live, inspiredcome, explore the world of cinnamon … inspiredcome, explore the world of cinnamon...

John Keells Hotels PLC | Annual Report 2014/15

Live, InspiredCome, explore the world of Cinnamon and live, inspired.

Live, InspiredCome, explore the world of Cinnamon and live, inspired.

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Contents

Our Vision 11

The Scope and Boundary of this Report 12

Report Profile 13

Group Financial and Operational Highlights 24

Chairman’s Statement 29

Group Structure 33

Board of Directors 34

Corporate Governance 38

Audit Committee Report 54

Risk Management 56

Management Discussion and Analysis 63

Sustainability Performance 110

Independent Assurance Report 144

Investor Information 145

Annual Report of the Board of Directors 150

Statement of Directors’ Responsibility 154

Independent Auditors’ Report 155

Income Statement 156

Statement of Comprehensive Income 157

Statement of Financial Position 158

Statement of Changes in Equity 160

Statement of Cash Flows 161

Notes to the Financial Statements 163

Quarterly Income Statement - Group 224

Quarterly Statement of Financial Position - Group 225

Indicative US dollar Income Statement 226

Indicative US dollar Statement of Financial Position 227

Ten Years Summary - Group 228

Group Real Estate Portfolio 230

Directors of Subsidiary Companies 232

Glossary of Financial Terms 235

Notice of Meeting 237

Form of Proxy 239

Corporate Information IBC

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Let us take you on a voyage of discovery as fascinating as those of the many travellers who dared the perils of unknown lands to visit an island famed for its fabulous beaches, dazzling wildlife, fiery cuisine and extraordinary spices…

Welcome to Cinnamon Hotels and Resorts, where every moment is an opportunity to enrich your life’s experience. Discover the vibrant heart and soul of our people and our offering at 11 exciting hotels and resorts sited in stunning locations across Sri Lanka and the Maldives, bringing contemporary grace and elegance to the world of hospitality, Sri Lankan style.

Come, explore the world of Cinnamon and live, inspired.

Live, Inspired

Come, explore the world of Cinnamon and live, inspired.

Discover the vibrant heart and soul of our people and our offering...

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Inspired to lead

OuR ViSiOn

We will always be the hospitality trendsetter

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View this Annual Report online at www.cinnamonhotels.com

Inspired to deliverOur commitment of value to our stakeholders remains total…

THE SCOpE anD BOunDaRy Of THiS REpORT

About this Report

This year, we transition to an Integrated form of reporting and present our Annual Report and Accounts in a way that provides a clear and concise view of our strategy and performance in relation to our financial, social and environmental goals. We have also enhanced the scope and coverage of this year’s report, demonstrating how our material issues are derived and how they are integrated into our business strategy. The Report is based on the Integrated Reporting Framework issued by the International Integrated Reporting Council (IIRC). Any material events after the reporting date and up to the sign off by the Board of Directors on 29th May 2015 have also been included.

In addition to the IIRC Guidelines this Report has been prepared in accordance with the Global Reporting Initiative (GRI) G4-Core Criteria. The Report conforms to the requirements of the Companies Act No. 7 of 2007, the continued listing requirements of the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance jointly issued by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. The financial statements have been prepared in accordance with the Sri Lanka Financial Reporting

Standards which comprises the International Financial Reporting Standards bound volume 2012. External Assurance on the financial statements and Sustainability reporting is provided by Messrs. Ernst and Young.

Scope and Boundary

The Report covers operations of John Keells Hotels PLC (herein referred to as “Group”) in Sri Lanka and Maldives for the period from 1st April 2014 to 31st March 2015. The Group consists of 8 resorts in Sri Lanka and 3 in the Maldives. The data used in the narrative refers to the Group’s operations in both countries, unless otherwise indicated. Report content has been selected and prioritised by the management, based on the requirements of our key stakeholders. There were no significant changes to the Group’s size, structure, ownership or supply chain during the period under review.

Forward Looking Statements

This Report contains forward looking statements which are based on our current plans and estimates and therefore involve inherent risks and uncertainties. These statements are not guarantees of the Group’s future performance as it may differ due to events or trends that become apparent subsequent to the sign off date.

Contact Point

We welcome your comments, feedback, suggestions and queries regarding this Report. Please contact, Mr. Sunil Peiris, Sector Financial Controller, 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02. E-mail: [email protected].

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REpORT pROfiLE

Performance at a Glance

Eco

no

mic

Per

form

ance

Revenue

4%

Operating Profit

3%

Profit Before Tax

16%

Earnings Per ShareLKR: 1.27 (2015)LKR: 1.08 (2014)

Operational Cash Flow

4%

Dividend Per ShareLKR: 0.25 (2015)LKR: Nil (2014)

Debt/Equity0.21 (2015)0.33 (2014)

Occupancy Levels

1%

Net Assets Per Share

12%

Env

iro

nm

enta

l Pe

rfo

rman

ce

Carbon Footprint 20,213 KG

Emissions Per Operational Factor

1%

Energy Per Operational Factor

2%

Water Use Per Operational Factor

1.3%

Water Recycled

7%

Waste Disposed

14%

So

cial

Per

form

ance Total Employees

2,720Investment In Training

LKR 20.0 MnFemale Participation

9%

Training hours/Employee46

Staff Injury Rate

1.75% Staff Satisfaction Rate – 87%

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About the Group

John Keells Hotels is Sri Lanka’s leading hotel operator with a portfolio of 11 hotels and 1,336 rooms in Sri Lanka and Maldives. Our multi-award winning hotels brands, Cinnamon and Chaaya aim to inspire guests by combining luxury and lifestyle experiences at our unique locations. As a pioneer in sustainable tourism in Sri Lanka, John Keells Hotels is committed to acting as a responsible corporate citizen, to its 2,720 employees as well as in its relationships with local communities and the environment. The Group is listed on the Main Board of the Colombo Stock Exchange with a market capitalisation of LKR 20.8 billion as at end-March 2015.

Our Hotel Portfolio

Cluster Hotel Room Capacity Rating (Year 2014)

Sri L

anka

Beach Front Cinnamon Bey 200 4.0

Chaaya Tranz 150 4.0

Chaaya Blu 81 4.0

Bentota Beach 133 4.0

Adventure and Heritage Cinnamon Wild 68 4.5

Cinnamon Lodge 137 4.5

Chaaya Village 108 4.5

Cinnamon Citadel 119 4.0

Mal

dive

s Beach Front Chaaya Island, Dhonveli 148 4.5

Chaaya Reef, Ellaidhoo 112 4.5

Chaaya Lagoon, Hakuraa Huraa 80 4.5

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Resort certifications

Gre

en G

lob

e C

ertifi

catio

n

3 S

tar

Cre

scen

t R

atin

g

Trav

elife

ISO

220

00:2

005

ISO

140

01

OH

SA

S 1

8001

LEE

D

Bentota Beach Hotel ü ü ü ü üChaaya Village ü ü ü üCinnamon Citadel ü ü ü ü üChaaya Blu ü ü ü üCinnamon Lodge ü ü ü ü üCinnamon Wild ü ü ü üChaaya Tranz ü ü ü ü üCinnamon Bey ü ü ü ü Gold

Chaaya Lagoon Hakuraa Huraa ü ü ü ü üChaaya Reef Ellaidhoo ü ü ü ü üChaaya Island Dhonveli ü ü ü ü

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Our Excellence

Sustainability, Health and Safety

1. International Hotel Awards, London - Award for the best sustainable hotel and award for the best resort in the country – Cinnamon Lodge Habarana

2. Annual Report of the John Keells Hotels PLC – Winner of ACCA Sri Lanka Sustainability Reporting Awards 2014 (Leisure & Connected Services Category)

3. NIOSH 2014 (National Occupational Safety and Health Awards)

> Chaaya Tranz Hikkaduwa- Silver Presidential Award – Intra Industry Category

> Cinnamon Citadel Kandy –Winner – Large Scale Hospitality Sector

> Bentota Beach Hotel – Merit Award – Large Scale Hospitality Sector

4. JKH Chairman’s award for Sustainability was won by Cinnamon Citadel Kandy

5. National Green Awards 2013/14 organized by Central Environment Authority – Silver Award – Large Scale Tourism Sector

6. Greening Awards 2014 organized by The Hotels Association of Sri Lanka – Merit awards – Cinnamon Citadel, Cinnamon Wild & Cinnamon Bey.

Customer Satisfaction

1. MATATO Maldives Travel Awards 2014 – Chaaya Island Dhonveli was awarded Leading Surf Resort for the 3rd consecutive year

2. Trip advisor 2014 – Travellers’ Choice Awards

Cinnamon Lodge, Cinnamon Citadel and Cinnamon Wild were awarded.

3. Trip advisor 2014 – Certificate of excellence

All resorts were rated 4 or above out of the maximum of 5

4. All hotels in the Sector were awarded Holiday Check Quality Certification 2014

5. Virgin bronze award for customer satisfaction – Hakuraa – Indian ocean hotels

6. Starway awards by coral travel Russia for Ellaidhoo – 1 of the best 25 hotels in the world – customer satisfaction

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Culinary Excellence

1. 3rd East coast Open Culinary Competition 2014 held in Fujairah, U.A.E. Mr. Julinda Pushpakumara, Executive Chef of Chaaya Tranz won two gold medals and was adjudged as the”Best Chef”

2. EXPOGAST” 2014 Villeroy & Boch culinary world cup held in Luxemburg

Silver Medal – won by Mr. H.Nuwan Silva, Sous Chef –BBH

Gold and two Silver Medals – won by Mr. Lasitha Kavirathna – Chaaya Tranz

Gold and a Bronze Medal – won by Chef Priyantha Weerasinghe – Cinnamon Bey

3. Singapore Food Festival (Suvai) - Silver Medal won by Chef Priyantha Weerasinghe

4. 2015 Restaurant award from Top Choice Hotel Media China was by Chaaya Blu, Trincomalee

5. Food Asia Exhibition & International Culinary Challenge, 2014

Chaaya Lagoon Hakuraa Huraa – One Silver and four Bronze Medals

Chaaya Island Dhonveli – Two Gold, three silver and seven Bronze Medals

Chaaya Reef Ellaidhoo – Two Silver and five Bronze Medals

6. Hotel Asia Exhibition and International Culinary Challenge 2014

Chaaya Island Dhonveli – Two Bronze Medals and Three Merit certificates

Chaaya Island Dhonveli – Two Bronze Medals

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The Cinnamon Brand

In transforming and driving the Group’s hotel portfolio to be ‘internationally recognised’, the ‘Cinnamon’ brand identity was developed and communicated to all our stakeholders through our product and service offering and operational delivery. We invested substantially in repositioning our brand with a distinctly expressed identity, in order to effectively differentiate ourselves from competition. The new brand strategy emerged as a result of a collaborative process of stakeholder engagement and strategic and creative exploration and positions Cinnamon 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. The essence of the Cinnamon brand encapsulates modern and vibrant spaces designed to redefine the best of contemporary Sri Lankan culture, entertainment and hospitality.

REpORT pROfiLE

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

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inputs Value Creating activities

Outcomes

Financial Capital

> Shareholders Funds

> Debt Funding

Manufactured Capital

> Physical properties

> Infrastructure

Natural Capital

> Water

> Energy

> Raw Materials

Human Capital

> Workforce

> Tacit Knowledge

> Values

Social & Relationship Capital

> Guest Relationships

> Suppliers

> Communities

Intellectual Capital

> Brands

> Systems, processes and procedures

Shareholder Value Creation

> Return on Investment

Customer Value Creation

> Inspire guests through unique experiences

Employee Value Creation

> Job Generation

> Development

> Career Progression

> Wellness

Value Creation to Government

> Tax contributions

Environment

> Consumption of natural resources

Community Value Addition

> Developing livelihoods

> Sponsorships

Core Business

Owns and manages a portfolio of 11 resort hotels in Sri Lanka and Maldives

Key Business Processes

Hotel OperationsFood and BeveragesHousekeepingSales and MarketingCustomer Relationship Management

Support Processes

BrandingHuman Resource ManagementDevelopment and Property ManagementInformation TechnologyProcurement

Shareholders

Customers

Employees

Suppliers

Community

Our Value Creating Model

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Stakeholder Engagement

We engage with our multiple stakeholders on a consistent basis in order to understand their expectations and concerns, and these considerations form a vital input in identifying the Group’s material issues. Effectively managing this engagement process has enabled us to generate synergies and shared values with our stakeholder groups whilst working towards the achievement of our business and sustainability goals.

Importance of EngagementHow we engage and Frequency of engagement Key topics arising from engagement

Shar

ehol

ders

Shareholder provide capital required to fund future growth plans

> AGM

> AGM (Annual)

> Quarterly results updates (Quarterly)

> Annual Report (Annual)

> 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- letter (Quarterly)

> Opportunities for growth

> Training and Development

> Job Security

> Performance Management

> Health and Safety considerations

Gue

sts

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

> Guest feedback forms (upon 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 transactions

> Activities

B2B

C

usto

mer

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

> Face to face interaction (Ongoing)

> Familiarisation visits and promotional materials (Ongoing)

> Ease of transactions

> Availability of up to date information on product offerings

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Importance of EngagementHow we engage and Frequency of engagement Key topics arising from engagement

Supp

liers

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 &

re

gula

tory

bod

ies Provides an enabling environment for us

to operate in.> Constructive relationships with Trade

Associations (Ongoing)


> Written communications (Ongoing)

> Taxation revenues

> Compliance to all laws and regulations

> Job creation

> Contribution towards uplifting communities

> Environmental Conservation

Com

mun

ities Strong ties with local communities is

essential for the sustainability of our operations

> Engagement projects and sponsorships

> Livelihood development programmes

> Environmental impacts

> Job creation

> Sponsorships

Financial Highlights

Employee Development Industry Trends

Environmental sustainability

Future Outlook and expansion

plans

Report page reference 24 115 65 123 31

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Identification of Material Issues

The content included in our integrated annual report has been carefully selected and prioritised by the management based on the information obtained from our stakeholder engagement processes. The identified material issues are aligned with the interests of our stakeholders and are focused on the Group’s long-term value creation. In determining the material issues for disclosure, we have considered the potential likelihood and impact of such issues on our business model, strategy and forms of capital which are inputs into our value creation process. The material issues prioritised by its importance in our strategic agenda and stakeholder interests are mapped in the matrix below;

REpORT pROfiLE

5

7

1211

13 12

3

12

1519

2110

9 24

14

8

6

4

H

H

M

M

L

L

Sign

ifica

nce

to o

ur S

take

hold

ers

Significance to the Group’s Strategy

Low Moderate HighL M H

1820

22

23

25

44

34

28

33 35

32

27

36 41

40

4243 46

3938

37 45

3031

26

29

17

16

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Ref. Category Indicator Ref. Category Indicator

1 EC Economic Performance 24 HR Forced or Compulsory Labour

2 EC Indirect Economic Impacts 25 HR Non-discrimination

3 EC Procurement Practices 26 SO Grievance mechanisms for impacts on society

4 EN Materials 27 EC Market Presence

5 EN Energy 28 SO Anti-Corruption

6 EN Water 29 SO Public Policy

7 EN Bio-Diversity 30 SO Anti-Competitive Behaviour

8 EN Emissions 31 SO Compliance

9 EN Effluents and Waste 32 SO Supplier assessment for impacts on society

10 EN Compliance 33 PR Product and service labelling

11 EN Supplier Environmental Assessment 34 PR Customer Privacy

12 LA Employment 35 PR Compliance

13 LA Labour Management Relations 36 LA Equal remuneration for women to men

14 LA Occupational Health and Safety 37 LA Supplier assessment for labour practices

15 LA Training and Education 38 HR Investment

16 SO Local Communities 39 HR Security Practices

17 PR Marketing Communications 40 HR Indigenous rights

18 PR Customer Health and Safety 41 SO Assessment

19 EN Products and Services 42 HR Supplier human resource assessment

20 LA Diversity and Equal Opportunity 43 HR Human Rights Grievance mechanism

21 LA Labour Practices Grievance Mechanism 44 EN Overall

22 HR Freedom of Association and Collective Bargaining 45 EN Transport

23 HR Child Labour 46 EN Environmental Grievance mechanism

REpORT pROfiLE

Category ReferencesEconomic - ECEnvironmental - ENLabour Practices and Decent Work - LA

Human Rights - HRSociety - SOProduct Responsibility - PR

Within the Group’s Internal Boundary

Boundary is external to the Group

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Inspired to performWe’re delivering value…our way.

GROup finanCiaL anD OpERaTiOnaL HiGHLiGHTS

Year ended 31st March 2015 2014

Earnings Highlights and RatiosRevenue Rs’000 11,382,779 10,966,381 Earnings before interest and tax (EBIT) Rs’000 2,455,788 2,427,116 Group profit before tax (PBT) Rs’000 2,190,687 1,893,239 Group profit after tax (PAT) Rs’000 1,867,764 1,574,926 Group profit attributable to the shareholders Rs’000 1,853,724 1,565,846 Earnings per share (EPS) Rs. 1.27 1.08 EPS growth % 17.6 40.5 Interest cover No. of times 9.3 4.5 Return on equity % 9.7 9.2 Pre-tax ROCE % 10.0 10.1

Statement of Financial Position - highlights and ratiosTotal assets Rs’000 26,749,369 26,467,522 Total debt Rs’000 4,313,827 6,360,731 Total shareholder’s funds Rs’000 20,327,502 18,095,814 No. of shares in issue Number 000’s 1,456,147 1,456,147 Net assets per share Rs. 13.96 12.43 Debt/Equity Times 0.21 0.33Debt/total assets % 16 24

Market/Shareholder informationMarket price of share as at 31st March Rs. 14.30 12.50Market capitalisation Rs ‘000 20,822,899 18,201,835 Price earnings ratio No. of times 11.26 11.57

Economic value distributedOperating cots Rs’000 7,302,443 7,103,136 Employee wages and benefits Rs’000 1,849,024 1,724,922 Payments to providers of funds Rs’000 629,138 533,877 Payments to government Rs’000 415,126 384,197Community investments Rs’000 8,850 5,071Retained within the business Rs’000 1,349,464 1,458,014Total employees Number 2,720 2,779

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GROup finanCiaL anD OpERaTiOnaL HiGHLiGHTS

Financial Calender

Audited Financial Statements signed on 29th May 2015

36th Annual General Meeting 30th June 2015

Interim Financial Statements

1st Quarter Interim Results released on 28th July 2014

2nd Quarter Interim Results released on 10th November 2014

3rd Quarter Interim Results released on 30th January 2015

4th Quarter Interim Results released on 29th May 2015

Group Operational Highlights

Year ended 31st March 2015 2014

Occupancy - Sri Lankan Sector 77% 75%

Occupancy - Maldivian Sector 89% 91%

Revenue Room Nights 389,257 384,894

Revenue (Rs.Bn)

2014 2015

11.3810.97

Earnings before interest and tax (Rs.Bn)

2014 2015

2.462.43

Pro�t before tax (Rs.Bn)

2014 2015

2.191.89

Interest Cover

2014 2015

9.3 Times

4.5 Times

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Dream, InspiredOur ambition to stand out in the crowd means that

we just dream bigger…

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Inspired by excellenceOur commitment to excellence has made us

outstanding in our industry…

Susantha RatnayakeChairman

CHaiRMan’S STaTEMEnT

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 2015.

The Company recorded a steady performance during the year with a double digit growth in profit before tax (PBT) aided by a perceptive focus in stabilising operations of the beach properties in Sri Lanka and a firm resolve to generate operating efficiencies across the Group. With our strong commitment to ensure sustainable tourism in the operation of our hotels, we have balanced our economic achievement by raising the bar on social and environmental aspects and I am pleased to present the progress we have made on all three fronts in this first integrated report of KHL.

Group performance

Group revenue grew by 4 percent year on year, stemming from the modest improvement in year round occupancies and yields. This growth was led by the Sri Lankan Cinnamon resorts Bey, Citadel, Wild and Lodge and Dhonveli in the Maldives. This resulted in the revenue contribution from the

Sri Lankan segment increasing marginally to 45 per cent from 44 per cent last year. Gross profit (GP) margins were maintained at the same level as last year by the continuous implementation of cost control measures supplemented by fresh initiatives introduced during the year to minimise direct costs.

The rationalisation of distribution expenses resulted in a year on year saving of 6 per cent while the reductions in fuel prices and energy tariffs during the year in Sri Lanka contributed to the 2 per cent reduction in operational expenses. Administrative expenses were marginally higher than last year partly due to the increase in data processing costs stemming from the introduction of the new Indra property management system which seamlessly integrates with the existing SAP back end system.

Finance costs reduced by 50 per cent through negotiation of lower rates and prudently substituting higher cost Rupee (LKR) debt with US Dollar borrowings where cash flows could be matched. The distribution of dividends, repayment of borrowings and the acquisition of

land in Nuwara Eliya, through an investment in a subsidiary, resulted in lower finance income for the Company. This, along with the lower interest rates that prevailed during the year, contributed to the 25 per cent drop in finance income when compared with the previous year.

Consolidated profit before tax increased by 16 per cent to Rs.2.2Bn in the year under review (2013/14 Rs.1.9Bn).

The effective tax rate of the Group was lower than the previous year primarily due to the strong performance and turnaround of Cinnamon Bey, which is entitled to tax concessions, and the lower quantum of finance income which attracts a higher rate of tax.

The higher utilisation of cash flows on investing activities during the year was due to the acquisition of the land in Nuwara Eliya, the instalments paid for the 25 year lease extension at Hakuraa and the comparatively higher value of short term investments with maturity periods exceeding three months.

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We have balanced our economic achievement by

raising the bar on social and environmental aspects


The Group ended the year with a profit after tax of Rs.1.86Bn against the Rs.1.57Bn achieved in 2013/14, representing a 19 per cent improvement on the previous year.

Global Tourism

Although global economic growth in 2014 as per the World Bank was relatively muted at 2.6 per cent, outbound travel recorded robust growth with an additional 51 million tourists travelling internationally despite health and aviation safety concerns, political, economic and security concerns in many key markets. International arrivals worldwide reached 1,138 million, representing year on year growth of 4.7 per cent according to the World Tourism Barometer published by the United Nations World Tourism Organisation (UNWTO) in January 2015. Led by stronger growth in Asia and the Pacific (+4 per cent to +5 per cent), the Americas (+4 per cent to +5 per cent) followed by Europe (+3 per cent to +4 per cent), prospects for global tourism are positive.

Sri Lanka Tourism

Tourist arrivals to Sri Lanka continued to demonstrate strong growth with Sri Lanka surpassing its annual tourism target of 1.5 million

arrivals for 2014, recording 1,527,153 international tourist visits to the country, representing a growth of 19.8 per cent over the previous calendar year. The surge in arrivals was led by the Chinese market, which grew by 136 per cent year on year and became the third largest source market into Sri Lanka. In comparison, the two other main source markets, India and UK, recorded growth of 16.3 per cent (242,734 arrivals) and 4.9 per cent (144,168 arrivals) respectively. Germany and France, considered as traditional source markets, also performed well. According to the Central Bank of Sri Lanka, receipts from tourism in 2014 grew by 42 per cent to USD2.4billion.

The Sri Lanka Tourism Development Authority (SLTDA) has established a target of two million arrivals for 2015. The growth in the first quarter of 2015 has averaged 14 per cent. Coupled with the ongoing private and public sector marketing initiatives and interest in the destination, which has been stimulated by positive global media coverage, it is anticipated that growth in tourism will be strong in the ensuing year.

Maldivian Tourism Prospects

Tourist arrivals in the Maldives recorded a relatively moderate year on year growth of 7.1 per cent in 2014 compared with the robust growth of

15.9 per cent achieved in 2013. The growth in arrivals was impacted by the tapering demand from the Chinese market during the last quarter of 2014 and the economic and political issues in Russia and Ukraine respectively during the year. However, stronger demand from the South East and South Asian regions helped to offset this impact. Despite the relative drop in arrivals at year end, the Chinese market grew by 9.6 per cent year on year and accounted for more than 30 per cent of total tourist arrivals to the country, thereby remaining the largest tourism source market for the Maldives.

New Initiatives

As stated last year, the new property management system was installed at all our hotels in Sri Lanka during the year under review, while installation at the Maldivian resorts is expected to be completed in the first quarter of the next financial year. The new system which runs on the world renowned SAP platform has seamlessly integrated back office and front office processing, enhancing operational efficiencies and making guest information available across the Group. Furthermore, it provides further assurance of the adequacy of the Company’s internal control on financial reporting as required by the Sarbanes-Oxley Act.

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In keeping with the overall branding strategy, we finalized the new brand identity during the year which will help Cinnamon occupy a unique positioning in an increasingly fragmented market. Cinnamon will be differentiated as a Lifestyle brand enabling us to go beyond the traditional hospitality offerings by focusing on experiences that will inspire our customers. We call this ‘inspired living’.

In keeping with this brand promise, Cinnamon Hotels & Resorts took the initiative to establish vibrant lifestyle offerings through several inspiring events. These included the pre-pageant tours for the Miss India & Miss China contestants, a unique familiarization tour for French Travel Agents titled “Treasure Hunt” and Asia’s first ever Travel Bloggers Conference which not only helped to create significant publicity and exposure for the Cinnamon Hotels & Resorts Brand among the target markets and in the online sphere, but also enhanced the attractiveness of Sri Lanka as a “must visit” tourism destination.

A dedicated booking engine for the three Maldivian properties was also launched with a view to drive direct web sales. The direct outcome of this initiative resulted in year on year online revenue growth of 36.3 percent.

We have also succeeded in maintaining a dominant media presence locally through our newsworthy events and initiatives. This has uplifted our brand image and resulted in significant brand recall due to the strong message via brand related stories being communicated across all media platforms. All these efforts were rewarded when Cinnamon Hotels & Resorts topped the list of Emerging Brands in Sri Lanka published by

Brand Finance. The Cinnamon brand also appeared for the first time on the list of the 2015 Brands Annual. Cinnamon was ranked twenty third with a brand value of Rs. 4.9 billion - well ahead of other leisure brands and a number of other well established brands.

Sustainability

In demonstrating its commitment to sustainability, the Group continued to assess its materiality impacts, engage with stakeholders and establish sustainability strategies and targets. I am pleased to report that the Group made significant progress in its environmental and social sustainability agenda during the year. The total carbon footprint for the year was 20,213 kg, a 2% increase in comparison to the previous year due to increased operational activity. However, the carbon footprint per operational factor continued to trend downwards, declining 1%. It is noteworthy that all environmental indicators of water footprint, energy consumption and waste declined on a per operational factor basis. From a labour perspective, the Group provided 46 hours of training per employee on average.

Accolades and Awards

The Group’s unwavering commitment to sustainability and maintaining the highest standards of safety and guest satisfaction was recognised once again during the year. While Cinnamon Bey obtained Green Globe certification and ISO certification for safety in food management, environmental impacts and occupational health and safety for the first time, all other hotels were re-certified as being ISO compliant and all were awarded TripAdvisor Certificates of Excellence in 2014.

At the ACCA Sri Lanka Sustainability Reporting Awards 2014, the Sustainability Report of John Keells Hotels PLC won the award in the Leisure and Connected Services category.

Cinnamon Lodge was recognised for its sustainability initiatives and as the best resort in the country at the International Hotel Awards, London which benchmarks hotels on an international five star standard. For the third consecutive year, Dhonveli was recognised as the Leading Surf Resort in the Maldives at the MATATO Maldives Travel Awards 2014. In addition, several resorts in the Group won local and global accolades for sustainability, health and safety, guest satisfaction and culinary excellence which are detailed in other sections of this report.

Outlook for the future

Tourist arrivals are expected to continue its current growth trajectory driven by newly established source markets which have demonstrated significant growth potential. Arrivals from China are likely to continue the strong growth momentum witnessed in 2014 driven by increasing awareness, focussed marketing and better connectivity. Arrivals from India, the largest source market, are expected to grow with both the leisure and business segments contributing.

Your Company remains positive that the newly initiated brand architecture, coupled with the digital and social media strategy, will strengthen our brand presence and help achieve differentiation of our offering in a market which now has a variety of product and service offerings. We will continue our online marketing strategy in order to drive direct online sales and in the

32



process reduce distribution costs. The revamped, responsive multilingual website, in keeping with the new brand identity, will be launched by December 2015. With the standardization of all online marketing components and furtherance of our vibrant social media strategy, we are confident of securing a stronger online brand presence and establishing Cinnamon Hotels & Resorts as the leading lifestyle brand in Sri Lanka.

We have initiated steps to formulate training curricula for all levels of staff geared to deliver on the brand promise and further optimise productivity ratios.

Conclusion

I 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.

Reflecting on the successful performance of the Group in 2014/15, 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 hard to provide quality customer service.

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

29th May 2015

33


GROup STRuCTuREJo

hn K

eells

Hol

ding

s P

LC(U

ltim

ate

Pare

nt C

ompa

ny)

John

Kee

lls H

otel

s P

LC80

.32%

Hikkaduwa Holiday Resorts (Pvt) Limited100% - Chaaya Tranz

Hikkaduwa

Beruwala Holiday Resorts (Pvt) Limited100% - Cinnamon Bey

Beruwala

Travel Club (Pte) Limited100% - Chaaya Reef

Ellaidhoo,

Maldives

Fantasea World Investments (Pte) Limited100% - Chaaya Lagoon

Hakuraa Huraa,

Maldives

Tranquility (Pte) Limited100% - Chaaya Island

Dhonveli,

Maldives

Resort Hotels Limited100% - 44.37 acres of land in Nilaveli

Kandy Walk Inn Limited 98.39% - Cinnamon Citadel Kandy

Yala Village (Pvt) Limited93.78% - Cinnamon Wild Tissamaharama

Habarana Lodge Limited98.35% - Cinnamon Lodge Habarana

Habarana Walk Inn Limited98.77% - Chaaya Village Habarana

Trinco Holiday Resorts (Pvt) Limited 100% - Chaaya Blu Trincomalee

Ceylon Holiday Resorts Limited 98.65% - Bentota Beach Hotel

Nuwara Eliya Holiday Resorts (Pvt) Limited100% - 2.66 acres of land in Nuwara Eliya

Rajawella Hotels Co Limited100% - 10 acres of land in Kandy

International Tourists & Hoteliers Limited99.33% - 0.11 acres of land in Beruwala

Wirawila Walk Inn Limited 100% - 25.15 acres of land in Wirawila

Trinco Walk Inn Limited 100% - 14.64 acres of land in Trincomalee

Ahungalla Holiday Resorts (Pvt) Limited100% - 4.63 acres of land in Ahungalla

John Keells Hotels Mauritius (Pvt) Limited100%

John Keells Maldivian Resorts (Pte) Limited100%

Sentinel Realty (Pvt) Limited 50% - Joint Venture 33.69 acres of land in Vaakarai

34


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 also the Chairman of Ceylon Tobacco Company PLC and Employers Federation of Ceylon.

Ajit Gunewardene

Ajit Gunewardene is the Deputy Chairman of John Keells Holdings PLC and a member of the Board for over 20 years. He is the Chairman of Union Assurance PLC. Mr Gunewardene is also 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 an Advisory Committee Member of COSTI, the Coordinating Secretariat for Science Technology & Innovation under the purview of the Senior Minister of Scientific Affairs. 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 in over 32 years of Management experience.

Ronnie Peiris

Ronnie 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. He is a member of the Committee of the Ceylon Chamber of Commerce, and serves on it’s Economic, Fiscal and Policy Planning Sub Committee.

Jayantissa Kehelpannala

Jayantissa Kehelpannala, Head of Maldivian Resorts, has over 31 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 represents same at the EFC Council Meetings 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.

Ranel Wijesinha

Ranel Wijesinha was appointed to the Board as a Non-Executive Director in July 2005 and functions as Chairman of the Audit Committee. Presently, an independent management consultant, he is a Fellow of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and a holder of a Master’s Degree in Business Administration from the University of Pittsburgh, in Pennsylvania, USA. He is a Past President of CA Sri Lanka and a Past President of the 23 nation Confederation of Asian and Pacific Accountants. Over a career of three and a half decades, Mr. Wijesinha has a unique blend of exposure between, local and overseas work, between private professional practice and private industry, as well as between advisory and regulatory roles for Governments. He worked with local and global ‘Big 4’ professional services firms in accounting, auditing and consulting industry in the largest diversified public quoted company in Sri Lanka, as well as in advisory and regulatory

Inspired leadershipThe quality of our leadership is reflected in the standards they set for themselves.

35


BOaRD Of DiRECTORS

roles for the Government of Sri Lanka and foreign Governments.

His contribution to the private sector began with KPMG, Sri Lanka, and subsequently overseas, as a Manager with Deloitte in the Bahamas when he worked with the firm’s US offices on many projects. On his return to Sri Lanka, he set up the first Business Development Division for the John Keells Holdings Group and served as its first Director, performing diagnostic studies, designing and implementing restructuring and turnaround strategies for subsidiaries within the group and advising on new projects, acquisitions and divestments. Invited to the Partnership of Coopers & Lybrand, to revive its consulting division, he served as Partner and Head of Consulting of PricewaterhouseCoopers, Sri Lanka, consequent to the firm’s global merger. He has extensive experience in the private sector, in strategic advisory services, business concept and project evaluation, due diligence, restructuring & turnarounds, valuations, privatizations, mergers, acquisitions and divestments, for local and multinational companies.

