Tumas Investments Annual Report 2022

Company Registration Number: C27296

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements

31 December 2022

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Pages

Directors’ report 1 - 4

Corporate governance - Statement of compliance 5 - 8

Statement of financial position 9 - 10

Statement of comprehensive income 11

Statement of changes in equity 12

Statement of cash flows 13

Notes to the financial statements 14 - 28

Independent auditor’s report

TUMAS INVESTMENTS 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 activities

The company’s principal activity is to carry on the business of an investment company, by raising funds to

finance the operations and capital projects of Spinola Development Company Limited, a company forming

part of the Tumas Group.

Review of business

Finance income on loans and ancillary revenue during 2022 stood at €2.42 million (€2.37 million in 2021).

Interest payable on the outstanding bonds totalled €2.25 million (€2.24 million in 2021), resulting in a net

income of €171,239, higher from that of the previous year by 22.7%.

Administrative expenses amounted to €144,349, 11.8% higher than last year. As in previous years these

expenses include listing, compliance, professional and directors’ fees. Profit before tax stood at €26,890.

The company’s financial position accounts for the two bond issues of €25 million each and the

corresponding loans to Spinola Development Company Limited for a similar amount. The latter is also the

guarantor of these bonds. Trade receivables consist of prepayments, interest accrued on the loans to

Spinola Development Company Limited and interest earned on treasury bills investments. Financial assets

in the form of treasury bills represent other financial assets in the statement of financial position while cash

and cash equivalents make up for the difference between funds invested and the advances from the

guarantor noted as €14.6 million and classified under trade and other payables.

The equity of the company stood at €672,172, up by €18,361 over the December 2021 figure.

Guarantor’s performance as at year ended December 2022

2022 started off engulfed in the COVID-19 fall out as towards the end of the previous year we were faced

with uncertainties which developed as a result of successive strains of the pandemic.

As we gradually moved out of the pandemic, the world was immersed yet again into another crisis, when in

February 2022 Russia invaded Ukraine. Additional to the human tragedy, this aggravated already strained

supply chains and added on to increase inflation, which was also spurred by lax monetary policies adopted

during the COVID-19 period. These factors were detrimental to the purchasing power potential as

households faced inflationary pressure. In Malta we were, and still are partly shielded as Government is

subsidising energy bills. Inflation and the war in Ukraine sent food costs higher as well as labour costs,

while the supply of labour was already constrained following the destabilisation of labour during the COVID-

19 period.

Despite the above, the tourism sector did recover and the guarantor’s hospitality business, the largest

segment of operations, saw a substantial improvement, however this was dampened by inflationary

pressures.

Total revenue for 2022 reached €43.42 million, an increase of 28.4% over 2021, mainly attributable to the

comeback in hospitality revenue. Property sales were down as a result of a very limited inventory available

for sale, while rental income and complex management costs were also up over the previous year.

Operating profit for the year shifted up to €11.68 million, or 56.9%. Net finance costs stood at €2.73 million,

up by 8.4%, so that profit before tax reached €9.27 million or 88.1% over 2021.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Directors’ report - continued

Outlook for Financial Year 2023 and Events after the financial reporting date

The budget for 2023 was prepared with further recovery in mind. Up to the time of drafting this review the

hotel is performing better then budget revenue wise, yet costs are escalating, both food and labour costs

continue on an upward trajectory. When it comes to travel patterns, we are noticing an increase in demand

for leisure travel, mirroring the increase in airport activity, while business travel is more lethargic as

alternative means of communications are still proving appealing.

The Hilton should continue to build steadily upon last year’s performance particularly with occupancy levels.

Efforts will proceed to maximize Rev PAR, taking into consideration the property’s standing in the local

market. This is also a prime factor when it concerns F&B and ancillary services leading to a higher EBITDA

for this year.

We forecast that complementary activities to the hotel, namely the marina, car park and the tower bar should

produce results similar to last year.

When reviewing the property development segment, activity at Portomaso is foreseeably limited as there

are only two apartment units for sale, however, this year is a milestone one as the guarantor’s efforts are

directed towards the development of the Halland Residences through its fully owned subsidiary Halland

Developments Company Limited. Excavation works were completed in 2021 and construction taken in

hand around Q2 2022. We shall soon publicly launch the project which is already generating quite some

interest from various potential clients, some of whom are repeat clients. Lastly, rental income at Portomaso

is steady and on course to meet budget, if not marginally better than last year.

The overall performance should therefore yield another positive return when compared to 2022, possibly

better, as we further consolidate upon a healthy performing hospitality market which is regaining in market

share after the pandemic.

The guarantor’s diverse footprint spanning various business segments should continue to back its solid

financial position.

Financial risk management

The company’s activities expose it to a variety of financial risks, including credit risk and liquidity risk. Refer

to Note 2 to these financial statements for further details.

Results and dividends

The statement of comprehensive income is set out on page 11. The directors do not recommend the

payment of a dividend.

