2017-Integrated-Annual-Report.Pdf

SUN INTERNATIONAL 2017 INTEGRATED ANNUAL REPORT

2017 INTEGRATED 2017ANNUAL INTEGRATED REPORT ANNUAL REPORT Our vision To be an internationally recognised and respected gaming and hospitality group that provides memorable experiences for our guests, offers rewarding employment for our people, delivers superior returns for our shareholders and creates genuine value for the communities in which we exist

Improve our existing operations and our guest experience

Protect and leverage our existing asset VISION, MISSION, portfolio OUR Grow our business VALUES AND into new areas and STRATEGIC products STRATEGIC OBJECTIVES OBJECTIVES Our people Governance and sustainability

Our mission To create great memories for our guests, people and stakeholders

Teamwork: We treat each other with respect and work together to create great memorable experiences for all Our values our stakeholders Our values represent an Customer first: Our customer is at the heart of all we do and we exceed unwavering commitment their expectations every time to behaving in a Passion: We inspire each other with consistent, positive our positive attitude and energy as we manner every day, in strive to be the best everything we do Professionalism: We use our skills and competence to provide the highest standard of work at all times CONTENTS ABOUT THIS REPORT SALIENT FEATURES

Flap Vision, mission, values and strategic objectives We are pleased to present Sun International Limited’s ifc About this report 2017 integrated annual report to our stakeholders. 1 Salient features

INTEGRATED ANNUAL REPORTING FRAMEWORKS OUR DECK OF CARDS REPORTS AND Our 2017 integrated annual report is primarily guided by 2 Chairman’s message INFORMATION REPORT PURPOSE the International Integrated Reporting Council’s (IIRC) 4 Group structure AVAILABLE ONLINE Sun International Limited reports in a holistic, recommendations for integrated reporting (the 6 Global presence framework). Our sustainability information contained in this Opened Transparency and transparent and integrated manner to assist our report and online is guided by the Global Reporting Initiative Debt at 8 Business model accountability stakeholders in making more informed decisions Revenue up Time Square Transaction 12 Operating environment (GRI) Sustainability Reporting Guidelines. This report is also entered into to 2 Corporate governance about our business. We aim to provide our prepared in accordance with the JSE Limited Listings R15 billion casino and 15 Stakeholder engagement 12% report stakeholders with a focused and concise report Requirements and the South African Companies Act, 71 of with South Africa arena on time increase interest

OUR DECK OF CARDS OUR DECK and 18 Material issues Social and ethics report that highlights both our successes and challenges 2008. A register of our application of the King IV governance debt to however, in Sun Dreams 20 Risk management King IV application EBITDA up during the period under review. principles is available online at www.suninternational.com. revenues are to register Our group annual financial statements (AFS) follow 13% EBITDA at B-BBEE compliance International Financial Reporting Standards (IFRS). well below 64.66% report 3.7% OUR GAME PLAN REPORT SCOPE AND BOUNDARY expectations 24 Strategic objectives Sustainability This is our primary report to stakeholders and covers the ASSURANCE 26 Chief executive’s review Our people financial period 1 January 2017 to 31 December 2017, 30 Strategic performance overview Health and safety following a change in our financial reporting from June to Standard/Code Assurance provider 31 Improve our existing operations Environment December, to align with our Chilean operations statutory requirements for a December year end. The report includes all The financial IFRS PricewaterhouseCoopers Inc and our guest experience Socio-economic information http://ir2017. 24 34 Protect and leverage our development Sun International’s subsidiaries and operating units, locally and presented on suninternational.com/ existing asset portfolio Enterprise and supplier internationally. Our report is structured around our leadership pages 46 to 55 downloads/downloads/pdf/ 36 Grow our business into new development reviews, business overview (our deck of cards), our strategic – extracted from Sun_International_IAR2017_ areas and products UN Global Compact performance and outlook (our game plan), our financial the group’s Group_AFS.pdf Several 37 Our people Report performance (our payouts) and our governance transparency audited AFS Launched OUR GAME PLAN Independent assurance and accountability (rules of the game). Achieved properties in 39 Governance and sustainability Sustainability GRI IRAS Ongoing statement Sun 39 Health and safety information1 AA1000AS http://ir2017. a group drought-stricken system The content covers the reporting period’s most material issues. International’s 41 Environment In some cases, this includes the period up to the report’s King IV suninternational.com/ areas reduced Annual financial other-gaming-information/ Level 1 improvements 44 Socio-economic finalisation. Material issues are matters that could substantively SunWay development statements water and influence the assessment of providers of capital and other B-BBEE Audit committee report B-BBEE Tourism Code Empowerdex culture 45 Enterprise and supplier stakeholders regarding the group’s ability to create value over http://ir2017. status consumption by operational development Directors' statement of information programme the short, medium and long term. In order to achieve our suninternational.com/ efficiencies responsibility other-gaming-information/ >30% Company secretary strategic objectives and manage our risks, these material issues certificate are continuously monitored by Sun International and its board Property risk Internationally Marsh Risk Consulting Value added statement as the governing body. Further detail on our material issues is audits Recognised 46 OUR PAYOUTS Audit Opinion set out on page 18 and http://ir2017.suninternational.com/ Code of 46 Chief financial officer’s review Directors' report our-deck-of-cards/ Practice: 49 Segmental review Group AFS NFPA and SANS Codes Accounting policies OUR PAYOUTS Company AFS Internal control Group Internal Audit functions Shareholder information DIRECTORS’ APPROVAL Letter from the chairman The board acknowledges its responsibility to ensure the 1 Sustainability information for the 2016 year was restated due to the change in the group’s year end from June to December. RULES OF THE GAME Notice of annual general integrity of information contained in the integrated annual meeting (AGM) report and has applied its collective mind in the preparation 56 Board of directors AGM explanatory notes of this report. The group audit committee was instrumental 58 Executive leadership Summarised consolidated in providing guidance on this process and keeping the board OPERATIONAL CONTEXT 56 59 Corporate governance overview financial results abreast of the reporting progress. South Africa continues to contribute the majority of group OUR NEW FORMULA FOR SUCCESS Directors standing for revenue at 70%, with Latam contributing 29% and Nigeria 1%. To improve our business performance, we created our new formula for success that embraces our vision and values in line with our election/re-election CV’s The board is of the opinion that this integrated annual report Gaming is the primary contributor to group revenue at 73%, brand promise and strategic objectives. Remuneration policy is presented in compliance with the framework and the alternate gaming contributes 7%, food and beverage 9%, rooms RULES OF THE GAME RULES Remuneration report information is correct and relevant. The report was approved 8% and other revenues 3%. Further detail on our formula for success is set out on page 37 and online http://ir2017.suninternational.com/our-game-plan/ Board of directors and by the board on 29 March 2018. prescribed officers REPORT VERSIONS Corporate data and Top-line enablers = the positive attributes that engage our people, helping them achieve their full potential, while creating great, administration For the period under review, the group has produced limited print OTHER GAMING Form of proxy copies of the integrated annual report. The printed report is a memorable experiences for our guests. INFORMATION summarised version of our full integrated annual report Other gaming available at www.suninternational.com Bottom-line disablers = the negative points that we need to eliminate to achieve our vision of being an internationally recognised and 63 Administration 63 information respected gaming and hospitality group. 63 Forward-looking statements Room statistics Valli Moosa Anthony Leeming REPORT FOOTPRINT INFORMATION OTHER GAMING OTHER Casino statistics Chairman Chief executive Sun International is committed to reducing its environmental footprint 29 March 2018 29 March 2018 wherever possible. With additional information available online, the printed report remains a summary document. Going forward, the group will produce an online integrated annual report only. NAVIGATION ICONS

For more information see our website Please refer to page/s in this Please email us at suninternational.com report for more information for more information STAKEHOLDER FEEDBACK We welcome stakeholders’ feedback on our reporting, which can be sent to [email protected] SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 1 OUR DECK OF CARDS CHAIRMAN’S MESSAGE

Corporate South Africa and the our debt and debt ratios have increased international corporate community have significantly. While we remain confident in been shaken by several corporate scandals the group’s ability to generate strong involving breaches of good governance free cash flows, we believe it prudent practices and ethical conduct. In this to strengthen the balance sheet. climate, it becomes all important to be Consequently, we are looking to raise hyper-vigilant and reinforce ethical values R1.5 billion through a rights offer. within the group. At Sun International, ethics is driven from the top and filtered Some of the key highlights in respect of down to all levels of the organisation. our significant strategic projects include Sun International has embraced King IV the opening of Time Square’s casino and (http://ir2017.suninternational.com/ arena, with the casino opening six months rules-of-the-game/), as it articulates ahead of the original opening date. principles the group has long upheld. Revenue has thus far been well behind As testament to our commitment to expectations and we are focused on ethical leadership, the board of directors increasing our market share and managing and executive committee signed an costs. The Maslow Time Square Hotel is ethics declaration, cementing their on track to formally open in April 2018 pledge to steering the group in a direction and will not disappoint our guests. that continuously upholds ethical conduct. Sun City’s refurbishments were largely completed by the end of 2016 and the From a macroeconomic perspective, the resort has shown a quick turnaround with global and local operating environment revenue up 7% and EBITDAR up 22%. remains challenging. In South Africa, the Our operations in Chile have had a mixed economic slowdown was further performance, with Monticello impacted exacerbated by heightened political by the tragic shooting and death of two uncertainty and Rand volatility. In an staff members. A third staff fatality industry reliant on consumer discretionary occurred at our Royal Swazi Sun property. spending and positive sentiment, group Our deepest sympathy goes out to the revenues came under pressure as families of the deceased employees. consumers become more conservative. This tough climate has made it even more We have made good progress in the necessary to strengthen the group’s Sun Dreams governance processes with balance sheet, contain costs and the establishment of relevant board streamline operations to ensure that we committees aligned to our South African operate as efficiently as possible. operations. Further details on the group’s financial The group remains passionate about its performance and operating environment sustainability commitments and are included in the chief executive’s responsibilities to the communities within review (page 26), chief financial officer’s which it operates. Sun International Valli Moosa review (page 46) and the operating proudly achieved a Level 1 B-BBEE status Chairman environment report (page 12). at a group level and was ranked the Strategically, we are focused on building a second most empowered company on the strong presence in Latin America (Latam), Johannesburg Stock Exchange. A new improving and consolidating our operating group diversity policy reinforces the At Sun International, performance in South Africa, exiting company’s commitment to maintain a ethics is driven from loss-making operations and strengthening diverse board of directors who can our balance sheet. In 2017 we exited the confidently lead the group. All properties the top and filtered International VIP Business, closed Fish continued efforts to further reduce their River and Sun Nao and downscaled the environmental footprint, and specific down to all levels Ocean Sun Casino operations. With energy and water targets were approved the significant investments made over the for the group in 2017. In view of the water of the organisation past four years and the failure of some of crisis in the Western Cape and Eastern these investments to meet expectations, Cape, GrandWest, Table Bay and

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Boardwalk have significantly reduced their water usage and have contingency plans to prevent disruption from the current water crisis. In total, South African operations’ water consumption reduced by 3% during the period under review. The Wild Coast Sun achieved zero-waste-to-landfill during 2017, and Sun City is looking to increase its local procurement in support of surrounding communities. Over the past 18 months, there have been changes in senior management with the resignation of Graeme Stephens and the appointment of Anthony Leeming as the new chief executive as well as Norman Basthdaw’s appointment as chief financial officer. It was encouraging to note the seamless transition in the management structure and the synergy between the board and management. The group welcomed Graham Dempster as an independent non-executive director to the board effective 6 October 2017. Graham has over 35 years’ experience in the local and international banking and financial services industry. He has also been appointed chairman of the investment committee, effective 1 January 2018. Nigel Matthews, Sun International’s lead independent director, retired effective 31 December 2017 and was succeeded by Leon Campher as the new lead independent director and chairman of the group’s remuneration committee on 1 January 2018. Graham Rosenthal, the current audit committee chairman announced that he will be retiring at the 2018 AGM and Caroline Henry will be succeeding him as the new audit committee chairman. Zarina Bassa resigned post year end on 12 February 2018. On behalf of the board, I welcome our new director and wish the outgoing directors well and thank them for their valuable contribution and roles played over many years. In this challenging and sometimes uncertain environment, it is important that Sun International continually engages with its stakeholders, updating them on progress against the group’s strategic objectives and listening to any specific issues that need to be addressed. Widespread management engagement took place during the year with key stakeholders such as employees, investors, shareholders, gambling boards and government to keep them informed of developments within the group. Of particular note was the active engagement around the revised short- and long-term remuneration incentives following the lack of shareholder support for the group’s 2016 remuneration policy. The revised policy will be subjected to a non-binding advisory vote at the upcoming AGM and shareholders are referred to the annual statutory report (http://ir2017.suninternational.com/downloads/ downloads/pdf/Sun_International_IAR2017_2017_annual_statutory_report.pdf) that discusses the changes considered based on shareholder feedback. Finally, I would like to thank the board, management and our employees for their unwavering support, commitment and passion in these difficult times. I believe in the group’s ability to emerge a stronger, more efficient and innovative group. Thank you to all our patrons, without whose support we would not be in business.

Valli Moosa Chairman 29 March 2018

Meropa Casino – Limpopo

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GROUP STRUCTURE

Sun International’s group structure remained largely unchanged from the prior reporting period. During the year under review the group closed Fish River, Sun Nao Casino, and transferred its Morula casino licence and opened the new Time Square Casino at Menlyn Maine. SOUTH AFRICA OTHER AFRICA LATIN AMERICA

Economic Economic Economic interest (%)1 Slots Tables Rooms interest (%) Slots Tables Rooms interest (%)2 Slots Tables Rooms

Gauteng Nigeria 49 106 10 146 Chile Carnival City 91 1 559 57 105 Monticello 55 2 164 81 155 Swaziland 51 158 15 351 Maslow 100 – – 281 Iquique 55 693 22 – Time Square 85.75 2 000 60 238 Temuco 55 694 36 96 2017 group contribution (%) Valdivia 55 405 22 104 Western Cape Puerto Varas 55 499 36 50 GrandWest 61 2 563 75 39 Coyhaique 55 168 11 40 Table Bay 61 – – 329 Punta Arenas 55 488 20 88 Worcester 61 220 7 98 SunBet 100 ––– ● South Africa 70 Panama R ● Latam 29 Ocean Sun KwaZulu-Natal ● Other Africa 1 Casino 55 600 38 – Sibaya 63 1 214 48 154 Peru Limpopo New York 55 444 17 – Meropa 68 417 17 60 Eden 55 206 – – North West Kingdom 55 161 6 – Sun City 100 700 51 1 296 Pachanga 55 254 8 –

Carousel 100 700 25 94 2 Sun International’s economic interest will increase to 65%, once the transaction to acquire a further 10% interest is concluded. Northern Cape Flamingo 71 300 10 –

Eastern Cape ● South Africa 73 EITDA Boardwalk 82 920 27 140 ● Latam 27 Wild Coast Sun 70 521 19 396 ● Other Africa 1 Free State Windmill 70 403 18 80 Naledi Sun 100 160 – –

Management activities Sun 100 ––– International Management

1 Economic interest excludes the interest held by the SIEST.

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GLOBAL PRESENCE

GROUP 2017 GROUP CONTRIBUTION (%) EBITDA

Other Africa % (2016: –) <1 27 4 303 18 717 3 720 764 12 959 384 GAMING ROOMS SLOTS LPMs1 TABLES EMPLOYEES VACATION LICENCES (2016: 4 147) (2016: 17 451) (2016: 3 651) (2016: 665) (2016: 13 179) CLUB UNITS (2016: 28) (2016: 382) 73%

Latin America South Africa (2016: 32) 27% (2016: 68)

Panama KEY GLOBAL PRESENCE STATISTICS Sun International owns and operates casino, Colombia hotel and resort properties in South Africa, Nigeria, Swaziland and Latin America. Our Nigeria SLOTS casino operations contribute the largest 1 146 106 10 333 share of group revenue. (2016: 1) (2016: 146) (2016: 158) (2016: 10) (2016: 354) Peru

Latin America

SLOTS

12 533 6 776 325 4 167 SLOTS (2016: 13) (2016: 533) (2016: 6 996) (2016: 313) (2016: 4 013) 1 351 158 15 215 (2016: 1) (2016: 351) (2016: 158) (2016: 13) (2016: 206) Chile

Swaziland South Africa 2017 GROUP CONTRIBUTION (%)

Revenue

Other Africa % (2016: 1) 1 %

70 1 SLOTS LPMs

Latin America South Africa 13 3 273 11 677 3 720 414 8 244 384 (2016: 32) 29% (2016: 67) (2016: 13) (2016: 3 117) (2016: 158) (2016: 3 651) (2016: 329) (2016: 8 606) (2016: 382)

OPEN HERE OPEN HERE 1 Limited Payout Machines (LPMs) SUN INTERNATIONAL 6 INTEGRATED ANNUAL REPORT 2 0 1 7 7 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION OUR DECK OF CARDS | BUSINESS MODEL continued OUR DECK OF CARDS | BUSINESS MODEL continued

BUSINESS MODEL Value created through outcomes Our business model requires utilising our inputs in the form of the six capitals, which through our business activities, culminate in outputs and outcomes Business activities Outputs Our business model culminates in specific outcomes that continue to create stakeholder value that create value for our various stakeholders. Good corporate governance, which has a far-reaching impact on the economy and society. These outcomes also align Delivering memorable guest experiences that align with our vision of being a directly to our strategic objectives. sustainable business principles and risk management underpin our business We offer gaming, events and hospitality, food and beverage and entertainment to our guests through preferred internationally recognised and respected gaming, event and hospitality, our casino, hotel and resort properties. We are leveraging our core assets, unused land, our track record, Improve our Protect and Grow our Our Governance model and provide the foundation on which we build and grow our business. food and beverage, and entertainment group. existing leverage our business into people and past experiences and management skills to take advantage of growth opportunities in emerging markets operations existing asset new areas sustainability but at the same time we focus on leveraging our existing assets to provide our overall memorable guest and our guest portfolio and products experience experience. We are invested in alternate gaming such as the LPM industry and online sports betting. CAPITALS CAPITALS OUTCOMES FINANCIAL Revenues generated Interest payments to debt funders GAMING – tables, slots, online sports Our source of funds includes debt R15 609 million R1 204 million Creating memorable Stimulating Creating (2016: R13 884 million) (2016: R508 million) and equity which we use for business betting and LPMs experiences through economies through opportunities for operations including running costs, 12 959 group employees Cash flows from internal Government taxes including our casinos and hotel taxes and salaries enterprise property refurbishments and Our gaming licences are the single most critical maintenance and strategic operations levies and VAT Stakeholders resorts to encourage paid. development acquisitions. enabler allowing us to operate. Gaming contributes FINANCIAL R3 654 million guests to return through our supply 31 R3 billion to our properties. chain. 73% of group revenue. We continuously evaluate our (2016: R3 152 million) properties across South Africa, Dividends paid to minority

PRODUCTIVE other Africa and Latam licence conditions to ensure they are relevant and are shareholders used optimally. Our unique properties form the bricks R330 million and mortar where our business (2016: R321 million) 27 Supporting activities are carried out to ensure we Employees Uplifting communities Reducing the offer our guests an unforgettable group gaming licences South Africa’s through our various environmental experience. Our unused land also Time Square development Meropa Hotel development transformation goals. social and economic impact on natural creates opportunities for development HOTELS AND RESORTS Maintaining an ethical development projects. resources. to unlock further shareholder value. food and beverage facilities R1 594 million R50 million culture and well- PRODUCTIVE The uniqueness of our properties and customer Sun City refurbishments Total capital expenditure governed organisation tables across the group service skills of our employees are our key in our countries of 764 R71 million R2 592 million representation. Inputs HUMAN differentiators to offering an unforgettable Our people are the primary interface experience for our guests, which keeps them Equity with our guests and the custodians of 4 303 South African employee Employee Share Trust distributions partners Customers the memorable experience we strive to rooms across the group choosing Sun International as a destination of development spend R22.4 million We use each of and debt and guests The gaming industry’s fiscal a total of R155 million was offer our guests. choice. Our hotel operations also service our (2016: R25.0 million) CREATING VALUE AS the six capitals R95 million funders contribution in the form of spent by CASA members on Debt and equity funding (2016: R84 million) A GAMBLING AND and appreciate casino guests, particularly those situated at our HUMAN Employee training interventions various taxes and levies paid initiatives focusing on: casino properties. Employee remuneration HOTEL INDUSTRY by the Casino Association of responsible gambling, that there are Respected brand and reputation 4 249 INTELLECTUAL (2016: 6 600) The gambling industry remains South Africa (CASA) members education, health, sports, arts R3 023 million 2 trade-offs between Our intellectual capital includes our (2016: R2 712 million) a significant contributor in amounted to R5.9 billion in and culture, and the them. These trade- gaming licences, brand and know-how fostering economic growth the year ended 31 March 2017. environment. which provides our licence to operate 384 and supporting over 64 000 Sun International’s contribution Sun International’s socio- offs are carefully Vacation Club units Regulators and cultivates a wealth of management FOOD AND BEVERAGE 27 and jobs. The South African to government during the year economic development aligns considered expertise and innovative IT. INTELLECTUAL ending 31 December 2017 with the CASA focus areas of gaming licences industry gambling industry is worth Energy and water The group’s food and beverage offers something for (2016: 28) about R27 billion, up 4% on the was R3,654 million education, sports, arts and to preserve bodies shareholder value. all food lovers – from fine dining to take-away comparative period1 and is (2016: R3,152 million). culture and the group