Mr. Wijesinha’s contribution to the public sector, includes serving in many advisory roles for the Government of Sri Lanka, on designing economic policy and strategy and fiscal and investment

incentives as well as in serving as a regulator, on the Securities and Exchange Commission, the first Consumer Affairs Council and the Sri Lanka Accounting and Auditing Standards Monitoring Board. His recent focus has been, performing advisory work in the public sector for foreign Governments in several post-soviet nations, as an independent international consultant to the Asian Development Bank.

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 Asia, MENA, Turkey and Central Asia, Sub-Saharan Africa and Latin America. 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 in Economics from the University of Colombo and a B.Sc. (Special) in Physics from the University of Peradeniya.

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

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.

36


37


Work, InspiredBeing better at everything we do

is what we care about most...

38


CORpORaTE GOVERnanCE

A commitment to high standards of corporate governance has been the foundation for the sustained performance and growth of John Keells Hotels PLC and its Group companies. An effective Board provides strategic guidance and sets the tone at the top to ensure that the organisational development is based on sound values that are encapsulated in our pledge. Formal governance structures facilitate judicious empowerment and comprehensive policy frameworks articulate the John Keells Hotels’ philosophy providing guidance for conduct of business to all staff. Policy frameworks go beyond legal requirements encompassing voluntary frameworks, international best practice and the responses to stakeholder engagement ensuring that high standards of ethics and professionalism characterises our interactions. A Code of Conduct which is understood and accepted by all employees, senior management and the Board of Directors creates an organisation culture based on common values nurturing an appreciation of high standards of integrity and ethics within the Group.

The Group corporate governance framework has been developed to comply with the Companies Act No.7 of 2007, the Colombo Stock Exchange Listing Rules and the Code of Best Practice on Corporate Governance issued jointly by the Securities & Exchange Commission and the Institute of Chartered Accountants of Sri Lanka in 2013. 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.

Chairman & the Board of Directors

audit Committee

Strategy formulation and Decision

Making process

integrated Risk Management

iT Governance

Effective & Transparent

Communication

Stakeholder Management

people and Talent Management

Employee performance Governance

independent Directors

External audit

JKH Code of Conduct

Employee participation

internal Control

audit Committee

Code of best practice on corporate

governance issued jointly by SEC and iCaSL

Companies act no. 07 of 2007

Corporate Governance rules published by CSE

nominations Committee of JKH

Human Resources and Compensation Committee of

JKH

president / CEO

Gro

up E

xecu

tive

Com

mitt

ee (G

EC

)

Group Management Committee (GMC)

Employees

Internal Governance Structure Assurance Regulatory Framework

Board of Directors and Senior Management Committees

Integrated Governance System and Procedures

> All Board sub committees are chaired by Independent Directors.

> The Human Resources and Compensation Committee and the Nomination Committee of the Parent Company John Keells Holdings PLC (JKH), functions as the Human Resources and Compensation Committee and the Nomination Committee of the Company and the Subsidiary Companies.

> The meeting of the Audit Committee are attended by President - CEO, Chief Financial Officer, Head of Finance, Head of Risk Control and Review, and External Auditors by invitation.

39



Principle A1: An Effective Board R

The John Keells Hotels PLC Board comprises of Five (5) Non-Executive, Non-Independent Directors including the Chairman and Three (3) Non-Executive, Independent Directors who are experienced professionals of repute. They are:

Code of Best practice on Corporate Governance

The Company

> Directors

> Directors’ Remuneration

> Relations with Shareholders

> Accountability & Audit

Shareholders

> Institutional Investors

> Other Shareholders

Sustainability

JKH Corporate Governance

1 Mr. S C Ratnayake – Non Executive Chairman

2 Mr. A D Gunewardene – Non-Executive Director

3 Mr. J R F Peiris – Non-Executive Director

4 Mr. J E P Kehelpannala – Non-Executive Director

5 Mr. B J S M Senanayake –Non-Executive Director

6 Mr. R T Wijesinha – Independent Non-Executive Director

7 Mr. N B Weerasekera – Independent Non-Executive Director

8 Mr. T L F W Jayasekera – Independent Non-Executive Director

Keells Consultants (Pvt) Ltd functions as the Secretaries and registrars of the Company and provides the Secretarial input for Board proceedings in addition to maintaining Board minutes and Board records. Profile of the Board of Directors is given on pages 34 to 35.

The Board has delegated some of its functions to sub-committees, while retaining final decision rights. Members of these sub-committees are able to focus on their designated areas of responsibility and impart knowledge and oversight in areas where they have greater expertise.

Of the four committees listed below, other than the Audit Committee, the Board sub committees of the ultimate parent company, John Keells Holdings PLC, functions as the sub committees of the Company and its subsidiaries as permitted by the listing rules of the Colombo Stock Exchange.

40



Board Committee & Composition Mandate Scope

Audit Committee

All members are exclusively Non-executive, independent Directors with at least one member having significant, recent and relevant financial management and accounting experience and a professional accounting qualification

Current members are:

> Mr. R T Wijesinha - Chairman

> Mr. N B Weerasekera

> Mr. T.L F W Jayasekera

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

> Adequacy and fairness of disclosure

> 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 obtaining assurance on various matters

Human Resources and Compensation Committee

As permitted by the listing rules of the CSE, the Human Resources and Compensation Committee of the ultimate parent company, John Keells Holdings PLC, functions as the Remuneration Committee of the Company and its subsidiaries. It comprises of five independent Directors. The Chairperson is a Non-executive Director while the Chairman of the Board is a permanent member except during discussions on his own compensation. Current members are:

> Mr. E F G Amerasinghe -Chairman

> Dr. I Coomaraswamy

> Mr. M A Omar

> Mr. N A Fonseka

> Mr. D A Cabraal

Determine the quantum of compensation (including employee share options in shares of the ultimate parent company), conduct performance evaluation of Chairman/CEO, review performance evaluation of other Directors and establish and review the Remuneration Policy

i. Determine and agree with the Board a framework for remuneration of the Chairman and other Directors

ii. Consider targets, and benchmark principles for any performance related pay schemes

iiii. Within the terms of agreed framework, determine total remuneration package of each Director keeping in view;

> Performance

> Industry trends

> Past remuneration

iv. Succession planning of key Management

41



Board Committee & Composition Mandate Scope

Nominations Committee

The Nomination Committee of the ultimate parent company, John Keells Holdings PLC, functions as the nomination committee of the Company and its subsidiaries. It comprises of five independent Directors and one non independent Director. The Chairperson is a Non-executive, independent Director. Current members are:

> Mr. T Das - Chairman

> Mr. S C Ratnayake - Non Independent

> Mr. M A Omar

> Mr. E F G Amerasinghe

> Mr. D A Cabraal

> 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.

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

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

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

iv. Identify and recommend suitable candidates for appointments to the board.

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

> Expectation in terms of time commitment

> Involvement outside of the formal Board meetings

> Participation in committees

Related Party Transaction Review Committee (Effective from 01st April 2014)

The Related Party Transaction Review Committee of the ultimate parent company, John Keells Holdings PLC, functions as the Related Party Transaction Review Committee of the Company and its subsidiaries. It comprises of four non-executive independent Directors. The Chairman is a Non-Executive Independent Director. Current members are:

> Mr. N A Fonseka - Chairman

> Mr. E F G Amerasinghe

> Mr. D A Cabraal

> 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 (RPT) issued by the Securities & Exchange Commission of Sri Lanka (SEC)

> Formulate and recommend a policy for adoption on RPT transactions for John Keells Holdings and its listed subsidiaries which is consistent with the Operating Model and the delegated Decision Rights of the John Keells Group.

> Exercise oversight on behalf of the Board, that all RPT of John Keells Hotels PLC and its subsidiaries are undertaken and disclosed in a manner consistent with the Code of Best Practices on RPT issued by the SEC

> Update the Board of Directors on RPT of each of the companies of the Group on a quarterly basis.

42



Regular Meetings

The Board and the Audit Committee meet once every quarter. Any absences are informed in advance and duly recorded. The absent members are briefed on the discussions and actions taken during the meeting. Directors are provided with the necessary information in advance of the Board meeting in order to facilitate more informed decision making. Board information packs supplied to the Directors include the Board Resolutions, performance reports and compliance statements etc.

Director Attendance

Board Meeting

Audit Committee

Mr. S C Ratnayake 4/4

Mr. A D Gunewardene 2/4

Mr. J R F Peiris 3/4

Mr. J E P Kehelpannala 4/4

Mr. B J S M Senanayake 4/4

Mr. R T Wijesinha 4/4 5/5

Mr. N B Weerasekera 4/4 5/5

Mr. T L F W Jayasekera 4/4 5/5

Role & Responsibilities of the Board

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

> Providing direction for the formulation of the Group’s medium and long-term strategy and

review and approval of the same, annual investment budgets, significant financial and operational policies

> 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.

> For the proper stewardship of the company’s resources and the effectiveness of the Company’s systems of internal control and the management of risk

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

> For reviewing and approving 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 the management on a quarterly basis in this regard.

In order to preserve the independence of the Board and to strengthen decision making, the Board seeks independent professional advice when deemed necessary, for which the expenses are borne by the company.

Accordingly, the Board obtained independent professional advice covering areas such as;

> Stakeholder engagement in meeting the requirements of the Global Reporting Initiative (GRI).

> Legal, tax and accounting aspects, particularly where independent external advice is deemed necessary in ensuring the integrity of the subject decision.

> Market surveys, architectural and engineering advisory services as necessary for business operations.

> Valuation of Land and Buildings of the Group

> Actuarial valuation of retirement benefits.

Additionally, individual Directors are encouraged to seek expert opinion and/or professional advice on matters where they may not have full knowledge or expertise for which the expenses are borne by the company.

Keells Consultants (Pvt) Ltd functions as the Secretaries and registrars of the Company and provides the Secretarial input for Board proceedings in addition to maintaining Board minutes and Board records.

Board induction and Training

Newly appointed non-executive Directors are apprised of

> The John Keells Group values and culture

> The Code of Conduct expected by the Company

> The operating model of the Hotels and hotels Group

> The operations of the Hotels group and its strategies

43



> Hotel group policies, governance framework and processes

> Their responsibilities as Directors in terms of prevailing legislation

The updating of the skills and knowledge of all Directors is progressive and ongoing. This is achieved by keeping them fully briefed on important developments in the business activities of the group and by providing them

> Access to External and Internal Auditors

> Periodic reports on performance

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

> Opportunities to meet Senior Management of the Operators in a structured setting

> Access to industry experts and other external professional advisory services

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

> The services of the Company Secretary

The Non-Executive Directors (NEDs) have the opportunity of gaining further insight into the Groups’ business by visiting hotels across the groups 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. This is achieved by the review of Board papers, business visits to understand risk exposures and operating conditions, attending Board meetings and participating in discussions

with the Internal & External Auditors and the Managing Agents.

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 Operators, with whom formal operating contracts have been signed.

> Habarana Lodge Limited - owner of Cinnamon Lodge, Habarana

> Habarana Walk Inn Limited - owner of Chaaya Village, Habarana

> Kandy Walk Inn Limited - owner of Cinnamon Citadel, Kandy

> Trinco Holiday Resorts (Private) Limited - owner of Chaaya Blu, Trincomalee

> Yala Village (Private) Limited - owner of Cinnamon Wild, Tissamaharama

> Ceylon Holiday Resorts Limited - owner of Bentota Beach Hotel, Bentota

> Hikkaduwa Holiday Resorts (Private) Limited - owner of Chaaya Tranz, Hikkaduwa

> Beruwala Holiday Resorts (Private) Limited - owner of Cinnamon Bey, Beruwala

> Travel Club (Pte) Limited - owner of Chaaya Reef Ellaidhoo, Maldives

> Fantasea World Investments (Pte) Limited - owner of Chaaya Lagoon Hakuraa Huraa, Maldives

> Tranquility (Pte) Limited - owner of Chaaya Island Dhonveli, Maldives

Principle A 2 & 3: Role of Chief Executive Officer and Role of Chairman R

The roles of the Chairman and Chief Executive 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 (Pvt) Limited, he also ensures that:

> Board procedures are followed

> Directors receive timely, accurate and clear information and

> Updates on matters arising between meetings

> The agenda for the Board meeting, reports

44



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

> 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 Acumen R

Collectively 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. T L F W Jayasekera

Principle A5: Board Balance R

The entire Board is Non Executive comprising Five (5) Non-Executive, Non-Independent Directors including the Chairman and Three (3) Non-Executive, Independent Directors ensuring that there is sufficient balance on the Board.

Independence of the Directors have been determined in accordance with the Continuing Listing Rules of the CSE. A brief profile of the Directors are set out on pages 34 to 35 of this Report

Name of Director/ Capacity Shareholding1

Management/ Director2

Material Business

Relationship3

Employee of

Company4

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 No 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.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.Jayasekera No No No No No No

Principle A6: Supply of Information

In 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

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

* Compliant by assessment and resolution

All three independent, non-executive Board members submit signed declarations of their interests on an annual basis. Based on such declarations and notwithstanding that Mr. Ranel Wijesinha has completed more than nine consecutive years, the Board considers him “Independent” given his objective and unbiased approach to matters of the Board.

45



> 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

Principle A7: Appointments to the Board R

Board appointments follow a transparent, structured and formal process within the purview of the Nominations Committee of the ultimate parent Company.

Principle A8: Re-Election R

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 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.

The proposal for the re-appointment of Directors is set out in the Report of the Board of Directors on pages 150 and 153, as well as the Notice of Meeting on page 237 of this Report.

Principle A9: Appraisal of Board Performance R

The 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;

> Role clarity and effective discharge of responsibilities

> Systems and procedures

> Quality of participation

> 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.

Principle A10: Disclosure of Information in respect of Directors R

Information specified in the Code with regards to Directors are disclosed within this Annual Report as follows:

> Name, qualifications, expertise, material business interests and brief profiles on pages 34 and 35.

> Related party transactions on pages 218 and 221.

> Membership of sub-committees and attendance at Board Meetings and Sub-Committee meetings on pages 39 to 42.

Principle A11: Appraisal of Chief Executive Officer R

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 B1: Remuneration Procedure R

Non Executive, Non Independent Director Remuneration

The remuneration of the Chairman/CEO and the NEDs is determined in line with the remuneration policies of the Group. The remuneration policy 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. The Group has adopted a remuneration policy designed to provide an appropriate balance between fixed remuneration and variable ‘risk’

46



reward which includes a fixed and variable element. The variable element is 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.

Non-executive, independent Director Remuneration

Compensation of non-executive, independent Directors 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 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 182 of this Report.

Compensation for early termination

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.

Human Resources Governance

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.

Performance Management

The Performance Management System is at the heart of many supporting Human Resource Management processes such as Learning and Development, Career Development, Succession Planning, Talent Management, Rewards/Recognition and Compensation/Benefits. The Group’s Performance Management System has been very instrumental in empowering staff in achieving organizational goals through relevant training, recognition and reward.

Short-term Incentives

The ‘short-term’ pay for performance is determined as follows.

> Manager and above levels –Given the progressively higher level of decision making authority, the greater weightage is placed on the achievement of organizational objectives rather than the achievement of individual objectives.

> Assistant Manager and Executive Level – Only individual performance ratings are considered.

> Clerical and Non-executive – A short term incentive in the form of Group-wide share of profit, calculated as a multiple of the basic salary is granted. Individual performance ratings are not carried out or considered.

Long-term Incentives – Share Options

Share options of the ultimate parent are offered to eligible employees at defined career levels based on pre-determined criteria which are uniformly applied across the eligible levels. As per the historical data, the financial benefit of the long term incentive scheme (ESOP) had been far greater than that of short term incentives and these long term incentives have been very instrumental in inculcating, in the recipients, a deep sense of ownership.

Share options are awarded to individuals on the basis of their immediate performance and potential importance of their contribution to the Group’s future plans

Principle C: Shareholder Relations R

The Board of Directors, in conjunction with the Audit Committee has ensured 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

47



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;

> In accordance with the rules of the SEC, Notice of the AGM and relevant documents are forwarded to shareholders within the specified period

> The Directors are available to clarify any points raised by shareholders

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

> 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 Reporting R

The 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. The Financial statements included in this Annual Report are prepared and presented in accordance with

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.

John Keells Hotels PLC has complied with the reporting requirements prescribed by the Colombo Stock Exchange.

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 an extraordinary resolution would be passed on the proposed way forward.

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

> The Annual Report of the Board of Directors on the affairs of the Company given on pages 150 to 153 cover all areas of this section

> The “Statement of Directors’ Responsibility is given on page 154

> The Directors’ Statement on Internal Controls is given on page 47

> The “Independent Auditors’ Report “on page 155 for the Auditor’s responsibility.

> The Financial Review on pages 67 to 69

Principle D2: Internal Control R

The 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 and KPMG, internationally reputed firms 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:

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

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

> 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

48


Principle D4: Code of Business Conduct and Ethics R

All employees, including the Board of Directors, are bound to abide by the following expectations:-


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 52 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 Directors on pages 150 to 153 contains a declaration on compliance with laws and regulations, declaration of material interests in contracts involving the Company and confirm 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 and operational 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 pages 218 and the 221.

Principle D3: Audit Committee R

The Board has established an Audit Committee comprising 3 Non Executive Independent Directors as stated in Principle A1 and information regarding its activities is provided in the Audit Committee Report on pages 54 to 55.

External Audit

Ernst & Young, are the Company’s 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 of the Annual Report.

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

The group believes that the strong set of core values which underlie the Code, are the main source of its competitive advantage which is rewarded by the trust placed in it by its stakeholders.

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.

49



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)

Managing conflicts / independence

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 on the right.

Details of companies in which Board members hold Board or Board committee membership is

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 the 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;

> 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.

Skip level meetings- Employees at Assistant Manager and all levels above can discuss matters of concern with superiors who are at a level higher than their own immediate supervisor in an open but confidential environment.

Exit interviews - This is conducted for all staff levels above Executive. All such reports are forwarded to the respective President and

50



Executive Vice President for their comments and are subsequently discussed by senior management bimonthly.

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.

360 degree evaluation - All employees at Manager, AVP and above level, including the Chairman (direct report evaluation only) is subject to a 360 degree evaluation conducted by an independent third party.

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.

Principle D 5: Corporate Governance Disclosures R

The 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 2014) 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 & F: Shareholders R

Shareholders are provided sufficient financial information and other relevant information on the website of the company to enable them to 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.

Principle G: Sustainability R

The Group follows a stakeholder model of governance 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 is provided on pages 110 to 144.

Investment Appraisal Decisions R

Over 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.

IT Governance R

The 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 skilful 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. Our commitment to this

51



is demonstrated in the recent investment to integrate the property management system with the existing back office system on a SAP platform.

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.

IT Governance Activities & Process

Stakeholder Value Drivers

iT Strategy

processes

ResourcesKnowledge Capability

Information

ResultsOutcome

Performance Risk

Assets

Drives

Directs Improve MeasureUse

Report

52



Compliance with CSE Continuing Listing Requirements R

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 or1/3 of NEDs, whichever is higher, should be independent Complied Corporate Governance

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

Corporate Governance

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

Complied Corporate Governance

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 Complied Corporate Governance

7.10.5(a) Composition of Remuneration Committee

Shall comprise of NEDs, a majority of whom will be independent Complied Corporate Governance

7.10.5.(b) Functions of Remuneration Committee

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

Complied Corporate Governance

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

53



Rule No. Subject Applicable requirement Compliance Status

Applicable Section in the Annual Report

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 –

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

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

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

> Assessment of the independence and performance of the external auditors

> 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


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.

Voluntarily complied with effect from April 2014

Corporate Governance Report

54


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 and its compliance with legal and regulatory requirements actively; reviewing procedures relating to statutory, regulatory and related compliance; and the adequacy of the Company’s 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 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 and Independent External Auditors, Ernst & Young, are required to attend meetings on a regular basis. The Committee met five times in connection with the financial year ended 31st March 2015 (information on the attendance at these meetings by the members of the Committee is given on page 42). 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.

> 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.

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

55


auDiT COMMiTTEE REpORT

> 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.

> 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, 2016, subject to the approval of the shareholders at the next Annual General Meeting.

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.

Ranel T. Wijesinha FCA Chairman - Audit Committee

29th May 2015

Members: N B Weerasekera T L F W Jayasekera

56


RiSK ManaGEMEnT

The operations of John Keells Hotels PLC (KHL) are exposed to an array of changing global and domestic socio-economic factors. Our operations also have a direct and indirect impact on the surrounding ecological environments and local communities. Risk Management has therefore always been a vital element of our responsible business ethic, while risk considerations form a critical input in our business decisions. We have continued to nurture an organisation-wide risk culture that aptly balances value creation for stakeholders with the long-term sustainability of our capital inputs.

Risk Governance

The Board of Directors retain ultimate responsibility for ensuring the adequacy and effectiveness of the Group’s risk management framework. The Audit Committee supports the Board in fulfilling these duties through providing objective and independent review on risk identification and mitigation processes, financial reporting, internal control systems and compliance. 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, and Functional and Operational Managers are responsible for the overall implementation of the Board approved risk management policy.

identification analysis and Mapping

Defining Measures

Monitoring and Communication

Risk Management Framework

Risks are identified at Property Level

Identified risks are mapped and rated on a risk register, based on likelihood and severity of impact. A velocity rating is also attached to identified risks based on the speed at which the business would be impacted by its occurrence

Measures of risk management, such as acceptance, mitigation, control and transfer are defined and responsibilities assigned.

Quarterly review by Audit Committee

> Sector Head confirms that risk registers and grids of business units have been updated

> Confirmation of financial and operational compliance and sustainability reports every quarter.

Board of Directors

John Keells Group BPR Division

audit Committee

Internal Auditors

Risk Management Teams

Policy Framework: The John Keells Group Sustainability and Enterprise Risk Management (ERM) division assists in aligning the risk management policy framework of KHL with that of the John Keells Group by continuing to review, assess and provide guidance on policy implementation. The JKH framework provides a comprehensive guideline on tools and techniques for risk identification, analysis and mapping, measures for risk management and monitoring as well as functional responsibilities for risk reporting and communication. The policy is reviewed and updated by the Board on a regular basis.

57


RiSK ManaGEMEnT

Internal Controls: Clearly defined and documented procedures are in place to ensure compliance with internal controls, which are monitored and reviewed for their continued effectiveness. The Board of Directors provide assurance on the effectiveness of the internal control systems covering financial, operational and compliance aspects through the Directors’ statement on internal controls on page 47. The outsourced internal audit function together with the BPR division reviews and provides assurance on the adequacy of the Group’s financial and operational internal control systems on a quarterly basis and a formal process is in place to review and monitor all audit findings. The Audit Committee report on pages 54 and 55 provides assurance on the adequacy of the Group’s internal control system and has obtained assurance from management that the identified risks are being mitigated.

Objective setting and Monitoring: Corporate plans formulated at business unit level include clearly defined risk parameters and performance objectives. This facilitates the effective monitoring of risk at business unit level and contributes towards nurturing a risk culture across the Group. The Audit Committee obtains assurance from management that risks registers have been updated and reviews financial and operational compliance reports and sustainability performance on a quarterly basis.

The Group’s Risk Environment

The post-war boom in tourism has attracted numerous new entrants in Sri Lanka’s hotel industry while existing industry players have continued to expand room capacity. According to statistics released by the Central Bank of Sri

Lanka, in 2014 alone 31 new establishments were opened, adding 1,855 rooms to total capacity which reflects an increase of 11% in comparison to the previous year. The industry has also witnessed an increase in the informal sector and 1-3 star class establishments, which have exerted competitive pressure on the 4-5 star class hotels. Although the increased room supply has so far kept pace with demand in peak periods, it has led to increased price competition during the off peak season.

We have continued to nurture an

organisation-wide risk culture that aptly balances

value creation for stakeholders with

the long-term sustainability of our

capital inputs

The last few years have also witnessed a gradual change in the composition of tourist arrivals to Sri Lanka with the share of the traditional source markets such as Western Europe being eroded by emerging markets. The share of total arrivals from Western Europe has declined to 31.4% in 2014 from 37.1% in 2012, whereas the combined share of arrivals from South and East Asia increased to 42.6% from 37.8% in 2012. For Sri Lanka, India has emerged as the largest source market, whilst China is a key growth market with arrivals increasing by 136% during the year. A similar trend is observed in the Maldivian market with the Asia Pacific region increasing its market share by an average of 4.8% every year, led by China whilst Europe has continued to account for a lower proportion of arrivals.

Risk Profile

These risks have a relatively low or minor impact.

The risks in this area have a moderate impact on our operations and are discussed partially in the report

These risks have a significant impact on our operations and are discussed fully in this report.

58


RiSK ManaGEMEnT

Risk/Issues Description Mitigating Strategies

Strategic Risk

Exposure to macro - economic factors (Low)

Impacts on profitability and cash flow, arising from changes in the macro-economic front.

> Consistent monitoring of economic trends and data Strategic 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

Industry Trends - Changing source markets (Moderate)

As discussed in the Risk Environment, arrivals from emerging markets continue to account for an increased proportion of total arrivals.

> Focused marketing strategy to pursue growth in non-traditional markets

> Tracking and Analysis of industry trends and data

> Strengthening linkages with B2B customers in emerging markets

> Customising service levels to cater to emerging market customer expectations

Industry Trend - Competition (Moderate)

The entrance of new players and capacity expansion by existing players have led to substantial increases in supply and more intense price competition during the off season.

Our ability to manage our pricing strategy could impact our market share as price competition intensifies

> Repositioning the existing portfolio through refurbishments and brand development

> Consistent focus on enhancing our product offering and service delivery

> Ongoing monitoring of capacity utilisation and strategic marketing initiatives to maximise market share and enhance top line growth

> 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

> Pursuing growth in new channels, introducing dedicated booking engines and enhancing online presence

> Persistent focus on achieving operational efficiencies, leading to cost savings

> Continuous pursuit of investment opportunities to expand room portfolio

59


RiSK ManaGEMEnT


Operational Risk

Safeguarding our assets (Low)

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

> 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

Environmental Sustainability (Low)

Minimising the environmental impacts of our operations and ensuring the sustainability of the environment we operate in.

> Clearly defined Environmental Policy with objectives, actions plans, performance indicators, allocated responsibilities etc.

> Continued compliance to local and international environmental accreditations and certifications

> Staff and guest engagement in environmental sustainability initiatives such as Beach cleaning, etc.

Changing needs of travellers (Low)

Rapidly changing guest expectations require us to be responsive to customer needs and innovative in our product offering

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

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

> Positioning staff with multilingual skills in guest interface areas

> Developing a multi-skilled pool of employees to improve responsiveness to customer needs

Attracting and retaining talent (Low)

Attracting and retaining suitable staff is paramount, given the importance of service delivery in the hospitality industry. This is further exacerbated by the shortage of skilled personnel in the industry.

> Providing opportunities for skill development through cross exposure, structured training and overseas training

> Identification of talent pool for succession planning

> Recognising and rewarding superior performance in a structured framework

> High level of staff engagement

60


RiSK ManaGEMEnT


Maintaining service quality and operational efficiency (Low)

The level of operational efficiency in our resorts will have an impact on the overall service delivery

> 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

Changes to existing legal regulations and ambiguity in interpretation (Low)

Ad hoc changes to existing local statutes and regulations and ambiguity in interpretation can lead to financial loss and adversely impact the Group’s reputation.

Changes in the legal and regulatory framework requiring significant changes to operating processes

> 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

Reliance on IT infrastructure (Low)

Risks associated with the failure, breakdown in IT systems and inadequate infrastructure to support operations and processes

> 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.

Impacts on local communities (Low)

Risks arising from inadequate engagement with local communities, leading to community unrest and reputational losses.

> 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

Supply Chain Risks (Low)

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

61


RiSK ManaGEMEnT


Financial Risk

Foreign Exchange Risk (Low)

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. 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 (Low)

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 related 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

Liquidity Risk (Low) Financial and reputational losses arising from the Group’s inability to meet its short-term financial obligations due to liquidity constraints.

> Asset and liability maturity mismatches are monitored on a consistent basis

> Contracted cash flows in each time bucket are matched with operational and other cash inflows, liquidation of short term investments whenever deemed necessary.

62


63


ManaGEMEnT DiSCuSSiOn anD anaLySiS

Economic Environment

Global Economy

Global economic growth remained unchanged at 3.4% in 2014 despite divergent growth in advanced and emerging economies. Growth in advanced economies improved to 1.8% from 1.4% last year, led by the stronger than anticipated recovery in the USA (2.4%) as an outcome of steady job creation and income generation, lower oil prices and improved customer confidence. Economic activity picked up in the Euro region during the latter part of the year with consumption increasing as oil prices dipped driving growth to 0.9% from the contraction of 0.5% last year. The performance of Emerging and Developing economies, which accounts for three fourths of global growth during the year, fell short of expectations, with growth slowing to 4.6% from 5.0% in 2013. Investment growth in China declined during the second half of the year, resulting in an overall growth of 6.8% (2013: 7.0%) while growth in the Latin American region slowed to 1.3% from 2.9% in 2013 as commodity prices softened.

Inspired to growThe future looks exciting, rewarding and bright.

Looking ahead, growth is projected to be stronger in 2015 relative to 2014 with global growth projected at 3.5% in 2015 and 3.8% in 2016. Economic activity is anticipated to expand in advanced economies but emerging markets are expected to record weaker growth in line with subdued prospects in certain large emerging economies and weaker activity in major oil exporting countries

Global Economic growth

2012 2013 2014 2015(F) 2016(F)

3.4% 3.4% 3.4% 3.5%3.8%

0.0

1.2

2.4

3.6

4.8

6.0

Advanced EconomiesEmerging and developing markets(F) - Forecasted

Sri Lanka

Sri Lanka’s economic growth was 7.4% in 2014, marginally higher than the previous year’s growth rate of 7.2%. Economic growth was once again driven by the Industrial sub-sector which expanded by 11.4% (2013: 9.9%) led by infrastructure development and construction activities. Growth in the Services sub-sector was relatively stable at 6.5% during the year and accounted for the largest share of GDP. The growth in the services sub-sector was driven mainly by the expansion in retail and wholesale trade whilst the banking, insurance and retail sub-sector also recorded strong growth. The Hotels and Restaurants sub-sector grew by 11.5% during the year, slowing down in comparison to the growth of 22.3% the previous year as the growth in tourist arrivals decelerated to 19.8% during the year (2013: 26.7%). Agriculture Sector growth was disappointing at 0.3% as adverse weather conditions impacted paddy and rubber production. Per capita income increased to USD 3,625 in 2014, from USD 3,280 the previous year and well in line with the goal of achieving per capita income of USD 4,000 by 2016.

64



Sri Lanka-GDP Growth

2010 2011 2012 2013 2014

8.0% 8.2%

6.3%7.2% 7.4%

0.0

2.4

4.8

7.2

9.6

12.0

Agriculture growth (%)Industry growth (%)Services growth (%)

Per capita income (USD)

2010 2011 2012 2013 2014

2,4002,836 2,922

3,2803,625

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Sri Lanka-Interest rate trend

Jan

-14

Dec

-14

No

v-14

Oct

-14

Sep

-14

Au

g-1

4Ju

l-14

Jun

-14

May

-14

Ap

r-14

Mar

-14

Feb

-14

4%

6%

8%

10%

1 year treasury bill rateAWPRAWDR

Exchange Rates (against LKR)

507090

110130150170190210230

US DollarEuroSterling Pound

2010 2011 2012 2013 2014

The government continued to maintain a relaxed monetary policy stance, resulting in high market liquidity levels and historically low interest rates. Yields on government securities and bank deposit and lending rates continued to trend downwards during the year; the Average Weighted Prime Lending Rate declined from 9.96% in December 2013 to 6.35% by December 2014, stimulating private sector investment. Meanwhile, inflation remained at single digit levels during the year, with annual average inflation declining to 3.3% in 2014.

The exchange rate policy during the year was centred on maintaining stability in the foreign exchange market. The first three quarters of the year saw the Sri Lankan rupee appreciating against the USD due to increased export earnings, workers remittances and financial inflows. However, this trend reversed during the last

quarter of the year due to an increase in import demand and outflows from the government securities market. Overall, the Rupee depreciated by 0.23% against the greenback to close the year at LKR131.05 per US Dollar. Meanwhile, the Rupee appreciated against the Euro and Sterling Pound during the year.

Overall the performance of the country’s external sector improved during the year, with the Balance of Payments (BOP) surplus improving to USD 1,369 million from USD 985 million the previous year. Meanwhile, the current account deficit improved to 2.7% of GDP, from 3.8% last year, led by inflows from workers remittances and trade in services. Gross Official Reserves improved to USD 8.2 billion by end December 2014, equivalent to 5.1 months of imports.