Retained profits carried forward at the reporting date amounted to €422,170 (2021: €403,809).

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Directors’ report - continued

Directors

The directors of the company who held office during the year were:

Raymond Fenech

Raymond Sladden

Michael Grech

Kevin Catania (resigned on 6 January 2023)

John Zarb

On 6 January 2023, Joseph Schembri was appointed as a director.

The company’s Articles of Association do not require any director to retire.

Statement of directors’ responsibilities for the financial statements

The directors are required by the Companies Act, 1995 to prepare financial statements which 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.

The directors are also responsible for designing, implementing and maintaining 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, and that comply with the Companies Act, 1995. 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 Tumas Investments p.l.c. for the year ended 31 December 2022 are included in

the Annual Financial Report 2022, which is made available on the Tumas Group’s website.

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 group’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.

The directors confirm that, to the best of their knowledge:

• the financial statements give a true and fair view of the financial position of the company as at 31

December 2022, and of the financial performance and the cash flows for the year then ended in

accordance with International Financial Reporting Standards as adopted by the EU; and

• the Annual Financial Report includes a fair review of the development and performance of the

business and the position of the company, together with a description of the principal risks and

uncertainties that the company and the guarantor face.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Directors’ report - continued

Statement of directors’ responsibilities for the financial statements - continued

Going concern statement pursuant to Capital Markets Rule 5.62

After making enquiries, the directors, at the time of approving the financial statements, have determined

that it is reasonable to assume that the company has adequate resources to continue operating for the

foreseeable future. For this reason, the directors have adopted the going concern basis in preparing the

financial statements.

Auditors

PricewaterhouseCoopers have indicated their willingness to continue in office and a resolution for their re-

appointment will be proposed at the Annual General Meeting.

Signed on behalf of the Board of Directors on 28 April 2023 by Raymond Fenech (Director) and Michael

Grech (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in

conjunction with the Annual Financial Report.

Registered office:

Tumas Group Corporate Office

Level 3

Portomaso Business Tower

Portomaso

St. Julians

Malta

Telephone (+356) 2137 2347

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Corporate governance - Statement of compliance

Introduction

Pursuant to the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority,

Tumas Investments p.l.c. (a fully owned subsidiary of Tumas Group Company Limited - “the group”) hereby

reports on the extent to which the company has adopted the “Code of Principles of Good Corporate

Governance” (the “Code”) appended to Chapter 5 of the Capital Markets Rules as well as the measures

adopted to ensure compliance with these same Principles.

Since its incorporation, the company’s principal activity was to raise funds mainly from the capital market to

finance the operations and capital projects of Spinola Development Company Limited (“SDC”), a company

forming part of the Tumas Group.

Roles and responsibilities

The Board acknowledges its statutory mandate to conduct the administration and management of the

company. The Board, in fulfilling this mandate and discharging its duty of stewardship of the company,

assumes responsibility for:

• the company’s strategy and decisions with respect to the issue, servicing and redemption of its

bonds;

• monitoring that its operations are in conformity with its commitments towards bondholders,

shareholders, other external financiers and all relevant laws and regulations.

The Board is also responsible for ensuring that the company installs and operates effective internal control

and management information systems and that it communicates effectively with the market.

Board of Directors

The company presently has five directors who are appointed by its ultimate principal shareholder, Tumas

Group Company Limited.

For the financial year ended 31 December 2022, two of the directors, Mr. Raymond Fenech and Mr.

Raymond Sladden, occupied senior executive positions within the Tumas Group of Companies. Mr. Kevin

Catania, Dr. Michael Grech and Mr. John Zarb, served on the Board of the Company, in a non-executive

capacity. Mr. John Zarb and Mr. Kevin Catania are considered by the board as independent directors since

they are free of any significant business relationship, family or other relationships with the Issuer, its

controlling shareholder or the management of either, that creates a conflict of interest such as to impair their

judgement. In assessing Mr. Zarb’s and Mr. Catania’s independence, due notice has been taken to Section

5.117 of the Capital Markets Rules.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Corporate governance - Statement of compliance - continued

The exercise of the role of the Board

The activities of the Board are exercised in a manner designed to ensure that it can effectively supervise

the operations of the company and protect the interests of bondholders, external lenders and the

shareholders.

Meetings of the Board were held as frequently as considered necessary. Individual directors, apart from

attendance at formal Board meetings, participate in other informal meetings during the year as may be

required, either to assure good corporate governance, or to contribute more effectively to the decision-

making process.

The Board members are notified of forthcoming meetings by the company Secretary with the issue of an

agenda and supporting documents as necessary which were then discussed during the Board meetings

held during 2022.

Apart from setting the strategy and direction of the company, the Board retains direct responsibility for

approving and monitoring:

• direct supervision, supported by expert professional advice as appropriate, on the issue and listing

of bonds;

• that the proceeds of the bonds are applied for the purposes for which they were sanctioned as

specified in the offering memoranda of the bonds in issue;

• proper utilisation of the resources of the company;

• approval of the annual financial report and financial statements and of relevant public

announcements and for the company’s compliance with its continuing listing obligations.

