 31 December 2021
19
Statement of compliance with the principles of good corporate governance
3. Compliance with the Code - continued
Principle Eleven: Conflicts of Interest - continued
All related party transactions are reported at the meetings of the Audit Committee for review.
Further information on the related party transactions mentioned above may be found in Note 21 to the
financial statements.
Principle Twelve: Corporate Social Responsibility
The Directors are committed to high standards of ethical conduct and to contribute to the well-being of
the local community and society at large. The company recognises the importance of its role in the
corporate social responsibility arena and seeks to ensure that in its operations the environment is
respected. The Directors are also aware of the importance of having good relations with stakeholders
and strive to work together with them in order to invest in human capital and safety issues and to adopt
environmentally friendly responsible practices.
4. Non-Compliance with the Code
The Directors set out below the Code Provisions with which the company does not comply and an
explanation as to the reasons for such non-compliance:
Code Provision
Explanation
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.
4.2
The Board has not formally developed a succession policy for the future
composition of the Board of Directors as recommended by Code Provision
4.2.7. In the context of the appointment of Directors being a matter
reserved exclusively to the company’s shareholders (except where the
need arises to fill a casual vacancy) as explained under Principle Three,
considering that every Director retires from office at the AGM, the
company does not consider it feasible to have in place such a succession
policy.
7.1
The Board has not appointed a committee for the purpose of undertaking
an evaluation of the Board’s performance in accordance with the
requirements of Code Provision 7.1. The Board believes that the size of
the company and the Board itself does not warrant the establishment of a
committee specifically for the purpose of carrying out a performance
evaluation of its role. Whilst the requirement under Code Provision 7.1
might be useful in the context of larger companies having a more complex
set-up and a larger Board, the size of the company’s Board is such that it
should enable it to evaluate its own performance without the requirement
of setting up an ad-hoc committee for this purpose. The Board shall retain
this matter under review over the coming year.
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Annual Financial Report and Financial Statements - 31 December 2021
20
Statement of compliance with the principles of good corporate governance
4. Non-Compliance with the Code - continued
Code Provision
Explanation
8A
The Board has not appointed a Remuneration Committee in line with
Code Provision 8A. The Board believes that the size of the company and
the Board itself does not warrant the setting up of an ad hoc committee
to establish the remuneration packages of individual Directors, and relies
on 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. In addition, the Board took into consideration the fact that the
remuneration of the Board is not performance related. The Board intends
to keep under review the utility and possible benefits of having a
Remuneration Committee in due course.
9.3
9.4
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. In
practice, however, the open channel of communication between the
company and minority shareholders via the Office of the Company
Secretary is such that any issue that may merit bringing to the attention
of the Board may be transmitted via the Company Secretary, who is in
attendance at all meetings of the Board of Directors.
The company does not have a policy in place to allow minority
shareholders to present an issue to the Board. The explanation provided
above in respect of Principle 9.3 refers.
5. Internal control
The Board is ultimately responsible for the company’s system of internal controls and for reviewing its
effectiveness. Such a system is designed to manage, rather than eliminate, risk to achieve business
objectives, and can provide only reasonable, and not absolute, assurance against normal business
risks or loss.
Through the Audit Committee, the Board reviews the effectiveness of the companyʼs system of internal
controls. The key features of the company’s system of internal control are as follows:
Organisation
The company operates through the Board with clear reporting lines and delegation of powers.
Control Environment
The company is committed to the highest standards of business conduct and seeks to maintain these
standards across all its operations. Company policies and employee procedures are in place for the
reporting and resolution of improper activities.
The company has an appropriate organisational structure for planning, executing, controlling and
monitoring business operations in order to achieve its objectives.
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Statement of compliance with the principles of good corporate governance
5. Internal control - continued
Risk Identification
Management is responsible for the identification and evaluation of key risks applicable to their
respective areas of business.
6. General meetings
The general meeting is the highest decision making body of the company and is regulated by its
Articles of Association. All shareholders registered on the register of members of the company on a
particular record date are entitled to attend and vote at general meetings. A general meeting is called
by twenty-one (21) days’ notice, which notice must specify the place, day and 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 such special business. The notice period may be reduced
to 14 days if certain conditions are satisfied.
At an Annual General Meeting, what is termed as “ordinary business” is transacted, namely, the
declaration of a dividend, the consideration of the financial statements and the reports of the Directors
and the auditors, the election of Directors, the appointment of auditors and the fixing of remuneration of
Directors and auditors. Other business, which may be transacted at a general meeting (including at the
Annual General Meeting), will be dealt with as “Special Business”.
The quorum of shareholders required is not less than fifty-one (51%) of the nominal value of the issued
share capital in respect of which holders thereof are entitled to attend and vote at the meeting. Voting
at any general meeting takes place by a show of hands or a poll where this is demanded. Subject to
any rights or restrictions for the time being attached to any class or classes of shares, on a show of
hands, each shareholder is entitled to one vote and on a poll, each shareholder is entitled to one vote
for each share carrying voting rights of which he is a holder. Shareholders who cannot participate in the
general meeting may appoint a proxy by written or electronic notification to the company. Appointed
proxy holders enjoy the same rights to participate in the general meeting as those to which the
shareholder they represent is entitled. Every shareholder represented in person or by proxy is entitled
to ask questions which are pertinent and related to the items on the agenda of the general meeting and
to have such questions answered by the Directors or such persons as the Directors may delegate for
such person.
The Directors’ statement of responsibilities for preparing the financial statements is set out on pages 7
and 8.
The information required by Capital Markets Rule 5.97.5, where applicable for the company, is found in
the Directors’ Report.
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Annual Financial Report and Financial Statements - 31 December 2021
22
Remuneration statement
In terms of Rule 8A.4 of the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of
the Capital Markets Rules of the MFSA (the “Code”), the company is to include a remuneration statement in
its annual financial report which shall include details of the remuneration policy of the company in respect of
the financial packages of members of the Board of Directors and the Chief Executive Officer of the company.
During the year under review, no individual was formally appointed as Chief Executive Officer of the company
although in effect Bettina Azzopardi occupied such role pursuant to a management support services
agreement entered into between the company and Embassy Limited (C20568), whereby the Main Street
Complex and operations relating thereto are managed by Embassy Limited. Accordingly, the remuneration
policy of the company is limited to the remuneration that may be paid to members of its Board of Directors.
The company’s remuneration of its Directors is based on the remuneration policy adopted and approved by
the shareholders of the company at the annual general meeting held on 29 July 2020 (the “Remuneration
Policy”). The Remuneration Policy of the company is available for inspection on the company’s website on
https://mainstreetcomplex.com/investor-relations/.
Remuneration policy
The Remuneration Policy of the company is intended to provide an over-arching framework that establishes
the principles and parameters to be applied in determining the remuneration to be paid to any member of the
Board of Directors. The Remuneration Policy is also intended to contribute to the development and attainment
of the company’s corporate strategy and its long-term success, development and sustainability.
