Main Street Complex 2022

Company Registration Number: C34767

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements

31 December 2022

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Pages

Chairman’s statement 1

Directors’ report 2 - 9

Statement of compliance with the principles of good corporate governance 10 - 21

Remuneration statement, Remuneration report 22 - 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 2022

Chairman’s statement

I am pleased to be presenting the Main Street Complex p.l.c. annual report for 2022 to shareholders, covering

the fourth full year of operations following the official listing of the company on the Malta Stock Exchange.

2022 witnessed a progressive return to normality for Main Street Complex and for business generally, as the

effects of the COVID-19 pandemic gradually receded. This notwithstanding, the company faced the challenge

of managing the introduction of two important new brands to the Complex following the departure of the anchor

Debenhams franchise in 2021. I am proud to report that Main Street Complex handled this transition smoothly,

with our Board and management team stepping up to the challenge, efficiently managing the impact on the

company, our concessionaires, and our stakeholders.

It is encouraging to note that business has recovered positively in 2022, with footfall at the complex increasing

by 27% over 2021, or +9% if one factors in the days the complex was closed for business in 2021. When

compared with the year 2019 before the COVID -19 pandemic, which was a record-breaking year in terms of

footfall for Main Street, footfall in 2022 was short by 15%.

The resulting upturn in business has had a direct impact on revenues. Gross revenues for 2022 reached €787K

compared to €638K in 2021, while profit before tax rose from €335K in 2021 to €462K in 2022. At the same

time, our management team worked hard to keep operating costs at the levels of the previous year. 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.

In last year’s annual report, we reported that the company would resume the payment of dividends in 2022.

Following the payment of a net interim dividend of €0.0067 per share in September 2022, the company will be

declaring a final net dividend of €0.0109 per share for 2022.

I am also pleased to advise that by the date of this annual report, the complex is at 100% occupancy and that

footfall in the first quarter of 2023 has exceeded the same period in 2022. We are confident that the new brand

line-up presents an appealing product offering that will ensure an enhanced customer experience at Main Street

Complex.

While international events and their effects on the global and local economy continue to be a cause for concern,

we remain confident that Main Street Complex will continue to be a popular shopping destination for the

southern part of the island. 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

optimism.

Signed by Joseph A. Gasan (Chairman) on 24 April 2023

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Directors’ report

The Directors present their annual financial report and the audited financial statements for the year ended 31

December 2022.

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

The year 2022 under review was the first year of uninterrupted operations in the last three years and a year that

saw the opening up of two new franchises, Lindex and IM Home, during the first 4 months. End of year

occupancy stood at 98.5% while the average occupancy for the year stood at 94.3%. Footfall at the Complex

was up by 27% over the previous year, adjusted to +9% if one had to eliminate the comparative period during

which the Shopping Complex was closed in March/April 2021. Despite the strong recovery, footfall remained

at 15% and 9% below 2019 and 2018 levels respectively, which were record years for the Complex since its

opening in terms of footfall.

The company’s revenues increased by 23% to €786,774 over the previous year (€637,517), positively impacted

by the fact that the Complex was open all throughout the year. The increase was partially affected as a result

of an initial rent-free period supporting the settling in of the new tenants in lieu of Debenhams and some ad hoc

support to tenants. A total of 45% (€8,923) of the increase of €19,633 (10% over 2021) in the company’s

operating and administrative costs were the result of an increase in professional & listing fees, with the balance

representing the additional costs related to increased days of business and cost of living increases. The

company’s net profit after tax for the year increased to €341,612 as against €241,617 registered in the previous

year. The strong EBITDA amounting to €574,404, the end of year cash balance of €636,157 and the absence

of debt commitments has enabled the resumption of payment of dividends, and the company’s financial position

remains strong with total equity amounting to €10,912,698, despite a negative impact of a €592,804 impairment

(€500,000 in 2021) which was taken to revaluation reserve. This was considered necessary to reflect the result

of independent technical and professional valuations of the property, which as a result of current interest rate

increases, prevailing adjustments to discounting rates, and future expectations indicated a revised property

value of €11,445,000.