ENGAGEMENT STAKEHOLDER estimated to reach R28 billion contributed R16 million SOCIAL AND Active stakeholder engagement options and everything in-between. The travel and tourism industry Socio-economic development Enterprise and supplier by the end of 2018. Research2 during the year ending RELATIONSHIP also forms an important part development also predicts that the industry 31 December 2017. R15.9 million of South Africa’s economy as Our guests, shareholders, employees, R16 million will grow at a compounded communities, gambling boards, SOCIAL AND R43.5 million it continues to attract domestic Good progress continues to be B-BBEE LEVEL rate of over 5% during the next government and regulators are key invested in socio-economic development RELATIONSHIP (2016: R30.2 million) and foreign travellers. Although made in supporting B-BBEE four years. Of this total revenue stakeholders and we actively engage the weak economy has with 36%3 of the 38 CASA Level 1 Gaming generated, the majority (66%) and manage these stakeholder relations Unused land within the group (2016: Level 2) Unions dampened domestic travellers’ members rated as Level 1 to promote a shared value proposition. boards was generated from casinos, EVENTS AND CONFERENCING spend on leisure and contributors based on the despite the 1.8% drop in gross

VISION, MISSION AND VALUES | STRATEGIC OBJECTIVES | | OBJECTIVES | STRATEGIC MISSION AND VALUES VISION, entertainment, it has also Tourism Sector Code. gambling revenues year-on- 18 717 Most of our properties have the facilities and Carbon emissions (Scope 1 and Water consumption encouraged some travellers Sun International’s B-BBEE year. The gross gambling NATURAL Sun International slot machines infrastructure to host world-class events and Scope 2) to opt for domestic travel as current rating was externally 5 340 041 kl revenue of LPMs increased Our business activities depend the depreciating Rand makes verified as a Level 1 contributor. conferences, which drive footfall at properties and 268 632 CO2e (2016: 5 072 217 kl) by 14.1% to R2.7 million1 , on natural resources particularly foreign travel more expensive. (2016: 290 570 CO2e) largely due to the increase in 1 Revenue reported in South Africa’s water and energy. Some of our 3 720 creates memorable experiences. Some of our NATURAL Total waste recycled Sun International’s wide array active LPMs in all provinces. National Gambling Board’s annual properties are located in pristine Limited payout machines (LPMs) in South Africa flagship annual events include the Nedbank Golf Energy consumption of world-class hotels situated report for the period ending environments rich in biodiversity 3.7 tonnes Sun International’s casino 31 March 2017. (2016: 3.6 tonnes) in pristine locations around which we protect and preserve. Challenge, SunMet and Miss South Africa. 307 060 056 kWh Communities revenues amounted to 2 CASA 2017 survey of casino the world. (2016:NATURAL 290 516 560 kWh) R11.5 billion, 11.4% up on the entertainment in South Africa. 3 PricewaterhouseCoopers Gambling comparative period ending As part of the industry’s Outlook South Africa 2017 – 2021 31 December 2016. commitment to uplifting report. South African communities, EXTERNAL ENVIRONMENT: REGULATION | ECONOMY INDUSTRY | GOVERNMENT | TECHNOLOGY | SOCIETY NATURAL ENVIRONMENT | POLITICAL CLIMATE

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Peru2 PRIMARY GAMBLING The FICA commenced in October 2017, Peru’s economic growth gained however, the gambling industry will be momentum in the third quarter of LEGISLATION operating within a transition period to 2017, underpinned by stronger domestic allow for system changes and training of demand, particularly a turnaround in fixed employees, among others. In the investment. Public investment improved as South Africa meantime, Sun International has designed key infrastructure projects restarted. Higher The National Gambling and implemented its anti-money commodity prices also boosted private Act, 7 of 2004 laundering and anti-corruption policies investment in the mining and hydrocarbon taking account of legislative changes. industries. With business confidence up Liquor legislation towards the end of 2017, growth should The liquor licence conditions at pick up in 2018, buoyed by strong global Time Square have negatively impacted demand for minerals and a ramp up in operating hours and revenue. The group infrastructure spending. However, volatility recently received approval for extended in global commodity prices is always trading hours from the Gauteng Liquor present and could impact growth. Board.

REGULATORY ENVIRONMENT Chile – The Law No 19.995 B-BBEE legislation The group monitors its dynamic regulatory The group continues to embrace environment through its legal and Colombia – The Law No 643 transformation and remains committed to compliance departments in South Africa continually improving its B-BBEE and Latam. Peru – The Law No 27.153 credentials in its South African operations. Sun International achieved a Level 1 The National Gambling Board (NGB) Panama – The Law No 19 B-BBEE status as at 31 July 2017. oversees the regulation in South Africa’s of 8 May 1947 gaming industry. In addition, each GAMING AND HOSPITALITY province has its own gaming legislation. There are 40 authorised gaming licences ENVIRONMENT in South Africa and 38 have been issued. Gaming Sun International has 13 of these licences South Africa’s casino industry remains in the eight provinces where it operates. under pressure on the back of a struggling We are also a member of The Casino economy placing increased pressure on Association of South Africa (CASA), which consumer disposable income. Despite represents the interests of the country’s these challenges, the gaming industry legal casino gaming industry. continues to contribute significantly to the economy through employment Following the move of one of the North opportunities (direct and indirect) and West licences (Morula Sun) to Gauteng, boosting government tax revenues. the dti authorised a 41st licence in North There was an increase in illegal and online West, which has been challenged by CASA gambling (currently prohibited in South as no socio-economic study was conducted Africa) resulting in negative socio- to justify the additional licence and there is economic impacts. These include less a concern that this may set a precedent collected taxes for national development for the granting of future licences. and redundancies in casino jobs. Illegal In Chile The Superintendent of Casinos gambling remains a concern and it was (SCJ) oversees 18 authorised casinos in Sun International is also in the process of encouraging to note the ongoing support 13 regions of the country, with another implementing alternative non-tobacco from CASA and the dti in combatting this, seven casinos operating under concession smoking options, at certain South African but more needs to be done in South Africa granted by certain municipalities. In terms casino properties beginning with Sun City and Chile. and in Chile, we have increased the of a new casino law, the licence for these In 2017 the High Court of South Africa number of outdoor smoking decks. casinos expired in December 2017 and the ruled that winnings obtained through group is in the process of submitting bids Taxation legislation illegal gambling will be forfeited. for these licences, with the successful The increased maximum marginal tax rate applicant to be named by mid 2018. The proliferation of Electronic Bingo of 45% for individuals earning more than Terminals (EBTs) continues to impact the The new licences will fall under the R1.5 million from the 2018 tax year as well regulations of the SCJ. casino market in South Africa. While the as the increase in VAT, from 14% to 15%, NGB is against the roll out of EBTs, certain Smoking legislation are further factors that could negatively provinces continue to issue licences or are impact customer disposable income going New anti-smoking regulations to ban looking to do so. Sun International is not forward. The increase in VAT will come as opposed to EBTs, but we do object to smoking in public places are expected to a direct increase in costs as we cannot be published soon. The legislation aims to having them licenced in the catchment pass on the increase to our gaming areas of casinos where significant introduce several amendments to South customers. investments have been made in return for African smoking laws, which could the casino licence. negatively impact casino revenues. CASA Financial Intelligence Centre Act engaged with the Department of Health to The amendments to the Financial The casino industry in Latam showed determine if concessions could be granted Intelligence Centre Act (FICA) has placed mixed results in 2017. Chile was impacted to enable casinos to retain the current 25% onerous control requirements on the by the challenging economic climate and smoking areas within casinos. group for transactions under R5 000. the tragic shooting in Monticello. In Peru,

1 IMF World Economic Outlook Update, January 2018. 2 The World Factbook.

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1 IMF World Economic Outlook Update, January 2018. 2 The World Factbook.

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 13 OUR PAYOUTS | OPERATING ENVIRONMENT continued

the industry stagnated as the economy REGULATORY AND continued to experience mining industry Total African casino licences and political turmoil. INDUSTRY BODIES Online gambling is currently prohibited in 14 Tsogo Sun Chile while it is opening up in other Sun International countries in the region. South Africa 13 Africa (South Africa) • The National Hospitality Gambling Board 1 Nigeria The hospitality industry is particularly • The Casino Association vulnerable to the ebbs and flows of of South Africa economic conditions and increasing 1 Swaziland • The Department of competition. 40 Trade and Industry 2 Sun International Rooms revenue makes up only 8% of (Other Africa) Sun International’s revenue, with most of 8 Peermont Global the group’s hotels primarily focused on serving our gaming customers. In South Africa, only Sun City, the Table Bay and 1 Caesars Entertainment The Maslow are focused on local and international business and leisure 1 Desert Palace Casino* travellers. Once The Maslow Time Square Hotel formally opens in April 2018, the Latam 1 Leithlo Resort* group will have an additional 238 rooms. Chile In Chile the group has several hotels at its South Africa source: CASA’s 2017 • SCJ – operating casino properties which serve both local Survey of Casino Entertainment under the auspices of in South Africa. travellers and VIP gaming customers. the Deputy Minister * Non-CASA member. TECHNOLOGY of Finance ENVIRONMENT Colombia Total Sun International Latam licences Technology is inherent in Sun International’s • The Coljuegos business of gaming and hospitality. 7 Chile It assists in creating innovative Peru Latam opportunities to understand and better • The General Direction serve our customers and identify of Casino Games and 1 Panama efficiencies as we strive to contain costs. Slot Machines 4 Our world-class Enterprise Gaming and Panama Peru Bally Business Intelligence systems • The Gaming Control continue to provide invaluable customer 12 Board – operating data to track customer behaviour and under the auspices of interact with customers directly. Going the Minister of forward, we will be adopting world-class Economy and Finance online gaming software for our online sport betting offering, SunBet. The threat of cyber attacks is also SOCIETAL ENVIRONMENT increasing. To address this threat, various Our casino properties, which to a large technologies have been implemented extent have exclusive rights in the areas groupwide to detect and block multiple where they operate, impact the levels of cyber threats. surrounding communities. Many of our customers and employees come NATURAL ENVIRONMENT from these communities and play a Even though our business poses limited meaningful role in community risk to the natural environment, the group development through various enterprise remains committed to limiting its and supplier development initiatives. Being environmental impact through our various a responsible corporate citizen is part of initiatives aimed at reducing resource the group’s DNA and we fully support consumption. The Eastern Cape and responsible gambling through the South Western Cape water crisis impacted three African Responsible Gambling Foundation, of our properties – Boardwalk, GrandWest the entity that supervises the National and Table Bay. Management is looking at Responsible Gambling Programme (NRGP) sustainable solutions to ensure our guests in cooperation with the gambling industry are not negatively impacted, including operators and governmental regulators. sinking additional boreholes and The NRGP integrates education, research completing the construction of a and treatment into one programme. purification plant. We follow a similar approach to reducing our environmental footprint in our Latam operations. Some of the initiatives include geothermal sources such as ground-source heat pumps and solar panels.

14 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

STAKEHOLDER ENGAGEMENT We actively engage with our stakeholders and value constructive feedback as well as encourage the voicing of legitimate concerns and comments through the various communication channels that we make available.

STAKEHOLDER Key stakeholders Stakeholder engagement process ENGAGEMENT APPROACH Every aspect of our business interacts with stakeholders and all our stakeholder relationships impact directly and indirectly on our business and its reputation. Our Identify key reputation or social and relationship stakeholders capital has a direct impact on our financial Employees capital, as it influences whether consumers decide to become our guests; whether suppliers want to be vendors; and whether government believes that we are complying with regulations, willing to give back to the community and driving Annual economic development. stakeholder Equity Achieving our five strategic objectives assessment Customers depends on our ability to engage with and partners respond to our stakeholders. Our various and debt and guests methods of engagement include, among funders others, face-to-face formal and informal meetings, results presentations and our Ongoing annual general meetings. We also engage stakeholder through our marketing efforts, advertising engagement and communication through electronic media, newsletters and roadshows. We Regulators survey our guests and our employees with and the aim of obtaining their feedback and industry responding to it. As testament to our open bodies and transparent communication, we Identify appointed a group community liaison and address officer in January 2018 to focus on concerns community-related engagement. ENGAGEMENT PROCESS The group’s stakeholder engagement Gaming process is depicted alongside. We annually Unions assess our stakeholder universe based on boards Regular their influence on the group and the stakeholder group’s influence on a particular feedback stakeholder grouping. We identify any material issues that may exist and purposefully engage to resolve such issues or to build a better understanding of our Regular stakeholders. The risk and social and reporting to the ethics committees provide oversight of Communities board, risk as well the group’s stakeholder engagement and as social and are responsible for keeping the board ethics sub- abreast on material matters arising. committees

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 15 OUR PAYOUTS | STAKEHOLDER ENGAGEMENT continued

STAKEHOLDER ENGAGEMENT

Link to Method of Key stakeholder Actions to address Link to strategic Stakeholder engagement issues stakeholder issues material issue objective

Communities • Direct engagement • Perception of • Appointed a dedicated group • Remaining relevant • Governance • Corporate website community community liaison officer in the societies and • Annual reporting upliftment • Ongoing supplier development within which we sustainability operate • Projects and • Limited in the communities we • Our people initiatives procurement operate in • Managing relations opportunities in the • Financial investment in with our key communities socio-economic development stakeholders initiatives

Customers • SunMVG • Customer • Implemented a new customer • Remaining relevant • Improve our and guests programme segmentation satisfaction survey in the societies existing • Interactions at • Customer service • Enhanced business analytics to within which we operations properties • Perception of value improve customer segmentation operate and guest experience • Brand campaigns • Discretionary • Ongoing learning and • Managing relations • Direct marketing spending under development programmes for with our key • Grow our stakeholders business into • Guest feedback pressure employees to improve skills and new areas and experience customer service • Exploring and and products measures • Ongoing customer surveys delivering on growth • Customer opportunities management strategy

Employees • Roadshows • Fair remuneration • Rolled out the SunWay culture • Managing relations • Our people • Employee • Learning and programme and employee with our key • Improve our engagement development value proposition stakeholders existing surveys • Succession • Reviewed and updated the operations • Online planning group remuneration policy to and guest communication • Talent align with best practice and experience • Quarterly One Sun management King IV magazine • Transformation • Ensuring compliance with the tenets of ‘equal pay for work of • Performance • Performance equal value’ throughout our reviews management South African operations • Employee inductions • Ongoing learning and development initiatives • Introduced a new talent acquisition strategy • Finalised Sun International’s talent management strategy

Equity • Analyst • Underperformance • Debt strategy communicated to • High gearing levels • Grow our partners presentations • Capital allocation investors through presentations, • Exploring and business into • Shareholder direct engagements and annual delivering on new areas meetings (AGM) and interim reporting growth and products • Direct engagement • Raising capital through a opportunities • Protect and with executives rights offer leverage our • Annual and interim existing asset reporting portfolio • Announcements • Investor relations website

16 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

Link to Method of Key stakeholder Actions to address Link to strategic Stakeholder engagement issues stakeholder issues material issue objective

Debt funders • Analyst • Debt funding • Raising capital through a • High gearing levels • Protect and presentations • Debt ratios rights offer • Managing our way leverage our • Direct engagement • Underperformance • Debt strategy in place through tough existing asset portfolio with executives • Capital allocation • Engaging with the various economic • Annual and interim lenders to renegotiate debt conditions reporting covenants • Announcements • Investor relations website

Gambling • Direct engagement • Electronic Bingo • Executives, together with group • Managing relations • Protect and boards • Lobbying through Terminals (EBTs) compliance continue to build with our key leverage our industry body CASA licencing relationships with all provincial stakeholders existing asset • Workshops • Licence conditions gaming boards through regular • Remaining relevant portfolio interaction • Submissions and change requests in the societies • Governance applications • Site visits to key properties within which we and operate sustainability • Onsite inspections

Regulators • Direct engagement • Compliance with • Ongoing engagements with the • Managing our • Protect and • Lobbying through relevant legislation, regulators and industry bodies complex regulatory leverage our industry body CASA e.g. B-BBEE, • Continuous monitoring of environment existing asset • Workshops labour, smoking changes to regulation directly portfolio and liquor • Submissions and impacting the group • Governance applications and sustainability • Onsite inspections

Unions • Direct engagement • Fair remuneration • Regular engagement with union • Managing relations • Our people • Workshops • Conditions of leaders and Sun International’s with our key • Improve our employment chief executive updates them stakeholders existing on the business • Remaining relevant operations • Entered into a three-year wage in the societies and guest agreement with SACCAWU within which we experience • Implemented medical aid for operate all employees

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 17 MATERIAL ISSUES

We consider material issues as matters that could substantively influence the assessment of providers of capital and other stakeholders regarding Sun International’s ability to create value over the short, medium and long term. Our material issues also inform our business model, strategy and stakeholder engagement process. To achieve our strategic objectives and manage our risks, these material issues are continuously monitored by Sun International and its governing body.

MATERIALITY APPROACH

Our materiality determination process identify the most material issues discussed Our material issues are addressed through includes consultation and interaction with and addressed. Based on this review, our strategic objectives, which are our stakeholders including employees, stakeholder consultation and feedback as discussed in the chief executive’s review stakeholders, investors, government, well as taking account of the group’s top on page 26 and throughout our integrated regulators and industry bodies as well as risks and opportunities, our material issues annual report. the communities within which we operate. are determined and discussed at the The process of determining materiality (see Additionally, we continue to monitor our relevant governance committees including below) is ongoing and evolves each year, external operating environment which executive management, board, social and thereby ensuring our material issues remain includes factors beyond our control such ethics, audit and risk. In addition, an relevant. as the economic and political climate, external assurance provider performs a natural resources and regulations. Internal materiality review of our board and documentation, committee meeting committee minutes to confirm Sun minutes and strategies are also reviewed to International’s material issues.

MATERIALITY DETERMINATION PROCESS

REVIEW CONSULT DETERMINE DISCUSS EXTERNAL REVIEW

and update with key the group’s material issues of documentation stakeholder stakeholders risks and with governance to confirm engagement and review opportunities committees material issues strategy documentation and how these (executive to identify impact on management, material issues material social and issues ethics, audit and risk)

18 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

MATERIAL ISSUES The material issues tabled below were reviewed, refined and approved by the board as being relevant to the group for the year under review.

Material Reference to issue status Material issue Why this is considered material Strategic objective discussion since prior year in report

Managing our way Our business depends on consumer spending at our Improve our existing Page 2, 12, through tough properties. The prevailing tough global economic operations and our 22, 26 economic conditions environment continues to place strain on consumers’ guest experience. disposable income, particularly discretionary spending on gaming and hospitality. This in turn negatively Protect and leverage impacts our profitability. The ongoing political and social our existing asset challenges in South Africa remain a concern for the portfolio. group.

High gearing levels1 Managing high debt levels, in a tough economic Protect and leverage Page 2, 23, environment, and managing certain properties that have our existing asset 26, 53 performed below expectations is imperative in ensuring portfolio. we continue to provide sustainable shareholder value.

Underperformance In this tough global economic environment, the group Protect and leverage Page 2, 23, of our new continues to carefully monitor the underperforming our existing asset 26 investments and investments in Colombia, Panama and South Africa portfolio. capital allocation1 (Time Square).

Expiring licences in Our casino business is dependent on the renewal of Protect and leverage Page 22, 23, Chile and GrandWest licences and the exclusivity of licences. The group our existing asset 28, 34 exclusivity1 continues to monitor licence renewal bidding processes portfolio. and changes in licence conditions that impact the

business.

Exploring and We continue to look for growth opportunities in Latam Grow our business. Page 28 delivering on growth as well as using undeveloped land in South Africa to into new areas and opportunities extract value. products. Improve our existing operations and our guest experience.

Managing our We operate in a highly regulated and complex Governance and Page 2, 13, complex regulatory environment. The proposed amendments to the smoking sustainability. 22, 23 environment legislation, the possibility of increased taxes and more onerous licence conditions will all impact the group’s revenues. The group continues to focus on compliance

requirements, ensuring we maintain our operational and social licence to operate.