Remuneration payable to Directors
Fixed remuneration
The remuneration payable to Directors of the company shall consist of fixed remuneration only and shall not
include any variable remuneration component based on performance indicators, share-based remuneration,
or other pension benefits, deferred consideration or other non-cash benefits.
In addition to fixed remuneration in respect of their position as members of the Board of Directors of the
company, individual Directors who are also appointed to chair, or to sit as members of, one or more
committees or sub-committees of the company may be entitled to receive additional compensation to occupy
such role. To date, no decision to grant such additional compensation has been taken.
In determining the fixed remuneration component payable to Directors, a number of key factors are taken into
consideration, including: the level of skills, competencies, expertise and experience required of, and enjoyed
by, such individuals; the duties and responsibilities attaching to their position and multiplicity of roles or
involvements within the company; and remuneration practices adopted by local companies operating in the
same industry sector of like standing, repute, size and complexity, among other factors.
Director service contracts
Each Director is party to a director service contract with the company, which contracts sets out the respective
role, responsibilities, duties and applicable remuneration of each Director, as well as the applicable term for
which the Directors shall be engaged, which term shall be in accordance with the provisions of the Articles of
Association of the company regulating the appointment, resignation and removal of directors of the company.
The Remuneration Policy of the company does not allow the granting to Directors of any entitlement to
termination payments or other payments linked to early termination of director service contracts.
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Annual Financial Report and Financial Statements - 31 December 2021
23
Remuneration report
In terms of Capital Markets Rule 12.26K, the company is also required to draw up an annual remuneration
report (the “Remuneration Report”), which report is to:
i. provide an overview of the remuneration, including benefits in whatever form, awarded or due to members
of the Board of Directors and the CEO (where appointed) during the financial year under review; and
ii. explain whether any deviations from the Remuneration Policy of the company arose.
In this respect, the company is hereby producing its second Remuneration Report since the approval and
entry into effectiveness, in July 2020, of the Remuneration Policy described in the preceding sections.
Remuneration paid to Directors
The aggregate emoluments which may be paid to Directors in any one financial year, and any increases
thereto, shall be as determined by the company in general meeting in accordance with Article 20.1 of the
Articles of Association of the company. The aggregate remuneration that may be paid to the Directors of the
company was last set at €40,000 and has not been the subject of any increase since the admission to listing
of the company’s shares on the Official List of the Malta Stock Exchange.
The remuneration which the individual Directors were entitled to receive during the year under review,
compared to the remuneration actually received in the previous financial year, was as follows:
Name Position Remuneration Paid
2021 2020
Joseph A. Gasan Executive Director and Chairman €8,000 €6,000
Mario Camilleri Executive Director €8,000 €6,000
Etienne Borg Cardona Independent Non-Executive Director €8,000 €6,000
Christopher Mifsud Independent Non-Executive Director €8,000 €6,000
Isabella Vella Independent Non-Executive Director €8,000 €6,000
The remuneration paid in respect of the year under review represents a return to the remuneration paid in
respect of the financial year ended 31 December 2019. The reduced remuneration paid in respect of the
financial year ended 31 December 2020 represented an aggregate reduction in remuneration of €10,000,
following a decision by the Directors to waive 25% of their respective remuneration by way of support to the
company in consequence of the onset of the COVID-19 pandemic and its impact on the operations and
financial position to the company during that financial year. With respect to the year under review: the
remuneration paid to Mr Joseph A. Gasan covered both his role as Director and Chairman of company; the
remuneration paid to the independent non-executive Directors covered both their role as Directors of the
company and their role as members and/or chairpersons of sub-committees of the Board of Directors of the
company.
In view of the management structure of the Group, and the fact that the sole asset of the company is the Main
Street Complex, the performance of which is dependent on concession income, the Board considers a fixed
remuneration to Directors as an appropriate and suitable remuneration package for the Board members in the
performance of their duties. Furthermore, the Board of Directors is satisfied that the fixed remuneration for the
year under review is in line with the core principles of the Remuneration Policy applicable during the year
under review, including giving due regard to market conditions and remuneration rates offered by comparable
organisations for comparable roles. Such remuneration was also considered to be consistent with the
practice adopted in respect of the determination of the remuneration payable to the members of the Board of
Directors in the preceding financial periods.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
24
Remuneration report - continued
Decision-making with respect to the Remuneration Policy
The Board of Directors is responsible for determining the Remuneration Policy of the company and, acting in
its function as the Remuneration Committee, is also responsible for overseeing and monitoring the
implementation and ongoing review thereof. The Remuneration Policy is to be reviewed by the Board of
Directors regularly, and any material amendments thereto shall be submitted to a vote by the annual general
meeting of the company before adoption, and in any case at least every four (4) years.
In evaluating whether it is necessary or beneficial to supplement or otherwise alter the Remuneration Policy of
the company, the Board of Directors shall have regard to, inter alia, best industry and market practice on
remuneration, the remuneration policies adopted by companies operating in the same industry sectors,
as well as legal and, or statutory rules, recommendations or guidelines on remuneration, including but not
limited to the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of the Capital
Markets Rules of the MFSA.
Whilst members of the Board of Directors may be present while his/her remuneration as a Director or sub-
committee member is being discussed at a meeting of the Board of Directors, no Director may be present
while his/her remuneration as aforesaid is being voted upon.
The contents of the Remuneration Report have been reviewed by the external auditor of the company for the
purpose of verifying that the information required in terms of Chapter 12 of the Capital Markets Rules
(including Appendix 12.1) has been included.
