AX Real Estate p.l.c - 485100D7B8FYJ8Q4CR24 - 2022

Registration number C 92104

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate

Financial Statements

For the year-ended 31 October 2022

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Contents

Page

Directors, Officers and Other Information

1

Directors’ Report

2 – 6

Statement of Directors’ Responsibilities

7

Corporate Governance – Statement of Compliance

8 – 11

Remuneration Report

12 – 13

Statements of Profit or Loss and Other Comprehensive Income

14

Statements of Financial Position

15

Statements of Changes in Equity

16 – 17

Statements of Cash Flows

18

Notes to the Financial Statements

19 – 53

Independent Auditor’s Report

54 – 62

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

1

Directors, Officers and Other Information

Registration:

AX Real Estate p.l.c. (formerly AX REAL ESTATE LIMITED) was registered in Malta as a Liability Company under the Companies Act, Cap. 386 of the Laws of Malta on 6 June 2019, with the registration number C 92104.

Directors:

Mr Angelo Xuereb

Ms Denise Xuereb

Mr Michael Warrington (appointed 23rd November 2021)

Dr Christian Farrugia (appointed 23rd November 2021)

Mr Joseph Lupi (appointed 23rd November 2021)

Mr Christopher Paris (appointed 23rd November 2021)

Mr Stephen Paris (appointed 23rd November 2021)

Secretary:

Dr David Wain

Registered office:

AX Group

AX Business Centre

Triq id-Difiza Civili

Mosta, MST 1741

Malta

Country of incorporation:

Malta

Company registration number:

C 92104

Auditors:

Ernst & Young Malta Limited

Regional Business Centre

Achille Ferris Centre

Msida, MSD 1751

Malta

Principal bankers:

Bank of Valletta p.l.c.

Labour Avenue

Naxxar

Malta

Legal adviser:

Dr David Wain

AX Group

AX Business Centre

Triq id-Difiza Civili

Mosta, MST 1741

Malta

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

2

Directors’ Report

The Directors present their annual report and the audited financial statements of AX Real Estate p.l.c. (formerly AX REAL ESTATE LIMITED) (“the Company”) and its subsidiaries (collectively, “the Group” or “the Estates Group”) for the year-ended 31 October 2022.

Principal activities

The Company acts as the holding company of the Estates Group within the AX Group p.l.c. group of companies (“the AX Group”). The Estates Group is involved in the letting of a diverse portfolio of real estate to subsidiary companies of AX Group p.l.c. and third parties.

Performance review

During 2021, the AX Group went through a reorganisation exercise, with the ultimate aim of consolidating the main property letting activities of the AX Group into one newly formed division under AX Real Estate p.l.c. (formerly AX REAL ESTATE LIMITED) and thus forming the Estates Group.

The Board resolved to approve the change in status of the Company from a Private Limited Liability Company to a Public Limited Liability Company also during 2021. As a result, the Company’s name was changed from AX Real Estate Limited to AX Real Estate p.l.c. with effect from 23 November 2021.

On 23 November 2021, the issued share capital of AX Real Estate p.l.c. was increased by EUR12,450,000 though a bonus issue of 99,600,000 ordinary ‘A’ shares of a nominal value of EUR0.125 each in favour of the-then Existing Shareholders, by virtue of the capitalisation of retained earnings. On 30 November 2021, the Company issued 150,000,000 ordinary ‘B’ shares of a nominal value of EUR0.125 each and EUR0.2084 per share in share premium in favour of AX Group p.l.c. by virtue of the capitalisation of a loan due to AX Group p.l.c. amounting to EUR50,000,000.

In January 2022, the Company obtained a sanction letter from a local credit institution for a Loan Facility amounting to EUR15,000,000 which has been provided to enable the Group to further support its initial costs related to the extension of the Suncrest Hotel in Qawra and for the redevelopment of the Verdala Hotel site in Rabat. The Loan Facility is repayable in full within 2 years from the date of the first drawdown.