65



Industry Environment

Global Tourism in 2014

International Tourist Arrivals increased by 4.7% to reach 1.14 billion in 2014, marking its fifth consecutive year of positive growth since the global financial crisis in 2009. The industry has demonstrated remarkable resilience against the global backdrop of fragile and uneven economic growth and geopolitical instability. By region, the Americas recorded the strongest growth at 7%, the region’s best performance since 2004 with all sub-regions doubling the growth recorded in the previous year. Arrivals in the Asia and Pacific region grew by 5%, consolidating the region’s recent growth trends, whilst Europe maintained its position as the most visited region in the world with arrivals growing by 4%. The United Nationals World Tourism Organisation (UNWTO) projects industry performance to improve further in 2015, as the reduction in oil prices will lower transport costs and increase disposable income in oil importing countries, although on the flip side oil exporting countries which have been emerging as strong tourism source markets may encounter slower outbound travel demand. The UNWTO estimates total arrivals to grow between 3% and 4% in 2015, led by strong growth in the Americas and the Asia and Pacific regions (between 4% and 5%).

Global Tourism Industry Growth

2010 2011 2012 2013 2014

WorldEuropeAsia and Pacific

AmericasAfricaMiddle East

-10%

-5%

5%

10%

15%

Sri Lanka Tourism Industry

Sri Lanka’s Tourism industry is earmarked to be a leading contributor to the country’s socio economic development over the medium to long-term. Since the cessation of hostilities in May 2009, tourist arrivals into the country increased at a compound annual growth rate of 23.7%. Continuing this momentum, arrivals into the country grew by 19.8% in 2014 to reach a record-high of 1,527,153 and surpassing the target of 1.5 million set for the year. Total earnings from tourism increased 43.2% to reach LKR 317.48 billion during the year.

Western Europe continued to be the largest source market accounting for 31.4% of total arrivals during the year. Although the region has recorded a decline in its market share over the last few years arrivals to this region increased by 13.8% during the year. The South Asian region maintained its position as the second largest source market whilst the fastest growth in arrivals

Sri Lanka’s Tourism industry is earmarked

to be a leading contributor to the

country’s socio economic development

over the medium to long-term

Growth in tourist arrivals into Sri Lanka

19.8%

66



2010 2011 2012 2013 2014

66%

68%

70%

72%

74%

76%

78%

Occupancy rate (Graded Units)

Trends in Tourist Arrivals-Sri Lanka

654,476855,975

1,005,605

1,274,593

1,527,153

Sri Lanka Tourist Arrival Composition in 2014

31%

10%5%

24%

19%

11%

Western EuropeEastern EuropeNorth America

South AsiaEast AsiaOthers

was recorded from the East Asian and East European regions, as an outcome of promotional activities targeted towards these regions. On an individual country basis, China recorded the strongest growth with arrivals increasing by 136.1% during the year, followed by Indonesia and Oman albeit with smaller numbers.

In terms of overall policy, emphasis was placed on targeting emerging markets through promotional campaigns and by participation in travel fairs. The Sri Lanka Tourism Promotion Bureau (SLTPB) launched a major promotional campaign in Shanghai, China during the year and a Memorandum of Understanding was entered into between the two countries to facilitate the promotion of tourism. . The SLTPB participated in around 30 travel fairs during the year and also hosted foreign media personnel as part of its global brand awareness drive. It also launched the Global Mega Promotion Initiative which showcased key tourism attractions of the country on taxis in major cities of generating markets. Sri Lanka’s tourism appeal continued to be highlighted in influential foreign media publications and was ranked among the ‘top 10 coolest countries’ in the world to be visited in 2015, by Forbes Magazine.

On the supply side, preliminary data issued by the SLTDA indicates that the number of total graded establishments increased from 279 to 310 during the year, bringing the total room capacity to 18,078, an increase of 11% in comparison to the previous year. Occupancy rates were healthy for most part of the year, with the average occupancy of graded establishments improving to 74.3% during the year (2013: 71.7%). In line with the expansion in capacity, the sector has been a key contributor towards job creation; total direct and indirect employment increased by 15.3% and 7.9% during 2014.

Outlook

Growth prospects for the country’s hotel sector remain encouraging with the Government of Sri Lanka targeting 2.5 million tourist arrivals by 2016. Despite slower than anticipated recovery of the Euro economies, focus on emerging markets

is expected to provide the required impetus for industry growth. Attracting and retaining skilled human resources will be a key challenge, and investment in developing human capital is vital for the long-term sustainability of the industry. Furthermore, in order to effectively compete with regional destinations, the branding and positioning of the country’s offering is also imperative to attract new and emerging markets.

Maldives

The Maldivian tourism industry performed well during the first three quarters of the year, although a decline in tourist arrivals in the last quarter impacted overall performance for the year. Total tourist arrivals into the country increased by 7.1% to 1,204,857 during the year, in line with the government’s target for 2014. The last quarter of the year, however, saw arrivals decline by 1.0% in comparison to the same quarter of the preceding year due to the early cessation of Chinese Charters and the drop in arrivals from Russia and Ukraine. Total bed nights for the year increased 3.2% during the year.

In terms of source markets, the year under review saw the Asia and Pacific region once again surpassing arrivals from the traditional European region. Arrivals from Asia & Pacific region increased by 12% and accounted for 49% of total arrivals. China retained its position as the leading individual market to Maldives accounting for 30.2% of total arrivals. The growth in arrivals from China which propelled tourism growth in the Maldives over the past few years, lost its momentum during 2014, with Chinese arrivals increasing by 9.6% compared to the annual average growth of 47% during the past 6 years. Arrivals from the European region grew marginally by 0.4%, although the key emerging markets of Ukraine and Russia recorded negative growth consequent to the escalation of geopolitical tensions.

67



Financial ReviewReflective of the Group’s focussed approach towards expanding the base of local destination management companies, driving online sales and improving financial and operational efficiencies, overall profit before tax for the year grew by 16% to LKR 2.19 billion.

Revenue

The Group was able to record revenue of Rs.11.4Bn in 2014 reflecting year on year growth of 4%.

The Sri Lanka sector achieved revenue of Rs.5.1Bn that represented 4% growth on last year despite the increasingly competitive industry environment. Strategic pricing enabled the sector to combat the lower rates offered by new and low end properties and increase occupancy by 02pts and ARR by 4% over last year. However, the comparatively lower revenue growth when compared to last year was due to the full year operation of Cinnamon Bey and Cinnamon Citadel in 2013/14 both of which commenced operations in October 2012. Sector performance was also adversely impacted by the poor performance of the Russian market due to the economic turmoil in Russia. Nevertheless, Cinnamon Bey (9%), Cinnamon Lodge (7%) and Cinnamon Wild (7%) recorded comparatively higher year on year revenue growth.

Revenue growth in the Maldives sector slowed from 10% in 2013/14 to 3% in 2014/15, due to the slowdown in arrivals from China, the cessation of charter flights from the UK, the drop in the Russian market due to the weakening of the Russian Rouble and intense price pressure from higher end resorts during the off peak season. Nevertheless, the 3% year on year growth in the ARR enabled the sector to compensate for this drop and achieve revenue of Rs.6.3Bn (2013/14- Rs.6.1Bn) during the year.

2010/11 2011/12 2012/13 2013/14 2014/15

0

2,000

4,000

6,000

8,000

10,000

12,000

Consolidated revenue trends (Rs. Mn)

5,8857,388

9,342

10,966 11,383

BeachFront

Heritage and Adventure

MaldivianResorts

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Cluster-wise revenue trends (Rs. Mn)

2013/20142014/2015

2,73

6

2,83

0

2,14

1

2,25

7

6,08

9

6,29

6

2010 2011 2012 2013 2014

67%

69%

71%

73%

75%

Occupancy rate

Trends in Tourist Arrivals-Maldives

791,917931,333 958,027

1,125,2021,204,857

Maldives Tourist Arrival Composition in 2014

44%

49%

3% 3% 1%

EuropeAsia & PacificAmerica

Middle EastAfrica

The country’s total operational bed capacity increased 2.8% to 26,891 rooms during the year and although occupancy levels during the last quarter were lower than last year, the annual average occupancy level increased marginally to 74.5% from 74% in 2013.

Tourism growth is expected to rebound in 2015 based on a projected 13.0% increase in tourist arrivals. This forecast is based on the addition of three new regional Chinese destinations by the “Maldivian” airline in February 2015 and aggressive promotional campaigns planned by the government in key markets.

68



15%

20%

25%

EBIT Margin

Trends in Consolidated EBIT (Rs. Mn)

1,105

1,641 1,824

2,427 2,456

2010/11 2011/12 2012/13 2013/14 2014/15

2

4

6

8

10

Interest Cover (Times)

Finance Expenses (Rs. Mn)

272 265

537 534

265

2010/11 2011/12 2012/13 2013/14 2014/15

Earnings Before Interest and Tax (EBIT)

Despite the increased competition, gross profit margins were preserved by fresh purchasing initiatives which effectively reduced the overall increase in the cost of sales below the rate of inflation. Group Earnings Before Interest and Tax amounted to Rs.2,456Mn, which was a marginal increase from the Rs.2,427Mn last year. This was due to slightly higher Administration expenses in Sri Lanka deriving from the stronger performance of Bey and the operational cost of the new Indra TMS property management system. The Maldivian sector continued to be the major contributor to Group EBIT (61%) while Cinnamon Citadel, Bey, Wild and Chaaya Tranz collectively accounted for 25%.

A 6% reduction in Distribution expenses was achieved by rationalising advertising and promotional expenses across the Group and by adopting more direct online marketing mechanisms. The drop in global fuel prices and the reduction of the electricity tariff led to lower energy costs in the Maldives and Sri Lanka respectively. This had a favourable impact on the Group operating expenses which dropped by 2% year on year.

Gross profit margins were preserved by fresh purchasing initiatives which

effectively reduced the overall increase in the cost of sales below the

rate of inflation

EBIT

Rs.2.46 Bn2014: Rs.2.43 Bn

69



of approximately 80,000litres of water per month by recycling treated water in the garden. Payments for the twenty-five year lease extension of Hakuraa also commenced during the year resulting in a cash outflow of Rs.167Mn during the year under review.

Cash Generation

Cash flows generated from operations increased by 10% to Rs.3.5Bn during the financial year under review. This was utilized to retire net debt amounting to Rs.1.96Bn, fund the Group’s net investment in property, plant and equipment amounting to Rs.787Mn, make a dividend payment of Rs.364Mn and the partial payment to extend the lease rights at Hakuraa, leaving a positive net cash balance of Rs.1,837Mn at year end. The Group continued to maintain a healthy liquidity position, with a Cash and Cash Equivalents to short-term debt ratio improving to 2.1 times from 1.3 times last year.

Capital Structure and Gearing

The asset base was funded through shareholders’ funds (76%), non-current liabilities (13%) and current liabilities (11%). The Group reduced its exposure to borrowings, through debt settlement during the year with total borrowings declining to Rs.4.3Bn, from Rs.6.4Bn the year before. Total equity increased by 12.4% to Rs.20.45Bn, reflective of the stronger profitability during the year. The ratio between long to short-term borrowing at 67:33 was relatively unchanged from the previous year.

The reduction in debt together with the growth in the equity base resulted in the Group’s debt to equity ratio declining to 0.21 times, from 0.33 a year earlier.

4%

6%

8%

10%

ROCEROE

2010/11 2011/12 2012/13 2013/14 2014/15

recognition of the deferred tax asset on the tax losses carried forward at Cinnamon Wild and the reduction in finance income liable for tax at a higher rate.

Consolidated profit after tax for the year amounted to Rs.1,868Mn representing year on year growth of 19% against the Rs.1,575Mn achieved in 2013/14.

During the year under review, ROE continued to trend upward reflective of the stronger performance of the Group and the tax concessions at Bey. However ROCE was flat due to the marginal growth in EBIT and the revaluation of freehold land and buildings carried out during the year. The dip in the five year trend of both ROCE and ROE stemmed from the revaluation of land and buildings in the Sri Lanka portfolio and the launch of Cinnamon Bey in 2012/13

Net Finance Cost

The Group’s net finance cost dropped by 61% to LKR 149.27 million (2014: LKR 380.07 million). The lower rates negotiated on US dollar borrowings and the retirement of long term debt enabled the Maldivian sector to reduce net finance expenses by Rs.60Mn. In Sri Lanka, the overall reduction in lending rates in the country, the negotiation of lower rates and the substitution of LKR debt with lower cost US Dollar borrowings enabled the Sri Lanka sector to reduce net finance costs by Rs.171Mn from last year. The Group’s average weighted borrowing rate dropped to 5% compared with 8% in the previous year while interest cover improved to 9.3 times from 4.5 times in the previous year.

Profit Before Tax

The Sri Lanka sector achieved year on year profit before tax (PBT) growth of 38% on the back of the turnaround at Cinnamon Bey and the commendable improvement in performance in all other resorts except Bentota Beach Hotel. This enabled the sector to increase its PBT contribution to 33% (Rs.726Mn) from last year’s contribution of 28% (Rs.527Mn). Led by the strong performance of Dhonveli, the Maldivian sector achieved PBT growth of 7%, contributing Rs.1,465Mn to Group PBT against last year’s contribution of Rs. 1,367Mn.

During the year under review, the Group achieved a milestone in recording profit before tax in excess of Rs.2Bn and achieving 16% year on year PBT growth (Last year PBT- Rs.1.893Bn)

Profit After Tax

The effective tax rate of the Group decreased to 15% from 17% of last year. This was primarily due to the tax holiday at Cinnamon Bey, the

Investment Activity & Funding

With the aim of expanding the group’s product offering, the Group acquired land at Nuwara Eliya with an investment of Rs.199Mn. A new sewerage treatment plant (STP) was installed at Chaaya Island Dhonveli enabling a saving

70


71



Operational Review-Cluster Performance

Beach Front – Sri Lanka

Our multi-award winning portfolio of Sri Lankan Beach Front properties in Sri Lanka are located alongside some of the country’s most pristine beaches in the Southern and North Eastern Coastal belts. Bentota Beach Hotel, Chaaya Blu, Cinnamon Bey and Chaaya Tranz, collectively offer 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. Resorts within this cluster account for around 40% of the guest nights recorded in the Sri Lankan sector. All resorts within the cluster espouse principles of sustainable tourism, underlining our commitment to environmental and social factors.

Our resorts are renowned for their individuality and

authenticity, which is expressed to our

guests through unique architecture, quality of service, amenities, themed restaurants

and bars

Cluster Contribution to Group

40% of CO2 footprint

43% of Staff

11% to pBT

25% to Revenue

72


73


Bentota Beach Hotel

Get a glimpse of local culture whilst touring

the surrounding mangroves or get

involved in conservation with a visit to the turtle

hatcheries nearby


Bordering the Bentota River on one side and the Indian Ocean on another, Bentota Beach Hotel is a place for fun filled holidays with family and friends. Zip along on jet ski’s, ride a banana boat with friends, skim the water on water skis or simply surf the waves at this water sports capital located a mere hour’s drive from Colombo. Get a glimpse of local culture whilst touring the surrounding mangroves or get involved in conservation with a visit to the turtle hatcheries nearby. Pamper yourself at the award winning Azmaara Spa as skilled Balinese therapists wrap you in coconut husk, seaweed or other treatment of your choice. Catering to both active and relaxed lifestyles, Bentota Beach offers fun experiences to everyone.

Designed by renowned architect Geoffrey Bawa, the hotel is inspired by an ancient Dutch Fort

and has 130 spacious rooms and 3 luxurious suites overlooking the river or the sea. Culinary journeys include an international buffet served at the Peacock Restaurant, a carefully selected a la carte menu at the Araliya Restaurant or a seafood barbecue on the Pontoon as you float down the river. 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. Ideal for a quick escape from the city with something to please everyone!

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75


Chaaya Blu

Bleached wooden decks, cut cement floors and

denim trimmings create a relaxed holiday

atmosphere with the promise of adventure


This retro-chic hotel is a haven to escape to on Sri Lanka’s Eastern shores where azure waters invite you to explore their depths. Chaaya Blu offers guests adventures in the sea as the location is ideal for whale watching, dolphin watching, snorkelling, scuba diving or the in-between with snuba! Inland journeys combine magnificent views and an insight in to the culture and traditions of this sea port town. Alternatively, enjoy a lazy day by the pool and enjoy the luxurious treatments at the Azmaara Spa!

Recently transformed, Chaaya Blu reflects its ocean setting in shades of blue and white while contrasting splashes of orange serve to brighten the spirits. Bleached wooden decks, cut cement floors and denim trimmings create

a relaxed holiday atmosphere with the promise of adventure. Guests have a choice of 36 beach chalets, 43 superior rooms and 2 suites, all reflecting changing moods of the Indian Ocean. Sundowners at The Rum Hold followed by a spread of local and international cuisine at the Captain’s Deck or delicious morsels of seafood at The Crab complete the sensory experience of Chaaya Blu.

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77


Cinnamon Bey

All 200 rooms overlook the garden and the sea and guests have a choice of

Superior or Deluxe rooms or one of the two suites. A mere 90 minute drive away from

Colombo, Cinnamon Bey is a perfect treat or escape


Nestled along the beach facing the Indian Ocean, Cinnamon Bey is perfect for relaxing and indulging the senses. Guests are taken on a journey in gastronomy with a range of mezze and grills served that Arabic Mezze restaurant, an array of sushi or sashimi at the Raw counter, freshly fired pizzas and seafood at the Fire restaurant, ice cream cones and sundaes at the I.C.E., traditional Sri Lankan food and International cuisine at the Buffe and fusion Asian cuisine at Rock Salt where guests can even cook their own food on a hot stone. Aptly named Cinnamon Bey with its reference to provincial noblemen of the Ottoman Empire, this beach resort offers affordable luxury by the beach. Water sports, turtle hatcheries, the historic Galle Fort and the Ambalangoda Mask Museum are all within reach of the hotel for energetic guests.

Beruwala was the first Muslim settlement in the country established around 8th century A.D. by Arab traders and the design of the resort is influenced by modern Moorish décor with lattice work and rich blues contrasting with the brighter golds reminiscent of the Persian empire. All 200 rooms overlook the garden and the sea and guests have a choice of Superior or Deluxe rooms or one of the two suites. A mere 90 minute drive away from Colombo, Cinnamon Bey is a perfect treat or escape.

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79


Chaaya Tranz

Reflecting the vibrancy of Hikkaduwa’s upbeat culture, Chaaya Tranz Hikkaduwa is a lavish resort that combines the avant-garde with absolute comfort. Unlimited sun, sea and sand, good friends and good times are synonymous with visitors’ experience at this town.

The experiences offered are eclectic. Dawn excursions for whale watching, engaging with your soul exploring a coral reef, a visit to the Galle Fort built by the Portuguese, a party on the beach or a moonlit stroll are all possibilities. A place to thrill or chill as the fancy takes you, Hikka also offers fabulous surfing and diving with professional, certified instructors to experience its underworld beauty.

Dawn excursions for whale watching, engaging with your soul exploring a coral reef, a visit to the Galle Fort built by the Portuguese, a party on the beach or a moonlit stroll are

all possibilities

Chaaya Tranz reflects its surroundings with bold paintings in a vibrant hues, uplifting the spirits to match the mood of this Bohemian Utopia. All 150 rooms offer dramatic views of the Indian Ocean that are complemented by the décor with wide balconies, perfect for watching the glorious sunsets. Mouth watering creations at the speciality crab restaurant tempt the palate and other bars and restaurants offer a wider variety. True Sri Lankan hospitality completes the experience making this a wonderful getaway.


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Financial Performance

Y-o-y change (%)

2014/2015 2013/2014 2012/2013

Revenue (LKR Mn) + 3.4% 2,829.50 2,736.54 2,065.24

PBT (LKR Mn) + 72.5% 243.68 141.30 (70.37)

Total Assets (LKR Mn) - 1.9% 9,632.50 9,818.26 9,205.69

Return on Assets + 1% 2% 1% (1%)

travellers. Adverse weather conditions in the North Eastern region, particularly during the month of December 2014 also had an adverse effect on occupancy levels in Chaaya Blu. Average occupancy for the year was 76% at our Sri Lanka beach front properties. Despite these challenges, all resorts within the cluster achieved positive revenue growth during the year, driven by focused online and local promotional activities.

Notwithstanding the moderation in revenue growth, cluster PBT surged 72.5% to LKR 243.68 million during the year, reflecting improved operational efficiencies and higher productivity. The settlement of debt together with the fall in interest rates during the year resulted in a significant reduction in finance expenses which also contributed towards overall profit growth. With the turnaround of Cinnamon Bey during the year under review, all resorts within the Cluster are now profitable.

Environmental Performance

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 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). During the year, Cinnamon Bey received a Merit Award at the Greening Awards 2014, organised by The Hotel Association of Sri Lanka.

The cluster’s total energy consumption for the year increased by 2.9% to 150,985 GJ, in line with increased operational activity. However energy consumption per operational factor continued to trend downwards reflecting our consistent efforts to improve energy efficiency. Energy Audits conducted at Cinnamon Bey and Chaaya Tranz resulted in the optimisation of chiller settings, leading to significant savings in energy. In addition, upon replacement, inverter type air conditioners are being installed to replace split type systems which nearly halve the energy requirement.

Energy

Cluster revenue growth of 3.4% was achieved despite weaker market performance during the fourth quarter of the year. Geopolitical tensions in markets such as Russia and Ukraine resulted in a sharp drop in arrivals from these regions, leading to a decline in occupancy levels in the beach resorts which are sought by East European

Cluster Snapshot

Cluster Capacity 4 Resorts offering 564 Rooms

Total Assets LKR 9,632.50 Mn

Revenue LKR 2,829.50 Mn

Return on Assets 2%

Contribution to Group’s Guest Nights 40%

Average Occupancy 76%

Number of Staff 1,124

Carbon Footprint (MT) 8,041.6

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Sustainability Performance

Y-o-y change (%)

2014/2015 2013/2014 2012/2013

Energy consumption per Operational Factor (MJ) (0.4%) 94.89 95.34 104.65

Water Consumption per Operational Factor (Litres) (2.0%) 604 616 761

Waste per Operational Factor (Kg) (15.3%) 1.83 2.16 2.07

Carbon Footprint per Operational Factor (Kg) (0.4%) 16.22 16.29 17.74

The higher volume of business led to the cluster’s total water consumption increasing marginally by 1.3% during the year, however, water consumption per operational factor reduced by 2% as concerted efforts were made across all cluster properties to reduce the water footprint. Water usage is tracked and monitored against defined parameters using divisional sub-metering. We have continued to increase our focus on using recycled water for gardening and washing purposes resulting in approximately 26% of the cluster’s total water discharge being completely recycled.

Waste per operational factor also declined to 1.83 kg during the year, from 2.16 kg in 2013/2014. Our Waste management strategy is targeted towards achieving a zero waste to landfill solution at our properties and procedures are in place to appropriately classify, segregate and recycle waste. Reflective of our commitment to these initiatives the cluster’s total non-hazardous waste declined by 12.5% during the year. Meanwhile, plans are underway to install a biogas digester at Chaaya Blu in the next financial year, which will enable the resort to produce biogas by utilising its food waste.

The cluster’s total carbon footprint increased marginally by 2.9% to 8041.6 MT during the year in line with the overall increase in operational activity. However, the cluster achieved a reduction in its carbon footprint per operational factor, which declined to 16.22 kg from 16.29 kg the previous year.

Water WasteCarbon

Footprint

The Group’s Environmental policy centres on the efficient usage of its natural capital inputs of raw materials, energy and water whilst minimising the adverse outputs of waste, effluents and emissions. (A summary of the cluster’s performance in each of these areas is given below. Please refer to the Group Environment Report on page 123 for more detailed information)

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HealthVolunteer Hours: 45

Environment and OtherVolunteer

Hours: 275

EducationVolunteer Hours:175

Livelihood Development

Volunteer Hours:181


Social Performance

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 obtaining the ISO 22000:2005 and OHSAS 18001 certifications during the year, all properties within the cluster are now ISO certified whilst Bentota Beach Hotel and Chaaya Tranz have also obtained the 3 Star Crescent Rating. A summary of the cluster’s social performance is provided in the following section; please refer the Group’s Sustainability Performance from pages 110 to 144 of this Report for more detailed information.

The Team: Our talent pool in the Beach Front Properties cluster consists of 1,124 employees, which includes more than 60% hired from local communities. We encourage a high level of staff engagement through regular employee surveys, work-life balance initiatives and opportunities for development. In ensuring better productivity, service quality and employee upskilling, we provide numerous opportunities for employee development through ongoing training programmes. During the year, we provided approximately 42.5 hours of training per employee. A safe and healthy environment is vital in nurturing a performance driven culture and the cluster reduced staff injury rate by 23% during the year. Chaaya Tranz and Bentota Beach Hotel received the Silver Presidential Award and Merit Award respectively at the National Occupational Safety and Health Awards 2014.

Engaging with our Communities: Continued engagement with the surrounding communities allowed us to focus our efforts in empowering and

developing these communities in creating shared value with the broader society. During the year, the cluster invested approximately 676 volunteer hours and more than LKR 0.9 million in a range of CSR initiatives, within the Group’s defined focus areas of Education, Health, Livelihood Development and Environmental Protection. Key projects carried out by cluster during the year include renovation of the Pitaramba IT Education Centre by Bentota Beach Hotel, donation of stationary and other items for school children by Chaaya Blu and Chaaya Tranz, Dengue prevention, HIV awareness campaigns and eye camps among others.

Cluster community projects for 2014/2015

“Sri Sambudda Vesak Kalapaya” organized by Chaaya Tranz Hikkaduwa is the first time a hotel in the area spearheaded a Vesak festival.

Exhibition of colourful Vesak lanterns and a pandol made by the staff members drew big crowds from all parts of Galle. alms giving for observers at the Thapodarama Temple - Hikkaduwa was followed by a “Saruwath Dansala” for vesak sightseers.

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Adventure and Heritage

The Adventure and Heritage cluster consists of four unique properties, each with an inimitable personality of its own, collectively offering a room capacity of 432. Located in the Central and North Central regions of the country, Cinnamon Lodge, Chaaya Village and Cinnamon Citadel feature a distinctive ambience combining culture and heritage with world-class luxury. Cinnamon Wild, 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.

Located in the Central and North Central

regions of the country, Cinnamon Lodge,

Chaaya Village and Cinnamon Citadel feature a distinctive ambience combining

culture and heritage with world-class luxury



36% of Staff

23% to pBT

20% to Revenue

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Ranging over 27 acres of forested land, Cinnamon Lodge offers its guests a luxurious space from which history, culture and nature can be explored. Located at the epicenter of the cultural triangle, it is the starting point for adventurous excursions or journeys in to the wonders of ancient kingdoms. A place to be explored by the whole family to discover a tree house or identify over 130 different species of birds, Cinnamon Lodge inspires shared experiences.

A unique place where each day can be a different experience, its location provides for a wide range of day excursions. The Minneriya and Kaudulla nature reserves inspires adventure to observe elephants or a quiet journey to watch the abundant bird life. The ancient kingdoms of Anuradhapura, Polonnaruwa and Kandy invites exploration of the remains and curiosity about the past. A place where memories are made and shared with friends.

An architecture reminiscent of the monastic palace remains at Ritigala, evokes the creates a serene

Cinnamon Lodge

Cinnamon Lodge offers its guests a luxurious

space from which history, culture and

nature can be explored

and tranquil environment from which nature can be experienced within the comfort of a 5 star hotel. Its 131 detached rooms and 6 luxurious suites are set in harmony with nature with tree lined walkways that offer delightful encounters. Culinary delights at 3 restaurants including tree top restaurant which offer both local and international cuisine and bars which offer a wide range of excellent cocktails and mocktails. Harmony of the mind and the body is seen to by our experienced staff at the Azmaara Spa. An ecofriendly resort, Cinnamon Lodge is a Green Globe certified hotel and also has its own butterfly garden and organic farm.


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A lush landscape of verdant greenery bordering a serene natural lake makes a beautiful setting for Chaaya Village where guests are warmed by the simplicity and charm of village life. Conveniently located within the cultural triangle, guests can steep themselves in the past exploring the remains of the ancient kingdoms of Anuradhapura, Polonnaruwa and Kandy, the Sigiriya Rock or Ritigala.

Experience the thrill of an elephant safari through the Minneriya Wildlife Park or the abundant wild life at the Kaudulla Nature Reserve or simply cool off by the pool and pamper yourself at the Azmaara spa for a relaxed experience.

Chaaya Village

The rustic barefoot type elegance of the hotel creates a romantic

atmosphere with homely chalets dotted across 27

acres of gardens

The rustic barefoot type elegance of the hotel creates a romantic atmosphere with homely chalets dotted across 27 acres of gardens. Guests accommodation is housed in the chalets with a total of 94 superior rooms, 12 deluxe rooms and 2 suites which reflect the rustic charm of a village dwelling. Dining experiences that take you to a tree top or the lakeside make memories that last.


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Discover Kandy with its panoramic views, a rich culture steeped in tradition and lore from the old world charm of Cinnamon Citadel. Located alongside the Mahaweli River and surrounded by rolling hills, guests awake to the misty mornings that gradually unveil a stunning landscape. This historically and culturally significant city offers an insight in to the country’s past and the present. The tranquil surroundings are ideally suited for a relaxed holiday with brief sojourns to experience the culture.

Cinnamon Citadel

Located alongside the Mahaweli River and surrounded by rolling hills, guests awake to the misty mornings

that gradually unveil a stunning landscape

Cinnamon Citadel design with its inventory of 119 rooms, reflects the majesty of the last kingdom of the country with heritage red representing royalty while white spaces link the present symbolizing a modern, chic and sophisticated ambience. Enjoy an international and local buffet at the main restaurant or dine a la carte at Café C and wind down over a drink at the Bar.


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Literally the closest thing to nature, Cinnamon Wild caters to the wild life enthusiasts with the best possible location, a mere 15 minutes from the Yala National Park. In complete harmony with its surroundings, Cinnamon Wild is a world class game lodge being almost an extension of the park with peacocks, sambar and deer making regular appearances. Take an excursion with our Cinnamon Trails naturalists, experience the wonder of a Yala night and capture the most amazing memories on high tech photographic equipment! Alternatively explore the archaeological remains at Sithulpawwa or mingle with the devotees at Kataragama which are all day excursions.

The rustic luxury of the hotel combines nature with absolute comfort synonymous with the Cinnamon Brand. With 61 jungle chalets and

Cinnamon Wild

In complete harmony with its surroundings, Cinnamon Wild is a world class game

lodge being almost an extension of the park with peacocks, sambar and deer

making regular appearances

7 beach chalets that offer spectacular views, Cinnamon Wild offers simple elegance within its boundaries. A champagne breakfast or a rustic BBQ dinner are all possibilities in this jungle hideaway. Gather with friends at the rooftop Peacock Bar or the Pugmarks Bar to recount the day’s adventures over your favourite tipple. Enjoy the surprising variety of delectable dishes on the Tuskers menu as you wind down in preparation for another day of adventure. It is a must do for every nature enthusiast!


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Cluster Snapshot




Return on Assets 11%



Number of Staff 931

Carbon Footprint (MT) 5,023.8



Y-o-y change (%)

2014/2015 2013/2014 2012/2013

Revenue (LKR Mn) + 4.6% 2,257.04 2,158.70 1,780.56

PBT (LKR Mn) + 34.2% 502.38 374.32 206.2

Total Assets (LKR Mn) + 4.2% 4,181.39 4,013.45 3,680.30

Return on Assets + 3% 11% 8% 5%

The cluster achieved a revenue growth of 4.6% during the year under review, supported by increased occupancy levels particularly during the first half of the year. Inclement weather conditions and floods in the Habarana region during December 2014 resulted in several cancellations at Lodge and Village leading to subdued performance in the fourth quarter. The annual average occupancy of the cluster improved from 77% the previous year to 78% in 2014/2015. Cluster profitability, benefited from the reduction in finance expenses stemming from the settlement of debt and the decline in market interest rates. Pre-tax profit grew by 34.2% to reach a record high of LKR 502.38 million during the year under review with all hotels in the cluster recording year on year growth.


The cluster recorded improvements in all of its key environmental indicators. All hotels in the cluster have obtained and continue to comply with ISO 14001 and Green Globe certification. Cinnamon Lodge won the award for the best sustainable hotel and best resort in the country at the 2014 International Hotel Awards in London. Furthermore, at the Greening Awards 2014, Cinnamon Citadel and Cinnamon Wild were recognised with Merit Awards reflective of the commitment to sustainable tourism practices.

Higher business volumes led to the total energy consumption of the cluster increasing by 4.5% to 93,552 GJ during the period under review. Energy consumption per operational factor declined further for the second consecutive year and reduced by 4.9% in 2014/2015. Inverter type air conditioners were installed at Cinnamon Citadel and Cinnamon Lodge leading to significant savings in energy. Meanwhile, biogas digesters installed in Cinnamon Citadel and Chaaya Village generated biogas with an estimated annual saving equivalent to 4,500 kg of LPG at each hotel.

Energy

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Y-o-y change (%)

2014/2015 2013/2014 2012/2013

Energy consumption per Operational Factor (MJ) (4.9%) 66.90 70.22 72.11



Carbon Footprint per Operational Factor (Kg) (2.17%) 10.71 10.95 11.00

The volume of water withdrawn for use at cluster properties increased by 5.8% to 264,233 litres during the year, but waster consumed per operational factor declined marginally. Cinnamon Wild commenced water recycling during the year and intends to expand the room coverage of this project by the latter part of 2015. Total water recycled amounted to 45% of the cluster’s total water discharge during the year. Meanwhile, Cinnamon Wild innovated an automatic change over switch for washers and extractors to minimise water drain out during power cuts.