Remaining relevant As most of our casino licences provide for exclusivity, we Governance and Page 13, 22, in the societies must remain mindful of the various communities within sustainability. 28, 34 within which we which we operate, to continuously provide services and Our people. operate products that support and remain relevant within these communities. The increased availability of alternate gaming and the encroachment of EBTs in our catchment areas remains a concern as our market share is eroded.

The water crisis The group remains cognisant of the water crisis in the Protect and leverage Page 2, 14, impacting Western and Eastern Cape and implemented various our existing asset 35, 41, 42 GrandWest, solutions to address the water crisis. External factors portfolio. Table Bay and such as the proposed material energy cost increase and Boardwalk as well as the financial crisis the supplier of energy is in, continue Governance and high energy costs1 to create additional pressure on our business. sustainability.

Managing relations Proactive stakeholder engagement is imperative to Governance and Page 3, 15, with our key ensure that we understand stakeholders’ needs to sustainability. 16, 17 stakeholders achieve our strategic objectives, minimise our risks and optimise business opportunities. Improve our existing operations and our guest experience. Our people.

1 New material issue. Improved Deteriorated Remained the same SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 19 RISK MANAGEMENT

The board is ultimately responsible for the governance of the group’s risk management, which includes the formulation of the group’s risk appetite and setting and monitoring of risk tolerance. The board discharges its duties by mandating specific risk management duties and responsibilities to the group risk committee.

The group operates in a dynamic and The risk committee is tasked with assessing the risks related to any new business challenging environment that includes opportunities against its risk appetite and risk tolerance. The chairman of the risk risks and opportunities both locally and committee reports to the board following each committee meeting in accordance with internationally. Sun International has a the committee’s terms of reference. The formal risk management process and committee’s mandate also provides that governance structure (see page 21) material issues are reported to the group’s Factors considered by the board with various management and board audit committee to ensure the audit when assessing risk sub-committees responsible for committee has appropriate insight into the • possible economic impact on our identifying, reviewing and monitoring group’s key risks and opportunities and to business the group’s risks. avoid duplication of matters within the remit of • degree to which it affects us and both committees. The board, through the our stakeholders RISK OVERVIEW audit and risk committees considers the risks • extent to which it is likely to grow The group’s management team is tasked and opportunities the group may face and in significance and impact our with identifying the risks the group faces assesses each issue in terms of the factors business in the future and each unit in South Africa, Africa and shown alongside. • business opportunities it presents Latam has a unit-specific risk register, The chairman of the audit committee is also • strength and effectiveness of using the same methodology, which is a member of the risk committee and the mitigating controls in place compiled and consolidated bi-annually. interaction between these two committees is • whether the residual risk is within The most significant risks are reported to such that the audit committee has an oversight the group’s tolerance levels. and reviewed by the risk committee at role specifically in relation to financial each meeting in the form of a risk reporting risks. dashboard, where the committee interrogates the controls and mitigating Risk management approach actions to ensure management is taking To adopt a more integrated and concise risk methodology and ranking system, to appropriate action and continually implement across all units and countries, management revised the group’s risk monitoring progress. The risks are also management approach. This revised risk methodology has enhanced our risk approach and linked to the group’s strategic objectives quality of reporting. Due to the revised methodology, the group compiled a consolidated to understand the likelihood of the group risk register where additional risks were introduced and certain risks were no longer achieving its long-term strategy. In considered material. addition, an annual risk workshop comprising the risk committee and Group Internal Audit (GIA) reviews the group’s risk management processes at group and at relevant exco members is held to ensure unit level. Its annual internal audit plan includes a review of the consistency of the the risk methodology is still relevant and application of the risk methodology and the effectiveness of risk controls. GIA’s overall that the group risks are representative of mandate includes the evaluation of risk exposures and the: the group’s risk universe. Exco remains collectively responsible for managing • reliability and integrity of information and reviewing the entire register prior to • effectiveness of operating processes each risk committee meeting. The group • safeguarding of assets considers its risks in terms of impact and • compliance with laws, regulations and controls. likelihood of a risk materialising, together with the effectiveness of the mitigating Risk management governance structure controls, which results in a residual risk The risk governance structure on page 21 depicts the various management and board exposure. A residual risk rating is sub-committees responsible for the risk management process. allocated to each risk as tabled on page 22.

20 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

SUN INTERNATIONAL’S RISK GOVERNANCE FRAMEWORK

Investment Nomination committee committee

Social and Remuneration ethics committee committee

Sun International Limited board of Risk directors Audit committee committee

INSURANCE AND RISK EXECUTIVE MANAGEMENT INTERNAL AUDIT

SOUTH AFRICAN and OTHER AFRICAN COUNTRIES LATAM

Divisional risk Sustainability Board and committee committee committee of directors

Unit operational risk IT governance Unit operational risk committee committee committee

Board sub-committee Management committee

RISK HEAT MAP The risk heat map below depicts Sun International’s top 15 risks in respect of likelihood and impacts.

1. Smoking legislation (South Africa and Latam) 1 2. Weak economic conditions 3. Erosion of market share due to EBTs and LPMs in catchment areas 2 4. Loss of GrandWest Casino 3 licence exclusivity 5. Ongoing changes in licence conditions 10 5 6. Increase in gaming taxes and VAT 4 7. Non-renewal of Chile municipal licences 7 8. Impairment of investments and going 8 concern of foreign subsidiaries Likelihood 9 6 12 11 (Panama/Colombia) 9. Debt levels and gearing 13 14 10. Time Square not achieving feasibility 15 11. Illegal gambling (South Africa and Latam) 12. Non-renewal of SCJ licences in Chile 13. Water supply risk at certain units 14. Infrastructure management and maintenance 15. Potential insourcing of temporary Impact employment services

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 21 OUR DECK OF CARDS | RISK MANAGEMENT continued

GROUP RISKS Based on the group’s new methodology process, the following risks have been identified as the key risks facing the group, together with the mitigating controls in place and the links to our strategic objectives, stakeholders and material issues. The table below includes our top 10 risks for 2017 compared to the top 10 risks in 2016.

Risk Strategic Material Page No. Risk Ranking Rating Mitigating controls objectives Stakeholders issue reference 1 Smoking 2017: 1 Serious • Legislative • Governance • Employees • Managing our 13, 17, legislation (2016: 4) developments and • Customers complex 19, 59 (South Africa monitored by sustainability • Health regulatory and Latam) management • Improve our authorities environment • Operational plans existing • Shareholders developed to address operations smoking legislation and guest • Rolling out alternative experience non-tobacco products at certain properties • Additional smoking decks at Latam operations • Industry monitoring and lobbying through CASA

2 Weak 2017: 2 Moderate • Cost containment • Improve our • Shareholders • Managing our way 2, 12, 19, economic (2016: 2 • Focusing on customer existing and potential through tough 21, 26, 59 conditions and 8) service and value operations investors economic offerings and guest • Employees conditions • Establishing an experience efficiency and optimisation team • Focusing on repairs and maintenance while carefully considering capital expenditure

3 Erosion of 2017: 3 Moderate • Lobbying through CASA • Protect and • Shareholders • Managing our way 13, 19, 21, market share (2016: 10) • Pursuing legal action in leverage our and potential through tough 28, 34, 36 due to EBTs Eastern Cape and existing asset investors economic and LPMs in KwaZulu-Natal portfolio • Gambling conditions catchment • Exploring new digital boards areas offerings • Regulators • Monitoring and • Suppliers commenting on all draft provincial regulations

4 Loss of 2017: 4 Moderate • Increasing focus on • Protect and • Gambling • Expiring licences 19, 34 GrandWest (2016: 3) compliance and leverage our boards in Chile and Casino licence interaction with the existing asset • Provincial GrandWest exclusivity Western Cape Gambling portfolio government exclusivity and Racing Board • Guests • Considering feasibility of relocating the Worcester casino licence • Cultivating positive relationships with key stakeholders • Continuing to review and challenge legislation

5 Ongoing 2017: 5 Moderate • Negotiating licence • Protect and • Gambling • Managing our 17, 28 changes in (2016: 1) conditions with various leverage our boards complex licence gambling boards existing asset • Provincial regulatory conditions • Proactively improving portfolio government environment relationships with • Shareholders gambling boards • Maintaining or improving current B-BBEE levels

22 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

Risk Strategic Material Page No. Risk Ranking Rating Mitigating controls objectives Stakeholders issue reference 6 Increase in 2017: 6 Moderate • Lobbying and • Protect and • Shareholders • Managing our 13, 17, gaming taxes (2016: 1) challenging proposed leverage our and potential complex 19, 59 and VAT gaming tax legislation existing asset investors regulatory • Monitoring CASA’s portfolio • Gambling environment progress on comments boards submitted to • Regulators government on draft legislation

7 Non-renewal 2017: 7 Within • Submitted bids for • Protect and • Shareholders • Managing our 13, 28 of Chile (2016: 3) appetite renewal of existing two leverage our and potential complex municipal licences and three existing asset investors regulatory licences additional licences portfolio • Chilean environment • Limiting capital municipalities expenditure until licence renewal certainty

8 Impairment of 2017: 8 Within • Closed the Sun Nao • Protect and • Shareholders • Managing our 2, 28 investments (New) appetite Casino in Colombia leverage our and potential way through and going • Relocating slot existing asset investors tough economic concern of machines to small portfolio • Employees conditions foreign casino facilities in subsidiaries Colombia (Panama/ • Closed the 66th floor Colombia) and VIP business and sold the 64th and 65th floor apartments in Panama • Negotiating an early exit of the Colombia lease

9 Debt levels 2017: 9 Within • Looking to raise capital • Protect and • Shareholders • High gearing 2, 17, 26, and gearing (2016: appetite through a rights offer leverage our and potential levels 46, 53 New) • Preserving capital by existing asset investors reducing or deferring portfolio • Debt funders capital expenditure • Managing working capital more effectively and efficiently • Cost containment • Suspending dividends to shareholders • Closure of loss-making units • Engaging with the various lenders to renegotiate debt covenant periods

10 Time Square 2017: 10 Within • Reconfiguring certain • Protect and • Shareholders • Underperformance 2, 26, not achieving (2016: appetite areas of the gaming leverage our and potential of our new 34, 35 feasibility New) floor asset portfolio investors investments and • Successfully opening of • Gambling capital allocation the casino and arena boards on time • Driving SunMVG sign-ups • Reviewing the current food and beverage offerings • Continuing to focus on marketing of Time Square

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 23 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

OUR GAME PLAN STRATEGIC OBJECTIVES

To achieve our strategy, we have set short- and medium-term objectives and initiatives, which are reviewed and updated when necessary. These objectives and initiatives address the material issues, risks and opportunities that the group faces as well as key stakeholder concerns and strategic growth aspirations. Our strategic objectives are incorporated under these five pillars. Governance and sustainability

As a responsible corporate citizen, the group has developed a credible track record that underpins our corporate reputation. Governance and sustainability are fundamental to Improve our Sun International’s operations and are interwoven into our strategy and existing decision-making process, from board operations and Our people and management level to our our guest operations. experience

Protect and Grow our In challenging the assumption that the leverage our business into Our people are the enablers of the markets in which we operate are new areas and group’s ability to achieve its strategic existing asset objectives. Given the highly regulated relatively mature, we are actively portfolio products relooking how our business is and service-orientated industry we structured and how we operate to operate in, our people’s motivation and maximise the value we can create and competence to perform and provide a improve our guest experience. memorable guest experience are key Ensuring that existing and new guests determinants of the group’s ongoing keep choosing Sun International success and sustainability. properties as their destination of While we believe there is still latent choice, through offering a great We have a diverse portfolio of assets growth to be had from our existing experience, is core to this focus area. including world-class five-star hotels, modern and well located casinos, assets, to effectively grow our business, some of the world’s premier resorts we are considering other geographic and some older legacy assets that for areas that offer attractive opportunities various reasons may no longer be for casinos. In particular, we continue positioned favourably. In evaluating our to focus on Latin America. We are also portfolio, we have identified those looking at the alternative gaming properties that can be better leveraged, market which continues to experience those that need protection and those strong growth. that may no longer be core to our strategy.

SUN INTERNATIONAL BRAND DIFFERENTIATORS

Significant contributors A strong brand The pioneers of Industry leaders Constantly An A company to the economies with a proud gaming in in the field demonstrating international with many iconic and communities in legacy South Africa of big events innovation in gaming business properties which we operate

SUN INTERNATIONAL 24 INTEGRATED ANNUAL REPORT 2 0 1 7 25 CHIEF EXECUTIVE’S REVIEW

My review provides a summary of Sun I am pleased to International’s position and performance in 2017 and our priorities for the year present my first chief ahead. This review should be read in conjunction with the individual strategic executive’s review. objective sections on pages 30 to 45, which detail the progress against each Having been part of strategic objective and our key priorities this company for for 2018. OVERVIEW more than 18 years, Over the past few years, the group has made significant investments including I am honoured developing Ocean Sun Casino and the to lead Sun Sun Nao Casino in Latam, refurbishing Sun City and developing Time Square. International into While the refurbishment of Sun City and the acquisition of SunSlots have met the future and expectations, the other developments have fallen well short, increasing the I thank the board group’s debt levels and debt ratios significantly. Over this period, economic for placing their growth in South Africa and Latam has slowed, political uncertainty has confidence in me. increased and social challenges, particularly in South Africa, are at an all-time high. Together, this has pressured consumer discretionary spending and slowed gaming revenue growth. Given the challenging environment and high debt levels, we have shifted our focus, realigned our strategy and are committed to getting the basics right as well as operating as efficiently and optimally as possible. At the same time, we are increasing our efforts to deliver outstanding service and creating lasting Anthony Leeming memories for our guests. While there is Chief executive much to be done, the change in focus has already paid dividends with a significantly improved comparative operating result in South Africa in the second half of 2017. Although we are facing several challenges, our business is resilient, cash generative and can adapt to the ever-changing environment.

KEY MESSAGES

Deteriorating Significant Focused on Time Square’s Improved Increased economy increase in group customer service, casino and arena comparative shareholding in impacting debt levels and operational opened but operating result Sun Dreams from revenues and debt ratios efficiencies, revenues are in South Africa 54.5% to 64.66% placing margins reducing wasteful well below in the second under pressure expenditure and expectations half of 2017 getting the basics right

26 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

Sadly, we experienced a tragic shooting touchpoints, where customer feedback is incident at our Monticello casino in Chile promptly fed back to management and Looking ahead where two employees were killed, and four addressed. Customer satisfaction targets We look forward to the Maslow injured. After the shooting we increased are also in place for 2018 to further Time Square Hotel's formal opening our security measures and encouraged all improve our service levels. We also in April 2018 and the continued employees to be extra aware of security improved our SunMVG loyalty programme success at our iconic property, threats and to raise the alarm when by offering early-bird discounts and Sun City. required. In a separate incident at Royal increased benefits such as leisure points to Swazi Sun, an employee was fatally injured keep customers engaged. New SunMVG To improve customer satisfaction while on duty. We have implemented sign-ups since the launch have been and remain relevant to our guests, measures to prevent such incidents from favourable. we are creating a single view of the reoccuring. Our thoughts are with the customer by enhancing our families and colleagues of the three To ensure we drive an all-embracing customer relations management employees who lost their lives and the four multifaceted guest focused behaviour, we platform. This means we can learn Monticello employees who were injured in launched our SunWay culture programme the behaviours and preferences the shooting. to encourage positive behaviours (known of each guest to expedite any as enablers) and discourage counter- complaints and requests. We will We made a number of changes to the productive behaviours (disablers). also revise our loyalty programme, executive management team. We Employees are encouraged to score the SunMVG, to implement digital welcomed Norman Basthdaw as our new SunWay formula regularly and provide communication and improve benefit chief financial officer and Thabo Mosololi feedback on how we can improve accessibility. VIP management is took over as chief operating officer from (see pages 1 and 37 for detail on the being decentralised back to Rob Collins, who is now our group strategy SunWay formula for success). properties to boost customer service and operations officer. I am confident that and engagement. these structural changes will further To remain relevant to our guests and to strengthen the executive management encourage them to keep returning to our Following an overhaul of our team and reinforce our strategic progress. properties, we continually refurbish our marketing approach in 2017, the hotels and casinos. During the year under new centralised marketing approach STRATEGIC OBJECTIVES review we refurbished Carnival City by integrates all projects into relevant PROGRESS IN 2017 AND improving the walkways, renovating the properties to improve events and campaigns. We will also be 2018 PRIORITIES restrooms and introducing new retail tenants such as Candilicious, FoodFactory insourcing a design team to improve We continually evaluate our strategic and RocoMamas. At Sun City, we marketing and property collateral as objectives and are confident that our shift refurbished the Welcome Centre at well as reduce costs. in focus and realignment within our Sun Central; and at Sibaya, we introduced strategic objectives will build a strong the new Rockwood Theatre. We also Efficiency and optimisation of foundation that positions the group to deal commenced a detailed review of all major with the current challenges and positions it our processes plant and equipment at our properties to for growth. Given the importance of our As part of getting back to basics, a lot of ensure they are well maintained. This will guests to the success of Sun International effort is going into optimising our not only contain future capital expenditure, and the need to get the basics right, we processes through increasing discipline, it will also ensure we improve our guests’ discuss our strategic objective of ‘Improve driving efficiencies and integrating key experience and attract new customers. our existing operations and our guest systems. This includes a human capital experience’ in two focus areas of ‘Improve Technology continues to play a vital role in management solution, Kronos, and advanced scheduling to improve workforce our guest experience’ and ‘Efficiency and enhancing our systems and improving management and to optimise staffing and optimisation of our processes’. customer service. Our Bally Business Data reduce overtime, which we commenced Intelligence system, implemented in the Improve our guest experience implementing in 2017. A new shared prior year, continues to improve our direct services centre for all Gauteng properties Our customers are at the heart of all we marketing initiatives to targeted customers was introduced to streamline support do, and it is imperative that we continually and anticipate their needs. Additionally, we services (finance and payroll), increase improve existing operations to ensure we signed contracts with Bede and Kambi to exceed their expectations and enhance the efficiencies and accuracies, and lower adopt their world-class online gaming guest experience. As such, we transaction costs. The bulk of the people in software for Sun International’s online implemented new customer survey these support services merged to form a sport betting offering, SunBet. transaction hub that operates from head office. Regional positions of finance, human resources, marketing and IT were also consolidated in the Western Cape.