In February 2022, the Company was listed on the Malta Stock Exchange, with 25% of the ordinary ‘A’ shares being taken up by the general public. Through this transaction, the Company raised EUR13,648,644. In conjunction with the share issue, the Company also issued EUR40,000,000 unsecured bonds redeemable in 2032. The general public subscribed to EUR18,354,600 bonds whilst the remaining EUR21,645,400 bonds were allocated to AX Group p.l.c. through the part conversion of the existing intra-group loan with the Company. These bonds are unsecured and subject to the terms and conditions in the prospectus dated 6 December 2021.

The Company received dividends of EUR10.8 million (2021: EUR17 million) from its subsidiaries and recognised an increase in the fair value of its investment property, the warehouses at Hardrocks Business Park and the Falcon House offices, of EUR1,033,961 (2021: EUR3,824,451). The Company’s profit before tax amounted to EUR10,411,386 (2021: EUR20,974,082).

The Group was formed in October 2021 following the reorganisation mentioned above. As a result, the performance of the Group in 2021 represented the results of the Company for the year and that of the subsidiaries as from the acquisition dates of when the Company acquired control of the subsidiaries (Note 4). On completion of the reorganisation, the Group entered into long-term lease agreements of 20 years with the respective operating companies of the AX Group responsible for the operation of the relevant properties.

The financial year ended 31 October 2022 represents the first full year results of the Group since it was formed. The Group generated EUR8,909,902 in revenue which consists of EUR8,155,774 in rental income from the lease of the Group’s investment properties and EUR754,128 in sales of property, representing the sale of the remaining apartments at Targa Gap Complex in Mosta. The new office development at Falcon House in Sliema as well as the remaining offices at AX Business Centre in Mosta were fully taken up by third parties during the year.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Directors’ Report – continued

Performance review – continued

The Group recognised an increase in the fair value of its investment properties of EUR2,787,449 (2021: a decrease of EUR23,720,268) reflecting new lease agreements entered into and changes to the existing lease agreements. The decrease in 2021 arose following the-then new lease agreements entered into by the Group since the property values are established through the discounting of rental income over the specific projected period and a discounted terminal value. Such movements in the fair value that arise from the restrictions imposed by the lease agreements with related parties within the AX Group are then fully reversed in the AX Group consolidated financial statements, where such investment properties are shown as own use properties under property, plant and equipment.

In February 2022, the Group obtained the full development permit for the redevelopment of the Suncrest Lido in Qawra. This was another important milestone for the Group to ensure that the Suncrest extension and Lido redevelopment (Phase 1 of the Qawra redevelopment) are delivered within the stipulated time frames. Works at Suncrest are progressing at a steady pace and it is expected that the hotel will reopen by May 2023 as planned. By the end of October, the foundations of the Verdala Hotel in Rabat were at an advanced stage.

Finance costs amounted to EUR3,288,902 (2021: EUR62,645), which mostly comprise interest due to related parties, interest on the above-mentioned bond and interest on bank loans.

The Group’s profit before taxation for the year amounted to EUR7,061,725 (2021: loss before tax for the period of EUR23,073,286).

As at year-end, the Group’s net assets stood at EUR142,032,510 (2021: EUR78,698,042). The increase is mainly attributable to the capitalisation of the loan due to AX Group p.l.c. amounting to EUR50,000,000 and the listing of new shares on the Malta Stock Exchange as mentioned above. The Group’s balance sheet remains sound with a gearing ratio of 43.6%.

As at date of reporting, all properties owned by the Group are fully taken up and leased for periods between 6 months to 20 years. In addition, the positive recovery experienced in the tourism industry augurs well for the Group in achieving the budgeted rental income from its hotels in the forthcoming year. Despite the positive trajectory projected, Directors and management are cautiously monitoring the situation to ensure a sustainable growth as well as a healthy performance.