Joseph A. Gasan
Chairman
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
25
Statement of financial position
As at 31 December
2021
2020
Notes
€
€
ASSETS
Non-current assets
Property, plant and equipment
4
12,249,146
12,793,613
Current assets
Trade and other receivables
6
214,191
213,082
Cash and cash equivalents
7
579,408
255,228
Total current assets
793,599
468,310
Total assets
13,042,745
13,261,923
EQUITY AND LIABILITIES
Capital and reserves
Share capital
8
1,938,462
1,938,462
Share premium
9
2,876,923
2,876,923
Revaluation reserve
10
5,376,566
5,828,609
Retained earnings
1,267,090
1,025,473
Total equity
11,459,041
11,669,467
Non-current liabilities
Deferred tax liability
5
1,221,738
1,269,695
Total non-current liabilities
1,221,738
1,269,695
Current liabilities
Trade and other payables
11
257,620
236,108
Current tax liabilities
104,346
86,653
Total current liabilities
361,966
322,761
Total liabilities
1,583,704
1,592,456
Total equity and liabilities
13,042,745
13,261,923
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 25 to 47 were authorised for issue by the Board of Directors on 25
April 2022 . The financial statements were signed on behalf of the company’s Board of Directors by
Joseph A. Gasan and Christopher Mifsud as per the Directors’ Declaration on ESEF Annual Financial
Report submitted in conjunction with the Annual Financial Report 2021.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
26
Income statement
Year ended 31 December
2021
2020
Notes
€
€
Revenue
12
637,517
517,469
Operating expenses
13
(78,786)
(76,578)
Depreciation
13
(108,532)
(102,125)
Administrative expenses
13
(113,951)
(113,444)
Operating profit
336,248
225,322
Finance costs
15
(832)
(1,220)
Profit before tax
335,416
224,102
Tax expense
16
(93,799)
(79,698)
Profit for the year
241,617
144,404
Earnings per share
17
0.012
0.007
Statement of comprehensive income
Year ended 31 December
2021
2020
Notes
€
€
Comprehensive income
Profit for the year
241,617
144,404
Other comprehensive income
Items that will not be reclassified to profit or
loss
Reversal of part of the revaluation surplus previously
recognised, on land and buildings, arising during the
year, before deferred tax
10
(500,000)
-
Movement in deferred tax
5
47,957
14,432
Total other comprehensive income for the year,
net of tax
(452,043)
14,432
Total comprehensive income for the year
(210,426)
158,836
The accompanying notes are an integral part of these financial statements.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
27
Statement of changes in equity
Share
Share
Revaluation
Retained
Total
capital
premium
reserve
earnings
equity
Notes
€
€
€
€
€
Balance at 1 January 2020
1,938,462
2,876,923
5,814,177
1,040,905
11,670,467
Comprehensive income
Profit for the year
-
-
-
144,404
144,404
Other comprehensive income
Movement in deferred tax
5
-
-
14,432
-
14,432
Total comprehensive income
-
-
14,432
144,404
158,836
Transactions with owners
Dividends paid
18
-
-
-
(159,836)
(159,836)
Balance at 31 December 2020
1,938,462
2,876,923
5,828,609
1,025,473
11,669,467
Balance at 1 January 2021
1,938,462
2,876,923
5,828,609
1,025,473
11,669,467
Comprehensive income
Profit for the year
-
-
-
241,617
241,617
Other comprehensive income
Reversal of part of the
revaluation surplus previously
recognised, on land and
buildings, arising during the
year, net of deferred tax
5, 10
-
-
(452,043)
-
(452,043)
Total comprehensive income
-
-
(452,043)
241,617
(210,426)
Balance at 31 December 2021
1,938,462
2,876,923
5,376,566
1,267,090
11,459,041
The accompanying notes are an integral part of these financial statements.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
28
Statement of cash flows
Year ended 31 December
Notes
2021
2020
€
€
Cash flows from operating activities
Cash generated from operations
19
465,183
255,997
Interest paid
15
(832)
(1,220)
Net tax paid
(76,106)
(96,656)
Net cash generated from operating activities
388,245
158,121
Cash flows from financing activities
Dividends paid
18
-
(159,836)
Net cash used in financing activities
-
(159,836)
Cash flows from investing activities
Additions to property, plant and equipment
4
(64,065)
(1,074)
Net cash used in investing activities
(64,065)
(1,074)
Net movement in cash and cash equivalents
324,180
(2,789)
Cash and cash equivalents at beginning of year
255,228
258,017
Cash and cash equivalents at end of year
7
579,408
255,228
The accompanying notes are an integral part of these financial statements.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
29
Notes to the financial statements
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set
out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
1.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU and with the requirements of the Maltese
Companies Act (Cap. 386). The financial statements have been prepared under the historical cost
convention, except as modified by the fair valuation of the land and buildings class within property,
plant and equipment.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the
use of certain accounting estimates. It also requires Directors to exercise their judgement in the
process of applying the company’s accounting policies (see Note 3 - Critical accounting estimates
and judgements).
Standards, interpretations and amendments to published standards effective in 2021
In 2021, the company adopted amendments to existing standards that are mandatory for the
company’s accounting year beginning on 1 January 2021. The adoption of these revisions to the
requirements of IFRSs as adopted by the EU did not result in changes to the company’s accounting
policies.
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published
by the date of authorisation for issue of these financial statements but are mandatory for the
company’s accounting periods beginning after 1 January 2021. The company has not early adopted
these revisions to the requirements of IFRSs as adopted by the EU and the company’s Directors
are of the opinion that there are no requirements that will have a possible significant impact on the
company’s financial statements in the period of initial application.
1.2 Foreign currency translation
(a) Functional and presentation currency
Items included in these financial statements are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The euro is the
company’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in profit or loss.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
30
1. Summary of significant accounting policies - continued
1.3 Property, plant and equipment
All property, plant and equipment, is initially recorded at cost. Land and buildings are subsequently
stated at market value, based on valuations by external independent valuers, less depreciation.
Valuations of land and buildings are carried out regularly, such that the carrying amount of property
does not differ materially from that which would be determined using fair values at the end of the
reporting period. All other property, plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the
items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the company and the cost of the item can be measured reliably. All other repairs
and maintenance are charged to profit or loss during the financial period in which they are incurred.
Increases in the carrying amount arising on revaluation of land and buildings are credited to other
comprehensive income and shown as a revaluation reserve in shareholders’ equity. Decreases
that offset previous increases of the same individual asset are charged in other comprehensive
income and debited against the revaluation reserve directly in equity; all other decreases are
charged to profit or loss. Any subsequent increases are recognised in profit or loss up to the
amount previously charged to profit or loss, and then reflected in other comprehensive income and
shown as a revaluation reserve.
An external, independent valuer, having appropriate recognised professional qualifications and
recent experience in the location and category of property being valued, values the company’s
property portfolio at periodical intervals. The fair values are based on market values, being the
estimated amount or price that would be received to sell an asset in an orderly transaction between
market participants at the measurement date. In the absence of current prices in an active market,
the valuations are prepared by considering the aggregate of the estimated cash flows expected to
be received from renting out the property. A yield that reflects the specific risk inherent in the net
cash flows is then applied to the net annual cash flows to arrive at the property valuation.
Land is not depreciated as it is deemed to have an indefinite life. Depreciation on other assets is
calculated using the straight-line method to allocate their cost or revalued amounts to their residual
values over their estimated useful life. Depreciation is calculated using the straight-line method to
allocate the cost of the assets to their residual values over their estimated useful lives as follows:
%
Buildings
1
Improvements to premises
5
Plant, machinery and equipment
5 - 25
Furniture, fixtures and fittings
10 - 20
The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at the end of
each reporting period, or whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
The assets that suffered impairment are reviewed for possible reversal of the impairment at the end
of each reporting period.
Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount and are recognised in profit or loss.