The Board does not consider necessary to institute separate committees such as the remuneration and the

nomination committees, as would be appropriate in an operating company.

Risk Management and Internal Control

The Board recognises that the company must manage a range of risks in the course of its activities and the

failure to adequately manage these risks could adversely impact the business. Whilst no system can provide

absolute guarantees and protection against material loss, the risk management systems are designed to

give the directors reasonable assurance that problems can be identified promptly and remedial action can

be taken as appropriate.

The Board maintains sound risk management and internal control systems. It is responsible for determining

the nature and extent of the risks it is willing to take in achieving its strategic objectives. The Board

establishes formal and transparent arrangements to apply risk management and internal control principles,

as well as maintaining an appropriate relationship with the company’s auditors.

An essential element of good internal control is the continual process of monitoring the investments made

by the company, and in its capacity it has adjourned itself periodically on the financial affairs and operational

development of Spinola Development Company Limited and its subsidiaries, the guarantor of the bonds

with particular reference to the progress of the operations and commercial activity and related operational

and commercial concerns.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Corporate governance - Statement of compliance - continued

Conduct review

Reference is made to reports linking a former director to alleged irregularities following events which

occurred since late 2019.

The Board of Tumas Investments plc sought and received assurances from the Tumas Group that the said

group had not funded or benefited from any illicit activities. An external independent review was completed

during 2020 and provided the Board with additional comfort on this point. It is the intention of the Tumas

Group in agreement with the board of directors of Tumas Investments plc to continue to monitor

developments that come to its attention and to take appropriate action as it deems necessary.

Audit Committee

During the year 2022, the Audit Committee held three meetings. Audit Committee meetings are held mainly

to discuss formal reports remitted by the Group Internal Auditor on audits conducted on the operations of

Spinola Development Company Limited, with the consent of the Board of Directors of Spinola Development

Company Limited, and also to consider the six monthly financial results and the annual financial statements.

The Audit Committee is entirety composed of non-executive directors and the Board is of the opinion that

given the committee members, professional background and relevant experience in legal, accounting and

auditing matters, as a whole have competence relevant to the sector in which the Issuer is operating.

The chairman of the Audit Committee is Mr. John Zarb, who is an accountant by profession and is deemed

by the Board to be an independent director competent in accounting and auditing matters. He held regular

meetings to review the accounts and operations with the executive directors.

As required by the Maltese Companies Act, 1995 and the Malta Financial Services Authority Capital Markets

Rules, the financial statements of Tumas Investments p.l.c. are subject to annual audit by its external

auditors. Moreover, the non-executive directors have direct access to the external auditors of the company,

who attend the Board meetings at which the company’s financial statements are approved. Moreover, in

ensuring compliance with other statutory requirements and with continuing listing obligations, the Board is

advised directly, as appropriate, by its appointed broker, legal advisor and the external auditors. Directors

are entitled to seek independent professional advice at any time on any aspect of their duties and

responsibilities, at the company’s expense.

The company has formal mechanisms to monitor dealings by directors and senior officials in the bonds of

the company and has also put in place the appropriate mechanisms for the advance notification of such

dealings.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Corporate governance - Statement of compliance - continued

Remuneration Statement

There have been no changes in the company’s remuneration policy other than as noted below, as compared

to the previous financial year and the company does not intend to effect any changes in its remuneration

policy for the following financial year.

Pursuant to the company’s Memorandum and Articles of Association, the maximum annual aggregate

emoluments that may be paid to the directors is approved by the shareholders in General Meeting.

None of the directors has service contracts with the company. Furthermore, the remuneration of directors

is a fixed amount per annum and does not include any variable component relating to profit sharing, share

options or pension benefits.

During the year under review, each director received an annual remuneration of €5,000 (2021: €3,494), as

approved at the last Annual General Meeting of the company.

Relations with bondholders and the market

Pursuant to the company’s statutory obligations in terms of the Maltese Companies Act, 1995 and the Malta

Financial Services Authority Capital markets Rules, the Annual Financial Report and Financial Statements,

the election of directors and approval of directors’ fees, the appointment of the auditors and the authorisation

of the directors to set the auditors’ fees, and other special business, are proposed and approved at the

company’s Annual General Meeting.

The company communicates with its bondholders by publishing its results on a six monthly basis during the

year and by way of the Annual Financial Report. The Board feels that it is providing the market with adequate

information about its activities through these channels.

The Board considers that the company has been in compliance with the Principles throughout the year as

befits a company of this size and nature.

