Chairman’s message

The financial year 2022 for Harvest Technology p.l.c. was challenging both on a macro and micro level. Despite new global headwinds, management changes, and certain business challenges for ApcoPay in the fast-paced and heavily regulated payments industry, the group reported a profit after tax of €1.3 million for the year ended 2022.  Furthermore, Harvest concluded the year with a healthy cash position of approximately €2.7 million and remained debt-free, positioning the business well for the necessary investments to support its ongoing expansion.

I am pleased to report that the Board of Directors and its various sub-committees continue to function properly and provided the appropriate level of challenge and support to the CEOs and senior management of each subsidiary. During 2022 the group strengthened its management team and successfully recruited a new CEO and several new senior management team members. These changes were necessary to expand the range and quality of our services, but also to ensure business continuity and develop our internationalisation strategy.

In 2022, the Group embarked on key projects to drive the future sustainable growth of the different businesses. At ApcoPay, the payment gateway is undergoing significant investment to upgrade the system to a cloud-based gateway which will allow the business to scale significantly, but more importantly, offer new features and products which are required by clients particularly in the iGaming sector. The development of the new gateway is highly demanding as it requires the Company to operate and maintain two payment gateways in parallel temporarily, which requires additional labour resources and operating costs. The new gateway is expected to be operational in the second half of 2023 following the migration of all existing clients and independent certifications. This will ensure a future proof setup offering a plethora of functionality in line with our roadmap of empowering our global e-commerce merchants with a Payment Orchestration platform. I would like to thank the teams at ApcoPay and PTL who are working together to ensure a seamless transition to the new gateway.

At Apco, the key investment is in new products and services primarily in Electrical Vehicle (EV) charging and Unmanned Aerial Vehicle (UAV) where we have already been awarded contracts in excess of €1 million. These two new products present an opportunity for us to further develop our internationalisation strategy. At PTL, the key focus will be on expanding the service offering both locally and internationally. During 2022, the management team has been developing new relationships with prospective partners, in various countries in both Africa and Europe, where PTL’s expertise in Health, Border Security and Financial Services is attracting interest from various stakeholders.

In recent years, the company has achieved a strong financial position despite the strong dividend payouts. Our future strategy includes investing in proprietary intellectual property and innovative ventures that will help us expand into new markets. We will also increase our efforts to evaluate strategic investments that will strengthen the position of each subsidiary.

Our key goal is to create sustainable value for our shareholders by diversifying the product offerings and improving operational efficiency to meet the ongoing market challenges. We remain committed to leveraging our strengths and driving long-term growth in the rapidly changing technology sector.

Mr Keith Busuttil

Chairman

13 April 2023

Chief Executive Officer’s overview

Greetings and welcome to the 2022 Annual Report for Harvest, marking the fourth report issued since Harvest Technology p.l.c. was listed on the Malta Stock Exchange. I commenced my tenure as CEO of Harvest Technology p.l.c. in October 2022 and hence my contribution to the group’s past year performance has been minimal. The people at Harvest and its subsidiaries deserve full credit for the consolidated performance of the group.  

Harvest Technology p.l.c. is a Group with a diversified portfolio of technology businesses – today comprised of PTL Ltd, APCO Ltd, Apco Systems Ltd, Ipsyon Ltd and a minority investment in Thought3D Ltd. We deliver value-added technical solutions to customers in multiple sectors including finance, health, iGaming, law enforcement, retail, governmental and many more. 

Notwithstanding the continued adversities faced by the Group during 2022, it is worth recognising that the team at Harvest Technology p.l.c. persevered and pushed to deliver value to our customers and tangible results to the group. The organisation has not only been subject to significant changes in management, but also faced some major headwinds. In 2022, the Group's profit after tax amounted to €1.3m, a decrease compared to €2.7m in 2021. 

Apco Systems, with a payment gateway at its core, processes significant volumes daily by offering more than 300 processing channels. However, during 2022 the transaction value processed by the payment gateway decreased marginally. The decrease was primarily due to the increased regulatory scrutiny and additional licensing requirements mandated on online gaming operators which impacted our large clients and the commissions receivable from partnering banks. In the previous year, the company also benefitted from an extraordinary revenue spike in e-commerce due to the Covid-19 pandemic which did not recur in the current year. The investment in product development and key personnel commenced in Q4 of last year and will have to increase significantly in 2023 to ensure that the platform remains a competitive solution in the payment space. 

During 2022, we established a new subsidiary in Greece, ApcoPay Greece S.A., with the aim of offering payment gateway services in the country. We also assembled a team of sales representatives who worked to expand our market presence in Greece. Despite these efforts, we did not achieve significant turnover. We still believe that there are opportunities to exploit, and we are currently reassessing our strategy for the Greece initiative to determine the best way forward.   

In line with expectations, PTL Limited recorded higher revenue than the previous year due to the recognition of hardware and software licenses revenue related to the two main projects carried out successfully by the team for the Maltese public sector.  

In late 2021, PTL was awarded a new project within the Ministry of Finance, Economic Planning and Development in Mauritius. Progress throughout 2022 was positive, resulting in recognition of services revenue that was delivered by year-end. The project is expected to be completed in 2023, after which PTL will enter into a maintenance and support revenue service agreement. This will be the company's second successful project in Mauritius, following the completion of the Advance Passenger Analysis Project with the Mauritius Police Force in 2021. In 2022, PTL provided maintenance and service support during the second year of the contracted six-year term for that project. Towards the end of 2022, PTL established a new subsidiary in Mauritius, PTLtech (Mauritius) Limited, with the aim of further expanding its presence on the African continent following the successful implementation of the beforementioned projects. 

Building on our strategic initiatives from 2021, we made noteworthy progress in 2022, completing our first EV charging infrastructure project and securing a €1.1 million tender for the supply and maintenance of an unmanned aerial vehicle for the Maltese public sector. The latter is slated for completion in 2023, and we are committed to its successful execution. Expanding into new areas and increasing revenue streams are key priorities for us. We are dedicated to pursuing these strategic initiatives and driving growth across our business.  

Furthermore, going-forward we are eager to enhance our relationships with current local banks in Malta and we plan to continue collaborate on exciting projects throughout 2023. During the current year, APCO Limited experienced delays in the award of certain contracts due to supply chain issues, resulting in lower performance than originally forecasted.  

In 2022, the Group maintained a debt-free position and ended the year with a cash balance of approximately €2.7 million. This financial stability positions us strongly for potential investments, and we are actively assessing acquisitions to support our continued international growth. 

Mr. Peter Ekmark

Chief Executive Officer

13 April 2023

Directors’ report

The directors present their report together with the audited financial statements of Harvest Technology p.l.c. and the consolidated financial statements of the Group of which it is the parent, for the year ended 31 December 2022.