When revalued assets are sold, the amounts included in the revaluation reserve relating to the
asset are transferred to retained earnings.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
31
1. Summary of significant accounting policies - continued
1.4 Financial assets
The company classifies its financial assets in at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.
Recognition and derecognition
The company recognises a financial asset in its statement of financial position when it becomes a
party to the contractual provisions of the instrument.
Regular way purchases and sales of financial assets are recognised on settlement date, the date
on which an asset is delivered to or by the company. Financial assets are derecognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and the
company has transferred substantially all the risks and rewards of ownership or has not retained
control of the asset.
Measurement
At initial recognition, the company measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial asset. Assets that are held for collection of
contractual cash flows where those cash flows represent solely payments of principal and interest
are measured at amortised cost. Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other gains/(losses) together with foreign
exchange gains and losses. Impairment losses are presented as a separate line item in the
statement of profit or loss, subject to materiality.
Impairment
The company assesses on a forward-looking basis the expected credit losses associated with its
debt instruments carried at amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the company applies the simplified approach permitted
by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the
receivables (See Note 2.1 for further information).
For all others financial assets that are subject to impairment under IFRS 9, the company applies a
three-stage model for impairment, based on changes in credit quality since initial recognition. A
financial asset that is not credit impaired on initial recognition is classified in stage 1.
Financial assets in stage 1, have their expected credit loss measured at amount equal to the
portion of lifetime expected credit loss that results from default events possible within the next 12
months, or until contractual maturity if shorter. If the company identifies a significant increase in
credit risk since initial recognition, the asset is transferred to stage 2 and its expected credit loss is
measured on a lifetime basis, that is up until contractual maturity. If the company determines that a
financial asset is credit impaired, the asset is transferred to stage 3 and the expected credit loss is
measured on a lifetime credit loss basis.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
32
1. Summary of significant accounting policies - continued
1.5 Trade and other receivables
Trade receivables comprise amounts due from customers for services performed in the ordinary
course of business. If collection is expected in one year or less (or in the normal operating cycle of
the business if longer), they are classified as current assets. If not, they are presented as non-
current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment, i.e. expected
credit loss allowance. The carrying amount of the asset is reduced through the use of an allowance
account, and the amount of the loss is recognised in the profit or loss within ‘administrative
expenses’. When a receivable is uncollectible, it is written off against the allowance account for
trade and other receivables. Subsequent recoveries of amounts previously written off are credited
against ‘administrative expenses’ in profit or loss.
Impairment of financial assets is described in Note 1.4 above.
1.6 Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at
call with banks.
1.7 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
1.8 Financial liabilities
The company recognises a financial liability in its statement of financial position when it becomes a
party to the contractual provisions of the instrument. The company’s financial liabilities are
classified as financial liabilities which are not at fair value through profit or loss (classified as ‘Other
liabilities’) under IFRS 9. Financial liabilities not at fair value through profit or loss are recognised
initially at fair value, being the fair value of consideration received, net of transaction costs that are
directly attributable to the acquisition or the issue of the financial liability. These liabilities are
subsequently measured at amortised cost. The company derecognises a financial liability from its
statement of financial position when the obligation specified in the contract or arrangement is
discharged, is cancelled or expires.
1.9 Trade and other payables
Trade payables comprise obligations to pay for goods or services that have been acquired in the
ordinary course of business from suppliers. Accounts payable are classified as current liabilities if
payment is due within one year or less (or in the normal operating cycle of the business if longer). If
not, they are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
33
1. Summary of significant accounting policies - continued
1.10 Borrowings
Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost, any difference between the
proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the
period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the company has an unconditional right to
defer settlement of the liability for at least twelve months after the end of the reporting period.
1.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position when there is a legally enforceable right to set off the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
1.12 Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss,
except to the extent that it relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
Deferred tax is recognised, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. However,
the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the end of the reporting period and are expected to
apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
1.13 Provisions
Provisions are recognised when the company has a present legal or constructive obligation as a
result of past events, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation, and a reliable estimate of the amount of the obligation can be
made.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
34
1. Summary of significant accounting policies - continued
1.14 Revenue recognition
Revenues include all revenues from the ordinary business activities. Ordinary activities do not only
refer to the core business but also to other recurring sales of goods or rendering of services.
Revenues are recorded net of value added tax, rebates and discounts.
(a) Sales of services
Revenue from services is generally recognised in the period in which the services are provided,
based on the services performed to date as a percentage of the total services to be performed.
Accordingly, revenue is recognised by reference to the stage of completion of the transaction under
the percentage of completion method.
IFRS 15 requires that at contract inception the goods or services promised in a contract with a
customer are assessed and each promise to transfer to the customer the good or service is
identified as a performance obligation. Promises in a contract can be explicit or implicit if the
promises create a valid expectation to provide a good or service based on the customary business
practices, published policies, or specific statements.
A contract asset must be recognised if the company recorded revenue for fulfillment of a contractual
performance obligation before the customer paid consideration or before – irrespective of when
payment is due – the requirements for billing and thus the recognition of a receivable exist.
A contract liability must be recognised when the customer paid consideration or a receivable from
the customer was due before the company fulfilled a contractual performance obligation and thus
recognised revenue.
(b) Property related income
Concession income receivable and premia charged are recognised in the period when the property
is occupied, and is credited to profit or loss on a straight-line basis over the period of the leases to
which they relate.
(c) Interest income
Interest income is recognised for all interest-bearing instruments on a time-proportion basis using
the effective interest method. When a receivable is impaired, the company reduces the carrying
amount to its recoverable amount, being the estimated future cash flow discounted at original
effective interest rate of the instrument, and continues unwinding the discount as interest income.
1.15 Leases - where the company is a lessor
Leases in which the company does not transfer substantively all the risks and rewards incidental to
ownership of an asset are classified as operating leases. Assets leased out under operating leases
are mainly being leased to third parties, with other assets being included in property, plant and
equipment in the statement of financial position. The latter are depreciated over their expected useful
lives on a basis consistent with similar owned property, plant and equipment. Concession income is
recognised in profit or loss on a straight-line basis over the period of the lease.
1.16 Finance costs
Finance costs are recognised in profit or loss for all interest-bearing instruments on an accrual
basis using the effective yield method. Finance costs includes the effects of amortising any
difference between net proceeds and redemption value in respect of the company’s borrowings.
Finance costs are charged against income without restrictions.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
35
1. Summary of significant accounting policies - continued
1.17 Dividends
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s
financial statements in the period in which the dividends are approved by the company’s
shareholders.
1.18 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments.
1.19 Earnings per share
The company presents earnings per share (EPS) data for its ordinary shares. EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the company by the weighted
average number of ordinary shares outstanding during the period.
2. Financial risk management
2.1 Financial risk factors
The company’s activities potentially expose it to a variety of financial risks: market risk (including
foreign exchange risk, fair value interest rate risk and cash flow interest rate risk), credit risk and
liquidity risk. The company’s overall risk management focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the company’s financial performance.