The cluster’s total non-hazardous waste declined 9.3% during the year, whilst waste generated per operational factor also declined 16% to 1.44 kg. In an ongoing project, Cinnamon Lodge in partnership with Maximum (Pvt) Ltd engages women from neighbouring communities in the production of recycled paper using the waste paper from the hotel and elephant dung. The recycled paper is used to manufacture luggage tags for the entire Cinnamon Hotels chain. Meanwhile, the two bio gas digesters installed in Citadel and Village have enabled these resorts to utilise food waste effectively.

The cluster’s total carbon footprint increased by 3.7% to 5,023.8 MT during the year. However, the emission usage per operational factor declined by 2.2% to 10.71 kg, reflecting enhanced efficiency in improvements in energy consumption controls.

Water WasteCarbon

Footprint

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Social Performance

On the social sustainability front, the cluster is committed to generate a positive social impact 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. Cinnamon Citadel and Lodge have also obtained the 3 Star Crescent Rating. Furthermore, at the National Occupational Safety and Health Awards 2014, Cinnamon Citadel emerged the winner in the large scale hospitality sector.

The Team: The cluster provides employment to 931 individuals, which includes more than 60% hired from neighbouring communities. Training and development initiatives targeted at multi-skilling our staff and nurturing the Cinnamon spirit was a key priority during the year, with cluster employees collectively undergoing training for approximately 56,640 hours. We also focused on strengthening health and safety procedures and awareness through regular audits, awareness and training campaigns as well as medical checks. A conducive work environment, opportunities for career and skill development and numerous work-life balance initiatives during the year, resulted in nurturing a motivated and satisfied workforce.

Engaging with our Communities: Cluster employees volunteered more than 6,100 hours for community engagement and CSR projects during the year. Key projects carried out during the year include blood donation and aids awareness campaigns organised by Cinnamon Citadel, Cinnamon Lodge and Cinnamon Wild, Workshops

for university undergraduates on hospitality management conducted by Cinnamon Lodge and several donations for cultural/religious activities and assistance to drought relief victims. Cinnamon Wild also constructed a pond with a capacity of 6500 litres of water within the Yala National Park, to mitigate the scarcity of water for wildlife brought about by severe drought conditions.

HealthVolunteer

Hours: 3,381

Environment and OtherVolunteer

Hours: 655

EducationVolunteer

Hours: 550


Volunteer Hours: 1,520


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Maldivian Cluster

Our world-renowned portfolio of Maldivian resorts feature 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, Chaaya Island Dhonveli, Chaaya Reef Ellaidhoo and Chaaya Lagoon Hakuraa Huraa 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.

Globally recognised for their sustainable tourism initiatives, resorts within the

cluster have received several international

awards and accolades for green practices



20% of Staff

70% to pBT

55% to Revenue

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Chaaya Island Dhonveli

The perfect destination for the discerning pleasure seekers, Chaaya Island Dhonveli with 36 water bungalows, 24 water suites, 44 beach bungalows and 44 garden bungalows and superior rooms, offers a heady combination of sun sand, and sea wrapped in luxury. Enjoy an underwater adventure as you snorkel or dive in the coral reefs that take your breath away with its myriad hues of a vast variety of fish. Unwind at the Chavana spa as you give in to the magic of the island. Blissful harmony of the mind and the body relaxes you making this the perfect getaway.

Considered as one of the best Maldives resorts, Chaaya Island Dhonveli has an array of fabulous options for you to select from. The choice of accommodation varies from garden bungalows to beach and water bungalows which are in harmony with its beautiful setting. Gastronomical experiences of freshly caught sea food await you at our restaurants

Chaaya Island Dhonveli, one of the world’s best resort hotels,

boasts a newly refurbished picturesque accommodation,

soft pristine beaches, abundant vegetation, a seductive ocean and lagoon, and celebrated

surf and dive sites

and delightful cocktails are served at our bars to enhance the mood and leave you sated. Our sundown entertainment includes disco nights, live music, fun themes and fascinating Maldivian Cultural shows that will enthral you.

Chaaya Island Dhonveli, one of the world’s best resort hotels, boasts a newly refurbished picturesque accommodation, soft pristine beaches, abundant vegetation, a seductive ocean and lagoon, and celebrated surf and dive sites. This is a holiday experience that will remain with you forever. This is Chaaya Island Dhonveli.


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Chaaya Reef Ellaidhoo

A seaplane journey of 25 minutes or a speedboat journey of 95 minutes takes you to the beautiful island of Ellaidhoo on the eastern fringe of the North Ari Atoll of the Maldives. Fall under the spell of the cerulean blue waters that lap its shores and discover an underworld fantasy as you swim or snorkel unbelievably clear waters. Coral reefs teeming with marine life invite you to explore their depths with professional divers at this famed dive spot. Watch schools of dolphins spinning joyously in the deep blue sea or experience sunset fishing.

The hospitality you experience will set the mood for a tranquil

holiday that heals the mind and body as you

find blissful harmony in your surroundings

This island paradise will envelope you in luxury at any one of the 24 water bungalows, 46 beach bungalows, 28 superior rooms or 14 standard rooms. The hospitality you experience will set the mood for a tranquil holiday that heals the mind and body as you find blissful harmony in your surroundings. Culinary delights will complete the elevating experience of your stay at Ellaidhoo. Let the magic of the island take over for an unforgettable holiday.


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Chaaya Lagoon Hakuraa Huraa

A 45 minute seaplane ride takes you to Chaaya Lagoon Hakuraa Huraa ringed by water bungalows in complete harmony with its beautiful ocean setting. Rated among the best hotels in the Maldives, it combines outstanding hospitality with an unforgettable setting to make it your perfect holiday.

Nirvana for marine enthusiasts, an azure lagoon entices you to explore the underwater world where you will see the most amazing sights as you snorkel or dive in to its depths. Sail or surf over water as the wind and the sea combine for a more exhilarating experience. Take a canoe and glide over the sea and experience harmony with nature.

Luxury envelopes you in the 70 water bungalows or 10 beach bungalows as waves lull you to an idyllic state of mind. Blissful days blend into balmy evenings and starry nights. Enjoy the sunset entertainment

Rated among the best hotels in the Maldives,

it combines outstanding hospitality with an

unforgettable setting to make it your perfect

holiday

of a disco or the Maldivian cultural show. Enjoy an international spread or dine a la carte at its restaurants which include a speciality crab restaurant for a memorable culinary experience. Make sure you pamper yourself at the Chavana Spa to complete the rejuvenation of the mind and body.

Hakuraa Huraa means ‘Reef above water’. What makes this reef even more special is the spectacular island resort that has been designed to complement the splendour of the island. It’s called Chaaya Lagoon Hakuraa Huraa.


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Cluster Snapshot




Return on Assets 11%



Number of Staff 533

Carbon Footprint (MT) 7,148


Y-o-y change (%)

2014/2015 2013/2014 2012/2013

Revenue (LKR Mn) + 3.3% 6,296.18 6,097.50 5,512.85

PBT (LKR Mn) + 6.1% 1,400.66 1,320.62 1,033.46

Total Assets (LKR Mn) + 6.6% 12,184.85 13,052.60 13,880.46

Return on Assets + 3% 11% 8% 6%

The Maldivian cluster recorded top line growth of 3.3% during the year to achieve total revenue of LKR 6.29 billion during the year. Performance was sustained by strong growth in tourist arrivals to Maldives, particularly during the first three quarters of the year whereas industry performance was below expectations in the peak period during the last quarter of the year. Average occupancy rates at our Maldivian resorts were 89% during the year, relatively unchanged over

the previous year whilst top line growth was broad based across all three resorts. Concerted efforts were made to preserve profitability through operational efficiencies. Meanwhile, cluster finance costs more than halved during the year, as debt was restructured and favourable interest rates were obtained through negotiation. Consequently, cluster pre-tax profit grew at a faster rate than top line growth, expanding by 6.1% to reach LKR 1.40 billion during the year. Profit growth was driven primarily by Chaaya Island Dhonveli. Overall, cluster ROA improved to 11%, from the previous year’s 8%.


All three Maldivian Resorts have obtained ISO 14001 and Travelife certifications, whilst Chaaya Lagoon Hakuraa Huraa and Chaaya Reef Ellaidhoo 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. The cluster’s environmental management policy also highlights the importance of engaging employees, guests and suppliers in sustainable tourism practices. A summary of the cluster’s performance in each of its material environmental aspects are given below, please refer to the Group Environment Report on page 123 for more detailed information.

The cluster engaged in a range of energy-conservation initiatives during the year, resulting in total energy consumption remaining more or less unchanged despite an increase in operational activity. During the year, we made significant progress in replacing split type air conditioners with inverter type air conditioners, which have now been installed in all guest rooms across our three resorts in Maldives. At Chaaya Lagoon Hakuraa Huraa we also replaced a generator, laundry dryer and washing extractor with more energy efficient equipments and installed an LED lighting system in the main kitchen. We are also currently in the process of installing two Reverse Osomosis plants with energy recovery functionality at Chaaya Island Dhonveli and Chaaya Reef Ellaidhoo which are expected to be commissioned in the next financial year.

Energy

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Y-o-y change (%)

2014/2015 2013/2014 2012/2013

Energy consumption per Operational Factor (MJ) 0.58% 215.31 214.07 215.59



Carbon Footprint per Operational Factor (Kg) 0.46% 15.74 15.67 15.78

The cluster’s water withdrawal for the year decreased by 5.2% to 133,960 litres mainly due to increased rainwater harvesting. Steps were taken to increase the capacity of rainwater harvested at Chaaya Island Dhonveli whilst a sewage treatment plant was established, enabling the reuse of treated water for gardening and flushing purposes. Meanwhile, Chaaya Reef Ellaidhoo installed a variable frequency drive water distribution system facilitating the more efficient use of water. The cluster’s overall water consumption per operational factor also declined by 4.7% during the year.

The cluster’s total non-hazardous waste declined by 17% during the year, with marked reductions in the amount of waste disposed through landfill and incineration. The sector’s key initiatives in waste management during the year comprised the installation of a multi-chopper at Chaaya Island Dhonveli which enables increased composting. Meanwhile, Chaaya Lagoon Hakuraa Huraa has also plans to install a bio-gas digester to be commissioned next year.

The cluster achieved a reduction in its total carbon footprint for the year, driven by its focused efforts towards reducing energy consumption. The cluster’s CO2 footprint thus declined to 7,148.35 MT (2014:7,153.18 MT) during the period under review. The carbon footprint per operational factor also declined by 0.5% to 15.74 kg during the year.

Water WasteCarbon

Footprint

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Social Performance

In aligning itself to the Group’s social sustainability agenda, the Maldivian resorts engage with its key stakeholder groups of employees, customers and suppliers with the objective of generating sustainable value. All resorts within the cluster have obtained ISO 22000:2005 and OHSAS 18001 certifications. The cluster also continuously pursues excellence in its product and service offering and all resorts in the sector have been internationally recognised for culinary excellence and customer satisfaction among others. During the year, cluster resorts performed impressively at the Food Asia Exhibition & International Culinary Challenge and Hotel Asia Exhibition and International Culinary Challenge in addition to others. (Please refer pages 16 and 17 of this report for a full list of awards obtained by our resorts during the period).

The Team: The Maldivian cluster provides employment to 533 individuals, out of which 45% represent individuals hired from local communities. In addition to the internship and management trainee programmes offered to graduates, the Maldivian cluster also conducts a Maldivian Executive Development programme which allows career development opportunities for Maldivian non-executive staff to progress to executive level through skill building. During the year under review, 7 employees underwent this training, whilst on average cluster employees received an 39 hours of training each during the year. We also ensure a high level of employee engagement through a range of work-life balance initiatives, cordial industrial relations and satisfaction surveys among others.

Community Engagement: The cluster carried out several philanthropic activities during the year within the framework set out by the Group’s CSR Policy. All three resorts celebrated World Environment Day through engaging staff and guests to contribute towards beach cleaning and tree planting projects. Aids awareness campaigns were also carried out by all three resorts on Worlds Aids Day.

HealthVolunteer Hours:768

Environment and OtherVolunteer Hours:783

EducationVolunteer Hours:430


Volunteer Hours:350


Maldivian resorts partnered with Ministry of Environment & Energy, Maldives for the World Environment Day national event.

The programme consisted of a Tree planting campaign, photography Exhibition, film festival, Musical show and a “Joining of hands against Climate Change” event.

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SuSTainaBiLiTy pERfORManCE

Inspired to be responsibleA long term vision that is engaged,

committed and sustainable.

Our Sustainability Vision

Empowering Lives for Tomorrow

Our Approach to Sustainability: 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 owning company we impact the 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.

Our initiatives have the ability to inspire our guests, our employees, our suppliers and other stakeholders to adopt sustainable practices; to engage in projects that uplift lives of those in need and preserve the limited resources of the planet creating unforgettable memories of their association with us.

Our Approach is based on the John Keells Group Sustainability Policy which provides guidance on the selection of the Group’s environmental initiatives and community engagement activities with emphasis on sustainability aspects relevant to the hotel industry. The John Keells Hotels approach to sustainability goes beyond conformance with regulations to performance, thereby enabling sustainable value creation.

Cinnamon Sustainability

approach

Carbon Consciousness

inspiring Livelihoods

Responsible Water usage

promoting Culture

Zero Wastepreserving the planet

internal (property Level) External (Corporate)

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Channels to Market

Domestic Guests

international Guests

Online Travel Agencies

Tour Operators

Travel Agencies

Destination Management Companies

Cinnamon Hotels and Resorts

35%

18%

5%

15%

7%

20%

Western EuropeCentral/Eastern EuropeDomestic GuestsMiddle EastSouth AsiaOther

Sustainability Governance: We 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 reference to sustainability indicators tracked on a quarterly basis at Group level in accordance to the GRI framework which are tracked, monitored and compared against international benchmarks. This has ensured the consistent tracking, monitoring and reporting of all selected sustainability indicators.

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.

CustomersOur Brand Promise

Customers are at the core of our innovative and sustainable value proposition and our commitment is to inspire them through unique hospitality experiences. Positioned as a lifestyle brand, the excellence of our service offering is ensured through a matrix of checks and balances aligned to our brand standards platform. All operational aspects of our resorts ranging from the behaviour of staff to cuisine and entertainment will be aligned to the attributes and personality of the Cinnamon brand.

The Customer Profile

The unique experiences and international standards of excellence offered by our resorts have enabled us to attract a range of domestic and foreign guests. Foreign guests account for close to 80% of our revenue, with our major source markets being Western, Central and Eastern Europe and East Asia. Our resorts typically attract young/boomer couples, family and friend groups. Customers are increasingly demanding a high degree of personalisation and service excellence and the required structures and frameworks have been put in place to facilitate consistent customer engagement.

Our guests are connected to us through our B2B customers including local and international tour operators, travel agents, destination management companies and online travel agencies which form a vital element of our value chain.

Customer Satisfaction

John Keells Hotels employs a variety of tools to evaluate customer experiences and perceptions on all aspects of our resort operations. The information thus obtained is collated and analysed in a structured manner and feeds back into our customer relationship management process. Customers engage with us through several platforms, including guest feedback forms, face to face interaction, hotel websites and social media. Customer 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

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an improvement in ratings from all three major travel websites, Trip Advisor, Agoda and Booking.com which are based on customer reviews. Several of our resorts also won international accolades for excellence in customer attraction and satisfaction during the year.

> MATATO Maldives Travel Awards 2014 – Leading Surf Resort: Chaaya Island Dhonveli

> Trip advisor 2014 – Travellers’ Choice Awards: Cinnamon Lodge, Cinnamon Citadel and Cinnamon Wild were recognised.

> Trip advisor 2014 – Certificate of excellence: All Resorts

> Holiday Check Quality Certification 2014 8 Hotels in the sector were certified 5.0 and above out of 6.0

> Virgin bronze award for customer satisfaction – Hakuraa – Indian ocean hotels

> Starway Awards by coral travel Russia for Ellaidhoo – 1 of the best 25 hotels in the world – in customer satisfaction

facebook fans: 128,300

Views: 131,721

Twitter followers: 1,140

Our social media presence

Increasing mobile internet connectivity has transformed the way guests share their experiences in real time. The Group has a high level of engagement with its customers through social media platforms, which allows us to maintain an effective two-way relationship and respond to customer needs and feedback promptly. Our social media strategy also aims to deliver our brand promise through social media

platforms, thereby creating a virtual identity of what the Cinnamon brand entails. 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.

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

instagram followers:

863

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Travel Bloggers Conference (TBC) Asia

In an innovative approach towards stakeholder engagement, Cinnamon Hotels & Resorts in partnership with the Professional Travel Bloggers Association (PTBA) and Sri Lankan Airlines, hosted Asia’s first ever Travel Bloggers Conference, in November 2014. Since travellers primarily use social media to share their travel experiences as well as obtain travel inspiration, travel bloggers

play a crucial role in promoting destinations, brands and experiences. Hence we created a forum and opportunity to feature the destination by hosting these travel bloggers in Sri Lanka. The conference was preceded by a tour around the country, enabling the bloggers to have a first-hand experience of the Cinnamon properties and popular tourist destinations in Sri Lanka.

The conference witnessed the participation of three very important stakeholders in the tourism industry – travel bloggers, traditional media and industry professionals and officials. While one track of the conference was dedicated for the Travel Bloggers, where topics relevant to developing their respective blogs were discussed, the other catered to the Hospitality and Travel Industry professionals in Sri Lanka. Industry participants were also offered a unique opportunity to network one-on-one with all the bloggers via a Speed Networking session at the end of the conference. While the keynote speech was delivered by the Global Editor of BBC Travel, speakers at the conference included key representatives of Google South Asia, TripAdvisor, Times of London, Four GB PR, Revinate and TravelClick along with Professional Travel Bloggers and Digital marketing experts. Given the astounding success of TBC Asia and the exposure received for Cinnamon Hotels & Resorts and Sri Lanka, plans are now underway to conduct the second instalment of TBC Asia in 2016. We also expect to pioneer the “Cinnamon Travel Blogger Awards” to recognize the contribution that bloggers make in creating awareness on travel and destinations.

6000 tweets 4 million reach49 million

impressions across

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Product and Service Responsibility

A comprehensive policy framework is in place in all our resorts to ensure a work environment in which the health and safety of our employees and customers are guaranteed. The policy addresses how health and safety standards are established, communicated, implemented and audited. The policy is reviewed and updated by the Group’s health and safety manager every two years and responsibility for implementation lies with the General Managers, Chief Health and Safety specialist and employees. All our resorts have also obtained ISO 22000, ISO 14001, OHSAS 18001, and HACCP Certifications. Health and Safety training and awareness programmes, Surveillance audits, monitoring and follow-up are conducted at all resorts on a consistent basis. The key components of the policy are as follows;

All our resorts have also obtained ISO 22000, ISO 14001, OHSAS

18001 and HACCP Certifications.

Health and Safety policy framework

Occupational safety

Erg

onom

ics

Bui

ldin

g D

esig

n

Em

erge

ncy

Res

pons

e

firs

t aid

Dea

th a

nd i

llnes

s

Tem

pera

ture

Con

trol

food

Sto

rage

Cle

anin

g

food

Han

dlin

g

Guest Safety

food Safety

Activity Participants

Health, Safety and Environmental Training

Carried in scheduled training and evaluation tests in all our resorts to increase health and safety awareness.

573

Health and Safety Audits and ISO Surveillance Audits 43 Audits

Food Handlers Medical Test

Annual medical tests to ensure 100% coverage of all food handlers

1130

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Health and Safety Results

2012/13 2013/14 2014/15

Total number of person days in the period 1,038,425 1,015,065 992,800

Total Person Days Lost (TPDL) 385 486 410

TPDL as a % of total person days in the period 0.04% 0.05% 0.04%

Occupational Injuries

2012/13 2013/14 2014/15

1.41

6157 56

0

10

20

30

40

50

60

70

80people

Highlights of 2014/2015

Staff pool - 2,720

female participation - 9%

Training Hours per employee - 46

Employee Satisfaction Rate - 87%

Lost Day Rate - 0.04%

Cinnamon Ambassadors Our employees are at the heart of our product and service delivery and are ambassadors of the Group’s culture, values and what the Cinnamon brand embodies. Our total pool of value creators consist of 2,720 high-performing and motivated employees, located in Sri Lanka and Maldives. During the period under review, focus was placed on driving employee transformation aligned to our new brand identity and equipping employees with the skills required to successfully cater to changing industry dynamics including destination markets and travel patterns of our guests.

Our approach towards people management is guided by formal policy frameworks which abide by the relevant laws and regulations whilst conforming to the overall standards of the John Keells Group HR management framework and industry best practices. The value of our team is founded upon five pledges which have been instilled through our organisational culture, training and engagement mechanisms.

Youth Development Program at Cinnamon Bey

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Human Resource Management

Talent attraction

RetentionLearning and Development

Policy Framework

Equal Opportunity

Policy on Child Labour

Policy on Forced Labour

Training

Succession Planning

Career Progression

Performance Management

Engagement

Work-life Balance

Health and Safety

Our pledges: i will get it right the first time, i will Care, i will be Green, i will empower, i will

standout wherever i am

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 local talent and around 50% of our resort employees are hired from the local 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.

During the year we added 787 new employees to our team, comprising 716 in Sri Lanka and 71 in Maldives, bringing our total talent pool to 2,720. Fair age and gender representations have enabled us to develop a dynamic team with diverse skills and industry experience. Overall, the Group’s female participation level is 9%, whilst at senior management level female representation is higher at 17.6%.

Staff Pool Highlights

38%

8%

54%

Below 3030 to 50Over 50

Age-wise breakdown

91%

9%

Gender-wise breakdown

Male Female

92%

8%

Male

New hires- gender breakdown

Female

Gender-wise breakdown of Permanent and Contract Employees

Contract Permanent

0

500

1,000

1,500

2,000

MaleFemale

72

902

163

1,583Talent Attraction

We are an equal opportunity employer and do not discriminate based on gender, race, age, religion or ethnicity. We also do not engage children or individuals below 18 in employment and do not encourage or tolerate any form of forced or compulsory labour. We strive to attract dynamic professionals who are committed to our vision

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76%

23%

1%

Below 3030 to 50Over 50

New Hires- Age breakdown

Learning and Development

Training needs are identified primarily through the annual appraisals and employee engagement mechanisms. We offer a range of structured and on the job training programmes designed to develop the technical, leadership and soft skills of our employees. Resource personnel are drawn from within the Group as well external experts and hospitality based consultants. During the year, we invested a total of LKR 20.0 million in training and development, our staff undergoing 126,130 hours of training during the year. The key training focus on the year was ‘Cinnamonising’ our staff, with the objective of inculcating the brand identity and nurturing them with the skills required to deliver the Cinnamon Brand Promise.

A few of the key ongoing training programmes carried out during the year are,

Programme Details Participants

Cinnamonisation Consisted of several comprehensive programmes including brand communication, implementing and delivering the brand promise, brand policies related to key operations, train the trainers, developing Cinnamon competencies, Cinnamon brand standards among others.

All employees

Management Trainee Programme

A comprehensive multi-disciplinary graduate programme spanning 24 months in Food and Beverage, Housekeeping, Front Office and Kitchen divisions. Provide the opportunity to learn & acquire best practices, technical skills as well as management competencies in respect of the specialization

6

Internship Programmes

We provide a structured internship programme, focused on grooming, developing and aspiring young talent

-

Youth Development Programme (partnership with John Keells Foundation and CARE International)

A six month long skill development program with the objective of increasing employability of 100 low income youth of the Habarana and Beruwala region

100

Maldivian Executive Development Programme

A 24 month programme with the objective of providing career development opportunities to the Maldivian non- executive staff in order to groom them to the executive level

7

Talent Acceleration Programme

This programme provides internal opportunities to our Non-Executive staff to grow within the company.

23

Language Skill Programmes

English language skills are developed through class-room programmes, English Day projects and on-the-job guidance

60% of total carder

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Grade Average Training Hours Total Training Hours

Male Female Male Female

AVP & above 32 27 201 80

Manager 149 50 774 73

Assistant Manager 270 8 682 62

Executives 105 104 8,472 1,236

Non-Executives 95 91 106,534 8,016

Total 116,663 99,467

Succession Planning and Career Development

We strive to create a strong pipeline of staff for executive positions, allowing employees to develop within the Company. Several executive and non-executive staff members have been included in a Personal Development Plant to ensure effective career progression. Our objective is to fill 20% of the vacancies arising from the hotels through internal staff members. During the year we provided career progression opportunities through promoting 45 executive level employees and 19 non-executive level employees.

Employee RetentionPerformance Management

A performance driven culture is nurtured within the Organisation and all employees work towards defined objectives, which are set in accordance with the Balance Scorecard and Hoshin Kanri methodology. During the year, we further extended the Competency based framework which was introduced in 2013/2014 to non-executive staff, encouraging our employees to embody the values set by the Cinnamon brand. The new process has also been designed to further empower our middle management in taking ownership and accountability for the development of our people. Currently, all our staff undergo annual performance appraisals based on this framework which is based on the following competencies.

Cinnamon Citizen

Lives the Cinnamon Vision and Pledges, is trustworthy and extends trust to others. Enthusiastic and passionate, displays integrity and cares for people, property and performance.

Adaptable and Change Agent

Displays flexibility and adapts to a changing environment being guided by the values and larger objectives of the organization. Responds and manages change with a positive attitude and a willingness to learn new ways to accomplish objectives.

Inspiring and Developing Teams

Inspires individuals and the team towards achieving aspirational and operational goals, engages and empowers others and develops individuals and the team. Supports individual development and succession planning by sharing insights and knowledge freely with team members.

Building and Maintaining Relationships

Connects with people, establishes and maintains meaningful relationships and networks with guests, employees and significant and external stakeholders.

Innovation and Creativity

Strives to develop and initiate new and improved products, services and process where appropriate to meet guests’ needs and support strategy. Stays current about changes in society and technology and uses this insight to improve “what we do” and “how we do it” to set new trends and standards that result in commercial advantage.

Maldivian Executive Development Programme

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Service and Customer Focus

Focuses on satisfying and surpassing the expectations, aspirations and needs of customers. Empathises, values and relates to the various cultural and personal beliefs of customers from different backgrounds, nationalities and customs to provide improved levels of customer service.

Technical Competence

Applies the knowledge, skills and attributes that are required to do her/his job as required. Engages in formal and informal professional development on a regular basis.

Creating Experiences

Creates experiences for guests and others that are personalized, meaningful, significant and memorable. Coordinates, where necessary, with others to deliver these experiences. Ensures that these experiences are delivered on a consistent basis.

Results Orientation

Focuses on agreed Targets and Key Performance Indicators and directs resources and energy towards achieving these results. Contributes to the success of the business and delivers what is expected of the role

Employee Engagement

We have a high level of employee engagement, facilitated through formal and informal engagement mechanisms which have contributed towards nurturing a satisfied and motivated workforce. We provide multiple forms of engagement including satisfaction surveys, suggestion box, open door policy with the Property level General Manager and sector level President as well as ability to directly engage with Group Chairman via e-mail. Employee grievances which were filed during the year were addressed successfully and resolved during the year; in widening our scope of disclosure such numbers will be disclosed from next year.

Measuring Satisfaction

The Great Place to Work (GPTW) survey is conducted once in three years and consists of a comprehensive and structured intervention process across the organisation. The GPTW was last conducted in February 2014 and Cinnamon Hotels and Resorts secured a score of 62%. Responses received from GPTW form a critical input to the Group’s human resource management action plan. Additionally, the Voice of Employee survey is conducted on an annual basis using an e-based interface for employees in the executive grade and above. Conducted in April 2015, the sector achieved a score of 87% reflecting an improvement in staff satisfaction levels in comparison to the previously conducted GPTW survey.

Collective Bargaining

We continued to maintain cordial relationships with two trade unions, 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, open dialogue and 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 Hotel, Bentota 39%

Cinnamon Lodge, Habarana 41%

Chaaya Village, Habarana 41%

Cinnamon Wild, Tissamaharama 28%

Chaaya Blu, Trincomalee 25%

Chaaya Tranz, Hikkaduwa 33%

Cinnamon Citadel Kandy operates under the Inter Company Employees Union.

Union representation as a percentage of the total cadre

Cinnamon Citadel, Kandy 24%

Work Life Balance

We engage our employees in a range of non-work related events, aimed at improving interaction and building loyalty between staff members. Our HR Vision of being ‘more than just a workplace’ embodies the need to have fun at work, through an action-packed event calendar giving employees the opportunity to participate in events at resort, sector and group

120



level. A year-round event calendar provides the opportunity for staff to participate at sector level, group level and mercantile level events. During the year are employees participated in annual family get-togethers, cultural/religious events, sporting events including inter-company and mercantile swimming, cricket, bowling and badminton tournaments and CSR initiatives among others.

Cinnamonisation

Having identified the crucial role to be played by all our employees in delivering the Cinnamon promise, during the year we focused on developing skills, attitudes and style of our people to be aligned with our brand identity and emerge as agents of Inspiration. Cinnamon Lifestyle Brand employees are expected to be energetic, vibrant professionals who are empathic, modern and personal – they will stand out wherever they are.

We will ensure that employees are equipped with the tools, skills and attributes to live and deliver the Cinnamon Lifestyle Brand.

They will;

> have the competencies, abilities, insights, skills and knowledge different from employees in traditional four and five star hotels

> be competent, stand out and be empowered to deliver personalised products and services

> be knowledgeable and able to respond quickly and accurately

> be competent in their roles, have the right skills, knowledge and values and be trusted to make the right decisions with minimal or no supervision

> They will display the brand attributes of live life, inspire, vibrant and togetherness.

In this journey as the phase 1 the Human Resources and Development team are currently focusing on introducing new life style brand personality and the key components of the brand to all our employees through the following initiatives;

> Cinnamon 2.0 launch

> A multitude of training programs to improve employees’ skills knowledge and attitude

> Enhancing staff facilities and the ambience of staff spaces to improve the employee lifestyle and showcase the brand personality

> Creative informal gatherings to reinforce learnings

> Cinnamon Wall to be used as the main source of internal communications

SuppliersThe Supply Chain

John Keells Hotels exercises responsible management through its supply chain and extends this commitment to businesses that collaborate with the Group as 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. We strive 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. Efforts are made to

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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

Supplier Value Creation

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.

Initiative Participants

Supplier awareness session in the southern region 28

Supplier awareness session in the round trip region 21

Supplier audits Local suppliers of Bentota Beach, Cinnamon Citadel, Chaaya Blu, Cinnamon Wild, Chaaya Tranz and Cinnamon Bey and several large suppliers in the Maldivian region.

Community EngagementThe Group’s sustainability and CSR policy highlights the need to proactively engage with the communities in our operating environment with the objective of meaningfully enriching their lives through empowerment. All our resorts adopts a strategic approach towards their CSR initiatives and as defined in our policy framework, focus on four specific areas when engaging with communities. These areas are Education, Culture and Religion, Developing Livelihoods and preservation of natural resources among others. During the year, all our resorts engaged in multiple CSR activities within these focus areas, and the following section discusses the progress that has been made in each of these aspects during the year.

Culture and ReligionVolunteer

Hours: 4,194

preservation of natural Environment

Volunteer Hours: 1,713

EducationVolunteer

Hours: 1,155

Developing LivelihoodsVolunteer

Hours: 2,051

Our Community focus

purchase locally as much as possible through suppliers who are located in communities neighbouring our resorts.

Supplier Screening

We are committed to procuring goods and services in a sustainable manner considering impacts on the environment and society. All our suppliers undergo a thorough supplier assessment, which comprises of environmental, social and economic obligations. We also ensure that the vendors do not employee persons that are less than 18 years of age, although the legal employable age in the country is 16 years and above.

Supplier assessments carried out in Maldives

Significant Suppliers Audited

22

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Education

We are committed to supporting the educational needs of school children and youth in the localities we operate in. Bentota Beach Hotel sponsored the renovation and expansion of the Pitaramba IT education centre, which was established by the hotel in 20005 under the guidance of the Chief Priest of Sri Dharmavijayaramaya. This is the only facility in the Bentota area which provides free IT facilities for school children, and during the year the hotel invested in adding new computers, installing an air conditioner, paining and wiring the facility among others. During the year, Cinnamon Citadel also organised an Art Competition for school children, under the theme of Tourism and Community Development. In addition to the above, several resorts in the cluster supported school children through donations of funds, stationary and other items required for their education purposes.

Culture and Religion

All our resorts donated generously towards cultural and religious activities in their localities during the year. The key initiatives during the year, were donations to Vesak kalaapaya (Chaaya Tranz), donation for painting at Habarana Temple (Chaaya Village) whilst almost all our resorts made donations or supported the activities of temples located in neighbouring communities.

Health

Several of our resorts carried out HIV/AIDS awareness programmes during the year, including Bentota Beach Hotel, Cinnamon Wild, Dhonveli, Cinnamon Citadel and Ellaidhoo. These programmes were targeted towards increasing

AIDS awareness of a diverse audience including schools, military personnel, university students and local communities. In an ongoing programme, several of our resorts including Cinnamon Wild, Cinnamon Lodge, Cinnamon Citadel also engaged in blood donations campaigns during the year, engaging employees, guests and local communities. Other initiatives carried out by the resorts include dengue eradication and awareness programmes, donations for hospitals, facilitating awareness campaigns on health related matters and


In an innovative community engagement venture, Cinnamon Hotels & Resorts partnered with John Keells Foundation and CARE International targeting the skill development of low youth among low income earning families in the Habarana and Beruwala region. The objective of this initiative is to increase the employability of 100

youth by equipping them with the skills required to obtain employment in the leisure and hospitality industry. The six month long skill development program was developed and executed by the Cinnamon Resort Training & Development Team together with Hotel Teams of Cinnamon Bey Beruwala, Bentota Beach Hotel, Cinnamon Lodge Habarana and Chaaya Village Habarana. Structured and on-the-job training was provided on a range of areas including technical skills, English language and soft skills.