Principal activities

The principal activity of the parent Company is that of acting as a holding Company. 

The Group is mainly involved in the sale, maintenance and servicing of information technology solutions, security systems, and to provide electronic payments solutions.

Performance review

During the year under review, the Group registered an operating profit of € 2,089,978 (2021: € 4,007,506) on revenue of € 16,275,659 (2021: € 15,747,511). After accounting for net finance costs and taxation, the Group registered a profit for the year of €1,341,370 (2021: € 2,693,519).

The Group’s net assets at the end of 2022 amounted to €13,600,797 (2021: € 13,398,459).

The Company earned management fees and investment income of €467,820 and €1,999,691 respectively (2021: € 325,813 and € 4,442,525 respectively). After accounting for finance income, finance costs and administrative expenditure, the Company registered a profit after tax of € 893,616 (2021: € 2,286,300). The net assets of the Company at the end of 2022 amounted to €12,747,416 (2021: € 12,992,832).

The Group measures the achievement of its objectives using the following other key performance indicators.

Financial

The Group’s current ratio (“current assets divided by current liabilities”) currently stands at 1.60:1 (2021: 1.49:1).

The Group measures its performance based on EBITDA. EBITDA is defined as the Group profit before depreciation, amortisation, net finance expense and taxation. During the year under review, EBITDA amounted to €2,838,178 (2021: € 4,748,658).

The Group aims to deliver a return on average capital employed above the level of its cost of funding. The return on average capital employed represents the profit on ordinary activities before finance costs and exceptional items, divided by the average of opening and closing tangible net worth. The Company ensures that this capital is used as effectively as possible. The return on capital employed amounted to 15% (2021: 30%).

Non-financial

The directors note that the transaction value in Euros processed by the payment gateway, which remained the most important segment to the Group’s result, decreased by 2% from € 568 million in 2021 to € 559 million in 2022.

Principal risks and uncertainties

The successful management of risk is essential to enable the Group to achieve its objectives. The ultimate responsibility for risk management rests with the Company’s directors, who evaluate the Group’s risk appetite and formulate policies for identifying and managing such risks. The principal risks and uncertainties facing the Group are included below:

Market and competition

The Group operates in a highly competitive environment and faces competition from various other entities. Technological developments also can create new forms of quickly evolving competition. An effective, coherent and consistent strategy to respond to competitors and changing markets has enabled the Group to sustain its market share and its profitability. The Group continues to focus on service quality and performance in managing this risk. Related to this is the growing pressure on commissions that Apco Systems Limited generates through its partnerships with various banks.

Talent and skills

Failure to engage and develop the Group’s existing employees or to attract and retain talented employees could hamper the Group’s ability to deliver in the future. Regular reviews are undertaken of the Group’s resource requirements.

Economic and market environment

A significant economic decline in any of the markets that the Group operates in, could impact the Group’s ability to continue to attract and retain customers. Demand for the Group’s products and services can be adversely affected by weakness in the wider economy which are beyond the Group’s control. This risk is evaluated as part of the Group’s annual strategy process covering the key areas of investment and development and updated regularly throughout the year. The Group continues to make investment in innovation. The Group regularly reviews its pricing structures to ensure that its products and services are appropriately placed within the markets in which it operates.

Brand and reputation risk

Damage to the Group’s reputation could ultimately impede the Group’s ability to execute its corporate strategy. To mitigate this risk, the Group strives continually to build its reputation through a commitment to sustainability, transparency, effective communication and best practices. The Group works to develop and maintain its brand value.

Technology and business interruption

The Group relies on information technology in all aspects of its business. In addition, the services that the Group offers to its customers are reliant on complex technical infrastructure. A failure in the operation of the Group’s key systems or infrastructure could cause a failure of service to its customers, thus negatively impacting its brand, and increased costs. The Group invests in technology infrastructure to enable it to continue to support the growth of its business and has a robust selection and monitoring process of third-party providers. The Group also organises regular business continuity exercises to ensure ongoing readiness of key systems and sites.

Customer service

The Group’s revenues are at risk if it does not continue to provide the level of service expected by its customers. The Group’s commitment to customers is embedded in its values. The relevant employees undertake appropriate training programmes to ensure that they are aware of, and abide by, the levels of service that are required by the Group’s customers.

Financial instruments risks

Note 40 to the financial statements provides details in connection with the Company’s financial risk management objectives and policies and the financial risks to which it is exposed.

Non-financial statement matters

Environmental matters

The Group is committed to environmental responsibility and feels that it is its duty to operate as part of the local community in order to keep the environment in which it operates tidy. Subsidiaries within the Group are enrolled in local programmes for waste collection, separation and recycling of waste.

Employee matters

The Group provides opportunities to individuals with diverse backgrounds and experiences, to work in its environment and provide the necessary training programs to its staff members to ensure high levels of engagement which is essential to its continuing business success, whilst making sure that it provides career progression mechanisms and rewarding achievements. All this is provided in an environment which fosters diversity and equal opportunities for everyone, respecting the unique attributes and perspectives of every employee.

The Group provides equal treatment and equal employment opportunity without regard to race, colour, religion, sex, age, national origin, disability, sexual orientation, gender identity or any other basis protected by law. In addition, it is committed to providing a safe and healthful working environment for its employees. For everyone’s safety, employees must immediately report accidents and unsafe practices or conditions to their immediate supervisors.

Social matters

The Group engages with its social partners and the community in general to give back through community involvement and the protection of the environment through the creation and realisation of advanced technology systems. The Group’s history has shown a proven contribution towards society by enhancing the quality of life of its customers and the general public alike.

Obligations

The Group conducts its activities by taking positive actions respect human rights, as defined in the code of business conduct, which applies to all employees of the Group. All Group employees are trained annually on the standard of business conduct.

The Group makes sure that it respects all its obligations regarding fraud, bribery and corruption. The Group prohibits all forms of bribery and corruption in accordance with the Group Code of Conduct and Whistle-blower Policy to ensure that all employees are deterred from any corrupt practices or bribery as well as are incentivized to report any such activities in a direct line with the responsible Group supervisor, without fearing reprisals.

Accordingly, all employees, representatives and business partners must fully comply with anti-bribery legislation.

Meanwhile, the Group is committed to complying with the applicable laws in all countries where it does business. It adopts an anti-corruption policy which sets forth its commitment to ensuring that it carries out business in an ethical manner.

Business model

The Group’s business model in Malta is a multi-brand information technology solutions provider to businesses and the public sector. In addition, the Group provides a payments solutions provider offering e-commerce processing services for retailers and internet-based merchants together with the provision of a wide range of automation and security solutions catering to the banking, retail, fuel and other sectors.