The company does not make use of derivative financial instruments to hedge certain risk exposures
during the current and preceding financial years.
The Board of Directors provides principles for overall company risk management, as well as
policies covering risks referred to above and specific areas such as investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
All monetary assets and liabilities of the company are denominated in the functional currency and
accordingly, the company is not exposed to foreign exchange risk.
(ii) Cash flow and fair value interest rate risk
The company does not have significant interest-bearing assets, and its income and operating cash
flows are substantially independent of changes in market interest rates. Management monitors the
level of floating rate as a measure of cash flow risk taken on. Interest rates on these financial
instruments are linked with the Central Intervention Rate issued by the European Central bank.
Based on this, management considers the potential impact on profit or loss of a defined interest
rate shift that is reasonably possible at the end of the reporting period to be immaterial.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
36
2. Financial risk management - continued
2.1 Financial risk factors - continued
(b) Credit risk
Credit risk arises from cash and cash equivalents, as well as credit exposures to customers,
including outstanding receivables and committed transactions.
The maximum exposure to credit risk at the reporting date was:
2021
2020
€
€
Financial assets at amortised costs
Trade and other receivables (excluding prepayments) (Note 6)
209,367
203,070
Cash and cash equivalents (Note 7)
579,408
255,228
788,775
458,298
The maximum exposure to credit risk at the end of the reporting period in respect of the financial
assets mentioned above is equivalent to their carrying amount as disclosed in the respective notes
to the financial statements. The company does not hold any significant collateral as security in this
respect. The figures disclosed in the table above in respect of trade and other receivables exclude
prepayments and deferred expenditure.
Trade and other receivables
The company assesses the credit quality of its trade customers, the majority of which are unrated,
taking into account financial position, past experience and other factors. The company’s exposure
to credit risk is influenced mainly by the individual characteristics of each customer. It has policies
in place to ensure that sales of services are effected to customers with an appropriate credit history.
The company’s management monitors the performance of its trade and other receivables on a
regular basis to identify expected collection losses, which are inherent in the company’s
receivables, taking into account historical experience in collection of accounts receivable. The
company’s trade receivables which are not impaired financial assets are principally debts in respect
of transactions with customers for whom there is no history of default.
Impairment of trade and other receivables
The company applies the IFRS 9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared
credit risk characteristics and the days past due.
In measuring the expected credit losses on trade receivables, the expected loss rates are based on
the payment profiles of sales over a period of time before the reporting date and the corresponding
historical credit losses experienced within this period. The historical loss rates are adjusted to
reflect current and forward-looking information on macroeconomic factors affecting the ability of the
customers to settle the receivables. The company adjusts the historical loss rates based on
expected changes in these factors.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
37
2. Financial risk management - continued
2.1 Financial risk factors - continued
(b) Credit risk - continued
As a response to the outbreak of COVID-19, the company monitors information available on
macroeconomic factors, affecting repayment ability, as well as the actual and projected impact of
the pandemic on the business model of the customers serviced by the company. Payment patterns
attributable to the company’s customers post COVID-19 outbreak is thoroughly and regularly
assessed to determine whether any deterioration in collection rates was being experienced. The
company determined that the expected credit losses have not materially changed taking
cognisance of the projected impact on the repayment ability of the company’s customers, the
repayment pattern actually experienced, and the estimated life of receivables.
Credit loss allowances include specific provisions against credit impaired individual exposures with
the amount of the provisions being equivalent to the balances attributable to credit impaired
receivables. The company considers that there is evidence of impairment if any of the following
indicators is present:
- significant financial difficulties of the debtor,
- probability that the customer will enter bankruptcy or financial reorganisation, and
- default or late payments (more than 90 days overdue).
The closing loss allowances for trade receivables as at 31 December 2021 and 2020 reconcile to
the opening loss allowances as follows:
2021
2020
€
€
At beginning of year
8,494
-
Change in loss allowances recognised
in profit or loss during the year
-
8,494
At end of year
8,494
8,494
The company established an allowance for impairment that represented its estimate of expected
credit losses in respect of trade and other receivables. The individually credit impaired trade
receivables mainly relate to a number of independent customers which are in unexpectedly difficult
economic situations and which are accordingly not meeting repayment obligations.
Cash and cash equivalents
The company principally banks with local financial institutions with high quality standing or rating.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the
identified impairment loss is insignificant.
(c) Liquidity risk
The company is exposed to liquidity risk in relation to meeting future obligations associated with its
financial liabilities, which comprise principally trade and other payables (refer to Note 11). 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
flows over a twelve month period detailed to ensure that no additional financing facilities are
expected to be required over the coming year.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
38
2. Financial risk management - continued
2.2 Capital risk management
The company’s objectives when managing capital are to safeguard the company’s ability to
continue as a going concern in order to provide returns for shareholders and benefits for other
stakeholders and to ensure that borrowings are adequately serviced and repaid on their contractual
maturity date. In order to maintain or adjust the capital structure, the company may adjust the
amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.
The company’s equity, as disclosed in the statement of financial position, constitutes its capital.
The company maintains the level of capital by reference to its financial obligations and
commitments arising from operational requirements. In view of the nature of the company’s
activities, the capital level as at the end of the reporting period is deemed adequate by the
Directors.
2.3 Fair value estimation
At 31 December 2021 and 2020 the carrying amounts of cash and cash equivalents, receivables, and
payables are reasonable estimates of fair value in view of the nature of these instruments or the
relatively short period of time between the origination of the instruments and their expected
realisation.
3. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and based on historical experience and other
factors including expectations of future events that are believed to be reasonable under the
circumstances.
The company makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. These estimates and
assumptions present a risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year. The company’s management also makes judgements, apart
from those involving estimations, in the process of applying the entity's accounting policies that may
have a significant effect on the amounts recognised in the financial statements.
In the opinion of the Directors, the accounting estimates and judgements made in the course of
preparing these financial statements, which have been highlighted above, are not difficult,
subjective or complex to a degree which would warrant their description as critical in terms of the
requirements of IAS 1.