The students who successfully complete the programme are certified with Cinnamon Hotels and are eligible to apply for NVZ Level 3 Hotel School Certification, subsequent to an additional 6 months of training. The Group intends to replicate the success of the two programmes with the intake of another batch during the next financial year, and we also hope to increase the female participation rate of the next batch.

Down South program

Round Trip program

> 36 students successfully completed the programme including 16 in Kitchen operations, 13 in Food and Beverage and 7 students in housekeeping

> 83% of the students were absorbed into our resorts

> 38 students successfully completed the programme including 20 in Kitchen operations, 16 in Food and Beverage and 2 students in housekeeping

> 74% of the students were absorbed into our resorts.

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Ou

r M

ater

ial E

nvir

on

men

tal A

spec

ts

Key Results At A Glance

Inte

rnal

Asp

ects

Carbon footprint

Co2 Emissions per operational factor (Kg)

1%

Total GHG Emissions 20,214 MT

Energy

Energy per operational factor (MJ)

2%

Total Energy 176,200 GJ

Waste

Waste per operational factor (Kg)

16%

Total Waste Generated 2.76 million KG

Water

Water withdrawal per operational factor (Liters)

1%

Total Water Withdrawn 697,696 m3

Exte

rnal

Asp

ects

Bio-Diversity

> Blue Whale IDs recorded - 56 > Elephant IDs recorded - 62 > Donated Leopard Pens - 52

Environment ReportAs a responsible corporate citizen and a green pioneer in Sri Lanka’s tourism industry, we have long since recognised the importance of managing our natural capital effectively. For us, environmental sustainability is a strategic priority and core business driver and is managed similarly to the way we manage our other 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.

14.89

137

2.21

520

14.37

127

2.31

498

14.25

124

1.94

492

2012/13

2012/13

2012/13

2012/13

2013/14

2013/14

2013/14

2013/14

2014/15

2014/15

2014/15

2014/15

14.25Kg

124MJ

1.94Kg

492Litres

Current SnapshotPer Operational Factor

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Management Approach

The Environmental policy framework is a crucial component of the Groups’ overall Sustainability and CSR policy and comprises four policies which address the management of the Group’s material environmental impacts. The policies highlight the importance of transparent and open communication on all environmental practices whilst engaging stakeholders in contributing towards developing global best practices. The policy framework covers all 11 resorts and is made available to all our stakeholders through our website, publications and notice boards. We are in compliance with all environmental regulations, laws as well as global industry best practices.

Environmental Management framework

Materials

Managing inputs Managing impacts

Water EnergyWaste and Effluents

EmissionsBio-

DiversityCompliance

Comprehensive policy framework

Our pledge: i Will Be Green

Cost of Environmental Expenditure

Type of Expenditure Cost (LKR Million)

Energy Saving 41.3

Water Saving 102.6

Waste Reduction 0.3

Impact of Climate Change - As a leisure industry operator, one of our most unique and valued selling propositions is the natural environment and bio-diversity. Climate change, natural disasters and depletion of natural resources can thus have a substantial impact on the Group’s operations over

the long term. Our comprehensive environmental management policy incorporates methods to mitigate this risk including use of renewable energy and lower carbon footprint, improving energy efficiency and emission reduction as described in detail in subsequent sections of this report.

We consistently seek to refine and improve our environmental disclosures and in doing so, this year we have sought to discuss the performance of our material environmental impacts with particular focus on consumption per operational factor. We believe using an operational factor methodology as opposed to a simple guest night methodology is a more accurate demonstration of resource efficiency as it captures all occupancy elements that affect resource consumption.

Operational Factor = total number of overnight guests + staff nights + (day guests + banquet guests + walk-in guests)/3

Initiatives and Results

Emissions

We 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 using the Greenhouse Gas Protocol as governed by the World Resource Institute (WRI) and the World Business Council for Sustainable Development. The emission factors have been derived from IPCC Guidelines for National Greenhouse Gas Inventories. The boundary for the emission measurement has been governed by Scope 1 and Scope 2.


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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

installation of Bio-Gas Digesters

RESORTS: Cinnamon Citadel and Chaaya Village Habarana

Food waste is utilised to generate bio-gas which is subsequently used in staff kitchens. The digesters are estimated to save close to 4500 lkg of LPG at each property resulting in significant cost savings and reductions in the carbon footprint. We hope to replicate this success at Cinnamon Wild Yala during the next financial year, whereas Chaaya Lagoon Hakuraa Huraa has obtained a grant for the installation of a bio-gas digester under the Tourism Adaptation Project (TAP) undertaken in collaboration with UNDP with support from the Global Environment Facility.

Results: Reduction of Carbon Footprint by 25 Mt

Earth Hour Celebrations

RESORTS: All Resorts

Earth Day was celebrated on the 29th of March 2015, with our resorts engaging in a variety of energy saving initiatives including switching off selected lights, air conditioners, heat pumps, heavy duty machinery which consume significant amounts of energy.

Results: Reduction Of Carbon Footprint By 1,354 Kgs

Trends in Emissions (In Metric Tonnes of Co2)

2011/12 2012/13 2013/14 2014/15

Diesel 6,562 6,527 6,537 6,316

Petrol 900 864 863 1,025

Liquid Petroleum Gas (LPG) 602 669 787 774

Electricity 7,619 9,440 11,619 12,098

CO2 Footprint - Direct Energy through Primary Sources ( Scope 1 ) 8,064 8,061 8,186 8,116

CO2 Footprint - Indirect Energy through Primary Sources ( Scope 2 ) 7,619 9,440 11,619 12,098

Total CO2 Footprint 15,683 17,501 19,806 20,214

RESULTS: The Group’s total CO2 footprint increased by 2% during the year primarily due to increased operational activity. However, CO2 footprint per operational factor continued to trend downwards, reducing 1% during the year under review, supported by broad based improvements in all operational clusters.

Contribution to Carbon Footprint-by source

31%

5%

4%

60%

DieselPetrolLPGElectricity


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Kgs of CO2 per operational factor

2011/12 2012/13 2013/14 2014/15

14.0214.89 14.37 14.25

0

3

6

9

12

15


Energy Efficient Cooling

RESORTS: Cinnamon Lodge, Chaaya Village, Cinnamon Citadel, Cinnamon Wild, Cinnamon Bey and all Maldivian Resorts

Split-type air conditioners were replaced with more energy efficient inverter-type air conditioners in an ongoing programme. Majority of split air-conditioning units are inverter type.

Results: Energy Savings of 50,985 kWh per month

Energy

Energy is an essential input for most of our resort operations and is among one of our top expenses. Therefore, concerted efforts are made across all our resorts to increase energy efficiency with all resorts measuring, tracking and reporting energy consumption on a consistent basis. As a policy, low energy consuming equipment is utilised 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.

Energy Efficient Lighting

Resorts in Sri Lanka Maldives

Sri Lankan Resorts are in the process of moving towards 100 per cent LED lighting in hotels, eliminating higher energy consuming incandescent bulbs. In Maldives currently 90% of our lighting requirements are fulfilled by LED lighting.

Renewable Energy

Resorts: Cinnamon Lodge and Chaaya Reef Ellaidhoo

Waste energy is utilised through co-generation at Cinnamon Lodge and Ellaidhoo 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 Chaaya Village to heat water, for use by guests.

Results: Reduction of Energy usage by 8,700 kWh per month

RESULTS: During the year, total energy usage increased marginally by 1% to 176,200 GJ of which electricity was the major source with a share of 36%. However, the energy usage per operational factor continued to improve, declining by 2% to 124.19 MJ during the reviewed period.

Energy consumption by source

48%

9%

7%

36%

DieselPetrolLPGElectricity

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Energy Consumption Trends (In Giga Joules)

2012/13 2013/14 2014/15

Diesel 88,090 88,219 85,236

Petrol 12,473 12,446 14,797

Furnace Oil - - -

LPG 10,603 12,472 12,269

Electricity 49,861 61,370 63,899

Direct Energy 111,166 113,137 112,301

Indirect Energy 49,861 61,370 63,899

Total Energy 161,027 174,506 176,200

Energy consumption by operational factor (MJ)

2011/12 2012/13 2013/14 2014/15

135 137127 124

0

30

60

90

120

150

Water

The Group’s water policy seeks to conserve and optimize the use of water obtained from surface and ground water sources whilst re-using waste water after treatment wherever possible in order to reduce the intake of fresh water. 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. All efforts are made to engage our staff and guests in water conservation through awareness programmes, signage and Go green options. Furthermore, all hotels strive to ensure that effluents discharged from the resorts meet 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 is checked on a regular basis by independent assessors to ensure it meets compliance levels. Our discharge water quality

Water Recycling


All our properties engage in recycling water which is used mainly for gardening and washing purposes. During the year, Cinnamon Wild commenced water recycling and connected 20 rooms during the period whereas Chaaya Island Dhonveli also connected 148 rooms during the year.

Results: The amount of recycled water increased by 7% and 32% of total water withdrawal was recycled

during the period

initiatives to Minimise Wastage

RESORTS: Cinnamon Wild and Chaaya Reef Elliadhoo

Cinnamon Wild installed an in-house developed control system to prevent wastage of water in the washer/extractors during CEB power cuts. Meanwhile, Chaaya Reef Ellaidhoo installed a variable frequency drive water distribution system with panel board, contributing to the Sector’s water conservation efforts.

Results: annual Water Saving of 816 Cubic Meters

levels ((BOD, COD, TSS, pH and oil and grease levels) complies with government standards.

128


initiatives to Reduce Water Withdrawal


All properties have taken initiatives to reduce water withdrawal through rainwater harvesting. During the year, rainwater harvesting was introduced at Cinnamon Citadel and Cinnamon Island Dhonveli and water thus harvested is used in the hotel laundry.

Results: annual Water Saving of 2,055 Cubic Meters

RESULTS: During the period under review, total water usage increased slightly by 1.8%to 613,741 litres in line with the increase in operational activity. However, water consumption per operational factor improved for the second consecutive year declining by 1% to 492 litres.

Water Discharge by Destination

27%

32%

37%

4%

To Municipality Sewerage, Drainage LinesTo ETPs and Recycled CompletelyTo Rivers, Lakes after being treated by ETP/STPDirect to Rivers, Lakes, Wetlands, Marshes

Water Withdrawal by Source

19%

54%

27%

Surface Water - Wetlands, Rivers, Lakes, OceansGround WaterMunicipality Water Sources

Water Discharged by Destination (m3)

2012/13 2013/14 2014/15

To Municipality Sewerage, Drainage Lines 147,024 144,122 167,180

To ETPs and Recycled Completely 138,517 177,460 193,215

To Rivers, Lakes after being treated by ETP/STP 186,172 228,320 227,568

Direct to Rivers, Lakes, Wetlands, Marshes 20,090 15,077 25,778

To Ground Through Soakage Pits etc 53,894 37,660 -

Provided to another Organisation (Outside the Group) - - -

Total Water Discharge 545,697 602,639 613,741

Water Consumption per operational factor

2011/12 2012/13 2013/14 2014/15

476520 498 492

0

100

200

300

400

500

600


129


Waste

Our Waste management policy is based on principles of ‘Reduce, Reuse and Recycle’ and multiple initiatives are in place to meet our waste reduction goals. 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. A 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.

initiatives to increase Recycling

RESORTS: Cinnamon Lodge and the Maldivian Cluster

The paper recycling plant commissioned at Cinnamon Lodge Habarana, utilises waste paper generated from hotel operations and elephant dung to produce recycled paper. The project is now moving into its second phase with increased participation from women in the community. The recycled paper which would be in turn purchased by the project technical partner Maximus Pvt Ltd.

Meanwhile, all our 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. Chaaya Island Dhonveli 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. In Hakuraa Huraa waste paper is being used as an input to produce building blocks.


Paper recycling plant at Cinnamon Lodge Habarana

130


Waste Disposal in Kg 2012/13 2013/14 2014/15

Through Reuse 701,529 1,020,758 1,007,945

Through Recycling 292,041 244,219 174,361

Through Composting 84,823 29,904 16,793

Through Recovery 91,631 174,773 98,106

Through Incineration 16,335 23,541 8,320

Through Deep Well Injection 522,869 586,741 586,112

Through Landfill 875,596 1,109,097 864,690

Through On-Site Storage 14,027 275 -

Total Non-Hazardous Waste Disposed 2,598,852 3,189,308 2,756,328

RESULTS: We achieved impressive results in waste management during the year, with total non-hazardous waste declining by 14% during the year despite the increase in operational activity. Meanwhile, landfill waste generated per operational factor also declined by 16% to 1.94 kg during the year from 2.31 kg the previous year.


Waste per operational factor (KG)

2011/12 2012/13 2013/14 2014/15

1.41

2.21 2.311.94

0.0

0.5

1.0

1.5

2.0

2.5

Materials

In line with our objective towards consistently improving the scope and coverage of our sustainability reporting, this year we initiate disclosures on our material consumption. As a leisure sector operator, our raw materials consist primarily of inputs which are used in food and beverage processes. This comprises a wide range of materials such as fresh fruits and vegetables, fish, meat and dry rations which have varying units of measurement. For the purpose of disclosure, we have only considered the raw materials which are measured in the unit of kilograms.

We strive to ensure the procurement of highest quality raw materials, through developing strategic relationships with our supplier base and consistently engaging with them for sharing of knowledge and value creation. As far as possible, attempts are made to source raw materials through suppliers in the local communities.

Type of Raw Material Consumption in units (kg)

Fresh Fruits 1,371,835.64

Vegetables 926,894.45

Fish 390,158.97

Meat 511,244.06

Dry Rations 42,190.75

Other Food Items 10,953,519.72

131



Bio-Diversity

Project Leopard at Cinnamon Wild

An on-going project in its fourth year of operation, The Project Leopard Yala has dual objectives of supporting the livelihoods of cattle farmers and protects the leopard population living in outside the parks of the boundary. To date, we have distributed 50 such pens 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 8000 US$ in assistance to further expand on planned distribution of steel pens to cattle farmers living adjacent to the park. This project is supervised and deployed by the Cinnamon Nature Trails naturalists at Cinnamon Wild, Yala.

Leopard Research Initiative at Cinnamon Wild

The Leopard Research Initiative was undertaken by Cinnamon Hotels and Resorts together with environmental scientists of Environmental Foundation Ltd.

Camera traps were deployed in the Yala National Park Block 1 to capture images of the leopards in order to estimate the leopard population using the ‘capture-recapture’ methodology. Random points were picked using maps and 28 remote infrared trap cameras which ran automatically providing 24 hour surveillance were placed above ground in designated locations within each grid for a period of 3 weeks. The images collected from the camera traps are being used by naturalists to determine the age structure and sex ratios of the animals. The initiative commenced in October

2012 and ended in August 2014 during which the cameras were deployed for 17 months, while the report is now ready to be shared with the Department of Wildlife Conservation.

Financing of the project commenced with a talk by Jonathan and Angela Scott at the Royal Geographic Society on 19th September 2014 titled Living with Leopards in Sri Lanka which provided seed funding. The balance funds was provided by Cinnamon Hotels and Resorts and John Keells Foundation, the CSR foundation of its parent company John Keells Holdings Plc.

Project Gathering - Cinnamon Elephant Project at Cinnamon Lodge

The ‘Cinnamon Elephant Project’ which is a collaborative effort between Cinnamon Hotels and the Centre for Conservation and Research breaks new ground in developing elephant viewing based tourism through integration of research and tourism. Under this program elephants are individually identified based on their morphological characters and their life stories followed by the naturalists at the Cinnamon Hotels. This information is shared with visitors while on safari and based at the Cinnamon Lodge through a newly constructed elephant research station, enabling them to obtain a unique, enriching and more personal experience. Web based information dissemination enables them 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. The project aims to benefit

science and tourism and through that, contribute to ensuring the long term conservation of the Asian elephant. Decades of work spearheaded by Dr.Prithiviraj Fernando Phd, heading the Center for Conservation and Research (CCR) have observed their movements in the North Central province and they feel that most elephants does not disperse far, as they break into smaller herds and live around the “Hurulu” reserve. The project will track some of the smaller elephant herds by using high tech satellite collars throughout the year even after the Gathering disperses as a second phase of the study to understand the seasonal movement of the elephant herds that are part of the larger gathering.

50th Pen donation at Yala to a Cattle Farmer

132



Cinnamon Elephant Project

Mega Pods of Sperm whales in Sri LankaLeopards at Yala

Dr.Prithiviraj Fernando Phd, and Dr.Jenny Fernando Phd, with the Cinnamon Nature Trails team at Cinnamon Lodge – Resort – Habarana Elephant research station

Cinnamon Elephant Project: Individual ID’s are developed on Bull’s and matriarchs at the Annual Gathering of elephants in the Minneriya national park, The second phase aims to have 3 cow herd matriarchs radio collared by later 2015, to track their movements after the rains in November, which results in conflict with settlements.

Understanding the Mega Pods of Sperm whales in Sri Lanka.

Cinnamon Nature Trails has been involved in conducting whale watching in the East since 2009, and our sea going teams have been recording unusually high numbers of sperm whales off the Trincomalee seas each year. This phenomenon has now been identified as the Super Pods of sperm whales, and the team began collating data to understand the reasons for this mega congregations of Sperm whales in Trinco, which is also observed in Mirissa and Kalpitiya.

The general behaviour that triggers mammals to congregate is expected to be socializing, food and reproduction, while the super pods of sperm whales could well be doing the same or something unique, identifying which is the purpose of this study headed by Vimukthi Weeratunga at Cinnamon Nature Trails with his field team led by B.Dayarathne.

133



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

Chaaya Blu Trincomalee 13.24 Pigeon Island Marine National Park

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

Yes

CinnamonCitadel

Kandy 5.80 UdawattekeleSanctuary

6km adjacent 0.023 Wildlife & Forestry

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

Yes

CinnamonWild

Tissamaharama 11.25 Yala National Park Bundala National Park

2km adjacent32km adjacent

0.044 Wildlife & Forestry

Flora and Fauna ProtectionOrdinance 1937IUCN Category II - NationalPark

Yes

ChaayaTranz

Hikkaduwa 4.65 Hikkaduwa MarineNational Park

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

Yes

CinnamonLodge

Habarana 25.48 Minneriya NationalParkRitigala Strict Nature Reserve Kaudulla NP

15km adjacent toPark entrance

20km adjacent20km adjacent



Yes

CinnamonBey

Beruwala 11.39 Hikkaduwa MarineNational Park

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

Yes

ChaayaVillage

Habarana 9.34 Minneriya NationalParkRitigala Strict Nature Reserve Kaudulla NP

11km adjacent toPark entrance17km adjacent

22km adjacent



Yes

134



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 Beach Hotel

Bentota 13.34 Hikkaduwa Marine National Park

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

Yes


North Male Atoll Republic of Maldives

18.62 Thamburudhoo thila 1km 0.0673 Maritime The Environmental Protection & Preservation Act

Yes


North Ari Atoll Republic of Maldives

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

Yes


Meemu Atoll Republic of Maldives

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

Yes

EPL - Environment Protection Licence

135



Chaaya Blu

Chundikulam Bird Sanctuary

Kokilai Bird Sanctuary

Naval Headworks Sanctuary

Somawathie Chaitya Sanctuary

Minneriya Tank Sanctuary

Wasgamuwa Strict Natural Reserve

Madura Oya National Park

Rantambe Reservior Sanctuary

Gal Oya National Park

Peak Wilderness Sanctuary

Uda Walawe National Park

Sinharaja Rainforest Reserve

Kann Eliya Forest Reserve

Muthurajawela Wetlands/Marsh

Wilpattu National Park

Ritigala Strict Natural Reserve

Madhu & Giants Tank Sanctuary

Yala National Park

Bundala Bird Sanctuary

Cinnamon Wild

Cinnamon LodgeChaaya Village

Cinnamon Citadel

Bentota Beach Hotel

Cinnamon Bey

Chaaya Tranz

Cinnamon Hotels & Resorts

Cinnamon Hotels & Resorts

Sanctuaries / National Parks / Nature / Forest Reserves

Protected Areas

Locations in Sri Lanka Locations in Maldives




Thamburudhoo Thila

Lhazikuraadi

Orimas Thila

136


Consolidated Value Added Statement

For the year ended 31st MarchIn Rs. ‘000s 2015 2014

Direct economic value generated Revenue 11,382,779 10,966,381 Finance income 115,835 153,805 Proceeds from sale of property, plant and equipment

55,431 89,031

11,554,045 11,209,217

Economic value distributedOperating cost 7,302,443 72% 7,103,136 73%Employee wages and benefits 1,849,024 18% 1,724,922 18%Payments to providers of funds 629,138 6% 533,877 5%Payments to government Sri Lanka 187,919 2% 214,790 2% Maldives 227,207 2% 169,407 2%Community investments 8,850 - 5,071 -

10,204,581 9,751,203

Economic value retained 1,349,464 1,458,014

2014/15

6%4%

72%

18%

Operating costEmployee wages and benefitsPayments to providers of fundsPayments to government

2013/14

Operating costEmployee wages and benefitsPayments to providers of fundsPayments to government

4%

73%

18%

5%


137



GRI Content Index Tool

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.

Chairman’s Message 29 to 32

Organisational Profile

G4-3 Name of the organization John Keells Hotels PLC

Cover Page

G4-4 Primary brands, products, and services About the Group 14 and 18

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

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 the Group 135

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 111 and 135

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 the Group

Financial Review

115

67 to 69

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

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

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

The total workforce by region and gender.

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.

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

Cinnamon Ambassadors

116

138





G4-11 The percentage of total employees covered by collective bargaining agreements. Cinnamon Ambassadors

119

G4-12 Describe the organization’s supply chain. Suppliers 120 to 121

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 12

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

120

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

Our Excellence

Sri Lanka Accounting Standards (SLAS) and Sri Lanka Financial Reporting Standards (SLFRS)

12

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

-


139





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 33

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 22

G4-19 List all the material Aspects identified in the process for defining report content. Defining Materiality 22 to 23

G4-20 For each material Aspect, the Aspect Boundary within the organization Defining Materiality 23

G4-21 For each material Aspect, report the Aspect Boundary outside the organization Defining Materiality 23

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

Financial Statements 204

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

Stakeholder Engagement

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

20 and 21

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

20 and 21

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

20 and 21

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

20 and 21

Report Profile

G4-28 Reporting period (such as fiscal or calendar year) for information provided. About this Report 12

G4-29 Date of most recent previous report (if any). Financial year ended 31st March 2014

G4-30 Reporting cycle (such as annual, biennial) Annual cycle 12

G4-31 The contact point for questions regarding the report or its contents. About this Report 12


140





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.

About the Report 12

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

12 and 114

Governance

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

38

Ethics and Integrity

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


38 to 53


141


SPECIFIC STANDARD DISCLOSURES

Material Aspect DMA/Indicators Reference/comments/Reasons for omission

Cross Reference

Pages

ECONOMIC ASPECTS

Economic Performance

G4-EC1 Direct economic value generated Sustainability Performance 136

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

Environment Report 124 (P)

G4-EC3 Coverage of defined benefit plan obligations Financial Statements 177

ENVIRONMENTAL ASPECTS

Materials

G4-EN1 Materials used by weight or volume Environmental Performance 130

Energy

G4-EN3 Energy consumption within the organization Environmental Performance 126 to 127

G4-EN5 Energy intensity Environmental Performance 123

G4-EN6 Reduction of energy consumption Environmental Performance 126

Water

G4-EN8 Total water withdrawal by source Environmental Performance 128

Biodiversity

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

Environmental Performance 133 to 134

Emissions

G4-EN15 Direct greenhouse gas (GHG) emissions Environmental Performance 124 to 126

G4-EN16 Energy indirect greenhouse gas (GHG) emissions Environmental Performance 124 to 126

G4-EN18 Greenhouse gas (GHG) emissions intensity Environmental Performance 124 to 126

G4-EN19 Reduction of greenhouse gas (GHG) emissions Environmental Performance 124 to 126

Effluents and Waste

G4-EN22 Total water discharge by quality and destination Environmental Performance 128

G4-EN23 Total weight of waste by type and disposal method Environmental Performance 130

G4-EN24 Total number and volume of significant spills Environmental Performance 128


P - Partially complied

142




Cross Reference

Pages

Products and Services

G4-EN27 Extent of impact mitigation of environmental impacts of products and services Environmental Performance 123 to 130

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.

N/A

Overall

G4-EN31 Total environmental protection expenditures and investments by type Environmental Performance 124 (P)

Supplier Environmental Assessment

G4-EN32 Percentage of new suppliers that were screened using environmental criteria Suppliers 121

Environmental Grievance Mechanisms

G4-EN33 Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms

No Environmental Grievances filed

N/A

SOCIAL ASPECTS

Employment: Labour practices and Decent Work

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

Cinnamon Ambassadors 116 to 117 (P)

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


114 to 115

Employment: Training and Education

G4-LA9 Average hours of training per year per employee by gender, and by employee category Cinnamon Ambassadors 115 to 118

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

Cinnamon Ambassadors 115 to 118



143




Cross Reference

Pages

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

Cinnamon Ambassadors 118

Employment: Labour practices grievance mechanism

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

Cinnamon Ambassadors 119 (P)

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, talent Attraction 116 and 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, talent Attraction 116 and 121

Society: Local Communities

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

Community Engagement 121 to 122

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


140

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

N/A



144


inDEpEnDEnT aSSuRanCE REpORT

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- 2014-15 (“the Report”).

> Reasonable assurance on the information on financial performance as specified on page 136 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.

Independent Assurance Report to the Board of Directors of John Keells Hotels PLC on the Sustainability Reporting Under the Integrated Annual Report- 2014-15

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 06 May 2015. 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 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 2015.

> 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 136 of the Report is properly derived from the audited financial statements of the Company for the year ended 31 March 2015.

> 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

29th May 2015Colombo

145


Distribution of Shareholders

There were 6,772 registered Shareholders as at 31st March 2015 (7,096 as at 31st March 2014) distributed as follows:-

As at 31st March 2015 As at 31st March 2014

No of Shares held No. of Shareholders

% No. of Shares held

% No. of Shareholders

% No. of Shares held

%

1 to 1,000 3,400 50.21 1,415,370 0.10 3,647 51.39 1,546,845 0.11

1,001 to 10,000 2,328 34.38 9,372,297 0.64 2,423 34.15 9,642,889 0.66

10,001 to 100,000 865 12.77 26,505,858 1.82 861 12.13 26,931,152 1.85

100,001 to 1,000,000 158 2.33 41,777,260 2.87 144 2.03 37,831,568 2.60

Over 1,000,000 21 0.31 1,377,075,995 94.57 21 0.30 1,380,194,326 94.78

Total 6,772 100.00 1,456,146,780 100.00 7,096 100.00 1,456,146,780 100.00

Composition of Shareholders

As at 31st March 2015 As at 31st March 2014

No. of Shareholders

No. of Shares held

% No. of Shareholders

No. of Shares held

%

John Keells Holdings PLC 1 1,169,598,478 80.32 1 1,169,598,478 80.32

Directors & Spouses 3 625,117 0.04 3 625,117 0.04

Public - Resident

Institution 256 203,619,726 13.98 250 206,772,647 14.20

Individual 6,408 70,177,358 4.82 6,741 67,228,624 4.62

Public - Non Resident

Institution 7 1,533,470 0.11 8 1,583,470 0.11

Individual 97 10,592,631 0.73 93 10,338,444 0.71

Total 6,772 1,456,146,780 100.00 7,096 1,456,146,780 100.00

The percentage of the shares of the Company held by the Public as at 31st March 2015 was 19.64% (2014 - 19.64%)

inVESTOR infORMaTiOn

146



Directors & Spouses Shareholdings

As at 31st Mar 2015

As at 31st Mar 2014

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

Total 625,117 625,117

Market Information on Ordinary Shares of the Company

2014/15 Date 2013/14 Date

Share Information

Highest Price (Rs.) 19.20 07-10-2014 13.70 16-04-2013

Lowest Price (Rs.) 12.50 02-04-2014 10.20 17-09-2013

As at period end (Rs.) 14.30 31-03-2015 12.50 31-03-2014

Trading Statistics

Number of Transactions 6,815 3,617

Number of Shares Traded 25,114,020 21,646,967

% of Total Shares in Issue 1.72 1.49

Values of all Shares Traded (Rs.) 409,276,833 277,607,053

Average Daily Turnover (Rs.) 1,719,650 1,147,137

Market Capitalisation (Rs.) 20,822,898,954 18,201,834,750

Ap

r-14

May

-14

Jun

-14

Jul-

14A

ug

-14

Sep

-14

Oct

-14

No

v-14

Dec

-14

Jan

-15

Feb

-15

Mar

-15

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

02468

101214161820

ASPIHotel Sector IndexJohn Keells Hotels PLC

Indices and Share Prices

Rs. Index

147



Twenty Largest Shareholders of the Company

Name of shareholder

31st March 2015 31st March 2014

No. of Shares % No. of Shares %

John Keells Holdings PLC 1,169,598,478 80.32 1,169,598,478 80.32

Employees Provident Fund 78,474,354 5.39 78,474,354 5.39

Sri Lanka Insurance Corporation Ltd. - Life Fund 71,622,800 4.92 72,747,800 5.00

Mercantile Investments PLC 13,000,000 0.89 13,000,000 0.89

Mr. D.J.M. Blackler 7,114,760 0.49 7,114,760 0.49

National Savings Bank 5,541,205 0.38 3,473,800 0.24

Seylan Bank PLC - A/C No. 3 3,832,772 0.26 5,574,500 0.38

Mercantile Fortunes (Private) Ltd. 3,800,000 0.26 3,800,000 0.26

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. 1,694,081 0.12 1,269,150 0.09

Mrs. N.Weerasinghe 1,556,706 0.11 1,419,853 0.10

People’s Leasing and Finance PLC/Mr. L.P Hapangama* 1,533,879 0.11 - 0.00

Mr. P.N.N. Fernando 1,327,888 0.09 1,163,280 0.08

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

1,375,940,895 94.49 1,374,479,947 94.39

Shares held by balance shareholders 80,205,885 5.51 81,666,833 5.61

Total 1,456,146,780 100.00 1,456,146,780 100.00

* As at 31st March 2014 1,497,679 (0.10%) shares were held under the name Waldock Mackenzie Ltd./Mr. L.P. Hapangama

149


finanCiaL infORMaTiOn

Live, InspiredThe value we deliver at the end of the year is the result of how

we live our vision, our dream and our ambition. We want to live, inspired.

150



Annual Report of the Board of Directors

The Directors have pleasure in presenting their 36th Annual Report of the Company 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 2015.

Principal Activities

The 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 developments

The financial and operational performance, during the year ended 31st March 2015 and future business development of the Company and Group, is provided in the Chairman’s Statement, 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 qualification 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 38 to 53 of this Report.

Human Resources

The 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 115 to 120 of the Annual Report.

System of Internal Control

The 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 47 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 Management

The 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 Statement on Pages 29 to 32 and Risk Management practices on Page 56 to 61 of this Report.

Compliance with Laws and Regulations

The 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 Concern

The 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 and CA 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 reporting

The 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 154 and forms an integral part of the Annual Report of the Board of Directors.

Revenue

The revenue of the Group from its operations amounted to Rs. 11,383 Mn (2013/14 - Rs. 10,966 Mn). Revenue contribution to the Group from different geographical segments is provided in Note 3.2 to the Financial Statements.

151



Market Value of Properties

Freehold 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 2015. Details of property valuations, including the valuation method and effective date of these valuations are provided in Note 14.1 to the Financial Statements on page 198 of this Report.

Investments

The details of investments held by the Company and the Group as at 31st March 2015, are given in Note 17 to the Financial Statements.

Impairment Assessment

The 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 2014/15 (2013/14 – Rs.6,652,931).

Stated Capital

The total Stated Capital of the Company as at 31st March 2015 stood at Rs.9,500.2Mn (2014 – Rs. 9,500.2 Mn) divided into 1,456,146,780 Ordinary Shares (2014- 1,456,146,780 Ordinary Shares).

Reserves

The 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 160 of this Report.

Segment Reporting

Geographical segment-wise contribution to Group revenue, results, assets and liabilities is provided in Note 2 to the Financial Statements.