Financial key performance Indicators

*The Group measures Adjusted Earnings before Interest, Tax, Depreciation and Amortisation (“Adjusted EBITDA”) as operating profit/(loss) after adjusting for gain/(loss) on revaluation of investment properties. This key performance indicator is not defined by International Financial Reporting Standards but can be directly calculated with reference to the Statement of Profit or Loss.

Adjusted EBITDA*

Operating profit/(loss)

Profit/(loss) after tax

Basic earnings/(loss) per share

Total equity and liabilities

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Directors’ Report – continued

Having made an appropriate assessment of going concern as discussed in Note 2.1 to these financial statements, the Directors, at the time of approving these financial statements, have determined that there is reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future and will meet its financial obligations as and when they fall due. For this reason, these financial statements have been prepared on a going concern basis.

Principal risks and uncertainties

The Company is exposed to risks inherent to its operation and can be summarized as follows:

1.Strategy risk

Risk management falls under the responsibility of the Board of Directors. The Board is continuously analysing its risk management strategy to ensure that risk is adequately identified and managed. The Audit Committee regularly reviews the risk profile adopted by the Board of Directors.

2.Operational risks

The Company’s revenue is mainly derived from rental income charged to related parties and hence the Company is heavily dependent on the performance of the AX Group. The Company regularly reviews the financial performance of the AX Group of companies to ensure that there is sufficient liquidity to sustain its operations.

3. Legislative risks

The Company is governed by a number of laws and regulations. Failure to comply could have financial and reputational implications and could materially affect the Company’s ability to operate. The Company has embedded operating policies and procedures to ensure compliance with existing legislation.

Financial risk management and exposures

Note 33 to the financial statements provides a detailed analysis of the financial risk to which the Company is exposed.

Dividends and reserves

A net interim dividend of EUR0.0125 per ordinary share equivalent to EUR3,429,209 was declared during the year. The Directors do not recommend payment of a final dividend.

As per the Registration Document dated 6 December 2021, it is the Group’s intention to pay out the majority of the Group’s distributable profits earned during the year, provided that a minimum balance of EUR1 million in cash is retained within the Group at any given time. The interim dividend referred to above was paid in July 2022 in line with the indication given in the above-mentioned registration document. The extent of any dividend distribution will depend upon, amongst other factors, the profit for the year, the Directors’ view on the prevailing market outlook, financial projections and forecasts, any debt servicing and repayment requirements, financial covenants and other restrictions contained in its facilities and other credit arrangements, the cash flows for the Company, working capital requirements, capital investment commitments and other investment opportunities and the requirements of the of the Companies Act, Cap. 386 of the Laws of Malta.

Events after the reporting period

In January 2023, Suncrest Hotels p.l.c., a subsidiary of the Company, obtained a sanction letter from a local financial institution for a Loan Facility amounting to EUR30,500,000 which has been provided to enable the Group to further support its costs related to the extension of the Suncrest Hotel in Qawra and Lido redevelopment. The Loan Facility bears interest of 4.25% p.a. and the outstanding loan amount is repayable over 15 years from the date of the first drawdown, inclusive of a 12-month moratorium period.

In January 2023, the Company declared an interim dividend amounting to EUR3,429,209, in line with the indication given in the above-mentioned registration document.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Directors’ Report - continued

In accordance with the Company’s Articles of Association, the present Directors remain in office. The Directors who held office during the year were as listed on page 1.

Information pursuant to Capital Markets Rule 5.64

The authorised share capital of the Company is EUR500,000,000 divided into 2,000,000,000 ordinary ‘A’ shares of a nominal value of EUR0.125 each, and 2,000,000,000 ordinary ‘B’ shares of a nominal value of EUR0.125 each. The issued share capital of the Issuer is EUR34,292,087.50 divided into 97,193,600 ordinary ‘A’ shares of a nominal value of EUR0.125 each, and 177,143,100 ordinary ‘B’ shares of a nominal value of EUR0.125 each, subscribed for, allotted and taken up as follows:

AX Group p.l.c.

