John Keells Hotels Plc | Annual Report 2013/2014

JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 Our Vision and Pledge 1 Consolidated Value Added Statement 132 Hotel Portfolio - Sri Lanka 2 Sustainable Value Chain 133 - Maldives 34 GRI Index 134

MANAGEMENT REPORTS FINANCIAL INFORMATION Group Financial Highlights 46 Annual Report of the Board of Directors 143 Financial Calender 47 Statement of Directors’ Responsibility 148 Group Operational Highlights 47 Independent Auditors’ Report 149 Chairman’s Message 48 Income Statement 150 Group Structure 51 Statement of Comprehensive Income 151 Board of Directors 52 Statement of Financial Position 152 Corporate Governance 54 Statement of Changes In Equity 154 Audit Committee Report 78 Statement of Cash Flows 155 Notes to the Financial Statements 157 MANAGEMENT DISCUSSION & ANALYSIS Investor Information 80 SUPPLEMENTARY INFORMATION Financial Overview 83 Quarterly Income Statement 210 Management Discussion and Analysis 86 Indicative US Dollar Financial Statements Risk Management 92 Income Statement 211 Indicative US Dollar Financial Statements SUSTAINABILITY REPORT Statement of Financial Position 212 Sustainability Report 98 Ten Years Summary - Group 214 Report Proﬁle 98 Group Real Estate Portfolio 216 Stakeholder Engagement Process 100 Directors of Subsidiary Companies 217 Awards, Accolades and Certiﬁcations 102 Glossary of Financial Terms 219 Independent Assurance Report 105 Notice of Meeting 221 Our Customers 106 Notes 222 Product and Service Responsibility 110 Form of Proxy 223 Our Team 110 Corporate Information IBC Green Philosophy 119 1 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

OUR VISION

We will always be the hospitality trendsetter

OUR PLEDGE

Flawless I will get it right the first time all the time I will make fact-based decisions using my own insight and experience to evaluate a range of options and arrive at the best possible solution. Caring I will care I will respect and care for people, property and information, and be mindful and considerate of my words and actions, thinking about their consequences for others. Exceptional I will stand out wherever I am I will strive to offer exceptional experiences to our guests, contributing towards the Company and our activities in a significant manner, using the talents and skills that are unique to me. Empowering I will empower I will instill a sense of responsibility in myself and others, in order to deliver the finest care in hospitality in the most satisfying manner, together with the freedom to make independent decisions in the best interests of the Company and of the guests we serve. Green I will be green I pledge to think and act in a socially responsible manner, to understand the best practices of sustainability and to use the knowledge and skills I have acquired to improve and sustain the natural world and its resources, spreading awareness to build a sustainable future. 2 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON LODGE

Sprawled over 25 acres, Cinnamon Lodge the option of indulging in gourmet organic Habarana is a wonder to behold. Inspired by the creations and in a range of locations from tree-top culture that surrounds it, and at the epicenter dining to a meal with the chef himself. of Anuradhapura, Polonnaruwa and Kandy, the Lodge gloriﬁes and evokes the past of a bygone age. The 131 rooms and 6 suites are shaded by CINNAMON LODGE over 2,000 trees, creating an exclusive hideaway for guests of all ages. The architecture is also GLORIFIES AND evocative of local history, the famous remains of Ritigala, and brings into play, the beautiful views EVOKES THE PAST of the lake and forest. OF A BYGONE Guests can either visit Anuradhapura, the ﬁrst kingdom of Sri Lanka, the majestic fortress AGE, CREATING of Sigiriya, or the rock temple in Dambulla. Excursions on a wilder theme are also provided with jeep safaris to Minneriya and Kaudulla AN EXCLUSIVE nature reserves or treks along the Ritigala jungle to view the ruins of the 6th century monastery. HIDEAWAY FOR For soothing rituals, the world class spa is well renowned and the pool is also a welcome respite. GUESTS OF ALL AGES.

Dining comes in the form of three restaurants that showcase delectable food. Guests also have 3 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 4 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON LODGE 5 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON LODGE 6 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA TRANZ

Up-tempo and embodying a higher level of swimming pool, the lounge and pool bar or dine consciousness, Chaaya Tranz Hikkaduwa lets at the specialty crab restaurant with mouth- guests experience the sun, sand and surf with watering delights. a heavy dose of Southern hospitality. A 100 km away from the metropolitan city of Colombo Chaaya Tranz incorporates the best of shore life, BRIGHT COLOURS spun together with the tastes and culture of a modern town. Whether guests wish to submerge AND A LAID-BACK in the euphoric or experience the bliss of relaxation, Tranz is the place to be. VIBE EPITOMIZE

Bright colours and a laid-back vibe epitomise the THE AMBIENCE OF ambience of the hotel. The design and furnishings ensure that guests are in tune with this mood. THE HOTEL. With a 150 rooms that open out to dramatic views of the Indian Ocean, the hotel offers patrons the chance to frolic in the waves as well as snorkel and dive with our professional and certiﬁed instructors.

Excursions to the famed Galle Fort and the Singharaja rain forest can be organised on request, and guests who prefer rest and relaxation may indulge in the roof-top spa, fresh water 7 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 8 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA TRANZ 9 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA TRANZ 10 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

BENTOTA BEACH HOTEL

Situated on the golden beaches of Southern Sri Lanka and designed by Geoffrey Bawa, Bentota THE HOTEL IS Beach Hotel has been based on an ancient Dutch Fort. The hotel is positioned at the point where POSITIONED AT the Bentara River flows into the Indian Ocean, offering scenic views of the ocean and estuary. THE POINT WHERE The 130 rooms and 3 suites are well equipped and provide a romantic view of either the sea or the THE BENTARA river. RIVER FLOWS The specialised sports centre on site provides guests with motorised and non-motorised water INTO THE INDIAN sports activities and excursions such as trips to the turtle hatcheries in Kosgoda, laid-back boat OCEAN, OFFERING rides to the surrounding mangroves, or an hour- long drive to the Dutch Fort in Galle. Guests can SCENIC VIEWS OF relax at the end of an adrenaline ﬁlled day with pampering at the spa. THE OCEAN AND ESTUARY. 11 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 12 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

BENTOTA BEACH HOTEL 13 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

BENTOTA BEACH HOTEL 14 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA VILLAGE Stretched out amidst 27 acres of verdant land communities which range from a morning hike overlooking a beautiful lake, Chaaya Village in the Ritigala jungle, to a bullock cart ride in Habarana is located at the heart of Sri Lanka’s Hiriwaduna. cultural triangle in the Anuradhapura District. The hotel consists of 94 superior rooms, 12 deluxe rooms and 2 suites created in a lodge style which DINING IS TRULY give guests the chance to view the serenity of nature, each day more beautiful than the last. And AN EXPERIENCE in communing with nature, the cosy dwellings WITH DIVERSE rest in the middle of thousands of high-rise trees and wildlife that enthrall and excite. POSSIBILITIES Dining is truly an experience with diverse FROM A SOJOURN UP possibilities from a sojourn up in a tree-hut or by the lake. The sunny skies allow for nature IN A TREE-HUT OR walks that will give guests a glimpse of the flora and fauna of the region. The hotel offers a BY THE LAKE. rustic setting studded with star class amenities such as an inﬁnity pool, sporting facilities and an Ayurvedic Health Centre. In keeping with the traditional theme of the area, the hotel also offers ﬁve ‘Experience Packages’ which promote sustainability in nature as well as local 15 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 16 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA VILLAGE 17 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA VILLAGE 18 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON BEY

One and a half hours away from the bustling streets of Colombo lies Cinnamon Bey Beruwela, CINNAMON BEY which is bordered by the bay and the beach. Inspired by the ﬁrst permanent Arab settlements MAKES DINING A in Sri Lanka in the 10th century, the hotel interior incorporates lattice work and complimentary FORM OF ART WITH hues that pay homage to this history. A WIDE RANGE OF With 200 rooms on offer, the hotel is the epitome of luxury and boasts wide spacious areas in OPTIONS THAT which to relax. The deluxe suites possess private terraces and swimming pools which take luxury to another level. Making dining almost an art INCLUDES AN ICE form, Cinnamon Bey has a wide range of options that includes an ice cream parlour that never CREAM PARLOUR fails to delight the younger patrons. The culinary diversity includes a pizzeria, Japanese, Arabic and THAT NEVER fusion cuisine . Each outlet, 6 in number, offers a myriad tastes and even showcases experience- FAILS TO DELIGHT based dining which is unique to the hotel. Each dining area presents an unforgettable seascape THE YOUNGER for guests to enjoy while their taste buds are satiated. PATRONS. 19 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 20 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON BEY 21 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON BEY 22 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA BLU

On the sun-kissed shores of the North Eastern Coast of Sri Lanka lies Chaaya Blu Trincomalee. GUESTS CAN START Located near the ﬁfth largest natural harbour in the world, Chaaya Blu, has incorporated OFF THE DAY WITH a retro-chic design in honour of its earliest incarnation as a resort in the 70’s. The hotel AN EXCITING boasts 36 beach chalets, 43 superior rooms and 2 suites which look over the sparkling ocean. WHALE OR DOLPHIN When it comes to dining, Chaaya Blu does not WATCHING TOUR disappoint, with the ‘Captain’s Deck’ the main restaurant, ‘The Crab’ which offers unbelievably delicious crab dishes out on the beach and ﬁnally OR ABSORB THE ‘The Rum Hold’, the perfect option for after dinner-drinks. SUBTERRANEAN

Guests can start off the day with an exciting BEAUTY WITH A whale or dolphin watching tour or absorb the subterranean beauty with a snorkelling excursion SNORKELLING at Pigeon Island. With a stunning pool and the perfect weather, guests will never be left wanting EXCURSION AT on this haven. PIGEON ISLAND. 23 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 24 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA BLU 25 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA BLU 26 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON CITADEL

Resplendent in green hills, and chilly mornings, Kandy is an iconic smorgasbord of art, culture FOR THOSE WHO and beauty. Located in the hill capital of Sri Lanka, Kandy possesses an aura and enchantment HAVE A THIRST that is imbued in the very essence of Cinnamon Citadel. Settled alongside the Mahaweli River, it FOR HERITAGE, has 26 deluxe rooms and 93 superior rooms with a sophisticated theme to enthrall guests from CULTURAL around the globe. The tranquil surroundings are sure to create a restful holiday. For those who TREASURES ARE have a thirst for heritage, cultural treasures are just a step away. Set amidst historic monuments, breath-taking natural vistas and that irresistible JUST A STEP AWAY. old-world charm, luxury and sophistication truly reigns.

The location creates a romantic atmosphere that is well suited for leisurely boat rides and long meandering excursions. Guests are also treated to three dining options encompassing Asian, Continental and international cuisine as well as fabulous local delights. The hotel offers services for corporate conferences, meetings and forums with flexibility to facilitate special arrangements. 27 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 28 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON CITADEL 29 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON CITADEL 30 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON WILD

The Yala National Park which houses the highest density of leopards in Asia sets the scene for THE HOTEL, Cinnamon Wild Yala which was established in 2002. Refurbished and revitalised, the hotel, WHICH COULD which could be considered as almost an extension of the park, is an eco-friendly getaway for wildlife BE CONSIDERED enthusiasts who wish to reside in a conceptual AS ALMOST AN world-class game lodge. EXTENSION OF THE With 61 jungle chalets and 7 beach chalets that afford guests some remarkable views, the hotel PARK, IS AN ECO- brings the ‘Wild’ indoors with luxurious interiors that complement the rustic exteriors. The FRIENDLY GETAWAY spacious accommodations are well positioned for privacy and a few guests have been lucky enough FOR WILDLIFE to even spot leopards on the rocks bordering the hotel. Experiential excursions such as infra- ENTHUSIASTS WHO red night drives and walks, wildlife safaris, WISH TO RESIDE IN A champagne breakfasts and BBQ dinners are among the services offered by the hotel. CONCEPTUAL WORLD- The main bar offers a diverse range of beverages CLASS GAME LODGE. with the added luxury of a 360 degree view of forest and vast ocean. The main restaurant offers an international cuisine that doesn’t disappoint. 31 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 32 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON WILD 33 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CINNAMON WILD 34 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA ISLAND DHONVELI - MALDIVES

Tony Hinde discovered the potential of surﬁng in Maldives and set up Atoll Adventures on Tari THIS SURFER’S Village in North Male Atoll in the early 70’s, and since then it has been a must-experience spot for PARADISE, wave riders from all over the world. This surfer’s paradise, now known as Chaaya OFFERS GUESTS Island Dhonveli, offers guests a variety of activities, from island hopping to dolphin A VARIETY OF watching as well as snorkelling and ﬁshing. ACTIVITIES, FROM Welcoming families from many countries, Chaaya Island Dhonveli is fortunate to be located, in an area with blue skies all year round as well as a ISLAND HOPPING committed staff. Further the resort offers spacious accommodation in the form of 148 bungalows. TO DOLPHIN In order to complete the perfect family holiday, the resort also has motorised and non-motorised WATCHING water sports, an exotic spa, a swimming pool, tennis courts, an excursion centre and AS WELL AS gymnasium. SNORKELLING AND The resort encompasses a delectable array of dining options which include tasty snacks, bites FISHING. and beach-side dining as well as international cuisine. 35 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 36 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA ISLAND DHONVELI 37 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA ISLAND DHONVELI 38 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA REEF ELLAIDHOO - MALDIVES Located on the North Ari atoll, 42 km away from the capital of Maldives Chaaya Reef Ellaidhoo SUN WORSHIPPERS is created with underwater adventure in mind. Accessed by either sea plane or sea boat, in 25 and ARE AT THEIR 95 minutes respectively, Chaaya Reef boasts a tri- coloured sea, pristine white sands and a unique ELEMENT HERE coral reef. AS THE RESORT With 88 land bungalows and 24 water bungalows, the resort is focused on absolute adventure. OFFERS A FABULOUS

When it comes to dining, the resort offers a ARRAY OF OUTDOOR selection for guests to partake of. Madi and Malamathi are the two main restaurants offering ACTIVITIES. international cuisine. Guests are also invited to experience the Irushenee sunset bar which stocks a wide range of wines and spirits.

Sun worshippers are at their element here as the resort offers a fabulous array of outdoor activities. From tennis, football, excursions, snorkelling and diving and indoor activities such as squash and a well-equipped gymnasium, all ages and interests are catered to on this little slice of paradise. 39 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 40 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA REEF ELLAIDHOO 41 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA REEF ELLAIDHOO 42 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA LAGOON HAKURAA HURAA - MALDIVES

Located in the South of Male in Meemu Atoll, Chaaya Lagoon is a private getaway that is sure THE LOCATION to provide an unforgettable trip. The location of Chaaya Lagoon Hakuraa Huraa is truly OF CHAAYA spectacular. Surrounded by one of the most beautiful lagoons that the Maldives has to offer, LAGOON HAKURAA it is accessible in 45 minutes by sea plane, and brings into view the abundant marine life, crystal HURAA IS TRULY white shores, and coastal foliage. SPECTACULAR, In kindling the ﬁres of romance, privacy is imperative. The 80 bungalows scattered over the water and on the beach epitomise the serene SURROUNDED setting. BY ONE OF THE If escape is what you’re looking for, the resort offers guests the chance to interact with marine MOST BEAUTIFUL life through snorkelling, swimming and safaris which brings them face to face with dolphins, LAGOONS manta rays and baby sharks. And for the less adventurous, a day at the spa is sure to help THAT THE relax and unwind. After a long day of delightful seafaring and pampering, the resort’s two MALDIVES HAS TO restaurants offer international cuisine. OFFER. 43 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 44 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA LAGOON HAKURAA HURAA 45 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHAAYA LAGOON HAKURAA HURAA 46 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 GROUP FINANCIAL HIGHLIGHTS

Rs.10.97Bn GROUP REVENUE

Rs.2.43Bn 1.89Rs. Bn EARNINGS BEFORE INTEREST GROUP PROFIT BEFORE TAX AND TAX

Rs. Bn Rs. Bn Rs. Bn 12 3.0 2.0

10 2.5 1.6 8 2.0 1.2 6 1.5 0.8 4 1.0

2 0.5 0.4

0 0 0.0 2014 2013 2012 2014 2013 2012 2014 2013 2012

REVENUE EARNINGS BEFORE INTEREST PROFIT BEFORE TAX ( PBT) AND TAX (EBIT) 47 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Year ended 31st March 2014 2013 FINANCIAL CALENDAR Earnings highlights and ratios Revenue Rs’000 10,966,381 9,341,581 Audited Financial Statements 29th May 2014 Earnings before interest and tax (EBIT) Rs’000 2,427,116 1,819,992 signed on Group profit before tax (PBT) Rs’000 1,893,239 1,282,896 35th Annual General Meeting 30th June 2014 Group profit after tax (PAT) Rs’000 1,574,926 1,121,019 Group profit attributable to the shareholders Rs’000 1,565,846 1,116,779 INTERIM FINANCIAL STATEMENTS Earnings per share (EPS) Rs. 1.08 0.77 1st Quarter Interim Results 31st July 2013 EPS growth % 40.3 1.3 released on Interest cover No. of times 4.6 3.4 2nd Quarter Interim Results 25th October 2013 Return on equity % 8.7 6.8 released on Pre-tax ROCE % 10.0 7.8 3rd Quarter Interim Results 31st January 2014 released on Financial Position highlights and ratios 4th Quarter Interim Results 30th May 2014 Total assets Rs’000 26,467,932 25,264,138 released on Total debt Rs’000 6,360,731 7,117,136 Total shareholder’s funds Rs’000 18,095,814 16,294,188 No. of shares in issue Number 000’s 1,456,147 1,456,147 Net assets per share Rs. 12.4 11.2 GROUP OPERATIONAL Debt/Equity % 34 42 Debt/Total assets % 24 28 HIGHLIGHTS

Year ended 31st March 2014 2013 Market/Shareholder information Market price of share as at 31st March Rs. 12.50 13.20 Occupancy - Sri Lankan 75% 60% Sector Market capitalisation Rs ‘000 18,201,835 19,221,137 Occupancy - Maldivian 91% 86% Price earnings ratio No. of times 11.57 17.14 Sector

Others Revenue Room Nights 384,894 303,974 Total value added Rs’000 5,037,111 3,694,911 To employees Rs’000 1,724,922 1,139,734 To the government Rs’000 384,197 241,840 To others Rs’000 2,927,992 2,313,337 Total employees Number 2,779 2,735 48 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CHAIRMAN’S MESSAGE

SRI LANKA TOURISM IS WELL POSITIONED IN THE POST-CONFLICT SETTING TO BE AMONGST THE MOST SOUGHT AFTER DESTINATIONS IN THE WORLD. ARRIVALS TO SRI LANKA GREW 26 PER CENT TO REACH 1.2 MN TOURISTS FOR THE YEAR UNDER REVIEW WITH WESTERN EUROPE AND SOUTH ASIA CONTINUING TO BE THE DOMINANT GENERATING MARKETS.

Dear Stakeholder, I am pleased to present the Annual Report and to be the dominant generating markets. While all key GROUP PERFORMANCE Statement of Accounts for the financial year ended 31st markets demonstrated appreciable growth, Eastern In the backdrop of the favourable operating March 2014. Europe, South Asia and East Asia, in particular, grew environment, Group revenue increased by 18 per at a rapid pace. Tourism receipts were recorded at cent to Rs.10.97 Bn. The Sri Lankan Resorts recorded GLOBAL LANDSCAPE USD 1.4 Bn. strong revenue growth of 27 per cent, achieving The global economy witnessed a steady recovery in higher occupancies across all its hotels compared the year 2013 resulting in improving prospects for A buoyant outlook is projected for the future of tourism to the previous year on the back of the growth in sustained growth and lower levels of unemployment in Sri Lanka. The recent infrastructure development overall tourism. This is demonstrated by the sharp in the advanced economies. According to initial projects implemented by the government, particularly increase in overall occupancy in Sri Lanka by 38 per estimates released by the UNWTO, world tourism the expressway to the main international airport, and cent, of which 16 per cent stemmed from the full year reached a record of 1,087 Mn international tourist other expressway networks, will provide the necessary operation of Cinnamon Citadel and Cinnamon Bey, arrivals in the calendar year 2013, corresponding to impetus in strengthening Sri Lanka’s position as a both of which were launched in October 2012. The a growth of 5 percent over the preceding year. The leading tourism destination. trend of improving occupancies will enable further growth in international tourist arrivals was driven by focus on yield management, which is expected to have Asia Pacific, led by South East Asia, Africa and Europe, MALDIVIAN TOURISM PROSPECTS a positive impact on the overall revenue of the sector. demonstrating the continuous change in demographics. Although tourist arrivals from Western Europe to The Maldivian Resorts recorded a revenue growth of 11 Tourism receipts are projected to post double-digit the Maldives declined by 3 per cent during the year per cent. growth while the outlook for world tourism in the year under review, focused marketing initiatives resulted 2014 is anticipated to be positive. in a 38 per cent growth in arrivals from China. The gross profit (GP) margin decreased marginally from This ensured that tourism growth during the year the previous year. Whilst yields declined marginally, SRI LANKA TOURISM PROSPECTS under review recovered to double-digit levels as the effective cost control measures helped mitigate the Sri Lanka tourism is well positioned in the post- Maldives recorded a growth of 15.9 per cent, against general increase in direct material costs although conflict setting to be amongst the most sought after the disappointing 2.9 per cent recorded in 2012/13. The payroll costs increased slightly in the Maldives as destinations in the world. Arrivals to Sri Lanka grew Chinese market accounted for over 30 per cent of the a consequence of absorbing a higher proportion of 26 per cent to reach 1.2 Mn tourists for the year under tourist arrivals to the country, remaining the primary service charge. review with Western Europe and South Asia continuing source market for the Maldives. 49 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Administration and operating expenses were higher past and prospective customers to stay in touch and be % than in the previous year due to the full year operation up to date with travel experiences, news and upcoming 25 of Cinnamon Bey and Cinnamon Citadel and higher events in Sri Lanka. expenses on payroll in the Maldives. While the 20 conversion of rupee denominated borrowings to US With a view to enhance its brand presence on the social 15 Dollar debt led to lower finance costs, finance income media network, Cinnamon Hotels and Resorts is now on increased due to prudent investment of short term all popular and well patronised social media platforms. 10 funds contributing to Group Earnings Before Interest and Tax growing by 33 per cent to Rs.2,427.1 Mn (2012/13 AWARDS AND RECOGNITION 5 Rs.1,819.9 Mn). Showcasing the superior quality of service and commitment to sustainable tourism, both the Sri 0 Agriculture Industry Services Hotels & Gross The tax charge for the year under review increased Lankan and Maldivian resorts continued to win awards Restaurants Domestic Product compared to the previous year. The exceptionally during the year under review. 2012 2013 lower tax charge last year was due to the reversal of the provision of Business Profit Tax on dividends, Trip Advisor recognised almost all the resorts for REAL GDP GROWTH which were exempted, and write backs of deferred tax excellence, with four hotels receiving the Travellers as a result of amendments to the Maldivian tax laws. Choice Award for 2014. Moreover, a leading Consolidated Profit after Tax increased by 40 per cent independent travel portal in Europe recognised Chaaya Lanka while Dhonveli was adjudged the Leading Surf to Rs.1.57 Bn against Rs.1.12 Bn in the previous year. Reef Ellaidhoo with the “Zoover Recommended Award Resort in Maldives at the Maldives Association of Travel 2013”. Agents and Tour Operators (MATATO) Maldives Travel BRANDING INITIATIVES Awards 2013. With a view to enhance brand awareness and establish Gaining recognition in their respective markets, Chaaya our presence in key target markets, we have embarked Lagoon Hakuraa and Chaaya Island Dhonveli in the The Annual Report of John Keells Hotels PLC was on sponsoring and organising events of international Maldives and Bentota Beach in Sri Lanka were singled adjudged as runner-up in the Hotel Companies category significance in key target markets. Towards this end, out for pre-eminence by the German operator TUI of the “Awards for Excellence in Annual Reports 2013” we invited the organisers of the Miss France and Miss Travel PLC and Tez, the leading travel brand and most conducted by CA Sri Lanka. India pageants to choose Cinnamon Hotels & Resorts popular Russian tour operator. as the host hotels. The main pageant in the French OUTLOOK FOR THE FUTURE and Indian markets generated strong publicity for the Cinnamon Lodge continued to win awards for its During the ensuing year, the Leisure industry group Cinnamon Hotels & Resorts brand, both locally and commitment to sustainable tourism, winning the will consolidate its overall branding strategy where all globally, whilst also significantly raising awareness of coveted Switch Asia award for the best Green Hotel resorts will be brought under the “Cinnamon” brand Sri Lanka as a tourism destination. in Asia and was recertified by Green Globe along with resulting in Cinnamon Hotels and Resorts having several of our other resorts. Cinnamon Lodge also won 14 hotel properties and over 2,400 rooms under its Cinnamon Hotels and Resorts, being trendsetters in the “National Cleaner Production Award” in the Service umbrella. The Group is also conscious of the need to hospitality and innovation, became the first Hotel sector. further inculcate the desired ‘lifestyle’ service culture chain to launch its own travel blog - ‘Cinnamon U’. within our staff through the re-invention of our By regularly publishing valuable and entertaining Cinnamon Citadel and Chaaya Blu won the several standard operating procedures and processes. information, Cinnamon U would create an incentive for regional awards at the Chef’s Guild competition in Sri 50 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CHAIRMAN’S MESSAGE CONTD.

In conjunction with the above, and in keeping with for their valuable guidance and support during the year THE SRI LANKAN RESORTS the evolving trends and technology, the resorts, as part under review and a special word of appreciation to Mr. RECORDED STRONG REVENUE of the John Keells Leisure Group, have embarked on a Amal Cabraal, who resigned from the Board, for his GROWTH OF 27 PER CENT, comprehensive Online and Social Media Strategy. This valuable contribution during his tenure on the Board. ACHIEVING HIGHER OCCUPANCIES will enable “Cinnamon” to launch a new and revamped website, establishing its presence across all Social ACROSS ALL ITS HOTELS Media Platforms. COMPARED TO THE PREVIOUS YEAR ON THE BACK OF THE The above initiatives will be augmented with the Susantha Ratnayake GROWTH IN OVERALL TOURISM. implementation of a new property management system Chairman across all hotels, improving the availability of guest THIS IS DEMONSTRATED BY THE information and enhancing the ability to improve 29th May 2014 SHARP INCREASE IN OVERALL satisfaction which should augur well for the future. OCCUPANCY IN SRI LANKA BY 38 PER CENT, OF WHICH 16 PER CONCLUSION I wish to acknowledge our shareholders for continuing CENT STEMMED FROM THE FULL to be an integral part of John Keells Hotels and look YEAR OPERATION OF CINNAMON forward to your continued support in the year ahead. CITADEL AND CINNAMON BEY. Reflecting on the successful performance of the Group in 2013, on behalf of the Board of Directors, I wish to express my thanks and appreciation to our guests for % their continued loyalty, our business partners for the 45 support extended and our staff, who worked hard to 40 provide quality customer service. 35 30 Finally, I take this opportunity to welcome Mr. Trevin 25 Jayasekera to the Board of Directors and place on 20 record my appreciation to my colleagues on the Board 15 10 5 0 Apr - Jun Jul - Sep Oct - Dec Jan - Mar Financial - Q1 - Q2 - Q3 - Q4 Year 2013/14 2012/13 2011/12

SRI LANKA TOURISM - QUARTERLY ARRIVAL TRENDS 51 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 GROUP STRUCTURE

John Keells Holdings PLC (Ultimate Parent Company)

John Keells Hotels PLC 80.32%

Kandy Walk Yala Village Habarana Habarana Trinco Rajawella International Wirawila TTrinco Walk John Keells Ahungalla Ceylon John Keells Sentinel Inn Limited (Pvt) Ltd Lodge Walk Inn Holiday Hotels Co Tourists & Walk Inn Inn Ltd Hotels Holiday Holiday Maldivian Realty (Pvt) 98.39% 93.78% Limited Limited Resorts (Pvt) Limited Hoteliers Ltd Ltd 100% Mauritius Resorts (Pvt) Resorts Ltd Resorts (Pte) Ltd Cinnamon Cinnamon 98.35% 98.77% Ltd 100% 99.33% 100% 114.6 acres of (Pvt) Ltd Ltd 98.65% Ltd 50% Citadel Wild Cinnamon Chaaya 100% 10 acres of 0.11 acres of 25.2 acres of land 100% 100% Bentota 100% Owned Joint Kandy Tissa- Lodge Village Chaaya Blu land land in land Trincomalee 6.5 acres of Beach Hotel Venture Beruwala T maharama Habarana Habarana Trincomalee Kandy Wirawila land 33.69 acres of Ahungalla land Vaakarai

Beruwala Holiday Hikkaduwa Travel Club (Pte) Ltd Resorts (Pvt) Ltd Holiday Resorts 100% 100% (Pvt) Ltd Chaaya Reef Cinnamon Bey 100% Ellaidhoo Beruwala Chaaya Tranz Maldives Hikkaduwa

Resort Hotels Ltd Fantasea World 100% Investments (Pte) Ltd 44.4 acres of land 100% Nilaveli Chaaya Lagoon Hakuraa Huraa Maldives

Tranquility (Pte) Ltd 100% Chaaya Island Dhonveli Maldives 52 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 BOARD OF DIRECTORS

SUSANTHA RATNAYAKE - CHAIRMAN RONNIE PEIRIS RANEL WIJESINHA Susantha Ratnayake was appointed as a Director Ronnie Peiris was appointed as a Director of John Keells Ranel Wijesinghe was appointed to the Board in of John Keells Hotels PLC in 1999 and Chairman in Hotels PLC in June 2003. As the Group Finance Director July 2005. He is a Chartered Accountant and an January 2006. He serves as the Chairman of John of John Keells Holdings PLC, Mr. Peiris has overall International Management Consultant, with over 30 Keells Holdings PLC. He is the Chairman of Ceylon responsibility for the Group’s Finance and Accounting, years of national and international professional work Tobacco Company PLC, Vice Chairman of the Employers Taxation, Corporate Finance, Treasury, Group Initiatives experience in accounting, auditing and consulting Federation of Ceylon and serves as a member of and the Information Technology functions. He is also and functions as Chairman of the Audit Committee. several clusters of the National Council of Economic Director of several companies in the John Keells Group. A Fellow of the Institute of Chartered Accountants of Development. A past Chairman of the Sri Lanka He was previously the Managing Director of Anglo Sri Lanka, Ranel is a Past President of the Institute Tea Board, immediate past Chairman of the Ceylon American Corporation (Central Africa) Limited in of Chartered Accountants of Sri Lanka, and a Past Chamber of Commerce, he serves on the Board of the Zambia. President of the Confederation of Asian and Pacific national carrier Sri Lankan Airlines. He has over 35 Accountants. His experience in public practice years of management experience, all of which is within He has over 40 years finance and general management includes working with KPMG Sri-Lanka, as Manager the John Keells Group. experience in Sri Lanka and abroad. He is a Fellow of the Deloitte, in the Bahamas and Partner and Head Chartered Institute of Management Accountants, UK, of Consulting and Financial Advisory Services of AJIT GUNEWARDENE Association of Chartered Certified Accountants, UK, and PricewaterhouseCoopers, Sri Lanka. He possesses a Ajit Gunewardene is the Deputy Chairman of John the Society of Certified Management Accountants, Sri Masters Degree in Business Administration from the Keells Holdings PLC and has been a member of the Lanka and holds an MBA from the University of Cape University of Pittsburgh in Pennsylvania, USA. His Board for over 20 years. He is a Director of many Town, South Africa. He is a member of the Committee contribution to industry included, conceptualising Companies in the John Keells Group and is the of the Ceylon Chamber of Commerce, and serves on its and functioning as the first Director of the Business Chairman of Union Assurance PLC. He is a member of Economic, Fiscal and Policy Planning Sub Committee. Development Division of the John Keells Holdings the Board of SLINTEC, a Company established for the Group, as Chairman, National Wealth Corporation development of nanotechnology in Sri Lanka under the JAYANTISSA KEHELPANNALA Ltd, Chairman, Ayojana Fund Management (Private) auspices of the Ministry of Science and Technology. He Jayantissa Kehelpannala, Head of Maldivian Resorts, Limited and as founder Director of Lanka Ventures is also an Advisory Committee Member of COSTI, the has over 30 years of experience in the leisure Ltd. He has held several statutory, regulatory and Coordinating Secretariat for Science Technology and industry both in hoteliering and inbound tourism. advisory positions for the Government of Sri Lanka as Innovation under the purview of the Minister (Senior) He is currently the Chairman of the Hotels & Tourism a member of the Securities and Exchange Commission, of Scientific Affairs. He has also served as the Chairman Employers Group of the Employers’ Federation of the Consumer Affairs Council, and the Board of the Post of the Colombo Stock Exchange. Ajit has a Degree in Ceylon and represents them at the EFC Council Graduate Institute of Management. Economics and brings over 31 years of management Meetings and is a member of the Wages Board for experience. the Hotel and Catering Trade. In addition, he is also With a distinctive exposure to and balance between the President of the Tourist Hotels Association of Sri the private and public sector, he is presently an Lanka (THASL) and represents the Association at the independent international management consultant Committee of Ceylon Chamber of Commerce. He is to multilateral and bilateral development banks and a member of the Tourism Cluster of NCED (National institutions providing advisory services to overseas Council for Economic Development) under the purview Governments. of the Ministry of Finance & Planning. 53 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

NISSANKA WEERASEKERA TREVINE JAYASEKARA Nissanka Weerasekera is responsible for investments Trevine Jayasekera, is the Group Finance Director in Sri Lanka and Bangladesh by the Abraaj Group, a of Brandix Lanka Limited and is responsible for the leading private equity investor operating in the growth overall finance function of the Brandix group, as markets of Asia, MENA, Turkey and Central Asia, well as related support functions. He is the former Sub-Saharan Africa and Latin America. Prior to that Group Finance Director of Aitken Spence & Co. Nissanka was the Chief Executive Officer of People’s Trevine brings with him a wealth of experience in Venture Investment Company (PVIC) and subsequently international banking, having worked at Arab Bank Managing Director of Nextventures, both venture Limited in Bahrain and subsequently holding the post capital firms. Nissanka is a Fellow of the Chartered of General Manager with Deutsche Bank in Colombo. Institute of Management Accountants. He holds a He is a Fellow Member of the Institute of Chartered Masters degree in Economics from the University Accountants of Sri Lanka and an Associate Member of of Colombo and a B.Sc. (Special) in Physics from the the Chartered Institute of Management Accountants, University of Peradeniya. UK. He is Non-Executive Director of NDB Bank.

SUNIMAL SENANAYAKE Sunimal Senanayake is an Executive Vice President of the John Keells Group, Sector Head of the Maldivian and Sri Lankan Resorts and Head of Human Resources of the Leisure Group. He is also a member of the Group Operating Committee and has over 30 years of experience in the Leisure Industry, both in Hotels and Inbound Tourism. He served as the Managing Director of Walkers Tours Limited from 1991 - 1997. He is a past President of the Sri Lanka Association of Inbound Tour Operators (SLAITO) and has held many positions in travel trade related associations and committees. He has also been a member of the Tourist Hotels Classiﬁcation Committee and Chairman / Member of the Advisory Board of the Sri Lanka Institute of Tourism & Hotel Management. 54 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE

1 INTRODUCTION through the governance processes that are in place. John Keells Hotels PLC and its Group of companies However, recognising that good governance also THE BOARD OF DIRECTORS continued to maintain its high standards of corporate entails the long term sustainability of the Group, we OF JOHN KEELLS HOTELS PLC governance and ethical business conduct across all have in our Sustainability Report on page 98 outlined AND STAFF AT ALL LEVELS aspects of its operations and decision-making processes how we engage with society at large. The reporting of during the year under review. The Company strongly financial and non-financial performance measures CONSIDER IT THEIR DUTY AND believes in the importance of corporate governance and have been integrated along the lines of the Global RESPONSIBILITY TO ACT IN THE maintains the highest standards of business integrity, Reporting Initiative (GRI) and display our commitment BEST INTERESTS OF THE GROUP ethical values and professionalism in all of its activities to governance, environmental, social, ethical and AND ITS STAKEHOLDERS. THIS and relationships. sustainability issues. IS THE FOUNDATION ON WHICH The Group corporate governance philosophy is within The Board of Directors of John Keells Hotels PLC OUR CORPORATE GOVERNANCE a framework of compliance and conformance, which and staff at all levels consider it their duty and FRAMEWORK IS STRUCTURED. has been institutionalised at all levels through a strong responsibility to act in the best interests of the Group set of corporate values and a written Code of Conduct. and its stakeholders. This is the foundation on which All employees, senior management and the Board of our corporate governance framework is structured. Directors are required to embrace this philosophy in the performance of their official duties and in other 2.1 Assurance Mechanisms z Companies Act No. 7 of 2007 – Mandatory situations that could affect the Group’s image. We This comprises of the ‘bodies and mechanisms’ which Compliance believe it is this strong set of values that has culminated are employed in enabling regular review of progress z The Continuing Listing Rules of the CSE (as per in the trust that our stakeholders have continued to against objectives with a view to highlighting deviations applicable corporate governance rules) - Mandatory place on the core values underlying our corporate and quick redress and in providing assurance that Compliance activities. actual outcomes are in line with expectations. z The recommendations of the Code of Best Practice on Governance issued jointly by the SEC and the Further, the Chairman ensures good governance 2.2 Regulatory Benchmarks Institute of Chartered Accountants of Sri Lanka at Board level and below on the basis of enduring This comprises of the regulations which govern, in the (CA Sri Lanka) to the extent that they are practicable principles that provide the framework of how the main, all our corporate activities from the Companies – Voluntary Compliance business is conducted. In this report we outline how our Act No.7 of 2007, Listing Rules of the Colombo Stock governance framework ensures the effectiveness of our Exchange (CSE), Rules of the Securities and Exchange 3 INTERNAL GOVERNANCE STRUCTURE Board and provides assurance to our shareholders. Commission (SEC) and the Benchmarks we have set The Group’s internal governance structure is designed for ourselves in working towards local and global best in such a way that the executive authority is well 2 THE JOHN KEELLS HOTELS GROUP practices. delegated through committees with clearly defined CORPORATE GOVERNANCE SYSTEM authority limits, responsibilities and accountability The Group corporate governance framework We are pleased to confirm compliance with the which are agreed upon in advance to achieve greater encompassing assurance mechanisms, the regulatory following statutes, rules and regulations; where operating efficiency and freedom of decision making. framework and the internal governance structure, appropriate, any deviations permitted by same, have enables the Board to provide assurance to investors been explained. As summary of the governance framework is illustrated that they have discharged their duties responsibly in page 55. 55 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

INTERNAL GOVERNANCE STRUCTURE

Board of Directors and Senior Integrated Governance Assurance Regulatory Framework Management Committees Systems and Procedures

Human Resources Strategy Formulation Code of best practice on Independent and Compensation and Decision Corporate Directors Committee of John Making Process Governance issued Keells Holdings PLC jointly by SEC and Employee CA Sri Lanka Performance Audit Committee Chairman & Governance the Board of Directors People and Talent Internal Control Nominations Management Audit Committee of Committee John Keells Employee Corporate Holdings PLC Stakeholder Participation Governance rules Management published by CSE John Keells Holdings PLC President / CEO Effective & Code of Transparent Conduct

(GEC) Communication

Group Management Committee External Audit (GMC) IT Governance

Group Executive Committee Executive Group Companies Act No. 07 of 2007 Integrated Risk External Sustainability Employees Management Audit

z All Board sub committees are chaired by Independent Directors. z The Human Resources and Compensation Committee and the Nomination Committee of the Parent Company John Keells Holdings PLC. functions as the Human Resource and Compensation Committee and the Nomination Committee of the Company and the Subsidiary Companies. z The meetings of the Audit Committee are attended by President- CEO, Chief Financial Ofﬁcer, Head of Finance, Head of Group Business Process Review and External Auditors by invitation. 56 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

3.1 Board of Directors and Board Sub-Committees ALL MEMBERS OF THE BOARD The Board of Directors is responsible and accountable for the stewardship functions of the Group. The actions of DEVOTE SUFFICIENT TIME the Board of Directors of the Group are governed by the following; AND MAKE EVERY EFFORT TO z Comply with all relevant legal and statutory requirements, ENSURE THAT THEY DISCHARGE z Implement the corporate governance guidelines and customise, where relevant, to Group’s current and emerging needs, THEIR RESPONSIBILITIES TO z Optimise speed of decision making, while maintaining adequate control, THE COMPANY AND THE GROUP z Create an environment of individual empowerment and promote a culture of openness, constructive dissent, IN KEEPING WITH THEIR and productive dialogue. KNOWLEDGE AND EXPERIENCE. THIS IS ACHIEVED BY THE REVIEW 3.1.1 Board composition OF BOARD PAPERS, BUSINESS As at 31st March 2014, the Board comprised of ﬁve (5) Non-Executive, Non-Independent Directors including the Chairman and three (3) Non-Executive, Independent Directors. VISITS TO UNDERSTAND RISK EXPOSURES AND OPERATING Date of Attendance at Board Meetings CONDITIONS, ATTENDING BOARD Appointment MEETINGS AND PARTICIPATING Name of Director IN DISCUSSIONS WITH THE INTERNAL & EXTERNAL AUDITORS

AND THE MANAGING AGENTS. 29.05.2013 31.07.2013 25.10.2013 31.01.2014 Meetings Attended 01-May-99 Mr. S C Ratnayake √√√√4/4 01-May-99 Mr. A D Gunewardene √√√√4/4 01-Jun-03 Mr. J R F Peiris √√√√4/4 07-Mar-05 Mr. J E P Kehelpannala √√√√4/4 01-Jul-11 Mr. B J S M Senanayake √√√√4/4 10-Oct-10 Mr. D A Cabraal *† − √ − − 1/3 01-Jul-05 Mr. R T Wijesinha* √ √ − √ 3/4 01-Nov-13 Mr. T L F W Jayasekera *†† − − − √ 1/1 01-Nov-10 Mr. N B Weerasekera * √√√√4/4 * Independent † Resigned w.e.f 30th October 2013 †† Appointed w.e.f 1st November 2013 57 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Independence of the Directors have been determined in accordance with the Continuing Listing Rules of the 3.1.3 Board responsibilities CSE and all three Independent, Non-Executive Board members have submitted signed declarations of their The Board of Directors is responsible; independence. A brief profile of the Directors are set out on page 52 to 53 of this Report. z For sharing responsibility in ensuring the highest standards of disclosure, reporting, ethics and Name of Director / Capacity Shareholding 1 Management Material Employee of Family Nine years of integrity across the Hotels Group. / Director 2 Business Company 4 Member a Continuous z To shareholders for the governance of the Company Relationship 3 Director or Service 6 z For providing direction by the formulation and 5 CEO approval of the Group’s medium and long-term Non-Executive, Non-Independent Directors (NED/NID) strategy, annual investment budgets, significant Mr. S C Ratnayake Yes Yes No No No Yes financial and operational policies Mr. A D Gunewardene No Yes No No No Yes z For the proper stewardship of the Company’s resources and the effectiveness of the Company’s Mr. J R F Peiris No Yes No No No Yes systems of internal control and the management of Mr. J E P Kehelpannala No No No No No Yes risk Mr. B J S M Senanayake No No No No No No z For monitoring compliance with laws and Non-Executive, Independent Directors (NED/ID) regulations of the countries in which the Group’s subsidiaries operate Mr. D A Cabraal † No No No No No No z For reviewing and approving major acquisitions, Mr. R T Wijesinha No No No No No No disposals and capital expenditure Mr. T L F W Jayasekera †† No No No No No No Mr. N B Weerasekera No No No No No No 3.1.4 Board induction and supply of information Newly appointed Non-Executive Directors are apprised † Resigned w.e.f 30th October 2013 of †† appointed w.e.f 1st November 2013 z The John Keells Group values and culture 1. Have shares in the Company z The Code of Conduct expected by the Company 2. Director of a listed Company in which they are employed, or having a "significant shareholding" with voting z The operating model of the Hotels and Hotels Group rights more than 10% of total or have a "business connection" where the transaction value is equivalent to or z The operations of the Hotels group and its strategies more than 10% of the turnover of the Company 3. Income/non cash benefits derived from Company equivalent to 20% of Directors annual income z Hotel Group policies, governance framework and 4. Employed by Company two years immediately preceding appointment processes 5. Close family member a Director or CEO z Their responsibilities as Directors in terms of 6. Continuously served on Board for over nine years prevailing legislation

3.1.2 Board appointments 3.1.5 Board skills Board appointments follow a transparent, structured and formal process within the purview of the Nominations The updating of the skills and knowledge of all Committee of the ultimate parent Company. Directors is progressive and ongoing. This is achieved by keeping them fully briefed on important 58 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

developments in the business activities of the Group Management Services Limited, the Operators, with z Hikkaduwa Holiday Resorts (Private) Limited - and by providing them whom formal operating contracts have been signed. owner of Chaaya Tranz, Hikkaduwa, z Access to External and Internal Auditors z Habarana Lodge Limited - owner of Cinnamon z Beruwela Holiday Resorts (Private) Limited - owner z Periodic reports on performance Lodge, Habarana, of Cinnamon Bey, Beruwela, z Updates on topics that range from proposed/new z Habarana Walk Inn Limited - owner of Chaaya z Travel Club (Pte) Limited - owner of Chaaya Reef regulations to industry best practices Village, Habarana, Ellaidhoo, Maldives, z Opportunities to meet senior management of the z Kandy Walk Inn Limited - owner of Cinnamon z Fantasea World Investments (Pte) Limited - owner of Managing Agents in a structured setting Citadel, Kandy, Chaaya Lagoon Hakuraa Huraa, Maldives, z Access to industry experts and other external z Trinco Holiday Resorts (Private) Limited - owner of z Tranquility (Pte) Limited - owner of Chaaya Island professional advisory services Chaaya Blu, Trincomalee, Dhonveli, Maldives. z Access to the Centre Legal, Tax and Finance z Yala Village (Private) Limited - owner of Cinnamon 3.1.7 Managing conflicts / independence Divisions of the John Keells Group of which the Wild, Tissamaharama, Each Director has a continuing responsibility to Company is a member and z Ceylon Holiday Resorts Limited - owner of Bentota determine whether he has a potential or actual Beach Hotel, Bentota z The services of the Company Secretary conflict of interest arising from external associations,

The NEDs have the opportunity of gaining further insight into the Groups’ business by visiting hotels across the groups portfolio.

Prior to z Nominees are requested to disclose their various interests that could All members of the Board devote sufﬁcient time and potentially conflict with the interest of the Company make every effort to ensure that they discharge their appointment responsibilities to the Company and the Group in keeping with their knowledge and experience. This is achieved by the review of Board papers, business visits to understand risk exposures and operating conditions, attending Board meetings and participating in z All Directors are expected to inform the Board and obtain Board clearance prior to accepting any position or engaging any transaction that could create discussions with the Internal & External Auditors and Upon the Managing Agents. a potential conflict of interest Appointment z All NEDs are required to notify the Chairman - CEO of changes in their 3.1.6 Delegation of authority current Board representation The Board has delegated some of its functions to the Audit Committee while retaining the ﬁnal right to accept the recommendations made by this committee. The Audit Committee is chaired by an Independent Directors who have disclosed an interest in a matter under discussion Director appointed by the Board. During Board z Excuse themselves from deliberations on the subject matter Meetings z Abstain from voting on the subject matter (Such abstentions from Board The operations of the hotels owned by the following decisions are duly recorded) companies has been entrusted to Keells Hotel 59 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

interests or personal relationships which may influence z Actuarial valuation of retirement benefits. its subsidiaries as permitted by the listing rules of the judgement in material matters, which are considered CSE. by the Board from time to time. Additionally, individual Directors are encouraged to i. Audit Committee seek expert opinion and/or professional advice on ii. Human Resources and Compensation Committee In order to mitigate any potential or actual conflict of matters where they may not have full knowledge or interest or independence of Directors throughout the expertise. iii. Nominations Committee term of their membership on the Board, the Company iv. Related Party Transactions Review Committee has adopted the processes as illustrated on page 58. 3.1.9 Tenure, retirement and re-election of Directors One third of the Directors except the Chairman retire The key features of these committees are; Details of companies in which Board members hold by rotation on the basis prescribed in the Articles of Board or Board committee membership is available Association of the Company. A Director retiring by 3.1.10.1 Audit Committee with the Company for inspection by shareholders on rotation is eligible for re-election. The tenure of office Composition All members are exclusively Non- request. for NEDs is limited by their prescribed Company Executive, Independent Directors retirement age. with at least one member having 3.1.8 Access to independent professional advice significant, recent and relevant In order to preserve the independence of the Board Independent Directors, on the other hand, can be financial management and accounting and to strengthen decision making, the Board seeks appointed to office for three consecutive terms of three experience and a professional independent professional advice when deemed years, which however, is subject to the age limit set by accounting qualification necessary. statute at the time of re-appointment following the end of a term. Mandate To provide an independent and Accordingly, the Board obtained independent objective review of the financial professional advice covering areas such as; The proposal for the re-appointment of Directors is set reporting process, internal controls and the audit function in ensuring; z Information technology consultancy service out in the Annual Report of the Board of Directors on pertaining to the acquisition of the new property page 143 as well as the Notice of Meeting on page 221 of z Adequacy and fairness of disclosure management system for the Hotels Group. this Report. z Transparency, integrity and quality z Consultancy in completing the brand architecture of financial reporting 3.1.10 Board sub-committees of the Group Scope i. Confirm and assure The Board has delegated some of its functions to z Stakeholder engagement in meeting the sub-committees, while retaining final decision rights. z Independence of External requirements of the Global Reporting Initiative Members of these sub-committees are able to focus Auditor (GRI). on their designated areas of responsibility and impart z Objectivity of Internal Auditor z Legal, tax and accounting aspects, particularly knowledge and oversight in areas where they have ii. Review with independent Auditors where independent external advice is deemed greater expertise. adequacy of internal controls and necessary in ensuring the integrity of the subject quality of financial reporting decision. Of the four committees mentioned below, other than iii. Regular review meetings with the Audit Committee, the Board sub-committees of the z Market surveys, architectural and engineering management, Internal Auditor ultimate Parent Company, John Keells Holdings PLC, advisory services as necessary for business and External Auditors in seeking functions as the sub-committees of the Company and operations. assurance on various matters 60 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

The Audit Committee met on seven occasions during the year and attendance was as follows:- The Human Resources and Compensation Committee Attendance at Audit Committee Meetings members of the ultimate parent Company are as Name of Director follows; Mr. E F G Amerasinghe - Chairman Dr. I Coomaraswamy 22.05.2013 18.06.2013 29.07.2013 23.10.2013 29.11.2013 20.01.2014 30.01.2014 Meetings Attended Mr. A R Gunasekara R T Wijesinha * √ √ √ − √ √ √ 6/7 Mr. M A Omar (Appointed w.e.f. 28/05/2013) D A Cabraal † √ √ √ −−−−3/4 Mr. N A Fonseka (Appointed w.e.f. 07/11/2013) T L F W Jayasekera †† −−−−√√√3/3 Mrs. S Tiruchelvam (Resigned w.e.f. 09/9/2013) N B Weerasekera − √√√√√√6/7 * Chairman † Resigned w. e. f. 30th October 2013 †† Appointed w. e. f. from 1st November 2013

3.1.10.2 Human Resources and Compensation Committee Composition As permitted by the listing rules of the CSE, the Human Resources and Compensation Committee of the ultimate Parent Company, John Keells Holdings PLC, functions as the Remuneration Committee of the Company and its subsidiaries. It comprises of ﬁve Independent Directors. The Chairperson is a Non-Executive Director while the Chairman of the Board is a permanent member except during discussions on his own compensation. Mandate Determine the quantum of compensation (including employee share options in shares of the ultimate parent Company), conduct performance evaluation of Chairman/CEO, review performance evaluation of other Directors and establish and review the Remuneration Policy Scope 1. Determine and agree with the Board a framework for remuneration of the Chairman and other Directors. 2. Consider targets, and benchmark principles for any performance related pay schemes 3. Within the terms of agreed framework, determine total remuneration package of each Director keeping in view; z Performance z Industry trends z Past remuneration 4. Succession planning of key Management 61 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

3.1.10.3 Nominations Committee Composition The Nomination Committee of the ultimate Parent Company, John Keells Holdings PLC, functions Composition The Related Party Transactions as the Nomination Committee of the Company and its subsidiaries. It comprises of four Review Committee of the ultimate Independent Directors and one Non-Independent Director. The Chairperson is a Non-Executive, parent Company, John Keells Holdings Independent Director PLC, functions as the Related Party Mandate Deﬁne and establish nomination process for Directors, lead the process and make Transactions Review Committee of recommendations to the Board on the appointment of Directors. the Company and its subsidiaries. It comprises of three Non-Executive Scope i. Assess skills required on the Board given the needs of the businesses Independent Directors and two Non- ii. From time to time assess the extent to which required skills are represented on Board Executive Non-Independent Directors. iii. Prepare a clear description of the role and capabilities required for a particular appointment The Chairperson is an Independent Non-Executive Director. iv. Identify and recommend suitable candidates for appointments to the Board. v. Ensure that on appointment to the Board, Directors receive a formal letter of appointment Mandate To ensure on behalf of the Board, that specifying clearly all Related Party Transactions of John Keells Hotels PLC is consistent with the z Expectation in terms of time commitment Code of Best Practices on Related Party z Involvement outside of the formal Board meetings Transactions issued by the SEC. z Participation in committees Scope i. Develop, and recommend for adoption by the Board of Directors The Nomination Committee members of the ultimate parent Company are as follows; of John Keells Hotels PLC and Mr. T Das - Chairman its subsidiaries, a Related Party Mr. S C Ratnayake - Non-Independent Transactions Policy which is consistent with the Operating Model and the Mr. M A Omar - (Appointed w.e.f. 7/11/2013) Delegated Decision Rights of the Group. Mr. E F G Amerasinghe - (Appointed w.e.f. 7/11/2013) ii. Update the Board of Directors on Mr. D A Cabraal - (Appointed w.e.f. 7/11/2013) the related party transactions of the Mrs. S Tiruchelvam - (Resigned w.e.f. 9/9/2013) Company on a quarterly basis.

3.1.10.4 Related Party Transactions Review Committee (Effective from 01st April 2014) The Related Party Transactions Review Committee With the goal of adding value, following global benchmarking of its governance framework, the Board of the members of the ultimate parent Company are as follows; ultimate parent Company established a Related Party Transactions Review Committee with effect from 01 April Mr. N A Fonseka - Chairman 2014, to review all the related party transactions of the listed companies within the Group. This move also complies Mr. E F G Amerasinghe with the early adoption of the Code of Best Practice on related party transactions issued by the SEC. On the basis Mr. D A Cabraal that the ultimate parent Company is also a listed Company, the SEC has permitted the Related Party Transactions Review Committee of the ultimate parent Company, to represent the listed companies in the John Keells Group of Mr. S C Ratnayake which, John Keells Hotels PLC is a member. Mr. J R F Peiris 62 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

3.1.11 Director Remuneration determined by the Board and reviewed annually. z Matters arising from the previous minutes 3.1.11.1 Non-Executive, Non-Independent Director NED/IDs do not receive any performance/incentive z Status updates of major projects Remuneration payments and are not eligible to participate in any of z Review of performance risk reports and other The remuneration of the Chairman/CEO and the NEDs/ the Group’s share option plans. The NED/IDs fees are functional areas NIDs is determined in line with the remuneration not subject to time spent or defined by a maximum/ policies of the Group. The remuneration policy is minimum number of hours committed to the Group per z Approval of quarterly and annual financial formulated to attract and retain high calibre executives annum, and hence are not subject to additional/lower statements and motivate them to develop and implement the fees for additional/lesser time devoted. z Ratification of capital expenditure and donations business strategy in order to optimise long term z Ratification of the use of the Company seal and Shareholder value creation. The Group has adopted a The aggregate remuneration paid to Directors is share certificates issued remuneration policy designed to provide an appropriate disclosed on page 173 of this Report. z New resolutions balance between fixed remuneration and variable ‘risk’ reward which includes a fixed and variable element. 3.1.11.3 Compensation for early termination z Any other business; The variable element is based on both individual In the event of an early termination of the Directors performance and an organisational performance matrix there are no compensation commitments other than 3.1.12.3 Supply of information which covers revenue and after tax profit. for; In order to ensure robust discussion, informed deliberation and effective decision making, the (1) NED/NIDs; as per their employment contract like Directors are provided access to; In addition, a long term incentive in the form of any other employee. employee share options (ESOP) in the stated capital z Information as is necessary to carry out their duties (2) NED/IDs; Director Fees payable, if any, in terms of of the ultimate parent Company is granted based on and responsibilities effectively and efficiently contract. actual performance. z Information updates from management on topics 3.1.12 Board meetings under review by the Board, new regulations and As prescribed by the Sri Lanka Accounting Standards 3.1.12.1 Regularity of Meetings and Pre-Board Meetings best practices as relevant to the Group’s business (SLFRS / LKAS) all ESOPs of the respective employees The Board meets, at the least, once every quarter. Any z External and Internal Auditors are charged to the income statement of the relevant absences are informed in advance and duly recorded. subsidiaries with effect from 01st July 2013 being the z Experts and other external professional services The absent members are briefed on the discussions date of the first award after the introduction of the z The services of the Company Secretaries whose and actions taken during the meeting. Directors are accounting standard. appointment and/or removal is the responsibility of provided with the necessary information in advance the Board of the Board meeting in order to facilitate more Directors fees applicable to NED/NIDs nominated by informed decision making. Board information packs z Periodic performance reports John Keells Holdings PLC are paid directly to John Keells supplied to the Directors include the Board Resolutions, z Senior management under a structured Holdings PLC and not to individuals. performance reports and compliance statements etc. arrangement 3.1.11.2 Non-Executive, Independent Director 3.1.12.2 Typical Board Agenda 3.1.12.4 Board Secretary Remuneration Keells Consultants (Pvt) Ltd functions as the Secretaries Compensation of Non-Executive, Independent Directors z Confirmation of previous minutes and registrars of the Company and provides the is determined with reference to fees paid to other z Circular resolutions Secretarial input for Board proceedings in addition to NED/IDs of comparable companies and is adjusted z Board sub-committee reports and other matters maintaining Board minutes and Board records. where necessary. The fees received by NED/IDs are exclusive to the Board 63 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

3.1.12.5 Board evaluation z Directors receive timely, accurate and clear Talent Management, Rewards/Recognition and The Chairman evaluates the performance of the information Compensation/Benefits. The Group’s Performance Board annually while the Independent Non-Executive z Updates on matters arising between meetings Management System has been very instrumental in Chairman of the Audit Committee evaluates the empowering staff in achieving organisational goals z The agenda for the Board meeting, reports and effectiveness of the Audit Committee. There is a through relevant training, recognition and reward. papers for discussion are dispatched at least one formalised process of self-appraisal which enables week in advance so that the Directors are in a each member to self-appraise on an anonymous basis, 3.3.2 Short-term Incentives position to study the material and arrive at sound the performance of the Board, using a very detailed The ‘short-term’ pay for performance is determined as decisions checklist / questionnaire covering areas such as; follows. z A proper record of all proceedings of Board z Role clarity and effective discharge of meetings is maintained responsibilities Manager and above levels – Given the progressively higher level of decision making authority, the z Systems and procedures The Board has, subject to pre-defined limits, greater weightage is placed on the achievement of z Quality of participation delegated its executive authority to the President/ organisational objectives rather than the achievement z Board image CEO of the Leisure Group for the implementation of of individual objectives. strategies approved by the Board and developing and The scoring and open comments are collated and the recommending to the Board the business plans and Assistant Manager and Executive Level – Only results are analysed to give the Board an indication of budgets in keeping with Group strategy. individual performance ratings are considered. its effectiveness as well as areas that require addressing and/or strengthening. 3.2.1 Chairman/CEO appraisal Clerical and Non-Executive – A short term incentive The Human Resources and Compensation Committee in the form of Group-wide share of profit, calculated 3.2 Role of Chairman/CEO of the ultimate parent Company appraises the as a multiple of the basic salary is granted. Individual The Chairman is a Non-Executive, Non-Independent performance of the Chairman on an organisational and performance ratings are not carried out or considered. Director. The main responsibility of the Chairman is to individual basis as approved by the Board. The annual lead and manage the Board and its Committees so that appraisal of the President/CEO is carried out at parent 3.3.3 Long-term Incentives – Share Options they can function effectively. He also sets the tone for level and is based on pre-agreed criteria. Share options of the ultimate parent are offered to the governance and ethical framework of the Group, eligible employees at defined career levels based on facilitates and encourages the expression of differing 3.3 Human Resources Governance pre-determined criteria which are uniformly applied views, and by keeping in touch with local and global A proven Performance Management System and other across the eligible levels. As per the historical data, the industry developments, ensures that the Board is alert supporting Human Resource Management Processes financial benefit of the long term incentive scheme to its obligations to the Company’s shareholders and are in place. This facilitates a culture of performance (ESOP) had been far greater than that of short term other stakeholders. He represents the Group externally within a framework of compliance, conformance and incentives and these long term incentives have been and is the focal point of contact for shareholders on all sustainable development. very instrumental in inculcating, in the recipients, a aspects of corporate governance. deep sense of ownership. 3.3.1 Performance Management With the assistance of the Board Secretaries, Keells The Performance Management System is at the heart Share options are awarded to individuals on the Consultants (Pvt) Ltd, he also ensures that: of many supporting Human Resource Management basis of their immediate performance and potential processes such as Learning and Development, z Board procedures are followed importance of their contribution to the Group’s future Career Development, Succession Planning, plans. 64 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

3.4 Risk review granted in order to execute operational and financial 3.6 IT Governance The Board has adopted a group-wide risk management decisions within their purview. The use of IT in the Hotels Group has evolved from the programme to identify, evaluate and manage significant simple automation of repetitive back office processing risks in a manner that supports the furtherance of 3.5.3 Monitoring of financial and operational data: to delivering real time management information on business strategy. This programme ensures that the z Financial results and key operational performance a wide variety of platforms. This evolution occurred risks accepted as a result of the Group’s operations are indicators are evaluated against the Annual Plan as the Group discerned the competitive advantage in keeping with its risk appetite, thereby preserving and and subsequent Reforecast on a monthly basis at all gained and the enhancement of business value which creating shared value for all stakeholders. The detailed levels of management came about through the skilful alignment of IT with Risk Management report on page 92 of the Annual its business objectives and the prudent management z The Board reviews the financial results on a Report describes the process of risk management as of the Group’s IT resources. The Group has always quarterly basis. adopted by the Group and the key risks impacting the been a step ahead in embracing emerging technologies achievement of the Group’s strategic business objectives. z The Chairman, CEO and Group Finance Director are and systems, consistently investing in developing its able to view key financial information for all Hotel IT infrastructure. Continuous focus on cutting edge 3.5 Investment appraisal process and investment Group companies on a real time basis via the Group technology has ensured greater reliability of IT systems decisions wide ERP system and has shortened information delivery times to both 3.5.1 Investment appraisal z The IT systems in place facilitate the online display internal and external stakeholders. Over the years, the Group has refined the process of of information relevant to the needs of Hotel investment appraisal which ensures the involvement Managers and Functional Heads pertinent to their The John Keells Group has progressively improved of the relevant persons when capital investment areas of responsibility. service quality and mitigated IT risks by implementing decisions are made. Several views, opinions and prudent internal controls based on the Information advice are obtained prior to the investment decision being made. Experience has proven that a holistic and IT GOVERNANCE ACTIVITIES & PROCESS well debated view of the commercial viability and potential of proposed projects including operational, Processes financial, funding, risk and tax implications has usually culminated in a good result. Project appraisal and Measure capital investment decisions are processed through Directs Use a committee structure which safeguards against one individual having unfettered decision making powers Improve Resources Drives in such decisions. Stakeholder Value z Knowledge IT Strategy Drivers z Capability Report 3.5.2 Operations, planning, monitoring and decision z Information rights: The responsibility for monitoring plans has been entrusted to the Operators. The achievement of annual Results plans as well as ensuring compliance with Group policies z Outcome and guidelines rests with the chief executive officer and z Performance functional department heads of the respective business z Risk units to whom appropriate decision rights have been z Assets 65 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Security Management guidelines outlined in ISO27001 z In accordance with the rules of the SEC, Notice of manner consistent with that expected of a responsible within the COSO framework which covers both risk the AGM and relevant documents are forwarded to corporate citizen. This has resulted in the credibility and business continuity management. shareholders within the specified period of the Group being high in the eyes of all government z The Directors are available to clarify any points institutions. Where possible, and appropriate, the With the growing dependence on IT caused by the rapid raised by shareholders Group proactively engages the authorities in better evolution and use of mobile technologies, the Group has understanding regulations and in expressing its own z The Chairman/CEO ensures that relevant senior also further strengthened its IT governance framework views. As a matter of policy, the Group has a zero managers are available at the AGM to answer by adopting the Control Objectives for Information and tolerance policy in ensuring that all business units meet specific queries related Technology guidelines (COBIT) issued by the IT their statutory obligations in time and in full. Periodic Governance Institute. The Hotels Group continues to z Separate resolutions are proposed for each item on information, and disclosures, demanded by regulatory benefit from this quest for excellence in IT governance the Agenda authorities are made available in a timely and accurate and aims to deliver sustainable business value by manner. Where relevant, Group companies make use of structuring its IT governance along similar lines. 3.7.1.3 Serious Loss of Capital their chambers and trade associations in dealing with In the unlikely event that the net assets of the Company the government. 3.7 Stakeholder management and effective fall below a half of shareholders’ funds, shareholders communication would be notified and an extraordinary resolution 3.7.4 Employees Group follows a stakeholder model of governance would be passed on the proposed way forward. The HR organisation and processes are designed and following are the key stakeholder management to enable employee accessibility to every level of methodologies adopted; 3.7.2 Customers / suppliers management. Constant dialogue and facilitation is also The Group works towards meeting customer maintained on work related issues as well as on matters 3.7.1 Shareholders / Investors expectations by ensuring the quality and safety of pertaining to general interest that affect employees and 3.7.1.1 Release of Information to the Public and CSE the services provided by the Hotels in the Group. their families. The Group follows an open-door policy The Board of Directors, in conjunction with the Audit Towards this end the Group constantly engages with for its employees at all levels. Committee has ensured the accuracy and timeliness the customers by way of print and electronic feedback of published information and has presented an honest forms, loyalty meetings and through celebrating special The Group recognises that employee involvement and balanced assessment of results in the quarterly and events of guests in-house. is a critical pre-requisite towards ensuring the annual financial statements. effectiveness of the corporate governance system The Group fosters long term business relations with and therefore attaches great importance to employee All other material and price sensitive information suppliers by adhering to contractual obligations, communications and employee awareness of key events about the Company is promptly communicated to the sharing knowledge at supplier forums and active and significant developments. The necessity of sincere CSE, where the shares of the Company are listed, and representation in business councils and committees of and regular communication; - top-down, bottom- such information is also released to shareholders, press the industry. up, and lateral, in gaining employee commitment to and employees. organisational goals and values are stressed extensively 3.7.3 Government and intensively through various communiques issued 3.7.1.2 Annual General Meeting (AGM) The Group maintains professional relationships with by the Chairman and the senior management. Whilst The Group makes use of the AGM constructively relevant government institutions by carrying out employees have many opportunities to interact with the towards enhancing relationship with the shareholders transactions in compliance with all relevant laws senior management as a part of their routine work and and towards this end the following procedures are and regulations, transparently and ethically and in a other regular social events, the Group has also created followed; 66 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

various formal channels, as described below, for such engaged by the Company who are in possession of 4.2.2 System of internal Audits communication and interaction. unpublished price sensitive information from trading The Board has, through the involvement of the Group in the Company shares or other companies in which Business Process Review function, taken steps to obtain 4 ASSURANCE MECHANISMS the Company has a business interest. The Group adopts assurance that systems designed to safeguard the The “Assurance Mechanisms” comprise, in the main, of a zero tolerance policy against any employee who is Company’s assets, maintain proper accounting records the various supervisory, monitoring and benchmarking found to be in violation of this policy. and provide management information, are in place elements of the Group corporate governance system and are functioning according to expectations. The risk which are used to measure “actuals” against “plan” on, 360 degree evaluation - All employees at Manager, review programme covering the internal audit of the in most instances, a pre-determined time table with a Assistant Vice President and above levels, including the whole Group is outsourced. view to signalling the need for quick corrective action, Chairman (direct report evaluation only) is subject to when necessary, on a timely basis. These mechanisms a 360 degree evaluation conducted by an independent To further strengthen internal control and obtain also act as “safety nets”, “buffer mechanisms” and third party. independent assurance the Group has enlisted the internal checks in the governance system. services of Messrs. PricewaterhouseCoopers, KPMG Great Place to Work Survey - These anonymous surveys and BDO Partners, to monitor and report on the 4.1 Employee participation in Assurance are conducted at regular intervals, to ascertain whether adequacy of the financial and operational systems of Whistleblower policy - Employees can report to the employees consider the Company and its subsidiaries the properties operated by the Group in both Sri Lanka Chairman through a communication link named ‘great workplaces’. Experience has confirmed that & Maldives. Their scope included: “Chairman Direct”, on any concerns about unethical this has contributed to significant improvements in z Assessment of the adequacy of accounting and behaviour and any violation of Group values. employee perceptions of the Group particularly in operational control systems in terms of economy, Employees reporting such incidents are guaranteed respect to practices, policies and behaviours that build efficiency and effectiveness. complete confidentiality and such complaints are credibility, respect and fairness. z Examination of compliance with statutory investigated and addressed via a select committee requirements, management policies and under the direction of the Chairman. 4.2 Internal Control procedures. The Board has taken necessary steps to ensure the Skip level meetings- Employees at Assistant Manager integrity of the Group’s accounting and financial z Review and monitor operational and financial and all levels above can discuss matters of concern reporting systems and internal control systems remain controls in order to ascertain adherence to such with superiors who are at a level higher than their effective via the review and monitoring of such systems controls. own immediate supervisor in an open but confidential on a periodic basis. environment. The internal audit reports are in the first instance, 4.2.1 Internal compliance considered and discussed at hotel level and after review Exit interviews - This is conducted for all staff levels A quarterly self-certification programme requires the by the relevant regional sector head and the President above Executive. All such reports are forwarded to the President, Sector Heads and the Chief Financial Officer of the Leisure group, an executive summary including respective President and Executive Vice President for to confirm compliance with financial standards and appropriate management action prepared by the Group their comments and are subsequently discussed by regulations. The President and sector heads of business Business Process Review is forwarded to the Audit senior management bi-monthly. units are required to confirm operational compliance Committee. Internal Audit reports are structured in with statutory and other regulations and key control a manner that facilitates resolution of the concerns Securities trading policy - The Group’s securities procedures, and also identify any significant deviations highlighted and the Board monitors management trading policy prohibits all employees and agents from expected norms. follow up action on an ongoing basis. 67 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

4.3 Code of Conduct Ombudsperson arising subsequent to an independent Standards (SLFRS/LKAS) issued by CA Sri Lanka and All employees, including the Board of Directors, are inquiry is confidentially communicated to the the requirements of the CSE and other applicable bound to abide by the following expectations:- Chairman or to the Senior Independent Director of the authorities. ultimate parent Company upon which the involvement duty of the Ombudsperson ceases. The Company and its subsidiaries are fully compliant CODE OF CONDUCT with all the mandatory rules and regulations stipulated z Allegiance to the Company and the Group On matters referred to him by the Ombudsperson, the by the Corporate Governance Listing Rules published z Compliance with rules and regulations Chairman or the Senior Independent Director of the by the CSE (revised in 2014) and also by the Companies applicable in the territories in which the Group ultimate parent Company, as the case may be, will place Act No. 07 of 2007. The Group has also given due operates before the Board; consideration to the Best Practice on Corporate Governance Reporting guidelines jointly set out by CA z Conduct of business in an ethical manner at all z The decision and recommendation of the Sri Lanka and the SEC and has voluntarily adopted the times and in keeping with acceptable business Ombudsperson relevant provisions as far as is practicable. practices z The action taken based on the recommendation z Exercise of professionalism and integrity in all z Areas of disagreement and the reasons adduced in business and personal transactions which could such instances affect the image of the Group Steps are taken to ensure that complainants are not victimised. There were no cases that were brought to The Group believes that the strong set of core values the attention of the Ombudsperson during the year which underlie the Code, are the main source of its under review. competitive advantage which is rewarded by the trust placed in it by its stakeholders. 4.5 External Audit Ernst & Young, are the Company external auditors and The Chairman of the Board affirms that there has not during the year under review they have not provided been any material violation of any of the provisions of non-audit services to the Group. The principal/ the code of conduct. In instances where violations did consolidator auditor has not engaged in any services take place, they were investigated and handled through which are in the restricted category as defined by the well established procedures. CSE for external auditors.

4.4 Ombudsperson The audit fees paid by the Company and Group to its In a situation where an individual employee or a group auditors are separately classiﬁed in the Note 8 to the of employees complain of an alleged violation of the Financial Statements. published Code of Conduct, and feels that the alleged violation has not been addressed satisfactorily by 5 REGULATORY BENCHMARKS internally available mechanisms, provision has been The Board of Directors has taken all reasonable made to refer such complaints to an Ombudsperson. steps to ensure that all Financial Statements are The ﬁndings and the recommendations of the prepared in accordance with the Sri Lanka Accounting 68 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

STATEMENT OF COMPLIANCE UNDER SECTION 7.10 OF THE RULES OF THE CSE ON CORPORATE GOVERNANCE (Mandatory provisions - fully complied) Rule No. Subject Applicable Requirement Compliance Applicable Section in the Annual Report Status 7.10.1(a) Non-Executive Directors (NED) 2 or at least 1/3 of the total number of Directors should be NEDs Complied Corporate Governance 7.10.2(a) Independent Directors (ID) 2 or 1/3 of NEDs, whichever is higher, should be independent Complied Corporate Governance 7.10.2(b) Independent Directors Each NED should submit a declaration of independence Complied Available with the Secretaries for review

7.10.3(a) Disclosure relating to Directors z The Board shall annually determine the independence or Complied Corporate Governance otherwise of the NEDs z Names of IDs should be disclosed in the Annual Report (AR) Complied 7.10.3(b) Disclosure relating to Directors The basis for the Board’s determination of ID, if criteria specified Complied Corporate Governance for independence is not met 7.10.3(c) Disclosure relating to Directors A brief resume of each Director should be included in the AR Complied Board of Directors (profile) section in the including the Director’s areas of expertise Annual Report 7.10.3(d) Disclosure relating to Directors Provide a brief resume of new Directors appointed to the Board Complied Corporate Governance and Board of Directors with details specified in 7.10.3(a), (b) and (c) to the CSE (profile) section in the Annual Report 7.10.4 (a-h) Determination of Independence Requirements for meeting criteria Complied Corporate Governance 7.10.5 Remuneration Committee (RC) The RC of the listed parent Company may function as the RC Complied Corporate Governance 7.10.5(a) Composition of Remuneration Shall comprise of NEDs, a majority of whom will be Complied Corporate Governance Committee independent 7.10.5.(b) Functions of Remuneration The RC shall recommend the remuneration of the Chief Complied Corporate Governance Committee Executive Officer (CEO) and NEDs

7.10.5.(c) Disclosure in the Annual Report z Names of Directors comprising the RC Complied relating to Remuneration z Statement of Remuneration Policy Complied Corporate Governance and the Board Committee Committee Reports z Aggregated remuneration paid to NED/NIDs and NED/IDs Complied 7.10.6 Audit Committee (AC) The Company shall have an AC Complied Corporate Governance

7.10.6(a) Composition of Audit Committee z Shall comprise of NEDs a majority of whom will be Complied Independent Corporate Governance and the Board z A NED shall be appointed as the Chairman of the Committee Complied Committee Reports z CEO and Chief Financial Ofﬁcer (CFO) should attend AC Complied meetings z The Chairman of the AC or one member should be a member Complied of a professional accounting body 69 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Rule No. Subject Applicable Requirement Compliance Applicable Section in the Annual Report Status 7.10.6(b) Audit Committee Functions Overseeing of the – z Preparation, presentation and adequacy of disclosures Complied in the financial statements in accordance with Sri Lanka Corporate Governance and the Board Accounting Standards Committee Reports z Compliance with financial reporting requirements, Complied information requirements of the Companies Act and other relevant financial reporting related regulations and requirements z Processes to ensure that the internal controls and risk Complied management are adequate to meet the requirements of the Sri Lanka Auditing Standards z Assessment of the independence and performance of the Complied external auditors z Make recommendations to the Board pertaining to Complied appointment, re-appointment and removal of external auditors, and approve the remuneration and terms of engagement of the external auditor

7.10.6(c) Disclosure in Annual Report z Names of Directors comprising the AC Complied Corporate Governance and the Board relating to Audit Committee z The AC shall make a determination of the independence of Complied Committee Reports the Auditors and disclose the basis for such determination z The AR shall contain a Report of the AC setting out the Complied manner of compliance with their functions

Related Party Transactions Review z Names of Directors comprising the Committee. Voluntarily Corporate Governance Report Committee z Will monitor and approve recurrent and non-recurrent complied related party transactions as set out in the Group policy with effect guidelines. from 1st April 2014 70 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

ADOPTION OF JOINT CODE OF BEST PRACTICE - CHECK LIST Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status A. 1 DIRECTORS– Board

A.1.1 Frequency of Board Meetings z Board should meet regularly, at least once, every quarter Complied Corporate Governance / Annual Report of the Board of Directors

A.1.2 Responsibilities of the Board z Formulation and implementation of strategy, Complied Corporate Governance z Skill adequacy of management and succession, Complied z Integrity of information, internal controls and risk Complied management z Compliance with laws, regulations and ethical standards Complied z Code of conduct Complied z Adoption of appropriate accounting policies Complied

A.1.3 Access to professional advice z Procedures to obtain independent professional advice Complied Corporate Governance

A.1.4 Company Secretary z Ensure adherence to Board procedures and applicable rules Complied Corporate Governance and regulations z Procedure for Directors to access services of Company Complied Secretary

A.1.5 Independent judgement z Directors should exercise independent judgement on Complied Corporate Governance issues of strategy, resources, performance and standards of business judgement

A.1.6 Dedication of adequate time and z Directors should devote adequate time and effort to Complied Corporate Governance effort by Directors discharge their responsibilities to the Company satisfactorily

A.1.7 Training for Directors z Directors should receive appropriate training, hone skills Complied Corporate Governance and expand knowledge to more effectively perform duties A. 2 DIRECTORS - Chairman & Chief Executive Ofﬁcer

A.2. Division of responsibilities z A balance of power and authority to be maintained by Complied Corporate Governance to ensure no individual has separating responsibility for conducting Board business unfettered powers of decision from that of executive decision making A. 3 DIRECTORS - Role of Chairman

A.3 Ensure good corporate governance z Chairman to preserve order and facilitate effective discharge Complied Corporate Governance of Board functions by proper conduct of Board meetings 71 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status A. 4 DIRECTORS - Financial Acumen

A.4 Possession of adequate ﬁnancial z Board to ensure adequacy of ﬁnancial acumen and Complied Corporate Governance acumen knowledge within Board A. 5 DIRECTORS – Board Balance

A.5.1 Composition of Board z The Board should include a sufﬁcient number of Non- Complied Corporate Governance Executive, Independent Directors

A.5.2 Proportion of independent z Two or one third of the Non-Executive Directors should be Complied Corporate Governance directors independent

A.5.3 Test of independence z Independent Directors should be independent of Complied Corporate Governance management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgement

A.5.4 Declaration of independence z Non-Executive Directors should submit a signed and dated Complied Corporate Governance / Annual Report of declaration of their independence / non-independence the Board of Directors

A.5.5 Annual determination of z The Board should annually determine and disclose the Complied Corporate Governance criteria of independence / non- names of Directors deemed to be independent independence and declaration of same by Board

A.5.6 Appointment of Senior z If the roles of Chairman / CEO are combined, a Non- N/A Independent Director (SID) Executive Director should be appointed as a Senior Independent Director

A.5.7 Availability of Senior Independent z If warranted, the SID should be available to the other N/A Director to other directors Directors for conﬁdential discussions.

A.5.8 Interaction between Chairman z The Chairman should meet the Non-Executive, Independent Complied Corporate Governance and Non-Executive, Independent Directors at least once a year Directors

A.5.9 Directors concerns to be recorded z When matters are not unanimously resolved, Directors to N/A ensure their concerns are recorded in Board minutes 72 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status A. 6 DIRECTORS - Supply of Information

A.6.1 Provision of adequate information z Management to ensure the Board is provided with timely Complied Corporate Governance to Board and appropriate information

A.6.2 Adequacy of Notice and formal z Board minutes, agenda and papers should be circulated at Complied Corporate Governance agenda to be discussed at Board least seven days before the Board meeting meetings A. 7 DIRECTORS - Appointments to the Board

A.7.1 Nomination Committee z Nomination committee of parent may function as such for Complied Corporate Governance the Company and make recommendations to the Board on new Board appointments

A.7.2 Annual assessment of Board z Nomination committee or Board should annually assess the Complied Corporate Governance composition composition of Board

A.7.3 Disclosure of new Board z Proﬁles of new Board appointments to be communicated to Complied Corporate Governance / Notice of Meeting appointments Shareholders A. 8 DIRECTORS – Re-election

A.8.1 Appointment of Non-Executive z Appointment of Non-Executive Directors should be for Complied Corporate Governance / Annual Report of Directors speciﬁed terms and re-election should not be automatic the Board of Directors

A.8.2 Shareholder approval of z The appointment of all Directors should be subject to Complied Corporate Governance / Annual Report of appointment of all Directors election by shareholders at the ﬁrst opportunity the Board of Directors / Notice of Meeting A. 9 DIRECTORS - Appraisal of Board Performance

A.9.1 Annual appraisal of Board z The Board should annually appraise how effectively it has Complied Corporate Governance performance discharged its key responsibilities

A.9.2 Self evaluation of Board and Board z The Board should evaluate its performance and that of its Complied Corporate Governance / Audit Committee Committees committees annually Report

A.9.2 Declaration of basis of z The Board should disclose in the Annual Report how Complied Corporate Governance performance evaluation performance evaluations have been carried out A. 10 DIRECTORS - Disclosure of information in respect of Directors

A.10.1 Biographical proﬁles and relevant z Annual Report should disclose the biographical details of Complied Board of Directors / Corporate Governance details of Directors to be disclosed Directors and attendance at Board/Committee meetings / Audit Committee Report 73 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status A. 11 DIRECTORS - Appraisal of Chief Executive Ofﬁcer

A.11.1 Short, medium and long term z The Board should set out the short, medium and long term Complied Corporate Governance objectives, financial and non- objectives, financial and non-financial objectives at the financial objectives to be set commencement of each year

A.11.2 Evaluation of CEO performance z The performance of the CEO should be evaluated by the Complied Corporate Governance Board at the end of the year B. 1 DIRECTORS REMUNERATION - Remuneration Procedure

B.1.1 Appointment of Remuneration z Remuneration Committee of parent may function as such Complied Corporate Governance Committee for the Company to make recommendations on Directors remuneration

B.1.2 Composition of Remuneration z Board to appoint only Non-Executive Directors to serve on Complied Corporate Governance Committee Remuneration Committee

B.1.3 Disclosure of members of z The Annual Report should disclose the Chairman and Complied Corporate Governance Remuneration Committee Directors who serve on the Remuneration Committee

B.1.4 Remuneration of Non-Executive z Board to determine the level of remuneration of Non- Complied Corporate Governance Directors Executive Directors

B.1.5 Access to professional advice z Remuneration Committee should have access to professional Complied Corporate Governance advice in order to determine appropriate remuneration for Executive Directors. B. 2 DIRECTORS REMUNERATION - Level and Make up of Remuneration

B.2.1 Remuneration packages for z Packages should be structured to attract, retain and motivate Complied Corporate Governance Executive Directors Executive Directors

B.2.2 Remuneration packages to be z Packages should be comparable and relative to that of Complied Corporate Governance appropriately positioned other companies as well as the relative performance of the Company

B.2.3 Appropriateness of remuneration z When determining annual increases remuneration Complied Corporate Governance and conditions in relation to other committee should be sensitive to that of other Group Group companies companies

B.2.4 Performance related elements of z Performance related elements of remuneration should be Complied Corporate Governance remuneration aligned with interests of Company

B.2.5 Share options z Executive share options should not be offered at a discount Complied Corporate Governance 74 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status

B.2.9 Remuneration packages for Non- z Should reflect time commitment and responsibilities of role Complied Corporate Governance Executive Directors and in line with existing market practice B. 3 DIRECTORS REMUNERATION - Disclosure of Remuneration

B.3.1 Disclosure of details of z The Annual Report should disclose the remuneration paid to Complied Financial Statements - Note 8 remuneration Directors C. 1 RELATIONS WITH SHAREOLDERS – Constructive use and conduct of Annual General Meeting

C.1.1 Proxy votes to be counted z The Company should count and indicate the level of proxies Complied Corporate Governance lodged for and against in respect of each resolution

C.1.2 Separate resolutions z Separate resolutions should be proposed for substantially Complied Corporate Governance separate issues Notice of Meeting

C.1.3 Availability of Committee z The chairmen of Board committees should be available to Complied Corporate Governance chairmen at AGM answer any queries at AGM

C.1.4 Notice of AGM z 15 calendar days notice to be given to shareholders Complied Notice of Meeting

C.1.5 Procedure for voting at meetings z Company to circulate the procedure for voting with Notice Complied Notice of Meeting of Meeting C. 2 MAJOR TRANSACTIONS

C.2.1 Disclosure of Major Transactions z Transactions that have a value which are greater than half of Complied Corporate Governance the net assets of the Company should be disclosed Annual Report of the Board of Directors D.1 ACCOUNTABILITY AND AUDIT - Financial Reporting

D.1.1 Presentation of public reports z Should be balanced, understandable and comply with Complied Management Discussion and Analysis, statutory and regulatory requirements Corporate Governance Risk Management Financial Statements 75 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status

D.1.2 Director’s Report z The Director’s Report should be included in the Annual Complied Annual Report of the Board of Directors Report and conﬁrm that z the Company has not contravened laws or regulations in Complied Audit Committee Report conducting its activities z Material interests in contracts have been declared by Complied Annual Report of the Board of Directors Directors Financial Statements z the Company has endeavoured to ensure equitable Corporate Governance treatment of shareholders z that the business is a “going concern” Complied Annual Report of the Board of Directors z that there is reasonable assurance of the effectiveness of the Complied Audit Committee Report existing business systems following a review of the internal Risk Management controls covering ﬁnancial, operational and compliance

D.1.3 Respective responsibilities of z The Annual Report should contain separate statements Complied Statement of Directors’ Responsibility and Directors and Auditors setting out the responsibilities of the Directors for the Independent Auditors’ Report preparation and presentation of the ﬁnancial statements and the reporting responsibilities of the Auditors

D.1.4 Management Discussion and z Annual Report to include section on Management Complied Management Discussion and Analysis Analysis Discussion and Analysis

D.1.5 Going Concern z Directors to substantiate and report that the business is a Complied Annual Report of the Board of Directors going concern or qualify accordingly

D.1.6 Serious Loss of Capital z Directors to summon an Extraordinary General Meeting in N/A the event that the net assets of the Company falls below 50% of the value of Shareholder’s Funds D.2 ACCOUNTABILITY AND AUDIT - Internal Control

D.2.1 Effectiveness of system of internal z Directors to annually conduct a review of the effectiveness Complied Audit Committee Report controls of the system of internal controls. This responsibility may be Risk Management delegated to the Audit Committee D.3 AUDIT COMMITTEE

D.3.1 Chairman and Composition of z Should comprise of a minimum of two Independent, Non- Complied Audit Committee Report Audit Committee Executive Directors z Audit Committee Chairman should be appointed by the Complied Board 76 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 CORPORATE GOVERNANCE CONTD.

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status D.3.2 Duties of Audit Committee Should include Corporate Governance z Review of scope and results of audit and its effectiveness Complied z Independence and objectivity of the Auditors Complied

D.3.3 Terms of Reference / Charter z The Audit Committee should have a written Term of Complied Corporate Governance Reference which deﬁne the purpose of the Committee and its duties and responsibilities

D.3.4 Disclosures z The Annual Report should disclose the names of Directors Complied Corporate Governance serving on the Audit Committee Audit Committee Report z The Audit Committee should determine the independence of Complied Corporate Governance the Auditors and disclose the basis of such determination z The Annual Report should contain a report by the Audit Complied Audit Committee Report Committee setting out the manner of the compliance of the Company during the period to which the Report relates D.4 CODE OF BUSINESS CONDUCT AND ETHICS

D.4.1 Adoption of Code of Business z The Company must adopt a Code of Business Conduct and Complied Corporate Governance Conduct and Ethics Ethics for directors and members of the senior management team and promptly disclose any violation of the Code

D.4.2 Chairman’s afﬁrmation z The Annual Report must include an afﬁrmation by the Complied Chairman’s Message / Annual Report of the Chairman that he is not aware of any violation of the Code Board of Directors of Business Conduct and Ethics D.5 CORPORATE GOVERNANCE DISCLOSURES

D.5.1 Corporate Governance Report z The Annual Report should include a report setting out the Complied Corporate Governance manner and extent to which the Company has adopted the principles and provisions of the Code of Best Practice on Corporate Governance 77 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Code Ref. Subject Applicable Requirement Adoption Applicable Section in the Annual Report Status E. INSTITUTIONAL INVESTORS – Structured Dialogue

E.1 Structured Dialogue with z A regular and structured dialogue should be conducted with Complied Corporate Governance Shareholders shareholders and the outcome of such dialogue should be communicated to the Board by the Chairman

E.2 Evaluation of Governance z Institutional investors should be encouraged to consider Complied Corporate Governance Disclosures by Institutional the relevant factors drawn to their attention with regard to Investors Board structure and composition F. OTHER INVESTORS – Investment/Divestment decisions

F.1. Individual Investors z Individual shareholders should be encouraged to carry Complied Corporate Governance out adequate analysis and seek professional advice when making their investment/divestment decisions

F.2 Shareholder Voting z Individual shareholders should be encouraged to participate Complied Corporate Governance / Form of Proxy and exercise their voting rights

CONCLUSION AND OUTLOOK Robust and sound governance has helped us to create and maintain trust with our employees, investors, governments, business partners, our guests and other stakeholders.

In the growing global investment climate, investors are looking for greater transparency in reporting, as well as the comparative ranking of non-ﬁnancial metrics such as innovation, brand value, culture, sustainable development and other social responsibilities, as these metrics create long term value for companies. Growing out of this trend in demand, regulators will seek to introduce more regulations governing such disclosure in order to create a level playing ﬁeld.

Founded on a culture of performance embedded in a framework of compliance, conformance and sustainable development, John Keells Hotels PLC is conﬁdent of rising to meet these challenges and run its business in a sustainable manner that will create wealth for its stakeholders. 78 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 AUDIT COMMITTEE REPORT

TERMS OF REFERENCE, PRINCIPAL FOCUS AND Head of Group Business Process Review and Head of z Met the outsourced Internal Auditors to consider MEDIUM OF REPORTING Sustainability and Enterprise Risk Management of their reports, management responses and matters The responsibilities of the Audit Committee are John Keells Holdings PLC, attend Audit Committee requiring follow up on the effectiveness of internal governed by the Audit Committee Charter, approved meetings by invitation. Outsourced Internal Auditors, financial controls that have been designed to and adopted by the Board. The Audit Committee i.e. PricewaterhouseCoopers, KPMG, BDO Partners provide reasonable but not absolute assurance to focuses principally on assisting the Board in fulfilling and Independent External Auditors, Ernst & Young, the Directors that assets are safeguarded and that its duties by providing an independent and objective are required to attend meetings on a regular basis. the financial reporting system can be relied upon review of the financial reporting process, the process of The Committee met seven times in connection with in the preparation and presentation of the financial risk identification and mitigation, internal controls and the financial year ended 31st March 2014 (information statements. Their scope of work and approach, the its compliance with legal and regulatory requirements on the attendance at these meetings by the members timeliness of their reports, and cooperation with actively; reviewing procedures relating to statutory, of the Committee is given on page 60). In addition, External Auditors was also addressed. regulatory and related compliance; and the adequacy the Chairman of the Committee met the Internal and z Reviewed the Business Risk Management processes of the Company’s internal and external audit function. External Auditors and in house personnel, as necessary, and procedures adopted by the Company, to manage The proceedings of the Audit Committee were regularly to strengthen guidance and oversight related to Audit and mitigate the effects of such risks and observed reported to the Board of Directors, through formal Committee matters. that risk analysis exercises had been conducted minutes. Further, the effectiveness of the Committee is across the different Hotels, key risks that could evaluated annually by each member of the Committee ACTIVITIES PERFORMED impact operations had been identified and to the and the results are communicated to the Board. z Reviewed the activities and financial affairs of extent possible, measures taken to minimise the the Company and its subsidiaries and underlying impact of such risks. It was noted that with the COMMITTEE COMPOSITION, MEETINGS HELD hotel entities, and the financial reporting system integration of Sustainability within the Leisure AND ATTENDANCE adopted in the preparation of quarterly and Group, further measures to mitigate the core The Audit Committee consists of three members. annual financial statements to ensure reliability sustainability risks had been identified and risk The Chairman of the Audit Committee, is a Fellow of of the process, appropriateness and consistency of mitigation measures designed and implemented. the Institute of Chartered Accountants of Sri Lanka accounting policies and methods adopted and that z Reviewed the quarterly and year-end financial (CA Sri Lanka). In addition to the Chairman of the they facilitate compliance with the requirements of statements and recommended their adoption to the Committee, the other two members of the Committee the Sri Lanka Accounting Standards (SLFRS/LKAS), Board. are also qualified Accountants with specialist financial the Companies Act No. 7 of 2007 and other relevant z Met with the External Auditors before background. All Non-Executive Directors satisfy the statutory and regulatory requirements. criteria for independence as specified in the Standards commencement of the External Audit to ascertain z Carried out a comprehensive and a transparent on Corporate Governance for listed Companies issued the nature, scope and approach of the audit and process in selecting the Outsourced Internal by the Securities & Exchange Commission of Sri reviewed their Audit Plans. Auditors for the financial year ending 31st March Lanka. The Audit Committee reports directly to the z Met with External Auditors to discuss interim audit 2014 onwards for Sri Lankan resort hotels. Board. The individual and collective financial and issues, management responses and to effect any Accordingly, selected three audit firms to carry out hotel industry specific knowledge, business experience corrective action where necessary. the audits i.e. PWC, KPMG and BDO Partners. PWC and the independence of members are brought to and KPMG were awarded four resort hotels each z Met with External Auditors at the conclusion of the bear on all matters, which fall within the committee’s and the BDO the hotel management company. Annual Audit to review the financial statements and purview. The Sector Head and Chief Financial Officer, the reports thereon and to respond as necessary to together with the Sector Financial Controller and such reports. 79 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

z Had closed door discussions with the External and CONCLUSION Outsourced Internal Auditors where necessary. The Audit Committee is satisﬁed that the Company’s z Reviewed the type and quantum of non-audit accounting policies, operational controls and risk services provided by the External Auditors to the management processes provide reasonable assurance Company to ensure that their independence as that the affairs of the Company are managed in auditors has not been impaired. accordance with Group policies and that Company assets are properly accounted for and adequately z Appraised the independence and performance of safeguarded. the Outsourced Internal Auditors whose services are coordinated by the Group Business Process Review Division. z Conducted special review of processes, content and the effectiveness of feeders to the deliberations of the Audit Committee, such as in-house accounting Ranel T. Wijesinha FCA and record keeping; Group Business Process Chairman - Audit Committee Review, and the Sustainability and Enterprise Risk Management division. 29th May 2014 z Reviewed the Company’s compliance framework to determine that it provides reasonable assurance Members: that all relevant laws, rules and regulations have D A Cabraal (resigned w.e.f 30th Oct 2013) been complied with. N B Weerasekera z Participated in discussions with management, to T L F W Jayasekera (appointed w.e.f 1st Nov 2013) evaluate compliance with the Code of Best Practice on Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka and CA Sri Lanka in June 2008, in relation to auditor appointments. z The Audit Committee has recommended to the Board of Directors that Messrs Ernst & Young be re-appointed as Auditors for the Financial Year ending March 31, 2015, subject to the approval of the shareholders at the next Annual General Meeting. 80 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INVESTOR INFORMATION

DISTRIBUTION OF SHAREHOLDERS There were 7,096 registered Shareholders as at 31st March 2014 (7,728 as at 31st March 2013) distributed as follows:- No. of Shares held As at 31st March 2014 As at 31st March 2013 No. of % No. of % No. of % No. of % Shareholders Shares held Shareholders Shares held 1 to 1,000 3,647 51.39 1,546,845 0.11 3,934 50.91 1,736,153 0.12 1,001 to 10,000 2,423 34.15 9,642,889 0.66 2,751 35.60 10,778,554 0.74 10,001 to 100,000 861 12.13 26,931,152 1.85 862 11.15 26,533,143 1.82 100,001 to 1,000,000 144 2.03 37,831,568 2.60 158 2.04 45,032,426 3.09 Over 1,000,000 21 0.30 1,380,194,326 94.78 23 0.30 1,372,066,504 94.23 Total 7,096 100.00 1,456,146,780 100.00 7,728 100.00 1,456,146,780 100.00

COMPOSITION OF SHAREHOLDERS As at 31st March 2014 As at 31st March 2013 No. of Shareholders No. of Shares held % No. of Shareholders No. of Shares held % John Keells Holdings PLC 1 1,169,598,478 80.32 1 1,169,598,478 80.32 Directors & Spouses 3 625,117 0.04 3 625,117 0.04 Public - Resident Institution 250 206,772,647 14.20 264 202,149,720 13.88 Individual 6,741 67,228,624 4.62 7,352 71,857,567 4.94 Public - Non Resident Institution 8 1,583,470 0.11 7 1,321,360 0.09 Individual 93 10,338,444 0.71 101 10,594,538 0.73 Total 7,096 1,456,146,780 100.00 7,728 1,456,146,780 100.00

The percentage of the shares of the Company held by the Public as at 31st March 2014 was 19.64% (2013 - 19.64%) 81 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

DIRECTORS & SPOUSES SHAREHOLDINGS

As at 31 Mar 2014 As at 31 Mar 2013 Indices Share Price 100 14 Directors 12 Mr. S. C. Ratnayake 142,877 142,877 80 10 Mr. A. D. Gunewardene - - 60 8 Spouses 40 6 Mrs. M. V. Ratnayake 407,434 407,434 4 Mrs. C. A. Gunewardene 74,806 74,806 20 2 Total 625,117 625,117 00 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar MARKET INFORMATION ON ORDINARY SHARES OF THE COMPANY 13 13 13 13 13 13 13 13 13 14 14 14

2013/14 Date 2012/13 Date All Share Index Hotel Sector Index Share Information John Keells Hotels PLC Highest Price ( Rs.) 13.70 16-04-2013 16.00 17-09-2012 INDICES & SHARE PRICES Lowest Price ( Rs.) 10.20 17-09-2013 11.50 02-07-2012 As at period end (Rs.) 12.50 31-03-2014 13.20 28-03-2013 Trading Statistics Number of Transactions 3,617 4,704 Number of Shares Traded 21,646,967 35,893,728 % of Total Shares in Issue 1.49 2.46

Values of all Shares Traded ( Rs.) 277,607,053 470,369,333 Average Daily Turnover ( Rs.) 1,147,137 1,976,342 Market Capitalisation ( Rs.) 18,201,834,750 19,221,137,496 82 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INVESTOR INFORMATION CONTD.

TWENTY LARGEST SHAREHOLDERS OF THE COMPANY 31st March 2014 31st March 2013 Name of shareholder No. of Shares % No. of Shares % John Keells Holdings PLC 1,169,598,478 80.32 1,169,598,478 80.32 Employees Provident Fund 78,474,354 5.39 67,905,482 4.66 Sri Lanka Insurance Corporation Ltd. - Life Fund 72,747,800 5.00 72,747,800 5.00 Mercantile Investments PLC 13,000,000 0.89 13,000,000 0.89 Mr. D. J. M. Blackler 7,114,760 0.49 7,114,760 0.49 Seylan Bank PLC - A/C No. 3 5,574,500 0.38 7,274,500 0.50 Employees Trust Fund Board 4,216,700 0.29 4,216,700 0.29 Mercantile Fortunes (Private) Ltd. 3,800,000 0.26 3,800,000 0.26 National Savings Bank 3,473,800 0.24 3,473,800 0.24 Phoenix Ventures Ltd. 2,801,000 0.19 2,801,000 0.19 Bank of Ceylon - No. 2 A/C 2,725,266 0.19 2,725,266 0.19 Mr. R. T. Jinasena 2,516,765 0.17 2,516,765 0.17 Mr. T. R. Jinasena 2,351,568 0.16 2,351,568 0.16 Mr. U. G. Madanayake 2,000,000 0.14 2,000,000 0.14 Merrill J Fernando & Sons (Pvt) Ltd. 1,911,573 0.13 1,911,573 0.13 Waldock Mackenzie Ltd. / Mr. L. P. Hapangama 1,497,679 0.10 1,497,679 0.10 Mrs. N. Weerasinghe 1,419,853 0.10 1,419,853 0.10 Mr. A. A.V. Amerasinghe 1,287,800 0.09 1,287,800 0.09 E. W. Balasuriya & Co. (Pvt) Ltd. 1,269,150 0.09 - 0.00 Mr. C. N. H. Liyanage 1,250,000 0.09 1,250,000 0.09 Mr. P. N. N. Fernando - 0.00 1,163,280 0.08 1,379,031,046 94.70 1,370,056,304 94.09 Shares held by balance shareholders 77,115,734 5.30 86,090,476 5.91 Total 1,456,146,780 100.00 1,456,146,780 100.00 83 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 FINANCIAL OVERVIEW

GLOBAL TOURISM in 2013/14, an increase of 13% from the corresponding Rs Mn The world economy evidenced gradual signs of period last year. However, the Indian market was the 12,000 recovery assisted by the stronger performance of single biggest contributor to Sri Lanka’s tourist arrivals 10,000 the emerging economies, particularly by the rise with a total of 339,124 (a 25% market share) reflecting of China. This improving trend saw global tourism growth of 29% from last year. Russia and Ukraine 8,000 record 1.087Bn international arrivals in 2013, 5% more proved to be high growth markets with tourist arrivals 6,000 than in 2012. Europe continued to be the greatest reaching 149,674 (a market share of 11%), an increase of attraction, with 563Mn tourist arrivals, a growth of 5% 63% on the 91,703 (9% market share) recorded during 4,000 from 2012. China and Russia drove growth in global 2012/13. 2,000 tourism spending in 2013, with travellers from each country increasing their spending by more than 25% in REVENUE 0 2011/12 2012/13 2013/14 comparison to 2012 resulting in global tourist spending The improvement in the operating environment, exceeding US$1Tn. coupled with aggressive sales strategies, saw the Group Maldives Sri Lanka record total revenue of Rs.10.97Bn, a year on year OPERATING ENVIRONMENT growth of 17% (2012/13 Rs.9.34Bn). TOTAL REVENUE By the end of 2013 there were 29,811 beds registered in the Maldives, an increase of 6% compared to the The Maldivian sector recorded increases in both, total of 28,088 registered beds in 2012. This growth occupancy levels (5pts) and average room rates (4%) in capacity complemented the increasing number enabling it to contribute revenue of Rs.6.1 Bn, which of tourist arrivals to the Maldives which recorded a represented an increase of 11% on the previous ﬁnancial total of 1.125Mn, representing growth of 17.4% over year. Chaaya Island Dhonveli remained the highest 2012. Overall occupancy in the country registered an contributor to sector revenue, while Chaaya Lagoon increase of 9.2% compared with that of 2012. Chinese Hakuraa Huraa achieved the highest growth in revenue outbound tourism continued to be the biggest source (15%), followed by Chaaya Reef Ellaidhoo (9%). % market with a market share of 32.6% of total arrivals. 70 Germany followed in a distant second place with a Higher occupancy levels across all hotels coupled with 60 market share of 7.9%; however this was lower than the full year operation of Cinnamon Bey and Cinnamon 50 the 10% achieved last year. The market shares of other Citadel saw the Sri Lankan sector improve its revenue 40 traditional markets such as the United Kingdom (-6.3%) by Rs.1.0Bn, a year on year increase of 27% from the and Italy (-2.7%) also recorded declines during the year Rs.3.8Bn earned last year despite lower average room 30 with only Russia showing an increase of 12.8%. rates. Cinnamon Bey was the highest revenue generator 20

followed by Chaaya Tranz and last year’s leader Bentota 10 During the ﬁnancial year under review, tourist arrivals Beach. The strong performance by the Sri Lanka 0 to Sri Lanka were reported at a record 1,358,375, an sector enabled it to increase its revenue contribution Q1 Q2 Q3 Q4 Full Year increase of 25% in comparison to the 1,082,979 arrivals to 44% from 41% while the revenue contribution from recorded during the corresponding period in 2012/13. Maldives dropped to 56% from the 59% achieved last Maldives Sri Lanka Led by UK and Germany, Western Europeans continue year. to dominate the country’s tourist arrivals with 437,142 QUARTER ON QUARTER REVENUE GROWTH 84 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 FINANCIAL OVERVIEW CONTD.

EARNINGS BEFORE INTEREST AND TAX operational cash flows enabled the quicker retirement Rs Mn Revenue gains, effective control of direct material of short term debt leading to a reduction of Rs.57 Mn in 6,000 costs and the full year operation of Cinnamon Bey finance expenses of the Maldivian sector. 5,000 and Citadel were the key factors contributing to the impressive 33% year on year growth in Group Earnings The net finance cost of the Sri Lankan sector 4,000 Before Interest and Tax for the year under review which decreased by Rs.54 Mn (14%) year on year mainly due 3,000 amounted to Rs.2,427 Mn against the Rs.1,820 Mn to the replacement of LKR denominated debt by US recorded in the previous financial year. Dollar borrowings for relevant Sri Lanka resorts at 2,000 comparatively lower rates. In addition, the infusion 1,000 The overall increase in Administrative expenses of Rs.0.9 Bn to Cinnamon Bey, the overall reduction in stemmed from the full year operation of Cinnamon borrowing rates in Sri Lanka and the retirement of long 0 2012/13 2013/14 Bey and Cinnamon Citadel along with higher payroll term debt, contributed to minimise overall net finance expenses in the Maldives arising from the higher rate expenses in Sri Lanka. Administration Other Operating of service charge on higher room revenue for the full Sales & Distribution Expenses financial year. Overall, net finance expenses of the Group decreased by 24% to Rs.380 Mn from the Rs.498 Mn recorded GROUP EXPENSE ANALYSIS Distribution expenses also increased by 6% mainly due in 2012/13. This contributed to the improvement in to the inclusion of full year expenses of Cinnamon Bey interest cover as depicted. and Cinnamon Citadel. PROFIT BEFORE TAX The 19% increase in operational expenses was primarily During the year under review, Group Profit Before Tax due to the higher cost of electricity in Sri Lanka (PBT) increased by 48% year on year and amounted to occasioned by the higher level of occupancy and the Rs.1,893 Mn against Rs.1,283 Mn achieved in 2012/13. Rs. Mn Times 3,000 7.00 upward revision of the tariff in April last year. The Sri Lankan sector recorded PBT of Rs.526 Mn, 2,500 6.00 Once again, Chaaya Lagoon Hakuraa Huraa and a 168% year on year growth in comparison to the 5.00 2,000 Chaaya Island Dhonveli were the key contributors to Rs.197 Mn recorded in 2012/13. The PBT of the 4.00 the 18% growth in Maldivian sector EBIT of Rs. 1,456 Mn Maldivian sector increased by Rs.280 Mn (26%) 1,500 3.00 (2012/13 - Rs.1,233 Mn). In the Sri Lankan sector, the recording a total of Rs.1,367 Mn. The stronger PBT 1,000 strong performance of Chaaya Tranz, Cinnamon growth of the Sri Lankan sector enabled it to increase 2.00 Citadel and Bentota Beach were the major contributors its sector contribution to 28% from 15% in 2012/13. 500 1.00 to the impressive 65% improvement in sector EBIT of 0 0.0 Rs.971 Mn (2012/13 - Rs.587 Mn). PROFIT AFTER TAX 2011/12 2012/13 2013/14 The effective tax rate of the Group increased to 17% EBIT Finance Expense FINANCE EXPENSES from the 13% recorded in 2012/13. The lower rate in Whilst borrowing rates on US dollar denominated 2012/13 stemmed from amendments to the tax laws Interest Cover debt in the Maldives remained largely constant during in Maldives which exempted dividends from Business the year, the retirement of long term debt and strong Profit Tax as well as deferred tax write backs arising INTEREST COVER 85 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

from changes in tax legislation. The increase in GEARING % finance income which attracts a higher tax rate also The gearing ratio of the Group for 2013/14 reduced to 100 contributed to the higher effective tax rate. Group after 20% from 38% in 2012/13. As depicted, the reduction tax profits from its operations amounted to Rs. 1,575Mn, was primarily due to the increase in Shareholders’ 80 a growth of 40% compared to the Rs.1,121Mn achieved funds, stemming from improved profitability and the 60 in the previous financial year. retirement of debt.

40 INVESTMENT ACTIVITY AND FUNDING BASIS OF PREPARATION The enhancement of capacity of the main restaurant at The Consolidated Financial Statements have been 20 Cinnamon Bey, the new staff accommodation facility prepared in accordance with SLFRS/LKAS issued by at Cinnamon Citadel and the refurbishment of rooms CA Sri Lanka. The comparative ﬁgures for the previous 0 2012 2013 2014 at Chaaya Island Dhonveli, were the major investments year have also been restated as required. in property, plant and equipment undertaken by the Long Term Debt Group during the current ﬁnancial year. Short Term Debt

The conclusion of the grace period of long term debt COMPOSITION OF DEBT acquired to fund construction and refurbishment in Sri Lanka during the ﬁnancial year under review, resulted in these debts falling due for repayment during the year. Therefore the composition of debt at year end was altered, with long term debt comprising 67% of total debt, in comparison to the 78% as at 31 March 2013. Rs. Mn % 20,000 50 CASH GENERATION 18,000 45 On the back of the comparatively stronger performance 16,000 40 of all resorts in the Group, cash flows generated from 14,000 35 operations grew by 22% to Rs.3,229Mn during the 12,000 30 year under review. After utilising this to fund the 10,000 25 comparatively lower investment in property, plant and 8,000 20 equipment (Rs.610Mn) and the net retirement of debt 6,000 15 4,000 10 (Rs.926Mn), the Group ended the year with a healthy 2,000 5 surplus of Rs.1,380Mn, reflecting growth of 213% and 00 leaving the Group with a year-end cash balance of 2012 2013 2014 Rs.2,027Mn which will be partially utilised to settle long term debt falling due for repayment in the ensuing Equity Net Debt year. Gearing

GEARING 86 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 MANAGEMENT DISCUSSION AND ANALYSIS

GLOBAL TOURISM PERSPECTIVE wildlife of Sub-Saharan Africa were in great demand, Fuelled by strong demand throughout the year, attracting 65% of the 56 Mn tourists visiting the region. HAVING MADE APPROPRIATE global tourism shrugged off sluggish growth in 2012, INVESTMENTS IN UPGRADING surpassing growth projections for 2013, as destinations Mixed growth trends in the Middle East led to flat AND EXPANDING ITS PRODUCT around the world welcomed 1,087Mn international growth for the region. The positive annual growth tourist arrivals, 52Mn more than the 1,035Mn recorded recorded in Dubai (+10%), Oman (+6%) and Palestine PORTFOLIO, JOHN KEELLS in 2012 according to the latest information available (+4%), was offset by the negative growth arising from HOTELS COMMENCED TO REAP to the United Nations World Tourism Organisation political tension in Egypt (-18%) and a lower number THE REWARDS OF ITS QUEST (UNWTO). Impetus for this growth stemmed from of pilgrims visiting Mecca in Saudi Arabia (-7%), due TO ESTABLISH ITS HOTELS ON stronger demand (+5.2%) in the advanced economies, to the timing of infrastructure improvements aimed at up from the comparatively weak growth (+3.7%) in 2012. increasing accommodation and safety. PAR WITH INTERNATIONAL Tourist arrivals in emerging economies also improved STANDARDS. from 4.4% in 2012 to 4.8% in 2013 led by strong growth Research, conducted jointly by Oxford Economics and (+10%) in South East Asia. the World Travel and Tourism Council (WTTC), reveals that Travel & Tourism’s contribution to world GDP In 2013, worldwide tourism arrival patterns were grew for the fourth consecutive year in 2013, making an the ongoing Incredible India advertising campaign, slightly different from last year with the month of overall contribution of 9.5% (US$7Tn) to global GDP. At hotels in Delhi, sustained the sharpest drop in ADR March recording the strongest YoY growth (+ 9%) due a global level, visitor exports - the amount directly spent (-18.6%) and RevPAR (-21.2%), which is attributed to to the shift in the Easter holidays while April (+1%) by international travellers rose to US$1.4Tn reflecting adverse publicity stemming from isolated, but highly recorded the weakest growth for the same reason. year on year growth of 3.9%. In terms of employment, publicised incidents of gender-based violence, which Travel & Tourism generated almost 266Mn jobs, 9% of has influenced safety perceptions of female tourists. Europe regained its popularity, reflected in the highest global employment. increase in tourist numbers (+29Mn) year on year, In 2012, China emerged as the largest outbound market with growth of 5%, almost double the average over the According to data collated by STR Global, mixed while Russia moved up to fifth place. During 2013, last seven years, thereby ensuring that it retained the regional results were reported in the key performance the upward trend of outbound tourism from these largest share of the market (52%). metrics of the industry in 2013. Hotels in Europe markets continued, with the UNWTO reporting high recorded average occupancy of 67.4% in 2013 and led growth in both the Chinese (+28%) and Russian (+26%) Once again, Asia and the Pacific recorded the YoY growth (+2.4%) in occupancy while hotels in the outbound markets. The tourism appeal of Sri Lanka most robust annual growth (+6%), aided by strong Americas led YoY growth (+3.6%) in the Average Daily and the Maldives and their relative proximity, attracted performances from South East Asia (+10%) and South Rate (ADR) denominated in US Dollars. The Americas increased arrivals from both these source markets Asia (+5%). also reported the strongest overall gain in Revenue per during the year under review enabling Sri Lanka to Available Room (RevPAR) with growth of 5.2%. report overall growth of 26% and the Maldives 16%. Arrival growth in the Americas picked up in the last two quarters of 2013 with particularly strong growth The Asia/Pacific region was the poorest performer The sustained demand for Travel & Tourism, together reported in the last quarter in Central (+7%) and North in terms of all three metrics with the Central and with its ability to generate high levels of employment (+5%) America. South Asian sub region recording the lowest RevPAR continues to prove the importance and value of the growth. This was primarily due to the disappointing sector as a tool for economic development and job With annual growth of 5.6%, tourist arrivals to the performance of India, the sub region’s largest market. creation. African region reached a new high.The game parks and Despite the depreciation of the Indian Rupee and 87 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

MACRO ECONOMY IN SRI LANKA the average spending per tourist per day increased to In its Annual Report for 2013, the Central Bank of Sri USD 156.50 in 2013 from USD 103/- in 2012, while the Nos. 000’ Lanka (CBSL) has reported annual real GDP growth average duration of stay decreased to 8.6 days from 10 180 of 7.3%, an improvement on the 6.3% reported for days in 2012. It is also reported that year round room 160 2012. For the fifth consecutive year, headline inflation occupancy of the graded and unclassified tourism 140 as measured by the change in the new Colombo establishments increased to 71.7% from 71.2% in 2012. 120 Consumers Price Index (2006/07 =100) was maintained In terms of employment, a total of 270,150 jobs, direct 100 at single digit level. The upward revision of the and indirect, were supported by the tourism industry in 80 electricity tariffs and an increase in the average prices Sri Lanka, an increase of 66% over 2012. 60 of food items exerted inflationary pressure during 40 the year. However, improved domestic supply, the INDUSTRY ENVIRONMENT IN SRI LANKA 20 moderation of international commodity prices and Tourist arrivals to Sri Lanka in 2013 surpassed the 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar monetary policies of the CBSL, contributed to reduce initial target of 1.2 Mn to record 1.27 Mn arrivals, a the annual average rate from 9.8% in January 2013 to growth of 27% over the previous year. 2009/10 2010/11 4.7% in December 2013. Per capita income at market 2011/12 2012/13 prices continued to increase, growing to USD 3,280/- India remained the single largest source market for Sri 2013/14 (+12%) from USD 2,922/- in 2012. Lanka in 2013 followed by the UK, Germany, Maldives and France. TOURIST ARRIVALS TO SRI LANKA BY MONTH The country is now focusing on progressing beyond the upper middle-income category by emulating strategies While arrivals from Western Europe recorded an adopted by regional models, which have reached the overall increase of 12.9% year-on-year, significant country average of 71.7% with the exception of Chaaya upper income category. It is noteworthy that key factors growth in tourist arrivals from emerging market Blu, Cinnamon Lodge and Cinnamon Bey, which were considered essential for this evolution such as,higher economies, particularly China and Eastern Europe, was slightly below. productivity, innovating in developing value added observed in 2013. products and services along with creating a learning Having made appropriate investments in upgrading culture have already been adopted by the Group. OUR HOTELS IN SRI LANKA and expanding its product portfolio, John Keells Hotels The gradual improvement in the economies of Western commenced to reap the rewards of its quest to establish The Services Sector has become the main engine of Europe and pent up travel demand in the Chinese and its hotels on par with international standards. growth in the medium term due to the strategy of East European markets was reflected in the growth developing the country into ‘five hubs+1’, namely, in tourist arrivals to the country and was reflected in Recovering from a weak performance in the first a knowledge, maritime, aviation, energy and a the nationality mix recorded at the Sri Lanka resorts. quarter, the Sri Lankan resorts secured an impressive commercial hub plus a tourism hub, by leveraging the While price sensitivity persisted in the traditional revenue gain of 27% during the year under review as country’s strategic location and competitive advantage. West European markets due to capacity surpluses an outcome of marketing strategies that focused on in competing destinations, natural and man made driving occupancy with prudent adjustments to room The continuous increase in tourist arrivals and an calamities in some of these destinations resulted in rates. Although the overall average room rate declined increase in average spending per tourist resulted in travel shifts that benefited tourism in Sri Lanka. In the slightly from the preceding year, overall occupancy levels earnings from tourism reaching USD 1,715 Mn in 2013, absence of regional occupancy statistics for 2013, it is increased by 38% year-on-year, 16% of which stemmed against the USD 1,039 Mn in 2012. According to the encouraging to note that all Sri Lankan resorts achieved from the full year operation of Cinnamon Bey and Sri Lanka Tourism Development Authority (SLTDA), year round occupancies that easily surpassed the Citadel that were both launched in October 2012. The Sri 88 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 MANAGEMENT DISCUSSION AND ANALYSIS CONTD.

Lankan resorts recorded an improvement of Rs.1.0 Bn leading revenue contributor last year slipped into third Rapidly penetrating its market, Cinnamon Citadel, over the turnover of Rs.3.8 Bn achieved last year. place although it achieved occupancy growth of 15%, which was launched in October 2012, has risen to albeit at a slightly lower yield. On the east coast, Chaaya fifth place in the forty-four hotels in Kandy ranked The newly opened Cinnamon Bey, with its complement Blu continued to dominate TripAdvisor rankings in by TripAdvisor. It generated the strongest gain in of 200 rooms proved to be the largest revenue Trincomalee, growing occupancy by 8% and doubling its profitability amongst the Sri Lankan resorts, recording contributor followed by the recently refurbished profitability. a near four-fold increase over the preceding year, Chaaya Tranz, while Bentota Beach, the mainstay of the contributing 30% of total sector profitability. sector last year, slipped into third place. ADVENTURE & HERITAGE PROPERTIES With an excellent score of 66% of all reviews posted Cinnamon Lodge and Chaaya Village continued to lead BEACH FRONT PROPERTIES on TripAdvisor, Cinnamon Wild achieved a revenue the TripAdvisor ranking in Habarana attracting a high Strong demand for the beach front properties on the growth of 5% year on year. The hotel hosted eight percentage of excellent reviews. It was heartening to West coast and focused marketing, contributed to aspiring photographers from across the world who note the turnaround at Cinnamon Lodge, which grew Cinnamon Bey and Chaaya Tranz recording significant were short listed to compete in the elimination rounds turnover by 14% and recorded a two-fold increase in gains in occupancy and revenue. The gradual of the ‘Nat Geo Mission Cover Shot’, produced by the profitability year on year. Although Chaaya Village stabilisation of demand for Cinnamon Bey and Chaaya National Geographic Channel, the first-ever photography continued to be challenged by the entrance of a large Tranz ensured that these outstanding properties began reality show to be completely filmed in Sri Lanka. number of small properties providing accommodation to maximise their revenue potential, with Cinnamon The programme was aired over eleven weeks in India in the vicinity, it increased occupancy by 6% albeit at Bey becoming the main contributor to sector revenue, generating significant exposure for the Cinnamon brand the cost of a lower yield. followed by Chaaya Tranz. Bentota Beach, which was the as well as providing global publicity for the country. With a view to engaging with our guests, building bridges to potential clients and nurturing loyalty, we regularly monitor and respond appropriately to online % travel reviews. 20 18 MACRO ECONOMY IN MALDIVES 16 14 The strong recovery of tourism in 2013 assisted by 12 growth in the transport and communication sub 10 sectors contributed to a slightly higher GDP growth 8 of 3.7 per cent than the 3.4 per cent recorded in 2012 6 despite the unsettled political climate created by over 4 two years of political turmoil. Inflation in Malé, which 2 peaked at 7% in May 2013, dropped to 3.1% in December 0 Sri Lanka British German Russian Italian French Middle East ChineseIndian Others 2013 as the catch improved over the year stabilising and lowering the price of fish. 2010/11 2012/13 2011/12 2013/14 With the conclusion of the Presidential election in November 2013, the Quarterly Business Survey conducted by the Maldivian Monetary Authority in JOHN KEELLS HOTELS SRI LANKA OCCUPANCY BY GUEST NATIONALITY March/April 2014, indicated an increase in the level of 89 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

business activity in all businesses surveyed except for the preceding year. The remarkable growth in arrivals construction, during the last quarter of the year under from China, augmented by a 10% growth in arrivals ALL OUR RESORTS IN MALDIVES review. from Eastern Europe, enabled the Maldives to register ACHIEVED YEAR ROUND year on year growth of 16% in international tourist OCCUPANCIES THAT WERE The government continued to implement its fiscal arrivals in the financial year under review, against the reform program and raised the rate of Tourism Goods low 3% growth recorded in 2012/13. WELL ABOVE THE COUNTRY and Services Tax (TGST) to 8% from 6% in January 2013. AVERAGE COMPLEMENTED BY AN As part of its revenue raising measures, the government The decline in arrivals from Europe stemmed from IMPROVEMENT IN THE AVERAGE reintroduced Bed tax, which was abolished in January negative growth from Germany (-5%), UK (-4%) and Italy ROOM RATE. 2013 and amended the Law on Tourism to commence (-4%) while positive growth was recorded from Russia the collection of lease extension fees in April 2014, (+6%), Poland (+48%) and Ukraine (+18%). Although instead of, at the time the lease extension becomes the Maldives is still the most sought after honeymoon effective. destination in the UK, there was a reduction in the improvement in the average room rate. The growing number of charter flights from the UK during the year, upward trend in online bookings led to revenue from INDUSTRY ENVIRONMENT IN MALDIVES an indication of the price sensitivity of this market as online sources increasing three-fold year on year on the Marked by a 38% increase in arrivals from China, which the Maldives continues to implement plans to ensure back of higher yields and contributing 7% to the sector mitigated the 3% decline in arrivals from the traditional its high-end position in the world tourism market. For revenue of Rs.6.1 Bn. West European markets, tourist arrival patterns in the the second year in succession, the Maldives emerged Maldives during the year under review, were similar to the winner as the World Leading Island Destination in Purchasing initiatives were tailored to minimise the the World Travel Awards 2013. general increase in prices while effective cost control measures implemented at the resorts ensured that Nos. The increase in arrivals from China and the overall Gross Profit (GP) margins were maintained at the same 000’ decline in arrivals from Europe were the key factors level as last year. Payroll expenses were slightly higher 120 leading to a further reduction in the average stay to than last year as the sector absorbed the full year effect 100 6.3 days from the 6.7 days in 2012 and the 7.0 days of the increased proportion of service charge initiated recorded in 2011. According to statistics released by the in July last year in keeping with industry best practices, 80 Maldives Monetary Authority, in December 2012, 103 on a higher revenue base. 60 resorts were in operation with a registered bed capacity of 29,811; this represents a year on year increase of 4% CHAAYA ISLAND DHONVELI 40 and 6% respectively. However, average occupancy in the Chaaya Island Dhonveli performed strongly, recording 20 country during the year improved to 74% from 70.4% revenue growth of 8% by the prudent alteration of its on the back of higher arrivals. client mix that improved the average room rate by 6%. 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Based on TripAdvisor reviews, the resort was ranked OUR HOTELS IN MALDIVES thirteenth out of sixty-nine resorts in the North Male 2009/10 2010/11 The Maldivian sector performed slightly better than Atoll. The resort maintained its position as the main 2011/12 2012/13 expected, recording revenue growth of 11% with Chaaya contributor to sector revenue while increasing its 2013/14 Lagoon Hakuraa being the main contributor. All our contribution to sector profitability. resorts achieved year round occupancies that were TOURIST ARRIVALS TO MALDIVES BY MONTH well above the country average complemented by an 90 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 MANAGEMENT DISCUSSION AND ANALYSIS CONTD.

% CHAAYA REEF ELLAIDHOO crew of the Monsoon Documentary series produced 100 The drop in demand from the German market was more by the BBC’s Natural History Film Team last year. The than adequately offset by marketing the resort to the production captured images of elephants, primates 80 Chinese market, which enabled Chaaya Reef Ellaidhoo and leopards in their natural settings as well as to enhance its average occupancy by 7% year on year focusing on the archaeological marvels of Polonnaruwa 60 and increase its contribution to sector proﬁtability. The and Sigiriya. This four part series, ﬁlmed across six

40 resort continues to be commended on online reviews countries, will be aired worldwide in 2015. attracting a 68% excellent rating on TripAdvisor and was 20 recognised with the Travellers Choice Award for 2013 As mentioned last year, following the review of the and the Zoover Recommended Award 2013. brand architecture, it is envisaged that all our resorts 0 would be brought under the umbrella of the Cinnamon Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar CHAAYA LAGOON HAKURAA HURAA Brand, becoming a part of the Cinnamon Hotels & Maldives JK Hotels The increasing popularity of Chaaya Lagoon Hakuraa Resorts chain, comprising a 2,400 room portfolio in the Chinese and web markets ensured its leadership spread across Sri Lanka and the Maldives. JOHN KEELLS HOTELS VS MALDIVES position amongst the resorts in the Meemu Atoll. OCCUPANCY 2013/14 In the context of the comparatively high occupancy In tandem with this branding initiative, we are in the maintained by the resort, marketing initiatives that process of revamping our policies, standard operating focused on increasing yield delivered the desired procedures and processes in order to imbue the desired results. The resort achieved revenue growth of 15%, ‘lifestyle’ service culture within our staff and position contributing significantly to the Maldivian sectors Cinnamon as brand of international stature. profitability. We are also in the process of deploying an integrated BRANDING INITIATIVES Property Management System that will augment the In order to increase brand awareness and market the branding initiative by bringing all properties on to resorts in key target markets, selected hotels in the a common operating platform thereby, enhancing Group hosted the contestants of the Miss France and guest satisfaction, facilitating customer relationship Miss India pageants during the year under review, management, encouraging guest loyalty and generating publicity for the Cinnamon brand and the integrating online marketing channels. relevant hotels. OUTLOOK The hotels of the Group were also positioned on popular Global and well-patronised social media platforms, thereby Led by the advanced economies, global activity has increasing their online presence. Furthermore, the broadly strengthened and is expected to improve in visits of international journalists hosted by the hotels of 2014/15 as reported by the International Monetary the Group have given the Cinnamon brand significant Fund (IMF) in the April 2014 edition of the World publicity in the global print and electronic media. Economic Outlook. However, lower than expected inflation in these economies, the emergence of geo In partnership with the excursion arm of the Group, political risks and the poor performance of emerging Cinnamon Nature Trails, the hotels also hosted the economies in a less favourable economic environment 91 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

have tended to dampen the prospects of sustained more trained staff, improved service standards, an Maldives growth in the global economy. Global economic growth increase in room capacity and better promotional In the context of encouraging signs of recovery in the is projected to strengthen from 3 percent in 2013 to 3.6 efforts in non-traditional markets, have been identified global economy, the projected growth in world tourism percent in 2014 and to 3.9 percent in 2015. The United as the key challenges faced by the industry in the 2013 and a comparatively stable political environment, States is expected to record the strongest growth in Annual Report of Central Bank of Sri Lanka (CBSL). economic growth in the Maldives is expected to rise the advanced economies while growth in emerging to 4.5% in 2014, up from the 3.7% estimated in 2013. market and developing economies, growth is expected In its 2014 Roadmap the CBSL has outlined its intention The fiscal budget for 2014 envisages that inflation to moderate. of pursuing a strategy of maintaining price and would increase to 5% mainly due to the heavy import financial stability while working towards achieving dependence for food and energy supplies which are Against this backdrop, the UNWTO panel of experts US$ 4,000 per capita income and a US$ 100 Bn subject to price volatility. have forecasted that growth in international arrivals in economy by 2016. 2014 would be in the range of a 4% to 4.5%, still above The Maldivian Tourism authorities have appointed the ten-year long-term projection of 3.8%. This above The Roadmap reveals that sustainable tourism Destination Public Relation Agencies in the Chinese, average growth pattern is indicative of the strong development will be the key focus in making Sri Russian, German, British, and Indian markets with a resilience of tourism demand and includes part of the Lanka a Tourism hub. An extended duration of stay is view to strengthening the image of the destination and rebound from the setback of 2009. anticipated based on the improvements in commercial boosting arrivals. activity, infrastructure, and health and education Once again, Asia and the Pacific (+5% to 6%) and Africa facilities. Marketing the destination in the growing Chinese (+4% to 6%) are expected to perform strongly followed market, twenty-seven companies from the Maldivian by Europe and the Americas (both +3% to +4%) with the The addition of approximately 22,500 rooms by 2016 tourism sector participated in the China Outbound Middle East having positive prospects of growth but to the existing industry capacity has been identified in Travel & Tourism Market (COTTM) held during April tempered by highly volatile political environment (+0% order to cater to projected tourist arrivals, while 51% 2014 in Beijing, China. The Maldives received the China to 5%). of the 268 tourism projects in the pipeline at the end of Tourist Welcome 2014 Silver Award in the Internet/ June 2013, have been granted final approval. Media category at the exhibition. A number of global events such as the Winter Olympics in Russia, FIFA World Cup in Brazil and the 2014 Asian With 1.2 Mn tourists visiting Sri Lanka in 2013, the These initiatives point to an optimistic outlook for Games in South Korea are expected to contribute SLTDA target of 1.5 Mn for 2014 is based on a year on tourism in the Maldives in 2014. towards this growth. year growth of 18%. As part of its strategy to increase tourist arrivals from China, the Sri Lanka Tourism CONCLUSION Sri Lanka Promotion Bureau has linked up with a Chinese The Group is confident that its increasing wealth In the context of favourable economic conditions television channel, ‘The Travel Channel of China’, which of experience, branding initiatives and strategic implicit in the growth of 7.3% in 2013, the gradual has an audience of 650 Mn. investment, in its properties and people, will ensure improvement in the global economy and policy that it remains in the forefront of regional tourism measures aimed at maintaining inflation at mid single The country hosted the World Conference on Youth growth in the year ahead. digit levels, the CBSL has targeted GDP growth of 7.8% (WCY) in early May with the tagline ‘Mainstreaming in 2014. Youth in the Post-2015 Development Agenda’ attracting over 1,500 youth from around the world, stimulating While recognising the tourism industry as one of the interest in the destination and generating significant fastest growing sectors of the economy, the need for publicity on social media and other online platforms. 92 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 RISK MANAGEMENT

By engaging its leadership and operational teams in used in running of generators to power desalination its risk management process, John Keells Hotels PLC, plants. We believe that such large investments provide THE BOARD ASSUMES further refined its risk management systems during assurance that the needs of the present are satisfied RESPONSIBILITY FOR ENSURING the year under review. This was facilitated by the in a manner that would not compromise the ability of THE EFFECTIVENESS OF THE John Keells Group Sustainability and Enterprise Risk future generations to meet their own needs. Management (ERM) Division, which continued to GROUP’S RISK MANAGEMENT AND provide the framework, assess and provide guidance The Board assumes responsibility for ensuring the INTERNAL CONTROL SYSTEM. on the identification and mitigation of emerging effectiveness of the Group’s risk management and THE BOARD AUDIT COMMITTEE risks encountered by the individual hotels while also internal control system. The Board Audit Committee WHILE ASSURING INTERNAL covering sustainability assurance within the Hotels while assuring internal control adequacy, also obtained Group. The risk management culture of the Hotels assurance from the management that identified risks CONTROL ADEQUACY, ALSO Group is nurtured by the annual and quarterly reviews are being mitigated. OBTAINED ASSURANCE FROM THE that are undertaken by the individual hotels. This has MANAGEMENT THAT IDENTIFIED become an integral part of the dynamic and resilient With the facilitation of the John Keells Group ERM RISKS ARE BEING MITIGATED. risk management process in place and resulted in a Team, Risk Review presentations were made to the better understanding of key risks, encouraged the Board Audit Committee during the year under review sharing of best practices across the individual hotels thereby providing an opportunity to review and and reduced the overall cost of risk mitigation. assess the risks identified, the appropriateness of the The Risk Management Team comprising of the risk ratings as well as the mitigation action plans Leisure Group President, Sector Heads, Chief Financial Our risk management process is an essential element formulated by the hotels. Officer, functional and operational managers take of our responsible business ethic, balancing the responsibility for the early identification of potential requirement for safeguarding assets with opportunities The John Keells Group Business Process Review risks. Risks are identified at hotel level by various to create value for our stakeholders. Accordingly, our (BPR) Division and outsourced Internal Auditors means. Those risks having a catastrophic impact on risk management process not only captures financial are separately responsible for providing assurance, the organisation, but may have a very low or zero and operational risks faced by the Company, but also identifying vulnerabilities, proposing new controls probability of occurrence are referred to as core considers risks faced by the Company through impacts and recommending improvements to existing sustainability risks. These are risks that threaten the on the environment, employees and the community internal controls across the Group. The outsourced sustainability or long term viability of a business and due to its operations. During the year under review, Internal Auditors with the facilitation of the BPR are typically risks, stemming from our impact on the we demonstrated this commitment to sustainability Division provide reports that assess the robustness environment or society. Identified risks are recorded by investing in a reverse osmosis plant at Cinnamon of the internal control framework to assist the Audit on the risk register of each business unit and analysed Wild, Yala, and nearing completion on a waste water Committee in fulfilling its assurance role. and ranked on a scale of 1 to 5 based on their likelihood treatment plant in Chaaya Island Dhonveli in the of occurrence and impact to the business. A high or low Maldives. The reverse osmosis plant is expected to RISK MANAGEMENT FRAMEWORK velocity rating is attached to each identified risk to rate reduce the risk of environmental damage arising from The Risk Management framework adopted by the the speed at which it would impact the business. the continuous use of bowsers to transport water, while Group enables us to understand material risk that the waste water treatment plant is expected to ensure we currently face as well as emerging risk. The risk Following a process of obtaining the input of all maximum water recycling thereby reducing the overall framework ensures that risks are effectively identified, concerned, several options are identified. Thereafter, carbon footprint through the saving of fossil fuel assessed and that appropriate controls are in place. appropriate risk management measures such as 93 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

acceptance, mitigation, transfer and control are from Western Europe and contributed to an overall identified, progressed and monitored. Action plans are year on year country growth of 16%. According to the reviewed at appropriate levels in the organisational Maldives Tourist Promotion Board, during the calendar structure and are escalated either to drive action year 2013, 38 new hotels and resorts were in operation or to develop a common solution. These plans are increasing bed capacity to 29,811 representing year implemented along with measures that continuously on year growth of 6%. Sri Lanka recorded country monitor their effectiveness. growth of 26% during the financial year under review with India continuing to be the main source market. This framework enables the Group to maintain and The East European market performed strongly in develop risk management strategies to assess and both countries with Sri Lanka being more popular control individual types of risk while developing garnering the larger share (56%) of the market. The guidelines, raising awareness levels and training staff Sri Lanka Tourist Development Authority (SLTDA) on the use of controls and systems in order to manage has not released monthly information with regard and mitigate existing risk as well as detect emerging to capacity growth and occupancy levels in graded risk. The Group has maintained insurance at levels tourism establishments; however, an increase in determined by it to be appropriate in relation to the accommodation capacity at the lower end of the market cost of cover and the risk profile of each property. was evidenced.

As an outcome of the risk management process, the Apart from this, the risk exposure and profile of the Audit Committee has received quarterly confirmations Group did not change significantly during the year of financial and operational compliance from the under review. Sector Head along with the sustainability reports in respect of each business unit. The Sector Head has A review of the key risks that could materially affect also confirmed that the risk registers and grids of the the John Keells Hotels Group along with the control individual business units have been updated by the measures and action plans implemented to mitigate respective Hotel Managers. them are set out below.

RISK ENVIRONMENT AND RISK PROFILE While both Sri Lanka and the Maldives operated in a similar external industry environment during the year under review, source markets and growth patterns were dissimilar. While the downward trend in arrivals from the traditional West European markets continued in the Maldives, double-digit growth was recorded in Sri Lanka. The persistent focus on the Chinese market by the Maldivian Government was rewarded by a 38% increase in arrivals from China during the year under review. This mitigated the drop in arrivals 94 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 RISK MANAGEMENT CONTD.

Risk category and description Potential Impact Control Measures and Action Plans to Mitigate Risk Strategic Risk Market Risk and Competition Risk Rating – Moderate Loss of market share in a high growth Reduction in fair share of market and z Innovating and trend setting while benchmarking with global competition competitive environment or industry loss of revenue z Refurbishing and repositioning the existing hotel portfolio. over capacity z Dynamic monitoring of capacity utilisation and strategic marketing initiatives to maximise market share and enhance top line growth z Providing value for money by enhancing services, improving service delivery and focusing on consistent quality z Participation in global and regional tourism promotions and events in existing, potential and emerging markets while maintaining relationships with key overseas industry partners z Evaluating web marketing channels and strategically developing the website to grow web business z Continuously evaluating investment opportunities to expand room portfolio Business Risk Risk Rating – Low The inability of the Company or Group Adverse impact on planned proﬁtability z Based on SWOT analysis, long term strategic plans are formulated, implemented and to achieve its business objectives due to and cash flow reviewed macro –economic, political and external Availability of affordable credit. z Corporate plans are formulated on an annual basis and formally approved by the factors Board. These plans are thereafter monitored and reviewed by the Board on an Increase in operating and asset ongoing basis. replacement costs due to fluctuation in exchange rates z Implementation of cost control procedures and innovative cost saving initiatives z Ongoing review of cost and expenditure by operational and ﬁnance staff to determine appropriate revision of rates and tariffs 95 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Risk category and description Potential Impact Control Measures and Action Plans to Mitigate Risk Brand Equity and Reputation Risk Rating - Low Any event that could undermine the Decline in customer base, loss of market Although some factors are beyond its control, the Group adopts the following approaches brand equity and the reputation of the share, market penetration and ability to to mitigate this risk Group such as decline in service levels, develop the business z All hotel operations are monitored against and guided by the Standard Operating the product not meeting customer Procedures (SOP) and Minimum Quality Standards (MQS) both of which are expectation, possible environmental Inability to maintain room rate benchmarked against leading international hotel chains impacts and health and safety as well differentiation and competitive z Innovative service in keeping with brand promise as failure to sustain the appeal of the advantage Groups brands to its customers z Completed review of Brand architecture and positioning of product portfolio Erosion in confidence may damage z Ongoing monitoring of online customer reviews and promptly responding to guest sustainability of Group business feedback z Host international events in collaboration with overseas partners z Regular brand audits are carried out covering both facilities and services z The Group ensures that key managerial positions are held by suitably qualified and trained staff with sufficient experience in the hotel industry z Ongoing attention to environment, health and safety concerns by obtaining appropriate internationally recognised quality certification standards z Initiatives to preserve water and energy resources to ensure long term sustainability Statutory & Legal Risk Risk Rating - Low Changes in legal and regulatory Loss which may arise due to non z Statutory returns, including taxes, are regularly monitored, reviewed and scrutinised. framework requiring significant changes compliance with statutes Compliance audits are included in the scope of the internal audit program. A to operating processes comprehensive financial and operational compliance checklist is reviewed by senior Enhanced incidence and potential management on a quarterly basis. Risk of litigation from guests, customers, exposure due to proposed legislation z Active engagement with industry advisory and policy making bodies to articulate suppliers, staff and regulatory concerns and make representations upon invitation authorities Loss arising from flawed contracts z The legal division of the John Keells Group provides guidance, advice and direction to safeguard the Group against exposure to unexpected losses arising from the legal consequences of its transactions z Continuous review and development of information systems which detect and report deviations 96 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 RISK MANAGEMENT CONTD.

Risk category and description Potential Impact Control Measures and Action Plans to Mitigate Risk Operational Risk Risks from natural or man-made Risk Rating - Low disasters Injuries to staff and guests, damage to z Documented business continuity and disaster recovery plans are in place and property and cost implications appropriate signage is in place z A process to communicate awareness of such incidents is in place z Fire ﬁghting systems , trained staff and procedures are in place z Relevant insurance policies are in place and the adequacy of such cover is subject to regular review Project Implementation Risk Risk Rating - Low Cost overruns and loss of earnings due z Establishing project time lines in consultation with all stakeholders to delays z Formal process established to cover project consultancy, project award and material procurement z Specialised teams monitor project progress and compliance with established sustainability guidelines z Online, real time repository which serves as a forum to discuss and resolve project related issues and track project cost and progress z Learning from past project activities are documented and reviewed to ensure that best practices are carried forward Personnel Risk Rating - Low The risk of losing highly skilled staff and Inability to maintain quality standards z Cross exposure and overseas training by providing opportunities to key staff to be key personnel due to industry growth, and meet guest expectations employed in overseas subsidiaries as part of career progression labour practices z Identiﬁcation of talent pool for succession planning Higher operational costs and loss of Shortage of appropriately skilled staff in business z Structured training arising from performance appraisal process the market to meet the growing need of z Developing a spirit of unity by organising staff gatherings the Group. z Recognising and rewarding superior performance z Continuous monitoring of associate motivation and satisfaction through surveys and initiating corrective actions where necessary z Cultivating a win-win approach by engaging in candid and continuous dialogue with labour unions 97 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Risk category and description Potential Impact Control Measures and Action Plans to Mitigate Risk Supply Chain Risks Risk Rating - Low Short supply of goods and raw materials Cost overruns, reputational loss z Alternate suppliers have been identified resulting in disruptions to operations z Maintain good business relationships with supply chain, rotating contracts when economically possible z Identification of local supplier base Technology and data protection risk Risk Rating - Low Failure to keep pace with developments Adverse impact on efficiency of z Following detailed evaluation, a new hotel operating system was selected as the in the technology could impair our operations, guest satisfaction, loss of preferred common property management system. This system would ensure greater competitive position and operations competitive advantage alignment with business needs and be more agile in implementing dynamic changes in business strategy. Risk of cyber attack Data theft z Continuous review of network protection processes at all operational locations to ensure integrity and security of data z Documented business continuity and disaster recovery plans are in place in the event of technical disruption or failure z A clearly defined IT policy is communicated to all staff Internal operational processes Risk Rating - Low Risk of financial loss due to breakdown Disruption of operations, loss of profits z Clearly defined systems and procedure are in place to ensure compliance with in internal controls and ineffective use of assets and internal controls, which are monitored and reviewed for their continued efficiency resources and effectiveness z An outsourced internal audit firm reviews and provides assurance on the adequacy of the Group’s financial and operational systems on a quarterly basis. z Quarterly confirmation of compliance with financial, operational and sustainability procedures and requirements which include any incidence of fraud z A formal process is in place to review and monitor all audit findings Financial Risk Credit Risk Liquidity Risk Please refer Note 13 to the Financial Statements Interest Risk Foreign Currency Risk

The Audit Committee has reviewed the risk management processes adopted by the Group and has noted that risk analysis exercises had been conducted across the different Hotels of the Group during the year under review. In conclusion, the Board is pleased to conﬁrm that a process for identifying, evaluating and managing signiﬁcant risks has been in place throughout the year in accordance with the guidelines set out by CA Sri Lanka and industry best practice. 98 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT

Kg 30.00

25.00

20.00

15.00 10.00 9.7% Our Carbon Footprint 5.00 (per guest night) 0.00 2012/13 2013/14

KGS OF CO2 PER GUEST NIGHT JOHN KEELLS HOTELS

AT JOHN KEELLS HOTELS SUSTAINABILITY IS A WAY OF LIFE. AS THE LEADING LEISURE SECTOR OPERATOR IN THE COUNTRY, WE BELIEVE IT IS VITAL FOR US TO SET INDUSTRY STANDARDS IN SUSTAINABILITY AND ADOPT ‘BETTER THAN THE BEST’ ABOUT THIS REPORT GLOBAL PRACTICES IN PEOPLE, Our Sustainability Report provides a concise analysis of our strategy, performance and outlook for the future SOCIAL AND ENVIRONMENTAL in relation to our social and environmental goals in the short, medium and long term. It includes a brief insight in to the Company’s policy framework, governance structures, guiding principles and execution of our overall SUSTAINABILITY. THIS Sustainability strategy based on upholding the rights of our stakeholders and preservation of the environment. YEAR, IT IS WITH GREAT This is our third Sustainability Report and relates to our performance during the period 1st April 2013 to 31st PRIDE THAT WE REPORT OUR March 2014. The report has been prepared in accordance with the Global Reporting Initiative Standards G3.1 OUTSTANDING RESULTS IN which has been consistently applied for the past 3 years within the John Keells Hotels PLC Group. We report on 32 performance indicators encompassing economic, environmental and social aspects making this a B+ level THIS JOURNEY. Report according to the GRI Application level framework as this report has been audited by Messrs. Ernst & Young 99 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Chartered Accountants, Sri Lanka and their assurance SUSTAINABILITY HIGHLIGHTS - 2013 report is given on page 105. John Keells Hotels has also embraced the principles of The United Nations Global Compact and pledged support to achieve the Millennium Development Goals.

The Sustainability Report covers 8 resorts in Sri Lanka and three resorts in the Maldives which are owned by 2,799 2.1% High Performing Team Waste per Guest Night the Group, as detailed in the Group Structure on page 51 The policy framework, guiding principles and their Members application are consistent across all these entities. No. of Injuries 80 Our stakeholder engagement processes are vital to 70 all aspects of our performance and form the basis 60 for selection of performance indicators reported and 25% 50 influence business strategy. Issues identified from Water usage reduction this process are filtered using the Group’s definition 40 in office premises of materiality to identify material issues. John Keells 30 9.7% Hotels defines materiality as economic, social or 20 Our Carbon Footprint (per Guest Night) environmental issues that cross a threshold, in 10 affecting the ability to meet the needs of the present 0 without compromising the needs of future generations. 2012 2013 2014 OUR TOTAL GUEST COMMUNITY John Keells Hotels will adopt to the GRI G4 guidelines in NIGHTS INCREASED STAFF- INJURY RATES ENGAGEMENT the financial year commencing 1st April 2014 and will BY 25% DURING THE Our Volunteer Hours review its policy framework, performance indicators YEAR and reporting processes in order to align with the Education: 242 guidelines. Culture and Religion: 1,493 Health and Welfare: 3,745 Natural Resources: 1,214 # 1 4 SRI LANKAN RESORTS AND 1 MALDIVIAN RESORT RATED # 1 IN THEIR RESPECTIVE AREAS 100 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

STAKEHOLDER ENGAGEMENT Our stakeholder engagement processes are vital to the formulation of strategy and brand building. There is a high degree of connectivity and impact between critical stakeholder groups and proactive engagement which enables us to understand and respond effectively to their changing needs. Consequently, we invest strategically in stakeholder engagement to facilitate early identiﬁcation of potential issues and trends to enable us to respond in a timely manner.

Stakeholder How We Engage Needs Identiﬁed

Customers z Staff interactions with guests z Unique experiences Our customers consist of the guests who visit our resorts as z Guest Comment cards z Memorable locations well as local and international tour operators, travel agents z Guest reviews on Trip Advisor z Superior service levels and destination management companies which generate business for us. z Reviews on social media z Value for money z One to one meetings with Business to Business (B2B) z Facilities and cleanliness clients z Fusion cuisine z Market surveys z Activities z B2B Customers- frequent familiarisation visits, z Up to date information on the product and service promotional material offerings to the customers Employees z Employee satisfaction surveys- Voice of Employee, Great z Competitive financial and non-financial remuneration Consists of our total talent pool of 2,799 employees in Sri place to work z Skill development Lanka and Maldives. z Skip level/focus group meetings z Opportunities for career advancement z 360° survey z Health and safety z Leisure portal (intranet) z Equal opportunities z Continuous interaction z Work-life balance Government , legal and regulatory authorities z Trade and related associations z Compliance with applicable laws and regulations This includes the government of Sri Lanka and Maldives, z Periodic disclosures z Good governance Department of Inland Revenue, Securities and Exchange z Meetings upon request z Continuous dialog with industry partners Commission, Colombo Stock Exchange, Sri Lanka Tourism Development Authority, Board of Investment Sri Lanka etc. Investors z Annual Report z Adequate return for risk undertaken We have a diversified shareholder base, including resident z Release of quarterly financial statements and periodic z Good governance practices and non- resident individuals and institutions. disclosures to the Colombo Stock Exchange z Compliance with relevant laws and regulations z Investor relations arm of John Keells Group z Responsible business practices Community z Community related activities and awareness z Preservation of environment in locality Consists of the local communities in which our hotels and programmes z Financial and non-financial assistance for community resorts are located, both in Sri Lanka and Maldives. z Sponsorships for religious, cultural and social activities related activities z Respect for local culture 101 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

CHALLENGES, OPPORTUNITIES AND RISKS The Tourism sector has been identiﬁed as one of the key growth sectors and Sri Lanka aspires to be a regional hub for tourism in South Asia by 2016. John Keells Hotels is the largest player in the country’s leisure sector and our goal is to become an internationally recognised premium leisure brand driving the growth of this sector whilst maintaining our focus on the triple bottom line. The table below summarises the key challenges, risks and opportunities in achieving our goal.

Focus z Challenges z Opportunities

Customer z Changes in customer needs and habits- guests seek unique z Changes in delivery channels to web and mobile based technology experiences and service excellence in parallel to value for money. enables easier access to a larger customer base. z Guests seeking out responsible hospitality providers. z Improved transportation infrastructure including road networks and internal air travel.

Employees z Shortage of skilled labour due to competition. z Focused staff training to achieve service excellence. z Intensive training requirements in line with the vision of creating an international brand

Shareholders- z Intensiﬁed competitive pressures, with new entrants and existing z Focus on niche market, aligned with the new branding strategy and economic players increasing capacity. positioning as a lifestyle brand. z Threat of substitutes-Increased competition from the informal sector, z Attract high spending, long-staying tourists. with initiatives such as home-stay gaining popularity. z Cost structure- inflationary pressures continue to impact proﬁt margins.

Communities z Local communities having a negative view of tourism, due to the z Direct, indirect and self-employment generated through tourism perceived adverse impacts on cultural heritage and moral values related activities z Greater tourist numbers could pose a threat to communities due to z Skill development and resultant improvement in employability of drugs and STDs youth in local communities due to formal training. z CSR projects aimed at uplifting the livelihoods local families

Environment z Threats to natural resources due to tourism related activities, such as z Widening and diversifying product content and processes that are over visitation and excessive use of boats. aligned with sustainable tourism z Meeting industry benchmarks on green products z Showcase Sri Lanka’s and Maldives’ rich biodiversity and other z Unsustainable use of limited natural resources for tourism natural resources z Compliance with global tourism industry certiﬁcation bodies

102 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

AWARDS, ACCOLADES AND CERTIFICATIONS We encourage our hotel teams to compete for industry awards as part of our quest for excellence in all aspects of operations. We congratulate the winners and believe they inspire other teams to strive harder to reach new standards of excellence.

John Keells Hotels z Gold Award and First Place in Hotels and Travel Sector of STING Corporate Accountability Index 2013 z Silver Award for Excellence in Annual Reports 2013 - Hotel Category

Bentota Beach Hotel z Trip advisor Certificate of Excellence z Won Five Crowns @ Crown For Food Hygiene Launched by IND-EXPO Certification Limited z Trip Advisor Certificate of Excellence 2013/2014 z “ Most popular Hotel in the Russian and CIS market” Award @ Tez Worldberry, 2013

Chaaya Village z Trip Advisor Certiﬁcate of Excellence 2013/2014

Cinnamon Citadel z Energy Conservation Champion @ EU- Switch Asia Greening Hotels Awards 2013 z Trip Advisor Travelers Choice Winner for 2013/2014 z Trip Advisor Certiﬁcate of Excellence 2013/2014 z Bronze Award for Efﬁcient Green & Sustainable Practices was Awarded by National Cleaner Production Center, Sri lanka

Chaaya Blu z Trip Advisor Certiﬁcate of Excellence 2013/2014 103 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Cinnamon Lodge z “Best Hotel in Sri lanka” Award by Zoover, The biggest Independent Travel Portal in Europe z “Best Green Hotel in Sri Lanka” Award @ EU Switch Asia Greening Hotels Awards 2013 z Trip advisor Travelers choice winner for 2013/2014 z Trip Advisor Certiﬁcate of Excellence 2013/2014 z Silver Award for Efﬁcient Green & Sustainable Practices was Awarded by National Cleaner Production Center, Sri Lanka

Cinnamon Wild z Trip Advisor Certiﬁcate of Excellence 2013/2014

Chaaya Traanz z Trip Advisor Travelers Choice Winner for 2013/2014 z Trip Advisor Certiﬁcate of Excellence 2013/2014

Chaaya Lagoon Hakuraa z “Holiday Check Quality Selection 2013” certiﬁcate with a rating of 5.3/6 z Trip Advisor Travelers Choice winner for 2013/14 z Trip Advisor Certiﬁcate of Excellence 2013/14 z Gold Award in Best First Choice 4 Tier Category by TUI Travel PLC

Chaaya Reef Ellaidhoo z “Zoover Recommended Award 2013” by Zoover, an independent travel portal in Europe z Trip Advisor Certiﬁcate of Excellence 2013/14 z Trip Advisor Travellers Choice 2013 - Winner

Chaaya Island Dhonveli z MATATO Maldives Travel Awards – Leading Surf Resort – 2013 z Trip Advisor Certiﬁcate of Excellence 2013/14 z Gold Award in Best First Choice 4 Tier Category by TUI Travel PLC z Gold Award in Best Thomson 4 Tier Category by TUI Travel PLC 104 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

Certiﬁcations We consider certiﬁcations as our baseline to provide assurance on systems and processes implemented in our hotels and we strive to go beyond the standards required by the certifying bodies in our constant quest for excellence in all what we do.

ISO 22000 ISO 14001 OHSAS 18001 Green Globe Certiﬁcation 3 Star Crescent Rating Travelife Gold Award

This certifies that our Provides assurance Provides assurance Certifies that we are Certifies that we are able Certifies that hotels food safety management to stakeholders that regarding occupational a sustainable tourism to cater for the Halal are sustainable systems addresses the food environment impacts health and safety Company. This means conscious travellers environmentally, socially, safety management risks are being measured and management systems that we save energy economically. across the food supply improved and compliance with and water resources, chain. legal requirements and reduce operational costs, international best practice. positively contribute to local communities and their environment.

Hotels Certiﬁed Bentota Beach Hotel Chaaya Village Cinnamon Citadel Chaaya Blu Cinnamon Lodge Cinnamon Wild Chaaya Tranz Chaaya Lagoon Hakuraa Chaaya Reef Ellaidhoo Chaaya Island Dhonveli 105 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INDEPENDENT ASSURANCE REPORT

Independent Assurance Report to the Board of Directors of John Keells Hotels PLC on the Sustainability Report - 2013/14

INTRODUCTION AND SCOPE OF THE ENGAGEMENT MANAGEMENT OF JKH’S RESPONSIBILITY FOR THE REPORT z Reconciling and agreeing the data on financial performance The management of John Keells Hotels PLC (“JKH”) engaged us to The management of the JKH is responsible for the preparation of are properly derived from the JKH’s audited financial provide an independent assurance on the following elements of the self-declaration, the information and statements contained statements for the year ended 31 March 2014 the Sustainability Report- 2013/14 (“the Report”) within the Report, and for maintaining adequate records and z Comparison of the content of the Report against the criteria z Reasonable assurance on the information on financial internal controls that are designed to support the sustaining for a self-declaration at a “B+” level in accordance with the GRI performance as specified on page 132 of the Report reporting process in line with the GRI Sustainability Reporting Application Level publication Guidelines. z Limited assurance on JKH’s self-declaration (“the self- declaration”) in respect of the content of the Report prepared Our procedures did not include testing electronic systems used to ERNST & YOUNG’S RESPONSIBILITY in accordance with the requirements of the Global Reporting collect and aggregate the information Our responsibility is to express a conclusion as to whether we Initiative G3.1 guidelines at application level ”B+”. have become aware of any matter that causes us to believe that the LIMITATIONS AND CONSIDERATIONS self-declaration contained in the Report has not been prepared, BASIS OF OUR WORK AND LEVEL OF ASSURANCE Environmental and social performance data are subject to in all material respect, in accordance with the requirements of We performed our procedures to provide limited assurance in inherent limitations given their nature and the methods used for the GRI Guidelines at application level “B+”. This report is made accordance with Sri Lanka Standard on Assurance Engagements determining, calculating and estimating such data. solely to JKH in accordance with our engagement letter dated 03 (SLSAE 3000): ‘Assurance Engagements Other than Audits or March 2014. We disclaim any assumption of responsibility for any Reviews of Historical Financial Information’, issued by the CONCLUSION reliance on this report to any person other than JKH or for any Institute of Chartered Accountants of Sri Lanka (“CASL”). Based on the procedures performed, as described above, we purpose other than that for which it was prepared. In conducting conclude that our engagement, we have complied with the independence The evaluation criteria used for this limited assurance z The information on financial performance as specified on requirements of the Code for Ethics for Professional Accountants engagement are based on the Sustainability Reporting Guidelines page 132 of the Report are properly derived from the audited issued by the CASL. (“GRI Guidelines”) and related information in particular, the financial statements of the JKH for the years ended 31 March requirements to achieve GRI application level “B+” in the ‘GRI 2013 and 31 March 2014. KEY ASSURANCE PROCEDURES Application Level’ publication ,publicly available at GRI’s global We planned and performed our procedures to obtain the z Nothing has come to our attention that causes us to believe the website at “www.globalreporting.org”. information and explanations considered necessary to provide GRI self-declaration contained in the page 98 of the Report has sufficient evidence to support our limited assurance conclusions. not been prepared, all material respects, in accordance with the Our engagement provides limited assurance as well as reasonable Key assurance procedures included: requirements of the GRI Guidelines at application level “B+”. assurance. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement conducted in z Interviewing relevant JKH’s personnel to understand the accordance with SLSAE-3000 and consequently does not enable process for collection, analysis, aggregation and presentation to obtain assurance that we would become aware of all significant of the self-declaration matters that might be identified in a reasonable assurance z Reviewing and validation of the information contained in the Chartered Accountants engagement. Accordingly, we do not express an opinion providing self-declaration and the Report reasonable assurance. z Checking the calculations performed by the JKH on a sample 29th May 2014 basis through recalculation Colombo 106 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

SUSTAINABILITY GOVERNANCE AND POLICIES OUR CUSTOMERS – INSPIRING AN EXPERIENCE Cinnamon Bey - LEED GOLD Certified John Keells Hotels has a formal sustainability governance structure and policies to ensure Demonstrating its commitment organisation-wide implementation of sustainability Guest Nights to sustainable business, strategy. Sustainability specialists, who champion 000’ 1,000 Cinnamon Bey Beruwela projects, ensure compliance with environment and became the first hotel in social aspects according to an agreed plan, co-ordinate 800 Sri Lanka to be awarded with our parent Company, John Keells Holdings PLC the prestigious LEED GOLD on sustainability strategy, monitor implementation 600 Certification from the US Green and measure performance on environment and social Building Council, after fulfilling a comprehensive factors. The Sustainability Officers report directly to 400 range of green standard requirements. Leadership the Sector Head of Hotels and co-ordinate activities 200 in Energy and Environmental Design (LEED) is a with the General Managers of the respective hotels and set of rating systems for the design, construction, centralised support services such as HR, Marketing 0 operation and maintenance of green buildings, and Finance teams. Monthly reports are provided to 2012 2013 2014 homes and neighbourhoods. LEED is the most sector management and Board on performance which prestigious and highly regarded green rating includes key financial and non-financial information TOTAL GUEST NIGHTS (GROUP) system in the world. facilitating holistic decision making. OUR TOTAL GUEST NIGHTS INCREASED BY The rating system, audits and examines five key 25% DURING THE YEAR areas as follows: sustainable sites which look Board of Directors at ecological impact, water efficiency – which covers reduction of total water usage and water OUR GUESTS HAVE EXTENDED THEIR efficient landscaping, energy and atmosphere – for Sector Head LENGTH OF STAY IN OUR HOTELS energy efficiency of the building and integration of all systems and equipment properly into the building envelope. The fourth area is material and Sustainability Sustainability OUR UNIQUE PRODUCT AND SERVICE resources which cover what green materials have Division in Sri Lanka Division in Maldives DELIVERY ENTICES OUR GUESTS TO been used in a particular project and finally indoor REVISIT OUR HOTELS environmental quality which looks at measures 8 Hotels 3 Hotels taken to prevent air pollution and strategies established to gain more daylight into the complex and less thermal energy. We have a robust Sustainability Policy Framework in place to provide guidance for our dispersed 8 management teams to facilitate better decision Booking engines facilitate making and embedding the sustainability principles reservations throughout the organisation. The policy framework mainly focuses on environment and social factors and are summarised below. 107 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Our customers Our customers can be broadly categorised as guests who visit our resorts as well as local and WE HAVE STRENGTHENED international tour operators, travel agents and destination management companies which generate OUR E-DELIVERY business for us (collectively referred to as B2B MECHANISMS IN ORDER TO customers). INCREASE ACCESSIBILITY AND CONVENIENCE TO OUR In terms of distribution channels, around 88% of our total revenue is generated through the travel agents. CUSTOMERS The unique offering of our resorts attracts a diverse base of both domestic and foreign guests, with the foreign guests accounting for nearly 60% of revenue. Currently guests from Western Europe namely 88% the United Kingdom, France Germany and Russia Extensive B2B dominate our customer base. partnerships- generate 88% of our guests Our resorts mainly attract young/boomer couples, family groups and groups of friends. Our customers typically seek to obtain unique experiences and authenticity in memorable locations.

4 Sri Lankan resorts and 1 Maldivian resort rated # 1 in # 1 their respective areas

Assured health and safety North America 1% Western Europe 34% Central/Eastern Europe 19% Middle East 8% Online travel agencies 10% South Asia 5% Local and international REVENUE MIX- REVENUE MIX- Domestic guests 20% DELIVERY Travel agents 88% ORIGIN OF Oceania 3% CHANNELS Independent travellers 2% CUSTOMERS Others 2% 108 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

Youthful OUR BRAND - THE EXPERIENCE Sri Lanka My Hotel During the next two to three years, we plan to make exciting new changes to our brand. The Cinnamon Personal Different Friendly brand will emerge as an internationally recognised Together Mobile ‘lifestyle brand’, with the focus being on people seeking Lime Design Amari to enjoy quality time with friends. Our resorts will be Violet modern, iconic and vibrant, inspiring a multi sensorial 1-4 Curated Local experience for our guests. . Our product and service choices White Great excellence will be guaranteed through a matrix of days Informal Vibrant quality checks and balances with our new brand standards platform. Every aspect of our operation ranging inclusive from the interior of the resorts to innovative cuisine, Flexible breaks Space prices music to entertainment, to events will be aligned to the Couples Glass attributes and personality of the Cinnamon brand. and Stylish Hotel Costes Bright Asian MEASURING CUSTOMER SATISFACTION Friends Relaxed John Keells Hotels places utmost priority in Active Modern understanding guest expectations and measuring Online Orange satisfaction. Our methods for measuring customer Short Interesting satisfaction cover the guests’ entire stay including services in restaurants, lobbies and outdoor facilities. Feedback, complaints and recommendations obtained Conventional through guest engagement is utilised to identify and MyHotel Gilded Formal bridge gaps in products, services and processes. We WHAT IT IS AND Limitless Beige Strict have made available multiple platforms through which Intimacy Options WHAT IT IS NOT Bland our guests can engage with us. Privacy Breaking down the Consistency Banyan tree new branding strategy Marriott z Interaction with guests Cream Wood Zen-like John Keells Hotels has Long vacations z Guest feedback forms defined what the brand Standard Luxury Expensive z is and what it is not. Silence Cinnamon Hotels & Resorts website Eighties Extras Traditional Karaoke z Social media Wooden Crowded 7-14 Operators z Telephone numbers and e-mail addresses are Honeymoon Anybody days provided in the Company’s website and all other couples Dark Indian Agencies Western communication medium. Brown Global Additionally, we consistently monitor customer reviews and feedback through popular independent travel websites and ensure that prompt action is taken to rectify any shortcomings. A specialised software is 109 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

utilised to monitor reviews and comments on social Exposure Value of media exposure generated for our brand media websites in multiple languages. Furthermore, (LKR Mn) General Managers at each hotel are empowered to respond to such comments and reviews on a daily basis. Local Foreign On average, all our resorts obtained scores above 7.5 Foreign Media Exposure 38.11 during the year from all three major travel websites, Local Media Exposure 22.98 TripAdvisor, Agoda and Booking.com. Miss. India pre-pageant tour 17.41 110.57 Furthermore our B2B customers are constantly kept Miss. France pre-pageant tour 19.50 197.76 abreast of new developments in our products and service offerings through frequent visits and familiarisation tours. Communication materials are designed and generated in order to provide a continuous flow of information to all our business partners.

Trip Advisor Ratings

Cinnamon Bey

Cinnamon Lodge

Chaaya Blu No. 1 Hotel in the area Cinnamon Wild

Chaaya Lagoon Hakuraa Huraa

Based on customer reviews Miss France Contest 2013 - Cinnamon Bey Beruwala 110 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

PRODUCT AND SERVICE RESPONSIBILITY At John Keells Hotels, ensuring that all our properties are safe for our guests is of paramount importance. A comprehensive health and safety policy which is applied across all our hotels and resorts, details the health and safety standards applicable to every aspect of our products, services and processes including rooms, food handling No. of and storage, cleaning and temperature control among others. Injuries 80 70 Aspect Salient points of health and safety standard 60 Guest safety All guest areas to be free of hazards and potential risks of damage or injury, hazard 50 controls in risky areas, electrical equipment guidelines, notifications to guests regarding 40 hazards that cannot be eliminated. 30 Emergency response Responses in place for natural disasters, emergency planning and preparedness outlined 20 in the Business Continuity Plan 10 First Aid All hotels will have a first response team for emergencies, including fully qualified first- 0 aid team. 2012 2013 2014 Food safety All hotels should comply with Hazard Analysis & Critical Control Points (HACCP) standards, all hotels should build awareness on dealing with food poisoning and allergies STAFF- INJURY RATES Temperature control Refrigerator temperatures must be monitored and controlled periodically, changes to temperature to be made only with consultation. Food storage All food is protected from contamination and covered appropriately. Cleaning Food contact surfaces to be kept clean at all times. Training on health and A minimum number of employees should be trained on first-aid including 70% safety Cardiopulmonary resuscitation (CPR), employees should be trained periodically and Employee Retention rates obtain the relevant certification.

Quarterly audits are carried out at each hotel in order to evaluate the compliance to health and safety standards. Additionally, a surveillance audit is conducted annually. All audits are carried out by independent parties. Within each resort, there exists a clear hierarchy and division of responsibilities with regards to health and safety aspects. 66,392 Training hours during the year Our resorts have also obtained the health and safety certiﬁcations of ISO 18001 and ISO 22000. We are proud to note that there were no health and safety incidents with regards to our guests during the year under review. ALL CATEGORIES OF STAFF OUR TEAM UNDERWENT TRAINING ON We believe that our ability to create truly unique guest experiences is inextricably linked to the strength and MULTIPLE ASPECTS DURING capabilities of our team. Each and every member of our formidable team strives towards service excellence, a THE YEAR philosophy that is deeply rooted at the core of our organisation. As the country’s largest leisure sector employer, our team has enabled us to become a trendsetter in the industry, setting new standards in every aspect of hospitality. 111 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

OUR APPROACH TO BUILDING A HIGH PERFORMANCE TEAM Our people philosophy is based on five pledges which have been instilled into our values and is resonant in all our activities. We strive to get things right the first time, care for our people and community, stand out wherever we We are an equal are, empower subordinates and colleagues and think green. Additionally the Organisation’s HR policies emphasise opportunity the importance of talent management, learning and development, work-life balance, health and safety and 2,799 employer, and do not performance management, among others. The comprehensive HR policies, together with the commitment towards High Performing Team discriminate based the five pledges have resulted in the development of a highly skilled team, who are dynamic, caring and motivated. Members on age, gender or Our people and their commitment to excellence will be a driving force on our journey towards building a global ethnicity. leisure brand.

Community representation We have contributed towards generating Talent Performance Compensation Training and 50% employment in the Attraction Management and Benefits Development employees hired from local areas in which our communities resorts are located. 87% Employee Satisfaction rate TALENT ATTRACTION Our talent pool Our talent pool comprises of 2,799 members, with nearly 50% hired from the localities in which the hotels operate. In line with our efforts to provide employment opportunities for the country’s youth, we attempt as far as possible to absorb individuals from the communities in which our hotels are located. Once recruited, these individuals LKR 41 Mn undergo extensive training thereby, equipping them with the knowledge and skills required to succeed. During the Total investment on Training and Development year 369 new employees were added to our team, consisting of 274 in Sri Lanka and the remainder in the Maldives. Our executive employee cadre consists of 386 members, out of which 72% is certified or professionally qualified. Our training programmes covered Our retention rates amounted to 70% during the year; relatively unchanged from the previous year. approximately 80% of our people during the year 112 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

EQUAL OPPORTUNITY EMPLOYER We are an equal opportunity employer, and do not practise gender, age, race or religion based discrimination. Our HR policies emphasise the recruitment, development and retention of individuals who best possess the required competencies and attitude to succeed in his/her role. The John Keells Group does not engage children in employment and does not encourage any form of forced or compulsory labour.

Males 92% GENDER-WISE Females 8%

Permanent 34% EMPLOYMENT TYPE Contract 66%

Below 30 40% John Keells Hotels won John Keells Group Inter Company Rugby 7’s 30 to 50 53% AGE-WISE Over 50 7% 113 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

PERFORMANCE MANAGEMENT COMPENSATION AND BENEFITS John Keells Hotels embody a performance driven We offer an attractive remuneration package to all our culture, with 90% of all employees covered by the employees, consisting of financial and non-financial performance appraisal system. Each employee works incentives. Gender based compensation is not practised towards a set of clearly defined objectives which are in companies within the John Keells Group and set at the outset and are categorised based on the compensation is based on qualifications, experience and Balanced Score Card and HoshinKanri Methodology. performance level. Commensurate with the position, Non-compliance to these objectives highlight areas for benefits include medical insurance, vehicle loans, STAFF TURNOVER Males 93% improvement whilst revealing training needs. accommodation and meals among others. GENDER-WISE Females 7% During the year, John Keells Hotels introduced a new TRAINING AND DEVELOPMENT competency framework. This Competency based John Keells Hotels offer an array of learning opportunities framework is developed around a set of key competencies to its workforce, ranging from technical on-the-job which are crucial in achieving service excellence training to personality and leadership development. In and taking the Cinnamon brand to new heights. The addition to nurturing the requisite skills for achieving framework is built on a promise of “We are Cinnamon service excellence in line with the Cinnamon brand’s professionals, delivering success”. The competencies offering, the training and development programmes broadly addresses, adapting to change, innovation and are also focused towards furthering the personal and creativity and creating experience. This framework professional development of our people. Below 30 67% which takes into consideration industry specific factors STAFF TURNOVER 30 to 50 32% is the first of its kind to be developed in the Sri Lankan During the year, our investment in training was AGE-WISE Over 50 1% hospitality industry. LKR 41 Mn. The increase reflects our commitment in bridging the current competency gaps, in reaching COMPETENCY FRAMEWORK - our objective of developing a global brand. During the No. of We are Cinnamon, Professionals delivering Success year, a detailed evaluation of the training needs was Employees 70 carried out for this purpose. Resource persons were Key competencies: drawn from multiple sources, including an expatriate 60 hospitality based consultant, external experts from the 1. Cinnamon Citizen 50 industry and personnel from within the Organisation. 2. Adaptable and Change Agent 40 3. Inspiring and Developing Teams 30 Staff category Training Hours 4. Building and Maintaining Relationships 20 2012/2013 2013/2014 5. Innovation and Creativity 10 6. Service and Customer Focus Assistant Vice President 128 257 0 Sri lanka Maldives 7. Technical Competence Assistant Manager/ Manager 4,030 2,893 8. Creating Experiences Executive 6,791 10,982 STAFF TURNOVER 9. Results Orientation Associate 235,375 52,260 REGIONAL BREAKDOWN 114 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

Training tool/ Number of No. of Details PRODUCTIVITY INITIATIVE program programs participants We are currently in the process of identifying and implementing areas for productivity improvement Management Trainee 01 10 Graduates from the Sri Lanka Institute of in all aspects of our product and service delivery, Programme (MT) Tourism and Hotel Management are picked for covering all our resorts. Phase 1 of this initiative was our MT programme. It is designed to prepare the concluded during the year, with a comprehensive fresh graduate to anticipate and resolve complex time and motion analysis of all key processes in the problems, manage multifaceted development key departments of Engineering, Food and Beverage, assignments, build social networks and overcome Kitchen, Front Office and Housekeeping. Critical the continuous challenges faced when being a evaluation of the existing productivity levels in these part of the hospitality industry. aspects has revealed the opportunities for substantial Development Centres 01 05 This is targeted towards the Executive level improvements in efficiency. Productivity benchmarks employees of the John Keells Group. The have been set based on local and global best practices Development Centres are designed with the with recommendations for process improvements to be aim of developing our potential employees to rolled out across all our resorts gradually. This initiative achieve their career goals and arm them with is anticipated to result in a significant improvement the necessary skills which are required to move in employee and process productivity levels over the into the next level. Each employee receives medium term. feedback from an assigned assessor along with the respective supervisor, subsequent to which a SUCCESSION PLANNING Personal Development Plan (PDP) is designed for Our wide range of staff training and development each employee. initiatives ensure that all employees have opportunity Grooming and 70 1,628 This programme focused on the key areas of for consistent professional and personal growth. Our Professional customer care, grooming and professional talent management and succession planning policy Development appearance, for front line staff at the Maldivian highlights the importance of providing opportunities resorts. for career advancement and creating a strong pipeline of staff. Currently, we are working towards our goal of Competency based 90 1,849 This training focuses on exceptional guest filling at least 20% of vacancies arising from our hotels, Training service, supervisory development, coaching and through internal staff members. mentoring and leading change. Training on Balanced 08 198 The training was conducted at each hotel for the EMPLOYEE HEALTH AND SAFETY Scorecard senior management on developing a strategy map We believe a safe and healthy work environment is and a balance scorecard in respect of each hotel conducive to optimum performance and employee based on the top 6 strategies of the Leisure Group. satisfaction levels. Health and safety standards are thus given high priority at all our resorts. John Keells Hotels’ English Class for 730 21,900 These programmes are conducted at all resorts, health and safety policy specifies the conformance of Associates and provides the opportunity to all our associates all work-places and operational equipment to building, to enhance their English language skills. health and safety regulations. These are periodically 115 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

checked and maintained. Our efforts towards creating LISTENING TO OUR PEOPLE GREAT PLACE TO WORK SURVEY (GPTW) a safe work environment are reflected in ten of our We have identified the importance of maintaining a This survey is conducted once in three years and is resorts obtaining the OHSAS 18001 and ISO 22,000 continuous dialogue with our team; for this purpose a comprehensive and structured intervention by an certifications. we maintain an open door policy and have introduced external party to understand employee concerns and a variety of tools to facilitate employee engagement. share thoughts. The above surveys are used as a People These tools have enabled us to clearly understand the Index tool which is shared with all staff, consolidated 2011/12 2012/13 2013/14 needs of our people whilst fostering a culture in which at the leisure group level and ultimately at John Total number of 842,055 1,038,425 1,015,065 thoughts and concerns are easily shared. Keells Group level to evaluate the level of employee person days in the engagement and satisfaction within the organisation. period VOICE OF EMPLOYEE We achieved a satisfaction rate of 67% in the GPTW Occupational Injuries Rate The Company annually conducts the Voice of Employee survey conducted during the review period. survey, which uses an e-based interface as a ‘pulse check’ No. of Staff affected by 71 59 57 for a representative sample of employees at Executive INDUSTRIAL RELATIONS Occupational Injuries level and above. The survey covers a comprehensive All resorts within John Keells Hotels are a member Lost Day Rate range of topics related to employee satisfaction and of the Employers’ Federation of Ceylon (EFC) and are Total Person Days Lost 748 385 486 engagement and is directly used to develop action plans governed by the labour laws of the country and adhere (TPDL) to address any areas of concern. In 2013/14 financial to the guidance of the Federation. Currently, Trade year, the sector scored a satisfaction rate of 87%. Unions operate in 7 Sri Lankan resorts and actively TPDL as a % of total 0.09% 0.04% 0.05% person days in the period Absentee Rate Findings are presented to all employees in the Survey is conducted using an e-based interface Total Absentee Days 12,149 4,923 5,196 respective business units (TAD) TAD as a % of total 1.44% 0.47% 0.51% person days in the period Action plans are prepared in collaboration with Focus group discussions to identify causes for the business unit head to address the areas of dissatisfaction concern

Action plans and resultant initiatives are continuously monitored and reviewed 116 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

engage with the management in the collective bargaining process; 5 resorts are under the Ceylon Food Beverages and Tobacco Industries Employee Union whilst 2 are under the Inter Company Employees Union. The relationship is governed by a memorandum of understanding (MOU) that has been entered into with each resort.

In addition to the above, the open door policy allows any employee to directly approach the Chairman and GM (at hotel level). A Suggestion Box and Bright Ideas tool is also available in order to encourage effective staff engagement

NURTURING CHAMPIONS

CULINARY COMPETITIONS - 2013 WOW (WORLD OF WINE) 2013 - SOMMELIER DEVELOPMENT Sri Lankan Resorts: Won 172 highly coveted awards at the Hotel Asia Exhibition and International Culinary Art Competition- PROGRAM prestigious Culinary Art Chef’s competition organised by Team Chaaya Island Dhonveli the Chefs’ Guild of Sri Lanka. This year we recorded our Objective: Developing a skilled set of best ever performance in this competition with resorts Wine Sommeliers across all resorts of such as Chaaya Tranz and Cinnamon Lodge winning 8 Sri Lanka Gold medals. Participants: 32 Maldivian Resorts: Won 13 Bronze & 08 Merit awards at the Hotel Asia Exhibition and International Culinary Art Format: 5 day interactive residential Competition. training programs and subsequent testing with global standards set by the Wine and Spirit Education Trust of London 22ND NATIONAL BARTENDERS COMPETITION World of Wine 2013 - Sommelier Development Program Objective: Identifying talented bartenders from different Recognition: The winner was given regions the opportunity to work in a South African vineyard for a period of 7 to Participants: Approximately 240 10 days.

Recognition: Our teams clinched 5 ﬁrst places, 3 ﬁrst runners up and 2 second runners up positions

21st National Bartenders Competition 117 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

WORK-LIFE BALANCE A healthy work-life balance is an essential element Education Community Health and Welfare in building employee loyalty, boosting morale and Volunteer Hours - 242 Volunteer Hours - 3,745 improving productivity in the workplace. In line with our HR vision of being ‘more than just a workplace’ we truly believe in the importance of having fun at work and through an action packed event calendar, our employees are given the chance to participate in several programmes at resort, sector and group level. OUR CSR INITIATIVES During 2013/2014, our staff had the opportunity of engaging in sports days, family get-togethers, quarterly staff get-togethers, sports events including inter-company and mercantile swimming meets, inter-company rugby 7s and mercantile cricket tournaments among others. Our team also play a part in our CSR initiatives and celebration of national Natural Resources Culture and Religion events throughout the year. These events ensure that Volunteer Hours - 1,214 Volunteer Hours - 1,493 our employees have abundant opportunities to build comradeship among each other, thereby contributing directly to the cohesiveness of our team. EDUCATION Many of our resorts conducted several programmes during the year to support the educational needs of the COMMUNITIES- I WILL CARE school children and youth in the localities they operate. Bentota Beach Hotel conducted an Education and As a responsible leisure sector operator, we are strong Skill Development programme, IT training programme as well as a Grade 5 Scholarship examination seminar advocates of the need to give back to the communities together with the distribution of study guides and stationery. Other initiatives included sponsorships for school that we operate in, as reflected in our pledge “I Will development, ﬁrst aid training programmes for school children and donations for prizes. Total volunteer hours of Care”. In all the localities we operate, we maintain an 242 were dedicated for education related CSR activities. open dialogue with the communities and engage with them to effectively respond to their needs in a focused CULTURE AND RELIGION way. Our CSR initiatives are primarily targeted towards Our resorts donated generously towards religious institutions in their localities during the year. Chaaya Village marginalised communities, school children, the elderly provided sponsorship for paintings at the Habarana Buddhist temple and the Habarana Church, as well as and military personnel covering the community needs contributed towards the alms-giving at the temple for Vesak. Our hotels also sponsored the development and of education, health and welfare, culture and religion maintenance activities and donated food and dry rations as alms-giving to several temples, including the and preservation of natural resources. All our resorts Pitaramba Temple, Horawala Temple, (Bentota Beach Hotel) Buddhist monastery in Ritigala (Cinnamon Lodge) and carry out multiple CSR activities and we also attempt to Temple in Beruwela (Cinnamon Bey). In addition several resorts also made donations towards socio-cultural events engage our guests in our initiatives. celebrated in the respective communities. Total volunteer hours dedicated for religion and culture related activities amounted to around 1,490 hours during the year. 118 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

HEALTH AND WELFARE Cinnamon Bey organised a Beach Cleaning Programme During the year, multiple HIV-AIDS Awareness in areas adjacent to the hotel. Meanwhile, Chaaya campaigns were carried out by several of our resorts Lagoon Hakuraa organised special campaigns for tree including Cinnamon Bey, Bentota Beach Hotel, Chaaya planting and reef cleaning. Blu , Chaaya Island Dhonveli, Chaaya Reef Ellaidhoo and Chaaya Lagoon Hakuraa. These programs Furthermore, all our resorts in Maldives joined hands were targeted towards a diverse audience including with the Ministry of Environment and Energy to schools, military personnel, university students and organise a national competition of Arts, Essay and communities in the localities we operate in such Poetry for schools and other educational institutions as beach operators, three wheel and taxi drivers, across Maldives. The competitions were based on among others. Furthermore, initiatives were taken environment related themes and drew over 200 entries Education and Skill Development programme conducted for School towards enhancing the living stand of HIV victims, in across four age groups. Children at Bentota Beach Hotel partnership with the IDH Hospital, Positive Women’s Network and Lanka Plus. In other health and welfare World Tourism Day Celebrations in the Maldivian related initiatives, our resorts conducted several Resorts blood donation programmes, mosquito eradication Our Maldivian Resorts carried out a series of events programmes, provided donations to elders, children’s themed “Tourism and Water” on the 27th of September homes, people with disabilities and maternity and child 2013, in view of the World Tourism Day, of which clinics among others. Total volunteer hours dedicated Maldives was the host nation for the year. for health and welfare related activities amounted to 3,745 hours during the year. Special VCDs were created for each resort, depicting water related activities and marine line in areas NATURAL RESOURCES adjacent to each respective resort. Furthermore, Beach cleaning programmes were organised by several information leaflets detailing Environmental of our beach resorts including Bentota Beach Hotel, protection, sustainability, biodiversity and climate Sea Turtle Conservation Project Chaaya Blu, Cinnamon Bey, Chaaya Island Dhonveli, change related to the Tourism industry were created Chaaya Reef Ellaidhoo and Chaaya Lagoon Hakuraa. and distributed. Guests were also engaged in these Bentota Beach Hotel in partnership with the Sea Turtle initiatives, with all in-house guests being invited to Conservation and Research Centre in Kosgoda, released a seminar on the Marine life and the Formation of 1,000 new born turtles to the sea. Total volunteer hours Maldives for environmental related CSR activities were 1,214 hours.

World Environment Day Celebrations All our resorts celebrated World Environment Day by conducting numerous environmentally friendly activities. For instance, Bentota Beach Hotel conducted an awareness programme on food wastage whilst HIV AIDS Awareness Campaign in Maldives 119 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

THE ENVIRONMENT- OUR GREEN PHILOSOPHY A green pioneer in Sri Lanka’s leisure industry, we take great pride in being known as one of the most environmentally friendly businesses in the region. ‘I will be Green’ is one of the ﬁve pledges of our employees who are committed to respecting, preserving and protecting the natural world and valuable resources, reducing waste and energy consumption, and re-using and re-cycling materials wherever possible. All our hotels and resorts have thus made a concerted effort to minimise our environmental footprint and the results have been outstanding. During 2013/14, all our footprint indicators per guest night, energy, water, waste and carbon footprint were signiﬁcantly reduced.

MJ Liters 300 1000 221.15 Per 250 guest MJ 25% 800 Reduction in water usage 200 ofﬁce premises 600 150 400 100

50 200

0 0 2010/11 2011/12 2012/13 2013/14 2.1% 2010/11 2011/12 generation TOTAL ENERGY CONSUMPTION PER Waste TOTAL WATER reduced per Guest night GUEST NIGHT CONSUMPTION PER GUEST NIGHT

ENERGY CONSUMPTION PER WATER CONSUMPTION GUEST NIGHT DECLINED BY PER GUEST NIGHT 13.6% WITH ALMOST 9.7% REDUCED BY 10.5% ALL RESORTS RECORDING AN Our Carbon Footprint DURING THE YEAR IMPROVEMENT (per guest night) 120 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

THE APPROACH TO OUR GREEN PHILOSOPHY OUR GREEN PHILOSOPHY- THE FOUR PILLARS Our Environmental policy is formulated on designing and operating sustainable processes, using latest technology Carbon Footprint and measuring and monitoring sustainability indicators on a regular basis. John Keells Hotels is committed to be Carbon emissions are measured using the Greenhouse in line with the highest available environmental regulations, laws and codes of practices as minimum standards Gas Protocol as governed by the World Resource Institute of environmental performance. It will strive to proactively exceed required levels of compliance wherever feasible (WRI) and the World Business Council for Sustainable even if not yet identiﬁed by law. Development. The emission factors have been derived from IPCC Guidelines for National Greenhouse Gas Inventories. The boundary for the emission WATER AND ENERGY CONSERVATION WASTE MANAGEMENT measurement has been governed by Scope 1 and Scope 2. We will use environmentally safe and We will strive to minimise waste by sustainable energy sources to meet our evaluating operations and ensuring efﬁciency Scope 1 - GHG emissions occurring directly from existing operational needs. We will invest by adapting environmental friendly waste sources that are owned or controlled by the in advanced energy and water management disposal practices and actively promoting the Organisation systems to improve the conservation of ‘reduce, reuse & recycle’ principle among all Scope 2 - Direct emissions generated in the production energy and natural resources. its stakeholders. of electricity consumed

Our results The Earth Hour celebrations during the year, resulted in 1,289 kg of CO2 saved across all our resorts. Overall,during the year, the carbon footprint per guest AIR EMISSIONS NATURAL HABITAT night declined by 9.7% , the result of a collective effort We are committed to reduce emissions from We will ensure all customers as well as by the Sri Lankan and Maldivian Resorts, both of which its processes. We will set environmental our staff are well-aware of the sensitive recorded an improvement. targets and a goal for air pollution prevention environmental elements around / inside the through continuous monitoring. property. We will support and initiate projects in line with conservation of biodiversity. Kg 30.00

25.00

20.00

15.00

The environmental policy will be made available to all hotel staff, guests, business partners and 10.00 public through the hotel’s website, publications and in-house notice boards. We will conduct an 5.00 annual evaluation of our performance in implementing and reviewing environmental objectives and targets, and regular training programmes will be conducted to encourage our employees in 0.00 2010/11 2011/12 2012/13 2013/14 establishing sound environmental practices.

KGS OF CO2 PER GUEST NIGHT JOHN KEELLS HOTELS 121 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Consumption in Metric tonnes of CO2 Initiatives Units Aggregate average 2010/2011 2011/2012 2012/2013 2013/2014 savings Diesel 6,262 6,562 6,527 6,537 Lighting kWh 68,293 Petrol 562 900 864 859 Air Conditioning kWh 250,297 LPG 471 602 669 787 Heating MJ 68,193 Electricity 6,228 7,619 9,440 11,619 Equipment scheduling kWh 218,920

CO2 Footprint- Scope 1 7,295 8,064 8,060 8,183 Energy results: Resultant from these initiatives, the energy usage per guest night declined 13.6% during CO2 Footprint- Scope 2 6,228 7,619 9,440 11,619 2013/2014. The last few years have seen a persistent Total CO2 Footprint 13,523 15,683 17,500 19,802 reduction in this figure, as our efforts to minimise our energy footprint has borne fruit. Despite increased ENERGY occupancy levels during the year, the diesel and petrol Our key sources of energy are electricity, diesel, petrol and liquid petroleum gas; energy is also one of our top usage remained relatively unchanged. Although expenses, as it is an essential element of all major operations. In a concerted effort to reduce our energy footprint, electricity usage increased during the year, it was several of our resorts implemented a range of energy-reducing initiatives. less than proportionate to the increased occupancy rates in the same period, contributed primarily by our Energy saving lighting: All our resorts use energy efficient LED lighting systems to varying degrees, and halogen Maldivian resorts, which played a crucial role in the and incandescent bulbs are being replaced by LED and CFL bulbs. Furthermore, motion sensors have been installed large scale reduction of energy consumption. in certain common areas and garden pathways in order to reduce energy wastage. All employees are made aware of the light savings initiatives and training is provided in order to engage staff in reducing the consumption of energy on lighting. MJ Energy saving air conditioning: At the point of replacement, split type Air Conditioners are being substituted 300.00 with energy saving inverter type machines across all our resorts. In certain hotels, the entirety of guest rooms is 250.00 cooled using inverter type air conditioners. Meanwhile, when modifying centrally driven air conditioning systems, ducting is made more efficient and conventional chillers are replaced with part load chillers; the new chillers use 200.00 variable flow drivers and reduce energy consumption in the chiller’s heat transfer process. 150.00

Energy efficient heating: Initiatives taken by the resorts to reduce energy usage for heating systems included 100.00 installation of solar heaters to heat water for guests. Meanwhile, the heat recovery system of one resort was 50.00 modified in order to increase efficiencies. 0.00 2010/11 2011/12 2012/13 2013/14 Equipment scheduling: This involves the monitoring and control of heavy equipment to reduce the consumption of power and energy. ENERGY PER GUEST NIGHT JOHN KEELLS HOTELS 122 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

Consumption in Giga Joules EARTH HOUR 2014 2011/2012 2012/2013 2013/2014 All our resorts celebrated Earth Hour on the 29th of March 2014, engaging in a range of energy and power Diesel 88,558 88,090 88,219 saving initiatives. Measures were taken to switch off selected lights, elevators, air conditioners, heat pumps, heavy duty machinery and other electrical appliances which consume signiﬁcant amounts of electricity. Petrol 12,992 12,473 12,396 LPG 9,539 10,603 12,472 Meanwhile, guests were given the opportunity of dining in candle light and bonﬁres and experiencing Electricity 40,240 49,861 61,370 entertainment programmes. 000 As a result of these initiatives, 1,254 kWh of electricity 1,289 kgs of CO2 was saved across all our resorts. Direct energy 111,089 111,166 113,087 Indirect energy 40,240 49,861 61,370 Total energy 151,329 161,027 174,457

WATER FOOTPRINT Waste water management has been identiﬁed as a key priority in our environmental policy and we encourage all our team members to engage in water management. Our resorts have implemented innovative solutions for water reuse as well as other water efﬁcient technologies. Meanwhile tools to measure water usage and progress in water savings are monitored on a daily basis. Our discharge water quality (BOD, COD, TSS, pH and oil and grease levels) complies with Government standards.

Food Preparation Guest 13% Food Preparation Staff 4% Guest Usage 34% Staff Usage 22% WATER FOOTPRINT Laundry 9% (USAGE) - JOHN Gardening 5% KEELLS HOTELS Common 13% 123 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Water saving initiatives Resorts implemented

To Municipality Sewerage, Installation of a Reverse Osmosis (RO) plant Cinnamon Wild Yala Drainage Lines 24% To ETPs and Recycled Improvements in rain water harvesting methods Chaaya Island Dhonveli, Completely 29% z Rainwater harvesting system is in place to collect rainwater in the sump to Cinnamon Bey Beruwala To Rivers, Lakes after be reused for gardening. being treated by ETP/STP 38% Direct to Rivers, Lakes, z Total rainwater harvested increased by nearly 58% during the year. TOTAL WATER DISCHARGE Wetlands, Marshes 3% Common initiative across all resorts BY QUALITY AND To Ground Through DESTINATION Soakage Pits etc 6% Water Recycling z Recycled water is used for organic farming, gardening and in toilet cistern tanks z Total water recycled across all our resorts increased by 28% during the year. Reducing water usage z Water usage is reduced through the use of dual and motion censored flush and low flow faucets Surface Water - Wetlands, In addition to the above, we have installed sub-meter systems to continuously monitor the water usage. We also Rivers, Lakes, Oceans 20% provide awareness-raising training programmes to our staff and other stakeholder on water conservation. Ground Water 54% TOTAL VOLUME Rainwater Harvested 1% OF WATER Municipality, Authority Cubic Metres Our Results Overall, water consumption per guest night WITHDRAWN FROM Water Sources 25% Water discharge by destination 2012/13 2013/14 reduced signiﬁcantly by 10.5% during the year. To Municipality sewerage, 147,024 144,122 This improvement was achieved despite increased liters drainage lines consumption in the Maldivian resorts, driven by a 1,200.0 few major constructions and commissioning of an To ETPs and recycled completely 138,516 177,461 effluent treatment plant. Meanwhile, across all our Sri 1,000.0 To rivers, lakes after being 186,173 228,319 Lankan resorts, the amount of water recycled, amount 800.0 treated by ETP/STP of recycled water used and the amount of harvested 600.0 Direct to rivers, lakes, wetlands, 20,090 15,076 rainwater showed an increase as measures were taken marshes to expand these areas. 400.0

To ground through soakage pits 53,894 37,661 200.0 etc 0.0 Total water discharge 545,697 602,639 2011/12 2012/13 2013/14

WATER LITERS PER GUEST NIGHT JOHN KEELLS HOTELS 124 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

WATER DESALINATION PLANT AT CINNAMON WILD Following the success of the newly refurbished Cinnamon Wild and resultant increase in occupancy levels, we experienced a corresponding increase in demand for water. As pipe borne water is unavailable in the area, the hotel previously procured its requirements form the National Water Supply and Drainage Board using its own bowsers. However, this exposed to hotel to several risks; z Lack of assurance on the consistency in the quality of water, particularly during drought seasons. z Inability to obtain water during electricity cuts, thereby leading to water shortages z Need to hire external bowsers at an additional cost during maintenance of the resort-owned bowsers z High maintenance cost, fuel usage and risks associated with the health and safety of the bowser drivers, especially during nocturnal movements.

In order to effectively address these risks and ensure a steady supply of high quality water, a water purification plant together with a Reverse Osmosis Unit was installed in the resort. A hydro geological and Geophysical Survey was conducted on February 2013, confirmed that available saline water was sufficient to match the increased demand for water. The Water thus produced also meets/exceeds SLSI standards. 125 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

WASTE MANAGEMENT Metric Tonnes All key processes in our hotels such as preparation of food, cleaning and guest activities result in the 2012/2013 2013/2014 generation of solid waste. We proactively seek Re-use 701,529 1,020,758 innovative ways to reduce, enhance re-use and recycle Recycle 292,041 244,219 waste with the ultimate objective of generating energy using waste. With our state of the art waste Composting 84,823 29,904 management system, a portion of the wet waste is used Recovery 91,631 174,773 to generate energy whilst the remainder is sent to the Incineration 16,335 23,541 local piggeries. In our Sri Lanka resorts, recyclable material obtained from dry waste is sent to recyclers Deep well 522,869 586,741 certified by the Central Environmental Authority and injection garden waste is used to produce eco-friendly fertilisers. Landfill 875,596 1,109,097 Hazardous waste is also segregated and disposed On-site storage 14,027 275 in assistance with GeoCycle, a party certified by the Central Environmental Authority. Total solid waste 2,598,851 3,189,308 disposal Meanwhile, all our Maldivian resorts in an innovative Discarded timber pieces move, now use discarded timber to produce a variety of items for guests including guest room trays, wine display racks, lamp shades, brochure stands and ash trays among others. Chaaya Island Dhonveli also uses bio-degradable and discarded materials such as dry coconuts and damaged chipboards in order to produce eco-friendly table décor for the Christmas and New Year season. In Hakuraa Huraa waste paper is being used as an input to produce building blocks.

Our results: Supported by all the above initiatives, waste generated per guest night reduced by 2.1% during the year with further improvements anticipated in the next ﬁnancial year. Meanwhile, total non-hazardous waste disposed increased by around 23% during the year, resultant from recycling, re-use, composting and recovery among others.

Lampshade made using discarded timber Towel tray made using discarded timber pieces 126 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

BIO DIVERSITY

THE LEOPARD PROJECT Cinnamon Wild together with Cinnamon Nature Trails continued to push forward Project Leopard, an effort to uplift livelihoods of the cattle farming community living by the Yala National park. This project aims to achieve a double success by directly supporting the cattle farmers thus collaboratively, conserving the Leopards that live outside of the parks boundary.

Now in its 3rd year Leopard Project has donated forty steel pens among cattle farmers and now plans to increase this number up-to sixty pens by the end of next year.

The project has drawn much support, locally and internationally with several fund raising efforts and donations being organised. Many of Cinnamon Nature Trails safari partners have supported this venture while the University of Clark – USA has granted the Davis Project for Peace and additional funding for Project Leopard. Cinnamon Wild has also committed US 50 cents for every room night towards leopard conservation.

Further, The Leopard Research Initiative - (LRI), launched by Cinnamon Nature Trails together with the Environment Foundation Limited completed one year of commendable progress. The research team led by Rukshan Jayawardena and Vimukthi Weeratunga is deploying 24 weather proof cameras inside the Yala National Park and the footage captured will be analysed for studying leopard behaviour. This event when concluded by October 2014, will host a public workshop at which all interested parties can participate in sharing the ﬁndings of this ground breaking initiative. 127 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

BEACH ENHANCEMENT REEF RESTORATION PROJECT AT HAKURAA Chaaya Island Dhonveli, together with its Dive Centre Severe sea erosion had resulted (Meridis) in a novel approach to protect the biodiversity in significant deterioration of in the area undertook a Reef Restoration Project. As the the beach area adjacent to the first phase, a coral nursery was created and the first iron Chaaya Lagoon Hakuraa Resort, skeleton made by the resort maintenance department particularly in the Restaurant was put into the waters. Three such skeletons are to front area. Previously, in order to be positioned similarly over the short term and coral address this problem, the existing obtained from the nursery is to be planted in the sea wall was repaired repeatedly at skeletons. a relatively large cost to the hotel.

However, during this year, the Resort’s General Manager himself proposed an innovative solution to the problem, which included the construction of temporary breakwaters at critical locations. Wave patterns were studies over a period of time in order to identify the critical locations.

Furthermore, innovative sea walls were also constructed during the year. 128 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

PROJECT WILD BLUE: SAFEGUARDING OUR BLUE WHALES In a pioneering venture, John Keells Hotels and Cinnamon Nature Trails in partnership with the Whale and Dolphin Conservation Society of UK launched Project Wild Blue, an initiative aimed at studying and preserving the Blue Whale population of Sri Lanka. The innovative project encourages the general public to share their images and information on a public platform, using social media tools such as Flickr and on-line catalogues. Photo identiﬁcation is used to identify whales based on unique markings and characteristics, allowing the individual whales to be catalogued effectively. Initiated in the North Eastern coast, the project was extended to other coastal areas in the Southern region in 2013/2014.

The project has already made astounding discoveries with over 50 unique blue whales being catalogued. In time to come, it is anticipated that the project could reveal much about the lifestyles of the whales, such as population numbers, diet and travel patterns. By engaging the local communities and public in this venture, we seek to instil a sense of stewardship in the minds of the public towards the whales and also bring the whale watching community together for further discoveries and knowledge sharing.

Project Wild Blue also supports the livelihoods of the local communities as boats are supplied by the community with experienced boatmen in charge of these. Financial support has also been provided to these ﬁshermen to commence their business as ofﬁcial boat suppliers for the Project.

This project was initiated in 2010 in Trincomalee and has now been implemented in the Southern Coast. The focus in 2013/14 shifted back to Trincomalee where this project will be spearheaded and monitored by Cinnamon Nature Trails. Meanwhile, guests and marine naturalists are also engaged in this project through the submission of whale photographs. 129 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Hotel Geographical Size of site Name of Protected Position relative Size of Biodiversity Protected through Has the Subsurface/ Location in Acres Area in the to Protected Operational value of (Legislation/IUCN/ EPL been Underground Vicinity Area (Within/ site in square Protected UNESCO etc.) obtained land utilised Adjacent and km site square km Distance) Chaaya Blu Trincomalee 13.24 Pigeon Island 16km adjacent 0.05 Maritime Flora and Fauna Protection Yes - Marine National Ordinance 1937 Park IUCN Category II - National Park Cinnamon Kandy 5.80 Udawattekele 6km adjacent 0.023 Wildlife & Flora and Fauna Protection Yes - Citadel Sanctuary Forestry Ordinance 1937 IUCN Category IV - Habitat/ Species Management Area Cinnamon Yala 11.25 Yala National Park 2km adjacent 0.044 Wildlife & Flora and Fauna Protection Yes - Wild Bundala National 32km adjacent Forestry Ordinance 1937 Park IUCN Category II - National Park Chaaya Hikkaduwa 4.65 Hikkaduwa Marine 0.5km adjacent 0.018 Maritime Flora and Fauna Protection Yes - Tranz National Park Ordinance 1937 IUCN Category II - National Park Cinnamon Habarana 25.48 Minneriya National 15km adjacent to 0.1 Wildlife & Flora and Fauna Protection Yes - Lodge Park Park entrance Forestry Ordinance 1937 Ritigala Strict IUCN Category II - National Nature Reserve 20km adjacent Park Kaudulla NP 20km adjacent Cinnamon Beruwala 11.39 Hikkaduwa Marine 45km adjacent 0.04 Maritime Flora and Fauna Protection Yes - Bey National Park Ordinance 1937 IUCN Category II - National Park Chaaya Habarana 9.34 Minneriya National 11km adjacent to 0.034 Wildlife & Flora and Fauna Protection Yes - Village Park Park entrance Forestry Ordinance 1937 Ritigala Strict 17km adjacent IUCN Category II - National Nature Reserve Park Kaudulla NP 22km adjacent 130 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

131 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Thuraakunu Van’gaaru Uligamu

Inn aﬁnolhu

Madulu Thiladhunmathee Uthuruburi

Berinmadhoo Gaamathikulhudhoo (Haa AlifuAt o l l )

Matheerah Hathifushi Govvaafushi Umareﬁnolhu Medhafushi Mulhadhoo Maafinolhu Velifinolhu Manafaru (The Beach House at Manafaru Maldives) Kudaﬁnolhu Huvarafushi LOCATIONS IN SRI LANKAUn’gulifinolhu LOCATIONS IN MALDIVES Huvahandhoo Kelaa

Ihavandhoo Gallandhoo

Beenaafushi Kan’daalifinolhu Dhigufaruhuraa Dhapparuhuraa

Dhidhdhoo Vashafaru Naridhoo Filladhoo

Maarandhoo Alidhuffaruﬁnolhu Thakandhoo Gaafushi Alidhoo (Cinnamon Island Alidhoo) Utheemu Muraidhoo Mulidhoo Dhonakulhi Maarandhoofarufinolhu Maafahi Baarah

Faridhoo Hon’daafushi Hon’daidhoo Veligan’du Ruffushi Hanimaadhoo Naivaadhoo Finey Theefaridhoo

Hirimaradhoo Kudafarufasgandu Nellaidhoo Adduatholhu Kanamana Atoll Hirinaidhoo Nolhivaranfaru (Seenu Atoll) Huraa Kurin’bee Kulhudhuffushi Atoll Capital Naagoashi Muiri Nolhivaramu Naivaadhoo Kun’burudhoo Inhabited Island Kudamuraidhoo Vaikaramuraidhoo Uninhabited Island Kulhudhuffushi

Berinmadhoo Future Resort Development Keylakunu Manafaru(Theat Manafaru Beach House Maldives) Existing Resort Develpment Thiladhunmathee Dhekunuburi

Kaalafushi Kumundhoo Vaikaradhoo (Haa DhaaluAt o l l )

Vaikaramuraidhoo Neykurendhoo Maavaidhoo Gaafaru

Kakaa eriyadhoo

Gonaafarufinolhu

Neyo Kan’ditheemu Kudadhoo Goidhoo Noomaraa Miladhunmadulu Uthuruburi (Shaviyani Atoll) Inn afushi Makunudhoo Fenboahuraa Fushifaru Olhuhali

Feydhoo Feevah Kagi Bileiyfahi

Foakaidhoo Nalandhoo Dhipparufushi

Madidhoo

Madikuredhdhoo Gaakoshibi Milandhoo Narurin’budhoo Helen’geli (Helengeli Island Resort) Narudhoo Akirifushi

Maakan’doodhoo Migoodhoo Maroshi Naainfarufinolhu Farukolhu Medhukun’burudhoo Hirubadhoo Dhonvelihuraa Lhaimagu Bis alhaahuraa

Hurasfaruhuraa Funadhoo

Naalaahuraa Kan’baalifaru Eriyadhoo(Eriyadhoo Island Resort) Thun’bafushi Raggan’duhuraa Firun’baidhoo

Eriadhoo

Van’garu (Maakanaa)

Boduhuraa Ekasdhoo Kudafarufinolhu Mathikomandoo Komandoo Maaun’goodhoo Dhigurah Medhurah Miladhunmadulu Dhekunuburi Mairah Kudalhaimendhoo (MakunudhooMakunudhoo Island) Keekimini (NoonuAtoll) Maifalhuhuraa Bodulhaimendhoo Dholhiyadhoo Dholhiyadhookudarah Eththigili Bolissafaru Bomasdhoo Kalaidhoo Hen’badhoo Alifushi Gallaidhoo (SummerZiyaaraiyfushi Island Village) Burehifasdhoo Kafakomandoo Ken’dhikulhudhoo Sanctuaries / NationalParks / Nature / Kunnamalei Ekulhivaru (One&Only ReethiMedhufinolhu Rah, Maldives) Dhekenanfaru Tholhendhoo Huivani Maalhendhoo

Dheefuram Kudafunafaru (Zitahli Resorts & Spa,Kudafunafaru) Kudafari Landhoo Kuramaadhoo Kuredhivaru Madivaru Farumuli Fushivelavaru Maafunafaru Kan’dinmaahuraa Vaadhoo Kedhivaru Huvan’dhumaavattaru Felivaru Orimasvaru Kudarah Goan’bilivaadhoo Hen’badhoo( T aj Coral Reef Resort) Maavadhdhoo Maafaru Rasgetheemu Hulhudhdhoo Lhohi Orivaru Maavelaavaru Orivarukudarah Dhelibey ruh elhihuraa In’gu raidhoo An’golhitheemu Vavathi Miladhoo Loafaru Kaalhugemendhoo Kan’doogan’du Magoodhoo Meerufenfushi(Meeru Island Resort) Hulhudhuffaaru Minaavaru Asdhoo (Asdhu Sun Island) Veyvah Faarufushi Manadhoo Fasgan’dufaru Holhudhoo Maanenfushi Gaaun’doodhoo Fodhdhipparu Holhumeedhoo Medhafushi(Irufushi Beach & Spa Resort) Hulhudhoo Forest Reserves Fodhdhoo Thoshigan’dukolhu Kandhoomeehunge lhaan’bugali Lun’boakandhoo Dhigurah Fuggiri Maakanaafushi Dhiffushi Than’burudhoo Medhufaru Thoddoo Ifuru Than’burudhuffushi Maakurandhoo Kudafushi Bodufushi Boduhithi (Coco Palm Boduhithi) Un’gulu Randheli Edhdhuffaru mairah

Ban’daidhidhdhoo Vihafarufinolhu Raalhulaakolhu

Uthurumaafaru Un’goofaaru Karinmavaaru Arilundhoo Velidhoo Karinma Maamin’gili Vaffushihuraa Lun’dhufushi Raafushi Kuredhdhoo Dhuvaafaruhuraa Dhonaeri kan’doodhoo Kudahithi (Coco Palm Kudahithi) Goiymaru Bodufen maaen’budhoo Vaffushi Ban’daveri Kudafen maaen’boodhoo Dhuvaafaru

Kan’dholhudhoo Hiboodhoo Boduhaiykodi Madivaafaru Kudalhosgiri Muravandhoo Maakurathu

Dhinnaafushi Giraavaru Mullaafushi Kudakurathu Dhikkuredhdhoo Rasfari Hiraveri Faadhippolhu Goyyafaru Rasmaadhoo Fehigili Angaagiri K( uredhdhuKuredhdhoo Island Resort) Dhehuraa evvihuraa (Lhaviyani Atoll) Lhaan’bugali Goboshi Innamaadhoo Kalhumanjehuraa Mas leggihuraa Medha adihuraa Mahidhoo Thulusdhoo 1. Chundikulam Bird Sanctuary Vandhoo Kanuhuraa(Kanu hura) Nakatchafushi(Huvafenfushi) Bodufarufinolhu Kothaifaru Veligan’du Vilin’gili mathidhahuraa

Kuroshigiri Huravalhi Kudafushi Gasfinolhu (Gasfinolhu Island Resort) Maashigiri Bodufushi Koefaru Kudadhoo Fasmendhoo Dhoragali Hinnavaru Boamandhipparu huraagan'du Filaidhoo Neyo Komandoo(K Re omandoo sort) Maldive Island Fushifaru Maduvvari Thaavathaa Gaaerifaru Lhohifushi (Adaaran Select Hudhuranfushi) Felivaru Dhigali In’guraidhoo Madhiriguraidhoo(Palm Beach Island) Ufulandhoo Kanifinolhu (Club Med Kaniﬁnolhu) Lhohi Meedhoo Fainu Madivaru Kukulhudhoo Vihafarufinolhu Aarah Meedhupparu(A M daaran eedhupparu) Select Furaveri Kinolhas Naifaru Meyyafushi

1 Faadhoohuraagandu Faadhoo Veyvah Dhekunu maafarufinolhu Dhashugirifinolhu Kudahuraa (Four Seasons Resort Maldives at Kuda Huraa) Ethigan’du jehihuraa Selhlhifushi Boduhuraa Vavvaru Hiriyaadhoo Huraa Kudathulhaadhoo Dheburidheythereyvaadhoo Rathuruh-huraa Thulhaagiri(Thulhaagiri Island Resort) Maidhoo Huruvalhi Fenfushi Dhiffushi Girifushi Vilin’gili Dhidhdhoo Vabbinfaru(Banyan Tree Maldives Vabbnifaru) Maamunagaufinolhu Gaagan’dufaruhuraa Meedhaadihuraa Hudhufushi (AngsanaSpa Maldives ResortIhuru Ihuru) & Kanifushi Maamunagau Maafilaafushi Fainu aadhanhuraa Dhigufaruvinagan’du Bathalaa Maakoa Govvaafushi Medhafushi Dhirun’baahuraa Inn ahuraa 1Than’burudhoo Maalhosmadulu Uthuruburi Anhenunfushi Vinaneiyfaruhuraa Veligan’du(Veligandu Island) Hinmafushi Maabinhuraa Maarikilu Lankanfushi (Soneva Gili by Six Senses) 2. Kokilai Bird Sanctuary Kurendhoo Bodugaahuraa (Raa Atoll) Lhohi Dheruhfinolhu Voavah Lhossalafushi Lankanfinolhu (Paradise Island Resort and Spa) Kashidhoo Kudarikilu Varihuraa Kashidhuffarufinolhu Lan’daagira(Four Seasonsavaru Resort Maldives at Landaa Giraavaru) Baros (Baros Holiday Resort) Boifushi Kihavah huravalhi Thulusdhoo irumathee huraagan’du Gemendhoo Maduvvari Olhuvelifushi Keyodhoo Hulhudhoo Kamadhoo Ookolhufinolhu Un’doodhoo Kendhoo Funadhoo Milaidhoo Madhirivaadhoo Bodufinolhu Thilamaafushi (Bandos Island Boduban’dosResort and Spa) Thiladhoo Fonimagoodhoo(Re ethi Beach Resort)

Dhakandhoo Dhoogan’duﬁnolhu Aligau Dhigudhefaru Finolhas Dhandhoo Fares Ahivaffushi Veyofushi (KuramathiKuramathi Tourist Resort) Rasdhoo Kudaban’dos Hirundhoo 1 Furanafushi (Full Moon Beach Resort) Kihaadhoo Velavaru Mudhdhoo Kan’duoiygiri

Kihaadhuffaru (Kihaadhuffaru Resort) Dhonfanu Aidhoo Nibiligaa Hanifaru Mendhoo Hanifaruhuraa

Horubadhoo(Royal Island Resort and Spa) Dharavandhoo Farukolhufushi (Club Faru, Farukolhufushi)Vabboahuraa (KurumbaVihamanaafushi Maldives) Hibalhidhoo 3. Naval Headworks Sanctuary Vakkaru Aarah Maalhos Nelivarufinolhu Kunfunadhoo(S oneva Fushi by Six Senses) Gangehi(Gangehi Island Resort) Eydhafushi Ukulhas Fushi Maaddoo Feydhoofinolhu Muthaafushi Velidhoo(Velidhoo Island Resort) (GiraavaruGiraavaru Tourist Resort) Hulhudhoo Gaavilin’gili En’boodhoo Miriandhoo Ariatholhu Uthuruburi Hulhumale’ Mathiveri Dhunikolhu(Coco Palm Dhuni Kolhu) Dhoonidhoo Kudadhoo Bodufolhudhoo Thulhaadhoo Ufuligiri Kudafolhudhoo Maamaduvvari Medhufinolhu Kanufusheegaathuﬁnolhu Mathivereefinolhu (Alifu Alifu Atoll) Madivaru Boduﬁnolhu Hithaadhoo Kanufushi Funadhoo Olhugiri Male’atholhu (Nika Island Resort) Kodhdhipparufinolhu Hulhule Thilafushi Gaagan’du (Kaafu Atoll) 4. Somawathie Chaitya Sanctuary Kaashidhoo Vilingilli Male’ Maalhosmadulu Dhekunuburi Gaagan’du (Baa Atoll) Fulhadhoo Fehendhoo Boadhaafushi Inn afushi Goidhoo Velassaru (Laguna Maldives) Vaadoo(Vadoo Island Resort) 2 Vihamaafaru Mathifaru Dhashufaruhuraa (En’boo T aj Exoticadhoofino and Spa Maldives)lhu Madoogali(Madoogali Resort) Bolifushi (Island of Bolifushi) 5. Ritigala Strict Natural Reserve En’boodhoo(Embudhu Village) 19 Gaafaru ( M a a y a f uMaayafushi s h i Tourist Resort) Bathala (Adaaran Club Bathala) Olhuhali

Kagi Feridhoo Dhinnolhufinolhu

Akirifushi Helen’geli (Helengeli Island Resort) Maifalhuhuraa (Halaveli HolidayHalaveli Village) Etheremadivaru Thun’bafushi Eriyadhoo(Eriyadhoo Island Resort) Gaathafushi

Fusfinolhu Makunudhoo(Makunudhoo Island) Ellaidhoo (Ellaidhoo Tourist Resort) 6. Minneriya Tank Sanctuary (S ummerZiyaaraiyfushi Island Village) (W. Retreat and SpaFesdhoo Maldives) (O ne&Only ReethiMedhufinolhu Rah, Maldives) Kan’dholhudhoo Madivaru Gulhi Hen’badhoo(Taj Coral Reef Resort) Maalhos

Asdhoo (Asdhu Sun Island) Meerufenfushi(M eeru Island Resort) 2 Dhiffushi Thoddoo Maniyafushi Boduhithi (Coco Palm Boduhithi) (Anantara Resort andDhigufinolhu Spa Maldives) Kudahithi (Coco Palm Kudahithi) Veligan’duhuraa (Naladhu) Boduhuraa Rasfari Mushimasmigili Thulusdhoo Vilin’gili mathidhahuraa Nakatchafushi(Huvafenfushi) Thulusdhoo irumathee huraagan’du Gasfinolhu (Gasfinolhu Island Resort) Vaagali Lhohifushi (Adaaran Select Hudhuranfushi) Alikoirah 1 Kanifinolhu (Club Med Kanifinolhu) 7. Wasgamuwa Strict Natural Reserve Huraa (Biyaadhoo IslandBiyaadhoo Resort) Kudahuraa (Four Seasons Resort Maldives at Kuda Huraa) Maafushi Girifushi Thulhaagiri(Thulhaagiri Island Resort) Vabboahuraa Kanuoiy huraa (Chaaya Island Dhonveli) Kalhuhuraa (AngsanaSpa Maldives ResortIhu Ihuru) ru& Vabbinfaru(Banyan Tree Maldives Vabbnifaru) Than’burudhoo Veligan’du(V eligandu Island) Hinmafushi Lankanfushi (Soneva Gili by Six Senses) Himendhoo (Dream Island Maldives)Villivaru Baros (Baros Holiday Resort) Lankanfinolhu (Paradise Island Resort and Spa) 2 Makunufushi (Cocoa Island) (Bandos Island Boduban’dosResort and Spa) Madivaru Kudaban’dos Kan’doomaafushi (Kandooma Tourist Resort) Rasdhoo Kodhdhipparufinolhu Kan’duoiygiri (KuramathiKuramathi Tourist Resort) Maagau Gaagan’du Furanafushi (Full Moon Beach Resort) Guraidhoo Gaagan’du Rannalhi (Adaaran Club Rannalhi) Aarah Farukolhufushi (Club Faru, Farukolhufushi) (K urumbaVihamanaafushi Maldives) Gangehi(Gangehi Island Resort) Fushi Feydhoofinolhu Lhosfushi Gulhigaathuhuraa Ukulhas Ariatholhu Uthuruburi Hulhumale’ Moofushi(Moofushi Island Resort) Velidhoo(Velidhoo Island Resort) Giraavaru(Giraavaru Tourist Resort) Dhoonidhoo (Athurugau IslandAthurugau Resort) Mathiveri (Alifu Alifu Atoll) Fihaalhohi(Fihaalhohi Island Resort) Mathivereefinolhu Bodufolhudhoo Funadhoo Male’atholhu Kudafolhudhoo(Nika Island Resort) Hulhule Thilafushi Vilingilli Male’ (Kaafu Atoll) Bodukaashihuraa Maadhoo 8. Maduru Oya National Park Dhinnolhufinolhu Vammaafushi Bodufinolhu (Fun Island Resort) Velassaru (Laguna Maldives) Vihamaafaru Kudafinolhu Etheremadivaru Vaadoo(V adoo Island Resort) Olhuveli (Olhuveli Beach and Spa Resort) En’boodhoofinolhu(T aj Exotica and Spa Maldives) Madoogali(Madoogali Resort) Bolifushi (Island of Bolifushi) En’boodhoo(E mbudhu Village)

(M aayafushiMaayafushi Tourist Resort) Bathala (Adaaran Club Bathala)

Feridhoo Maniyafushi (Halaveli HolidayHalaveli Village) Hangnaameedhoo Gaathafushi

Fusfinolhu Kalhuhuraa (W . Retreat and SpaFesdhoo Maldives) E l l a i d h o o ( E l l a i dh o o Tourist Resort) Heenfaru Kan’dholhudhoo En’boodhoo Maalhos Maagau Gulhi

Gulhigaathuhuraa Mahaana(Rihiveli Beach elhihuraa Resort) (A nantara Resort andDhiguﬁnolhu Spa Maldives) Veligan’duhuraa (Naladhu) Boduhuraa 3 Mushimasmigili Innafushi Vaagali Vammaafushi Omadhoo 9. Rantambe Reservoir Sanctuary Alikoirah Maafushi (Biyaadhoo IslandBiyaadhoo Resort) Himendhoo Makunufushi (Cocoa Island) (Dream Island Maldives)Villivaru (ThundufushiThun’dufushi Island Resort) Rannalhi (Adaaran Club Rannalhi) Kan’doomaafushi (Kandooma Tourist Resort) Guraidhoo Lhosfushi Moofushi(M oofushi Island Resort) Dhiggiri (Athurugau IslandAthurugau Resort)

Bodukaashihuraa Fihaalhohi(Fihaalhohi Island Resort) Maadhoo Kudafinolhu Dhiggiri Hangnaameedhoo Bodufinolhu (Fun Island Resort) Mahibadhoo 18 Olhuveli (Olhuveli Beach and Spa Resort) Kun’burudhoo Heenfaru Erruh-huraa En’boodhoo Mahaana(Rihiveli Beach elhihuraa Resort) Olhigan’dufinolhu

Kalhahan’dhihuraa Inn afushi Omadhoo Thun’dufushi(Thun dufushi Island Resort) Kun’burudhoo Bulhaalhohi Erruh-huraa

Fushidhigga Mahibadhoo Olhigan’duﬁnolhu

10. Gal Oya National Park Bulhaalhohi Kalhahan’dhihuraa

5 4 Mandhoo Mandhoo Fulidhoo

Hurasdhoo Theluveligaa

Angaaga (Angaaga Island Resort and Spa) Huvahendhoo (Lily Beach Resort) D h i g g i r i ( D h i g g i r i Tourist Resort) Kudhiboli (V ilamendhooVilamendhoo Island Resort) Vashugiri Rangali Mirihi (Mirihi Island Resort) Vilin’gilivaru (Ranveli Village) Rangalifinolhu(ConradRangali MaldivesIsland) Fushidhigga (TMaafushivaru win Island Resort) Dhan’gethi Lonuboi Hurasdhoo (M achchafushiMachchafushi Island Resort) Alimathaa (Alimatha Aquatic Resort) Felidhuatholhu Huvahendhoo (Lily Beach Resort) (V akarufalhiVakarufalhi Island Resort) Hukurudhoo Kudarah (Kudarah Island Resort) (Vaavu Atoll) Angaaga (Angaaga Island Resort and Spa) Finolhu Fulidhoo Huruelhi 11. Uda Walawe National Park Dhigurah (VilamendhooVilamendhoo Island Resort) Dhiggiri ( D h i g g i r i T ourist Resort) Kudhiboli 6 Aarah Dhidhdhoofinolhu (Diva Maldives) Boduﬁnolhu Hulhidhoo Rangali Fenfushi Tholhifushi Maamin’gili Thinadhoo Hiyafushi Dhidhdhoo Nalaguraidhoo (Sun Island Resort and Spa) Kudadhoo Felidhoo Dhiffushi (Holiday Island) Ariyadhoo Keyodhoo Mirihi (Mirihi Island Resort) Ariatholhu Dhekunuburi Foththeyobodufushi Vilin’gilivaru (Ranveli Village) 8 Rangalifin(ConradRangali Island)Maldivesolhu (Alifu Dhaalu Atoll) Dhan’gethi Kuda anbaraa (TwinMaafushivaru Island Resort) Lonuboi Alimathaa (Alimatha Aquatic Resort)

(MachchafushiMachchafushi Island Resort) Theluveligaa Nilandheatholhu Uthurumuri Anbaraa 7 Ruh hurihuraa (Faafu Atoll) Hin’gaakulheefinolhu Felidhuatholhu Thun’duhuraa 12. Yala National Park Bodumohoraa (VakarufalhiVakarufalhi Island Resort) Hukurudhoo Kudarah (Kudarah Island Resort) Kan’dumoonufushi Rakeedhoo (Vaavu Atoll)

Vilin’gilivaruﬁnolhu Feeali Makunueri Madivaruhuraa Himithi Vashugiri Dhiguvaruﬁnolhu Huruelhi Minimasgali Maafushi Dhigurah

Faanumaahuraa Vattaru Filitheyo (Filitheyo Island Resort)

Jinna thugau

Dhidhdhoofinolhu (Diva Maldives) Adhangau Aarah 13. Bundala Bird Sanctuary En’bulufushi Bileiydhoo Dhiggaru Fenfushi Boduﬁnolhu Maamin’gili Hulhidhoo Maduvvari Nalaguraidhoo (Sun Island Resort and Spa) Tholhifushi Dhidhdhoo Raiymandhoo Raaban’dhihuraa Hiyafushi Madifushi Magoodhoo boduﬁnolhu Magoodhoo Dhiffushi (Holiday Island) Erruh-huraa Finolhu Dharan’boodhoo Nilandhoo Ariyadhoo Hudhuveli Uthurugasveli Uthuruboduveli Thinadhoo Hurasveli Foththeyobodufushi Meedhuffushi (Vilu Reef Beach and Spa Resort) Ariatholhu Dhekunuburi Felidhoo Meedhoo

Velavaru (Angsana Resort and Spa Maldives - Velavau) Faandhoo Udhdhoo Lhohi Mulah Veyvah (Alifu Dhaalu Atoll) Keyodhoo 14. Kann Eliya Forest Reserve Maagau Aluvifushi Ban’didhoo Rin’budhoo Boahuraa Kanneiyfaru Dhoores Muli Vommuli Maalhaveli Thuvaru Naalaafushi Hudhufusheefinolhu Maadheli Maalefaru Medhufushi (Medhufushi Island Resort)

Seedheehuraa veligan’du Hakuraahuraa (Chaaya Lagoon Hakuraa Huraa) Hulhudheli Seedheehuraa Hulhuvahi Kekuraalhuveli Gongalihuraa Kudadhoo

Gasveli Dhekunuboduveli Olhufushi Kuda usfushi Bulhalafushi Fenfushi Maa usfushi Gemendhoo 7 Thaban’lhaidhoo Maahuraa Ayyakaloahuraa Dhebaidhoo Fenfuraaveli Anbaraa Fenmeeruhuraa Kiraidhoo Gaakurali Kolhufushi Kuradhigan’du Thinhuraa Nilandheatholhu Uthurumuri Dhiththun’di Mulakatholhu Thilabolhufushi Minimasgali (Meemu Atoll) 15. Sinharaja Rainforest Reserve Kan’dinmaa Vallalhohi Vaanee (Faafu Atoll) Hiriyafushi Kuda anbaraa Valla Issari 8 Kedhigan’du Maaen’boodhoo Maafushi Bodumohoraa Olhuveli En’boodhoofushi Kudahuvadhoo Nilandheatholhu Dhekunuburi (Dhaalu Atoll)

Burunee

Gaalee Kuran’dhuvaru 16. Peak Wilderness Sanctuary Maagulhi Ruh hurihuraa Kan’dufushi Hikan’dhilhohi Rakeedhoo Dhiffushi Olhugiri Vilufushi Hin’gaakulheefinolhu

Hon’delifushi Dhonanfushi Makunueri Thun’duhuraa Himithi

Minimasgali

Kalhufahalafushi Maafushi Kan’dumoonufushi

Olhufushifinolhu Kolhufushi Olhufushi MadifushiUfuriyaa Filitheyo (Filitheyo Island Resort) Vattaru Mathidhoo Medhafushi 17. Muthurajawela Wetlands/Marsh 6 Kaﬁdhoo Dhiyamigili

Kan’doodhoo Kakolhas Guraidhoo Fondhoo Boduﬁnolhu

Kudadhoo Maalefushi Lhavaddoo Vilin’gilivaruﬁnolhu Vandhoo Kalhudhiyafushi Fonidhaani Jinnathugau Rihaamaafushi Fenfushi Kudakaaddoo Hathifushi Kaaddoo Fenmeerufushi Feeali Olhudhiyafushi Hirilandhoo Ekuruffushifinolhu Kolafushi Bodurehaa Madivaruhuraa Hulhiyanfushi Gaadhiffushi Usfushi Dhiguvaruﬁnolhu Hiriyanfushi Thimarafushi Fushi Funaddu Kani Kanimeedhoo Vanbadhi Veymandoo Gaathurehaa Ruththibirah Elaa Dhururehaa Kuredhifushi Kin’bidhoo 9 Omadhoo Kudakin’bidhoo 18. Wilpattu National Park Adhangau Faanumaahuraa

Kolhumadulu Fonagaadhoo En’bulufushi Isdhoo (Thaa Atoll) Dhan'bidhoo

Hulhiyandhoo

Dhonberahaa Thun’buri Kudarah Holhurahaa Kandaru Fenboahuraa Hikan’dhirahaa Rahaa Fushi Kanuhuraa Boduﬁnolhu Maabaidhoo Vadinolhu Mundoo Kuda mungnafushi Bokaiyfushi Bodu mungnafushi Kalhaidhoo Uvadhevifushi Madifushi Baresdhoo

Hanhushi Mahakanfushi Gasgan’dufinolhu 19. Madhu & Giants Tank Sanctuary Boduﬁnolhu Kashidhoo Gan 10 Guraidhoo Maavah

Maandhoo

Kokurahaa Bileiydhoo Kadhdhoo Bodumaabulhali Dhiggaru Kudamaabulhali Kalhurahaa Haiythoshi Huraa Enberahaa Thathunrahaa Maaveshi Aarahaa Veligan’dufinolhu Bodufenrahaa Burrahaa Fonadhoo Maduvvari Athahendhu Kudavoshi Hulhimendhoo Hendha Uthuruboduveli Uthuru vinagan’du Vinagan’du Maamendhoo Medhu vinagan’du Fenboarahaa Olhuveli Gaadhoo Meedhuffushi (Vilu Reef Beach and Spa Resort) Kudafenrehaa Fares Maafushi Hurasveli Boduhuraa Kudafares Maakalhuveli Hithadhoo Olhutholhu Raiymandhoo Bodumahigulhi Hulisdhoo Kudafushi Mendhoo Raaban’dhihuraa Kuredhirehaa Kunahandhoo Hadhdhunmathi Magoodhoo boduﬁnolhu Magoodhoo (Laamu Atoll) Erruh-huraa Nilandhoo Dharan’boodhoo Velavaru (Angsana Resort and Spa Maldives - Velavau) Faandhoo Udhdhoo

Lhohi Hudhuveli Uthurugasveli Maagau

Aluvifushi Mulah Boahuraa Operating Entities KanneiyfaruMeedhoo Dhoores Vommuli Maalhaveli Thuvaru 16 MedhufushiMuli (Medhufushi Island Resort) Maadheli 17 Maalefaru 3 Veyvah

Ban’didhoo Seedheehuraa Rin’budhoo Hulhuvahi 1. Chaaya Blu Kekuraalhuveli

Dhekunuboduveli Olhufushi Hudhufusheefinolhu Naalaafushi Fenfushi Maa usfushi Gemendhoo Thaban’lhaidhoo Maahuraa Ayyakaloahuraa Dhebaidhoo Fenfuraaveli Fenmeeruhuraa Hulhudheli Seedheehuraa veligan’du 2. Cinnamon Wild Kiraidhoo Gaakurali Gongalihuraa Thinhuraa Mulakatholhu Dhiththun’di 3 Thilabolhufushi Minimasgali Gasveli (Meemu Atoll) Kan’dinmaa Kuda usfushi 11 Vallalhohi Bulhalafushi Hiriyafushi 5 Valla 3. Chaaya Tranz Issari Kedhigan’du Kolhufushi Kuradhigan’du

Kudalafari

Matu Faruhulhudhoo Kan’duvilin’gili Faruhulhedhoo Melaimaa Maarandhoo Bodehuttaa Kalhehuttaa Maagihuttaa Hithaadhoo Maamutaa Hurendhoo Kodagehuttaa Kolamaafushi Hithaadhoogalaa Lhossaa Maakanaarataa Boduﬁnolhu Beyrumauddoo Nilandheatholhu Dhekunuburi Vaanee Raaverrehaa Falhuverrahaa 15 12 Huvadhuatholhu Uthuruburi Villin’gili (Gaafu Alifu Atoll) Kooddoo 4. Bentota Beach Hotel Kendheraa (Dhaalu Atoll) Fenfuttaa Maamendhoo Boadduvaa Hulhimendhoo Maaen’boodhoo

Fulan'gi Maadhigavara Dhigurah Kodahuttaa Maththidhoo Falhumaafushi Maafushi

Keredhdhoo Olhuveli Odagallaa Kisserahaa Nilandhoo En’boodhoofushi 4 Hinaamaagalaa Dhaandhoo

Dhevvalaabadhoo Vodamulaa Munandhuvaa Meradhoo (Salus Fushi) Mahadhdhoo Kudahuvadhoo Dhevvaamaagalaa Funadhooviligillaa

Dhevvadhoo Funadhoo

Havoddaa Minimessaa Dhigudhoo Funamudua (Huvadhumaafushi Maldives) Hirihuttaa 5. Cinnamon Bey Thinadhoo Galamedhuvaa Havodigalaa Baavanadhoo Kafena Viligalaa Kodeyvilin'gili Hadahaa Maagon’derehaa Gosi Kudherataa Kodeymatheelaabadhoo Rahadhuvaa Kon'dey Maallaarehaa Baulhagallaa Kaadedhdhoo Dhiyadhoo Medhehuaa Madaveli Maarehaa Konoaa Kudhehulhedhdhoo Araigaththaa Kannigillaa Gemanafushi Hoan’dedhdhoo Hunigon’direhaa Kaludirehaa Kadevaarehaa Dhigurehaa Bihurehaa Fenrehaa Kodedhoo Bodubon’deyyaa Boduhuttaa Idh imaa Mathikeranahuttaa 2 Kaashihulhudhoo Ulegalaa Keramiththaa Kudhelifadhoo Bakeththaa Bodurehaa Maafehelaa Inn arehaa Dekaanbaa Kodegalaa Medhuburiyaa Koderataa Maagalaa Maththurehaa Thinahuaa Gahevelagalaa Medharehaa Kan’duhulhudhoo Kadhefalaa Olhimuttaa Kodaanahutta Kaishidhoo Maavaarulu 6. Cinnamon Citadel Keyhuvadhoo Hulhuvaarulaa Farehulhedhoo Kalhahuttaa Dhoonirehaa Odegallaa Menthandhuvaa Veraaviligillaa Golhaallaa Lonudhoo Kalhehamalaa Olhurataa Mathaidhuvaa Bodehuttaa Maavadhdhuva Hevaahulhudhoo Lonudhuahuttaa Rodhavarrehaa Thelehuaa KalhahigillaaNadellaa Kodahutigalaa Vaireyaadhuvaa Gadhdhoo Ehivakaa Maaehivakaa Magudhdhuvaa Ban’defodiyaa Kanandhuvaa Gan Mudhimaahutta Meregihuaa Meehunthibenehuttaa Fenevenehuttaa Mathihutta Gazeeraa Kudhemaanaidhoo Mudhimaahutta Dherukurehaa Vatavarrehaa 14 Rathafandhoo Kalherehaa Laihaa Meyragillaa Femunaidhoo Ukurihuttaa Kan’dahalagalaa Vilin’gillaa Kaalhehuaa Vaadhoo Uhehuttaa Fiyoari Ekelondaa Keleihuttaa Dhigelaabadhuvaa Hoothodeyaa Boduhuttaa Faresmaathodaa Farukolhuhuttaa Maarehaa Kaalhehuaa Dhoonirehaa

7. Chaaya Village Huvadhuatholhu Dhekunuburi 3 13 (Gaafu Dhaalu Atoll) 8. Cinnamon Lodge Chaaya Hotels & Resort Protected Areas

Foamulah (Gnaviyani Atoll) Fuvahmulaku 1. Chaaya Island Dhonveli 1. Thamburudhoo Thila 2. Chaaya Reef Ellaidhoo 2. Orimas Thila

Kedevaahera Hikahera Bedhey aurah Kaohera Meedhoo Maahera Kudamaahera Hulhudhoo Dheeron’di Hithadhoo Fathikedehera gan’du Kodadhihera gan’du Kan’dihera gan’du Herethere (Hadhufushi)

Aboohuraa Geskalhuheraa Gauken’di

Hankede Maradhoo Mulikede Maradhoofeydhoo Boduhajaraa Feydhoo Villin’gili Savaaheli Dhigiheraa Gomahera 3. Chaaya Lagoon Hakuraa Huraa 3. Lhazikuraadi Gan

Adduatholhu (Seenu Atoll)

As a Company which monitors most of the environment related indicators, we continuously report on signiﬁcant spills of chemicals, oil, fuel and waste on a quarterly basis and reported zero incidents. Also, due to the strict adherence to environment, social and product related rules and regulations in the country, there were no ﬁnes or sanctions imposed on us during the year. 132 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

CONSOLIDATED VALUE ADDED STATEMENT For the year ended 31st March (Rs. ‘000s) 2014 2013

Revenue 10,966,381 9,341,581 To employees 34% Other operating income and ﬁnance income 309,818 182,178 To the government 8% Total 11,276,199 9,523,759 To providers of capital 11% Less : Cost of materials and services (6,239,088) (5,828,848) Retained within the 2013/2014 Value added 5,037,111 3,694,911 business 47%

Distributed as follows : To employees as salaries and other beneﬁts 1,724,922 34% 1,139,734 31% To the government as taxes 384,197 8% 241,840 7%

To the providers of capital To employees 31% Interest in borrowings 533,877 11% 537,096 15% To the government 7% Non-controlling interest 9,080 0% 4,240 0% To providers of capital 15% Retained within the 2012/2013 business 48% Retained within the business As depreciation 819,189 16% 651,010 18% As reserves 1,565,846 31% 1,120,991 30% Total 5,037,111 100% 3,694,911 100%

Deﬁned contribution plan obligations Rs. ‘000s 2014 2013 2012 2011 2010 EPF 42,812 36,046 30,571 22,908 19,287 ETF 12,583 10,511 7,380 5,825 4,481

Employee beneﬁt liability as at 31 March 113,836 89,346 84,677 78,713 65,974 Payments during the ﬁnancial year 10,497 6,672 6,403 5,766 4,064 133 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

THE WAY FORWARD: A SUSTAINABLE VALUE CHAIN Suppliers Forum- Maldivian Resorts As a green pioneer, our ultimate goal is to extend our concepts of Our Maldivian resorts successfully carried out its inaugural Suppliers Forum, in sustainability across the value chain. We believe that by working together order to build awareness on sustainable tourism amongst suppliers. The forum with our value chain partners, we can identify optimal solutions thereby was attended by 25 delegates from 15 domestic and international organisations. leading towards holistic action to generate more value. We are proud to report The forum focused on the key issues of sustainable business practices in the that we have already set the wheels in motion to achieve this goal. During the supply chain covering the health and safety of suppliers. year, we formulated criteria detailing a comprehensive set of sustainability requirements to be met by all our significant suppliers. As one of the largest leisure sector operator, our supply chain comprises several hundreds of product and service suppliers and we believe the impact we could The suppliers were mapped based on the level of fulfilment of the criteria. have in this regard would be substantial. Over the next five years, we will strive Suppliers who did not meet the required specifications have been given to spread our sustainability values along the supply chain, reflective of our a particular time period to comply with the requirements, failing which commitment towards achieving our ultimate green objective. alternative suppliers are pursued. The criteria consist of a range of indicators that take into consideration the environment, social and economic obligations of an entity.

KEY ASPECTS CONSIDERED IN THE SUPPLIER ASSESSMENT z Environmental Policy and Environmental Management Systems z Energy Consumption, Water Consumption and Discharge, Waste Management, Emissions, z Noise Impact, Biodiversity - Environmental Provisions z Emissions z Health, Safety and Welfare - Health Provisions z Hours of Work and Holidays – General z Employment of Women, Young Persons and Children - Night Work and Industrial undertakings z Maternity Provisions - Maternity Beneﬁts 134 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

GRI INDEX G3 Content Index Profile Description Reported Cross Reference Disclosure Pages 1. Strategy and analysis 1.1 Statement from the most senior decision-maker of the organisation. Yes 48-50 1.2 Description of key impacts, risks, and opportunities. Yes 92-99, 101 2. Organisational profile 2.1 Name of the organisation. Yes Back inner cover 2.2 Primary brands, products, and/or services. Yes 107-108 2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries, and joint Yes 51 ventures. 2.4 Location of organisation’s headquarters. Yes Back inner cover 2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are Yes 131 specifically relevant to the sustainability issues covered in the report. 2.6 Nature of ownership and legal form. Yes Back inner cover 2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries). Yes 107 2.8 Scale of the reporting organisation. Yes 98-99 2.9 Significant changes during the reporting period regarding size, structure, or ownership. Yes N/A 2.10 Awards received in the reporting period. Yes 102-104 3. Report parameters 3.1 Reporting period (e.g., fiscal/calendar year) for information provided. Yes 98-99 3.2 Date of most recent previous report (if any). Yes 98-99 3.3 Reporting cycle (annual, biennial, etc.) Yes 98-99 3.4 Contact point for questions regarding the report or its contents. Yes Back inner cover 3.5 Process for defining report content. Yes 98-101 3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). Yes 99 3.7 State any specific limitations on the scope or boundary of the report. Yes 98-99 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can Yes 98-99 significantly affect comparability from period to period and/or between organisations. 3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying Yes 120 estimations applied to the compilation of the Indicators and other information in the report. 135 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

G3 Content Index Profile Description Reported Cross Reference Disclosure Pages 3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re- Yes N/A statement (e.g., mergers/acquisitions, change of base years/periods, nature of business, measurement methods). 3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the Yes 98-99 report. 3.12 Table identifying the location of the Standard Disclosures in the report. Yes Inner Front Cover 3.13 Policy and current practice with regard to seeking external assurance for the report. Yes 98-99 4. Governance, commitments and engagement 4.1 Governance structure of the organisation, including committees under the highest governance body responsible for Yes 54-67, 106 specific tasks, such as setting strategy or organisational oversight. 4.2 Indicate whether the Chair of the highest governance body is also an executive officer. Yes 54-67 4.3 For organisations that have a unitary Board structure, state the number and gender of members of the highest Yes 54-67 governance body that are independent and/or non-executive members. 4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. Yes 54-67 4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives Yes 54-67 (including departure arrangements), and the organisation’s performance 4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. Yes 54-67 4.7 Process for determining the composition, qualifications, and expertise of the members of the highest governance body Yes 54-67 and its committees, including any consideration of gender and other indicators of diversity. 4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, Yes 54-67 environmental, and social performance and the status of their implementation. 4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of Yes 54-67 economic, environmental, and social performance, including opportunities, and adherence or compliance relevant risks and with internationally agreed standards, codes of conduct, and principles. 4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, Yes 54-67 environmental, and social performance. 4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation. Yes 54-67 4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the Yes 54-67 organisation subscribes or endorses. 4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations. Yes 54-67 136 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

G3 Content Index Proﬁle Description Reported Cross Reference Disclosure Pages 4.14 List of stakeholder groups engaged by the organisation. Yes 54-67

4.15 Basis for identification and selection of stakeholders with whom to engage. Yes 54-67 4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder Group. Yes 54-67 4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has Yes 54-67 responded to those key topics and concerns, including through its reporting. Economic Economic Performance DMA EC Disclosures on management approach to economic aspects. Yes N/A EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, Yes 132 donations and other community investment , retained earnings, and payments to capital providers and governments. EC2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change. No N/A EC3 Coverage of the organisation’s defined benefit plan obligations. Yes 132 EC4 Significant financial assistance received from Government. No N/A Market Presence EC5 Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of No N/A operation. EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. Yes N/A EC7 Procedures for local hiring and proportion of senior management hired from the local community at locations of No N/A significant operation. Indirect economic impacts EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through Yes 119-120 commercial, in-kind, or pro bono engagement. EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. No N/A Environmental Materials EN1 Materials used by weight or volume. No N/A EN2 Percentage of materials used that are recycled input materials. No N/A 137 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

G3 Content Index Profile Description Reported Cross Reference Disclosure Pages Energy EN3 Direct energy consumption by primary energy source. Yes 122 EN4 Indirect energy consumption by primary source. Yes 122 EN5 Energy saved due to conservation and efficiency improvements. Yes 121 EN6 Initiatives to provide energy-efficient or renewable energy-based products and services, and reductions in energy No N/A requirements as a result of these initiatives. EN7 Initiatives to reduce indirect energy consumption and reductions achieved. Partially 121 Water EN8 Total water withdrawal by source. Yes 123 EN9 Water sources significantly affected by withdrawal of water. No N/A EN10 Percentage and total volume of water recycled and reused. Yes 123 Biodiversity EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value Yes 129-130 outside protected areas. EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of No N/A high biodiversity value outside protected areas. EN13 Habitats protected or restored. Yes 126-127 EN14 Strategies, current actions, and future plans for managing impacts on biodiversity. No N/A EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by No N/A level of extinction risk. Emissions, effluents and waste EN16 Total direct and indirect greenhouse gas emissions by weight. Yes 120 EN17 Other relevant indirect greenhouse gas emissions by weight. No N/A EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. Partially 120-122 EN19 Emissions of ozone-depleting substances by weight. No N/A EN20 NO, SO, and other significant air emissions by type and weight. No N/A EN21 Total water discharge by quality and destination. Yes 123 EN22 Total weight of waste by type and disposal method. Yes 125 EN23 Total number and volume of significant spills. Yes 131 138 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

G3 Content Index Profile Description Reported Cross Reference Disclosure Pages EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention No N/A Annex I, II, III, and VIII, and percentage of transported waste shipped internationally. EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the No N/A reporting organisation’s discharges of water and runoff. Products and services EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. No N/A EN27 Percentage of products sold and their packaging materials that are reclaimed by category. No N/A Compliance EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with Yes 131 environmental laws and regulations. Transport EN29 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s No N/A operations and transporting members of the workforce. Overall EN30 Total environmental protection expenditures and investments by type. No N/A Social: Labour practices and decent work Employment LA1 Total workforce by employment type, employment contract and region, broken down by gender. Yes 112 LA2 Total number and rate of new employee hires and employee turnover by age Group, gender and region. Yes 111-113 LA3 Benefits provided to full-time employees that are not provided to temporary or part- time employees, by significant No N/A locations of operation. Labour/management relations LA4 Percentage of employees covered by collective bargaining agreements. Partially 115-116 LA5 Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements. No N/A Occupational health and safety LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help Yes 114-115 monitor and advise on occupational health and safety programmes. LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region Yes 115 and by gender. 139 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

G3 Content Index Profile Description Reported Cross Reference Disclosure Pages LA8 Education, training, counselling, prevention, and risk-control programmes in place to assist workforce members, their Yes 114-118 families or community members regarding serious diseases. LA9 Health and safety topics covered in formal agreements with trade unions. No N/A Training and education LA10 Average hours of training per year per employee by gender, and by employee category. Partially 113 LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and No N/A assist them in managing career endings. LA12 Percentage of employees receiving regular performance and career development reviews, by gender. Partially 113 Diversity and equal opportunity LA13 Composition of governance bodies and breakdown of employees per employee category according to gender, age Group, No N/A minority Group membership, and other indicators of diversity. LA14 Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation. No N/A Social: Human Rights Investment and procurement practices HR1 Percentage and total number of significant investment agreements and contracts that include clauses incorporating No N/A human rights concerns, or that have undergone human rights screening. HR2 Percentage of significant suppliers, contractors, and other business partners that have undergone human rights No N/A screening, and actions taken. HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to No N/A operations, including the percentage of employees trained. Non-discrimination HR4 Total number of incidents of discrimination and corrective actions taken. No N/A Freedom of association and collective bargaining HR5 Operations and significant suppliers identified in which the right to exercise freedom of association and collective No N/A bargaining may be violated or at significant risk, and actions taken to support these rights. Child labour HR6 Operations and significant suppliers identified as having significant risk for incidents of child labour, and measures Yes N/A taken to contribute to the effective abolition of child labour. 140 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 SUSTAINABILITY REPORT CONTD.

G3 Content Index Profile Description Reported Cross Reference Disclosure Pages Forced and compulsory labour HR7 Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labour, Yes N/A and measures to contribute to the elimination of all forms of forced or compulsory labour. Security practice HR8 Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights No N/A that are relevant to operations. Indigenous rights HR9 Total number of incidents of violations involving rights of indigenous people and actions taken. No N/A Social: Society Local communities SO1 Percentage of operations with implemented local community engagement, impact assessments and development Yes 117-118, 127 programmes. Corruption SO2 Percentage and total number of business units analysed for risks related to corruption. No N/A SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures. No N/A SO4 Actions taken in response to incidents of corruption. No N/A Public policy SO5 Public policy positions and participation in public policy development and lobbying. No N/A SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. No N/A Anti-competitive behaviour SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes. No N/A Compliance SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and Yes 131 regulations. 141 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

G3 Content Index Profile Description Reported Cross Reference Disclosure Pages Social: Product Responsibility Customer health and safety PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement and No N/A percentage of significant products and services categories subject to such procedures. PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety No N/A impacts of products and services during their life cycle, by type of outcomes. Product and service labelling PR3 Type of product and service information required by procedures and percentage of significant products and services No N/A subject to such information requirements. PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service No N/A information and labelling, by type of outcomes. PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. Yes 99 Marketing communications PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including No N/A advertising, promotion and sponsorship. PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing No N/A communications, including advertising, promotion and sponsorship by type of outcomes. Customer privacy PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. No N/A Compliance PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of Yes 131 products and services. 142 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 FINANCIAL REPORTS

FINANCIAL INFORMATION

Annual Report of the Board of Directors 143 Statement of Directors’ Responsibility 148 Independent Auditors’ Report 149 Income Statement 150 Statement of Comprehensive Income 151 Statement of Financial Position 152 Statement of Changes In Equity 154 Statement of Cash Flows 155 Notes to the Financial Statements 157 143 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 ANNUAL REPORT OF THE BOARD OF DIRECTORS

The Directors have pleasure in presenting their 35th the achievement of corporate objectives. The policies COMPLIANCE WITH LAWS AND REGULATIONS Annual Report of the Company together with the and procedures ensure the equitable treatment of The Board has received assurance from the Board Audited Financial Statements of John Keells Hotels all employees. Some of the processes and procedures Audit Committee and conﬁrms that the Company has PLC and the Consolidated Financial Statements of the adopted in this regard are mentioned on pages 110 to complied with all applicable laws, rules and regulations Group for the year ended 31st March 2014. 118 of the Annual Report. in the territories in which it operates.

PRINCIPAL ACTIVITIES SYSTEM OF INTERNAL CONTROL GOING CONCERN The principal activity of the Company, which is The Board has implemented an effective and The Board of Directors, after considering the financial Investment, remained unchanged. The principal comprehensive system of internal controls, which position, operating conditions, regulatory and other activity of the subsidiaries and joint ventures, which is provide reasonable but not absolute assurance that factors, and such matters required to be addressed in hoteliering, also remained unchanged. assets are safeguarded and that the financial reporting the Code of Best Practice on Corporate Governance system may be relied upon in the preparation of the issued jointly by the Securities & Exchange Commission REVIEW OF BUSINESS AND FUTURE Financial Statements. Reliance upon the internal and CA Sri Lanka, have a reasonable expectation DEVELOPMENTS controls is set out on page 66 of this Report. that the Company, its subsidiaries and joint ventures The financial and operational performance, during possess adequate resources to continue in operation for the year ended 31st March 2014 and future business The Audit Committee receives and acts upon reports the foreseeable future. For this reason, they continue development of the Company and Group, is provided in on the results of internal control reviews carried out by to adopt the Going Concern basis in preparing the the Chairman’s Message, The Management Discussion independent external auditors. Financial Statements. and Analysis of Operations, Sustainability Report and the Financial Overview. These reports, which form an integral RISK MANAGEMENT DIRECTORS’ RESPONSIBILITY FOR FINANCIAL part of the Annual Report of the Board of Directors, The Board confirms that there is an ongoing process REPORTING together with the Audited Financial Statements, reflect for identifying, evaluating, managing and mitigating The Directors are responsible for the preparation of the state of affairs of the Company and Group. any significant risks faced by the Company, that the Financial Statements so that they present a true financial, operational and compliance controls have and fair view of the state of affairs of the Company. CORPORATE GOVERNANCE been reviewed. Risk assessment and evaluation for the The Directors are of the view that these Financial The Corporate Governance practices of the Company Company takes place as an integral part of the business Statements have been prepared in conformity with the are described on pages 54 to 77 of this Report. The and the Board Audit Committee reviews the principal requirements of the Companies Act No.7 of 2007, the Directors confirm that the operations of the Group risks and mitigating actions in place regularly. The Sri Lanka Accounting and Auditing Standards Act No.15 are compliant with the Listing Rules of the Colombo Board, through the involvement of the Group Risk and of 1995 and the Listing Rules of the Colombo Stock Stock Exchange and has adopted the relevant Rules Control Review Division takes steps to gain assurance Exchange. on Corporate Governance issued by the Securities & on the effectiveness of control systems in place. Exchange Commission of Sri Lanka and the Institute of The Statement of Directors’ Responsibility for financial Chartered Accountants of Sri Lanka (CA Sri Lanka). The Head of the Group Business Process Review reporting is given on page 148 and forms an integral Division has direct access to the Chairman of the Audit part of the Annual Report of the Board of Directors. HUMAN RESOURCES Committee. Foreseeable risks that may materially impact the business are disclosed in the Chairman’s The Company continued to implement appropriate Message on Pages 48 to 50 and Risk Management human resource management policies to develop practices on Page 92 to 97 of this Report. employees and optimise their contribution towards 144 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 ANNUAL REPORT OF THE BOARD OF DIRECTORS CONTD.

REVENUE PROVISION FOR TAXATION The revenue of the Group from its operations amounted to Rs. 10,966 Mn (2012/13 - Rs. 9,342 Mn). Revenue The details of the tax provision of the Group is disclosed contribution to the Group from different geographical segments is provided in Note 3.2 to the Financial Statements. in Note 9 to the Financial Statements.

FINANCIAL RESULTS AUDITORS’ REPORT The Company recorded a proﬁt after tax of Rs. 375.9 Mn while the Group recorded a consolidated net proﬁt after The Auditors’ Report on the Financial Statements is tax of Rs. 1,574.9 Mn for the year under review. A synopsis of the Company’s consolidated performance is presented given on page 149 of the Annual Report. below. PROPERTY, PLANT & EQUIPMENT The book value of property, plant and equipment as at As at 31st March Group Company the reporting date amounted to Rs. 13,213 Mn 2014 2013 2014 2013 In Rs. ‘000s (2013 –Rs. 13,472 Mn) for the Group.

After making provision for doubtful debts, all known 2,427,116 1,819,992 400,705 82,141 Capital expenditure for the Group amounted to liabilities and depreciation on property, plant, Rs. 610 Mn (2012/13 – Rs. 2,440.3 Mn). equipment the profit earned before interest was Interest paid during the year was (533,877) (537,096) (12,728) (7,186) Details of property, plant and equipment and their Profit before tax was 1,893,239 1,282,896 387,977 74,955 movements are given in Note 14 to the Financial From which was deducted the provision for taxation, (318,313) (161,877) (12,068) (12,839) Statements on page 187 of this Report. including deferred taxation of MARKET VALUE OF PROPERTIES Leaving a net profit after tax of 1,574,926 1,121,019 375,909 62,116 Freehold land and buildings of the Group are subject to The profit attributable to the non controlling interest (9,080) (4,240) - - routine revaluation by independent qualified valuers. was The most recent valuation in respect of Group was The amount attributable to the Company and the 1,565,846 1,116,779 375,909 62,116 carried out as at 31st March 2013. Group was therefore When the balance brought forward from the previous 3,165,257 2,482,461 412,199 786,927 Details of property valuations, including the valuation year was added method and effective date of these valuations are provided in Note 14.1 to the Financial Statements on page 188 of this Report. The amount available for appropriation was 4,731,103 3,599,240 788,108 849,043 Other adjustments (22,461) 2,861 - - INVESTMENTS Dividend paid during the year and direct cost on - (436,844) - (436,844) The details of investments held by the Company and the share issue was Group as at 31st March 2014, are given in Note 17 to the Leaving a balance to be carried forward to the next 4,708,642 3,165,257 788,107 412,198 Financial Statements. year of 145 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

IMPAIRMENT ASSESSMENT The number of shareholders as at 31st March 2014 of subsidiaries and joint ventures which are Public The Board of Directors has evaluated impairment loss was 7,096 (31st March 2013- 7,728). An analysis of Companies or Private Companies which have not in relation to property, plant and equipment, intangible shareholders based on shares held, the distribution dispensed with the requirement to maintain an assets and investments. Based on the assessment of ownership and details of share transactions during interests register as permitted by Section 30 of the the investment made by Habarana Walk Inn Ltd on the year are provided on pages 80 and 81 of this report. Companies Act No. 7 of 2007. Rainforest Eco Lodge (Pvt) Ltd was impaired by The list of top twenty shareholders of the Company as Rs. 6,652,931 and had been recognised in the income at 31st March 2014 is also provided on page 82 of this Directors Interests in Contracts statement for the year 2013/14 (2012/13 – Rs. Nil). Report. All the Directors have made a general disclosure to the Board of Directors as permitted by Section 192 (2) of the STATED CAPITAL DIRECTORS Companies Act No 7 of 2007 and no additional interests The total Stated Capital of the Company as at The Board of Directors of the Company as at 31st March have been disclosed by any Director. 31st March 2014 stood at Rs. 9,500.2 Mn (2013 – 2014 and their brief proﬁles are given on pages 52 and Rs. 9,500.2 Mn) divided into 1,456,146,780 Ordinary 53 of this Report. Indemnities and remuneration Shares (2013- 1,456,146,780 Ordinary Shares). Mr. T L F W Jayasekera was appointed to the Board on BOARD COMMITTEES the standard terms and non-executive fees approved RESERVES The following members serve on the Board Audit by the Board for Non-Executive Directors, which fees The movement of Other Components of Equity and Committee: are commensurate with the market complexities of the Revenue Reserves of the Company, its Subsidiaries and Mr. Ranel T Wijesinha Company. Joint Ventures are shown in the Statement of Changes Mr. N B Weerasekera in Equity on page 154 of this Report. Mr. N B Weerasekera’s contract as a Non-Executive Mr. T L F W Jayasekera (Appointed w.e.f 01st Nov 2013) Director was renewed on the standard terms and non- SEGMENT REPORTING Mr. D A Cabraal (Resigned w.e.f 30th Oct 2013) executive fees approved by the Board for Non-Executive Director which fees are commensurate with the market Geographical segment-wise contribution to Group The Audit Committee reviewed the type and quantum complexities of the Company. revenue, results, assets and liabilities is provided in of non-audit services provided by the external auditors Note 2 to the Financial Statements. to the Group to ensure that their independence as auditors has not been impaired. The Report of the Audit SHARE INFORMATION AND SHAREHOLDINGS Committee is given on pages 78 and 79 of this Report. The market value of an Ordinary Share of the Company as at 31st March 2014 was Rs. 12.50 (31st March 2013 – INTERESTS REGISTER Rs. 13.20). The Company has maintained an Interests Register as contemplated by the Companies Act No 7 of 2007. In Information relating to earnings, dividends, net assets compliance with the requirements of the Companies and market value per share is given in the ten years Act No. 7 of 2007, this Annual Report also contains summary on page 214. particulars of entries made in the interest registers 146 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 ANNUAL REPORT OF THE BOARD OF DIRECTORS CONTD.

Directors’ Shareholdings DIRECTORS MEETINGS SUPPLIER POLICY The shares held by Directors’ and their spouses in the Details of the meetings of the Directors are given on The Company applies an overall policy of agreeing and Company and its Subsidiaries as at 31st March 2014 are page 56. clearly communicating terms of payment as part of as follows; the commercial agreements negotiated with suppliers, EMPLOYMENT and endeavors to pay for all items properly charged John Keells Hotels PLC The Company has an equal opportunity policy and in accordance with these agreed terms. As at 31st these principles are enshrined in speciﬁc selection, March 2014, the trade and other payable of the Group As at 31st March 31st March training, development and promotion policies, ensuring amounted to Rs. 858 Mn (2013 – Rs. 992 Mn) and for the 2014 2013 that all decisions are based on merit. The Group Company amounted to Rs. 13.6 Mn (2013 - Rs. 11.3 Mn). Directors practices equality of opportunity for all employees irrespective of ethnic origin, religion, political opinion, SUSTAINABILITY REPORTING Mr. S.C. Ratnayake 142,877 142,877 gender, marital status or physical disability. There The Group is conscious of the impact, direct and Mr. A.D. Gunewardene were no material issues pertaining to employees and indirect, on the environment due to its business Spouses industrial relations in the year under review. activities. Every endeavor is made to minimise Mrs. M.V. Ratnayake 407,434 407,434 the adverse effects on the environment to ensure Details of the Group’s Human Resource initiatives are sustainable continuity of our natural resources. The Mrs. C.A. Gunewardene 74,806 74,806 detailed in pages 110 to 117. The number of persons activities undertaken by the Group in recognition of its Total 625,117 625,117 employed by the Group as at 31st March 2014 was 2,779 responsibility as a corporate citizen are disclosed more International Tourists & Hoteliers Ltd (2013 – 2,735) fully on pages 98 to 141 of this Report. Mr. J.E.P. Kehelpannala 150 150 STATUTORY PAYMENTS DONATIONS

Directors’ Remuneration The Directors, to the best of their knowledge are Total donations made by the Group during the year satisfied that all statutory payments in relation to amounted to Rs.5.1 Mn (2012/13 – Rs.3.0 Mn). The Details of the remuneration and other benefits received the Government and the employees have been either amount includes contributions on account of Corporate by the Directors of the Company, its subsidiaries and duly paid or appropriately provided for. The income Social Responsibility (CSR) initiatives for which the joint ventures are set out in Note 8 to the Financial tax position of the Company and its subsidiaries are Group donated Rs.2,021,661/- (2012/13 – Rs.768,750/-). Statements. disclosed in Note 9 to the Financial Statements. The John Keells Social Responsibility Foundation, which operates with funds contributed by each of the Executive Directors’ remuneration is established within OUTSTANDING LITIGATION companies in the Group, handles most of the Group’s a framework approved by the Board’s Remuneration CSR initiatives and activities. Committee. The Directors are of the opinion that the In the opinion of the Directors and in consultation framework assures appropriateness of remuneration within the Company Lawyers, litigation currently The Foundation manages a range of programs that and fairness for the Company. The remuneration of pending against the Company will not have a material underpin its key principle of acting responsibly the Non-Executive Directors is determined according impact on the reported financial results or future in all areas of business to bring about sustainable to scales of payments decided upon by the Board operations of the Company. previously. 147 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

development. In quantifying the Group’s contribution Messrs Ernst & Young, Chartered Accountants have ANNUAL GENERAL MEETING to charities no account has been taken of ‘in-house’ indicated their willingness to continue as Auditors of The Annual General Meeting will be held at 117, Sir costs or management time. the Company, accordingly, a resolution proposing their Chittampalam A Gardiner Mawatha, Colombo 02, on reappointment as Auditors will be proposed at the 30th June 2014 at 3.30pm. The Notice of the Annual Donations made by Subsidiaries of the Company were Annual General Meeting. General Meeting appears on page 221. as follows: Ceylon Holiday Resorts Ltd – Rs. 1,136,530/- (2012/13- Rs. 1,043,547/-), Habarana Lodge Details of the Audit Fees paid to the Auditors are set out This Annual Report is signed for and on behalf of the Ltd - Rs. 565,305/- (2012/13- Rs. 449,581/-), Habarana in Page 173 of this Report. Board of Directors by: Walk Inn Ltd - Rs. 506,669/- (2012/13- Rs. 439,495/-), Kandy Walk Inn Ltd.-Rs. 330,553/- (2012/13- Rs. 138,521/-), Further details on the work of the Auditor and the Audit Trinco Holiday Resorts (Pvt) Ltd – Rs. 236,910/- (2012/13– Committee are set out in the Audit Committee Report Rs. 173,796/-), Hikkaduwa Holiday Resorts (Pvt) Ltd – on pages 78 and 79. Rs. 281,100/- (2012/13– Rs. 290,767/-), Yala Village (Pvt) Director Director Ltd - Rs. 1,018,334/- (2012/13- Rs. 461,421/-), Beruwala ANNUAL REPORT Holiday Resorts (Pvt) Ltd, - Rs. 591,465/- (2012/13- The audited consolidated Financial Statements were Rs. Nil), Travel Club Pte) Ltd, - Rs. 73,281/- (2012/13- approved for issue by the Board of Directors on 29th And By Order of the Board Rs. Nil), Fantasea World Investments (Pte) Ltd, - May 2014. Rs. 91,355/- (2012/13- Rs. Nil), Tranquility (Pte) Ltd, - Rs. 232,936/- (2012/13- Rs. Nil). The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to The CSR initiatives, including completed and on-going the Sri Lanka Accounting and Auditing Standards Keells Consultants (Private) Limited projects, are detailed in the sustainability report on Monitoring Board on 5th June 2014. Secretaries pages 98 to 141. 29th May 2014 AUDITORS The Audit Committee reviews the appointment of the Auditors, their effectiveness, independence and relationship with the Company, including the level of audit. As far as the Directors are aware, the Auditors, Messrs Ernst & Young, Chartered Accountants, do not have any relationship or interest in the Company, its subsidiaries or joint ventures. 148 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 STATEMENT OF DIRECTORS’ RESPONSIBILITY

The responsibility of the Directors, in relation to the The Directors confirm that the Financial Statements of The Directors are required to provide the Auditors with Financial Statements of the John Keells Hotels PLC the Company and its subsidiaries for the year ended 31st every opportunity to take whatever steps and undertake (Company) and the Consolidated Financial Statements of March 2014 presented in the Report have been prepared whatever inspection they consider appropriate for the the Company and its Subsidiaries (Group) is set out in this in accordance with the Sri Lanka Accounting and purpose of enabling them to give their independent statement. This Statement of Directors’ Responsibility is Auditing Standards Act No. 15 of 1995 , the Companies Audit Report. The Directors are of the view that they to be read in conjunction with the Report of the Auditors Act No. 7 of 2007 and has provided the information have discharged their responsibilities in this regard. and is made to distinguish the respective responsibilities required by and otherwise complied with the listing of the Directors and of the Auditors in relation to the rules of the Colombo Stock Exchange (CSE) and the COMPLIANCE REPORT Financial Statements contained in this Annual Report. code of best practice on Corporate Governance issued The Directors confirm that, to the best of their jointly by the Institute of Chartered Accountants of Sri knowledge, all taxes and levies payable by the Company The Financial Statements comprise of: Lanka (CA Sri Lanka) and the Securities and Exchange and the subsidiaries and all contributions, levies z Income statement and statement of comprehensive Commission of Sri Lanka (SEC). and taxes payable on behalf of the employees of the income of the Company and its subsidiaries, which Company and its subsidiaries, and all other known present a true and fair view of the profit and loss of In preparing the Financial Statements, the Directors statutory obligations as at the Reporting date have been the Company and its subsidiaries for the financial have selected appropriate accounting policies and have paid or provided for, except as specified in Note 38 to the year. applied them consistently. Reasonable and prudent Financial Statements covering Contingent Liabilities. judgements and estimates have been made and z Statement of financial position, which represents applicable accounting standards have been followed a true and fair view of the state of affairs of the By Order of the Board and the Financial Statements have been prepared on Company and its subsidiaries as at the end of the a going concern basis. The Directors are of the view financial year: that adequate funds and other resources are available within the Company to continue in operation for the As per the provisions of the Companies Act No. 7 of foreseeable future. 2007, the Board of your Company shall cause the Annual General Meeting report to be sent to every Keells Consultants (Private )Limited The Directors have taken all reasonable steps expected shareholder of the Company no less than fifteen Secretaries of them to safeguard the assets of the Company and working days before the date fixed for holding the of the Group and to establish appropriate systems of Annual General Meeting. 29th May 2014 internal controls in order to prevent, deter and detect any fraud, misappropriation or other irregularities. The Directors of the Company are required by the provisions of the Companies Act No. 7 of 2007 to prepare The Directors have also taken all reasonable steps to Financial Statements which gives a true and fair view of ensure that the Company and its Subsidiaries maintain the state of affairs of the Company and of the Group as adequate and accurate accounting books of record at the end of the financial year, and of the Profit or Loss which reflect the transparency of transactions and and of the Cash flows of the Company and of the Group provide an accurate disclosure of the financial position for the financial year. of the Company and its subsidiaries.

149 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF JOHN KEELLS HOTELS PLC Report on the financial statements Scope of audit and basis of opinion Opinion We have audited the accompanying financial Our responsibility is to express an opinion on these In our opinion, so far as appears from our examination, statements of John Keells Hotels PLC (“Company”), the financial statements based on our audit. We conducted the Company maintained proper accounting records consolidated financial statements of the Company our audit in accordance with Sri Lanka Auditing for the year ended 31 March 2014 and the financial and its subsidiaries which comprise the statements of Standards. Those standards require that we plan and statements give a true and fair view of the Company’s financial position as at 31 March 2014, and the income perform the audit to obtain reasonable assurance financial position as at 31 March 2014 and its statements, statements of comprehensive income, whether the financial statements are free from material performance and cash flows for the year then ended in statements of changes in equity and statements of misstatement. accordance with Sri Lanka Accounting Standards. cash flows for the year then ended, and a summary of significant accounting policies and other explanatory An audit includes examining, on a test basis, evidence In our opinion, the consolidated financial statements notes. supporting the amounts and disclosures in the financial give a true and fair view of the financial position statements. An audit also includes assessing the as at 31 March 2014 and the performance and cash Management’s responsibility for the financial statements accounting principles used and significant estimates flows for the year then ended, in accordance with Sri Management is responsible for the preparation and made by management, as well as evaluating the overall Lanka Accounting Standards, of the Company and its fair presentation of these financial statements in financial statement presentation. subsidiaries dealt with thereby, so far as concerns the accordance with Sri Lanka Accounting Standards. shareholders of the Company. This responsibility includes: designing, implementing We have obtained all the information and explanations and maintaining internal control relevant to the which to the best of our knowledge and belief were Report on other legal and regulatory requirements preparation and fair presentation of financial necessary for the purposes of our audit. We therefore These financial statements also comply with the statements that are free from material misstatement, believe that our audit provides a reasonable basis for requirements of Sections 151(2) and 153(2) to 153(7) of the whether due to fraud or error; selecting and applying our opinion. Companies Act No. 07 of 2007. appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

29th May 2014 Colombo. 150 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INCOME STATEMENT

For the year ended 31st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

Revenue 3 10,966,381 9,341,581 - - Cost of sales (3,590,914) (3,004,424) - -

Gross proﬁt 7, 375,467 6,337,157 - -

Dividend income 4 - - 382,781 34,937 Other operating income 5 156,013 143,319 13,699 7,478 Administrative expenses (3,428,468) (3,123,523) (24,971) (30,159) Distribution expenses (326,174) (307,668) - - Other operating expenses 6 (1,503,527) (1,268,152) (205) (489)

Results from operating activities 2,273,311 1,781,133 371,304 11,767

Finance expenses 7.2 (533,877) (537,096) (12,728) (7,186) Finance income 7.1 153,805 38,859 29,401 70,374 Net ﬁnance income / (expense) (380,072) (498,237) 16,673 63,188

Proﬁt before tax 8 1,893,239 1,282,896 387,977 74,955 Tax expense 9 (318,313) (161,877) (12,068) (12,839) Proﬁt for the year 1,574,926 1,121,019 375,909 62,116

Attributable to : Equity holders of the parent 1,565,846 1,116,779 Non-controlling interests 9,080 4,240 1,574,926 1,121019

Rs. Rs.

Earnings per share 10 1.08 0.77 Dividends per share 11 - 0.30

Figures in brackets indicate deductions.

The Accounting Policies and Notes on pages 157 to 209 form an integral part of these ﬁnancial statements. 151 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 STATEMENT OF COMPREHENSIVE INCOME

Group Company In Rs. ‘000s 2014 2013 2014 2013

Proﬁt for the year 1,574,926 1,121,019 375,909 62,116

Other comprehensive income Revaluation of land and buildings - 2,018,498 - - Income tax on other comprehensive income - (58,087) - - Exchange differences on translation of foreign operations 253,902 (101,851) - - Fair value loss on available for sale assets - (5) - (5) Actuarial gain / (Loss) on employee beneﬁt plan (11,487) 4,212 - -

Other comprehensive income for the year, net of tax 242,415 1,862,767 - (5)

Total comprehensive income for the year, net of tax 1,817,341 2,983,786 375,909 62,111

Attributable to: Equity holders of the parent 1,808,261 2,958,362 Non-controlling interests 9,080 25,424 1,817,341 2,983,786

Note: All values are in rupees thousands, unless otherwise stated. Figures in brackets indicate deductions. 152 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 STATEMENT OF FINANCIAL POSITION

As at 31st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

ASSETS Non-Current Assets Property, plant and equipment 14 13,213,160 13,471,801 - - Lease rentals paid in advance 15 8,235,508 8,639,214 - - Intangible assets 16 670,407 670,407 - - Investments in subsidiaries and joint ventures 17 - - 10,398,901 9,456,741 Other non current ﬁnancial assets 17 22,570 25,058 8 8 Deferred tax assets 18 38,368 54,231 - - Other non-current assets 19 620 - - - 22,180,633 22,860,711 10,398,909 9,456,749

Current Assets Inventories 20 196,666 181,338 - - Trade and other receivables 21 909,040 740,558 - - Other current assets 22 313,941 402,412 2,794 1,411 Amounts due from related parties 36 138,215 168,994 5,513 10,561 Loans given to related parties 23 - - - 356,400 Other investments - deposits 25 1,985,510 321,731 32,530 60,000 Cash in hand and at bank 24 743,927 588,394 2,648 46,897 4,287,299 2,403,427 43,485 475,269

Total Assets 26,467,932 25,264,138 10,442,394 9,932,018

EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital 26 9,500,247 9,500,247 9,500,247 9,500,247 Other components of equity 27 3,886,925 3,628,684 (5) (5) Revenue reserves 4,708,642 3,165,257 788,107 412,199 18,095,814 16,294,188 10,288,349 9,912,441 Non-controlling interests 100,442 92,623 - - Total Equity 18,196,256 16,386,811 10,288,349 9,912,441

153 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

As at 31st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

Non-Current Liabilities Interest bearing borrowings 28 4,245,400 5,571,060 33,441 - Deferred tax liabilities 29 144,361 114,422 - - Employee beneﬁt liabilities 30 113,836 89,346 - - Other deferred liabilities 31 68,426 34,160 - - Other non-current ﬁnancial liabilities 32 63,752 59,253 - - 4,635,775 5,868,241 33,441 -

Current Liabilities Trade and other payable 33 858,347 992,007 13,664 11,302 Other current liabilities 35 258,340 104,846 - - Amounts due to related parties 36 110,892 125,783 702 782 Income tax liabilities 34 292,991 240,374 5,278 7,493 Current portion of interest bearing borrowings 28 1,840,626 1,325,111 100,000 - Bank overdrafts 24 274,705 220,965 960 - 3,635,901 3,009,086 120,604 19,577 Total Equity and Liabilities 26,467,932 25,264,138 10,442,394 9,932,018

I certify that the ﬁnancial statements comply with the requirements of the Companies Act, No. 7 of 2007.

D.A.R.C. Perera Chief Financial Ofﬁcer

The Board of Directors is responsible for the preparation and presentation of these ﬁnancial statements.

Signed for and on behalf of the Board by,

S.C. Ratnayake J.R.F Peiris Chairman Director

Figures in brackets indicate deductions.

The Accounting Policies and Notes on pages 157 to 209 form an integral part of these ﬁnancial statements. 29 May 2014 154 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 STATEMENT OF CHANGES IN EQUITY

Attributable to Equity Holders of the Parent Non- GROUP Stated Revaluation Exchange Revenue Available ESOP Total controlling Total Capital Reserve Equalisation Reserve for sale Reserve Interest Equity In Rs. ‘000s Reserve Reserve

Balance as at 01st April 2012 9,500,247 675,688 1,115,625 2,482,461 - - 13,774,021 67,725 13,841,745 Proﬁt for the year - - - 1,116,779 - - 1,116,779 4,240 1,121,019 Other comprehensive income / (loss) - 1,939,227 (101,851) 4,212 (5) - 1,841,583 21,184 1,862,767 Total comprehensive income / (loss) - 1,939,227 (101,851) 1,120,991 (5) - 2,958,362 25,424 2,983,786 Dividend paid 2011/12 - - - (436,844) - - (436,844) - (436,844) Direct cost on share issue - - - (1,351) - - (1,351) (9) (1,360) Dividend paid to minority shareholders ------(517) (517) Balance as at 31st March 2013 9,500,247 2,614,915 1,013,774 3,165,257 (5) - 16,294,188 92,623 16,386,811 Proﬁt for the year - - - 1,565,846 - - 1,565,846 9,080 1,574,926 Other comprehensive income - - 253,902 (11,487) - - 242,415 - 242,415 Total comprehensive income - - 253,902 1,554,359 - - 1,808,261 9,080 1,817,341 Share based payment - - - - - 4,339 4,339 - 4,339 Group affect of acquisition of right issue of a Subsidiary - - - 373 - - 373 - 373 Acquisitions and changes in effective holding ------53 53 Direct cost on share issue - - - (11,347) - - (11,347) (82) (11,429) Dividend paid to minority shareholders ------(1,233) (1,233) Balance as at 31st March 2014 9,500,247 2,614,915 1,267,676 4,708,642 (5) 4,339 18,095,814 100,442 18,196,256

COMPANY Stated Available Revenue Total Capital for sale Reserve Equity In Rs. ‘000s Reserve

Balance as at 01st April 2012 9,500,247 - 786,926 10,287,173 Proﬁt for the year - - 62,116 62,116 Other comprehensive income / (loss) - (5) - (5) Total comprehensive income / (loss) - (5) 62,116 62,111 Final dividend paid - 2011/12 - - (436,844) (436,844) Balance as at 31st March 2013 9,500,247 (5) 412,198 9,912,440 Proﬁt for the year - - 375,909 375,909 Other comprehensive income - - - - Total comprehensive income - - 375,909 375,909 Balance as at 31st March 2014 9,500,247 (5) 788,107 10,288,349

Figures in brackets indicate deductions.

The Accounting Policies and Notes on pages 157 to 209 form an integral part of these ﬁnancial statements. 155 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 STATEMENT OF CASH FLOWS

For the year ended 31st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

Cash flows From Operating Activities Net proﬁt before taxation 1,893,239 1,282,896 387,977 74,955

Adjustments for; Depreciation 819,189 651,010 - - Provision for employee beneﬁt costs 30 21,010 18,821 - - Share based payment expense 4,339 - - - Amortisation of prepaid lease rentals 15 666,663 738,345 - - Interest expense 7 533,877 537,096 12,728 7,186 Charge / (reversal) of impairment 6,653 - - 3,832 Amortisation of grant received 31 (325) (325) - - Dividend received - - (382,781) (34,937) Interest income 7 (153,805) (38,859) (29,401) (70,374) Loss on revaluation of property, plant and equipment - 8,229 - - Loss on disposal of property, plant and equipment (4,201) 28,659 - - Provision for slow moving inventories 2,515 2,274 - - Provision for deferred liabilities 39,090 34,423 - - Operating proﬁt/(loss) before working capital changes 3,828,244 3,262,569 (11,477) (19,338)

(Increase)/decrease in inventories (17,843) (12,131) - - (Increase)/decrease in trade and other receivables (111,171) (100,531) - - (Increase)/decrease in other current assets 88,470 176,305 (1,608) 295 (Increase)/decrease in amounts due from related parties 30,779 30,876 5,274 (1,814) Increase/(decrease) in amounts due to related parties (14,891) 5,061 (80) (967) Increase/(decrease) in other current liabilities 153,493 (194,426) - - Increase/(decrease) in trade and other payable (133,662) 165,287 2,360 1,583 Cash Generated from/(used in) Operations 3,823,419 3,333,010 (5,531) (20,241)

Interest paid (533,877) (537,096) (12,728) (7,186) Income tax paid (205,866) (184,158) (14,283) (9,509) Interest received 153,805 38,859 29,401 70,374 Dividend received - - 382,781 34,937 Employee beneﬁt costs transferred 30 2,490 (3,268) - - Gratuity paid 30 (10,497) (6,672) - - Net Cash from/(used in) Operating Activities 3,229,474 2,640,675 379,640 68,375 156 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 STATEMENT OF CASH FLOWS CONTD.

For the year ended 31st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

Cash Flows from Investing Activities Purchase of property, plant and equipment (610,037) (2,440,341) - - Proceeds from disposal of property, plant and equipment 89,031 153,277 - - Investments in short term deposits (385,441) (42,093) - - Staff vehicle loan given (4,165) - - - Loans given to related parties - - 356,400 103,100 Investments in subsidiaries and joint ventures - - (942,160) (132,000) Net Cash used in Investing Activities (910,612) (2,329,157) (585,760) (28,900)

Cash Flows from Financing Activities Direct cost on share issue (11,428) (1,360) - - Proceeds from minority on issue of rights in subsidiaries 425 - - - Dividend paid to equity holders of parent - (436,844) - (436,844) Net repayment of short term borrowings - (82,500) - - Repayments of long term borrowings (2,615,131) (1,048,839) - - Proceeds long term borrowings 1,688,637 1,231,283 133,441 - Dividend paid to minority shareholders (1,233) (517) - - Net Cash Flows from/(used in) Financing Activities (938,730) (338,777) 133,441 (436,844)

Net Increase/(decrease) in Cash and Cash Equivalents 1,380,132 (27,259) (72,679) (397,369) Cash and Cash Equivalents at the beginning of the Year 647,067 674,326 106,897 504,266 Cash and Cash Equivalents at the End of the Year 24 2,027,199 647,067 34,218 106,897

Analysis of Cash and Cash Equivalents Other Investments 1,557,977 279,638 32,530 60,000 Cash in hand and at bank 743,927 588,394 2,648 46,897 Bank overdrafts (274,705) (220,965) (960) - Cash and Cash Equivalents at the End of the Year 24 2,027,199 647,067 34,218 106,897

Figures in brackets indicate deductions.

The Accounting Policies and Notes on pages 157 to 209 form an integral part of these ﬁnancial statements. 157 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS

1.1 Corporate Information There were no significant changes in the nature of The significant accounting policies are discussed in Reporting Entity the principal activities of the Company and the Group Note 1.4 below. during the financial year under review. John Keells Hotels PLC. is a public limited liability The indicative US Dollar financial statements on pages Company incorporated and domiciled in Sri Lanka and Responsibility for Financial Statements 211 to 213 does not form part of the financial statements listed on the Colombo Stock Exchange. The registered The responsibility of the Directors in relation to the prepared in accordance with SLFRS/LKAS. office and principal place of business of the Company is financial statements is set out in ‘The statement of located at 117, Sir Chittampalam A. Gardiner Mawatha, Directors’ responsibility on Page 148 of the Annual Report. Basis of consolidation Colombo 2. The former registered office of the The consolidated Financial Statements comprise the Company was at 130, Glennie Street, Colombo 02. Statement of compliance financial statements of the Company and its subsidiaries The financial statements which comprise the income In the Director’s opinion, the Company’s parent as at 31st March 2014. The financial statements of the statement, statement of comprehensive income, statement undertaking is John Keells Holdings PLC, which is a subsidiaries are prepared in compliance with the Group’s of financial position, statement of changes in equity and accounting policies unless otherwise stated. Company incorporated in Sri Lanka. the statement of cash flows, together with the accounting policies and notes (the “financial statements”) have been All intra-group balances, income and expenses, Consolidated Financial Statements prepared in accordance with Sri Lanka Accounting unrealised gains and losses and dividends resulting The financial statements for the year ended 31 March Standards (SLFRS/ LKAS) as issued by the Institute of from intra-group transactions are eliminated in full. 2014, comprise “the Company” referring to John Keells Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Hotels PLC as the holding Company and “the Group” requirement of the Companies Act No. 7 of 2007. Subsidiaries referring to the companies whose accounts have been consolidated therein. 1.2 Basis Of Preparation Subsidiaries are those enterprises controlled by the parent. Control exists when the parent holds more than 50% of the Bases of Measurement voting rights or otherwise has a controlling interest. Approval of Financial Statements The consolidated financial statements have been The financial statements for the year ended 31 March prepared on an accrual basis and under the historical Subsidiaries are fully consolidated from the date 2014 were authorised for issue by the Board of Directors cost convention, other than land and buildings, and of acquisition or incorporation, being the date on on 29th May 2014. available-for-sale financial assets that have been which the Group obtains control, and continue to be measured at fair value. consolidated until the date such control ceases. Principal Activities and Nature of Operations Presentation and Functional Currency Holding Company The financial statements of the subsidiaries are The consolidated financial statements are presented John Keells Hotels PLC, the Group’s holding Company, prepared for the same reporting period as the parent in Sri Lankan Rupees, the Group’s functional and manages a portfolio of holdings consisting of Company, which is 12 months ending 31 March, using presentation currency, which is the primary economic hoteliering business, which together constitute the John consistent accounting policies. environment in which the Holding Company operates. Keells Hotels Group. Each entity in the Group uses the currency of the primary economic environment in which they operate Subsidiaries and Joint Ventures as their functional currency. The Companies within the Group are shown in the Group Structure on page 51. The subsidiaries and the All values are rounded to the nearest rupees thousand joint venture are involved in the business of hoteliering. (Rs. ’000) except when otherwise indicated. 158 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

The following subsidiaries have been incorporated 1.3 Accounting Policies 1.3.2 Significant Accounting Judgements, Estimates outside Sri Lanka: 1.3.1 Changes in Accounting Policies and Assumptions The accounting policies adopted by the Group are The preparation of the Financial Statements of the Group require the management to make judgements, Country of Name consistent with those used in the previous year except estimates and assumptions, which may affect the Incorporation for the following: amounts of income, expenditure, assets , liabilities z Retirement benefit obligation (Gratuity) – policy Mauritius and the disclosure of contingent liabilities, at the end no 1.4.15, which has been changed due to revisions of the reporting period. In the process of applying the John Keells Hotels Mauritius (Pvt) Ltd made to LKAS 19- Employee benefits. Group’s accounting policies, the key assumptions made Republic of relating to the future and the sources of estimation at the Maldives Previously, actuarial gain/(loss) was recognised in reporting date together with the related judgements that John Keells Maldivian Resorts (Pte) Ltd the income statement in the year of occurrence. have a significant risk of causing a material adjustment Tranquility (Pte) Ltd to the carrying amounts of assets and liabilities within Travel Club (Pte) Ltd Revised standard requires recognition of actuarial the next financial year are discussed below. gain or loss in full, in the year of occurrence in the Fantasea World Investments (Pte) Ltd statement of other comprehensive income (OCI). Valuation of property, plant and equipment.

The total profits and losses for the year of the Company The Group measures land and buildings at revalued and of its subsidiaries included in consolidation are Accordingly, the Group has changed its policy amounts with changes in fair value being recognised shown in the consolidated income statement and retrospectively, to recognise actuarial gain / (loss) in in other comprehensive income and in the statement statement of other comprehensive income and all assets other comprehensive income (OCI). of equity. The Group engaged independent valuation and liabilities of the Company and of its subsidiaries specialists to determine fair value of identified land and included in consolidation are shown in the statement of The change in this accounting policy did not buildings. financial position. have an impact on the statement of cash flows or significant impact on the Group’s Earnings Per The valuer has used valuation techniques such as Non-controlling interest which represents the portion Share. market values and discounted cash flow methods where there was lack of comparable market data available of profit or loss and net assets not held by the Group, z Share-based payment – Policy no 1.4.10, which is based on the nature of the property. are shown as a component of profit for the year in the an application of new accounting for share based consolidated income statement and statement of other payment transactions from the current financial Impairment of non-financial assets comprehensive income and as a component of equity year. in the consolidated statement of financial position, Impairment exists when the carrying value of an asset separately from parent’s shareholders’ equity. Comparative information or cash generating unit exceeds its recoverable amount, The presentation and classification of the financial which is the higher of its fair value less costs to sell and The consolidated cash flow statement includes the cash statements of the previous years have been amended, its value in use (VIU). The fair value less costs to sell flows of the Company and its subsidiaries. where relevant for better presentation and to be calculation is based on available data from an active comparable with those of the current year. market, in an arm’s length transaction, of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows 159 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

are derived from the budget for the next five years and and the level of future taxable profits together with discounted cash flow model. The inputs to these models do not include restructuring activities that the Group is future tax planning strategies. are taken from observable markets where possible. not yet committed to or significant future investments that will enhance the asset’s performance of the cash The Group has tax losses carried forward amounting Where this is not feasible, a degree of judgement is generating unit being tested. The recoverable amount to Rs. 2,491 million (2013 - Rs. 2,094 million). These required in establishing fair values. The judgements is most sensitive to the discount rate used for the losses relate to subsidiaries that have a history of include considerations of inputs such as liquidity risk, discounted cash flow model as well as the expected losses that do not expire and may not be used to offset credit risk and volatility. Changes in assumptions about future cash inflows and the growth rate used for other tax liabilities and where the subsidiaries have no these factors could affect the reported fair value of extrapolation purposes. The key assumptions used to taxable temporary differences nor any tax planning financial instruments. determine the recoverable amount for the different opportunities available that could partly support cash generating units, are further explained in Note 16. the recognition of these losses as deferred tax assets. 1.4. Summary of Significant Accounting Policies Further details on taxes are disclosed in Note 9 in the 1.4. 1. Revenue recognition Taxes financial statements. Revenue is recognised to the extent that it is probable The Group is subject to income tax and other taxes that the economic benefits will flow to the Group, Deferred tax for tax holiday companies including VAT. Significant judgement was required to and the revenue and associated costs incurred or to determine the total provision for current, deferred and Deferred tax during the tax holiday period for Group be incurred can be reliably measured. Revenue is other taxes due to uncertainties that exist, in respect to companies under BOI tax holidays has been recognised measured at the fair value of the consideration received the interpretation of the applicability of tax laws, at the for temporary differences, where reversals of such or receivable, net of trade discounts and value added time of the preparation of these financial statements. differences extend beyond the tax exemption period. taxes, after eliminating sales within the Group.

Uncertainties also exist with respect to the interpretation Employee Benefit Liability The following specific criteria are used for recognition of complex tax regulations and the amount and timing of The employee benefit liability of the Group is based of revenue: future taxable income. Given the wide range of business on the actuarial valuation carried out by Independent relationships and the long-term nature and complexity actuarial specialist. The actuarial valuations involve Rendering of services of existing contractual agreements, differences arising making assumptions about discount rates and future Revenue from rendering of services is recognised in the between the actual results and the assumptions made, or salary increases. The complexity of the valuation, the accounting period in which the services are rendered or future changes to such assumptions, could necessitate underlying assumptions and its long term nature, the performed. future adjustments to tax income and expense already defined benefit obligation is highly sensitive to changes recorded. Accordingly, based on such reasonable in these assumptions. All assumptions are reviewed Room revenue is recognised on the rooms occupied on estimates the Group establishes the provisions to be at each reporting date. Details of the key assumptions a daily basis and food and beverage and other related made in the financial year. used in estimating the employee benefit liability are sales are accounted for at the time of sale. contained in Note 30 to the financial statements. Deferred tax assets are recognised for all unused tax Turnover based taxes losses to the extent that it is probable that taxable profit Fair value of financial instruments will be available in the future against which the losses Turnover based taxes include value added tax, Where the fair value of financial assets and financial can be utilised. Significant management judgement is economic service charge, nation building tax, liabilities recorded in the statement of financial position required to determine the amount of deferred tax assets Pradeshiya Sabha levies and tourism development levy. cannot be derived from active markets, their fair value that can be recognised, based upon the likely timing Companies in the Group pay such taxes in accordance is determined using valuation techniques including the with the respective statutes. 160 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

Dividend All expenditure incurred in the running of the business consideration transferred including the recognised Dividend income is recognised when the Group’s right and in maintaining the property, plant and equipment amount of any non-controlling interests in the to receive the payment is established. in a state of efficiency has been charged to the income acquiree, less the net recognised amount (generally fair statement. value) of the identifiable assets acquired and liabilities Finance income assumed, all measured as of the acquisition date. For the purpose of presentation of the income When the excess is negative, a bargain purchase gain is Finance income comprises interest income on funds statement, the “function of expenses” method has been recognised immediately in the income statement. invested (including available-for-sale financial assets), adopted, on the basis that it presents fairly the elements gains on the disposal of available-for-sale financial of the Company and Group’s performance. The Group elects on a transaction-by-transaction assets. basis whether to measure non-controlling interests Finance costs at fair value, or at their proportionate share of the Interest income or expense is recorded using the recognised amount of the identifiable net assets, at the effective interest rate (EIR), which is the rate that exactly Finance costs comprise interest expense on borrowings, acquisition date. Transaction costs, other than those discounts the estimated future cash payments or receipts unwinding of the discount on provisions, losses associated with the issue of debt or equity securities, through the expected life of the financial instrument or on disposal of available for- sale financial assets, that the Group incurs in connection with a business a shorter period, where appropriate, to the net carrying impairment losses recognised on financial assets combination are expensed as incurred. amount of the financial asset or liability. Interest income (other than trade receivables) that are recognised in the is included in finance income in the income statement. income statement. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate Gains and losses Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily classification and designation in accordance with Net gains and losses of a revenue nature arising from takes a substantial period of time to get ready for its the contractual terms, economic circumstances and the disposal of property, plant and equipment and intended use or sale are capitalised as part of the cost pertinent conditions as at the acquisition date. other non-current assets, including investments, are of the respective assets. All other borrowing costs are accounted for in the income statement, after deducting expensed in the period they occur. Borrowing costs If the business combination is achieved in stages, the from the proceeds on disposal, the carrying amount of consist of interest and other costs that the Group incurs acquisition date fair value of the acquirer’s previously such assets and the related selling expenses. in connection with the borrowing of funds. held equity interest in the acquiree is re measured to fair value at the acquisition date through income Gains and losses arising from activities incidental to the 1.4.3 Intangible Assets statement. main revenue generating activities and those arising from Basis of recognition a group of similar transactions, which are not material Any contingent consideration to be transferred by are aggregated, reported and presented on a net basis. An intangible asset is recognised if it is probable that the acquirer will be recognised at fair value at the future economic benefits associated with the asset acquisition date. Contingent consideration which is Other income will flow to the Group and the cost of the asset can be deemed to be an asset or liability, which is a financial Other income is recognised on an accrual basis. reliably measured. instrument and within the scope of LKAS 39, is measured at fair value with changes in fair value 1.4. 2 Expenditure recognition Business combinations & goodwill either in the income statement or as a charge to other Expenses are recognised in the income statement Acquisitions of subsidiaries are accounted for using the comprehensive income. If the contingent consideration on the basis of a direct association between the cost acquisition method of accounting. The Group measures is classified as equity, it will not be re measured. incurred and the earning of specific items of income. goodwill at the acquisition date as the fair value of the Subsequent settlement is accounted for within equity. 161 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

In instances where the contingent consideration does 1.4.4 Interest in Joint venture Upon loss of joint control, the Group measures and not fall within the scope of LKAS 39, it is measured in A joint venture is a jointly controlled entity, whereby recognises its remaining investment at its fair value. accordance with the appropriate SLFRS/LKAS. the Group and other parties have a contractual Any differences between the carrying amount of the arrangement that establishes joint control over the former jointly controlled entity upon loss of joint control After initial recognition, goodwill is measured at cost economic activities of the entity. and the fair value of the remaining investment and less any accumulated impairment losses. Goodwill is proceeds from disposal are recognised in the income reviewed for impairment, annually or more frequently The agreement requires unanimous agreement for statement. When the remaining investment constitutes if events or changes in circumstances indicate that the financial and operating decisions among the ventures. significant influence, it is accounted for as investment in carrying value maybe impaired. The Group recognises its interest in the joint venture an associate. using the proportionate consolidation method until the For the purpose of impairment testing, goodwill date on which the Group ceases to have joint control. The 1.4.5 Foreign currency translation acquired in a business combination is, from the Group’s share of each of the assets, liabilities, income Foreign currency transactions and balances acquisition date, allocated to each of the Group’s cash and expenses of the joint venture are combined with The consolidated financial statements are presented in generating units that are expected to benefit from the similar items, line by line, in the consolidated financial Sri Lankan rupees, which is the Company’s functional combination, irrespective of whether other assets or statements. The financial statements of the joint venture and presentation currency. liabilities of the acquiree are assigned to those units. are aligned to the Group accounting policies. The functional currency is the currency of the primary Impairment is determined by assessing the recoverable The gains or losses arising from transactions between economic environment in which the entities of the amount of the cash-generating unit to which the Group and the joint venture are recognised based on Group operate. goodwill relates. Where the recoverable amount of the the substance of the transactions. The Group’s share of cash generating unit is less than the carrying amount, unrealised gain on asset purchases is not recognised All foreign exchange transactions are converted to an impairment loss is recognised. The impairment loss until such assets are resold to a third party. Losses on functional currency, at the rates of exchange prevailing is allocated first to reduce the carrying amount of any these transactions are recognised immediately if the loss at the time the transactions are effected. goodwill allocated to the unit and then to the other assets provides evidence of a reduction in the net realisable value pro-rata to the carrying amount of each asset in the unit. of current assets or an impairment loss. The joint venture Monetary assets and liabilities denominated in is proportionately consolidated until the date on which the foreign currency are translated to functional currency Goodwill and fair value adjustments arising on the Group ceases to have joint control over the joint venture. equivalents at the spot exchange rate prevailing at the acquisition of a foreign operation are treated as assets reporting date. and liabilities of the foreign operation and translated at Joint ventures entered into by the Group, which the closing rate. have been accounted for under the proportionate Non-monetary items that are measured in terms of consolidation method are: historical cost in a foreign currency are translated Where goodwill forms part of a cash-generating unit using the exchange rates as at the dates of the initial and part of the operation within that unit is disposed of, Name Country of transactions. Non-monetary assets and liabilities are the goodwill associated with the operation disposed of is Incorporation translated using exchange rates that existed when the included in the carrying amount of the operation when Sentinel Realty Pvt Ltd Sri Lanka values were determined. The gain or loss arising on determining the gain or loss on disposal of the operation. translation of non-monetary items is recognised in line Goodwill disposed of in this circumstance is measured Financial statements of joint ventures are with the gain or loss of the item that gave rise to the based on the relative values of the operation disposed of proportionately consolidated using their respective 12 translation difference. and the portion of the cash-generating unit retained. month financial reporting period drawn to 31 March. 162 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

Foreign operations are those that are enacted or substantively enacted, at losses carried forward, to the extent that it is probable The statement of financial position and income the reporting date in the countries where the Group that taxable profit will be available against which the statement of overseas subsidiaries and joint ventures operates and generates taxable income. deductible temporary differences and the unused tax which are deemed to be foreign operations are credits and tax losses carried forward can be utilised translated to Sri Lankan rupees at the rate of exchange Current income tax relating to items recognised except: prevailing as at the reporting date and at the average directly in equity is recognised in equity and for z where the deferred income tax asset relating to annual rate of exchange for the period respectively. items recognised in other comprehensive income is the deductible temporary difference arises from recognised in other comprehensive income and not the initial recognition of an asset or liability in a The exchange rates applicable during the period were in the income statement. Management periodically transaction that is not a business combination and, as follows: evaluates positions taken in the tax returns with at the time of the transaction, affects neither the respect to situations in which applicable tax regulations q||²ÍǱĿ¼¾²æÇĿ²¾ĿÇqÜq{¦Ŀ¼¾²æÇĿ²¾Ŀ¦²ÂÂĿqƓ Reporting Date Income Statement are subject to interpretation and establishes provisions z in respect of deductible temporary differences where appropriate. 2014 2013 2014 2013 associated with investments in subsidiaries, Rs. Rs. Rs. Rs. associates and interests in joint ventures, deferred Deferred tax tax assets are recognised only to the extent that it is US dollar 130.70 126.75 130.09 126.75 Deferred tax is provided using the liability method on probable that the temporary differences will reverse temporary differences at the reporting date between The exchange differences arising on the translation in the foreseeable future and taxable profit will be the tax bases of assets and liabilities and their carrying are taken directly to other comprehensive income. On available against which the temporary differences amounts for financial reporting purposes. disposal of a foreign entity, the deferred cumulative can be utilised. amount recognised in other comprehensive income Deferred tax liabilities are recognised for all taxable relating to that particular foreign operation is The carrying amount of deferred tax assets is reviewed temporary differences, except: recognised in the income statement. at each reporting date and reduced to the extent that it z where the deferred tax liability arises from the is no longer probable that sufficient taxable profit will The Group treated goodwill and any fair value initial recognition of goodwill or of an asset or be available to allow all or part of the deferred tax asset adjustments to the carrying amounts of assets and liability in a transaction that is not a business to be utilised. Unrecognised deferred tax assets are liabilities arising on the acquisition as assets and combination and, at the time of the transaction, reassessed at each reporting date and are recognised liabilities of the parent. Therefore, those assets and affects neither the accounting profit nor taxable to the extent that it has become probable that future liabilities are non-monetary items already expressed profit or loss and taxable profit will allow the deferred tax asset to be in the functional currency of the parent and no further z in respect of taxable temporary differences recovered. translation differences occur. associated with investments in subsidiaries, associates and interests in joint ventures, where Deferred tax assets and liabilities are measured at 1.4.6 Tax the timing of the reversal of the temporary tax rates that are expected to apply to the year when Current tax differences can be controlled and it is probable that the asset is realised or liability is settled, based on the temporary differences will not reverse in the the tax rates and tax laws that have been enacted or Current tax assets and liabilities for the current and foreseeable future. substantively enacted as at the reporting date. prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Deferred tax assets are recognised for all deductible Deferred tax relating to items recognised outside The tax rates and tax laws used to compute the amount temporary differences, and unused tax credits and tax income statement is recognised outside income 163 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

statement. Deferred tax items are recognised in parts of the plant and equipment and borrowing costs amount of the asset. Upon disposal, any revaluation correlation to the underlying transaction either in for long-term construction projects if the recognition reserve relating to the particular asset being sold is other comprehensive income or directly in equity. criteria are met. When significant parts of plant and transferred to retained earnings. equipment are required to be replaced at intervals, the Deferred tax assets and deferred tax liabilities are Group de-recognises the replaced part, and recognises De-recognition offset, if a legally enforceable right exists to set off the new part with its own associated useful life. All An item of property, plant and equipment are current tax assets against current tax liabilities and other repair and maintenance costs are recognised in derecognised upon replacement, disposal or when no when the deferred taxes relate to the same taxable the income statement as incurred. future economic benefits are expected from its use. Any entity and the same taxation authority. gain or loss arising on de-recognition of the asset is Land and buildings are measured at fair value included in the income statement in the year the asset Sales tax less accumulated depreciation on buildings and is derecognised. Revenues, expenses and assets are recognised net of the impairment charged subsequent to the date of the amount of sales tax except: revaluation. Depreciation z where the sales tax incurred on a purchase of asset Depreciation is calculated by using a straight-line The carrying values of property, plant and equipment or service is not recoverable from the taxation method on the cost or valuation of all property, plant are reviewed for impairment when events or changes in authority, in which case the sales tax is recognised and equipment, commencing from the month of circumstances indicate that the carrying value may not as part of the cost of acquisition of the asset or as purchase and no depreciation is provided in the month be recoverable. part of the expense item as applicable and of disposal, other than freehold land, in order to write off such amounts over the estimated useful economic z receivables and payable that are stated with the Where land and buildings are subsequently revalued, life of such assets or over the unexpired period of lease, amount of sales tax included. the entire class of such assets is revalued at fair value whichever is lower. on the date of revaluation. The Group has adopted a The net amount of sales tax recoverable from, or guideline of revaluing assets by a professional valuer at Each part of an item of property, plant and equipment payable to, the taxation authority is included as part least once in every five years. of receivables or payable in the statement of financial with a cost that is significant in relation to the total cost of the item shall be depreciated separately. position. Any revaluation surplus is recognised in other comprehensive income and accumulated in equity in 1.4.7 Property, plant and equipment the asset revaluation reserve, except to the extent that Basis of recognition it reverses a revaluation decrease of the same asset Property, plant and equipment are recognised if it is previously recognised in the income statement, in probable that future economic benefits associated with which case the increase is recognised in the income the asset will flow to the Group and the cost of the asset statement. A revaluation deficit is recognised in the can be reliably measured. income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the Basis of measurement asset revaluation reserve. Plant and equipment are stated at cost less accumulated Accumulated depreciation as at the revaluation date depreciation and any accumulated impairment loss. is eliminated against the gross carrying amount of the Such cost includes the cost of replacing component asset and the net amount is restated to the revalued 164 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

The estimated useful life of assets is as follows: leased property or, if lower, at the present value of The cumulative expense recognised for equity-settled the minimum lease payments. Lease payments are transactions at each reporting date until the vesting Assets Years apportioned between finance charges and reduction date reflects the extent to which the vesting period has Buildings on leasehold land Estimated lease of the lease liability so as to achieve a constant rate expired and the Group’s best estimate of the number of period of interest on the remaining balance of the liability. equity instruments that will ultimately vest. Finance charges are recognised in finance costs in the Buildings freehold land 30 - 60 income statement. The income statement expense or credit for a period Plant and machinery 03 - 10 represents the movement in cumulative expense Equipment 05 - 08 A leased asset is depreciated over the useful life of the recognised as at the beginning and end of that period Furniture and fittings 05 - 08 asset. However, if there is no reasonable certainty that and is recognised in the share based payment plan. (See the Group will obtain ownership by the end of the Note 27.3) Motor vehicles 05 lease term, the asset is depreciated over the shorter Computer equipment 05 of the estimated useful life of the asset and the lease No expense is recognised for awards that do not Cutlery, crockery and glassware 03 term. Operating lease payments are recognised as ultimately vest, except for equity-settled transactions and linen an operating expense in the income statement on a where vesting is conditional upon a market or straight-line basis over the lease term. non-vesting condition, which are treated as vesting Marine vessels 04 - 05 irrespective of whether or not the market or non- 1.4.9 Lease rentals paid in advance vesting condition is satisfied, provided that all other The asset’s residual values and useful lives are reviewed, performance and service conditions are satisfied. and adjusted if appropriate, at each financial year end. Prepaid lease rentals paid to acquire land use rights are amortised over the lease term. Details of the Where the terms of an equity-settled transaction award 1.4.8 Leases leasehold property are given in Note 15 to the financial statements. are modified, the minimum expense recognised is the The determination of whether an arrangement is, expense as if the terms had not been modified, if the or contains, a lease is based on the substance of the 1.4.10 Employee Share Option Plan original terms of the award are met. An additional arrangement at the inception date, whether fulfillment expense is recognised for any modification that Employees of the Group receive remuneration in the of the arrangement is dependent on the use of a specific increases the total fair value of the share-based form of share-based payment transactions, whereby asset or assets or the arrangement conveys a right to payment transaction, or is otherwise beneficial to the employees render services as consideration for equity use the asset, even if that right is not explicitly specified employee as measured at the date of modification. in an arrangement. instruments (equity-settled transactions). Where an equity-settled award is cancelled, it is treated The Group applies SLFRS 2 Share Based Payments in For arrangements entered into prior to 1 April 2011, as if it vested on the date of cancellation, and any accounting for employee remuneration in the form of the date of inception is deemed to be 1 April 2012 in expense not yet recognised for the award is recognised shares from financial year 2013/14 onwards. accordance with SLFRS 1. immediately. This includes any award where non- vesting conditions within the control of either the Equity-settled transactions Group as a lessee entity or the employee are not met. However, if a new Finance leases which transfer to the Group The cost of equity-settled transactions is recognised, award is substituted for the cancelled award, and substantially all the risks and benefits incidental to together with a corresponding increase in other designated as a replacement award on the date that it ownership of the leased item, are capitalised at the capital reserves in equity, over the period in which is granted, the cancelled award and the new award are commencement of the lease at the fair value of the the performance and service conditions are fulfilled. 165 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

treated as if they were a modification of the original by taking into account any discount or premium on the entity has the ability and intention to hold the award, as described in the previous paragraph. acquisition and fees or costs that are an integral part financial asset accordingly. of the EIR. The EIR amortisation is included under 1.4.11 Financial instruments — initial recognition and finance income under the income statement. The losses For a financial asset reclassified out of the available- subsequent measurement arising from impairment are recognised in the income for-sale category, any previous gain or loss on that i) Financial assets statement. asset that has been recognised in equity is amortised to income statement over the remaining life of the Initial recognition and measurement Available-for-sale financial investments investment using the EIR. Any difference between Financial assets within the scope of LKAS 39 are Available-for-sale financial investments include equity the new amortised cost and the expected cash flows classified as financial assets at fair value through investments. Equity investments classified as available- is also amortised over the remaining life of the asset income statement, loans and receivables, held-to- for-sale are those, which are neither classified as held using the EIR. If the asset is subsequently determined maturity investments, available-for-sale financial for trading nor designated at fair value through income to be impaired, then the amount recorded in equity is assets, or as derivatives designated as hedging statement. reclassified to the income statement. instruments in an effective hedge, as appropriate. The Group determines the classification of its financial After initial measurement, available-for-sale financial Derecognition assets at initial recognition. investments are subsequently measured at fair value A financial asset (or, where applicable a part of a with unrealised gains or losses recognised as other financial asset or part of a group of similar financial All financial assets are recognised initially at fair value comprehensive income in the available-for-sale reserve assets) is derecognised when: plus, in the case of assets not at fair value through until the investment is derecognised, at which time income statement, directly attributable transaction z The rights to receive cash flows from the asset have the cumulative gain or loss is recognised in other costs. expired operating income, or determined to be impaired, at z The Group has transferred its rights to receive cash which time the cumulative loss is reclassified to the The Group’s financial assets include cash and short- flows from the asset or has assumed an obligation income statement in finance costs and removed from term deposits, trade and other receivables, loans and to pay the received cash flows in full without the available-for-sale reserve. other receivables, quoted and unquoted financial material delay to a third party under a ‘pass- instruments. through’ arrangement; and either (a) the Group has The Group evaluates its available-for-sale financial transferred substantially all the risks and rewards assets to determine whether the ability and intention Subsequent measurement of the asset, or (b) the Group has neither transferred to sell them in the near term is still appropriate. When nor retained substantially all the risks and rewards The subsequent measurement of financial assets the Group is unable to trade these financial assets due of the asset, but has transferred control of the asset. depends on their classification as follows: to inactive markets and management’s intention to do so significantly changes in the foreseeable future, When the Group has transferred its rights to receive Loans and receivables the Group may elect to reclassify these financial assets cash flows from an asset or has entered into a pass- Loans and receivables are non-derivative financial in rare circumstances. Reclassification to loans and through arrangement, and has neither transferred assets with fixed or determinable payments that are not receivables is permitted when the financial assets meet nor retained substantially all of the risks and rewards quoted in an active market. After initial measurement, the definition of loans and receivables and the Group of the asset nor transferred control of it, the asset is such financial assets are subsequently measured at has the intent and ability to hold these assets for the recognised to the extent of the Group’s continuing amortised cost using the effective interest rate method foreseeable future or until maturity. Reclassification to involvement in it. (EIR), less impairment. Amortised cost is calculated the held-to-maturity category is permitted only when 166 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

In that case, the Group also recognises an associated If the Group determines that no objective evidence of In the case of equity investments classified as available- liability. The transferred asset and the associated impairment exists for an individually assessed financial for-sale, objective evidence would include a significant liability are measured on a basis that reflects the rights asset, whether significant or not, it includes the asset or prolonged decline in the fair value of the investment and obligations that the Group has retained. in a Group of financial assets with similar credit risk below its cost. ‘Significant’ is evaluated against the Continuing involvement that takes the form of a characteristics and collectively assesses them for original cost of the investment and ‘prolonged’ against guarantee over the transferred asset is measured at the impairment. Assets that are individually assessed the period in which the fair value has been below its lower of the original carrying amount of the asset and for impairment and for which an impairment loss is, original cost. Where there is evidence of impairment, the maximum amount of consideration that the Group or continues to be, recognised are not included in a the cumulative loss — measured as the difference could be required to repay. collective assessment of impairment. between the acquisition cost and the current fair value, less any impairment loss on that investment ii) Impairment of financial assets If there is objective evidence that an impairment loss previously recognised in the income statement — is The Group assesses at each reporting date whether has been incurred, the amount of the loss is measured removed from other comprehensive income and there is any objective evidence that a financial asset or as the difference between carrying amount of the asset recognised in the income statement. Impairment a Group of financial assets is impaired. A financial asset and the present value of estimated future cash flows losses on equity investments are not reversed through or a Group of financial assets is deemed to be impaired (excluding future expected credit losses that have not the income statement; increases in their fair value if, and only if, there is objective evidence of impairment yet been incurred). The present value of the estimated after impairment are recognised directly in other as a result of one or more events that has occurred future cash flows is discounted at the financial asset’s comprehensive income. after the initial recognition of the asset (an incurred original effective interest rate. ‘loss event’) and that loss event has an impact on the In the case of debt instruments classified as available- estimated future cash flows of the financial asset or the The carrying amount of the asset is reduced through for-sale, impairment is assessed based on the same Group of financial assets that can be reliably estimated. the use of an allowance account and the amount of the criteria as financial assets carried at amortised cost. loss is recognised in the income statement. Amounts However, the amount recorded for impairment is the Evidence of impairment may include indications receivable together with the associated allowance are cumulative loss measured as the difference between that the debtors or a Group of debtors is experiencing written off when there is no realistic prospect of future the amortised cost and the current fair value, less significant financial difficulty, default or delinquency recovery and all collateral has been realised or has been any impairment loss on that investment previously in payments, the probability that they will enter transferred to the Group. If, in a subsequent year, the recognised in the income statement. bankruptcy or other financial reorganisation and amount of the estimated impairment loss increases where observable data indicate that there is a or decreases because of an event occurring after the Future interest income continues to be accrued based measurable decrease in the estimated future cash flows, impairment was recognised, the previously recognised on the reduced carrying amount of the asset, using such as changes in arrears or economic conditions that impairment loss is increased or reduced by adjusting the rate of interest used to discount the future cash correlate with defaults. the allowance account. If a future write-off is later flows for the purpose of measuring the impairment recovered, the recovery is credited to other income in loss. The interest income is recorded as part of finance Financial assets carried at amortised cost the income statement. income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can For financial assets carried at amortised cost, the Available-for-sale financial investments be objectively related to an event occurring after Group first assesses whether objective evidence of the impairment loss was recognised in the income impairment exists individually for financial assets For available-for-sale financial investments, the statement, the impairment loss is reversed through the that are individually significant, or collectively for Group assesses at each reporting date whether there income statement. financial assets that are not individually significant. is objective evidence that an investment or a Group of investments is impaired. 167 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

iii) Financial liabilities Derecognition An analysis of fair values of financial instruments Initial recognition and measurement A financial liability is derecognised when the obligation and further details as to how they are measured are provided in Note 12.3. Financial liabilities within the scope of LKAS 39 are under the liability is discharged or cancelled or expires. classified as financial liabilities at fair value through 1.4.12 Impairment of non-financial assets income statement, loans and borrowings, or as When an existing financial liability is replaced derivatives designated as hedging instruments in an by another from the same lender on substantially The Group assesses at each reporting date whether effective hedge, as appropriate. The Group determines different terms, or the terms of an existing liability there is an indication that an asset may be impaired. If the classification of its financial liabilities at initial are substantially modified, such an exchange or any such indication exists, or when annual impairment recognition. modification is treated as a derecognition of the testing for an asset is required, the Group makes an original liability and the recognition of a new liability, estimate of the asset’s recoverable amount. An asset’s All financial liabilities are recognised initially at fair and the difference in the respective carrying amounts is recoverable amount is the higher of an asset’s or cash value and, in the case of loans and borrowings, carried recognised in the income statement. generating unit’s fair value less costs to sell and its value at amortised cost. This includes directly attributable in use and is determined for an individual asset, unless transaction costs. iv) Offsetting of financial instruments the asset does not generate cash inflows that are largely Financial assets and financial liabilities are offset and independent of those from other assets or Groups of The Group’s financial liabilities include trade and the net amount reported in the consolidated statement assets. Where the carrying amount of an asset exceeds other payable, bank overdrafts, loans and borrowings, of financial position if, and only if, there is a currently its recoverable amount, the asset is considered impaired financial guarantee contracts. enforceable legal right to offset the recognised and is written down to its recoverable amount. In amounts and there is an intention to settle on a net assessing value in use, the estimated future cash flows are Subsequent measurement basis, or to realise the assets and settle the liabilities discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time simultaneously. The measurement of financial liabilities depends on value of money and the risks specific to the asset. their classification as follows: v) Fair value of financial instruments Impairment losses are recognised in the income Loans and borrowings The fair value of financial instruments that are traded statement, except that, impairment losses in respect of in active markets at each reporting date is determined After initial recognition, interest bearing loans and property, plant and equipment previously revalued are by reference to quoted market prices, without any borrowings are subsequently measured at amortised recognised against the revaluation reserve through the deduction for transaction cost. cost using the effective interest rate method. Gains and statement of other comprehensive income to the extent losses are recognised in the income statement when that it reverses a previous revaluation surplus. the liabilities are derecognised as well as through the For financial instruments not traded in an active market, the fair value is determined using appropriate effective interest rate method (EIR) amortisation process. An assessment is made at each reporting date as valuation techniques. Such techniques may include to whether there is any indication that previously using recent arm’s length market transactions; Amortised cost is calculated by taking into account recognised impairment losses may no longer exist reference to the current fair value of another any discount or premium on acquisition and fees or may have decreased. If such indication exists, instrument that is substantially the same; a discounted or costs that are an integral part of the EIR. The EIR the recoverable amount is estimated. A previously cash flow analysis or other valuation models. amortisation is included under finance costs in the recognised impairment loss is reversed only if there has income statement. been a change in the estimates used to determine the 168 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

asset’s recoverable amount since the last impairment loss The costs incurred in bringing inventories to its present 1.4.17 Government grants was recognised. If that is the case, the carrying amount location and condition, are accounted for as follows: Grants are recognised where there is reasonable of the asset is increased to its recoverable amount. That assurance that the grant will be received and all increased amount cannot exceed the carrying amount Food and Beverage - On a weighted average basis attached conditions will be complied with. When that would have been determined, net of depreciation, House Keeping and the grant relates to an expense item, it is recognised had no impairment loss been recognised for the asset Maintenance - On a weighted average basis as income over the period necessary to match to the in prior years. Such reversal is recognised in the income costs, that it is intended to compensate. Where the Other inventories - At actual cost statement unless the asset is carried at revalued amount, grant relates to an asset, the fair value is credited to a in which case the reversal is treated as a revaluation deferred income account and is released to the income 1.4.14 Cash and cash equivalents increase. After such a reversal, the depreciation charge is statement over the expected useful life of the relevant adjusted in future periods to allocate the asset’s revised Cash and short-term deposits in the statement of asset by equal annual instalments. carrying amount, less any residual value, on a systematic financial position comprise cash at banks and in hand basis over its remaining useful life. and short-term deposits with a maturity of three Where the Group receives non-monetary grants, the months or less. asset and the grant are recorded gross at nominal The following criteria are also applied in assessing amounts and released to the income statement over impairment of specific assets: For the purpose of the cash flow statement, cash the expected useful life and pattern of consumption and cash equivalents consist of cash and short-term of the benefit of the underlying asset by equal annual Goodwill deposits as defined above, net of outstanding bank instalments. Goodwill is tested for impairment annually and when overdrafts. circumstances indicate that the carrying value may be 1.4.18 Provisions, contingent assets and contingent impaired. 1.4.15 Defined benefit obligation - gratuity liabilities The liability recognised in the statement of financial Provisions are recognised when the Group has a Impairment is determined for goodwill by assessing the position is the present value of the defined benefit present obligation (legal or constructive) as a result of recoverable amount of each cash-generating unit (or obligation at the reporting date using the projected unit a past event, it is probable that an outflow of resources Group of cash-generating units) to which the goodwill credit method. Any actuarial gains or losses arising are embodying economic benefits will be required to settle relates. Where the recoverable amount of the cash recognised in other comprehensive income. the obligation and a reliable estimate can be made of generating unit is less than their carrying amount, the amount of the obligation. Where the Group expects an impairment loss is recognised. Impairment losses 1.4.16 Defined contribution plan - Employees’ Provident some or all of a provision to be reimbursed, for example relating to goodwill cannot be reversed in future periods. Fund and Employees’ Trust Fund under an insurance contract, the reimbursement Employees are eligible for Employees’ Provident Fund is recognised as a separate asset but only when the 1.4.13 Inventories contributions and Employees’ Trust Fund contributions reimbursement is virtually certain. The expense Inventories are valued at the lower of cost and net in line with respective statutes and regulations. The relating to any provision is presented in the income realisable value. Net realisable value is the estimated Group contributes the defined percentages of gross statement net of any reimbursement. selling price less estimated costs of completion and the emoluments of employees to an approved Employees’ estimated costs necessary to make the sale. Provident Fund and to the Employees’ Trust Fund If the effect of the time value of money is material, respectively, which are externally funded. provisions are discounted using a current pre-tax rate 169 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

that reflects, where appropriate, the risks specific to the This standard will be effective for annual periods 1.6 Segment Information liability. Where discounting is used, the increase in the beginning on or after 01 January 2014. Operating segments provision due to the passage of time is recognised as a The Group’s segments are determined based on the finance cost. However use of fair value measurement principles Group’s geographical spread of operations. contained in this standard are currently recommended. All contingent liabilities are disclosed as a note to the The Group’s internal organisation and management is financial statements unless the outflow of resources is In addition to the above, following standards will also structured based on the Group’s geographical spread of remote. be effective for annual periods commencing on or after operations. The geographical analysis of turnover and 01 January 2014. profits are based on the location of the operations. Contingent assets are disclosed, where inflow of economic benefit is probable. SLFRS 10 -Consolidated financial statements SLFRS 11 - Joint Arrangements 1.5 Sri Lanka Accounting Standards (SLFRS/LKAS) SLFRS 12 -Disclosure of Interests in Other Entities issued but not yet effective The following SLFRS have been issued by CA Sri Lanka The above parcel of three standards will impact the that have an effective date in the future and have not recognition, measurement and disclosures aspects been applied in preparing these financial statements. currently contained in LKAS 27 - Consolidated and Those SLFRS will have an effect on the accounting separate financial statements, LKAS 28 - Investments policies currently adopted by the Group and may have in associates ,LKAS 31 - Interest in joint ventures and an impact on the future financial statements. SIC-12 and SIC 13 which are on consolidation of special purpose entities(SPEs) and jointly controlled entities (i) SLFRS 9 -Financial Instruments: Classification and respectively. Measurement Establishing a single control model that applies to SLFRS 9, as issued reflects the first phase of work on all entities including Special Purpose Entities and replacement of LKAS 39 and applies to classification removal of the option to proportionately consolidate and measurement of financial assets and liabilities. jointly controlled entities are the significant changes introduced under SLFRS 10 and SLFRS 11 respectively. This standard was originally effective for annual periods commencing on or after 01 January 2015. SLFRS 12, establishes a single standard on disclosures However the effective date has been deferred related to interests in other entities. This incorporates subsequently and the revised effective date is yet to be new disclosures as well as disclosures currently announced. required under LKAS 27, LKAS 28 and LKAS 31. (ii) SLFRS 13 -Fair Value Measurement Based on the preliminary analysis performed, the above SLFRS 13 establishes a single source of guidance under Standards on adoption are not expected to have any SLFRS for all fair value measurements. material impact on the financial statements. 170 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

2 OPERATING SEGMENTS The following tables present revenue, proﬁt information, segment assets and segment liabilities regarding the Group’s operating segments.

For the year ended 31st March Sri Lanka Maldives Group Total In Rs. ‘000s 2014 2013 2014 2013 2014 2013

Net Revenue 4,895,323 3,845,884 6,141,463 5,512,850 11,036,786 9,358,734 Less: inter segment revenue (17,755) (17,153) (52,650) - (70,405) (17,153) Segment revenue 4,877,568 3,828,731 6,088,813 5,512,850 10,966,381 9,341,581

Segment operating profit 809,249 527,922 1,308,050 1,109,892 2,117,299 1,637,814 Other operating income 15,928 22,318 140,085 121,001 156,013 143,319 Finance costs (444,369) (390,390) (89,508) (146,706) (533,877) (537,096) Finance income 145,754 36,940 8,051 1,919 153,805 38,859 Profit before taxation 526,562 196,790 1,366,677 1,086,106 1,893,239 1,282,896 Taxation (131,794) (57,472) (186,519) (104,405) (318,313) (161,877) Profit for the year 394,768 139,318 1,180,158 981,701 1,574,926 1,121,019

Assets Segment assets 13,767,548 13,109,022 12,029,977 11,484,709 25,797,525 24,593,731 Goodwill 670,407 670,407 Total assets 26,467,932 25,264,138

Liabilities Segment liabilities 5,624,507 5,656,414 2,647,169 3,220,913 8,271,676 8,877,327 Total liabilities 8,271,676 8,877,327

Others Purchase of property, plant and equipment 337,804 2,137,995 272,232 302,345 610,036 2,440,340 610,036 2,440,340

Depreciation of property, plant and equipment 566,337 430,807 252,852 220,203 819,189 651,010 819,189 651,010

Amortisation of leasehold properties 3,507 3,507 663,156 734,838 666,663 738,345 666,663 738,345

Provision for retirement beneﬁt costs 21,010 18,821 - - 21,010 18,821 21,010 18,821 171 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

3 REVENUE 3.1 Summary Gross revenue 11,270,752 9,618,044 - - Less: Turnover based taxes Tourism development levy/bed tax (292,799) (270,224) - - Turnover tax (11,572) (6,239) - - Net revenue 10,966,381 9,341,581 - -

Value Added Tax and Goods & Services Tax of Rs. 889 Mn (2013 - Rs. 847 Mn) have been deducted in arriving at the gross revenue.

Group 2014 2013

3.2 Revenue Analysis of the Group by Geographical Segment Segment Sri Lankan hotels 4,877,568 3,828,731 Maldivian hotels 6,088,813 5,512,850 10,966,381 9,341,581

3.3 Proﬁt/(Loss) Before Tax of the Group by Geographical Segment Segment Sri Lankan hotels 526,562 196,790 Maldivian hotels 1,366,677 1,086,106 1,893,239 1,282,896 172 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

4 DIVIDEND INCOME Income from investments in related parties - - 382,781 34,937 - - 382,781 34,937

5 OTHER OPERATING INCOME Exchange gain 119,294 100,955 - 124 Other income 36,712 42,039 13,699 7,354 Amortisation of grant received 7 325 - - 156,013 143,319 13,699 7,478

6 OTHER OPERATING EXPENSES Other Operating Expenses include Power and Energy cost of Rs. 681.6 Mn (2013 - Rs.573.9 Mn) and Maintenance and Repair Cost of Rs. 338.5 Mn (2013 - Rs. 202 Mn).

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

7 NET FINANCE INCOME / (EXPENSE) 7.1 Finance Income Interest income - Related parties - - 534 56,334 - Others 153,805 38,859 28,867 14,040 153,805 38,859 29,401 70,374

7.2 Finance expense Interest expenses on Long term borrowings 456,506 501,080 12,398 - Short term borrowings 77,371 36,016 330 7,186 533,877 537,096 12,728 7,186 Net ﬁnance income / (expense) (380,072) (498,237) 16,673 63,188 173 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

8 PROFIT BEFORE TAX Proﬁt before tax from operations is stated after charging all expenses including the following;

Remuneration to directors 20,061 19,224 5,661 6,624 Audit fees 9,255 9,383 1,093 1,008 Cost of defined employee benefits Defined benefit plan cost 21,010 18,821 - - Defined contribution plan cost-(EPF and ETF) 55,395 46,558 - - Staff expenses 1,648,517 1,078,567 - - Depreciation of property, plant and equipment 819,189 651,010 - - Donations 5,071 2,982 - - Amortisation of pre-paid lease 666,663 738,345 - - Reversal of impairment of bad and doubtful debts (1,615) (4,271) - - Provision for slow moving inventories 2,515 2,274 - - Loss /(profit) on disposal of property, plant and equipment (4,201) 28,659 - - Operating lease rentals 215,822 190,274 - - Business expansion expenses 9,616 8,044 9,616 8,044

9 TAX EXPENSE Current income tax Current tax charge 284,996 220,828 12,068 12,839 Under /(over) provision of current tax in respect of prior years (20,666) (48,646) - - Deemed dividend tax - (533) - - 10% withholding tax on inter company dividends 7,657 3,882 - -

Deferred income tax Relating to origination and reversal of temporary differences 46,326 (13,654) - - Tax expense reported 318,313 161,877 12,068 12,839 174 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

9.1 Reconciliation Between Tax Expense and the Product of Accounting Profit Profit before tax 1,893,239 1,282,896 387,977 74,955 Dividend income from Group companies 382,781 34,937 - - Income capitalised - 21,446 - - Consolidation adjustments (5,755) (3,832) - - Aggregate accounting profit 2,270,265 1,335,477 387,977 74,955

Dividends not charged to income tax (382,781) (34,937) (382,781) (34,937) Profits not charged to income tax - (112) - - Exempt profits (18,207) (11,085) - - Accounting profit/(loss) liable to income tax 1,869,277 1,289,313 5,196 40,018

Tax effect on chargeable proﬁts 287,905 203,679 1,455 11,205 Tax effect on non deductible expenses 9,027 36,038 111 1,634 Tax effect on deductions claimed (2,017) (1,150) - - Net tax effect of unrecognised deferred tax assets for the year 19,963 13,041 10,502 - Net tax effect of deferred tax assets in respect of previous year 24,069 (40,502) - - Utilisation of tax losses (7,625) (3,932) - - Under / (over) provisions for previous years (20,666) (48,646) - - Other income based taxes Deemed dividend tax - (533) - - 10% withholding tax on inter company dividends 7,657 3,882 - - Total tax expense 318,313 161,877 12,068 12,839

Income tax charged at Standard rate of 28% (2013-28%) 32,384 23,858 12,068 12,839 Income tax charged at 15% (2013-15%) 216,326 176,224 - - Concessionary rate of 12% (2013 - 12%) 36,286 20,746 - - 284,996 220,828 12,068 12,839 Under /(over) provision of current tax in respect of prior years (20,666) (48,646) - - 264,330 172,182 12,068 12,839 Deferred tax charge / (reversal) 46,326 (13,654) - - Other income based taxes 10% withholding tax on inter company dividends 7,657 3,882 - - Deemed dividend tax - (533) - - Total tax expense 318,313 161,877 12,068 12,839

The Group tax is based on the taxable proﬁt of individual companies within the Group. At present the Tax Laws of Sri Lanka do not provide for Group taxation. 175 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

9.2 Deferred Tax Expense Income statement Deferred tax arising from Accelerated depreciation for tax purposes 97,414 55,565 - - Employee beneﬁts liability (2,458) (246) - - Beneﬁt arising from tax losses (48,630) (68,973) - - Total deferred tax charge/(reversal) 46,326 (13,654) - -

Deferred Tax has been computed based on the following rates : Subsidiary companies in Sri Lanka engaged in promotion of tourism - 12% Yala Village (Pvt) Ltd and subsidiary companies in Maldives - 15% Other companies in Sri Lanka - 28%

For the Year Ended 31st March Group Company In Rs. ‘000s 2014 2013 2014 2013

9.3 Tax Losses Carried Forward Tax losses brought forward 2,093,526 1,272,675 - - Adjustments on ﬁnalisation of liability (46,363) 112,862 - - Tax losses arising during the year 546,981 783,562 - - Utilisation of tax losses (102,962) (75,573) - - Tax losses carried forward 2,491,182 2,093,526 - -

9.4 Applicable rates of Income Tax Companies which operate undertakings for the promotion of tourism in Sri Lanka are liable to tax at the rate of 12% of such income. Other Income is taxed at the rate of 28% . The following Companies enjoy a full or partial exemptions and concessions under Board of Investment Law. I Yala Village (Pvt) Ltd is taxed at a concessionary rate of 15% for a period of 15 years commencing from September 2003. II Profits and income of Trinco Holiday Resorts (Pvt) Ltd are exempt from tax for a period of 10 years from the year of assessment 2011/12. III Profits and income of Beruwala Holiday Resorts (Pvt) Ltd are exempt from tax for a period of 8 years commencing from the year in which the Company commences to make profits or any year of assessment not later than two years reckoned from the date of commencement of commercial operation whichever is earlier. The tax holiday has still not commenced. 176 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

9.5 Income Tax rates of off-shore Companies I John Keells Hotels Mauritius (Pvt) Ltd is taxed at an effective rate of 3 % . II The following subsidiaries based in the Republic of Maldives, are subject to Business Proﬁt Tax of 15% with effect from 18th July 2011. z John Keells Maldivian Resorts (Pte) Ltd z Travel Club (Pte) Ltd z Fantasea World Investments (Pte) Ltd z Tranquility (Pte) Ltd

For the Year Ended 31st March Group 2014 2013

10 EARNINGS PER SHARE Proﬁt attributable to equity holders of the parent (Rs. ‘000s) 1,565,846 1,116,779 Weighted average number of ordinary shares (‘000s) 1,456,147 1,456,147 Basic earnings per share - Rs. 1.08 0.77

Group In Rs. ‘000s 2014 2013

11 DIVIDENDS PER SHARE Declared and paid during the year Final dividend - 436,844 Weighted average number of ordinary shares 1,456,147 1,456,147 Dividend per share - 0.30 177 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

12 FINANCIAL INSTRUMENTS - GROUP 12.1 Financial Assets and Liabilities by Categories Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.

Financial assets by categories Loans and receivables Available-for-sale ﬁnancial assets As at 31 st March In Rs. ‘000s 2014 2013 2014 2013 Financial instruments in non-current assets Other non-current ﬁnancial assets 4,165 - 18,405 25,058

Financial instruments in current assets Trade and other receivables 909,040 740,558 - - Amounts due from related parties 138,215 168,994 - - Short term investments 1,985,510 321,731 - - Cash in hand and at bank 743,927 588,394 - - Total 3,780,857 1,819,677 18,405 25,058

For available-for-sale ﬁnancial assets the carrying amount and fair value are equal.

The fair value of loans and receivables does not signiﬁcantly vary from the value based on the amortised cost methodology.

Financial liabilities by categories Financial liabilities Financial liabilities at fair value measured through income statement at amortised cost As at 31 st March In Rs. ‘000s 2014 2013 2014 2013

Financial instruments in non-current liabilities Borrowings - - 4,245,400 5,571,060 Other non current ﬁnancial liabilities 63,752 59,253 - -

Financial instruments in current liabilities Trade and other payable - - 858,347 992,007 Amounts due to related parties - - 110,892 125,783 Borrowings - - 1,840,626 1,325,111 Bank overdrafts - - 274,705 220,965 Total 63,752 59,253 7,329,970 8,234,926 178 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

12 FINANCIAL INSTRUMENTS - COMPANY 12.2 FINANCIAL ASSETS AND LIABILITIES BY CATEGORIES

Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.

Financial assets by categories Loans and receivables Available-for-sale ﬁnancial assets As at 31 st March In Rs. ‘000s 2014 2013 2014 2013

Financial instruments in non-current assets Other non-current ﬁnancial assets - - 8 8

Financial instruments in current assets Amounts due from related parties 5,513 10,561 - - Loans given to related parties - 356,400 - - Short term investments 32,530 60,000 - - Cash in hand and at bank 2,648 46,897 - - Total 40,691 473,858 8 8

For available-for-sale ﬁnancial assets the carrying amount and fair value are equal.

The fair value of loans and receivables does not signiﬁcantly vary from the value based on the amortised cost methodology.

Financial liabilities by categories Financial liabilities measured at amortised cost As at 31 st March In Rs. ‘000s 2014 2013

Financial instruments in current liabilities Trade Payable 13,664 11,302 Amounts due to related parties 702 782 Total 14,366 12,084 179 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

12.3 Financial Assets and Liabilities by Fair Value Hierarchy - Group The Group uses the following hierarchy for determining and disclosing the fair value of ﬁnancial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs that have a signiﬁcant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques that use inputs that have a signiﬁcant effect on the recorded fair value that are not based on observable market data

The Group held the following ﬁnancial instruments carried at fair value in the statement of ﬁnancial position:

Financial Assets Level 1 Level 2 Level 3 As at 31 st March In Rs. ‘000s 2014 2013 2014 2013 2014 2013

Available for sale 8 8 - - 18,397 25,050 Total 8 8 - - 18397 25,050

Financial Liabilities Level 3 As at 31 st March In Rs. ‘000s 2014 2013

Fair value through income statement Designated at fair value through income statement 63,752 59,253 Total 63,752 59,253

During the reporting periods 31 March 2014 and 2013, there were no transfers between Level 1 and Level 2 fair value measurements. 180 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

12.4 Reconciliation of fair value measurements of Level 3 financial instruments The Group carries unquoted equity shares as available-for-sale financial instruments classified as Level 3 within the fair value hierarchy.

A reconciliation of the beginning and closing balances including movements is summarised below:

Available-for-sale In Rs. ‘000s ﬁnancial assets

As at 1 April 2013 25,050 Impairment (6,653) As at 31 March 2014 18,397

Fair value would not signiﬁcantly vary if one or more of the inputs were changed.

12.5 Financial Assets and Liabilities by Fair Value Hierarchy - Company The Company uses the following hierarchy for determining and disclosing the fair value of ﬁnancial instruments by valuation techniques:

The Company held the following ﬁnancial instruments carried at fair value in the statement of ﬁnancial position:

Financial Assets Level 1 As at 31 st March In Rs. ‘000s 2014 2013

Available for sale 8 8 Total 8 8 181 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

13 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments held by the Group, principally comprise of cash, loans and other receivables, trade and other receivables, trade and other payable, loans and borrowings. The main purpose of these ﬁnancial instruments is to manage the operating, investing and ﬁnancing activities of the Group.

Financial risk management of the Group is carried out based on guidelines established by its parent Company’s central treasury department (Group Treasury) which comes under the purview of the Group Executive Committee (GEC) and Board of Directors of the parent Company.

Group Treasury identifies, evaluates and hedges financial risk in close co-operation with the Hotel Group’s operating units. The parent Company provides guidelines for overall risk management, as well, covering specific areas such as credit risk, investment of excess liquidity, interest rate risk and foreign currency risk.

The Hotel Group has established guidelines for risk controlling procedures and for the use of financial instruments, including a clear segregation of duties with regard to financial activities, settlement, accounting and related controlling. The guidelines upon which the Group’s risk management processes are based are designed to identify and analyse these risks throughout the Group, to set appropriate risk limits and controls and to monitor the risks by means of reliable and up-to-date administrative and information systems. The guidelines and systems are regularly reviewed and adjusted to changes in markets and products. The Group manages and monitors these risks primarily through its operating and financing activities.

13.1 Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all clients who wish to trade on credit terms are subject to credit veriﬁcation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to debtors impairment is not signiﬁcant.

With respect to credit risk arising from the other financial assets of the Group, such as cash and cash equivalents and available-for-sale financial investments, the Group’s exposure to credit risk arises from default of the counter party. The Group manages its operations to avoid any excessive concentration of counter party risk and the Group takes all reasonable steps to ensure that the counter parties fulfill their obligations. 182 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

13.1.1 Credit risk exposure The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts. Following table shows the maximum risk positions. 2014 2013 Other non Cash Amounts Other non Cash Amounts current in hand Trade due from current in hand Trade due from financial and at and other Other related financial and at and other Other related In Rs. ‘000s assets bank receivables investments parties Total assets bank receivables investments parties Total

Deposits with bank 13.1.2 - - - 1,985,510 - 1,985,510 - - - 321,731 - 321,731 Trade and other receivables 13.1.3 - - 909,040 - - 909,040 - - 740,558 - - 740,558 Amounts due from related parties 13.1.4 - - - - 138,215 138,215 - - - - 168,994 168,994 Cash in hand and at bank - 743,927 - - - 743,927 - 588,394 - - - 588,394 Total credit risk exposure - 743,927 909,040 1,985,510 138,215 3,776,692 - 588,394 740,558 321,731 168,994 1,819,677

Available-for-sale investments 18,405 - - - - 18,405 25,058 - - - - 25,058 Total equity risk exposure 18,405 - - - - 18,405 25,058 - - - - 25,058

Total 18,405 743,927 909,040 1,985,510 138,215 3,795,097 25,058 588,394 740,558 321,731 168,994 1,844,735

13.1.2 Credit risk relating to cash and cash equivalents In order to mitigate settlement and operational risks related to cash and cash equivalents, the Group uses several banks with acceptable ratings for its deposits. The Group held cash and cash equivalents of Rs. 2,027 Mn at 31 March 2014 (2013 - Rs. 647 Mn).

Deposits with banks and Credit rating of the banks

Bank Instrument Credit rating Investment for 2014 Rs. 000’s

People’s Bank Fixed Deposits AA+ 1,773,688 Sampath Bank PLC Fixed Deposits AA- 58,302 Hatton National Bank PLC Fixed Deposits AA- 27,447 Nations Trust Bank PLC Re purchase Agreements A 97,521 Nations Trust Bank PLC Fixed Deposits A 28,552 1,985,510 183 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

13.1.3 Trade and other receivables Group In Rs. ‘000s 2014 2013

Neither past due nor impaired 851,316 671,773

Past due 60–90 days 48,425 64,241 but not impaired 91–180 days 9,299 4,544

Impaired 35,209 36,824 Gross carrying value 944,249 777,282 Less: impairment provision (35,209) (36,824) Total 909,040 740,558

Based on the review of their past performance and credit worthiness, the Group companies have obtained deposits and advances from major customers.

The requirement for an impairment is analysed at each reporting date on an individual basis for major clients.

13.1.4 Amounts due from related parties The amounts due from related parties mainly consists of the balances from afﬁliate companies and parent.

13.2 Liquidity Risk The Group’s policy is to hold cash and undrawn committed facilities at a level sufﬁcient to ensure that the Group has available funds to meet its medium term capital and funding obligations, including organic growth and acquisition activities, and to meet any unforeseen obligations and opportunities. The Group holds cash and undrawn committed facilities to manage its liquidity risk.

The Group monitors its risk of a shortage of funds using a daily cash management process. This process considers the maturity of both the Group’s financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of multiple sources of funding including bank loans and overdrafts. 184 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

13.2.1 Net (debt)/cash Group Company In Rs. ‘000s 2014 2013 2014 2013

Short term investments 1,985,510 321,731 32,530 60,000 Cash in hand and at bank 743,927 588,394 2,648 46,897 Total liquid Assets 2,729,437 910,125 35,178 106,897

Borrowings Bank borrowings 6,086,026 6,896,171 133,441 - Bank overdrafts 274,705 220,965 960 - Total liabilities 6,360,731 7,117,136 134,401 - Net (debt) / cash (3,631,294) (6,207,011) (99,223) 106,897

The net debt position of the Group is due to the expansion and refurbishment of its hotel portfolio which will commence generating cash flows in the medium term. This position is constantly monitored and evaluated to determine appropriate risk mitigation strategies.

13.2.2 Liquidity risk management The Group attempts to match contracted cash outflows in each time bucket using a combination of operational cash inflows and other inflows that can be generated through the liquidation of short term investments, repurchase agreements or other secured borrowings.

Maturity analysis The table below summarises the maturity proﬁle of the Group’s ﬁnancial liabilities at 31 March 2014 based on contractual undiscounted payments.

Group Within 1 year Between Between More than In Rs. ‘000s 0 - 30 days 31 - 365 days 1-2 years 2-5 years 5 years Total

Financial instruments in non-current liabilities - 86,948 1,564,592 2,596,100 61,512 4,309,152 Borrowings-Financial instruments in current liabilities 153,386 1,687,240 - - - 1,840,626 Trade and other payable 858,347 - - - - 858,347 Amounts due to related parties 110,892 - - - - 110,892 Bank overdrafts 274,705 - - - - 274,705 1,397,330 1,774,188 1,564,592 2,596,100 61,512 7,393,722 185 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

13.3 Market risk Market risk is the risk that the fair value of future cash flows of a ﬁnancial instrument will fluctuate because of changes in market prices.

Market prices comprise of the following risks: z Interest rate risk z Currency risk

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The sensitivity analysis in the following sections relate to the position as at 31 March in 2014 and 2013.

The following assumptions have been made in calculating the sensitivity analysis:

The sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risks. This is based on the ﬁnancial assets and ﬁnancial liabilities held at 31 March 2014 and 2013.

13.3.1 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a ﬁnancial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s proﬁt before tax (through the impact on floating rate borrowings).

Group Increase/ (decrease) in basis points Effect on proﬁt before tax (Rs.000’s) 2014 + 100-150 basis points (6,673) - 100-150 basis points 6,673 2013 + 100-150 basis points (6,714) - 100-150 basis points 6,714

The assumed spread of basis points for the interest rate sensitivity analysis is based on the currently observable market environment changes to base rates such as LIBOR, SLIBOR and AWPLR. 186 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

13.3.2 Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a ﬁnancial instrument will fluctuate because of changes in foreign exchange rates. The Group has exposure to foreign currency risk where it has cash flows in overseas operations and foreign currency transactions which are affected by foreign exchange movements.

13.3.3 Effects of currency translation. For purposes of consolidated ﬁnancial statements, the income and expenses and the assets and liabilities of subsidiaries located outside Sri Lanka are converted into Sri Lankan Rupees. Therefore, period-to-period changes in average exchange rates may cause translation effects that have a signiﬁcant impact on, for example, revenue, segment results (earnings before interest and taxes –EBIT) and assets and liabilities of the Group. Unlike exchange rate transaction risk, exchange rate translation risk does not necessarily affect future cash flows. The Group’s equity position reflects changes in book values caused by exchange rates.

The Group’s exposure to foreign currency changes for currencies other than USD is not material.

Increase/(decrease) in Effect on proﬁt Effect on Currency exchange rate before tax Rs. 000’s equity Rs. 000’s

Group 2014 USD 3% (29,301) 282,608 -3% 29,301 (282,608) Group 2013 USD 3% (52,454) 101,377 -3% 52,454 (101,377)

Assumptions The assumed movement, in the spread of the exchange rate sensitivity analysis, is based on the current observable market environment.

13.4 Capital management The Group manages its capital structure, and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may issue new shares, have a rights issue or buy back of shares.

Group 2014 2013

Debt / Equity 0.34 0.42 187 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Motor Cutlery, Buildings vehicles crockery Land on Plant Furniture and glassware Capital As at 31 st March and leasehold and and marine Computer and work in Total Total In Rs. ‘000s buildings land machinery Equipment ﬁttings vessels equipment linen progress2014 2013

14 PROPERTY, PLANT AND EQUIPMENT Group Cost or valuation At the beginning of the year 5,985,617 5,554,415 1,137,663 1,398,992 1,055,768 99,793 126,228 222,969 174,79615,756,241 12,004,265 Additions 111,288 127,737 31,426 129,780 85,018 33,863 23,647 54,835 295,044 892,638 2,440,340 Disposals (8,420) (21,247) (24,304) (45,242) (38,333) (25,997) (7,512) (52,697) (282,601) (506,353) (292,466) Revaluations ------2,010,268 Transfers 32,237 - 19,907 87 - - - - (52,231) - (355,305) Exchange translation difference - 69,807 10,194 7,060 9,494 1,118 1,455 (62) 10,084 109,150 (50,862) At the end of the year 6,120,722 5,730,712 1,174,886 1,490,677 1,111,947 108,747 143,818 225,045 145,092 16,251,676 15,756,240

Accumulated depreciation At the beginning of the year 53,056 740,792 432,009 463,968 392,050 42,750 53,471 106,343 - 2,284,439 2,086,007 Charge for the year 49,219 263,770 104,385 169,786 137,852 19,360 24,178 50,639 - 819,189 651,010 Disposals (10) (5,407) (14,146) (33,500) (32,308) (9,324) (6,512) (37,715) - (138,922) (110,530) Transfers ------(355,305) Exchange translation difference - 43,052 9,253 8,569 10,359 1,214 1,155 208 - 73,810 13,258 At the end of the year 102,265 1,042,207 531,501 608,823 507,953 54,000 72,292 119,475 - 3,038,516 2,284,439

Carrying value As at 31 March 2014 6,018,457 4,688,505 643,383 881,854 603,994 54,777 71,526 105,570 145,092 13,213,160 - As at 31 March 2013 5,932,561 4,813,622 705,655 935,025 663,718 57,043 72,757 116,624 174,796 - 13,471,801

Carrying value of assets At cost 7,142,170 7,362,131 At valuation 6,070,990 6,109,669 13,213,160 13,471,801 Carrying value of land and buildings At cost 4,635,973 4,636,514 At valuation 6,070,990 6,109,669 10,706,963 10,746,183 188 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

14.1 The details of Property, Plant & Equipment of the Group which are stated at valuation are indicated below.

Property Method of Valuation Effective Date Property Valuer of Valuation

Ceylon Holiday Resorts Ltd Depreciated replacement cost method / Open market value method 31st March 2013 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor Kandy Walk Inn Ltd Depreciated replacement cost method / Open market value method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Habarana Lodge Ltd Depreciated replacement cost method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Habarana Walk Inn Ltd Depreciated replacement cost method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Trinco Walk Inn Ltd Open market value method 31st March 2013 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor Wirawila Walk Inn Ltd Open market value method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Resort Hotels Ltd Open market value method 31st March 2013 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor Yala Village (Pvt) Ltd Depreciated replacement cost method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Rajawella Hotels Co Ltd Depreciated replacement cost method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Beruwala Holiday Resorts (Pvt) Ltd Open market value method 31st March 2013 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor Trinco Holiday Resorts (Pvt) Ltd Depreciated replacement cost method / Open market value method 31st March 2013 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor Hikkaduwa Holiday Resorts (Pvt) Ltd Depreciated replacement cost method / Open market value method 31st March 2013 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor Ahungalla Holiday Resorts (Pvt) Ltd Open market value method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor Sentinel Realty (Pvt) Ltd Open market value method 31st March 2013 Mr. Sunil Fernando Consultant Valuer & Assessor

Revaluation of land and buildings The Group uses the revaluation model of measurement of land and buildings. Fair value is determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any difference in the nature, location or condition of the speciﬁc property.

In determining the fair value of properties as at 31 March 2013, the Group has engaged independent Chartered valuers and they have carried out the valuation in accordance with Sri Lanka Accounting Standards and 8th edition of International Valuation Standards published by the International Valuation Standards Committee (IVSC). 189 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

14.2 The carrying amounts of revalued properties if they were carried at cost less depreciation, would be as follows.

Net Book Net Book Class of Assets Accumulated Value Value Rs. ‘000 Cost Depreciation 31.03.2014 31.03.2013

Land and buildings 4,716,390 (574,859) 4,141,532 3,981,113 4,716,390 (574,859) 4,141,532 3,981,113

14.3 Segmental Analysis of Net Book Value

Rs. ‘000 31.03.2014 31.03.2013

Sri Lanka 11,013,288 11,286,087 Maldives 2,199,872 2,185,714 13,213,160 13,471,801

14.4 Details of property, plant and equipment pledged as security for term loans obtained, are disclosed in Note 28.3

14.5 Group property, plant and equipment with a cost of Rs. 500 Mn (2013 - Rs. 402 Mn) have been fully depreciated and continue to be in use by the Group.

As at 31st March Group In Rs. ‘000s 2014 2013

15 LEASE RENTALS PAID IN ADVANCE Prepaid lease rentals paid to acquire land use rights are amortised over the lease term in accordance with the pattern of beneﬁts provided.

Balance at the beginning of the year 8,639,214 9,386,494 Addition during the year - - Amortisation during the year (666,663) (738,345) Exchange difference 262,957 (8,935) Balance at the end of the year 8,235,508 8,639,214 190 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

15.1 Details of Leasehold Properties

Land Extent Group (in Acres) Lease Period 2014 2013

Rajawella Hotels Co. Ltd 10.00 95 years and 10 months 33,767 34,180 from 02nd February 2000

Yala Village (Pvt) Ltd 11.25 30 years from 27th November 2006 67,613 70,607

Hikkaduwa Holiday Resorts (Pvt) Ltd 0.03 10 years from 01st January 2012 800 900

Tranquility (Pte) Ltd 18.62 18 years from 26th August 2010 7,111,034 7,374,568 Chaaya Island Dhonveli - Maldives

Travel Club (Pte) Ltd 13.75 14 years from 04th August 2006 1,022,294 1,158,959 Chaaya Reef Ellaidhoo - Maldives

8,235,508 8,639,214

Group In Rs. ‘000s 2014 2013

16 INTANGIBLE ASSETS Goodwill Cost Balance at the beginning of the year 670,407 670,407 Additions during the year - - Adjustments on impairment - - Carrying value as at the end of the year 670,407 670,407

Goodwill acquired through Business Combinations has been allocated to two (2) Cash Generating Units (CGU) as Chaaya Resorts and Cinnamon Resorts for impairment testing. 191 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

The carrying amount of goodwill allocated to each Cash Generating Unit has been tabulated below.

Net Carrying Value of Goodwill In Rs. ‘000s 2014 2013

Chaaya resorts 258,355 258,355 Cinnamon resorts 412,052 412,052 670,407 670,407

The recoverable amount of all CGUs have been determined based on the Fair Value Less Cost to Sell or Value In Use (VIU) calculation.

Key Assumptions Used in the VIU Calculations Gross Margins The basis used to determine the value assigned to the budgeted gross margins, is the gross margins achieved in the year preceding the budgeted year adjusted for projected market conditions.

Inflation The basis used to determine the value assigned to the budgeted cost inflation is the inflation rate based on projected economic conditions.

Discount Rate The discount rate used is the risk free pre-tax discount rate, adjusted by the addition of an appropriate risk premium.

Volume Growth Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of the two years immediately preceding the budgeted year and future industry growth rates.

Cash flows beyond the ﬁve year period has been extrapolated using a zero growth rate. 192 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

As at 31 st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

17 INVESTMENTS 17.1 Investments in subsidiaries and joint ventures Investments in subsidiaries - Unquoted 17.4 - - 10,340,613 9,440,953 Investments in joint ventures - Unquoted 17.5 - - 58,288 15,788 - - 10,398,901 9,456,741

17.2 Other equity investments Quoted 17.6 8 8 8 8 Unquoted 17.7 18,397 25,050 - - 18,405 25,058 8 8

17.3 Loans to executives 4,165 - - - 22,570 25,058 10,398,909 9,456,749

% Holding Company In Rs. ‘000s 2014 2013 2014 2013

17.4 Investments in subsidiaries Unquoted Ceylon Holiday Resorts Ltd 98.65% 98.65% 1,052,011 1,052,011 Habarana Lodge Ltd 98.35% 98.35% 695,084 695,084 International Tourists and Hoteliers Ltd 99.33% 98.92% 2,094,401 1,194,741 Kandy Walk Inn Ltd 98.39% 98.39% 408,998 408,998 Habarana Walk Inn Ltd 98.77% 98.77% 311,851 311,851 John Keells Maldivian Resorts (Pte) Ltd 100.00% 100.00% 4,739,853 4,739,853 Rajawella Hotels Co. Ltd 100.00% 100.00% 29,300 29,300 Trinco Walk Inn Ltd 100.00% 100.00% 95,940 95,940 Wirawila Walk Inn Ltd 100.00% 100.00% 23,497 23,497 Yala Village (Pvt) Ltd 93.78% 93.78% 300,678 300,678 John Keells Hotels Mauritius (Pvt) Ltd 100.00% 100.00% - - Trinco Holiday Resorts (Pvt) Ltd 100.00% 100.00% 357,000 357,000 Ahungalla Holiday Resorts (Pvt) Ltd 100.00% 100.00% 132,000 132,000

15% Cumulative preference shares Yala Village (Pvt) Ltd 100.00% 100.00% 100,000 100,000 Total investments in subsidiaries 10,340,613 9,440,953 193 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

% Holding Company In Rs. ‘000s 2014 2013 2014 2013

17.5 Investments in joint ventures Unquoted Sentinel Realty (Pvt) Ltd 50.00% 50.00% 58,288 15,788 Total investments in joint ventures 58,288 15,788 Total investments in subsidiaries and joint ventures 10,398,901 9,456,741

17.6 Outside Investments Quoted Ceylon Hotels Corporation PLC 8 8 8 8

17.7 Unquoted Rainforest Ecolodge (Pvt) Ltd 18,347 25,000 - - Sri Lanka Hotel Tourism Training Institute Ltd 50 50 - - 18,397 25,050 - - Total Outside Investments 18,405 25,058 8 8

Directors’ valuation of unquoted investments of the Company and the Group amounts to Rs. 10,398 Mn (2013- Rs. 9,456 Mn) and Rs. 18.4Mn (2013 - Rs.25.06 Mn ) respectively.

The Market Value of the quoted investment as at 31st March 2014 is Rs. 0.008 Mn (2013 - Rs. 0.008 Mn).

2014 2013

17.8 Summarised ﬁnancial information of joint venture Group share of; Revenue - - Administration expenses (182) (83) Loss for the year (182) (83)

Group share of; Total assets 60,244 17,754 Total liabilities (325) (144) Net assets 59,919 17,610

The Group and the Company have neither contingent liabilities nor capital and other commitments in respect of its joint venture. 194 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

18 DEFERRED TAX ASSETS Balance at the beginning of the year 54,231 34,143 - - Transferred from / to deferred tax liabilities (18,795) 28,506 - - Impact of revaluation reserve on property, plant and equipment - (21,850) - - Exchange translation difference 284 (279) - - Credit/(release) 2,648 13,711 - - Balance at the end of the year 38,368 54,231 - -

The closing deferred tax asset balance relates to the following:

Accelerated depreciation for tax purposes (136,004) (85,945) - - Impact on revaluation of property, plant and equipment 342 342 - - Employee beneﬁts liability 1,888 2,388 - - Losses available for off-set against future taxable income 172,142 137,446 - - 38,368 54,231 - -

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

19 OTHER NON-CURRENT ASSETS Prepaid staff loans 620 - - - 620 - - -

20 INVENTORIES Food and beverage 96,694 93,602 - - House keeping and maintenance 64,519 65,726 - - Others 41,046 25,088 - - 202,259 184,416 - - Less : Provision for slow moving inventories (5,593) (3,078) - - 196,666 181,338 - - 195 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

21 TRADE AND OTHER RECEIVABLES Trade receivables 944,223 777,382 - - Impairment for bad and doubtful debts (35,183) (36,824) - - 909,040 740,558 - -

21.1 As at 31 March 2014, trade receivables of an initial value of Rs. 35.1 Mn (2013: Rs. 36.8 mn) were impaired and fully provided for. See below for the movements in the impairment of receivables.

Group Individually Impaired Total

As at 1 April 2012 41,095 41,095 Unused amounts reversed (4,271) (4,271) As at 31 March 2013 36,824 36,824 Reversal for the year (1,641) (1,641) As at 31 March 2014 35,183 35,183

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

22 OTHER CURRENT ASSETS Prepayments and non cash receivables 215,773 172,926 - - Tax recoverable 55,439 158,174 - 1,411 Other receivables 42,729 71,312 2,794 - 313,941 402,412 2,794 1,411

23 LOANS GIVEN TO RELATED PARTIES Habarana Walk Inn Ltd - - - 2,900 Trinco Holiday Resorts (Pvt) Ltd - - - 353,500 - - - 356,400 196 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

24 CASH AND CASH EQUIVALENTS Favorable cash and cash equivalents 24.1 Short term investments (less than 3 months) 1,557,977 279,638 32,530 60,000

1,557,977 279,638 32,530 60,000

24.2 Cash and bank balances 743,927 588,394 2,648 46,897 743,927 588,394 2,648 46,897

Unfavorable cash and cash equivalents 24.3 Banks overdrafts (274,705) (220,965) (960) - (274,705) (220,965) (960) -

Total cash and cash equivalents for the purpose of cash flow statement 2,027,199 647,067 34,218 106,897

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

25 SHORT TERM INVESTMENTS - DEPOSITS Favorable cash and cash equivalents Short term investments (Less than 3 months) 1,557,977 279,638 32,530 60,000 Short term investments (Between 3 to 12 months) 427,533 42,093 - -

Total short term investments 1,985,510 321,731 32,530 60,000 197 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

2014 2013 Rs. Rs. As at 31st March Number of Value of Number of Value of In ‘000s Shares Shares Shares Shares

26 STATED CAPITAL Fully paid ordinary shares At the beginning of the year 1,456,147 9,500,247 1,456,147 9,500,247 Issue of shares for cash - - - - At the end of the year 1,456,147 9,500,247 1,456,147 9,500,247

As at 31 st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

27 OTHER COMPONENTS OF EQUITY Revaluation reserve 27.1 2,614,915 2,614,915 - - Exchange equalisation reserve 27.2 1,267,676 1,013,774 - - Available for sale reserve (5) (5) (5) (5) Employee share option plan reserve 27.3 4,339 - - - 3,886,925 3,628,684 (5) (5)

27.1 Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment.

27.2 Exchange translation reserve comprises the net exchange movement arising on the translation of net equity investments of overseas subsidiaries into Sri Lankan Rupees.

27.3 Share-based payment plans Employee Share Option Scheme Under the John Keells Group’s Employees share option scheme (ESOP), share options of the parent are granted to executives of the Group generally with more than 12 months of service. The exercise price of the share options is equal to the 30 day volume weighted average market price of the underlying shares on the date of grant. The share options vest over a period of four years and is dependent on a performance criteria and a service criteria. The performance criteria being a minimum performance achievement of “Met Expectations” and service criteria being that the employee has to be in employment at the time the share options vest. The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted.

The contractual term for each option granted is ﬁve years. There are no cash settlement alternatives. 198 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

The expense recognised for employee services received during the year is shown in the following table: In Rs. ‘000s 2014 2013

Expense arising from equity-settled share-based payment transactions 4,339 - Total expense arising from share-based payment transactions 4,339 -

Movements in the year The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the year:

2014 2014 No. WAEP

Outstanding at 1 April - - Granted during the year 152,764 253 Forfeited during the year - - Adjustment during the year - - Expired during the year - - Outstanding at 31 March 152,764 253 Exercisable at 31 March - -

Fair value of the share option and assumptions The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted.

The valuation takes into account factors such as stock price, expected time to maturity, exercise price, expected volatility of share price, expected dividend yield and risk free interest rate. 199 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

As at 31 st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

28 INTEREST BEARING BORROWINGS 28.1 Bank borrowings Bank borrowings 6,086,026 6,896,171 133,441 - 6,086,026 6,896,171 133,441 -

As at 31 st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

28.2 Movement Balance at the beginning of the year 6,896,171 6,815,034 - - Loans obtained during the year 1,688,637 1,231,283 200,000 - Currency translation difference 116,349 (18,807) - - Repayments during the year (2,615,131) (1,131,339) (66,559) - Balance at the end of the year 6,086,026 6,896,171 133,441 -

Repayable within one year 1,840,626 1,325,111 100,000 - Repayable after one year Repayable between one and ﬁve years 4,183,888 5,161,384 33,441 - Repayable after ﬁve years 61,513 409,676 - - 4,245,400 5,571,060 33,441 - 6,086,026 6,896,171 133,441 - 200 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

28.3 Security and Repayment Terms of Bank Borrowings/ Other Borrowings

Company Lending Nature of Interest Rate As at 31st March Repayment terms Institution Facility & Security 2014 2013 In Rs. In Rs. '000s '000s John Keells Habib Bank Ltd. Term Loan AWPLR - 0.5% 133,441 - Capital repayment 24 equal monthly instalments of Hotels PLC Rs. 8,333,333/- John Keells Sampath Bank PLC Term Loan 3 months US$ LIBOR + 1.3% for ﬁrst two 182,980 380,250 30 equal quarterly instalments of US$ 400,000/- Maldivian years and 3 months LIBOR + 1.5% thereafter commencing after a grace period of 18 months from Resorts (Pte) September 2006. Ltd Head lease right of Chaaya Island Dhonveli, Corporate guarantee of John Keells Hotels PLC. HSBC Bank Term Loan 3 months LIBOR + 3.0% per annum 206,942 327,437 48 equal monthly instalments of USD 83,333/- commencing from November 2011 Secured with a letter of comfort from John Keells Hotels PLC

Travel Club Bank of Ceylon Term Loan 3 months US$ LIBOR + 2% or 3.75% 436,443 577,164 36 equal quarterly instalments of US$ 236,111/- (Pte)Ltd whichever is higher commencing after a grace period of two years from November 2007 Sub lease right of Ellaidhoo, Corporate guarantee of John Keells Hotels PLC Fantasea World Hatton National Term Loan 3 months LIBOR + 3.25% with a floor rate of 725,506 1,033,130 4 annual instalments of US$ 2,600,000/- each and Investments Bank PLC 4.25% ﬁnal instalment being US$ 2,950,926/- commencing (Pte) Ltd from August 2011 Leasehold rights of Island of Lagoon Hakuraa Huraa Resort Trinco Holiday Sampath Bank PLC Term Loan 3 Months LIBOR+4% Per annum. 151,351 - Capital repayment in 20 equal quarterly instalments Resorts ( Pvt) of USD 57,900/- commencing after a grace period of Ltd Corporate guarantee of John Keells Hotels one year from the date of disbursement. Interest to PLC. be serviced monthly. 201 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

Company Lending Nature of Interest Rate As at 31st March Repayment terms Institution Facility & Security 2014 2013 In Rs. In Rs. '000s '000s Habarana Sampath Bank PLC Term Loan 3 Months LIBOR+4%. Corporate guarantee 221,538 - Capital repayment in 20 equal quarterly instalments Lodge Ltd USD of John Keells Hotels PLC. of USD 100,000/- Habib Bank Ltd Term Loan 1 Month LIBOR+3.25%. Corporate guarantee 100,638 - Capital repayment in 60 equal quarterly instalments USD of John Keells Hotels PLC. of USD 150,00/- Hatton National Term Loan Monthly AWPLR 240,400 320,200 60 monthly instalments commencing from April 2012 Bank PLC Kandy Walk HSBC Bank Term Loan 1 month LIBOR + 3.5% per annum 485,744 521,267 60 monthly instalments after, 12 months grace period Inn Ltd of 1 year Yala Village People's Bank Term Loan AWPLR - revised bi annually 175,377 403,750 72 monthly instalments from January 2013 after (Pvt) Ltd grace period of 12 months Sampath Bank PLC Term Loan LIBOR+4% Payable monthly. Corporate 166,548 - 20 equal quarterly instalments guarantee of John Keells Hotels PLC. Beruwala Hatton National Term Loan 1 month LIBOR Primary floating mortgage 802,434 1,940,232 71 equal monthly instalments of Rs. 26,388,890/- and Holiday Resorts Bank PLC bond for Rs. 1.9 Bn over hotel property a ﬁnal instalment of Rs. 26,388,810/- commencing (Pvt) Ltd from June 2013 after 2 years grace period Sampath Bank PLC Term Loan 3 Month LIBOR + 4.0% payable monthly 222,345 - Capital repayment 20 equal quarterly instalments of (LIBOR to be reset quarterly). Corporate US $ 100,000/- guarantee of John Keells Hotels PLC. Standard Term Loan 3 months LIBOR + 3.25% with an 523,549 509,244 16 instalments after grace period of 1 year 1. USD Chartered Bank arrangement fee of 0.5% variable at the 100,000/- per quarter in 2nd year 2. USD 150,000/- discretion of the bank. Corporate guarantee per qtr in 3rd year 3. USD 350,000/- per quarter in 4th from John Keells Hotels PLC year 4. USD 400,000/- per quarter in 5th year Hikkaduwa DFCC Bank Term Loan AWPLR - 1% per annum Rs. 940 Mn primary 837,265 883,497 72 monthly instalments after a grace period of 24 Holiday Resorts mortgage over leasehold rights and Rs. 60 months from November 2013 (Pvt) Ltd Mn over movable plant, machinery and equipment of the Company Sampath Bank PLC Term Loan 3 Month LIBOR+4% per annum. Corporate 473,525 - Capital repayment in 20 equal quarterly instalments guarantee of John Keells Hotels Plc for the of USD 200,000/- commencing after a grace period of LKR equivalent of USD 4Mn. six months from the date of disbursement. Interest to be serviced monthly. 6,086,026 6,896,171 202 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

29 DEFERRED TAX LIABILITIES Balance at the beginning of the year 114,422 49,337 - - Transferred from/to deferred tax assets (18,795) 28,506 - - Impact on revaluation of property, plant and equipment - 36,237 - - Exchange translation difference (239) 284 - - Credit/(release) 48,973 57 - - Balance at the end of the year 144,361 114,422 - -

The closing deferred tax liability balance relates to the following: Accelerated depreciation for tax purposes 172,448 128,390 - - Impact on revaluation of property, plant and equipment 59,281 59,281 - - Employee beneﬁts liability (11,056) (7,724) - - Losses available for off-set against future taxable income (76,262) (65,525) - - 144,361 114,422 - -

30 EMPLOYEE BENEFIT LIABILITY Balance at the beginning of the year 89,346 84,677 - - Gratuity charge 11,195 10,353 - - Interest cost 9,815 8,468 - - Payments made during the year (10,497) (6,672) - - Transfers 2,490 (3,268) - - Loss / (gain) arising from changes in the assumptions or due to under / (over) provision in the previous year 11,487 (4,212) - - Balance at the end of the year 113,836 89,346 - -

The expenses recognised in the following line items in the income statement Cost of sales 8,141 5,000 - - Administrative expenses 12,869 13,821 - - Distribution expenses 50 138 - - 21,010 18,821 - -

The employee beneﬁt liability of the Group is based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries.

The principal assumptions used in determining the cost of employee beneﬁts were: 2014 2013

Discount rate 11% 11% Future salary increases 10% 10% 203 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

30.1 Sensitivity of assumptions used If a one percentage point change is assumed in the discount rate and salary increase rate, it would have the following effect:

As at 31st March Discount rate Salary increment In Rs. ‘000s 2014 2013 2014

Effect on deﬁned beneﬁt obligation liability Increase by one percentage point (5,509) (3,984) 6,752 Decrease by one percentage point 6,425 3,882 (5,802)

30.2 Maturity analysis of the payments The following payments are expected on employee beneﬁt liabilities in future years: In Rs. ‘000s 2014

Within the next 12 months 12,552 Between 1-2 years 25,704 Between 2 and 5 years 34,463 Between 5 and 10 years 24,055 Beyond 10 years 17,062 Total expected payments 113,836

The average duration of the deﬁned beneﬁt plan obligation at the end of the reporting period is 5.88 years.

As at 31 st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

31 OTHER DEFERRED LIABILITIES Grant 31.1 1,273 1,598 - - Deferred sublease payment 31.2 67,153 32,562 - - 68,426 34,160 - -

31.1 Grant Balance at the beginning of the year 1,598 1,923 - - Amortisation during the year (325) (325) - - Balance at the end of the year 1,273 1,598 - -

Basis of amortisation - 10% p.a.

This represents the grant received by Yala Village (Pvt) Ltd from Ceylon Chamber of Commerce for the garbage disposal project with regard to the Promotion of Eco-efﬁcient Productivity (PEP). 204 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

31.2 Deferred sublease payment Differences arising due to lease payments and lease charges recognised on straight line basis, as per SLFRS / LKAS, are adjusted through the other deferred liabilities account. These amounts are expected to be reversed over the lease term.

As at 31 st March Group Company In Rs. ‘000s Note 2014 2013 2014 2013

32 OTHER NON CURRENT FINANCIAL LIABILITIES Amount payable to Yacht Tours Maldives (Pvt) Ltd 32.1 63,752 59,253 - - 63,752 59,253 - -

32.1 Amount to be paid to Yacht Tours Maldives (Pvt) Ltd at the expiration of lease period of 18 years as per the Sale agreement, dated 24th June 2010.

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

33 TRADE AND OTHER PAYABLE Trade payable 296,657 266,629 - - Other payable 360,328 459,231 6,402 5,530 Accrued expenses 201,362 266,147 7,262 5,772 858,347 992,007 13,664 11,302

34 INCOME TAX LIABILITIES Balance at the beginning of the year 240,374 250,185 7,493 4,163 Charge for the year 267,898 221,383 12,069 12,839 Exchange translation difference (2,347) (2,348) - - Payments, set off against refunds and tax credits (212,934) (228,846) (14,284) (9,509) Balance at the end of the year 292,991 240,374 5,278 7,493

35 OTHER CURRENT LIABILITIES Other current liabilities 258,340 104,846 - - 258,340 104,846 - - 205 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

36 RELATED PARTY TRANSACTIONS 36.1 Amounts Due from Related Parties Ultimate parent John Keells Holdings PLC 1,983 63 - -

Companies under common control Walkers Tours Ltd 118,707 128,476 - - Walkers Air Services Ltd 2,374 - - - Whittall Boustead (Travel) Ltd 7,019 12,493 - - Keells Shipping Ltd 15 - - - Whittall Boustead (Pvt) Ltd 1,873 - - - Keells Hotel Management Services Ltd 6,175 26,632 - - Keells Consultants (Pvt) Ltd - 18 - - Keells Food Products PLC 17 100 - - DHL Keells Private Limited - 409 - NDO Lanka (Private) Limited - 487 - Asian Hotels & Properties PLC - 88 - - John Keells PLC 52 120 - Sentinel Realty (Pvt) Ltd - 108 - 216 Resorts Hotels Ltd - - 87 - Habarana Lodge Ltd - - 94 - Habarana Walk Inn Ltd - - - 36 Wirawila Walk Inn Ltd - - 403 - Yala Village (Pvt) Ltd - - 71 - Beruwela Holiday Resorts (Pvt) Ltd - - 317 2,614 Hikkaduwa Holiday Resorts (Pvt) Ltd - - 200 325 Rajawella Hotels Co. Ltd - - 3,996 417 Trinco Holiday Resorts (Pvt) Ltd - - 64 6,403 Travel Club (Pte) Ltd - - 203 243 John Keells Maldivian Resorts (Pte) Ltd - - 78 307 136,232 168,931 5,513 10,561 138,215 168,994 5,513 10,561 206 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

36.2 Amounts Due to Related Parties Ultimate parent John Keells Holdings PLC 7,842 3,075 336 404

Companies under common control Keells Hotel Management Services Ltd 95,220 115,791 285 195 InfoMate (Pvt) Ltd 2,294 1,971 - 7 Keells Food Products PLC 1,641 846 - - Ceylon Cold Stores PLC 865 998 - - John Keells Ofﬁce Automation Ltd 277 716 - - Jaykay Marketing Services (Pvt) Ltd 60 20 - - John Keells International (Pvt) Ltd 1,205 1,040 - - Keells Business Systems Limited - 18 - - John Keells PLC 785 - 6 - Keells Consultants (Pvt) Ltd 226 273 37 73 Nexus Networks (Pvt) Ltd 42 75 - - Mackinnons Travels (Pvt) Ltd 23 139 - - Walkers Tours Ltd 230 101 - - Union Assurance PLC 182 - - - Trans Asia Hotels PLC - 720 - - Kandy Walk Inn Ltd - - 35 25 Rajawella Hotels Co Ltd - - 3 78 103,050 122,708 366 378 110,892 125,783 702 782

36.3 Loans given to Related Parties Companies under common control Long term - - - - Short term - - - 356,400 - - - 356,400 207 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

36.4 Transactions with Related Parties Ultimate parent Rendering /(receiving) of services (72,416) (15,889) (1,255) (1,848) Interest (paid)/ received - (10,174) - - Directors fees (paid)/ received (10,224) (15,300) (3,024) (2,700)

Companies Under Common Control (Purchase)/sale of goods (35,316) (21,921) - - (Receiving)/rendering of services (346,139) (23,074) (498) (4,218) Interest (paid)/ received 3,419 - 534 56,334 Loans given/(taken) - - - 103,000 Guarantees received - - 13,699 7,098

36.5 Transactions with Related Parties - Companies under Common Control Sale/(purchase) of goods Ceylon Cold Stores PLC (14,225) (4,446) - - Jaykay Marketing Services (Pvt) Ltd (632) (12) - - John Keells Ofﬁce Automation (Pvt) Ltd (767) (387) - - Keells Food Products PLC (19,693) (17,076) - - (35,317) (21,921) - -

Rendering/(receiving) of services Infomate (Pvt) Ltd (23,098) (20,613) (82) (73) John Keells International (Pvt) Ltd (14,547) - - - John Keells Ofﬁce Automation (Pvt) Ltd (735) (4,609) - - Keells Hotel Management Services Ltd (720,907) (641,752) - - Mackinnons Travels (Pvt) Ltd (621) (6,801) - (174) Walkers Tours Ltd 356,745 550,554 - - Whittall Boustead (Travels) Ltd 60,108 129,967 - - Other related parties (3,085) (29,819) (416) (3,971) (346,140) (23,073) (498) (4,218) 208 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES TO THE FINANCIAL STATEMENTS CONTD.

As at 31 st March Group Company In Rs. ‘000s 2014 2013 2014 2013

Loans given/(taken) Yala Village (Pvt) Ltd - - - (50,000) Habarana Walk Inn Ltd - - - (55,100) Kandy Walk Inn Ltd - - - (5,000) Trinco Holiday Resorts (Pvt) Ltd - - - 7,000 - - - (103,000)

36.6 Compensation of Key Management Personnel Short term employee beneﬁts 20,061 19,224 5,661 6,624 20,061 19,224 5,661 6,624

Key management personnel include members of the Board of Directors of John Keells Hotels PLC, its subsidiaries and John Keells Holdings PLC.

36.7 Terms and Conditions of Transactions with Related Parties Transactions with related parties are carried out in the ordinary course of business. Outstanding current account balances at the year end are unsecured, interest free and settlements occur in cash. Loans are given at pre agreed terms and interest rates.

For the Year Ended 31st March Group In Rs. ‘000s 2014 2013

37 COMMITMENTS 37.1 Capital Commitments There were no signiﬁcant capital commitments as at 31 March 2014 (2013-Nil)

37.2 Lease Commitments Within one year 195,809 190,213 Between one and ﬁve years 788,411 766,030 After ﬁve years 2,463,216 2,587,401 3,447,436 3,543,644 209 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

37.3 Details of Leasehold Land Company Land Extent Lessor Leased Properties Acres

Ceylon Holiday Resorts Ltd 11.02 Ceylon Tourist Board Land occupied Hikkaduwa Holiday Resorts (Pvt) Ltd 4.69 Ceylon Tourist Board Land occupied Habarana Walk Inn Ltd 9.34 Kekirawa Divisional Secretariat Land occupied Habarana Lodge Ltd 25.48 Kekirawa Divisional Secretariat Land occupied Yala Village (Pvt) Ltd 11.25 Ceylon Tourist Board Land occupied Rajawella Hotels Co. Ltd 10.00 Rajawella Holding Co. Ltd Land occupied Fantasea World Investments (Pte) Ltd 13.42 Government of Maldives Island rent for the land occupied Travel Club (Pte) Ltd Island of Ellaidhoo 13.75 Government of Maldives and sub-lease Lease rental and Island rent for the land occupied with Ellaidhoo Investment (Pte) Ltd Tranquility (Pte) Ltd Island of Dhonveli 18.62 Government of Maldives Island rent for the land occupied

38 CONTINGENT LIABILITIES Contingencies of the Company as at the reporting date on account of guarantees issued on behalf of subsidiary companies amounted to Rs. 2,511 Mn (2013- Rs. 1,858 Mn) There were no signiﬁcant contingent liabilities as at the reporting date other than what is disclosed above, which require adjustments to or disclosures in the ﬁnancial statements.

39 EVENTS SUBSEQUENT TO THE REPORTING DATE There have been no material events occurring after the reporting date which would have any material effect on the Company or on the Group. 210 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 QUARTERLY INCOME STATEMENT

2013/2014 For the three months ended June September December March Total In Rs. ‘000s 30th 30th 31st 31st

Revenue 2,025,822 2,557,116 2,876,211 3,507,232 10,966,381 Cost of sales (763,181) (904,149) (957,336) (966,248) (3,590,914) Gross profit 1,262,641 1,652,967 1,918,875 2,540,984 7,375,467 Other operating income 13,376 6,156 32,184 104,297 156,013 Administrative expenses (787,153) (858,131) (918,045) (865,139) (3,428,468) Distribution expenses (82,879) (70,749) (75,514) (97,032) (326,174) Other operating expenses (386,347) (343,543) (349,919) (423,718) (1,503,527) Finance expenses (152,862) (138,415) (111,188) (131,412) (533,877) Finance income 42,618 39,182 37,027 34,978 153,805 Profit before tax (90,606) 287,467 533,420 1,162,958 1,893,239 Tax expense (15,124) (37,362) (78,357) (187,470) (318,313) Profit after tax (105,730) 250,105 455,063 975,488 1,574,926

Attributable to: Equity holders of the parent (102,415) 248,624 451,856 967,781 1,565,846 Non-controlling interests (3,315) 1,481 3,207 7,707 9,080 (105,730) 250,105 455,063 975,488 1,574,926

2012/2013 For the three months ended June September December March Total In Rs. ‘000s 30th 30th 31st 31st

Revenue 1,746,761 1,963,959 2,488,596 3,142,265 9,341,581 Cost of sales (619,326) (673,840) (767,653) (943,605) (3,004,424) Gross profit 1,127,435 1,290,119 1,720,943 2,198,660 6,337,157 Other operating income 36,563 21,841 25,926 58,989 143,319 Administrative expenses (700,213) (761,520) (872,150) (789,640) (3,123,523) Distribution expenses (74,413) (88,578) (121,705) (22,972) (307,668) Other operating expenses (270,895) (291,253) (321,627) (384,377) (1,268,152) Finance expenses (93,847) (98,314) (165,022) (179,913) (537,096) Finance income 13,108 7,410 5,383 12,958 38,859 Profit before tax 37,738 79,705 271,748 893,705 1,282,896 Tax expense 1,817 35,259 (48,850) (150,103) (161,877) Profit after tax 39,555 114,964 222,898 743,602 1,121,019

Attributable to: Equity holders of the parent 40,360 113,951 222,373 737,561 1,116,779 Non-controlling interests (805) 117 525 6,041 4,240 39,555 114,068 222,898 743,602 1,121,01 9 211 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INDICATIVE US DOLLAR FINANCIAL STATEMENTS INCOME STATEMENT

For the Year Ended 31st March Group Company In USD ‘000s 2014 2013 2014 2013

Revenue 84,302 73,701 - - Cost of sales (27,604) (23,604) - - Gross profit 56,698 49,997 - - Dividend income - - 2,943 276 Other operating income 1,199 1,131 105 3 Administrative expenses (26,356) (24,643) (192) (238) Distribution expenses (2,507) (2,427) - - Other operating expenses (11,558) (10,005) (2) (4) Results from operating activities 17,476 14,052 2,854 37 Finance expenses (4,104) (4,237) (98) (57) Finance income 1,182 307 226 611 Net finance income (2,922) (3,931) 128 555 Profit before tax 14,554 10,121 2,982 591 Tax expense (2,447) (1,277) (93) (101) Profit for the year 12,107 8,844 2,889 490

Attributable to : Equity holders of the parent 12,037 8,811 Non-controlling interests 70 33 12,107 8,844

Exchange Rate (SL Rs.) 130.09 126.75 130.09 126.75

Indicative consolidated accounts have been published in USD equivalents for information purposes only.

This information does not constitute a full set of financial statements in compliance with SLFRS/LKAS. These financial statements should be read together with the opinion of the Auditors and financial statements set out on pages 149 to 209

The exchange rates prevailing at each year end have been used for the conversion of the consolidated income statement and the statement of ﬁnancial position. 212 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 INDICATIVE US DOLLAR FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION

As at 31 st March Group Company In USD ‘000s 2014 2013 2014 2013

ASSETS Non-Current Assets Property, plant and equipment 101,095 106,286 - - Lease rentals paid in advance 63,011 68,159 - - Intangible assets 5,129 5,289 - - Investments in subsidiaries and joint ventures - - 79,563 74,609 Other non current ﬁnancial assets 173 198 - - Deferred tax assets 294 428 - - Other non-current assets 5 - - - 169,707 180,361 79,563 74,609

Current Assets Inventories 1,505 1,431 - - Trade and other receivables 6,955 5,843 - - Other current assets 2,402 3,175 21 11 Amounts due from related parties 1,057 1,333 42 83 Loans given to related parties - - - 2,812 Other investments 15,191 2,538 249 473 Cash in hand and at bank 5,692 4,642 20 370 32,802 18,962 333 3,750 Total Assets 202,509 199,323 79,896 78,359

EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital 72,687 74,953 72,687 74,953 Other components of equity 29,739 28,629 - - Revenue reserves 36,026 24,972 6,030 3,252 138,452 128,554 78,717 78,205 Non-controlling interests 768 731 - - Total Equity 139,220 129,285 78,717 78,205 213 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

As at 31 st March Group Company In USD ‘000s 2014 2013 2014 2013

Non-Current Liabilities Interest bearing borrowings 32,482 43,953 256 - Deferred tax liabilities 1,105 903 - - Employee beneﬁt liability 871 705 - - Other deferred liabilities 524 270 - - Other non-current ﬁnancial liabilities 488 467 - - 35,470 46,298 256 -

Current Liabilities Trade and other payable 6,567 7,826 105 89 Other current liabilities 1,977 827 765 - Amounts due to related parties 848 992 5 6 Income tax liabilities 2,242 1,896 40 59 Current portion of interest bearing borrowings 14,083 10,455 - - Bank overdrafts 2,102 1,743 7 - 27,819 23,740 922 154 Total Equity and Liabilities 202,509 199,323 79,895 78,359 Exchange Rate (SL Rs.) 130.7 126.75 130.7 126.75 214 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 TEN YEARS SUMMARY - GROUP

31st March 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 In Rs.000s

OPERATING RESULTS Revenue 10,966,381 9,341,581 7,388,158 5,884,513 6,038,073 5,114,000 5,158,168 3,692,785 2,024,811 1,308,950 Cost of sales (3,590,914) (3,004,424) (2,310,998) (1,807,367) (1,832,385) (1,653,083) (1,879,017) (1,252,068) (814,959) (447,719) Gross profit 7,375,467 6,337,157 5,077,170 4,077,146 4,205,688 3,460,917 3,279,151 2,440,717 1,209,852 861,231 Other operating income 156,013 143,319 116,162 30,974 27,485 24,448 140,173 87,494 65,466 1,129 Profit on disposal of non-current investments ------42,680 - - - Administrative expenses (3,428,968) (3,123,523) (2,291,066) (2,306,846) (2,614,181) (2,406,136) (2,111,078) (1,339,585) (591,131) (467,755) Distribution expenses (326,174) (307,668) (311,162) (206,955) (173,171) (158,062) (149,389) (126,282) (107,967) (46,574) Other operating expenses (1,503,527) (1,268,152) (977,290) (872,179) (875,018) (862,702) (775,926) (519,668) (337,699) (186,993) Finance expenses (533,877) (537,096) (264,628) (272,972) (373,688) (292,013) (475,484) (343,624) (25,292) (10,613) Finance Income 153,805 38,859 26,968 157,238 11,032 12,069 66,612 9,539 17,646 8,324 Share of associate company profits ------8,551 Profit/(loss) before tax 1,893,239 1,282,896 1,376,154 606,406 208,147 (221,479) (83,261) 208,591 230,875 167,300 Tax expense (318,313) (161,877) (265,354) (80,423) (2,989) 503 12,199 20,107 (31,636) (36,100) Profit/(loss) for the year 1,574,926 1,121,019 1,110,800 525,983 205,158 (220,976) (71,062) 228,698 199,239 131,200 Earnings per share - Rs. 1.08 0.77 0.76 0.36 0.17 (0.17) (0.07) 0.39 3.32 3.26

ASSETS Non current assets Property, plant and equipment 13,213,160 13,471,801 9,918,258 6,585,581 8,718,964 8,685,256 7,823,749 3,454,781 3,158,410 2,524,725 Lease rentals paid in advance 8,235,508 8,639,214 9,386,494 8,605,476 3,653,846 3,839,086 3,686,557 3,796,043 - - Intangible assets 670,407 670,407 670,407 670,407 670,963 666,068 666,068 655,143 852,882 895,754 Other non-current ﬁnancial assets 22,570 25,058 25,063 25,063 25,063 25,057 25,083 25,083 25,083 - Deferred tax assets 38,368 54,231 34,143 37,978 41,344 22,339 16,244 9,833 - - Other non-current assets 620 - - 9,073 - - - 218,400 297,381 25,083 22,180,633 22,860,711 20,034,365 15,933,578 13,110,180 13,237,806 12,217,701 8,159,283 4,333,756 3,445,562

Current assets Inventories 196,666 181,338 171,481 118,541 129,239 127,992 127,577 96,185 61,304 44,677 Trade and other receivables 909,040 740,558 687,631 679,512 519,691 396,993 807,060 649,032 380,179 304,984 Other current assets 313,941 402,412 579,332 656,899 519,057 450,685 599,032 1,223,527 321,241 217,602 Amounts due from related parties 138,215 168,994 199,870 183,568 77,925 30,323 60,080 27,471 52,793 24,346 Loans given to related parties ------10,000 - Short term investments 1,985,510 321,731 1,140,134 10,938 2,960,000 - 25,379 685 5,960 191,560 Cash in hand and at bank 743,927 588,394 547,136 314,429 612,296 504,494 394,502 424,974 249,421 661,361 4,287,299 2,403,427 3,325,584 1,963,887 4,818,208 1,510,487 2,013,630 2,421,874 1,080,898 1,444,530

Total assets 26,467,932 25,264,138 23,359,949 17,897,465 17,928,388 14,748,293 14,231,331 10,581,157 5,414,654 4,890,092

EQUITY & LIABILITIES Equity attributable to equity holders of the parent Stated capital 9,500,247 9,500,247 9,500,247 9,500,247 9,500,247 5,859,880 5,859,880 595,696 595,696 595,696 Other components of equity 3,886,925 3,628,684 1,791,313 761,197 772,879 620,791 303,213 2,558,418 2,468,238 2,443,733 Revenue reserves 4,708,642 3,165,257 2,482,461 1,379,022 870,373 695,953 907,451 970,173 579,149 468,837 18,095,814 16,294,188 13,774,021 11,640,466 11,143,499 7,176,624 7,070,544 4,124,287 3,643,083 3,508,266 Non-controlling interests 100,442 92,623 67,725 63,689 56,269 47,111 56,534 48,680 63,244 47,543 Total equity 18,196,256 16,386,811 13,841,746 11,704,155 11,199,768 7,223,735 7,127,078 4,172,967 3,706,327 3,555,809

215 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014

31st March 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 In Rs.000s

Non current liabilities Negative goodwill ------423,771 478,338 Non- interest bearing borrowings - - - - - 79,536 79,536 82,655 149,610 162,023 Interest bearing borrowings 4,245,400 5,571,060 5,809,814 2,615,273 3,006,492 3,184,228 3,582,006 1,977,188 121,053 1,052 Deferred tax liabilities 144,361 114,422 49,337 34,987 48,521 48,784 64,028 89,880 57,276 63,060 Employee beneﬁt liabilities 113,836 89,346 84,677 78,713 65,974 61,008 51,641 41,046 40,893 38,703 Other deferred liabilities 68,426 34,160 1,923 2,248 2,573 2,898 3,223 - - - Other non-current ﬁnancial liabilities 63,752 59,253 57,392 47399 ------4,635,775 5,868,241 6,003,143 2,778,620 3,123,560 3,376,454 3,780,434 2,190,769 792,603 743,176

Current liabilities Trade and other payable 858,347 992,007 826,718 206,017 213,372 199,388 262,796 161,348 70,035 152,467 Other current liabilities 258,340 104,846 299,271 394,489 1,038,340 666,704 758,800 650,329 310,394 290,939 Amounts due to related parties 110,892 125,783 120,722 120,068 124,681 200,762 109,104 85,894 27,481 33,569 Income tax liabilities 292,991 240,374 250,185 82,500 7,606 6,259 7,627 - 334 18,516 Short term borrowings - - - - - 2,500 2,500 2,344,230 269,520 - Current portion of Interest bearing borrowings 1,840,626 1,325,111 1,005,220 821,440 872,741 652,901 479,196 57,964 - 139 Bank overdrafts 274,705 220,965 1,012,944 1,790,176 1,348,320 2,419,590 1,703,796 917,656 237,960 95,477 3,635,901 3,009,086 3,515,060 3,414,690 3,605,060 4,148,104 3,323,819 4,217,421 915,724 591,107

Total equity and liabilities 26,467,932 25,264,138 23,359,949 17,897,465 17,928,388 14,748,293 14,231,331 10,581,157 5,414,654 4,890,092

Rs. Bn Rs. Bn Rs. Bn 12 2.0 30

10 1.5 25 8 20 1.0 6 15 0.5 4 10

2 0 5

0 (0.5) 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

REVENUE PROFIT AFTER TAX TOTAL ASSETS 216 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 GROUP REAL ESTATE PORTFOLIO

Owning Company and location Buildings (Sq Ft) Land in acres Net book value Freehold property Leasehold property Rs.’000 Rs.’000 2014 2013 2014 2013 2014 2013 2014 2013 Properties - Sri Lanka Beruwala Holiday Resorts (Pvt) Ltd Cinnamon Bey, Beruwala 425,684 425,684 11.39 11.39 - - 3,092,474 3,104,334 Ceylon Holiday Resorts Ltd Bentota Beach Hotel, Bentota 236,524 236,524 2.32 2.32 11.02 11.02 662,087 700,808 Hikkaduwa Holiday Resorts (Pvt) Ltd Chaaya Tranz, Hikkaduwa 233,965 233,965 0.29 0.29 4.36 4.36 1,196,734 1,237,785 Habarana Lodge Ltd Cinnamon Lodge, Habarana 202,999 202,999 - - 25.48 25.48 649,874 665,689 Habarana Walk Inn Ltd Chaaya Village, Habarana 121,767 121,767 - - 9.34 9.34 372,434 387,000 International Tourists and Hoteliers Ltd Beruwala - - 0.11 0.11 - - - - Kandy Walk Inn Ltd Cinnamon Citadel, Kandy 173,900 160,550 5.80 5.80 - - 948,937 902,259 Rajawella Hotels Company Ltd Mahaberiatenna, Kandy 3,700 3,700 - - 10.00 10.00 764 622 Resort Hotels Ltd Medway Estate, Nilaveli 4,485 4,485 44.37 44.37 - - 667,600 667,600 Trinco Holiday Resorts (Pvt) Ltd Chaaya Blu, Trincomalee 120,910 120,910 13.24 13.24 - - 767,699 771,840 Trinco Walk Inn Ltd Trincomalee - - 14.64 14.64 - - 226,368 226,368 Wirawila Walk Inn Ltd Randunukelle Estate, Wirawila - - 25.15 25.15 - - 69,997 70,000 Yala Village (Pvt) Ltd Cinnamon Wild, Tissamaharama 111,529 110,248 - - 11.25 11.25 425,108 438,015 Ahungalle Holiday Resorts (Pvt) Ltd Ahungalle - - 6.50 6.50 - - 148,850 148,850 Sentinel Realty (Pvt) Ltd Vaakarai - - 33.69 8.43 - - 120,478 35,500 Properties - Maldives Tranquility (Pte) Ltd Chaaya Island Dhonveli 246,358 246,358 - - 18.62 18.62 409,763 347,862 Travel Club (Pte) Ltd Chaaya Reef Ellaidhoo 170,877 170,877 - - 13.75 13.75 369,807 419,101 Fantasea World Investments (Pte) Ltd Chaaya Lagoon Hakuraa Huraa 150,412 150,412 - - 13.42 13.42 771,482 774,348 Total 2,203,110 2,188,479 157.50 132.24 117.24 117.24 10,900,466 10,897,981 217 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 DIRECTORS OF SUBSIDIARY COMPANIES

SRI LANKA RAJAWELLA HOTELS COMPANY LTD TRINCO HOLIDAY RESORTS (PRIVATE) CEYLON HOLIDAY RESORTS LIMITED Mr S C Ratnayake - Chairman LIMITED Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr S C Ratnayake – Chairman Mr A D Gunewardene Mr J R Gunaratne Mr A D Gunewardene Mr J E P Kehelpannala Mr J E P Kehelpannala Mr B J S M Senanayake TRINCO WALK INN LIMITED Mr B J S M Senanayake Mr S C Ratnayake - Chairman HABARANA LODGE LIMITED Mr A D Gunewardene HIKKADUWA HOLIDAY RESORTS Mr S C Ratnayake – Chairman Mr J E P Kehelpannala (PRIVATE) LIMITED Mr A D Gunewardene Mr B J S M Senanayake Mr S C Ratnayake – Chairman Mr J E P Kehelpannala Mr A D Gunewardene Mr B J S M Senanayake RESORT HOTELS LIMITED Mr J E P Kehelpannala Mr S C Ratnayake - Chairman Mr B J S M Senanayake HABARANA WALK INN LIMITED Mr A D Gunewardene Mr S C Ratnayake - Chairman AHUNGALLA HOLIDAY RESORTS Mr A D Gunewardene WIRAWILA WALK INN LIMITED (PRIVATE) LIMITED Mr J E P Kehelpannala Mr S L Ratnayake - Chairman Mr S C Ratnayake – Chairman Mr B J S M Senanayake Mr A D Gunewardene Mr A D Gunewardene Mrs D C Alagaratnam Mr J E P Kehelpannala INTERNATIONAL TOURISTS AND Mr B J S M Senanayake HOTELIERS LIMITED YALA VILLAGE (PRIVATE) LIMITED Mr S C Ratnayake - Chairman Mr S C Ratnayake – Deputy Chairman Mr A D Gunewardene Mr A D Gunewardene Mr J E P Kehelpannala Mr J E P Kehelpannala Mrs D C Alagaratnam Mr J A Davis Mr B J S M Senanayake Mr M A Perera - Chairman Mr B J S M Senanayake KANDY WALK INN LIMITED Mr S C Ratnayake - Chairman BERUWALA HOLIDAY RESORTS Mr A D Gunewardene (PRIVATE) LIMITED Mr J E P Kehelpannala Mr S C Ratnayake – Chairman Mr R T Molligoda Mr A D Gunewardene Mr B J S M Senanayake Mr J E P Kehelpannala Mr B J S M Senanayake 218 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 DIRECTORS OF SUBSIDIARY COMPANIES CONTD.

MALDIVES MAURITIUS JOHN KEELLS MALDIVIAN RESORTS JOHN KEELLS HOTELS MAURITIUS (PVT) (PTE) LIMITED LIMITED Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr A D Gunewardene Mrs D C Alagaratnam Mr B J S M Senanayake Mr K D Joory Mr S A S Perera Mr A F Soreefan Mr J E P Kehelpannala

TRAVEL CLUB (PTE) LIMITED Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera Mr J E P Kehelpannala

FANTASEA WORLD INVESTMENTS (PTE) LIMITED Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera Mr J E P Kehelpannala

TRANQUILITY (PTE) LIMITED Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera

219 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 GLOSSARY OF FINANCIAL TERMS

ACCOUNTING POLICIES CAPITAL EXPENDITURE EFFECTIVE TAX RATE The specific principles, bases, conventions, rules and The total additions to property, plant and equipment. Tax expense divided by the profit before tax. practices adopted by an enterprise in preparing and presenting Financial Statements. CORPORATE GOVERNANCE EPS GROWTH The process by which corporate entities are governed. It Percentage of the increase in the EPS over the previous ACCRUAL BASIS is concerned with the way in which power is exercised year. Recognising the effects of transactions and other over the management and direction of entity, the events when they occur without waiting for receipt or supervision of executive actions and accountability to EQUITY METHOD payment of cash or its equivalent. owners and others. The equity method is a method of accounting whereby the investment is initially recognised at cost and AMORTISATION DEBT/EQUITY RATIO adjusted thereafter for the post-acquisition changes in The systematic allocation of the depreciable amount of Debt as a percentage of shareholders’ funds and non- the investors’ share of net assets of the investee. The an intangible asset over its useful life. controlling interest. income statement of the investor includes the investor’s share of the profit or loss of the investee. CAPITAL EMPLOYED DEFERRED TAX Shareholders’ funds plus non-controlling interest and Sum set aside in the Financial Statements for taxation FAIR VALUE debt. that may become payable in a financial year other than Fair value is the amount at which an asset could be the current financial year. exchanged between a knowledgeable willing buyer CASH EQUIVALENTS and a knowledgeable willing seller in an arm’s length Short term highly liquid investments that are readily DIVIDEND YIELD transaction. convertible to known amounts of cash and which are Dividend earned per share as a percentage of its market subject to an insignificant risk of changes in value. value. FINANCE LEASE A contract whereby a lessor conveys to the lessee the CONTINGENCIES EARNINGS PER SHARE (EPS) right to use an asset for rent over an agreed period of A condition or situation existing at reporting date Profit attributable to equity holders of the parent time which is sufficient to amortise the capital outlay where the outcome will be confirmed only by divided by the weighted average number of ordinary of the lessor. The lessor retains ownership of the asset occurrence or non-occurrence of one or more future shares in issue during the period. but transfers substantially all the risks and rewards of events. ownership to the lessee. EBIT GROUP CURRENT RATIO Earnings before interest and tax (includes other Current assets divided by current liabilities. operating income). A group is a parent, all its subsidiaries and joint ventures. CAPITAL RESERVES EBITDA GUARANTEES Reserves identified for specific purposes and considered Earnings before interest, tax, depreciation and not available for distribution. amortisation. Three party agreement involving a promise by one party (the guarantor) to fulfill the obligations of a person owing a debt if that person fails to perform. 220 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 GLOSSARY OF FINANCIAL TERMS CONTD.

IMPAIRMENT MARKET CAPITALISATION the other party in making financial and operating This occurs when recoverable amount of an asset is less Number of shares in issue at the end of period decisions, directly or indirectly. than its carrying amount. multiplied by the market price at end of the period. RETURN ON EQUITY INTANGIBLE ASSET NET ASSETS Profit attributable to shareholders as a percentage of An intangible asset is an identifiable non-monetary Total assets minus current liabilities, minus long term average shareholders’ funds. asset without a physical substance. liabilities and minus minority interest. RETURN ON ASSETS INTEREST COVER NET ASSETS PER SHARE Profit after tax divided by the average assets. Consolidated profit before interest and tax over finance Shareholders’ funds divided by the weighted average expenses. number of ordinary shares in issue. SEGMENT Constituent business units grouped in terms of KEY MANAGEMENT PERSONNEL OPERATIONAL RISK similarity in operations and locations. Key management personnel are those persons having This refers to the risk of loss resulting from inadequate authority and responsibility for planning, directing or failed internal processes, people and systems or from SUBSTANCE OVER FORM and controlling the activities of the entity, directly or external events. The consideration that the accounting treatment indirectly, including any Director (whether Executive or and the presentation in Financial Statements of otherwise) of that entity. PRE-TAX RETURN ON CAPITAL EMPLOYED transactions and events should be governed by their Consolidated profit before interest and tax as a substance and financial reality and not merely by legal MATERIALITY percentage of average capital employed at year end. form. The relative significance of a transaction or an event, the omission or misstatement of which could PRICE EARNINGS RATIO SHAREHOLDERS’ FUNDS influence the economic decisions of users of Financial Market price per share over Earnings per Share. Shareholders’ funds consist of stated capital plus Statements. capital and revenue reserves. PRUDENCE NON-CONTROLLING INTEREST TOTAL DEBT Inclusion of a degree of caution in the exercise of Part of net results of operations and net assets of judgement needed in making the estimates required Long term loans plus short term loans and overdrafts. subsidiaries attributable to interests which are not under conditions of uncertainty, such that assets or owned, directly or indirectly through subsidiaries, by income are not overstated and liabilities or expenses TOTAL VALUE ADDED the Parent Company. are not understated. The difference between net revenue (including other income) and expenses, cost of materials & services MARKET VALUE PER SHARE RELATED PARTIES purchased from external sources. The price at which an ordinary share can be purchased Parties where one party has the ability to control in the stock market. the other party or exercise significant influence over 221 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTICE OF MEETING

Notice is hereby given that the Thirty Fifth Annual General Meeting of John Keells Notes: Hotels PLC will be held on 30th June 2014 at 3.30 p.m at the John Keells Staff dining z A member unable to attend is entitled to appoint a Proxy to attend and vote in hall at No. 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 2, for the following his/her place. purposes: z A Proxy need not be a member of the Company. z A member wishing to vote by Proxy at the Meeting may use the Proxy Form 1. To read the Notice convening the Meeting. enclosed. 2. To receive and consider the Annual Report and Financial Statements of the z In order to be valid, the completed Proxy Form must be lodged at the Registered Company for the Financial Year ended 31st March 2014 with the Report of the Office of the Company not later than 48 hours before the meeting. Auditors thereon. z If a poll is demanded, a vote can be taken on a show of hand or by a poll. Each 3. To re-elect as Director, Mr. R T Wijesinha, who retires in terms of Article 84 of share is entitled to one vote. Votes can be cast in person, by proxy or corporate the Articles of Association of the Company. A brief profile of Mr. R T Wijesinha is representatives. In the event an individual shareholder and his proxy holder contained in Page 52 of the Annual Report. are both present at the meeting, only the shareholder‘s vote will be counted. If 4. To re-elect as Director, Mr. N B Weerasekera, who retires in terms of Article 84 of proxy holder’s appointor has indicated the manner of voting, only the appointors the Articles of Association of the Company. A brief profile of Mr. N B Weerasekera indication of the manner to vote will be used is contained in Page 53 of the Annual Report. 5. To re-elect as Director, Mr. T L F W Jayasekera, who retires in terms of Article 90 of the Articles of Association of the Company. A brief profile of Mr. T L F W Jayasekera is contained in Page 53 of the Annual Report. 6. To re-appoint Messrs Ernst & Young, Chartered Accountants, as Auditors and to authorise the Directors to determine their remuneration. 7. To consider any other business of which due notice has been given in terms of the relevant laws and regulations.

By Order of the Board,

Keells Consultants (Private) Limited Secretaries

5th June 2014 222 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 NOTES 223 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 FORM OF PROXY

I/We ...... of FOR AGAINST ...... being To re-elect as Director, Mr. R T Wijesinha who retires in terms of a member/s of John Keells Hotels PLC hereby appoint Article 84 of the Articles of Association of the Company...... of To re-elect as Director, Mr. N B Weerasekera, who retires in terms of Article 84 of the Articles of Association of the Company...... or failing him/her To re-elect as Director, Mr. T L F W Jayasekera, who retires in Mr. Susantha Chaminda Ratnayake of Colombo or failing him terms of Article 90 of the Articles of Association of the Company. Mr. Ajit Damon Gunewardene of Colombo or failing him To re-appoint Auditors Messrs. Ernst & Young Chartered Mr. James Ronnie Felitus Peiris of Colombo or failing him Accountants and to authorise the Directors to determine their Mr. Jayantissa Emalka Pohath Kehelpannala of Colombo or failing him remuneration. Mr. Ranel Tissa Wijesinha of Colombo or failing him

Mr. Balapuwaduge Jestus Sunimal Mendis Senanayake of Colombo or failing him Signed this …………………...……. day of …………..…… Two Thousand and Fourteen. Mr. Nissanka Bandara Weerasekera of Colombo or failing him Mr. Trevine Lalith Francis Waas Jayasekera of Colombo as my/our proxy to vote for me/us on my/our behalf at the Thirty Fifth Annual ………………………………………………………. General Meeting of the Company to be held on the 30th June 2014 at 3.30 p.m and Signature/s of shareholder/s at any adjournment thereof and at every poll which may be taken in consequence thereof.

Note: Instructions as to completion of form of proxy are set out on the reverse hereof. 224 JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014 FORM OF PROXY CONTD.

INSTRUCTIONS AS TO COMPLETION OF PROXY 1. Kindly complete the Form of Proxy by filling in legibly your full name and address and that of the Proxy holder. Please sign in the space provided and fill in the date of signature. 2. The instrument appointing a Proxy shall, in the case of an individual, be signed by the appointer or by his Attorney and in the case of a Corporation must be executed under the Common Seal or in such other manner prescribed by its Articles of Association or other Constitutional documents. 3. If the Proxy Form is signed by an Attorney, the relevant Power of Attorney or a notarially certified copy thereof, should also accompany the completed Form of Proxy if it has not already been registered with the Company. 4. To be valid, the completed Form of Proxy should be deposited at the Registered Office of the Company at No. 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 2 not later than 48 hours before the time appointed for the holding of the meeting. CORPORATE INFORMATION

NAME OF COMPANY BANKERS John Keells Hotels PLC Bank of Ceylon Deutsche Bank A.G LEGAL FORM Hongkong and Shanghai Banking Corporation Public Limited Liability Company Nations Trust Bank Incorporated in Sri Lanka on 1 Oct 1979 Hatton National Bank Habib Bank Ltd STOCK EXCHANGE LISTING HEAD OFFICE & REGISTERED OFFICE The issued shares of John Keells Hotels PLC are listed on OF THE COMPANY the Colombo Stock Exchange 117, Sir Chittampalam A. Gardiner Mawatha, COMPANY REGISTRATION NO. Colombo 2 Telephone : (94-11) 2421101-15, PQ 8 (94-11) 2306000 Facsimile : (94-11) 2439046 DIRECTORS E-mail : [email protected] S C Ratnayake – Chairman Web : www.johnkeellshotels.com A D Gunewardene J R F Peiris HOTEL RESERVATIONS J E P Kehelpannala Keells Hotel Management Services Ltd B J S M Senanayake 117, Sir Chittampalam A. Gardiner Mawatha, R T Wijesinha Colombo 2 N B Weerasekera Telephone : (94-11) 2306600, D A Cabraal (resigned w.e.f 30.10.2013) (94-11) 2439049-51, T L F W Jayasekera (appointed w.e.f 01.11.2013) Facsimile : (94-11) 2320862 E-mail : [email protected] SECRETARIES AND REGISTRARS Web : www.cinnamonhotels.com Keells Consultants (Pvt) Ltd www.chaayahotels.com 117, Sir Chittampalam A. Gardiner Mawatha Colombo 2

AUDITORS Ernst & Young Chartered Accountants P.O. Box 101 Colombo

Design & Concept by : Designs (Pvt) Ltd. | Printed by : Aitken Spence Printing & Packaging (Pvt) Ltd. JOHN KEELLS HOTELS PLC | ANNUAL REPORT 2013/2014