Share Information and shareholdings

The market value of an Ordinary Share of the Company as at 31st March 2015 was Rs. 14.30 (31st March 2014

Group CompanyAs at 31st March 2015 2014 2015 2014

After making provision for doubtful debts, all known liabilities and depreciation on property, plant, equipment the profit earned before interest was 2,455,788 2,427,116 760,404 400,705

Interest paid during the year was (265,101) (533,877) (8,448) (12,728)

Profit before tax was 2,190,687 1,893,239 751,956 387,977

From which was deducted the provision for taxation, including deferred taxation of (322,923) (318,313) (19,039) (12,068)

Leaving a net profit after tax of 1,867,764 1,574,926 732,917 375,909

The profit attributable to the non controlling interest was (14,040) (9,080) - -

The amount attributable to the Company and the Group was therefore 1,853,724 1,565,846 732,917 375,909

When the balance brought forward the previous year was added 4,708,642 3,165,257 788,107 412,198

The amount available for appropriation was 6,562,366 4,731,103 1,521,024 788,107

Other adjustments (8,686) (22,461) - -

Dividend paid during the year and direct cost on share issue was (364,037) - (364,037) -

Leaving a balance to be carried forward to the next year of 6,189,643 4,708,642 1,156,987 788,107

Financial Results

The Company recorded a profit after tax of Rs. 732.9 Mn (2013/14 – Rs. 375.9 Mn), while the Group recorded a consolidated net profit after tax of Rs. 1,867.7 Mn (2013/14 – Rs. 1,574.9 Mn) for the year under review. A synopsis of the Company’s consolidated performance is presented below.

Provision for Taxation

The details of the tax provision of the Group is disclosed in Note 9 to the Financial Statements.

Auditors ’ Report

The Auditors’ Report on the Financial Statements is given on page 155 of the Annual Report.

Property, Plant & Equipment

The book value of property, plant and equipment as at the reporting date amounted to Rs. 13,560 Mn (2013/14 –Rs. 13,153 Mn) for the Group. Capital expenditure for the Group amounted to Rs. 787 Mn (2013/14 – Rs. 610 Mn). Details of property, plant and equipment and their movements are given in Note 14 to the Financial Statements on page 197 of this Report.

152


– Rs. 12.50). Information relating to earnings, dividends, net assets and market value per share is given in page 224 of this Report. The number of shareholders as at 31st March 2015 was 6,772 (31st March 2014- 7,096). An analysis of shareholders based on shares held, the distribution of ownership and details of share transactions during the year are provided on pages 145 to 147 of this report. The list of top twenty shareholders of the Company as at 31st March 2015 is also provided on page 147 of this Report.

Directors

The Board of Directors of the Company as at 31st March 2015 and their brief profiles are given on pages 34 and 35 of this Report.

Board Committees

The following members serve on the Board Audit Committee:

Mr. Ranel T Wijesinha

Mr. N B Weerasekera

Mr. T L F W Jayasekera

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 54 and 55 of this Report.

Interests Register

The 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 Contracts

All 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

The Board approved the increased remuneration for Non-Executive Directors Messrs. S C Ratnayake, A D Gunewardene, J R F Peiris, J E P Kehelpannala, B J S M Senanayake, R T Wijesinha, N B Weerasekara and T L F W Jayasekara as recommended by the Human Resources and Compensation Committee of John Keells Holdings PLC (its holding company) which fees are commensurate with market complexities of the Company. Fees payable to Non-Executive nominee directors of John Keells Holdings PLC was paid to John Keells Holdings PLC and not to individual Directors. Further the Board approved the renewal of R T Wijesinha’s contract as a Non-Executive Director of John Keells Hotels PLC for a further period at increased Non-Executive Directors fees approved by the Human Resources and Compensation Committee of John Keells Holdings PLC .

Directors’ Shareholdings

The shares held by Directors’ and their spouses in the Company and its Subsidiaries as at 31st March 2015 are as follows:

Directors’ Remuneration

Details 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


Annual Report of the Board of Directors

As at 31 March 2015 31 March 2014

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

Company. The remuneration of the Non-Executive Directors is determined according to scales of payments decided upon by the Board previously.

Directors Meetings

Details of the meetings of the Directors are given on page 42.

153


Employment

The 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 115 to 120. The number of persons employed by the Group as at 31st March 2015 was 2.720 (2014 – 2,779)

Statutory Payments

The 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 Litigation

In 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 Policy

The 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 2015, the trade and other payable of the Group amounted to Rs. 774 Mn (2014 – Rs. 858 Mn) and for the Company amounted to Rs. 12.9 Mn (2014 - Rs. 13.6 Mn).

Sustainability Reporting

The Group is conscious of the impact, direct and indirect, on the environment due to its business

activities. Every endeavour is made to minimise 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 110 to 143 of this Report.

Donations

Total donations made by the Group during the year amounted to Rs.8.8 Mn (2013/14 – Rs.5.1 Mn). The amount includes contributions on account of Corporate Social Responsibility (CSR) initiatives for which the Group donated Rs.6,221,478/- (2013/14 – Rs.3,749,442/-). 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. 2,718,056/- (2013/14- Rs. 1,136,530/-) ,Habarana Lodge Ltd - Rs. 1,010,727 /- (2013/14- Rs. 565,305/-), Habarana Walk Inn Ltd - Rs. 843,260 /- (2013/14- Rs. 506,669/-), Kandy Walk Inn Ltd.-Rs. 322,169 /- (2013/14- Rs. 330,553/-), Trinco Holiday Resorts (Pvt) Ltd – Rs. 299,515 /- (2013/14– Rs. 236,910/-), Hikkaduwa Holiday Resorts (Pvt) Ltd – Rs. 625,238 /- (2013/14– Rs281,100/-), Yala Village (Pvt) Ltd - Rs. 974,081/- (2013/14- Rs.1,018,334/-), Beruwala Holiday Resorts (Pvt) Ltd, - Rs. 1,092,300 /- (2013/14- Rs. 591,465), Travel Club Pte) Ltd, - Rs.153,519 /- (2013/14- Rs. 73,281), Fantasea World Investments (Pte) Ltd, - Rs. 499,299 /- (2013/14- Rs.91,355), Tranquility (Pte) Ltd, - Rs. 312,116/- (2013/14- Rs. 232,936). The CSR initiatives, including completed and on-going projects, are detailed in the sustainability report on pages 110 to 144.

Auditors

The Audit Committee reviews the appointment of the Auditors, their effectiveness, independence and relationship with the Company, including the level of

audit. As far as the Directors are aware, the Auditors, Messrs Ernst & Young, Chartered Accountants, do not have any relationship or interest in the Company, its subsidiaries or joint ventures.

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 182 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 54 and 55.

Annual Report

The audited consolidated Financial Statements were approved for issue by the Board of Directors on 29th May 2015. 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 4th June 2015.

Annual General Meeting

The Annual General Meeting will be held at 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02, on 30th June 2015 at 3.30 pm. The Notice of the Annual General Meeting appears on page 237. This Annual Report is signed for and on behalf of the Board of Directors by:

Director Director

And By Order of the Board

Keells Consultants (Private) LimitedSecretaries

29th May 2015


154



Statement of Directors’ 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 2015 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 in this regard.

Compliance Report

The 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.

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, satisfies 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

Keells Consultants (Private )LimitedSecretaries

29th May 2015

155



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 2015, 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 judgment, 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 2015, 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 2015, 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.

29 May 2015 Colombo

156


Income Statement


Group CompanyFor the year ended 31st March 2015 2014 2015 2014In Rs. ‘000s Note Restated

Revenue 3 11,382,779 10,966,381 - - Cost of sales (3,760,543) (3,590,914) - -

Gross profit 7,622,236 7,375,467 - -

Dividend income 4 - - 768,113 382,781 Other operating income 5 109,263 135,175 9,577 13,699 Administrative expenses (3,633,575) (3,428,286) (22,921) (24,971)Distribution expenses (305,919) (326,174) - - Other operating expenses 6 (1,451,430) (1,482,684) (455) (205)Results from operating activities 2,340,575 2,273,498 754,314 371,304

Finance expenses 7.2 (265,101) (533,877) (8,448) (12,728)Finance income 7.1 115,835 153,805 6,090 29,401 Net finance income/(expenses) (149,266) (380,072) (2,358) 16,673 Share of results of equity accounted investees 17.4 (622) (187) - -

Profit before tax 8 2,190,687 1,893,239 751,956 387,977 Tax expense 9 (322,923) (318,313) (19,039) (12,068)Profit for the year 1,867,764 1,574,926 732,917 375,909

Attributable to :Equity holders of the parent 1,853,724 1,565,846 Non controlling interests 14,040 9,080

1,867,764 1,574,926

Rs. Rs.

Earnings per share 10 1.27 1.08 Dividend per share 11 0.25 -

Figures in brackets indicate deductions. The notes as set out in pages 163 to 233 form an integral part of these financial statements.

157


Statement of Comprehensive Income



Profit for the year 1,867,764 1,574,926 732,917 375,909

Other comprehensive income Other comprehensive income to be reclassified to income statement in subsequent periods

Currency translation of foreign operations 204,209 253,567 - - Net 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 14 560,447 - - - Re-measurement gain/(loss) on defined benefit plans 30 (10,679) (11,487) - - Tax on other comprehensive income 9.2 (13,577) - - -

Other comprehensive income for the year, net of tax 740,404 242,080 4 -

Total comprehensive income for the year, net of tax 2,608,168 1,817,006 732,921 375,909

Attributable to:

Equity holders of the parent 2,587,897 1,807,926 Non-controlling interests 20,271 9,080

2,608,168 1,817,006 Figures in brackets indicate deductions. The notes as set out in pages 163 to 233 form an integral part of these financial statements.

158


Statement of Financial Position


Group CompanyAs at 31st March 2015 2014 2015 2014In Rs. ‘000s Note Restated

ASSETSNon-Current AssetsProperty, plant and equipment 14 13,560,033 13,152,921 - - Lease rentals paid in advance 15 7,861,533 8,235,508 - - Intangible assets 16 670,407 670,407 - - Investments in subsidiaries 17 - - 10,552,744 10,340,613 Investments in equity accounted investees 17 59,296 59,834 58,288 58,288 Non-current financial assets 18 22,798 22,570 12 8 Deferred tax assets 19 55,099 38,368 - - Other non-current assets 20 648 620 - -

22,229,814 22,180,228 10,611,044 10,398,909

Current AssetsInventories 21 173,672 196,666 - - Trade and other receivables 22 942,382 909,040 - - Other current assets 23 350,086 313,941 12,601 2,794 Amounts due from related parties 36 160,111 138,215 648 5,513 Short term investments 24 2,076,400 1,985,510 - 32,530 Cash in hand and at bank 816,904 743,922 95,195 2,648

4,519,555 4,287,294 108,444 43,485

Total Assets 26,749,369 26,467,522 10,719,488 10,442,394

EQUITY AND LIABILITIESEquity attributable to equity holders of the parentStated capital 25 9,500,247 9,500,247 9,500,247 9,500,247 Revenue reserve 6,189,643 4,708,642 1,156,987 788,107 Other components of equity 26 4,637,612 3,886,925 (1) (5)

20,327,502 18,095,814 10,657,233 10,288,349 Non controlling interests 118,187 100,442 - - Total Equity 20,445,689 18,196,256 10,657,233 10,288,349

159



Group CompanyAs at 31st March 2015 2014 2015 2014In Rs. ‘000s Note Restated

Non-Current Liabilities Interest bearing borrowings 28 2,900,658 4,245,400 - 33,441 Deferred tax liabilities 29 178,859 144,361 - - Employee benefit liability 30 141,005 113,836 - - Other deferred liabilities 31 77,926 68,426 - - Non-current financial liabilities 32 67,919 63,752 - -

3,366,367 4,635,775 - 33,441

Current Liabilities Trade and other payables 33 774,493 858,262 12,995 13,664 Other current liabilities 35 265,515 258,152 - - Amounts due to related parties 36 125,121 110,755 6,738 702 Income tax liabilities 34 359,015 292,991 9,081 5,278 Current portion of interest bearing borrowings 28 1,295,992 1,840,626 33,441 100,000 Bank overdrafts 117,177 274,705 - 960

2,937,313 3,635,491 62,255 120,604 Total Equity and Liabilities 26,749,369 26,467,522 10,719,488 10,442,394

I certify that the financial statements comply with the requirements of the Companies Act, No. 7 of 2007. D.A.R.C. Perera Chief Financial Officer The Board of Directors is responsible for the preparation and presentation of these financial statements. Signed for and on behalf of the Board by,

S.C. Ratnayake J.R.F Peiris Chairman Director The notes as set out in pages 163 to 233 form an integral part of these financial statements. 29th May 2015

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Statement of Changes in Equity


Attributable to Equity Holders of the ParentGROUP Foreign Employee

currency share option Available Stated Revaluation translation plan For Sale Revenue Non-controlling Total

In Rs. ‘000s Capital Reserve Reserve Reserve Reserve Reserve Total Interest Equity

As at 1st April 2013 9,500,247 2,614,915 1,013,774 - (5) 3,165,257 16,294,188 92,623 16,386,811 Profit for the year - - - - - 1,565,846 1,565,846 9,080 1,574,926 Other comprehensive income - - 253,567 - - (11,487) 242,080 - 242,080 Total comprehensive income - - 253,567 - - 1,554,359 1,807,926 9,080 1,817,006 Share based payment - - - 4,674 - - 4,674 - 4,674 Acquisition, disposal and changes in

non-controlling interest - - - - - 373 373 53 426

Direct cost on issue of shares - - - - - (11,347) (11,347) (81) (11,428)Subsidiary dividend to non-

controlling interest - - - - - - - (1,233) (1,233)As at 31st March 2014 9,500,247 2,614,915 1,267,341 4,674 (5) 4,708,642 18,095,814 100,442 18,196,256 Profit for the year - - - - - 1,853,724 1,853,724 14,040 1,867,764 Other comprehensive income - 538,907 204,209 - 4 (8,947) 734,173 6,231 740,404 Total comprehensive income - 538,907 204,209 - 4 1,844,777 2,587,897 20,271 2,608,168 Share based payment - - - 8,824 - - 8,824 115 8,939 Transfers - (1,257) - - - 1,257 - - -Direct cost on issue of shares - - - - - (996) (996) - (996)Interim dividend paid - 2014/15 - - - - - (364,037) (364,037) - (364,037)Subsidiary dividend to non-

controlling interest - - - - - - - (2,641) (2,641)As at 31st March 2015 9,500,247 3,152,565 1,471,550 13,498 (1) 6,189,643 20,327,502 118,187 20,445,689

COMPANY Stated Available Revenue TotalIn Rs. ‘000s Capital For Sale Reserve Equity

As at 1st April 2013 9,500,247 (5) 412,198 9,912,440 Profit for the year - - 375,909 375,909 Other comprehensive income - - - - Total comprehensive income - - 375,909 375,909 As at 31st March 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

Figures in brackets indicate deductions.The notes as set out in pages 163 to 233 form an integral part of these financial statements.

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Statement of Cash Flows


Cash flows From Operating ActivitiesProfit before taxation 2,190,687 1,893,239 751,956 387,977

Adjustments for;Depreciation of property, plant and equipment 918,039 819,189 - - Provision for employee benefit costs 25,067 21,010 - - Share based payment expense 8,939 4,674 - - Amortisation of lease rentals paid in advance 672,417 666,663 - - Finance expense 265,101 533,877 8,448 12,728 Provision for impairment losses - 6,653 - - Amortisation of grant received (325) (325) - - Dividend received - - (768,113) (382,781)Finance income (115,835) (153,805) (6,090) (29,401)(Profit)/Loss on disposal of property, plant and equipment 2,205 (4,201) - - Share of results of equity accounted investees 622 187 - - Provision for slow moving inventories (368) 2,515 - - Impairment for bad and doubtful debts 1,963 - - -Provision for deferred liabilities 35,729 39,090 - -

Operating profit/(loss) before working capital changes 4,004,241 3,828,766 (13,799) (11,477)

(Increase)/decrease in inventories 23,362 (17,843) - - (Increase)/decrease in trade and other receivables 41,159 (111,507) - - (Increase)/decrease in other current assets (11,107) 88,470 (9,807) (1,608)(Increase)/decrease in amounts due from related parties (21,896) 30,592 4,865 5,274 Increase/(decrease) in amounts due to related parties 14,366 (14,891) 6,036 (80)Increase/(decrease) in other current liabilities 13,131 153,493 - - Increase/(decrease) in trade and other payables (83,769) (133,662) (669) 2,360

Cash Generated from/(used in) Operations 3,979,487 3,823,418 (13,374) (5,531)

Finance expenses paid (265,101) (533,877) (8,448) (12,728)Tax paid (279,348) (205,866) (15,236) (14,283)Finance income received 115,835 153,805 6,090 29,401Dividend received - - 768,113 382,781Gratuity paid/transfers (8,577) (8,007) - -

Net Cash from/(used in) Operating Activities 3,542,296 3,229,473 737,145 379,640

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Statement of Cash Flows



Cash Flows from Investing ActivitiesPurchase and construction of property, plant and equipment (787,299) (610,037) - - Proceeds from sale of property, plant and equipment 55,431 89,031 - - (Investment)/withdrawal in short term investments (net) (511,600) (385,441) - - Purchase of lease rights (167,000) - - - (Purchase)/disposal of non-current financial assets (net) (224) (4,165) - - Proceeds from repayment of loans given to related parties - - - 356,400 Increase in interest in subsidiaries and joint ventures - - (212,131) (942,160)Grant received for investing activities 2,386 - - -

Net Cash Flow from/(used) in Investing Activities (1,408,306) (910,612) (212,131) (585,760)

Cash Flows from Financing ActivitiesDirect cost on issue of shares (996) (11,428) - - Dividend paid to equity holders of parent (364,037) - (364,037) -Proceeds from shareholders with NCI, on issue of rights in subsidiaries - 426 - - Repayments of long term borrowings (2,686,836) (2,615,131) (100,000) - Proceeds from long term borrowings 730,315 1,688,637 - 133,441 Dividend paid to shareholders with non-controlling interest (2,641) (1,233) - -

Net Cash Flows from/(used in) Financing Activities (2,324,195) (938,729) (464,037) 133,441

Net Increase/(decrease) in Cash and Cash Equivalents (190,205) 1,380,132 60,977 (72,679)Cash and Cash Equivalents at the beginning of the year 2,027,199 647,067 34,218 106,897 Cash and Cash Equivalents at the end of the year 1,836,994 2,027,199 95,195 34,218

ANALYSIS OF CASH & CASH EQUIVALENTSShort term investments 24 1,137,267 1,557,977 - 32,530 Cash in hand and at bank 816,904 743,927 95,195 2,648 Bank overdrafts (117,177) (274,705) - (960)

1,836,994 2,027,199 95,195 34,218

Figures in brackets indicate deductions.The notes as set out in pages 163 to 233 form an integral part of these financial statements.

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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 2015, comprise “the Company” referring to John Keells Hotels PLC as the holding Company and “the Group” referring to the companies that have been consolidated therein.

Approval of Financial Statements

The Financial statements for the year ended 31 March 2015 were authorised for issue by the Directors on 29th May 2015.

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 33. 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 Page 154 to in the Annual 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, 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.

The following subsidiaries are using United States Dollar (USD) as its functional currency;

Fantasea World Investments (Pte) Ltd.

John Keells Holdings Mauritius (Pvt) Ltd.

John Keells Maldivian Resort (Pte) Ltd.

Tranquility (Pte) Ltd.

Travel Club (Pte) 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 226 and 227 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 2015. 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.

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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 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 flows includes the cash flows of the Company and its subsidiaries.

1.3. ACCOUNTING POLICIES

1.3.1 Changes in Accounting Policies

The accounting policies adopted by the Group are consistent with those used in the previous year except for the following SLFRSs with effect from current year.

> Consolidated Financial Statements (SLFRS 10)

> Joint Arrangements (SLFRS 11)

> Disclosure of Interests in Other Entities(SLFRS 12) and

> Fair Value Measurement (SLFRS 13).

SLFRS 10 Consolidated Financial Statements

SLFRS 10 establishes a single control model that applies to all entities including special purpose entities.

SLFRS 10 replaces the parts of previously existing LKAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial statements and SIC-12 Consolidation – Special Purpose Entities. SLFRS 10 changes the definition of control such that an investor controls an investee has exposure or rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. To meet the definition of control in SLFRS 10, all three criteria must be met, including:

(a) an investor has power over an investee;

(b) the investor has exposure, or rights, to variable returns from its involvement with the investee; and

(c) the investor has the ability to use its power over the investee to affect the amount of the investor’s returns.

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SLFRS 10 has had no impact on the consolidation of investments held by the Group.

SLFRS 11 Joint Arrangements

SLFRS 11 replaces LKAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities Non-monetary Contributions by Venturers. SLFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture under SLFRS 11 must be accounted for using the equity method.

The application of this new standard impacted the financial position of the Group by replacing proportionate consolidation of the joint venture with the equity method of accounting.

The effect of SLFRS 11 is described in more detail in note 17.6, which includes quantification of the effect on the financial statements.

SLFRS 12 Disclosure of Interests in Other Entities

SLFRS 12 requires that an entity disclose information about significant judgements and assumptions it has made (and changes to those judgements and assumptions) in determining:

> that it has control of another entity

> that is has joint control of an arrangement or significant influence over another entity

> the type of joint arrangement (i.e. joint operation or joint venture) when the arrangement has been structured through a separate vehicle

An entity must disclose, for example, significant judgements and assumptions made in

determining that:

> it does not control another entity even though it holds more than half of the voting rights of the other entity

> it controls another entity even though it holds less than half of the voting rights of the other entity

> it is an agent or principal as defined by SLFRS 10

> it does not have significant influence even though it holds 20 per cent or more of the voting rights of another entity

> it has significant influence even though it holds less than 20 per cent of the voting rights of another entity

The Group does not have any interest in unconsolidated structured entities.

SLFRS 13 Fair Value Measurement

SLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. SLFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under SLFRS when fair value is required or permitted. The application of SLFRS 13 has not materially impacted the fair value measurements carried out by the Group except for the new disclosure requirements which have been made in notes 12.4 and 14.1.

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.

1.3.2 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Financial Statements of the Group require the management to make judgements, 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 judgements 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 2015.

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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 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.

The Group has tax losses that relate 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 taxes are disclosed in note 9 in 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.

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 and are further explained in Note 13.

1.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These accounting policies have been applied consistantly by the 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.

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.



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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, turnover tax, Pradeshiya Sabha and tourism development levy. 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 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.


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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.

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 an asset or service 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.



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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 notes 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. 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 available for sale 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 by the Group after discussion with and approval by the Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.


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The Group decides after discussions with the Group’s external valuers, which valuation techniques and inputs to use 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 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, commencing from the month of purchase and no depreciation is provided in the month of disposal, 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 on 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 fulfillment 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 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 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


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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 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

NameCountry 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.

Income statement reflects the Group’s share of the results of operations of the joint venture. Any change in 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.



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1.4.10 Foreign currency translation

Foreign currency transactions and balances

The consolidated financial statements are presented in Sri Lanka rupees, which is the holding 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.

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 DateIncome

Statement

2015 2014 2015 2014

Rs. Rs. Rs. Rs.

US dollar 133.45 130.70 131.24 130.09

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.

1.4.11 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 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:


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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.

1.4.12 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. 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



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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 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


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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:

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.

1.4.13 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

1.4.14 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 statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

1.4.15 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.



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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).

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.

1.4.16 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.

1.4.17 Defined contribution plan - Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund contributions 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.

1.4.18 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.

1.4.19 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, (where applicable) 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 EFFECTIVE

The following SLFRS have been issued by the Institute of Chartered Accountants of 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 Group and may have an impact on the future financial statements.

a) 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 was originally effective for annual periods commencing on or after 01 January 2018. However the effective date has been deferred subsequently.

b) 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 at 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. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 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.

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.



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2. OPERATING SEGMENT INFORMATION

The following tables present revenue, profit information, assets and liabilities based on the Group’s operating segments.

For the year ended 31st MarchIn Rs. ‘000s

Sri Lanka Maldives Group Total

2015 2014 2015 2014 2015 2014

Total Revenue 5,113,813 4,895,323 6,384,872 6,141,463 11,498,685 11,036,786 Less: inter segment revenue (27,212) (17,755) (88,694) (52,650) (115,906) (70,405)Segment revenue 5,086,601 4,877,568 6,296,178 6,088,813 11,382,779 10,966,381

Segment operating profit 863,942 830,273 1,367,370 1,308,050 2,231,312 2,138,323 Other operating income (9,812) (4,910) 119,075 140,085 109,263 135,175 Finance expenses (221,306) (444,369) (43,795) (89,508) (265,101) (533,877)Finance income 93,670 145,754 22,165 8,051 115,835 153,805 Share of results of equity accounted investees (622) (187) - - (622) (187)Profit before taxation 725,872 526,561 1,464,815 1,366,678 2,190,687 1,893,239 Tax expense (115,954) (131,794) (206,969) (186,519) (322,923) (318,313)Profit for the year 609,918 394,767 1,257,846 1,180,159 1,867,764 1,574,926

AssetsSegment assets 14,405,657 13,767,138 11,673,305 12,029,977 26,078,962 25,797,115 Goodwill 670,407 670,407 Total assets 26,749,369 26,467,522

LiabilitiesSegment liabilities 4,795,845 5,624,097 1,507,835 2,647,169 6,303,680 8,271,266 Total liabilities 6,303,680 8,271,266

Other Information

Purchase and construction of property, plant and equipment 595,007 337,804 192,292 272,233 787,299 610,037

Depreciation of property, plant and equipment 578,972 566,337 339,067 252,852 918,039 819,189

Amortisation of lease rentals paid in advance 3,507 3,507 668,910 663,156 672,417 666,663

Provision for employee benefit costs 25,067 21,010 - - 25,067 21,010

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GroupFor the Year Ended 31st March 2015 2014In Rs. ‘000s

3 REVENUE3.1 Summary

Gross revenue 11,580,419 11,270,752 Less: Turnover based taxes Tourism development levy/bed tax (188,632) (292,799) Turnover tax (9,008) (11,572)

Net revenue 11,382,779 10,966,381

Value Added Tax and Goods & Services Tax of Rs. 1,288 Mn (2014 - Rs. 889 Mn) have been deducted in arriving at the gross revenue.

3.2 Revenue Analysis of the Group by Geographical SegmentGroup

For the Year Ended 31st March 2015 2014In Rs. ‘000s

Segment Sri Lankan hotels 5,086,601 4,877,568 Maldivian hotels 6,296,178 6,088,813

11,382,779 10,966,381

3.3 Profit Before Tax of the Group by Geographical SegmentGroup

For the Year Ended 31st MarchIn Rs. ‘000s

2015 2014

Segment Sri Lankan hotels 725,872 526,561 Maldivian hotels 1,464,815 1,366,678

2,190,687 1,893,239

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Group CompanyFor the Year Ended 31st March 2015 2014 2015 2014In Rs. ‘000s

4 DIVIDEND INCOMEIncome from investments in related parties - - 768,113 382,781

- - 768,113 382,781


5 OTHER OPERATING INCOMEExchange gains 85,625 98,456 (64) - Profit on sale of property, plant and equipment - 4,201 - - Sundry income 23,313 32,193 9,641 13,699 Amortisation of grant received 325 325 - -

109,263 135,175 9,577 13,699


6 OTHER OPERATING EXPENSESPower and Energy 651,995 676,457 - -Maintenance and repair cost 230,001 227,267 - -Loss on sale of property, plant and equipment 2,205 - - -Nation Building Tax 113,000 108,360 - -Operating fees 342,713 326,665 - -Other overheads 111,516 143,935 455 205

1,451,430 1,482,684 455 205

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7 NET FINANCE INCOME / EXPENSE7.1 Finance Income

Interest income - Related parties - - - 534 - Others 115,835 153,805 6,090 28,867

115,835 153,805 6,090 29,401

7.2 Finance expenseInterest expenses on Long term borrowings 261,059 456,506 6,259 12,398 Short term borrowings 4,042 77,371 2,189 330

265,101 533,877 8,448 12,728

Net finance income / (expense) (149,266) (380,072) (2,358) 16,673


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

Remuneration to executive directors 18,171 17,037 3,771 2,637 Remuneration to non executive directors 3,375 3,024 3,375 3,024 Auditor’s remuneration Audit 8,887 8,274 1,035 972 Non-audit 5,587 5,125 384 267Cost of defined employee benefits

Defined benefit plan cost 25,067 21,010 - - Defined contribution plan cost-(EPF and ETF) 61,141 55,395 - -

Staff expenses 1,762,816 1,648,517 - - Depreciation of property, plant and equipment 918,039 819,189 - - Donations 8,850 5,071 - - Amortisation of lease rentals paid in advance 672,417 666,663 - - (Reversal) / Impairment of bad and doubtful debts 1,963 (1,641) - - (Reversal) / Provision for slow moving inventories (368) 2,515 - - (Profit)/Loss on disposal of property, plant and equipment 2,205 (4,201) - - Operating lease rentals 226,926 215,822 - - Business expansion expenses 1,753 9,616 463 9,616

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Group CompanyFor the Year Ended 31st March 2015 2014 2015 2014In Rs. ‘000s Note

9 TAX EXPENSECurrent income tax

Current tax charge 9.1 291,811 284,996 1,705 12,068 Under /(over) provision of current tax in respect of prior years 6,190 (20,666) 17,334 -10% withholding tax on inter company dividends 20,226 7,657 - -

Deferred income taxRelating to origination and reversal of temporary differences 9.3 4,696 46,326 - -

Tax expense reported 322,923 318,313 19,039 12,068

9.1 Reconciliation between current tax charge and the accounting profitProfit before tax 2,190,687 1,893,239 751,956 387,977 Dividend income from Group companies 768,113 382,781 - - Share of results of equity accounted investees (622) (187) - - Other consolidation adjustments - (5,755) - -

Profit after adjustments 2,958,178 2,270,078 751,956 387,977

Dividends not subjected to income tax (768,113) (382,781) (768,113) (382,781)Income not subject to income tax (3,952) - - - Income exempt from income tax (77,086) (18,207) - - Adjusted accounting profit/(loss) chargeable to income tax 2,109,027 1,869,090 (16,157) 5,196

Disallowable expenses 1,692,162 2,106,218 62 395Allowable expenses (1,744,213) (2,608,434) - -Utilization of tax losses (146,553) (125,856) - -Qualifying payment deductions and tax free allowances (4,255) (4,218) - -Tax losses not utilised in the current financial year 56,649 614,389 22,183 37,509Taxable income 1,962,817 1,851,189 6,088 43,100

Current tax charged atStandard rate of 28% (2014 - 28%) 15,162 32,384 1,705 12,068 Income tax charged at 15% (2014 - 15%) 237,752 216,326 - - Concessionary rate of 12% (2014 - 12%) 38,897 36,286 - -

Current tax charge 291,811 284,996 1,705 12,068

184


Group CompanyFor the Year Ended 31st March 2015 2014 2015 2014In Rs. ‘000s Note

9.2 Reconciliation between tax expense and the product of accounting profitAdjusted accounting profit/(loss) chargeable to income tax 2,109,027 1,869,090 (16,157) 5,196 Tax effect on chargeable profits 310,860 287,905 (4,524) 1,455 Tax effect on non deductible expenses 3,606 9,027 18 111 Tax effect on deductions claimed (17,939) (2,017) - - Net tax effect of unrecognised deferred tax assets for the year 8,277 19,963 6,211 10,502 Net tax effect of deferred tax assets in respect of previous year (8,297) 24,069 - - Tax effect on utilization of tax losses - (7,625) - - Under / (over) provisions of current tax in respect of prior years 6,190 (20,666) 17,334 - Other income based taxes 10% withholding tax on inter company dividends 20,226 7,657 - - Total tax expense 322,923 318,313 19,039 12,068

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.


9.3 Deferred income taxIncome statementDeferred tax arising from

Accelerated depreciation for tax purposes 8,458 97,414 Benefit arising from tax losses (1,492) (48,630)Employee benefits liability (2,270) (2,458)

4,696 46,326 Other comprehensive incomeDeferred tax arising from

Employee benefits liability (1,535) - Revaluation of land and building to fair value 15,112 -

13,577 -

Total deferred tax charge 18,273 46,326



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Deferred Tax has been computed at the following rates :Subsidiary companies in Sri Lanka engaged in promotion of tourism - 12%. Yala Village and subsidiary companies in Maldives - 15%.


9.4 Tax Losses Carried ForwardTax losses brought forward 2,530,131 2,094,282 37,509 - Adjustments on finalisation of liability (94,280) (50,601) (37,509) - Tax losses arising during the year 56,649 614,389 22,183 37,509 Utilisation of tax losses (146,553) (127,939) - -

2,345,947 2,530,131 22,183 37,509

9.5 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 commencing from the year in which the company commences to make profits or any year of assessment not later than two years reckoned from the date of commencement of commercial operation whichever is earlier. As the Company has recorded a profit for 2014/15, BOI exemption period has commenced from the current year.

9.6 Income Tax rates of off-shore Companies

I The following subsidiaries based in the Republic of Maldives, are subject to Business Profit Tax at 15% with effect from 18th July 2011.

