Directors’ Report

Statement of Directors’ Responsibilities

Statement of the Directors Pursuant to Listing Rule 5.68

Corporate Governance – Statement of Compliance

Income Statement

Statements of Financial Position

Statements of changes in equity of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

Independent Auditor’s Report

Directors’ Report

The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2021.

Principal activities

LifeStar Holding p.l.c. (the “Company”) is the holding and financing company of the LifeStar Group, which consists of the Company and its subsidiaries, hereinafter referred to as the “LifeStar Group” or “the Group” . The Company has raised finance for the LifeStar Group, through the issue of equity and bonds listed on the Malta Stock Exchange as well as a facility with Bank of Valletta.

Review of business

2021 proved to be another uncertain year as the Covid-19 pandemic has continued to impact businesses globally. While many hoped that th e pandemic would come to an end, the development of new variants continued to impact all sectors globally. Like many businesses, the Company has learnt to operate within this reality and the circumstances obtained positive results. In fact, LifeStar Holding p.l.c. generated a total comprehensive profit of €0.1 million (2020: €0.3 million).

The Company’s assets decreased by 20.4% (2020: increased by 14.4 %) from €35.7 million as at 31 December 2020 to €28.4 million as at 31 December 2021 The Company’s net asset value at end of the year stood at €16.1 million (2020: €17.7 million).

During the year, the Group continued to undertake restructuring and transformation activity to align the business operations with the Board’s approved strategy and to strengthen its capital based. This was achieved by implementing a holistic strategic plan, designed to permanently resolve various legacy issues that continue to negatively impact the LifeStar Group and to support the consolidation and future growth of the Group. Furthermore, on 4 May 2021 the Malta Financial Services Authority approved an offer for sale of 18,518,519 ordinary shares in LifeStar Insurance p.l.c. at an offer price of €0.54 per share (‘the Share Offer’) and the offer of 6,570,000 ordinary shares in LifeStar Insurance p.l.c. to its shareholders in exchange for their ordinary shares in LifeStar Holding p.l.c. at an exchange ratio of 1 LifeStar Holding p.l.c. share to 1 share in LifeStar Insurance p.l.c. (‘the Exchange Offer). From the Share Offer, 10,854,000 shares (for a total value of €5,861,160) were received by LifeStar Insurance p.l.c., whilst 5,897,951 shares from the Exchange Offer (for a total value of €3,184,894) were received by LifeStar Insurance p.l.c. The Group also redeemed in full the 5% Unsecured Bond in June 2021. Furthermore, on 6 May 2021, the Malta Financial Services Authority approved the issue of €10,000,000 4% Subordinated Bonds due 2026-2031 issued by LifeStar Insurance p.l.c. (the “Subordinated Bonds”). A total of 24,313 Subordinated Bonds (for a total value of €2,431,300) were received by LifeStar Insurance p.l.c.

Future outlook

Following the successful implementation of the Company’s holistic strategic plan, the Group will continue exploring possible ways to strengthen its capital base, whilst focusing on achieving positive results for the years to come. It is also actively seeking new opportunities to further strengthen its revenue generating capacity which could also involve ventures beyond Malta’s shores.

Principal risks and uncertainties

The Company’s principal risks and uncertainties are further disclosed in Note 1 – Critical accounting estimates and judgements and Note 2 – Management of insurance and financial risk.

Financial risk management

Note 2 to the financial statements provides details in connection with the Company’s use of financial instruments, its financial risk management objectives and policies and the financial risks to which it is exposed.

Results and dividends

The Directors do not recommend the declaration of a dividend (2020: €Nil).

Events after the financial reporting date

Towards the end of February 2022, the armed conflict between the Russian Federation and Ukraine set in motion a chain of diplomatic efforts and other major geopolitical events which led a number of western nations, including the EU institution and the United States government, to impose a number of sanctions on Russia and Belarus. These current sanctions in place include several restrictive measures of a direct financial nature that are having a significant direct impact on the broad economy of the invading nations, as well as resulting in a downgrading of their sovereign and private debt by international credit rating agencies.

The consequences of these restrictive measures are however also expected to have a significant impact on the economies of the countries implementing such trade restrictions, with a spill-over on the world economy, as uncertainty and market volatility remain high across all industries with increasing tensions and rhetoric on both sides. The cost of doing business is undoubtedly set to rise further, following the initial COVID-19 shocks on the global economy seen in the last couple of years, as the ongoing conflict in Ukraine and COVID-related measures continue to rock global supply chains. The economic magnitude of this will depend on how the conflict unfolds. Different scenarios present different economic outcomes in terms of impact magnitude and on the eventual recovery.

The Company is not expected to be negatively impacted by the ongoing conflict in Ukraine because the Company’s business is predominantly in Malta. However, should individuals continue to refrain from travelling due to the ongoing conflicts as well as the continuous spikes in COVID-19 numbers, the Company’s revenue may be impacted as travel insurance may decrease and the financial investments of the Group may be negatively impacted. The Directors continue to actively monitor the situation, as well as all developments taking place internationally in order to take any action that might be necessary in the eventuality that developments in the conflict start to impact the Company’s turnover and business activity.

Going concern

The Directors, as required by Capital Markets Rule 5.62, have considered the Company’s operating performance, the statement of financial position at year end, as well as the business plan for the coming year, and they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.  For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Directors

The Directors of the Company who held office during the period were:

Paolo Catalfamo (Chairman)

Joseph Schembri (Senior Independent Director)

Joseph Del Raso

Cinzia Catalfamo

Gregory Eugene McGowan

In terms of the Company’s Articles of Association, Directors elected at an Annual General meeting shall hold office until the next subsequent Annual General Meeting, unless they resign or are removed from office. On the lapse of such term, a Director shall be eligible for re-appointment.

Remuneration Committee and Corporate Governance

The Board of Directors has set up an Audit and Risk Committee, as well as a Remuneration and Nominations Committee. The Board of the Company will be submitting to the Shareholders at the next Annual General Meeting the Remuneration Report for the financial year ending 31 December 2021 (the “Reporting Period”). The Remuneration Report is drawn up in accordance with, and in fulfilment of the provisions of Chapter 12 of the Capital Markets Rules issued by the Malta Financial Services Authority (“Capital Markets Rules”) relating to the Remuneration Report and Section 8A of the Code of Principles of Good Corporate Governance (Appendix 5.1 of the Capital Market Rules) regarding the Remuneration Statement.  