-72,854,900 ordinary ‘A’ shares of a nominal value of EUR0.125 each, fully paid-up, and

-177,143,100 ordinary ‘B’ shares of a nominal value of EUR0.125 each, fully paid-up

AX Finance Limited

-2,000 ordinary ‘A’ shares of a nominal value of EUR0.125, fully paid-up,

Shares in public hands

-24,336,700 ordinary ‘A’ shares of a nominal value of EUR0.125, fully paid-up

The Company’s share capital is divided into two classes of shares, specifically, ordinary ‘A’ shares and ordinary ‘B’ shares. Ordinary ‘A’ shares and ordinary ‘B’ shares will entitle holders thereto the same rights, benefits and powers in the Company, save that ordinary ‘B’ shares shall not entitle their holders to vote on any matter at any general meeting of the Company, save in the following instances:

(i)in respect of a resolution which has the effect of reducing the capital of the Company;

(ii)in respect of a resolution for the winding up of the Company; and

(iii)in respect of a resolution which has the effect of directly affecting the rights and privileges of ordinary ‘B’ shareholders.

The shares are freely transferable in accordance with the rules and regulations of the Malta Stock Exchange applicable from time to time.

On the basis of the information available to the Company as at 31 October 2022, no shareholder other than AX Group p.l.c. has direct or indirect shareholding in excess of 5% of the Company’s total issued share capital.

Every shareholder owning twelve per cent (12%) of the issued share capital of the Company having voting rights or more shall be entitled to appoint one Director for each and every twelve per cent (12%) of the issued share capital of the Company having voting rights owned by such shareholder and such shareholder may remove, withdraw or replace such Director at any time. Any appointment, removal, withdrawal or replacement of a Director to or from the Board of Directors shall take effect upon receipt by the Board of Directors or the Company secretary of a notice in writing to that effect from such shareholder. Any shares of the Company having voting rights not utilised for appointment of Directors may be used to fill the remaining unfilled posts of Directors at the annual general meeting of the Company or at an extraordinary general meeting convened for the purpose of electing Directors.

The rules governing the appointment, election or removal of Directors are contained in the Company’s Articles of Association, Articles 84 to 87.3. A resolution approved by the shareholders in a general meeting in which shareholders holding at least seventy-five percent (75%) of the shares of the Company having voting rights are present is required to amend the Articles of Association.

The Chairman is appointed by the shareholder holding at least fifty percent (50%) of the shares of the Company having voting rights.

The powers and duties of Directors are outlined in Articles 82 to 121 of the Company’s Articles of Association. In terms of Article 22 of the said Articles of Association, the Company may, subject to the provisions of the Maltese Companies Act, 1995 acquire any of its shares.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Directors’ Report - continued

Information pursuant to Capital Markets Rule 5.64 - continued

It is hereby declared that, as at 31 October 2022, the Company is not party to any significant agreement pursuant to Capital Markets Rule 5.64.10 and 5.64.11.

Furthermore, the Board declares that the information required under Capital Markets Rules 5.64.5 and 5.64.7 are not applicable to the Company.

Statement of responsibility pursuant to the Capital Markets Rules of the Malta Financial Services Authority

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 Group and the Company as at 31 October 2022, and of the financial performance and the cash flows for the year then ended in accordance with the requirements of the International Financial Reporting Standards (IFRSs) as adopted by the EU and the requirements of the Companies Act, Cap. 386 of the Laws of Malta; and

In accordance with the Capital Markets Rules, the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that the Group and the Company face.

Ernst & Young Malta Limited have expressed their willingness to continue in office and a resolution for their re-appointment will be proposed at the Annual General Meeting.

