Priscilla Outschoorn

BRIDGES OF VALUE ASIAN HOTELS AND PROPERTIES PLC ANNUAL REPORT 2022/2023 BRIDGES OF VALUE AtAsian AsianHotels Hotelsand andProperties PropertiesPLC, PLC,we webelieve believe that At that wewe are a are abridge, strongconstructed bridge, constructed of 7 dynamic strong of seven dynamic values,values, which are uplifting Trust, and supporting ourAgility, communities to thrive and and Greatness, Compassion, Curiosity, Wellbeing develop their talents to the fullest of their potential. Inclusivity. We our seven 7 dynamic values have Webelieve believethat that our dynamic values havebeen been aa phenomenal driving force behind our success, even four phenomenal driving force behind our success, even amidst amidst 4 years of uncertain times. These values have years of uncertain times. These values have been embedded beenour embedded into providing our business core,toproviding a into business core, a lifeline communities lifeline to communities nationwide. We will continue to nationwide. We will continue to create memorable experiences, create memorable experiences, striding forward striding forward optimistically into the future. optimistically into the future. CONTENT OVERVIEW About Us Performance Highlights 03 04 STEWARDSHIP Chairperson’s Review Board of Directors Corporate Governance Risk Management Report - MANAGEMENT REPORTS Management Discussion & Analysis Financial Review Sustainability Report 56 59 61 FINANCIAL REPORTS Financial Calendar Annual Report of the Board of Directors Report of the Audit Committee Statement of Directors’ Responsibility Independent Auditors’ Report Statement of Profit or Loss Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements - SUPPLEMENTARY INFORMATION Consolidated Value Added Statement Information to Shareholders & Investors 5 Year Financial Summary of the Group 5 Year Financial Summary of the Property Development Division 5 Year Financial Summary of Cinnamon Grand Colombo Hotel Glossary of Financial Terms Corporate Information - Inner Back Cover ABOUT US Asian Hotels and Properties PLC stands proudly as the undisputed leader in Sri Lanka’s hospitality industry, leveraging on decades of experience and excellence. It has been a torchbearer of Sri Lankan hospitality and the preferred operator in Colombo city’s hospitality sector, reputed for its signature service and exclusive luxury offerings. The Group comprises of two five-star hotels - Cinnamon Grand Colombo and Cinnamon Lakeside Colombo - as well its refurbished mall, Crescat Boulevard. The Group’s strength is in its industry leadership, the backing of its parent, the blue-chip John Keells Holdings PLC, its talented and skilled professional team, and its ability to pioneer new guest experiences. Annual Report 2022/2023 | 3 PERFORMANCE HIGHLIGHTS 2023 Operational Performance Group revenue Results from operating activities Profit/(Loss) before tax Profit/(Loss) after tax Dividends Return on equity (ROE) Pre-Tax return on capital employed (ROCE) Rs. Mn Rs. Mn Rs. Mn Rs. Mn Rs. Mn % % 2022 2021 2020 2019 8,417 93 (133) (333) (0.92) 0.86 4,095 (407) (459) (508) (1.62) (0.65) 1,790 (1,913) (2,370) (2,244) (5.54) (6.43) 5,560 - (0.15) 0.61 7,658 1,083 1,270 1,- 45,912 13,674 2,101 28,875 442,- 42,509 7,549 1,645 31,626 442,- 40,869 6,-,306 442,- 42,582 5,889 (587) 32,941 442,- 42,524 6,092 (846) 32,785 442,- Rs Rs. Mn Rs Rs Rs 44.00 19,482 - 37.00 16,383 - 37.40 16,560 - 29.00 12,840 - 41.90 18,- Social Performance Economic value added Rs. Mn Employee benefit liabilities as of 31st March Rs. Mn 2,875 334 1,569 344 (7) 378 3,014 345 4,884 365 Strength of the Statement of Financial Position Total assets Rs. Mn Total liabilities Rs. Mn Net debt/(Cash) Rs. Mn Total shareholders' funds Rs. Mn No. of shares in issue Thousands Net assets per share Rs Debt/Equity Times Debt/Total assets Times Investor Information Market price of share as at 31st March Market capitalisation Dividend payout Dividend per share Dividend yield 4 | Asian Hotels and Properties PLC STEWARDSHIP Annual Report 2022/2023 | 5 CHAIRPERSON’S REVIEW Dear Stakeholder, I am pleased to present to you, on behalf of the Board, the highlights of the Annual Report and Financial Statements of Asian Hotels & Properties PLC for the year ended 31st March 2023. A challenging operating environment Global Despite headwinds such as the emergence of Omicron variant of COVID-19 at the beginning of the year, the start of the Russian Ukraine conflict and a challenging global economic environment, international tourism witnessed stronger than expected recovery in 2022. According to UNWTO estimates, tourist arrivals in CY 2022 more than doubled as compared to CY 2021 though still remained 37 per cent below pre-pandemic levels. While all regions witnessed significant increases in tourism related activity in 2022 over the previous year, Asia and the Pacific region lagged behind in terms of momentum of recovery due to stronger pandemic-related restrictions in the region, with arrivals reaching only 23 per cent of prepandemic levels. Asia, which was the destination for 25 per cent of the world’s international tourists in 2019, saw a significant slowdown, accounting for only 9 per cent of global tourist travel in 2022, mainly due to the closure of borders in China as a curtailment measure against the resurgence of COVID-19 in the Country. Sri Lanka Tourist arrivals to Sri Lanka continued to be subdued, impacted by macroeconomic, political and social disruptions during the year. Having witnessed encouraging growth from the end of 2021, arrivals started tapering off from April 2022, due to the scarcity of fuel and food, civil unrest and the resultant travel advisories. Further, the slowdown in global recovery on the back of inflationary pressures coupled with the high cost of fuel and impact of these on cost of air travel exerted pressure on outbound travel to destinations such as Sri Lanka. However, a slow pickup on tourist arrivals is being seen from October 2022 onwards and with some acceleration during the first three months of 2023. Majority of the tourist arrivals to Sri Lanka were from India, Russia and the UK. A Resilient Performance During the year under review, the occupancy levels were impacted by tourist arrivals since March 2022 due to the social unrest caused by economic and political instability in the country and its impact on both domestic and inbound tourism. As a result, occupancy levels during the first and second quarters of FY 2022/23 averaged around 31 per cent. The Value Added Tax (VAT) rate was increased to the standard rate and Social Security Contribution Levy (SSCL) was introduced during the 1st and 3rd quarters of the year respectively, which had an adverse impact on the rates offered to customers. The significant increase in personal income tax rates in the 4th quarter also contributed to a reduction in discretionary customer spend, affecting the domestic business 6 | Asian Hotels and Properties PLC to the group. Further, record high inflation which persisted during the year exerted cost pressures and impacted margins. This together with import restrictions also impacted customer sentiment and demand for leisure offerings. Additionally, borrowings obtained to navigate the unprecedented challenges encountered by the industry since April 2019, together with the impact of high interest rates exerted pressure on funding costs. However, the occupancy levels gradually recovered from November onwards with the gradual easing of the ground situation in the country since August 2022, together with the removal of travel advisories in main source markets and the increase in frequency of flights by major airlines. The Group revenue increased by 106 per cent to Rs. 8.4Bn from Rs. 4.1Bn in the previous financial year. The restaurant and banqueting operations recorded a strong performance, driven primarily by domestic demand. The number of events and banquets also noted a steady uptick across the quarters while restaurant operations also recorded encouraging growth in covers in line with pre-pandemic levels of activity. The revenue from this segment stood at Rs. 5.4Bn which represented a a year on year growth of 98 per cent. Crescat Boulevard Mall opened its doors for customers in November 2021 after the refurbishment and therefore, 2022/23 was its first full year of operations after being closed for ten months. As a result, revenue from the mall increased year on year by 130 per cent to Rs. 241Mn. However, the performance of the mall was impacted by the social and economic disruptions which were present during the first half of the year. A gradual recovery of the mall performance was seen during the second half of the year. The group recorded a pre-tax loss of Rs. 132.5Mn against the previous year pre-tax loss of Rs. 459.2Mn. Striving for Greatness As we look towards a new phase of growth in a recalibrated post pandemic world, we have re-evaluated our priorities and developed a clear strategic direction for our operation. A summary of the progress achieved in each of our strategic priority areas are given below. Cultivating the best people and evolving our culture Attracting and retaining skilled talent within the industry remains a key challenge amidst rising levels of migration in the country. We therefore continued to focus on enhancing our own employee value proposition while also actively leading industry initiatives aimed at attracting more youth into the industry. During the year we carried out a comprehensive designation levelling and salary band realignment exercise to align ourselves with bench-marked international players. The exercise will not only enhance the prospects of our existing employees but also support our recruitment efforts in the longer term. Employee development remains a key focus and we continued to expand our training and development models during the year to ensure that every employee has a clear path of development within the organisation. As a leading player in the industry, we see it as our prerogative to drive efforts to create a pipeline of talent for the industry. During the year we initiated a dedicated Apprenticeship Academy for youth interested in entering the industry. We also entered into a partnership with the Vocational Training Authority (VTA). John Keells Group’s, diversity, equity and inclusion (DE&I) initiative - “ONE JKH”, aims to create a diverse, equal and inclusive workplace. In alignment with this we continue to encourage female participation in the traditionally male dominated hospitality industry through targeted recruitment programmes, awareness campaigns, vocational training opportunities as well as by continuing to