The Remuneration Report provides a comprehensive overview of the nature and quantum of remuneration paid to the individual Directors and members of Executive Management during the Reporting Period and details how this complies with the Company’s Remuneration Policy. The Remuneration Report is intended to provide increased corporate transparency, increased accountability and a better shareholder oversight of the remuneration paid to Directors and members of Executive Management. The contents of the Remuneration Report have been reviewed by the Company’s Auditors to ensure that the information required in terms of Appendix 12.1 of the Capital Market Rules has been included.

The Company’s arrangements for corporate governance are reported in the ‘Corporate Governance - Statement of Compliance’ section.

Statement of Directors’ responsibilities

The Directors are required by the Companies Act (Cap. 386 of the Laws of Malta) 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 are responsible for:

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 (Cap. 386 of the Laws of Malta). This responsibility includes designing, implementing and maintaining such internal control as the Directors determine necessary to enable the preparation 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 including by taking reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, the Directors are required to ensure that the Group companies have, at all times, complied an observed the various requirements, more specifically that LifeStar Insurance p.l.c. adhered to the provisions and requirements of the Insurance Business Act (Cap. 403 of the Laws of Malta); that LifeStar Health Limited has, at all times, complied with and observe the various requirements of the Insurance Distribution Act (Cap. 487 of the Law of Malta); and that Global Capital Financial Management Limited was in compliance of the Investment Services Act (Cap. 370 of the Laws of Malta).

Auditors

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.

Information pursuant to Capital Markets Rule 5.64

The Company has an authorised share capital of €58,234,400 divided into 200,000,000 ordinary shares with a nominal value of €0.291172 each (2020: €58,234,400). The issued share capital of the Company is € 8,735,160 (2020: €8,735,160) divided into 30,000,000 ordinary shares with a nominal value of €0.291172 each. The issued shares of the Company consist of one class of ordinary shares with equal voting rights attached. The shares carry equal rights to participate in any distribution of dividends declared by the Company. Each share shall be entitled to one vote at the meetings of the shareholders. The shares are freely transferable in accordance with the rules and regulations of the Malta Stock Exchange, as applicable from time to time, and in terms of the provisions of the Articles of Association of the Company.

The Directors confirm that, as at 31 December 2021, Investar p.l.c. (52.60%), GlobalCapital Financial Management Limited as nominee for Client accounts (23.74%) and LifeStar Holding plc (19.7%) held a shareholding in excess of 5% of the total issued share capital.

The Nominations and Remuneration Committee of the Board of Directors currently consists solely of Independent Non-Executive Directors . It has the responsibility to assist and advise the Board of Directors on matters relating to the remuneration of the Board of Directors and senior management, in order to motivate and retain executives and ensure that the Company is able to attract the best talents in the market in order to maximise shareholder value.

The rules governing the appointment and replacement of the Company’s Directors are contained in Articles 73 to 81 of the Company’s Articles of Association. Directors of the Company shall be elected on an individual basis by ordinary resolution of the Company in general meeting. The said ordinary resolution shall be determined and decided by means of a poll. The Company may, by an ordinary resolution of the members entitled to vote at a general meeting of the Company, remove any Director before the expiration of his term of office.

The Directors can only issue and allot shares up to such maximum amount not exceeding the authorised share capital of the Company, as may be authorised by ordinary resolution of the general meeting in accordance with section 85 of the Companies Act. This and other powers vested in the Company’s Directors are confirmed in Articles 82 to 99 of the Company’s Articles of Association.

The Company is the holder of 19.7% of its own shares, which do not hold any voting rights.

It is hereby declared that as at 31 December 2021, the information required under Capital Markets Rules 5.64.4, 5.64.5, 5.64.7, 5.64.10 and 5.64.11 is not applicable to the Company.

Information pursuant to Capital Markets Rule 5.70.1

As at 31 December 2019, the Company had a loan from the ultimate parent company (Investar p.l.c.). This loan was repaid in full during FY2020. The Company made advances to Investar p.l.c. during the year which were still outstanding as at 31 December 2021. Furthermore, during the year the Company also entered into a loan agreement with Lifestar Insurance plc. Other than these, there were no other material contracts to which the Company, or its subsidiary was a party, and in which anyone of the Company’s Directors was directly or indirectly interested.

Information pursuant to Capital Markets Rule 5.70.2

The Company Secretary is Dr Clinton Calleja and the registered office is LifeStar Holding p.l.c., Testaferrata Street, Ta’ Xbiex, Malta.

Statement by the Directors pursuant to Capital Markets Rule 5.68

We, the undersigned, declare that to the best of our knowledge, the financial statements prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its subsidiaries included in the consolidation taken as a whole, and that this Director’s Report includes a fair review of the performance of the business and the position of the Company and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board of Directors on 29 April 2022 by Prof. Paolo Catalfamo (Chairman) and Joseph  Schembri (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Corporate Governance – Statement of Compliance

Corporate Governance – Statement of Compliance

Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority, the Company whose equity securities are listed on a regulated market should endeavour to adopt the Code of Principles of Good Corporate Governance (“the Code”) as contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules.  In terms of the Capital Markets Rules, the Company is hereby reporting on the extent of its adoption of the Code.

The Company acknowledges that the Code does not prescribe mandatory rules but recommends principles so as to provide proper incentives for the Board of Directors (“the Board”) and the Company’s management to pursue objectives that are in the interests of the Company and its shareholders.  Good corporate governance is the responsibility of the Board, and in this regard the Board has carried out a review of the Company’s compliance with the Code during the period under review, and hereby provides its report thereon.

As demonstrated by the information set out in this statement, the Company believes that during the reporting period, it has been in full compliance with the Code.

Compliance with the Code

Principles one and four: The Board

The Directors report that for the financial year under review, the Directors have provided the necessary leadership in the overall direction of the Company and have performed their responsibilities for the efficient and smooth running of the Company with honesty, competence and integrity. The Company is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations.