In view that a number of concession agreements expire between 2024 and 2025, and of the upcoming shopping

mall developments across the island, the company is currently embarking on a plan for a soft refurbishment and

reconfiguration of spaces with the aim of giving a refreshed image to the Complex and retaining Main Street

Complex an important and attractive destination in the region. The Board remains confident that the strong

brand equity that Main Street Complex has accumulated over the years will continue to attract visitors and

tenants, resulting in continued positive results in the future.

The Directors recommend that at the forthcoming Annual General Meeting, the shareholders approve the

payment of a net final dividend of €212,000.

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 2022

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. 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 and profits 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 could be further accentuated by any pandemic, inflation and its impact pricing and

on consumer spending power 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

and ensuing government and/or public health authorities legislations and/or recommendations related to but not

limited to restrictions on daily activities, and other general market and economic conditions. International

economic and political factors, such as the Russia – Ukraine conflict, as well as turmoil in the financial and/or

banking sectors and any ensuing collapses of operators within those sectors 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 on the company.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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. Furthermore, with the emergence of a number of

new shopping malls across the island, the risks related to the retail market could also be regional and/or specific

to certain geographical areas as new shopping malls may divert retail activity from one area to another. These

are particularly accentuated owing to the size of the Maltese market. A significant downturn in the performance

of the retail sector and/or the retail activity in the area in which the company operates 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 and/or external finance 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 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 2022

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. The emergence of new shopping malls and/or

shopping districts, 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 or not take place at all. 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 2022

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 2022

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), inflation 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 Chairman

Mario Camilleri 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 2022

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 2022 are included in

the Annual Financial Report 2022, 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 the Russia – Ukraine conflict, the inflationary pressures and the proximity to the

expiry of a number of concession agreements, 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, the Directors 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 2022 and 2021 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 2022 and 2021, 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 2022 none of the requirements apply to the company.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 24 April 2023 by Joseph A. Gasan and Etienne Borg

Cardona as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the

Annual Financial Report 2022.

Registered office:

Main Street Complex

Antoine de Paule Square

Paola PLA 1262

Malta

24 April 2023

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 2022

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 considers the representatives of Embassy Ltd as the de facto

Chief Executive Officer and Financial Controller of the company and ensures continuous dialogue on the

manner in which 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.

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

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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;

(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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 with an operations update by the Chief Executive Officer and a financial update covering the

period since the previous board meeting by the Financial Controller.

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 four (4) 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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 7 out of 7

Mario Camilleri Executive Director 7 out of 7

Etienne Borg Cardona Independent Non-Executive Director 7 out of 7

Christopher Mifsud Independent Non-Executive Director 7 out of 7

Isabella Vella Independent Non-Executive Director 7 out of 7

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, Directors and senior management were kept informed of 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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 committed to having an open and communicative relationship with its shareholders and

investors, and is compliant with its statutory and regulatory requirements relating to the Annual General

Meeting, the publication of interim and annual financial statements, and market updates through company

announcements.

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 2022 2021

€ €

Management and administration fees 42,444 40,000

Other expenses 40,196 35,814

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Statement of compliance with the principles of good corporate governance

4. Non-Compliance with the Code - continued

Code Provision

Explanation

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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 years, was as follows:

Name Position Remuneration paid

2022 2021 2020

Joseph A. Gasan Executive Director and Chairman €8,000 €8,000 €6,000

Mario Camilleri Executive Director €8,000 €8,000 €6,000

Etienne Borg Cardona Independent Non-Executive Director €8,000 €8,000 €6,000

Christopher Mifsud Independent Non-Executive Director €8,000 €8,000 €6,000

Isabella Vella Independent Non-Executive Director €8,000 €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 2022. 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 company, 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 2022