identify and promote non-traditional roles for women within the company. Our female participation stood at 13 per cent during the year which is an increase from 9 per cent recorded in 2021/22 and are working towards achieving our 2025 gender target of 24 per cent. Further, 100 days of equal parental leave at the birth or adoption of a child was introduced. Understanding the financial constraints faced by our employees amidst rising living costs in Sri Lanka, an ex-gratia payment was made to all employees in April 2022. Continuing this support, we also implemented a temporary crisis allowance from January 2023. Driving Guest and Customer Personalisation Customer and guest personalisation is a powerful differentiator for hotels in the post-COVID era as travellers increasingly seek out unique, personalised travel experiences. We therefore continue to fine-tune our product offerings, distribution strategies and communication strategies to offer our guests curated experiences that set us apart from our competition. Data analytics has been a key enabler in this process; and we continued to enhance our Artificial Intelligence (AI) and data analytics capabilities during the year with the deployment of state-of the art business intelligence tools in our company. We also strengthened our direct distribution channels by setting up Global Sales Offices in key markets and establishing a Global Contact Center for guests to directly communicate with us from any part of the world. As customer engagement through digital channels continues to grow; we are increasingly leveraging digital mediums to directly connect with our customers and guests. During the year we established our own in-house content design agency which has enabled us to create customer data driven content to better communicate our value proposition to customers. Driving Operational Excellence We continue to leverage technology as well as our global and local expertise to create a more agile, efficient and productive business model. A key focus during the last two years has been to enhance our revenue management capabilities and to streamline our commercial operation. Ongoing investments in data analytics tools and property management systems continue to provide invaluable customer and operational insights. Growing with Intent During the year we expanded our network by establishing Global Sales Offices in key source markets which includes UK, Germany, France, India and China. Delivering on our ESG commitments Achieving a key milestone in our renewed strategic direction, “Cinnamantra” our new purpose and seven corporate values were rolled out during the year through a series of employee engagement activities that culminated in the official values launch on the 21st of March 2023. Our seven-core values Greatness, Compassion, Agility, Wellbeing, Inclusivity, Trust and Curiosity will be the foundation on which we base our future journey of growth. Caring for our people, communities and planet is an integral part of our brand ethos. Environmental, social and governance considerations are therefore embedded into all aspects of our operation through a comprehensive sustainability policy and specific, measurable ESG goals and targets for the Company. In honouring commitment to sustainability, out of a total of 458,716 Kg of waste collected by the company, 85.07 per cent was re-used during the year. We continued to provide a free meal to those working tirelessly for the betterment of our society from health care workers to policemen through the ‘Meals that Heal’ which won the Gold award for CSR activities at the PATA awards 2022. In addition, the company engaged in tree planting at Sinharaja Rainforest as part of the “Cinnamon Rainforest Restoration Project”. Recognition Asian Hotels & Properties PLC was ranked among the top 20 companies in Transparency in Corporate Reporting (TRAC) Assessment by Transparency International Sri Lanka (TISL). Corporate Governance I am pleased to state that there were no departures from any of the provisions of the Code of Business Conduct and Ethics of the Code of Best Practice of Corporate Governance, jointly advocated by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka. I also wish to affirm our commitment to upholding Group policies, where emphasis is placed on ethical and legal dealings, zero tolerance for corruption, bribery and any form of harassment or discrimination in our workplace. Annual Report 2022/2023 | 7 Chairperson’s Review Outlook Global The United Nations World Tourism Organisation (UNWTO) projects the outlook for tourism based on two scenarios. UNWTO forecasts international tourist arrivals for CY 2023 to range between 80 per cent to 95 per cent of pre-pandemic levels. Similarly, the World Travel and Tourism Council (WTTC) estimates the sector to recover more than 95 per cent of CY 2019 arrivals. The notable increase in airfares in comparison to rates prepandemic, exerts additional pressure on the travel and hospitality industry. However, the strong ‘pent-up’ demand for travel and tourism that is continuing, sustained recovery of air connectivity, recent uplifting of border restriction in China, coupled with improved sentiment is envisaged to off-set these impacts. Sri Lanka The Government and the Central Bank of Sri Lanka (CBSL) have implemented a multitude of much required reforms to stabilise the macroeconomy and the overall operating landscape, which has proved fruitful, thus far, in stabilising the economy through effectively managing demand pressures, curbing the rapid rise in inflation and easing the pressure on the external sector. Such policy measures coupled with the IMF Extended Fund Facility (EFF) arrangement, which is aimed at restoring macroeconomic stability, debt sustainability, safeguarding financial system stability and strengthening governance, is envisaged to provide a strong foundation for the economy’s sustained recovery. Against this backdrop, the CBSL projects the economy to contain its contraction to 2.0 per cent in CY 2023, as opposed to the 7.8 per cent contraction in CY 2022 and rebounding thereafter to a growth of 3.3 per cent. Sri Lanka received approval from the Executive Board of the IMF for the EFF arrangement in March 2023 with the aim of restoring macroeconomic stability and debt sustainability. Tourism Development Authority aims to attract 2Mn visitors in 2023. Although arrivals are still significantly below pre-pandemic levels, it is encouraging to witness the month-on-month pick-up in inquiries and forward bookings. The recovery trend in arrivals is expected to continue with growth across all major source markets. The opening of the Chinese borders for international travel in January 2023 after a period of three years and the increase in frequencies of flights by a few major airlines is envisaged to augur well for the destination. Concentrated marketing campaigns, improving connectivity into the country at competitive rates, addressing capacity constraints both in terms of airport capacity constraints and tourism infrastructure is expected to be a significant catalyst to attract tourism into Sri Lanka. The Bandaranaike International Airport (BIA) expansion project Phase A, which entails the construction of a new passenger terminal building, has unfortunately been suspended with the final date of opening uncertain at this time. It is hoped that the authorities will re-commence the project and fast track this important aspect of infrastructure to support the tourism industry. Several major infrastructure projects are expected to be completed in the ensuing years in Colombo including the Port City Colombo project and the development of the East and West Terminals of the Port of Colombo. Such notable developments will augur well for Colombo, particularly in attracting business travellers. The availability of dedicated conferencing and meeting facilities is also expected to bode well for tourism, particularly to attract tourism from the MICE segment. The Colombo Hotels segment will be uniquely positioned to capitalise on this opportunity. Continued focus will be placed on prioritising the development of market-specific strategies aimed at catering to a diverse clientele. The company will also leverage on its unparalleled F&B offering, by continuing to strengthen its dedicated offerings and flagship restaurants. Given the socio-economic environment of the country it is expected that the current trend of labour migration will continue resulting in a significant reduction in skilled employees in our company. As discussed above, the company has already put in place several initiatives to attract, retain and develop talent within the company. Acknowledgements I take this opportunity to thank my colleagues on the Board for their invaluable guidance and support. I would also like to convey my appreciation to our management team and staff for their untiring effort, commitment and drive and holding steadfast in very challenging circumstances. Finally, I wish to convey my sincere appreciation to all our stakeholders including our tour operator partners, guests and shareholders for their continued support. Sri Lanka continues to remain attractive as a tourist destination given our diverse landscape and unique offerings, with the added competitive advantage from a pricing perspective due to the significant depreciation of the Rupee in March 2022. Whilst we remain confident that the prospects for tourism in the medium to long-term remain extremely positive, Sri Lanka’s potential in the tourism sector remains largely untapped, considering that the country received only 2.3 Mn tourists prior to the Easter Sunday attacks in 2019, while regional tourism has experienced significant growth over the past decade. 