SD Finance plc - 549300OYE47PF4MSZ102

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Directors’ report

The directors present their report and the audited financial statements for the year ended 31 March 2022.

Principal activities

Thecompany’sprincipalactivityistocarryonthebusinessofaninvestmentcompany,byraisingfundsto finance the operations and capital projects of the companies forming part of the db Group.

Review of business

Duringtheperiodunderreview,financeincomeonloansandancillaryrevenuefromSDHoldingsLimited, theguarantoroftheCompany’sbonds,andSeabankHotelandCateringLimitedandHotelSanAntonio Limited(fellowsubsidiaries),amountedto€3million(2021:€3million),whilstinterestpayableonbonds totalled €2.92 million (2021: €2.91 million).

Administrativeexpensesmainlyrepresentinglistingandcompliancecosts,togetherwithdirectors’and professionalfeesamountedto€89,893 (2021:€84,796). Profitfortheperiodaftertaxremainedconsistent with prior year at €4,870 (2021: €4,939).

TheCompany’sbalancesheetisprimarilymadeupofthebondissuefor€65million(classifiedasnon-currentliabilities)andtheloansreceivablefromSDHoldingsLimited,SeabankHotelandCateringLimited andHotelSanAntonioLimited(classifiedasnon-currentassets).Duringthecurrentfinancialyearafurther amountof€1.2millionwasadvancedtothefellowsubsidiaries.SDFinanceplc’sequityasatyearendis stated at €285,007 (2021: €280,137) primarily made up of the initial share capital funds.

TheCompanyrecognisesthatthekeyriskanduncertaintyofitsbusinessisthatofthepotentialnon-fulfilment by the borrowers (noted above) of their obligations.

Guarantor’s performance for 2022 and outlook for 2023

ThedbGroupownedbySDHoldingsLimited,asguarantortotheBondIssue,experiencedachallenging startduringthefirsttwomonthsofthecurrentfinancialyear,seeingarecoveryfromlateJuneonwards. ThiswasmainlyduetothegradualrelaxationofCOVID-relatedrestrictionswhicheventuallybroughta generalimprovementintheaccommodationandleisureindustry.Thisledtoanincreaseinbookingsand patronageresultinginincreasedrevenuesuptoNovemberwhereonceagainanewCOVIDvariant threatenedtobringtheindustrytoitskneesonceagain.However,byFebruarythesituationstarted improvingwiththegovernmentalsoannouncingthegradualremovalofvariousmeasuresoveranumber ofweeks.ThegroupcontinueditsexpansionofitsStarbucksoutletsnetworkinMaltaandalsoopeneda new restaurant in St. Paul’s Bay towards the end of the current financial year.

TheGroupcontinuedmonitoringtheCOVID-19outcome,takingallnecessaryhealthprecautionsas directedbytheHealthAuthoritiesandmanagingitsoperationsaccordingtothemeasuresapplicableatthat timesoastominimisecostsandmaintainappropriateliquiditylevels.Non-essentialservicecontractsand retainerswerekeptataminimumeventuallybeingrevisedupwardswhenthesituationstartedimproving. Allstaffwhowereonareducedworkingschedulewereeventuallymovedtoanormalscheduleandbythe endofJuneallemployeeswithinthegroupwereworkingona40hourweekbasis.TheGroupalso continuedavailingitselfoftheCOVID-19Governmentschemesthatitwasentitledtoacrossallcompanies withinthegroup.Asat31March2022,theGroupstillhasasubstantialcashreserveofover€40 million.

Weareencouraged,however,tonotethatasatthedatethatthesefinancialstatementshavebeen authorisedforissue,allthebusinessunitsoftheGrouparebackinbusinessandfullyoperationalandhave beenforanumberofmonthsnow.Thisresultedinhigheraccommodationbookings,andsatisfactoryresults in the hospitality and leisure sectors have been registered.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Directors’ report- continued

Review of business - continued

Guarantor’s performance for 2022 and outlook for 2023 - continued

ThehealthcarearmoftheGroupcontinuedwithanupswingindemandfortheservicesofferedbythe Groupwithinthissector,specificallynowthatthe504-bedwingattheSaintVincentdePaulResidenceis up and running.