John Keells Maldivian Resorts (Pte) Ltd Travel Club (Pte) Ltd Fantasea World Investments (Pte) Ltd Tranquility (Pte) Ltd

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10 EARNINGS PER SHAREProfit attributable to equity holders of the parent 1,853,724 1,565,846 Weighted average number of ordinary shares 1,456,147 1,456,147 Basic earnings per share - Rs. 1.27 1.08


11 DIVIDENDS PER SHAREDeclared and paid during the yearInterim dividend 2014/15 364,037 - Weighted average number of ordinary shares 1,456,147 1,456,147 Dividend per share 0.25 -

12 FINANCIAL INSTRUMENTS12.1 Financial Assets and Liabilities by Categories

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

Group CompanyFinancial assets by categories

Loans and receivablesAvailable-for-sale financial assets Loans and receivables

Available-for-sale financial assets

As at 31 st March 2015 2014 2015 2014 2015 2014 2015 2014In Rs. ‘000

Financial instruments in non-current assetsNon-current financial assets 4,389 4,165 18,409 18,405 - - 12 8

Financial instruments in current assetsTrade and other receivables 942,382 909,040 - - - - - - Amounts due from related parties 160,111 138,215 - - 648 5,513 - - Short term investments 2,076,400 1,985,510 - - - 32,530 - - Cash in hand and at bank 816,904 743,922 - - 95,195 2,648 - - Total 4,000,186 3,780,852 18,409 18,405 95,843 40,691 12 8

Both carrying amount and fair value are equal of 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.

187


Group Company

Financial liabilities by categories

Financial liabilities at fair value through income

statement

Financial liabilities measured at amortised

cost

Financial liabilities measured at amortised

costAs at 31 st March 2015 2014 2015 2014 2015 2014In Rs. ‘000

Financial instruments in non-current liabilitiesBorrowings - - 2,900,658 4,245,400 - 33,441 Non current financial liabilities 67,919 63,752 - - - -

Financial instruments in current liabilitiesTrade and other payables - - 774,493 858,262 12,995 13,664 Amounts due to related parties - - 125,121 110,755 6,738 702 Borrowings - - 1,295,992 1,840,626 33,441 100,000 Bank overdrafts - - 117,177 274,705 - 960

Total 67,919 63,752 5,213,441 7,329,748 53,174 148,767

The fair value of financial liabilities does not significantly vary from the value based on the amortised cost methodology.

The management assessed that 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, debentures 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.


188


12.2 Financial Assets and Liabilities by Fair Value HierarchyThe 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 liabilitiesLevel 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observableLevel 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 - GroupThe Group held the following financial instruments carried at fair value in the statement of financial position:

FINANCIAL ASSETSAs at 31 st MarchIn Rs. ‘000

Level 1 Level 2 Level 3

2015 2014 2015 2014 2015 2014

Available for sale 12 8 - - 18,397 18,397 Total 12 8 - - 18,397 18,397

FINANCIAL LIABILITIESAs at 31 st MarchIn Rs. ‘000


2015 2014 2015 2014 2015 2014

Fair value through income statementNon current financial liabilitiesDesignated at fair value through income statement - - - - 67,919 63,752 Total - - - - 67,919 63,752

Financial Assets and Liabilities by Fair Value Hierarchy - CompanyThe Company held the following financial instruments carried at fair value in the statement of financial position:

FINANCIAL ASSETSAs at 31 st MarchIn Rs. ‘000


2015 2014 2015 2014 2015 2014

Available for sale 12 8 - - - - Total 12 8 - - - -

During the reporting periods 31 March 2015 and 2014, there were no transfers between Level 1 and Level 2 fair value measurements.



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12.3 Reconciliation of fair value measurements of Level 3 financial instrumentsThe 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. ‘000 Group

As at 1 April 2014 18,397 Total gains and losses recognised in OCI - As at 31 March 2015 18,397

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.

12.4 Non Financial Assets - GroupLevel 1 Level 2 Level 3

As at 31 st March 2015 2014 2015 2014 2015 2014In Rs. ‘000

Assets measured at fair valueLand and buildings - - - - 6,703,286 6,054,833 Buildings on leasehold land - - - - 4,515,409 4,627,320 Total - - - - 11,218,695 10,682,153

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 POLICIES

Financial 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.

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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 fulfill their obligations.

13.1.1 Credit risk exposure - CompanyThe 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.

2015

NotesNon current

financial assetsCash in hand

and at bankShort term

investments

Amounts due from related

parties Total

Amounts due from related parties 13.1.4 - - - 648 648Cash in hand and at bank 13.1.2 - 95,195 - - 95,195Total credit risk exposure - 95,195 - 648 95,843

Available-for-sale investments 12 - - - 12Total equity risk exposure 12 - - - 12

Total 12 95,195 - 648 95,855

2014

NotesNon current


and at bankShort term

investments


parties Total

Deposits with bank 13.1.2 - - 32,530 - 32,530Amounts due from related parties 13.1.4 - - - 5,513 5,513Cash in hand and at bank 13.1.2 - 2,648 - - 2,648Total credit risk exposure - 2,648 32,530 5,513 40,691

Available-for-sale investments 8 - - - 8Total equity risk exposure 8 - - - 8

Total 8 2,648 32,530 5,513 40,699

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13.1.1 Credit risk exposure - GroupThe 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.

2015

NotesNon current


and at bank

Trade and other

receivablesShort term

investments


parties Total

Deposits with bank 13.1.2 - - - 2,076,400 - 2,076,400 Trade and other receivables 13.1.3 - - 942,382 - - 942,382 Amounts due from related parties 13.1.4 - - - - 160,111 160,111 Loans to executives 13.1.5 4,389 - - - - 4,389Cash in hand and at bank 13.1.2 - 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 - - - - 18,409Total equity risk exposure 18,409 - - - - 18,409

Total 22,798 816,904 942,382 2,076,400 160,111 4,018,595

2014

NotesNon current


and at bank

Trade and other

receivablesShort term

investments


parties Total

Deposits with bank 13.1.2 - - - 1,985,510 - 1,985,510 Trade and other receivables 13.1.3 - - 909,040 - - 909,040 Amounts due from related parties 13.1.4 - - - - 138,215 138,215 Loans to executives 13.1.5 4,165 - - - - 4,165Cash in hand and at bank 13.1.2 - 743,922 - - - 743,922 Total credit risk exposure 4,165 743,922 909,040 1,985,510 138,215 3,780,852

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

Total 22,570 743,922 909,040 1,985,510 138,215 3,799,257

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13.1.2 Credit risk relating to cash and cash equivalentsIn order to mitigate settlement and operational risks related to cash and cash equivalents, the Group uses several banks with acceptable ratings for its deposits.The Group held cash and cash equivalents of Rs. 2,889.2 Mn at 31 March 2015 (2014 - Rs.2,729.4 Mn).Deposits with banks and Credit rating of the banks

2015 2014

Bank Instrument

Credit rating for 2015

Investment Rs. 000’

Rating % of total

Credit rating for 2014

Investment Rs. 000’

Rating % of total

GroupPeople’s Bank Fixed Deposits AA+ 553,359 27% AA+ 1,773,688 89%Sampath Bank PLC Fixed Deposits AA- 1,014,320 49% AA- 58,302 3%Hatton National Bank PLC Fixed Deposits AA- 24,103 1% AA- 27,447 1%Nations Trust Bank PLC Fixed Deposits A - - A 28,552 1%Commercial Bank PLC Re purchase Agreements AA 415,473 20% AA - -Nations Trust Bank PLC Re purchase Agreements A 69,145 3% A 97,521 5%

2,076,400 100% 1,985,510 100%

CompanyNations Trust Bank PLC Re purchase Agreements A - - A 32,530 100%

13.1.3 Trade and other receivablesGroup

2015 2014

Neither past due nor impaired 710,334 685,136 Past due but not impaired

31–60 days 133,957 189,853 61–90 days 62,010 22,920 > 91 days 36,081 11,131

Impaired 37,146 35,209 Gross carrying value 979,528 944,249

Less: impairment provision (37,146) (35,209)Individually assessed impairment provision

Total 942,382 909,040

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.

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

13.1.5 Loans to executivesLoans 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.

13.2.1 Net (debt)/cashGroup Company

2015 2014 2015 2014

Short term investments 2,076,400 1,985,510 - 32,530 Cash in hand and at bank 816,904 743,922 95,195 2,648 Total liquid Assets 2,893,304 2,729,432 95,195 35,178

Bank borrowings 4,196,650 6,086,026 33,441 133,441 Bank overdrafts 117,177 274,705 - 960 Total liabilities 4,313,827 6,360,731 33,441 134,401 Net (debt)/cash (1,420,523) (3,631,299) 61,754 (99,223)

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.

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

Maturity analysisThe table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2015 based on contractual undiscounted payments.

Group 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 Trade and other payables 774,493 - - - - - 774,493 Amounts due to related parties 125,121 - - - - - 125,121 Bank overdrafts 117,177 - - - - - 117,177

2,312,783 1,064,694 965,625 634,494 144,845 91,000 5,213,441

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

Group Within 1 year Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years


Borrowings 1,840,626 1,589,629 1,100,033 870,844 623,382 61,512 6,086,026 Trade and other payables 858,262 - - - - - 858,262 Amounts due to related parties 110,755 - - - - - 110,755 Bank overdrafts 274,705 - - - - - 274,705

3,084,348 1,589,629 1,100,033 870,844 623,382 61,512 7,329,748

Maturity analysisThe table below summarises the maturity profile of the company’s financial liabilities at 31 March 2015 based on contractual undiscounted payments.

Company Within 1 year Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years


Borrowings 33,441 - - - - 33,441 Trade and other payables 12,995 - - - - 12,995 Amounts due to related parties 6,738 - - - - 6,738

53,174 - - - - 53,174

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

Company Within 1 year Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years


Borrowings 100,000 33,441 - - - 133,441 Trade and other payables 13,664 - - - - 13,664 Amounts due to related parties 702 - - - - 702 Bank overdrafts 960 - - - - 960

115,326 33,441 - - - 148,767

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 2015 and 2014.

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 2015 and 2014.

13.3.1 Interest rate riskInterest 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 taxGroup Company

2015 Rupee borrowings Other currency borrowings+ 30 basis points + 07 basis points (7,022) (100)- 30 basis points - 07 basis points 7,022 100

2014+ 125 basis points + 06 basis points (6,673) 159 - 125 basis points - 06 basis points 6,673 (159)

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.

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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 CompanyIncrease/

(decrease) in exchange rate

USD

Effect on profit before tax Rs.

000’sEffect on equity

Rs. 000’s

Effect on profit before tax Rs.

000’sEffect on equity

Rs. 000’s

2015 2.18% (24,957) 224,721 - - -2.18% 24,957 (224,721) - -

2014 3% (29,301) 282,608 - - -3% 29,301 (282,608) - -

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

13.4 Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a strong financial position and healthy capital ratios in order to support its business and maximise shareholder value.

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

Group Company2015 2014 2015 2014

Debt / Equity 0.21 0.34 0.00 0.01

197



Land and buildings

Buildings on

leasehold land

Plant and machinery Equipment

Furniture and fittings

Motor vehicles

Computer equipment

Cutlery, crockery

glassware and linen

Capital work in

progress TotalAs at 31 st March 2015 2014In Rs. ‘000s

14 PROPERTY, PLANT AND EQUIPMENTGroupCost or valuationAt the beginning of the year 6,119,975 5,693,715 1,164,592 1,475,829 1,100,539 108,778 141,832 223,231 96,796 16,125,287 15,696,002 Additions 238,268 47,833 50,501 181,495 66,592 18,739 42,999 94,717 46,155 787,299 610,037 Disposals - (2,967) (51,334) (64,902) (32,610) (43,718) (11,589) (68,348) - (275,468) (223,752)Revaluations 454,943 105,504 - - - - - - - 560,447 - Transfers 4,294 246 106,964 - - - - - (111,504) - - Exchange translation difference - 51,824 7,625 8,225 6,981 1,112 1,100 891 210 77,968 109,150 Transfers on revaluation (19,540) (311,166) - - - - - - - (330,706) -At the end of the year 6,797,940 5,584,989 1,278,348 1,600,647 1,141,502 84,911 174,342 250,491 31,657 16,944,827 16,191,437

Accumulated depreciation At the beginning of the year 65,142 1,066,395 454,993 625,881 500,129 61,992 71,135 126,699 - 2,972,366 2,284,439 Charge for the year 49,052 295,687 122,763 200,415 144,947 14,200 26,931 64,044 - 918,039 819,189 Disposals - (526) (42,315) (50,935) (21,173) (31,692) (9,271) (61,920) - (217,832) (138,922)Transfers - - - - - - - - - - - Exchange translation difference - 19,190 4,030 4,272 4,423 460 518 10,034 - 42,927 73,810 Transfers on revaluation (19,540) (311,166) - - - - - - - (330,706) -At the end of the year 94,654 1,069,580 539,471 779,633 628,326 44,960 89,313 138,857 - 3,384,794 3,038,516

Carrying valueAs at 31 March 2015 6,703,286 4,515,409 738,877 821,014 513,176 39,951 85,029 111,634 31,657 13,560,033 As at 31 March 2014 6,054,833 4,627,320 709,599 849,948 600,410 46,786 70,697 96,532 96,796 13,152,921

Carrying value of assetsAt cost 3,810,392 4,021,815 At valuation 9,749,641 9,131,106

13,560,033 13,152,921 Carrying value of land and buildings

At cost 1,469,054 1,551,047 At valuation 9,749,641 9,131,106

11,218,695 10,682,153

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14.1 The details of Land and Buildings of the Group which are stated at valuation are indicated below.

Property Method of ValuationEffective date of valuation Property Valuer

Significant unobservable inputs (weighted average)

Sensitivity of fair value to unobservable inputs

Land of

Ahungalla Holiday Resorts (Pvt) Ltd

Open market value method 31st March 2015 Mr. Sunil Fernando Consultant Valuer & Assessor

Estimated price per perch Rs. 200,000

Positively correlated sensitivity

Beruwala Holiday Resorts (Pvt) Ltd

Open market value method 31st March 2015 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor

Estimated price per perch Rs. 450,000 -550,000


Resort Hotels Ltd Open market value method 31st March 2015 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor



Trinco Walk Inn Ltd Open market value method 31st March 2015 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor



Wirawila Walk Inn Ltd Open market value method 31st March 2015 Mr. Sunil Fernando Consultant Valuer & Assessor



Land and buildings of

Kandy Walk Inn Ltd Depreciated replacement cost method / Open market value method

31st March 2015 Mr. Sunil Fernando Consultant Valuer & Assessor

Estimated price per perch Rs. 850,000 and per square foot Rs.850 - 7,000


Trinco Holiday Resorts (Pvt) Ltd

Depreciated replacement cost method / Open market value method

31st March 2015 Mr. P.B. Kalugalagedara Consultant Valuer & Assessor

Estimated price per perch Rs. 150,000 and per square foot Rs.1,000 - 7,000


199



Property Method of ValuationEffective date of valuation Property Valuer

Significant unobservable inputs (weighted average)

Sensitivity of fair value to unobservable inputs

Buildings on leasehold land of

Ceylon Holiday Resorts Ltd





Habarana Lodge Ltd Depreciated replacement cost method


Estimated price per square foot Rs.1,230 - 8,405


Habarana Walk Inn Ltd

Depreciated replacement cost method


Estimated price per square foot Rs.1,360 - 4,420


Hikkaduwa Holiday Resorts (Pvt) Ltd





Rajawella Hotels Co Ltd

Depreciated replacement cost method


Estimated price per square foot Rs.4,250


Yala Village (Pvt) Ltd Depreciated replacement cost method


Estimated price per square foot Rs.1250 - 6,750


Valuation 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 2015, 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).

200




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 2015 2014

Cost 5,002,491 4,716,390 Accumulated depreciation and impairment (658,233) (574,859)Carrying value 4,344,258 4,141,531

14.3 Segmental Analysis of Net Book Value of property, plant and equipment

As at 31 st MarchIn Rs. ‘000s 2015 2014

Sri Lanka 11,457,621 10,953,049 Maldives 2,102,412 2,199,872

13,560,033 13,152,921

14.4 Details of property, plant and equipment pledged as security for term loans obtained, are disclosed in Note 28.2

14.5 Group property, plant and equipment with a cost of Rs. 578 Mn (2014 - Rs. 500 Mn) have been fully depreciated and continue to be in use by the Group.

GroupAs at 31st March 2015 2014In Rs. ‘000s

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 8,235,508 8,639,214 Payments made during the year 167,000 - Transfer from other deferred liability (28,290) - Amortisation during the year (672,417) (666,663)Exchange difference 159,732 262,957 Balance at the end of the year 7,861,533 8,235,508

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15.1Details of Leasehold Properties

Land Extent (in Acres) Lease Period Group

2015 2014

Rajawella Hotels Co. Ltd 10.00 95 years and 10 months 33,354 33,767 from 02nd February 2000

Yala Village (Pvt) Ltd 11.25 30 years from 27th November 2006 64,619 67,613

Hikkaduwa Holiday Resorts (Pvt) Ltd 0.03 10 years from 01st January 2012 700 800

Tranquility (Pte) Ltd 18.62 18 years from 26th August 2010 6,756,921 7,111,034 Chaaya Island Dhonveli - Maldives

Travel Club (Pte) Ltd 13.75 14 years from 04th August 2006 867,385 1,022,294 Chaaya Reef Ellaidhoo - Maldives

Fantasea World Investments (Pte) Ltd * 13.42 25 years lease extension from 27th August 2022 138,554 - Chaaya Lagoon Hakuraa Huraa - Maldives

7,861,533 8,235,508

* 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 has paid four instalments amounting to US$ 1,250,000/-. These lease rentals paid have been classified as prepaid lease rentals under non-current assets and are amortised over the lease term.


16 INTANGIBLE ASSETSGoodwillCostAt 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 two (2) Cash Generating Units (CGU) as Chaaya Resorts and Cinnamon Resorts for impairment testing.

202




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

GoodwillAs at 31st March 2015 2014In Rs. ‘000s

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

670,407 670,407

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

Key Assumptions Used in the VIU CalculationsGross 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.

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

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

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

Cash flows beyond the five year period has been extrapolated using a zero growth rate.

203



Group CompanyAs at 31st March Note 2015 2014 2015 2014In Rs. ‘000s

17 INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES17.1 Carrying value

Investments in subsidiaries - Unquoted 17.2 - - 10,552,744 10,340,613 Investments in joint venture - Unquoted 17.3,17.4 59,296 59,834 58,288 58,288

59,296 59,834 10,611,032 10,398,901

17.2 Investments in subsidiaries - Unquoted % Holding CompanyAs at 31st March 2015 2014 2015 2014In Rs. ‘000s

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 (Pte) Ltd 100.00% 100.00% 4,739,853 4,739,853 Rajawella Hotels Co. Ltd 100.00% 100.00% 34,302 29,300 Trinco Walk Inn Ltd 100.00% 100.00% 95,940 95,940 Wirawila Walk Inn Ltd 100.00% 100.00% 25,259 23,497 Yala Village (Pvt) Ltd 93.78% 93.78% 300,678 300,678 John Keells Hotels Mauritius (Pvt) Ltd. 100.00% 100.00% - - Trinco Holiday Resorts (Pvt) Ltd 100.00% 100.00% 357,000 357,000 Ahungalla Holiday Resorts (Pvt) Ltd 100.00% 100.00% 132,000 132,000 Nuwara Eliya Holiday Resorts (Pvt) Ltd 100.00% - 205,367 -

15% Cumulative preference sharesYala Village (Pvt) Ltd 100.00% 100.00% 100,000 100,000 Total investments in subsidiaries 10,552,744 10,340,613

17.3 Investments in joint venture - UnquotedSentinel Realty (Pvt) Ltd 50.00% 50.00% 58,288 58,288 Total investments in joint venture 58,288 58,288

204


17.4 Summarised financial information of joint venture Group share of

2015 2014 2015 2014

Revenue - - - - Administration expenses (1,244) (374) (622) (187)Loss for the year (1,244) (374) (622) (187)Group share of;

Total assets 120,488 120,488 60,244 60,244 Total liabilities (1,896) (820) (948) (410)Net assets 118,592 119,668 59,296 59,834

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.

17.6 Share of results of equity accounted investeesInterest in a joint venture (adoption to SLFRS 11)The Group has a 50% interest in Sentinel Realty (Pvt) Ltd. Under LKAS 31 Investment in Joint Ventures the Group’s interest was classified as a jointly controlled entity and prior to the adoption to SLFRS 11 the Group’s share of the assets, liabilities, revenue, income and expenses were proportionately consolidated in the consolidated financial statements. Upon adoption of SLFRS 11, the Group is required to account for its investment using the equity method. The effect of adopting SLFRS 11 for the comparative periods are as follows:

Impact on the income statement For the year ended 31st March 2014

Decrease in administrative expenses (182)Decrease in other operating expenses (5)Increase in share of results of equity accounted investees 187 Net impact on profit before tax -

Impact on the statement of financial position As at 31.03.2014

Decrease in property, plant and equipment (60,239)Increase in equity accounted investments 59,834 Decrease in cash in hand and at bank (5)Decrease in trade and other payables 85 Decrease in other current liabilities 188 Decrease in amounts due to related parties 137 Net impact on equity -



205



Group CompanyAs at 31st March Note 2015 2014 2015 2014In Rs. ‘000s

18 NON-CURRENT FINANCIAL ASSETSOutside InvestmentsQuoted Ceylon Hotels Corporation PLC 12 8 12 8

Unquoted Rainforest Ecolodge (Pvt) Ltd 18,347 18,347 - - Sri Lanka Hotel Tourism Training Institute Ltd 50 50 - -

18,397 18,397 - -

Loans to executives 18.1 4,389 4,165 - -

Total other non current financial assets 22,798 22,570 12 8


18.1 Loans to executivesAt the beginning of the year 4,631 - Loans granted / transfers 2,419 5,414 Recoveries (1,665) (783)At the end of the year 5,385 4,631

Receivable within one year 996 466 Receivable between one and five years 4,389 4,165

5,385 4,631

206



19 DEFERRED TAX ASSETSBalance at the beginning of the year 38,368 54,231 Transferred from / to deferred tax liabilities 12,156 (18,795)Exchange translation difference 724 284 Credit/(release) 3,851 2,648 Balance at the end of the year 55,099 38,368

The closing deferred tax asset balance relates to the following:Accelerated depreciation for tax purposes 8,459 (136,004)Impact on revaluation of property, plant and equipment 392 342 Employee benefits liability 1,179 1,888 Losses available for off-set against future taxable income 45,069 172,142

55,099 38,368


20 OTHER NON-CURRENT ASSETSPrepaid staff loans 648 620

648 620


21 INVENTORIESFood and beverage 91,913 101,233 House keeping and maintenance 77,135 87,194 Others 9,932 13,915

178,980 202,342 Less : Provision for slow moving inventories (5,308) (5,676)

173,672 196,666



207



GroupAs at 31st March Note 2015 2014In Rs. ‘000s

22 TRADE AND OTHER RECEIVABLESTrade receivables 867,524 872,137 Provision for bad and doubtful debts 22.1 (37,146) (35,183)Other debtors 111,008 71,620 Loans to executive 18.1 996 466

942,382 909,040

22.1 Movement of provision for bad and doubtful debts

Group Individually Impaired

Total

As at 1 April 2013 36,824 36,824 Unused amounts reversed (1,641) (1,641)As at 31 March 2014 35,183 35,183 Charge for the year 1,963 1,963 As at 31 March 2015 37,146 37,146

Group CompanyAs at 31st March 2015 2014 2015 2014In Rs. ‘000s

23 OTHER CURRENT ASSETSPrepayments and non cash receivables 187,392 177,332 728 226 Tax recoverable 162,694 136,609 11,873 2,568

350,086 313,941 12,601 2,794

Group CompanyAs at 31st March 2015 2014 2015 2014In Rs. ‘000s

24 SHORT TERM INVESTMENTSBank deposits (Less than 3 months) 1,137,267 1,557,977 - 32,530 Reported for cash flow 1,137,267 1,557,977 - 32,530 Bank deposits (more than 3 months and less than 1 year) 939,133 427,533 - - Total 2,076,400 1,985,510 - 32,530

208




As at 31st March 2015 2014In 000s Rs. Rs.

Number of Value of Number of Value of Shares Shares Shares Shares

25 STATED CAPITALFully paid ordinary sharesAt 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

Group CompanyAs at 31st March 2015 2014 2015 2014In Rs. ‘000s Note

26 OTHER COMPONENTS OF EQUITYRevaluation reserve 26.1 3,152,565 2,614,915 - - Foreign currency translation reserve 26.2 1,471,550 1,267,676 - - Available for sale reserve 26.3 (1) (5) (1) (5)Employee share option plan reserve 26.4 13,498 4,339 - -

4,637,612 3,886,925 (1) (5)

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.

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.

209



27 SHARE-BASED PAYMENT PLANSEmployee Share Option SchemeUnder 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:

GroupFor the year ended 31st March 2015 2014In Rs. ‘000s

Expense arising from equity-settled share-based payment transactions 8,939 4,674 Total expense arising from share-based payment transactions 8,939 4,674

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

Group Group2015 2014

No. WAEP No. WAEP

Outstanding at 1 April 135,572 253.16 - -Granted during the year 167,865 229.93 135,572 253Forfeited during the year - - - -Adjustment during the year - - - -Expired during the year (3,230) 253.16 - -Outstanding at 31 March 300,207 240.10 135,572 253Exercisable at 31 March 33,894 253.16 - -

Fair value of the share option and assumptionsThe 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.

210




As at 31st March Group CompanyIn Rs. ‘000s 2015 2014 2015 2014

28 INTEREST BEARING BORROWINGS28.1 Movement

Balance at the beginning of the year 6,086,026 6,896,171 133,441 - Loans obtained during the year 730,315 1,688,637 - 200,000 Currency translation difference 67,145 116,349 - - Repayments during the year (2,686,836) (2,615,131) (100,000) (66,559)Balance at the end of the year 4,196,650 6,086,026 33,441 133,441

Repayable within one year 1,295,992 1,840,626 33,441 100,000 Repayable after one year Repayable between one and five years 2,809,658 4,183,888 - 33,441 Repayable after five years 91,000 61,512 - -

2,900,658 4,245,400 - 33,441

4,196,650 6,086,026 33,441 133,441

28.2 Security and Repayment Terms of Borrowings

In Rs. ‘000sLending Institution

Nature of Facility Interest Rate and Security Repayment terms

Carrying value of collaterals 2015 2014

John Keells Hotels PLC

Habib Bank Ltd

Term Loan AWPLR - 0.5% per annum 24 monthly instalments which commenced on July 2013.

- 33,441 133,441

John Keells Maldivian Resorts (Pte) Ltd

Sampath Bank PLC

Term Loan 3 months LIBOR + 1.3%per annum, for first two years and 3 months LIBOR + 1.5% per annum, thereafter.

30 quarterly instalments which commenced on March 2008.

- - 182,980

Head lease right of Chaaya Island Dhonveli, Corporate guarantee from John Keells Hotels PLC.

211






HSBC Bank Term Loan 3 months LIBOR + 3.0% per annum.

48 equal monthly instalments which commenced on November 2011.

- 77,846 206,942

Secured with a letter of comfort from John Keells Hotels PLC.

Travel Club (Pte) Ltd

Bank of Ceylon

Term Loan 3 months LIBOR + 2% or 3.75% whichever is higher.

28 quarterly instalments which commenced on November 2009.

- - 436,443

Sub lease right of Ellaidhoo, Corporate guarantee from John Keells Hotels PLC.

HSBC Bank Term Loan 3 months LIBOR + 2.65% per annum.

8 quarterly instalments which commenced on August 2014.

- 270,236 -

Fantasea World Investments (Pte) Ltd

Hatton National Bank PLC

Term Loan 3 months LIBOR + 3.25% per annum, with a floor rate of 4.25%.

Repayment over 5 years which commenced on August 2011.

- 170,406 725,506

Leasehold rights of Island of Lagoon Hakuraa Huraa Resort.

Trinco Holiday Resorts ( Pvt) Ltd

Sampath Bank PLC

Term Loan 2.8% per annum, Corporate guarantee from John Keells Hotels PLC.

20 quarterly instalments which commenced on April 2014.

- 123,372 151,351

Sampath Bank PLC

Term Loan AWPLR - 0.3% per annum, letter of comfort from John Keells Hotels PLC.

83 monthly Instalments which commenced on June 2014.

- 225,256 -

212





Habarana Lodge Ltd

Sampath Bank PLC


20 Quarterly Instalments which commenced on June 2013.

- 172,932 221,538

Habib Bank Ltd

Term Loan 1 Month LIBOR+2.8% per annum, Corporate guarantee from John Keells Hotels PLC.

60 Quarterly Instalments which commenced on July 2013.

- 78,703 100,638


Term Loan Monthly AWPLR. Repayment over 5 years which commenced on April 2012.

- - 240,400

Kandy Walk Inn Ltd

HSBC Bank Term Loan 1 month LIBOR + 3% per annum, letter of awareness of John Keells Hotels PLC.

60 monthly instalments after a 12 month grace period which commenced on October 2013.

- 368,675 485,744

Yala Village (Pvt) Ltd

People’s Bank

Term Loan AWPLR per annum - revised bi annually.

72 monthly instalments which commenced on December 2012.

- - 175,377

Sampath Bank PLC


20 Quarterly instalments which commenced on April 2013.

- 131,295 166,548

Habib Bank Ltd

Term Loan AWPLR - 0.5% per annum, clean basis.

60 monthly instalments which commenced on August 2014.

- 121,333 -



213





Beruwala Holiday Resorts (Pvt) Ltd


Term Loan 1 month SLIBOR per annum, Primary floating mortgage bond for Rs. 1.9 Bn over hotel property.

72 monthly instalments which commenced on July 2013.

3,148,991 679,683 802,434

Sampath Bank PLC


20 Quarterly Instalments which Commenced on May 2013.

- 173,485 222,345

Standard Chartered Bank

Term Loan 1 month LIBOR + 2.25% per annum, Corporate guarantee from John Keells Hotels PLC.

16 Quarterly Instalments which Commenced on March 2014.

- 480,420 523,549

Hikkaduwa Holiday Resorts (Pvt) Ltd

DFCC Bank PLC

Term Loan 8% 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 on November 2013.

1,228,272 715,907 837,265

Sampath Bank PLC

Term Loan 2.8% per annum, Corporate guarantee of John Keells Hotels PLC.

20 Quarterly Instalments which commenced on July 2013.

- 373,660 473,525

4,377,263 4,196,650 6,086,026


214




As at 31st March GroupIn Rs. ‘000s 2015 2014

29 DEFERRED TAX LIABILITIESBalance at the beginning of the year 144,361 114,422 Transferred from/to deferred tax assets 12,156 (18,795)Exchange translation difference 218 (240)Credit/(release) 22,124 48,973 Balance at the end of the year 178,859 144,361

The closing deferred tax liability balance relates to the following: Accelerated depreciation for tax purposes 239,761 172,398 Impact on revaluation of property, plant and equipment 65,390 59,281 Employee benefits liability (11,680) (11,056) Losses available for off-set against future taxable income (114,612) (76,262)

178,859 144,361


30 EMPLOYEE BENEFIT LIABILITYBalance at the beginning of the year 113,836 89,346 Current service cost 12,489 11,195 Interest cost 12,578 9,815 Payments made during the year (9,010) (10,497)Transfers 433 2,490 Gain arising from changes in the assumptions or due to over provision in the previous year 10,679 11,487 Balance at the end of the year 141,005 113,836

The expenses recognised in the following line items in the income statementCost of sales 10,202 8,141 Administrative expenses 14,139 12,819 Distribution expenses 726 50

25,067 21,010

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

215



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

2015 2014

Discount rate 10% 11% Future salary increases 8% 10%

30.1 Sensitivity of assumptions usedIf a one percentage point change is assumed in the discount rate and salary increment rate, it would have the following effects:

Discount rate Salary incrementAs at 31st March 2015 2014 2015 2014In Rs. ‘000s

Effect on the defined benefit obligation liability Increase by one percentage point (6,246) (5,509) 7,346 6,752 Decrease by one percentage point 6,851 6,425 (4,775) (5,802)

30.2 Maturity analysis of the paymentsThe following payments are expected on employee benefit liabilities in future years.

2015 2014In Rs. ‘000s

Within the next 12 months 21,345 12,552 Between 1 and 2 years 38,716 25,704 Between 2 and 5 years 33,946 34,463 Between 5 and 10 years 30,616 24,055 Beyond 10 years 16,382 17,062 Total expected payments 141,005 113,836

The average duration of the defined benefit plan obligation at the end of reporting period is 5.25 years.


31 OTHER DEFERRED LIABILITIESGrant 31.1 3,334 1,273 Deferred sublease payment 31.2 74,592 67,153

77,926 68,426

216





31.1 Balance at the beginning of the year 1,273 1,598 Grant received during the year 2,386 -Amortisation during the year (325) (325)Balance at the end of the year 3,334 1,273

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 with regard to the Promotion of Eco-efficient Productivity (PEP).

During the year Fantasea World Investments (Pte) Ltd received an amount of US$ 17,882/- as the 1st instalment of the grant from Ministry of Tourism of Maldives to develop a bio gas plant. As at the reporting period, the Company has not commenced the construction of the bio gas plant.

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.