Approved by the Board of Directors on on 28 April 2023.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Statement of financial position

As at 31 December

Notes

2022

2021

€

ASSETS

Non-current assets

Loans receivable from fellow subsidiary

50,000,000

Total non-current assets

50,000,000

Current assets

Trade and other receivables

1,041,494

1,155,864

Other financial assets at amortised cost

11,339,766

Current tax asset

678

Cash and cash equivalents

3,919,626

437,628

Total current assets

16,300,886

1,594,170

Total assets

66,300,886

51,594,170

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Statement of financial position - continued

As at 31 December

Notes

2022

2021

€

EQUITY AND LIABILITIES

Capital and reserves

Share capital

250,002

Retained earnings

422,170

403,809

Total equity

672,172

653,811

Non-current liabilities

Borrowings

49,832,830

49,782,811

Total non-current liabilities

49,832,830

49,782,811

Current liabilities

Trade and other payables

15,792,282

1,157,548

Current tax liability

3,602

Total current liabilities

15,795,884

1,157,548

Total liabilities

65,628,714

50,940,359

Total equity and liabilities

66,300,886

51,594,170

The notes on pages 14 to 28 are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 28 April

2023.

The financial statements were signed on behalf of the Board of Directors by Raymond Fenech (Director)

and Michael Grech (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted

in conjunction with the Annual Financial Report.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Statement of comprehensive income

Year ended 31 December

Notes

2022

2021

€

Finance income

2,419,903

2,374,987

Finance costs

(2,248,664)

(2,235,450)

Net interest income

171,239

139,537

Administrative expenses

(144,349)

(128,075)

Profit before tax

26,890

11,462

Tax expense

(8,529)

(4,012)

Profit for the year - total comprehensive income

18,361

7,450

The notes on pages 14 to 28 are an integral part of these financial statements.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

Statement of changes in equity

Retained

capital

earnings

Total

€

Balance at 1 January 2021

250,002

396,359

646,361

Comprehensive income

Profit for the year - total comprehensive income

7,450

Balance at 31 December 2021

250,002

403,809

653,811

Balance at 1 January 2022

250,002

403,809

653,811

Comprehensive income

Profit for the year - total comprehensive income

18,361

Balance at 31 December 2022

250,002

422,170

672,172

The notes on pages 14 to 28 are an integral part of these financial statements.

TUMAS INVESTMENTS 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 generated from/(used in) operating activities

Cash generated from/(used in) operations

17,527

(140,636)

Income tax paid

(4,249)

(4,690)

Interest received

2,395,986

2,374,987

Interest paid

(2,187,500)

(2,187,613)

Net cash generated from operating activities

221,764

42,048

Cash flows generated from financing activities

Advances from fellow subsidiary

14,600,000

Net cash generated from financing activities

14,600,000

Cash flows used in investing activities

Investment in treasury bills

(11,339,766)

Net cash used in investing activities

(11,339,766)

Net movement in cash and cash equivalents

3,481,998

42,048

Cash and cash equivalents at beginning of year

437,628

395,580

Cash and cash equivalents at end of year

3,919,626

437,628

The notes on pages 14 to 28 are an integral part of these financial statements.

TUMAS INVESTMENTS 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

The financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRSs) as adopted by the EU and the requirements of the Companies Act, 1995. They

have been prepared under the historical cost convention.

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 (Note 3 - Critical accounting estimates and

judgements).

Standards, interpretations and amendments to published standards effective in 2022

In 2022, the company adopted new standards, amendments and interpretations to existing standards

that are mandatory for the company’s accounting period beginning on 1 January 2022. The adoption

of these revisions to the requirements of IFRS as adopted by the EU did not result in substantial

changes to the company’s accounting policies impacting the company’s financial performance and

position.

Standards, interpretations and amendments to published standards that are not yet effected

Certain new standards, amendments and interpretations to existing standards have been published

by the date of authorisation for issue of these financial statements, that 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 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 the financial statements are measured using the currency of the primary economic

environment in which the entity operates (‘the functional currency’). The financial statements are

presented in euro, which 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.

All foreign exchange gains and losses are presented in the statement of comprehensive income

within ‘administrative expenses’. No exchange differences were recognised during 31 December

2022 and 2021.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

1. Summary of significant accounting policies - continued

1.3 Financial assets

Classification

The company classifies its financial assets as financial assets measured at amortised costs. The

classification depends on the entity’s business model for managing the financial assets and the

contractual terms of the cash flows. The company classifies its financial assets as at amortised cost

only if both the following criteria are met:

- The asset is held within a business model whose objective is to collect the contractual cash flows,

and

- The contractual terms give rise to cash flows that are solely payments of principal and interest.

Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on

initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit

risk associated with the principal amount outstanding during a particular period of time and for other

basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the

company considers the contractual terms of the instrument. This includes assessing whether the

financial asset contains a contractual term that could change the timing or amount of contractual cash

flows such that it would not meet this condition.

Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade date, which is the

date on which the company commits to purchase or sell the asset. 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.

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.

Interest income on debt instruments measured at amortised cost from these financial assets is

included in finance income using the effective interest rate method. Any gain or loss arising on

derecognition of these instruments 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 consolidated statement of profit or loss.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

1. Summary of significant accounting policies - continued

1.3 Financial assets - continued

Impairment

The company assesses on a forward-looking basis the expected credit losses (ECL) 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. The company’s financial assets are

subject to the expected credit loss model.