TheGrouphasalsopreparedprojectionsforthecoming2years,basedonhistoricalfinancialinformation andforecasts,butfactoringintheimprovedresultsofthepastyear.TheUkraine-Russiaconflictisnot expectedtoaffecttheresultsofthegroupasitsexposureofbusinessfromthesetwocountriesisnegligible. However,whilstthegrouphasnodirectbusinesslinkageswiththesecountries,wearemonitoringtheeffect thatthisconflictmighthave.Possibleincreasesinthepriceofgoodsandservicesistheprincipalchallenge thatthegroup’sentitieswillexperienceinthenextfinancialyear.Theprojectionscontemplatetheexistence ofasignificantliquiditybufferattheendoftheyearandtheDirectorsfeelconfidentthatwiththemeasures takenandthesecuredfinancingarrangements,theGroupshallovercomeanypotentialfurtherdisruptions. Onthisbasis,thedirectorsareoftheopinionthattherearenomaterialuncertaintieswhichmaycast significant doubt about the ability of the Group to continue operating as a going concern.

Issuer’s outlook for the financial year ending 2023

AmidthedisruptionsfacedbytheGroup,theIssuerpaiditsbondholdersthefullinterestthatwasduein April2022.Furthermore,inviewofthemeasuresundertakenbytheGroup,theprojectionsoutlinedabove andthecashreservesavailabletotheGroup,thedirectorsareoftheopinionthattheIssuerwillhavethe necessaryfundstofinancetheinterestfallingdueinApril2023andgoingforward.Theboardoftheissuer, having reviewed the group’s cashflow forecast, further confirms this statement.

Financial risk management

Thecompany’sactivitiesexposeittoavarietyoffinancialrisks,includingcreditriskandliquidityrisk.Refer to Note 2 to these financial statements.

Results and dividends

Thecompany’sfinancialresultsaresetoutonpage10.Thedirectorsdonotrecommendthepaymentofa dividend.

Thedirectorsproposethatthebalanceofretainedearningsamountingto€35,007(2021:€30,137)be carried forward to the next financial year.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Directors’ report– continued

Directors

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

Silvio Debono

Robert Debono

Arthur Gauci

Philip Micallef

Vincent Micallef

Stephen Muscat

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

Statement of directors’ responsibilities for the financial statements

ThedirectorsarerequiredbytheMalteseCompaniesAct(Cap.386)topreparefinancialstatementswhich giveatrueandfairviewofthestateofaffairsofthecompanyasattheendofeachreportingperiodandof the profit or loss for that period.

In preparing the financial statements, the directors are responsible for:

•ensuringthatthefinancialstatementshavebeendrawnupinaccordancewithInternationalFinancial Reporting Standards as adopted by the EU;

•selecting and applying appropriate accounting policies;

•making accounting estimates that are reasonable in the circumstances;

•ensuringthatthefinancialstatementsarepreparedonthegoingconcernbasisunlessitisinappropriate to presume that the company will continue in business as a going concern.

Thedirectorsarealsoresponsiblefordesigning,implementingandmaintaininginternalcontrolasthe directorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterial misstatement,whetherduetofraudorerror,andthatcomplywiththeMalteseCompaniesAct(Cap.386). Theyarealsoresponsibleforsafeguardingtheassetsofthecompanyandhencefortakingreasonablesteps for the prevention and detection of fraud and other irregularities.

ThefinancialstatementsofSDFinanceplcfortheyearended31March2022areincludedintheAnnual Financial Report 2022, which is made available on the db Group website.

ThedirectorsareresponsibleforthemaintenanceandintegrityoftheAnnualFinancialReportonthewebsite inviewoftheirresponsibilityforthecontrolsover,andthesecurityof,thewebsite. Accesstoinformation publishedonthegroup’swebsiteisavailableinothercountriesandjurisdictions,wherelegislationgoverning thepreparationanddisseminationoffinancialstatementsmaydifferfromrequirementsorpracticeinMalta.