Closed our Submitted bids for Expanded Rolled out our Good progress non-performing expiring SCJ operations in SunWay formula made in aligning Fish River and municipal licences Peru by acquiring for success and Latam’s Sun Nao Casino in Chile 100% of employee value governance operations and Thunderbird proposition structures with suspended the Resorts Inc and groupwide to Sun International’s International VIP Casinos encourage a governance gaming business Peruano S.A. positive working structures at Sun City and at culture, focusing the Ocean Sun on enabling Casino behaviours

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 27 OUR GAME PLAN | CHIEF EXECUTIVE’S REVIEW continued

Our International VIP gaming business Looking ahead Looking ahead continued to make losses due to a low We are establishing an efficiency and We will be submitting our bid for the win percentage, high costs and optimisation team to drive system licence renewal of the Wild Coast uncollected debts. Consequently, we optimisation, utilisation and Sun, which is due in July 2018. suspended this business in April 2017. integration; standardisation of our Construction of the Boardwalk Mall Due to the continued underperformance processes and enhanced information will commence subject to tenant of the Ocean Sun Casino, its operations flow. Operating margins will also be leasing and finance approval. have been scaled down and the VIP critically assessed and benchmarked In addition, Boardwalk will be business has been suspended while the in order to set targets. We will restructured once we have approval Sun Nao Casino in Colombia, which has conclude the Kronos and advance of our LA10 application. Concerns continued to incur losses, was closed in scheduling projects as well as bring remain around possible licencing of December 2017. We are in negotiations additional properties into the shared EBTs in KwaZulu-Natal that could also with the lessor of the Sun Nao Casino services centre. impact Sibaya and Wild Coast Sun’s premises to early exit the lease. revenue. The group concluded agreements to Protect and leverage our existing The Western Cape Government increase its stake in Sun Dreams during portfolio gazetted draft legislation on 2017 – from 54.5% to 64.66%. The The challenging economic environment, 28 February 2018 to establish three implementation of this transaction is particularly in South Africa, put us under zones for casinos in the Cape pending finalisation of an underwritten increased pressure to contain costs and Metropole and to allow for the 10-year land issue which is expected to be make some tough decisions for the relocation of casino licences. This finalised by the end of March 2018. In long-term success of our business. This legislation includes: changes to the October 2017, Sun Dreams expanded meant closing Fish River at the end of gaming tax tables and conditions for operations in Peru through its acquisition November 2017 and submitting an relocation, which includes additional of Thunderbird Resorts Inc and Casinos application to the gaming board for the taxes and fees; obligations to mitigate Peruanos S.A. that operate four gambling restructure of Boardwalk to address its any negative impacts which relocating operations and includes immovable operational performance. We finally a casino may have on the area from property. We also submitted bids for three settled the land claim with government for where the casino relocates; and to municipal licences in Chile that are R75 million for the Fish River property and provide economic opportunities for currently run by competitors. proceeds were received in February 2018. designated groups that reside in the Positively, we received gaming board area where the casino will relocate to. approval for the Boardwalk Mall We are still assessing the draft Looking ahead development. legislation and will respond at the To expand our market and create appropriate time. Management will growth opportunities, we will be Retaining our municipal licences and also focus on settling the North West investigating online sports betting winning others remains important to our licence conditions which we have opportunities in Latam, where good casino operations in Chile. Sun Dreams taken under review. prospects exist for online gaming submitted bids for both its municipal and sports betting. We will be licences in Iquique and Puerto Varas in On the property front, the Maslow concluding the Thunderbird Resorts Chile and submitted bids for Coquimbo, Time Square Hotel will be opened acquisition and commencing Viña del Mar and Pucón. formally in April 2018 and we are development of successful looking to restructure the Carousel municipal bids with the outcome of Our new Time Square casino and arena given the impact Time Square has had the municipal bidding process to be were opened in April and November 2017 on its business. We will continue to announced during June 2018. respectively. Casino revenues remain pursue land development below expectations and increased effort opportunities at Carousel, Carnival Our people is going into driving footfall and capturing City and Sibaya. markets we have not yet penetrated. Our people remain imperative to our Meropa’s 60-room hotel opened in Despite numerous interactions and business and we continued to invest in our August 2017 and has been well received legal interventions, the TCN employees’ learning and development, by our gaming and leisure guests. shareholder dispute remains with the aim of building casino and unresolved. A forensic audit has hospitality functional knowledge and skills. Good progress was made with land commenced which we expect will Of note was the partnership we entered developments at Carnival City, Carousel clear the path for discussions to into with the International Hotel School to and Sibaya, which will further unlock reopen and for the group to exit this open a gaming school that will offer value. We are in the process of drafting a business. tailored group learning and development partnership agreement with a construction initiatives. company to develop Carnival City’s undeveloped land to create a Carnival Grow our business into new areas We launched key projects to improve the precinct. and products organisation’s culture and drive positive Growing our business remains important, behaviour. For example, the SunWay but with the challenges we are currently culture programme has taken us on an facing and the underperformance of some exciting journey of self-reflection, which of our newer investments, our focus has was sculpted into themes, each one shifted from a growth and investment with its unique icon (see page 1). The phase to one of getting back to basics executive management team embarked as elaborated on page 27, and on a countrywide roadshow to share the addressing loss-making businesses. SunWay formula for success and update Therefore, we are carefully analysing our people on our strategy, focus areas capital allocation and managing our cash and challenges. We have a long way to flow to reduce debt and improve our debt travel on this journey but employee cover ratios. feedback and buy-in has been positive. We also developed our employee value proposition to attract and retain

28 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

talented staff (see page 38). Further, From a sustainability perspective, we The closure of loss making entities such as progress was made with our ‘equal formed a focused group sustainability hub Fish River, the International VIP Businesses work for equal pay’ analysis with the incorporating occupational health and (in South Africa and Panama) and the Sun objective of removing disproportionate safety, environmental, socio-economic Nao Casino will result in these losses no income differential levels over time. development and B-BBEE functions. Our longer recurring. In addition, the new approach to sustainability will ensure interventions that have and are taking place Maintaining and strengthening positive better alignment with the group strategy in respect of the Ocean Sun Casino, the relations with our union, SACCAWU, and ensure that sustainability will be Boardwalk and the Carousel are expected remains a top priority for Sun International. streamlined throughout the group. to result in much improved performance We entered into a three-year wage from these operations. agreement with the union, which is important for reducing strike action Looking ahead The opening of the arena at Time Square in November 2017 and the formal opening of and stabilising the workforce. We will streamline the group the hotel in April 2018 will increase footfall structure and embed our holistic to the property with a commensurate risk-based compliance programme. Looking ahead increase in revenue and EBITDA. In The sustainability strategy will be We will institute focused addition, Sun City will continue to benefit implemented and we will continue management development through from the significant refurbishment of the to promote and create awareness our wide array of learning and resort while The Table Bay Hotel is likely to around ethics in the workplace, development initiatives to drive come under some pressure from the through training and other initiatives. improved customer services as well stronger Rand and the water crisis facing as improving our performance the Western and Eastern Cape, which is management and change RIGHTS OFFER deterring tourists from visiting Cape Town management processes. and Port Elizabeth. Due to the difficult trading conditions Following the launch of our SunWay and Time Square trading well behind The Chilean economy is showing signs of formula for success, focus will be on expectations, the group renegotiated its recovery, assisted by the recent change in embedding this programme to South African debt covenant levels for government. Gaming revenues have ensure a positive culture change and June 2017 and December 2017. Although stabilised and Monticello is starting to more open and transparent employee trading has improved marginally at Time reflect revenue growth compared to the engagement. Ethics will be a key Square and the group met its debt prior year. The addition of Thunderbird focus to cultivate an ethical and fair covenants at 31 December 2017, the Resorts in Peru will contribute positively culture throughout the group. board deemed it prudent to embark on and we look forward to the outcome of the a capital raise exercise to de-risk the municipal licence bidding process, which Governance and sustainability balance sheet. Accordingly, the proceeds could significantly change our position in Chile. On the governance front, there were a from the rights offer will be used to repay few changes to the board during the year debt, creating headroom in relation With the proceeds from the rights offer, under review as discussed in the to relevant debt covenants. A stronger we will settle debt and capitalise chairman’s message on page 2. balance sheet and capital structure will Time Square which will significantly We value the support and guidance the also afford management more operational reduce our interest cost. outgoing directors provided over the years freedom to focus on the back to basics and wish them all the best in the future. strategy. In addition, the rights offer will I also look forward to working with our reduce Sun International’s interest charge APPRECIATION new director, who brings a wealth of as rates are based on Sun International’s I would like to extend my thanks to the experience and knowledge to the group. prevailing debt metrics. board for their ongoing support and wise counsel during this challenging year. To my Following feedback from shareholders FINANCIAL PERFORMANCE management team and all our employees, on our remuneration practices and Our group financial performance I fully appreciate that you are all working procedures, we revised the group is detailed in the chief financial harder than ever in these tough times. remuneration practices to align with officer's review on page 46. Thank you for your valued contribution shareholder interests and best practice. and I look forward to working with Detail on the group’s remuneration all of you, getting to know you policy and implementation report is OUTLOOK better and to continue building on the available online at http://ir2017. While the South African outlook has Sun International legacy of delivering suninternational.com/downloads/ improved and the economy is showing outstanding service and creating lasting signs of a recovery, we do not anticipate memories for our customers. We commenced with the development of that it will be immediately felt in a group governance framework to support discretionary expenditure and in particular the King IV principles and good progress discretionary consumer spending on was made with integrating Sun Dreams’ gaming. In response to disappointing corporate governance structures with revenue growth and the uncertain Sun International’s governance structures. economic outlook, management has A dedicated group ethics office was taken further steps to reduce the cost of established to reinforce our ethical culture. doing business and continues to drive and Anthony Leeming implement its ‘back to basics’ strategy The group’s risk methodology and risk Chief executive across the group with a specific focus ranking were revised to create a more 29 March 2018 integrated and robust groupwide risk on improving operating efficiencies approach with enhanced executive and margins and improving the accountability. guest experience.

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 29 STRATEGIC PERFORMANCE OVERVIEW

The information contained in the strategic performance overview section expands on the chief executive’s review in accordance with Sun International’s five strategic objectives. Given the importance of our guests to the group the first strategic objective: Improve our existing operations and our guest experience has been divided into two focus areas, namely ‘Improve our guest experience’ and ‘Efficiency and optimisation of our processes’ to distinguish our progress on and priorities for guests through process and system improvements.

Sun International’s five strategic objectives are the foundation of how we operate our business as well as identify and manage risks and opportunities, based on our identified material issues.

Page 31 Improve our existing operations and our guest experience • Improve our guest experience • Efficiency and optimisation of our processes The group’s performance is measured against Protect and leverage our these strategic Page 34 existing asset portfolio objectives and enables the group to create shareholder Page 36 Grow our business into new value. areas and products

Page 37 Our people

Page 39 Governance and sustainability • Health and safety • Environment • Socio-economic development • Enterprise and supplier The information contained in the strategic development performance overview section expands on the chief executive’s review in accordance with Sun International’s five strategic objectives (depicted above). Given the importance of our guests to the group the first strategic objective has been divided into two focus areas, namely ‘Improve our guest experience’ and ‘Efficiency and optimisation of our processes’ to distinguish our progress on and priorities for guests through process and system improvements. Our governance and sustainability strategic objective is discussed in two sections of this report – the sustainability portfolios of the business, namely health and safety, environment, socio-economic development and enterprise and supplier development are discussed under the strategic performance overview, while Sun International’s governance overview is on page 59 of this report with the detailed governance report available online. http://ir2017.suninternational. com/rules-of-the-game/

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Improve our existing operations and our guest experience IMPROVE OUR GUEST EXPERIENCE In accordance with our mission of creating great memories for our guests, we must remain relevant and continually offer our guests memorable experiences. Our two greatest assets – our people and our properties – work tirelessly to place our guests first and at the core of our business, demonstrating how we walk the talk to crystallise our vision.

2017 PROGRESS SCORECARD

2017 focus areas Self-assessment on what we achieved Page reference

Customer service • Implemented a new customer satisfaction survey. 27, 31, 32

• Rolled out the SunWay culture programme and new employee value 28, 37 proposition.

Property refurbishments • Refurbishments completed at certain properties. 27, 32

Ongoing property repairs • Maintenance schedules and priorities being developed for all 27, 32 and maintenance properties.

World-class gaming systems • World-class online gaming systems in place. 27, 32

Substantially achieved In progress Limited progress

OVERVIEW information. Sun International’s customer relations management platform To create memorable experiences, we will be enhanced in 2018 to further enable continually focus on improving customer a single view of the customer, which will service. During 2017 we introduced a give us greater insight into customer new customer engagement system that behaviour and preferences, and provide enables enhanced customer feedback at a management capability for customer various touchpoints including restaurants, complaints and requests. With these check-ins and casino floors. This system enhancements and continued customer not only provides more qualitative service training, we anticipate improving responses, it also provides immediate our customer satisfaction scores in 2018. feedback to management who can take action if needed. Following a six-month Improving our guest experience Bending over Backwards property observation period, a customer required a critical review of how we drive satisfaction target score was set and will a more disciplined approach across the organisation. To gain maximum benefit be actively monitored by management. Put our customers first The customer satisfaction score is also from our properties, particularly in aligned to relevant employees’ key off-peak times, we are finding new ways performance indicators. of driving footfall. For example, we rolled out our SunPark multipurpose Live and breathe the CLEAR In line with our new SunWay success conferencing facility to Carnival City, principles formula, the enabler ‘Bending over and Sibaya during 2017. Hosting events, Backwards’ builds on our corporate value festivals and conferences also offers of placing customers first. Customer cross-sell opportunities like banqueting, Use every opportunity to service training was conducted at gaming and room nights. create great memories properties to improve our service offering and customer experience and empower During the year under review we focused staff in line with the group’s new on bedding down the significant work Exceed customer expectations employee value proposition. Please completed over the past four years to by doing ‘what’s not my job’ refer to page 37 in this report for more improve operations, drive footfall and

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 31 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

increase revenues. The latest phase of Sun City refurbishments is complete, with Wow and Sizzle the new Sun Central entertainment centre gaining traction in attracting individuals and corporates and increasing room Be the home of world-class entertainment revenue. Refurbishments at Carnival City included improved walkways, refurbished restrooms and the introduction of new retail tenants including Candilicious, Be content-obsessive by seeking out new, fresh experiences FoodFactory and RocoMamas. At Sibaya, we opened the new Rockwood Theatre. The ageing infrastructure of our properties remains a risk to the group. To mitigate Partner with others to leverage great opportunities this risk, we are conducting a review of all plant and maintenance and will implement stringent maintenance schedules to avoid Wow the mind and mood by igniting the senses significant capital outlays in the future. Sun International’s online sports betting offering, SunBet, showed positive results, increasing 40% in new sign-ups (2016: update their loyalty profile. Looking ahead, our focus will remain on driving 30%), 40% (2016: 58%) in active users and new sign-ups, delivering information to SunMVG cardholders through digital 27% (2016: 86%) in overall bets. This communication, enhancing the accessibility of benefits, rewards and special culminated in a 23% (2016: 37%) increase offers and creating a seamless customer experience at all touchpoints. in gross gambling revenues. Customer service improvements included How we use our capitals to improve our existing operations and guest introducing a dedicated VIP support team, experience implementing state-of-the-art contact centre support software, and launching a Financial capital is deployed to refurbish and maintain our existing asset Vegas-style sports betting video wall at portfolio, to cover operating costs, to grow our business through strategic Time Square. SunBet also leveraged off developments or acquisitions, and to invest in our employees who in turn the Sun International brand by increasing provide a memorable guest experience. sports presence at major sporting events such as the Nedbank Golf Challenge and Our human capital is the primary interface with our guests and our the SunMet. SunBet will be migrating to a employees are the custodians of the memorable experience we strive world-class international online gaming to offer. software during 2018. People are our brand ambassadors who we rely on to protect and appropriately represent our brand. Our stock of intellectual capital is The insourced food and beverage business represented by our wealth of management expertise, and our management has been bedded down, with revenues up team’s ability to establish successful relationships. 11.1% to R921 million (2016: R830 million). The new restaurants at our properties Our guests are key stakeholders in our business. We strive not just to meet have enabled us to dovetail our food and their expectations but to exceed them through using our social and beverage offering with the marketing relationship capital. initiatives of the gaming division, driving footfall and remaining relevant to our guests. The gross margin in the food and beverage business remains low and we are Looking ahead implementing the appropriate controls • Improving customer satisfaction scores as well as improving and and procedures to improve the margin. optimising guest communication • Improving communications and our SunMVG loyalty programme based Our refreshed four-tier loyalty on customer feedback programme, SunMVG, was rolled out at the end of the comparative period. The • Migrating to new and improved systems and software for SunBet and focus during 2017 was on familiarising SunSlots customers with the new rewards and • Insourcing a design team to improve marketing benefits. This loyalty programme enables • Assessing the effectiveness of direct marketing campaigns customers to earn both casino and leisure • Focusing on scheduled property repairs and maintenance points when gambling, staying in our hotel • Decentralising VIP management back to properties rooms and dining at selected restaurants • Leveraging food and beverage opportunities at SunPark events as well and bars. Tier credits earned can be spent as national events including SunMet, Miss South Africa and the across all Sun International hotels and Nedbank Golf Challenge casinos and customers enjoy a range of exciting benefits such as the new on-demand TV and movie streaming service launched in June 2017. Loyalty customers can register online, arrange to collect their cards as well as manage and

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EFFICIENCY AND OPTIMISATION OF OUR PROCESSES To leverage the significant investments made in our systems, it is vital that we review our processes to optimise and gain efficiency. This will not only help us contain and reduce our costs but will also ensure that we improve the quality of our information so that we can make better and more informed decisions, which will lead to an improved guest experience.

2017 PROGRESS SCORECARD

2017 focus areas Self-assessment on what we achieved Page reference

Human capital Implemented Kronos and advanced scheduling. management 27, 28, 33

Integrating key IT Scoping completed and system integration developed. Operational systems process still to be aligned. 27, 28, 33

Establish shared services Established a centralised shared services centre for all Gauteng centre properties. 27, 33

Consolidating support Completed the consolidation of Western Cape regional positions. services 27

Substantially achieved In progress Limited progress

OVERVIEW How we use our capitals to improve our existing operations and Over the past few years, the group has guest experience made significant investments in new systems including our Enterprise Gaming Financial capital is deployed to invest in innovative IT and in our employees, who System and our ERP system, IFS, for the in turn provide a memorable guest experience. back office. These and our other systems are world class and if used correctly can Our human capital is critical to ensuring we operate efficiently and optimally. provide significant benefits to the group. At Our stock of intellectual capital is represented by our wealth of management present, we have limited integration of key expertise, and our management team’s ability to plan and implement processes systems, inconsistent use of the various and systems groupwide. applications, work arounds and manual processes. To assist in our human capital management Looking ahead we have started implementing Kronos and • Establishing an efficiency and optimisation team advanced scheduling, which will improve • Critically assessing margins and benchmarking our scheduling, processing of payroll and • Driving system utilisation and process standardisation reduce overtime costs. • Expanding shared services centres to other properties Food and beverage embarked on a system standardisation and optimisation process, and developed standard operating procedures and training videos, available on the group’s intranet. Employee training is tracked and monitored to ensure service levels and customer offerings are constantly improved and refreshed. Integration of our Big savvy Micros point of sale system with IFS is a key priority and will enhance control and stock management. Think like entrepreneurs Our new shared services centre for all Gauteng properties, which operates out of head office, improved efficiencies by Use business intelligence to make the right decisions centralising the finance and payroll functions. The intention is to reduce the cost of the back-office processing and Grow the business into new areas with relevant innovation significantly improve the control over procurement and payment processing. With our units not having to focus on the Become the home of the game changers back office, operational management can focus on our guests. The aim is to expand the shared services centre to other Embrace rainmakers to create new opportunities properties and provinces.

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 33 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

Protect and leverage our existing asset portfolio

Our diverse portfolio of assets includes world-class, five-star hotels, modern and well-located casinos, and premier resorts and events facilities. It is essential that we harvest the full potential of our portfolio, explore land development opportunities and continually review our offerings to identify properties that need reinvestment and upgrading, and those that may no longer be core to our strategy.

2017 PROGRESS SCORECARD

2017 focus areas Self-assessment on what we achieved Page reference

Protecting our existing Received gaming board approval for the Boardwalk Mall development. 28, 34 asset portfolio Submitted an LA10 application to restructure Boardwalk. 28, 34

Closed Fish River and settled the land claim with government. 28, 34

Closed Sun Nao Casino in Colombia. 28

Dispose of interest in Swaziland and Nigeria. 28

Gaming licence renewals Submitted bids for municipal licences in Chile. 28, 35

New casino and arena Opened Time Square arena and casino but revenues tracking below 26, 28, 34, 35 openings expectations.

Opened Meropa Hotel. 28, 35

Investigating undeveloped Progressed land developments at Carousel, Carnival City and Sibaya. 28, 35 land opportunities at various properties

Substantially achieved In progress Not achieved

OVERVIEW The Time Square construction project The Boardwalk casino in Port Elizabeth continues to be negatively impacted by generated 10 000 jobs directly and indirectly the roll out of EBTs, with an additional EBT and will positively impact Tshwane’s economic outlet opened within its catchment area. We have challenged the award of the EBT and tourism growth. licences on the basis that the granting of the licences is in breach of the exclusivity We closed the Fish River operation in During the year under review we that Boardwalk paid for as part of our November 2017, following continued enhanced our portfolio with the opening licencing bid commitments. The court operational losses. Positively, we settled of Time Square’s casino and the processes are, however, frustratingly slow. the Fish River land claim agreement with Meropa Hotel. To win back market share, we are planning the government for R75 million. The to significantly increase the size of the proceeds were received in February 2018. Time Square offers our customers shopping mall at Boardwalk. The group impressive entertainment and food will only contribute its existing land and In Latam, Sun Dreams submitted bids experiences, cutting-edge technology and buildings as equity for which it will receive for its two municipal licences, namely inspiring designs. The opening was not a 50% equity interest. Given the reduced Iquique and Porta Varas and we expect without its challenges: initial footfall figures revenue at Boardwalk, we submitted an to hear the outcome in June 2018. were below expectation, which in turn LA10 application to the Eastern Cape In South Africa, GrandWest exclusivity negatively impacted revenues, which are Gambling and Betting Board to restructure remains under threat as draft legislation tracking well below expectation with a the business. Public hearings are expected from the Western Cape on the potential market share of only 13%. We are working shortly following which we will go ahead relocation of licences from the Western hard to increase our market share through with the restructure. Cape to the Cape Metropole was released focused marketing initiatives and driving an in February 2018. increase in footfall to the precinct.