Approved by the Board of Directors and signed on its behalf on 27 February 2023 by Mr Angelo Xuereb (Chairman) and Ms Denise Xuereb (Chief Executive Officer) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report 2022.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Statement of Directors’ Responsibilities

The Directors are required by the Companies Act (Chap. 386) to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the EU which give a true and fair view of the state of affairs of the Company at the end of each financial year and of the profit or loss of the Company for the year then ended. In preparing the financial statements, the Directors should:

-adopt the going concern basis unless it is inappropriate to presume that the Company will continue in business;

-select suitable accounting policies and apply them consistently;

-make judgements and estimates that are reasonable and prudent;

-account for income and charges relating to the accounting period on the accruals basis;

-value separately the components of asset and liability items; and

-report comparative figures corresponding to those of the preceding accounting period.

The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and which enable the Directors to ensure that the financial statements comply with the Companies Act (Chap. 386). This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. The Directors are also responsible for safeguarding the assets of the Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Corporate Governance – Statement of Compliance

Pursuant to Capital Markets Rule 5.97 issued by the Malta Financial Services Authority, AX Real Estate p.l.c. (formerly AX REAL ESTATE LIMITED) (“the Company”) is hereby reporting on the extent of its adoption of “the Code of Principles of Good Corporate Governance” (“the Code”) previously established by the Malta Stock Exchange. The Board has reviewed its Corporate Governance practices and an explanation of how the Principles of Good Governance have been applied is contained in this report.

The Company acts as the holding company of the Estates Group within the AX Group of Companies. The Company holds a number of warehouses and office buildings which it rents out. Its primary function is the funding of the Group as and when the demands of its business so require, and accordingly is economically dependent on the subsidiaries.

Although the adoption of the Code is not mandatory, the Board has considered the principles embodied in the Code and has noted the Code’s recommended practices aimed towards the fulfilment of these same principles. The Board has also taken into account the nature of the Company’s structure, business activities and operations and in the light of such considerations it has formulated the view that the Company was generally in compliance with the Code throughout the period.

The Board of Directors of AX Real Estate p.l.c. (“the Board”) is currently made up of seven Directors, three of whom are independent from the Company or any related Group Company. Pursuant to generally accepted practices, as well as the Company’s Articles of Association, the appointment of Directors to the Board is reserved exclusively to the Company’s shareholders.

The present Directors are Mr Angelo Xuereb, Ms Denise Xuereb, Mr Michael Warrington, Dr Christian Farrugia, Mr Joseph Lupi, Mr Christopher Paris and Mr Stephen Paris. Messrs Farrugia, Lupi and S. Paris are independent non-executive directors. In the opinion of the Board, the independent non-executive directors are free from any significant business, family or other relationship with the Group, its shareholders or its management that would create a conflict of interest such as to impair their judgement.

Mr Angelo Xuereb has been appointed as Chairman of the Board and Ms Denise Xuereb as the Chief Executive Officer of the Company.

The Board acknowledges its statutory mandate to conduct the administration and management of the Company. The Board’s functions are governed by Chapter 5 of the Capital Markets Rules and the Code of Corporate Governance for Listed entities.

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.

The Board met eight times during the year under review. The Board has a formal schedule of matters reserved to it for decision. Directors receive board and committee papers 10 days in advance of meetings and have access to the advice and services of the Company Secretary. Directors may, in the furtherance of their duties, take independent professional advice on any matter at the Company’s expense.

The Company, due to its continuous oversight and communication with its shareholders, has not established a performance evaluation committee chaired by a non-executive Director in order to carry out a performance evaluation of its role.

Mr Angelo Xuereb indirectly, through AX Group p.l.c., holds a controlling interest in the Company. Mr Michael Warrington holds the position of Group Chief Executive Officer with the majority shareholder AX Group p.l.c., whereas Ms Denise Xuereb holds directorship positions within other entities in the AX Group. Mr Christopher Paris holds a non-executive directorship position with AX Group p.l.c.