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

•thefinancialstatementsgiveatrueandfairviewofthefinancialpositionofthecompanyasat31 March2022,andofthefinancialperformanceandthecashflowsfortheyearthenendedin accordance with International Financial Reporting Standards as adopted by the EU; and

•theAnnualFinancialReportincludesafairreviewofthedevelopmentandperformanceofthe businessandthepositionofthecompany,togetherwithadescriptionoftheprincipalrisksand uncertainties that the company and the guarantor face.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Directors’ report- continued

Going concern statement pursuant to Capital Markets rule 5.62

Aftermakingenquiries,thedirectors,atthetimeofapprovingthefinancialstatements,havedetermined thatitisreasonabletoassumethatthecompanyhasadequateresourcestocontinueoperatingforthe foreseeablefuture. Forthisreason,thedirectorshaveadoptedthegoingconcernbasisinpreparingthe financial statements.

Auditors

PricewaterhouseCoopershaveindicatedtheirwillingnesstocontinueinofficeandaresolutionfortheirre-appointment will be proposed at the Annual General Meeting.

SignedonbehalfoftheBoardofDirectorson25July2022byRobertDebono(Director)andStephen Muscat(Director)aspertheDirectors'DeclarationonESEFAnnualFinancialReportsubmittedin conjunction with the Annual Financial Report.

Registered office:

Seabank Hotel

Marfa Road

Mellieha

MLH 9064

Malta

Telephone (+356) 2289 1000

Company secretary

Dr Shaheryar Ghaznavi

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Corporate Governance - Statement of Compliance

Introduction

PursuanttotherequirementsoftheCapitalMarketsRulesissuedbytheListingAuthorityoftheMalta FinancialServicesAuthority,SDFinanceplc(the“Company”orthe“Issuer”-afullyownedsubsidiaryof SDHoldingsLimited)herebyreportsontheextenttowhichthecompanyhasadoptedTheCodeof PrinciplesofGoodCorporateGovernance(the“Code”)appendedtoChapter5oftheCapitalMarketsRules as well as the measures adopted to ensure compliance with these same Principles.

Sinceitsincorporation,thecompany’sprincipalactivitywastoraisefundsfromthecapitalmarkettofinance the operations of other group companies forming part of the db Group (the “Group”).

TheCompanyacknowledgesthatalthoughtheCodedoesnotdictateorprescribemandatoryrules, compliancewiththeprinciplesofgoodcorporategovernancerecommendedintheCodeisinthebest interestsoftheCompany,itsshareholdersandotherstakeholders.Indecidingonthemostappropriate mannerinwhichtoimplementthePrinciples,theBoardofSDFinanceplc(the“Board”)hastaken cognisanceofitssize,whichinevitablyimpactsonthestructuresrequiredtoimplementthePrinciples without diluting the effectiveness thereof. The Company does not have any employees.

TheBoardconsidersthat,totheextentotherwisedisclosedherein,theCompanywasgenerallyin compliance with the Principles throughout the period under review.

Roles and Responsibilities

TheBoardacknowledgesitsstatutorymandatetoconducttheadministrationandmanagementofthe Company.TheBoard,infulfillingthismandateanddischargingitsdutyofstewardshipoftheCompany, assumes responsibility for:

•theCompany’sstrategyanddecisionswithrespecttotheissue,servicingandredemptionofitsbonds; and

•monitoringthatitsoperationsareinconformitywithitscommitmentstowardsbondholders, shareholders and all relevant laws and regulations.

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

The Board of Directors

Principles One to Five of the Code deal fundamentally with the role of the Board of Directors.

TheBoardiscomposedofsixmembersmadeupoftwoexecutiveandfournon-executivedirectors.The twoexecutivedirectors,MrSilvioDebonoandMrRobertDebono,occupyvariousseniorexecutiveand directorshippositionswithintheGroup.Thethreenon-executiveindependentdirectorsareMrPhilip Micallef,DrVinceMicallefandMrStephenMuscat.Mr.ArthurGauci,isalsoanon-executivedirectorbutis engagedasaconsultantwithinthegroupandholdsthepostasadirectorinvariouscompanieswithinthe group.