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One team Looking ahead • Submitting our bid for the Collaboration and teamwork Wild Coast Sun licence renewal • Restructuring the Carousel and pursuing land development Sharing ideas and inspiring greatness opportunities at Carousel, Carnival City and Sibaya • Completing the Boardwalk Cooperate, support and set up others for success restructure and commencing with construction of the Boardwalk Mall • Finalising North West licence Think group, act local conditions • Protecting GrandWest from possible new competition We aim to grow Time Square’s market its Privé and restaurants. The challenge for • Protecting GrandWest’s exclusivity share to 16% in 2018. The Maslow Time Sibaya and Wild Coast Sun is around the and settling the North West licence Square Hotel, which formally opens in possible licencing of EBTs in their conditions April 2018, includes a conference centre catchment area. We are challenging the • Opening Maslow Time Square that can host functions for up to 600 process and will remain abreast of these Hotel on time and within budget seated delegates to five-star standards and challenges. • Managing the water crisis that is should encourage business, leisure and impacting our properties in the The water crisis in the Eastern and gaming customers. As part of the group’s Western and Eastern Cape commitment to the environment, Time Western Cape has impacted three of our Square’s external design blends in with the properties; Boardwalk, GrandWest and surrounding green design principles and Table Bay. Apart from intensified efforts to overall aesthetics of the Menlyn Maine save and reuse water, Sun International is eco-precinct. also exploring more permanent solutions to ensure our guest experience is not Meropa opened its 60-room Moroccan- compromised. Some of these solutions style hotel in August 2017, with the hotel include sinking additional boreholes and being well received by our guests. completing a purification plant at GrandWest. Alternative water sourcing Carnival City is one of our older properties options are being considered for and faced challenges as it lost market Table Bay. share to other casinos. Plans are under way to unlock the value of the unused land Monticello, in Chile, opened its new by developing a Carnival precinct and to 4 100-seat arena and 1 500 m2 smoking attract more footfall to the property. terrace in June 2017. This arena will be Sibaya’s market share improved significantly key to increasing visitation to Monticello during 2017 as more customers visited the and has already drawn large crowds with property and enjoyed its offerings. We several events hosted. In addition to the anticipate increased footfall in the area bids submitted for the two municipal as a new university and apartments are licences currently operated by to be built in the surrounding area. Sun Sun Dreams, bids were submitted for International is also planning to enhance Pucon, Coquimbo and Vina del Mar with its entertainment offering by refurbishing the adjudication expected in June 2018.

How we use our capitals to protect and leverage our existing asset portfolio Financial capital is deployed to refurbish and maintain our existing asset portfolio, cover operating costs, and grow our business through strategic developments or acquisitions.

As a gaming, leisure and entertainment group our stock of intellectual capital is realised in the form of our gaming licences, which are the single most critical enablers of our ability to operate.

The bricks and mortar of our properties and unused land form our stock of productive capital. The uniqueness of our properties is a key differentiator for our business and we focus on protecting, leveraging and growing our asset base.

We aim to reduce the use of our natural capital and the impact on the environment by reducing consumption of water and energy resources. Plans are in place to increase waste recycling initiatives and partnerships.

Sun City

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 35 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

Grow our business into new areas and products

While the focus has shifted to strengthening our balance sheet and getting the basics right in South Africa, we continue to seek opportunities that either grow our core casino business or offer new products in Latam.

2017 PROGRESS SCORECARD

2017 focus areas Self-assessment on what we achieved Page reference

Exiting non-profitable Suspended our International VIP gaming business at Sun City and Ocean operations Sun Casino. 27, 28, 36

Closed Sun Nao Casino in Colombia. 27, 28, 36

Increasing interest in Increased our interest in Sun Dreams from 54.5% to 64.66%, which is still strategic acquisitions subject to funding. 26, 28, 36

Exploring strategic growth Acquired 100% interest in Thunderbird Resorts and Casinos Peruanos S.A. opportunities in Peru, subject only to final regulatory approval. 28, 36

Submitted bids for three municipal licences currently held by competitors. 28, 36

Substantially achieved In progress Limited progress

OVERVIEW Our International VIP gaming business at Sun City and Ocean Sun Casino was 3 720 18 717 suspended in 2017, due primarily to high volatility and bad debts. The debt collection active limited total slot process has been slow to yield results, payout machines machines resulting in legal action against outstanding debtors. The local VIP management will be decentralised back to properties in 2018 The online sports betting market is to increase the focus on our guests. increasing rapidly as customers prefer the How we use our capitals to grow The Sun Dreams merger has been bedded convenience of using their mobile devices our business into new areas and down and during 2017, the group agreed in the comfort of their home. The group is products to increase its stake in Sun Dreams investigating online gaming and sports Financial capital is used to grow our from 54.5% to 64.66% following the betting opportunities in Latam. business through strategic acquisition of 50% equity interest held SunSlots is part of the group’s alternate developments or acquisitions. by Entretenimientos Del Sur Limitada gaming strategy. SunSlots holds six (EDS). This acquisition is now only licences in four provinces: Gauteng, The bricks and mortar of our subject to funding. KwaZulu-Natal, Mpumalanga and the properties and unused land form our Sun Dreams also concluded a share Western Cape. stock of productive capital. Growth purchase agreement with Thunderbird in our productive capital requires the We also increased our base of LPMs Resorts Inc and Casinos Peruanos S.A. investment of financial capital, through SunSlot’s by activating 616 new Under this agreement, Sun Dreams whether into our existing properties, machines. This improved gross gambling acquired 100% of certain Peruvian new assets or new products. revenue, which exceeded R1 billion for companies that operate four gambling the first time. Additionally, Mpumalanga operations in Peru including immovable issued a ‘request for application’ for property where one of the casinos (Fiesta licences, which should generate renewed Looking ahead Casino) is located. This acquisition is an gambling activity. Sun International • Investigating online gaming and opportunity for Sun Dreams to strengthen submitted 21 site applications, which sports betting in Latam its position in the Peruvian market and equate to over 100 extra LPMs in the • Concluding the Thunderbird diversify its asset base in Latam. province. We also successfully migrated acquisition and integrating to a new Central Monitoring system at operations the end of 2017, which will provide • Commencing development of enhanced operational reporting and successful municipal gaming business intelligence to improve licence bids business management.

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Our people

Our employees are important enablers of the group’s ability to achieve its strategic objectives. Given that we operate in a highly governed and competitive service-oriented industry, the motivation and competence of our people to perform and provide a memorable guest experience are key determinants of the group’s ongoing success and sustainability.

2017 PROGRESS SCORECARD

Page/online 2017 focus areas Self-assessment on what we achieved reference

Remuneration and benefits Reintroduced our remuneration scales for our gaming 38 framework departments. Transitioned to the Hay Job Evaluation http://ir2017. methodology and developed organisational design suninternational.com/ methodologies and processes. our-game-plan/

Remuneration and benefits 27, 28, 37 Rolled out the SunWay culture programme, our employee framework http://ir2017. value proposition, and an interactive communications suninternational.com/ platform (SunTalk). our-game-plan/

Union engagement Ongoing training has been introduced and regular 29, 38 meetings held. http://ir2017. suninternational.com/ our-game-plan/

Disability and black Phase one of the disability management awareness 38 management programme delivered and good progress made at junior http://ir2017. representation and middle management levels regarding black suninternational.com/ representation. our-game-plan/

Talent management Talent management and learning and leadership 28, 38 development initiatives ongoing. http://ir2017. suninternational.com/ our-game-plan/

Substantially achieved In progress Limited progress OVERVIEW prior years. The chief executive held SunWay formula for success roadshows across South Africa to At the end of the financial year, we had a reconnect the organisation following Enablers Disablers total of 12 959 (2016: 13 179) employees significant changes over the past few across our operations, a decrease of 1.7% years. The SunWay formula for success Mutual respect Passing the buck on the prior financial year. The decrease in (see alongside and on page 1) includes Sun vibe Inefficient headcount was mainly a result of the enablers that employees are encouraged processes closure of Fish River, Morula Sun Casino to strive for as well as disablers, which and operations in Latam. The number of Champion our Favouritism include factors we must eradicate. women in the group’s employ remained champions constant at 51.5% even with the inclusion Employment equity Wow and sizzle Communication of Sun Dreams. There were 3 178 (2016: 2 gap Our employment equity approach across 969) terminations groupwide and group our South African operations is to achieve Bending over Absenteeism turnover was 24.1% of the total headcount both legislative and substantive backwards (2016: 22.3%). This increase was mainly transformation through numerical and Sun Heroes Complacency due to retrenchments at properties that non-numerical targets aligned to the were closed during the year under review. #BeCool Silos business’ strategic objectives. These targets Top talent magnet Waste To reinforce a positive culture that drives are tracked and monitored quarterly and positive behaviours, we launched our are included in line managers’ performance Big savvy Distrust SunWay culture programme and employee contracts. The social and ethics committee Sharing the sun Going nowhere value proposition in South Africa. This is responsible for monitoring our progress slowly launch followed the group’s vision, against set targets. Investing in our Repeating mission and values introduction in the people mistakes One team Wrong persons for the job Courage to lead Backstabbing

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 37 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

With 60.5% (2016: 62%) of our South over time, remove any disproportionate Workforce proﬁle by gender (%) African workforce (excludes SunSlots) income differentials. Some of the being covered by collective agreements, it anomalies have been identified and will be is imperative to maintain healthy addressed in the March 2018 increase relationships through meaningful process. engagements with the various unions. ● Male 45 Engagement with South African unions Reward is directly linked to performance at ● Female 55 improved during the 2017 financial year, group, team and individual levels. By linking especially on collective bargaining issues. employee performance to business This was mainly due to continuous objectives through a key performance engagement between senior management indicator (KPI) scorecard, we can more and the unions as well as shop steward accurately measure, and provide feedback training to ensure a better understanding on, performance. The scorecard includes KPIs for managing and developing people Workforce proﬁle by race (%) of the business and changing operating environment. In addition, we entered into and transformation, as these are vital areas a three-year wage agreement with our of our business. Individual employment South African recognised union contracts include minimum requirements ● African 76 (SACCAWU) which is applicable to South and standards for each role that employees ● Coloured 11 African operations excluding SunSlots. must perform against. ● Indian 5 ● White 7 During 2017 all employee relations policies How we use our capitals to invest and ● Foreign were reviewed and implemented. develop our employees across the group national 1 Talent management and employee Financial capital is used to invest in our development employees training as well as fairly remunerate their performance. Talent management and employee During the 2017 financial year, we development are important in creating a Our human capital includes our established and adopted a property- high-performance culture and realising employees who are the primary interface specific, three-year employment equity the business strategy. The group has with our guests and are responsible for plan that supports the group’s strategic various talent management projects creating the memorable experience we strive to offer. objectives and takes into account our explained in more detail at transformation and talent management http://ir2017.suninternational.com/ strategies, succession planning, talent our-game-plan/ that reinforce our attraction, career progression and retention. commitment to ensuring we create a Looking ahead It also takes into account the demographics sustainable talent pipeline. To ensure that • Embedding our succession of the provinces where we operate. Each our employees are equipped to carry out management practices and property is now positioned to set their own their responsibilities, Sun International has integrated management strategy goals and objectives for employment several learning and development groupwide equity, while meeting the provincial gaming initiatives aimed at empowering and board licencing criteria. developing our talent groupwide explained • Continuing to focus on the development of leadership skills We maintained our overall black employee in more detail at http://ir2017. suninternational.com/our-game-plan/ throughout our workforce and representation at 91.5% (2016: 91.0%), strengthening the manager’s role exceeding the distribution of the national Remuneration and performance as coach and mentor economically active population. Black management • Aligning our employee management employees make up 80% The group remuneration policy was remuneration following the ‘equal (2016: 78%) of the management team with reviewed and updated to align with best pay for work of equal value’ review 45% (2016: 46%) being women. practice and King IV. This included • Embedding the employee value To mitigate our previous challenges in reviewing our short and long-term proposition within the group and retaining persons with disabilities in the incentives to address concerns expressed addressing challenges employees workplace, we introduced disability by some shareholders. The annual have identified capacity building workshops and disability increment review date was amended from • Managing employee productivity awareness days. This has resulted in the 1 July to 1 March to align with our new to avoid unnecessary stability of representation of persons with financial year. An organisational design absenteeism costs policy was introduced and the Hay Job disabilities and provides us with an • Continuing to actively engage with Evaluation methodology replaced the opportunity to increase the representation. employees and address concerns legacy systems. We continue to participate as they arise Employee and union relations in and take into account market To improve the group’s communication remuneration surveys and align our pay with employees, we introduced the decisions to the principles set out in our SunTalk mobile communication platform. remuneration policy. We contracted an This enables all employees who own a external service provider to guide us in cell phone to register and to receive complying with our ‘equal pay for work of communication from us, such as group equal value’ requirements per the messages or targeted communications to employment equity legislation (as specific groups. amended). The primary objective is to,

38 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

Governance and sustainability INTEGRATED SUSTAINABILITY the: executive management, sustainability The information that follows is a summary Sustainable business practices form an committee (established in 2017), social of our health and safety, environmental, integral part of Sun International’s culture, and ethics committee and the risk socio-economic development and strategy and operations. A new integrated committee. enterprise and supplier development sustainability structure was established portfolios. Detailed information on these in 2017, incorporating the following Specific KPIs and short, medium and portfolios are available online at portfolios: environmental, health and long-term sustainability targets have been http://ir2017.suninternational.com/ safety, socio-economic development, set and aligned with the overall group our-game-plan . We encourage readers to and B-BBEE with a sustainability focus on strategy. A group sustainability strategy is visit our website for a better understanding enterprise and supplier development. being developed and will be rolled out of our sustainability highlights, challenges, A group sustainability manager was during 2018, to ensure that sustainability is approach, focus areas, progress appointed to formulate our sustainability streamlined across all units in the group, during 2017, plans going forward strategy, monitor and report on this with a focus on cost saving, breaking and initiatives implemented during the integrated sustainability structure to the down silos and integrating management year under review. relevant governance structures including systems and communication approaches.

HEALTH AND SAFETY Sun International takes a holistic approach to occupational health and safety through the integration of the health and safety strategy, into our newly established sustainability portfolio and other collaborative initiatives.

2017 PROGRESS SCORECARD

Page/online 2017 focus areas Self-assessment on what we achieved reference

Embedding a group health 40 The health and safety policy was updated, communicated and safety policy http://ir2017. and displayed at all local business units and on the Sun suninternational.com/ International website. our-game-plan/

Aligning to ISO 45001 ISO 45001 was only released in March 2018. The http://ir2017. requirements management system will be integrated with environmental suninternational.com/ as a safety, health and environment (SHE) management our-game-plan/ system aligning to the requirements of both ISO 45001 and ISO 14001.

Health and safety incident Safety incident reporting and monitoring process 40 reporting process implemented across the group. http://ir2017. suninternational.com/ our-game-plan/

Implementing standardised Health and safety reporting processes, templates and http://ir2017. data collection and procedures have been standardised. suninternational.com/ reporting our-game-plan/

Implementing an This project was placed on hold pending the integration of http://ir2017. e-learning health and SHE into the new sustainability department. New SHE suninternational.com/ safety training platform e-learning training is scheduled for development in 2018. our-game-plan/

Substantially achieved In progress Limited progress

OVERVIEW We recognise that we have an obligation to ensure a safe and healthy environment for our guests, employees (including contractors) and other stakeholders across the group, which currently operates in South Africa, Nigeria, Swaziland and Latam. The group also proactively works to improve health and safety performance by reporting against indicators that are standard international measures for reporting occupational health and safety performance.

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 39 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

Lost-time injury frequency rates

South Africa Africa Latam

2017 2016 2017 2016 2017 2016

Fatal Injury Frequency Rate (FIFR)1 Rate 0.00 0.01 0.09 0.00 0.04 0.00 Lost Time Injury Frequency Rate (LTIFR)2 Rate 1.27 2.61 0.00 0.22 4.27 1.30 Total Recordable Injury Frequency Rate (TRIFR)3 Rate 3.35 5.95 191.04 2.65 11.22 2.43 Total Injury Frequency Rate (TIFR)4 Rate 7.86 12.44 301.71 29.69 17.27 7.26

1 FIFR is the determination of the frequency of fatalities resulting from a work injury or work-related disease/illness, i.e. the number of fatalities per 200 000 employee hours worked. 2 LTIFR is the determination of the frequency of Lost Time Injuries (LTI), i.e. number of LTI’s per 200 000 employee hours worked. 3 TRIFR is the determination of the frequency of all recordable Injuries (RIs) – inclusive of all fatalities, LTIs and medical treatment cases (MTCs) per 200 000 employee hours worked. 4 TIFR is the sum off all injuries (i.e. First Aid Cases (FACs), MTCs, LTIs and Fatalities) per 200 000 employee hours worked, where the difference between TRIFR and TIFR is the addition of FACs.

The LTIFR for FY2017 in South Africa, was adopt a group medical surveillance Communications and awareness 1.27 injuries per 200 000 hours worked programme. As such, we have developed strategy (2016: 2.61), Africa, was 0.00 injuries per a medical surveillance programme for all A groupwide SHE communications and 200 000 hours worked (2016: 0.22), and our local units and we will be establishing awareness strategy has been developed to Latam, was 4.27 injuries per 200 000 hours our group’s first health risk profile. ensure collaborative communication across worked (2016: 1.30). Fire and life safety audits were conducted all units within South Africa. The aim of this The frequency rate in South Africa at all local units in the reporting period. integrated strategy is to improve reduced by 51%. This is primarily due to This helped us identify areas of concern communications between units, improve the improvement in reporting of person and possible risks. Units have received collaboration and save costs, all of which hours worked, applying the correct detailed reports with the concerns and aligns to the group’s new formula for definitions to our injury classifications, and possible risks to be addressed. Detailed success. For more detail on our approach, improved awareness in terms of health mitigation measures have been identified strategy and project initiatives, refer to and safety within the company. While and are being implemented to reduce the http://ir2017.suninternational.com/ measures were implemented to improve risk and improve the health and safety of all our-game-plan/ contractor person hours worked and our stakeholders. injury classifications, there is still room for How we use our capitals to improve improvement and additional controls and Health and safety training health and safety across the group procedures will be implemented in 2018 Sun International and its employees are Financial capital is used to invest in to improve the accuracy of this responsible for protecting themselves and relevant health and safety systems and information. Reduction targets have been others from harm. All new employees in training safety to monitor and report on set for our South African properties to South Africa undergo basic health and the group’s safety status. safety awareness training as part of their achieve in 2018. Our human capital includes our health induction. In 2017 employees and Reliable reporting by our Latam and African and safety specialists that ensure all contractors participated in general health properties comply with relevant properties remains a challenge and will be and safety awareness training, compliance legislation and attend relevant health and investigated in 2018 to identify process training and specialised training. safety training. improvement opportunities. Hygiene and food safety Governance and compliance Sun International monitors hygiene and The group’s health and safety policy can food safety through an independent third Looking ahead be viewed online at http://ir2017. party and SANAS-accredited laboratories. • Implementing a medical suninternational.com/downloads/ . Sun International has shown an surveillance programme and a The policy was revised to align with the improvement in all aspects of its hygiene sustainability culture programme group sustainability strategy and policy, and food safety audits. In terms of our across our local operations which details our commitment to concessionaires, there is room for • Implementing an integrated SHE improving our health and safety improvement in documentation control, management system based on the performance. Each South African property however we are satisfied with the overall ISO 45001 and ISO 14001 standards has an approved site-specific health and general compliance. safety policy, which is reviewed annually • Implementing cross-unit SHE audits and aligned with the group policy. Legionnaires disease is a significant risk in to improve awareness, share best the hospitality industry. Sun International practice and increase efficiencies We developed SHE legal registers for our monitors this risk through an independent • Standardising the Latam and African South African properties, which includes a third-party assessment and SANAS properties incident reporting to the legal library of all the SHE legislation Sun accredited laboratories. Sun International’s South African reporting system International must comply with. Our legal Legionella Risk Index achieved 81% • Improving communication and obligations are directly linked to our compliance across the group in the period awareness within South Africa identified risks and impacts, to allow easy under review, which is an improvement • Enhancing our combined assurance accessibility, reference and relevance. from the 80% in 2016. This indicates that process to ensure efficient All international operations comply with we still have room for improvement in compliance management relevant laws and regulations and have terms of improving legionella • Improving incident reporting and successfully implemented SHE standards management and preventing legionella collection of contractor data within and systems. exposure to our stakeholders. South Africa Medical surveillance is a requirement in During the year under review there was an • Improving emergency preparedness terms of the Occupational Health and outbreak of Listeriosis and bird flu in South processes Safety Act, 85 of 1993 and its regulations. Africa. Sun International’s health and safety, • Developing a group fire standard Increasing risk exposure and staffing food safety and procurement procedures pressures have resulted in a need to revise ensured that none of the units were our medical surveillance processes and impacted by these two diseases.

40 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

ENVIRONMENT As a responsible company, we recognise that we have an obligation to ensure we operate in an environmentally responsible and proactive manner. This ensures a safe and pristine environment for our guests, employees and other stakeholders affected by our operations.