Expected credit loss model

The company measures loss allowances at an amount equal to lifetime ECLs, except for the

following, which are measured at 12-month ECLs:

• debt securities that are determined to have low credit risk at the reporting date; and

• other debt securities and bank balances for which credit risk has not increased significantly since

initial recognition.

When determining whether the credit risk of a financial asset has increased significantly since initial

recognition and when estimating ECLs, the company considers reasonable and supportable

information that is relevant and available without undue cost or effort. The company assumes that

the credit risk on a financial asset has increased significantly if it is more than 30 days past due, and

it considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations

to the company in full, without recourse by the company to actions such as realising security (if any

is held); or the financial asset is more than 90 days past due.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a

financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are

possible within the 12 months after the reporting date (or a shorter period if the expected life of the

instrument is less than 12 months). The maximum period considered when estimating ECLs is the

maximum contractual period over which the company is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present

value of all cash shortfalls. ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the company assesses whether financial assets carried at amortised cost are

credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental

impact on the estimated future cash flows of the financial asset have occurred. Evidence that a

financial asset is credit-impaired includes observable data such as significant financial difficulty of the

borrower or issuer, or a breach of contract such as a default or being more than 90 days past due.

Loss allowances for financial assets measured at amortised cost are deducted from the gross

carrying amount of the assets.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

1. Summary of significant accounting policies - continued

1.4 Trade and other receivables

Trade receivables comprise amounts due from a fellow subsidiary 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. Details about the

company’s impairment policies and the calculation of loan allowance are provided in Note 1.3.

1.5 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at face value. In the

statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with

banks and bank overdrafts. Bank overdrafts, are shown within borrowings in current liabilities in the

statement of financial position.

1.6 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new

ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

1.7 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’).

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.

1.8 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.

Issue costs incurred in connection with the issue of the bonds include professional fees, publicity,

printing, listing, registration, underwriting, management fees, selling costs and other miscellaneous

costs.

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 reporting period.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

1. Summary of significant accounting policies - continued

1.9 Trade and other payables

Trade payables comprise obligations to pay for 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.

1.10 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.

1.11 Current and deferred tax

The tax expense for the period 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,

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 tax assets and liabilities relate to

income taxes levied by the same taxation authority on either the same taxable entity or different

taxable entities where there is an intention to settle the balances on a net basis.

1.12 Provisions

Provisions for legal claims 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 will be required to

settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Provisions are measured at the present value of the expenditures expected to be required to settle

the obligation using a pre-tax rate that reflects current market assessments of the time value of money

and the risks specific to the obligation. The increase in the provision due to passage of time is

recognised as a finance cost.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

1. Summary of significant accounting policies - continued

1.13 Finance income and costs

Finance income and costs are recognised in profit or loss for all interest-bearing instruments on a

time-proportion basis using the effective interest method. Finance costs include the effect of

amortising any difference between net proceeds and redemption value in respect of the company’s

borrowings. Finance income and costs are recognised as they accrue, unless collectability is in doubt.

2. Financial risk management

2.1 Financial risk factors

The company constitutes a financing special purpose vehicle whose bonds are matched by

equivalent amounts due from, and guaranteed by, Spinola Development Company Limited (a fellow

subsidiary). The company’s principal risk exposures relate to credit risk and liquidity risk. The

company is not exposed to currency risk and the directors deem interest rate risk exposure to be

minimal due to matching of its interest costs on borrowings with finance income from its loans and

receivables referred to above.

(a) Credit risk

The company measures credit risk and expected credit losses using probability of default, exposure

at default and loss given default. Management consider both historical analysis and forward-looking

information in determining any expected credit loss.

The company’s exposure to credit risk is limited to the carrying amount of financial assets recognised

at the reporting date, as summarised below. The company’s exposures to credit risk as at the end of

the reporting period are analysed as follows:

2022

2021

€

Financial assets at amortised cost

Loans receivable from fellow subsidiary (Note 4)

50,000,000

Trade and other receivables (Note 5)

1,041,494

1,155,864

Other financial assets at amortised cost (Note 6)

11,339,766

Cash and cash equivalents (Note 7)

3,919,626

437,628

66,300,886

51,593,492

The company does not hold collateral as security on the loans from fellow subsidiary. Yet as disclosed

in Note 9, Spinola Development Company Limited has issued corporate guarantees with respect to

the company’s bond.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

2. Financial risk management - continued

2.1 Financial risk factors - continued

(a) Credit risk - continued

The company had to assess on a forward-looking basis the expected credit losses associated with

its debt instruments carried at amortised cost. These instruments are considered to have low credit

risk, and the loss allowance recognised during the period was therefore limited to 12 months expected

losses. Management consider ‘low credit risk’ for instruments, which have a low risk of default, and

the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. In

case of the loans issued to the guarantor, the assessment takes into consideration the financial

position, performance and other factors of the guarantor of the bonds. Management monitors intra-

group credit exposures on a regular basis and ensures timely performance of these assets in the

context of overall group liquidity management. The company takes cognisance of the related party

relationship with this entity and management does not expect any losses from non-performance or

default. The expected credit risk model of IFRS 9, did not result in the recognition of any loss

allowance on the loans receivable from fellow subsidiary as any such impairment would be wholly

insignificant to the company.