Directors, individually and collectively, are of appropriate calibre, with the necessary skill and experience to assist them in providing leadership, integrity and judgment in directing the Company towards the maximisation of shareholder value and to make an effective contribution to the leadership and decision-making processes of the Company as reflected by the Company’s strategy and policies. Members of the Board are selected on the basis of their core competencies and professional background so as to ensure the continued success of the Company.

All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company. The Board on its delegates are accountable for the Company’s performance towards shareholders and other relevant stakeholders.

The responsibilities of the Board also involve the oversight of the Company’s internal control procedures and financial performance, and the review of business risks facing the Company, in order to ensure that these are adequately identified, evaluated, managed and minimised. The activities of the Board are exercised in a manner designed to ensure that it can effectively supervise the operations of the Company and protect the interests of the shareholders and stakeholders. .

All directors are required to:

The Board has established an Audit and Risk Committee in terms of the Capital Markets Rules 5.117 – 5.134A in order to assist with the monitoring of the Company’s present and future operations, threats and risks in the external environment and current and future strengths and weaknesses. The Audit and Risk Committee ensures that the Company has the appropriate policies and procedures in place to ensure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical standards. The Audit and Risk Committee has a direct link to the Board and is represented by the Chairman of the Audit and Risk Committee in all Board meetings.

Principle two: Chairman and Chief Executive Officer

Due to the structure of the Company and the nature of its operations, the Company does not employ a Chief Executive Officer (CEO) at Company level.

Prof. Paolo Catalfamo occupies the post of Chairman and is responsible to:

Joseph C. Schembri is appointed as the Senior Independent Director of the Company to act a reference and coordination point for the requests and contributions of non-executive directors and, in particular, those who are independent.

The regulated operating subsidiaries of the Company, LifeStar Insurance plc, LifeStar Health Limited and  GlobalCapital Financial Management Limited each have a CEO or Managing Director. The CEO of LifeStar Insurance plc is Cristina Casingena. The Managing Director of LifeStar Health Limited is Adriana Zarb Adami. In the case of GlobalCapital Financial Management Limited, the Managing Director is Konrad Camilleri.

Principle three: Composition of the Board

In accordance with the provisions of the Company’s Articles of Association, the appointment of Directors to the Board is exclusively reserved to the Company’s shareholders, except in so far as appointment is made to fill a casual vacancy on the Board, and which appointment would expire at the Company’s Annual General Meeting following appointment.  Any vacancy among the Directors may be filled by the co-option of another person to fill such vacancy.  Such co-option shall be made by the Board of Directors.

The Board has the overall responsibility for the activities carried out within the Company and the Group. The Board understands and fully appreciates the business risk issues and key performance indicators affecting the ability of the Company to achieve its objectives.

The Board is composed of five (5) Directors (one (1) of whom is the Chairman). All Directors are non-executive Directors.

For the purpose of Capital Markets Rules 5.118 and 5.119, Mr Joseph C Schembri, Mr Joseph Del Raso and Mr Gregory Eugene McGowan are the non-executive Directors which are deemed independent. The independent non-executive Directors constitute a majority of the Board. Mr Joseph C Schembri was confirmed in his position as non-executive Senior Independent Director of the Company. Each director is mindfulof maintaining independence, professionalism and integrity in carrying out his duties, responsibilities and providing judgement as a director of the Company.

The Board considers that none of the independent directors of the Company:

Each of the directors hereby declares that he undertakes to:

The Board of Directors is currently chaired by Prof. Paolo Catalfamo. The Company Secretary (Dr. Clinton Calleja) attends all meetings and takes minutes. Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good information flows between the Board of Directors and its Committees and between senior management and the Directors, as well as ensuring that the Board of Directors’ procedures are followed. The Company’s Articles of Association also provide for adequate controls and procedures in so far as the treatment of conflicts of interest during Board of Directors meetings is concerned.

The following Directors served on the Board during the period under review:

Prof. Paolo Catalfamo                                                       Non-executive Director and Chairman

Mr. Joseph Schembri                                                        Senior, Independent, Non-executive Director

Mr Joseph Del Raso                                                          Independent, Non-executive Director

Mr. Gregory Eugene McGowan                                        Independent, Non-executive Director

Ms. Cinzia Catalfamo                                                        Non-executive Director

Principle five: Board Meetings

The Directors meet regularly to dispatch the business of the Board. The Directors are notified of forthcoming meetings by the Company Secretary with the issue of an agenda and supporting Board papers, which are circulated in advance of the meeting. Minutes of Board meetings are taken recording inter alia attendance, and resolutions taken at the meeting. The Chairman ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all Directors every opportunity to contribute to relevant issues on the agenda. The agenda for the meeting seeks to achieve a balance between long-term strategic and short-term performance issues.

The Board of Directors meets in accordance with a regular schedule of meetings and reviews and evaluates the Group’s strategy, major operational and financial plans, as well as new material initiatives to be undertaken by the Group. The Board of Directors meets formally at least once every quarter and at other times on an ‘as and when’ required basis.

During the period under review, the Board of Directors met fifteen (15) times . The following Directors attended Board meetings as follows:

Principle six: Information and Professional development

The Company ensures that it provides Directors with relevant information to enable them to effectively contribute to Board decisions. The Company Secretary advises the Board through the Chairman on governance matters.

Directors may, in the course of their duties, take independent professional advice on any matter at the Company’s expense. The Company will provide for additional individual Directors' training on a requirements basis.

Principle seven: Evaluation of Board of Directors performance

The Chairman of the Board informally evaluates the performance of the Board members, which assessment is followed by discussions within the Board.  Through this process, the activities and working methods of the Board and each committee member are evaluated.  Amongst the things examined by the Chairman through his assessment are the following: how to improve the work of the Board further, whether or not each individual member takes an active part in the discussions of the Board and the committees; whether they contribute independent opinions and whether the meeting atmosphere facilitates open discussions. Under the present circumstances 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 furthermore also under the scrutiny of the shareholders. The self-evaluation of the Board has not led to any material changes in the Company’s governance structures and organisations.