As referred to in Note 4, the land and buildings class of property, plant and equipment is fair valued
on the basis of future cash flows emanating from the operation of the property and other key inputs,
namely the discount and growth rates.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
39
4. Property, plant and equipment
Land and
buildings
Plant,
Furniture,
including
machinery
fixtures
improvements
and
and
to premises
equipment
fittings
Total
€
€
€
€
At 1 January 2020
Cost or valuation
12,935,673
623,265
358,368
13,917,306
Accumulated depreciation
(159,147)
(512,884)
(350,611)
(1,022,642)
Net book amount
12,776,526
110,381
7,757
12,894,664
Year ended 31 December 2020
Opening net book value
12,776,526
110,381
7,757
12,894,664
Additions
-
-
1,074
1,074
Depreciation charge
(79,574)
(21,227)
(1,324)
(102,125)
Closing net book amount
12,696,952
89,154
7,507
12,793,613
At 31 December 2020
Cost or valuation
12,935,673
623,265
359,442
13,918,380
Accumulated depreciation
(238,721)
(534,111)
(351,935)
(1,124,767)
Net book amount
12,696,952
89,154
7,507
12,793,613
Year ended 31 December 2021
Opening net book value
12,696,952
89,154
7,507
12,793,613
Additions
-
56,481
7,584
64,065
Reversal of part of the revaluation
surplus, previously recognised (Note 10)
(500,000)
-
-
(500,000)
Depreciation charge
(79,574)
(26,875)
(2,083)
(108,532)
Closing net book amount
12,117,378
118,760
13,008
12,249,146
At 31 December 2021
Cost or valuation
12,435,673
679,746
367,026
13,482,445
Accumulated depreciation
(318,295)
(560,986)
(354,018)
(1,233,299)
Net book amount
12,117,378
118,760
13,008
12,249,146
The company operates Main Street Complex, a fully serviced shopping complex, leasing out of
retail space. The extent of the services provided is deemed to be significant to the arrangement
with the concessionaires as a whole. The shopping complex, which is made up of all the classes of
assets included in property, plant and equipment above, is leased out under operating leases and
accordingly is treated as property, plant and equipment under the requirements of IAS 16 rather
than investment property under IAS 40.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
40
4. Property, plant and equipment - continued
Fair value of land and buildings
The land and buildings within property, plant and equipment were revalued during the year ended
31 December 2017 by an independent firm of property valuers having appropriate recognised
professional qualifications and experience in the location and category of the property being
valued. The Directors have reviewed the carrying amounts of the property as at 31 December 2021
and on the basis of current market conditions, resulting in a reversal of part of the revaluation
surplus previously recognised, amounting to €500,000. This reversal was debited to the revaluation
reserve, in shareholders’ equity (Note 10), net of applicable deferred tax. The Directors are of the
opinion that the principal assumptions used reflect a prudent approach and that the carrying
amount of the company’s property as at the end of the current financial year, is an appropriate
estimate of its fair value.
The company is required to disclose fair value measurements by level of the following fair value
measurement hierarchy for non-financial assets carried at fair value:
- Quoted prices (unadjusted) in active markets for identical assets (level 1).
- Inputs other than quoted prices included within level 1 that are observable for the asset either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
- Inputs for the asset that are not based on observable market data (that is, unobservable inputs)
(level 3).
The company’s recurring fair value measurements are categorised as level 3 as they are based on
significant unobservable inputs. The company’s policy is to recognise transfers into and out of fair
value hierarchy levels as of the beginning of the reporting period. During the current financial year
there were no transfers between the fair value levels.
The company’s land and buildings represent Main Street Complex, and its current use equates to
the highest and best use.
Valuation process and techniques
The company’s property is valued on periodic valuation by the Directors after seeking professional
advice from independent professionally qualified valuers who holds a recognised relevant
professional qualification and have the necessary experience in the location and segments of the
property being valued.
At the end of every reporting period during which an external valuation is not carried out, the
Directors also assess whether any significant changes in actual circumstances, income streams,
results and developments have been experienced since the last external valuation. An adjustment
to the carrying amount of the property is only reflected if it has been determined that there has been
a significant change.
The valuation was determined using discounted cash flow projections considering, inter alia, the
projected future earnings from the Complex, in the main based on current concession agreements,
its ongoing maintenance needs, and other relevant market factors. Accordingly, the significant
unobservable inputs applied in the company’s valuation are the following:
- Earnings before interest, tax, depreciation and amortisation (EBITDA): which is based on the
company’s existing concession income streams less operating costs (before depreciation) which
include marketing and maintenance expenses.
- Growth rate, at an average of 2.5% (2020: 2.5%): represents the estimated average growth of
the company’s concession income.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
41
4. Property, plant and equipment - continued
- A discount rate of 6% (2020: 6%) was applied in estimating the net present value of the
projected future free cash flows, and a cap rate of 5.7% (2020: 5%).
Generally, an increase in the EBITDA and the growth rate will result in an increase to the fair value
of the property. Conversely, a lower discount rate will give a higher fair value.
Historical cost of land and buildings
The carrying value of land and buildings would have been as follows had these assets been
included in the financial statements at cost less depreciation:
2021
2020
€
€
Cost
6,572,551
6,572,551
Accumulated depreciation
(1,029,406)
(949,832)
5,543,145
5,622,719
5. Deferred taxation
2021
2020
€
€
Deferred tax liability
At beginning of year
1,269,695
1,284,127
Deferred tax on movement for the year (Note 10)
(47,957)
(14,432)
At end of year
1,221,738
1,269,695
Deferred taxes are calculated on all temporary differences under the liability method using a
principal tax rate of 35% (2020: 35%), except for deferred taxation on the fair valuation of property
which is computed on the basis applicable to disposals of immovable property, i.e. tax rate of 10%
(2020: 10%) of the transfer value.
The balance at 31 December represents temporary differences attributable to:
2021
2020
€
€
Fair valuation of property
(1,221,738)
(1,269,695)
Deferred tax liability
(1,221,738)
(1,269,695)
Deferred taxation is principally composed of deferred tax liabilities which are to be mainly recovered
and settled after more than twelve months.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
42
6. Trade and other receivables
2021
2020
€
€
Current
Trade receivables - gross
217,861
197,278
Expected credit loss allowance
(8,494)
(8,494)
Trade receivables - net
209,367
188,784
Other receivables
-
14,286
Prepayments
4,824
10,012
214,191
213,082
7. Cash and cash equivalents
For the purposes of the statement of cash flows, the year-end cash and cash equivalents comprise
the following:
2021
2020
€
€
Cash at bank
579,408
255,228
8. Share capital
2021
2020
€
€
Authorised share capital
50,000,000 ordinary shares of €0.10 each
5,000,000
5,000,000
Issued and fully paid share capital
19,384,619 ordinary shares of €0.10 each
1,938,462
1,938,462
9. Share premium
2021
2020
€
€
At beginning and end of year
2,876,923
2,876,923
The share premium arose on the issue of 5,230,769 ordinary shares at a premium of €0.55.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
43
10. Revaluation reserve
2021
2020
€
€
Year ended 31 December
At beginning of year
5,828,609
5,814,177
Reversal of part of the revaluation surplus,
previously recognised (Note 4)
(500,000)
-
Deferred tax on movement for the year (Note 5)
47,957
14,432
At end of year
5,376,566
5,828,609
The revaluation reserve relates to fair valuation of the land and buildings component of property,
plant and equipment, and the balance represents the cumulative net increase in fair value of such
property, net of related deferred tax. The revaluation reserve is a non-distributable reserve.