Through the wide range of services and experience in technology, the Group is positioned to continue to develop and offer a broad range of state-of-the-art solutions and assure an excellent quality of service to its customers.

Significant judgements and estimates

Note 4 to the financial statements provides details in connection with the inherent uncertainties that surround the preparation of the financial statements which require significant estimates and judgements.

Results and dividends

The results for the year ended 31 December 2022 are shown in the statements of profit or loss and other comprehensive income. The Group’s profit for the year after taxation was €1,341,370 (2021: € 2,693,519), whilst the Company’s profit for the year after taxation was €893,616 (2021: € 2,286,300).

On 8 April 2022, the Company declared a final dividend of € 455,613 - € 0.020 per share, for 2021. This was paid on 29 April 2022. During the current year, the Company paid two net interim dividends amounting to € 683,419 - € 0.030 per share. A further dividend of €113,903 - €0.005 per share is proposed by the Company for financial year 2022.

Likely future business developments

The directors consider that the year-end financial position was satisfactory and that the Group is well placed to sustain the present level of activity in the foreseeable future.

Post balance sheet events

There were no adjusting or significant non-adjusting events that have occurred between the end of the reporting period and the date of authorisation by the board.

Directors

The following have served as directors of the Company during the period under review:

The directors are eligible for re-appointment in the manner specified in the corporate governance statement.

Remuneration statement

In terms of Rule 8A.4 of the Code, the Company is to include a remuneration statement in its annual report which shall include details of the remuneration policy of the Company in respect of the financial packages of members of the Board of Directors and the Chief Executive Officer ( “CEO” ) of the Company.

The Company’s remuneration of its Directors and CEO is based on the remuneration policy adopted and approved by the shareholders of the Company at the annual general meeting held on 30 July 2020 (the “Remuneration Policy” ). The Remuneration Policy of the Company is available for inspection on the Company’s website on https://harvest.tech/wp-content/uploads/2020/07/Harvest-Renumeration-Policy.pdf

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, and the CEO. The Remuneration Policy is also intended to demonstrate how the remuneration that may be paid to Directors and the CEO contributes to the development and attainment of the Company’s corporate strategy and its long-term success, development and sustainability, and is aimed at attracting and retaining suitable candidates with the appropriate skills, technical knowledge experience and expertise.

Remuneration payable to Directors

Fixed remuneration

The remuneration payable to Directors shall be fixed and shall not include any variable element based on performance indicators or the right to purchase shares in the Company by virtue of share options, or any other deferred compensation, or pension 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, or its subsidiaries, are entitled to receive additional remuneration as may be determined by the Board of Directors from time to time. Any such additional/ remuneration shall, however, form part of the aggregate emoluments of the Directors as approved by the general meeting of the Company. The basis upon which such additional remuneration is paid shall take into account the skills, competencies and technical knowledge that members of such committees require and the respective functions, duties and responsibilities attaching to membership of such committees .

Other entitlements

The Company may also pay out fringe benefits, comprising of medical and life insurance (subject, however, to a commercially reasonable capping on the premium payable), as well as mobile and internet connectivity data, at the expense of the Company.

Director service contracts

As at the date hereof, the independent non-executive Directors are party to a director services contract with the Company, pursuant to which their respective role, responsibilities, duties and the applicable remuneration is set out.

The term of such service contracts commences from the date of entry into the said contract and continues in force thereafter until the next annual general meeting of the Company at which the Directors shall be eligible for re-election, or until such time as the Director resigns or until such time as such Director is removed from office.

None of the service contracts contain provisions for termination payments and other payments linked to early termination.

Remuneration payable to CEO

Fixed and Variable Remuneration

The CEO is entitled to a fixed-based salary together with a variable discretionary performance bonus, based on a pre-defined percentage of the audited consolidated net profit before taxation of the Company. Such bonus scheme is driven by the crucial role of the CEO in the oversight of the day-to-day business, and the growth of the Company and its underlying business clusters.

The remuneration payable to the CEO is reviewed annually by the Board of Directors to ensure that such remuneration is commensurate with the roles, duties and responsibilities of the CEO, as well as the individual skills, knowledge, expertise, experience and performance thereof. In establishing the remuneration payable to the CEO, the Board of Directors is guided by the recommendations of the RemNom Committee, including any recommendations intended to ensure that remuneration payable is in line with market standards and is well suited to retain and motivate the CEO of the Company to contribute to the long-term success and development of the Group.

Other entitlements

In addition to his fixed and variable remuneration, the CEO is also entitled to a fully expensed mobile phone and laptop, as well as part payment of premia for overseas medical insurance and life insurance.

CEO Service Contract

The CEO’s contract of service is of an indefinite duration and is subject to the termination notice periods prescribed by law.

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:

In this respect, the Company is hereby producing its third 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 remuneration paid to individual Directors during the year under review was as follows:

* Resigned on 28 February 2022.

** Appointed as Chairman in place of Prof. Juanito Camilleri, with effect from 28 February 2022

*** Resigned on 1 July 2022.

**** Appointed with effect from 14 March 2022.

The remuneration paid to the independent non-executive Directors covers both their role as directors of the Company and their role as members or chairpersons of sub-committees of the Company, as well as their position as directors of subsidiaries forming part of the Group.

The aggregate emoluments that may be paid to Directors in any one financial year shall be as determined by the Company in the general meeting in accordance with Article 21.1 of the Articles of Association of the Company. In this respect, the shareholders of the Company approved, as part of the ordinary business approved at the last annual general meeting of the Company held on 28 June 2022, that the aggregate remuneration that may be paid to the Directors of the Company for the financial year ending 31 December 2022 was fixed at € 150,000.

The aggregate emoluments of the Directors in respect of their role as directors of the Company and, where applicable, as members of sub-committees of the Board of Directors of the Company and non-executive directors of subsidiaries forming part of the Group, amounted to €56,687.

In view of the management structure of the Group, and the fact that the main assets of the Company are its investments in its operating subsidiaries (PTL Limited, APCO Limited, Apco Systems Limited and Ipsyon Limited), the Board considers a fixed remuneration to Directors as an appropriate and suitable remuneration package for the Board in the performance of their duties. Furthermore, the Remuneration Committee 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.

Remuneration paid to CEO

Emoluments paid and accrued to the persons occupying the post of CEO, or interim CEO (as applicable), for the period under review amounted to €150,072, split as follows:

The contents of the remuneration report have been checked by the auditors of the Company.

Decision-making with respect to the Remuneration Policy

Whereas the Board of Directors is responsible for determining the Remuneration Policy of the Company, the RemNom Committee, acting in its function as the Remuneration Committee, is, in turn, responsible for overseeing and monitoring its implementation and ongoing review thereof.

The Remuneration Policy shall be reviewed 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 RemNom Committee 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 issued by the MFSA.