2017 PROGRESS SCORECARD

Page/online 2017 focus areas Self-assessment on what we achieved reference

Finalising the Sun City A scoping exercise revealed that the landfill space was http://ir2017. landfill feasibility study in adequate until 2019 and not 2017 as originally anticipated. suninternational.com/ preparation for closure This extension was largely due to higher recycling our-game-plan/ in 2019 recoveries and a decrease in waste generation volumes during the temporary closure of Sun City’s entertainment centre.

Sun City’s waste-to-energy A basic assessment report was submitted to the http://ir2017. project Department of Environmental Affairs for the proposed suninternational.com/ waste-to-energy project for Sun City. The process is our-game-plan/ currently being reviewed for final approval.

Implementing electricity Electricity and water metering implementation was 42 and water metering delayed so that improved technology could be built into http://ir2017. groupwide our new environmental dashboard to allow for real-time suninternational.com/ monitoring. our-game-plan/

Identifying reduction Numerous water initiatives implemented across properties 42 initiatives to further reduce resulted in a reduction in water consumption from the http://ir2017. water consumption previous year. suninternational.com/ our-game-plan/

Encouraging supply chain Sustainability elements are in the process of development 43 and concessionaire for incorporation in our supply chain policies and our http://ir2017. compliance to Sun supplier onboarding process in 2018. Additional supplier suninternational.com/ International’s group workshops are planned to continue to work towards our our-game-plan/ compliance WWF-SASSI objective of only procuring sustainable seafood.

Implementing Various environmentally-friendly initiatives were http://ir2017. environmentally-friendly implemented at Time Square making this property the suninternational.com/ initiatives at Time Square group’s most green unit. our-game-plan/

Substantially achieved In progress Limited progress

OVERVIEW culture programme is being developed to water withdrawals and accounts for 92% of promote various SHE elements. the main water supply in South Africa. To As part of the environmental strategy, we reduce our overall water consumption, the developed and implemented our first water Environmental data is collected, group has committed to implement and energy reduction targets along with consolidated and analysed monthly at all electronic water meters at all local units. our committed zero-waste-to-landfill South African units and then captured on This will allow the group to view real-time target for all local units by 2020. Overall the new environmental platform, which consumption and eliminate data group reduction targets are 18% for water provides groupwide visibility and ongoing capturing errors. Data will feed into by 2020, and 15% for electricity by 2022. monitoring against environmental targets. our environmental dashboard that will To ensure our environmental strategy Going forward, the same procedure will flag anomalies and highlight possible water targets and commitments are monitored be implemented at our Latam operations leaks and wastage. and achieved, the group will be developing that currently reports environmental During 2017, our water consumption data an integrated SHE management system information to the group on an for South Africa was 3% less than in 2016. and training SHE representatives to annual basis. This was largely due to significant water conduct cross-unit internal audits across consumption reductions and water saving our South African operations, which allows Water management initiatives in place, especially in the Western for learning experiences, shared value and Water is a critical resource for our and Eastern Cape. In addition, we improving best practice at unit level. Formal operations and remains a key focus area experienced improved data reporting in SHE awareness campaigns will be held for each of our properties. Municipal water 2017, although data inaccuracies remain a monthly at all units and a sustainability supply remains the largest source of overall problem at most of our units.

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 41 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

Group water source (%) During the financial year, Cape Town and collection systems, water-wise plants and Port Elizabeth experienced their driest information posters and awareness material periods in recorded history. Cape Town in our hotels. Boardwalk is investigating an was declared a disaster area, with severe alternative water source that, with minimal ● Municipal water restrictions being imposed across the treatment, could see the unit drastically supply 87 city. This water scarcity impacted three of reducing its dependency on municipal 2017 ● Ground 6 our properties in the Western and Eastern water supply. Cape – GrandWest, Table Bay and ● Surface 7 Boardwalk. These properties have Waste management intensified efforts to save and reuse water, The group reinforced its waste monitoring and investigate long-term solutions for programme during 2017. Ongoing alternative water sources. Together, these reporting and tracking of waste reduction Group water source (%) properties have reduced their net water and recycling initiatives will also allow consumption by more than 33% (from Sun International to monitor year-on-year 35 666 /kl month to 23 816/kl month). cost savings within the group. No Some of the long-term solutions include significant spillage incidents were reported ● Municipal financing additional boreholes, constructing during 2017. With the exception of Sun supply 90 water treatment plants to treat enough City, which owns its own licenced landfill 2016 ● Ground 4 water to operate the non-potable water site, all non-hazardous waste is either aspects of their operations, and various recycled or disposed of at municipal ● Surface 6 other initiatives such as grey water landfill sites.

Waste – South Africa 2017 (kgs) % 2016 (kgs) % Total volume of non-hazardous waste to licenced landfill 3 916 575 (52) 4 954 760 (57) Total volume of non-hazardous waste recycled 3 586 898 (47) 3 643 722 (42) Total volume of hazardous waste to licenced landfill 24 145 (0.32) 26 776 (0.31) Total volume of oils recycled 31 684 (0.42) 40 130 (0.46) Total volume of hazardous waste recycled 16 087 (0.21) 12 742 (0.15) Total waste for South Africa 7 575 389 8 678 129

Note: The 2016 environmental data has been restated due to our year end changing from June to December.

During 2017, the total waste measured Energy management Total group emissions for Scope 1 for 2017 throughout our South African operations was 23 097 tonnes CO e (2016: 32 838 Our energy management focus is driven by 2 was 7 575 tonnes (2016: 8 678 tonnes), a tonnes CO e). The decrease in the group reducing GHG emissions and our impact 2 13% reduction compared to the previous Scope 1 CO e is due to no data being on the environment. The group continues 2 year. Of the waste generated during the to focus on reducing energy consumption available for the Latam operations. reporting period, 52% (2016: 57%) was by managing behaviour, improving disposed at landfill and 47% (2016: 42%) During 2017, the total amount of efficiencies and implementing energy- electricity (Scope 2) consumed by was recycled. The reduction in waste was saving initiatives. largely attributable to improved recycling Sun International was 307 060 056 kWh (2016: 273 308 898 kWh), reflecting a 12% and beneficiating measures, improved During the year under review, all South increase compared to the prior year. This data reporting as well as the Wild Coast African properties underwent energy audits was mainly due to the acquisition of Sun achieving their zero-waste-to-landfill to improve data collation and reporting Sun Dreams resulting in additional units target in 2017. processes, and identify further energy in Latam in the comparative reporting reduction initiatives. A new energy data In 2018, the group will be embarking on period. Scope 2 emissions remain the management platform, including a data various waste management projects to largest contribution to total footprint at validation component, has been introduced standardise waste practices, operating approximately 90%, followed by fossil as part of the environmental dashboard. procedures and data collection as well as fuels utilised for energy generation, at just to review and improve our current service Along with the planned implementation of under 4%. level agreements with waste service real-time electricity meters at each local providers. operation, these two initiatives will assist in The increase in fuels, used by generators to eliminating incorrect data capturing and produce energy, can mainly be attributed developing data with high levels of to the reliance of Latam and African integrity, accuracy and traceability. operations on this type of energy source.

42 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

2017 % year- 2016* on-year Electricity purchased kWh Rand change kWh Rand

South Africa 239 352 621 234 849 928 (0.28) 238 696 073 224 481 411

Latam1 55 463 591 107 786 516 (89) 29 392 981 58 849 751

Africa (Nigeria and Swaziland) 12 243 844 18 005 624 (135) 5 219 844 7 185 398

Total 307 060 056 360 642 068 (12) 273 308 898 290 516 560

2017 % year- 2016* on-year Direct: Fuel use for generator litres Rand change litres Rand

South Africa 68 035 840 913 (63) 184 512 2 020 406

Latam1 152 663 1 495 830 (971) 14 249 21 915

Africa (Nigeria and Swaziland) 2 444 939 17 734 298 (66) 1 471 778 9 860 913

Total 2 665 637 20 071 040 (60) 1 670 539 11 903 234

2017 % year- 2016* on-year Direct: Liquified Petroleum Gas kgs Rand change kgs Rand

South Africa 724 974 11 868 318 (32) 549 386 9 075 723

Latam1 783 928 8 126 890 (185) 275 429 2 642 345

Africa (Nigeria and Swaziland) 40 412 845 502 (66) 24 288 504 270

Total 1 549 314 20 840 710 (82) 849 103 12 222 338

1 The comparative 2016 data does not include all Sun Dreams properties resulting in the material variances. * 2016 environmental data has been restated due to our year end changing from June to December.

Biodiversity For more information on our In addition to our standard management environmental strategy, approach, targets Looking ahead measures to protect important biodiversity, and project initiatives, refer to many of our properties continue to http://ir2017.suninternational.com/ • Implementing and training SHE monitor and support biodiversity initiatives our-game-plan/ professionals on the use and in and around their operations. updating of the new environmental How we use our capitals to limit our dashboard As a principal partner of the WWF, environmental impact across the group • Training all SHE professionals to Sun International continues to support Financial capital is used to invest in conduct cross-unit SHE audits at efforts and initiatives identified by the WWF, relevant environmental initiatives, systems our local units one of which is the WWF-SASSI initiative. In and training to continuously improve, • Updating the environmental 2017, Sun International achieved a 65% monitor and report on the group’s strategy to align with the group’s rating compared to the 72.5% in 2016. The environmental performance. new sustainability strategy decrease is mainly due to the group not • Monitoring and achieving our meeting the commitments to purchase We aim to reduce the use of our natural capital and the impact on our South African environmental only green sustainable seafood species. environment by reducing consumption of reduction targets for 2018 The group has implemented various water and energy resources. Plans are in • Improving data quality throughout procurement processes and procedures to place to increase waste recycling reduce and/or eliminate the purchasing of initiatives and partnerships. the group any red seafood species and aim to do the • Developing and implementing our same with the orange seafood species, Our human capital includes our sustainability culture programme environmental specialists that ensure all although this remains a challenge for properties comply with relevant • Improving health, safety and the group. legislation. environmental awareness through training and initiatives

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 43 OUR GAME PLAN | STRATEGIC PERFORMANCE OVERVIEW continued

SOCIO-ECONOMIC DEVELOPMENT Sun International’s socio-economic development (SED) vision is to deliver sustainable social development projects that improve the lives of people in the communities we work in, for the better.

2017 PROGRESS SCORECARD

Page/online 2017 focus areas Self-assessment on what we achieved reference

Uplifting communities We continued to identify and implement relevant projects 44 through our focus areas within our three focus areas of education, sport and arts http://ir2017. and culture. suninternational.com/ our-game-plan/

Developing and launching Finalised the development of the learning material and http://ir2017. Sun International’s launched Sun International’s Hospitality Curriculum suninternational.com/ Hospitality Curriculum Development Programme in April 2017. our-game-plan/ Development Programme

Maintaining B-BBEE target Maintained full SED points at all local units. http://ir2017. for SED suninternational.com/ our-game-plan/

Formalising our SED strategic Draft framework and policy developed and will be 44 framework and policy implemented in 2018. http://ir2017. suninternational.com/ our-game-plan/

Improving data capturing System was reviewed and updated but will only be 44 and monitoring of SED implemented in 2018. http://ir2017. projects suninternational.com/ our-game-plan/

Substantially achieved In progress Limited progress OVERVIEW wealth creation for communities and How we use our capitals to improve stakeholders affected directly and indirectly socio-economic development Sun International invested R16 million in by our operations. Both the framework and SED projects across all 15 local properties. Financial capital is invested in the group’s policy will be rolled out in 2018. In addition, the group invested in various project focus areas: education, sports and arts and culture. corporate social investment initiatives Furthermore, a stakeholder engagement including donations, sponsorships and framework, standard operating procedures Our human capital is the primary charitable givings. and a stakeholder engagement plan is interface with our communities through being developed, which will be aligned to our projects and volunteering Creating value the group’s sustainable business strategy. programmes. Social capital investments are essential to This will ensure a unified stakeholder Our communities are key stakeholders as our long-term business sustainability. We engagement approach groupwide to affirm most of our properties are located in do not only create economic value in the our commitment to creating value for our various communities. We use our social communities we operate in, we aim to stakeholders and that initiatives deliver a and relationship capital to actively maximise the impact we have on the positive impact for the communities where engage with the communities to build communities as well as our business. Our we operate. and maintain relationships. people play an active role in investing their personal time in social investment projects Focus areas that resonate with them, from volunteering Our project focus areas are education, Looking ahead and mentoring bursary students to sports and arts and culture, with an providing business advice and training. emphasis on education as we believe this • Encouraging more students to to be critical to assisting poverty alleviation. register on Sun International’s Governance These were selected to unify the Sun Hospitality Curriculum A group SED strategic framework is being International brand and meet the various Development Programme finalised to ensure all processes are gaming licence conditions set out by the • Continuing to create value through streamlined across properties as well as different gaming regulatory authorities. We the group’s SED focus areas – providing guidance in respect of adherence strive to be known for innovative, inspired education, sports and arts and to the various gaming licence conditions projects that positively impact our culture and group targets. This framework also communities and afford them access to • Following the progress of the five guides applicable standards when the economy, while recognising the value approving projects, with approximately 70% students studying in the United of developing a sustainable model that States of the SED spend allocated to group connects our social investment to our core • Implementing the new SED and projects, and approximately 30% allocated business strategy. For more detail on community and stakeholder to property specific projects. The revised our approach, strategy and project engagement strategic framework SED policy aligns to the group’s sustainable initiatives, refer to http://ir2017. and policy business strategy and demonstrates our suninternational.com/our-game-plan/ commitment to social upliftment and • Improving the capturing of SED, CSI and licence conditions spend for reporting purposes 44 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

ENTERPRISE AND SUPPLIER DEVELOPMENT The group creates and maintains an efficient and equitable supply chain aligned to our strategic objectives through a robust governance process.

2017 PROGRESS SCORECARD

Page/online 2017 focus areas Self-assessment on what we achieved reference

Centralised supplier The group deployed a centralised supplier onboarding http://ir2017. onboarding controls portal, introducing a paperless, automated and seamless suninternational.com/ process for supplier listing and activation. This resulted in our-game-plan/ better management of new supplier compliance.

Valid B-BBEE certificates http://ir2017. The group is now enforcing valid B-BBEE compliance as a for onboarding suninternational.com/ mandatory requirement for (local) supplier onboarding. our-game-plan/

Groupwide deactivation of Focus has shifted to managing the compliance of active http://ir2017. non-compliant suppliers suppliers within the supply chain. B-BBEE valid spend is suninternational.com/ more than 93%, and a significant number of non- our-game-plan/ compliant suppliers have been suspended pending receipt of updated documentation.

Automated supplier due The group is busy implementing a comprehensive supplier http://ir2017. diligence and compliance compliance management component to the supplier suninternational.com/ portal, introducing additional and automated compliance our-game-plan/ checks at the point of onboarding. Ongoing compliance management will also be conducted on active suppliers.

Standardisation of The group is working towards effective control over, and http://ir2017. enterprise and supplier reporting of, E&SD funding through a formalised project suninternational.com/ development (E&SD) process within the ERP system. our-game-plan/ funding through IFS

Review of existing projects A comprehensive review of existing beneficiaries http://ir2017. against E&SD programme highlighted several opportunities within existing projects suninternational.com/ and key focus areas for future projects. This is being our-game-plan/ incorporated into the strategy for 2018.

Substantially achieved In progress Limited progress

OVERVIEW Preferential procurement investment represents over 11% (2016:2%) of net profit after tax, against the Tourism The group remains committed to creating Sun International’s total measured Code’s requirement of 3.5% for the tourism opportunities for all suppliers, especially procurement spend for the financial year sector. B-BBEE compliant small, medium and exceeded R4.0 billion (2016: R5.6 billion), micro-sized enterprises (SMMEs). of which R3.7 billion was procured from over 2 800 verified B-BBEE compliant Looking ahead Ethical conduct throughout our supply suppliers. This 93% valid spend compliance chain is imperative and the group requires exceeds our target of 87%. Our 2020 goal • Consolidating E&SD activities into its suppliers to commit to the highest is to reach and maintain 95%. a structured and consistent standards of ethical conduct. Sun offering, ensuring we leverage International has developed a supplier code Supplier and enterprise opportunities to introduce of conduct based on recognised development additional efficiencies international standards, principles and best Additional indicators, tabled below, have • Supporting and enhancing the Sun practices. All suppliers will be required to been introduced to our preferential International brand within our adhere to this new supplier code of procurement strategy, with the intention of communities conduct http://ir2017.suninternational. achieving optimal compliance by 2020. • Positioning the E&SD function com/downloads/ and our code of ethics groupwide and implementing the The group invested over R34.5 million http://ir2017.suninternational.com/ 2020 strategy downloads/ . Suppliers are encouraged to (2016: R21.2 million) in supplier • Finalising and implementing the follow specific requirements in respect of development, including early settlements fronting policy labour conditions, human rights and substantially above the claimable value. occupational health and safety, as well as Similar to 2016, Sun International invested • Focusing on effective reporting of demonstrate consideration in mitigating an additional R9.0 million in enterprise E&SD funding harmful environmental impacts. development, supporting a pipeline of new • Meeting our B-BBEE target for business into the supply chain. This E&SD suppliers

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 45 CHIEF FINANCIAL OFFICER’S REVIEW

Highlights

Revenue up EBITDAR up 12% to 13% to R15.6bn R4.3bn

DEBT OF EBITDA up 13% to R15.0bn of which R11.4 billion attributable to the R4.0bn South African balance sheet.

Challenges

Weakened South African Trading at economy Time Square impacted local well behind casino revenue expectations growth

Cost of doing Increasing business in regulatory Norman Basthdaw South Africa pressures Chief financial officer

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FINANCIAL REVIEW managed cash flow, which despite the disappointing performance, has enabled For the year to 31 December 2017 our the group to grow free cash flow before focus has shifted from an investment expansion activities. A lot more still needs phase to one of getting ‘back to basics’. to be done but with the ‘back to basics’ This has entailed critically reviewing approach, we will not only improve several aspects of our business, among operating performance but most others, increasing disciplines across the importantly, we will be able to improve organisation, improving system utilisation our guest experience and ultimately and driving efficiencies. We have carefully grow revenue. analysed our capital allocation and

Significant investments over the past few years For the year, group revenue increased by 12% to R15.6 billion, with the growth attributable to the inclusion of the results of Sun Dreams (from 1 June 2016), SunSlots (from 1 April 2016) and Time Square (from 1 April 2017).