8 | Asian Hotels and Properties PLC K N J Balendra Chairperson 23 May 2023 BOARD OF DIRECTORS Krishan Balendra Mikael Svensson Chairperson Director Krishan Balendra is the Chairperson-CEO of John Keells PLC (JKH). He is also the Chairman of the Employers Federation of Ceylon, Deputy Vice Chairman of the Ceylon Chamber of Commerce and the Hon. Consul General of the Republic of Poland in Sri Lanka. In addition, he is a former Chairman of the Nations Trust Bank and the Colombo Stock Exchange. Krishan started his career at UBS Warburg, Hong Kong, in investment banking, focusing primarily on equity capital markets. He joined JKH in 2002. Krishan holds a law degree (LLB) from the University of London and an MBA from INSEAD. Mikael Svensson is the Chief Executive Officer of Cinnamon Hotels & Resorts, part of the Leisure group. He overlooks Cinnamon’s entire portfolio of hotels and resorts in Sri Lanka and the Maldives, including developing the much-anticipated mixed-development project Cinnamon Life Integrated Resort. He brings extensive international senior leadership experience in managing and operating large-scale luxury hotels across Asia, the Middle East and Australia, of which over 20 years was with the Hyatt Group. His previous roles were at Palm Jumeirah, the Viceroy Palm Jumeirah Dubai, the Grand Hyatt in Mumbai, Park Hyatt in Canberra and the Hyatt Regency in Hua Hin, Thailand. Before joining the John Keells Group, he was the Senior Vice President of Louis T Collection, a Singapore-based hospitality management and building solutions company that owns a portfolio of hotels across Asia and Australia. Gihan Cooray Director Gihan Cooray is the Deputy Chairperson/Group Finance Director and has overall responsibility for the Group’s Finance and Accounting, Taxation, Corporate Finance and Strategy, Treasury, Information Technology and Corporate Communications functions. He was the Chairman of Nations Trust Bank PLC till 30 April 2023. Gihan holds an MBA from Jesse H. Jones Graduate School of Management at Rice University, Houston, Texas. He is a Fellow member of the Chartered Institute of Management Accountants, UK, a certified management accountant of the Institute of Certified Management Accountants, Australia and has a Diploma in Marketing from the Chartered Institute of Marketing, UK. He serves as a committee member of The Ceylon Chamber of Commerce. Suresh Rajendra Director Suresh Rajendra has over 30 years of experience in finance, travel and tourism, hotel management, property development, real estate management, and business development both in Sri Lanka and overseas. Before joining the JKH Group, he was the Head of Commercial and Business Development for NRMA Motoring and Services in Sydney, Australia and Director/ General Manager of Aitken Spence Hotel Management (Pvt) Ltd, Sri Lanka. He is a Fellow member of the Chartered Institute of Management Accountants, UK. He is a member of the Group Executive Committee of the John Keells Group. He is the President of the Leisure industry group and is also responsible for Union Assurance PLC, John Keells Information Technology (Private) Limited and John Keells Stockbrokers. In addition, Union Assurance PLC, Trans Asia Hotels PLC and also in many of the unlisted companies of the John Keells Group. Changa Gunawardane Director Changa Gunawardane is presently the Chief Financial Officer (CFO) of the Leisure industry group and serves as a NonExecutive Director on the Board of Trans Asia Hotels PLC and many of the unlisted companies of the John Keells Group. He has been with John Keells Holdings PLC (JKH) for over 17 years. He previously held the position of Chief Financial Officer of the Information Technology sector, as well as the Sector Financial Controller of the Airlines and Logistics SBU within the Transportation sector. He has over 28 years of experience as a finance professional in varying industries including Pharmaceutical, Manufacturing, Management Services, Electrical Engineering and Construction. He is also a Fellow member of the Chartered Institute of Management Accountants UK and holds an MBA from the Postgraduate Institute of Management, University of Sri Jayewardenepura. Aroshi Nananyakkara Director * Aroshi is the CEO of the Global Consulting Company and a dynamic leader in the fields of Strategic Planning, HR and Risk Management, having gathered extensive experience through her 25 plus years in multinationals as well as some of Sri Lanka’s prominent blue-chip companies. She commenced her career as a Corporate Banker and then moved into the fields of HR and Risk Management holding the position of Chief Risk Officer for the Brandix Group and thereafter a more operational role as CEO of Brandix Hangers (Pvt) Ltd. Annual Report 2022/2023 | 9 Board of Directors She holds a B.Sc. from the prestigious Massachusetts Institute of Technology (MIT), Boston, USA in addition to a M.Sc. from the London School of Economics (LSE), UK. She is the Regional Chair in Sri Lanka for the MIT Educational Council. She also holds the professional qualifications of ACMA and CGMA from the Chartered Institute of Management Accountants (CIMA), UK. She was recognised as one of the top 22 women leaders of Sri Lanka at the World Women Leadership Congress & Awards 2020 by CMO Asia and received an award at the Top 50 Professional & Career Women Awards 2020. She serves on the Board of Sampath Bank PLC. She was formerly an Independent Non-Executive Director of Siyapatha Finance PLC, Sampath IT Solutions (Pvt) Ltd, Hela Clothing PLC and Delmege Interior Décor (Pvt) Ltd. She is the incoming Chairman of the Sri Lanka Institute of Directors (SLID) and the Founding Chair of the Women Directors’ Forum, a pioneering initiative by SLID. She is also the Founding Chair of the Sri Lanka chapter of the Women Corporate Directors (WCD), the world’s largest community of pre-eminent women leaders serving on more than 8500 public and private Boards across six continents. She is the Immediate Past President of the Rotary Club of Colombo, the first Rotary Club to be set up in Sri Lanka in 1939. Jegatheesan Durairatnam Director* Jegatheesan Durairatnam joined the Commercial Bank of Ceylon PLC in 1982 and he is the retired Managing Director/ Chief Executive Officer. His banking experience covers all aspects of International Trade, Offshore Banking, Credit, Operations, and IT. He has been in the Bank’s Corporate Management Team for 14 years. He holds a bachelor’s degree from the University of Peradeniya. He has held positions in Senior Management, including the position of Chief Operating Officer, Deputy General Manager International Division, Assistant General Manager - International Division and Head of Imports. He also serves on the Boards of Commercial Development Company PLC, Lanka Financial Services Bureau Limited, Sri Lanka Banks’ Association (Guarantee) Limited and The Financial Ombudsman Sri Lanka (Guarantee) Limited. He currently serves as an Independent Non-Executive Director on the boards of Asset line Leasing Co Ltd, Ceylinco Life Ltd and as the Non-Executive Chairman of DFCC Bank PLC. 10 | Asian Hotels and Properties PLC Ashan De Zoysa Director* Ashan De Zoysa counts more than 26 years of experience in the field of Information & Communication Technology including several years of overseas exposure, in the fields of IT and Derivative/Commodity Trading in Australia. Ashan holds a Bachelor of Commerce Degree from the University of New South Wales. He is the Managing Director of A.E.C. Properties Private Ltd and serves on the Board of Associated Electrical Corporation Ltd. He has previously served on the Boards of AMW Group as a working Director and as an Independent Non-Executive Director of Union Assurance PLC. * Independent Non-Executive Director CORPORATE GOVERNANCE Corporate governance provides the necessary guidelines to ensure the continuation of essential functions to achieve sustainable economic growth and corporate success. The comprehensive corporate governance framework of Asian Hotels and Properties PLC (‘Company’/AHP) has provided a solid foundation to navigate the uncertainties during the year under review. The expectations of the Board were met through stringent policies, organisational structures and systems placed to provide internal checks and controls on the conduct of business. Key Governance Highlights - 2022/23 › Establishing an enabling environment for growth in a structured, sustainable, and transparent manner. › Continuous strengthening of internal controls through efficient process. › Priority on cashflow and liquidity management. › Fostering a positive work atmosphere to promote engagement, showing appreciation to employees, providing competitive pay and benefits, and encouraging a healthy work-life balance. › Asian Hotels and Properties PLC was ranked 16th in the Transparency in Corporate Reporting (TRAC) Assessment by Transparency International Sri Lanka (TISL). This ranking is based on an assessment of corporate disclosure practices among the top 100 companies listed on the Colombo Stock Exchange. As a subsidiary of John Keells Holdings PLC (Group) (“the Holding/Parent Company”) the Company and its subsidiary Trans Asia Hotels PLC (‘TAH’) adhere to the Parent Company’s policies, strategic planning, resource allocation, accountability, values and assurance processes. A mutual understanding and an agreed level of compliance is reached across the JKH Group through the adoption of a strong set of values and a formal Code of Conduct ensuring the application of policies and structures of the Holding Company. Highlights of the 28th Annual General Meeting held on 21st June 2022 Mr. J.G.A. Cooray, who retired in terms of Article 84 of the Articles of Association of the Company was re-elected as a Director of the Company. Mr. J. Durairatnam, who retired in terms of Article 84 of the Articles of Association of the Company, was re-elected as a Director of the Company. Ms. A. Nanayakkara, who retired in terms of Article 91 of the Articles of Association of the Company, was re-elected as a Director of the Company. Messrs. KPMG were re-appointed as the External Auditors of the Company and the Directors were authorised to determine their remuneration. COMPLIANCE SUMMARY Regulatory Benchmark Standard/Principle/Code › The Companies Act No. 7 of 2007 including regulations Adherence Mandatory provisions - Fully Compliant › Listing Rules of the Colombo Stock Exchange (CSE) including circulars › Securities and Exchange Commission of Sri Lanka (SEC) Act No. 19 of 2021, including rules, regulations, directives and circulars › Code of Best Practices on Related Party Transactions (2013) advocated by SEC › Code of Best Practice on Corporate Governance (2013) jointly advocated by the SEC and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) › Code of Best Practice on Corporate Governance (2017) issued by CA Sri Lanka Voluntary provisions - Fully Compliant Voluntary provisions - compliant with the 2017 Code to the extent of business exigency and as required by the John Keells Group Annual Report 2022/2023 | 11 Corporate Governance Key Internal Policies › Articles of Association of the Company › Policy on communications and ethical advertising › Recruitment and selection policy › Ombudsperson policy › Learning and development policy › Group accounting procedures and policies › Policies on equal opportunities, non-discrimination, career management and promotions › Policies on enterprise risk management › Rewards and recognition policy › Policies on fund management and forex risk mitigation › Leave, flexi-hours, tele-working