Principle eight: Committees

Audit and Risk Committee

The Board of Directors delegates certain responsibilities to the Audit Committee, the terms of reference of which reflect the requirements stipulated in the Capital Markets Rules. As part of its terms of reference, the Audit Committee of the Company has the responsibility to, if required, vet, approve, monitor and scrutinise related party transactions falling within the ambits of the Capital Markets Rules, and to make its recommendations to the Board of Directors on any such proposed related party transactions. The Audit Committee also assists the Board of Directors in monitoring and reviewing the Group’s financial statements, accounting policies and internal control mechanisms in accordance with the Committee’s terms of reference.

The primary purpose of the Audit Committee is to protect the interests of the Company`s shareholders and assist the Directors in conducting their role effectively so that the company’s decision-making capability and the accuracy of its reporting and financial results are maintained at a high level at all times. In the performance of its duties the Audit Committee calls upon any person it requires to attend meetings.  The external auditors of the Company are invited to attend all relevant meetings. The internal auditors are also invited to attend meetings of the Audit Committee and report directly any findings of their audit process.  The head of legal and compliance, as well as the compliance officers of the regulated subsidiaries are invited to attend meetings of the Audit Committee to present their compliance reports. In addition, the Audit Committee invites the Chief Financial Officer and other members of management to attend Audit Committee meetings on a regular basis and as deemed appropriate.

The Audit Committee also approves and reviews the Group’s Compliance Plan and Internal Audit Plan prior to the commencement of every financial year and monitors the implementation of these plans. The remit of the Audit Committee was also extended to include Group risk management, and it is also referred to as the Audit and Risk Committee.

During the financial year under review, the Audit Committee held twenty one (21) meetings.

The Audit Committee was chaired by Joseph Schembri, who is an auditor by profession, and is considered to be an independent non-executive member possessing the necessary competence in auditing/accounting as required in terms of the Capital Markets Rules. All the members that served on the Audit Committee were deemed by the Board of Directors to be Independent Non-Executive Directors, and the Board of Directors felt that as a whole the Audit Committee had the necessary skills, qualifications and experience in satisfaction of the Capital Markets Rules.

The terms of reference of the Audit Committee include, inter alia , its support to the Board of the Company in its responsibilities in dealing with issues of risk management, control and governance and associated assurance. The Board has set formal terms that establish the composition, role , function, the parameters of the Audit Committee’s remit as well as the basis for the processes that it is required to comply with.

The Audit Committee is expected to deal with and advise the Board on the following matters:

In addition, the Audit Committee also has the role and function of scrutinising and evaluating any proposed transaction prior to be entered into by the Company and a related party, to ensure that the execution of any such transaction is at arm's length and on a commercial basis and ultimately in the best interests of the Company. The Audit Committee oversees the financial reporting of the Company and ensures the process takes place in a timely manner. The Audit Committee is free to question any information that may seem unclear.

Nominations and Remuneration Committee

The Board of Directors has appointed a Nominations and Remuneration Committee, which fulfils the joint-function of a Nominations Committee as well as a Remuneration Committee. In fulfilling the nominations’ function, the Committee is responsible for recommending Directors for election by shareholders at the Annual General Meeting, for planning the structure, size, performance and composition of the Group’s subsidiary boards, for the appointment of senior executives and management and for the development of a succession plan for senior executives and management.

Remuneration Function

In the fulfilment of its remuneration matters oversight, the Committee makes proposals to the Board on the remuneration policy for Directors and senior executives, makes proposals to the Board on the individual remuneration to be attributed to executive Directors, ensuring that they are consistent with the remuneration policy adopted by the Company and the evaluation of the performance of the Directors concerned,  as well as approves the remuneration packages of senior executives and management.

During the financial year under review, the Nominations and Remuneration Committee met once and was composed of Joseph Del Raso as Chairman, and Joseph Schembri and Gregory Eugene McGowan as members.

Nominations Function

The Remuneration and Nominations Committee is also responsible for making recommendations for appointment to the Board and for reviewing in order to ensure that appointments to the Boards are conducted in a systematic, objective and consistent manner. It is also responsible for the review of performance of the Company’s Board members and committees, the appointment of senior executives and management and the development of a succession plan for senior executives and management.

Executive Management Committees

The Executive Management Committee manages the Group’s day-to-day business and the implementation of the strategy established by the Board of Directors. The Executive Management Committee as at 31 December 2021 was composed of the Managing Directors of each of the operating regulated subsidiaries of the Group, as well as of the Chief Financial Officer, the Chief Technical Officer, the Head of Operations and Risk and the Head of Legal and Compliance.

Members                                 Role

Roberto Apap Bologna  -           Chief Financial Officer

Cristina Casingena        -           Chief Executive Officer LifeStar Insurance plc

Adriana Zarb Adami      -           Managing Director LifeStar Health Limited

Konrad Camilleri           -           Managing Director GlobalCapital Financial Management Limited

Adrian Mizzi                  -           Chief Technical Officer

Jonathan Camilleri        -           Chief Operations Officer

Michael Schembri         -           Head Legal and Compliance

Internal controls

The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The Company has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve its objectives.

LifeStar Holding p.l.c. encompasses different licensed activities regulated by the MFSA. These activities include the carrying on of long-term business of insurance under the Insurance Business Act (Cap. 403 of the Laws of Malta); acting as an agent for sickness and accident insurance in terms of the Insurance Distribution Act (Cap. 487 of the Laws of Malta); and the provision of investment services and advice in terms of the Investment Services Act (Cap. 370 of the Laws of Malta). The Board of Directors has continued to ensure that effective internal controls and processes are maintained to support sound operations. The regulated subsidiaries have also set up Committees to further enhance internal controls and processes. These include the setting up of an Asset and Liability Committee and the Risk Management Committee at life company level. Policies such as Risk Compliance Monitoring Programmes, Risk Management, Complaints, Data Protection, Internal Audit and Anti-Money Laundering Policies and Procedures as well as a Conflict of Interest Policy have been adopted.

The Directors are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against normal business risks. During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Company.