The Company’s management ensures that it provides Directors with relevant information to enable them to effectively contribute to Board decisions. All Directors have access to independent financial advice at the expense of the Company should they require.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Corporate Governance – Statement of Compliance – continued

Audit Committee

The Committee is chaired by Mr Stephen Paris, and its other members are Dr Christian Farrugia and Mr Christopher Paris. As described above, all three Directors forming the audit committee are non-executive Directors and the majority of its members are independent from the Company or the AX Group of Companies. Mr Stephen Paris is considered by the Board to be competent in accounting and, or auditing in terms of the Capital Markets Rules.

The Company Secretary acts as secretary to the committee which also receives the assistance of the Group Chief Executive Officer; Ms Denise Xuereb, and the Chief Financial Officer; Mr Joseph Borg. The Audit Committee met six times during the year under review.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee (the “RemNom Committee”) is composed of Dr Christian Farrugia (Chairperson), Mr Michael Warrington and Mr Joseph Lupi. Dr Farrugia and Mr Lupi are independent non-executive Directors.

In its function as remuneration committee, the RemNom Committee is charged with the oversight of the remuneration policies implemented by the Group with respect to its senior management. Its objectives are those of determining a remuneration policy aimed to attract, retain and motivate directors, whether executive or non-executive, as well as senior management with the right qualities and skills for the benefit of the Company. It is responsible for making proposals to the Board on the individual remuneration packages of directors and senior management 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 of Directors candidates for the position of director, including persons considered to be independent in terms of the Capital Markets Rules, whilst also taking into account any recommendation from shareholders. It is to periodically assess the structure, size, composition and performance of the Board of Directors and make recommendations to the Board of Directors regarding any changes, as well as consider issues related to succession planning. It is also entrusted with reviewing the Board of Directors’ policy for selection and appointment of senior management.

The RemNom Committee was formed during the year and had not met by the reporting date. The Directors and Executives were appointed prior to the listing of the Company and prior to the formation of the RemNom Committee. Their remuneration for the year had no variable components. No nominations were received from the Company’s members for directors’ nomination by the deadline of the 17th June 2022. The Directors were all re-appointed at the Annual General Meeting held during the year.

Given that every Director retires from office at the Annual General Meeting, the Company does not consider it necessary to have in place a succession policy. However, the recommendation to have in place such a policy will be kept under review.

Dealings by Directors and Senior Officers

Conscious of its responsibility for monitoring dealings by Directors and senior officers in the Company’s securities, the Board approved a Code of Conduct for Securities Transactions by Directors, Executives and Employees in compliance with Capital Markets Rules 5.102 to 5.116. The Code provides guidance to the Company’s officers and serves as a minimum standard of good practice when dealing in the Company’s securities. Each Director has declared their interest in the share capital and debt securities of the Company to the other members of the Board. In accordance with the provisions of the Articles of Association of the Company, any actual, potential or perceived conflict of interest must be immediately declared by a director to the other members of the Board. In the event that the Board perceives such interest to be conflicting with the Director’s duties, the conflicted director is required to leave the meeting and both the discussion on the matter and the vote, if any, on the matter concerned, are conducted in the absence of the conflicted director.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Corporate Governance – Statement of Compliance – continued

Internal Control

The Board is ultimately responsible for the Company’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve objectives, and can provide only reasonable, and not absolute, assurance against material misstatement or loss.

A policy is in place, laying down the minimum required reports that should be made available to the Board in order to keep it informed in a structured and systematic manner on the operational and financial performance of the Company.

Risk Identification

Management is responsible for the identification and evaluation of key risks applicable to their areas of business. Risks 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 Board is responsible to review its risk management policies and strategies and oversee their implementation to ensure that identified operational risks are properly assessed and managed.