and agile working policies including health and safety enhancements and protocols › IT policies and procedures, including data protection, classification and security › Code of Conduct which includes policies on gifts, entertainment, facilitation payments, proprietary and confidential information › Group sustainability, environmental and economic policies › Policies on diversity, equity and inclusion, including gender › Whistle-blower policy › Policy against sexual harassment › Policies on energy, emissions, water and waste management › Disciplinary procedure › Policies on products and services › Policy on grievance handling › Policy on bidding for contracts, including on government contracts › Policies on forced, compulsory and child labour and child protection › Policies on anti-fraud, anti-corruption, anti- money laundering and countering the financing of terrorism Above policies of the Group are followed by all employees of the Company and its subsidiary. PRINCIPLES OF CORPORATE GOVERNANCE › Allegiance to the Group values. › Compliance with applicable laws, rules and regulations. › Conducting business in an ethical manner, in line with acceptable business practices. › Exercise professionalism and integrity in all business and ‘public’ personal transactions. › Ensuring that no one person has unfettered powers of decision making. › Opting for the early adoption of accounting standards and best practices of governance, when practical. › Encouraging proactive discussions with the relevant regulatory bodies to facilitate the implementation of matters of governance and other business reforms in Sri Lanka. › Making business decisions and resource allocations in an efficient and timely manner, within a framework that ensures transparent and ethical dealings, which adhere to the laws of the country and the standards of governance that stakeholders expect from the Company. 12 | Asian Hotels and Properties PLC THE CORPORATE GOVERNANCE SYSTEM The regulatory frameworks based on the foundational principles of accountability, participation, integrity and transparency are regularly reviewed to reflect global best practices, evolving regulations, and dynamic stakeholder needs. The Company’s governance structure and policies are in conformity with the Parent Company. The Parent Company’s governance structure and policies are as depicted in the diagram. Level Internal Governance Structure Integrated Governance Board of Directors and Senior Management Committees Integrated Governance Systems and Procedures Human Resources and Compensation Committee of JKH Group Audit Committee Related Party Transactions Review Committee of JKH Board of Directors Strategy Formulation and Decision Making Process Assurance Mechanisms Companies Act No.07 of 2007 JKH Code of Conduct Mandatory compliance Listing Rules of the Colombo Stock Exchange (CSE) Project Risk Assessment Committee of JKH Human Resource Governance Senior Independent Director Mandatory compliance Securities and Exchange Commission of Sri Lanka Act No. 19 of 2021, including directives and circulars Nominations Committee Integrated Risk Management Board Committee Mandatory compliance Code of best practices on Related Party Transactions (2013) advocated by Securities and Exchange Commission (SEC) Chairperson/CEO Group + Industry/ Function Group Executive Committee (GEC) IT Governance Employee Participation Mandatory compliance The Code of Best Practice on Corporate Governance (2013) as published by the Securities and Exchange Commission and the Institute of Chartered Accountants, Sri Lanka (CA Sri Lanka) Group Operating Committee (GOC) Tax Governance Industry/ Function Sector/ Function/ Sub- sector Internal Controls Group Management Committee (GMC) Sector Committee (SC) Business/ Function/ BU / Department Regulatory Mechanisms Stakeholder Management and Effective Communication Voluntary compliance Ombudsperson Code of Best Practice on Corporate Governance (2017) issued by CA Sri Lanka Management Committee Sustainability Governance Employee Empowerment External Assurance Voluntary compliance with almost the full 2017 Code to the extent of business exigency and as required by the John Keells Group › Except the Audit Committee and Nominations Committee, the other three (3) Boards Sub-Committees of JKH act on behalf of Asian Hotels and Properties PLC and are chaired by Independent Directors appointed by the JKH Board. Annual Report 2022/2023 | 13 Corporate Governance BOARD OF DIRECTORS • Reviewing the performance of the senior management. Roles and Responsibilities • Monitoring systems of governance and compliance, including concerns on ethics, bribery and corruption. The Board has overall responsibility for formulating strategy, setting risk appetite, ensuring consistency of workforce policies with Company values, and monitoring achievement of goals and objectives while balancing stakeholder interests. Integrated thinking at the Board level ensures that Environmental, Social and Governance (ESG) perspectives are incorporated into policy and strategy across the Company. • Overseeing systems of internal control, risk management and establishing whistle-blowing conduits. • Determining any changes to the discretions/authorities delegated from the Board to the executive levels. Chairperson Steers and Sets Strategic Direction Approves Policy and Capital Planning The Chairperson of JKH, serves as the Chairperson of the Company as well. Key roles and responsibilities include: • Approves strategy. Focuses on high environmental, social and governance standards • Gives effect to strategy, sets direction, resource allocation and risk appetite • Providing leadership to the Board whilst inculcating good governance and ensuring effectiveness of the Board • Ensuring that, constructive working relations are maintained between the members of the Board • Ensuring the assistance of the Board Secretary that: Board's Primary Governance Roles and Responsibilities Overlooks and Monitors Ensures Accountability • Implementation by Management • For organisational performance through reporting, disclosure and engagement In carrying out its responsibilities, the Board promotes a culture of openness, productive dialogue and constructive dissent, ensuring an environment which facilitates employee empowerment and engagement and creates value to all stakeholders. The Board’s key responsibilities include: • Providing direction and guidance to the Company in the formulation of sustainable, high-level, medium, and long-term strategies which are aimed at promoting the long-term success of the Company. • Tracking actual progress against plans. • Ensuring business is conducted with due consideration to ESG factors. • Reviewing HR processes with emphasis on senior management succession planning, including diversity, equity and inclusion (DE&I) strategy. • Ensuring operations are carried within the scope of the Enterprise Risk Management framework. 14 | Asian Hotels and Properties PLC • Board procedures are followed • Information is disseminated in a timely manner to the Board The Board is of the view that the Chairperson’s other commitments do not interfere with the discharge of his responsibilities to the Company. The Board is satisfied that the Chairperson allocates sufficient time to serve the Company effectively. President – Leisure, JKH and Chief Executive Officer Cinnamon Hotels & Resorts While the Company does not have a Chief Executive Officer, the President – Leisure, JKH and Chief Executive Officer (CEO) Cinnamon Hotels & Resorts, who are Non-Executive Directors of the Company, undertake the following responsibilities: President – Leisure, JKH: Provides leadership pertaining to business portfolio decisions, strategy and planning of the Company and its subsidiary. CEO - Cinnamon Hotels & Resorts: Executes strategies and policies of the Board, in consultation with the President Leisure, JKH and ensures: • The efficient management of all businesses of the Hotel and its subsidiary • That the operating model is aligned with the short and longterm strategies of Cinnamon Hotels and Resorts • Succession planning in respect of the senior management levels of the Hotel and its subsidiary Regular reporting on key matters by the President – Leisure, JKH and CEO - Cinnamon Hotels & Resorts to the Board, enables effective oversight by the Board. Composition of the Board of Directors The composition of the Board of Directors of the Company during the year under review is illustrated as follows: Non-Executive NonIndependent Directors Non-Executive Independent Directors TENURE, RETIREMENT AND RE-ELECTION OF DIRECTORS As prescribed by the Articles of Association of the Company, at each Annual General Meeting, one-third of the Directors of the Company, except the Chairperson, retire by rotation. A Director retiring by rotation is eligible for re-election. The Directors who retire by rotation are those who have been longest in office since their appointment, last election/re-appointment. In addition, any new Director who was appointed to the Board during the year is required to stand for re-election at the next Annual General Meeting in terms of the Articles of Association of the Company. Induction and Training for Directors All newly appointed Directors undergo a formal induction process which includes knowledge sharing sessions on Company values and culture, governance framework, policies and processes, JKH Group Code of Conduct & Ethics adopted by the company, sector business model, strategy and Directors’ responsibilities. Board members are also given insights into regulatory changes that may impact the industry at Board meetings. Further, newly appointed Directors are granted access to relevant parts of the business and are given the opportunity to meet with key management personnel and other key thirdparty service providers such as External Auditors and Risk Consultants. Directors recognise the need for continuous training and expansion of their knowledge and skills to effectively discharge their duties and regularly participate in industry forums and other personal development training to expand their knowledge and skills. Board Meetings, Agendas and Attendance Four (04) Board meetings were held during the financial year under review. The typical Board agenda of the Company includes the following : › Matters arising from the previous minutes All Non-Executive Independent Directors are appointed for a period of three (3) years subject to any limitations under the Listing Rules and applicable laws, including those on the age limit. Further, Non-Executive Independent Directors can serve up to a maximum of three successive terms unless