Thethreenon-executiveindependentdirectorsareconsideredbytheBoardasindependentdirectorssince theyarefreeofanysignificantbusinessrelationship,familyorotherrelationshipswiththeIssuer,its controllingshareholderorthemanagementofeither,thatcreatesaconflictofinterestsuchastoimpair their judgement.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Corporate Governance - Statement of Compliance- continued

The Board of Directors - continued

TheactivitiesoftheBoardareexercisedinamannerdesignedtoensurethatitcaneffectivelysupervise theoperationsoftheCompanyandprotecttheinterestsofbondholdersandtheshareholders.Duringthe current financial period, meetings of the Board were held as frequently as considered necessary.

TheBoardmembersarenotifiedofforthcomingmeetingsbytheCompanysecretary(DrShaheryar Ghaznavi)withtheissueofanagendaandsupportingdocumentsasnecessarywhicharethendiscussed during the Board meetings.

TheBoarddoesnotconsideritnecessarytoinstituteseparatecommitteesforremunerationandnomination, aswouldbeappropriateinanoperatingcompany.Duringthefinancialyear,theBoardmetfourtimesand wasattendedbymorethan75%oftheOfficersoftheCompany. Duringthisyear,theBoarddidnot undertakeaperformanceevaluationofitsroleinaccordancewithArticle7oftheCorporateGovernance Code, but intends to do so in the coming year.

ApartfromsettingthestrategyanddirectionoftheCompany,theBoardretainsdirectresponsibilityfor approving and monitoring:

•thedirectsupervision,supportedbyexpertprofessionaladviceasappropriate,ontheissueandlisting of bonds;

•thattheproceedsofthebondsareappliedforthepurposesforwhichtheyweresanctionedasspecified in the prospectus of the bonds issued;

•the proper utilisation of the resources of the Company;

•theannualfinancialreportandfinancialstatements,therelevantpublicannouncementsandthe Company’s compliance with its continuing listing obligations.

Remuneration Statement

TheBoardconfirmsthatthemaximumannualaggregateemolumentsthatmaybepaidtothedirectors pursuanttotheCompany’sMemorandumandArticlesofAssociation,wasapprovedbytheshareholders attheAnnualGeneralMeeting.NoneofthedirectorshasservicecontractswiththeCompany.Furthermore, theremunerationofeachoftheindependentnon-executivedirectorsisafixedhonorariumof€5,000per annum. Theboardapprovedanincreaseinthefixedhonorariumto€10,000witheffectfromthe1April 2022.TheexecutivedirectorsdonotearnanyfixedhonorariumfromtheCompanybuthaveanindefinite full-time contract of service with companies forming part of the db Group.

Noneofthedirectorshaveanyvariablecomponentremunerationrelatingtoprofitsharing,shareoptionsor pension benefits from the Company.

TheBoardfurtherconfirmsthattheCompanydoesnotintendtoeffectanychangestoitsremuneration policy for the following year.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Corporate Governance - Statement of Compliance- continued

Risk Management and Internal Control

TheBoardisultimatelyresponsiblefortheCompany’ssystemofinternalcontrolsandforreviewingits effectiveness.Thedirectorsareawarethatinternalcontrolsystemsaredesignedtomanage,ratherthan eliminate,theriskoffailuretoachievebusinessobjectives,andcanonlyprovidereasonable,andnot absolute, assurance against normal business risks.

DuringthefinancialperiodunderreviewtheCompanyoperatedasystemofinternalcontrolswhichprovided reasonableassuranceofeffectiveandefficientoperationscoveringallcontrols,includingfinancialand operationalcontrolsandcompliancewithlawsandregulations.Processesareinplaceforidentifying, evaluating and managing the significant risks facing the Company.

TheBoardrecognisesthattheCompanymustmanagearangeofrisksinthecourseofitsactivitiesandin thisrespectmaintainsasoundriskmanagementandinternalcontrolsystemwhichincludesthe determination of the nature and extent of the risks it is willing to take in achieving its strategic objectives.

TheBoard,inthisfinancialperiod,establishedaformalandtransparentarrangementtoapplyrisk managementandinternalcontrolprinciples,aswellasmaintaininganappropriaterelationshipwiththe Company’s auditors.

TheBoardisadjournedperiodicallyofthefinancialaffairsandoperationaldevelopmentsofthegroup entities to whom the Issuer has advanced the proceeds from the bond issue.