32 NON-CURRENT FINANCIAL LIABILITIESAmount payable to Yacht Tours Maldives (Pvt) Ltd 32.1 67,919 63,752

67,919 63,752

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

Group Company As at 31st March 2015 2014 2015 2014In Rs. ‘000s

33 TRADE AND OTHER PAYABLESTrade payables 287,278 303,700 - - Other payables 409,690 431,157 7,756 6,402 Accrued expenses 77,525 123,405 5,239 7,262

774,493 858,262 12,995 13,664

217




34 INCOME TAX LIABILITIESBalance at the beginning of the year 292,991 240,374 5,278 7,493 Charge for the year 298,001 267,898 19,039 12,069 Exchange translation difference 6,512 (2,347) - - Payments, set off against refunds and tax credits (238,489) (212,934) (15,236) (14,284)Balance at the end of the year 359,015 292,991 9,081 5,278


35 OTHER CURRENT LIABILITIESNon refundable deposits 129,820 137,990 Other tax payables 135,695 120,162

265,515 258,152

218



36 RELATED PARTY TRANSACTIONS 36.1 Amounts Due from Related Parties

Ultimate parentJohn Keells Holdings PLC 1,565 1,983 - -

Companies under common controlWalkers Tours Ltd 126,303 118,707 - - Walkers Air Services Ltd - 2,374 - - Whittall Boustead (Travel) Ltd. 24,710 7,019 - - Keells Shipping Ltd - 15 - - Whittall Boustead (Pvt) Ltd. - 1,873 - - Cinnamon Hotel Management Ltd 7,462 6,175 - - John Keells Residential Properties (Pvt) Ltd 58 - - - Ceylon Cold Stores PLC 13 - - -Keells Food Products PLC - 17 - - John Keells PLC - 52 - - Resorts Hotels Ltd - - - 87 Habarana Lodge Ltd - - 107 94 Habarana Walk Inn Ltd - - - - Wirawila Walk Inn Ltd - - - 403 Yala Village (Pvt) Ltd - - 55 71 Beruwala Holiday Resorts (Pvt) Ltd - - 278 317 Hikkaduwa Holiday Resorts (Pvt) Ltd - - 159 200 Rajawella Hotels Co. Ltd - - - 3,996 Trinco Holiday Resorts (Pvt) Ltd - - 52 64 Travel Club (Pte) Ltd - - (3) 203 John Keells Maldivian Resorts (Pte) Ltd - - - 78

158,546 136,232 648 5,513

160,111 138,215 648 5,513



219




36.2 Amounts Due to Related PartiesUltimate parent

John Keells Holdings PLC 7,121 7,842 753 336

Companies under common controlCinnamon Hotel Management Ltd 108,442 95,083 2,612 285 InfoMate (Pvt) Ltd 2,057 2,294 7 - Keells Food Products PLC 1,731 1,641 - - Ceylon Cold Stores PLC 1,055 865 - - John Keells Office Automation Ltd 147 277 - - Jaykay Marketing Services (Pvt) Ltd 78 60 - - John Keells International (Pvt) Ltd 1,348 1,205 - - John Keells PLC 785 - 6 Keells Consultants (Pvt) Ltd 202 226 64 37 Nexus Networks (Pvt) Ltd 25 42 - - Mackinnons Travel (Pvt) Ltd 1,604 23 - - Walkers Tours Ltd 1,290 230 - - Wirawila Walk Inn Ltd - - 1,022 - Union Assurance PLC - 182 - - Kandy Walk Inn Ltd - - 120 35 Trans Asia Hotels PLC 21 - - -Resort Hotels Ltd - - 582 -Nuwara Eliya Holiday Resorts (Pvt) Ltd - - 854 -Rajawella Hotels Co Ltd - - 724 3

118,000 102,913 5,985 366

125,121 110,755 6,738 702

220




Group Company For the year ended 31st March Note 2015 2014 2015 2014In Rs. ‘000s

36.3 Transactions with Related PartiesUltimate parent

Rendering /(receiving) of services (80,049) (72,416) (2,952) (1,255)Directors fees (paid)/ received (18,171) (17,424) (3,771) (3,024)

Companies Under Common Control(Purchase)/sale of goods 36.4 (31,991) (35,316) - - (Receiving)/rendering of services 36.5 128,663 (85,261) (527) (498)Interest (paid)/ received - 3,419 - 534 Loans given/(taken) - - - - Guarantee fess paid/(received) - - 9,577 13,699

Equity accounted investeesJoint ventures

(Receiving) / Rendering of services - - - -

Key management personnel - - - -

Close family members of KMP - - - -

Post employment benefit planContributions to the provident fund 4,599 4,452 - -

36.4 Transactions with Related Parties - Companies under Common ControlSale/(purchase) of goods

Ceylon Cold Stores PLC (15,266) (14,225) - - Jaykay Marketing Services (Pvt) Ltd (790) (632) - - John Keells Office Automation (Pvt) Ltd (567) (767) - - Keells Food Products PLC (19,062) (19,692) - - Cinnamon Hotel Management Ltd 3,694 - - -

(31,991) (35,316) - -

221



Group Company For the year ended 31st March 2015 2014 2015 2014In Rs. ‘000s

36.5 Transactions with Related Parties - Companies under Common ControlRendering/(receiving) of services

InfoMate (Pvt) Ltd (23,989) (23,098) (82) (82)Keells Consultants (Pvt) Ltd (2,219) - (445) - John Keells International (Pvt) Ltd (12,250) (14,547) - - John Keells Office Automation (Pvt) Ltd (957) (735) - - Cinnamon Hotel Management Ltd (740,718) (720,907) - - Mackinnons Travels (Pvt) Ltd (702) (621) - - Walkers Tours Ltd 823,316 617,623 - - Whittall Boustead (Travels) Ltd 97,442 60,108 - - Other related parties (11,260) (3,084) - (416)

128,663 (85,261) (527) (498)

36.6 Compensation of Key Management PersonnelShort term employee benefits 21,546 20,061 7,146 5,661 Post employment benefits - - - - Other long term benefits - - - - Termination benefits - - - - Share based payments - - - -

21,546 20,061 7,146 5,661

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 PartiesTransactions 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.

222




37 COMMITMENTS 37.1 Capital Commitments

There were no significant capital commitments as at 31 March 2015. (2014 - Nil)


37.2 Lease CommitmentsWithin one year 585,107 195,809 Between one and five years 1,622,769 788,411 After five years 2,345,359 2,463,216

4,553,235 3,447,436

37.3 Details of Leasehold Land

CompanyLand Extent

Acres Lessor Leased Properties

Ceylon Holiday Resorts Ltd 11.02 Ceylon Tourist Board Land occupiedHikkaduwa Holiday Resorts (Pvt) Ltd 4.68 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 occupiedRajawella Hotels Co. Ltd 10.00 Rajawella Holding Co. Ltd Land occupiedFantasea World Investments (Pte) Ltd 13.42 Government of Maldives Island rent for the land

occupiedTravel Club (Pte) Ltd Island of Ellaidhoo

13.75 Government of Maldives and sub-lease with Ellaidhoo Investment (Pte) Ltd

Lease rental and Island rent for the land occupied

Tranquility (Pte) Ltd Island of Dhonveli

18.62 Government of Maldives Island rent for the land occupied

223



38 CONTINGENT LIABILITIES

Contingencies of the Company as at the reporting date on account of guarantees issued on behalf of subsidiary companies amounted to Rs. 1,533 Mn. (2014 -Rs. 2,511 Mn.)

There were no significant contingent liabilities as at the reporting date other than what is disclosed above, which require adjustments to or disclosures in the Financial Statements.

39 EVENTS SUBSEQUENT TO THE REPORTING DATE

Super Gains Tax

An imposition of a Super Gains Tax has been recommended for the approval of Parliament per a Bill dated 27 March 2015. Since the Bill had not been approved by the parliament as at the reporting date, being 31 March 2015, the Company has not provided for the potential liability in the Financial Statements for the year ended 31 March 2015.

224


SuppLEMEnTaRy infORMaTiOn

Quarterly Income Statement - Group

2014/2015

For the three months ended June September December March For the year ended

In Rs. ‘000s 30th 30th 31st 31st

Revenue 2,343,933 2,681,518 2,882,163 3,475,165 11,382,779 Cost of sales (876,120) (933,999) (979,007) (971,417) (3,760,543)

Gross profit 1,467,813 1,747,519 1,903,156 2,503,748 7,622,236

Other operating income 43,860 31,835 13,919 19,649 109,263 Administrative expenses (877,800) (903,052) (929,225) (923,498) (3,633,575) Distribution expenses (65,594) (65,377) (82,299) (92,649) (305,919) Other operating expenses (366,892) (364,174) (369,599) (350,765) (1,451,430) Finance expenses (84,530) (68,920) (58,160) (53,491) (265,101) Finance income 32,126 29,913 25,184 28,612 115,835 Share of results of equity accounted investees (306) (83) (66) (167) (622)

Profit before tax 148,677 407,661 502,910 1,131,439 2,190,687 Tax expense (19,401) (62,956) (82,009) (158,557) (322,923) Profit for the year 129,276 344,705 420,901 972,882 1,867,764

Attributable to: Equity holders of the parent 128,628 342,283 417,580 965,233 1,853,724 Non controlling interests 648 2,422 3,321 7,649 14,040

129,276 344,705 420,901 972,882 1,867,764

225



Quarterly Statement of Financial Position - Group

2014/2015As at June September December MarchIn Rs. ‘000s 30th 30th 31st 31st

ASSETS Non current assets 22,092,809 21,836,306 21,692,380 22,229,814 Current assets 3,877,299 3,292,097 4,148,493 4,519,555 Total Assets 25,970,108 25,128,403 25,840,873 26,749,369

EQUITY AND LIABILITIES Equity 18,196,982 18,201,151 18,721,570 20,327,502 Non controlling interest 101,090 102,443 105,785 118,187 Total Equity 18,298,072 18,303,594 18,827,355 20,445,689

Non current liabilities 4,260,100 3,750,597 3,530,466 3,366,367 Current liabilities 3,411,936 3,074,212 3,483,052 2,937,313 Total Liabilities 7,672,036 6,824,809 7,013,518 6,303,680

Total Equity and Liabilities 25,970,108 25,128,403 25,840,873 26,749,369

SHARE INFORMATIONEarnings per share 0.09 0.24 0.29 0.66 Dividend per share - 0.25 - -Net assets per share 12.50 12.50 12.86 13.96

Market price per shareHighest 16.10 18.50 19.20 18.20 Lowest 12.50 14.50 15.50 14.00 Last traded price 14.70 17.40 17.00 14.30

226



Indicative US dollar financial statementsIncome Statement

Group Company For the Year Ended 31st March 2015 2014 2015 2014In USD ‘000s

Revenue 86,736 84,302 - - Cost of sales (28,655) (27,604) - -

Gross profit 58,081 56,698 - -

Dividend income - - 5,853 2,943 Other operating income 833 1,039 73 105 Administrative expenses (27,687) (26,354) (175) (192)Distribution expenses (2,331) (2,507) - - Other operating expenses (11,060) (11,398) (3) (2)

Results from operating activities 17,836 17,478 5,748 2,854 Finance expenses (2,020) (4,104) (64) (98)Finance income 883 1,182 46 226 Net finance income/(expenses) (1,137) (2,922) (18) 128 Share of results of equity accounted investees (5) (1) - -

Profit before tax 16,694 14,555 5,730 2,982 Tax expense (2,461) (2,447) (145) (93)Profit for the year 14,233 12,108 5,585 2,889

Attributable to :Equity holders of the parent 14,125 12,037 Non controlling interests 107 70

14,232 12,107

Exchange Rate (SL Rs.) 131.2353 130.0851 131.2353 130.0851

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.

227



Indicative US dollar financial statementsStatement of Financial Position

Group Company As at 31st March 2015 2014 2015 2014In USD ‘000s

ASSETSNon-Current AssetsProperty, plant and equipment 101,611 100,634 - - Lease rentals paid in advance 58,910 63,011 - - Intangible assets 5,024 5,129 - - Investments in subsidiaries - - 79,076 79,117 Investments in joint ventures 444 458 437 446 Other non current financial assets 171 173 - - Deferred tax assets 413 294 - - Other non-current assets 5 5 - -

166,578 169,704 79,513 79,563 Current AssetsInventories 1,301 1,505 - - Trade and other receivables 7,062 6,955 - - Other current assets 2,626 2,402 95 21 Amounts due from related parties 1,200 1,057 5 42 Short term investments 15,559 15,191 - 249 Cash in hand and at bank 6,121 5,692 713 20

33,869 32,802 813 332 Total Assets 200,447 202,506 80,326 79,895

EQUITY AND LIABILITIESEquity attributable to equity holders of the parentStated capital 71,190 72,687 71,190 72,687 Other components of equity 34,752 29,739 - - Revenue reserve 46,382 36,026 8,670 6,030

152,324 138,452 79,860 78,717 Non controlling interests 886 768 - - Total Equity 153,210 139,220 79,860 78,717 Non-Current Liabilities Interest bearing borrowings 21,736 32,482 - 256 Deferred tax liabilities 1,340 1,105 - - Employee benefit liability 1,057 871 - - Other deferred liabilities 584 524 - - Other non-current financial liabilities 509 488 - -

25,226 35,470 - 256Current Liabilities Trade and other payables 5,804 6,567 97 105 Other current liabilities 1,990 1,975 - - Amounts due to related parties 938 847 50 5 Income tax liabilities 2,690 2,242 68 40 Current portion of interest bearing borrowings 9,711 14,083 251 765 Bank overdrafts 878 2,102 - 7

22,011 27,816 466 922 Total Equity and Liabilities 200,447 202,506 80,326 79,895

Exchange Rate (SL Rs.) 133.45 130.7 133.45 130.7

228



Ten Years Summary - Group

31st March 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006In Rs.000s

OPERATING RESULTSRevenue 11,382,779 10,966,381 9,341,581 7,388,158 5,884,513 6,038,073 5,114,000 5,158,168 3,692,785 2,024,811Cost of sales (3,760,543) (3,590,914) (2,916,619) (2,310,988) (1,807,367) (1,832,385) (1,653,083) (1,879,017) (1,252,068) (814,959)Gross profit 7,622,236 7,375,467 6,424,962 5,077,170 4,077,146 4,205,688 3,460,917 3,279,151 2,440,717 1,209,852Other operating income 109,263 135,175 143,319 116,162 30,974 27,485 24,448 40,173 87,494 65,466Profit on disposal of non current

investments - - - - - - - 42,680 - - Administrative expenses (3,633,575) (3,428,286) (3,129,500) (2,291,066) (2,306,846) (2,614,181) (2,406,136) (2,111,078) (1,339,585) (591,131)Distribution expenses (305,919) (326,174) (392,611) (311,162) (206,955) (173,171) (158,062) (149,389) (126,282) (107,967)Other operating expenses (1,451,430) (1,482,684) (1,260,825) (977,290) (872,179) (875,018) (862,702) (775,926) (519,668) (337,699)Finance expenses (265,101) (533,877) (537,096) (264,628) (272,972) (373,688) (292,013) (475,484) (343,624) (25,292)Finance Income 115,835 153,805 38,859 26,968 157,238 11,032 12,069 66,612 9,539 17,646Share of results of equity

accounted investees (622) (187) - - - - - - - - Profit/(loss) before tax 2,190,687 1,893,239 1,287,108 1,376,154 606,406 208,147 (221,479) (83,261) 208,591 230,875Tax expense (322,923) (318,313) (161,877) (265,354) (80,423) (2,989) 503 12,199 20,107 (31,636)Profit/(loss) for the year 1,867,764 1,574,926 1,125,231 1,110,800 525,983 205,158 (220,976) (71,062) 228,698 199,239Earnings per share - Rs. 1.28 1.08 0.77 0.76 0.36 0.17 (0.17) (0.07) 0.39 3.32

ASSETSNon current assetsProperty, plant and equipment 13,560,033 13,152,921 13,471,801 9,918,258 6,585,581 8,718,964 8,685,256 7,823,749 3,454,781 3,158,410Lease rentals paid in advance 7,861,533 8,235,508 8,639,214 9,386,494 8,605,476 3,653,846 3,839,086 3,686,557 3,796,043 - Intangible assets 670,407 670,407 670,407 670,407 670,407 670,963 666,068 666,068 655,143 852,882Investments in joint ventures 59,296 59,834 - - - - - - - - Non-current financial assets 22,798 22,570 25,058 25,063 25,063 25,063 25,057 25,083 25,083 25,083Deferred tax assets 55,099 38,368 54,231 34,143 37,978 41,344 22,339 16,244 9,833 - Other non current assets 648 620 - - 9,073 - - - 218,400 297,381

22,229,814 22,180,228 22,860,711 20,034,365 15,933,578 13,110,180 13,237,806 12,217,701 8,159,283 4,333,756

Current assetsInventories 173,672 196,666 181,338 171,481 118,541 129,239 127,992 127,577 96,185 61,304Trade and other receivables 942,382 909,040 740,558 687,631 679,512 519,691 396,993 807,060 649,032 380,179Other current assets 350,086 313,941 402,412 579,332 656,899 519,057 450,685 599,032 1,223,527 321,241Amounts due from related parties 160,111 138,215 168,994 199,870 183,568 77,925 30,323 60,080 27,471 52,793Loans given to related parties - - - - - - - - - 10,000Short term investments 2,076,400 1,985,510 321,731 1,140,134 10,938 2,960,000 - 25,379 685 5,960Cash in hand and at bank 816,904 743,922 588,394 547,136 314,429 612,296 504,494 394,502 424,974 249,421

4,519,555 4,287,294 2,403,427 3,325,584 1,963,887 4,818,208 1,510,487 2,013,630 2,421,874 1,080,898

Total assets 26,749,369 26,467,522 25,264,138 23,359,949 17,897,465 17,928,388 14,748,293 14,231,331 10,581,157 5,414,654

229


31st March 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006In Rs.000s

EQUITY & LIABILITIESEquity attributable to equity holders

of the parentStated capital 9,500,247 9,500,247 9,500,247 9,500,247 9,500,247 9,500,247 5,859,880 5,859,880 595,696 595,696Other components of equity 4,637,612 3,886,925 3,628,684 1,791,313 761,197 772,879 620,791 303,213 2,558,418 2,468,238Revenue reserves 6,189,643 4,708,642 3,165,257 2,482,461 1,379,022 870,373 695,953 907,451 970,173 579,149

20,327,502 18,095,814 16,294,188 13,774,021 11,640,466 11,143,499 7,176,624 7,070,544 4,124,287 3,643,083Non-controlling interests 118,187 100,442 92,623 67,725 63,689 56,269 47,111 56,534 48,680 63,244Total equity 20,445,689 18,196,256 16,386,811 13,841,746 11,704,155 11,199,768 7,223,735 7,127,078 4,172,967 3,706,327

Non current liabilitiesNegative goodwill - - - - - - - - - 423,771Non- interest bearing borrowings - - - - - - 79,536 79,536 82,655 149,610Interest bearing borrowings 2,900,658 4,245,400 5,571,060 5,809,814 2,615,273 3,006,492 3,184,228 3,582,006 1,977,188 121,053Deferred tax liabilities 178,859 144,361 114,422 49,337 34,987 48,521 48,784 64,028 89,880 57,276Employee benefit liability 141,005 113,836 89,346 84,677 78,713 65,974 61,008 51,641 41,046 40,893Other deferred liabilities 77,926 68,426 1,598 1,923 2,248 2,573 2,898 3,223 - - Non-current financial liabilities 67,919 63,752 91,815 57,392 47,399 - - - - -

3,366,367 4,635,775 5,868,241 6,003,143 2,778,620 3,123,560 3,376,454 3,780,434 2,190,769 792,603

Current liabilitiesTrade and other payables 774,493 858,262 992,008 826,718 206,017 213,372 199,388 262,796 161,348 70,035Other current liabilities 265,515 258,152 104,845 299,271 394,489 1,038,340 666,704 758,800 650,329 310,394Amounts due to related parties 125,121 110,755 125,783 120,722 120,068 124,681 200,762 109,104 85,894 27,481Income tax liabilities 359,015 292,991 240,374 250,185 82,500 7,606 6,259 7,627 - 334Short term borrowings - - - - - - 2,500 2,500 2,344,230 269,520Current portion of Interest bearing

borrowings 1,295,992 1,840,626 1,325,111 1,005,220 821,440 872,741 652,901 479,196 57,964 -Bank overdrafts 117,177 274,705 220,965 1,012,944 1,790,176 1,348,320 2,419,590 1,703,796 917,656 237,960

2,937,313 3,635,491 3,009,086 3,515,060 3,414,690 3,605,060 4,148,104 3,323,819 4,217,421 915,724

Total equity and liabilities 26,749,369 26,467,522 25,264,138 23,359,949 17,897,465 17,928,388 14,748,293 14,231,331 10,581,157 5,414,654


230


Group Real Estate Portfolio


Owning Company and location Buildings (Sq Ft) Land in acres Net book value

Freehold property Leasehold property Rs.'000 Rs.'000

2015 2014 2015 2014 2015 2014 2015 2014

Hotel properties - Sri Lanka

Beruwala Holiday Resorts (Pvt) Ltd Cinnamon Bey, Beruwala 425,684 425,684 11.39 11.39 - - 3,176,089 3,119,571

Ceylon Holiday Resorts Ltd Bentota Beach Hotel, Bentota 236,524 236,524 2.32 2.32 11.02 11.02 638,614 662,087

Hikkaduwa Holiday Resorts (Pvt) Ltd Chaaya Tranz, Hikkaduwa 233,965 233,965 0.29 0.29 4.36 4.36 1,190,330 1,158,892

Habarana Lodge Ltd Cinnamon Lodge, Habarana 202,999 202,999 - - 25.48 25.48 680,912 648,986

Habarana Walk Inn Ltd Chaaya Village, Habarana 121,767 121,767 - - 9.34 9.34 332,000 372,434

International Tourists and Hoteliers Ltd Beruwala - - 0.11 0.11 - - - -

Kandy Walk Inn Ltd Cinnamon Citadel, Kandy 173,900 173,900 5.80 5.80 - - 1,224,254 948,937

Rajawella Hotels Company Ltd Mahaberiatenna, Kandy 3,700 3,700 - - 10.00 10.00 38,347 34,531

Resort Hotels Ltd Medway Estate, Nilaveli 4,485 4,485 44.37 44.37 - - 700,980 667,600

Trinco Holiday Resorts (Pvt) Ltd Chaaya Blu, Trincomalee 120,910 120,910 13.24 13.24 - 722,378 686,628

Trinco Walk Inn Ltd Trincomalee - - 14.64 14.64 - 237,683 226,368

Wirawila Walk Inn Ltd Randunukelle Estate, Wirawila - - 25.15 25.15 - - 86,888 69,998

231


Owning Company and location Buildings (Sq Ft) Land in acres Net book value

Freehold property Leasehold property Rs.'000 Rs.'000

2015 2014 2015 2014 2015 2014 2015 2014

Yala Village (Pvt) Ltd Cinnamon Wild, Tissamaharama 111,529 111,529 - - 11.25 11.25 471,623 488,404

Ahungalle Holiday Resorts (Pvt) Ltd Ahungalle - - 4.63 4.63 - - 148,850 148,850

Nuwara Eliya Holiday Resorts (Pvt) Ltd Nuwara Eliya - - 2.66 - - - 199,367 -

Hotel properties - Republic of Maldives

Tranquility (Pte) Ltd Chaaya Island Dhonveli 246,358 246,358 - - 18.62 18.62 7,134,834 7,520,797

Travel Club (Pte) Ltd Chaaya Reef Ellaidhoo 170,877 170,877 - - 13.75 13.75 1,197,720 1,392,096

Fantasea World Investments (Pte) Ltd Chaaya Lagoon Hakuraa Huraa 150,412 150,412 - - 13.42 13.42 899,359 771,482

Total 2,203,110 2,203,110 124.60 121.94 117.24 117.24 19,080,228 18,917,661


232


Directors of Subsidiary Companies


Sri Lanka

Ceylon Holiday Resorts Limited

(PB 40) - 98.65%Owner & operator of Bentota Beach Hotel - BentotaIncorporated in - 1966Company operating address - Bentota Beach Hotel, Galle Road, Bentota Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.745MnContact No. - 034-2275176/7Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

Habarana Lodge Limited

(PB 38) - 98.35%Owner & operator of Cinnamon Lodge - HabaranaIncorporated in - 2007Company operating address - Cinnamon Lodge, P.O Box 02, Habarana.Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs.342Mn Contact No. - 066-2270011/2Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

Habarana Walk Inn Limited

(PB 33) - 98.77%Owner & operator of Chaaya Village - HabaranaIncorporated in - 1973Company operating address - Chaaya Village, PO Box 01, Habarana.Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs.126MnContact No. - 066-2270046Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

International Tourists and Hoteliers Limited

(PB 17) - 99.33%Owner of real estate in Beruwala Incorporated in - 1973Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.1.9 Mn.Contact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mrs D C Alagaratnam Mr B J S M Senanayake

Kandy Walk Inn Limited

(No. PB 395) - 98.39%Owner & operator of Cinnamon Citadel - Kandy Incorporated in - 1979Company operating address - Cinnamon Citadel, 124, Srimath Kuda Ratwatte Mawatha, Kandy.Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs.115MnContact No. - 0812234365/6Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake Mr R T Molligoda

Rajawella Hotels Company Limited

(PB 92) - 100%Owner of real estate in Kandy Incorporated in - 1992Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs. 34MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J R Gunaratne

233



Trinco Walk Inn Limited

(PB168) - 100%Owner of real estate in Trincomalee Incorporated in - 1984 Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs.120MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

Resort Hotels Limited

(PB 193) - 100%Owner of real estate in Nilaveli Incorporated in - 2008Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.7.2MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene

Wirawila Walk Inn Limited

(PB 89) - 100%Owner of real estate in Wirawila Incorporated in - 1994Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.18MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mrs D C Alagaratnam

Yala Village (Private) Limited

(PV 2868) - 93.78%Owner & Operator of Cinnamon Wild - Tissamaharama Incorporated in - 1999Company operating address - P.O Box 01, Kirinda, TissamaharamaRegistered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.419MnContact No. - 047- 2239449/52Directors - Mr S C Ratnayake - Deputy Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr J A Davis Mr M A Perera - Chairman Mr B J S M Senanayake

Beruwala Holiday Resorts (Private) Limited

(PV 69678) - 99.33%Owner & Operator of Cinnamon Bey - Beruwala Incorporated in - 2009Company operating address - Moragolla, Beruwala.Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs. 2.3BnContact No. - 034-2297000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

Trinco Holiday Resorts (Private) Limited

(PV 69908) - 100%Owner & Operator of Chaaya Blu - Trincomalee Incorporated in - 2010Company operating address - Chaaya Blu, Sambativu, Uppuvelli, Trincomalee.Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs.357MnContact No. - 026-2222307Directors - Mr S C Ratnayake – Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

Hikkaduwa Holiday Resorts (Private) Limited

(PV 71747) - 98.65%Owner & Operator of Chaaya Tranz - Hikkaduwa Incorporated in - 2010Company operating address - No.01, Galle Road, Hikkaduwa, Sri Lanka.Registered office address - No.117, Sir Chittampalam A Gardiner Mawatha, Colombo 2Stated Capital - Rs.1.06BnContact No. - 091-2277023Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

234


Directors of Subsidiary Companies


Ahungalla Holiday Resorts (Private) Limited

(PV 85046) - 100%Owner of real estate in AhungallaIncorporated in - 2012Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs. 132MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr J E P Kehelpannala Mr B J S M Senanayake

Nuwara Eliya Holiday Resorts (Pvt) Limited

(PV98357) - 100%Owner of real estate in Nuwara Eliya Incorporated in - 2014Registered office address - 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Stated Capital - Rs.205MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene

Maldives

John Keells Maldivian Resorts (Pte) Limited

(C-208/96) - 100% Incorporated in - 1996Registered office address - 2nd Floor, H.Maizan Building, Sosun Magu, Male, Republic of Maldives. Stated Capital - US$39MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera Mr J E P Kehelpannala

Travel Club (Pte) Limited

(C-121/92) - 100%Owner & Operator of Chaaya Reef Ellaidhoo Incorporated in - 1992Company operating address - Chaaya Reef Ellaidhoo, Aril Atoll, MaldivesRegistered office address - 2nd Floor, H.Maizan Building, Sosun Magu, Male, Republic of Maldives. Stated Capital - US$2.5MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera Mr J E P Kehelpannala

Fantasea World Investments (Pte) Limited

(C-143/97) - 100%Owner & Operator of Chaaya Lagoon Hakuraa Huraa Incorporated in - 1997Company operating address - Chaaya Lagoon Hakuraa Huraa, Meemu Atoll, MaldivesRegistered office address - 2nd Floor, H.Maizan Building, Sosun Magu, Male, Republic of Maldives. Stated Capital - US$0.6MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera Mr J E P Kehelpannala

Tranquility (Pte) Limited

(C344/2004) - 100%Owner & Operator of Chaaya Island Dhonveli Incorporated in - 2004Company operating address - Chaaya Island Dhonveli, North Male’ Atoll, MaldivesRegistered office address - 2nd Floor, H.Maizan Building, Sosun Magu, Male, Republic of Maldives. Stated Capital - US$5MnContact No. - 0112306000Directors - Mr S C Ratnayake - Chairman Mr A D Gunewardene Mr B J S M Senanayake Mr S A S Perera Mr J E P Kehelpannala

235


Glossary of Financial Terms


Accounting policies

The specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting Financial Statements.

Accrual basis

Recording 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 or 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.


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 entity, the supervision of executive 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

Dividend earned per share as a percentage of its market value.

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 the 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 to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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 is a parent, all its subsidiaries and joint ventures.

Guarantees

Tri party agreement involving a promise by one party (the guarantor) to fulfill the obligations of a person owing a debt if that person fails to perform.

236


Glossary of Financial Terms


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.

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 over 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.

Related parties

Parties where one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, directly or indirectly.

Return on equity

Profit attributable to shareholders as a percentage of average shareholders’ funds.

Return on assets

Profit after tax divided by the average assets.

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 plus capital and revenue reserves.

Total debt

Long term loans plus short term loans and overdrafts.

Net (debt)/cash

Total debt minus (cash plus short term deposits)

Total value added

The difference between net revenue (including other income) and expenses, cost of materials & services purchased from external sources.

237



Notice of Meeting

Notice is hereby given that the Thirty Sixth Annual General Meeting of John Keells Hotels PLC will be held on 30th June 2015 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 2015 with the Report of the Auditors thereon.

3. To re-elect as Director, Mr. A.D Gunewardene, who retires in terms of Article 84 of the Articles of Association of the Company. A brief profile of Mr. A.D Gunewardene is contained in Page 34 of the Annual Report

4. To re-elect as Director, Mr. B.J.S.M Senanayake, who retires in terms of Article 84 of the Articles of Association of the Company. A brief profile of Mr. B.J.S.M Senanayake is contained in Page 35 of the Annual Report

5. To re-appoint Messrs Ernst & Young, Chartered Accountants, as Auditors and to authorise the Directors to determine their remuneration.

6. To consider any other business of which due notice has been given in terms of the relevant laws and regulations.

By Order of the Board,

Keells Consultants (Private) LimitedSecretaries

Colombo4th June 2015

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 will be 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

238



Notes

239


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 Jestus Sunimal Mendis Senanayake of Colombo or failing him Mr. Nissanka Bandara Weerasekera of Colombo or failing himMr. Trevine Lalith Francis Waas Jayasekera of Colombo

as my/our proxy to vote for me/us on my/our behalf at the Thirty Sixth Annual General Meeting of the Company to be held on the 30th June 2015 at 3.30 p.m. and at any adjournment thereof and at every poll which may be taken in consequence thereof.

FOR AGAINST

To re-elect as Director, Mr. A.D Gunewardene who retires in terms of Article 84 of the Articles of Association of the Company.

To re-elect as Director, Mr. B.J.S.M Senanayake, who retires in terms of Article 84 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 fifteen

…………………………………. Signature/s of shareholder/s

Note: INSTRUCTIONS AS TO COMPLETION OF FORM OF PROXY ARE NOTED ON THE REVERSE.


240



Form of Proxy

INSTRUCTIONS AS TO COMPLETION

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.

Name : ......................................................................................................................

Address : ......................................................................................................................

......................................................................................................................

......................................................................................................................

Jointly with : ......................................................................................................................

Share Folio No. : ......................................................................................................................

Please fill in the following details:

Corporate Information

Name of Company

John Keells Hotels PLC

Legal Form

Public Limited Liability CompanyIncorporated in Sri Lanka on 1 Oct 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 – ChairmanA D GunewardeneJ R F PeirisJ E P KehelpannalaR T WijesinhaN B WeerasekeraB J S M SenanayakeT L F W Jayasekera

Secretaries and Registrars

Keells Consultants (Pvt) Ltd117, Sir Chittampalam A. Gardiner MawathaColombo 2

Auditors

Ernst & YoungChartered AccountantsP.O. Box 101Colombo

Bankers

Bank of CeylonDeutsche Bank A.GHongkong and Shanghai Banking CorporationNations Trust BankHatton National BankHabib Bank Ltd

Head Office & Registered Office of the Company

117, Sir Chittampalam A. Gardiner Mawatha,Colombo 2Telephone : (94-11) 2421101-15, (94-11) 2306000Facsimile : (94-11) 2439046E-mail : [email protected] : www.johnkeellshotels.com

Hotel Reservations

Cinnamon Hotel Management Ltd117, Sir Chittampalam A. Gardiner Mawatha,Colombo 2Telephone : (94-11) 2306600, (94-11) 2439049-51Facsimile : (94-11) 2320862E-mail : [email protected] : www.cinnamonhotels.com

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