Members of the RemNom Committee are not present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed at a meeting of such Committee, and any decision taken by the Committee in this respect shall be subject to the approval of the Board of Directors. At a meeting of the Board of Directors, no Director may be present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed.

Going concern

The directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

Disclosure of information to the auditor

At the date of making this report the directors confirm the following:

Statement of directors’ responsibilities

The Companies Act, Cap 386 requires the directors to prepare financial statements for each financial period which give a true and fair view of their state of affairs of the Group and the Company as at the end of the reporting period and of the profit or loss of their operations for that period.  In preparing those financial statements, the directors are required to:

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company, and to enable them to ensure that the financial statements have been properly prepared in accordance with the Companies Act, Cap 386.  This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. They are also responsible for safeguarding the assets of the Group, and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements of the Company for the year ended 31 December 2022 are included in the Annual Report 2022, which is published in hard-copy printed form and is made available on the Company’s website.  The Directors are responsible for the maintenance and integrity of the Annual 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.

Auditor

Grant Thornton have intimated their willingness to continue in office.

A resolution to reappoint Grant Thornton as auditor of the Company will be proposed at the forthcoming annual general meeting.

Signed on behalf of the Board of Directors on 13 April 2023  by Mr. Keith Busuttil ( Chairman and Director ) and Mr. Stephen Paris (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Registered address:

Nineteen Twenty-Three

Valletta Road

Marsa MRS 3000

Malta

13 April 2023

Corporate Governance - Statement of Compliance

A.      Introduction

Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority (MFSA), Harvest Technology p.l.c. (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 ”). As at the date of this Report, the Board of Directors of the Company (the “ Board ” or the “ Directors ”) considers the Company to be generally compliant with the Code. In those instances where the Company’s organisation and practices deviate from the Code, the Board is of the view that there are cogent justifications for such divergences, taking into account the size, complexity and nature of operations of the Company, as explained in further detail in section B of this Corporate Governance Statement.

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 Code is not only expected by investors but also evidences the Directors’ and the Company’s commitment to a high standard of good governance.

The Company’s governance lies principally with its Board, which is responsible for the overall determination of the Company’s policies and business strategies. 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 and suitable 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 organisational structures, internal controls, practices and processes in place within the Company and explains how these effectively achieve the provisions and principles set out in the Code. For this purpose, the Statement will make reference to the pertinent provisions and principles of the Code and set out the manner in which the Directors believe these have been adhered to. Where the Company has not complied with any of the principles of the Code, this Statement provides an explanation for such non-compliance. Reference in this Statement to compliance with the principles of the Code means compliance with the Code’s main principles and provisions.

The Board has carried out a review of the Company’s compliance with the Code during the period under review and is hereby reporting on the extent of its adoption of the provisions and principles of the Code for the financial year being reported, as required in terms of Capital Markets Rule 5.97.

The Code is accessible via the website of the MFSA on https://www.mfsa.mt/wp-content/uploads/2023/01/Full-Capital-Markets-Rules-as-amended-on-23-January-2023.pdfthereof.

B.      Compliance

 Principle 1: The Board

The Directors believe that for the period under review, the Company has generally complied with the requirements of this principle and the relative Code provisions.

The Board is composed of members who are fit and proper to direct and manage the business of the Company with honesty, competence and integrity. All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company and its status as a listed company and the Board is cognisant of its accountability for its own performance and that of its delegates.

The Board is primarily responsible for determining the Company’s strategic direction and organisational requirements, whilst ensuring that the Company has the appropriate mix of financial, human and operational resources to meet its objectives and improve its performance. Throughout the period under review, the Board provided the necessary leadership in the overall direction of the Company and has adopted prudent and effective systems whereby it obtains timely information from the Chief Executive Officer (the “CEO” ) and the Chief Financial Officer (the “CFO” ).

The CEO acts as a channel of communication between the Board, the senior management team and the managing directors of the Company’s operating subsidiaries, ensuring an effective contribution to the decision-making process, whilst at the same time exercising prudent and effective controls. The CFO leads the finance function of the Company and plays a central role in the preparation of the Company’s consolidated financial statements, the appraisal of investment opportunities, as well as the monitoring of the operational performance of the Company’s business, cash flow and capital requirements. The CFO is also generally responsible for ensuring that the Company complies with its statutory financial and fiscal reporting obligations.

The Board delegates specific responsibilities to a number of committees, most notably the Audit Committee (the “Audit Committee” ),  and the Remuneration and Nominations Committee (the “RemNom Committee” ), as well as the Governance and Risk Committee and the Investment Committee, each of which operate/d under formal terms of reference approved by the Board. Further detail in relation to the Committees and the responsibilities of the Board is found in paragraph ‘ Principles 4 and 5 ’ of this Statement.

Principle 2: Chairman and Chief Executive Officer

The roles of the Chairman and the CEO are occupied by separate individuals. During the period under review, Prof. Juanito Camilleri occupied the post of Chairman until he tendered his resignation with effect from the 28 February 2022, and with effect from the same date, the Board of Directors appointed Mr. Keith Busuttil, a non-executive director of the Company, as Chairman of the Board of Directors, in accordance with the Articles of Association of the Company. As to the post of CEO, this was occupied by Dr. Godwin Caruana until his resignation on 20 April 2022. With effect from the same date, Mr. Chris Fenech, the Group’s CFO, was appointed as interim CEO. Mr Fenech retained the post of interim CEO until 4 October 2022, when Mr. Peter Gunnarsson Ekmark was appointed CEO.

Prof. Juanito Camilleri was not, and Mr. Keith Busuttil is not, an independent Director as recommended by the Code. The Board considers that notwithstanding that the Chairman was/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. During the period under review, the Board considered its past and present Chairmen to be fit and proper to occupy the role, having the relevant and necessary experience and expertise to fulfil the role.

The responsibilities and roles of the Chairman and the CEO are clearly established and agreed to by the Board of Directors, with the Chairman generally responsible for leading the Board, whereas the CEO is generally responsible for the ­ day-to-day management of the Company, thereby ensuring effective checks and balances on the exercise of the management and conduct of affairs of the Company. The separation of roles is also entrenched in the Articles of Association of the Company, whereby in terms of Article 13.2 of the Articles of Association, where the CEO is appointed to form part of the senior management team of the Company, the CEO may not also simultaneously form part of the Board of Directors .

The Chairman is responsible for:

Principle 3: Composition of the Board

In terms of Clause 5 of the Memorandum of Association of the Company and Article 12.3 of the Articles of Association of the Company, the board of directors shall consist of a minimum of five (5) and maximum of seven (7) directors, one of whom may include the CEO provided that said CEO does not form part of the senior management of the Company in accordance with Article 13.2 of the Articles of Association.