Audit Committee

During the current financial period, the Audit Committee met three times with 100% attendance.

TheAuditCommittee’sprimaryobjectiveistoassisttheBoardinfulfillingitsresponsibilitiesrelatingtorisk, controlandgovernance;aswellastoreviewthefinancialreportingprocesses.TheBoardhassetformal termsofreferenceoftheAuditCommitteethatestablishitscomposition,roleandfunctions.TheAudit CommitteeisasubcommitteeoftheBoardandisdirectlyresponsibleandaccountabletotheBoard.The Board reserves the right to change these terms of reference from time to time.

Furthermore,theAuditCommitteehastheroleandfunctionofscrutinisingandevaluatinganyproposed transactiontobeenteredintobytheCompanyandarelatedparty,toensurethattheexecutionofanysuch transactionwasatarm’slengthandonacommercialbasisandultimatelyinthebestinterestsofthe Company.

AsrequiredbytheMalteseCompaniesAct(Cap.386)andtheListingAuthorityCapitalMarketsRules,the financialstatementsofSDFinanceplcaresubjecttoannualauditbyitsexternalauditors.Moreover,the AuditCommitteehasdirectaccesstotheexternalauditorsoftheCompany,whoattendtheBoardmeetings at which the Company’s financial statements are approved.

TheAuditCommitteeiscomposedofthreeindependentnon-executivedirectors,inaccordancewithCapital MarketsRule5.117.ThemembersoftheAuditCommitteeareMrStephenMuscat,MrPhilipMicallefand DrVinceMicallef.MrStephenMuscat,whoalsoactsastheChairmanoftheAuditCommittee,isaCertified PublicAccountantandisconsideredbytheBoardtobebothindependentandcompetentinaccountingas required in terms of the Capital Markets Rules.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Corporate Governance - Statement of Compliance- continued

Relations with Bond Holders and the Market

PursuanttotheCompany’sstatutoryobligationsintermsoftheMalteseCompaniesAct(Cap.386)andthe ListingAuthorityCapitalMarketsRules,theAnnualFinancialReportandFinancialStatements,theelection ofdirectorsandapprovalofdirectors’fees,theappointmentoftheauditorsandtheauthorisationofthe directorstosettheauditors’fees,andotherspecialbusiness,areproposedandapprovedattheCompany’s Annual General Meeting.

TheCompanycommunicateswithitsbondholdersbypublishingitsinterimresultsforasix-monthperiod duringtheyearandbywayofpublicationofthefullyearAuditedFinancialStatements.TheFinancial AnalysisSummaryisalsopublishedinSeptember.Additionally,duringthecurrentfinancialperiod,the CompanyorganisedaspecificsessionforFinancialIntermediariesandthepresstoexplaintheCompany’s resultsandthoseoftheGroup.DuringtheperiodApril2021toMarch2022,thecompanyissuedseven companyannouncements.TheBoarddeemsthatitisprovidingthemarketwithadequateinformationabout its activities through these channels.

Inthisrespect,thedirectorsareoftheviewthatPrincipleTenoftheCodeofCorporateGovernanceisnot applicable to the Company.

Other Information

InviewofthesizeandtypeofoperationsoftheCompany,theBoarddoesnotconsidertheCompanyto require the setting up of a nomination committee.

Duringthefinancialperiodunderreview,noprivateinterestsordutiesunrelatedtotheCompanywere disclosedbythedirectorswhichwereorcouldhavebeenlikelytoplaceanyoftheminconflictwithany interests in, or duties towards the Company.

TheCompanyisamemberofthedbGroup,whichgrouphasitsownprogramforCorporateSocial Responsibility initiatives.

Conclusion

TheBoardconsidersthattheCompanyhasgenerallybeenincompliancewiththeprinciplesthroughoutthe period under review as befits a company of this size and nature.