an extended Board tenure is necessitated by the requirements of the Company. › Board Sub-Committee reports and other matters exclusive to the Board The proposal for the re-election of Directors is set out in the Annual Report of the Board of Directors. › Ratification of the use of the Company seal Retirements and re-appointments during the year › New resolutions Mr. J.G.A. Cooray, who retired in terms of Article 84 of the Articles of Association of the Company was re-elected as a Director of the Company. Mr. J. Durairatnam, who retired in terms of Article 84 of the Articles of Association of the Company, was re-elected as a Director of the Company. › Review of performance - in summary and in detail, including high level commentary on actuals and outlook › Approval of quarterly and annual Financial Statements › Ratification of capital expenditure and donations › Ratification of Circular resolutions › Any other business All Directors have access to Keells Consultants (Private) Limited, who act as Company Secretaries, for advice on relevant matters. The Chairperson ensured that all Board proceedings were conducted in a proper manner, approving the agenda for each meeting prepared by the Board Secretary. Ms. A Nanayakkara, who retired in terms of Article 91 of the Articles of Association of the Company, was re-elected as a Director of the Company. Annual Report 2022/2023 | 15 Corporate Governance The Director’s attendance at Board meetings held during the financial year 2022/23 is given below: Name of Director 28/04/2022 19/07/2022 26/10/2022 27/01/2023 Total Mr. K. N. J. Balendra - Chairperson     4/4 Mr. J. G. A. Cooray     4/4 Mr. C. L. P. Gunawardane     4/4 Mr. S. Rajendra     3/4 Mr. M. R. Svensson     3/4 Mr. A. S. De Zoysa     4/4 Mr. J. Durairatnam     4/4 Ms. A. Nanayakkara     4/4 Access to Information and Resources Directors receive their Board packs seven days prior to the meetings. Directors have unrestricted access to the management and organisation information, as well as the resources required to clarify matters and carry out their duties and responsibilities effectively. Executive Management makes presentations on matters including business performance against operating plans, strategy, investment proposals, risk management, compliance and regulatory changes. Access to independent professional advice, co-ordinated through the Company Secretaries, is available to Directors at the Company’s expense. Board Agenda The Chairperson ensures that all Board proceedings are conducted smoothly and efficiently, approving the agenda for each meeting prepared by the Board Secretary. The typical Board agenda entailed confirmation of previous minutes, ratification of circular resolutions, ratification of the use of the Company seal and share certificates issued, discussion of matters arising from the previous minutes, submission of Board Sub-Committee reports, status updates of projects, review of performance, strategy formulation, approval of quarterly and annual financial statements, review of risks, sustainability and corporate social responsibility related aspects, ratification of capital expenditure, amongst others. Added emphasis was also placed on business performance considering the challenges stemming from the challenging macroeconomic environment. Board Secretary Secretarial services to the Board are provided by Keells Consultants (Private) Limited. The Secretaries and the Management apprise the Board of new and potential laws, revisions, regulations and requirements which are relevant to them as individual Directors and collectively to the Board. The Secretaries maintain minutes of Board meetings, which are open for inspection by any Director at any time. 16 | Asian Hotels and Properties PLC All Directors have access to the advice and services of the Secretaries, as necessary. The shareholders can also contact the Company secretaries, during office hours, on- for any Company related information requirements. Appointment and removal of the Company Secretaries is a matter for the Board. Time Dedicated by Non-Executive Directors The Board has dedicated adequate time for the fulfilment and discharge of their duties as Directors of the Company. It must be recognised that Directors have to dedicate sufficient time before a meeting to review Board papers and call for additional information and clarification, and after a meeting to follow up on issues consequent to the meeting. This should be supplemented by a time allocation for familiarisation with business changes, operations, risks and controls. In addition to attending Board meetings, the Directors attend the relevant Sub-Committee meetings and have also contributed to decision making via Circular Resolutions and one-on-one meetings with key management personnel, when necessary. Maintaining Board Independence and Managing Conflicts of Interest Stringent nominating procedures, the use of systematic and comprehensive board evaluation processes and independent director led engagement emphasise Board independence. All Directors are experienced leaders in their respective fields and exercise independent and unfettered judgement, promoting constructive Board deliberations and objective evaluation of matters set before them. Each Director holds a continuous responsibility to identify potential or actual conflicts of interest or biases arising from external associations, interests or personal relationships in material matters and to disclose the same to the Board. Directors make a general disclosure of interests, as illustrated below, at appointment, at the beginning of every financial year and during the year as required. Potential conflicts are reviewed by the Board from time to time to ensure integrity and Board independence. Details of companies in which Board members hold Board or Board Committee membership are available with the Company Secretary for inspection by shareholders, on request. Prior to Appointment Nominees are requested to make known their various interests that could potentially conflict with the interest of the Company Once Appointed Directors obtain Board clearance prior to; During Board Meetings • Accepting a new position Directors who have an interest in a matter under discussion; • Engaging in any transaction that could create or potentially create a conflict of interest • Excuse themselves from deliberations on the subject matter • All NEDs are required to notify the Chairperson-CEO of any changes to their current Board representations or interests and a new declaration is made annually. • Abstain from voting on the subject matter (abstention from decisions are duly minuted) The independence of all its Independent Non-Executive Directors was reviewed against the criteria summarised below: Criteria for defining Independence Status of conformity of INED None of the INEDs have Shareholding carrying not less than 10 per cent of voting rights None of the INEDs is a Director of another company* Compliant Compliant None of the INEDs have Income/non-cash benefit equivalent to 20 per cent of the Director’s annual income Compliant None of the INEDs have employment at JKH and/or material business relationship with JKH, currently or in the two years immediately preceding appointment as Director Compliant None of the INEDs have close family member who is a Director, CEO or a Key Management Personnel Compliant None of the INEDs have served on the Board continuously for a period exceeding nine years from the date of the first appointment Compliant None of the INEDs are employed or has a material business relationship and/or significant shareholding in other companies*. Entails other companies that have significant shareholding in JKH and/or JKH has a business connection with Compliant * Other companies in which a majority of the other Directors of the listed company are employed or are Directors or have a significant shareholding or have a material business relationship. The Related Party Transactions Review Committee of the parent acts as the Related Party Transactions Review Committee of the Company and, considers all transactions that require approval, in line with the Company’s Related Party Transactions Policy and in compliance with the applicable rules and regulations. The related party transactions are disclosed in note 30 to the financial statements. No Non-Executive Independent Director has a conflict of interest as per the criteria for independence outlined above. REMUNERATION Remuneration for Non-Executive, Non-Independent Directors Compensation for NED/NIDs is determined by reference to fees paid to other NED/NIDs of comparable companies. Director fees applicable to NEDs nominated by JKH are paid directly to JKH and not to the individual Directors. Annual Report 2022/2023 | 17 Corporate Governance Remuneration for Non-Executive, Independent Directors Compensation for NED/IDs is determined by reference to fees paid to other NED/IDs of comparable companies. NED/IDs receive a fee for devoting time and expertise for the benefit of the Company. Nevertheless, NED/IDs fees are not timebound 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/lower time devoted. NED/ IDs do not receive any performance/incentive payments. The aggregate remuneration paid for the NED/IDs of the Company, for the year was Rs. 2,715,000. The Board sub-committees comprise predominantly of NonExecutive Independent Directors. John Keells Holdings PLC (Parent Company) Human Resources and Compensation Committee Related Party Transactions Review Committee Project Risk Assessment Committee Asian Hotels and Properties PLC Audit Committee Nominations Committee AUDIT COMMITTEE BOARD EVALUATION Role The Board conducts its Board performance appraisal every financial year. This formalised process of individual appraisal enabled each member to self-appraise on an anonymous basis, the performance of the Board under the areas of, Assist the Board in fulfilling its oversight responsibilities for the integrity of the Financial Statements of the AHP Group, the internal control and risk management systems of the Company and its compliance with legal and regulatory requirements, the External Auditors’ performance, qualifications and independence, and the adequacy and performance of the Internal Audit function, which is undertaken by the Group Business Process Review Division of JKH (Group BPR). This is detailed in the terms of reference of the Committee which has been approved by the Board and is reviewed annually. The effectiveness of the Committee is evaluated annually by each member of the Committee and the results are communicated to the Board. › Role clarity and effective discharge of responsibilities, › People