The Company has 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. Measures taken include physical controls, segregation of duties and reviews by management, internal audit and the external auditors. The Internal Audit Department monitors and reviews the Group’s compliance with policies, standards and best practice in accordance with an Internal Audit Plan approved by the Audit Committee. KPMG fulfil the functions of internal auditors of the Company.

Principle nine and ten: 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.  During the period under review, the Company has maintained an effective communication with the market through a number of channels including Company announcements and Circulars.

The Company shall also communicate with its shareholders through the Company’s Annual General Meeting (“AGM”) to be held later in 2022, which will include resolutions such as the approval of the Annual Report and Audited Financial Statements for the year ended 31 December 2021, the election/re-election of Directors, the determination of the maximum aggregate emoluments that may be paid to Directors, the appointment of auditors and the authorisation of the Directors to set the auditors’ remuneration, as well as any other resolution as may necessary in terms of law or as required by the Company. In terms of Rule 12.26L of the Capital Market Rules, an annual general meeting shall have the right to hold an advisory vote on the remuneration report of the most recent financial year. Both the Chairman of the Board and the Chairman of the Audit Committee will be available to answer shareholder questions, which may be put forward in terms of Rule 12.24 of the Capital Markets Rules.

Apart from the AGM, the Group communicates and shall communicate with its shareholders through the publication of its Annual Report and Financial Statements, the publication of interim results, updates and articles on the Group’s website, the publication of Group announcements and press releases.

The Office of the Company Secretary maintains regular communication between the Company and its investors.  Individual shareholders can raise matters relating to their shareholdings and the business of the Company at any time throughout the year, and are given the opportunity to ask questions at the AGM or to submit written questions in advance.

As provided by the Companies Act (Cap. 386), minority shareholders may convene Extraordinary General Meetings.

Principle eleven: Conflicts of Interest

The Directors are fully aware of their responsibility always to act in the best interests of the Company and its shareholders as a whole 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.

Directors’ direct interest in the shareholding of the Company:

With the exception of Paolo Catalfamo, none of the Directors of the Company have any direct interest in the shares of the Company’s subsidiaries or investees or any disclosable interest in any contracts or arrangements either subsisting at the end of the last financial year or entered into during this financial year. No other changes in the Directors’ interest in the shareholding of the Company between year-end and 29 April 2022.

Prof. Paolo Catalfamo holds shares in the Company indirectly through his shareholding in Investar plc, through GlobalCapital Financial Management Limited as nominee for client accounts and through the Company’s own shares.

Principle twelve: Corporate social responsibility

The Company seeks to adhere to sound Principles of Corporate Social Responsibility in its management practices, and is committed to enhance the quality of life of all stakeholders of the Company. The Board is mindful of the environment and its responsibility within the community in which it operates. In carrying on its business the Company is fully aware of and at the forefront in preserving the environment and continuously reviews its policies aimed at respecting the environment and encouraging social responsibility and accountability. During the financial year under review, the Group pursued its corporate social responsibility by supporting and contributing to a number of charitable causes.

Remuneration Report

Remuneration Committee

The remuneration functions of the Remuneration and Nominations Committee were performed by  Joseph Del Raso, as Chairman, as well as Joseph Schembri and Gregory Eugene McGowan as members.

Remuneration policy

The Company’s remuneration of its Directors and senior executives is based on the remuneration policy adopted and approved by the shareholders of the Company at the annual general meeting held on 9 October 2020 (the “Remuneration Policy” ). The Remuneration Policy of the Company is available for inspection on the Company’s website on https://lifestarholding.com/wp-content/uploads/2020/11/AGM-2020-Remuneration-Policy-15.09.2020-.pdf . During the latest annual general meeting of the Company held on 9 November 2021, the meeting approved the Remuneration Statement published as part of the Annual Report of the Company for the financial year ended 31 December 2020.

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 senior executives. The policy describes the components of such remuneration and how this contributes to the Company’s business strategy, in the context of its long-term sustainable value creation. This Remuneration Policy is divided into five parts distinguishing between directors, senior management, employees, intermediaries and service providers.

Remuneration payable to Directors

Fixed remuneration

The remuneration payable to Directors shall be fixed and will not have any incentive programmes and will therefore not receive any performance-based remuneration. None of the Directors, in their capacity as Directors of the Company, is entitled to profit-sharing, share options 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.

Director Employment Service Contracts

As at the date hereof, none of the Directors have an employment service contract.

Remuneration payable to executives

Senior executive service contracts

All senior executive contracts are of an indefinite duration and 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 remuneration report following the approval and entry into effectiveness, in October 2020, of the Remuneration Policy described in the preceding sections.

Remuneration paid to Directors

All remuneration for directors was in conformity with this policy. The remuneration paid to individual Directors during the year under review was as follows:

The Directors receive remuneration for their appointment to the Board, and remuneration for their role as members or chairpersons of any committees of the Board of the Company. The above-indicated remuneration is comprehensive also of their position as directors of any subsidiary forming part of the Group.

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 aggregate amount fixed for this purpose during the last annual general meeting was €400,000.

The aggregate emoluments of the Directors in respect of their role as directors of the Company and, where applicable, as members of committees of the Board of Directors of the Company and non-executive directors of subsidiaries forming part of the Group, amounted to €175,000. The Directors do not expect the abovementioned maximum aggregate remuneration limit of €400,000 to be exceeded during the financial year ending 31 December 2022.

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 Senior Management

Remuneration paid to Senior Management amounts to €467,586 and excludes the fringe benefit for health insurance and life cover as described above.

Decision-making with respect to the Remuneration Policy

Whereas the Board of Directors is responsible for determining the Remuneration Policy of the Company, the Remuneration and Nominations Committee, acting in its function as the Remuneration Committee, is, in turn, responsible for overseeing and monitoring its implementation and ongoing review thereof. This policy is to be reviewed annually by the Remuneration and Nominations Committee of the Company. The annual review will ensure that the policy remains relevant for the Company and that any improvements by way of amendments are indeed effected.

In evaluating whether it is necessary or beneficial to supplement or otherwise alter the Remuneration Policy of the Company, the Remuneration Committee have regard to, inter alia, best industry and market practice on remuneration, the remuneration policies adopted by companies operating in the same industry sectors, as well as legal and, or statutory rules, recommendations or guidelines on remuneration, including but not limited to the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of the Capital Markets Rules of the Listing Authority.