Relations with Shareholders and with the Market, including Institutional Shareholders

The Company recognises the importance of maintaining a dialogue with its stakeholders to ensure that its strategies and performance are understood. The Company communicates with bondholders and shareholders by way of the Annual Report and Financial Statements and by publishing its results on a six-monthly basis during the year, and through company announcements to the market in general.

The Board has also implemented an Investor Relations Program, which aims at giving Bond and Equity holders rewards to be used within the AX Group to foster loyalty. This program, which is managed by AX Group p.l.c. executives, includes the issue of the AX Investors Loyalty Card and the periodic dissemination of the AX Group Newsletter.

The Board endeavours to protect and enhance the interests of both the Company and its shareholders, present and future. The Chairman ensures that the views of shareholders are communicated to the Board as a whole. The Board ensures fair and equal treatment towards holders of each class of capital and ensures that any decisions take into account the interests of future shareholders as well.

The Company also communicates with its shareholders through the Company’s Annual General Meeting (“the AGM”).

General Meetings

The manner in which the general meeting is conducted is outlined in Articles 71-81 of the Company’s Articles of Association, subject to the provisions of the Companies Act.

The Annual General Meeting of the shareholders shall be convened within seven months of the end of the financial year. During the AGM the members will confirm the annual financial statements, the directors’ and auditors’ reports for the year, decide on any dividends recommended by the board, if necessary; elected directors, appoint auditors and set their remuneration. A presentation will be given to the shareholders present showing how the company operated in the light of prevailing economic and market conditions, and an assessment on future prospects will be given. The Chairman arranges for all directors to attend the Annual General Meeting.

In addition, and in terms of Article 73 of the Articles of Association of the company, the board of directors may convene an extraordinary general meeting. If at any time there are not in Malta sufficient Directors capable of acting to form a quorum of the Board, the Directors in Malta capable of acting, or if there are no Directors capable and willing to act, any Member or Members of the Company holding in aggregate not less than five per cent (5%) of the Equity Securities conferring a right to attend and vote at general meetings of the Company, may convene an extraordinary general meeting in the same manner, as nearly as possible, as that in which Meetings may be convened by the Directors.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Corporate Governance – Statement of Compliance – continued

General Meetings – continued

Adequate notice of general meetings must be given to shareholders as outlined in Articles 74 of the company’s Articles of Association.

All shareholders registered in the Shareholders’ Register on the Record Date as defined in the Capital Markets Rules have the right to attend, participate and vote in the general meeting. A shareholder who cannot participate in the general meeting can appoint a proxy by written or electronic notification to the company.

Corporate Social Responsibility

The Company is conscious of its responsibility towards the society in which it operates. It promotes environmentally friendly measures such as the reduction in the Company’s carbon footprint as well as encourages its employees to lead a healthy and active lifestyle.

Furthermore, the AX Foundation, which is the charitable arm of the Group, is devoted to supporting people living with invisible disabilities, with its primary focus being on the autism spectrum. AX Foundation was originally founded in 2006 to provide support to people who are going through social, mental or physical difficulties. Along the years AX Foundation has supported numerous other NGOs.

Approved by the Board of Directors on 27 February 2023 and were signed on its behalf by Mr. Angelo Xuereb (Chairman) and Ms. Denise Xuereb (Chief Executive Officer) as per Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report 2022.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Remuneration Report

Remuneration Policy

The Remuneration Committee have prepared a Remuneration Policy that will be submitted for shareholders’ approval during the upcoming AGM later this year. The proposed Remuneration Policy will seek to deliver and retain a fair and transparent remuneration for the Board of Directors, including the Company Secretary and the incumbent Chief Executive Officer and Chief Financial Officer of the Company (the ‘Executives’) with a view towards aligning the best interests of all stakeholders whilst safeguarding the interests and sustainability of the Company.

In order to achieve these strategic objectives, the proposed Remuneration Policy will provide a remuneration framework that defines the principles and guidelines to be applied in determining the remuneration to be paid to the Board and the Executives.