Acquisition Revenue generated by the comparable Development Significant of the minorities’ South African operations (excluding of Time Square in upgrades to interest in alternative gaming, International VIP Menlyn, Pretoria Sun City Monticello Business, Time Square and Morula) was flat when compared to the prior year. Sibaya, Sun City, SunSlots and Table Bay produced encouraging results with growth in revenue and EBITDA. The performance of the Latam operations has remained subdued. The Chilean operations, and in particular Monticello, were impacted by the shooting incident at half-year. Due to the continued Development underperformance of the Ocean Sun of the Ocean Increased Merger Casino, its operations have been scaled Sun Casino in our interest in with Sun Dreams down and the International VIP Business Panama and the Sun Dreams, in Chile closed while the Sun Nao Casino in Sun Nao Casino the Latam merged Colombia, which has continued to incur in Colombia entity, from 55% to 65% losses, was closed in December 2017. Group EBITDA increased by 13% from R3.6 billion to R4.0 billion. Through a focus on costs and efficiency, EBITDA generated on a comparable basis by the South African operations increased by 3%. The income statement below includes adjusted headline earnings adjustments. Interest charges were well up on the prior year due to the inclusion of Sun Dreams Year Pro forma for the full year and the borrowings ended 12 months relating to Time Square. Minorities’ share 31 December % 31 December of earnings has increased with the disposal R million 2017 movement 2016 of the 10% interest in SunWest and Golden Revenue 15 609 12 13 884 Valley in April 2016 and the consolidation EBITDA 4 031 13 3 582 of Sun Dreams for the full year. Adjusted operating profit 2 475 7 2 315 Adjusted headline earnings of R310 million Foreign exchange loss (82) (332) (19) are 41% below the prior year, with adjusted Net interest (1 039) (21) (856) headline earnings per share down 41% to 298 cents. Profit before tax 1 354 (6) 1 440 Tax (597) (28) (468) HEADLINE AND ADJUSTED Profit after tax 757 (22) 972 HEADLINE EARNINGS Minorities (397) 6 (423) ADJUSTMENTS Attributable profit 360 (34) 549 The group has incurred a number of once-off or abnormal items that have Share of associates 2 (87) 15 been adjusted for in headline and adjusted Continued adjusted headline headline earnings, the most significant of earnings 362 (36) 564 which are described on page 48. Discontinued operations (52) (30) (40) Adjusted headline earnings 310 (41) 524

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 47 OUR PAYOUTS | CHIEF FINANCIAL OFFICER’S REVIEW continued

Headline earnings adjustments include the • restructuring costs of R43 million • amortisation of R149 million of the following: relating to Sun Nao Casino, Morula and Sun Dreams intangible assets raised as Fish River closures part of a purchase price adjustment • profit on disposals of shares in • expensing of the remaining bid • an increase in the value of the subsidiaries of R27 million commitment of R20 million relating to Sun Dreams and Tsogo put options of • impairment of assets of R92 million the Fish River R223 million • fair value adjustment on a held-for-sale • foreign exchange loss on intercompany • tax on the above items of R102 million; investment of R43 million. loans of R27 million and minorities’ interest on the above • pre-opening expenses of R48 million items of R147 million. Adjusted headline earnings adjustments include the following: • interest of R22 million incurred up to the opening of the Time Square casino DIVIDEND • an onerous lease contract provision in which related to the payment made to Given the need to reduce the high debt Colombia of R50 million relating to the Peermont levels, the board has decided not to Sun Nao Casino • the straightlining of the Maslow and declare a dividend for the year ended • bid and transaction costs of R43 million head office building lease expense of 31 December 2017. relating to the Latam operations’ R20 million

municipal bids and Sun Dreams merger

REVENUE BY NATURE AND GEOGRAPHICAL SEGMENT South Africa Latam Nigeria Group R million 2017 2016 2017 2016 2017 2016 2017 2016 Casinos 7 411 6 918 3 983 3 277 57 80 11 451 10 275 LPM 1 060 753 – – – – 1 060 753 SunBet 49 40 – – – – 49 40 Rooms 976 921 224 131 41 39 1 241 1 091 Food and beverage 921 828 368 404 41 38 1 330 1 270 Other 465 434 9 15 4 6 478 455 Total operating segments 10 882 9 894 4 584 3 827 143 163 15 609 13 884 International VIP Business 4 135 – – – – 4 135 Group operations 10 886 10 029 4 584 3 827 143 163 15 613 14 019

South Africa continues to contribute the majority of group revenue at 70%, with Latam contributing 29% and Nigeria 1%. Gaming is the primary contributor to group revenue at 73%, alternate gaming contributes 7%, food and beverage 9%, rooms 8% and other revenues 3%. The table below sets out the consolidated revenue, EBITDA and operating profit by geographical region and the reconciliation between operating profit as reflected in the statement of comprehensive income and the income statement above which includes headline and adjusted headline earnings adjustments. Revenue EBITDA Operating profit R million 2017 2016 2017 2016 2017 2016 South Africa 10 882 9 894 2 926 2 622 1 926 1 784 Sun International comparable operations 8 908 8 888 2 495 2 411 1 739 1 630 Time Square (consolidated from 1 April 2017) 827 – 184 – 26 – SunSlots (consolidated from 1 April 2016) 1 060 753 249 182 166 123 Morula 38 213 (4) 29 (5) 34 SunBet 49 40 2 – – (3) Latam 4 584 3 827 1 097 964 571 574 Nigeria 143 163 8 (4) (22) (43) Total operating segments 15 609 13 884 4 031 3 582 2 475 2 315 Headline and adjusted headline earnings adjustments impacting operating profit – – – – (544) (547) Unadjusted group operating profit 15 609 13 884 4 031 3 582 1 931 1 768

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SEGMENTAL REVIEW The implementation of strategic initiatives makes the current period difficult to analyse and therefore a segmental review with the full comparable trading of Sun Dreams and SunSlots is provided. The review is based on actual historic performance as if the acquisitions had been implemented with effect from 1 January 2016. The segmental review throughout includes all headline and adjusted headline earnings adjustments. The table below sets out the operating performance of the group’s geographic segments. South Africa Latam Nigeria Group R million 2017 2016 2017 2016 2017 2016 2017 2016 Revenue 10 882 9 894 4 584 4 794 143 163 15 609 14 851 EBITDA 2 926 2 622 1 097 1 271 8 (4) 4 031 3 889 Adjusted operating profit 1 926 1 784 590 837 (19) (38) 2 497 2 583 PPA adjustment – – (19) (14) (3) (5) (22) (19) Operating profit after PPA 1 926 1 784 571 823 (22) (43) 2 475 2 564

South Africa On a comparable basis, revenue for the first half of 2017 decreased by 1% while revenue grew by 2% in the second half, resulting in revenue remaining flat for the year. Comparable EBITDA for the first half of the year was down 9%. However, through a focus on costs and efficiencies, EBITDA in the second half of the year was up 15%, resulting in an increase in EBITDA of 3% for the year. The group’s core casino operations continued to be impacted by the current economic climate in South Africa, with comparable casino revenue down 1% while the hospitality operations performed well with 6% growth in rooms revenue and food and beverage revenue improving by 4%. The International VIP Business struggled to achieve the required volumes to mitigate against volatility and we experienced legal challenges in collecting outstanding debts. Consequently, we suspended the International VIP Business operations in April 2017. Revenue EBITDA Operating profit R million 2017 % 2016 2017 % 2016 2017 % 2016 GrandWest 2 155 – 2 154 850 (2) 866 721 (2) 733 Sun City 1 831 7 1 708 318 58 201 115 >100 12 Vacation Club adjustment (100) 26 (136) (81) 28 (112) (89) 25 (118) Sibaya 1 269 10 1 157 439 16 378 385 22 315 Carnival City 980 (9) 1 074 254 (19) 314 162 (31) 235 Boardwalk 552 (6) 585 95 (14) 110 27 4 26 Wild Coast 481 2 473 93 4 89 46 28 36 Meropa 302 (7) 325 96 (18) 117 75 (22) 96 Windmill 255 (9) 279 79 (18) 96 57 (24) 75 Flamingo 172 (4) 180 47 (11) 53 33 (13) 38 Golden Valley 176 5 167 39 11 35 23 35 17 Carousel 246 (22) 315 28 (53) 60 10 (69) 32 Table Bay 354 6 333 89 19 75 70 19 59 The Maslow 148 1 147 (22) (16) (19) (40) 7 (43) Naledi 21 (13) 24 (7) <(100) (3) (8) (100) (4) Fish River 21 (19) 26 (21) 5 (22) (23) 4 (24) 8 863 1 8 811 2 296 3 2 238 1 564 5 1 485 SunSlots 1 060 41 753 249 37 182 166 35 123 Time Square 827 100 – 184 100 – 26 100 – Morula 38 (82) 213 (4) <(100) 29 (5) <(100) 34 SunBet 49 23 40 2 100 – – 100 (3) Management companies 593 3 578 199 15 173 175 21 145 Inter-company management fees (548) (9) (501) – – – – – – 10 882 10 9 894 2 926 12 2 622 1 926 8 1 784

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 49 OUR PAYOUTS | CHIEF FINANCIAL OFFICER’S REVIEW continued

04 Time Square (Gauteng) 01 Following a soft opening of the casino to the public on 1 April 2017, Time Square achieved total revenue of R827 million for the nine months of trading with R744 million derived from casino revenue and EBITDA of R184 million. The loss after tax and interest incurred was R345.2 million of which R296.0 million was attributable to the group. The Gauteng gaming market grew strongly in the second half of the year and achieved growth of 4.4% for the year. Time Square captured approximately 13% share of the Gauteng market, which is below initial expectations. Recent trading has reflected growth in activity and visitation following the opening of the 02 arena in November 2017 but unfortunately, due to a lower win ratio, the growth has not translated into revenue. With the formal opening of the hotel in April 2018, we anticipate growth in gaming revenue.

05 Carnival City (Gauteng) Carnival City continued to deliver disappointing results with revenue and EBITDA down 9% and 19% respectively. However, the second half of the year showed a marked improvement compared to the first half with revenue down by 3% compared to the 14% decline in the first half. The improvement can partly be attributed to a refresh of the retail as well as food and beverage offering, walk ways 01 GrandWest (Western Cape) and restrooms. Carnival City continues to GrandWest’s revenue remained flat at 03 focus on driving footfall through events R2.2 billion while EBITDA decreased by and entertainment to counter the effects 2%. Strong growth in tables’ revenue was of lower average spend achieved while slots revenue came under pressure with a slowdown in top end play. 06 Boardwalk (Eastern Cape) Overall footfall was up, however average Boardwalk’s overall revenue decreased by spend was down. 6% with casino revenue down by 5%. With the drop in revenue, EBITDA decreased by 02 Sun City (North West) 14% from R110 million to R95 million. Of Despite tough trading conditions, Sun City further concern is the opening of an EBT had an exceptional year benefiting from outlet in Uitenhage in September 2017, the extensive refurbishments completed in which will likely impact the Boardwalk’s prior periods. Casino revenue increased by revenues further. An application to 11%, rooms revenue by 11% and food and restructure the Boardwalk has been beverage by 3%. Hotel occupancy submitted to the Eastern Cape Gaming increased from 68% to 72% assisted by the Board. The shopping mall development is refurbished conference facility. The progressing, having received gaming average room rate increased by 4%. board approval and we have secured an anchor tenant for the premises. The EBITDAR (pre the vacation club 04 adjustment) increased by 22% reflecting Boardwalk’s sole contribution to the the focus on controlling costs. EBITDA development will be the inclusion of the (pre the vacation club adjustment) existing retail and land in return for a 50% however increased by 58% as the equity interest in a joint venture. temporary conference facility rental in 2016 of R57.8 million was no longer 07 The Table Bay (Western Cape) incurred. The Table Bay continues to perform well with revenue up 6% and EBITDA up 19%. 03 Sibaya (KwaZulu-Natal) Occupancy was down two percent to 75% Sibaya delivered pleasing results with while the average room rate increased by revenue up 10% and EBITDA up 16%. The 9% resulting in a REVPAR growth of 7%. property continues to show growth in Our international mix increased by one market share, which for the year was at percent to 82% of room revenue. 35.1%, up 1.6% on the prior year. The food and beverage offering and Privè will be upgraded in 2018.

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10 Other Casinos 05 The other small urban casinos which include Meropa (Limpopo), Windmill (Free State), Flamingo (Northern Cape), Carousel (North West) and Golden Valley (Western Cape) were impacted by depressed trading conditions with aggregated revenue down 9% and aggregated EBITDA down 20%. A new 60-room hotel was opened at Meropa in July 2017. SunSlots revenue exceeded R1 billion for the first time with an increase of 8% on the comparable prior year. Management fees and related income of R593 million, was 3% higher than the prior year. EBITDA increased 15% to R199 million.

06 08 11

OTHER AFRICA 07 09 11 Nigeria The trading conditions in Nigeria have not improved during the last six months and as a result revenue decreased by 12%. However an EBITDA of R10 million was achieved partly due to provision reversals.

08 Wild Coast Wild Coast revenue and EBITDA increased 10 by 2% and 4% respectively while maintaining the EBITDA margin. The casino licence expires in 2019 and the Eastern Cape Gambling and Betting Board has issued a request for proposal (RFP), which the company has responded to. We now await the final RFP to be issued.

09 The Maslow Hotel 12 LATAM The Maslow Hotel increased revenue by Sun International’s Latam operations have 1% due to higher occupancy, which was been successfully integrated with those of up from 70% to 72%. With the increased Dreams. The table on page 52 includes the competition and a slowdown in business historic trading of Sun Dreams for the year travel, the room rate was in line with the ended 31 December 2016, with the prior year. conversion at the average exchange rate for the year ended 31 December 2017, to enable comparison in Rands.

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 51 OUR PAYOUTS | CHIEF FINANCIAL OFFICER’S REVIEW continued

Presentation of constant currency information and pre-acquisition adjustment Revenue EBITDA Operating profit R million 2017 2016 2017 2016 2017 2016 Monticello 1 674 1 861 417 562 265 427 Dreams SCJ licences 1 532 1 547 586 590 551 559 Dreams municipal licences 834 853 303 319 256 270 Sun Chile office 9 – 8 – 8 – Central Office – – (132) (170) (277) (254) Chile operations 4 049 4 261 1 182 1 301 803 1 002 Ocean Sun 223 231 (80) (38) (162) (121) Sun Nao 35 40 (38) (37) (67) (62) Peru 277 262 33 45 (3) 4 Latam total 4 584 4 794 1 097 1 271 571 823

Constant currency adjustment – 113 – 31 – 19 Pre-acquisition adjustment – (1 081) – (338) – (268) 4 584 3 827 1 097 964 571 574

Overall, revenue from Chile decreased by 13 5% to CLP197 billion (R4.1 billion) while EBITDA decreased by 9% to CLP57 billion (R1.2 billion). Iquique, which is located in a copper mining region was impacted by strikes early in the year, while Monticello’s revenue was down 10% with gaming revenue down 6%. The property was negatively impacted by the relocation of the toll road in September 2016 and the unfortunate shooting incident that took place in July 2017. In June 2017, Monticello opened a new smoking deck, a 4 000-seat arena and a new bar. However, due to the arena start-up costs, additional security measures being put in place post the shooting incident and an increase in marketing spend to attract guests back to the casino, EBITDA was down 26%.

The 31 December 2016 segmental The effective date of the merger with comparative pro forma results set out in Sun Dreams was 1 June 2016. In order to the segmental tables relating to our Latam present a meaningful comparative, the businesses have been translated at the pre-acquisition adjustment includes the 31 December 2017 average exchange rate 5 months prior to the merger. The pro of 48.7 Chilean Pesos (CLP) to the Rand forma information has been prepared for (47.6 for 31 December 2016). The illustrative purposes only and because of adjustment has been disclosed as a its nature, it may not fairly present the constant currency adjustment. The group’s financial position, changes in presentation of financial information on a equity, results of operations or cash flow. constant currency basis and in relation to The pro forma information has been the pre-acquisition adjustment falls into extracted from management accounts. the category of non-application of a Shareholders are further advised that the specific IFRS requirement and is therefore above information has not been reviewed regarded as pro forma information, per or reported on by our auditors. the JSE Listings Requirements.

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13 Panama 15 The performance of the Panama operation continues to disappoint. Revenue decreased by 4% from R231 million to R223 million while the EBITDA loss increased from R38 million to R80 million due to bad debts and high marketing, promotion and tournament costs which did not drive the expected revenues. With the closure of the International VIP Business and the 66th floor casino, the cost structure has been reduced significantly. 14 Colombia The Sun Nao Casino in Colombia continued to incur an EBITDAR loss and consequently the business was closed in December 2017. Some of the slot machines have been redeployed to smaller outlets in Cartagena with significantly less overhead costs and we are in negotiations to early exit the current property lease. 15 Peru Revenue in Peru increased by 6% while EBITDA decreased from R45 million to R33 million due to higher promotional and marketing expenditure in the region.

GROUP BORROWINGS Sun International’s borrowings as at 31 December 2017 were R15.0 billion of which R11.4 billion can be attributable to the South African balance sheet. Group debt increased by approximately R480 million from 31 December 2016, due primarily to the capital expenditure at Time Square. The group’s balance sheet remains resilient and the operations continue to generate strong cash flows. Following negotiations with the group’s lenders, the debt covenant levels were adjusted and the group continues to trade within these levels. The group has unutilised borrowing facilities of R730 million and available cash balances of R700 million. Minorities Sun R million Total debt share International South Africa 11 424 1 373 10 051 SunWest 869 305 564 Afrisun Gauteng 580 31 549 Afrisun KZN 284 96 188 Emfuleni 610 91 519 Wild Coast 280 84 196 Meropa 131 38 93 Teemane 75 19 56 Windmill 102 27 75 Golden Valley (11) (4) (7) SunSlots 70 21 49 Time Square 4 669 665 4 004 Management and corporate 3 765 – 3 765

Nigeria 493 250 243 Shareholder loans 761 386 375 Sun International inter-company (268) (136) (132)

Latam 3 078 1 031 2 047 Sun Dreams 2 267 1 031 1 236 Sun Chile 811 – 811

31 December 2017 14 995 2 654 12 341 31 December 2016 14 517 3 134 11 383

SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 53 OUR PAYOUTS | CHIEF FINANCIAL OFFICER’S REVIEW continued

Debt covenants The bank debt covenants per the funding agreements in South Africa and Chile at 31 December 2017 are set out below.

South Africa Chile Covenant Actual Covenant Actual Debt to EBITDA 4.0x 3.7x 4.75x 2.8x Interest cover 2.5x 3.3x – –

RIGHTS OFFER Proposed acquisition by Due to difficult trading conditions and Time Square producing disappointing results, Sun International of 50% of the group renegotiated its South African debt covenant levels for June 2017 and Entretenimientos Del Sur December 2017. Although trading has improved marginally at Time Square and the group Limitada’s (EDS) equity interest in met its debt covenants at 31 December 2017, the board has deemed it prudent to embark Sun Dreams and put options on a capital raise exercise to de-risk the balance sheet. Accordingly, the proceeds from the Shareholders are referred to the rights offer will be used to repay debt, thereby creating headroom in relation to relevant announcements released by the debt covenants. A stronger balance sheet and capital structure will also afford management company on SENS on 30 May 2017 and more operational freedom to focus on the back to basics strategy. In addition, the rights 15 November 2017 which provided offer will reduce Sun International’s interest charge as rates are based on Sun International’s details regarding Sun International's prevailing debt metrics. intention to increase its shareholding in Sun Dreams from approximately 55% to CASH FLOW approximately 65%. The group continues to generate strong cash flow from operations, which has resulted in the group trading within the debt covenant levels. As part of the transaction, the put options previously exercisable by Nueva Inversiones CAPITAL EXPENDITURE Pacifico Sur Limitada and EDS on R million Total Sun International will fall away. The implementation of this transaction (which South African operations is now unconditional) is pending Expansionary finalisation of an underwritten 10-year Time Square 1 594 bond issue which is expected to be implemented by the end of March 2018, Meropa 50 after which the put option liability and Sun City 28 reserve will be derecognised from the 1 672 balance sheet. Refurbishment and ongoing Peru acquisition Sun City 71 Sun Dreams has finalised an acquisition in GrandWest 128 Peru of Thunderbird Resorts, which comprises of 4 gambling operations Sibaya 81 generating EBITDA of US$4.2 million. SunSlots 95 The purchase consideration is approximately Other 127 US$27 million and includes premises valued at US$11 million. The acquisition 502 presents an opportunity for Sun Dreams Total South African capital expenditure 2 174 to strengthen its position in Peru and Latam operations diversify its asset base in Latam. The proposed transaction is still awaiting the Expansionary 230 relevant gambling board approvals which Refurbishment and ongoing 178 are anticipated to be received in the Total Latam capital expenditure 408 near future. Nigerian operations INCREASE IN VAT RATE Expansionary 10 The 1% increase in the VAT rate in South Total Nigerian capital expenditure 10 Africa will result in a direct cost for the Total group capital expenditure 2 592 business as the increase cannot be passed on to our gaming customers. The Project capital expenditure additional cost will equate to an approximate 5% increase in the VAT Sun International has outstanding capital commitments of approximately R230 million to currently payable on gaming revenue. be incurred in 2018 to complete Time Square development. Based on the 2017 gaming revenue, this would have amounted to approximately UPDATE ON STRATEGIC INITIATIVES R54 million from which corporate tax will The Time Square casino was completed and opened on 1 April 2017. The arena opened in be deducted. November 2017 and the hotel will open in March. We believe that these facilities will have a significant impact on visitation to the property and an increase in casino revenue. To date, the cost of the development equals R4.2 billion. The board of the Tourist Company of Nigeria (TCN) – Federal Palace has been reconstituted with the Securities Exchange Commission appointing two directors thereto. Deloitte has been mandated to investigate the shareholder disputes. Once the Deloitte Norman Basthdaw investigation has been completed it will pave the way for Sun International to exit its Chief financial officer investment in Nigeria. 29 March 2018

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SUN INTERNATIONAL INTEGRATED ANNUAL REPORT 2 0 1 7 55 OTHER OUR DECK OUR OUR RULES OF GAMING OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION

RULES OF THE GAME BOARD OF DIRECTORS

N (NORMAN) BASTHDAW 50 MV (VALLI) AM (ANTHONY) MOOSA 61 LEEMING 48 Chief financial officer ZBM (ZARINA) PL (LEON) (CFO) 53 Chairman CAMPHER 69 Chief executive (CE) BASSA GW (GRAHAM) BCompt (Hons), CTA, 62 COMMITTEES BCom, BAcc, CA(SA) Non-executive E (ENRIQUE) DEMPSTER BSc (Mathematics, Non-executive CA(SA), MCom, 64 BAcc, Dip Acc, CA(SA) CIBIE Non-executive A Audit Physics) BEcon Appointed in 2013 Higher Diploma in PDS (PETER) 71 Non-executive BCom, CTA, I Investment Appointed in 2005 Appointed in 2002 (board) Company Law BACON Appointed in 2010 BA, CA (Pontificia CA(SA), AMP (Harvard) Appointed in 2009 as Appointed in 2017 (CE) Appointed in 2017 Non-executive Resigned 12 February IT IT governance • Extensive experience Universidad Catolica de chairman of the board 2018 Appointed in 2017 in investment • Financial and • External and internal FIH Chile), MBA (Stanford) N Nomination • Sound business management corporate finance audit experience • Financial technical • Extensive local and Appointed in 2013 Appointed in 2014 experience • Sound stock expertise • Financial expert international RM Remuneration • Sound governance • Extensive experience • Extensive experience • Extensive experience • Public and private exchange experience management R Risk sector leadership in equity property and IT experience expertise in hospitality and in banking international gaming in banking and • Sustainability funds and clearing • Gaming and • Corporate finance gaming • Sound business experience finance S Social and ethics experience • Sound business hospitality • Sound business experience • Sound business • Sound business advisory and private Chairman • Global experience experience experience equity experience experience • Business leader experience experience COMMITTEES COMMITTEES COMMITTEES COMMITTEES COMMITTEES COMMITTEES COMMITTEES COMMITTEES N I RM S I A N RM S IT R IT R R A A I RM A RM R I