Whilst members of the Remuneration Committee 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 at a meeting of such Committee, 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.

Other information on remuneration in terms of Appendix 12.1 of the Capital Markets Rules

In terms of the requirements within Appendix 12.1 of the Capital Market Rules, the following table presents the annual change of remuneration, of the company’s performance, and of average remuneration on a full-time equivalent basis of the company’s employees (other than directors) over the two most recent financial years. The Company’s non-executive Directors, have been excluded from the table below since they have a fixed fee as described above.

The contents of the Remuneration Report have been reviewed by the external auditor to ensure that the information required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets rules have been included.

Income Statement

The accounting policies and explanatory notes form an integral part of these financial statements.

Statements of financial position

The accompanying notes are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 29 April 2022. The financial statements were signed on behalf of the Board of Directors by Prof. Paolo Catalfamo (Director) and Mr Joseph Schembri (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Accumulated losses include all current and prior period results as disclosed in the income statement. In accordance with the Companies Act, the merger reserve is not distributable.

During the year, as a result of an exchange of shares process which took place at the time of listing of the shares of LifeStar Insurance p.l.c on the Malta Stock Exchange, the company became the owner of 5,897,951 of its own shares. As at 31 December 2021, the amount of these shares is deducted from equity attributable to the owners of the Company until the shares are cancelled or reissued.

The accounting policies and explanatory notes form an integral part of these financial statements. 

Statements of cash flows

The accounting policies and explanatory notes form an integral part of these financial statements.  

Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented except for those adopted for the first time during 2021.

1.            Basis of preparation

These separate financial statements have been prepared for the Company. The Company is primarily a holding and financing company.

These separate financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU (EU IFRSs), and with the Companies Act (Cap. 386 of the Laws of Malta).

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.

The preparation of financial statements in conformity with EU IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise their judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement and estimates or complexity are disclosed in Note 1 to these financial statements.

The statements of financial position are presented in increasing order of liquidity, with additional disclosures on the current or non-current nature of the assets and liabilities provided within the notes to the financial statements.

Appropriateness of going concern assumption in the preparation of the financial statements

As explained in the Directors’ report, the company made a total comprehensive profit of € 0.1 m (2020: € 0.3 m) for the year ended 31 December 2021 and, at balance sheet date, had net assets amounting to € 16.1 m (2020: € 17.7 m).

When assessing the going concern assumption for the Company, the Directors have made reference to the Group’s performance as well as the impact that the COVID-19 pandemic had on the Group. The measures taken by Malta over the past year in an effort to curb the COVID-19 pandemic, including social distancing, has had an impact on the distribution channels of the Group. Despite this, the Group has partially recovered during 2021.

The directors have also submitted a plan to the regulator which shows that the companies liabilities will be settled as they fall due through the sale of certain assets and the receipt of dividends from subsidiaries.

Appropriateness of going concern assumption in the preparation of the financial statements (continued)

Having concluded this assessment the Directors expect that the Group will be able to sustain its operations over the next twelve months and in the foreseeable future and consider the going concern assumption in the preparation of the Company’s financial statements as appropriate as at the date of authorisation for issue of these financial statements.

Change in accounting policy

During the current reporting period, the Company effected a change in accounting policy, whereby the investment in group undertakings were recognised as an asset at fair value through profit and loss. Previously, these investments were shown at cost in the Company’s financial statements.

This change in accounting policy is being applied retrospectively. As a result, these financial statements reflect this change from the beginning of the earliest accounting period presented, i.e. 1 January 2020.

The effects of the above change in the Company’s financial statements are fully described in Note 19.

Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year

The following accounting pronouncements became effective from 1 January 2021 and have therefore been adopted:

·           Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16)

·           COVID-19 Rent Related Concessions (Amendments to IFRS 16)

The adoption of these pronouncements did not result in substantial changes to the Company’s accounting policies and did not have a significant impact on the Company’s financial results or position and therefore no additional disclosures have not been made.

Standards, interpretations and amendments to published standards as endorsed by the EU that were effective before 2020 for which the Company elected for the temporary exemption

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling.

For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 is generally effective for years beginning on or after 1 January 2018. However in September 2016, the IASB issued amendments to IFRS 4 which provide optional relief to eligible insurers in respect of IFRS 9. The options permit entities whose predominant activity is issuing insurance contracts within the scope of IFRS 4, a temporary exemption to defer the implementation of IFRS 9.

Entities that apply the optional temporary relief were initially required to adopt IFRS 9 on annual periods beginning on or after 1 January 2021. However on 14 November 2018, the IASB deferred both the effective date of IFRS 17 Insurance Contracts and the expiry date for the optional relief in respect of IFRS 9 by one year.  On 17 March 2020, the IASB deferred again both the effective date of IFRS 17 Insurance Contracts and the expiry date for the optional relief in respect of IFRS 9 by a further 1 year. Therefore, entities that apply the optional temporary relief will be required to adopt IFRS 9 on 1 January 2023 which aligns with the new effective date of IFRS 17.

Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Company

Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements but are mandatory for the Company’s accounting periods beginning on or after 1 January 2021. The Company has not early adopted these revisions to the requirements of IFRSs and the Company’s Directors are of the opinion that, with the exception of the below pronouncements, there are no requirements that will have a possible significant impact on the Company’s financial statements in the period of initial application.

IFRS 17 – Insurance Contracts

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2023.

The Company’s Directors are assessing the potential impact, if any, of the above IFRSs on the financial statements of the Company in the period of initial application.

2.    Deferred income tax

Deferred income tax is provided using the balance sheet liability method for temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates or those that are substantively enacted by the end of the reporting period are used in the determination of deferred income tax.

Deferred income tax related to the fair value re-measurement of investments is allocated between the technical and non-technical account depending on whether the temporary differences are attributed to policyholders or shareholders respectively.

Deferred tax assets are recognised only to the extent that future taxable profit will be available such that realisation of the related tax benefit is probable.