Approved by the Board on 25 July 2022.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Statement of financial position

As at 31 March

2022

2021

Notes

€

ASSETS

Non-current assets

Loans receivable

64,332,686

62,232,686

Current assets

Receivables

91,327

2,819,773

Current tax assets

1,177

Cash and cash equivalents

3,018,511

2,293,486

Total current assets

3,111,015

5,113,259

Total assets

67,443,701

67,345,945

EQUITY AND LIABILITIES

Capital and reserves

Share capital

250,000

Retained earnings

35,007

30,137

Total equity

285,007

280,137

Non-current liabilities

Borrowings

64,490,922

64,401,010

Current liabilities

Payables

2,667,772

2,664,101

Current tax liabilities

697

Total current liabilities

2,667,772

2,664,798

Total liabilities

67,158,694

67,065,808

Total equity and liabilities

67,443,701

67,345,945

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

ThefinancialstatementswereapprovedandauthorisedforissuebytheBoardofDirectorson25July2022. ThefinancialstatementsweresignedonbehalfoftheBoardofDirectorsbyRobertDebono(Director)and StephenMuscat(Director)aspertheDirectors’DeclarationonESEFAnnualFinancialReportsubmittedin conjunction with the Annual Financial Report.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Statement of comprehensive income

Year ended 31 March

2022

2021

Notes

€

Finance income

3,014,799

3,005,960

Finance costs

(2,917,413)

(2,913,811)

Net interest income

97,386

92,149

Administrative expenses

(89,893)

(84,796)

Profit before tax

7,493

7,353

Tax expense

(2,623)

(2,414)

Profit for the year

- Total comprehensive income

4,870

4,939

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

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Statement of changes in equity

Retained

capital

earnings

Total

€

Balance at 1 April 2020

250,000

25,198

275,198

Comprehensive income

Profit for the year - total comprehensive income

4,939

Balance at 31 March 2021

250,000

30,137

280,137

Comprehensive income

Profit for the year - total comprehensive income

4,870

Balance at 31 March 2022

250,000

35,007

285,007

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

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Statement of cash flows

Year ended 31 March

Note

2022

2021

€

Cash flows from operating activities

Interest received

5,743,245

2,989,727

Interest paid

(2,827,584)

(2,817,585)

Cash paid to services providers

(86,139)

(72,199)

Tax paid

(4,497)

(6,068)

Net cash generated from operating activities

2,825,025

93,875

Cash flows used in investing activities

Loans advanced to fellow subsidiaries

(2,100,000)

Net cash used in investing activities

(2,100,000)

Net movement in cash and cash equivalents

725,025

93,875

Cash and cash equivalents at beginning of year

2,293,486

2,199,611

Cash and cash equivalents at end of year

3,018,511

2,293,486

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

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

Notes to the financial statements

1.Summary of significant accounting policies

Theprincipalaccountingpoliciesappliedinthepreparationofthesefinancialstatementsaresetout below. Thesepolicieshavebeenconsistentlyappliedtotheperiodpresented,unlessotherwise stated.

1.1 Basis of preparation

ThesefinancialstatementshavebeenpreparedinaccordancewiththerequirementsofInternational FinancialReportingStandards(IFRSs)asadoptedbytheEUandwiththerequirementsofthe MalteseCompaniesAct(Cap.386). Thefinancialstatementshavebeenpreparedunderthe historical cost convention.

ThepreparationoffinancialstatementsinconformitywithIFRSsasadoptedbytheEUrequiresthe useofcertainaccountingestimates. Italsorequiresdirectorstoexercisetheirjudgmentinthe processofapplyingtheCompany’saccountingpolicies(seeNote3–Criticalaccountingestimates and judgments).

InviewofthecurrentsituationbroughtaboutbytheCOVID-19pandemic,thecompanyrecognises thatthekeyriskanduncertaintyofitsoperationsisthatofthepotentialnon-fulfilmentbythe borrowers,(thatisSDHoldingsLimited,SeabankHotelandCateringLimitedandHotelSanAntonio Limited) of their obligations.

TheGrouphasalsopreparedprojectionsforthecoming2years,basedonhistoricalfinancial informationandforecasts,butfactoringintheimprovedresultsofthepastyear.Theseforecasts projectapositivecashflowfortheGroup.TheGrouphasoverthepastyearsaccumulateda substantialcashreservewhichasatyearendamountedto€40millionandalsoutiliseda€10million loanundertheMDBCOVID-19Guaranteeschemetomitigateagainstitsworkingcapitalneedsand at the same time cushioning the effect of any prolongment in its receivables cycle.