Executive Non-executive

DR NN (LULU) CM (CAROLINE) BLM (TUMI) IN (NIGEL) DR (KHATI) GR (GRAHAM) GWAGWA 58 HENRY 51 MAKGABO- MATTHEWS 72 MOKHOBO 52 ROSENTHAL 73 43 Non-executive Non-executive FISKERSTRAND Lead independent Executive director Non-executive BA, MTRP, MSc, CA(SA) Non-executive director (LID) BCom, BAcc, CA(SA) PhD (London) Appointed in 2016 BA (International MA (Oxon), MBA ACMA, CA(SA) Appointed in 2002 Relations) Appointed in 2005 • Extensive Appointed in 1996 Appointed in 2016 Retiring at 2018 AGM Appointed in 2010 (board) • Sound business experience in • Financial and • Expertise in finance experience finance, treasury, • Extensive experience Appointed in July 2009 forensics expertise • Extensive experience COMMITTEES debt capital in investment (LID) • Sound new business in audit and business markets and opportunities development N R Retired 31 December advisory pension and throughout the experience 2017 provident funds African continent • Gaming expertise COMMITTEES • Sound business • Sound business and • Environmental A R S experience leadership expertise • Tourism expertise COMMITTEES experience • Expertise in • Sustainable A R communications development expertise COMMITTEES S COMMITTEES RM I N R

SUN INTERNATIONAL 56 INTEGRATED ANNUAL REPORT 2 0 1 7 57 EXECUTIVE LEADERSHIP

ANDREW JOHNSTON 52 NORMAN Director: corporate JAIME 51 BASTHDAW 50 services and group WILHELM Chief financial company secretary Chief executive – Sun Dreams S.A. officer BA, LLB, FCIS, CLAUDIO ANTHONY 47 LEEMING 48 BCompt (Hons), Post Graduate Business TESSADA CTA, CA(SA), MCom, Diploma Administration and Chief executive Chief financial Higher Diploma in (Environmental Law) Economics, MBA officer – BCom, BAcc, Company Law • Legal, secretarial, • Strategic, Sun Dreams S.A. CA(SA) • External and compliance, planning, and • Financial and internal audit sustainability and development and BA, MBA corporate finance experience corporate implementation • Financial and expertise • Financial governance expertise insurance • Sound management experience • Financial and experience governance and expertise • Corporate finance accounting • Marketing IT experience • Corporate finance and investor expertise experience • Gaming and advisory and relations expertise • Casino design • Casino hospitality private equity • Certified ethics and operations operations experience experience officer experience experience

THABO ZAINE CATHERINE VERNA ROB KHATI MOSOLOLI 48 MILLER 52 NYATHI 36 ROBSON 46 COLLINS 56 MOKHOBO 52 Chief operating Group chief Chief audit Director: group Group strategy and Director: officer information officer executive human resources operations officer special projects BCom Honours, CIO certification, CA(SA), Post Graduate BProc (Legal), BCom (Legal), BCom BCom, BAcc, CA(SA), EDP, MAP, electrical Diploma in Banking Advanced Human Honours (Marketing), ACMA, CA(SA) engineering, Diploma in project Law, Post Graduate Resource Higher Diploma Tax • Financial and electronics management, (Honours) in Management Law, Company Law forensics expertise International • Information Corporate • Labour relations • Marketing, events, • Sound new business Business certificate Technology (IT) Governance experience entertainment and development • Financial and expertise • Extensive audit • Extensive human sales expertise experience corporate finance • IT governance, experience resources • Gaming and • Gaming expertise expertise IT operations • Governance, risk experience hospitality and strategy • Gaming and and compliance experience experience hospitality expertise • Hotel • Hospitality, experience • Banking, management gaming, ERP, insurance, gaming • Internal audit and eCommerce and and hospitality advisory services integrated experience experience system architecture experience Group South Africa

Latin America

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CORPORATE GOVERNANCE OVERVIEW In the challenging environment we find ourselves in, good corporate governance is more important than ever, and we continue to live by the pillars of integrity, responsibility, fairness, transparency, honesty and accountability to all stakeholders. These pillars preserve the group’s long-term sustainability, thereby delivering value to all stakeholders.

MESSAGE FROM THE awareness will be created around the and responsive in their responsibility of importance of using the ethics hotline. In securing the host of information stored CHAIRMAN addition, an ethics office has been created across the various systems within Dear stakeholders with a dedicated resource to assist with the group. In the past 18 months, we have seen the awareness and upliftment of ethics Governance in Latam was a focus area much change at Sun International, most within the organisation. and good progress was made where notably in our senior management: With the chief executive’s directive of board committees have been established chief executive Graeme Stephens resigned ‘getting back to basics’, the board is and their processes are being aligned to as chief executive effective 31 January 2017 renewing its focus on reviewing the the South African operations. Going and was replaced by Anthony Leeming on fundamentals of how we govern and how forward, the Latam committees will be 1 February 2017. Norman Basthdaw was our structures enhance and unlock reporting into the South African board appointed chief financial officer on shareholder value. The board committee committees so that the local operations 24 March 2017, and Andrew Johnston was memberships were reviewed during the can focus on the operational matters appointed director: corporate services and year to ensure an integrated approach that while material governance, risk and group company secretary effective delivers on our strategic objectives. This strategy issues are elevated to the group 16 November 2016. In addition Leon integrated governance approach enables board. We acknowledge that there is still Campher was appointed lead independent these committees to ensure that progress work to be done in this area to align director and chairman of the remuneration against the group’s strategic objectives is governance practices with the rest of the committee and Graham Dempster was monitored. We have also embraced group. The integration process has already appointed chairman of the investment King IV™; our application register provides commenced with the group company committee. details on how we have applied the secretary attending all committee There were no material instances of 16 King IV™ principles http://ir2017. meetings of Sun Dreams. suninternational.com/rules-of-the-game/ non-compliance during the year under The operating environment continues to The board is satisfied with the extent of review. While the board is satisfied with pose new challenges as the threat of the group’s application of the principles the group’s level of compliance in increased gaming taxes, proposed set out in King IV™, the group’s regulatory accordance with applicable governance amendments to smoking legislation and universe, and with the JSE Listings and regulatory requirements, it will the overall tougher economic times, Requirements as articulated in this report. continue to review the group’s requires innovative thinking along with governance practices against best During the year under review a revised disciplined processes. We continue striving practice. integrated risk methodology and ranking to achieve that balance. The group experienced some operational challenges Sun International takes pride in the fact system was adopted to more accurately as the automated compliance portal has that its business practices remain identify and rank groupwide risks and not been fully rolled out given some underpinned by ethical principles opportunities in South Africa and Latam. difficulties in implementation. However, embraced by the board, practiced by the Additionally, specific executives are management is focusing on completing leadership team and cascaded down to accountable for managing, monitoring and reporting on identified risks and this roll out. We continue to engage with our employees groupwide. We are opportunities in their areas of expertise. the gaming boards with a view to unwavering in our endeavours of zero A new sustainability committee was simplifying our group corporate structure tolerance for corruption at every level of constituted to focus on environmental, and we hope to bed down the simplified the organisation. To reinforce the board’s health and safety, socio-economic structure by the end of 2018. ethical leadership commitment, the board development, enterprise and supplier of directors and executive committee Looking ahead our key focus areas development as well as ethics and monitor signed an ethical declaration, include: the group’s progress against B-BBEE. http://ir2017.suninternational.com/ Further, a policy revitalisation rules-of-the-game/ and looking ahead we • enhancing an ethical culture through management sub-committee was aim to highlight ethics in the organisation acting on the results of a groupwide established to review, update and and encourage employees to commit to a ethics survey consolidate group policies. Sun International similar ethical conduct declaration, which • embedding the policy revitalisation also adopted a new memorandum of will build on the SunWay project that has programme to guide the group and incorporation that aligns with current stakeholders with whom it engages been initiated around creating a positive corporate governance best practices. culture within the organisation. We also • continuing to remain resilient to cyber engaged with Deloitte Tip-Offs With the increase of cyber threats across threats by developing robust IT systems Anonymous to manage the group’s ethics our operating environment, the group’s and processes hotline and going forward, greater IT governance structures remain resilient

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• continuing work on the integration of interrogated and canvassed. We will Latam’s governance structures with continue to apply our minds individually This governance overview report South Africa including systems, and collectively to guide the group’s should be read in conjunction with processes and risk management strategic direction and to facilitate the the full governance report online • revisiting remuneration practices and group’s delivery of its strategic objectives. http://ir2017.suninternational.com/ procedures to closer align with rules-of-the-game/ as well as shareholders interests following the separate sub-committee reports – concerns they have expressed. audit, remuneration and social and ethics – to obtain a holistic view of We are satisfied that the group is meeting the governance matters under the requisite standards of governance and Valli Moosa consideration during the year under compliance, and that matters for our Chairman review. consideration have been robustly 29 March 2018

GOVERNANCE FRAMEWORK Sun International’s governance framework is depicted below and shows the integration between the board, its sub-committees and the executive management committee. The board and sub-committees are supported in their deliberations through the feedback of

the operational management committees within the organisation.

S Chairman: Graham Rosenthal

R Reviews activities and performance of the internal audit function and the

Audit E external auditor oversees effective governance of the group’s financial

D results L

O H Chairman: Leon Campher

Investment E Reviews and recommends new merger, acquisition and disposal

K opportunities aligned to the group’s strategy A

• Chairman: Valli Moosa

A Evaluates the skills requirements of the board and executive management

Nomination

T and makes recommendations on board, committee and executive E

T composition and succession planning R

E U

Y N Chairman: Nigel Matthews

N Reviews the groups remuneration practices and structures and ensures A Remuneration O P best corporate governance practices are applied

L O

C A

P C I U H O Chairman: Peter Bacon IT governance R Risk T G E Evaluates groupwide risks of the risk universe committee

in which the group operates

•

S Chairman: Tumi Makgabo-Fiskerstrand Social R Monitors the social, economic and environmental activities of the group and E and reports to the board and the group’s stakeholders on developments ethics D and progress L O Executive H E Chairman: Anthony Leeming Sustainability management R A Oversees the implementation of decisions committee H and strategy endorsed by the board, S throughout the group

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BOARD OVERVIEW integrity, transparency, honesty, members as well as the roles and responsibilities incumbent on the directors Sun International has a unitary board accountability, fairness and responsibility. as individuals. This board charter is structure comprising a mix of executive Board charter reviewed every other year or more and non-executive directors, the majority frequently as may be required, to ensure of whom are independent, non-executive The board’s role is to exercise ethical its relevance and a copy is available directors. The non-executive directors leadership and sound judgment in online http://ir2017.suninternational.com/ have the necessary skills, qualifications directing Sun International to achieve downloads/ and industry experience to provide sustainable growth in the best interests of judgment independent of management on its stakeholders. The board operates under The board is satisfied that it has fulfilled its material board issues. The board provides the auspices of a board charter that sets responsibilities in accordance with the ethical leadership and directs the group out specific responsibilities to be charter for the reporting period. based on the fundamental principles of collectively discharged by the board

In terms of the board charter, the chairman and chief executive have separate responsibilities as tabled below. The board’s primary role is to exercise effective, ethical and responsible Chairman’s responsibilities Chief executive’s responsibilities leadership in determining the group’s Setting the ethical tone of the Setting the tone and providing ethical strategy, overseeing the implementation company. leadership and creating an ethical culture. of this strategy by the management team, and closely monitoring business Providing overall leadership without Developing and implementing the company performance. limiting individual responsibility. strategy for board approval. Board processes include: Participating in the identification and Assisting the nomination committee with • Board appointments and rotation of selection of board members. senior executive appointments. directors Overseeing succession planning for the Developing business plans and budgets that • Nomination and selection process board and senior executives. support the company’s long-term strategy. for board appointments • Board induction Encouraging collegiality and candid Establishing an executive management debate. structure to enable strategic execution. • Ongoing director training and development Managing directors’ conflicts of Monitoring and managing the day-to-day • Independence interests. operational requirements of the company. • Succession planning Acting as a link between the board and Ensuring that the company applies best • Conflicts of interest executive management. practice and complies with all relevant laws. • Board, directors and committee Ensuring the board fulfils a constructive Maintaining personal awareness of business, evaluations role in the affairs of the company. economic and political trends that may • Board meetings affect the company. Ensuring board effectiveness and Ensuring executive committee effectiveness Detail on the board processes is assessing individual director by assessing top managements performance. available online http://ir2017. performance. suninternational.com/ rules-of-the-game/ Ensuring that all directors are made Ensuring the company assets are adequately aware of their responsibilities. maintained and protected. Ensuring positive stakeholder relations Ensuring that comprehensive and are maintained. appropriate internal control mechanisms are approved by the board to mitigate key risks. Ensuring that decisions of the board are Ensuring that business practices and executed. activities are in accordance with good corporate governance and ethical conduct.

Gender diversity policy Independence

BOARD COMPOSITION (as at 31 December 2017) Gender ● Independent directors (8/13) 62% MALE (9) ● Non-independent directors (2/13) 15%

FEMALE (4)

Executive and non-executive directors Ethnicity

BLACK (6) ● Executive directors (3/13) 23% ● Non-executive WHITE (7) directors (10/13) 77%

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Gender diversity policy delegated the group’s IT responsibilities to SUPPORTING SUSTAINABLE Sun International adopted a gender the IT governance committee which BUSINESS PRACTICES reports into the risk committee. diversity policy during 2017 which is The group is aware of its responsibility Sun International’s chief information available online at http://ir2017. towards being a good corporate citizen as officer reports directly to the chief suninternational.com/downloads/ and it considers the sustainability of its became effective on 1 January 2017 executive and is responsible for IT business practices and its potential impact (gender). The race targets become effective operations and IT strategy within the group. on all stakeholders and on the from 1 June 2018 but have already been The focus during 2017 included enhancing environment. The achievement of the adopted: 50% of the board should be black group’s key strategic imperatives is customer services, improving internal and a minimum of 30% should be women. underpinned by the group’s sustainable efficiencies and refining IT infrastructure Factors considered in ensuring appropriate business practices and are often an gender and race targets included: the and security. Sun International’s enabler by ensuring that a sound current composition and expected e-Learning portal was well received and corporate reputation and the group’s changes in the board going forward, the contributed to developing and retaining brand are synonymous. B-BBEE Codes of Good Practice, the IT skills within the group. The group is sectoral charter for the tourism industry, committed to ensuring business continuity The board engaged the services of an the gaming board licences and their external assurance provider to provide an and has a robust business continuity respective requirements as well as the independent assurance statement on the programme aligned to ISO 22301 and group’s employment equity plan. group’s sustainability reporting as ISO 27031 standards. Good progress was advocated by King IV™. This external IT GOVERNANCE made in aligning Latam’s IT governance review is also beneficial in identifying The board is responsible for the oversight framework with the South African those areas where there is room for of IT governance within Sun International, operations’ IT governance framework. improvement. which operates within its IT mandate that Going forward, emphasis will be placed on Furthermore, the group continues to use incorporates King IV™ IT governance information security, system integration, the Global Reporting Initiative Framework requirements and is aligned with the as the basis for its integrated sustainability group’s strategic objectives. The board has automation and standardisation of processes. reporting.

THE ACTS, REGULATIONS, FRAMEWORKS AND LISTINGS REQUIREMENTS THAT APPLY TO SUN INTERNATIONAL Sun International conducts business in a highly regulated industry. We have identified our legal and regulatory universe, which we continuously monitor given the increased changes in law and the varied jurisdictions within which we operate. Being a responsible corporate citizen is imperative for maintaining our casino licences and we provide a snapshot of our legal and regulatory universe below.

What we comply with JSE Listings Requirements Sun International is a public company listed on the Johannesburg Stock Exchange and accordingly complies with the JSE Listings Requirements. King IV Code of Governance (King IV™ Code) King IV™ and its recommended practices are applied throughout the group as shown in our King IV™ application register that is available online at http://ir2017.suninternational.com/rules-of-the-game/ The board confirms that the group has applied the 16 principles of King IV™ and that the spirit of King IV™ is preserved and embedded in the way the group operates. Local and international legislation Sun International is committed to complying with all relevant legislation and best practices in the jurisdictions within which it operates. The group has identified the main areas of legislation that materially affect its operations and regularly engages with key regulators to make public comments and submissions on proposed new industry and other relevant legislation. Licence conditions issued by the various The gaming industry in which the group operates is highly regulated and is subject to gambling boards significant probity and external regulatory monitoring both locally and internationally. In addition, the casino licence conditions contain their own requirements which must be adhered to.

What we choose to comply with The United Nations Global Compact Principles Sun International remains committed to making the 10 UNGC Principles part of its (UNGC) on human rights, labour environment strategy, culture and day-to-day operations of the group. An analysis in relation to the and anti-corruption group’s standing against these principles can be found on the group’s website http://ir2017.suninternational.com/rules-of-the-game/ Carbon Disclosure Project (CDP) – water and Sun International participates annually in the CDP. energy Organisation for Economic Cooperation and The group adheres to the guidelines for multinational enterprises regarding anti- Development corruption. International Framework Sun International applies the international integrated reporting framework in compiling its integrated annual report.

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ADMINISTRATION

SUN INTERNATIONAL LIMITED CORPORATE LAW ADVISOR Incorporated in the Republic of South Africa Cliffe Dekker Hofmeyr Incorporated Registration number: 1967/007528/06 (Registration number 2008/018923/21) JSE share code: SUI 1 Protea Place ISIN: ZAE000097580 Sandton 2196 COMPANY SECRETARY AND Private Bag X40, Benmore, 2010 REGISTERED OFFICE Telephone +27 (0)11 562 1000 Company Secretary: AG Johnston Telefax +27 (0)11 562 1111 6 Sandown Valley Crescent Sandton REGISTERED OFFICE 2196 6 Sandown Valley Crescent (PO Box 784487, Sandton, 2146) Sandton 2196, Gauteng South Africa SPONSOR Telephone +27 (0)11 780 7000 Investec Bank Limited Telefax +27 (0)11 780 7716 (Registration number 1969/004763/06) website: www.suninternational.com 2nd Floor 100 Grayston Drive Postal address Sandown PO Box 782121, Sandton 2146, Gauteng Sandton South Africa 2196 TRANSFER SECRETARIES (PO Box 785700, Sandton, 2146) Computershare Investor Services Proprietary Limited AUDITORS (Registration number 2004/003647/07) Rosebank Towers PricewaterhouseCoopers Inc 15 Biermann Avenue 4 Lisbon Lane Rosebank Waterfall City 2196 Jukskei View 2090 South Africa (PO Box 61051, Marshalltown, 2107) Telephone +27 (0)11 797 4000 RESERVATIONS AND Telecopier +27 (0)11 797 5800 NATIONAL SALES BANKERS Telephone +27 (0)11 780 7810 ABSA Bank Limited First National Bank Limited INVESTOR RELATIONS Investec Bank Limited Telephone +27 (0)11 780 7762 Nedbank Limited Email: [email protected] Rand Merchant Bank (a division of FirstRand Bank Limited) The Standard Bank of South Africa Limited

FORWARD-LOOKING STATEMENTS

This report may contain certain forward-looking statements other than the statements of historical fact which cannot be construed as reported financial results. Investors are cautioned not to place undue reliance on any forward-looking statements contained herein, as they have not been reviewed or reported on by the group’s external auditors. Such statements may include predictions of or indicate future earnings, objectives, savings, events, trends or plans based on current expectations, forecasts and assumptions. As with any forward-looking statement, prediction or forecast, there are inherently unexpected events which could cause uncertainty and unexpected change which have not, and could not, be accounted for. Whereas the company has made every effort to accurately and reasonably ensure the accuracy and completeness of the information contained within this integrated annual report, any forward-looking statements speak only as at the date that they are made; the actual results may vary materially from those expressed or implied; and the company undertakes no obligation to publicly update or alter these or to release revisions after the date of publication of this report.

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