3.    Property, plant and equipment

Property, plant and equipment, comprising land and buildings, office furniture, fittings and equipment, are initially recorded at cost and are subsequently shown at cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company, and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful lives as follows:

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Property, plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Gains or losses arising from derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount, and are included in profit or loss in the period of derecognition.

4.    Investment in group undertakings

The Company measures shares in group undertakings at fair value with gains or losses recognised in profit or loss. The fair value is determined based on the quoted prices for those shares.

Previously, investment in group undertakings were measured using the cost method of accounting, net of impairment loss. The impact of the change in accounting policy is discussed in Note 19.

5.    Business combinations

The Company applies the acquisition method in accounting for business combinations. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Company recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

6.    Other financial assets

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially recognised at their fair value plus directly attributable transaction costs for all financial assets or financial liabilities not classified at fair value through profit or loss.

Financial assets and financial liabilities are off-set and the net amount presented in the statement of financial position when the Company has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle liability simultaneously.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.

Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

 (i)     Trade receivables

Trade receivables are classified with current assets and are stated at their nominal value.

(ii)      Trade payables

Trade payables are classified with current liabilities and are stated at their nominal value.

(iii)     Shares issued by the Company

Ordinary shares are classified as equity instruments.

7.    Impairment of assets

(a)           Impairment of financial assets at amortised cost

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (“a loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Company about the following events:

In addition to the above loss events, objective evidence of impairment for an investment in an equity instrument includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered and/or a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

For financial assets at amortised cost, the Company first assesses whether objective evidence of impairment exists for financial assets that are individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred on financial assets carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as improved credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the profit or loss.

When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative impairment loss that had been recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment and is measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss for an available-for-sale investment in an equity instrument are not reversed through profit or loss. Impairment losses recognised in profit or loss for an available-for-sale investment in a debt instrument are reversed through profit or loss if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.

(b)     Impairment of other financial assets

At the end of each reporting period, the carrying amount of other financial assets is reviewed to determine whether there is an indication of impairment and if any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is the amount by which the amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of fair value less the costs to sell and value in use. Impairment losses and reversals are recognised in profit or loss.

Assets that are subject to amortisation or depreciation, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable,

principally comprise property, plant and equipment and computer software. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). An impairment loss recognised in a prior year is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Impairment losses and reversals are recognised in profit or loss.

8.    Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

9.    Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. For the purposes of the statements of cash flows, cash and cash equivalents comprise cash in hand, deposits held at call with banks and time deposits maturing within three months (unless these are held specifically for investment purposes) and are net of the bank overdraft, which is included with liabilities.

10.  Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Trade payables are stated at their nominal value unless the effect of discounting is material.

Borrowing costs are capitalised within property held for development in so far as they relate to the specific external financing of assets under development. Such borrowing costs are capitalised during the development phase of the project. Other borrowing costs are recognised as an expense in the year to which they relate.

11.  Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. 

12.  Dividend distribution

Dividend distribution to the Company’s Shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are declared.

13.  Provisions

­

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

14.  Investment return

The total investment return in the notes includes dividend income, net fair value movements on financial assets at fair value through profit or loss (including interest income from financial assets classified as fair value through profit or loss), interest income from financial assets not classified as fair value through profit or loss, rental receivable and net fair value movements on investment property and is net of investment expenses, charges and interest.

15.  Leases

(i)            Company as a lessor

Lessor accounting remains similar to treatment under IAS 17 meaning that lessors continue to classify leases as finance or operating leases.

To classify each lease, Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term.

(ii)           Company as a lessee

A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.

Right-of-use asset

The Company recognises a right-of-use asset at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset of the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-

use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The Company presents right-of-use asset that do not meet the definition of investment property as ‘right-of-use assets’.

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Estimating the incremental borrowing rate

The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate ("IBR") to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company

‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).

Lease payments included in the measurement of the lease liability comprise the following:

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

16.  Employee benefits

The Company contributes towards the state pension in accordance with local legislation. The only obligation is to make the required contributions. Costs are expensed in the period in which they are incurred.

17.  Current tax

Current tax is charged or credited to profit or loss except when it relates to items recognised in other comprehensive income or directly in equity. The charge/credit for current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit or loss because it excludes items which are non-assessable or disallowed and it further excludes items which are taxable or deductible in other periods. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Notes to the financial statements

1.        Critical accounting estimates and judgements

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.  Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

In the opinion of the Directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1.

2.    Management of financial risk

The Company is subject to financial risk and this section summarises this risks and the way the Company manages it. The Company’s and Group’s risk management strategy has remained unchanged from the prior year.

Financial risk

The Company is exposed to financial risk through its financial assets and liabilities. The most important components of financial risk are market risk (including currency risk, fair value interest rate risk and price risk), credit risk and liquidity risk.  

(a)          Fair value interest rate risk

The Company is exposed to the risk of fluctuating market interest rate. Assets/liabilities with variable rates expose the Company to cash flow interest risk, whilst assets/liabilities with fixed rates expose the Company to fair value interest rate risk to the extent that they are measured at fair value.

The total assets and liabilities subject to interest rate risk are the following.

As disclosed in Note 14, The Company obtained loans from LifeStar Insurance p.l.c amounting to €7,041,697 (2020: Nil) which is subject to an annual interest rate of 3%. This exposure does not give rise to fair value interest rate risk since the loans are carried at amortised cost in the financial statements.

Interest rate risk is monitored by the Board of Directors on an ongoing basis. This risk is mitigated on a Group basis, through the distribution of fixed interest investments over a range of maturity dates, and the definition of an investment policy as described earlier, which limits the amount of investment in any one interest earning asset or towards any one counterparty.

Management monitors the movement in interest rates and, where possible, reacts to material movements in such rates by adjusting or restructuring its investment or financing structure and by maintaining an appropriate mix between fixed and floating rate instruments. As at the end of the reporting period, the Directors considered that no hedging arrangements were necessary to address interest rate risk.

(a)          Price risk

The Company is exposed to market price risk arising from the uncertainty about the future prices of investments held that are classified in the statement of financial position as at fair value through profit or loss. This risk is mitigated through the adherence to an investment policy, particularly on a Group basis, geared towards diversification. The Company is exposed to price risk in respect of one investment, as all other investments are held through its subsidiaries.