In 2022, the company invested in short-term treasury bills issued by the government of Malta. The

government’s debt instruments are sovereign in nature and therefore the expected credit loss

provision is considered to be minimal.

The company banks only with local financial institutions with high quality standing or rating.

Management considers the probability of default to be very remote as the counterparties have a

strong capacity to meet their contractual obligations in the near term. As a result, no loss allowance

has been recognised based on 12-month expected credit losses, as any such impairment would be

wholly insignificant to the company.

(b) Liquidity risk

The company is exposed to liquidity risk arising primarily from its ability to satisfy liability commitments

depending on cash inflows receivable in turn from Spinola Development Company Limited.

Management monitors liquidity risk by means of cash flow forecasts on the basis of expected cash

flows over a twelve month period to ensure that no additional financing facilities are expected to be

required over the coming year. This process is performed through a rigorous assessment of detailed

cash flow projections of the fellow subsidiary where matching of cash inflows and outflows arising

from expected maturities of financial instruments are assessed on an annual basis.

The carrying amounts of the company’s assets and liabilities are analysed into relevant maturity

groupings based on the remaining period at the end of the reporting period to the contractual maturity

date in the respective notes to the financial statements.

The following table analyses the company’s financial liabilities into relevant maturity groupings based

on the remaining period at the statement of financial position date to the contractual maturity date.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within

twelve months equal their carrying amounts, as the impact of discounting is not significant.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

2. Financial risk management - continued

2.1 Financial risk factors - continued

(b) Liquidity risk - continued

2.2 Capital risk management

The company’s bonds are guaranteed by Spinola Development Company Limited (a fellow

subsidiary). Related finance costs are also guaranteed by this fellow subsidiary. The capital

management of the company therefore consists of a process of regularly monitoring the financial

position of the guarantor (Note 2.1).

2.3 Fair values of financial instruments

At 31 December 2022, the carrying amounts of receivables (net of impairment provisions if any) and

payables are assumed to approximate their fair values. The fair value of financial liabilities for

disclosure purposes is estimated by discounting the future contractual cash flows at the current

market interest rate that is available to the company for similar financial instruments.

As at the end of the reporting period, the fair values of financial assets and liabilities, approximate

the carrying amounts shown in the statement of financial position.

The fair value of non-current financial instruments for disclosure purposes is estimated by discounting

the future contractual cash flows at the current market interest rate that is available to the company

for similar financial instruments. The fair value of the company’s non-current trade and other

payables at the end of the reporting period is not significantly different from the carrying amounts.

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.

In the opinion of the company directors, the accounting estimates and judgements made in the course

of preparing these financial statements are not difficult, subjective or complex to a degree which

would warrant their description as critical in terms of the requirements of IAS 1.

Carrying

Contractual

Within

One to

Over

amount

cash flows

one year

five years

€

31 December 2022

Unsecured bonds

49,832,830

56,218,041

2,187,500

54,030,541

Trade and other payables

15,792,282

65,625,112

72,010,323

17,979,782

54,030,541

31 December 2021

Unsecured bonds

49,782,811

58,379,856

2,187,500

30,727,459

25,464,897

Trade and other payables

1,157,548

50,940,359

59,537,404

3,345,048

30,727,459

25,464,897

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

4. Loans receivable from fellow subsidiary

2022

2021

€

Loans receivable from fellow subsidiary

At beginning and end of year

50,000,000

At 31 December

Cost and net book amount

50,000,000

Loans receivable from fellow subsidiary reflect the transfer of funds to Spinola Development

Company Limited generated by the company from its bonds. During 2022, the directors assessed the

expected loss and the resulting amount was not considered material to be adjusted for in these

financial statements.

Weighted average effective interest rate as at 31 December 2022 and 2021:

2022

2021

Loans to fellow subsidiary

4.5%

The company’s exposure to credit and interest rate risks related to investments is disclosed in Note

Maturity of loans and receivables:

2022

2021

€

Within 2 and 5 years

50,000,000

25,000,000

Over 5 years

25,000,000

5. Trade and other receivables

2022

2021

€

Current

Amounts owed by fellow subsidiary

137,487

Prepayments and accrued income

1,041,494

1,018,377

1,041,494

1,155,864

Amounts owed by fellow subsidiary are unsecured, interest free and repayable on demand. This

balance together with accrued income includes interest due and accrued as at the end of the reporting

period on the loans advanced by the company.