mix and structures, › Systems and procedures, › Quality of participation and › Board image The scoring and open comments are collated by an Independent Director, and results are analysed to give the Board an indication of its effectiveness as-well-as areas that required addressing and strengthening. BOARD SUB-COMMITTEES The Board has delegated certain functions to Board subcommittees, while retaining final decision-making 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. These are; 1. The Audit Committee 2. The Nominations Committee 3. The Human Resources and Compensation Committee 4. The Related Party Transactions Review Committee 5. Project Risk Assessment Committee As permitted by the listing rules of the CSE, the Human Resources and Compensation Committee and the Related Party Transactions Review Committee of the ultimate Parent Company, JKH, functions as the Human Resources and Compensation Committee and Related Party Transactions Review Committee of the AHP. Additionally, the Project Risk Assessment Committee of JKH also functions as the Project Risk Assessment Committee of the AHP. 18 | Asian Hotels and Properties PLC Composition of Committee The Audit Committee comprises of three (3) Independent Non Executive Directors. As prescribed in the Listing Rules of CSE, the Chairperson of the Audit Committee is an Associate member of the Chartered Institute of Management Accountants (CIMA), UK. Review Process › Review the quarterly and annual Financial Statements, including the quality, transparency, integrity, accuracy and compliance with accounting standards, laws and regulations › Procedures for identifying business risks and controlling their financial impact on the Company and the operational effectiveness of the policies and procedures related to risk and control › The appointment, remuneration, qualifications, independence and performance of the External Auditor and the integrity of the audit process as a whole › Budgeting and forecasting processes, financial reporting processes and controls › Procedures for ensuring compliance with relevant regulatory and legal requirements Meetings held during the year › Arrangements for protecting intellectual property and other non-physical assets › Overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls › Policies, information systems and procedures for preparation and dissemination of information to shareholders, the CSE and the financial community. › Review the adequacy and effectiveness of the internal audit arrangements. Four (4) meetings were held during the year under review. The Senior Management of Cinnamon Grand Colombo and the Crescat Property Division attend the Audit Committee meetings by invitation. Further, the representatives of the Internal Auditors, Messrs. PricewaterhouseCoopers (Pvt) Ltd, Group BPR Division and the External Auditors Messrs. KPMG, Chartered Accountants, also attend the Audit Committee meetings by invitation. The Audit Committee performs an important monitoring function in the overall governance of the Group. Director Finance of Cinnamon Grand is the Secretary of the Committee. Attendance Name of the member 22/04/2022 18/07/2022 20/10/2022 23/01/2023 Total Ms. A. Nanayakkara - Chairperson     4/4 Mr. A.S. De Zoysa     4/4 Mr. J. Durairatnam     4/4 Report of the Human Resources and Compensation Committee The Human Resource and Compensation Committee forms a key part of the governance framework of the Group and carries the mandate to oversee the compensation and benefits policies adopted by the Group, and in doing so, review and recommend overall remuneration philosophy, strategy, policies and practice and performance-based pay plans. Furthermore, it reviews performance, compensation and benefits of the Chief Executive Officer (CEO), the other Executive Directors, and key executives who support and implement decisions at an apex level, the overall business strategy and make recommendation thereon to the Board of Directors. The Committee also reviews and monitors the performance of the Group’s top talent for purposes of organisational growth and succession planning, with particular emphasis on succession at key executive levels. In performing this role, the Committee is conscious of the need to ensure that stakeholder interests are aligned, and the Group is able to attract, motivate and retain talent and ensure their loyalty; the integrity of the Group’s compensation and benefits programme is maintained and importantly, that the compensation policy and schemes are compliant with applicable laws and regulations. In this context, the Committee determined the remuneration of the Executive Directors including the Chairperson-CEO in terms of the methodology set out by the Board, upon an evaluation of their performance by the Non-Executive Directors. The evaluation of the members of the Group Executive Committee (GEC) was considered by the Committee and remuneration was determined based on performance, market comparators for similar positions and in accordance with the Company’s Compensation and Benefits policy. As per the mandate outlined, the report from the Chairperson of the Human Resources and Compensation Committee continues to be a standing agenda item at the quarterly Board meetings. The Chairperson of the Committee reports on the developments which have taken place since the last Board meeting, if any, and updates the Board on various matters, as relevant and requested. The Committee wishes to report that the Company has complied with the Companies Act in relation to remuneration of Directors. The annual performance appraisal scheme, the calculation of short-term incentives, and the award of ESOPs were executed in accordance with the approvals given by the Board, based on discussions conducted between the Committee and the Management. D.A. Cabraal Chairperson of the Human Resources and Compensation Committee 22 May 2023 Annual Report 2022/2023 | 19 Corporate Governance Committee Meeting Dates and attendance Name Mr. D.A. Cabraal - Chairperson Dr. S.S.H. Wijayasuriya 01/07/2022 12/12/2022* Eligible to attend Attended   2 2   2 2 N/A N/A N/A N/A   2 2 Mr. K.N.J. Balendra   2 2 Mr. J.G.A. Cooray   2 2 N/A  1 1 Mr. A. Omar** Mr. N. Fonseka*** By Invitation Ms. P. Perera * Directors of John Keells Holdings PLC who were not sub-committee members of the Human Resources and Compensation Committee were requested to attend via invitation. ** Resigned w.e.f. 27 June 2022 *** Appointed w.e.f 27 June 2022 Report of the Nominations Committee Composition The Nominations Committee of the Company as at 31 March 2023, consisted of the following members: Mr. J. Durairatnam (INED*) – Chairperson Mr. K.N.J. Balendra (NED*) Mr. A.S. De Zoysa (INED*) * INED-Independent Non-Executive Director ** NED-Non-Executive Director During its annual self-review, the Committee reaffirmed its mandate as follows: › To identify suitable persons who could be considered for appointment as Directors to the Boards of the Company and its subsidiary, Trans Asia Hotels PLC, as Non-Executive Directors. › To review the structure, size, composition and skills of the Board of the Company and its subsidiary. › To ensure that every appointee undergoes an induction. › To make recommendations on matters referred to it by the respective Boards of the Company and its subsidiary. During the reporting period, the Committee recommended the following appointments/re-appointments to the Board of Trans Asia Hotels PLC:› Ms. S.A. Atukorale (new appointment as an Independent Non-Executive Director); and › Mr. N.L. Gooneratne (renewal of contract as an Independent Non-Executive Director). The Committee continues to work with the Company Board on reviewing its skills mix, based on immediate and emerging needs. Further, the Committee discusses with the Board the outputs of the Annual Board Evaluation. J. Durairatnam Chairperson of the Nominations Committee 22 May 2023 20 | Asian Hotels and Properties PLC Committee Meeting Dates and attendance Name - Attended Mr. J. Durairatnam - Chairperson  1/1 Mr. K.N.J. Balendra  1/1 Mr. A.S. De Zoysa  1/1 RELATED PARTY TRANSACTIONS REVIEW COMMITTEE Composition › The Chairperson shall be an Independent Non-Executive Director. › Members of the committee should be a combination of Non-Executive Directors and Independent NonExecutive Directors. › The composition may include Executive Directors at the option of the Listed Entity. Scope › The Group has broadened the scope of the Committee to include senior decision makers in the list of key management personnel, whose transactions with Group companies also get reviewed by the Committee, in addition to the requisitions of the CSE. › Develop, and recommend for adoption by the Board of Directors of JKH and its listed subsidiaries, a Related Party Transaction Policy which is consistent with the operating model and the delegated decision rights of the Group. › Update the Board on related party transactions of each of the listed companies of the Group on a quarterly basis. › Define and establish the threshold values for each of the subject listed companies in setting a benchmark for related party transactions, related party transactions which have to be pre-approved by the Board, related party transactions which require to be reviewed annually and similar issues relating to listed companies. Report of the Related Party Transactions Review Committee Composition The following Directors served as members of the Committee during the financial year: Ms. P. Perera - Chairperson Mr. N. Fonseka Mr. D.A. Cabraal The Chairperson-CEO, Deputy Chairperson/Group Finance Director, and Group Financial Controller attended meetings by invitation. The Head of Group Business Process Review served as the Secretary to the Committee. The Committee held four meetings during the financial year, on a quarterly basis. Information on the attendance at these meetings by the members of the Committee is given below. Objective and Governing Policies The objective of the Committee is to exercise oversight on behalf of the Board of John Keells Holdings PLC and its listed subsidiaries, to ensure compliance with all applicable rules and regulations, namely the Code on Related Party Transactions, as issued by the Securities and Exchange Commission of Sri Lanka (‘The Code’) and the Listing Rules of the Colombo Stock Exchange (CSE). The Committee has also adopted best practices as recommended by the Institute of Chartered Accountants of Sri Lanka and ensures that transactions are in line with the Groups’ internal governance framework and associated policies. Procedure The Committee in discharging its functions primarily relied on processes that were