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 2022

Statement of financial position

As at 31 December

2022

2021

Notes

€

ASSETS

Non-current assets

Property, plant and equipment

11,571,998

12,249,146

Current assets

Trade and other receivables

134,510

214,191

Cash and cash equivalents

636,157

579,408

Total current assets

770,667

793,599

Total assets

12,342,665

13,042,745

EQUITY AND LIABILITIES

Capital and reserves

Share capital

1,938,462

Share premium

2,876,923

Revaluation reserve

4,861,000

5,376,566

Retained earnings

1,236,313

1,267,090

Total equity

10,912,698

11,459,041

Non-current liabilities

Deferred tax liability

1,144,500

1,221,738

Total non-current liabilities

1,144,500

1,221,738

Current liabilities

Trade and other payables

161,601

257,620

Current tax liabilities

123,866

104,346

Total current liabilities

285,467

361,966

Total liabilities

1,429,967

1,583,704

Total equity and liabilities

12,342,665

13,042,745

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 24 April

2023. The financial statements were signed on behalf of the company’s Board of Directors by Joseph A.

Gasan and Etienne Borg Cardona as per the Directors’ Declaration on ESEF Annual Financial Report

submitted in conjunction with the Annual Financial Report 2022.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Income statement

Year ended 31 December

2022

2021

Notes

€

Revenue

786,774

637,517

Operating expenses

(85,576)

(78,786)

Depreciation

(111,220)

(108,532)

Administrative expenses

(126,794)

(113,951)

Operating profit

463,184

336,248

Finance costs

(933)

(832)

Profit before tax

462,251

335,416

Tax expense

(120,639)

(93,799)

Profit for the year

341,612

241,617

Earnings per share

0.018

0.012

Statement of comprehensive income

Year ended 31 December

2022

2021

Notes

€

Comprehensive income

Profit for the year

341,612

241,617

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

(592,804)

(500,000)

Movement in deferred tax

77,238

47,957

Total other comprehensive income for the year,

net of tax

(515,566)

(452,043)

Total comprehensive income for the year

(173,954)

(210,426)

(500,000)

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 2022

Statement of changes in equity

Revaluation

Retained

Total

capital

premium

reserve

earnings

equity

Notes

€

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

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)

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

Balance at 1 January 2022

1,938,462

2,876,923

5,376,566

1,267,090

11,459,041

Comprehensive income

Profit for the year

341,612

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

(515,566)

Total comprehensive income

(515,566)

341,612

(173,954)

Transactions with owners

Dividends paid

(372,389)

Balance at 31 December 2022

1,938,462

2,876,923

4,861,000

1,236,313

10,912,698

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 2022

Statement of cash flows

Year ended 31 December

Notes

2022

2021

€

Cash flows from operating activities

Cash generated from operations

554,046

465,183

Interest paid

(933)

(832)

Net tax paid

(101,119)

(76,106)

Net cash generated from operating activities

451,994

388,245

Cash flows from financing activities

Dividends paid

(368,369)

Net cash used in financing activities

(368,369)

Cash flows from investing activities

Additions to property, plant and equipment

(26,876)

(64,065)

Net cash used in investing activities

(26,876)

(64,065)

Net movement in cash and cash equivalents

56,749

324,180

Cash and cash equivalents at beginning of year

579,408

255,228

Cash and cash equivalents at end of year

636,157

579,408

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 2022

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 2022

In 2022, the company adopted amendments to existing standards that are mandatory for the

company’s accounting year beginning on 1 January 2022. 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 2022. 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 2022

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

Improvements to premises

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 2022

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 2022

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 2022

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 2022

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 fulfilment 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.

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 2022

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 2022

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:

2022

2021

€

Financial assets at amortised costs

Trade and other receivables (excluding prepayments) (Note 6)

129,840

209,367

Cash and cash equivalents (Note 7)

636,157

579,408

765,997

788,775

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 2022

2. Financial risk management - continued

2.1 Financial risk factors - continued

(b) Credit risk - continued

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 2022 and 2021 reconcile to the

opening loss allowances as follows:

2022

2021

€

At beginning and end of year

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.

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.