The Articles of Association of the Company distinguish between the process for the appointment of executive directors and non-executive directors.

Appointment of executive directors

Non-executive directors of the Company are entitled to appoint executive directors to the Board of Directors of the Company from amongst the most senior executive positions of the Company. An executive director appointed in such manner will have a term of office of three (3) years and will thereafter be eligible for re-appointment and may not be removed from office by the non-executive directors: (i) unless his office as a senior executive has also been terminated; or (ii) with just cause being shown to the satisfaction of the Nominations Committee.

As indicated hereunder, none of the directors of the Company are executive directors.

Appointment of non-executive directors

Non-executive directors of the Company shall be appointed by the shareholders in the annual general meeting of the Company. The Articles of Association of the Company provide for two mechanisms by which non-executive directors may be nominated for appointment by the shareholders at the annual general meeting, as follows: (i) any member or number of members who in the aggregate hold not less than 10% of the total number of equity securities having voting rights in the Company shall be entitled to nominate a fit and proper person for appointment as a director of the Company; and (ii) in addition to the aforementioned nominations, the directors themselves, or the Nominations  Committee, may make  recommendations and nominations for the appointment of directors at the next following annual general meeting. In either case, no person will be entitled to take office as a director unless approved by the Nominations Committee, which is empowered to reject any recommendation if in its considered opinion, such appointment could be detrimental to the Company’s interests or if such person is not considered fit and proper to occupy that position.

Removal of directors

Any Director may be removed at any time by the ordinary resolution of the shareholders of the Company in accordance with the Companies Act (Cap. 386 of the laws of Malta), or in accordance with any other applicable law, or in the specific cases set out in the Articles of Association of the Company. Once appointed to office in accordance with the provisions of the Articles of Association of the Company, a Director shall hold office for a minimum period of three (3) years and a maximum period of five (5) years, unless he/she resigns or is earlier removed or is due to retire by rotation in accordance with the Articles of Association of the Company. A Director whose term of office expires will be eligible for re-appointment.

During the period under review the Board of Directors was chaired by Prof. Juanito Camilleri, until his resignation which took effect from the 28 February 2022. With effect from the same date, the Board of Directors appointed Mr. Keith Busuttil as Chairman of the Board of Directors, in accordance with the Articles of Association of the Company. Subsequently, the Board of Directors co-opted Mr. Peter Hili to the office of non-executive director, effective 14 March 2022.

The Board of Directors is currently chaired by Mr. Keith Busuttil and comprises five (5) non-executive Directors. As at the date of this Statement, the directors of the Company are:

Mr Keith Busuttil and Mr Stephen Paris will be obliged to retire from office at the next annual general meeting but will be eligible for re-appointment thereat.

For the purpose of Code provision 3.2, two of the Directors are considered by the Board to be independent within the meaning of the Capital Markets Rules, such independent directors being Ms. Jacqueline Camilleri and Mr. Stephen Paris. In making this determination in respect of the former, the Board of Directors considered the following principal determining factors: (i) with reference to her position as a member of the Board of Directors of Hili Finance Company p.l.c. (C85692), the Board noted that Ms. Camilleri sits as an independent non-executive director and is, therefore, not involved in the day-to-day operations; and (ii) none of the circumstances set out in Code provision 3.2 that would be indicative of a director’s non-independence, are satisfied.

The Board of Directors considers that notwithstanding that Mr. Keith Busuttil is the CEO of 1923 Investments p.l.c., and Mr. Georgios Kakouras and Mr. Peter Hili are both directors of Hili Properties p.l.c. (C-57954), an associate company of 1923 Investments p.l.c., such persons are mindful of maintaining the necessary professionalism and integrity to duly fulfil their roles and responsibilities as non-executive directors of the Company.

Until his resignation in July 2022, the Board of Directors maintained the view, expressed in previous remuneration statements, that notwithstanding that while occupying the role of non-executive director of the Company Mr. Conrad Aquilina was employed by Hili Ventures Limited, the parent company of the majority and controlling shareholder of the Company, there were cogent reasons to believe that the independence of the said director was/is not compromised by the services rendered by the said director under his contract of employment, mindful of maintaining professionalism and integrity in carrying out his duties, responsibilities and providing judgement as a non-executive director of the Company.

The non-executive Directors contribute to the strategic development of the Company and the creation of its long-term growth and are responsible for:

Save as disclosed above, none of the non-executive Directors of the Company:

In terms of Code provision 3.4, each non-executive Director has declared in writing to the Board that he/she undertakes:

Each non-executive Director has complied with such an undertaking for the period under review.

Principles 4 and 5: The Responsibilities of the Board and Board Meetings

The Board of Directors is entrusted with the overall direction, administration and management of the Company and meets on a regular basis to discuss and take decisions on matters concerning the strategy, operational performance and financial performance of the Company.

In fulfilling its mandate, the Board assumes responsibility to:

In fulfilling its responsibilities, the Board continuously assesses and monitors the Company’s present and future operations, opportunities, threats, and risks in the external environment, and its current and future strengths and weaknesses in its internal environment.

The Board delegates specific responsibilities to the Audit Committee and the RemNom Committee, as well as, for part of the period under review, the Governance and Risk Committee and the Investment Committee.

The Board believes that it complies fully with the requirements of Principle 5 and the relative Code provisions, in that it has systems in place to ensure reasonable notice of meetings of the Board and ensuring that the Directors receive discussion papers in advance of meetings so as to provide adequate time for Directors to adequately and suitably prepare themselves and enable them to make an informed decision during meetings of the Board.

The Directors are assisted by the company secretary, who is consulted to ensure compliance with statutory requirements and with continuing listing obligations. The company secretary keeps detailed minutes of all meetings of the Board and of its committees, which minutes are subsequently circulated to the Board as soon as practicable after the meeting.

The company secretary also maintains detailed records of all dealings by Directors and senior executives of the Company and its subsidiaries in the Company’s shares, and assists the Board and senior management in being duly informed of, and conversant with, their obligations emanating from the Market Abuse Regulation (EU Regulation 596/2014) (“ MAR ”) and ensuring compliance therewith, to ensure the prevention and detection of insider dealing, unlawful disclosure of inside information and, or market abuse. In particular, cognisant of the material consequences of non-compliance with MAR and the effects thereof on investor confidence and market integrity, the Board has in place written policies and procedures relating to the keeping of permanent and temporary insiders lists, dealing in shares of the Company, and procedures for persons in possession of inside information.

In addition, the Directors may, in the course of their duties, seek independent professional advice on any aspect of their duties and responsibilities or the business and activities of the Company, at the Company’s expense.