validated from time to time and periodic reporting by the relevant entities and Key Management Personnel (KMP) with a view to ensuring that: › there is compliance with ‘The Code’ and the Listing Rules of the CSE › shareholder interests are protected; and › fairness and transparency are maintained. Annual Report 2022/2023 | 21 Corporate Governance Non-recurrent Related Party Transactions (RPTs) of listed entities: The Committee advocated the Management to implement appropriate procedures to ensure that all non-recurrent RPTs of the Group’s listed entities are submitted to the Committee, for pre-approval. Accordingly, the Committee reviewed and pre-approved all proposed non-recurrent Related Party Transactions (RPTs) of the parent, John Keells Holdings PLC, and all its listed subsidiaries, namely: Asian Hotels and Properties PLC, Ceylon Cold Stores PLC, John Keells PLC, John Keells Hotels PLC, Keells Food Products PLC, Tea Smallholder Factories PLC, Trans Asia Hotels PLC and Union Assurance PLC. Recurrent RPTs of listed entities: The Committee has endorsed guidelines to facilitate disclosures and assurances to be provided by the Senior Management of listed entities in the Group so as to validate compliance with sec 9.5(a) of the Listing Rules and thus exclusion from the mandate for review and pre-approval of such transactions by the Committee. Accordingly Recurrent RPTs as well as the aforesaid disclosures and assurances were reviewed annually by the Committee. Other significant transactions of non-listed subsidiaries: Material transactions of non-listed subsidiaries in the Group were presented to the Committee for information. The activities and views of the Committee have been communicated to the Board of Directors, quarterly, through verbal briefings, and by tabling the minutes of the Committee’s meetings. Ms. P. Perera Chairperson of the Related Party Transactions Review Committee 22 May 2023 Committee Meeting Dates and attendance Name Ms. P. Perera - Chairperson Mr. N. Fonseka Mr. D.A. Cabraal By Invitation Mr. K.N.J Balendra Mr. J.G.A. Cooray 19/05/2022 25/07/2022 03/11/2022 30/01/2023    Eligible to attend 4 4 4 Attended 4 4 4                  4 4 4 4 PROJECT RISK ASSESSMENT COMMITTEE Composition › › › › Should comprise of a minimum of four Directors. Must include the Chairperson-CEO and Group Finance Director. Must include two Non-Executive Directors. The Chairperson must be a Non-Executive Director. Scope › Review and assess risks associated with large-scale investments and the mitigatory plans thereto, if mitigation is possible, and identify risks that cannot be mitigated. › Ensure stakeholder interests are aligned, as applicable, in making this investment decision. › Where appropriate, obtain specialised expertise from external sources to evaluate risks, in consultation with the Group Finance Director. › Recommend to the Board, necessary action required, to mitigate risks that are identified in the course of evaluating a project in order to ensure that those risks are captured by the Group Risk Matrix for monitoring and mitigation. *No meetings were held during the year 2022/23 as the committee is required to convene only when there is a need, as per terms of its mandate 22 | Asian Hotels and Properties PLC Report of the Project Risk Assessment Committee The following Directors served as members of the Committee during the financial year: Dr. S.S.H. Wijayasuriya - Chairperson Mr. K.N.J. Balendra Mr. J.G.A. Cooray Ms. P. Perera The Project Risk Assessment Committee was established with the purpose of further augmenting the Group’s Investment Evaluation Framework. The Committee provides the Board with enhanced illumination of Risk perspectives with respect to large scale new investments, and also assists the Board in assessing the potential impact of risks associated with such investments. Investments which are referred to the Committee are those which exceed a board-agreed threshold in terms of quantum of investment and/or potential impact to the Group. The Committee accordingly provides early-stage recommendations to the Board with respect to the extent of risk and adequacy of mitigation strategies. Given the extenuating impact of Sri Lanka’s macroeconomic crisis on Group businesses and the trailing impacts of the pandemic on specific sectors; Board discussions took place at a higher frequency, affording the opportunity for matters pertaining to Group investments and risk assessments to be deliberated by the full Board. The Project Risk Assessment Committee did not meet during the financial year 2022/23. Dr. S.S.H. Wijayasuriya Chairperson of the Project Risk Assessment Committee 22 May 2023 INTEGRATED GOVERNANCE SYSTEMS AND PROCEDURES Listed below are the main governance systems and procedures of the JKH Group, adopted by the Company and its subsidiary. These systems and procedures strengthen the elements of the company’s Internal Governance Structure and are benchmarked against industry best practice. a. Strategy formulation and decision-making process b. Human resource governance c. Integrated risk management d. IT governance e. Tax governance f. Stakeholder management and effective communication g. Sustainability governance a. Strategy formulation and decision-making processes This exercise entails the following key aspects, among others. 1. Progress and deviation report of the strategies formed. 2. Competitor analysis and competitive positioning. 3. Analysis of key risks and opportunities. 4. Management of stakeholders such as suppliers and customers. 5. Value enhancement through initiatives centred on the various forms of capital under an integrated reporting framework. The strategies of the various business units, operating in diverse industries and markets, will always revolve around the JKH group strategy, while considering their domain specific factors. The prime focus always is to enhance value for all stakeholders. The JKH Group’s investment appraisal methodology and decision-making process adopted by the Company and its subsidiary ensures the involvement of all key stakeholders that are relevant to the evaluation of the decision. Strategy Mapping Strategy mapping exercises, concentrating on the short, medium and long-term aspirations of each business, are conducted annually and reviewed, at a minimum, quarterly/half-yearly or as and when a situation so demands. Annual Report 2022/2023 | 23 Corporate Governance In this manner: 1. • Several views, opinions and advice are obtained prior to making an investment decision including carrying out sensitivity analysis • A holistic view is taken on the commercial viability and potential of any project, including operational, financial, funding, legal, risk, sustainability, and tax implications. • All investment decisions are consensual in nature, made through the afore-discussed management committee structure where no single individual has unfettered decision making powers over investment decisions. 5. Performance evaluation of the second half/full year Formulating business strategy, objectives and risk management for each BU for the financial year and ensuing 5 years Continuous performance monitoring at BU/ sector/industry group level 2. GEC review and approval • The ultimate responsibility accountability of the investment decision rests with the Chairperson - CEO. The following section further elaborates on the Group’s strategy formulation and planning process. 4. Reforecasting the targets for the second half of the year and GEC approval 3. Business performance evaluation of the first six months against the target Medium-term Strategy The ensuing section illustrates the comprehensive process followed by each business in developing the business’s strategy for the medium term. Values and Promises • Identification of the core values the business will operate with and the internal promises that the business will strive to deliver to stakeholders Brand and Business Review • Review of global and regional trends • Identification of insights, risks, challenges, opportunities and implications, collated into key themes Brand Plan • Identifying key activities required to be undertaken under each theme and the articulation of the varied brand-led themes and activities • Identification of KPIs to measure delivery of promises Performance Measurement Measure of performance against: • Promises • Annual plans and projects • Long-term initiatives • Financial objectives 24 | Asian Hotels and Properties PLC Long-term Business Plan • Setting of a long-term goal and agreeing on the core pillars that would deliver growth • Target setting, scheduling activities and identifying workstreams to execute long-term initiatives • Identifying operating and capital expenditure along with capability resources Annual Business Plans • Articulation and approval of detailed project plans for execution of workstreams • Approval of Annual Business Plans Project Approval Process New projects follow a detailed feasibility report covering key business considerations under multiple scenarios within sustainability framework. The feasibility stage is not restricted to financial feasibility and encompasses a wider scope of work covering risk management, sustainable development, economic, social governance and human resources considerations. 