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.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

2. Financial risk management - continued

2.3 Fair value estimation

At 31 December 2022 and 2021 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 2022

4. Property, plant and equipment

Land and

buildings

Plant,

Furniture,

including

machinery

fixtures

improvements

and

to premises

equipment

fittings

Total

€

At 1 January 2021

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)

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

Year ended 31 December 2022

Opening net book value

12,117,378

118,760

13,008

12,249,146

Additions

10,910

15,966

26,876

Reversal of part of the revaluation

surplus, previously recognised (Note 10)

(592,804)

Depreciation charge

(79,574)

(28,094)

(3,552)

(111,220)

Closing net book amount

11,445,000

101,576

25,422

11,571,998

At 31 December 2022

Cost or valuation

11,842,869

690,656

382,992

12,916,517

Accumulated depreciation

(397,869)

(589,080)

(357,570)

(1,344,519)

Net book amount

11,445,000

101,576

25,422

11,571,998

The company operates Main Street Complex, a fully serviced shopping complex, leasing out 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 2022

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 2022 by an independent property valuer having appropriate recognised professional

qualifications and experience in the location and category of the property being valued. The Directors

have reviewed the valuation and on the basis of this external valuation a reversal of part of the

revaluation surplus previously recognised, amounting to €592,804, resulted. 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 hold 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% (2021: 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 2022

4. Property, plant and equipment - continued

- A discount rate of 8.5% (2021: 6%) was applied in estimating the net present value of the projected

future free cash flows, and a cap rate of 7.0% (2021: 5.7%).

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:

2022

2021

€

Cost

5,837,369

Accumulated depreciation

(631,111)

(588,296)

5,206,258

5,249,073

5. Deferred taxation

2022

2021

€

Deferred tax liability

At beginning of year

1,221,738

1,269,695

Deferred tax on movement for the year (Note 10)

(77,238)

(47,957)

At end of year

1,144,500

1,221,738

Deferred taxes are calculated on all temporary differences under the liability method using a principal

tax rate of 35% (2021: 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% (2021:

10%) of the transfer value.

The balance at 31 December represents temporary differences attributable to:

2022

2021

€

Fair valuation of property

1,144,500

1,221,738

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 2022

6. Trade and other receivables

2022

2021

€

Current

Trade receivables – gross

138,334

217,861

Expected credit loss allowance

(8,494)

Trade receivables – net

129,840

209,367

Prepayments

4,670

4,824

134,510

214,191

7. Cash and cash equivalents

For the purposes of the statement of cash flows, the year-end cash and cash equivalents comprise

the following:

2022

2021

€

Cash at bank

636,157

579,408

8. Share capital

2022

2021

€

Authorised share capital

50,000,000 ordinary shares of €0.10 each

5,000,000

Issued and fully paid share capital

19,384,619 ordinary shares of €0.10 each

1,938,462

9. Share premium

2022

2021

€

At beginning and end of year

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 2022

10. Revaluation reserve

2022

2021

€

Year ended 31 December

At beginning of year

5,376,566

5,828,609

Reversal of part of the revaluation surplus,

previously recognised (Note 4)

(592,804)

(500,000)

Deferred tax on movement for the year (Note 5)

77,238

47,957

At end of year

4,861,000

5,376,566

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

2022

2021

€

Current

Trade payables

56,826

38,630

Amounts owed to related parties

24,804

24,736

Accruals

45,493

56,829

Contract liabilities

25,445

62,250

Indirect taxes and social security

9,033

75,175

161,601

257,620

Amounts owed to related parties are unsecured, interest free and repayable on demand.

Contract liabilities comprise deposits received in advance from customers:

2022

2021

€

Deposits received in advance from customers

At beginning of year

62,250

64,006

Originations

695

6,000

Refunds to customers

(37,500)

(7,756)

At end of year

25,445

62,250

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 2022

13. Expenses by nature

2022

2021

€

Depreciation of property, plant and equipment (Note 4)

111,220

108,532

Administrative and management fees

42,444

40,000

Other expenses

169,926

152,737

Total operating expenses, depreciation, and administrative expenses

323,590

301,269

Auditor’s fees:

Included in other expenses are fees charged by the auditor and its connected undertakings to the

company for services rendered during the financial periods ended 31 December 2022 and 2021.