11. Trade and other payables
2021
2020
€
€
Current
Trade payables
38,630
79,572
Amounts owed to related parties
24,736
24,603
Accruals
56,829
44,650
Contract liabilities
62,250
64,006
Indirect taxes and social security
75,175
23,277
257,620
236,108
Amounts owed to related parties are unsecured, interest free and repayable on demand.
Contract liabilities comprise deposits received in advance from customers:
2021
2020
€
€
Deposits received in advance from customers
At beginning of year
64,006
64,006
Originations
6,000
-
Refunds to customers
(7,756)
-
At end of year
62,250
64,006
12. Revenue
All the company’s revenue relates to concession income arising over time, from contracts with
customers, attributable to retail outlets in Main Street Complex in Paola, Malta.
The company primarily operates in one segment that comprises granting of concessions of outlets
or spaces within the Main Street Complex against an agreed annual rate, and in some cases, a fee
payable based on a percentage of the concessionaire’s turnover, which activities are substantially
subject to the same risks and returns. Accordingly, the presentation of segment information
required by IFRS 8, Operating segments, within these financial statements is not deemed
applicable.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
44
12. Revenue - continued
During the current and preceding financial year, certain discounts were granted to tenants as a
result of the COVID-19 pandemic. These discounts were not deemed to be a modification of the
company’s concession arrangements since the term of the respective concessions remained
unchanged, and similarly the scope of the concession was not modified. The amount of the
discounts has been treated as negative variable concession payments and consequently
recognised as a deduction from revenue.
13. Expenses by nature
2021
2020
€
€
Depreciation of property, plant and equipment (Note 4)
108,532
102,125
Administrative and management fees
40,000
32,500
Other expenses
152,737
157,522
Total operating expenses, depreciation, and administrative expenses
301,269
292,147
Auditor’s fees:
Included in other expenses are fees charged by the auditor to the company for services rendered
during the financial periods ended 31 December 2021 and 2020. These relate to the following:
2021
2020
€
€
Annual statutory audit
8,000
6,000
Other assurance services
1,750
2,175
Tax advisory and compliance services
-
1,750
9,750
9,925
During the current year fees in relation to non-assurance services amounting to €1,250 have been
charged by connected undertakings of the company’s auditor, in respect of tax advisory and
compliance services.
14. Directors’ fees
2021
2020
€
€
Directors’ fees
40,000
30,000
15. Finance costs
2021
2020
€
€
Bank charges and interest
832
1,220
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
45
16. Tax expense
2021
2020
€
€
Current tax expense
93,799
76,698
The tax on the company’s profit before tax differs from the theoretical amount that would arise using
the basic tax rate as follows:
2021
2020
€
€
Profit before tax
335,416
224,102
Tax at 35%
117,396
78,436
Unrecognised deferred tax
9,996
3,755
Income taxed at different rates
(125,602)
(101,291)
Expenses not allowed for tax purposes
95,600
98,798
Overprovision of current tax in prior years
(3,591)
-
Tax expense
93,799
79,698
The tax rate applied to rental income during the year ended 31 December 2021 and 2020 was 15%.
17. Earnings per share
Earnings per share is based on the net profit for the year divided by the weighted average number
of ordinary shares in issue during the year. The diluted earnings per share is equal to the basic
earnings per share.
2021
2020
Net profit attributable to shareholders
€241,617
€144,404
Weighted average number of ordinary shares in issue
19,384,619
19,384,619
Earnings per share
€0.012
€0.007
18. Dividends
2021
2020
€
€
Net dividends paid on ordinary shares
-
159,836
Dividends per share
€4
-
0.008
A net dividend in respect of the year ended 31 December 2021 of €0.012 per share amounting to
€241,000, is to be proposed by the Board of Directors at the forthcoming Annual General Meeting.
The financial statements do not reflect this proposed dividend, which, subject to the approval by the
shareholders, will be accounted for within shareholders’ equity as an appropriation of retained
earnings in the year ending 31 December 2022.
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
46
19. Cash generated from operations
Reconciliation of operating profit to cash generated from operations:
2021
2020
€
€
Operating profit
336,248
225,322
Adjustment for:
Depreciation of property, plant and equipment (Note 4)
108,532
102,125
Expected credit loss allowance (Note 6)
-
8,494
Changes in working capital:
Trade and other receivables
(1,109)
58,757
Trade and other payables
21,512
(138,701)
Cash generated from operations
465,183
255,997
20. Commitments
Operating lease commitments - where the company is the lessor
The future minimum lease payments receivable under non-cancellable operating leases are as
follows:
2021
2020
€
€
Not later than 1 year
565,222
632,203
Later than 1 year and not later than 5 years
1,309,744
1,560,166
Later than 5 years
36,780
15,897
1,911,746
2,208,266
21. Related party transactions
The company has related party relationships with Embassy Limited, (its former parent) and all
entities ultimately controlled by it are still considered to be related parties, in view of Embassy
Limited’ s interest in the company. Gasan Group is also considered to be a related party of the
company, in view of the fact that Joseph A. Gasan, the Executive Director and Chairman, is the
ultimate controlling party of the Group. Related entities ultimately controlled by Embassy Limited
and Gasan Group, together with the company’s Directors (‘key management personnel’) are also
considered to be related parties.
The following principal operating transactions, which were carried out with related parties, have a
material effect on the operating results and financial position of the company:
2021
2020
€
€
Expenditure for services
Management and administration fees
40,000
32,500
Other expenses
35,814
28,626
MAIN STREET COMPLEX p.l.c.
Annual Financial Report and Financial Statements - 31 December 2021
47
21. Related party transactions - continued
Except for Directors’ fees (Note 14) the company has not entered into material transactions with
key management personnel which would warrant disclosure thereof for the purpose of
understanding the company’s financial results or its financial position. Also, the company has not
entered into material transactions with entities in which its key management personnel directly or
indirectly have an interest or over which they have direct or indirect influence. Any such
transactions would constitute normal operating transactions under normal market and commercial
terms relating to provision of operational services by the company, and would not comprise
financing transactions.
Year-end balances with related parties, arising principally from transactions referred to previously,
are disclosed in Note 11 to these financial statements.
22. Statutory information
Main Street Complex p.l.c. is a public liability company and is incorporated in Malta, with its
registered office at Main Street Complex, Antoine de Paule Square, Paola PLA 1262.
Independent auditor’s report
To the Shareholders of Main Street Complex p.l.c.
Report on the audit of the financial statements
Our opinion
In our opinion:
· The financial statements give a true and fair view of the financial position of Main Street Complex p.l.c. (the company) as at 31 December 2021, and of the company’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU; and
· The financial statements have been prepared in accordance with the requirements of the Maltese Companies Act (Cap. 386).