The total assets subject to equity price risk are the following:

(b)          Credit risk

The Company has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Company is exposed to credit risk as at the financial year-end in respect of amounts due from subsidiary undertakings and cash at bank balances, which are placed with reliable financial institutions.

On a Group basis, the Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparties. Limits on the level of credit risk by category are defined within the Group’s investment policy as described earlier. This policy also considers regulatory restrictions on asset and counterparty exposures.

Credit risk in respect of trade and other receivables is not deemed to be significant after considering the range of underlying debtors, and their creditworthiness. Receivables are stated net of impairment. Further detail in this regard is provided in Note 11 to the financial statements.

The credit risk in respect of cash at bank is mitigated by placing such balances with reliable financial institutions.

Credit risk in respect of the amounts due from subsidiary undertakings to the Company is closely monitored by the Company and is tested for impairment.

(c)          Liquidity risk

Liquidity is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Company adopts a prudent liquidity risk management approach by maintaining a sufficient proportion of its assets in cash and marketable securities through the availability of an adequate amount of committed credit facilities and the ability to close out market positions. Senior management is updated on a regular basis on the cash position of the Company and the Group illustrating, inter alia, actual cash balance net of operational commitments falling due in the short term as well as investment commitments falling due in the medium and long term.

The Group is exposed to daily calls on its available cash resources in order to meet its obligations, including claims arising from contracts in issue by the Group. Other financial liabilities which expose the Group and the Company to liquidity risk mainly comprise the borrowings disclosed in Note 14 and trade and other payables disclosed in Note 15.

The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on the remaining period between the end of the reporting period and the maturity date.

Summary of financial assets and liabilities by category

3.    Expenses by nature

Auditor’s remuneration for the current financial year amounted to €39,000 (2020: €45,000) for the Company. Other fees payable to the auditor comprise €nil (2020: €31,000) for other assurance services, €850 (2020: €nil) for tax services and €9,000 (2020: € nil) for other non-audit services.

Other provisions for the year under review represent the best estimate of the expected outflow of resources to settle a present obligation resulting from outstanding court and arbitration cases against the Company.

4.    Staff costs

The table below represents salaried staff:

The average number of persons employed by both the Company during the year are analysed below:

5.    Investment return and finance costs

6.    Income tax

Income tax recognised in other comprehensive income is as follows:

The tax on the Company’s loss before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

7.    Directors’ emoluments

Directors’ emoluments amounting to €191,250 (2020: € 40,000 ) were recharged to group undertakings.

8.    Dividends

The Directors of the Company do not recommend the payment of a dividend for 2021 as the Company had no distributable reserves at the end of the reporting period. No dividend was also paid in 2020.

9.     Property, plant and equipment

10.  Investment in group undertakings

During the year, the Company effected a change in accounting policy, whereby the investment in group undertakings was recognised at fair value through profit and loss. The impact of this change is further discussed in Note 19.

The fair value of the Company’s investments is determined on the basis of the net assets of the underlying companies as disclosed below. As from the year ending 31 December 2021, the fair value of the Company’s shares in LifeStar Insurance plc is determined on the basis of the quoted prices for those shares.

The principal group undertakings at 31 December are shown below:

The distribution of dividends by these subsidiary undertakings may be restricted by the solvency requirements of relevant legislation, mainly the Insurance Business Act (Cap. 403 of the Laws of Malta), the Insurance Distribution Act (Cap. 487 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta) and any ad hoc specific notifications by the regulator to the marked regulated entities.

In 2021, LifeStar Insurance p.l.c. was listed on Malta Stock Exchange. The quoted price of its shares at 31 December 2021 was €0.50 per share. The total amount of the investment in LifeStar Insurance p.l.c. amounts to €24,031,425.

11.  Trade and other receivables

Note i:     Amounts due from subsidiaries are unsecured and interest-free . These balances are

payable on demand except for amounts amounting to € 551,230 . These are expected to be paid in five years’ time. The carrying amount of such amounts has been adjusted for the time-value of money. During the year an amount of € Nil (20 20 : € 504,000 ) due from group undertakings were written off .

Note ii:    Other receivables are unsecured, interest-free and repayable on demand.

There are no other material past due amounts in trade and other receivables.

All of the above amounts are current in nature.

12.     Share capital

13.     Interest-bearing borrowings

During 2016, by virtue of the offering memorandum dated 12 May 2016, the Company issued for subscription to the general public €10,000,000 bonds. The bonds are unsecured and were effectively issued on 8 June 2016 at the bond offer price of €100 per bond.

The bonds were subject to a fixed interest rate of 5.0% per annum payable yearly on 2 June.

All bonds were redeemed at par and at the latest are due on 2 June 2021.

The Company obtained loans amounting to € 7,041,697 (2020: Nil) payable to a subsidiary which is subject to an annual interest rate of 3%.

The bond is disclosed at the value of the proceeds less the net book amount of the issue costs as follows:

During 2020, the Company entered into a loan agreement with BOV, pursuant to which it borrowed an amount of €3 million from BOV. This loan benefits from the support of the Malta Development Bank through the provision of a bank guarantee under the COVID-19 Loan Guarantee Scheme .

The loan is subject to a fixed rate of 2.5% for the first two years, increasing to 3% over the Base Rate of the Bank for the following six years.

A guarantee is being given individually by Prof Paolo Catalfamo, LifeStar Insurance p.l.c., LifeStar Health Limited and GlobalCapital Financial Management Limited for €3 million against the €3 million loan from BOV.

The following table sets out a maturity analysis of loan payments, to be paid after the reporting date.

14.  Trade and other payables

All of the above amounts are payable within one year.

Amounts owed to group undertakings are unsecured and do not bear interest . These balances are payable on demand except for amounts due to subsidiaries amounting to €Nil (2020: €2,047,186). The latter are expected to be paid in three years’ time. The carrying amount of such amounts due to subsidiaries has been adjusted for the time-value of money.

15.  Cash used in operations

Reconciliation of operating loss to cash used in operations: