John Keells Hotels PLC | Annual Report 2015/16 Keells Hotels PLC | Annual Report 2015/16 8 About this Report John Keells Hotels PLC’s corporate reporting model complements the Group’s

John Keells Hotels PLC | Annual Report 2015/16

Annual Report 2015/16 | John Keells Hotels PLC

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There is an art to enjoying any experience worth having. At John Keells Hotels we have perfected the art of inspired living through a portfolio of resort hotels; inviting every guest to experience life’s best moments. Cinnamon’s resort hotels offer inspiring experiences across 11 properties in Sri Lanka and the Maldives in stunning locations in the whispering jungles and remote beaches in Sri Lanka or even in the jewel-like islands of the Maldives…

Come, discover the world of Cinnamon. We’ll show you the art of inspired living.

Cinnamon Lodge Habarana . Hikka Tranz by Cinnamon. Trinco Blu by Cinnamon . Bentota

Beach by Cinnamon . Cinnamon Wild Yala . Cinnamon Bey Beruwala . Habarana Village

by Cinnamon . Cinnamon Citadel Kandy . Ellaidhoo Maldives by Cinnamon . Cinnamon

Hakuraa Huraa Maldives . Cinnamon Dhonveli Maldives


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ContentsOur Vision 7About this Report 8Performance Scorecard 9Group Overview 11Group Structure 12Key Achievements in 2015/16 13Group Financial and Operational Highlights 16Chairman’s Message 20Board of Directors 26Corporate Governance 30Audit Committee Report 48Risk Management 50Management Discussion and Analysis 60

Consolidated Value Added Statement 140GRI Content Index Tool 141Independent Assurance Report 147

Investor Information 149Annual Report of the Board of Directors 154Statement of Directors’ Responsibility 161Independent Auditors’ Report 163

Income Statement 164Statement of Comprehensive Income 165Statement of Financial Position 166Statement of Changes in Equity 168Statement of Cash Flows 170Notes to the Financial Statements 172Quarterly Income Statement - Group 238Quarterly Statement of Financial Position - Group 239Indicative US dollar Income Statement 240Indicative US dollar Statement of Financial Position 241Ten Years Summary - Group 244Group Real Estate Portfolio 248Directors of Subsidiary Companies 250Glossary of Financial Terms 254Notice of Meeting 257Form of Proxy 259Corporate Information IBC


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Inspired to lead We will always be the hospitality trendsetter

Vision


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About this Report

John Keells Hotels PLC’s corporate reporting model complements the Group’s integrated approach towards strategy formulation, which strives to consistently embed its sustainability objectives to its business strategy. Accordingly, in preparing this Report, we have adopted the principles of the <IR> Framework issued by the International Integrated Reporting Council for the second consecutive year. Through this Report, we aim to present a balanced and concise assessment of our strategy, performance and outlook in relation to our financial, social and environmental goals.

Scope and BoundaryWe adopt an annual reporting cycle and this Report covers the Group’s operations in Sri Lanka and Maldives for the period from 1st April 2015 to 31st March 2016. The Group consists of 8 resorts in Sri Lanka and 3 in the Maldives. Material aspects included in the Report were selected through a systematic and

comprehensive process which involved robust stakeholder engagement at multiple levels, evaluation of emerging risks and opportunities in the industry landscape as well as assessment of our value creation model. There were no significant changes to the Group’s size, structure, shareholding or supply chain during the period under review.

Reporting enhancementsWe understand that Integrated Reporting is an evolving discipline, and this year we have sought to further improve the meaningfulness and readability of our Report through,

Refined process of materiality analysis resulting in improved scope and coverage of our material issues

Enhanced connectivity of information

Increased conciseness of information presented

Standards, Principles and Verification

Integrated Report Annual Financial Statements Corporate Governance Risk Management Report

Sustainability Performance

Sta

ndard

s and

Pri

nci

ples

Integrated Reporting Framework of the International Integrated Reporting Council (IIRC)

Sri Lanka Financial Reporting Standards

Companies Act No. 7 of 2007

Listing Requirements of the Colombo Stock Exchange

Code of Best Practice on Corporate Governance issued by the ICASL and SEC

Global Reporting Initiative - G4 standards (Core)

Ass

ura

nce Messrs. Ernst and Young,

Chartered AccountantsAssurance on the Director’s Statement of Internal Controls provided by Messrs. Ernst and Young, Chartered Accountants

Messrs. Ernst and Young, Chartered Accountants

Your OpinionWe value your comments, feedback and suggestions on our reporting. For further information, please contact,

Mrs. Chandrika Perera - Chief Financial Officer, Leisure Group

117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.E-mail: [email protected].


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Performance Scorecard

2015/16 2014/15 Y-o-y change (%)

Eco

nom

ic P

erfo

rmance

Financial & Manufactured Capital

Revenue Rs. Mn 11,632 11,444 2%

Trevpar Rs. 23,771 23,451 1%

Operating Profit Rs. Mn 2,091 2,341 -11%

Profit for the year Rs. Mn 1,749 1,868 -6%

Earnings per share Rs. 1.19 1.27 -6%

Dividend per share Rs. 0.40 0.25 60%

Total Assets Rs. Mn 28,900 26,749 8%

Property, Plant and Equipment Rs. Mn 14,273 13,560 5%

Total Equity Rs. Mn 23,018 20,446 13%

Total Debt Rs. Mn 3,726 4,314 -14%

Net Assets per share Rs. 15.72 13.96 13%

Share Price Rs. 12.00 14.30 -16%

Market Capitalization Rs. Mn 17,474 20,823 -16%

Soc

ial

Per

form

ance

Human Capital

Headcount No. 2,628 2,720 -3%

Employee satisfaction rate % 86.7 89.6 -3%

Retention % 80 79 1%

Productivity Profit Rs.’000/employee 666 687 -3%

Investment in training Rs. Mn 33 20 65%

Training hours per employee hours 45 46 -2%

Injury rate % 2.28 2.06 10%

Female representation at senior management level % 21.9 17.6 24%

Social and Relationship Capital

Customer satisfaction (Ave. Trip advisor rating) Out of 5 4.26 4.25 0.2%

Occupancy rate % 80.4 79.8 0.8%

Social media presence No. of followers 140,100 127,399 10%

Investment in Community engagement Rs. Mn 7.9 8.3 -15%

Volunteer Hours hours 9,316 9,113 2%


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Performance Scorecard

2015/16 2014/15 Y-o-y change (%)

Envi

ronm

enta

l P

erfo

rmance

Natural Capital

Raw Material usage MT 3,369 3,331 1.1%

Carbon Footprint tCO2e 20,294 20,234 0.3%

Energy consumption per guest night MJ 213 219 -2.8%

Water consumption per guest night Litres 770 815 -5.5%

Waste disposed per guest night Kgs 3.34 3.42 -2.2%

Carbon footprint per guest night Kgs 24.88 25.11 -0.9%


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About John Keells Hotels PLC

John Keells Hotels PLC is Sri Lanka’s premier hospitality sector operator, owning and managing a portfolio of 1,337 four and five star rooms in 11 hotels across Sri Lanka and Maldives. The Group’s flagship lifestyle brand ‘Cinnamon’, embodies the best of Sri Lankan culture, entertainment and hospitality, delivering its promise of ‘Inspired Living’ through iconic, modern and vibrant spaces. Globally renowned for its commitment to sustainable tourism, the multi-award winning Cinnamon Hotels & Resorts portfolio has obtained and continues to comply with numerous international certifications including Green Globe, ISO 22000:2005, ISO 14001 and OHSAS 18001, among others.

We provide a conducive working environment and exciting opportunities for skill and career development to our talent pool of 2,628 employees, who play an integral role in facilitating our

customer experience. As a responsible corporate citizen we have implemented multiple community engagement initiatives targeted at empowering and uplifting communities in which we operate in. John Keells Hotels is also committed to environmental preservation and have continued to monitor a range of non-financial indicators which has enabled us to optimize the inputs and outputs of natural resources. The Group is a 80.32% owned subsidiary of John Keells Holdings PLC, Sri Lanka’s premier diversified conglomerate, and most valuable listed entity in terms of market capitalization. John Keells Hotels PLC is listed on the primary board of the Colombo Stock Exchange with a market capitalization of Rs. 17.5 Bn by end-March 2016.

Our Hotel Portfolio

Cluster Hotel Room Capacity

Trip Advisor Rating

Sri

Lanka

Beach Front Cinnamon Bey Beruwala 200 4.2

Hikka Tranz by Cinnamon 150 4.3

Trinco Blu by Cinnamon 81 4.1

Bentota Beach by Cinnamon 133 4.0

Adventure and Heritage Cinnamon Wild Yala 68 4.4

Cinnamon Lodge Habarana 138 4.4

Habarana Village by Cinnamon 108 4.2

Cinnamon Citadel Kandy 119 4.1

Mald

ives Beach Front Cinnamon Dhonveli Maldives 148 4.4

Ellaidhoo Maldives by Cinnamon 112 4.3

Cinnamon Hakuraa Huraa Maldives 80 4.5


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Group StructureJo

hn K

eell

s H

oldin

gs

PLC

(Ulti

mat

e P

aren

t C

ompa

ny)

John Keells Hotels PLC

80.32%

Hikkaduwa Holiday Resorts (Pvt) LimitedHikka Tranz by Cinnamon100%

Travel Club (Pvt) LimitedEllaidhoo Maldives by Cinnamon100%

Beruwala Holiday Resorts (Pvt) LimitedCinnamon Bey Beruwala100%

Resort Hotels Limited44.37 acres of land in Nilaveli100%

Fantasea World Investments (Pvt) LimitedCinnamon Hakuraa Huraa Maldives100%

Tranquility (Pvt) LimitedCinnamonDhonveli Maldives100%

Kandy Walk Inn Limited Cinnamon Citadel Kandy

98.39%

Yala Village (Pvt) Limited Cinnamon Wild Yala

93.78%

Habarana Lodge Limited Cinnamon Lodge Habarana

98.35%

Habarana Walk Inn Limited Habarana Village by Cinnamon

98.77%

Trinco Holiday Resorts (Pvt) Limited Trinco Blu by Cinnamon

100%

Ceylon Holiday Resorts LimitedBentota Beach by Cinnamon

98.65%

Nuwara Eliya Holiday Resorts (Pvt) Limited3.35 acres of land in Nuwara Eliya

100%

Rajawella Hotels Company Limited100%

International Tourists & Hoteliers Limited99.33%

Wirawila Walk Inn Limited 25.15 acres of land in Wirawila

100%

Trinco Walk Inn Limited14.64 acres of land in Trincomalee

100%

Ahungalla Holiday Resorts (Pvt) Limited4.63 acres of land in Ahungalla

100%

Sentinel Realty (Pvt) LimitedJoint Venture 33.69 acres of land in Vaakarai

50%

Cinnamon Holidays (Pvt) Limited100%

Yala Holiday Resorts (Pvt) Limited99.98%

John Keells Maldivian Resorts (Pvt) Limited100%


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Key Achievements in 2015/16

Winner - PATA Inspire award for the Best Marine and Wildlife Tourism Provider

National Green Awards 2015 organized by Central Environmental Authority – Gold Award to Cinnamon Citadel Kandy– Large Scale Tourism Sector

Sustainability

Trip Advisor- All Group hotels obtained ratings of 4.0 or above

Trip Advisor- Certificates of Excellence (Cinnamon Wild Yala, Cinnamon Bey Beruwala, Hikka Tranz by Cinnamon, Ellaidhoo Maldives by Cinnamon, Cinnamon Lodge Habarana, Habarana Village by Cinnamon)

Trip Advisor- Travellers Choice Award 2016 (Cinnamon Lodge Habarana)

Welcome Chinese bronze standard certificate 2016 (Cinnamon Bey Beruwala)

Guest Satisfaction

Food & Hospitality Asia Maldives International Culinary Challenge & Exhibition 2015 – One Gold medal (Cinnamon Dhonveli Maldives), Silver and Bronze medal (Ellaidhoo Maldives by Cinnamon)

Chefs Guild Culinary Art Competition- 6 Gold, 29 Silver and 64 Bronze

Mr. W.M. Saman Kumara – Executive Sous Chef of Hikka Tranz by Cinnamon won two silver medals at the 4th East Coast International Culinary Event 2015 held in Fujairah, UAE.

Bentota Beach by Cinnamon – winning team of the first ever culinary challenge organized by the Health Ministry and WHO celebrating the “World Heart Day”

Culinary Excellence

ACCA Sri Lanka Sustainability Reporting Awards 2015 – Winner (Leisure and Connected Services Category)

Institute of Chartered Accountants Sri Lanka – Annual Report Awards 2014/15 – Gold (Hotel Sector)

Corporate Reporting

National Green Awards 2015 - Gold

PATA Inspire Award 2015 - Winner

ACCA Sustainability Reporting Awards 2015 - Winner

ICASL Annual Report Awards 2014/15 - Gold


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Inspired to perform

We deliver value

Financial Highlights


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Group Financial and Operational Highlights

Year ended 31st March 2016 2015

Earnings Highlights and Ratios

Revenue Rs’000 11,631,973 11,444,150 Earnings before interest and tax (EBIT) Rs’000 2,217,246 2,455,788 Profit before tax (PBT) Rs’000 2,035,221 2,190,687 Profit after tax (PAT) Rs’000 1,748,799 1,867,764 Profit attributable to the shareholders Rs’000 1,734,543 1,853,724 Earnings per share (EPS) Rs. 1.19 1.27 EPS growth % (6.3) 17.6 Interest cover No. of times 12.2 9.3 Return on equity % 8.0 9.7 Pre-tax ROCE % 8.7 10.0

Statement of Financial Position - highlights and ratios

Total assets Rs’000 28,899,600 26,749,369 Total debt Rs’000 3,725,753 4,313,827 Total shareholder’s funds Rs’000 22,884,813 20,327,502 No. of shares in issue Number 000’s 1,456,147 1,456,147 Net assets per share Rs. 15.72 13.96 Debt/Equity Times 0.16 0.21 Debt/Total assets % 13 16

Market/Shareholder information

Market price of share as at 31st March Rs. 12.00 14.30 Market capitalisation Rs ‘000 17,473,761 20,822,899 Price earnings ratio No. of times 10.08 11.26

Economic value distributed

Operating costs Rs’000 7,857,563 7,418,780 Employee wages and benefits Rs’000 1,873,646 1,794,058 Payments to providers of funds Rs’000 764,484 265,101 Payments to government Rs’000 461,610 384,197 Community investments Rs’000 7,941 8,251 Retained within the business Rs’000 819,007 1,743,831 Total employees Number 2,628 2,720


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Financial Calendar

Audited Financial Statements signed on 27th May 201637th Annual General Meeting 30th June 2016

Interim Financial Statements1st Quarter Interim Results released on 23rd July 20152nd Quarter Interim Results released on 28th October 20153rd Quarter Interim Results released on 2nd February 20164th Quarter Interim Results released on 27th May 2016

Group Operational Highlights

Year ended 31st March 2016 2015

Occupancy - Sri Lankan Sector 79% 77%Occupancy - Maldivian Sector 85% 89%Revenue Room Nights 393,496 389,257

Revenue

0

2

4

6

8

10

12

Rs.Bn

2015/16

2014/15

2013/14

Earnings Before Interest and Tax (EBIT)

0

0.5

1.0

1.5

2.0

2.5

Rs.Bn

2015/16

2014/15

2013/14

Profit Before Tax

0

0.5

1.0

1.5

2.0

2.5

Rs.Bn

2015/16

2014/15

2013/14

Interest Cover

0

3

6

9

12

15

Times

2015/16

2014/15

2013/14


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Inspired leadership

Delivering excellence to every stakeholder is our purpose.

Chairman’s Message


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During the year under review, a brand enhancement exercise brought all 11 resorts of the group under one “Cinnamon” umbrella. Based on our new brand strategy, our services and product standards were enhanced through the “Cinnamonization” initiative, which is developed to heighten our offerings to guests, catering to the next generation of travellers.

Susantha RatnayakeChairman

Sri Lanka Tourism Sri Lanka recorded 1.79 million tourist arrivals for the calendar year 2015, representing a growth of 17.8 per cent over the previous calendar year. Western Europe emerged as the largest regional contributor with arrivals increasing by 15.3 per cent year on year to 552,442. India continued to be the largest single source market with 316,247 arrivals whilst East Asia was the fastest growing source market with a year on year growth of 29.4 per cent driven by the strong growth in Chinese arrivals of 67.6 per cent to 214,783. Arrivals from China continue to grow at a rapid pace driven by increasing flight connectivity and increasing awareness of the Sri Lankan tourism offering.

According to the Central Bank of Sri Lanka, earnings from tourism recorded a 22.6 per cent growth against last year to reach USD 2.98 Bn during the twelve months ended December 2015.

Maldivian Tourism Political instability in the Maldives, together with external impacts such as the prevailing economic and political unrest in Russia and the Ukraine, the relative slowdown in the Chinese economy, which primarily affected the high-end tourism segment, and travel alerts issued by France, slowed growth in arrivals to 2.4 per cent over the previous year (1,234,248 arrivals).

Dear Stakeholder,

I am pleased to present, on behalf of the Board, the Annual Report and Financial Statements of John Keells Hotels PLC (KHL) for the year ended 31st March 2016.

Group profit before tax (PBT) for the year was Rs.2 Bn, compared to the Rs.2.2 Bn recorded in the previous year. The decline in profitability was mainly on account of the performance of the Maldivian Resorts sector, where growth in tourist arrivals was negatively impacted due to the reasons discussed subsequently in this message. The Sri Lankan resorts sector recorded a marginal increase in PBT of 4 per cent to Rs.780 million, due to cost saving initiatives along with successful yield management strategies to combat competitive price pressure.

Global Tourism The World Tourism Barometer published by the United Nations World Tourism Organisation (UNWTO) in January 2016 indicated that international tourism reached new heights in 2015 with international tourist arrivals reaching 1,184 million, which is a 4.4 per cent year on year growth. By region, Europe, the Americas and Asia Pacific recorded growth of approximately 5 per cent. Arrivals to the Middle East grew by 3 per cent while arrivals to Africa declined by 3 per cent approximately. Results from the UNWTO Confidence Index remain positive for 2016.


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Despite China retaining its position as the largest source market, Chinese arrivals declined by 1.1 per cent year on year to 359,514, accounting for 29 per cent of total arrivals. Further, in the months of November, December 2015 and February 2016 the country arrivals from China declined by 20 per cent, 11 per cent and 21 per cent respectively. Traditional markets such as Germany and the United Kingdom grew by 6.9 per cent and 4.6 per cent whilst accounting for 8.5 per cent and 7.5 per cent of total arrivals to the Maldives respectively.

Group performanceGroup revenue grew by 1.75 per cent to Rs.11.6 Bn compared to the Rs.11.4 Bn recorded in the previous year. Revenue of Sri Lanka Resorts increased by 8 per cent to Rs.5.5 Bn which stemmed from an improvement in year round occupancy and yields. However, revenue in the Maldivian Resorts sector declined by 3 per cent to Rs.6.1 Bn, due to the aforementioned challenges in the operating environment.

Continuous implementation of cost control measures complemented by new initiatives introduced to minimise direct costs facilitated the Group to record improved gross profit (GP) margins compared against the previous year. Gross profit also benefited from the impact of the depreciation of the Sri Lankan Rupee against the US Dollar.

Administration expenses were higher than last year as the Group continued to invest in staff development programmes in line with the Cinnamon brand offering which led to a 4 per cent year on year increase in staff expenses. Furthermore, the Group made a provision for an additional sum of Rs.15.7 million in accordance with the Budgetary Relief Allowance of Workers Act.

Operating expenses were higher than last year due to an unrealised exchange valuation loss of Rs.158 million on US Dollar loans in the Sri Lanka resorts sector arising from the devaluation of the Sri Lanka Rupee against the US Dollar. It is pertinent to note that the foreign currency denominated revenue is positively impacted due to the depreciation of the Rupee, although such a benefit will accrue over the financial year as opposed to the exchange impact on the valuation of loan which is at a point in time. However, this loss was partially mitigated by a reduction in energy related costs.

Group net finance expenses decreased by 63 per cent year on year to Rs.55 million due to the retirement of long term debt and comparatively lower cost of US dollar denominated borrowings.

A capital gain of Rs.121 million was recognised on the disposal of the lease hold rights of Rajawella Hotels Company Ltd (a subsidiary of KHL) to Rajawella Holdings Ltd (a subsidiary of John Keells Holdings PLC) based on a market based valuation of the lease rights.

The consolidated PBT reduced by 7 per cent year on year to Rs.2 Bn during the year under review (2014/15- Rs.2.2 Bn). The effective tax rate of the Group was slightly lower than the previous year.

The current sub lease of Ellaidhoo Maldives by Cinnamon which was due to expire in February 2020 was extended by another ten years at a cost of Rs.426 million by utilising internally generated cash flows.

The Group ended the year with a profit after tax of Rs.1,749 million against Rs.1,868 million achieved in 2014/15, representing a 6.4 per cent reduction against last year.

New InitiativesDuring the year under review, the Sri Lanka resorts sector was able to reap the full benefit of the newly implemented property management system while installation in the Maldives was completed during the first quarter of 2015/16. The system which runs on the SAP platform seamlessly integrates back office and front office processing, enhancing operational efficiencies across the Group, whilst providing assurance of the adequacy of the Company’s internal controls on financial reporting as required by the Sarbanes-Oxley Act.

During the year under review, a brand enhancement exercise brought all 11 resorts of the group under one “Cinnamon” umbrella. Based on our new brand strategy, our services and product standards were enhanced through the “Cinnamonization” initiative, which is developed to heighten our offerings to guests, catering to the next generation of travellers.


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In taking our brand to a global platform, several large scale events were organised encapsulating all elements of our brand in terms of fashion, arts & culture, culinary, educational, fun & vibrancy. Our brand building exercises are geared to bring us digital and mainstream media attention, both locally and internationally. This would help us to distinctively position our brand, as well as promote Sri Lanka as a must visit tourism destination. Cinnamon Hotels and Resorts was proud to host Marco Pierre White (Michelin 3 Star celebrity chef), Nigel Barker (fashion photographer, celebrity and judge of America’s Next Top Model) and Richard Quest, (Editor-at-large- CNN Money, host of Quest Means Business and CNN Traveller), leading the way in positioning both the brand and the destination through inspiring globally reported events.

Cinnamon Hotels and Resorts also organised “Cinnamon Colomboscope”, the only multi-disciplinary international festival of arts in Sri Lanka, in-partnership with the John Keells Foundation to promote contemporary art in Sri Lanka, ensuring a wider reach of audiences both locally and internationally.

Continuing with our brand promise, Cinnamon Hotels and Resorts also took the initiative to organise a unique familiarisation tour for French Travel Agents titled “Treasure Hunt 2016” and the “Cinnamon Future of Tourism Conference” to commemorate World Tourism Day in September 2015. For the second consecutive year, Cinnamon Hotels and Resorts sponsored “Red Bull Levels event” and participated in the grand finale of the Miss England pageant held in Birmingham in August 2015.

Furthermore, the new Cinnamon brand site was launched in October 2015. By enhancing our online presence, the Group has been able to reap benefits by way of improving online direct bookings by 12 per cent and room revenue by 16 per cent year on year. As part of a focused strategy to increase business from the Indian market, we have partnered with a Public Relations Company to represent Cinnamon Hotels and Resorts in India.

Accolades and AwardsThe Group’s clear commitment to sustainable consumption and production practices, tangible impacts and measurable outcomes were recognised at the prestigious PATA InSPIRE awards held in the

Philippines in November 2015, where Cinnamon Hotels and Resorts was recognised as the “Best Marine and Wildlife Tourism Provider”.

In recognition of its notable initiatives in minimising environment damage and better managing natural resources, Cinnamon Citadel Kandy was awarded Gold at the National Green Awards 2015 organised by Central Environmental Authority under the category Large Scale Tourism Sector.

The 2014/15 Annual Report of the John Keells Hotels PLC was adjudged the best amongst Hotel Companies and was awarded Gold at the “Awards for Excellence in Annual Reports 2014/2015” conducted by the Institute of Chartered Accountants of Sri Lanka. Furthermore, John Keells Hotels PLC also won the Gold Award of the STING Corporate Accountability Index conducted by STING Consultants while improving its ranking to the 7th position (from a previous ranking of 11) in the “Hotels and Travel” sector.

John Keells Hotels PLC was adjudged ‘winner’ at the ACCA Sri Lanka Sustainability Reporting Awards 2015 in the Leisure and Connected Services category.

Outlook for the futureSri Lanka tourism has established a target of 2.2 million visitors for the calendar year 2016 which is a 22 per cent annual growth, while aiming to increase the average daily expenditure of a tourist up to USD200, which would increase total tourism revenue to USD2.75 Bn. Sri Lanka will focus on China and India as growth markets, and will be looking for niche sector growth from sports, adventure, MICE and cruise tourism whilst protecting the market share of traditional markets.

Cinnamon Hotels and Resorts will continue to focus on brand building initiatives through its social media strategy to secure a strong online brand presence that would drive direct online sales, whilst reducing distribution costs.

In the recent years, the industry has witnessed a significant growth in the informal accommodation sector while an increase in star category rooms is also anticipated during the year. The company will tailor its strategies to combat competitor pressure arising as a result of the increased room inventory.



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In order to strengthen our presence in the Maldives, the Group secured the island adjacent to Hakuraa Huraa and plans are underway to enhance capacity by constructing 35 rooms, commencing in the latter part of 2016/17.

We are currently in the process of obtaining necessary local authority approvals to expand the Cinnamon foot print by commencing construction of a 135 room resort at Nuwara Eliya during the first half of 2016/17.

ConclusionI wish to acknowledge our shareholders for continuing to be an integral part of John Keells Hotels and look forward to your continued support in the year ahead.

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 support extended and our staff, who worked tirelessly to provide quality customer care.

Mr. Ranel Wijesinha, having served on the Board of Directors of the Company for more than nine years from the date of his first appointment, has informed us that he would be resigning after the Annual General Meeting of the Company. On behalf of the Board of Directors, I would like to place on record my sincere appreciation to him for the valuable contribution made during his tenure and wish him all the best in his future endeavours.

Finally, I take this opportunity to place on record my appreciation to my colleagues on the Board for their valuable guidance and support during the year under review.

Susantha RatnayakeChairman

27 May 2016


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Inspired visionWe create unforgettable experiences

for all guests

Board of Directors


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Board of Directors

Susantha Ratnayake - Chairman

Susantha Ratnayake was appointed as a Director of John Keells Hotels PLC in 1999 and as Chairman in January 2006. He serves as the Chairman of John Keells Holdings PLC. A past Chairman of the Sri Lanka Tea Board and Ceylon Chamber of Commerce, he is the Chairman Employers’ Federation of Ceylon.

Ajit Gunewardene

Ajit Gunewardene is the Deputy Chairman of John Keells Holdings PLC and has been a member of the Board for over 21 years. He is a Director of several companies in the John Keells Group and is the Chairman of Union Assurance PLC. He is a member of the Board of SLINTEC, a company established for the development of nanotechnology in Sri Lanka under the auspices of the Ministry of Science and Technology. He is also a member of the Tourism Advisory Committee appointed by the Minister of Tourism Development, a member of the advisory committee for Investment Promotion appointed by the Minister of Development Strategy & International Trade and a member of the Steering Committee for establishment of the National Science Centre in Sri Lanka appointed by the Minister of Science, Technology & Research. He has also served as the Chairman of the Colombo Stock Exchange and Nations Trust Bank PLC. Ajit has a Degree in Economics and brings over 33 years of management experience.

Ronnie PeirisRonnie Peiris was appointed as a Director of John Keells Hotels PLC in June 2003. As the Group Finance Director of John Keells Holdings PLC, Mr. Peiris has overall responsibility for the Group’s Finance and Accounting, Taxation, Corporate Finance, Treasury and the Information Technology functions. He is also Director of several other companies in the John Keells Group. He was previously the Managing Director of Anglo American Corporation Limited (Central Africa) in Zambia. He has over 40 years of Finance and General Management experience in Sri Lanka and abroad. He is a Fellow of the Chartered Institute of Management Accountants, UK, Association of Chartered Certified Accountants, UK, and the Society of Certified Management Accountants, Sri

Lanka and holds an MBA from the University of Cape Town, South Africa. Previously a past Chairman of the Sri Lanka Institute of Directors, he is currently a member of the committee of the Chamber of Commerce.

Jayantissa KehelpannalaJayantissa Kehelpannala, Head of Maldivian Resorts, has over 33 years of experience in the Leisure Industry both in hoteliering and inbound tourism. He is currently the Chairman of the Hotels & Tourism Employers Group of the Employers’ Federation of Ceylon and is a member of the Wages Board for the Hotel and Catering Trade. In addition, he is the immediate Past President of the Tourist Hotels Association of Sri Lanka (THASL) and is a Board Member of the Convention Bureau.

Sunimal Senanayake Sunimal Senanayake is an Executive Vice President of the John Keells Group and the Sector Head of the Leisure Resorts (Sri Lanka & Maldives). 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.

Nissanka Weerasekera Nissanka Weerasekera is responsible for investments in Sri Lanka and Bangladesh by the Abraaj Group, a leading private equity investor operating in the growth markets of Africa, Asia, Latin America, Middle East and Turkey. Prior to that Nissanka was the Chief Executive Officer of People’s Venture Investment Company (PVIC) and subsequently Managing Director of Nextventures, both venture capital firms. Nissanka is a Fellow of the Chartered Institute of Management Accountants. He holds a Masters degree


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in Economics from the University of Colombo and a B.Sc. (Special) in Physics from the University of Peradeniya.

Trevine Jayasekara Trevine Jayasekara is the Group Finance Director of Brandix Lanka Limited and is responsible for the overall finance function of the group, as well as related support functions. Trevine brings with him a wealth of experience in international banking and finance, having worked at Arab Bank Limited in Bahrain, Deutsche Bank Colombo and Aitken Spence & Co. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and an Associate Member of the Chartered Institute of Management Accountants, UK. He is a non-Executive Director of NDB Bank.

Krishan BalendraKrishan Balendra is a President and Executive Committee member of John Keells Holdings PLC with responsibility for the Leisure Group and John Keells Stock Brokers. He also serves as the Chairman of Nations Trust Bank PLC and is the Hon. Consul General of the Republic of Poland in Sri Lanka. He is a former Chairman of the Colombo Stock Exchange. He started his professional career at UBS Warburg, Hong Kong, in investment banking, focusing primarily on equity capital markets. After a four year stint in Hong Kong, he continued his career in corporate finance at Aitken Spence & Company PLC, Sri Lanka prior to joining the John Keells Group. Krishan holds a law degree (LLB) from the University of London and an MBA from INSEAD.

Ranel T. WijesinhaRanel Wijesinha, is an independent, non-executive Director, appointed to the Board in July 2005. He has served as Chairman, Board Audit Committee, throughout this period.

Skills and Experience

A practicing, chartered accountant and independent international management consultant, with over 35 years of post qualification experience, he has a distinctive balance of local and overseas

exposure, between private professional practice and private industry in the private sector, and between advisory and regulatory roles in the public sector.

His experience in the Private Sector, includes serving the John Keells Holdings Group, PricewaterhouseCoopers, Sri Lanka and Deloitte in The Bahamas. Having trained at KPMG Sri Lanka, he commenced his post qualification career with John Keells, then worked overseas with Deloitte in Nassau, The Bahamas, was tasked with establishing a new branch in Freeport, Bahamas and served as its first Resident Manager. On his return to the country, he proposed the setting up of the first Business Development Division for the John Keells Holdings Group and functioned as Director Business Development, advising the Main Board on strategic redirection, corporate turnarounds, new project evaluation, privatisation related diagnoses and bidding, acquisitions and divestments. He was subsequently invited to the partnership of Coopers & Lybrand to revive and restructure the consulting and advisory services of the firm and served as a Partner and Head of Consulting and Financial Advisory Services of PricewaterhouseCoopers Sri Lanka, pursuant to the firms global merger.

He has contributed to the Public Sector, through many statutory, regulatory and advisory roles, for the Government of Sri Lanka, over the last two and a half decades. During the immediately preceding decade, he has performed advisory work in the Public Sector for foreign Governments in several countries on behalf of multilateral development partners such as the Asian Development Bank. These assignments included, functioning as Team Leader, in Governance and Institutional Risk Assessments relating to Public Financial Management and Procurement, in post soviet nations in the Caucasus such as Armenia and Azerbaijan. He has performed infrastructure related Financial Management Assessments, Project Evaluation, Institutional Development and Capacity Building Assessments, in the Kyrgyz Republic, Afghanistan and India and has undertaken assignments for the World Bank, UNESCAP, UNIDO, UNDP, IFAD, USAID, and the Friedrich Naumann Foundation.


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Professional and Post Graduate Qualifications

He is a Fellow of the Institute of Chartered Accountants of Sri Lanka, and a holder of a Masters Degree in Business Administration from the University of Pittsburgh, in Pennsylvania USA. He has also studied Multinational Corporations and Political Risk Analysis at the University’s Graduate School of Public and International Affairs.

Current Appointments

In February 2015, he was appointed a Commissioner of the Securities and Exchange Commission of Sri Lanka, and an independent non executive Director, of the Bank of Ceylon, Sri Lanka’s largest Bank, where he serves as Chairman of the Board Audit Committee, since March 2015. During the year 2015, he also served as a Director of Hotels Colombo (1963) Limited, which is a subsidiary of the Bank of Ceylon.

Previous Appointments

He is a Past President of the Institute of Chartered Accountants of Sri Lanka and a Past President of the 23 Nation Confederation of Asian and Pacific Accountants. He has served as Chairman, Ayojana Fund Management Ltd; Founder Chairman, National Wealth Corporation; and Founder Director, Lanka Ventures Ltd. He has also served in the following capacities: Chairman of the Monitoring and Advisory Committee of the Ministry of Power & Energy; Member of the first Consumer Affairs Council under the first Consumer Affairs Authority Act; and Member of the Accounting and Auditing Standards Monitoring Board. During the period 2000-2001, he served as a Commissioner of the Securities and Exchange Commission of Sri Lanka; Member, Governing Council, National Institute of Business Management; Member, Board of Management, Post Graduate Institute of Management; and Member, Main Committee, Ceylon Chamber of Commerce; Advisor, Federation of Chambers of Commerce and Industry of Sri Lanka and Advisor, the SAARC Chamber of Commerce and Industry.

Board of Directors


29


30

High standards of corporate governance are key to driving performance and delivering value to our key stakeholders. John Keells Hotels PLC has honed its governance structures, policies and processes over the years with inputs from its parent company, John Keells Holdings PLC to build an organisation that is effective and accountable with a high degree of transparency. As the highest decision making body of the Company, the Board sets the tone at the top and is responsible for reviewing the effectiveness of its corporate governance mechanisms, maintaining an appropriate balance between empowerment and accountability with explicit statements of values and standards of conduct expected of its officers and employees.

The Group corporate governance framework has been developed to comply with the Companies Act No. 7 of 2007, the Colombo Stock Exchange (CSE) Listing Rules and the Code of Best Practice on Corporate Governance issued jointly by the Securities & Exchange Commission (SEC) of Sri Lanka and the Institute of Chartered Accountants (ICASL) of Sri Lanka. The Board has also used the G4 Guidelines published by the Global Reporting Initiative to provide guidance in ensuring that due emphasis is given to environmental and social concerns. This report is structured in line with the Code of Best Practice on Corporate Governance as it provides a comprehensive view of relevant matters and facilitates reporting in a concise and logical manner.

The Board 11 Principles

Institutional Investors

2 Principles

Directors’ Remuneration 3 Principles

Other Investors 2 Principles

Relations with Shareholders 3 Principles

Sustainability Reporting

Accountability & Audit

5 Principles

Code of Best Practice on Corporate Governance

The Company ShareholdersBeyond

Compliance

Investment Criteria

IT Governance

The Board (11 Principles)

1. An effective Board (A1)

2. Roles of Chairman & Chief Executive Officer (A2 & A3)

3. Financial Acumen (A4)

4. Board Balance (A5)

5. Supply of Information (A6)

6. Appointments to the Board (A7) & Re-election (A8)

7. Appraisal of Board Performance (A9)

8. Disclosure of Information in respect of Directors (A10)

9. Appraisal of Chief Executive Officer (A11)

Corporate Governance


31

Principle A1 – An effective BoardThe John Keells Hotels PLC Board comprises Six (6) Non-Executive, Non-Independent Directors including the Chairman and Three (3) Non-Executive, Independent Directors whose profiles are given on pages 26 to 28. With a majority of Non-Executive Directors, all of whom are of high repute and a Non-Executive chairman, the Board is deemed to have sufficient balance in line with the requirements of the Code. Keells Consultants (Pvt) Ltd functions as the Secretaries and Registrars of the Company and

John Keells Holdings PLC


Board of Directors

Group Management Committee

Internal Audit

President/CEO Employees

Board of Directors

Audit Committee

Nominations Committee

HR & Remuneration Committee

Related Party Transactions Review

Committee

Group Executive Committee

provides the Secretarial input for Board proceedings in addition to maintaining Board minutes and Board records.

The governance structures of the Group is given below with reporting lines clearly identified. Nominations, Human Resources and Compensation and Related Party Transactions Review committees of the Group’s parent company, John Keells Holdings PLC assist the Board of John Keells Hotels PLC, as permitted by the listing rules of the CSE.


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Committees supporting the Board’s effective governance are as follows:

Board Committee & Composition Mandate Scope

Audit Committee

Comprises Non-Executive, Independent Directors with at least one member having current membership of a reputed professional accountancy body. Current members are:

1. Mr. R T Wijesinha - Chairman

2. Mr. N B Weerasekera

3. Mr. T L F W Jayasekara

To provide an independent and objective review of the financial reporting process, internal controls and the audit function in ensuring;

1. Adequacy and fairness of disclosure

2. Transparency, integrity and quality of financial reporting

i. Confirm and assure

Independence of external auditor

Objectivity of internal auditor

ii. Review with independent auditors adequacy of internal controls and quality of financial reporting

iii. Regular review meetings with management, internal auditor and external auditors in seeking assurance on various matters

Human Resources and Compensation Committee (of parent company John Keells Holdings PLC)

Comprises 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. Current members are:

1. Mr. E F G Amerasinghe - Chairman

2. Dr. I Coomaraswamy

3. Mr. D A Cabraal

4. Mr. M A Omar

5. Mr. A N Fonseka

Determine the Remuneration Policy and review implementation of the same in alignment with performance appraisal systems, conduct performance evaluation of Chairman/CEO, review performance evaluation of the Board and its committees

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;

Performance

Industry trends

Past remuneration

4. Succession planning of key Management



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Nominations Committee (of parent company John Keells Holdings PLC)

Comprises five Independent Directors and one Non Independent Director. The Chairperson is a Non-Executive, Independent Director. Current members are:

1. Mr. T Das - Chairman

2. Mr. S C Ratnayake - Non Independent

3. Mr. M A Omar

4. Mr. E F G Amerasinghe

5. Mr. D A Cabraal

6. Ms. M P Perera

Define and establish nomination process for Directors, lead the process and make recommendations to the Board on the appointment of Directors.

1. Assess skills required on the Board given the needs of the businesses

2. From time to time assess the extent to which required skills are represented on Board

3. Prepare a clear description of the role and capabilities required for a particular appointment

4. Identify and recommend suitable candidates for appointments to the Board.

5. Ensure that on appointment to the Board, Directors receive a formal letter of appointment specifying clearly

Expectation in terms of time commitment

Involvement outside of the formal Board meetings

Participation in committees

Related Party Transaction Review Committee (of parent company John Keells Holdings PLC)

Comprises four Non-Executive Independent Directors and One Non-Executive Non Independent Director. The Chairperson is a Non-Executive Director. Current members are:

1. Mr. A N Fonseka - Chairman

2. Mr. E F G Amerasinghe

3. Mr. D A Cabraal

4. Mr. S C Ratnayake - Non Independent

5. Ms. M P Perera

To ensure on behalf of the Board, that all Related Party Transactions of John Keells Hotels PLC and its subsidiaries are consistent with the Code of Best Practices on Related Party Transactions issued by the Security and Exchange Commission of Sri Lanka (SEC).

Develop, and recommend for adoption by the Board of Directors of John Keells Hotels PLC and its subsidiaries, a Related Party Transaction Policy which is consistent with the Operating Model and the Delegated Decision Rights of the Group.

Update the Board of Directors on the related party transactions of each of the companies of the Group on a quarterly basis.


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Comprises the following Executive members of John Keells Hotels Group:

1. President – Leisure sector

2. Sector heads

3. Chief Financial Officer

4. Sector Financial Controller

5. Head of Sales & Marketing

6. Head of Brand Marketing

7. Head of Human Resources

8. Head of Brand Assurance

9. Head of Asset Management

10. Head of Business Solutions

11. Head of Legal

To design, implement and monitor the best practices of the industry groups, sectors, strategic business units where appropriate and material.

1. Strategy formulation

2. Implementation of sector strategies

3. Performance monitoring

4. Risk management

5. Brand Marketing

6. Brand Assurance

The Board and the Audit Committee meet once every quarter and their attendance during the year is given below. The parent company committees meet on a needs basis and their recommendations are considered by the Board of John Keells Hotels PLC. The absent members are briefed on the discussions and actions taken during the meeting. Directors are provided with Board packs which include Board Resolutions, performance reports and compliance statements etc. in advance of the Board meeting to facilitate informed decision making.

Director Attendance

Board Meetings

Audit Committee

Mr. S C Ratnayake 6/6

Mr. A D Gunewardene 6/6

Mr. J R F Peiris 6/6

Mr. J E P Kehelpannala 6/6 6/6

Director Attendance

Board Meetings

Audit Committee

Mr. B J S M Senanayake 6/6 6/6

Mr. K N J Balendra (appointed w.e.f 01/04/2016) N/A

Mr. R T Wijesinha 5/6 6/6

Mr. N B Weerasekera 6/6 6/6

Mr. T L F W Jayasekara 6/6 5/6

Roles & Responsibilities of the Board

The Board of Directors is responsible and accountable for the stewardship functions of the Group including the following:

1. Providing direction for Group’s medium and long-term strategy and review and approval of same.



35

2. Setting in place governance structures and policy frameworks to ensure compliance with laws, regulations and ensuring the highest standards of disclosure, reporting, ethics and integrity across the hotels group.

3. Stewardship of the Company’s resources and the effectiveness of the Company’s systems of internal control and the management of risk.

4. Ensuring that key management personnel and the management team have the required skills, experience and knowledge to implement strategy.

5. Review and approval of major acquisitions, disposals and capital expenditure.

Act in accordance with Laws and Independent Professional Advice

The Board acts in accordance with the laws of the countries where John Keells Hotels has business interests and all employees are also required to conform accordingly as stated in the Code of Conduct. The Board and the Audit Committee receive statements of compliance on recurrent statutory requirements from management on a quarterly basis in this regard.

Directors can seek independent professional advice when deemed necessary, for which the expenses are borne by the Company, strengthening the independence of the Board and the quality of its decisions.

Board induction and Training

Newly appointed Non-Executive Directors are apprised of the John Keells Group values and culture, Group governance framework, policies and processes, Code of Conduct expected by the Company, business model of the hotels Group, strategy and the Directors’ responsibilities in accordance with current legislation. The Chairman ensures that new Directors are introduced to other Board members and key management personnel and briefed on matters taken up at prior meetings.

Directors are encouraged to update their skills and knowledge on a continuous basis and this is facilitated through the following activities.

1. Access to External and Internal Auditors

2. Periodic reports on performance

3. Updates on topics that range from proposed/new regulations to industry best practices

4. Opportunities to meet Senior Management of the Managing Agents in a structured setting

5. Access to industry experts and other external professional advisory services

6. Access to the Centre Legal, Tax and Finance Divisions of the John Keells Group of which the Company is a member and

7. The services of the Company Secretary

They have the opportunity of gaining further insight into the Groups’ business by visiting hotels across the group’s portfolio.

All members of the Board devote sufficient time and make every effort to ensure that they discharge their responsibilities to the Company and the Group in keeping with their knowledge and experience.

Delegation of authority

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 Director appointed by the Board.

The operations of the hotels owned by the following companies has been entrusted to Cinnamon Hotel Management Limited, the Operator, with whom formal operating contracts have been signed.

1. Habarana Lodge Limited - owner of Cinnamon Lodge Habarana

2. Habarana Walk Inn Limited - owner of Habarana Village by Cinnamon

3. Kandy Walk Inn Limited - owner of Cinnamon Citadel Kandy


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4. Trinco Holiday Resorts (Private) Limited - owner of Trinco Blu by Cinnamon

5. Yala Village (Private) Limited - owner of Cinnamon Wild Yala

6. Ceylon Holiday Resorts Limited - owner of Bentota Beach by Cinnamon

7. Hikkaduwa Holiday Resorts (Private) Limited - owner of Hikka Tranz by Cinnamon

8. Beruwala Holiday Resorts (Private) Limited - owner of Cinnamon Bey Beruwala

9. Travel Club (Pte) Limited - owner of Ellaidhoo Maldives by Cinnamon

10. Fantasea World Investments (Pte) Limited - owner of Cinnamon Hakuraa Huraa Maldives

11. Tranquility (Pte) Limited - owner of Cinnamon Dhonveli Maldives

Principle A2 and A3 – Roles of Chairman and CEOThe roles of the Chairman and Chief Executive Officer are segregated. The Chairman is a Non Executive, Non Independent Director. The main responsibility of the Chairman is to lead and manage the Board and its Committees so that they can function effectively. He also sets the tone for the governance and ethical framework of the group, facilitates and encourages the expression of differing views, and by keeping in touch with local and global industry developments, ensures that the Board is alert to its obligations to the Company’s shareholders and other stakeholders. He represents the Group externally and is the focal point of contact for shareholders on all aspects of corporate governance.

With the assistance of the Board Secretaries, Keells Consultants (Private) Limited, the Chairman and CEO also ensures that:

1. Board procedures are followed

2. Directors receive timely, accurate and clear information

3. Updates on matters arising between meetings

4. The agenda for the board meeting, reports and papers for discussion are dispatched at least one week in advance so

that the directors are in a position to study the material and arrive at sound decisions

5. A proper record of all proceedings of Board meetings is maintained

The Board has, subject to pre-defined limits, delegated its executive authority to the President/CEO of the Leisure Industry Group for the implementation of strategies approved by the Board and developing and recommending to the Board the business plans and budgets in keeping with group strategy.

The Human Resources and Compensation Committee of the ultimate parent company appraises the performance of the Chairman on an organizational and individual basis as approved by the Board. The annual appraisal of the President/CEO is carried out at parent level and is based on pre-agreed criteria.

Principle A4 – Financial AcumenCollectively the Board has sufficient financial acumen as they are selected through a sufficiently rigorous process. Additionally, the following Directors are members of professional accounting organisations and able to offer guidance on matters of finance drawing on their specialised knowledge on the subject of finance:

Mr. J R F Peiris

Mr. R T Wijesinha

Mr. N B Weerasekera

Mr. T L F W Jayasekara

Principle A5 – Board BalanceThe entire Board is Non Executive comprising Six (6) Non-Executive, Non-Independent Directors including the Chairman and Three (3) Non-Executive, Independent Directors ensuring that there is sufficient balance on the Board.

Determining Independence of Directors

Independence of the Directors have been determined in accordance with the Continuing Listing Rules of the CSE and all three independent, Non-Executive Board members have submitted signed declarations of their independence.


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Name of Director/Capacity Shareholding 1 Management/ Director 2

Material Business

Relationship 3

Employee of the Company 4

Family Member a Director or

CEO

Nine Years of Continuous

service

Non Executive, Non Independent Directors (NED/NID)

Mr. S C Ratnayake Yes Yes No No No N/A

Mr. A D Gunewardene Yes Yes No No No N/A

Mr. J F R Peiris No Yes No No No N/A

Mr. J E P Kehelpannala No No No No No N/A

Mr. K N J Balendra (appointed w.e.f 01/04/2016)

No No No No No N/A

Mr. B J S M Senanayake No No No No No N/A

Non Executive Independent Directors (NED/ID)

Mr. R T Wijesinha No No No No No Yes

Mr. N B Weerasekera No No No No No No

Mr. T L F W Jayasekara No No No No No No

1. Have shares of the Company2. Director of a listed Company in which they are employed, or having a significant shareholding with voting rights more than 10% of total or have a business

connection where the transaction value is equivalent to or more than 10% of the turnover of the Company.3. Income non cash benefits derived from Company equivalent to 20% of annual income4. Employed by Company two years immediately preceding appointment

Principle A6 – Supply of InformationIn order to ensure robust discussion, informed deliberation and effective decision making, the Directors are provided access to;

Information as is necessary to carry out their duties and responsibilities effectively and efficiently

Information updates from management on topics under review by the Board, new regulations and best practices as relevant to the Group’s business

External and internal auditors

Experts and other external professional services

The services of the company secretaries whose appointment and/or removal is the responsibility of the Board

Periodic performance reports

Senior management under a structured arrangement


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Principle A7 and A8 – Appointments to the Board and Re-ElectionDirectors are elected by the Shareholders at the Annual General Meeting based on nominees recommended by the Board following a transparent, structured and formal process within the purview of the Nominations Committee of the ultimate parent Company. Casual vacancies are filled by the Board following the same rigorous process of selecting nominees. One third of the Directors, except the Chairman, retire by rotation on the basis prescribed in the Articles of Association of the Company. A Director retiring by rotation is eligible for re-election. The tenure of office for NEDs is limited by their prescribed company retirement age. Independent Directors, on the other hand, can be appointed to office for three consecutive terms of three years, which however, is subject to the age limit set by statute at the time of re-appointment following the end of a term.

Proposals for the re-appointment of Directors are set out in the Annual Report of the Board of Directors on page 154 as well as in the Notice of Meeting on page 257 of this Report.

Principle A9 – Appraisal of Board PerformanceThe Chairman evaluates the performance of the Board annually while the Independent Non Executive Chairman of the Audit Committee evaluates the effectiveness of the Audit Committee. There is a formalised process of self-appraisal which enables each member to self-appraise on an anonymous basis, the performance of the Board, using a very detailed checklist / questionnaire covering areas such as;

1. Role clarity and effective discharge of responsibilities

2. People mix and structure

3. Systems and procedures

4. Quality of participation

5. Board image

The scoring and open comments are collated and the results are analysed to give the Board an indication of its effectiveness as well as areas that require addressing and/or strengthening.

The Human Resources and Compensation Committee of the ultimate parent company appraises the performance of the Chairman on an organizational and individual basis as approved by the Board. The annual appraisal of the CEO is carried out at parent level and is based on pre-agreed criteria.

Principle A10 – Disclosure of Information in respect of DirectorsInformation specified in the Code with regards to Directors are disclosed within this Annual Report as follows

1. Name, qualifications, expertise, material business interests and brief profiles on pages 26 to 28.

2. Related party transactions on pages 233 to 236.

3. Membership of sub-committees and attendance at Board Meetings and Sub-Committee meetings on pages 32 to 34.

Principle A11– Appraisal of Chief Executive OfficerThe Human Resources and Compensation Committee of the ultimate parent company appraises the performance of the Chairman on an organizational and individual basis as approved by the Board. The annual appraisal of the CEO is carried out at parent level and is based on pre-agreed criteria.

Directors’ Remuneration (3 Principles)

1. Remuneration Procedures

2. The Level & Makeup of Remuneration

3. Disclosure of Remuneration

Principle B – Directors’ Remuneration


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Remuneration policy is determined by the Human Resources and Compensation Committee of the ultimate parent company which in turn is used to ascertain the remuneration of the Chairman/CEO and Non Executive Directors. Executive remuneration is formulated to attract and retain high calibre executives and motivate them to develop and implement the business strategy in order to optimise long term Shareholder value creation. It is designed to provide an appropriate balance between fixed remuneration and variable ‘risk’ reward based on both individual performance and an organisational performance matrix which covers revenue and after tax profit. In addition, a long term incentive in the form of employee share options (ESOP) in the stated capital of the ultimate parent company is granted based on actual performance. As prescribed by the Sri Lanka Accounting Standards (SLFRS / LKAS) all ESOPs of the respective employees are charged to the income statement of the relevant subsidiaries with effect from 01st July 2013 being the date of the first award after the introduction of the accounting standard.

Compensation of Non-Executive, Independent Directors (NED/ID) is determined with reference to fees paid to other NED/IDs of comparable companies and is adjusted where necessary. The fees received by NED/IDs are determined by the Board and reviewed annually. NED/IDs do not receive any performance/incentive payments and are not eligible to participate in any of the Group’s share option plans. The NED/IDs fees are not subject to time spent or defined by a maximum/minimum number of hours committed to the Group per annum, and hence are not subject to additional/lower fees for additional/lesser time devoted.

Directors’ fees applicable to Non-Executive, Independent Directors (NED/NIDs) nominated by John Keells Holdings PLC are paid directly to John Keells Holdings PLC and not to individuals. The aggregate remuneration paid to Directors is disclosed on page 194 of this Report.

In the event of an early termination of the Directors there are no compensation commitments other than for;

1. NED/NIDs; as per their employment contract like any other employee.

2. NED/IDs; Director Fees payable, if any, in terms of contract.

A proven Performance Management System and other supporting Human Resource Management Processes are in place. This facilitates a culture of performance within a framework of compliance, conformance and sustainable development. Details regarding the Human Resource Management process could be found on page 117 of this Report.

Shareholder Relations (3 Principles)

1. Constructive use of AGM and General Meetings

2. Communication with shareholders

3. Major and material transactions

The Board of Directors, in conjunction with the Audit Committee, ensures the accuracy and timeliness of published information and has presented an honest and balanced assessment of results in the quarterly and annual financial statements. All other material and price sensitive information about the Company is promptly communicated to the CSE, where the shares of the Company are listed, and such information is also released to shareholders, press and employees.

The Group makes use of the Annual General Meetings constructively towards enhancing relationship with the shareholders and towards this end the following procedures are followed;

1. In accordance with the rules of the SEC, Notice of the Annual General Meeting (AGM) and relevant documents are forwarded to shareholders within the specified period

2. The Directors are available to clarify any points raised by shareholders

Principle C – Shareholder Relations


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Accountability & Audit (5 Principles)

1. Financial Reporting

2. Internal Control

3. Audit Committee

4. Code of Business Conduct & Ethics

5. Corporate Governance Disclosures

3. The Chairman/CEO ensures that relevant senior managers are available at the AGM to answer specific queries

4. Separate resolutions are proposed for each item on the Agenda

Shareholders are advised of any instance where the contemplated value of a transaction would be in excess of half of the net assets of the Company (Major transactions).

Principle D1 – Financial ReportingThe Board recognises its responsibility to present a balanced and understandable assessment of the Group’s financial position, performance and prospects in accordance with the requirements of the Companies Act No. 07 of 2007 and the CSE Continuing Listing Requirements. The Financial Statements included in this Annual Report are prepared and presented in accordance with the Sri Lanka Accounting Standards. The Annual Report also conforms to the G4 standard on Sustainability Reporting published by the Global Reporting Initiative and the Integrated Reporting Framework published by the International Integrated Reporting Council.

In the unlikely event that the net assets of the Company fall below a half of shareholders’ funds (Serious Loss of Capital),

shareholders would be notified and the requisite resolutions would be passed on the proposed way forward as per requirements of the Companies Act No. 07 of 2007.

The following specialised information requirements are also included in this Annual Report:

1. The Annual Report of the Board of Directors on the Affairs of the Company given on pages 154 to cover all areas of this section.

2. The “Statement of Directors’ Responsibility” is given on page 161.

3. The Directors’ Statement on Internal Controls is given on page 161.

4. The “Independent Auditors’ Report “on page 163 for the Auditor’s responsibility.

5. The Financial Review and Value Creation Report on page 84.

Principle D2 – Internal ControlThe Board has, through the involvement of the Group Business Process Review function, taken steps to obtain assurance that systems designed to safeguard the Company’s assets, maintain proper accounting records and provide management information, are in place and are functioning according to expectations. The risk review programme covering the internal audit of the whole Group is outsourced.

To further strengthen internal control and obtain independent assurance, the Group has enlisted the services of Messrs. PricewaterhouseCoopers, an internationally reputed firm of Chartered Accountants, to monitor and report on the adequacy of the financial and operational systems of the properties operated by the Group in both Sri Lanka & Maldives. Their scope included:

1. Assessment of the adequacy of accounting and operational control systems in terms of economy, efficiency and effectiveness.

2. Examination of compliance with statutory requirements, management policies and procedures.

Principle D – Accountability & Audit


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3. Review and monitor operational and financial controls in order to ascertain adherence to such controls.

The internal audit reports are in the first instance, considered and discussed at hotel level and after review by the relevant regional sector head and the President of the Leisure group, an executive summary including appropriate management action prepared by the Group Business Process Review is forwarded to the Audit Committee. Internal Audit reports are structured in a manner that facilitates resolution of the concerns highlighted and the Board monitors management follow up action on an ongoing basis.

Risk Review

The Board has adopted a group-wide risk management programme to identify, evaluate and manage significant risks in a manner that supports the furtherance of business strategy. This programme ensures that the risks accepted as a result of the group’s operations are in keeping with its risk appetite, thereby preserving and creating shared value for all stakeholders. The detailed Risk Management report on page 50 of the Annual Report describes the process of risk management as adopted by the group and the key risks impacting the achievement of the group’s strategic business objectives.

Internal compliance

A quarterly self-certification programme requires the President, Sector Heads and the Chief Financial Officer to confirm compliance with financial standards and regulations. The President and sector heads of business units are required to confirm operational compliance with statutory and other regulations and key control procedures, and also identify any significant deviations from expected norms.

The Annual Report of the Board of Director’s on page 154 contains a declaration on compliance with laws and regulations, declaration of material interests in contracts involving the Company and confirms that they refrain from voting on matters in which they were materially interested; equitable treatment of shareholders and confirms that the business is a going concern, review of the internal controls covering financial, operational and compliance controls and risk management and that they have obtained

reasonable assurance of their effectiveness and compliance thereof. It also sets out the responsibilities of the Board for the preparation and presentation of financial statements. Related party transactions are disclosed on page 233 of the Annual Report.

Principle D3 – Audit CommitteeThe Board has established an Audit Committee comprising three (3) Non Executive Independent Directors as stated in Principle A1 and information regarding its activities is provided in the Audit Committee Report on page 48.

Messrs. Ernst &Young, are the Company External Auditors and during the year under review they have not provided non-audit services to the Group. The principal/consolidator auditor has not engaged in any services which are in the restricted category as defined by the CSE for External Auditors. The audit fees paid by the Company and Group to its auditors are separately classified in the Notes to the Financial Statements.

Code of Conduct Allegiance to the company and the group

Compliance with rules and regulations applicable in the territories in which the group operates

Conduct of business in an ethical manner at all times and in keeping with acceptable business practices

Exercise of professionalism and integrity in all business and personal transactions which could affect the image of the group

Principle D4 – Code of Business Conduct & EthicsAll employees, including the Board of Directors, are bound to abide by a formal Code of Conduct which is outlined below. The group believes that the strong set of core values which underlie the Code, is the main source of its competitive advantage which is rewarded by the trust placed in it by its stakeholders.


42

The Chairman of the Board affirms that there has not been any material violation of any of the provisions of the code of conduct. In instances where violations did take place, they were investigated and handled through well established procedures.


Prior to Appointment

Upon Appointment

During Board Meetings

Nominees are requested to disclose their various interests that could potentially conflict with the interest of the company

All Directors are expected to inform the board and obtain board clearance prior to accepting any position or engaging in any transaction that could create a potential conflict of interest

All NEDs are required to notify the Chairman-CEO of changes in their current board representation

Directors who have disclosed an interest in a matter under discussion:-

excuse themselves from deliberations on the subject matter

abstain from voting on the subject matter (Such abstentions from board decisions are duly recorded)

Each Director has a continuing responsibility to determine whether he has a potential or actual conflict of interest arising from external associations, interests or personal relationships which may influence judgement in material matters, which are considered by the Board from time to time.

In order to mitigate any potential or actual conflict of interest or independence of Directors throughout the term of their membership on the board, the Company has adopted the processes as illustrated.

Details of companies in which Board members hold Board or Board committee membership are available with the Company for inspection by shareholders on request.

Whistleblower Policy

Employees can report to the Chairman through a communication link named “Chairman Direct”, on any concerns about unethical behaviour and any violation of Group values. Employees reporting such incidents are guaranteed complete confidentiality and such complaints are investigated and addressed via a select committee under the direction of the Chairman.

Ombudsperson

In a situation where an individual employee or a group of employees complain of an alleged violation of the published Code of Conduct, and feels that the alleged violation has not been addressed satisfactorily by internally available mechanisms, provision has been made to refer such complaints to an Ombudsperson. The findings and recommendations of the Ombudsperson arising subsequent to an independent inquiry is confidentially communicated to the Chairman or to the Senior Independent Director of the ultimate parent company upon which the involvement duty of the Ombudsperson ceases.

On matters referred to him by the Ombudsperson, the Chairman or the Senior Independent Director of the ultimate parent company, as the case may be, will place before the Board;

1. The decision and recommendation of the Ombudsperson

2. The action taken based on the recommendation


43

3. Areas of disagreement and the reasons adduced in such instances

Steps are taken to ensure that complainants are not victimised. There were no cases that were brought to the attention of the Ombudsperson during the year under review.

Other avenues available to employees to highlight matters of concern are detailed in page 122 of this Annual Report.

Securities trading policy

The Group’s securities trading policy prohibits all employees and agents engaged by the Company who are in possession of unpublished price sensitive information from trading in the Company shares or other companies in which the Company has a business interest. The Group adopts a zero tolerance policy against any employee who is found to be in violation of this policy.

Principle D5 – Corporate Governance DisclosuresThe Board of Directors has taken all reasonable steps to ensure that all financial statements are prepared in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) issued by the ICASL and the requirements of the CSE and other applicable authorities.

The Company and its subsidiaries are fully compliant with all the mandatory rules and regulations stipulated by the Corporate Governance Listing Rules published by the CSE (revised in August 2015) and also by the Companies Act No. 07 of 2007. The Group has also given due consideration to the Best Practice on Corporate Governance Reporting guidelines jointly set out by the ICASL and the SEC and has voluntarily adopted the relevant provisions as far as is practicable.

Principle E and F – ShareholdersShareholders are provided sufficient financial information and other relevant information on the website of the company to enable them to take decisions regarding their investments. Annual Reports and Interim Financial statements are circulated to all registered shareholders within prescribed timelines. All

shareholders are encouraged to participate at the Annual General Meeting and vote on matters set before the shareholders which are detailed on page 257.

Shareholders

1. Institutional Shareholders

1. Shareholder voting

2. Evaluation of Governance Disclosures

2. Other investors

1. Investing, Divesting Decisions

2. Shareholder voting

Principle G – Sustainability The Group follows a stakeholder model of governance as enumerated in Stakeholder Engagement on page 62 and is engaged in a number of projects which have a positive social and environment impact outside its immediate business sphere. This report is an Integrated Report which includes sustainability information and an index as provided on page 128.

Investment Appraisal DecisionsOver the years, the group has refined the process of investment appraisal which ensures the involvement of the relevant persons when capital investment decisions are made. Several views, opinions and advice are obtained prior to the investment decision being made. Experience has proven that a holistic and well debated view of the commercial viability and potential of proposed projects including operational, financial, funding, risk and tax implications has usually culminated in a good result. Project appraisal and capital investment decisions are processed through a committee structure which safeguards against one individual having unfettered decision making powers in such decisions.


44


IT GovernanceThe use of IT in the Hotels Group has evolved from the simple automation of repetitive back office processing to delivering real time management information on a wide variety of platforms. This evolution occurred as the Group discerned the competitive advantage gained and the enhancement of business value which came about through the skillful alignment of IT with its business objectives and the prudent management of the Group’s IT resources. The Group has always been a step ahead in embracing emerging technologies and systems, consistently investing in developing its IT infrastructure. Continuous focus on cutting edge technology has ensured greater reliability of IT systems and has shortened information delivery times to both internal and external stakeholders.

IT Governance Activities & Process

Shareholder Value

DriversIT Strategy

Process

Results

Outcome Performance Risk Assets

Resources

Knowledge Capability Information

Drives

DirectMeasure

UseImprove

Report

The John Keells Group has progressively improved service quality and mitigated IT risks by implementing prudent internal controls based on the Information Security Management guidelines outlined in ISO27001 within the COSO framework which covers both risk and business continuity management.

With the growing dependence on IT caused by the rapid evolution and use of mobile technologies, the Group has also further strengthened its IT governance framework by adopting the Control Objectives for Information and related Technology guidelines (COBIT) issued by the IT Governance Institute. The Hotels group continues to benefit from this quest for excellence in IT governance and aims to deliver sustainable business value by structuring its IT governance along similar lines.


45

Compliance with CSE Listing Requirements

Rule No. Subject Applicable requirement Compliance Status

Applicable Section in the Annual Report

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


7.10.2(b) Independent Directors (ID)

Each NED should submit a declaration of independence

Complied Available with the Secretaries for review

7.10.3(a) Disclosure relating to Directors

The Board shall annually determine the independence or otherwise of the NEDs

Names of IDs should be disclosed in the Annual Report (AR)

Complied

Complied


7.10.3(b) Disclosure relating to Directors

The basis for the Board’s determination of ID, if criteria specified 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 including the Director’s areas of expertise

Complied Board of Directors (profile) section in the Annual Report

7.10.3(d) Disclosure relating to Directors

Provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3(a), (b) and (c) to the CSE

Complied Corporate Governance and Board of Directors (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


7.10.5(a) Composition of Remuneration Committee

Shall comprise of NEDs, a majority of whom will be independent


7.10.5.(b) Functions of Remuneration Committee

The RC shall recommend the remuneration of the Chief Executive Officer (CEO) and NEDs



46



7.10.5.(c) Disclosure in the Annual Report relating to Remuneration Committee

Names of Directors comprising the RC

Statement of Remuneration Policy

Aggregated remuneration paid to NED/NIDs and NED/IDs

Complied

Complied

Complied

Corporate Governance and the Board Committee Reports

7.10.6 Audit Committee (AC) The Company shall have an AC Complied Corporate Governance

7.10.6(a) Composition of Audit Committee

Shall comprise of NEDs, a majority of whom will be Independent

A NED shall be appointed as the Chairman of the Committee

CEO and Chief Financial Officer (CFO) should attend AC meetings

The Chairman of the AC or one member should be a member of a professional accounting body

Complied

Complied

Complied

Complied


7.10.6(b) Audit Committee Functions

Overseeing of the –

1. Preparation, presentation and adequacy of disclosures in the financial statements in accordance with Sri Lanka Accounting Standards

2. Compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements

3. Processes to ensure that the internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards

4. Assessment of the independence and performance of the external auditors

5. Make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors, and approve the remuneration and terms of engagement of the external auditor

Complied

Complied

Complied

Complied

Complied




47



7.10.6(c) Disclosure in Annual Report relating to Audit Committee

Names of Directors comprising the AC

The AC shall make a determination of the independence of the Auditors and disclose the basis for such determination

The AR shall contain a Report of the AC setting out the manner of compliance with their functions

Complied

Complied

Complied


Related party transactions review committee

Names of Directors comprising the Committee.

Will monitor and approve recurrent and non-recurrent related party transactions as set out in the Group policy guidelines.

Complied Corporate Governance Report


48

Audit Committee Report

Terms of Reference, Principal Focus and Medium of Reporting The responsibilities of the Audit Committee are governed by the Audit Committee Charter, approved and adopted by the Board. The Audit Committee focuses principally on assisting the Board in fulfilling its duties by providing an independent and objective review of the financial reporting process, the process of risk identification and mitigation, internal controls; reviewing procedures relating to statutory, regulatory and related compliance; adequacy and effectiveness of the Company’s outsourced internal and external audit function. The proceedings of the Audit Committee were regularly reported to the Board of Directors, through formal minutes. Further, the effectiveness of the Committee is evaluated annually by each member of the Committee and the results are communicated to the Board.

Committee Composition, Meetings Held and Attendance The Audit Committee consists of three members. The Chairman of the Audit Committee, is a Fellow of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). In addition to the Chairman of the Committee, the other two members of the Committee are also qualified Accountants with specialist financial background. All Non-Executive Directors satisfy the criteria for independence as specified in the Standards on Corporate Governance for listed Companies issued by the Securities & Exchange Commission of Sri Lanka. The Audit Committee reports directly to the Board. The individual and collective financial and hotel industry specific knowledge, business experience and the independence of members are brought to bear on all matters, which fall within the committee’s purview. The Sector Head and Chief Financial Officer, together with the Sector Financial Controller and Head of Group Business Process Review (GBPR) and Head of Sustainability and Enterprise Risk Management of John Keells Holdings PLC, attend Audit Committee meetings by invitation. Outsourced Internal Auditors, i.e. PricewaterhouseCoopers, KPMG, BDO Partners and Independent External Auditors, Ernst & Young, are required to attend meetings on a regular basis. The Committee met six times in connection with the financial year ended 31st March 2016 (information on the attendance at these meetings by the members of the Committee is given on page 34). In addition, the Chairman of the Committee met the Internal and External Auditors and in house personnel, as necessary, to strengthen guidance and oversight related to Audit Committee matters.

Activities Performed Reviewed the activities and financial affairs of the Company

and its subsidiaries and underlying hotel entities, and the financial reporting system adopted in the preparation of quarterly and annual financial statements to ensure reliability of the process, appropriateness and consistency of accounting policies and methods adopted and that they facilitate compliance with the requirements of the Sri Lanka Accounting Standards (SLFRS/LKAS), the Companies Act No. 7 of 2007 and other relevant statutory and regulatory requirements.

Met the outsourced Internal Auditors to consider their reports, management responses and matters requiring follow up on the effectiveness of internal financial controls that have been designed to provide reasonable but not absolute assurance to the Directors that assets are safeguarded and that the financial reporting system can be relied upon in the preparation and presentation of the financial statements. Their scope of work and approach, the timeliness of their reports, and cooperation with External Auditors was also addressed.

Reviewed the Business Risk Management processes and procedures adopted by the Company, to manage and mitigate the effects of such risks and observed that risk analysis exercises had been conducted across the different Hotels, key risks that could impact operations had been identified and to the extent possible, measures taken to minimise the impact of such risks. It was noted that with the integration of sustainability within the Leisure Group, further measures to mitigate the core sustainability risks had been identified and risk mitigation measures designed and implemented.

Reviewed the quarterly and year-end financial statements and recommended their adoption to the Board. For this purpose, in addition to the routine and special purpose interactions with External and Internal Auditors, the Audit Committee, interacted with Group IT, Group Legal and Group Risk and Sustainability Divisions as and when further clarifications were needed, in order to ensure, appropriateness of accounting treatment, adequacy of transparency, compliance and disclosure.

Met with the External Auditors before commencement of the External Audit to ascertain the nature, scope and approach of the audit and reviewed their Audit Plans.


49

Met with External Auditors to discuss interim audit issues, management responses and to effect any corrective action where necessary.

Met with External Auditors at the conclusion of the Annual Audit to review the financial statements and the reports thereon and to respond as necessary to such reports.

Had closed door discussions with the External and outsourced Internal Auditors where necessary.

Reviewed the type and quantum of non-audit services provided by the External Auditors to the Company to ensure that their independence as auditors has not been impaired.

Appraised the independence and performance of the outsourced Internal Auditors whose services are coordinated by the Group Business Process Review Division.

Conducted special review of processes, content and the effectiveness of feeders to the deliberations of the Audit Committee, such as in-house accounting and record keeping; Group Business Process Review, and the Sustainability and Enterprise Risk Management division.

Reviewed the Company’s compliance framework to determine that it provides reasonable assurance that all relevant laws, rules and regulations have been complied with.

Participated in discussions with management, to 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.

Pursuant to the recommendations of the Audit Committee over the preceding three year period, during which several outsourced internal auditors and GBPR were requested to design and implement data mining and analytical techniques, on a pilot or sample basis, in order to upgrade the tools and techniques adopted at all 11 properties in Sri Lanka and the Maldives, to further enhance accountability and oversight:

GBPR and Group IT have procured and are in the process of implementing in phases, data mining and data analytical tools, to capture and graphically present information on transaction outliers/red flags on a near

real time basis on a management dashboard which will be used for further investigation. This system will be made operative, in the early part of the financial year 2016/2017.

The Terms of Reference, in Requests for Proposals, invited from four selected outsourced Internal Auditors, required their demonstration of capacity and capability in data mining and data analytical techniques, and clarity on information technology related and people related resource deployment therefore. Outsourced Internal Auditors, were required to diagnose on site, the data mining and data analytical tools referred to in the preceding paragraph, and the corresponding manner in which such tools will be used as a feeder, and other tools and techniques the outsourced Internal Auditors, will deploy, independently thereof, or as a supplement thereto. The Audit Committee incorporated this aspect as well, in the criteria for the evaluation of the bids of outsourced Internal Auditors and based thereon, the award of professional services contracts will be made shortly.

In conclusion, the Audit Committee is satisfied that the Company’s accounting policies, operational controls and risk management processes provide reasonable assurance that the affairs of the Company are managed in accordance with Group policies and that Company assets are properly accounted for and adequately safeguarded.

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, 2017, subject to the approval of the shareholders at the next Annual General Meeting.

Ranel T. Wijesinha., FCA Chairman - Audit Committee

27 May 2016

Members: N B Weerasekera., FCMA T L F W Jayasekara, FCA


50

Risk Management

Effective risk management is critical in the pursuit of our strategic objectives and underpins our ability to deliver sustainable stakeholder value. As an organisation exposed to an array of global and domestic, socio-economic and ecological factors, we have continued to enhance our capability to anticipate and proactively respond to these risks.

Approach to Risk ManagementWe strive to consistently refine and evolve our risk management framework to reflect changing dynamics in the operating environment and ensure alignment to the Group’s business strategy. Our key risks stem from the our material aspects (as detailed on page 51 of this Report) and we evaluate, manage and report on all significant risks in line with our policy frameworks and international best practices where applicable.

Governance of Risk ManagementThe Board of Directors oversee and retain ultimate responsibility for the Group’s risk management framework. They are assisted in the discharge of their duties by the Audit Committee who have oversight responsibility for risk and internal control. The John Keells Group Business Process Review (BPR) Division together with the outsourced Internal Auditors assist the Audit Committee in performing its assurance role through regular reviews and recommendations on the robustness of the internal control systems in place. At executive level, the Risk Management Team comprising of the Leisure Group President, Sector Heads, Chief Financial Officer, Sector Financial Controller and Functional and Operational Managers are responsible for the overall implementation of the Board approved risk management policy.

Board of Directors

Audit Committee

John Keells Group BPR Division

Internal Auditors

Risk Management Teams

Policy FrameworkThe formalised Risk Management policy ensures that standardised tools and techniques are used across all properties for the risk identification, analysis and mapping, management and reporting and monitoring. Meanwhile, the John Keells Group Sustainability and Enterprise Risk Management (ERM division) ensures that the policy framework of John Keells Hotels PLC (KHL) is aligned to that of the John Keells Group, through ongoing review, assessment and guidance on implementation.

The Risk Management ProcessThe Group’s structured risk management process, which has been implemented across all properties, is set out below.

Monitoring and

Reporting

Defining Measures

Mapping and Analysis

Risk Identification

Determining material aspectsO

pera

ting

Envi

ronm

ent

Sta

kehol

der

E

ngagem

ent

and

Valu

e C

reati

on

Mod

el


51

Determination of material aspects: We adopt a structured and comprehensive process to identify and prioritise the most material issues that could have an impact on the Group’s ability to create value to its stakeholders. As discussed in detail on page 64 of this Report, in determining material issues we consider the priorities of our stakeholders and factors that are critical to our value creation process as well as broader economic, social and ecological trends.

Risk Identification: Potential risks stemming from the defined material issues are identified at property level.

Mapping and Analysis: Identified risks are mapped in terms of impact and probability and plotted on a risk register, enabling the prioritisation of key risk exposures. A velocity rating is also attached to identified risks based on the speed at which the business would be impacted by its occurrence.

Defining Measures: Measures of risk management, such as acceptance, mitigation, control and transfer are defined and responsibilities assigned. Compliance to internal controls is ensured through formalised procedures while assurance on the adequacy of the Group’s financial and operational internal controls is provided by the outsourced internal audit function and the BPR unit.

Monitoring and Reporting: Formalised reporting structures and monitoring mechanisms are in place to consistently track the Group’s risk profile and ensure that mitigation strategies and internal controls are adequate in design and implementation. In addition to a Quarterly review by the Audit Committee, the Sector Head confirms that risk registers of business units have been updated to correctly reflect internal and external risk dynamics.

Principal Risks and UncertaintiesThe Group’s key risk exposures and mitigating strategies that are in place are summarised below.

Risk Category Potential Impact Mitigating Strategies Risk Assessment for 2015/16

Strategic Risks

Macro-economic risks

Refer to discussion on operating environment on page 70 of this Report

Economic growth, income distribution, as well as fluctuations in interest rates, exchange rates, and inflation have a direct impact on the Group’s revenue generation and profitability.

Consistent monitoring of economic trends and Strategic data and Annual Corporate plans are formulated taking into consideration the outlook on the country’s macro-economic environment. These are monitored and reviewed by the Board on an ongoing basis

Periodic review of changes in cost and expenditure by operational and financial staff to determine appropriate review of rates and tariffs

Low Moderate


52

Risk Management


Competitive pressures

Capacity expansions within Sri Lanka as well as the emergence of alternative hospitality models (such as home-stay and apartments) have resulted in a significant increase in the inventory of rooms over the last few years.

Intensified price competition (particularly during the off-season) could significantly impact profitability margins, underscoring the importance of proactively managing our pricing strategy.

Continuous and proactive monitoring of our capacity utilisation and targeted marketing initiatives to optimise occupancy and profitability

Consistent focus on enhancing our product offering and service delivery

Pursuing multi-channel distribution, including focus on online channels

Strengthening existing distribution channels by nurturing relationships with key local and overseas partners and by participating in global and regional trade fairs in both traditional and emerging markets

Optimising off-peak capacity through guaranteed inventory agreements with direct operators

Continuous pursuit of investment opportunities to expand room portfolio

Shifts in source markets

Arrivals from emerging markets, particularly China and India are increasingly accounting for a higher proportion of tourists into the country, reflecting economic factors and shifts in global wealth profiles.

Inability to effectively respond to the market dynamics and customer needs presented by the shift in source markets could result a decline in market share.

Focused marketing strategies to pursue growth in non-traditional markets, particularly China and India

Customising service levels to cater to emerging market customer expectations

Tracking and Analysis of industry trends and data


53


Operational Risk

Talent attraction and retention

The shortage of skilled hospitality industry personnel in the country continues to be a key risk factor for leisure sector operators

Employees are a vital aspect of our service offering and inability to attract and retain skilled talent can directly impact our competitiveness.

Providing opportunities for competency and multi-skill development through targeted training and overseas exposure

Identification of talent pool for succession planning and providing opportunities for career progression

Collaboration with the University of Colombo to attract graduates from the recently introduced hospitality management undergraduate degree program

Robust performance management system

High level of staff engagement

Changing needs of travellers

Shifts in the demographic profiles of travellers have led to rapidly evolving guest expectations and emphasis on the experiential value created by the service offering

Proactively responding to changing customer preferences through innovation and enhanced service delivery is essential in increasing customer satisfaction and growing market share.

High level of guest engagement through satisfaction surveys, social media platforms and face to face interactions.

Enhancing the brand promise with focus on inspiring guests and enhancing their experience

Reviewing and innovating food and beverage offerings to cater to evolving customer expectations

Positioning staff with multilingual skills in guest interface areas

Low Moderate


54

Risk Management


Maintaining service quality and operational efficiency

Employees are a critical factor in ensuring superior service quality. Accordingly, enhancing the productivity and efficiency of our employees is a key priority for the Group, given the increasing competition among leisure sector players for skilled labour.

Inadequacies in operational efficiency will affect overall profitability while below-par service quality will have a direct impact on guest satisfaction and market share.

Implementation of a robust Property Management System which facilitates the tracking and analysis of each aspect of our hotel operations and allows us to benchmark our operational efficiency against global best practices.

Continued investment in training and developing our people

Ensuring continuing compliance with several national and international accreditations and certifications

Government policy

Ad hoc changes to existing local statutes and lack of predictability in enforcement timelines can result in numerous financial and operational challenges.

This can lead to ambiguity of interpretation and difficulties in planning and budgeting, resulting in financial as well as reputational losses.

Legal requirements and statutory returns are monitored and reviewed on a consistent basis. Compliance audits are conducted regularly by the Internal Audit function

Active engagement with industry advisory and policy making bodies to articulate concerns and make representations upon invitation

Guidance provided by the John Keells Group legal division

Continuous review and upgrade of information systems to detect and report deviations


55


Technology

Rapid growth in the use of online and mobile connectivity platforms have transformed the way customers interact with us, paving way for new methods of engagement and communication

Inability to respond to opportunities presented by rapidly evolving dynamics in the technology landscape can significant affect our competitive position. Furthermore, the failure and breakdown of IT systems and processes can cause disruption to operations and lead to financial loss

Focused strategy targeted towards increasing bookings from online channels

The recently implemented Property Management System ensures greater alignment of our technology requirements with that of our business needs

Continuous review of network protection processes at all operational locations to ensure integrity and security of data

Comprehensive IT policy which is clearly defined and communicated to all staff.

Safeguarding physical assets

Natural disasters, fire, accidents crime and unethical behaviour in and around the resorts can result in destruction and/or loss to our assets

Could lead to disruptions in operations and financial losses

Documented business continuity plans and disaster recovery plans are in place

Signage in appropriate locations to increase staff and guest awareness

24-hour security service on premises

Fire-fighting procedures, trained staff and systems are in place

Insurance coverage for physical damage of properties

Raw materials and supply chain risks

The Group’s key raw materials comprise of food inputs which are sourced from multiple suppliers. Please refer page 115 of this Report for details on supply chain and material management.

Inadequate supply of raw materials and/or procurement of inferior quality raw materials can lead to financial losses, disruptions to operations and reputational losses.

Defined criteria for supplier assessment

Diverse pool of suppliers limit exposure to a single party and rotation of contracts where possible

Supply contracts are rotated in order to ensure strong relationships

Low Moderate


56

Risk Management


Energy

An uninterrupted energy supply is critical for the functioning of our properties, with energy costs accounting for 10% of our total cost base.

Interruptions to the power supply can cause disruption to operations and adversely impact the customer experience. Energy consumption also has a direct impact on our carbon footprint.

Investing in energy efficient lighting, cooling and other equipment

Consistent monitoring of property-wise energy consumption and intensity ratios to drive efficiency

Impacts on local communities

Our operations impact the communities around our properties through employment generation, environmental impacts and cultural factors among others.

Inadequate engagement and inability to fulfil the expectations of the surrounding communities can lead to reputational losses, community unrest and ultimately impact our social license to operate

Providing job opportunities for youth in the local communities

High level of engagement with neighbouring communities

Identification and use of local supplier base

Sponsorships and donations for cultural, religious and other projects

Environmental sustainability

The decline of the eco-system, reflected by increases in temperature, decline in bio-diversity and increased natural disasters can potentially have a significant impact on all industries, including leisure.

Irregular weather patterns over the longer term can have an impact on tourist arrivals while the decline in bio-diversity could impact the attractiveness of Sri Lanka as a destination.

Continuous monitoring of emissions to ensure compliance with Central Environmental Authority (CEA) requirements and certifications

Raising guest awareness on impacts of climate change through notices, leaflets, annual earth hour celebrations at all our properties

Use of energy efficient machinery and equipment to reduce our total carbon footprint


57

Low Moderate


Financial Risk

Foreign exchange risk

Fluctuations in the respective strengths of currencies impact operations to the extent of changes against the reporting currency (LKR), services are priced in the foreign currency.

In addition to financial implications arising at the point of translation, currency fluctuations may also have an impact on tourist arrivals due to relative cost effectiveness of destinations

Maintenance of Foreign Exchange Earners Accounts

Use of forward exchange rates to minimise our exposure to fluctuations

Natural hedge by invoicing and accepting payments in the same currency as the debt

Sensitivity analysis to identify the potential impact of currency fluctuations on profit

Interest Rate risk Changes in market interest rates lead to changes in fair value or future cash flows of a financial instrument. In the Group’s perspective, this relates mainly to our debt obligations with floating rate interests

Trends in market interest rates are monitored on a consistent basis

Leveraging rate differences in foreign and local lending markets and structuring low cost debt through negotiation

Sensitivity analysis is conducted to identify the potential impact that market interest rates will have on profitability.


58


59

Inspired to delight

Our work is about delighting people, always

Management Discussion &Analysis


60

StrategyValue Creation Model

Capital Inputs Value Creating Activities

Financial & Manufactured Shareholders’ funds: Rs. 23,018 Mn Borrowings: Rs. 3,726 Mn

Hotel Operations

Food and Beverages

Housekeeping

Sales and Marketing

Customer Relationship Management

Value Drivers

Bra

ndin

g

Ris

k M

anagem

ent

Pro

pert

y M

anagem

ent

Sm

art

Str

ate

gy

Peo

ple

Managem

ent

Gov

ernance

Pro

cure

men

t

Manufactured CapitalProperty, plant and equipment: Rs. 14,273 Mn Lease rentals paid in advance: Rs. 8,537 Mn

Human CapitalEmployees: 2,628 Attitudes and values of our employees

Social and Relationship CapitalGuest relationshipsSuppliersOther business partnersCommunity relationshipsThe Cinnamon brand

Intellectual PropertyTacit knowledge base

Natural CapitalRaw materials: 3,369 MTEnergy consumption: 173,594 GJWater usage: 627,651 Cubic Meters

“Our value creation model demonstrates how our capital inputs are altered through our value creating activities to generate sustainable value to our diverse stakeholders”


61

Key Outputs Key Outcomes

Shareholder ValueNet profit: Rs. 1,749 MnEarnings per Share: Rs. 1.19Dividend per share: 0.40

Shareholders

Sustainable growth in shareholder earnings

Employees

Job creation, enabling and rewarding environment with equal opportunities, and work-life balance

Opportunities for skill and career development

Guests

Inspire guests through unique experiences

Business Partners

Partner growth through mutually rewarding, sustainable relationships

Communities

Contribute towards empowerment and socio economic progress of communities we operate in

Employee ValueTotal payments to employees: Rs.1,768 MnPromotions: 138Investment in training: Rs 33 MnTotal training hours: 116,966Employee satisfaction rate: 86.7%

Customer ValueGuest Satisfaction: Average TripAdvisor rating of 4.26Occupancy: 80.4%

Business PartnersRelationship with suppliers

CommunitiesInvestment in community engagement: Rs. 7.9 MnVolunteer hours: 9,316Direct Beneficiaries from Corporate Social Investments (CSI): 5,960

EnvironmentWaste: 2.7 mn kgEffluents: 599,700 Cubic MetersCarbon footprint: 20,294 tCO2e


62

StrategyStakeholder Engagement

Robust stakeholder engagement mechanisms ensure that we clearly identify issues which matter most to our diverse stakeholders. Feedback obtained from this engagement forms the foundation for identifying material aspects which are a vital input in our strategy formulation, planning, operations and sustainability reporting.

Importance of engagement Method and frequency of engagement Key topics arising from engagement

Share

hol

der

s

Shareholders provide capital required to fund future growth plans

AGM(Annual)

Quarterly results updates

Annual Report

Website (Ongoing)

Open door policy for investors (Ongoing)

Return on Investment

Sustainable growth

Corporate Governance and ethics

Risk Management

Growth opportunities and future outlook

Em

ploy

ees

Employees play a crucial role in delivering guest experiences and achieving our strategic objectives

Staff meetings at multiple levels (Ongoing)

Performance Appraisal (Annual)

Employee Survey(Annual)

Collective Agreements(Ongoing)

News-letters (Quarterly)

Opportunities for growth

Training and Development

Job Security

Performance Management

Health and Safety considerations

Gues

ts

Understanding customer needs and preferences is a prerequisite for delivering unique guest experiences

Guest feedback forms (on check-out)

Social Media platforms (Ongoing)

Face to face interactions (Ongoing)

Customer relationship managers (Ongoing)

Unique experiences

Quality of offering

Value for money

Ease of transaction

Activities

B2B

C

ust

omer

s Local and International tour operators, travel agents and destination management companies generate business for us

Face to face interaction (Ongoing)

Familiarizations visits and promotion materials (Ongoing)

Ease of transactions

Availability of up to date information on product offerings


63

Importance of engagement Method and frequency of engagement Key topics arising from engagement

Supp

lier

s Suppliers and other partners enable us to deliver consistent customer experiences

Procurement process(Ongoing)

Supplier Forums (Ongoing)


Timely payment

Ease of transaction

Supplier Development

Gov

ernm

ent

&

regula

tory

bod

ies

Provides an enabling environment for us to operate in.

Constructive relationships with Trade Associations(Ongoing)


Written communications (Ongoing)

Tax revenues

Compliance to all laws and regulations

Job creation

Contribution towards uplifting communities

Environmental Conservation

Com

munit

ies Strong ties with local communities is

essential for the sustainability of our operations

Engagement projects and sponsorships

Livelihood development programs

Environmental impacts

Job creation

Sponsorships


64

StrategyDetermining Materiality

Having identified issues that are most relevant to our stakeholders, material aspects are selected and prioritised to ensure that the metrics we measure and manage are aligned with the requirements of our stakeholders. Our process for determining material aspects also takes cognizance of the Group’s strategic priorities as well as economic and market dynamics that could potentially affect our value creation process.

The structured process we adopt for determining material issues is as follows;

Identify matters that can impact our value creation process with reference to the impact to stakeholders and

contextual trends

Evaluate their significance to the Group and the impacted stakeholders

Prioritize matters based on their relative importance

Determine matters to be disclosed in the Integrated Report

This year, we have broadened the scope of our material aspects by considering industry-specific factors that could affect our value creation process, in addition to the aspects prescribed by the GRI G-4 reporting criteria. We have also clearly disclosed how our selected material aspects correspond to the disclosures recommended by GRI. The material aspects and the relevant GRI disclosures (if any) discussed in each section of this report are listed at the start of each section.

6 10 11 12 131 4 5

9

7

14

8

2 3

Significance to the Group’s Strategy

Sig

nif

icance

to

our

Sta

kehol

der

s

Sustainable Growth

Enhancing Guest Experience

Cinnamon Ambassadors

Corporate responsibility

Material Aspect Corresponding GRI aspect Aspect boundary

1 Financial Performance Economic Performance Internal

2 New Markets - External

3 New Channels - External

4 Talent Attraction & Retention Employment-Labor practices and decent work, Labor practice grievance mechanism, Human Rights: Child labor, Forced or compulsory labour

Internal

5 Training and Development Training and Education Internal


65

Material Aspect Corresponding GRI aspect Aspect boundary

6 Health and Safety Occupational health and safety Internal

7 Productivity - Internal

8 Customer Satisfaction - External

9 Quality of Service - Internal

10 Product Responsibility Customer health and safety (PR) Internal

11 Nurturing the Planet Materials, Energy, Bio diversity, Emissions, Effluents and Waste, Products and Services, Overall (EN), Environmental Grievance mechanism

Internal

12 Empowering Communities Local communities External

13 Value Chain development Supplier Environmental Assessment External

14 Compliance Compliance (EN), Compliance (PR) Internal


66

StrategyOur Strategy

The Group’s key strategic priorities of Sustainable growth, Empowering Cinnamon Ambassadors, Creating unique guest experiences, Corporate Responsibility and Delivering the Brand Promise, embody our approach towards creating value for our stakeholders. We continuously seek to reinvent ourselves in all strategic areas by reviewing and enhancing our way of thinking and working.

“The impeccable execution of a holistic strategy has resulted in the ethical and responsible creation of shared value”


Risk Management

Government Policy

Technology

Travel In

frastru

cture

Chann

els t

o M

arke

t

EnergyCompetition

Bio D

iversity

Dem

ogra

phic

s

Cur

renc

y flu

ctua

tion

Wealth

Talent Attraction and Retention


Health and Safety

Productivity

Empowering Cinnamon Ambassadors

Financial Performance

New Markets

New Channels

Sustainable Growth

Nurturing the Planet

Empowering Communities

Value Chain Development

Compliance

Corporate Responsibility

Customer Satisfaction

Quality of Service

Product Responsibility

Enhancing Guest

Experience

Our Brand Promise- Inspired Living


67

Our Commitment to the UN Sustainability Development Goals

Sustainability Development Goal

Relevance to the Tourism Industry Our Commitment

Tourism is one of the fastest growing industry sectors in the world, and is well positioned to foster economic growth and development through job creation and empowering youth and women

We create employment and skill development opportunities for youth in our communities

(Refer to page 118)

Tourism can support increased agricultural production, use and sale of local produce in tourist destinations and its full integration in the tourism value chain

Wherever possible, we source supplies from local communities

(Refer to page 115)

The efficient use of water in the sector, together with appropriate wastewater management and pollution control can be critical to preserving water resources

We have adopted and continue to improve measures to preserve water and minimise our water discharge

(Refer page 131)

The tourism sector is relatively energy intensive and engaging in the generation of greener energy can accelerate the shift towards renewable energy sources

Energy efficiency is an environmental priority and we have introduced numerous measures to reduce our energy footprint

(Refer page 129)

By providing access to job opportunities in the sector, particularly for women and youth, tourism can contribute towards increased skill and professional development

We are a preferred employer in the leisure sector and provide a conducive working environment with growth opportunities

(Refer page 117)

Through adopting sustainable consumption methods including the promotion of local products, the tourism sector can contribute towards the global shift to sustainability

We actively engage our suppliers in propagating sustainable social and environmental practices

(Refer page 115)


68

Sustainability Development Goal

Relevance to the Tourism Industry Our Commitment

Tourism contributes to and is affected by climate change and by lowering energy consumption, shifting to renewable energy, the sector can contribute towards combatting climate change

We consistently pursue new technologies and ways of working which enable us to reduce our carbon footprint

(Refer page 133)

Coastal and maritime tourism is crucial for developing the sector, particularly in small island states such as Sri Lanka underscoring the importance of conserving and preserving marine ecosystems

We have implemented several projects aimed at preserving marine ecosystems

(Refer to page 135)

Rich bio-diversity, pristine forests and landscapes are vital to attracting tourists to destinations and tourism can play a significant role in conserving these natural resources through preservation of flora and fauna and awareness building.

We continue to engage our guests in several of bio-diversity preservation projects

(Refer page 134)

StrategyOur Commitment to the UN Sustainability Development Goals


69

Sustainability at Cinnamon

John Keells Hotels PLC conducts business in a sustainable manner, identifying, measuring and monitoring material economic, social and environment impacts to ensure that our growth, earnings and reputation can be sustained and improved in the long term. As a hotel management company we impact lives of our guests, our employees, the communities we work in, our suppliers and business partners, and the surrounding environments in addition to meeting the financial needs of our key investors and shareholders. We have the ability to inspire all stakeholders associated with the brand and impact the people we interact with, the communities we operate in and the environment.

Sustainability GovernanceWe have established an integrated governance mechanism which spans across the entire organisational structure and all our resorts in the form of strategic planning, resource utilization, accountability and assurance. The Key Performance Indicators of Sustainability projects would be the ascertained by assessing the performance of sustainability indicators tracked at a Group level in accordance to the GRI framework on a quarterly basis, and the key indicators tracked, monitored and compared against international benchmarks. This has ensured the consistent tracking, monitoring and reporting of all selected sustainability indicators.

Cinnamon Sustainability Approach

Balance

Carbon Consciousness

Inspiring Livelihoods

Bio-DiversityPreserving the

Planet

Responsible Water Usage

and Minimising Waste

Promoting Culture

Connect

Precautionary Principle: Our operational decisions are guided by the Precautionary Principle, and environmental impacts including depletion of natural resources, environmental pollution and degradation as well as impacts on local communities are given due consideration when balancing risk and growth opportunities.


70

Business PerformanceOperating Environment

The Global Economic ClimateServices offered by the hospitality sector are in general considered to be discretionary and luxury purchases and are therefore impacted by a multitude of macro-economic, social and political factors in source markets. Global economic growth moderated to 3.1% in 2015, from 3.4% of the previous year as falling commodity prices, geopolitical tensions and rebalancing of the Chinese economy continued to shape global growth. Advanced economies grew by 1.9% supported by the recovery of the US economy while developing and emerging market economies grew by 4.0% during the year (2014: 4.6%) reflecting softening conditions in India and China due to lower investments. The International Monetary Fund projects global growth to be modest at 3.2% in 2016, increasing slightly to 3.5% in 2017; emerging markets and developing economies will continue to propel global growth with an expected growth rate of 4.1% whereas advanced economies are projected to expand at 1.9%.

Global Tourism in 2015International tourist arrivals increased by 4.4% to reach a record high of 1.2 billion in 2015, marking the sixth consecutive year of above average growth. Overall, demand was strong, yet uneven across individual destinations as exchange rate fluctuations, the sharp drop in oil and commodity prices, together with increased safety and security concerns shaping market dynamics during the year. Tourism expenditure in 2015 was driven by a few leading source markets, led by China (which continued to record double digit growth), followed by the US (+9%), and the UK (+6%) while the previously dynamic source markets of Russia and Brazil showed a sharp decline.

“Overall, demand was strong, marking the sixth consecutive year of above average growth in global tourist arrivals, yet uneven across individual destinations”

Source: UNWTO

10% of GDP

6% of World Exports

1/11 of Jobs

30% of Service Exports

Global Economic Growth

0

1

2

3

4

5

%

2017(F)

2016(F)

20152014

Global Growth Advanced Economies

Emerging and Developing Economies

Global Tourism Industry Growth

-4-3-2-1012345678

%

Europe

World

Middle

EastAfrica

America

s

Asia and

Pacific

2013 2014 2015

Source: IMG, World Economic Outlook

Source: UNWTO

Why Tourism Matters

Top Tourism Spenders (2015)

0

50

100

150

200

250

300

US$ Bn

China

FranceUK

Germany

USA


71

The Sri Lankan Tourism Industry in 2015Tourist arrivals into Sri Lanka increased by 17.8% to reach a record high of 1.8 million tourists in 2015, maintaining the growth momentum enjoyed by the sector since the cessation of hostilities. Accordingly, total earnings from tourism increased by 22.6% to USD 2,981 million. Western Europe continues to be Sri Lanka’s largest source markets, although as a proportion arrivals from the region has recorded a decline as non-traditional markets such as China and India have grown in prominence. On an individual country basis, China (+68%) and India (+31%) grew at a rapid pace and is likely to present further opportunities for growth.

The tourism sector is earmarked to play a leading role in Sri Lanka’s socio economic progress over the medium to long-term, as the Government targets 2.2 million tourist arrivals by 2016. Despite headwinds from prolonged economic woes in several traditional markets, focus on emerging and non-traditional markets is anticipated to provide the required impetus for the

industry. From a policy front, Sri Lank Tourism’s integrated marketing plan for the sector addresses growth in several key performance indicators, namely, arrivals, average spend, average stay and the country’s overall brand value. In achieving these strategic goals, attracting and retaining skilled human resources will be vital for the long-term sustainability of the industry. Branding and positioning Sri Lanka’s offering to target non-traditional markets and to effectively compete with regional destinations is also necessary for achieving sustainable growth in the industry.

The Maldivian Tourism Industry in 2015Tourist arrivals to the Maldives grew at a modest 2.4% in 2015, with the growth rate slowing considerably in comparison to previous years. Political unrest and the resultant declaration of a state of emergency resulted in several key source markets issuing travel advisory warnings during the year. Accordingly, total bed nights for the year declined by 4.3% during the year while average occupancy rates at resorts

On the supply side, the number of total graded establishments increased from 310 to 354 during the year, bringing the total room capacity to 19,377, an increase of 7% in comparison to the previous year. The room capacity in supplementary establishments has also grown by 35%, inserting intense pressure on graded established rooms, as guests have increasingly sought out value-for-money home stays, apartments and other alternative accommodation.

Source: Sri Lanka Tourism Development Authority

Sri Lanka Tourism

0

500,000

1,000,000

1,500,000

2,000,000

No. %

20112015

20142013

2012

70

72

74

76

78

80

Tourist Arrivals Occupancy Rate

Arrivals by Region (%)

0

20

40

60

80

100

%

20152014

2013

Western Europe

Eastern Europe

North America

South Asia

East Asia

Others

East Coast Development with IFC

Cinnamon Hotels & Resorts tied up with the International Finance Corporation (IFC), a member of the World Bank Group, as a strategic partner to promote Eastern Sri Lanka as an attractive tourism destination. The partnership will be initiated with the financial support of the European Union's Support to District Development program (EU-SDDP) which aims to align itself with the Government's thrust for economic and social development in seven conflict-affected districts. We hope to propagate our industry insights and technical knowledge in enhancing the appeal of the region as a tourist destination including employee training programs.


72

Currency fluctuationsAs offerings are generally priced in the currencies of source markets, fluctuations in the respective strengths of source and reporting currencies can impact our business in several ways including translation impacts, impact on margins as revenues are derived in source currencies but expenses are incurred in reporting currencies as well as through the impact on price and demand. During the year, currencies in advanced economies strengthened including the US dollar, Euro and the Yen while those of commodity exporters weakened. The Indian Rupee remained stable while the Chinese Yuan depreciated by around 2% during the year.

Channels to MarketThe emergence of internet tour operators and the increasing use of the internet to research and book holidays have resulted in a gradual transformation of the traditional channels to market structures. This has also brought about an increasing need for transparency regarding pricing structures while necessitating a high level of engagement with potential guests.

Business PerformanceOperating Environment

Ser

vice

pro

vider

s

Inte

rmed

iari

es

Con

sum

ers

Airlines

Hotels

Transport providers

Tours

Activities and attractions

Tour operators

Traditional travel agencies

Online travel agencies

Destination management companies

Leisure travellers

Business travellers

Source: Maldives Ministry of Tourism

Maldives Tourism

0

300,000

600,000

900,000

1,200,000

1,500,000

No. %

20112015

20142013

2012

60

64

68

72

76

80

Tourist Arrivals Occupancy Rate

also fell to 76% from 82% the year before. In terms of source markets, North East Asia is the largest contributor to arrivals with a share of 35.7%, although this declined slightly during the year as Chinese arrivals contracted by 1.1%. Other top markets like Germany, United Kingdom, and Italy showed positive growth rates in 2015 given the improved outlook of the Euro Zone while growth from Russia, France and Korea was negative.


73

Cluster Reviews

Adventure and Heritage

Cluster Contribution

Revenue PBT Guest Nights

Assets Employees Carbon Footprint

21% 26% 32% 15% 35% 25%

The Adventure and Heritage cluster consists of four unique properties, each with an inimitable personality of its own, collectively offering a room capacity of 433. Located in the Central and North Central regions of the country, Cinnamon Lodge Habarana, Habarana Village by Cinnamon and Cinnamon Citadel Kandy feature a distinctive ambience combining culture and heritage with world-class luxury. Cinnamon Wild Yala, bordering the wilderness of the Yala National Park is an eco-friendly getaway

offering rustic luxury and unforgettable experiences for wildlife enthusiasts. All resorts within the cluster are recipients of multiple international awards and accolades for green tourism practices, culinary excellence and customer satisfaction.

Cluster Snapshot

Number of rooms 433

Occupancy in 2015/16 77%

Headcount 908

Assets (LKR Mn) 4,323

Capital (LKR Mn) 3,739

Carbon footprint (tCO2e) 5,104

Direct CSI Beneficiaries 3,272

Economic, Environmental and Social Performance Review

2015/16 2014/15 y-o-y change

Eco

nom

ic

Revenue LKR Mn 2,488.4 2,307.3 8%

PBT LKR Mn 523.5 502.4 4%

Total Assets LKR Mn 4,323.4 4,181.9 3%

Total Capital LKR Mn 3,738.8 3,681.2 2%

ROCE (%) % 14.8 15.1

Envi

ronm

enta

l Energy GJ 94,899 93,551 1%

Water use Cub.m 235,851 233,537 1%

Water extraction Cub.m 301,823 299,305 1%

Waste MT 677 620 8%

Carbon Footprint MT 5,104 5,024 2%

Compliance Issues Incidents No. Nil Nil

Soc

ial

Head Count No. 908 931 -2%

Employee productivity Profit (Rs.‘000) /employee 499 481 4%

Investment in community engagement LKR Mn 3.0 2.5 24%

Training hours Hours 48,204 56,640

Volunteer hours Hours 6,394 6,106


74

The cluster’s revenue growth was 8% during the year under review, with all four resorts within the cluster achieving increased occupancy levels and turnover growth. The Group’s strategy of pursuing growth from non-traditional markets paid dividends during the year with Chinese, Ukrainian and Indian guests driving growth. The annual average occupancy level for the cluster was 77% during the year, while ARR also widened by 9%. Rising cost pressures continued to be a key challenge and organization-wide focus on improving staff productivity and operational efficiencies enabled the cluster to contain the increase in costs during the year.

Productivity improvements were driven through continued investment in training and development of our people and comprehensive work studies aimed at developing a new manpower model to arrive at an optimum staff cadre ratio. The cluster provided approximately 48,204 training hours to its pool of 908 employees at a cost of Rs.8.0 Mn. Resultantly, staff productivity (defined as net profit per employee) improved by 4% to Rs.498,923 during the year under review. The cluster also placed strategic focus on improving its energy efficiencies in a bid to contain its costs. We invested close to Rs. 14.3 million on multi-faceted energy saving initiatives across all resorts in the cluster, including installation of inverter type air conditioners at Cinnamon Lodge Habarana, Habarana Village by Cinnamon, Cinnamon Citadel Kandy, LED flood lighting (Cinnamon Lodge Habarana), installation of bio-gas digesters as well as capturing solar power. Collectively, these initiatives enabled the cluster to contain the increase in energy consumption to a mere 1%, despite the increase in operational activity. Overall, the cluster’s pre-tax profits increased by 4% to Rs. 523.5 Mn during the year, while Return on Capital Employed clocked in at 14.8% during the year.

Business PerformanceCluster Reviews

“During the year, Cinnamon Citadel Kandy won the Gold Award in the large scale tourism sector at the National Green Awards 2015, organized by the Central Environmental Authority.”

Intensity Ratios(Consumption per guest night)

Energy: 125 MJ 2015: 121 MJ

Water: 921 litres 2015: 903 litres

Waste: 2.42 kg 2015: 2.62 kg

Carbon Footprint: 19.93 kg 2015: 19.43 kg

In demonstrating our environment commitment all resorts within the cluster continue to comply with ISO 14001 and Green Globe certification. During the year, Cinnamon Citadel Kandy won the Gold Award in the large scale tourism sector at the National Green Awards 2015, organized by the Central Environmental Authority. All resorts in the cluster monitor a range of environmental indicators including energy and water consumption, effluents, waste and the carbon footprint and during the year under review, energy, water, and carbon footprint increased only marginally while quantity of waste generated declined.(Please refer Report on Natural Capital on page 128 for further information).


75

Key Environmental Initiatives

Increased scope of water recycling in all resorts

Better monitoring of water usage at Cinnamon Lodge Habarana

Installation of bio-gas digester at Cinnamon Wild Yala

Waste water treatment enabling fat separation at Cinnamon Lodge Habarana

Recycled paper projects at Cinnamon Lodge Habarana

Installation of bio-gas digesters at Cinnamon Wild Yala

Heat exchanges for guest rooms at Cinnamon Lodge Habarana

Installation of inverter type air conditioners

Water Waste & Effluents Energy

The cluster is also committed to minimizing its negative social impacts through engagement and sustainable value addition to its employees, customers, suppliers and local communities. All four cluster resorts have obtained and continue to comply with the requirements of the ISO 22000:2005 and OHSAS 18001 certifications. We provide a conducive work environment with exciting opportunities for skill and career development to a pool of 908 employees. During the year the cluster provided new employment opportunities to 174 individuals, of whom nearly 50% were hired from local communities. Total payments to

employees for the year amounted to Rs. 305 Mn, an increase of 10% compared to last year.

We are cognizant of the role we can play in empowering and contributing to the socio economic progress of the communities we operate in. Cluster employees volunteered for community engagement and Corporate Social Responsibility (CSR) projects during the year and our total investment in community initiatives for the year amounted to Rs. 3.0 Mn. Some of the key projects carried out by the cluster include the following. (Please refer page 115 of this Report for detailed information on the Group’s community engagement).


Multiple donations to schools

Awareness drive of opportunities for women in tourism (Cinnamon Citadel Kandy)

Workshop on F&B operations for undergraduates of Rajarata University

Blood donation campaigns organised by Cinnamon Citadel Kandy and Cinnamon Lodge Habarana

Commemoration of World Aids Day with multiple programs

Eye camp at Habarana

Awareness program on eliminating violence against women in Habarana

Workshop to build knowledge of the hospitality industry and skills of F&B Operations in Navy camp staff done at Cinnamon Wild Yala

Education Health Livelihood


76


Our Integrated Performance Summary

Beach Front-Sri Lanka




26% 12% 42% 33% 41% 42%

Our multi-award winning portfolio of Sri Lankan Beach Front properties in Sri Lanka are located alongside some of the country’s most scenic beaches in the Southern and North Eastern Coastal belts. Bentota Beach by Cinnamon, Trinco Blu by Cinnamon, Cinnamon Bey Beruwala and Hikka Tranz by Cinnamon collectively offer 564 four and five star class rooms and are renowned for their individuality and authenticity, which is expressed to our guests through unique architecture, quality of service, amenities, themed restaurants and bars. All resorts within the cluster espouse principles of sustainable tourism, underlining our commitment to environmental and social factors.

Cluster Snapshot

Number of rooms 564


Headcount 1,087

Assets (LKR Mn) 9,593

Capital(LKR Mn) 8,933

Carbon footprint(tCO2e) 8,474


“All resorts within the cluster espouse principles of sustainable tourism, underlining our commitment to environmental and social considerations.”

Economic

0

1,000

2,000

3,000

4,000

5,000

Rs.Mn %

2015/16

2014/15

2013/14

10

11

12

13

14

15

16

Revenue Assets ROCE (%)

Environment

0

1,000

2,000

3,000

4,000

5,000

6,000

Tonnes Tco2e

15

16

17

18

19

20

21

Carbon footprint Emission intensity

2015/16

2014/15

2013/14

Social

0

200

400

600

800

1,000

No. Hours

0

2,000

4,000

6,000

8,000

Headcount Volunteer Hours

2015/16

2014/15


77


2015/16 2014/15 y-o-y change

Eco

nom

ic

Revenue LKR Mn 3,073 2,868 +7%

PBT LKR Mn 251 244 +3%

Total Assets LKR Mn 9,593 9,632 -

Total Capital LKR Mn 8,933 7,378 21%

ROCE(%) % 5.2% 5.8%

Envi

ronm

enta

l Energy GJ 158,928 151,067 +5%

Water Use Cub.m 260,017 288,838 -9%

Water extraction Cub.m 276,703 299,503 -12%

Waste MT 875 907 -3%

Carbon Footprint MT 8,474 8,047 +5%

Compliance issues Incidents No. Nil Nil

Soc

ial

Head Count No. 1,087 1,124 -3%

Employee productivity Profit (Rs.‘000) /employee 202 198 2%

Investment in community engagement LKR Mn 4.6 4.8 -4%


Volunteer hours Hours 1,912 676

The Sri Lankan Beach resorts cluster achieved a revenue growth of 7% during the year, with Trinco Blu by Cinnamon, Cinnamon Bey Beruwala and Hikka Tranz by Cinnamon recording strong top line growth. Overall cluster performance was supported by increased guest nights from the China and India, as the Group placed strategic importance on pursuing growth in these markets. For instance, Cinnamon Bey Beruwala successfully obtained the Welcome Chinese Bronze Standard Certification during the year, a certified travel service standard which ensures specific, dedicated offers to Chinese clients and promotion opportunities in China. Overall, the cluster’s average occupancy levels increased from 76% last year to 80% during the year under review while ARR widened by 1%.

The Group’s overall HR strategy for the year focused on driving productivity improvements and the cluster engaged in a series of training and development initiatives targeted at achieving this goal. We thus provided training opportunities for all our employees, amounting to a total of 48,780 training hours at a cost of Rs. 9 Mn. Resultantly, staff productivity (defined as net profit per employee) improved by 2% to Rs.201,709 during the year under review. These initiatives enabled us to enhance productivity by contributing to the cluster’s pre-tax profit increase of 3% to Rs. 251Mn during the year. Cluster Return on Assets remained unchanged at 2.3%.


78

As an industry leader in sustainable tourism, green practices are integrated into all the day to day routines of our resorts. All hotels within the cluster have obtained ISO 14001 Environmental Management System and Green Globe Certification. Cinnamon Bey Beruwala continues to be the only Sri Lankan hotel to be awarded the prestigious LEEDV-2009 Gold Certification for Leadership in Energy and Environmental Design (LEED). All resorts in the cluster have mechanisms in place to monitor the consumption and output of natural resources through a range of environmental indicators. During the year, the cluster’s energy consumption per guest night reduced by 1% while water consumption, effluents and waste generation also declined in comparison to the previous year, despite an overall increase in operational activity. (Please refer Report on Natural Capital on page 128 for further information).


Energy: 144.70 MJ 2015: 146 MJ


Waste: 2.55 kg 2015: 2.82 kg

Carbon Footprint: 24.67 kg 2015: 25.0 kg



Increased coverage of water recycling

Rainwater harvesting at all resorts

Initiative to preserve the bio diversity of Pigeon Island

Cleaning of Moragalla beach

Heat pump replacements in Bentota Beach by Cinnamon

Alternative energy generation through solar

Installation of inverter type air conditioners in all resorts

Water Bio Diversity Energy

From a social and product responsibility perspective, the cluster is committed towards generating sustainable value to its employees and local communities whilst ensuring superior quality service levels to its customers. With Cinnamon Bey Beruwala obtaining the ISO 22000:2005 and OHSAS 18001 certifications during the year, all properties within the cluster were ISO certified. The

cluster provides employment to a pool of 1,087 individuals who are given numerous opportunities for development in a rewarding and enabling work environment. Total payments to cluster employees amounted to Rs. 356 Mn for the year, an increase of 9% compared to last year.


79

We continue to proactively engage with and support the communities we operate in, through a range of multi-faceted CSR initiatives. Some of the key projects carried out by the cluster include the following. (Please refer page 115 of this Report for detailed information on the Group’s community engagements).


Donation of funds and school supplies

Renovation of the Moragalla primary school grounds

Donation to support Karapitiya Teaching Hospital

Multiple blood donation campaigns

Donation of glucose monitors to the staff who are suffering from Diabetes

Medical camp to screen for Diabetes

Renovating the pediatric ward of Seenawatta Hospital

Donations to government hospitals

Donations to temples and cultural activities

Donation of dry rations’ through the Positive Women’s network



Economic

0

2,000

4,000

6,000

8,000

10,000

Rs.Mn %

0

1

2

3

4

5

6

7

8


2015/16

2014/15

2013/14

Social

0

200

400

600

800

1,000

1,200

No. Hours

0

500

1,000

1,500

2,000


2015/16

2014/15

Environment

0

2,000

4,000

6,000

8,000

10,000

Tonnes Tco2e

0

6

12

18

24

30


2015/16

2014/15

2013/14


80

Maldivian Cluster




52% 56% 25% 47% 18% 33%

Our world-renowned portfolio of Maldivian resorts features some of the best beaches in the world, offering guests a combination of luxury and authenticity in spectacular surroundings. Our Maldivian cluster consists of 3 properties, Cinnamon Dhonveli Maldives, Ellaidhoo Maldives by Cinnamon, Cinnamon Hakuraa Huraa Maldives which collectively offer a capacity of 340 four star rooms. Globally recognised for their sustainable tourism initiatives,

resorts within the cluster have received several international awards and accolades for green practices as well as customer satisfaction and culinary excellence.

Cluster Snapshot

Number of rooms 340


Headcount 501

Assets (LKR. Mn) 13,224

Capital (LKR. Mn) 5,574

Carbon footprint (tCO2e) 6,716



2015/16 2014/15 y-o-y change

Eco

nom

ic

Revenue LKR Mn 6,085 6,296 -3%

PBT LKR Mn 1,131 1,465 -23%

Total Assets LKR Mn 13,224 11,746 +13%

Total Capital LKR Mn 5,673 4,589 +24%

ROCE(%) % 10% 14%

Envi

ronm

enta

l Energy GJ 91,820 98,007 -6%

Water Use Cub.m 131,783 133,960 -2%

Waste MT 1,232 1,173 +5%

Carbon Footprint MT 6,716 7,163 -6%

Compliance issues Incidents No. Nil Nil

Soc

ial

Head Count No. 501 533 -6%

Employee productivity Profit (Rs.‘000) /employee 2,257 2,746 -18%

Investment in community engagement LKR Mn 0.3 1.1


Volunteer hours Hours 1,011 2,331



81

The Maldivian cluster’s revenue declined by 3% during the year, reflecting challenging market conditions as political unrest and the declaration of a state of emergency resulted in arrivals growth slowing down to 2.4%, much lower than the growth rates recorded in recent years. Ellaidhoo Maldives by Cinnamon performed commendably in the face of these adversities, achieving a revenue growth of 3% while the other resorts saw a decline in turnover. The cluster’s average occupancy rate for the year thus declined to 85% from 89% recorded last year. On the other hand, the depreciation of the Sri Lankan Rupee against the US Dollar augured well for the cluster, with exchange rate gains softening the impact to a certain extent.

In response to the adverse market conditions, the cluster engaged in concerted efforts to preserve profitability through improving staff productivity while enhancing operational efficiencies. Specific focus was placed on achieving energy efficiencies which included the installation of inverter type air conditioners in all three resorts and setting up a bio-gas digester at Cinnamon Hakuraa Huraa Maldives. Resultantly the cluster’s total energy consumption for the year declined by 6% while consumption per guest night also fell by 3%. The cluster generated a pre-tax profit of Rs. 1.13 Bn during the year, compared to Rs. 1.46 Bn the previous year. On the other hand, a reduction in the cluster’s finance expenses against the backdrop of a fall in interest rates supported profitability during the year.

The Maldivian cluster provides employment to 501 individuals, out of which 46% represent individuals hired from surrounding communities. Robust reward systems and comprehensive training and development initiatives have enabled the cluster to achieve a high level of employee retention. The Maldivian Executive Development program is a unique initiative which allows Maldivian non-executive staff to progress to executive levels through broadening skills required to progress in the hospitality industry. During the year under review, the cluster invested Rs. 6.4 Mn in employee development, whilst on average each cluster employee received 38 hours of training during the year.

All three Resorts in the cluster have obtained ISO 14001 and Travelife Gold certifications, whilst Cinnamon Hakuraa Huraa Maldives and Ellaidhoo Maldives by Cinnamon have also obtained the Green Globe Certification. Environmental performance is monitored consistently against defined parameters and practices and procedures are reviewed continually to identify areas for further improvement. During the year, the cluster achieved a reduction in both its energy and carbon footprints, whilst water consumption and waste & effluents increased slightly in comparison to the previous year (Please refer page 128 for more details on Natural Capital)


Energy: 425 MJ 2015: 436 MJ


Waste: 5.70 kg 2015: 5.21 kg

Carbon Footprint: 31 kg 2015: 32 kg

“Globally recognised for their sustainable tourism initiatives, resorts within the cluster have received several international awards and accolades for green practices as well as customer satisfaction and culinary excellence.”


82



Increased coverage of water recycling

Rainwater harvesting at all resorts

Awareness programs conducted by all three resorts in commemoration of World Environment Day

Reef and beach cleaning initiatives

Setting up a bio-gas digester at Cinnamon Hakuraa Huraa Maldives

Installation of inverter type air conditioners at all three resorts

Water Bio Diversity Energy

We strive to continuously enhance our guest experience through perfecting our product and service offering. All resorts within the cluster have obtained ISO 22000:2005 and OHSAS 18001 certifications and have repeatedly obtained international recognition for culinary excellence and customer satisfaction. This year, cluster resorts performed exceptionally well at the Food & Hospitality Asia Maldives International Culinary Challenge & Exhibition 2015 winning a gold, silver and a bronze medal in

addition to several merit awards. (Please refer page 13 of this report for a full list of awards obtained by our resorts during the period).

We maintain a high level of engagement with adjacent communities through ongoing CSR initiatives, which are in line with the Group’s strategic community engagement agenda. (Please refer page 115 of this Report for detailed information on the Group’s community engagement).


Technical and educational training program to interns of Mulak School to develop skills required in the hospitality industry

Multiple school donations

First aid training programs

Blood donation campaign

Donations to a health center

Construction of a Bio gas facility in the Nalafushi island

First Aid training program for the staff of the Huraa health center and the Himmafushi health center



83


Economic

0

3,000

6,000

9,000

12,000

15,000

Rs.Mn %

0

3

6

9

12

15


2015/16

2014/15

2013/14

Environment

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Tonnes Tco2e

15

20

25

30

35


2015/16

2014/15

2013/14

Social

0

100

200

300

400

500

600

No. Hours

0

500

1,000

1,500

2,000

2,500


2015/16

2014/15


84

Value Creation ReportFinancial Capital

Value Creation Highlights

2015/16 2014/15 y-o-y %

Inputs (Rs. Mn)

Shareholder’s funds 23,018 20,446 13%

Total debt 3,726 4,314 -14%

Interest earned from investments

127 116 10

Revenue reserves 7,278 6,190 18%

Activities during the year

Capital investments of Rs. 1,122 Mn in growth initiatives

Ensuring optimum capital allocation through rigorous investment appraisal

Proactive management of all investments

Outputs

Net Profit (Rs. Mn) 1,749 1,868 -6%

Earnings per share (Rs.) 1.19 1.27 -6%

ROE (%) 8.0 9.7 -16%

Cash from operations (Rs. Mn) 3,616 3,542 2%

Share Price (Rs.) 12.00 14.30 -16%

Relevance of our Financial Capital

Obtaining and adequately managing our Financial Capital is essential for generating sustainable shareholder value. Financial Capital is reinvested in the other capital inputs and is vital in fulfilling our growth aspirations.

Earnings per share

Shareholder Value Proposition

Dividends Net Assets per share

Share price appreciation

OverviewThe Group delivered yet another year of strong performance, demonstrating resilience to persistent volatilities and uncertainties in the economic and industry landscapes. In the context of multiple challenges, our financial focus during the year was on supporting the delivery of our strategy through proactively managing our balance sheet and preserving profitability margins. Investments were also made in strengthening our human capital and enhancing our brand which is anticipated to provide a strong platform for growth in the years ahead.

A Resilient Performance

Revenue

The Group’s consolidated revenue increased by 2% to Rs.11.63 Bn during the year, upheld by the commendable performance of the Sri Lankan resorts which saw revenue increasing by 7% supported by the strong performance of non-traditional markets as well as the resurgence of traditional European markets such as the United Kingdom and Germany. Average occupancy levels in the Group’s Sri Lankan Resorts thus improved to 79%, from 77% the previous year. The Maldivian cluster, on the other hand experienced a challenging year as political unrest, together with a slump in the Russian and French markets and a slowdown in Chinese arrivals to the country resulted in revenue declining by 3%. (Please refer Cluster Reviews from pages 73 to 83 for detailed performance analysis of the clusters)

Consolidated Revenue

0

2,000

4,000

6,000

8,000

10,000

12,000

Rs.Mn

2011/12

2015/16

2014/15

2013/14

2012/13

Cluster-wise Revenue Composition

Beach Front

Heritage and Adventure

Maldivian Resorts

26%

21%

52%


85

Cost Management

The Group’s total overhead expenses increased by 6% to Rs. 6.29 Bn, primarily due to an 6% year on year increase in administrative expenses in view of higher employee costs, brand building initiatives and the LKR depreciation. Distribution expenses increased by 4% during the year while other operating expenses remained relatively unchanged.

the Sri Lankan sector’s relative contribution increased from 39% to 48% during the year under review. Meanwhile, the Group’s EBIT margin contracted to 16% from 19% the previous year, impacted by relatively lower capacity utilization levels in the Maldivian resorts.

Net Finance Cost

The Group’s net finance cost declined by 63% to Rs. 54.9 mn supported by relatively benign interest rates for most part of the year and the settlement of long-term borrowings. Finance expenses fell by 31% during the year while proactive management of its investment portfolio enabled the Group to grow its interest income by 10%. Successful negotiations with banks allowed the Group to maintain an average weighted lending rate of 4.5% during the year.

Net Profit

Consolidated profit for the year under review was Rs. 1.75 Bn, compared to Rs. 1.86 Bn the previous year. Profit contributions from the Maldivian cluster declined by 11%, although with a share of 56% it continues to be the largest profit generator to the Group. Meanwhile, the Sri Lankan segment’s profit for the year increased by 27% with all resorts generating profits for the second consecutive

year. Consolidated Return on Capital Employed clocked in at 8.7%, marginally lower than the return of 10% in the previous year.

Other Comprehensive Income

The Group’s other comprehensive income for the year increased by 98% to Rs. 1.47 billion during the year, primarily due to translation gains on its foreign currency income, as the Sri Lankan Rupee depreciated by around 6% against the US Dollar during 2015. Revaluation gains on land and building amounted to Rs. 423 million during the year. Overall, consolidated total comprehensive income for the period grew by 23% to Rs. 3.22 billion.

Earnings before Interest and Tax

Resultantly, consolidated Earnings before interest and tax (EBIT) declined by 10% to Rs. 2.2 Bn. The Maldivian sector continued to contribute a larger proportion to consolidated EBIT, although

Overhead Cost Breakdown

Administrative

Distribution

Other Operating Costs

72%

5%

23%

EBIT

0

500

1,000

1,500

2,000

2,500

Rs.Mn %

0

5

10

15

20

25

EBIT EBIT margin

2011/12

2015/16

2014/15

2013/14

2012/13

EBIT Contributions

0

500

1,000

1,500

2,000

2,500

Rs.Mn

2015/16

2014/15

Sri Lanka Maldives

Net Profit

0

500

1,000

1,500

2,000

Rs.Mn %

2011/12

2015/16

2014/15

2013/14

2012/13

0

3

6

9

12

15

Net Profit ROCE


86

Value Creation ReportFinancial Capital

A Strong Balance SheetThe total asset base increased by 8% to Rs. 28.9 Bn by end-March 2016, resulting from capital expenditure of Rs. 1,122 Mn. All major capital investments are evaluated rigorously against specified criteria to ensure an appropriate risk return balance. The Group’s asset composition remained relatively unchanged with non-current assets forming the bulk of its balance sheet. Meanwhile, assets are funded primarily by shareholders’ funds which accounted for 80% of the Group’s balance sheet followed by non-current liabilities (8%) and current liabilities (12%). Total debt declined from Rs. 4.31 Bn in 2014/15 to Rs. 3.73 Bn by end-March 2016 as long-term debt was settled during the year. This translated to a reduction in the Group’s debt to equity ratio to 0.16 times (2014/15: 0.21 times).

utilise Rs. 2.36 Bn for investing activities and Rs.1.96 Bn for financing activities. Overall Cash and Cash Equivalents (CCE) by end-March 2016 was Rs. 1.13 Bn, translating to a CCE to short-term debt ratio of around 0.6 times. Cash flow debt protection metrics however decreased during the year, as a result of the overall increase in the Group’s short term debt profile and drop in comparative CCE; operational cash flow debt coverage ratio decreased to 1.9, from 2.5 the previous year.

Shareholder ReturnsShareholder value is returned primarily in the form of dividend payments and share price appreciation. The Group’s dividend policy is formulated taking into consideration economic and market dynamics, capital investment plans and the Group’s overall performance. During the year under review, Earnings per Share amounted to Rs. 1.19 while dividend per share increased to Rs.0.40 (2014/15: Rs. 0.25). Meanwhile the Group’s share price decreased by 16% year on year (compared to a 10% fall in the broad market) to close the year at Rs. 12.00.

2015/16 2014/15 y-o-y %

Earnings per Share 1.19 1.27 -6%Net Assets per Share 15.72 13.96 13%Dividend per Share 0.40 0.25 6%Share Price 12.00 14.30 -16%Dividend payout 34% 20%Dividend yield 3.3% 1.7%

Cash Flow GenerationCash generated from operations is used for debt repayments, tax commitments, dividend payments and capital investments. Strong cash flow generation over the past few years has contributed to the reduction of the Group’s gearing ratio. During the year under review, net cash flow from operating activities amounted to Rs. 3.62 Bn, compared to Rs. 3.54 Bn the previous year which enabled the Group to

Asset Composition

PPE

Lease rentals paid in advance(LRPA)

Other non-current assets

Working Capital

ST Investments

Cash

Other assets

49%

30%

3%

4%

9%

3%

2%

PPE & LRPA Growth

0

5,000

10,000

15,000

20,000

25,000

Rs.Mn

20122016

20152014

2013


87

Manufactured Capital

Our manufactured capital comprises 11 properties which are architectural masterpieces, elevating the natural beauty of scenic locations with tasteful structures facilitating inspired living. As one of the largest inventory of rooms amongst hotel operators in the country, our properties offer the guests the full experience of coastal thrills and chills, awesome nature trails and the mystique of ancient culture.

Hotel Properties Room Capacity Property Plant and Equipment

and Lease Rental Paid in

Advance Rs. Mn

Beach Front Cinnamon Bey Beruwala 200 3,793

Hikka Tranz by Cinnamon 150 1,465

Trinco Blu by Cinnamon 81 962

Bentota Beach by Cinnamon 133 760

Adventure and Heritage Cinnamon Wild Yala 68 547

Cinnamon Lodge Habarana 138 799

Habarana Village by Cinnamon 108 430

Cinnamon Citadel Kandy 119 1,454

Maldives Beach Front Cinnamon Dhonveli Maldives 148 7,873

Ellaidhoo Maldives by Cinnamon 112 1,748

Cinnamon Hakuraa Huraa Maldives 80 1,449


88

Cinnamon Lodge Habarana


89

Waking up to birdsong and butterflies, an adventurous safari or a spiritual tour to the ancient Buddhist shrines are just a few of the inspiring experiences on offer at this sprawling property located in the heart of Sri Lanka’s cultural triangle. Choose from 4 world heritage sites located in close proximity to steep yourself in the 2,500 year old history of this ancient land. Be awed by the herds of majestic pachyderms or marvel at the diversity of birdlife at the Minneriya and Kaudulla nature reserves. Alternatively, spend the day exploring nature at your doorstep, calm your senses at the Azmaara spa and revel in a culinary journey at the restaurant. Let excitement and serenity harmonize, weaving a myriad of

treasured memories as you experience the many journeys on offer at Cinnamon Lodge Habarana.

Reminiscent of the monastic palace remains at Ritigala, this property combines 5 star luxury with nature creating a tranquil environment reflecting all of its possibilities. Detached rooms and luxurious suites blend in to tree lined walkways that slope to a natural lake which is a paradise for bird watchers. Make dining an experience at any one of our 3 restaurants which offer local and international cuisine or delightful fusions for a novel experience. A range of excellent cocktails and mocktails elevates the experience slaking the thirst on a sunny day or as you wind down with the sun at the end of an adventure filled day. Certified by Green Globe, Cinnamon Lodge Habarana is instantly recognizable as an eco-friendly resort that pays homage to nature, nurturing its gifts.


90

Hikka Tranz by Cinnamon


91

A lavish resort combining the avant-garde with ubiquitous comfort, Hikka Tranz by Cinnamon reflects the joie de vivre of Hikkaduwa’s upbeat culture. A heady combination of sun, sea and sand invites you to unwind and surrender to buoyant spirits with friends, rejuvenating your spirits.

Thrill or chill as you choose from an eclectic range of possibilities. Thrill to the sight of a whale emerging from the water or shoals of spinner dolphins dancing around your boat. Explore a coral reef as you snorkel in the famed coral reefs in perfect balance with nature or surf and dive with professional, certified instructors to

experience its underworld beauty. Indulge your thirst for culture with a visit to the Galle Fort built by the Portuguese where architecture of the west blends with the traditions of the east. Party on the beach or enjoy a moonlit stroll on the famed golden beaches. This is Hikka, the place where all becomes possible.

Elevating spirits to match the vibrancy of this Bohemian Utopia, Hikka Tranz by Cinnamon reflects its surroundings with bold paintings in vibrant hues. Wide balconies in all 150 rooms offer guests ideal vantage points for stunning seascapes of the Indian Ocean with dramatic sunsets that beguile the senses. A specialty Crab restaurant is a favourite haunt of sea food enthusiasts while the culinary creations at our other restaurants offer aim to please those seeking a wider range. Cocktails and mocktails are a necessary part of the experience to uplift the spirits as true Sri Lankan hospitality makes this a wonderful getaway.


92

Trinco Blu by Cinnamon


93

A retro-chic haven on Sri Lanka’s Eastern shores where cerulean waters invite you to thrill and chill as the fancy takes you. Nature enthusiasts can marvel at the whales and dolphins with experienced guides. Snorkel to explore the coral reefs, enjoy scuba diving with professionals. Experience the culture and traditions of this sea port town with inland journeys as you enjoy magnificent views. Wind down by the pool and surrender to the luxurious treatments at the Azmaara Spa!

Blue and white interiors reflect the ocean setting of Trinco Blu by Cinnamon while splashes of orange uplifts the spirits. Rustic bleached wooden decks, cut cement floors and denim trimmings create a relaxed holiday atmosphere with the promise of adventure. Accommodations comprising 36 beach chalets, 43 superior rooms and 2 suites, reflect the changing moods of the Indian Ocean according to natures fancy. Complete your experience with sundowners at The Rum Hold followed by a spread of local and international cuisine at the Captain’s Deck as you recapture the highlights of a beautiful day with your friends and family. Welcome to everyday at the Trinco Blu by Cinnamon!


94

Bentota Beach by Cinnamon


95

Cradled by the Bentota River and the Indian Ocean, Bentota Beach by Cinnamon offers a fun filled experience with family and friends in a unique setting. A haven for aqua sports enthusiasts, the site invites you to zip along on jet ski’s, enjoy the hilarity of a banana boat ride, skim the water on water skis or simply surf the waves. Experience the local culture with a river tour of the mangroves or get involved in conservation with a visit to the turtle hatcheries nearby. Rejuvenate your mind, body and soul as skilled Balinese therapists wrap you in coconut husk or seaweed at the award winning Azmaara Spa. A place for laughter, activity and fun-filled memories, Bentota Beach by Cinnamon offers a perfect escape a mere hour’s journey from Colombo.

Inspired by an ancient Dutch Fort, the renowned architect Geoffrey Bawa designed the hotel with all 130 spacious rooms and 3 luxurious suites overlooking the river or the sea. International cuisine at the Peacock Restaurant, an eclectic menu at the Araliya Restaurant or a seafood barbecue on the Pontoon as you float down the river offer epicurean adventures for the gourmet in you. Cocktails featuring both local and international spirits are a must at dusk as you enjoy dramatic sunsets with a kindred spirit. The Sooriya Terrace caters to the casual lifestyle with drinks and snacks till sundown and the Pool Bar serves up a variety of local and well known cocktails.


96

Cinnamon Wild Yala


97

Catering to wild life enthusiasts, Cinnamon Wild Yala is literally the closest thing to nature as peacocks, Sambar and spotted deer wander in, delighting guests with unexpected encounters. Located a mere 15 minutes from the Yala National Park, Cinnamon Wild Yala is a world class game lodge in complete harmony with its surroundings, offering both nature and luxury to its guests. Let our Nature Trails naturalists guide you on an unforgettable excursion as you capture incredible scenes on high tech photographic equipment. Marvel at the wonder of a Yala night with a million stars and the sounds of the jungle. Experience local culture as you mingle with devotees at Kataragama or explore

archaeological remains at Sithulpawwa. These are just a few possibilities that Cinnamon Wild Yala offers you.

Completely in sync with its setting but offering the luxury synonymous with the Cinnamon Brand, this hotel is about simple elegance. Occupants of its 61 jungle chalets and 7 beach chalets can expect painted sunsets at dusk and brilliant plumage at dawn. Epicurean adventures enhance the experience with a champagne breakfast or a rustic BBQ dinner which all seem just right in this jungle hideaway. Relive the thrills while you chill over delightful concoctions at the rooftop Peacock Bar or the Pugmarks Bar. A carefully chosen menu at the Tuskers pays tribute to international and local cuisine in a perfect ending to a thrilling day!


98

Cinnamon Bey Beruwala


99

Relax yourself at Cinnamon Bey Beruwala as the Indian Ocean provides a panoramic setting to soothe your senses. A gourmet adventure awaits the guests with a varied cuisine ranging from Arabic mezzes and grills, a Raw Counter with an array of sushi and sashimi, pizza and seafood, flavoursome Sri Lankan food, popular international dishes and delightful frozen treats that never fail to please. Water sports, turtle hatcheries, the historic Galle Fort and the Ambalangoda Mask Museum are just some of the activities that are on offer for the active and the curious.

Named Cinnamon Bey Beruwala referring to provincial noblemen of the Ottoman Empire, the resorts design combines the rich blues and golds of this era combined with modern Moorish décor with lattice work. Beruwala is a fit setting for this hotel as the first Muslim settlement in the country was established here around 8th century A.D. by Arab traders. Offering affordable luxury by the beach, all 200 rooms overlook the garden and the sea and with a choice of Superior or Deluxe rooms or one of the two suites. A short, 90 minute drive from Colombo, Cinnamon Bey Beruwala is a perfect weekend retreat or escape from the city.


100

Habarana Village by Cinnamon


101

Nestled in a lush landscape bordering a tranquil lake Habarana Village by Cinnamon transports guests to the simplicity and charm of a rural village setting. Wildlife adventures, cultural journeys to ancient kingdoms, serene experiences of monasteries, or days absorbing the tranquility of the hotel are just some of the possibilities that guests can indulge in. Experience the soothing charm of the Azmaara Spa where you can restore your serenity at the hands of Balinese therapists who will wrap you in seaweed or coconut husk as you relax.

Homely chalets dotted across 27 acres of gardens creates a rustic barefoot type elegance with a charm all its own, making your stay truly memorable. Choose your accommodation from 94 superior rooms, 12 deluxe rooms and 2 suites which reflect the pastoral charm of a Sri Lankan village dwelling. Indulge the gourmet in you with dining experiences that take you to a tree top or the lakeside with cuisine to match the ambience. A place where a countless possibilities come to life making memories that last, Habarana Village by Cinnamon will charm you back again.


102

Cinnamon Citadel Kandy


103

Discover the hill capital with its panoramic views and a rich culture that provides a glimpse of the majesty of Sri Lanka’s last kingdom from Cinnamon Citadel Kandy. A town steeped in tradition and lore, it is a world heritage site with the Temple of the Tooth Relic of the Buddha serving as the focal point of cultural activity. Wake up to misty mornings and watch the landscape unfold to rolling hills as you prepare for a day that promises an encounter with history and culture.

Located alongside the Mahaweli River, Cinnamon Citadel Kandy design connects the country’s past and the present with heritage red representing royalty while white spaces link the present symbolizing a modern, chic and sophisticated ambience. Gastronomy being a large part of the Sri Lankan culture, you will be treated to an array of international and local dishes at the sumptuous buffet in the main restaurant. Dine a la carte at Café C for a more personalised experience. A convivial atmosphere prevails at the Bar where a selection of local and well known cocktails add to the camaraderie.


104

Ellaidhoo Maldives by Cinnamon


105

Feel the enchantment as you skim over clear blue waters in a speedboat or sea plane towards the beautiful island of Ellaidhoo on the eastern fringe of the North Ari Atoll of the Maldives. Step on to soft golden sands and let the hospitality and comfort of this island paradise lull your senses and surrender to its charm. Discover spectacular coral reefs that are home to abundant marine life as you explore this renowned dive spot with a professional diver or snorkel near the surface. Watch schools of dolphins spinning in blissful abandon or experience the splendour and tranquility of sunset fishing.

The soothing sounds of the ocean will restore your balance with nature as you relax in any one of the 24 water bungalows, 46 beach bungalows, 28 superior rooms or 14 standard rooms. Wake up to yoga on the beach or a peaceful stroll watching the sun bring the world to life. Delectable seafood and other culinary delights accompanied by a carefully selected wine will elevate your experience of nature’s bounty as you let the magic of the island take over for an unforgettable holiday.


106

Cinnamon Hakuraa Huraa Maldives


107

Rated among the best hotels in the Maldives, Cinnamon Hakuraa Huraa Maldives combines nature and luxury to make your stay a treasured memory. Experience the calm of our water bungalows or beach bungalows as the ocean laps softly against the pier and the golden sand. Thrill to the heady combination of wind and water as you sail or surf on the clear waters. Dive in to the depths of the azure lagoon and explore the amazing underwater world or snorkel for a more leisurely experience.

Meaning ‘Reef above water’ Hakuraa Huraa has been designed to complement its natural setting with 70 water bungalows and 10 beach bungalows set in a ring round the island. A 45 minute seaplane ride from Male, this lovely island is Nirvana for marine enthusiasts, combining nature and outstanding hospitality for an unforgettable holiday. Gastronomic adventures include a sumptuous international buffet, a tantalizing a la carte meal tailored to your palate or a specialty crab restaurant. Rejuvenate your senses at the Chavana Spa to complete the healing of the mind and the body.


108

Cinnamon Dhonveli Maldives


109

A heady combination of sun sand, and sea wrapped in luxury offers discerning pleasure seekers a perfect destination for a memorable experience. Underwater adventures invite you on diving or snorkelling excursions in glorious coral reefs teeming with countless species in myriad hues. Wrap yourself in luxurious treatments at the Chavana spa rejuvenating your mind and body in perfect synchrony.

Choose from garden, beach or water bungalows at the picturesque Cinnamon Dhonveli Maldives, considered as one of the best Maldivian resorts. Pristine beaches, lush vegetation, the seductive call of the ocean and celebrated surf and dive sites makes an escape at Cinnamon Dhonveli Maldives an experience you will treasure forever. Epicurean journeys indulge the palate with delectable appetisers, freshly caught sea food for mains and sweet sensations that completes the soul. Enjoy our sundown entertainment and sway to the beat or watch an authentic Maldivian Cultural show. Elevate the experience with a local cocktail at one of our bars and take it all in to relive and relish the memory on another day.


110

Value Creation ReportSocial and Relationship Capital


Inputs

Collaborative relationships with our Customers, Business Partners, communities and the government

The Cinnamon Brand


Rs. 7.9 Mn on community engagement initiatives during the year

Staff volunteer hours of 9,316

Brand enhancement activities

Continuous engagement with our business partners and supplier development initiatives

2015/16 2014/15

Outputs

Occupancy levels 80.4% 79.8%

Total volunteer hours 9,316 9,113

Develop sustainable, mutually beneficial relationships with our supplier base

Relevance of Social and Relationship Capital

Our stakeholder relationships are fundamental to ensuring the sustainability of our operations and maintain our social license to operate. We continue to invest in collaborative partnerships with our diverse stakeholders to generate shared value.

Customer relationships

Social and Relationship Capital

Business Partners

Community relationships

Our Brand

Our CustomersOur brand promise embodies inspiring guests through unique experiences and international standards of excellence and during the year, we placed strategic emphasis on furthering our customer value proposition.

Engagement

Customer value proposition

AccessibilityProduct

ResponsibilityGuest

Satisfaction

Customer Profile

Foreign guests account for close to 80% of our revenue, with our major destination markets being Western, Central and Eastern Europe. In recent years, there has been a notable shift in Sri Lanka’s source markets, with non – traditional markets such as India and China demonstrating rapid growth. We have responded to this trend with focused strategies directed towards tapping this growth potential. Accordingly, during the year we obtained the Welcome China Bronze certification for Cinnamon Bey Beruwala (refer page 77 for further details) and tied up with an Indian strategic partner to engage with and attract guests from India. Resultantly, Indian arrivals to our resorts comprised 5% while guests from China comprised 12%. The domestic segment also performed commendably, accounting for 17% of our total guests.

Customers by Source Market

Western Europe

Central/Eastern Europe

Domestic Guests

North and East Asia

South Asia

Middle East

Other

33%

16%

17%

14%

5%

6%

9%


111

Digital Platforms

Wider and better access to digital platforms is transforming the way companies engage with their customers; this is particularly true in the tourism industry where new digital models are playing an increasingly significant role and transforming traditional channels to market. During the year, we placed emphasis on strengthening our online presence through relaunching our corporate website resultant from which, online bookings increased significantly during the year.

Tour Operators

Cinnamon Resort Hotels

Inte

rnati

onal

Gues

tsD

omes

tic

G

ues

ts

Travel Agencies

Destination Management Companies

Online Travel Agencies

We also pursued higher penetration levels on social media, through proactively engaging with our existing and potential customers on multiple platforms including Facebook, Twitter, Youtube and Instagram among other. Social media is also used as an effective means of propagating the Group’s sustainability agenda, and has helped raise awareness on several of the Group’s wildlife and bio-diversity projects. During the year, we reached a total of

140,100 customers and potential customers through social media platforms, an increase of 10% over the previous year.

Social Media Penetration

Measurements 31st March 2016

31st March 2015

Likes 140,100 127,399

Views 175,225 125,650

Followers 1,928 1,050

Followers 1,745 749

Views 531,067 N/A

Followers 1,020 419

Additionally, a comprehensive IT Road Map will be implemented with the objective of enhancing guest touch points through IT platforms. Key initiatives to be carried out,

Mobile/tab based check-in at all hotels

Launch of Cinnamon App

Guest feedback automation

Product and Service Responsibility

A comprehensive policy framework is in place in all our resorts to ensure a high level of product responsibility for our guests and our employees. The policy addresses how health and safety standards are established, communicated, implemented and audited and encompasses aspects such as food safety, First-Aid, cleaning, temperature control and emergency response among other. All our resorts have also obtained ISO 22000, ISO 14001, OHSAS

Channels to Market

DMC

FIT and Corporates

Tour operators and agencies

Online platforms

60%

18%

7%

15%


112

18001, and HACCP Certifications. During the year, there were no incidences of non-compliance pertaining to any aspect of our product responsibility.

Guest Satisfaction

Obtaining and analysing customer feedback to identify areas of concern and potential aspects for improvement is a key component of our guest experience strategy. Guest feedback is


Sri Lankan Resorts Maldivian Resorts

Cinnamon Bey

Beruwala

Cinnamon Lodge

Habarana


Hikka Tranz by

Cinnamon

Cinnamon WildYala



Trinco Blu by

Cinnamon


Ellaidhoo Maldives

by Cinnamon

Cinnamon Hakuraa Huraa

Maldives

2014/15 4.2 4.4 3.9 4.0 4.5 4.2 4.2 4.2 4.4 4.2 4.5

2015/16 4.2 4.4 4.0 4.3 4.4 4.1 4.2 4.1 4.4 4.3 4.5

Recognition for Guest Satisfaction

Trip Advisor- All Group hotels obtained ratings of 4.0 or above

Trip Advisor- Certificates of Excellence (Cinnamon Wild Yala, Cinnamon Bey Beruwala, Hikka Tranz by Cinnamon, Ellaidhoo Maldives by Cinnamon, Cinnamon Lodge Habarana, Habarana Village by Cinnamon)

Trip Advisor- Travellers Choice Award 2016 (Cinnamon Lodge Habarana)

Welcome Chinese bronze standard certificate 2016 (Cinnamon Bey Beruwala)

Cinnamon Travel Bloggers’ Awards 2016

Following the astounding success of Asia’s first ever Travel Bloggers’ Conference (TBCasia) organized by Cinnamon Hotels & Resorts in collaboration with the Professional Travel Bloggers Association in 2014, plans are currently underway to execute the second edition of Cinnamon TBCasia this year, with the first ever Cinnamon Travel Blogger Awards. This initiative is aimed to provide due recognition to the role played by travel bloggers. The Awards Ceremony will be held in June 2016 and has drawn global interest from over 700 international bloggers of which 30 have been short-listed and nominated.

obtained upon check-out through a feedback system which was automated during the year under review. In addition, feedback and reviews on independent travel websites are also monitored on a consistent basis, using specialised software which tracks social media comments in multiple languages. During the year, our resorts on average achieved an improvement in ratings from all three major travel websites, Trip Advisor, Agoda and Booking.com which are based on customer reviews.

Cinnamon Hotels & Resorts hosted the popular CNN presenter and host of ‘Quest Means Business’ -

Richard Quest at Cinnamon Grand Colombo, as part of an eight day journey to nine destinations

which included Colombo Sri Lanka.


113

YouthfulSri Lanka

LimeGreat

quality

AsianCouples

and Friends

White

music

Curatedchoices

inclusive prices

Flexible

ActiveOnline

1-4 days

Personal

Informal

Hotel Costs

Vibrant

Space

Modern

Local

breaks

Stylish Bright Glass

Short

Relaxed

Orange

VioletTogether

Amari

Friendly Different

My Hotel

DesignMobile

Interesting

Conventional

My Hotel GildedFormalBeige Strict Limitless

OptionsConsistency Bland

Banyan treeZen-like

Silence

Marriott

Cream Long vacations

Wooden

Traditional

AnybodyDark

AgenciesBrown

Global

Crowded

Operators

Expensive Extras

Eighties Karaoke

IndianWestern

Honeymoon couples

7-14days

Standard

WoodLuxury

Privacy

Intimacy

WHAT IT IS ANDWHAT IT IS NOTBreaking down the new branding strategy John Keells Hotels has

is and what it is not.defined what the brand

Inflexible

brand identity is positioned as a lifestyle brand with ‘inspired living’ as the brand essence. Since implementation, the branding strategy has been at the core of our product and service development, operational delivery, marketing communications and people development. All operational aspects of our resorts ranging from the behaviour of staff and architecture to cuisine and entertainment are aligned to the attributes and personality of the Cinnamon brand.

Our BrandOver the past two years, we placed strategic focus on repositioning our brand with a distinctly expressed identity, in order to effectively differentiate ourselves from competition. Accordingly, the Cinnamon

Cinnamon Hotels & Resorts partnered the Miss England

Organisation in the grand finale of the Miss England pageant held in Birmingham, United Kingdom.

Cinnamon Colomboscope

Cinnamon Colomboscope returned for its third edition during the year, offering a content rich festival of visual arts and literature. Themed, as ‘The City. Identity. Urbanity’ the festival engaged and examined Colombo through the eyes of artists, musicians, performers, writers and researchers.


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Nigel Barker tour with Cinnamon

Cinnamon Hotels & Resorts hosted internationally reputed fashion and celebrity photographer of America’s Next Top Model fame in Sri Lanka along with his family from the 15th to 23rd of July. His visit included a workshop and book launch event held at Cinnamon Grand Colombo. This inspiring workshop was well attended by members of the Sri Lankan fashion and photography industry.

Cinnamon Future of Tourism Summit

Cinnamon Hotels & Resorts, organized a content rich conference on the theme of ‘Future of Tourism & Responsible Tourism for Driving Revenue’. An initiative targeted at disseminating global insights and thought leadership in driving the country’s tourism industry strategically and sustainably. The conference which featured an eminent panel of global industry experts was extremely well received, attracting over 350 industry participants from Sri Lanka and the region. The Conference was held on the 28th of September 2015, to celebrate the World Tourism Day.

Marco Pierre White’s Tour

The celebrity 3 Michelin star chef Marco Pierre White was hosted by Cinnamon Hotels & Resorts from the 8th to the 31st of January 2016. To coincide with his visit, Cinnamon Hotels & Resorts organized a ‘cook-off’ challenge providing amateur chefs and culinary enthusiasts the opportunity to participate in a MasterChef style competition. The event also featured curated dinners with Marco recreating several of his signature dishes and a Master Class style workshop for 50 Sri Lankan Executive Chefs in the culinary industry.


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Supplier evaluation

Supplier Screening Criteria

Environmental Policy and Environmental Management Systems

Consumption of natural resources, emissions and wastage

Noise impact

Health, safety and welfare

Hours of work and holidays

All our significant suppliers undergo a comprehensive evaluation of product and process quality as well as labour and environmental practices. We also ensure that the vendors do not employ persons who are less than 18 years of age, although the legal employable age in the country is 16 years and above.

We believe that by working together with our value chain partners, we can identify optimal solutions thereby leading towards holistic action to generate more value. Supplier audits and awareness raising initiatives are carried out by the Group on a regular basis to ensure compliance to quality standards and supplier criteria.

84 Supplier assessments were conducted

during the year

SuppliersWe persistently engage with and support the development of our supply chain partners to ensure that the products sourced are of good quality, safe, durable, easy to use and maintain and offer value for money through local suppliers. The Group’s key suppliers are those that provide inputs for the food and beverage divisions of the resorts and our supply chain consists of a broad base of wholesalers and retailers through whom we procure fresh fruits, vegetables, meat, fish, dry rations and other items.

Community EngagementAll our resorts engage proactively with the communities we operate in with the objective of meaningfully enriching lives through empowerment. The Group’s Corporate Social Responsibility (CSR) initiatives are governed by its sustainability and CSR Policy which highlights four specific areas of community support, namely education, culture and religion, developing livelihoods and preservation of the natural environment. During the year, all our resorts engaged in multiple CSR activities within these focus areas through which 5,960 individuals got directly benefited; However our initiatives indirectly benefited a larger number of people.

EducationVolunteer Hours: 3,765

Developing Livelihoods

Volunteer Hours: 2,797

Culture and Religion


Preservation of Natural Environment


Our Community Focus

DASVAARU Internship Programme at Cinnamon Hakuraa Huraa Maldives


116


Education

We conduct year-round initiatives supporting the educational requirements of school children and youth in the localities we operate in. During the year, several of our resorts including Trinco Blu by Cinnamon, Cinnamon Lodge Habarana, Hikka Tranz by Cinnamon and Habarana Village by Cinnamon, donated supplies to school children in neighbouring communities. Cinnamon Bey Beruwala also engaged in the renovation of the playground of Moragolla primary school. Cinnamon Citadel Kandy sponsored a book donation campaign of Child Action Lanka, an NGO approved by the Department of Probation and Child Care Services.

Livelihood Development

Many of our resorts organized HIV/Aids awareness and screening programs during the year, including Cinnamon Bey Beruwala, Cinnamon Citadel Kandy, Cinnamon Lodge Habarana (for army officers), Hikka Tranz by Cinnamon and Cinnamon Dhonveli Maldives. Multiple blood donation campaigns were also carried out during the year in aid of blood banks of several General Hospitals in the neighbouring communities. Bentota Beach by Cinnamon organized and sponsored a diabetes screening test for nearly 300 villagers and donated blood glucose monitors. The Hotel also organized an eye clinic in collaboration with the Colombo Oasis Lion’s Club, which attracted a participant base of over 200. In addition our resorts donated linen and wheelchairs among others to several surrounding government hospitals.

Culture and Religion

We continue to support cultural and religious activities in our communities through financial and non-financial support. During the year, Cinnamon Bey Beruwala built a shrine for the Buddhasiri temple in Beruwala and provided financial support for the annual New Year festival organized by village youth. Meanwhile, Hikka Tranz by Cinnamon donated floor tiles for the renovation of St. Joseph’s Chapel in Galle Fort while Cinnamon Wild Yala made a donation towards constructing a Buddha statue at the Yala junction.

Street to School CSR Project - Cinnamon Citadel Kandy

Temple Renovation Project - Cinnamon Bey Beruwala

School CSR Project - Hikka Tranz by Cinnamon


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Value Creation ReportHuman Capital


2015/16 2014/15 y-o-y %

Inputs

Headcount 2,628 2,720 -3.0%

A safe and conducive work environment

A comprehensive training curriculum


Invested Rs. 33 Mn in 116,966 training hours in multiple aspects

34 executive level promotions and 104 non-executive level promotions

Enhanced engagement mechanisms and staff facilities

Outputs

Staff Satisfaction Rate 86.7% 89.6%

Lost Day Rate 0.04% 0.04%

Rewards (LKR mn) 1.5 Mn 0.95 Mn

Employee Retention (%) 80% 79%

Relevance of our Human Capital

As a service driven industry, the skills, experience and productivity of our people is a key source of competitive advantage. For us, our human capital is also essential in driving our strategic priorities and implementing expansion plans.

Employee Engagement

Employee Value Proposition


Health and Safety

Career Progression

OverviewOur talent pool of 2,628 high-performing employees in Sri Lanka and Maldives are ambassadors of our brand as they facilitate our guest experience, live our corporate values and drive the Group’s strategic agenda. Our successful track record, social commitment and reputation for corporate accountability have enabled us to reinforce an appealing brand which is capable of attracting and retaining the country’s best young talent. During the year, we placed focus on driving consolidation of our medium to long-term people strategies to effectively position ourselves as the preferred employer in the hospitality sector, particularly given the intensification of competition with the entrance of several international hotel chains to the country.

Human Resource GovernanceOur approach towards people management is guided by formal policy frameworks and robust governance structures which exceed the minimum requirements of the relevant laws and regulations whilst conforming to the overall standards of the John Keells Group HR management framework and industry best practices.

The governance structures of the Group is given below with reporting lines clearly identified. Nominations, HR & Remuneration and Related Party Transactions Review committees of the Group’s parent Company, John Keells Holdings PLC assist the Board of John Keells Hotels PLC as permitted by the listing rules of the CSE.

Dress Down Themed Day - Superheroes


118

John Keells Holdings PLC


Board of Directors


Internal Audit

President/CEO Employees

Board of Directors

Audit Committee

Nominations Committee

HR & Remuneration Committee

Related Party Transactions Review

Committee

Group Executive Committee

HR Policy Framework

Recruitment and Selection

Equal Opportunity

Policy on Child Labour

Policy on Forced Labour

Training

Succession Planning

Career Progression

Empowerment Policy

Grooming and Deportment Policy

Language Proficiency

Rewards and Recognition

Engagement

Work-life Balance

Health and Safety

Internal Communications

Accommodation and Change

Cinnamon Associates Policy

Cinnamon Associates Restaurant Policy

Footwear Policy

Uniform Policy

Talent AttractionLearning and Development

Retention Others



119

As Ambassadors of the Cinnamon Brand, the conduct and attitudes of our employees are governed by five pledges which have been instilled through the organizational culture, employee engagement and development initiatives.

Ombudsman

In a situation where an individual employee or a group of employees complain of an alleged violation of the published Code of Conduct, and feels that the alleged violation has not been addressed satisfactorily by internally available mechanisms, provision has been made to refer such complaints to an Ombudsperson. The findings and the recommendations of the Ombudsperson arising subsequent to an independent inquiry is confidentially communicated to Chairman or to the Senior Independent Director of the ultimate parent company upon which the involvement duty of the Ombudsperson ceases.

Our Pledges I will Get It Right The first time - all the time I will Care I will Stand Out wherever I am I will Empower I will be Green

On matters referred to him by the Ombudsperson, the Chairman or the Senior Independent Director of the ultimate parent company, as the case may be, will place before the Board;

The decision and recommendation of the Ombudsperson

The action taken based on the recommendation

Areas of disagreement and the reasons adduced in such instances

Steps are taken to ensure that complainants are not victimised. There were no cases that were brought to the attention of the Ombudsperson during the year under review.

People Strategy 2020The Group’s five-year people strategy was formulated and developed during the year, using feedback obtained from our robust stakeholder engagement mechanisms, as well as the evaluation of the Group’s value creation model and emerging market risks. Key pillars of the Group’s HR strategy for 2020 are as follows;

“During the year, we placed focus on driving consolidation of our medium to long-term people strategies to effectively position ourselves as the preferred employer in the hospitality sector, particularly given the intensification of competition with the entrance of several international hotel chains to the country.”

Culinary Art Competition Winners 2015


120

Enhancing Productivity

Employer Value

Proposition

Training Curriculum

Implementing a sustainable manpower model to arrive at an optimum staff cadre ratio.

Implementing a Cinnamon Employee Value Proposition (EVP) which will position Cinnamon Hotels & Resorts to be the “preferred employer” within the hospitality industry.

Development of a comprehensive curriculum of training programs based on the Cinnamon Hotels & Resorts Competencies. Total of 56 training programs in 17 themes catering to all five levels of the employee groups are currently being developed.


Team Profile

AttractionOur talent attraction policy is aimed towards attracting dynamic professionals who are committed to our vision and values whilst adhering to the guidelines set by the John Keells Group. In adding value to the communities we operate in, we make every effort to absorb talent and around 50% of our resort employees are hired from surrounding communities. For executive and above grades, vacancies are initially advertised with John Keells Group and through the ‘buddy finds buddy’ programme, our employees are encouraged to invite suitable individuals from their social and professional networks. We are an equal

Gender Breakdown

Male

Female

2,402

226

92%

8%

Age Breakdown

0

300

600

900

1,200

1,500

No.

Over 50

30 to 50

Below 30

987

1,411

230

Employment Type

0

500

1,000

1,500

2,000

2,500

No.

Permanen

t

Employee

sCon

tract

Employee

s

Male

Female

1,485

917

159

67

Region-wiseGender Breakdown

0

500

1,000

1,500

2,000

2,500

No.

Maldives

Sri Lanka

Male

Female

1,970

157

432

69


121

opportunity employer and do not discriminate based on gender, race, age, religion or ethnicity. Cinnamon Hotels & Resorts does not engage children in employment and as a general practice, we do not employ any person below the age of 18 (eighteen). We also do not encourage or tolerate any form of forced or compulsory labour practices.

During the year, we added 725 new employees to our team, whilst 704 left employment. The profiles of our new hires and attrition are as follows;

“We have continued to invest in strengthening our employee engagement, which encompasses a range of formal and informal mechanisms.”

New Hires - Gender Representation

Male

Female

651

74

90%

10%

New Hires - by Location

Sri Lanka

Maldives

648

77

89%

11%

New Hires - Age Representation

Below 30

30 to 50

Over 50

76%

1%

23%

549

171

5

Attrition - Gender Representation

635

69

90%

10%

Male

Female

Attrition - by Location

Sri Lanka

Maldives

601

103

85%

15%

Attrition - Age Representation

Below 30

30 to 50

Over 50

493

203

7

70%

1%

29%


122


1. Blood Donation Campaign

2. Medical Test Campaign

3. Bowling Bash

4. Wet and Wild Party

5. John Keells Maldivian Resorts Sports Day

6. Bakmaha Festival 2016

7. Women’s Day Celebration

8. Christmas Party

1

2 3

Employee EngagementWe have continued to invest in strengthening our employee engagement, which encompasses a range of formal and informal mechanisms. These include frequent employee satisfaction surveys, performance appraisals, multiple forms of internal communications, an open door policy, regular staff meetings, year-round work life balance initiatives as well as the ability to directly engage with the Group Chairman via e-mail.

Key engagement initiatives that were carried out/launched during the year are,

Voice of Employee Survey: This survey is conducted on an annual basis and is administered to all employees in the executive grade and above. During the year, the Group obtained a score of 86.7%, revealing a high level of employee satisfaction.

360 Degree Survey (Assistant Manager and above): In order to obtain comprehensive feedback an e-based questionnaire is circulated to all team members.

Great Place to Work Survey: These anonymous surveys are conducted at regular intervals, to ascertain whether employees consider the Company and its subsidiaries ‘great workplaces’ experience has confirmed that this has contributed to significant improvements in employee perceptions of the Group particularly in respect to practices, policies and behaviours that build credibility, respect and fairness

Cinnamon Knowledge Hubs: Launched in April 2015, this aims to create a platform through which employees will share knowledge, read, learn and understand “Cinnamon” better and also create a space which encourages creative thinking.

Cinnamon Wall: An initiative to enhance internal communications at Cinnamon Hotels & Resorts through an informative digital display in all business units to communicate management information and news.


123

4

5

6

7

8


124

Performance ManagementIn nurturing a performance driven culture within the Organisation, transparent mechanisms are in place to ensure that all employees work towards a set of defined objectives, which are set in accordance with the Group’s overall business objectives and categorized based on the Balanced Scorecard and Hoshin Kanri methodology. The Competency Framework has been designed to represent the Group’s new brand identity and embodies the concept of “We are Cinnamon, Professionals Delivering Success” and consists of 9 key competencies addressing all middle management, senior management and business leaders. All employees also undergo annual performance appraisals which are based on the following competencies;


Cinnamon Citizen

Adaptable and Change Agent

Inspiring and Developing Teams

Building and Maintaining Relationships

Innovation and Creativity

Service and Customer Focus

Technical Competence

Creating Experiences

Results Orientation

We ensure that all Cinnamon Ambassadors are duly rewarded and recognised for their exceptional performance and adhere to organisational values and competencies. Thus the following

programs are designed to nurture an organisational culture based on superior performance and strict adherence to values.

Rewards and Recognition programs

Chairman’s Award Awarded for superior performance and adherence to corporate values.

Eligibility: All Managers and above

Champion of the Year Awarded for superior performance and adherence to corporate values.

Eligibility: All Non-Executives

Employee of the Year Awarded for superior performance and adherence to corporate values

Eligibility: All Executives and Assistant Managers

BRAVO Awarded for superior performance and adherence to corporate values

Eligibility: Cinnamon Ambassadors

Cinnamon Citizen Awarded for superior performance and demonstration of the Cinnamon Competencies

Eligibility: Cinnamon Ambassadors

Learning and DevelopmentWe offer our employees an array of opportunities for skill development, ranging from on-the-job training to structured programs as well as soft skill development opportunities. Training needs are identified primarily through annual appraisals and employee engagement mechanisms and also aim to support the lifelong learning of our employees. Resource personnel are drawn from within the Group as well as external experts and hospitality based consultants. During the year, we invested a total of LKR 33 million in training and development, providing an average of 45 training hours per employee.


125

Key training initiatives carried out during the year include,

Training Tool/Programme Details Participants

Management Trainee Programme

Graduates from the Sri Lanka Institute of Tourism and Hotel Management are selected for our MT programme which provides invaluable opportunities for graduates to obtain comprehensive knowledge on best practices, technical skills and management competencies.

6

Development Centers Development Centers (DC) are held each year for Executive level employees by the John Keells Group. The DCs are designed to equip our employees with the skills necessary to achieve career development.

This tool identifies the level of preparedness of the employee in respect of the next level competencies and highlights development areas through which we ensure the commitment towards the continuous development of the employee. On the completion of the assessments, the assessor along with the supervisor agrees on a Personal Development Plan (PDP) containing the action plan to develop and improve the areas identified. The PDP is reviewed every six months to ensure continuous development of the employee.

5 employees from leisure resorts sector were selected for Group Development Centers at Executive and Assistant Manager level

18 Executives identified as Group Talent

57 Executives identified as Sector Talent

23 Non-Executives identified for Sector Talent

Internship Programmes Cinnamon Hotels and Resorts conducts a structured internship programme, focused on grooming, developing and aspiring young talent to emerge as the next generation of leaders in the organisation. Functional internships provide the route to permanent employment at entry level positions.

11

Talent Acceleration Programme (TAP)

TAP was launched to fast track the Non-Executive level associates to progress to executive level though a 12 months structured development programme, the key objective behind this is to provide opportunities for internal talent

22

Management Acceleration Programme (MAP)

The MAP aims at fast tracking the Assistant HOD’s and HOD’s through a Personal Development Programme (PDP) aimed to progress them to the next level.

18

Partnership with the Faculty of Management and Finance, Colombo University

Cinnamon Hotels and Resorts partnered with the Faculty of Management and Finance, of Colombo University to support the faculty in the development of a Bachelors programme in Hospitality Leisure Management in 2015 with the objective of bringing in an element of professional experience and expertise into the delivery of the programme. This programme consists of comprehensive exposure to hotel operations inclusive of modules such as Front Office and Food & Beverage.

21


126

Training Tool/Programme Details Participants

English Classes Cinnamon Hotels & Resorts provides the opportunity to all our associates to achieve fluency in English language by providing language classes at all our properties in Sri Lanka & the Maldives.

As a means of showcasing the learning gained through the English language program, participants of the program organize an “English Day” which includes a variety of activities such as spelling bees, debates and singing competitions.

Offered to all employees

IT Classes As an initiative towards improving IT knowledge our Associates, few initiatives were undertaken by Cinnamon Hotels & Resorts during the year including training on Advanced MS Excel, TMS, Reservations and POS system trainings.

705


Succession Planning and Talent ManagementOur strong brand and industry presence enables us to attract an ambitious and talented pool of people who are inspired to excel. In order to effectively groom them to emerge as the next generation of leaders in the Company, we strive to create a strong pipeline of staff through a comprehensive talent development framework. A dedicated Career Committee has been set up to identify key talent within the Organisation and structured mechanisms are implemented to develop and fast-track the progression of these star performers. The Talent Acceleration Programme aims to develop and fast tracking identified associate level talent to executive level positions, while the Management Acceleration Programme is designed to fast track the Assistant Head of

Executive Level Promotions: 34

Non-Executive Level Promotions: 104

Departments and Head of the Departments to the next level within the Organisation. Our objective is to fill 20% of the vacancies arising from the hotels through internal staff promotions.

Grade Average Training Hours Total Training Hours

Male Female Male Female

AVP & Above 7.47 7.67 112 23

Manager 27.13 16.20 651 81

Assistant Managers 17.14 1.71 480 12

Executives 16.60 10.35 4,018 569

Non-Executives 48.57 60.01 101,659 9,361


127

Health and SafetyWe strive to create a safe place of work for our employees and have implemented a comprehensive health & safety policy framework. Responsibility of overseeing and implementing the health and safety policy lies with the General Managers and the Chief Health and Safety officers. Awareness programs, surveillance audits as well as monitoring and follow-up of any work place injuries are conducted on an ongoing basis. In addition, all our resorts have obtained and continue to comply with ISO 22000, ISO14001, OHSAS 18001 and HACCP certifications.

2015/16 2014/15 2013/14

Total Person Days 1,075,655 992,800 1,015,065

Total Person Days Lost 423 410 486

Lost Day Rate 0.04% 0.05% 0.05%

Industrial RelationsDuring the year, we maintained cordial and co-operative relationships with the two trade unions, namely the Food & Beverages and Tobacco Industries Employee Union and Inter Company Employee Union which are represented in all of our Sri Lankan resorts. The relationship is based on a strong foundation of mutual understanding and open dialogue which is governed by a Memorandum of Understanding (MOU) with each resort. Union representation at each of our Sri Lanka resorts is as follows;

Bentota Beach by Cinnamon - 44%

Cinnamon Lodge Habarana - 51%

Habarana Village by Cinnamon - 42%

Cinnamon Wild Yala - 31%

Trinco Blu by Cinnamon - 29%

Hikka Tranz by Cinnamon - 21%

Cinnamon Citadel Kandy operates under the parent union Inter Company Employees Union.

Union representation percentage as of the total cadre

Cinnamon Citadel Kandy - 24%

2015-16 2014-15

Total No. of Occupational Injuries: Male 60 51

Total No. of Occupational Injuries: Female - 5

Total No. of Injuries due to Falling 14 22

Total No. of Injuries due to Exposure to Harmful Substances 2 7

Total No. of Injuries due to Moving Objects 44 27

Occupational Injuries by Region

Sri Lanka 49 49

Maldives 11 7

Occupational Injuries

0

10

20

30

40

50

60

No.

2015/16

2014/15

2013/14


128

Value Creation ReportNatural Capital

Highlights in 2015/16

Natural Inputs

Energy (GJ)

0 50,000 100,000 150,000 200,000

2016

2015

173,594

176,489

GJ

Water extraction (Litres)

0 100 200 300 400 500 600 700 800

2016

2015

Mn Liters

710

733

Raw Materials (Kg)

0 500 1,000 1,500 2,000 2,500 3,000 3,500

2016

2015

Metric Tonnes

3,369

3,331

Our Activities Installation of energy efficient lighting and cooling technology

Water recycling and rain water harvesting

Installation of bio-gas digesters

Outputs and Impacts

Effluents (Litres)

0 100 200 300 400 500 600 700 800

2016

2015

Mn Liters

600

614

Carbon footprint (tCO2e)

0 5,000 10,000 15,000 20,000 25,000

2016

2015

tCO2e

20,294

20,234

Relevance of our Natural Capital

Elements of our natural environment complement the services we offer and preserving these attractions and destinations are crucial for the long-term viability of our industry.

Energy WaterRaw

MaterialsNatural Habitat

Waste & Effluents

Emissions

Inputs Outputs

Natural Capital Management

Com

plia

nce

OverviewAs a leisure sector operator, we generate substantial value additions to most of our capital inputs. However, we acknowledge that our operations can adversely impact our natural capital and we have long since considered environmental sustainability to be a key strategic priority and core business driver. We are a green pioneer in Sri Lanka’s tourism industry and have continued to invest in strengthening our environmental monitoring mechanisms to ensure that our green impacts are managed similar to the way we manage our day to day resort operations. Our approach towards environmental management is structured, holistic and comprehensive, and is shaped by a clearly defined policy framework, governance structures, tools and techniques for monitoring, performance indicators and reporting.


129

All 11 Resorts have obtained the ISO 14001 Certification

Cinnamon Bey Beruwala - LEED Gold certified

Climate ChangeThe key impacts of climate change on the tourism industry are anticipated to be felt through the rise of sea levels, desertification, loss of bio diversity and scarcity of water which will make regions less hospitable for tourists as well as deforestation and the harm to bio-diversity. As a Group, we are yet to implement mechanisms to quantify the impacts of climate change although we are cognizant of how these impacts could affect our long-term ability to generate value.

Raw MaterialsOur primary raw materials consist of inputs which are used in the food and beverage processes. This is the second consecutive year in which we are reporting on our material consumption, and for the purpose of this disclosure we have only considered the raw materials which are measured in the unit of kilograms. Our approach towards procurement is characterized by developing mutually beneficial, strategic relationships with our diverse supplier base, thereby providing an effective platform for empowerment while ensuring that we procure highest quality raw materials. At all times, attempts are made to source materials from surrounding communities in which our resorts are based.

Consumption in units kgs

Type of Raw Material 2015/16 2014/15

Vegetable 899,243 894,708Fruits 830,059 798,398Fish 384,188 388,212Meat 474,868 459,835Other Food Items 780,581 789,822

EnergyEnergy is one of key natural inputs and among one of our top expenses. We engage in a range of concerted efforts across all our resorts to increase energy efficiency with mechanisms in place at all resorts to measure, track and report energy consumption on a consistent basis. As a policy, low energy consuming equipment is utilized when replacing higher energy consuming units across all our resorts whilst employees and guests are encouraged to contribute towards conserving energy through a range of ‘Go Green’ choices. Furthermore, energy audits are conducted at our resorts on a regular basis to identify areas for improving energy efficiency. Our key sources of energy are electricity, diesel, petrol and liquid petroleum gas.

“We are a green pioneer in Sri Lanka’s tourism industry and have continued to invest in strengthening our environmental monitoring mechanisms to ensure that our green impacts are managed similar to the way we manage our day to day resort operations.”

Bio gas facility commissioned at Cinnamon Wild Yala


130

Our key energy initiatives are,

Initiative Resort Estimated Annual Savings(in kWh)

Energy efficient lighting: Over the past few years, all Sri Lankan resorts have shifted towards using LED for all lighting purposes. During the year, we achieved 100% coverage and all our lighting requirements are now fulfilled through LED lighting.

All Resorts in Sri Lanka and Maldives 57,600

Energy efficient cooling: Split-type air conditioners are being replaced with more energy efficient inverter-type air conditioners in an ongoing programme.

All Resorts in Sri Lanka and Maldives 920,400

Renewable Energy: Waste energy is utilised through co-generation at Cinnamon Lodge Habarana which heats water for guest use through the waste heat from air conditioners and results in overall energy savings. Furthermore, solar heaters have been installed at most of our hotels to heat water for use by guests.

Cinnamon Lodge Habarana, Trinco Blu by Cinnamon

87,400


In GJ 2015/16 2014/15 2013/14

Diesel 84,009 85,391 88,219

Petrol 10,102 14,879 12,446

LPG 13,307 12,321 12,472

Electricity (GJ) 66,174 63,899 61,370

Direct Energy (GJ) 107,418 112,590 113,137

Indirect Energy (GJ) 66,174 63,899 61,370

Total Energy Consumption(GJ) 173,594 176,489 174,507

Energy Results

Our total energy consumption declined by 2% to 173594 GJ during the year, reflective of our continued focus on generating energy efficiencies. Energy consumption per guest night also declined from 219 MJ to 213 MJ during the year under review.

Energy by Source

Diesel

Petrol

LPG

Electricity (GJ)

48%

6%

8%

38%

Energy Per Guest Night - John Keells Hotels

0

50

100

150

200

250

300

350

MegaJoules

2009/10

2015/16

2014/15

2013/14

2012/13

29.4%


131

WaterOur water management policy aims to minimize water withdrawal from surface and ground water sources through re-cycling water wherever possible and engaging employees and guests in water conservation. Sub-divisional metering systems have been installed at all properties enabling the continuous monitoring and tracking of water usage and identification of areas of inefficiency.

Initiative Resort Results

Increased scope of water recycling mechanisms

Recycled water is used for gardening and flushing purposes.

Cinnamon Dhonveli Maldives, Cinnamon Bey Beruwala

Recycling was improved by further 22,264m3 for the year under review

Minimizing wastage

Installation of in-house developed control system to prevent wastage of water in the washer/extractors during power cuts.

Cinnamon Wild Yala Reduction of 408m2

Rainwater Harvesting

The harvested rainwater is used in the hotel laundry

Cinnamon Citadel Kandy,


Annual rain water harvest of 2,592m3

Water Results

We continued to achieve efficiencies in water consumption, with the Group’s water withdrawal declining by 3% (or 22458 m3) during the year. This translated to a 5.5% reduction in water consumption per guest night.

Water Withdrawal by Source

Surface Water

Ground Water

Rainwater Harvested

Municipality, Authority

Water Sources

137,456

386,167

2,592

181,094

19%

55%

Cubic Meters

1%

25%

Water Litres Per Guest Night- John Keells Hotels

0

200

400

600

800

1,000

Liters

2015/16

2014/15

2013/14

2012/13

10.4%

Rain water harvesting

improved by 30%

Recycling and reusing treated

water broadened by 14%


132


Waste and EffluentsA state of the art waste management system has enabled all resorts to effectively segregate, recycle and responsibly dispose of waste in an environmentally friendly manner. In our Sri Lankan resorts, wet waste is used to generate energy whilst the remainder is sent to local piggeries. Meanwhile, recyclable material obtained from dry waste is sent to recyclers certified by the Central Environmental Authority and garden waste is used to generate eco-friendly fertilizers. Hazardous waste is also segregated and disposed in assistance with GeoCycle, a party certified by the Central Environmental Authority. Given that all key resort operations generate waste, our ultimate objectives are to

generate energy through waste and reduce landfill waste, goals towards which we made significant progress during the year under review.

We ensure that effluents discharged from our resorts comply with the requisite water quality standards and that hotels that do not have the ability to discharge water into common municipal sewerage lines, have a dedicated effluent treatment plant on site. All such effluent plants are checked on a regular basis by independent assessors to ensure it meets compliance levels. Our discharge water quality levels (BOD, COD, TSS, pH and oil and grease levels) comply with government standards. There were no significant spills recorded during the year.

Initiative Resort Results(Annual)

Installation of bio-gas digesters

The bio-gas generators installed in 4 of our resorts (out of which 2 resorts commissioned during the year) have contributed towards effectively utilising food waste, reducing the waste to landfill ratio whilst reducing energy consumption and the overall carbon footprint.

Cinnamon Wild Yala


10,200kgs of CO2 emission reduction

Recycling

Maldivian resorts continue to 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. Cinnamon Dhonveli Maldives also uses bio-degradable and discarded materials such as dry coconuts and damaged chipboards in order to produce eco-friendly table decor for the Christmas and New Year season.



Ellaidhoo Maldives by Cinnamon

Installation of permanent roofing Cinnamon Dhonveli Maldives Savings in the long run

Waste and Effluents Results

The Group’s total non-hazardous waste declined by 1% during the year while waste generated per guest night also fell by 2.2% to 3.34 Kg in the reviewed period. Meanwhile, effluent discharge for the year also declined by 2% and quality parameters of the water discharge complied with the regulatory requirements of the Central Environmental Authority.


133

Solid waste by type of disposal (In kgs)

2015/16 2014/15 2013/14

Disposed through Reuse 982,118 1,007,945 1,020,758

Disposed through Recycling 147,904 174,361 244,219

Disposed through Composting 5,425 16,793 29,904

Disposed through Recovery 78,609 98,106 174,773

Disposed through Incineration 11,863 8,320 23,541

Disposed through Deep Well Injection 559,339 586,112 586,741

Disposed through Landfill 942,564 864,690 1,109,097

Disposed through On-Site Storage - - 275

Total Non-Hazardous Waste Disposed 2,727,822 2,756,327 3,189,308

Discharge by destination (In M3)

2015/16 2014/15 2013/14

To Municipality Sewerage, Drainage Lines 133,005 167,180 144,122

To ETPs and Recycled Completely 215,480 193,216 177,461

To Rivers, Lakes after being treated by ETP/STP 222,557 227,568 228,319

Direct to Rivers, Lakes, Wetlands, Marshes 28,658 25,777 15,077

To ground through soakage pits etc. - - 37,660

Total Water Discharge 599,700 613,741 602,639

Carbon FootprintWe are committed towards reducing emissions from all key resort operations and each individual property engages in tracking, monitoring and measuring performance against set targets for air pollution. Emissions are measured using the Greenhouse Gas Protocol as governed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development. The emission factors have been derived from IPCC Guidelines for National Greenhouse Gas Inventories, published by the institute for global environmental strategies (IGES) and includes only CO2. The boundary for the emission measurement has been governed by Scope 1 and Scope 2.

Scope 1 - GHG emissions occurring directly from sources that are owned or controlled by the Organisation

Scope 2 - Direct emissions generated in the production of electricity consumed

Multi-faceted initiatives taken to reduce the Group’s energy footprint (refer discussion on page 130) has allowed us to contain emissions at relatively unchanged levels over the previous year. Our scope 1 emissions declined more pronouncedly by 4% during the year under review.

Water Discharge by Destination

To Municipality Sewerage, Drainage Lines

To ETPs and Recycled Completely

To Rivers, Lakes after being treated by ETP/STP

Direct to Rivers, Lakes, Wetlands, Marshes

22%

36%

37%

5%

Waste Kgs Per Guest Night- John Keells Hotels

0

1

2

3

4

5

kgs

2015/16

2014/15

2013/14

2012/13

19%

Emissions per guest night has reduced by 14%


134


Trends in Emissions (in Metric Tonnes of CO2)

2015/16 2014/15 2013/14

Diesel 6,225 6,327 6,537

Petrol 700 1,031 862

Liquid Petroleum Gas (LPG) 840 778 787

Electricity 12,528 12,098 11,619

CO2 Footprint - Direct Energy through Primary Sources (Scope 1) 7,765 8,116 8,186

CO2 Footprint - Indirect Energy through Primary Sources (Scope 2) 12,528 12,098 11,619

Total CO2 Footprint 20,294 20,234 19,805

Bio-DiversitySeveral of our resorts are located in areas of high bio diversity and the Group has several ongoing initiatives in place to preserve this important element of our natural capital.

Project Leopard at Cinnamon Wild YalaThe Project Leopard Yala was formulated with multiple objectives of supporting the livelihoods of cattle farmers, protecting the leopard population living in and around the park boundary as well as building shared economies and creating awareness on the importance of coexistence amongst the communities we operate in. Currently in its fifth year of operation, 67 steel pens have been donated to cattle farmers, enabling them to protect their cattle from leopards in the area. This effort won the Davis award for peace last year at the University of Clark – USA and was granted US$ 8000 in assistance to further expand on planned distribution of steel pens. This project is supervised and deployed by Nature Trails naturalists at Cinnamon Wild Yala. The project is sponsored and funded by John Keells Foundation, Land Rover Sri Lanka and Abercrombie and Kent Philanthropy and many international philanthropists such as Paul Goldstein, Angela and Jonathan Scott and Exodus UK.

Outcomes

Leopard predation rates have declined by 87%

Zero retaliatory killing of leopards (compared to 3-4 annual killings previously)

Farmer’s average income increased

Kgs of CO2 Per Guest Night -

John Keells Hotels

0

5

10

15

20

25

30

Kgs

2009/10

2015/16

2014/15

2013/14

2012/13

14%

Project Leopard at Cinnamon Wild Yala


135

Outcomes

Ongoing Research expected to be completed by January 2017

Over 370 guests engaged through photographic safari tours

Over 75 visits to the Elephant Research Station

Outcomes

Obtained 5 years of valuable GPS data

56 IDs and over 100 individual images of the tail flukes

Over 1,500 guests engaged

The Guest Experience

We engaged guests in this initiative by providing opportunities for excursions with the participation of a naturalist. Guests engage directly with the farmers and obtain an understanding and appreciation of the lives of these farmers. Approximately over 50 tourists participate in these excursions each year enabling us to share the impact and the importance of providing information regarding the solutions provided to end animal human conflict while uplifting livelihoods.

Cinnamon Elephant Project at Cinnamon Lodge HabaranaThe ‘Cinnamon Elephant Project’ which is a collaborative effort between Cinnamon Hotels and Resorts and the John Keells Foundation with the assistance of the Centre for Conservation and Research, breaks new ground in developing elephant viewing based tourism and taking it to a higher level through integration of research. Under this program elephants are individually identified based on their morphological characters and their life stories followed by the naturalists at the Cinnamon Lodge Habarana. This information is shared with visitors while on safari through a newly constructed elephant research station at Cinnamon Lodge Habarana, enabling them to obtain a unique, enriching and more personal experience. Web based information dissemination enables guests to follow the lives of identified elephants even after their visit, encouraging repeat visitation. In addition, demographic, health and behavioural data is collected, which provides baseline data on the population enables monitoring of their well-being and contributes to the scientific knowledge based on Asian elephants.

Project Wild Blu at Trinco Blu by CinnamonImplemented by Trinco Blu by Cinnamon where the project is spearheaded by the marine naturalists of Nature Trails. Project Wild Blu involves the collation of photographic evidence and data to identify blue whales and super pods of sperm whales. Guests too engage in whale watching and a marine naturalist has been deployed to document and evaluate the behaviour of the animal. The project is supported by Dr. Charles Anderson PhD who works with our team annually. The project was also selected by BBC Ocean this year (2016) to film the phenomenon over 35 days at sea by sharing the recorded data. We now have 5 years of valuable GPS data records of Blue Whales and Super-Pod sightings as they migrate to warmer waters in search of krill and squid, their exclusive kill. Our research has also provided information on breeding grounds for these endangered species which needs careful management in the future.

Cinnamon Elephant Project


136

Compliance and InvestmentDuring the year under review, we invested Rs. 75.60 million in initiatives targeted towards reducing our environmental footprint. There were no incidences of non-compliance, penalties or fines imposed on us pertaining to any applicable environmental regulations and laws.

Initiative Investment (Rs. Mn)

Energy Saving Initiatives 31.95

Water Conservation 0.80

Waste Management 48.88

Total 75.60


Project Wild Blu at Trinco Blu by Cinnamon


137

Our Biodiversity and Natural Habitats

Hotel GeographicalLocation

Size of site in Acres

Name of Protected Area in the Vicinity

Position relative to ProtectedArea (Within/ Adjacent and Distance)

Size of Operational site in square km

Biodiversity value of Protected site

Protected through (Legislation/IUCN/ UNESCO etc.)

Has the EPL been obtained


Trincomalee 13.24 Pigeon Island Marine National Park

16km adjacent 0.05 Maritime Flora and Fauna ProtectionOrdinance 1937IUCN Category II - NationalPark

Yes

CinnamonCitadel Kandy

Kandy 6.39 Udawatte KeleSanctuary

6km adjacent 0.023 Wildlife & Forestry

Flora and Fauna ProtectionOrdinance 1937IUCN Category IV - Habitat/ Species Management Area

Yes

CinnamonWild Yala

Yala 11.25 Yala National Park Bundala National Park

2km adjacent32km adjacent

0.044 Wildlife & Forestry

Flora and Fauna ProtectionOrdinance 1937IUCN Category II - NationalPark

Yes

HikkaTranz by Cinnamon

Hikkaduwa 4.65 Hikkaduwa MarineNational Park

0.5km adjacent 0.018 Maritime Flora and Fauna ProtectionOrdinance 1937IUCN Category II - NationalPark

Yes

CinnamonLodge Habarana

Habarana 25.48 Minneriya National ParkRitigala Strict Nature Reserve Kaudulla National Park

15km adjacent

20km adjacent 20km adjacent



Yes

CinnamonBey Beruwala

Beruwala 11.39 Hikkaduwa MarineNational Park

45km adjacent 0.04 Maritime Flora and Fauna ProtectionOrdinance 1937IUCN Category II - NationalPark

Yes

HabaranaVillage by Cinnamon

Habarana 9.34 Minneriya National ParkRitigala Strict Nature Reserve Kaudulla National Park

11km adjacent

17km adjacent

22km adjacent



Yes


138

Hotel GeographicalLocation

Size of site in Acres

Name of Protected Area in the Vicinity

Position relative to ProtectedArea (Within/ Adjacent and Distance)

Size of Operational site in square km

Biodiversity value of Protected site

Protected through (Legislation/IUCN/ UNESCO etc.)

Has the EPL been obtained


Bentota 13.34 Hikkaduwa Marine National Park

40km adjacent 0.05 Maritime Flora and Fauna Protection Ordinance 1937 IUCN Category II - National Park

Yes

Cinnamon DhonveliMaldives

North Male Atoll Republic of Maldives

18.62 Thamburudhoo thila

1km 0.0673 Maritime The Environmental Protection & Preservation Act

Yes

EllaidhooMaldives by Cinnamon

North Ari Atoll Republic of Maldives

13.75 Orimas thila 1km 0.0556 Maritime The Environmental Protection & Preservation Act

Yes

CinnamonHakuraa Huraa Maldives

Meemu Atoll Republic of Maldives

18.90 Lhazikuraadi 6km 0.05437 Maritime The Environmental Protection & Preservation Act

Yes

EPL - Environment Protection Licence

Our Biodiversity and Natural Habitats


139

Cinnamon Hotels& Resorts

Protected Areas

Locations in Maldives


Ellaidhoo Maldives byCinnamon

Cinnamon HakuraaHuraa Maldives

Thamburudhoo Thila

Lhazikuraadi

Orimas Thila


Chundikulam Bird Sanctuary

Kokilai Bird Sanctuary

Naval Headworks Sanctuary

Somawathie Chaitya Sanctuary

Minneriya Tank Sanctuary

Wasgamuwa Strict Natural Reserve

Madura Oya National Park

Rantambe Reservoir Sanctuary

Gal Oya National Park

Peak Wilderness Sanctuary

Uda Walawe National Park

Sinharaja Rainforest Reserve

Kanneliya Forest Reserve

Muthurajawela Wetlands/Marsh

Wilpattu National Park

Ritigala Strict Natural Reserve

Madhu & Giants Tank Sanctuary

Yala National Park

Bundala Bird Sanctuary

Cinnamon Lodge Habarana


Bentota Beach byCinnamon

Hikka Tranz byCinnamon

Cinnamon Hotels& Resorts

Sanctuaries / National Parks

/ Nature / Forest Reserves

Locations in Sri Lanka


Cinnamon BeyBeruwala

Cinnamon Wild Yala


140

Consolidated Value Added Statement

For the year ended 31st March In Rs. ‘000s

2016 2015

Direct economic value generated

Revenue 11,631,973 11,444,150

Finance income 127,129 115,835

Proceeds from sale of property, plant and equipment 25,149 55,431

11,784,251 11,615,416

Economic value distributed

Operating cots 7,857,563 71% 7,418,780 75%

Employee wages and benefits 1,873,646 17% 1,794,058 18%

Payments to providers of funds 764,484 7% 265,101 3%

Payments to government

Sri Lanka 288,974 3% 214,790 2%

Maldives 172,636 2% 169,407 2%

Community investments 7,941 0% 8,251 0%

10,965,244 9,870,387

Economic value retained 819,007 1,743,831

Economic Value Distributed - 2015/16

Operating cots

Employee wages and benefits

Payments to providers of funds


Community investments

71%

17%

7%

5%

0%

Economic Value Distributed - 2014/15

Operating cots

Employee wages and benefits

Payments to providers of funds


Community investments

75%

18%

3%

4%

0%


141

GENERAL STANDARD DISCLOSURES-G4

Number Description Reference/Comments

Cross Reference Pages

Strategy and Analysis

G4-1 Statement from the most senior decision maker of the Organisation about the relevance of sustainability to the organization and the organization’s strategy for addressing sustainability.


Page 20

Organisational Profile

G4-3 Name of the organization John Keells Hotels PLC

G4-4 Primary brands, products, and services About the Group Page 11

G4-5 The location of the organization’s headquarters Colombo, Sri Lanka

G4-6 Number of countries where the organization operates, and names of countries where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the report.

About John Keells Hotels PLC

Page 11

G4-7 The nature of ownership and legal form Inner Back Cover

G4-8 The markets served (geographic breakdown, sectors served, and types of customers/beneficiaries)

Customers Page 71, 110

G4-9 The scale of the organization, including:

Total number of employees

Total number of operations

Net sales (for private sector organizations) or net revenues (for public sector organizations)

Total capitalization broken down in terms of debt and equity (for private sector organizations)

Quantity of products or services provided

About John Keells Hotels PLC Financial Review

Page 11, 117

G4-10 a. The total number of employees by employment contract and gender.

b. The total number of permanent employees by employment type and gender.

c. The total workforce by employees and supervised workers and by gender.

d. The total workforce by region and gender.

e. Report whether a substantial portion of the organization’s work is performed by workers who are legally recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors.

f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries).

Human Capital Page 120

GRI Content Index Tool


142





G4-11 The percentage of total employees covered by collective bargaining agreements. Human Capital Page 127

G4-12 Describe the organization’s supply chain. Operating Environment

Page 72

G4-13 Any significant changes during the reporting period regarding the organization’s size, structure, ownership, or its supply chain, including:

Changes in the location of, or changes in, operations, including facility openings, closings, and expansions

Changes in the share capital structure and other capital formation, maintenance, and alteration operations (for private sector organizations)

Changes in the location of suppliers, the structure of the supply chain, or in relationships with suppliers, including selection and termination

None

G4-14 Whether and how the precautionary approach or principle is addressed by the organization.

Sustainability at Cinnamon

Page 69

G4-15 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses.

About this Report Page 8

G4-16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization is a member.

Tourist Hotels Association of Sri Lanka

Ceylon Chamber of Commerce

Identified Material Aspects and Boundaries

G4-17 a. List all entities included in the organization’s consolidated financial statements or equivalent documents.

b. Report whether any entity included in the organization’s consolidated financial statements or equivalent documents is not covered by the report.

Group Structure Accounting Policies

Page 12

G4-18 a. Explain the process for defining the report content and the Aspect Boundaries.

b. Explain how the organization has implemented the Reporting Principles for Defining Report Content.

Defining Materiality Page 64

G4-19 List all the material Aspects identified in the process for defining report content. Defining Materiality Page 64-65

G4-20 For each material Aspect, the Aspect Boundary within the organization Defining Materiality Page 64-65

G4-21 For each material Aspect, report the Aspect Boundary outside the organization Defining Materiality Page 64-65


143




G4-22 The effect of any restatements of information provided in previous reports, and the reasons for such restatements.

There are no restatements

G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries. None

Stakeholder Engagement

G4-24 List of stakeholder groups engaged by the organization. Stakeholder Engagement

Page 62

G4-25 The basis for identification and selection of stakeholders with whom to engage. Stakeholder Engagement

Page 62

G4-26 The organization’s approach to stakeholder engagement Stakeholder Engagement

Page 62

G4-27 Key topics and concerns that have been raised through stakeholder engagement Stakeholder Engagement

Page 62

Report Profile

G4-28 Reporting period (such as fiscal or calendar year) for information provided. About this Report Page 8

G4-29 Date of most recent previous report (if any). Financial year ended 31st March 2015

G4-30 Reporting cycle (such as annual, biennial) Annual

G4-31 The contact point for questions regarding the report or its contents. About this Report Page 8

G4-32 a. Report the ‘in accordance’ option the organization has chosen.

b. Report the GRI Content Index for the chosen option c. Report the reference to the External Assurance Report, if the report has been externally assured.

Core Page 141 to 146

G4-33 a. Report the organization’s policy and current practice with regard to seeking external assurance for the report.

b. If not included in the assurance report accompanying the sustainability report, report the scope and basis of any external assurance provided.

c. Report the relationship between the organization and the assurance providers.

d. Report whether the highest governance body or senior executives are involved in seeking assurance for the organization’s sustainability report.

External Assurance provided by Messrs. Ernst and Young

Page 147 to 148

Governance

G4-34 The governance structure of the organization, including committees of the highest governing body.


Page 31


144





Ethics and Integrity

G4-56 The organization’s values, principles, standards and norms of behaviour such as codes of conduct and codes of ethics.


Page 41

SPECIFIC STANDARD DISCLOSURES

Material Aspect

DMA/Indicators Reference/comments/Reasons for omission

Page

Economic AspectsEconomic Performance

G4-EC1 Direct economic value generated Consolidated value added statement

Page 140

G4-EC2 Financial implications and other risks and opportunities for the Organisation’s activities due to climate change

Natural Capital Page 129

G4-EC3 Coverage of defined benefit plan obligations Financial Statements Page 170, 189

Environmental AspectsMaterials

G4-EN1 Materials used by weight or volume Natural Capital Page 129

Energy

G4-EN3 Energy consumption within the organization Natural Capital Page 130

G4-EN5 Energy intensity Natural Capital Page 130

G4-EN6 Reduction of energy consumption Natural Capital Page 130

Water

G4-EN8 Total water withdrawal by source Natural Capital Page 131

Biodiversity

G4-EN11 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

Natural Capital Page 137-139

G4-EN12 Description of significant impacts of activities, products, and services on bio diversity in protected areas and areas of high bio diversity value outside protected areas

Natural Capital Page 137-139

G4-EN13 Habitats protected or restored Natural Capital Page 137-139


145


Material Aspect


Page

Emissions

G4-EN15 Direct greenhouse gas (GHG) emissions Natural Capital Page 134

G4-EN16 Energy indirect greenhouse gas (GHG) emissions Natural Capital Page 134

G4-EN18 Greenhouse gas (GHG) emissions intensity Natural Capital Page 134

G4-EN19 Reduction of greenhouse gas (GHG) emissions Natural Capital Page 134

Effluents and Waste

G4-EN22 Total water discharge by quality and destination Natural Capital Page 133

G4-EN23 Total weight of waste by type and disposal method Natural Capital Page 133

G4-EN24 Total number and volume of significant spills Natural Capital Page 132

Products and Services

G4-EN27 Extent of impact mitigation of environmental impacts of products and services Product Responsibility Page 136

Compliance

G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

There were no violations of environmental laws and regulations during the year due to our strict compliance programme. Consequently there were no fines incurred.

Overall

G4-EN31 Total environmental protection expenditures and investments by type Natural Capital Page 136

Supplier Environmental Assessment

G4-EN32 Percentage of new suppliers that were screened using environmental criteria Suppliers Page 115

Environmental Grievance Mechanisms

G4-EN34 Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms

No Environmental Grievances filed

Page 120

Social AspectsEmployment: Labour practices and Decent Work

G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender, and region



146


Material Aspect


Page

Employment: Occupational health and safety

G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender


Employment: Training and Education

G4-LA9 Average hours of training per year per employee by gender, and by employee category Human Capital Page 126

G4-LA10 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

Human Capital Page 125, 126

G4-LA11 Percentage of employees receiving regular performance and career development reviews, by gender and by employee category


Employment: Labour practices grievance mechanism

G4-LA16 Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms


Human Rights: Child Labour

G4-HR5 Operations and suppliers identified as having significant risk for incidents of child labour, and measures taken to contribute to the effective abolition of child labour

Suppliers Page 115, 121

G4-HR6 Operations and suppliers identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of all forms of forced or compulsory labour

Suppliers Page 115, 121

Society: Local Communities

G4-SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programs

Community Engagement

Page 115

Product Responsibility: Customer Health and Safety

G4-PR1 Percentage of significant product and service categories for which health and safety impacts are assessed for improvement

Product and Service Responsibility

Page 111

G4-PR5 Results of surveys measuring customer satisfaction Customers Page 112

Product Responsibility: Compliance

G4-PR9 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes

No incidence of non-compliance



147

Independent Assurance Report

Independent Assurance Report of John Keells Hotels PLC on the Sustainability Reporting Criteria Presented in the Integrated Annual Report 2015-16

Introduction and scope of the engagement

The management of John Keells Hotels PLC (“the Company”) engaged us to provide an independent assurance on the following elements of the sustainability reporting indicators under the annual report- 2015-16 (“the Report”).

Reasonable assurance on the information on financial performance as specified on page 140 of the Report.

Limited assurance on other information presented in the Report, prepared in accordance with the requirements of the Global Reporting Initiative G4 ‘In accordance’ - Core guidelines.

Basis of our work and level of assurance

We performed our procedures to provide limited assurance in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE 3000): ‘Assurance Engagements Other than Audits or Reviews of Historical Financial Information’, issued by the Institute of Chartered Accountants of Sri Lanka (“CASL”).

The evaluation criteria used for this limited assurance engagement are based on the Sustainability Reporting Guidelines (“GRI Guidelines”) and related information in particular, the requirements to achieve GRI G4 ‘In accordance’ –Core guideline publication, publicly available at GRI’s global website at “www.globalreporting.org”.

Our engagement provides limited assurance as well as reasonable assurance. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement conducted in accordance with SLSAE-3000 and consequently does not enable to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement.

Management of the Company’s responsibility for the Report

The management of the Company is responsible for the preparation of the self-declaration, the information and statements contained within the Report, and for maintaining adequate records and internal controls that are designed to support the sustaining reporting process in line with the GRI Sustainability Reporting Guidelines.

Ernst & Young’s responsibility

Our responsibility is to express a conclusion as to whether we have become aware of any matter that causes us to believe that the Report is not prepared in accordance with the requirements of the Global Reporting Initiative G4 ‘In accordance’ – Core guidelines. This report is made solely to the Company in accordance with our engagement letter dated 03 May 2016. We disclaim any assumption of responsibility for any reliance on this report to any person other than the Company or for any purpose other than that for which it was prepared. In conducting


148

our engagement, we have complied with the independence requirements of the Code for Ethics for Professional Accountants issued by the CASL.

Key assurance procedures

We planned and performed our procedures to obtain the information and explanations considered necessary to provide sufficient evidence to support our limited assurance conclusions. Key assurance procedures included:

Interviewing relevant the company’s personnel to understand the process for collection, analysis, aggregation and presentation of data.

Reviewing and validation of the information contained in the Report.

Checking the calculations performed by the Company on a sample basis through recalculation.

Reconciling and agreeing the data on financial performance are properly derived from the Company’s audited financial statements for the year ended 31 March 2016.

Comparison of the content of the Report against the criteria for a Global Reporting Initiative G4 ‘In accordance’ - Core guidelines.

Our procedures did not include testing electronic systems used to collect and aggregate the information.

Limitations and considerations

Environmental and social performance data are subject to inherent limitations given their nature and the methods used for determining, calculating and estimating such data.

Conclusion

Based on the procedures performed, as described above, we conclude that;

The information on financial performance as specified on page 140 of the Report are properly derived from the audited financial statements of the Company for the year ended 31 March 2016.

Nothing has come to our attention that causes us to believe that other information presented in the Report are not fairly presented, in all material respects, in accordance with the Company’s sustainability practices and policies some of which are derived from GRI-G4-‘In accordance’ Core Sustainability Reporting Guidelines.

Chartered Accountants

27 May 2016Colombo

Independent Assurance Report


149

Investor Information

Distribution of ShareholdersThere were 6,568 registered Shareholders as at 31st March 2016 (6,772 as at 31st March 2015) distributed as follows:-

No. of Shares held

As at 31st March 2016 As at 31st March 2015

No. of Shareholders %

No. ofShares held %

No. ofShareholders %

No. ofShares held %

1 to 1,000 3,355 51.08 1,362,116 0.09 3,400 50.21 1,415,370 0.10

1,001 to 10,000 2,187 33.30 8,784,618 0.60 2,328 34.38 9,372,297 0.64

10,001 to 100,000 850 12.94 26,602,995 1.83 865 12.77 26,505,858 1.82

100,001 to 1,000,000 156 2.38 42,392,209 2.91 158 2.33 41,777,260 2.87

Over 1,000,000 20 0.30 1,377,004,842 94.57 21 0.31 1,377,075,995 94.57

Total 6,568 100.00 1,456,146,780 100.00 6,772 100.00 1,456,146,780 100.00

Composition of Shareholders

No. of Shares held

As at 31st March 2016 As at 31st March 2015

No. of Shareholders

No. ofShares held %

No. ofShareholders

No. ofShares 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 266 204,082,500 14.02 256 203,619,726 13.98

Individual 6,198 70,403,740 4.84 6,408 70,177,358 4.82

Public - Non Resident

Institution 7 1,482,979 0.10 7 1,533,470 0.11

Individual 93 9,953,966 0.68 97 10,592,631 0.73

6,568 1,456,146,780 100.00 6,772 1,456,146,780 100.00

The percentage of the shares of the Company held by the Public as at 31st March 2016 was 19.64% (31st March 2015 - 19.64%)

The number of public shareholders as at 31st March 2016 was 6,564 (31st March 2015 - 6,768)


150

Directors & Spouses Shareholdings

As at31st Mar 2016

As at31st Mar 2015

Directors

Mr. S. C. Ratnayake 142,877 142,877

Mr. A. D. Gunewardene - -

Spouses

Mrs. M. V. Ratnayake 407,434 407,434

Mrs. C. A. Gunewardene 74,806 74,806

625,117 625,117

Market Information on Ordinary Shares of the Company

2015/16 Date 2014/15 Date

Share Information

Highest Price (Rs.) 18.30 12-05-2015 19.20 07-10-2014

Lowest Price (Rs.) 11.00 09-03-2016 12.50 02-04-2014

As at period end (Rs.) 12.00 31-03-2016 14.30 31-03-2015

Trading Statistics

Number of Transactions 3,332 6,815

Number of Shares Traded 13,971,929 25,114,020

% of Total Shares in Issue 0.96 1.72

Values of all Shares Traded (Rs.) 215,247,592 409,276,833

Average Daily Turnover (Rs.) 904,402 1,719,651

Market Capitalisation (Rs.) 17,473,761,360 20,822,898,954

Investor Information

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Indices and Share Prices

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151

Twenty Largest Shareholders of the Company

31st March 2016 31st March 2015

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 78,474,454 5.39 78,474,354 5.39

Sri Lanka Insurance Corporation Ltd. - Life Fund 71,622,800 4.92 71,622,800 4.92

Mercantile Investments PLC 13,000,000 0.89 13,000,000 0.89

Mr. D.J.M. Blackler 6,514,760 0.45 7,114,760 0.49

National Savings Bank 5,541,205 0.38 5,541,205 0.38

Mercantile Fortunes (Private) Ltd. 3,800,000 0.26 3,800,000 0.26

Seylan Bank PLC - A/C No. 3 3,666,962 0.25 3,832,772 0.26

Mr. D.G. Wijemanna 3,000,000 0.21 - -

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

E.W. Balasuriya & Co. (Pvt) Ltd. 1,851,626 0.13 1,694,081 0.12

Mrs. N.Weerasinghe 1,556,706 0.11 1,556,706 0.11

People's Leasing and Finance PLC/Mr. L.P Hapangama 1,533,879 0.11 1,533,879 0.11

Mr. A.A.V Amerasinghe 1,287,800 0.09 1,287,800 0.09

Mr. C.N.H. Liyanage 1,250,000 0.09 1,250,000 0.09

1,377,004,842 94.56 1,374,613,007 94.40

Shares held by balance shareholders 79,141,938 5.44 81,533,773 5.60

TOTAL 1,456,146,780 100.00 1,456,146,780 100.00


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153

Inspired to achieve

We’re inspired to achieve more and more each year

Financial Information


154

The Directors have pleasure in presenting their 37th Annual Report together with the Audited Financial Statements of John Keells Hotels PLC and the Consolidated Financial Statements of the Group for the year ended 31st March 2016.

Principal ActivitiesThe principal activity of the Company, which is Investment, remained unchanged. The principal activity of the subsidiaries and joint ventures, which is hoteliering, also remained unchanged.

Review of Business and Future DevelopmentsThe financial and operational performance, during the year ended 31st March 2016 and future business development of the Company and Group, is provided in the Chairman’s Message, The Management Discussion and Analysis of operations, Sustainability Report and the Financial Overview. These reports, which form an integral part of the Annual Report of the Board of Directors, together with the Audited Financial Statements, reflect the state of affairs of the Company and Group.


Directors’ Declarations

The Directors declare that;

a) the Company complied with all applicable laws and regulations in conducting its business.

b) the Directors have declared all material interests in contracts involving the Company and refrained from voting on matters in which they were materially interested.

c) the Company has made all endeavours to ensure the equitable treatment of shareholders.

d) the business is a going concern with supporting assumptions or quantifications as necessary, and

e) have conducted a review of internal control covering financial, operational and compliance controls and risk management and have obtained a reasonable assurance of their effectiveness and successful adherence herewith.

The Corporate Governance practices of the Company are described on pages 30 to 47 of this Report.

Human ResourcesThe Company continued to implement appropriate human resource management policies to develop employees and optimize their contribution towards the achievement of corporate objectives. The policies and procedures ensure the equitable treatment of all employees. Some of the processes and procedures adopted in this regard are mentioned on pages 117 to 127 of this Report.

System of Internal ControlThe Board has implemented an effective and comprehensive system of internal controls, which provide reasonable but not absolute assurance that assets are safeguarded and that the financial reporting system may be relied upon in the preparation of the Financial Statements. Reliance upon the internal controls is set out on page 40 of this Report. The Audit Committee receives and acts upon reports on the results of internal control reviews carried out by independent external auditors.

Risk ManagementThe Board confirms that there is an ongoing process for identifying, evaluating, managing and mitigating any significant risks faced by the Company, that financial, operational and compliance controls have been reviewed. Risk assessment and evaluation for the Company takes place as an integral part of the business and the Board Audit Committee reviews the principal risks and mitigating actions in place regularly. The Board, through the involvement of the Group Risk and Control Review Division takes steps to gain assurance on the effectiveness of control systems in place. The Head of the Group Business Process Review Division has direct access to the Chairman of the Audit Committee. Foreseeable risks that may materially impact the business are disclosed in the Chairman’s Message on Pages 20 to 23 and Risk Management practices on Page 50 to 57 of this Report.

Annual Report of the Board of Directors


155

Compliance with Laws and RegulationsThe Board has received assurance from the Board Audit Committee and confirms that the Company has complied with all applicable laws, rules and regulations in the territories in which it operates.

Going ConcernThe Board of Directors, after considering the financial position, operating conditions, regulatory and other factors, and such matters required to be addressed in the Code of Best Practice on Corporate Governance issued jointly by the Securities & Exchange Commission of Sri Lanka and Institute of Chartered Accountants of Sri Lanka, have a reasonable expectation that the Company, its subsidiaries and joint ventures possess adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the Going Concern basis in preparing the Financial Statements.

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of the Financial Statements so that they present a true and fair view of the state of affairs of the Company. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Companies Act No. 7 of 2007, the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the Listing Rules of the Colombo Stock Exchange. The Statement of Directors’ Responsibility for financial reporting is given on page 161 and forms an integral part of the Annual Report of the Board of Directors.

Financial ResultsThe Company recorded a profit after tax of Rs. 965.8 Mn (2014/15 – Rs. 732.9Mn), while the Group recorded a consolidated net profit after tax of Rs. 1,748.8 Mn (2014/15 – Rs. 1,867.8 Mn) for the year under review. A synopsis of the Company’s consolidated performance is presented below.

Group Company

For the year ended 31st March 2016 Rs.

2015 Rs.

2016 Rs.

2015 Rs.

After making provision for doubtful debts, all known liabilities and depreciation on property, plant, equipment the profit earned before interest was 2,217,246 2,455,788 975,323 760,404

Interest paid during the year was (182,025) (265,101) (355) (8,448)

Profit before tax was 2,035,221 2,190,687 974,968 751,956

From which was deducted the provision for taxation, including deferred taxation of (286,422) (322,923) (9,174) (19,039)

Leaving a net profit after tax of 1,748,799 1,867,764 965,794 732,917

The profit attributable to the non controlling interest was (14,256) (14,040) - -

The amount attributable to the Company and the Group was therefore 1,734,543 1,853,724 965,794 732,917

Super gain tax (86,387) - (1,398) -

When the balance brought forward from the previous year was added 6,189,643 4,708,642 1,156,987 788,107

The amount available for appropriation was 7,837,799 6,562,366 2,121,383 1,521,024

Other adjustments 22,782 (8,686)

Dividend paid during the year (582,459) (364,037) (582,459) (364,037)

Leaving a balance to be carried forward to the next year of 7,278,122 6,189,643 1,538,924 1,156,987


156


RevenueThe revenue of the Group from its operations amounted to Rs. 11,632 Mn (2014/15 - Rs. 11,444 Mn). Revenue contribution to the Group from different geographical segments is provided in Note 3.2 to the Financial Statements.

DividendsAn interim dividend of Rs. 0.30 per share for the quarter ended 30th June 2015 was paid on 05th August 2015.

The second interim dividend of Rs. 0.10 per share for the nine months ended 31st December 2015 was paid on 30th March 2016.

As required by Section 56 (2) of the Companies Act No. 7 of 2007, the Board of Directors confirmed that the Company satisfied the solvency test in accordance with Section 57 of the Companies Act No. 7 of 2007, and have obtained a certificate from the Auditors, prior to recommending the interim dividends mentioned above, for the financial year ended 31st March 2016.

Provision for TaxationThe details of the tax provision of the Group is disclosed in Note 9 to the Financial Statements.

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on page 163 of the Annual Report.

Property, Plant & EquipmentThe book value of property, plant and equipment as at the reporting date amounted to Rs. 14,273 Mn (2014/15 – Rs. 13,560 Mn) for the Group. Capital expenditure for the Group amounted to Rs. 1,122 Mn (2014/15 – Rs.787 Mn). Details of property, plant and equipment and their movements are given in Note 14 to the Financial Statements.

Market Value of PropertiesFreehold land and buildings of the Group are subject to routine revaluation by independent qualified valuers. The most recent valuation in respect of Group was carried out as at 31st March 2016. Details of property valuations, including the valuation method and effective date of these valuations are provided in Note 14.1 to the Financial Statements.

InvestmentsThe details of investments held by the Company and the Group as at 31st March 2016, are given in Note 17 to the Financial Statements.

Impairment AssessmentThe Board of Directors has evaluated impairment loss in relation to property, plant and equipment, intangible assets and investments. Based on the assessment the investment made by the Company and its subsidiaries do not warrant any impairment in the year 2015/16 (2014/15 – Rs. Nil).

Stated CapitalThe total Stated Capital of the Company as at 31st March 2016 stood at Rs. 9,500.2 Mn (2015 – Rs. 9,500.2 Mn) divided into 1,456,146,780 Ordinary Shares (2015 - 1,456,146,780 Ordinary Shares).

ReservesThe movement of Other Components of Equity and Revenue Reserves of the Company, its Subsidiaries and Joint Ventures are shown in the Statement of Changes in Equity on page 168 of this Report.

Segment ReportingGeographical segment-wise contribution to Group revenue, results, assets and liabilities is provided in Note 2 to the Financial Statements.


157

Share Information and shareholdingsThe market value of an Ordinary Share of the Company as at 31st March 2016 was Rs. 12 (31st March 2015 – Rs. 14.30). Information relating to earnings, dividends, net assets and market value per share is given in page 16 of this Report. The number of shareholders as at 31st March 2016 was 6,568 (31st March 2015 - 6,772). An analysis of shareholders based on shares held, the distribution of ownership and details of share transactions during the year are provided on pages 149 to 151 of this Report. The list of top twenty shareholders of the Company as at 31st March 2016 is also provided on page 151 of this Report.

DirectorsThe Board of Directors of the Company as at 31st March 2016 and their brief profiles are given on pages 26 and 28 of this Report.

Mr. J R F Peiris and Mr. J E P Kehelpannala who retire by rotation in terms of Article 84 of the Articles of Association of the Company and being eligible for re-election are recommended by the Board for re-election. Brief profiles of Mr. J R F Peiris and Mr. J E P Kehelpannala are contained on page 26 of this Report.

Mr. K N J Balendra was appointed to the Board of the Company with effect from 01st of April 2016.

Mr. K N J Balendra retires in terms of the Article 90 of the Article of Association of the Company and being eligible is recommended by the Board for re-election. A brief profile of Mr. K N J Balendra is contained on page 27 of this Report.

Mr. R T Wijesinha having completed his tenure as a Director of the Company for nine years has given notice of his intention to resign from the Board of Directors after the forthcoming Annual General Meeting of the Company.

Board CommitteesThe following members serve on the Board of Audit Committee:

Mr. R T Wijesinha (Chairman)

Mr. N B Weerasekera

Mr. T L F W Jayasekara

The Audit Committee reviewed the type and quantum of non-audit services provided by the external auditors to the Group to ensure that their independence as auditors has not been impaired. The Report of the Audit Committee is given on pages 48 and 49 of this Report.

Human Resources and Compensation CommitteeAs permitted by the Listing Rules of the Colombo Stock Exchange, the Human Resources and Compensation Committee of John Keells Holdings PLC, the Parent Company of John Keells Hotels PLC, functions as the Human Resources and Compensation Committee of the Company. The Human Resources and Compensation Committee of John Keells Holdings PLC comprises of five Independent Non-Executive Directors:

Mr. E F G Amerasinghe - Chairman

Dr. I Coomaraswamy

Mr. D A Cabraal

Mr. M A Omar

Mr. A N Fonseka

The Remuneration Policy of the Company is detailed in the Corporate Governance Report on pages 30 to 47 of this Report.


158

Nominations Committee The mandate and the scope of the Nominations Committee is set out in Page 33 of this Report.

The Nominations Committee members of the parent company are as follows;

Mr. T Das - Chairman

Mr. S C Ratnayake

Mr. M A Omar

Mr. E F G Amerasinghe

Mr. D A Cabraal

Ms. M P Perera

Related Party Transaction Review Committee Related Party Transaction Review Committee of the Parent Company John Keells Holdings PLC functions as Related Party Transactions Review Committee of the Company and its Subsidiaries and conforms to the requirements of the Listing Rules of the Colombo Stock Exchange.

The Related Party Transactions Review Committee members of the parent company are as follows;

Mr. A N Fonseka – Chairman

Mr. E F G Amerasinghe

Mr. D A Cabraal

Mr. S C Ratnayake

Ms. M P Perera

The mandate and the scope of the Related Party Transaction Review Committee is set out on Page 33 of this Report.

Interests RegisterThe Company has maintained an Interests Register as contemplated by the Companies Act No. 7 of 2007. In compliance with the requirements of the Companies Act No. 7 of 2007, this Annual Report also contains particulars of entries made in

the interest registers of subsidiaries and joint ventures which are Public Companies or Private Companies which have not dispensed with the requirement to maintain an interests register as permitted by Section 30 of the Companies Act No. 7 of 2007.

Directors Interests in ContractsAll the Directors have made a general disclosure to the Board of Directors as permitted by Section 192 (2) of the Companies Act No. 7 of 2007 and no additional interests have been disclosed by any Director.

Indemnities and remuneration Fees payable to Non- Executive nominee Directors of John Keells Holdings PLC was paid to John Keells Holdings PLC and not to individual Directors.

Directors’ ShareholdingsThe shares held by Directors and their spouses in the Company and its Subsidiaries as at 31st March 2016 are as follows:

As at 31st March 2016

31st March 2015

Directors

Mr. S.C. Ratnayake 142,877 142,877

Mr. A.D. Gunewardene Nil Nil

Spouses

Mrs. M.V. Ratnayake 407,434 407,434

Mrs. C.A. Gunewardene 74,806 74,806

Total 625,117 625,117

International Tourists & Hoteliers Ltd

Mr. J.E.P. Kehelpannala 150 150



159

Directors’ RemunerationDetails of the remuneration and other benefits received by the Directors of the Company, its subsidiaries and joint ventures are set out in Note 8 to the Financial Statements. Executive Directors’ remuneration is established within a framework approved by the Board’s Remuneration Committee. The Directors are of the opinion that the framework assures appropriateness of remuneration and fairness for the Company. The remuneration of the Non-Executive Directors is determined according to scales of payments decided upon by the Board previously.

Directors MeetingsDetails of the meetings of the Directors are given on page 34.

EmploymentThe Company has an equal opportunity policy and these principles are enshrined in specific selection, training, development and promotion policies, ensuring that all decisions are based on merit. The Group practices equality of opportunity for all employees irrespective of ethnic origin, religion, political opinion, gender, marital status or physical disability. There were no material issues pertaining to employees and industrial relations in the year under review. Details of the Group’s Human Resource initiatives are detailed in pages 117 to 127. The number of persons employed by the Group as at 31st March 2016 was 2,628 (2015 – 2,720)

Statutory PaymentsThe Directors, to the best of their knowledge are satisfied that all statutory payments in relation to the Government and the employees have been either duly paid or appropriately provided for. The income tax position of the Company and its subsidiaries are disclosed in Note 9 to the Financial Statements.

Outstanding LitigationIn the opinion of the Directors and in consultation within the Company Lawyers, litigation currently pending against the Company will not have a material impact on the reported financial results or future operations of the Company.

Supplier PolicyThe Company applies an overall policy of agreeing and clearly communicating terms of payment as part of the commercial agreements negotiated with suppliers, and endeavours to pay for all items properly charged in accordance with these agreed terms. As at 31st March 2016, the trade and other payable of the Group amounted to Rs. 934 Mn (2015 – Rs. 774 Mn) and for the Company amounted to Rs. 15.4 Mn (2015 - Rs. 12.6 Mn).

Sustainability ReportingThe Group is conscious of the impact, direct and indirect, on the environment due to its business activities. Every endeavour is made to minimize the adverse effects on the environment to ensure sustainable continuity of our natural resources. The activities undertaken by the Group in recognition of its responsibility as a corporate citizen are disclosed more fully on pages 128 to 138 of this Report.

DonationsTotal donations made by the Group during the year amounted to Rs. 7.9 Mn (2014/15 – Rs.8.3 Mn). The amount includes contributions on account of Corporate Social Responsibility (CSR) initiatives for which the Group donated Rs.5,469,318/- (2014/15 – Rs.6,221,478/-). The John Keells Social Responsibility Foundation, which operates with funds contributed by each of the companies in the Group, handles most of the Group’s CSR initiatives and activities. The Foundation manages a range of programs that underpin its key principle of acting responsibly in all areas of business to bring about sustainable development. In quantifying the Group’s contribution to charities no account has been taken of ‘in-house’ costs or management time. Donations made by Subsidiaries of the Company were as follows: Ceylon Holiday Resorts Ltd – Rs. 2,641,543 (2014/15 - Rs. 2,718,056/-), Habarana Lodge Ltd - Rs.347,219/- (2014/15 - Rs.412,045), Habarana Walk Inn Ltd - Rs. 934,770/- (2014/15 - Rs. 843,260/-), Kandy Walk Inn Ltd. - Rs. 679,990/- (2014/15 - Rs. 322,169/-), Trinco Holiday Resorts (Pvt) Ltd – Rs. 477,998 - (2014/15– Rs. 299,515/-), Hikkaduwa Holiday Resorts (Pvt) Ltd – Rs. 652,557/- (2014/15 – Rs 625,238/-), Yala Village (Pvt) Ltd - Rs. 991,618/- (2014/15 - Rs.974,081/-), Beruwala Holiday Resorts


160

(Pvt) Ltd, - Rs.788,554/- (2014/15 - Rs. 1,092,300/-), Travel Club (Pte) Ltd, - Rs.152,244/- (2014/15 - Rs.153,519/-), Fantasea World Investments (Pte) Ltd - Rs. 90,587/- (2014/15 - Rs.499,299/-) Tranquility (Pte) Ltd - Rs. 173,972/- (2014/15 - Rs. 312,116/-). The CSR initiatives, including completed and on-going projects, are detailed on page 115 of this Report.

AuditorsThe 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.

Messrs. Ernst & Young, Chartered Accountants have indicated their willingness to continue as Auditors of the Company, accordingly, a resolution proposing their reappointment as Auditors will be proposed at the Annual General Meeting. Details of the Audit Fees paid to the Auditors are set out in Page 194 of this Report. Further details on the work of the Auditor and the Audit Committee are set out in the Audit Committee Report on pages 48 and 49.

Annual ReportThe audited consolidated Financial Statements were approved for issue by the Board of Directors on 27th May 2016. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board on 3rd June 2016.

Annual General MeetingThe Annual General Meeting will be held at 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02, on 30th June 2016 at 3.30 pm. The Notice of the Annual General Meeting appears on page 257. This Annual Report is signed for and on behalf of the Board of Directors by:

Director Director

By Order of the Board

Keells Consultants (Private) LimitedSecretaries

27 May 2016



161

Statement ofDirectors’ Responsibility

The responsibility of the Directors, in relation to the Financial Statements of the John Keells Hotels PLC (Company) and the Consolidated Financial Statements of the Company and its Subsidiaries (Group) is set out in this Statement. This Statement of Directors’ Responsibility is to be read in conjunction with the Report of the Auditors and is made to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the Financial Statements contained in this Annual Report.

The Financial Statements comprise of: Income statement and statement of comprehensive income

of the Company and its subsidiaries, which present a true and fair view of the profit and loss of the Company and its subsidiaries for the financial year.

Statement of financial position, which represents a true and fair view of the state of affairs of the Company and its subsidiaries as at the end of the financial year:

As per the provisions of the Companies Act No. 7 of 2007, the Board of your Company shall cause the Annual General Meeting report to be sent to every shareholder of the Company not less than fifteen working days before the date fixed for holding the Annual General Meeting. The Directors of the Company are required by the provisions of the Companies Act No. 7 of 2007 to prepare Financial Statements which give a true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year, Profit or Loss, Cash flows of the Company and of the Group for the financial year.

The Directors confirm that the Financial Statements of the Company and its subsidiaries for the year ended 31st March 2016 presented in the Report have been prepared in accordance with the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Companies Act No. 7 of 2007 and has provided the information required by and otherwise complied with the listing rules of the Colombo Stock Exchange (CSE) and the code of best practice on Corporate Governance issued jointly by the Institute

of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission of Sri Lanka (SEC).

In preparing the Financial Statements, the Directors have selected appropriate accounting policies and have applied them consistently. Reasonable and prudent judgements and estimates have been made and applicable accounting standards have been followed and the Financial Statements have been prepared on a going concern basis. The Directors are of the view that adequate funds and other resources are available within the Company to continue in operation for the foreseeable future.

The Directors have taken all reasonable steps expected of them to safeguard the assets of the Company and of the Group and to establish appropriate systems of internal controls in order to prevent, deter and detect any fraud, misappropriation or other irregularities. The Directors have also taken all reasonable steps to ensure that the Company and its Subsidiaries maintain adequate and accurate accounting books of record which reflect the transparency of transactions and provide an accurate disclosure of the financial position of the Company and its subsidiaries.

The Directors are required to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspection they consider appropriate for the purpose of enabling them to give an independent Audit Report.

The Directors are of the view that they have discharged their responsibilities as set out in this statement.

Compliance ReportThe Directors confirm that, to the best of their knowledge, all taxes and levies payable by the Company and the subsidiaries and all contributions, levies and taxes payable on behalf of the employees of the Company and its subsidiaries, and all other known statutory obligations as at the Reporting date have been paid or provided for, except as specified in Note 38 to the Financial Statements covering Contingent Liabilities.


162

Further, as required by Section 56(2) of the Companies Act No. 7 of 2007, the Board of Directors have confirmed that the Company, based on the information available, satisfied the solvency test immediately after the distribution of dividend in accordance with Section 57 of the Companies Act No. 7 of 2007.

By Order of the Board


27 May 2016

Statement ofDirectors’ Responsibility


163

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of John Keells Hotels PLC Report on the Financial Statements

We have audited the accompanying financial statements of John Keells Hotels PLC (“Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at 31 March 2016, and the income statement and statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Board’s Responsibility for the Financial Statements

The Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal controls as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on other legal and regulatory requirements

As required by Section 163(2) of the Companies Act No. 7 of 2007, we state the following:

a) The basis of opinion and scope and limitations of the audit are as stated above.

b) In our opinion:

- we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company,

- the financial statements of the Company give a true and fair view of its financial position as at 31 March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, and

- the financial statements of the Company and the Group comply with the requirements of section 151 and 153 of the Companies Act No. 07 of 2007.

27 May 2016 Colombo


164

Income Statement

For the year ended 31st March Group Company

In Rs. ‘000s Note 2016 2015 2016 2015

Revenue 3 11,631,973 11,444,150 - -

Cost of sales (3,436,976) (3,290,496) - -

Gross profit 8,194,997 8,153,654 - -

Dividend income 4 - - 962,744 768,113

Other operating income 5 189,946 109,263 6,869 9,577

Administrative expenses (4,518,006) (4,164,993) (26,155) (22,921)

Distribution expenses (319,504) (305,919) - -

Other operating expenses 6 (1,456,723) (1,451,430) (503) (455)

Results from operating activities 2,090,710 2,340,575 942,955 754,314

Finance expenses 7.2 (182,025) (265,101) (355) (8,448)

Finance income 7.1 127,129 115,835 32,368 6,090

Net finance income/(expenses) (54,896) (149,266) 32,013 (2,358)

Share of results of equity accounted investees 17.4 (593) (622) - -

Profit before tax 8 2,035,221 2,190,687 974,968 751,956

Tax expense 9 (286,422) (322,923) (9,174) (19,039)

Profit for the year 1,748,799 1,867,764 965,794 732,917

Attributable to :

Equity holders of the parent 1,734,543 1,853,724

Non controlling interests 14,256 14,040

1,748,799 1,867,764

Note Rs. Rs.

Earnings per share 10 1.19 1.27

Dividend per share 11 0.40 0.25

Figures in brackets indicate deductions.The notes as set out in pages 172 to 237 form an integral part of these financial statements.


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Statement of Comprehensive Income


In Rs. ‘000s Note 2016 2015 2016 2015

Profit for the year 1,748,799 1,867,764 965,794 732,917

Other comprehensive income

Other comprehensive income to be reclassified to income statement in subsequent periods

Currency translation of foreign operations 1,067,736 204,209 - -

Net gain/(loss) on available for sale financials assets - 4 - 4

Other comprehensive income not to be reclassified to income statement in subsequent periods

Revaluation of land and buildings 14 422,629 560,447 - -

Realisation of revaluation reserve (20,504) - - -

Share of other comprehensive income of equity accounted investees 3,201 - - -

Re-measurement gain/(loss) on defined benefit plans 30 1,608 (10,679) - -

Tax on other comprehensive income 9.3 (8,208) (13,577) - -

Other comprehensive income for the year, net of tax 1,466,462 740,404 - 4

Total comprehensive income for the year, net of tax 3,215,261 2,608,168 965,794 732,921

Attributable to:

Equity holders of the parent 3,196,289 2,587,897

Non-controlling interests 18,972 20,271

3,215,261 2,608,168



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Statement of Financial Position

As at 31st March Group Company

In Rs. ‘000s Note 2016 2015 2016 2015

ASSETS

Non-Current Assets

Property, plant and equipment 14 14,272,874 13,560,033 - -

Lease rentals paid in advance 15 8,537,247 7,861,533 - -

Intangible assets 16 670,407 670,407 - -

Investments in subsidiaries 17 - - 10,623,739 10,552,744

Investments in equity accounted investees 17 67,215 59,296 63,599 58,288

Non-current financial assets 18 185,476 22,798 12 12

Deferred tax assets 19 71,888 55,099 - -

Other non-current assets 20 489 648 - -

23,805,596 22,229,814 10,687,350 10,611,044

Current Assets

Inventories 21 183,071 173,672 - -

Trade and other receivables 22 965,011 942,382 - -

Other current assets 23 340,292 350,086 15,374 12,601

Amounts due from related parties 36 164,879 160,111 1,109 648

Short term investments 24 2,570,671 2,076,400 360,315 -

Cash in hand and at bank 870,080 816,904 6,799 95,195

5,094,004 4,519,555 383,597 108,444

Total Assets 28,899,600 26,749,369 11,070,947 10,719,488

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Stated capital 25 9,500,247 9,500,247 9,500,247 9,500,247

Revenue reserve 7,278,122 6,189,643 1,538,924 1,156,987

Other components of equity 26 6,106,444 4,637,612 (1) (1)

22,884,813 20,327,502 11,039,170 10,657,233

Non controlling interests 132,952 118,187 - -

Total Equity 23,017,765 20,445,689 11,039,170 10,657,233


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In Rs. ‘000s Note 2016 2015 2016 2015

Non-Current Liabilities

Interest bearing borrowings 28 1,852,851 2,900,658 - -

Deferred tax liabilities 29 236,468 178,859 - -

Employee benefit liability 30 156,077 141,005 - -

Other deferred liabilities 31 84,401 77,926 - -

Non-current financial liabilities 32 78,418 67,919 - -

2,408,215 3,366,367 - -

Current Liabilities

Trade and other payables 33 934,026 774,493 15,411 12,995

Other current liabilities 35 252,080 265,515 - -

Amounts due to related parties 36 159,970 125,121 1,929 6,738

Income tax liabilities 34 254,642 359,015 14,399 9,081

Current portion of interest bearing borrowings 28 1,150,925 1,295,992 - 33,441

Bank overdrafts 721,977 117,177 38 -

3,473,620 2,937,313 31,777 62,255

Total Equity and Liabilities 28,899,600 26,749,369 11,070,947 10,719,488

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

D.A.R.C. PereraChief 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 PeirisChairman Director

The notes as set out in pages 172 to 237 form an integral part of these financial statements.

27 May 2016


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Statement of Changes in Equity

Attributable to Equity Holders of the ParentGROUP

In Rs. ‘000s Note

StatedCapital

RevaluationReserve

Foreign currencytranslation

Reserve

Employee share option plan

Reserve

As at 1st April 2014 9,500,247 2,614,915 1,267,341 4,674 Profit for the year - - - - Other comprehensive income - 538,907 204,209 - Total comprehensive income - 538,907 204,209 - Share based payment - - - 8,824 Transfers - (1,257) - - Direct cost on issue of shares - - - - Interim dividend paid - 2014/15 - - - - Subsidiary dividend to non-controlling interest - - - - As at 31st March 2015 9,500,247 3,152,565 1,471,550 13,498 Charge relating to Super Gain Tax 9.1 - - - - Profit for the year - - - - Other comprehensive income - 391,579 1,067,736 - Total comprehensive income - 391,579 1,067,736 - Realisation of revaluation reserve - - - -Share based payment - - - 9,517 Direct cost on issue of shares - - - -Interim dividend paid - 2015/16 - - - -Subsidiary dividend to non-controlling interest - - - -As at 31st March 2016 9,500,247 3,544,144 2,539,286 23,015

COMPANYIn Rs. ‘000s Note

StatedCapital

Available For Sale Reserve

Revenue Reserve

TotalEquity

As at 1st April 2014 9,500,247 (5) 788,107 10,288,349 Profit for the year - - 732,917 732,917 Other comprehensive income - 4 - 4 Total comprehensive income - 4 732,917 732,921 Interim dividend paid - 2014/15 - - (364,037) (364,037)As at 31st March 2015 9,500,247 (1) 1,156,987 10,657,233 Charge relating to Super Gain Tax 9.1 - - (1,398) (1,398)Profit for the year - - 965,794 965,794 Other comprehensive income - - - - Total comprehensive income - - 965,794 965,794 Interim dividend paid - 2015/16 - - (582,459) (582,459)As at 31st March 2016 9,500,247 (1) 1,538,924 11,039,170



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Non-controlling

Interest

TotalEquityAvailable

For SaleReserve

Revenue Reserve

Total

(5) 4,708,642 18,095,814 100,442 18,196,256 - 1,853,724 1,853,724 14,040 1,867,764 4 (8,947) 734,173 6,231 740,404 4 1,844,777 2,587,897 20,271 2,608,168 - - 8,824 115 8,939 - 1,257 - - - - (996) (996) - (996) - (364,037) (364,037) - (364,037) - - - (2,641) (2,641)

(1) 6,189,643 20,327,502 118,187 20,445,689 - (86,387) (86,387) (1,485) (87,872) - 1,734,543 1,734,543 14,256 1,748,799 - 2,431 1,461,746 4,716 1,466,462 - 1,736,974 3,196,289 18,972 3,215,261- 20,504 20,504 - 20,504- - 9,517 83 9,600 - (153) (153) - (153)- (582,459) (582,459) - (582,459)- - - (2,805) (2,805)

(1) 7,278,122 22,884,813 132,952 23,017,765


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Statement of Cash Flows


In Rs. ‘000s Note 2016 2015 2016 2015

Cash flows from operating activitiesProfit before taxation 2,035,221 2,190,687 974,968 751,956

Adjustments for;Depreciation of property, plant and equipment 980,767 918,039 - - Provision for employee benefit costs 30,578 25,067 - - Share based payment expense 9,600 8,939 - - Amortisation of lease rentals paid in advance 700,853 672,417 - - Finance expense 182,025 265,101 355 8,448 Amortisation of grant received (325) (325) - - Dividend received - - (962,744) (768,113)Finance income (127,129) (115,835) (32,368) (6,090)(Profit)/Loss on disposal of property, plant and equipment 43,118 2,205 - - Profit on sale of lease right (121,341) - - - Share of results of equity accounted investees 593 622 - - Provision for slow moving inventories (787) (368) - - Provision for Impairment losses 4,891 1,963 - - Provision for deferred liabilities 6,800 35,729 - - Unrealised (gain) / loss on foreign exchange (net) 156,353 36,968 - - Operating profit/(loss) before working capital changes 3,901,217 4,041,209 (19,789) (13,799)

(Increase)/decrease in inventories (8,612) 23,362 - - (Increase)/decrease in trade and other receivables 41,530 4,191 - - (Increase)/decrease in other current assets (4,698) (11,107) (2,773) (9,807)(Increase)/decrease in amounts due from related parties (4,768) (21,896) (461) 4,865 Increase/(decrease) in amounts due to related parties 34,849 14,366 (4,809) 6,036 Increase/(decrease) in other current liabilities (416) 13,131 - - Increase/(decrease) in trade and other payables 159,533 (83,769) 2,416 (669)Cash generated from/(used in) operations 4,118,635 3,979,487 (25,416) (13,374)

Finance expenses paid (182,025) (265,101) (355) (8,448)Tax paid including super gain tax (434,083) (279,348) (5,254) (15,236)Finance income received 127,129 115,835 32,368 6,090 Dividend received - - 962,744 768,113 Gratuity paid/transfers (13,898) (8,577) - - Net cash flows from/(used in) operating activities 3,615,758 3,542,296 964,087 737,145


171


In Rs. ‘000s Note 2016 2015 2016 2015

Cash flows from investing activitiesPurchase and construction of property, plant and equipment (1,122,404) (787,299) - - Proceeds from sale of property, plant and equipment 25,149 55,431 - - (Investment)/withdrawal in short term investments (net) (653,038) (511,600) - - Purchase of lease rights (607,155) (167,000) - - (Purchase)/disposal of non-current financial assets (net) (1,321) (224) - - Proceeds from repayment of loans given to related parties - - - - Increase in interest in subsidiaries and joint ventures (5,311) - (76,306) (212,131)Grant received for investing activities - 2,386 - - Net cash flows from/(used) in investing activities (2,364,080) (1,408,306) (76,306) (212,131)

Cash flows from financing activitiesDirect cost on issue of shares (153) (996) - - Dividend paid to equity holders of parent (582,459) (364,037) (582,459) (364,037)Repayments of long term borrowings (1,376,652) (2,686,836) (33,441) (100,000)Proceeds from long term borrowings - 730,315 - - Subsidiary dividend to non-controlling interest (2,805) (2,641) - - Net cash flows from/(used in) financing activities (1,962,069) (2,324,195) (615,900) (464,037)Net increase/(decrease) in cash and cash equivalents (710,391) (190,205) 271,881 60,977 Cash and cash equivalents at the beginning of the year 1,836,994 2,027,199 95,195 34,218 Cash and cash equivalents at the end of the year 1,126,603 1,836,994 367,076 95,195

ANALYSIS OF CASH & CASH EQUIVALENTSShort term investments 24 978,500 1,137,267 360,315 - Cash in hand and at bank 870,080 816,904 6,799 95,195 Bank overdrafts (721,977) (117,177) (38) -

1,126,603 1,836,994 367,076 95,195



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Notes to the Financial Statements

1.1. Corporate Information

Reporting Entity

John Keells Hotels PLC. is a public limited liability Company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered office and principal place of business of the Company is located at 117, Sir Chittampalam A Gardiner Mawatha, Colombo 2.

In the Director’s opinion, the Company’s parent undertaking is John Keells Holdings PLC, which is a Company incorporated in Sri Lanka.

Consolidated Financial Statements

The Financial Statements for the year ended 31 March 2016, comprise “the Company” referring to John Keells Hotels PLC as the holding Company and “the Group” referring to the companies whose accounts have been consolidated therein.

Approval of Financial Statements

The Financial statements for the year ended 31 March 2016 were authorised for issue by the Directors on 27 May 2016.

Principal Activities and Nature of Operations

Holding Company

John Keells Hotels PLC, the Group’s holding Company, manages a portfolio of holdings consisting of hoteliering business, which together constitute the John Keells Hotels Group.

Subsidiaries and Joint Ventures

The Companies within the Group are shown in the Group Structure on page 12. The subsidiaries and the joint venture are involved in the business of hoteliering.

There were no significant changes in the nature of the principal activities of the Company and the Group during the financial year under review.

Responsibility for Financial Statements

The responsibility of the Directors in relation to the financial statements is set out in ‘The statement of Director’s responsibility’ on pages 161 of this report.

Statement of compliance

The financial statements which comprise the income statement, statement of comprehensive income, statement of financial position, statement of changes in equity and the statement of cash flows, together with the accounting policies and notes (the “financial statements”) have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS/ LKAS) as issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the requirement of the Companies Act No. 7 of 2007.

1.2. Basis of Preparation

Bases of Measurement

The consolidated financial statements have been prepared on an accrual basis and under the historical cost convention, other than land and buildings, and available-for-sale financial assets that have been measured at fair value.

Presentation and Functional Currency

The consolidated Financial Statements are presented in Sri Lankan Rupees, the Group’s functional and presentation currency, which is the primary economic environment in which the Holding Company operates. Each entity in the Group uses the currency of the primary economic environment in which they operate as their functional currency.


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The following subsidiaries are using United States Dollar (USD) as its functional currency;

John Keells Maldivian Resorts (Pvt) Ltd.

Fantasea World Investments (Pvt) Ltd.

Tranquility (Pvt) Ltd.

Travel Club (Pvt) Ltd.

Each material class of similar items is presented cumulatively in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard-LKAS 1, ‘Presentation of Financial Statements’.

All values are rounded to the nearest rupees thousand (Rs. ’000) except when otherwise indicated.

The significant accounting policies are discussed in Note 1.3 below.

The indicative US Dollar Financial Statements on pages 240 and 242 does not form part of the Financial Statements prepared in accordance with SLFRS/LKAS.

Basis of consolidation

The consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries as at 31st March 2016. Control over an investee is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

Exposure, or rights, to variable returns from its involvement with the investee

The ability to use its power over the investee to affect its returns

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Subsidiaries

Subsidiaries are those enterprises controlled by the parent and have been listed in the Group directory.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, which is 12 months ending 31 March, using consistent accounting policies.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while


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any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

The total profits and losses for the year of the Company and of its subsidiaries included in consolidation are shown in the consolidated income statement and consolidated statement of comprehensive income and all assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the consolidated statement of financial position.

Non-controlling interest which represents the portion of profit or loss and net assets not held by the Group, are shown as a component of profit for the year in the consolidated income statement and statement of comprehensive income and as a component of equity in the consolidated statement of financial position, separately from equity attributable to the shareholders of the parent.

The consolidated statement of cash flow includes the cash flows of the Company and its subsidiaries.

Comparative information

The presentation and classification of the financial statements of the previous years have been amended, where relevant for better presentation and to be comparable with those of the current year, and includes the reclassification of depreciation in full under administration expenses.

1.3. Accounting Policies

1.3.1 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Financial Statements of the Group require the management to make judgments, estimates and assumptions, which may affect the amounts of income, expenditure, assets , liabilities and the disclosure of contingent liabilities, at the end of the reporting period. In the process of applying the Group’s accounting policies, the key assumptions made relating to the future and

the sources of estimation at the reporting date together with the related judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are discussed below.

Other disclosures relating to the Group’s exposure to risks and uncertainties includes:

Financial risk management and policies - Note 13

Sensitivity analysis disclosures - Note 13

Capital management - Note 13.4

Revaluation of property, plant and equipment.

The Group measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income and in the statement of equity. The Group engaged independent valuation experts to determine fair value of identified land and buildings as at 31st March 2016.

The valuer has used valuation techniques such as market values and discounted cash flow methods where there was lack of comparable market data available based on the nature of the property.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active 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 are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most



175

sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, are further explained in Note 16.

Taxes

The Group is subject to income tax and other taxes including VAT. Significant judgement was required to determine the total provision for current, deferred and other taxes due to the uncertainties that exists with respect to the interpretation of the applicability of tax laws, at the time of the preparation of these financial statements.

Uncertainties also exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. Where the final tax outcome of such matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

Management has used its judgement on the application of tax laws including transfer pricing regulations involving identification of associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanism.

The Group has tax losses relating to subsidiaries that have a history of losses that do not expire and may not be used to offset other tax liabilities and where the subsidiaries have no taxable temporary differences nor any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets. Further details on tax provisions are disclosed in note 9 to the financial statements.

Employee Benefit Liability

The employee benefit liability of the Group is based on the actuarial valuation carried out by Independent actuarial specialist. The actuarial valuations involve making assumptions about discount rates and future salary increases. The complexity of the valuation, the underlying assumptions and its long term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Details of the key assumptions used in the estimates are contained in Note 30 to the Financial Statements.

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible.

Where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments, are further explained in Note 13 to the Financial Statements.

1.4 Summary of Significant Accounting PoliciesThese accounting policies have been applied consistently by Group entities.

1.4.1 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group, and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and value added taxes, after eliminating sales within the Group.


176

The following specific criteria are used for recognition of revenue:

Rendering of services

Revenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

Room revenue is recognised on the rooms occupied on a daily basis and food and beverage and other related sales are accounted for at the time of sale.

Turnover based taxes

Turnover based taxes include value added tax, economic service charge, nation building tax, Pradeshiya Sabha levy, tourism development levy and bed tax/green tax. Companies in the Group pay such taxes in accordance with the respective statutes.

Dividend

Dividend income is recognised when the Group’s right to receive the payment is established.

Finance income

Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets.

Interest income is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset.

Gains and losses

Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.

Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a Group of similar transactions, which are not material are aggregated, reported and presented on a net basis.

Other income

Other income is recognised on an accrual basis.

1.4.2 Expenditure recognition

Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the income statement.

For the purpose of presentation of the income statement, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company’s and Group’s performance.

Finance costs

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, losses on disposal of available for- sale financial assets, impairment losses recognised on financial assets (other than trade receivables) that are recognised in the income statement.

Interest expense is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial liability.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are



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expensed in the period they occur. Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds.

1.4.3 Tax

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and for items recognized in other comprehensive income shall be recognised in other comprehensive income and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, where the timing of the reversal of

the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, and unused tax credits and tax losses carried forward, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the unused tax credits and tax losses carried forward can be utilized except:

where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realised or liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the reporting date.


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Deferred tax relating to items recognised outside the income statement is recognised outside the income statement. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

No deferred tax asset or liability has been recognised in the Companies which are enjoying the BOI Tax Holiday period, as

there are no qualifying assets or liabilities beyond the BOI period.

Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

1.4.4 Current versus non-current classification

The Group presents assets and liabilities in statement of financial position based on current/non-current classification. An asset as current when it is:

expected to be realised or intended to sold or consumed in normal operating cycle

held primarily for the purpose of trading

expected to be realised within twelve months after the reporting period, or

cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

it is expected to be settled in normal operating cycle

it is held primarily for the purpose of trading

it is due to be settled within twelve months after the reporting period, or

there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities accordingly.

1.4.5 Fair value measurement

Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed, are summarised in the following notes:

Disclosures for valuation methods, significant estimates and assumptions - notes 12.1, 12.4

Quantitative disclosures of fair value measurement hierarchy - note 12.2

Investment in unquoted equity shares - note 17,18

Property, plant and equipment under revaluation model - note 14.1

Financial instruments (including those carried at amortised cost) - note 12.1

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



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The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group determines the policies and procedures for both recurring fair value measurement, such as unquoted AFS financial assets, and for non-recurring measurement, such as assets held for distribution in discontinued operations.

External valuers are involved for valuation of significant assets, such as land and buildings. Involvement of external valuers is decided upon annually by the Group after discussion with and approval by the Company’s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. After discussions with the Group’s external valuers, the Group decides which valuation techniques and inputs to be used for each case.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

1.4.6 Property, plant and equipment

Basis of recognition

Property, plant and equipment are recognized if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured.

Basis of measurement

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss. Such cost includes the cost of replacing component parts of the


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plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Group de-recognises the replaced part, and recognises the new part with its own associated useful life and depreciation. All other repair and maintenance costs are recognised in the income statement as incurred.

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment charged subsequent to the date of the revaluation.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Where land and buildings are subsequently revalued, the entire class of such assets is revalued at fair value on the date of revaluation. The Group has adopted a guideline of revaluing assets by a professional valuer at least once in every five years.

Any revaluation surplus is recognised in other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

De-recognition

An item of property, plant and equipment are derecognised upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset is included in the income statement in the year the asset is derecognised.

Depreciation

Depreciation is calculated by using a straight-line method on the cost or valuation of all property, plant and equipment, other than freehold land, in order to write off such amounts over the estimated useful economic life of such assets or over the unexpired period of lease, whichever is lower.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

The estimated useful life of assets is as follows:

Assets Years

Buildings on leasehold land Estimated lease period

Buildings freehold land up to 60

Plant and machinery 03 - 10

Equipment 05 - 08

Furniture and fittings 05 - 08

Motor vehicles 05

Computer equipment 05

Cutlery, crockery and glassware and linen 03

Marine vessels 04 - 05

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end.



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Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

1.4.7 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

For arrangements entered into prior to 1 April 2011, the date of inception is deemed to be 1 April 2012 in accordance with the SLFRS 1.

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease

payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Lease rentals paid in advance

Prepaid lease rentals paid to acquire land use rights are amortised over the lease term. Details of the Leasehold Property are given in Note 15 to the Financial Statements.

1.4.8 Intangible assets

Basis of recognition

An Intangible asset is recognised if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured.

Business combinations & goodwill

Business combinations are accounted for using the acquisition method of accounting. The Group measures goodwill at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

When the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree is lower than the fair value of net


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assets acquired, a gain is recognised immediately in the income statement.

The Group elects on a transaction-by-transaction basis whether to measure non-controlling interests at fair value, or at their proportionate share of the recognised amount of the identifiable net assets, at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability, which is a financial instrument and within the scope of LKAS 39, is measured at fair value with changes in fair value either in income statement or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS/LKAS.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value maybe impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the carrying amount of each asset in the unit.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

1.4.9 Investment in subsidiaries and joint venture

Investment In subsidiaries and joint venture are initially recognised at cost in the financial statements of the Company. Any transaction cost relating to acquisition of investment in subsidiaries and joint venture are immediately recognised in the income statement. Following initial recognition, Investment In subsidiaries and joint venture are carried at cost less any accumulated impairment losses.



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1.4.10 Equity accounted investees

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Joint ventures entered into by the Group, which have been accounted for using the equity method, is

Name Country of incorporation

Sentinel Realty Pvt Ltd Sri Lanka

The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries.

Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The Income statement reflects the Group’s share of the results of operations of the joint venture. Any change in Other Comprehensive Income (OCI) of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity.

Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.

The share of profit or loss of a joint venture is shown on the face of income statement outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint venture.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, and then recognises the loss as ‘Share of profit of a joint venture’ in the income statement.

Upon loss of joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in the income statement.

1.4.11 Foreign currency translation

Foreign currency transactions and balances

The consolidated financial statements are presented in Sri Lanka rupees, which is the Company’s functional and presentation currency.

The functional currency is the currency of the primary economic environment in which the entities of the Group operate.

All foreign exchange transactions are converted to functional currency, at the rates of exchange prevailing at the time the transactions are effected.

Monetary assets and liabilities denominated in foreign currency are translated to functional currency equivalents at the spot exchange rate prevailing at the reporting date.


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Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. The gain or loss arising on translation of non-monetary items is treated in line with the recognition of gain or loss on changing fair value of the item.

Foreign operations

The statement of financial position and income statement of overseas subsidiaries which are deemed to be foreign operations are translated to Sri Lanka rupees at the rate of exchange prevailing as at the reporting date and at the average annual rate of exchange for the period respectively.

The Exchange rates applicable during the period were as follows:

Reporting Date Income Statement

2016 Rs.

2015 Rs.

2016 Rs.

2015 Rs.

US dollar 147.65 133.45 139.18 131.24

The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income relating to that particular foreign operation is recognised in the income statement.

The Group treated goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition as assets and liabilities of the parent. Therefore, those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur.

1.4.12 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses are recognised in the income statement, except that, impairment losses in respect of property, plant and equipment previously revalued are recognized against the revaluation reserve through the statement of other comprehensive income to the extent that it reverses a previous revaluation surplus.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation



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increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. The following criteria are also applied in assessing impairment of specific assets:

Goodwill

Goodwill is tested for impairment annually (as at 31 March) and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

1.4.13 Financial instruments — initial recognition and subsequent measurement

i) Financial assets

Initial recognition and measurement

Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables and quoted and unquoted financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs.

Available-for-sale financial investments

Available-for-sale financial investments include equity investments. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the income statement in finance costs and removed from the available-for-sale reserve.

The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances.


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Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognised in equity is amortised to the income statement over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.

Derecognition

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired

The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.

In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

ii) Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the Group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Group of financial assets with



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similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the income statement.

Available-for-sale financial investments

For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairments are recognised directly in other comprehensive income.

iii) Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, other non-current financial liabilities and financial guarantee contracts.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:


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Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

iv) Offsetting of financial instruments

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

1.4.14 Inventories

Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price less estimated costs of completion and the estimated costs necessary to make the sale.

The costs incurred in bringing inventories to its present location and condition, are accounted for as follows:

Food and Beverage - On a weighted average basis

House Keeping and Maintenance - On a weighted average basis

Other inventories - At actual cost

1.4.15 Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the cashflow statement, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

1.4.16 Employee share option plan

Employees of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity settled transaction).

The Group applies SLFRS 2 - Share Based Payments - in accounting for employee remuneration in the form of shares, from 2013/14 financial year onwards.

Equity-settled transactions

The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense (Note 27).



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No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

1.4.17 Defined benefit plan - gratuity

The liability recognised in the statement of financial position is the present value of the defined benefit obligation at the reporting date using the projected unit credit method. Any actuarial gains or losses arising are recognised immediately in the other comprehensive income this was previously recognized in income statement. The liability is not externally funded.

1.4.18 Defined contribution plan - Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund and Employees’ Trust Fund contributions in line with respective statutes and regulations. The companies contribute the defined percentages of gross emoluments of employees to an approved Employees’ Provident Fund and to the Employees’ Trust Fund respectively, which are externally funded.

1.4.19 Government grants

Grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match to the costs, that it is intended to compensate.

Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments.

Where the Group receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the income statement over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual instalments.

1.4.20 Provisions, contingent assets and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

All contingent liabilities are disclosed as a note to the financial statements, unless the outflow of resources is remote. A contingent liability recognised in a business combination is initially measured at its fair value.

Subsequently, it is measured at the higher of:

The amount that would be recognised in accordance with the general guidance for provisions above (LKAS 37) or


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The amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition (LKAS 18)

Contingent assets are disclosed, where inflow of economic benefit is probable.

1.5 Sri Lanka Accounting Standards (SLFRS/LKAS) Issued but not yet EffectiveThe following SLFRS have been issued by CA Sri Lanka that have an effective date in the future and have not been applied in preparing these financial statements. Those SLFRS will have an effect on the accounting policies currently adopted by the Company and may have an impact on the future financial statements.

SLFRS 9 - Financial Instruments: Classification and Measurement

SLFRS 9, as issued reflects the first phase of work on replacement of LKAS 39 and applies to classification and measurement of financial assets and liabilities. This standard is originally effective for annual periods commencing on or after 01 January 2018. However the effective date has been deferred subsequently.

SLFRS 15 Revenue from Contracts with Customers

SLFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under SLFRS 15, revenue is recognised as an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in SLFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all

entities and will supersede all current revenue recognition requirements under SLFRS 15. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Group is currently assessing the impact of SLFRS 15 and plans to adopt the new standard on the required effective date.

The following amendments and improvements are not expected to have a significant impact on the Group’s and the Company’s financial statements.

Accounting for Acquisitions of Interests in Joint Operations (Amendments to SLFRS 11), Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to LKAS 16 and LKAS 38), Equity Method in Separate Financial Statements (Amendments to LKAS 27), Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to SLFRS 10 and LKAS 28), Annual Improvements to SLFRSs 2012–2014 Cycle – various standards, Investment Entities: Applying the Consolidation Exception (Amendments to SLFRS 10, SLFRS 12 and LKAS 28). Disclosure Initiative (Amendments to LKAS 1).

1.6 Segment Information

Operating segments

The Group’s segments are determined based on the Group’s geographical spread of operations.

The Group’s internal organization and management is structured based on the Group’s geographical spread of operations. The geographical analysis of turnover and profits are based on the location of the operations.



191

2 Operating Segment InformationThe following tables present revenue, profit, assets and liabilities based on the Group’s operating segments.

For the year ended 31st March Sri Lanka Maldives Group

In Rs. ‘000s 2016 2015 2016 2015 2016 2015

Total Revenue 5,561,283 5,175,184 6,179,107 6,384,872 11,740,390 11,560,056

Less: inter segment revenue (14,353) (27,212) (94,064) (88,694) (108,417) (115,906)

Segment revenue 5,546,930 5,147,972 6,085,043 6,296,178 11,631,973 11,444,150

Segment operating profit 832,541 863,942 1,068,223 1,367,370 1,900,764 2,231,312

Other operating income 128,740 (9,812) 61,206 119,075 189,946 109,263

Finance expenses (167,269) (221,306) (14,756) (43,795) (182,025) (265,101)

Finance income 110,442 93,670 16,687 22,165 127,129 115,835

Share of results of equity accounted investees (593) (622) - - (593) (622)

Profit before tax 903,861 725,872 1,131,360 1,464,815 2,035,221 2,190,687

Tax expense (131,094) (115,954) (155,328) (206,969) (286,422) (322,923)

Profit for the year 772,767 609,918 976,032 1,257,846 1,748,799 1,867,764

Assets

Segment assets 15,004,954 14,332,793 13,224,239 11,746,169 28,229,193 26,078,962

Goodwill 670,407 670,407

Total assets 28,899,600 26,749,369

Liabilities

Segment liabilities 4,165,437 4,795,845 1,716,398 1,507,835 5,881,835 6,303,680

Total liabilities 5,881,835 6,303,680

Other Information

Purchase and construction of property, plant and equipment 410,622 595,007 711,782 192,292 1,122,404 787,299

Depreciation of property, plant and equipment 581,645 578,972 399,122 339,067 980,767 918,039

Amortisation of lease rentals paid in advance 3,300 3,507 697,553 668,910 700,853 672,417

Provision for employee benefit costs 30,578 25,067 - - 30,578 25,067


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In Rs. ‘000s 2016 2015 2016 2015

3 Revenue3.1 Summary

Gross revenue 11,707,650 11,580,470 - -

Less : Green tax / Bed tax (75,677) (136,320) - -

Net revenue 11,631,973 11,444,150 - -

Value Added Tax and Goods & Services Tax of Rs. 1,461 Mn (2015 - Rs. 1,288 Mn) have been deducted in arriving at the gross revenue.

For the year ended 31st March Group

In Rs. ‘000s 2016 2015

3.2 Revenue Analysis of the Group by Geographical Segment

Segment

Sri Lankan hotels 5,546,930 5,147,972

Maldivian hotels 6,085,043 6,296,178

11,631,973 11,444,150


In Rs. ‘000s 2016 2015

3.3 Profit Before Tax of the Group by Geographical Segment

Segment

Sri Lankan hotels 903,861 725,872

Maldivian hotels 1,131,360 1,464,815

2,035,221 2,190,687


193


In Rs. ‘000s 2016 2015 2016 2015

4 Dividend IncomeIncome from investments in subsidiaries - - 962,744 768,113

- - 962,744 768,113


In Rs. ‘000s Note 2016 2015 2016 2015

5 Other Operating IncomeExchange gain - 85,625 3 (64)Gain on sale of lease right 5.1 121,341 - - - Amortisation of grant received 325 325 - -Sundry income 68,280 23,313 6,866 9,641

189,946 109,263 6,869 9,577

5.1 Gain on sale of lease right

During the year, Rajawella Hotels Company Ltd, a subsidiary of John Keells Hotels PLC, disposed of its lease right at Mahaberiatenna, Kandy to Rajawella Holdings Ltd, a subsidiary of John Keells Holdings PLC, for a sum of Rs. 161,357,156/-, which was settled through the issue of 1,490,597 ordinary shares of Rajawella Holdings Ltd. Accordingly, a gain of Rs.121,341,244/- is reflected under other operating income.


In Rs. ‘000s 2016 2015 2016 2015

6 Other Operating ExpensesExchange loss 88,617 - - - Power and Energy 514,732 651,995 - - Maintenance and repair cost 253,232 230,001 - - Loss on sale of property, plant and equipment 43,118 2,205 - - Nation Building Tax 121,355 113,000 - - Operating fees 325,610 342,713 - - Other overheads 110,059 111,516 503 455

1,456,723 1,451,430 503 455


194



In Rs. ‘000s 2016 2015 2016 2015

7 Net Finance Income / Expense7.1 Finance Income

Interest income 127,129 115,835 32,368 6,090 127,129 115,835 32,368 6,090

7.2 Finance expenseInterest expense on borrowings 182,025 265,101 355 8,448

182,025 265,101 355 8,448 Net finance income / (expense) (54,896) (149,266) 32,013 (2,358)


In Rs. ‘000s 2016 2015 2016 2015

8 Profit Before Tax Profit before tax is stated after charging all expenses including

the following;

Remuneration to executive directors 18,396 18,171 3,996 3,771 Remuneration to non executive directors 3,600 3,375 3,600 3,375 Auditors’ remuneration Audit 9,976 8,887 1,102 1,035 Non-audit 6,217 5,587 794 384Cost of defined employee benefits Defined benefit plan cost 30,578 25,067 - - Defined contribution plan cost-(EPF and ETF) 75,133 68,969 - - Staff expenses 1,767,935 1,700,022 - - Depreciation of property, plant and equipment 980,767 918,039 - - Donations 7,941 8,251 - - Amortisation of lease rentals paid in advance 700,853 672,417 - - Provision for Impairment losses 4,891 1,963 - - Provision/(reversal) for slow moving inventories (787) (368) - - Loss on disposal of property, plant and equipment 43,118 2,205 - - Operating lease rentals 231,712 226,926 - - Business expansion expenses 2,373 1,753 2,373 463


195


In Rs. ‘000s Note 2016 2015 2016 2015

9 Tax ExpenseCurrent income tax

Current tax charge 9.2 248,615 291,811 10,986 1,705

Under/(over) provision of current tax in respect of prior years (16,200) 6,190 (1,812) 17,334

10% withholding tax on inter company dividends 18,302 20,226 - -

Irrecoverable Economic Service Charge 446 - - -

Deferred income tax

Relating to origination and reversal of temporary differences 9.4 35,259 4,696 - -

Tax expense reported 286,422 322,923 9,174 19,039

9.1 Super Gain Tax

As per the provisions of Part III of the Finance Act,No. 10 of 2015, the Group and the Company was liable for Super Gain tax of Rs.87.9 Mn and Rs.1.4 Mn respectively . According to the Act, the super gain tax shall be deemed to be an expenditure in the financial statements relating to the year of assessment which commenced on 1 April 2013.The Act supersedes the requirements of the Sri Lanka Accounting Standards and hence the expense of super gain tax is accounted in accordance with the requirements of the said Act as recommended by the Statement of Alternative Treatment (SoAT) on Accounting for Super Gain Tax issued by the Institute of Chartered Accountants of Sri Lanka, dated 24 November 2015.


196


9.2 Reconciliation between current tax charge and the accounting profit


In Rs. ‘000s 2016 2015 2016 2015

Profit before tax 2,035,221 2,190,687 974,968 751,956

Dividend income from Group companies 962,744 768,113 - -

Share of results of equity accounted investees (593) (622) - -

Other consolidation adjustments 3,816 - - -

Profit after adjustments 3,001,188 2,958,178 974,968 751,956

Dividends not subjected to income tax (962,744) (768,113) (962,744) (768,113)

Income not subject to income tax (121,409) (3,952) - -

Income exempt from income tax (118,987) (77,086) - -

Adjusted accounting profit/(loss) chargeable to income taxes 1,798,048 2,109,027 12,224 (16,157)

Disallowable expenses 1,897,497 1,692,162 - 62

Allowable expenses (1,977,077) (1,744,213) - -

Utilization of tax losses (120,589) (146,553) - -

Qualifying payment deductions and tax free allowances (4,513) (4,255) - -

Tax losses not utilised in the current financial year 53,860 56,649 27,010 22,183

Taxable income 1,647,226 1,962,817 39,234 6,088

Current tax charged at

Standard rate of 28% (2015 - 28%) 25,004 15,162 10,986 1,705

Income tax charged at 15% (2015 - 15%) 183,161 237,752 - -

Concessionary rate of 12% (2015 - 12%) 40,450 38,897 - -

Current tax charge 248,615 291,811 10,986 1,705


197

9.3 Reconciliation between tax expense and the product of accounting profit


In Rs. ‘000s 2016 2015 2016 2015

Adjusted accounting profit/(loss) chargeable to income taxes 1,798,048 2,109,027 12,224 (16,157)

Tax effect on chargeable profits 266,750 310,860 3,423 (4,524)

Tax effect on non deductible expenses 15,330 3,606 - 17

Tax effect on deductions claimed (14,158) (17,939) - -

Net tax effect of unrecognised deferred tax assets for the year 31,769 8,277 7,563 6,212

Net tax effect of deferred tax in respect of previous year (15,817) (8,297) - -

Under / (over) provisions of current tax in respect of prior years (16,200) 6,190 (1,812) 17,334

Other income based taxes

Irrecoverable Economic Service Charge 446 - - -

10% withholding tax on inter company dividends 18,302 20,226 - -

Total tax expense 286,422 322,923 9,174 19,039

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.


198



In Rs. ‘000s 2016 2015 2016 2015

9.4 Deferred Tax Expense

Income statement

Deferred tax arising from

Accelerated depreciation for tax purposes 1,135 8,458 - -

Benefit arising from tax losses 35,960 (1,492) - -

Employee benefits liability (1,836) (2,270) - -

35,259 4,696 - -

Other comprehensive income

Deferred tax arising from

Employee benefits liability (847) (1,535) - -

Revaluation of land and building to fair value 9,055 15,112 - -

8,208 13,577 - -

Deferred Tax has been computed at the following rates :

Subsidiary companies in Sri Lanka engaged in promotion of tourism - 12%. Yala Village (Pvt) Ltd and subsidiaries in Maldives - 15%.Others - 28%.


In Rs. ‘000s 2016 2015 2016 2015

9.5 Tax Losses Carried Forward

Tax losses brought forward 2,345,947 2,530,131 22,183 37,509

Adjustments on finalisation of liability (32,003) (94,280) (22,183) (37,509)

Tax losses arising during the year 53,860 56,649 27,010 22,183

Utilisation of tax losses (120,589) (146,553) - -

2,247,215 2,345,947 27,010 22,183


199

9.6 Applicable rates of Income Tax

Companies which undertake 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 exemption and concessions under the law of Board of Investment (BOI).

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 2011/2012.

III Profits and income of Beruwala Holiday Resorts (Pvt) Ltd are exempt from tax for a period of 8 years from the year of assessment 2014/15.

9.7 Income Tax rates of off-shore Companies

I The following subsidiaries based in the Republic of Maldives, are subject to Income Tax at 15% with effect from 18th July 2011.

John Keells Maldivian Resorts (Pvt) LtdTravel Club (Pvt) LtdFantasea World Investments (Pvt) LtdTranquility (Pvt) Ltd


In Rs. ‘000s 2016 2015

10 Earnings Per ShareProfit attributable to equity holders of the parent 1,734,543 1,853,724

Weighted average number of ordinary shares 1,456,147 1,456,147

Basic earnings per share - Rs. 1.19 1.27


In Rs. ‘000s 2016 2015

11 Dividend Per ShareDeclared and paid during the year

Dividend paid 582,459 364,037

Weighted average number of ordinary shares 1,456,147 1,456,147

Dividend per share 0.40 0.25


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12 Financial Instruments

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.

Group Company

Financial assets by categories As at 31 st March

Loans and receivables Available-for-sale financial assets

Loans and receivables Available-for-sale financial assets

In Rs. ‘000s 2016 2015 2016 2015 2016 2015 2016 2015

Financial instruments in non-current assets

Non-current financial assets 5,710 4,389 179,766 18,409 - - 12 12 Financial instruments in current

assetsTrade receivables 965,011 942,382 - - - - - - Amounts due from related parties 164,879 160,111 - - 1,109 648 - - Short term investments 2,570,671 2,076,400 - - 360,315 - - - Cash in hand and at bank 870,080 816,904 - - 6,799 95,195 - - Total 4,576,351 4,000,186 179,766 18,409 368,223 95,843 12 12

Both carrying amount and fair value are equal to the available-for-sale financial assets.The fair value of loans and receivables does not significantly vary from the value based on the amortised cost methodology.

Group Company

Financial assets by categories As at 31 st March

Financial liabilities at fair value through income statement

Financial liabilities measured at

amortised cost

Financial liabilities measured at

amortised cost

In Rs. ‘000s 2016 2015 2016 2015 2016 2015

Financial instruments in non-current liabilitiesBorrowings - - 1,852,851 2,900,658 - - Non-current financial liabilities 78,418 67,919 - - - - Financial instruments in current liabilitiesTrade payables - - 934,026 774,493 15,411 12,995 Amounts due to related parties - - 159,970 125,121 1,929 6,738 Borrowings - - 1,150,925 1,295,992 - 33,441 Bank overdrafts - - 721,977 117,177 38 - Total 78,418 67,919 4,819,749 5,213,441 17,378 53,174


201

The fair value of financial liabilities does not significantly vary from the value based on the amortised cost methodology.

The management assessed that the fair value of cash and short-term investments, trade and other receivables, trade and other payables and bank overdrafts approximate their carrying amounts largely due to the short-term maturities of these instruments.

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

The following methods and assumptions were used to estimate the fair values:

Fair value of quoted equities and bonds is based on price quotations in an active market at the reporting date.

The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

Fair value of the unquoted ordinary shares has been estimated using a Discounted Cash Flow (DCF) model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

12.2 Financial Assets and Liabilities by Fair Value Hierarchy

The Group and Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Financial Assets and Liabilities by Fair Value Hierarchy - Group

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 MarchIn Rs. ‘000s

2016 2015 2016 2015 2016 2015

Available for sale 12 12 - - 179,754 18,397

Total 12 12 - - 179,754 18,397


202


FINANCIAL LIABILITIES Level 1 Level 2 Level 3


2016 2015 2016 2015 2016 2015

Fair value through income statement

Non-current financial liabilities

Designated at fair value through income statement - - - - 78,418 67,919

Total - - - - 78,418 67,919

Financial Assets and Liabilities by Fair Value Hierarchy - Company

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

FINANCIAL ASSETS Level 1 Level 2 Level 3


2016 2015 2016 2015 2016 2015

Available for sale 12 12 - - - -

Total 12 12 - - - -

During the reporting periods 31 March 2016 and 2015, there were no transfers between Level 1 and Level 2 fair value measurements.

12.3 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 financial assets

In Rs. ‘000s Group

As at 1 April 2015 18,397

New investment 161,357

Total gains and losses recognised in OCI -

As at 31 March 2016 179,754

Group has valued level 3 financial instruments as at reporting date using discounted cash flow method.Fair value would not significantly vary if one or more of the inputs were changed.


203

12.4 Non Financial Assets - Group

As at 31 st March Level 1 Level 2 Level 3

In Rs. ‘000s 2016 2015 2016 2015 2016 2015

Assets measured at fair value

Land and buildings - - - - 7,024,741 6,673,333

Buildings on leasehold land - - - - 4,706,291 4,545,362

In determining the fair value, highest and best use of the property has been considered including the current condition of the properties, future usability and associated redevelopment requirements have been considered. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.

13 Financial risk management objectives and policiesFinancial instruments held by the Group, principally comprise of cash, loans and other receivables, trade and other receivables, trade and other payables and loans and borrowings. The main purpose of these financial instruments is to manage the operating, investing and financing activities of the Group. These financial instruments are exposed to credit, liquidity and market risks.

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 counterparty. The Group manages its operations to avoid any excessive concentration of counterparty risk and the Group takes all reasonable steps to ensure that the counterparties fulfil their obligations.


204


13.1.1 Credit risk exposure - Group

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.


In Rs. ‘000s

Note Non-current financial

assets

Cash in hand and at bank

Trade and other

receivables

Short term investments

Amounts due from related

parties

Total

Government Securities 13.1.2 - - - 442,950 - 442,950 Deposits with bank 13.1.3 - - - 2,127,721 - 2,127,721 Trade and other receivables 13.1.4 - - 965,011 - - 965,011 Amounts due from related parties 13.1.5 - - - - 164,879 164,879 Loans to executives 13.1.6 5,710 - - - - 5,710 Cash in hand and at bank 13.1.3 - 870,080 - - - 870,080 Total credit risk exposure 5,710 870,080 965,011 2,570,671 164,879 4,576,351

Available-for-sale investments 179,766 - - - - 179,766 Total equity risk exposure 179,766 - - - - 179,766

Total 185,476 870,080 965,011 2,570,671 164,879 4,756,117


In Rs. ‘000s


assets


Trade and other

receivables



parties

Total

Deposits with bank 13.1.3 - - - 2,076,400 - 2,076,400 Trade and other receivables 13.1.4 - - 942,382 - - 942,382 Amounts due from related parties 13.1.5 - - - - 160,111 160,111 Loans to executives 13.1.6 4,389 - - - - 4,389 Cash in hand and at bank 13.1.3 - 816,904 - - - 816,904 Total credit risk exposure 4,389 816,904 942,382 2,076,400 160,111 4,000,186

Available-for-sale investments 18,409 - - - - 18,409 Total equity risk exposure 18,409 - - - - 18,409

Total 22,798 816,904 942,382 2,076,400 160,111 4,018,595


205

13.1.1 Credit risk exposure - Company

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.


In Rs. ‘000s


assets




parties

Total

Deposits with bank 13.1.3 - - 360,315 - 360,315

Amounts due from related parties 13.1.5 - - - 1,109 1,109

Cash in hand and at bank 13.1.3 - 6,799 - - 6,799

Total credit risk exposure - 6,799 360,315 1,109 368,223

Available-for-sale investments 12 - - - 12

Total equity risk exposure 12 - - - 12

Total 12 6,799 360,315 1,109 368,235


In Rs. ‘000s


assets




parties

Total

Amounts due from related parties 13.1.5 - - - 648 648

Cash in hand and at bank 13.1.3 - 95,195 - - 95,195

Total credit risk exposure - 95,195 - 648 95,843

Available-for-sale investments 12 - - - 12

Total equity risk exposure 12 - - - 12

Total 12 95,195 - 648 95,855


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13.1.2 Government Securities

The Group invested in Treasury bonds which are usually referred to as risk free due to the sovereign nature of the instrument.

13.1.3 Credit risk relating to cash and cash equivalents

In order to mitigate settlement and operational risks related to cash and cash equivalents, the company uses several banks with acceptable ratings for its deposits.

The Group held cash and cash equivalents including short term investments of Rs. 3,440.7 Mn as at 31 March 2016 (2015 - Rs.2,893.3 Mn).

Deposits with banks and Credit rating of the banks

2016 2015

Bank Instrument Credit rating for 2016

Investment Rs. 000’

Rating % of total

Credit rating for 2015

Investment Rs. 000’

Rating % of total

Group

People’s Bank PLC Fixed Deposits AA+ 569,936 27% AA+ 553,359 27%

Sampath Bank PLC Fixed Deposits A+ 575,964 27% AA- 1,014,320 49%

Hatton National Bank PLC

Fixed Deposits AA- 113,545 5% AA- 24,103 1%

Nations Trust Bank PLC Fixed Deposits A 4,691 0% A - 0%

Commercial Bank PLC Re purchase Agreements AA 780,045 37% AA 415,473 20%

Nations Trust Bank PLC Re purchase Agreements A 83,540 4% A 69,145 3%

2,127,721 100% 2,076,400 100%

Company

Nations Trust Bank PLC Re purchase Agreements A 360,315 - A - -


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13.1.4 Trade and other receivables

As at 31st March Group

In Rs. ‘000s 2016 2015

Neither past due nor impaired 665,286 710,334 Past due but not impaired 31–60 days 222,293 133,957 61–90 days 13,451 62,010 > 91 days 63,981 36,081 Impaired 42,037 37,146 Gross carrying value 1,007,048 979,528

Less: impairment provision (42,037) (37,146)Individually assessed impairment provisionTotal 965,011 942,382

Based on the review of their past performance and credit worthiness the Group companies has 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.

13.1.5 Amounts due from related parties

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

13.1.6 Loans to executives

Loans to executive portfolio is largely made up of vehicle loans which are given to staff at assistant manager level and above. The respective business units have obtained the necessary Power of Attorney/promissory notes as collateral for the loans granted.

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 enable the Group 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.


208


13.2.1 Net (debt)/cash


In Rs. ‘000s 2016 2015 2016 2015

Short term investments 2,570,671 2,076,400 360,315 -

Cash in hand and at bank 870,080 816,904 6,799 95,195

Total liquid Assets 3,440,751 2,893,304 367,114 95,195

Borrowings

Bank borrowings 3,003,776 4,196,650 - 33,441

Bank overdrafts 721,977 117,177 38 -

Total liabilities 3,725,753 4,313,827 38 33,441

Net (debt)/cash (285,002) (1,420,523) 367,076 61,754

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 mixed approach combines elements of the cash flow matching approach and the liquid assets approach. The business units attempt to match cash outflows in each time bucket against a combination of contractual cash inflows plus other inflows that can be generated through the sale of assets, repurchase agreement or other secured borrowing.

Maturity analysis

The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2016 based on contractual undiscounted payments.

GroupIn Rs. ‘000s

Within 1 year

Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Borrowings 1,150,925 1,015,912 610,428 135,511 84,000 7,000 3,003,776

Trade and other payables 934,026 - - - - - 934,026

Amounts due to related parties 159,970 - - - - - 159,970

Bank overdrafts 721,977 - - - - - 721,977

2,966,898 1,015,912 610,428 135,511 84,000 7,000 4,819,749


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The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2015 based on contractual undiscounted payments.

GroupIn Rs. ‘000s

Within 1 year

Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Borrowings 1,295,992 1,064,694 965,625 634,494 144,845 91,000 4,196,650



Bank overdrafts 117,177 - - - - - 117,177

2,312,783 1,064,694 965,625 634,494 144,845 91,000 5,213,441

Maturity analysis

The table below summarises the maturity profile of the company’s financial liabilities at 31 March 2016 based on contractual undiscounted payments.

CompanyIn Rs. ‘000s

Within 1 year

Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total



Bank overdrafts 38 - - - - - 38

17,378 - - - - - 17,378

The table below summarises the maturity profile of the company’s financial liabilities at 31 March 2015 based on contractual undiscounted payments.

CompanyIn Rs. ‘000s

Within 1 year

Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Borrowings 33,441 - - - - 33,441



53,174 - - - - - 53,174


210


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:

Interest rate risk 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 2016 and 2015.

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 2016 and 2015.

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).

Increase/ (decrease) in basis points Effect on profit before tax

Group Company

2016 Rupee borrowings Other currency borrowings

+180 basis points +40 basis points (19,308) -

- 180 basis points - 40 basis points 19,308 -

2015

+30 basis points +07 basis points (7,022) (100)

- 30 basis points - 07 basis points 7,022 100

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.


211

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 transaction and 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.

Group Company

Increase/(decrease)

in exchange rate USD

Effect on profit before

tax Rs. 000's

Effect on equity Rs.

000's

Effect on profit before

tax Rs. 000's

Effect on equity Rs.

000's

2016 10.15% (29,115) 1,174,324 - -

-10.15% 29,115 (1,174,324) - -

2015 2.18% (24,957) 224,721 - -

-2.18% 24,957 (224,721) - -

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.


In Rs. ‘000s 2016 2015 2016 2015

Debt / Equity 0.13 0.21 - -


212


As at 31st March

Land and buildings

Buildings on leasehold

land

Plant and machinery

In Rs. ‘000s

14 Property, Plant and EquipmentGroupCost or valuationAt the beginning of the year 6,767,552 5,615,377 1,278,348 Additions 71,910 195,358 101,840 Disposals (159) (52,774) (39,452)Revaluations 345,158 77,471 - Transfers - 52,227 65,348 Exchange translation difference - 270,141 49,377 Transfers on revaluation (25,655) (267,436) -At the end of the year 7,158,806 5,890,364 1,455,461

Accumulated depreciation At the beginning of the year 94,219 1,070,015 539,471 Charge for the year 65,501 297,101 140,836 Disposals - (29,431) (33,055)Exchange translation difference - 113,824 22,923 Transfers on revaluation (25,655) (267,436) -At the end of the year 134,065 1,184,073 670,175

Carrying valueAs at 31 March 2016 7,024,741 4,706,291 785,286 As at 31 March 2015 6,673,333 4,545,362 738,877

Carrying value of assets At cost At valuation

Carrying value of land and buildings At cost At valuation


213

Equipment Furniture and fittings

Motor vehicles

Computer equipment

Cutlery, crockery glassware and linen

Capital work in progress

Total

2016

Total

2015

1,600,647 1,141,502 84,911 174,342 250,491 31,657 16,944,827 16,125,287 195,576 83,575 15,471 39,978 112,547 306,149 1,122,404 787,299

(115,148) (54,484) (10,087) (13,886) (86,590) - (372,580) (275,468) - - - - - - 422,629 560,447 - - - 9,129 - (126,704) - -

47,411 37,800 4,457 5,581 5,588 3,230 423,585 77,968 - - - - - - (293,091) (330,706)

1,728,486 1,208,393 94,752 215,144 282,036 214,332 18,247,774 16,944,827

779,633 628,326 44,960 89,313 138,857 - 3,384,794 2,972,366 216,835 145,801 12,554 36,411 65,728 - 980,767 918,039

(102,813) (45,129) (7,828) (12,683) (66,505) - (297,444) (217,832) 27,295 26,877 2,806 3,079 3,070 - 199,874 42,927

- - - - - - (293,091) (330,706) 920,950 755,875 52,492 116,120 141,150 - 3,974,900 3,384,794

807,536 452,518 42,260 99,024 140,886 214,332 14,272,874 821,014 513,176 39,951 85,029 111,634 31,657 13,560,033

4,201,064 3,810,392 10,071,810 9,749,641 14,272,874 13,560,033

1,659,222 1,469,054 10,071,810 9,749,641 11,731,032 11,218,695


214


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 of valuation

Property Valuer Significant unobservable inputs

Sensitivity of fair value to unobservable inputs

Land of

Ahungalla Holiday Resorts (Pvt) Ltd

Open market value method

31st March 2016

Mr. Sunil Fernando - Consultant Valuer & Assessor

Estimated price per perch Rs. 265,500

Positively correlated sensitivity

Resort Hotels Ltd Open market value method

31st March 2016

Mr. P.B. Kalugalagedara - Consultant Valuer & Assessor



Trinco Walk Inn Ltd Open market value method

31st March 2016




Wirawila Walk Inn Ltd Residual method 31st March 2016


Estimated occupancy rate 65%


Nuwara Eliya Holiday Resorts (Pvt) Ltd

Residual method 31st March 2016


Estimated occupancy rate 70%


Land and buildings of

Beruwala Holiday Resorts (Pvt) Ltd

Depreciated replacement cost method / Open market value method

31st March 2016


Estimated price per perch Rs. 500,000 -600,000 and per square foot Rs.3,000 - 10,500


Kandy Walk Inn Ltd Depreciated replacement cost method / Open market value method

31st March 2016


Estimated price per perch Rs. 385,000 - 825,000 and per square foot Rs.850 - 8,000


Trinco Holiday Resorts (Pvt) Ltd


31st March 2016


Estimated price per perch Rs. 170,000 and per square foot Rs.1,000 - 7,000



215

Property Method of Valuation Effective date of valuation

Property Valuer Significant unobservable inputs

Sensitivity of fair value to unobservable inputs

Buildings on leasehold land of

Ceylon Holiday Resorts Ltd


31st March 2016


Estimated price per perch Rs. 150,000 - 450,000 and per square foot Rs.1,000 - 2,800


Habarana Lodge Ltd Depreciated replacement cost method

31st March 2016


Estimated price per square foot Rs.500 - 10,250


Habarana Walk Inn Ltd Depreciated replacement cost method

31st March 2016


Estimated price per square foot Rs.2,500 - 7,500


Hikkaduwa Holiday Resorts (Pvt) Ltd


31st March 2016


Estimated price per perch Rs. 461,000 and per square foot Rs.1,000 - 5,350


Yala Village (Pvt) Ltd Depreciated replacement cost method

31st March 2016


Estimated price per square foot Rs.1,000 - 6,750


Revaluation of land and buildings

The Group uses the fair valuation 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 2016, 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).


216


14.2 The carrying amounts of fair valued land and buildings if they were carried at cost less depreciation, would be as follows.

As at 31 st MarchIn Rs. ‘000s 2016 2015

Cost 5,269,759 5,002,491

Accumulated depreciation and impairment (746,062) (658,233)

Carrying value 4,523,697 4,344,258

14.3 Segmental Analysis of Net Book Value of property, plant and equipment

As at 31 st MarchIn Rs. ‘000s 2016 2015

Sri Lanka 11,674,861 11,457,621

Maldives 2,598,013 2,102,412

14,272,874 13,560,033

14.4 Group land and buildings with a carrying value of Rs. 4.4 Bn as at 31st March 2016 (2015 - Rs. 4.3 Bn) have been pledged as security for term loans obtained, details of which are disclosed in Note 28.2.

14.5 Group property, plant and equipment with a cost of Rs. 740 Mn 31st March 2016 (2015 - Rs. 578 Mn) have been fully depreciated but continue to be in use by the Group.


In Rs. ‘000s 2016 2015

15 Lease Rentals Paid in AdvancePrepaid lease rentals paid to acquire land use rights are amortized over the lease term.

Balance at the beginning of the year 7,861,533 8,235,508

Payments made during the year 607,155 167,000

Transfer from other deferred liability - (28,290)

Disposal of lease right (33,147) -

Amortisation during the year (700,853) (672,417)

Exchange differences 802,559 159,732

Balance at the end of the year 8,537,247 7,861,533


217

Details of lease rentals paid in advance Land Extent Lease Period Group

(in Acres) 2016 2015

Rajawella Hotels Company Ltd 10.00 95 years and 10 months from 02nd February 2000 - 33,354

Yala Village (Pvt) Ltd Cinnamon Wild Yala

11.25 30 years from 27th November 2006 61,625 64,619

Hikkaduwa Holiday Resorts (Pvt) Ltd Hikka Tranz by Cinnamon

0.03 10 years from 01st January 2012 600 700

Tranquility (Pvt) Ltd Cinnamon Dhonveli Maldives

18.62 18 years from 26th August 2010 6,917,044 6,756,921

Travel Club (Pvt) Ltd * Ellaidhoo Maldives by Cinnamon

13.75 14 years from 04th August 2006 1,230,540 867,385

Fantasea World Investments (Pvt) Ltd * Cinnamon Hakuraa Huraa Maldives

18.90 25 years lease extension from 27th August 2022 327,438 138,554

8,537,247 7,861,533

* Fantasea World Investments (Pte) Ltd has to pay the lease period extension fee of US$ 2,500,000/- in eight instalments to secure the 25 year lease extension. During the year the Company paid the last four instalments, amounting to US$ 1,250,000/-.

* Travel Club (Pte) Ltd paid US$ 3,000,000 to extend the operating lease rights by further 10 years up to February 2030.

These lease rentals paid have been classified as prepaid lease rentals under non-current assets and are amortised over the lease term.

Group

In Rs. ‘000s 2016 2015

16 Intangible AssetsGoodwill

Cost

At the beginning of the year 670,407 670,407

Additions during the year - -

Adjustments on impairment - -

At the end of the year 670,407 670,407

Goodwill acquired through Business Combinations has been allocated to Cash Generating Units (CGU) of Cinnamon Resorts for impairment testing.


218


As at 31st MarchNet Carrying Value of

Goodwill

In Rs. ‘000s 2016 2015

Cinnamon resorts 670,407 670,407

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 one to four years immediately preceding the budgeted year based on industry growth rates.

Cash flows beyond the five year period are extrapolated using 0% growth rate.


219


In Rs. ‘000s Note 2016 2015 2016 2015

17 Investments in Subsidiaries and Joint Ventures

17.1 Carrying value

Investments in subsidiaries - Unquoted 17.2 - - 10,623,739 10,552,744

Investments in joint venture - Unquoted 17.3, 17.4 67,215 59,296 63,599 58,288

67,215 59,296 10,687,338 10,611,032

As at 31st March % Holding Company

In Rs. '000s 2016 2015 2016 2015

17.2 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% 99.33% 2,094,401 2,094,401

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 (Pvt) Ltd 100.00% 100.00% 4,739,853 4,739,853

Rajawella Hotels Co. Ltd 100.00% 100.00% 34,452 34,302

Trinco Walk Inn Ltd 100.00% 100.00% 95,940 95,940

Wirawila Walk Inn Ltd 100.00% 100.00% 25,259 25,259

Yala Village (Pvt) Ltd 93.78% 93.78% 300,678 300,678

Trinco Holiday Resorts (Pvt) Ltd 100.00% 100.00% 357,000 357,000

Ahungalla Holiday Resorts (Pvt) Ltd 100.00% 100.00% 132,350 132,000

Nuwara Eliya Holiday Resorts (Pvt) Ltd 100.00% 100.00% 275,562 205,367

Cinnamon Holidays (Pvt) Ltd 100.00% - 200 -

Yala Holiday Resorts (Pvt) Ltd 99.98% - 100 -

15% Cumulative preference shares

Yala Village (Pvt) Ltd 100.00% 100.00% 100,000 100,000

Total investments in subsidiaries 10,623,739 10,552,744


220


As at 31st March % Holding Company

In Rs. '000s 2016 2015 2016 2015

17.3 Investments in joint venture - Unquoted

Sentinel Realty (Pvt) Ltd 50.00% 50.00% 63,599 58,288

Total investments in joint venture 63,599 58,288

As at 31st March Group share of

In Rs. '000s 2016 2015 2016 2015

17.4 Summarised financial information of joint venture

Revenue - - - -

Administrative expenses (1,186) (1,244) (593) (622)

Loss for the year (1,186) (1,244) (593) (622)

Total assets 136,800 120,488 68,400 60,244

Total liabilities (2,370) (1,896) (1,185) (948)

Net assets 134,430 118,592 67,215 59,296

The Group and the Company have neither contingent liabilities nor capital and other commitments in respect of its joint venture.

17.5 Material partly-owned subsidiaries

The Group has concluded that non-controlling interest is not material in aggregate and individually for disclosure purpose.


221


In Rs. '000s 2016 2015 2016 2015

18 Non-Current Financial AssetsOutside Investments

Quoted - - - -

Ceylon Hotels Corporation PLC 12 12 12 12

Unquoted

Rainforest Ecolodge (Pvt) Ltd 18,347 18,347 - -

Sri Lanka Hotel Tourism Training Institute Ltd 50 50 - -

Rajawella Holdings Ltd 161,357 -

179,754 18,397 - -

Loans to executives 18.1 5,710 4,389 - -

185,476 22,798 12 12


In Rs. '000s 2016 2015 2016 2015

18.1 Loans to executives

At the beginning of the year 5,385 4,631 - -

Loans granted / transfers 6,019 2,419 - -

Recoveries (4,154) (1,665) - -

At the end of the year 7,250 5,385 - -

Receivable within one year 1,540 996

Receivable between one and five years 5,710 4,389

7,250 5,385 - -


222



In Rs. '000s 2016 2015 2016 2015

19 Deferred Tax AssetsBalance at the beginning of the year 55,099 38,368 - - Transferred from/(to) deferred tax liabilities (3,518) 12,156 - - Exchange translation difference 5,597 724 - - Credit/(release) 14,710 3,851 - - Balance at the end of the year 71,888 55,099 - -

The closing deferred tax asset balance relates to the following:

Accelerated depreciation for tax purposes 66,745 8,459 - - Impact on revaluation of property, plant and equipment - 392 - - Employee benefits liability - 1,179 - - Losses available for off-set against future taxable

income 5,143 45,069 - - 71,888 55,099 - -


In Rs. '000s 2016 2015 2016 2015

20 Other Non-Current AssetsPrepaid staff loans 489 648 - -

489 648 - -


In Rs. '000s 2016 2015 2016 2015

21 InventoriesFood and beverage 97,300 91,913 - - House keeping and maintenance 83,205 77,135 - -

Others 7,087 9,932 - -

187,592 178,980 - - Less : Provision for slow moving inventories (4,521) (5,308) - -

183,071 173,672 - -


223


In Rs. '000s Note 2016 2015 2016 2015

22 Trade and Other ReceivablesTrade receivables 883,102 867,524 - -

Provision for impairment losses 22.1 (42,037) (37,146) - -

Other debtors 122,406 111,008

Loans to executives 18.1 1,540 996 - -

965,011 942,382 - -

Group

In Rs. ‘000sIndividually

ImpairedTotal

22.1 Movement in provision for impairment losses

As at 1 April 2014 35,183 35,183

Charge for the year 1,963 1,963

As at 31 March 2015 37,146 37,146

Charge for the year 4,891 4,891

As at 31 March 2016 42,037 42,037


In Rs. '000s 2016 2015 2016 2015

23 Other Current AssetsPrepayments and non cash receivables 247,210 134,922 3,251 728

Tax recoverable 93,082 110,224 12,123 11,873

340,292 350,086 15,374 12,601


224


In Rs. '000s 2016 2015 2016 2015

24 Short Term InvestmentsBank deposits (less than 3 months) 978,500 1,137,267 360,315 -

Reported for cash flow 978,500 1,137,267 360,315 -

Bank deposits (more than 3 months and less than 1 year) 1,592,171 939,133 - -

Total 2,570,671 2,076,400 360,315 -

2016 2015

In Rs. '000sNumber of

Shares Value of

Shares Number of

Shares Value of

Shares

25 Stated CapitalFully 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


In Rs. '000s Note 2016 2015 2016 2015

26 Other Components of EquityRevaluation reserve 26.1 3,544,144 3,152,565 - -

Foreign currency translation reserve 26.2 2,539,286 1,471,550 - -

Available for sale reserve 26.3 (1) (1) (1) (1)

Employee share option plan reserve 26.4 23,015 13,498 - -

6,106,444 4,637,612 (1) (1)

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

26.2 Foreign currency translation reserve comprises the net exchange movement arising on the currency translation of foreign operation into Sri Lankan rupees.

26.3 Available for sale reserve includes changes of fair value of financial instruments designated as available for sale financial assets.



225

26.4 Employee share option plan reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration.

27 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 senior executives of the company and the subsidiary 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.

The expense recognised for employee services received during the year is shown in the following table:


In Rs. '000s 2016 2015

Expense arising from equity-settled share-based payment transactions 9,600 8,939

Total expense arising from share-based payment transactions 9,600 8,939

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:

Group

2016 2015

No. WAEP No. WAEP

Outstanding at 1 April 316,713 211.10 135,572 253.16

Granted during the year 170,636 171.25 184,451 229.93

Forfeited during the year (76,310) 186.53 - -

Adjustment during the year 75,545 202.36 - -

Expired during the year - - (3,230) 253.16

Outstanding at 31 March 486,664 196.00 316,793 240.10

Exercisable at 31 March 103,504 212.24 33,894 253.16


226

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 grated.

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.


In Rs. '000s 2016 2015 2016 2015

28 Interest Bearing Borrowings28.1 Movement

Balance at the beginning of the year 4,196,650 6,086,026 33,441 133,441

Loans obtained during the year - 730,315 - -

Currency translation difference 183,778 67,145 - -

Repayments during the year (1,376,652) (2,686,836) (33,441) (100,000)

Balance at the end of the year 3,003,776 4,196,650 - 33,441

Repayable within one year 1,150,925 1,295,992 - 33,441

Repayable after one year

Repayable between one and five years 1,845,851 2,809,658 - -

Repayable after five years 7,000 91,000 - -

1,852,851 2,900,658 - -

3,003,776 4,196,650 - 33,441



227

28.2 Security and Repayment Terms of Borrowings

In Rs. ‘000s Lending Institution

Nature of Facility

Interest Rate and Security

Repayment terms Carrying value of

collaterals

2016 2015


Habib Bank Ltd

Term Loan AWPLR - 0.5% per annum.

24 monthly instalments which commenced in July 2013.

- - 33,441

John Keells Maldivian Resorts (Pvt) Ltd

HSBC Bank Term Loan 3 months LIBOR + 3.0% per annum.

48 equal monthly instalments which commenced in November 2011.

- - 77,846

Secured with a letter of comfort from John Keells Hotels PLC.

Travel Club (Pvt) Ltd HSBC Bank Term Loan 3 months LIBOR + 2.65% per annum.

8 quarterly instalments which commenced in August 2014.

- 99,664 270,236

Fantasea World Investments (Pvt) Ltd


Term Loan 3 months LIBOR + 3.25% per annum, with a floor rate of 4.25%.

Repayment over 5 years which commenced in August 2011.

- - 170,406

Leasehold rights of Island of Cinnamon Hakuraa Huraa Maldives.

Trinco Holiday Resorts ( Pvt) Ltd

Sampath Bank PLC

Term Loan 3 month LIBOR + 4% per annum, Corporate guarantee from John Keells Hotels PLC.

20 quarterly instalments which commenced in April 2014.

- 102,655 123,372

Sampath Bank PLC

Term Loan AWPLR - 0.3% per annum, letter of comfort from John Keells Hotels PLC.

83 monthly Instalments which commenced in June 2014.

- 216,432 225,256


228



Nature of Facility



collaterals

2016 2015

Habarana Lodge Ltd Sampath Bank PLC

Term Loan 3 Month LIBOR + 4%, Corporate guarantee from John Keells Hotels PLC.

20 Quarterly Instalments which commenced in June 2013.

- 132,885 172,932

Habib Bank Ltd

Term Loan 1 Month LIBOR+3.25% per annum, Corporate guarantee from John Keells Hotels PLC.

60 Quarterly Instalments which commenced in July 2013.

- 32,483 78,703

Kandy Walk Inn Ltd HSBC Bank Term Loan 1 month LIBOR + 3.5% per annum, letter of awareness of John Keells Hotels PLC.

60 monthly instalments after a 12 month grace period which commenced in October 2013.

- 252,933 368,675

Yala Village (Pvt) Ltd

Sampath Bank PLC


20 Quarterly instalments which commenced in April 2013.

- 99,664 131,295

Habib Bank Ltd

Term Loan AWPLR - 0.4% per annum, clean basis.

60 monthly instalments which commenced in August 2014.

- 67,747 121,333

Beruwala Holiday Resorts (Pvt) Ltd


Term Loan 1 month SLIBOR per annum, Primary floating mortgage bond over hotel property.

72 monthly instalments which commenced in July 2013.

3,229,000 559,104 679,683

Sampath Bank PLC


20 Quarterly Instalments which commenced in May 2013.

- 132,937 173,485

Standard Chartered Bank

Term Loan 3 month LIBOR + 3.25% per annum, Corporate guarantee from John Keells Hotels PLC.

16 Quarterly Instalments which commenced in March 2014.

- 443,477 480,420


229


Nature of Facility



collaterals

2016 2015

Hikkaduwa Holiday Resorts (Pvt) Ltd

DFCC Bank PLC

Term Loan AWPLR + 3% per annum, Rs.940 Mn primary mortgage over leasehold rights and Rs. 60 Mn over movable plant, machinery and equipment of the company.

72 monthly instalments which commenced in November 2013.

1,198,550 572,892 715,907

Sampath Bank PLC

Term Loan 3 month LIBOR + 4%, Corporate guarantee of John Keells Hotels PLC.

20 Quarterly Instalments which commenced in July 2013.

- 290,903 373,660

4,427,550 3,003,776 4,196,650


In Rs. '000s 2016 2015 2016 2015

29 Deferred Tax LiabilitiesBalance at the beginning of the year 178,859 144,361 - -

Transferred from/to deferred tax assets (3,518) 12,156

Exchange translation difference 2,950 218 - -

Credit/(release) 58,177 22,124 - -

Balance at the end of the year 236,468 178,859 - -

The closing deferred tax liability balance relates to the following:

Accelerated depreciation for tax purposes 292,507 239,761 - -

Impact on revaluation of property, plant and equipment 76,688 65,390 - -

Employee benefits liability (17,133) (11,680) - -

Losses available for off-set against future taxable income (115,594) (114,612) - -

236,468 178,859 - -


230


In Rs. '000s 2016 2015 2016 2015

30 Employee Benefit LiabilityBalance at the beginning of the year 141,005 113,836 - Current service cost 19,346 12,489 - Interest cost 11,232 12,578 - Payments made during the year (14,452) (9,010) - Transfers 554 433 - Gain arising from changes in the assumptions or due to

over provision in the previous year (1,608) 10,679 - - Balance at the end of the year 156,077 141,005 - -

The expenses recognised in the following line items in the income statement

Cost of sales 12,705 10,202 Administrative expenses 16,877 14,139 Distribution expenses 996 726

30,578 25,067

The employee benefit liability of the Group is based on the actuarial valuations carried out by Smiles Global (Pvt) Ltd, actuaries.

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

2016 2015

Discount rate 10.50% 10%Future salary increases 9% 8%

30.1 Sensitivity of assumptions used

If a one percentage point change is assumed in the discount rate and salary increment rate, it would have the following effects:

As at 31st March Discount rate Salary increment

In Rs. '000s 2016 2015 2016 2015

Effect on the defined benefit obligation liability Increase by one percentage point (5,400) (6,246) 5,898 7,346 Decrease by one percentage point 5,593 6,851 (5,520) (4,775)



231

30.2 Maturity analysis of the payments

The following payments are expected on employee benefit liabilities in future years.

In Rs. '000s 2016 2015

Within the next 12 months 9,616 21,345

Between 1 and 2 years 23,541 38,716



Beyond 10 years - 16,382

Total expected payments 156,077 141,005

The Group weighted average duration of the defined benefit plan obligation is 3.18 (2015 - 5.25) years.


In Rs. '000s Note 2016 2015 2016 2015

31 Other Deferred LiabilitiesGrant 31.1 3,009 3,334 - -

Deferred sublease payment 31.2 81,392 74,592 - -

84,401 77,926 - -

31.1 Balance at the beginning of the year 3,334 1,273 - - Grant received during the year - 2,386 - - Amortisation during the year (325) (325) - -

Balance at the end of the year 3,009 3,334 - -

Basis of amortisation - 10% p.a.

This represents the grant received by Yala Village (Pvt) Ltd from The Ceylon Chamber of Commerce for the garbage disposal project for the Promotion of Eco-efficient Productivity (PEP).

Fantasea World Investments (Pte) Ltd received the grant from Ministry of Tourism of Maldives to develop a bio gas plant in year 2015. The Company has commenced the construction during the year.

31.2 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.


232



In Rs. '000s Note 2016 2015 2016 2015

32 Non-Current Financial LiabilitiesAmount payable to Yacht Tours Maldives (Pvt) Ltd 32.1 78,418 67,919 - -

78,418 67,919 - -

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


In Rs. '000s 2016 2015 2016 2015

33 Trade and Other PayablesTrade payables 337,080 287,278 - - Other payables 500,331 409,690 10,036 7,756 Accrued expenses 96,615 77,525 5,375 5,239

934,026 774,493 15,411 12,995


In Rs. '000s 2016 2015 2016 2015

34 Income Tax LiabilitiesBalance at the beginning of the year 359,015 292,991 9,081 5,278 Charge for the year 248,615 291,611 10,986 1,705 Exchange translation difference 3,657 6,512 - - Payments, set off against refunds, tax credits and adjustments (356,645) (232,099) (5,668) 2,098Balance at the end of the year 254,642 359,015 14,399 9,081


In Rs. '000s 2016 2015 2016 2015

35 Other Current LiabilitiesNon refundable deposits 100,099 129,820 - - Other tax payables 151,981 135,695 - -

252,080 265,515 - -


233


In Rs. '000s 2016 2015 2016 2015

36 Related Party Transactions 36.1 Amounts Due from Related Parties

Ultimate parent

John Keells Holdings PLC 639 1,565 - -

Companies under common control

Walkers Tours Ltd 133,692 126,303 - -

Whittall Boustead (Travel) Ltd 22,122 24,710 - -

Cinnamon Hotel Management Ltd 8,062 7,462 - -

John Keells Residential Properties (Pvt) Ltd - 58 - -

Ceylon Cold Stores PLC - 13 - -

John Keells Office Automation (Pvt) Ltd 245 - - -

Asian Hotels & Properties PLC 15 - - -

Trans Asia Hotels PLC 33 - - -

Jaykay Marketing Services (Pvt) Ltd 30 - - -

Sancity Hotels & Properties Ltd 41 - - -

Habarana Lodge Ltd - - 70 107

Cinnamon Holidays (Pvt) Ltd 60 -

Nuwara Elliya Holiday Resorts (Pvt) Ltd - - 373 -

Yala Village (Pvt) Ltd - - 42 55

Beruwala Holiday Resorts (Pvt) Ltd - - 242 278

Hikkaduwa Holiday Resorts (Pvt) Ltd - - 124 159

Rajawella Hotels Company Ltd - - 155 -

Trinco Holiday Resorts (Pvt) Ltd - - 43 52

Travel Club (Pvt) Ltd - - - (3)

164,240 158,546 1,109 648

164,879 160,111 1,109 648


234


In Rs. '000s 2016 2015 2016 2015

36.2 Amounts Due to Related Parties

Ultimate parent

John Keells Holdings PLC 6,348 7,121 60 753

Companies under common control

Cinnamon Hotel Management Ltd 135,616 108,442 676 2,612

InfoMate (Pvt) Ltd 2,442 2,057 30 7

Keells Food Products PLC 5,130 1,731 - -

Ceylon Cold Stores PLC 1,303 1,055 - -

John Keells Office Automation Ltd 540 147 - -

Jaykay Marketing Services (Pvt) Ltd 103 78 - -

John Keells International (Pvt) Ltd 1,318 1,348 - -

Ceylon Holiday Resorts Ltd - - 2 -

Asian Hotels & Properties PLC 523 - - -

Keells Consultants (Pvt) Ltd 483 202 318 64

Nexus Networks (Pvt) Ltd - 25 - -

Mackinnons Travel (Pvt) Ltd 1,331 1,604 - -


Wirawila Walk Inn Ltd - - 236 1,022

Trinco Holiday Resorts (Pvt) Ltd - - 164 -

Mack Air Services Maldives (Pvt) Ltd 581 - - -

Yala Village (Pvt) Ltd - - 171 -

Kandy Walk Inn Ltd - - - 120

Trans Asia Hotels PLC 189 21 158 -

Resort Hotels Ltd - - 114 582

Nuwara Elliya Holiday Resorts (Pvt) Ltd - - - 854

Rajawella Hotels Company Ltd - - - 724

Sancity Hotels & Properties Ltd 299 - - -

153,622 118,000 1,869 5,985

159,970 125,121 1,929 6,738



235


In Rs. '000s Note 2016 2015 2016 2015

36.3 Transactions with Related Parties

Ultimate parent Rendering /(receiving) of services (60,563) (65,649) (2,792) (2,952) Directors fees (paid)/ received (18,396) (18,171) (3,996) (3,771)

Companies Under Common Control (Purchase)/sale of goods 36.4 (69,237) (31,991) - (Receiving)/rendering of services 36.5 (74,620) 128,663 (496) (527) (Purchase)/sale of lease right 5.1 161,357 - - - Interest (paid)/ received - - - - Loans given/(taken) - - - - Guarantee fess paid/(received) - - (6,866) (9,641)

Equity accounted investeesJoint ventures (Receiving) / Rendering of services - - - -

Key management personnel (KMP) - - - -

Close family members of KMP - - - -

Post employment benefit plan Contributions to the provident fund 4,688 4,599 - -

36.4 Transactions with Related Parties - Companies under Common Control


In Rs. '000s 2016 2015 2016 2015

Sale/(purchase) of goodsCeylon Cold Stores PLC (13,506) (15,266) - - Jaykay Marketing Services (Pvt) Ltd (1,574) (790) - - John Keells Office Automation (Pvt) Ltd (8,349) (567) - - Keells Food Products PLC (45,808) (19,062) - - Cinnamon Hotel Management Ltd - 3,694 - -

(69,237) (31,991) - -


236


36.5 Transactions with Related Parties - Companies under Common Control


In Rs. '000s 2016 2015 2016 2015

Rendering/(receiving) of services

Infomate (Pvt) Ltd (27,178) (23,989) (84) (82)

Keells Consultants (Pvt) Ltd (2,139) (2,219) (412) (445)

John Keells International (Pvt) Ltd (11,492) (12,250) - -

John Keells Office Automation (Pvt) Ltd (1,072) (957) - -

Cinnamon Hotel Management Ltd (769,740) (740,718) - -

Mackinnons Travels (Pvt) Ltd (1,114) (702) - -


Whittall Boustead (Travels) Ltd 97,676 97,442 - -

Other related parties (229) (11,260) - -

(74,620) 128,663 (496) (527)

36.6 Compensation of Key Management Personnel

Short term employee benefits 21,996 21,546 7,596 7,146

Post employment benefits - - - -

Other long term benefits - - - -

Termination benefits - - - -

Share based payments - - - -

21,996 21,546 7,596 7,146

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.

37 Commitments

37.1 Capital Commitments

Capital commitments contracted but not incurred in relation to Nuwara Eliya Hotel project and Kakaahuraa Hotel project in Maldives as at 31 March 2016 amounts to Rs. 86 Mn and Rs.15 Mn respectively.

Capital commitments approved but not contracted for Nuwara Eliya Hotel project amounts to Rs. 3.718 Bn and Kakaahuraa Hotel project amounts to USD 13.5 Mn.


237


In Rs. '000s 2016 2015

37.2 Lease CommitmentsWithin one year 488,895 585,107 Between one and five years 2,005,051 1,622,769 After five years 6,235,692 2,345,359

8,729,638 4,553,235

37.3 Details of Leasehold Land

Company Land Extent Lessor Leased Properties

Ceylon Holiday Resorts Ltd 11.02 Ceylon Tourist Board Land occupiedHikkaduwa Holiday Resorts (Pvt) Ltd 4.36 Ceylon Tourist Board Land occupiedHabarana Walk Inn Ltd 9.34 Kekirawa Divisional Secretariat Land occupiedHabarana Lodge Ltd 25.48 Kekirawa Divisional Secretariat Land occupiedYala Village (Pvt) Ltd 11.25 Ceylon Tourist Board Land occupiedFantasea World Investments

(Pvt) Ltd18.90 Government of Maldives Island rent for the land occupied

Travel Club (Pvt) Ltd 13.75 Government of Maldives and sub-lease with Ellaidhoo Investment (Pte) Ltd

Lease rental and Island rent for the land occupied

Tranquility (Pvt)Ltd 18.62 Government of Maldives Island rent for the land occupied

38 Contingent LiabilitiesThere were no material contingent liabilities as at the reporting date except for the following:

Contingencies of the Company as at the reporting date on account of guarantees issued on behalf of subsidiary companies amounted to Rs. 1,235 Mn. (2015 - Rs. 1,533 Mn.)

Ceylon Holiday Resorts LtdThe Department of Inland revenue has raised an income tax assessment in respect of the year 2012/13 for Rs. 2.1 Mn. The Company has filed an appeal against the assessment and the appeals have not been heard as at the reporting date. Having discussed with independent legal tax experts and based on the information available, the contingent liability as at 31st March 2016 is estimated at Rs 2.1 Mn.

Habarana Walk Inn LtdThe Department of Inland revenue has raised income tax assessments in respect of the year 2012/13 and 2013/14 totalling Rs. 1.7Mn. The Company has filed an appeal against the assessment and the appeals have not been heard as at the reporting date. Having discussed with independent legal tax experts and based on the information available, the contingent liability as at 31st March 2016 is estimated at Rs 1.7Mn.

The management is confident that the ultimate resolution of the above contingencies are unlikely to have a material adverse effect on the financial position of the Group.

39 Events Subsequent to the Reporting DateThere has been no material events occurring after the reporting date that requires adjustment to or disclosure in the financial statements.


238

Quarterly Information Income Statement - Group

2015/2016

For the three months endedIn Rs. ‘000s

June30th

September30th

December31st

March31st

For the year ended

Revenue 2,373,975 2,768,312 2,872,862 3,616,824 11,631,973

Cost of sales (815,726) (855,156) (851,525) (914,569) (3,436,976)

Gross profit 1,558,249 1,913,156 2,021,337 2,702,255 8,194,997

Other operating income 40,902 123,997 9,937 15,110 189,946

Administrative expenses (1,019,563) (1,124,682) (1,162,935) (1,210,826) (4,518,006)

Distribution expenses (64,085) (71,677) (88,314) (95,428) (319,504)

Other operating expenses (334,820) (408,828) (346,848) (366,227) (1,456,723)

Finance expenses (48,163) (45,546) (42,126) (46,190) (182,025)

Finance income 28,584 30,941 30,063 37,541 127,129

Share of results of equity accounted investees (108) (110) (118) (257) (593)

Profit before tax 160,996 417,251 420,996 1,035,978 2,035,221

Tax expense (30,590) (64,848) (53,484) (137,500) (286,422)

Profit for the year 130,406 352,403 367,512 898,478 1,748,799

Attributable to:

Equity holders of the parent 130,794 350,550 364,554 888,645 1,734,543

Non controlling interests (388) 1,853 2,958 9,833 14,256

130,406 352,403 367,512 898,478 1,748,799


239

Quarterly Information Statement of Financial Position - Group

2015/2016

As atIn Rs. ‘000s

June30th

September30th

December31st

March31st

Assets

Non current assets 22,122,416 22,696,216 22,793,248 23,805,596

Current assets 4,328,304 3,861,404 4,374,135 5,094,004

Total Assets 26,450,720 26,557,620 27,167,383 28,899,600

Equity and Liabilities

Equity 20,486,009 20,952,444 21,453,650 22,884,813

Non controlling interest 117,935 116,889 118,382 132,952

Total Equity 20,603,944 21,069,333 21,572,032 23,017,765

Non current liabilities 3,162,585 2,926,396 2,612,381 2,408,215

Current liabilities 2,684,191 2,561,891 2,982,970 3,473,620

Total Liabilities 5,846,776 5,488,287 5,595,351 5,881,835

Total Equity and Liabilities 26,450,720 26,557,620 27,167,383 28,899,600

SHARE INFORMATION

Earnings per share 0.09 0.24 0.25 0.61

Net assets per share 14.07 14.39 14.73 15.72

Market price per share

Highest 18.30 17.40 15.90 15.20

Lowest 14.00 15.00 14.20 11.00

Last traded price 16.80 15.20 15.40 12.00


240

Indicative US dollar financial statements

Income Statement

For the Year Ended 31st March Group Company

In USD ‘000s 2016 2015 2016 2015

Revenue 83,576 87,203 - -

Cost of sales (24,695) (25,073) - -

Gross profit 58,881 62,130 - -

Dividend income - - 6,917 5,853

Other operating income 1,365 833 49 73

Administrative expenses (32,462) (31,737) (188) (175)

Distribution expenses (2,296) (2,331) - -

Other operating expenses (10,467) (11,060) (4) (3)

Results from operating activities 15,021 17,835 6,774 5,748

Finance expenses (1,308) (2,020) (3) (64)

Finance income 913 883 233 46

Net finance income/(expenses) (395) (1,137) 230 (18)

Share of results of equity accounted investees (4) (5) - -

Profit before tax 14,622 16,693 7,004 5,730

Tax expense (2,058) (2,461) (66) (145)

Profit for the year 12,564 14,232 6,938 5,585

Attributable to :

Equity holders of the parent 12,462 14,125

Non controlling interests 102 107

12,564 14,232

Exchange Rate (SL Rs.) 139.18 131.24 139.18 131.24

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 auditors opinion and note to the financial statements.

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.


241




In USD ‘000s 2016 2015 2016 2015

ASSETS

Non-Current Assets

Property, plant and equipment 96,667 101,611 - -

Lease rentals paid in advance 57,821 58,910 - -

Intangible assets 4,541 5,024 - -

Investments in subsidiaries - - 71,952 79,076

Investments in equity accounted investees 455 444 431 437

Non-current financial assets 1,256 171 - -

Deferred tax assets 487 413 - -

Other non-current assets 3 5 - -

161,230 166,578 72,383 79,513

Current Assets

Inventories 1,240 1,301 - -

Trade and other receivables 6,536 7,062 - -

Other current assets 2,305 2,626 104 95

Amounts due from related parties 1,117 1,200 8 5

Short term investments 17,411 15,559 2,440 -

Cash in hand and at bank 5,893 6,121 46 713

34,502 33,869 2,598 813

Total Assets 195,732 200,447 74,981 80,326

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Stated capital 64,343 71,190 64,343 71,190

Other components of equity 41,358 34,752 - -

Revenue reserve 49,293 46,382 10,423 8,670

154,994 152,324 74,766 79,860

Non controlling interests 900 886 - -

Total Equity 155,894 153,210 74,766 79,860


242


In USD ‘000s 2016 2015 2016 2015

Non-Current Liabilities

Interest bearing borrowings 12,549 21,736 - -

Deferred tax liabilities 1,602 1,340 - -

Employee benefit liability 1,057 1,057 - -

Other deferred liabilities 572 584 - -

Non-current financial liabilities 531 509 - -

16,311 25,226 - -

Current Liabilities

Trade and other payables 6,327 5,804 104 97

Other current liabilities 1,707 1,990 - -

Amounts due to related parties 1,083 938 13 50

Income tax liabilities 1,725 2,690 98 68

Current portion of interest bearing borrowings 7,795 9,711 - 251

Bank overdrafts 4,890 878 - -

23,527 22,011 215 466

Total Equity and Liabilities 195,732 200,447 74,981 80,326

Exchange Rate (SL Rs.) 147.65 133.45 147.65 133.45




243

0

2

4

6

8

10

12

Revenue

Rs.Bn

20072008

20092010

20112012

20132014

20152016

-0.5

0.0

0.5

1.0

1.5

2.0

Profit After Tax

Rs.Bn

20072008

20092010

20112012

20132014

20152016

0

5

10

15

20

25

30

Total Assets

Rs.Bn

20072008

20092010

20112012

20132014

20152016

Ten Years Graphical Review

0

5

10

15

20

25

Net Assets

Rs.Bn

20072008

20092010

20112012

20132014

20152016


244

Ten Years Summary - Group

31st MarchIn Rs. ‘000s

2016 2015 2014 2013

OPERATING RESULTSRevenue 11,631,973 11,444,150 10,966,381 9,341,581 Cost of sales* (3,436,976) (3,290,496) (3,590,914) (3,004,424)Gross profit 8,194,997 8,153,654 7,375,467 6,337,157 Earnings before interest and tax 2,217,246 2,455,788 2,427,116 1,819,992 Finance expenses (182,025) (265,101) (533,877) (537,096)Profit/(loss) before tax 2,035,221 2,190,687 1,893,239 1,282,896 Tax expense (286,422) (322,923) (318,313) (161,877)loss after tax for the year from discontinued operations - - - - Profit/(loss) for the year 1,748,799 1,867,764 1,574,926 1,121,019

Attributable to:Equity holders of the parent 1,734,543 1,853,724 1,565,846 1,116,779 Non controlling interests 14,256 14,040 9,080 4,240

1,748,799 1,867,764 1,574,926 1,121,019

ASSETSNon current assetsProperty, plant and equipment (PPE) 14,272,874 13,560,033 13,152,921 13,471,801 Lease rentals paid in advance (LRPA) 8,537,247 7,861,533 8,235,508 8,639,214 Intangible assets (IA) 670,407 670,407 670,407 670,407 Non current assets other than PPE, LRPA and IA 325,068 137,841 121,392 79,289

23,805,596 22,229,814 22,180,228 22,860,711

Current assetsShort term investments and cash in hand and bank 3,440,751 2,893,304 2,729,432 910,125 Other current assets 1,653,253 1,626,251 1,557,862 1,493,302

5,094,004 4,519,555 4,287,294 2,403,427 Total assets 28,899,600 26,749,369 26,467,522 25,264,138

EQUITY & LIABILITIESEquity attributable to equity holders of the parentStated capital 9,500,247 9,500,247 9,500,247 9,500,247 Other components of equity 6,106,444 4,637,612 3,886,925 3,628,684 Revenue reserves 7,278,122 6,189,643 4,708,642 3,165,257

22,884,813 20,327,502 18,095,814 16,294,188 Non-controlling interests 132,952 118,187 100,442 92,623 Total equity 23,017,765 20,445,689 18,196,256 16,386,811


245

2012 2011 2010 2009 2008 2007

7,388,158 5,691,186 5,187,129 5,114,000 5,158,168 3,692,785 (2,310,988) (1,735,846) (1,567,127) (1,653,083) (1,879,017) (1,252,068) 5,077,170 3,955,340 3,620,002 3,460,917 3,279,151 2,440,717 1,640,782 1,104,756 825,250 70,534 392,223 552,216 (264,628) (271,603) (318,986) (292,013) (475,484) (343,625)

1,376,154 833,153 506,264 (221,479) (83,261) 208,591 (265,354) (80,423) (2,989) 503 12,199 20,107

- (226,747) (298,117) - - - 1,110,800 525,983 205,158 (220,976) (71,062) 228,698

1,105,271 523,944 204,960 (211,498) (61,337) 236,826 5,529 2,039 198 (9,478) (9,725) (8,128)

1,110,800 525,983 205,158 (220,976) (71,062) 228,698

9,918,258 6,585,581 8,718,964 8,685,256 7,823,749 3,454,781 9,386,494 8,605,476 3,653,846 3,839,086 3,686,557 3,796,043

670,407 670,407 670,963 666,068 666,068 655,143 59,206 72,114 66,407 47,396 41,327 253,316

20,034,365 15,933,578 13,110,180 13,237,806 12,217,701 8,159,283

1,687,270 325,367 3,572,296 504,494 419,881 425,659 1,638,314 1,638,520 1,245,912 1,005,993 1,593,749 1,996,215 3,325,584 1,963,887 4,818,208 1,510,487 2,013,630 2,421,874

23,359,949 17,897,465 17,928,388 14,748,293 14,231,331 10,581,157

9,500,247 9,500,247 9,500,247 5,859,880 5,859,880 595,696 1,791,313 761,197 772,879 620,791 303,213 2,558,418 2,482,461 1,379,022 870,373 695,953 907,451 970,173

13,774,021 11,640,466 11,143,499 7,176,624 7,070,544 4,124,287 67,725 63,689 56,269 47,111 56,534 48,680

13,841,746 11,704,155 11,199,768 7,223,735 7,127,078 4,172,967


246

31st MarchIn Rs. ‘000s

2016 2015 2014 2013

Non current liabilitiesNon current liabilities other than borrowings 555,364 465,709 390,375 297,181 Borrowings 1,852,851 2,900,658 4,245,400 5,571,060

2,408,215 3,366,367 4,635,775 5,868,241

Current liabilitiesCurrent liabilities other than borrowings and OD 1,600,718 1,524,144 1,520,160 1,463,010 Current portion of borrowings and bank overdraft 1,872,902 1,413,169 2,115,331 1,546,076

3,473,620 2,937,313 3,635,491 3,009,086 Total equity and liabilities 28,899,600 26,749,369 26,467,522 25,264,138

CASH FLOWSNet cash flows from/(used in) operating activities 3,615,758 3,542,296 3,229,473 2,640,675 Net cash flows from/(used) in investing activities (2,364,080) (1,408,306) (910,612) (2,329,157)Net cash flows from/(used in) financing activities (1,962,069) (2,324,195) (938,729) (338,777)Net Increase/(decrease) in Cash and Cash Equivalents (710,391) (190,205) 1,380,132 (27,259)

KEY INDICATORSEarnings per share (EPS) 1.19 1.27 1.08 0.77 EPS growth (%) (6.3%) 17.6% 40.2% 1.0%Dividend per share (Rs.) 0.40 0.25 - 0.30 Interest cover (no. of times) 12.2 9.3 4.5 3.4 Return on equity (%) 8.0 9.7 9.2 7.5 Pre-tax ROCE (%) 8.7 10.0 10.1 8.1 No. of shares in issue (‘000) 1,456,147 1,456,147 1,456,147 1,456,147 Net assets per share (Rs.) 15.72 13.96 12.43 11.19 Debt/Equity (no. of times) 0.16 0.21 0.35 0.44 Debt/Total assets (%) 13% 16% 24% 28%Market price of share as at 31st March 12.00 14.30 12.50 13.20 Market capitalisation (Rs.’000) 17,473,761 20,822,899 18,201,835 19,221,137 Price earnings ratio (no. of times) 10.08 11.26 11.62 17.21 USD closing rate 147.65 133.45 130.70 126.75 USD average rate 139.18 131.24 130.09 139.91

* Depreciation included in cost of sales was reclassified to administrative expenses in the current year together with the corresponding change for 2014/15. However, this reclassification was not done for the periods prior to 2014/15.

Ten Years Summary - Group


247

2012 2011 2010 2009 2008 2007

193,329 163,347 117,068 192,226 198,428 213,581 5,809,814 2,615,273 3,006,492 3,184,228 3,582,006 1,977,188 6,003,143 2,778,620 3,123,560 3,376,454 3,780,434 2,190,769

1,496,896 803,074 1,383,999 1,073,113 1,138,327 897,571 2,018,164 2,611,616 2,221,061 3,074,991 2,185,492 3,319,850 3,515,060 3,414,690 3,605,060 4,148,104 3,323,819 4,217,421

23,359,949 17,897,465 17,928,388 14,748,293 14,231,331 10,581,157

2,481,857 494,403 989,108 916,481 192,224 (236,799) (3,273,604) (2,312,965) (473,600) (1,032,180) (1,623,409) (4,148,699) 2,930,882 (1,870,223) 3,623,564 (515,482) 645,198 3,876,080 2,139,135 (3,688,785) 4,139,072 (631,181) (785,987) (509,418)

0.76 0.36 0.14 (0.19) (0.06) 0.40 111.0% 155.6% (172.7%) 244.8% (114.1%) 19.9%

- - - - - - 6.2 4.1 2.6 0.2 0.8 1.6 8.7 4.6 2.2 (3.1) (1.3) 5.9 8.5 6.6 5.5 0.5 3.5 8.1

1,456,147 1,456,147 1,456,147 1,092,110 1,092,110 595,696 9.46 7.99 7.65 6.57 6.47 6.92 0.57 0.45 0.47 0.87 0.82 1.28 34% 29% 29% 42% 41% 50%

12.60 17.20 18.25 6.50 7.00 8.25 18,347,449 25,045,725 26,574,679 7,098,715 7,644,770 4,914,495

16.60 47.80 129.66 (33.56) (124.64) 20.75 128.10 110.40 114.00 115.53 107.78 109.20 112.56 112.13 115.02 109.83 110.30 105.51


248

Group Real Estate Portfolio

Buildings (Sq Ft)

Land in acres Net book value

Freehold property Leasehold property Rs.'000 2016

Rs.'000 20152016 2015 2016 2015 2016 2015

Sri Lanka

Beruwala Holiday Resorts (Pvt) Ltd.Cinnamon Bey Beruwala 425,684 425,684 11.39 11.39 - - 3,256,098 3,176,089Ceylon Holiday Resorts Ltd.Bentota Beach by Cinnamon 236,524 236,524 2.32 2.32 11.02 11.02 642,042 638,614 Hikkaduwa Holiday Resorts (Pvt) LtdHikka Tranz by Cinnamon 233,965 233,965 0.29 0.29 4.36 4.36 1,160,508 1,190,330Habarana Lodge LtdCinnamon Lodge Habarana 202,999 202,999 - - 25.48 25.48 668,601 680,912Habarana Walk Inn Ltd.Habarana Village by Cinnamon 121,767 121,767 - - 9.34 9.34 330,300 332,000 Kandy Walk Inn Ltd.Cinnamon Citadel Kandy 173,900 173,900 6.39 6.39 - - 1,293,567 1,224,254

Rajawella Hotels Company Ltd - 3,700 - - - 10.00 - 38,347

Resort Hotels LtdMedway Estate, Nilaveli 4,485 4,485 44.37 44.37 - - 767,740 700,980 Trinco Holiday Resorts (Pvt) LtdTrinco Blu by Cinnamon 120,910 120,910 13.24 13.24 - 764,729 722,378Trinco Walk Inn LtdUppuveli, Trincomalee - - 14.64 14.64 - 271,638 237,683 Wirawila Walk Inn LtdRandunukelle Estate, Wirawila - - 25.15 25.15 - - 86,886 86,888 Yala Village (Pvt) Ltd.Cinnamon Wild Yala 111,529 111,529 - - 11.25 11.25 484,533 471,623Ahungalla Holiday Resorts (Pvt) LtdAhungalla - - 4.63 4.63 - - 148,850 148,850 Nuwara Eliya Holiday Resorts (Pvt) LtdNuwara Eliya - - 3.35 2.66 - - 259,396 199,367


249

Buildings (Sq Ft)

Land in acres Net book value

Freehold property Leasehold property Rs.'000 2016

Rs.'000 20152016 2015 2016 2015 2016 2015

Republic of Maldives

Tranquility (Pte) LtdCinnamon Dhonveli Maldives 246,358 246,358 - - 18.62 18.62 7,414,527 7,134,834 Travel Club (Pte) Ltd.Ellaidhoo Maldives by Cinnamon 170,877 170,877 - - 13.75 13.75 1,564,500 1,197,720 Fantasea World Investments (Pte) Ltd.Cinnamon Hakuraa Huraa Maldives 150,412 150,412 - - 18.90 13.42 1,155,214 899,359 Total 2,199,410 2,203,110 125.77 125.08 112.72 117.24 20,269,129 19,080,228


250

Directors of Subsidiary Companies

Sri Lanka

Ceylon Holiday Resorts Limited

(PB 40) - 98.65%Owner & operator of Bentota Beach by Cinnamon

Incorporated in - 1966

Company operating address - Bentota Beach by Cinnamon, Galle Road, Bentota

Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2

Stated Capital - Rs.745Mn

Contact No. - 034-2275176/7

Directors - Mr S C Ratnayake - ChairmanMr A D GunewardeneMr B J S M Senanayake Mr K N J Balendra*

Habarana Lodge Limited

(PB 38) - 98.35%Owner & operator of Cinnamon Lodge Habarana


Company operating address - Cinnamon Lodge HabaranaP.O Box 02, Habarana.

Registered office address - 117, Sir ChittampalamA Gardiner Mawatha, Colombo 02.


Contact No. - 066-2270011/2


Habarana Walk Inn Limited

(PB 33) - 98.77%Owner & operator of Habarana Village by Cinnamon


Company operating address - Habarana Village by Cinnamon, PO Box 01, Habarana.



Contact No. - 066-2270046


International Tourists and Hoteliers Limited

(PB 17) - 99.33%Incorporated in - 1973

Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.1.9 Bn.

Contact No. - 0112306000


Kandy Walk Inn Limited

(No. PB 395) - 98.39%Owner & operator of Cinnamon Citadel Kandy


Company operating address - Cinnamon Citadel Kandy124, Srimath Kuda Ratwatte Mawatha, Kandy.



Contact No. - 0812234365/6


Rajawella Hotels Company Limited

(PB 92) - 100%Incorporated in - 1992


Stated Capital - Rs. 34Mn

Contact No. - 0112306000

Directors - Mr S C Ratnayake - ChairmanMr A D GunewardeneMr J R Gunaratne Mr K N J Balendra*

Trinco Walk Inn Limited

(PB168) - 100%Owner of real estate in Trincomalee





251

Contact No. - 0112306000


Resort Hotels Limited

(PB 193) - 100%Owner of real estate in Nilaveli


Registered office address -

No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2

Stated Capital - Rs.7.2Mn

Contact No. - 0112306000

Directors -

Mr S C Ratnayake - ChairmanMr A D Gunewardene Mr K N J Balendra*

Wirawila Walk Inn Limited

(PB 89) - 100%Owner of real estate in Wirawila




Contact No. - 0112306000

Directors -

Mr S C Ratnayake - ChairmanMr A D GunewardeneMr. B.J.S.M. Senanayake Mr K N J Balendra*

Yala Village (Private) Limited

(PV 2868) - 93.78%Owner & Operator of Cinnamon Wild Yala


Company operating address -

P.O Box 01, Kirinda,Tissamaharama



Contact No. - 047- 2239449/52

Directors - Mr S C Ratnayake - Deputy ChairmanMr A D GunewardeneMr J A DavisMr M A Perera - ChairmanMr B J S M Senanayake Mr K N J Balendra*

Beruwala Holiday Resorts (Private) Limited

(PV 69678) - 99.33%Owner & Operator of Cinnamon Bey Beruwala


Company operating address - Cinnamon Bey BeruwalaMoragolla, Beruwala.

Registered office address - No.117, SirChittampalam A Gardiner Mawatha, Colombo 2

Stated Capital - Rs. 2.3Bn

Contact No. - 034-2297000

Directors -

Mr S C Ratnayake - ChairmanMr A D GunewardeneMr B J S M Senanayake Mr K N J Balendra*

Trinco Holiday Resorts (Private) Limited

(PV 69908) - 100%Owner & Operator of Trinco Blu by Cinnamon


Company operating address - Trinco Blu by Cinnamon Sambativu, Uppuvelli, Trincomalee.



Contact No. - 026-2222307

Directors - Mr S C Ratnayake – ChairmanMr A D GunewardeneMr B J S M Senanayake Mr K N J Balendra*

Hikkaduwa Holiday Resorts (Private) Limited

(PV 71747) - 98.65%Owner & Operator of Hikka Tranz by Cinnamon


Company operating address - Hikka Tranz by Cinnamon No.01, Galle Road, Hikkaduwa, Sri Lanka.


Stated Capital - Rs.1.06BnContact No. - 091-2277023



252

Ahungalla Holiday Resorts (Private) Limited

(PV 85046) - 100%Owner of real estate in Ahungalla



Stated Capital - Rs. 132Mn

Contact No. - 0112306000


Nuwara Eliya Holiday Resorts (Pvt) Limited

(PV98357) - 100%Owner of real estate in Nuwara Eliya




Contact No. - 0112306000


Yala Holiday Resorts (Pvt) Limited

(PV101005) – 99.98%Incorporated in - 2014



Contact No. - 0112306000

Directors - Mr M A Perera - ChairmanMr S C Ratnayake Mr A D GunewardeneMr B J S M Senanayake Mr K N J Balendra*

Cinnamon Holidays (Pvt) Limited

(PV101005) – 100%Inbound and Outbound Tour Operator




Contact No. - 0112306000

Directors - Mr S C Ratnayake - ChairmanMr A D Gunewardene Mr K N J Balendra*

Maldives

John Keells Maldivian Resorts (Pte) Limited

(C-208/96) - 100%


Registered office address - 2nd Floor, H.MaizanBuilding, Sosun Magu, Male, Republic of Maldives.

Stated Capital - US$39Mn

Contact No. - 0112306000

Directors - Mr S C Ratnayake - ChairmanMr A D GunewardeneMr B J S M SenanayakeMr S A S PereraMr J E P Kehelpannala Mr K N J Balendra*

Travel Club (Pvt) Limited

(C-121/92) - 100%Owner & Operator of Ellaidhoo Maldives by Cinnamon


Company operating address - Ellaidhoo Maldives by Cinnamon Ari Atoll, Maldives


Stated Capital - US$2.5Mn

Contact No. - 0112306000


Fantasea World Investments (Pvt) Limited

(C-143/97) - 100%Owner & Operator of Cinnamon Hakuraa Huraa Maldives


Company operating address - Cinnamon Hakuraa Huraa , Meemu Atoll, Maldives

Directors of Subsidiary Companies


253


Stated Capital - US$0.6Mn

Contact No. - 0112306000


Tranquility (Pvt) Limited

(C344/2004) - 100%Owner & Operator of Cinnamon Dhonveli Maldives


Company operating address - Cinnamon Dhonveli, North Male’ Atoll, Maldives


Stated Capital - US$5Mn

Contact No. - 0112306000


* Appointed 2nd May 2016


254

Glossary ofFinancial Terms

Accounting policies The specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting Financial Statements.

Accrual basisRecording revenues and expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period.

Amortisation The systematic allocation of the depreciable amount of an intangible asset over its useful life.

Capital employed Shareholders’ funds plus non-controlling interest and debt.

Cash equivalents Short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Contingent liabilities A condition or situation existing at the reporting date due to past events, where the financial effect is not recognized because:

1. the obligation is crystallised by the occurrence or non-occurrence of one or more future events or,

2. a probable outflow of economic resource is not expected or,

3. it is unable to be measured with sufficient reliability

Current ratio Current assets divided by current liabilities.

Capital expenditure The total additions to property, plant and equipment.

Corporate governance The process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of the entity, the supervision of executing actions and accountability to owners and others.

Debt/Equity ratio Debt as a percentage of shareholders’ funds and non-controlling interest.

Deferred tax Sum set aside in the Financial Statements for taxation that may become payable in a financial year other than the current financial year.

Dividend Yield Dividends adjusted for changes in number of shares in issue as a percentage of the share price (diluted) at the end of the period

Earnings per share (EPS) Profit attributable to equity holders of the parent divided by the weighted average number of ordinary shares in issue during the period.

EBIT Earnings before interest and tax (includes other operating income).

EBITDA Earnings before interest, tax, depreciation and amortisation.

Effective tax rate Tax expense divided by profit before tax.

EPS growth Percentage of the increase in the EPS over the previous year.

Equity method The equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post acquisition changes in the investors’ share of net assets of the investee. The income statement of the investor includes the investor’s share of the profit or loss of the investee.

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


255

Finance lease A contract whereby a lessor conveys to the lessee the right to use an asset for rent over an agreed period of time which is sufficient to amortise the capital outlay of the lessor. The lessor retains ownership of the asset but transfers substantially all the risks and rewards of ownership to the lessee.

Group A group includes the parent, all its subsidiaries and joint ventures.

Guarantees Tri party agreement involving a promise by one party (the guarantor) to fulfil the obligations of a person owing a debt if that person fails to perform.

Impairment This occurs when recoverable amount of an asset is less than its carrying amount.

Intangible asset An intangible asset is an identifiable non-monetary asset without a physical substance.

Interest cover Consolidated profit before interest and tax over finance expenses.

Key Management Personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the

activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity.

Materiality The relative significance of a transaction or an event, the omission or misstatement of which could influence the economic decisions of users of Financial Statements.

Non-controlling interest Part of net results of operations and net assets of subsidiaries attributable to interests which are not owned, directly or indirectly through subsidiaries, by the Parent Company.

Market value per share The price at which an ordinary share can be purchased in the stock market

Market capitalisation Number of shares in issue at the end of period multiplied by the market price at end of the period.

Net assets Total assets minus current liabilities, minus long term liabilities and minus non-controlling interest.

Net assets per share Net assets as at a particular financial year end divided by the number of shares in issue as at the current financial year end.

Net (debt)/cash Total debt minus (cash plus short term deposits)

Operational risk This refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

Pre-Tax Return on capital employed Consolidated profit before interest and tax as a percentage of average capital employed at year end.

Price earnings ratio Market price per share (diluted) over diluted earnings per Share.

Prudence Inclusion of a degree of caution in the exercise of judgement needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.

Public holdingPercentage of shares held by the public calculated as per the Colombo Stock Exchange Listing Rules as at the date of the Report.

Related parties Parties where one party has the ability to control the other party or exercise


256

Glossary ofFinancial Terms

significant influence over the other party in making financial and operating decisions, directly or indirectly.

Return on assets Profit after tax divided by the average total assets.

Return on equity Profit attributable to shareholders as a percentage of average shareholders’ funds.

Segment Constituent business units grouped in terms of similarity in operations and locations.

Substance over form The consideration that the accounting treatment and the presentation in Financial Statements of transactions and events should be governed by their substance and financial reality and not merely by legal form.

Shareholders’ funds Shareholders’ funds consist of stated capital, other components of equity and revenue reserves.

Total debt Long term loans plus short term loans and overdrafts.

Total value added The difference between net revenue (including other income) and expenses, cost of materials & services purchased from external sources.


257

Notice of Meeting

Notice is hereby given that the Thirty Seventh Annual General Meeting of John Keells Hotels PLC will be held on 30th June 2016 at 3.30 p.m. at the John Keells staff dining hall at No. 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 2, for the following purposes:

1. To read the Notice convening the Meeting.

2. To receive and consider the Annual Report and Financial Statements of the Company for the Financial Year ended 31st March 2016 with the Report of the Auditors thereon.

3. To re-elect as Director, Mr. J R F Peiris, who retires in terms of Article 84 of the Articles of Association of the Company. A brief profile of Mr. J R F Peiris is contained in Page 26 of the Annual Report

4. To re-elect as Director, Mr. J E P Kehelpannala, who retires in terms of Article 84 of the Articles of Association of the Company. A brief profile of Mr. J E P Kehelpannala is contained in Page 26 of the Annual Report

5. To re-elect as Director, Mr. K N J Balendra who retires in terms of Article 90 of the Articles of Association of the Company. A brief profile of Mr. K N J Balendra is contained in Page 27 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,


Colombo03 June 2016

Notes:

A member unable to attend is entitled to appoint a Proxy to attend and vote in his/her place.

A Proxy need not be a member of the Company.

A member wishing to vote by Proxy at the Meeting may use the Proxy Form enclosed.

In order to be valid, the completed Proxy Form must be lodged at the Registered Office of the Company not later than 48 hours before the meeting.

If a poll is demanded, a vote can be taken on a show of hand or by a poll. Each share is entitled to one vote. Votes can be cast in person, by proxy or corporate representatives. In the event an individual shareholder and his proxy holder are both present at the meeting, only the shareholder‘s vote is counted. If proxy holder’s appointor has indicated the manner of voting, only the appointor’s indication of the manner to vote will be used.


258

Notes


259

Form of Proxy

I/We ………………………………………………………………………………………………………………………………………………………. of

………………………………………………………………………………………………………………………………………...………………. being

a member/s of John Keells Hotels PLC hereby appoint

……………………………………………………………………………………………………………………………………………………………. of

………………………………………………………………………………………………………………………………………….... or failing him/her

Mr. Susantha Chaminda Ratnayake of Colombo or failing himMr. Ajit Damon Gunewardene of Colombo or failing himMr. James Ronnie Felitus Peiris of Colombo or failing himMr. Jayantissa Emalka Pohath Kehelpannala of Colombo or failing himMr. Ranel Tissa Wijesinha of Colombo or failing himMr. Balapuwaduge Justus Sunimal Mendis Senanayake of Colombo or failing himMr. Nissanka Bandara Weerasekera of Colombo or failing himMr. Trevine Lalith Francis Waas Jayasekara of Colombo or failing himMr. Krishan Niraj Jayasekara Balendra of Colombo

as my/our proxy to represent me/us and vote on my/our behalf at the Thirty Seventh Annual General Meeting of the Company to be held on 30th June 2016 and at any adjournment thereof and at every poll which may be taken in consequence thereof.

I/ We, the undersigned, hereby direct my/ our proxy to vote for me/ us and on my/ our behalf on the specified Resolution as indicated by the letter “X” in the appropriate cage:

FOR AGAINST

To re-elect as Director, Mr. J R F Peiris who retires in terms of Article 84 of the Articles of Association of the Company.

To re-elect as Director, Mr. J E P Kehelpannala, who retires in terms of Article 84 of the Articles of Association of the Company.

To re-elect as Director, Mr. K N J Balendra, who retires in terms of Article 90 of the Articles of Association of the Company.

To re-appoint Auditors, Messrs. Ernst & Young, Chartered Accountants and to authorise the Directors to determine their remuneration.

Signed this ……………………….day of ……………… Two Thousand and Sixteen

………………………………….Signature/s of shareholder/s

Note: INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.


260

Form of Proxy

INSTRUCTIONS AS TO COMPLETION OF PROXY

1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature.

2. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 02, not later than 48 hours before the time appointed for the holding of the Meeting.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

4. If the appointer is a Company or Corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorised officer of the Company or Corporation in accordance with its Articles of Association or Constitution.

5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.

Please fill in the following details:

Name : ........................................................................................................

Address : ........................................................................................................

.........................................................................................................

.........................................................................................................

Jointly with : ........................................................................................................

Share Folio No. : ........................................................................................................

Corporate Information

Name of Company John Keells Hotels PLC

Legal Form Public Limited Liability Company incorporated in Sri Lanka on 1st October 1979

Stock Exchange Listing The issued shares of John Keells Hotels PLC are listed on the Colombo Stock Exchange

Company Registration No. PQ 8

Directors S C Ratnayake – Chairman A D Gunewardene J R F Peiris J E P Kehelpannala R T Wijesinha N B Weerasekera B J S M Senanayake T L F W Jayasekera K N J Balendra - (appointed w.e.f. 01.04.2016)

Secretaries and RegistrarsKeells Consultants (Pvt) Ltd 117, Sir Chittampalam A. Gardiner Mawatha Colombo 2

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

Bankers Bank of Ceylon Deutsche Bank A.G Hongkong and Shanghai Banking Corporation Nations Trust Bank Hatton National Bank Habib BankCiti Bank N.A

Head Office & Registered Office of the Company 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 2 Telephone : (94-11) 2421101-15, (94-11) 2306000 Facsimile : (94-11) 2439046 E-mail : [email protected] Web : www.johnkeellshotels.com

Hotel Reservations Cinnamon Hotel Management Ltd 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 2 Telephone : (94-11) 2306600, (94-11) 2439049-51 Facsimile : (94-11) 2320862 E-mail : [email protected] Web : www.cinnamonhotels.com

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Documents

John Keells Hotels PLC | Annual Report 2015/16 Keells Hotels PLC | Annual Report 2015/16 8 About this Report John Keells Hotels PLC’s corporate reporting model complements the Group’s