TheUkraine-Russiaconflictisnotexpectedtoaffecttheresultsofthegroupasitsexposureof businessfromthesetwocountriesisnegligible. However,whilstthegrouphasnodirectbusiness linkageswiththesecountries,thedirectorsaremonitoringtheeffectthatthisconflictmighthave. Possibleincreasesinthepriceofgoodsandservicesistheprincipalchallengethatthegroup’s entities will experience in the next financial year.

Thedirectorsoftheguarantorhaveconcludedthatapartfromthestrongcashreserveposition reportedabove,thegroupalsohasasolidequitypositionresultinginagearingratioof23.1%asat 31March2022.ThiswillenabletheGrouptoensurethatitdoesmeetitscommitmentsbothfinancial and otherwise and hence the company’s obligations to bondholders should be met in full.

Onthisbasis,thedirectorshaveassessedthatthecompanyisexpectedtohavethenecessaryfunds tofinancethepaymentofbondinterestfallingdueinApril2022and2023andgoingforward. Accordingly,theboardcontinuestoadoptthegoingconcernbasisinpreparingthefinancial statementsandconsidersthattherearenomaterialuncertaintieswhichmaycastsignificantdoubt about the ability of the company and the Group to continue operating as a going concern.

Standards,interpretationsandamendmentstopublishedstandardseffectiveduringthecurrent financial year

Duringthecurrentfinancialyear,thecompanyadoptedamendmentstoexistingstandardsthatare mandatoryforthecompany’saccountingperiodbeginningon1April2021.Theadoptionofthese revisionstotherequirementsofIFRSsasadoptedbytheEUdidnotresultinsubstantialchangesto the company’s accounting policies impacting the company’s financial performance and position.

SD FINANCE plc

Annual Financial Report and Financial Statements - 31 March 2022

1.Summary of significant accounting policies - continued

1.1 Basis of preparation - continued

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

Certainnewstandards,amendmentsandinterpretationstoexistingstandardshavebeenpublished bythedateofauthorisationforissueofthesefinancialstatementsbutaremandatoryforthe company’saccountingperiodsbeginningafter1April2021. Thecompanyhasnotearlyadopted theserevisionstotherequirementsofIFRSsasadoptedbytheEUandthecompany’sdirectorsare oftheopinionthattherearenorequirementsthatwillhaveapossiblesignificantimpactonthe company’s financial statements in the period of initial application.

1.2 Foreign currency translation

(a)Functional and presentation currency

Itemsincludedinthesefinancialstatementsaremeasuredusingthecurrencyoftheprimary economicenvironmentinwhichtheentityoperates(‘thefunctionalcurrency’).Thefinancial statements are presented in euro which is the company’s functional and presentation currency.

(b)Transactions and balances

Foreigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangerates prevailingatthedatesofthetransactions. Foreignexchangegainsandlossesresultingfromthe settlementofsuchtransactionsandfromthetranslationatyear-endexchangeratesofmonetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

1.3 Financial assets

1.3.1 Classification

Thecompanyclassifiesitsfinancialassetsasfinancialassetsmeasuredatamortisedcost.The classificationdependsontheentity’sbusinessmodelformanagingthefinancialassetsandthe contractualtermsofthecashflows.Thecompanyclassifiesitsfinancialassetsasatamortisedcost only if both the following criteria are met:

-Theassetisheldwithinabusinessmodelwhoseobjectiveistocollectthecontractualcashflows, and

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

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

Forthepurposesofthisassessment,‘principal’isdefinedasthefairvalueofthefinancialasseton initialrecognition. ‘Interest’isdefinedasconsiderationforthetimevalueofmoneyandforthecredit riskassociatedwiththeprincipalamountoutstandingduringaparticularperiodoftimeandforother basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

Inassessingwhetherthecontractualcashflowsaresolelypaymentsofprincipalandinterest,the companyconsidersthecontractualtermsoftheinstrument. Thisincludesassessingwhetherthe financialassetcontainsacontractualtermthatcouldchangethetimingoramountofcontractualcash flows such that it would not meet this condition.