In general, to establish remuneration appropriately the RemNom Committee shall be guided by the extent of responsibilities and experience of the individual concerned.

The proposed Remuneration Policy, shall establish an appropriate remuneration to the individual Directors and Executives and shall consider the following factors:

I.The expectation that Directors and Executives are to be appropriately dedicated to their role;

II.The time, commitment and dedication required by Directors and Executives in accordance with their duties and the affairs of the Company; and

III.The provision of a fair, attractive, and competitive remuneration, benefits, and conditions, that are commensurate to the level of experience, expertise, qualifications, professional status and responsibilities of the appointed Directors and Executives.

The emoluments payable to the Board refer to the total fixed remuneration of the Directors.

In order to manage conflict of interest, the individual Directors appointed as members of the RemNom Committee shall not be present when his/her appointment, remuneration or other matters relating to him/her are being discussed by the RemNom Committee. If the member absenting himself/herself from such discussions relating to him/her is the Chairperson, another member of the RemNom Committee shall chair the meeting during the Chairperson’s absence.

The RemNom Committee shall on annual basis ensure that the said Emolument remains commensurate with the performance of the individual concerned, as well as market conditions.

The duration of service of Directors is regulated by the Articles of Association of the Company. Directors are appointed to the Board of Directors by the shareholders at a general meeting and shall hold office until the next general meeting. The appointment of Executives is subject to employment laws and regulations. The engagement of both Directors and Executives are governed by a written engagement contract clearly setting out the duties, roles, responsibilities and remuneration.

Remuneration paid to Directors

The proposed Remuneration Policy shall regulate the aggregate emoluments of all Directors in any one financial year, and any increases thereto which shall be such amount as may from time to time be determined by the Company in a general meeting.

Furthermore, the remuneration of the Directors is a fixed amount per annum and does not include any variable component relating to profit sharing, share options or pension benefits. The Directors’ aggregate annual remuneration for the financial year under review, as approved by the Board, amounted to EUR175,000. This included EUR46,667 of directors’ fees relating to the previous financial year. For the purposes of clarity, although several Directors sit on various committees of the Company, such Directors did not receive extra remuneration for occupying such roles during the year under review. It is the shareholders, in terms of the memorandum and articles of association of the Company, who determine the maximum annual aggregate emoluments of the Directors by resolution at the annual general meeting of the Company. The maximum aggregate amount fixed for this purpose during the last annual general meeting was EUR200,000.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022

Remuneration Report - continued

Remuneration paid to Directors – continued

The following table provides a summary of the remuneration for the year ended 31 October 2022 for each individual Director:

Fixed Remuneration

Variable Remuneration

Remuneration paid to Executives

The aggregate remuneration paid to executives of the Group, other than the Chief Executive Officer who is also an Executive Director, amounted to EUR120,000 during the year under review. In addition to the fixed remuneration, the total compensation received by the Executives may include a discretionary variable remuneration based on company performance as well as the individual’s performance. However, there was no variable remuneration paid to the executives during the year.

The average employee remuneration (excluding Directors and Executives) on a full-time equivalent basis amounted to EUR31,400 during the year under review.

FY2022 represents the first full year results of the Group since it was formed, thus affecting the comparability of such figures as disclosed in the notes to these financial statements.

There were no termination of Directors or executives during the year and therefore no compensation paid for any such terminations.

The contents of the Remuneration Report have been reviewed by the external Auditors to ensure that it conforms with the requirements of Appendix 12.1 to Chapter 12 of the Capital Market Rules.

Approved by the Board of Directors on 27 February 2023 and were signed on its behalf by Mr. Angelo Xuereb (Chairman) and Ms. Denise Xuereb (Chief Executive Officer) as per Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report 2022.

AX REAL ESTATE P.L.C.

(formerly AX REAL ESTATE LIMITED)

Annual Report and Consolidated and Separate Financial Statements for the year-ended 31 October 2022