These relate to the following:

2022

2021

€

Annual statutory audit

12,500

10,750

Other assurance services

1,800

1,550

14,300

12,300

During the current year fees in relation to non-assurance services amounting to €1,880 (2021:

€1,250) have been charged by connected undertakings of the company’s auditor, in respect of tax

advisory and compliance services.

14. Directors’ fees

2022

2021

€

Directors’ fees

40,000

15. Finance costs

2022

2021

€

Bank charges and interest

933

832

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

16. Tax expense

2022

2021

€

Current tax expense

120,639

93,799

The tax on the company’s profit before tax differs from the theoretical amount that would arise using

the basic tax rate as follows:

2022

2021

€

Profit before tax

462,251

335,416

Tax at 35%

161,788

117,396

Unrecognised deferred tax

9,996

Income taxed at different rates

(154,613)

(125,602)

Expenses not allowed for tax purposes

113,464

95,600

Overprovision of current tax in prior years

(3,591)

Tax expense

120,639

93,799

The tax rate applied to rental income during the year ended 31 December 2022 and 2021 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.

2022

2021

Net profit attributable to shareholders

€341,612

€241,617

Weighted average number of ordinary shares in issue

19,384,619

Earnings per share

€0.018

€0.012

18. Dividends

2022

2021

€

Net dividends paid on ordinary shares

372,389

Dividends per share

€4

0.019

A net dividend in respect of the year ended 31 December 2022 of €0.0109 per share amounting to

€212,000 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 2023.

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

19. Cash generated from operations

Reconciliation of operating profit to cash generated from operations:

2022

2021

€

Operating profit

463,184

336,248

Adjustment for:

Depreciation of property, plant and equipment (Note 4)

111,220

108,532

Changes in working capital:

Trade and other receivables

79,681

(1,109)

Trade and other payables

(100,039)

21,512

Cash generated from operations

554,046

465,183

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:

2022

2021

€

Not later than 1 year

567,335

565,222

Later than 1 year and not later than 5 years

955,296

1,309,744

Later than 5 years

36,780

1,522,631

1,911,746

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:

2022

2021

€

Expenditure for services

Management and administration fees

42,444

40,000

Other expenses

40,196

35,814

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

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

diagram

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 2022, 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 2022;

· the income statement and 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 2022 to 31 December 2022, are disclosed in note 13 to the financial statements.

Our audit approach

Overview

	Overall materiality: €23,100, 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

€23,100

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 €2,300 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 €11.4 million. The property, which leases units primarily for retail activity, was revalued by an independent professionally qualified valuer as at 31 December 2022.

On the basis of this valuation, a reversal of part of the revaluation surplus previously recognised, amounting to €592,804 was accounted for in the financial statements for the year ended 31 December 2022.

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 applied.

We discussed the valuation with the Audit Committee and the external valuer and based on our audit work, we found the property valuation to be 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.

In addition, we evaluated the adequacy of the accounting policy (Note 1.3) and the appropriateness of disclosures made in this respect in Note 4 to these financial statements, including those relating to the key valuation assumptions.

Other information

The directors are responsible for the other information. The other information comprises the Chairman’s statement, the Directors’ report, the Statement of compliance with principals of good corporate governance, and the Remuneration statement and Remuneration 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, future events or conditions may cause the Company to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the 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 2022, 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 2022 has been prepared in XHTML format in all material respects.

Other reporting requirements

The Annual Financial Report and Financial Statements 2022 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.

Area of the Annual Financial Report and Financial Statements 2022 and the related Directors’ responsibilities

Our responsibilities

Our reporting

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.

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.

Statement of Compliance with the Code of 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 Code of 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.

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.

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.

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.

Other matter – use of this report

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 on 30 April 2005. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 18 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

24 April 2023