During the period under review, the Board met fourteen (14) times. As a matter of policy, the Board seeks to meet at least twice every quarter, and a policy was established whereby early in the calendar year, meetings are scheduled for the full year, to allow adequate planning and time commitment, subject to the addition of ad hoc meetings as and when considered necessary.

The following reports the attendance at Board meetings of each of the Directors during the period under
review :

Principle 6: Information and Professional Development

On joining the Board, Board members undergo a formal induction programme, whereby the company secretary informs the incoming members of their statutory director duties and obligations, the requirements and implications of relevant legislation, as well as their rights, duties, and obligations under the Company’s Articles of Association and internal policies and procedures. Directors are also provided with a presentation on the activities of the Company and subsidiaries.

On a regular basis, the Directors also receive periodic information on the Group’s financial performance and position. The company secretary ensures effective information flows within the Board, committees and between senior management and Directors, as well as facilitating professional development. The company secretary advises the Board on governance matters.  Directors may, in the course of their duties, seek independent professional advice on any matter at the Company’s expense. In addition, the Board and its committees are given adequate and suitable resources to duly discharge their functions in a proper and effective manner.

The CEO is responsible for ensuring that management and employees have access to development and training opportunities to retain and enhance the Group’s competitive positioning, to safeguard and augment staff morale, and to ensure effective continuity and succession planning. The Company will provide for additional individual Directors' training on an as required basis.

Principle 7: 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.

The Board considers its own performance, and that of its committees as described in Principle 8 hereunder, as satisfactory and not meriting a revision to the Company’s corporate governance structures. The Board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the Board’s performance is evaluated on an ongoing basis by, and is subject to the constant scrutiny of, the Board itself, the Company’s shareholders, the market and the rules by which the Company is regulated as a listed company.

Principle 8: Committees

Audit Committee

The Audit Committee’s primary objective is to assist the Board in fulfilling its oversight responsibilities over the financial reporting processes, and the system of internal controls, the audit process and the process for monitoring compliance with applicable laws and regulations. The Audit Committee oversees the conduct of the internal and external audit and acts to facilitate communication between the Board, management and the internal and external auditors. The external auditors are invited to attend the Audit Committee meetings. The Audit Committee reports directly to the Board.

The Board has set formal terms of reference of the Audit Committee, which set out its composition, role, function, and the parameters of its remit, as well as the procedures and processes to be complied with in its activities.

The Audit Committee is expected to deal with and advise the Board on issues of financial risk, control and compliance, and associated assurance of the Company, including:

Furthermore, the Audit Committee has the role of assessing any potential conflicts of interest between the duties of the Directors and their respective private interests or duties unrelated to the Company.

In addition, the Audit Committee has the role and function of evaluating any proposed transaction to be entered into by the Company and a related party (which term shall have the same meaning as in the international accounting standards adopted in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council) to ensure that the execution of any such transaction is at arm’s length, on a commercial basis and ultimately in the best interests of the Company.

Any proposed transaction which the Company wishes to enter into and which satisfies either of the following conditions shall be referred to the Audit Committee for its consideration and approval:

At the meeting convened for this purpose, the Audit Committee shall consider the proposed transaction and first determine whether it is a transaction that falls within the ambit of the applicable Capital Markets Rules and, if it so determines, shall then consider the merits of the proposed transaction.

In its evaluation of the proposed transaction, the Audit Committee is at all times guided by the best interests of the Company and its general body of shareholders taken as a whole. The Audit Committee reports to the Board on its findings and makes its recommendations to the Board as to whether the transaction should be entered into in the first place and to make such further recommendations as to any matters that, in the opinion of the Audit Committee, need to be reviewed or improved in the proposed transaction or any of its terms so as to ensure that the best interests of the Company are properly safeguarded.

The Audit Committee is made up entirely of non-executive Directors, the majority of whom are independent of the Company. Audit Committee members are appointed for a one (1) year term of office, automatically renewed for further periods of one (1) year each unless otherwise determined by the Board of Directors of the Company, or unless removed and replaced by another member by the Board of Directors in accordance with the Capital Markets Rules. During the period under review, the Audit Committee was composed of Ms. Jacqueline Camilleri (independent and non-executive Director), Mr. Stephen Paris (independent and non-executive Director) and Mr. Keith Busuttil (non-executive Director). Following his appointment as Chairman of the Board,  Mr Keith Busuttil was replaced by Mr Georgios Kakouras (non-Executive Director) as Audit Committee member.

The Chairperson of the Audit Committee, appointed by the Board, is entrusted with reporting to the Board on the workings and findings of the Audit Committee. Ms. Jacqueline Camilleri occupied the post of Chairperson of the Audit Committee during the period under review.

The independent non-executive directors forming part of the Audit Committee are considered by the Board to be competent in accounting and/or auditing in terms of the Capital Markets Rules, based on their respective extensive experience occupying financial management and auditing roles within various private and public entities, as well as their respective skills and competencies in financial reporting, financial management, financial auditing and general financial advisory.

The Audit Committee met four (4) times during the year under review. The meetings of the Audit Committee were attended by all its members during the period under review. The Audit Committee is scheduled to meet at least four times in 2023.

RemNom Committee

In view of its size, the Company is of the view that whilst it considers the role and function of each of the remuneration committee and the nomination committee as important, it would be more efficient for these committees to be merged into one committee (the “RemNom Committee” ) that would serve a dual role. During the period under review the RemNom Committee was composed of Prof. Juanito Camilleri (who also acted as its Chairman, until his effective resignation on 28 February 2022), Ms. Jacqueline Camilleri and Mr Stephen Paris. On 14 March 2022, Mr Keith Busuttil was appointed as member and chairman of the RemNom Committee.

In its function as remuneration committee, the RemNom Committee is delegated with the oversight of the remuneration policies implemented by the Company with respect to the Board of Directors, the CEO and individuals who report directly to the Board of Directors. In assisting and making recommendations to the Board of Directors in setting out the Company’s remuneration policy, the RemNom Committee seeks to formulate remuneration policies aimed at attracting, retaining and motivating directors, whether executive or non-executive, as well as senior management with the right qualities and skills for the benefit of the Company. In turn, it is responsible for making proposals to the Board on the individual remuneration packages of directors and senior executives and is entrusted with monitoring the level and structure of remuneration of the non-executive directors. In addition, the RemNom Committee is responsible for reviewing the performance-based remuneration incentives that may be adopted by the Company from time to time and is authorised to determine whether a performance-based bonus or other incentive should be paid out or otherwise.

In its function as nomination committee, the RemNom Committee’s task is to propose to the Board candidates for the position of director, including persons considered to be independent in terms of the Capital Markets Rules, whilst also considering any recommendations from or nominations made by the shareholders in accordance with the Articles of Association of the Company.