The company’s exposure to credit and liquidity risk related to trade and other receivables is disclosed

in Note 2.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

6. Other financial assets at amortised cost

Financial assets at amortised cost include the following debt investments:

2022

2021

€

Current

Treasury bills

11,339,766

The company’s exposure to credit and liquidity risk related to other financial assets at amortised cost

is disclosed in Note 2.

7. Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:

2022

2021

€

Cash and cash equivalents

3,919,626

437,628

8. Share capital

2022

2021

€

Authorised, issued and fully paid up

250,002 ordinary shares of €1 each

250,002

9. Borrowings

2022

2021

€

Non-current

250,000 5% bonds 2024

24,951,289

24,922,478

250,000 3.75% bonds 2027

24,881,541

24,860,333

49,832,830

49,782,811

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

9. Borrowings - continued

The bonds are measured at the amount of the net proceeds adjusted for the amortisation of the

difference between the net proceeds and the redemption value of such bonds, using the effective

yield method as follows:

2022

2021

€

Face value

250,000 5% bonds 2024

25,000,000

250,000 3.75% bonds 2027

25,000,000

50,000,000

Issue costs

(486,028)

Accumulated amortisation

318,858

268,839

Closing net book amount

(167,170)

(217,189)

Amortised cost at 31 December

49,832,830

49,782,811

The interest rate exposure of the borrowings of the company was as follows:

2022

2021

€

Total borrowings:

At fixed rates

49,832,830

49,782,811

The effective interest rates as at the end of the reporting period were as follows:

2022

2021

Bonds 2024

5.00%

Bonds 2027

3.75%

This note provides information about the contractual terms of the company’s borrowings. For more

information about the company’s exposure to interest rate and liquidity risk, refer to Note 2.

By virtue of an offering memorandum dated 7 July 2014, the company issued €25,000,000 bonds with

a face value of €100 each. The bond’s interest is payable semi-annually in arrears on 31 January and

31 July. The bonds are redeemable at par and are due for redemption on 31 July 2024. The bonds

are guaranteed by Spinola Development Company Limited, which has bound itself jointly and

severally liable for the payment of the bonds and interest thereon, pursuant to and subject to the

terms and conditions in the offering memorandum. The bonds have been admitted on the Official List

of the Malta Stock Exchange on 31 July 2014. The quoted market price as at 31 December 2022 for

the bonds was €100.6 (2021: €101.05). In the opinion of the directors these market prices fairly

represent the fair value of these financial liabilities.

By virtue of an offering memorandum dated 29 May 2017, the company issued €25,000,000 bonds

with a face value of €100 each. The bond’s interest is payable annually in arrears on 10 July. The

bonds are redeemable at par and are due for redemption on 10 July 2027. The bonds are guaranteed

by Spinola Development Company Limited, which has bound itself jointly and severally liable for the

payment of the bonds and interest thereon, pursuant to and subject to the terms and conditions in the

offering memorandum. The bonds have been admitted on the Official List of the Malta Stock

Exchange on 7 July 2017. The quoted market price as at 31 December 2022 for the bonds was €99.00

(2021: €100.05). In the opinion of the directors these market prices fairly represent the fair value of

these financial liabilities.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

10. Trade and other payables

2022

2021

€

Current

Interest payable

976,883

Amounts owed to fellow subsidiary

14,600,000

Other payables

176,941

144,966

Accruals and deferred income

38,458

35,699

Trade and other payables

15,792,282

1,157,548

Amounts owed to fellow subsidiary are unsecured, bear an interest of 1% and repayable on demand.

The company’s exposure to liquidity risk related to trade and other payables is disclosed in Note 2.

11. Finance income

2022

2021

€

Interest on loans to fellow subsidiary

2,237,500

Facility fee receivable

158,486

137,487

Interest on treasury bills

23,917

2,419,903

2,374,987

12. Finance cost

2022

2021

€

Coupon interest payable on bonds

2,237,519

2,235,450

Interest payable to fellow subsidiary

11,145

2,248,664

2,235,450

13. Expenses by nature

Administrative expenses are classified by their nature as follows:

2022

2021

€

Listing and related compliance costs

58,241

61,948

Directors’ fees (Note 15)

25,000

17,470

Other expenses

61,108

48,657

144,349

128,075

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

13. Expenses by nature - continued

Auditor’s fees

Fees charged by the auditor for services rendered during the financial periods ended 31 December

2022 and 2021 relate to the following:

2022

2021

€

Annual statutory audit

8,424

6,212

Tax advisory and compliance services

400

375

8,824

6,587

14. Tax expense

2022

2021

€

Current tax expense:

on taxable profit subject to tax at 15%

3,588

on taxable profit subject to tax at 35%

4,941

4,012

Tax expense

8,529

4,012

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

26,890

11,462

Tax on profit at 35%

9,412

4,012

Tax effect of:

Income taxed at source with a final tax

(4,783)

Disallowed expenses

3,900

Tax expense

8,529

4,012

15. Directors’ emoluments

2022

2021

€

Directors’ fees

25,000

17,470

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

16. Cash generated from/(used in) operations

Reconciliation of profit before tax to cash generated from/(used in) operations:

2022

2021

€

Profit before tax

26,890

11,462

Adjustment for:

Amortisation of bond issue costs

50,019

47,837

Finance income

(2,419,903)

(2,374,987)

Finance costs

2,198,645

2,187,613

Changes in working capital:

Trade and other receivables

138,287

(6,036)

Trade and other payables

23,589

(6,525)

Cash generated from/(used in) operations

17,527

(140,636)

Net debt reconciliation

All the movements in the company’s net debt related only to cash flow movements and disclosed as

part of the financing activities in the statement of cash flows on page 13.