Our opinion is consistent with our additional report to the Audit Committee.
What we have audited
Main Street Complex p.l.c.’s financial statements comprise:
· the statement of financial position as at 31 December 2021;
· the income statement and the statement of comprehensive income for the year then ended;
· the statement of changes in equity for the year then ended;
· the statement of cash flows for the year then ended; and
· the notes to the financial statements, which include significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these Codes.
To the best of our knowledge and belief, we declare that non-audit services that we have provided to the company are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).
The non-audit services that we have provided to the company in the period from 1 January 2021 to 31 December 2021, are disclosed in Note 13 to the financial statements.
Our audit approach
Overview
|
|
Overall materiality: €16,700, which represents 5% of profit before tax.
|
|
Valuation of property, plant and equipment.
|
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
|
Overall materiality |
€16,700 |
|
How we determined it |
5% of profit before tax |
|
Rationale for the materiality benchmark applied |
We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the company is most commonly measured by users, and is a generally accepted benchmark.
We chose 5% which is within the range of quantitative materiality thresholds that we consider acceptable.
|
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €1,650 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the 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.
|
Key audit matter |
How our audit addressed the Key audit matter |
|
Valuation of property, plant and equipment
The company’s property comprises the Main Street Complex, having a carrying amount of €12.2 million. The property, which leases units primarily for retail activity, was revalued by an independent professionally qualified valuer in previous years.
Following the Directors’ valuation assessment as at 31 December 2021, of whether any significant changes occurred since the last external valuation, a reversal of part of the revaluation surplus previously recognised, for an amount of €500,000 was recognised in the financial statements for the year ended 31 December 2021.
As explained in Note 4 to the financial statements, the valuation was determined using discounted cash flow projections. The most significant estimates and judgements affecting these valuations include the projected pre-tax cash flows or concession income, the growth rate and the discount rate.
The valuation considers the agreements in hand as well as possible future concession income streams that are comparable to market.
We focused on this area because of the significance of the carrying amount of the property in the company’s statement of financial position and the judgemental nature of the assumptions used in the valuation model.
|
We agreed the property information in the valuation to the underlying property records held by the company. We tested the data inputs, including the concession income by agreeing it to supporting concession agreements and documentation.
We understood the methodology, tested the accuracy of the workings within the valuation model, and challenged the assumptions to ensure that they apply for the year under review. We engaged our own in-house valuation experts to review and challenge the valuation approach and assumptions for the property.
In relation to this property, we found that the discount rate was predominantly consistent with comparable information for property in the area.
We discussed the valuation with the Audit Committee and concluded, based on our audit work, that the parameters utilised by the company were reasonable, given historic results, economic outlook, industry forecasts and other market data as at 31 December 2021, and that the property valuation is within an acceptable range of values. Our discussions with the Audit Committee and the Directors in respect of this key audit matter focused on the key assumptions.
The appropriateness of disclosures made in this respect was also reviewed.
|
Other information
The Directors are responsible for the other information. The other information comprises the Chairman’s statement, the Statement of compliance with the principles of good corporate governance, the Remuneration statement and report and the Directors’ report (but does not include the financial statements and our auditor’s report thereon).
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except as explicitly stated within the Report on other legal and regulatory requirements.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the 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 financial statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirements of the Maltese Companies Act (Cap. 386), and for 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.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the company’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the 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 financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the 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 company’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 company’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 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, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern. In particular, it is difficult to evaluate all of the potential implications that COVID-19 will have on the company’s trade, customers and suppliers, and the disruption to its business and the overall economy.
· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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 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.
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 Main Street Complex p.l.c. 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 financial statements, 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 financial statements, complies 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 XHTML format.
· Examining whether the Annual Financial Report has been prepared in XHTML format.
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 XHTML format in all material respects.
Other reporting requirements
The Annual Financial Report and Financial Statements 2021 contains other areas required by legislation or regulation on which we are required to report. The Directors are responsible for these other areas.
The table below sets out these areas presented within the Annual Financial Report, our related responsibilities and reporting, in addition to our responsibilities and reporting reflected in the Other information section of our report. Except as outlined in the table, we have not provided an audit opinion or any form of assurance.
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Area of the Annual Financial Report and Financial Statements 2021 and the related Directors’ responsibilities |
Our responsibilities |
Our reporting |
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Directors’ report The Maltese Companies Act (Cap. 386) requires the directors to prepare a Directors’ report, which includes the contents required by Article 177 of the Act and the Sixth Schedule to the Act. |
We are required to consider whether the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.
We are also required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements.
In addition, we are required to state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of our audit, we have identified any material misstatements in the Directors’ report, and if so to give an indication of the nature of any such misstatements.
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In our opinion: · the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and · the Directors’ report has been prepared in accordance with the Maltese Companies Act (Cap. 386).
We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
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Statement of Compliance with the Principles of Good Corporate Governance The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare and include in the Annual Financial Report a Statement of Compliance with the Principles of Good Corporate Governance within Appendix 5.1 to Chapter 5 of the Capital Markets Rules. The Statement’s required minimum contents are determined by reference to Capital Markets Rule 5.97. The Statement provides explanations as to how the company has complied with the provisions of the Code, presenting the extent to which the company has adopted the Code and the effective measures that the Board has taken to ensure compliance throughout the accounting period with those Principles.
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We are required to report on the Statement of Compliance by expressing an opinion as to whether, in light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have identified any material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such misstatements.
We are also required to assess whether the Statement of Compliance includes all the other information required to be presented as per Capital Markets Rule 5.97.
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 corporate governance procedures or its risk and control procedures. |
In our opinion, the Statement of Compliance has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority.
We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section. |
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Remuneration report The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare a Remuneration report, including the contents listed in Appendix 12.1 to Chapter 12 of the Capital Markets Rules. |
We are required to consider whether the information that should be provided within the Remuneration report, as required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets Rules, has been included. |
In our opinion, the Remuneration report has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority. |
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Other matters on which we are required to report by exception We also have responsibilities under the Maltese Companies Act (Cap. 386) to report to you if, in our opinion: · adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us. · the financial statements are not in agreement with the accounting records and returns. · we have not received all the information and explanations which, to the best of our knowledge and belief, we require for our audit. We also have responsibilities under the Capital Markets Rules to review the statement made by the directors 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. |
Our report, including the opinions, has been prepared for and only for the company’s shareholders as a body in accordance with Article 179 of the Maltese Companies Act (Cap. 386) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior written consent.
Appointment
We were first appointed as auditors of the company for the period ending 30 April 2005. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 17 years. The company became listed on a regulated market on 30 May 2018.
PricewaterhouseCoopers
78, Mill Street
Zone 5, Central Business District
Qormi
Malta
Lucienne Pace Ross
Partner
25 April 2022