The nominations committee also periodically assesses the structure, size, composition and performance of the Board and make recommendations to the Board regarding any changes, as well as consider issues related to succession planning. When fulfilling this function, the committee assesses the individual skills, knowledge and experience of the Directors, in order to ensure that that these endow the Board with the requisite collective skills, knowledge and experience for the proper functioning of the Company and its oversight by the Board. It is also entrusted with reviewing the Board’s policy for selection and appointment of senior management.

The nominations committee is empowered by the Articles of Association of the Company 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 committee and the existing Board members themselves may also make recommendations for the appointment of new directors at the annual general meeting. Where the number of candidates approved by the nominations committee is greater than the number of vacancies on the Board, an election would take place in accordance with the provisions of the Articles of Association of the Company.

In this respect, it is pertinent to note that, in advance of the 2022 annual general meeting, the Nominations Committee received two (2) valid nominations for the appointment of incumbent Non-Executive Directors, Mr. Conrad Aquilina and Ms Jacqueline Camilleri, which nominations were approved by the Nominations Committee and both approved candidates were automatically appointed, without requiring a resolution to be voted upon in view of the fact that the number of approved candidates did not exceed the number of vacancies and that no shareholder holding not less than ten per cent (10%) in nominal value of the shares having voting rights demanded that a vote be taken in respect of all or any one or more of the approved candidates.

The RemNom Committee met once during the period under review and is scheduled to meet in advance of and following the Company’s next annual general meeting, in addition to meetings which may be held from time to time and as may be required .

Governance and Risk Committee

During part of the period under review, the Company maintained a governance and risk committee (the “Governance and Risk Committee” or the “GRC” ). The GRC was entrusted with :

The GRC reported directly to the Board of Directors of the Company. During the period under review, the GRC was composed of Mr. Stephen Paris (Chairman), Ms. Jacqueline Camilleri and Mr. Conrad Aquilina. The latter was replaced by Mr George Kakouras after Mr. Aquilina tendered his resignation from the Board with effect from 1 July 2022. The CEO of the Company and members of senior management were invited to meetings of the GRC as observers.

The GRC met twice during the period under review, before it was resolved by the Board of Directors to have the functions of the GRC absorbed by the Audit Committee which is composed of the same members referred to above.

Investment Committee

On the 3 August, 2021, the Board of Directors resolved to establish an Investment Committee, composed of Mr Keith Busuttil, who was entrusted to chair the committee, Mr Georgios Kakouras, Mr Stephen Paris and the CEO, the primary purpose of which was that of determining what investments and, or divestments the Company should undertake within the parameters of the Group’s strategic plan in this respect as determined by the Board from time to time. 

Additionally, the Investment Committee was entrusted with the review of the aforementioned strategic plan, as well as prospective investments and, or divestments, and their funding requirements, as proposed from time to time, and once approved, the Investment Committee was tasked with overseeing their implementation and keeping the Board abreast of developments relating thereto. The Investment Committee was also responsible for monitoring emerging risks and opportunities, industry and regulatory developments as well as key business developments, which could impact the Group’s investment strategy.

During the period under review, the Investment Committee met twice before it was resolved by the Board of Directors to have the functions of the Investment Committee absorbed by the Board of Directors, with the support of the CEO.

Principles 9 and 10: Relations with Shareholders and with the Market, and Institutional Shareholders

The Company recognises the importance of maintaining a dialogue with its shareholders and of keeping the market informed to ensure that its strategies and performance are well understood. The Company is highly committed to having an open channel of communication and effective relationship with its shareholders and the wider market.

The Company communicates with its shareholders principally through the Company’s Annual General Meeting (the “AGM” ). The Chairman of the Board ensures that all Directors attend the AGM and that both the Chairman of the Board and committee chairpersons are available to answer questions. Individual shareholders can raise matters relating to their shareholdings and the business of the Group at any time throughout the year and are given the opportunity to ask questions at the AGM or to submit written questions in advance.

Both the Chairman and CEO also ensure that sufficient contact is maintained with major shareholders to understand issues and concerns.

Apart from the AGM, the Company communicates with its shareholders by way of the Annual Report and Financial Statements and through the Company’s website ( https://harvest.tech/ ) which also contains information about the Company and its business, including an ‘Investor Relations’ section.

The office of the company secretary also assists the Board in maintaining regular communication between the Company and its investors through the publication of company announcements.

The Company ensures that the market is provided with regular, timely, accurate, comprehensive, and comparable information to enable existing and prospective investors to make informed investment decisions. In this respect, over and above its statutory and regulatory requirements relating to the AGM, the publication of annual and interim financial statements, interim directors’ statements and Company announcements, the Company seeks to engage with investors and the market on a regular basis, and the Company holds meetings with major stockbrokers and financial intermediaries.

Principle 11: Conflicts of Interest

The Directors are fully aware of their responsibility to always act in the best interests of the Company and its shareholders irrespective of whoever appointed or elected them to serve on the Board.  

On joining the Board and regularly thereafter, the Directors are informed of their obligations on dealing in securities of the Company within the parameters of law, including the Capital Markets Rules, and Directors follow the required notification procedures.

It is the practice of the Board that when a potential conflict of interest arises in connection with any transaction or other matter, the potential conflict of interest is declared, so that steps may be taken to ensure that such items are appropriately addressed. By virtue of the Memorandum and Articles of Association, the Directors are obliged to keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with that of the Company. The Board member concerned shall not take part in the assessment by the Board as to whether a conflict of interest exists. A director shall not vote in respect of any contract, arrangement, transaction or proposal in which he/she has a material interest in accordance with the Memorandum and Articles of Association of the Company. The Board believes that this is a procedure that achieves compliance with both the letter and rationale of Principle 11 of the Code.

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 independent legal advice, where required.

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.

Any material transactions with related parties, which pose intrinsic potential conflicts of interests, require the approval of the Audit Committee, which is charged with ensuring that such transactions are necessary for the conduct of the Company’s business and are transacted on an arm’s length basis. Furthermore, such material transactions with related party transactions are subject to the Listing Rules regulating the approval process for transactions of such nature, including disclosure and shareholder approval requirements that may apply if certain conditions are met.

Save as stated below, the Directors are not aware of any potential conflicts of interest which could relate to their roles within the Company:

None of the Directors held any disclosable interest in any contracts or arrangements either subsisting at the end of the last financial year or entered during this financial year.

Principle 12: Corporate Social Responsibility

The Directors also seek to adhere to accepted principles of corporate social responsibility in their management practices of the Company in relation to the Group’s workforce and the community in general.

Over the period under review, the Group has supported several organisations engaged in charitable and philanthropic work.

The Group recognises that its workforce is one of its main assets, essential for achieving its objectives and sustained growth. The Group recognises the need to embed good governance in its day-to-day operations and, for this purpose, has introduced a Code of Conduct that establishes the general guidelines governing the conduct of all of its employees in fulfilling their functions and their commercial and professional relations.