17. Related party transactions

The company forms part of the Tumas Group of Companies. All companies forming part of the Tumas

Group are related parties since these companies are all ultimately owned by Tumas Group Company

Limited which is considered by the directors to be the ultimate controlling party. Trading transactions

between these companies include items which are normally encountered in a group context. The

group is ultimately fully owned by members of the Fenech family, who are therefore considered to be

related parties. The main related party with whom transactions are entered into is Spinola

Development Company Limited, the guarantor of the borrowings (Note 9).

The following are the principal transactions that were carried out with related parties:

2022

2021

€

Income from goods and services

Finance income from fellow subsidiary (Note 11)

2,237,500

Facility fee from fellow subsidiary (Note 11)

158,486

137,487

Expenditure for goods and services

Finance expense to fellow subsidiary (Note 12)

11,145

Key management personnel compensation, consisting of directors’ remuneration, has been disclosed

in Note 15 to the financial statements.

Year end balances arising from related party transactions are disclosed in Notes 4, 5 and 10 to the

financial statements.

TUMAS INVESTMENTS p.l.c.

Annual Financial Report and Financial Statements - 31 December 2022

18. Statutory information

Tumas Investments p.l.c. is a limited liability company and is incorporated in Malta.

The ultimate and immediate parent company of Tumas Investments p.l.c. is Tumas Group Company

Limited, a company registered in Malta, with its registered address at Tumas Corporate Office, Level

3, Portomaso Business Tower, Portomaso, St. Julians, Malta.

Raymond Fenech, a director on all Tumas companies and part shareholder of the Tumas Group, has

acted as the executive chairman of the board of Tumas Group Company Limited and as Chief

Executive Officer of the Tumas Group generally. All decisions taken by the board of the ultimate

parent were executed by the chairman in his role as chief executive officer of the group.

19. Comparative information

Comparative figures disclosed in the main components of these financial statements have been

reclassified to conform with the current year’s presentation format for the purpose of fairer

presentation.

Logo

Independent auditor’s report

To the Shareholders of Tumas Investments 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 Tumas Investments 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

Tumas Investments p.l.c.’s financial statements comprise:

· the statement of financial position as at 31 December 2022;

· the statement of comprehensive income for the year then ended;

· the statement of changes in equity for the year then ended;

· the statement of cash flows for the year then ended; and

· the notes to the financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these Codes.

To the best of our knowledge and belief, we declare that non-audit services that we have provided to the company are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).

The non-audit services that we have provided to the company, in the period from 1 January 2022 to 31 December 2022, are disclosed in note 13 to the financial statements.

Our audit approach

Overview

	· Overall materiality: €663,000, which represents 1% of total assets.
	· Recoverability of loans issued to the Guarantor of the bonds

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

€663,000

How we determined it

1% of total assets

Rationale for the materiality benchmark applied

We chose total assets as the benchmark because, in our view it is an appropriate measure for this type of entity. We considered that this provides us with a consistent year-on-year basis for determining materiality.

We chose 1%, 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 €66,300 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

Recoverability of loans issued to the Guarantor of the bonds

Loans and receivables include funds advanced to a fellow subsidiary, Spinola Development Company Limited, who is the guarantor of the bonds issued by the Company. Loan balances with this related party as at 31 December 2022 amounted to €50 million.

As explained in accounting policy note 1.3 and note 4, the recoverability of the loans are assessed at the end of each financial year.

The loans are the principal asset of the company, which is why we have given additional attention to this area.

We have agreed the terms of these loans to supporting loan agreements.

We have assessed the financial soundness of the fellow subsidiary, Spinola Development Company Limited, which is also the guarantor of the company’s bonds. In doing this, we made reference to the latest audited financial statements, management accounts, cash flow projections and other relevant information made available to us.

Based on evidence and explanations obtained, we concur with management’s view with respect to the recoverability of these loans.

Other information

The directors are responsible for the other information. The other information comprises the Directors’ report and the Corporate governance – Statement of compliance (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 Tumas Investments 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.

Corporate governance – Statement of compliance

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.

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 for the year ended 31 December 2000. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 23 years. The company became listed on a regulated market on 2 August 2002.

PricewaterhouseCoopers

78, Mill Street

Zone 5, Central Business District

Qormi

Malta

Stephen Mamo

Partner

28 April 2023