C.      Non-compliance with the Code

The Directors believe that good corporate governance is a function of a mix of checks and balances that best suit the Company and its business. Accordingly, whilst there are best practices that can be of general application, the structures that may be required within the context of larger companies are not necessarily and objectively the structures for companies whose size and/or business dictate otherwise. It is in this context that the Directors have adopted a corporate governance framework within the Company that is designed to better suit the Company, its business, scale, and complexity, whilst ensuring proper checks and balances.

Taking the above into account and considering that the Code is not mandatory and that the provisions thereof may be departed from provided that reasonable and justifiable circumstances exist and are adequately explained, the Directors set out below the Code Provisions with which the Company does not comply and what are, in its view, a reasonable and justifiable basis for such departure from the recommendations set out in the Code relating to the composition of the Board.

Code Provision                                Explanation

D.      Internal controls

The key features of the Group’s system of internal controls are as follows:

Organisation

The boards of directors of the Company’s subsidiaries (that is, of PTL Limited, APCO Limited, Apco Systems Limited, and Ipsyon Limited) are subject to clear reporting lines and delegation of powers.

During the period under review (and until his resignation which took effect from the 28 February 2022), as the Company’s Chairman Prof. Juanito Camilleri occupied the post of Chairman of the board of directors of the Company’s subsidiary companies. With effect from 22 March, 2022, Mr. Keith Busuttil assumed the role of director and Chairman of the board of the subsidiaries.

The CEO and the Chief Financial Officer (CFO) are invited as observers at the meetings of the Board of Directors of the Company, acting as the liaison between the senior management of the Company and the Board of Directors; and (iii) the managing director or general manager (as applicable) of each operating subsidiary report directly to the CEO (save in the case of Apco Systems Limited, in which the CEO has assumed the role of managing director), ensuring a regular and open communication channel among members of the senior management team.

Control environment

The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all its operations. Although the Company has not appointed an internal auditor, the Board of Directors believes that the combination of checks and balances on the finance function of the Company, including the remit and responsibilities of the Audit Committee and the Governance and Risk Committee, the Company’s finance policies and procedures, as well as the Company’s statutory and legal obligations as a listed entity, provide adequate and suitable controls that are commensurate with the size and complexity of its business and operations. The Board of Directors will retain this matter under review in the coming year.

As part of the good governance best practices adopted by the Group, the Group implements various policies, procedures, systems and controls, designed to detect, prevent, and properly and effectively mitigate and manage legal, regulatory, business and commercial risks to which the Group is or may become exposed to.  In this respect, the Group has also adopted the following policies:

Each policy sets out clear reporting lines, to enable employees to disclose incidents to their superiors in a confidential and secure manner, without fear of reprisal. Policies are periodically reviewed and updated.

The Group has an appropriate organisational structure for financial planning, executing, controlling and monitoring business operations in order to achieve Group objectives. Measures taken include physical controls, segregation of duties and reviews by management and the external auditors. Lines of responsibility and delegation of authority are documented.

The Group and the subsidiary companies comprising it have implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. In particular, the Group adopts:

These policies, procedures, controls and systems are reviewed from time to time in order to reflect new operational and market realities, ensuring that the Group evolves in tandem with the latest developments in a timely manner, seeking pre-empting challenges and maximising potential.

The Group is committed to legal and regulatory compliance and devotes significant attention to promoting and ensuring acquiescence with the legal and regulatory framework affecting its various operations. Throughout the period under review, the Group had its own inhouse legal counsel. In addition the Company is able to engage third party legal experts where necessary through ongoing and, or ad-hoc arrangements, in order to provide sector-specific legal and advice and the necessary support and assistance, with the objective of properly mitigating the business and legal risks of undertaking its activities.

Risk identification and assessment

Group management is responsible together with each of the subsidiary companies’ management, for the identification and evaluation of key risks applicable to their areas of business. These risks are assessed on a continual basis and may be associated with a variety of internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements. The Governance and Risk Committee, the setting up of which transcends the principles set out in the Code, plays a central role in this risk assessment, monitoring and control process.

Information and communication

Group companies participate in periodic strategic reviews, which include consideration of long-term financial projections and the evaluation of business alternatives. 

Monitoring and corrective action

There are clear and consistent procedures in place for monitoring the system of internal financial controls. The Audit Committee plans to meet regularly during the year and, within its terms of reference as approved by the MFSA, reviews the effectiveness of the Group’s systems of internal financial controls. The Audit Committee receives reports from management and the external auditors.

E.      General meetings

Annual General Meeting (AGM)

The AGM is the highest decision-making body of the Company.

All shareholders registered in the shareholders’ register at the relevant registration record date, have the right to participate in the AGM and to vote thereat. A shareholder who cannot participate in at the AGM can be represented by proxy.

A general meeting is deemed to have been duly convened if at least twenty-one (21) days’ notice is given in writing to all persons entitled to receive such notice, which must specify the place, the day and the hour of the meeting, and in case of special business, the general nature of that business, and shall be accompanied by a statement regarding the effect and scope of any proposed resolution in respect of such special business. The notice period may be reduced to fourteen (14) days if certain conditions are satisfied. The quorum of Shareholders required is not less than fifty-one per cent (51%) of the nominal value of the issued Shares entitled to attend and vote at the meeting.

The agenda of the AGM will comprise of the ordinary business of the AGM, covering the presentation and approval of the Annual Report and Financial Statements, the declaration of dividends, election of Directors and the approval of their remuneration, the appointment of the auditors and the authorisation of the Directors to set the auditors’ fees, together with any special business specified in the notice calling the AGM.

Extraordinary general meetings (EGMs)

The Directors may convene an extraordinary general meeting whenever they think fit. In addition, any two members or more of the Company holding at least ten per cent (10%) of the shares conferring a right to attend and vote at general meetings of the Company, may convene an extraordinary general meeting.

The financial statements were approved and authorised for issue by the Board of Directors on 13 April 2023. The financial statements were signed on behalf of the Board of Directors by Mr. Keith Busuttil (Chairman and Director) and Mr. Stephen Paris (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Retained earnings comprise current and prior period results as disclosed in the statements of profit or loss and other comprehensive income.

Retained earnings include an amount of €475,515 (2021: € 410,050) relating to deferred tax assets which are undistributable in terms of the Companies Act, Cap. 386.

Statement of changes in equity – the Company

Retained earnings comprise current and prior period results as disclosed in the statements of profit or loss and other comprehensive income.

Retained earnings include an amount of €113,574 (2021: € 109,635) relating to deferred tax assets which are undistributable in terms of the Companies Act, Cap. 386.