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. Risk management Project origination Feasibility study Review by the GEC Due diligence Board/GEC approval Sustainability management Legal, regulatory and HR requirements/framework b. Human Resource Governance The JKH human resource governance framework adopted by the Company and its subsidiary is designed in a manner that enables high accessibility by any employee to every level of management. Constant dialogue and facilitation are also maintained ranging from work related issues to matters pertaining to general interest that could affect employees and their families. Company and its subsidiary follows an open-door policy for its employees and this is promoted at all levels of the Company and its subsidiary. The Human Resource Information System (HRIS) manages the entire life cycle of the employee from onboarding to performance management, succession planning, compensation, learning and development, through to offboarding. Performance Management The Performance Management System, as illustrated below, is at the heart of supporting human resource management processes such as learning and development, career development, succession planning, talent management, rewards/recognition and compensation/ benefits. Learning and Development Compensation and Benefits Identification of: • Long-term development plans • Competency-based training needs • Business focused training needs Identification of: • Performance ratings • Competency ratings Career Development Rewards and Recognition Identification of: • Chairperson's Award • Employee of the Year • Champion of the Year Performance Management System Identification of: • Promotions • Inter-company transfers • Inter department transfers Succession Planning Talent Management Identification of: • High performers • High potential Identification of: • Jobs at risk • Suitable successors • Readiness level of successors • Development plans • External recruitments Annual Report 2022/2023 | 25 Corporate Governance Performance based Compensation Policy The JKH Group Compensation Policy adopted by the Company and its subsidiary is as follows: Performance Management 'Pay for performance' Greater prominence is given to the incentive component of the total target compensation. Satisfaction 'More than just a workplace' Continuously focuses on creating a sound work environment covering all aspects of employee satisfaction. Compensation Policy • Compensation comprises of fixed (base) payments, short-term incentives and long-term incentives. • Higher the authority levels within the Group, higher the incentive component as a percentage of total pay. • Greater the decision influencing capability of a role, higher the weight given to organisational performance as opposed to individual performance. • Long-term incentives are in the form of Employee Share Options and cash payments. Internal Equity • Remuneration policy is built upon the premise of ensuring equal pay for equal roles. • Manager and above level roles are banded using the Mercer methodology for job evaluation, on the basis of the relative worth of jobs. During the year a comprehensive designation levelling and salary band realignment exercise was carried out to align ourselves with bench-marked international players. This is in line with our policy of ensuring internal and external equity. Employee Share Option Plan JKH Employee Share Option Plans are offered at defined career levels based on pre-determined criteria which are uniformly applied across the eligible levels and performance levels. These long-term incentives have been significantly instrumental in inculcating a deep sense of ownership in the recipients and is seen to be a key driver of performance driven rewards. Share options are awarded to individuals based on their immediate performance and potential importance of their contribution to the Group’s future plans. c. Integrated Risk Management JKH’s Group-wide risk management programme adopted by the Company and its subsidiary focuses on wider sustainability development, to identify, evaluate and manage significant Group risks and to stress test various risk scenarios, including a review of materiality. The programme ensures that a multitude of risks, arising as a result of the Group’s diverse operations, are effectively managed in creating and preserving stakeholder wealth. The Group manages its enterprise risk, audit and incident management processes through an automated risk management platform that enables the maintenance of live, 26 | Asian Hotels and Properties PLC External Equity • Fixed compensation is set at competitive levels using the median, 65th percentile and 75th percentile of the best comparator set of companies (from Sri Lanka and the region, as relevant) as a guide. • Regular surveys are done to ensure that employees are not under/over compensated. dynamic and virtual risk registers which are linked to business goals and responsible personnel. Features such as the provision of timely alerts on action plans and escalation processes for risks, where action plans are over-due, ensure maintenance of live risk grids. Continuous steps taken towards promoting the Group’s integrated risk management process are: • Integrating and aligning activities and processes related to planning, policies/ procedures, culture, competency, internal audit, financial management, monitoring and reporting with risk management. • Supporting executives/managers in moving the organisation forward in a cohesive integrated and aligned manner to improve performance, while operating effectively, efficiently, ethically and legally within the established limits for risk taking. The risk management programmes have allowed greater visibility and understanding of risk appetites. Enabled by the automated risk management platform, key management personnel have virtual visibility of the risks, as relevant, while the Board has visibility of all Group risks. The Board, GEC and Group Management Committees, oversee risk management across the Group to ensure that risks are brought within tolerance, managed and/or mitigated. Please refer the Risk Management Report on page 48 and Notes to the financial statements. d. Information Technology (IT) Governance IT governance stewardship roles are governed through layered and nested committees, cascading from the GEC to the Group IT Steering Committee to the Group IT Operation Committee with well-defined roles and responsibilities at a Group, industry group as well as business unit level. The Group’s IT governance framework adopted by the Company and its subsidiary focuses on five broader segments, namely strategic alignment, value delivery, performance management, risk management, and resource management. Additionally, the IT governance framework used within the JKH Group leverages best practice and industry leading models such as CoBIT (Control Objectives for Information and Related Technology), ISO 35800, ISO27001, ISO 9001:2015, COSO (Committee of Sponsoring Organisations of the Treadway Commission)/ BCP (Business Continuity Planning), ITIL (Information Technology Infrastructure Library), CMMI (Capability Maturity Model Integration), NIST (National Institute of Standards and Technology), FAIR (Factor Analysis of Information Risk), among others, in formulating a state-of-the-art framework for IT governance, risk and compliance management across the Group. The key focus areas of the governance framework are as follows: o ortfoli ation P t Applic gemen a n a M at lic pp & A ise on on pr cti tati ter Sele en m En ple Im Corp ora Cult te IT ure d IT Governance Goo k IT Ris t gemen Mana ip h rds wa Ste ls & Res o l Corpo Govern rate ance IT Risk Intelligen ce D Transfoata rmatio n ce & Cybersecu rity rnan ove G IT t of Conflicest Inter urc es Ski Data Quality Strategic & IT Governance Compliance & ing lann ice P ture Serv rchitec A a Service Managem ent Tra ns ion rat nt gu e nfi gem Co ana M t ta en Da gem a an M M Q an uali ag ty em en t C Co ode nd of uc t re Ar D ch ata ite ctu I As T R i s e ssm sk en t l Quanti tati Metho ve ds Ch Mana ange gemen t IT S e c Ri urity sks & a on ati nis n a g g Or Desi IT ta Metada Infrastructure & Operations ss ss Proce l Busine terna ls & In Contro Audit par enc y D Ec igit on al om y m & ity bil nta ibility u s co Ac spon re B Co usin nti es nu s ity ess e c sin Bu ligen g el tin Int epor &R on ati ce lic enan p t Ap ain M ess sin Bu nce & e ta lig Da Intel IT & Dat ation Risk Manager & ment anage IT M licies Po Di Re saste c Pla over r nin y g Digitis ise pr re ter ctu En hite c Ar In c M iden an ag t & em Pr en obl e t l IT Digitaure Cult Availab ility & Capacity Managem ent & ct oje io Pr rtfol ent Po gem a an M ion Annual Report 2022/2023 | 27 Corporate Governance The Group continually focusses on enhancing the IT governance framework in line with its business and IT strategies with a focused shift towards a zero-trust model built on a mobile-first, internet-first, cloud-first and AI-first strategy. 3. The Head of Tax of each industry group, reporting functionally to the Group Head of Tax, ensures compliance and implements Group tax strategy across all businesses. Digital Oversight and Cyber Security Ensure: The rapidly advancing nature of technology and the continual integration of the Group’s operations with technological progress has resulted in increased vulnerability for the Group from a digital standpoint. As a result, the Board places significant emphasis on ensuring that the Group’s soft and hard infrastructure is designed in a manner, and adequate, to deal with a potential breach. Data protection and cyber security are regularly addressed during the Risk Management and Audit Committee meetings and periodically discussed at a Board level. Data Protection, Information Management and Adoption Policy and Strategy 1. Integrity of all reported tax disclosures. 2. Robust controls and processes to manage tax risk. 3. Openness, honesty and transparency in all dealings. 4. Presence of legitimate business transactions underpinning any tax planning or structuring decision/ opportunity. 5. Contribute to fiscal policy decisions constructively in the interest of all stakeholders. Role 1. Implement and maintain strong compliance processes. 2. Analyse and disseminate business impact from change in tax legislation. The presence of continuously evolving IT infrastructure and platforms to meet requirements of day-to-day business, augured well for the Group, particularly given restrictions in movement and social distancing measures due to the COVID-19 pandemic. The Group witnessed an acceleration of digitisation and better user adoption. Despite this, adoption of such systems and features remain at a relatively early stage across the Group and is a key focus area for the Group. Given the emergence of regulations such as European Union General Data Protection Regulation (GDPR) and the Data Protection Act of No. 09 of 2022 of Sri Lanka, data security, integrity and information management will be pivotal. In addition to this, the Group’s initiatives on advanced data analytics also necessitate an established governance framework to manage the flow of data. 3. Provide clear, timely, and relevant business focused advice across all aspects of tax. To this end, the Group will continue to strengthen its data governance structure to ensure ownership and accountability of clearly articulated data governance policies and processes and Group-wide data quality standards. 2. Periodic updates to the Board of Directors on various tax matters (quarterly at minimum). e. Tax Governance The JKH Group’s tax governance framework and tax strategy adopted by the Company and its subsidiary is guided by the overarching principles of compliance, transparency and accountability, and acknowledges JKH’s adopted by the Company and its subsidiary duty in fulfilling its tax obligations as per fiscal legislation, while preserving value for other stakeholders, particularly investors. Governance Structure 1. Voluntary compliance and efficient tax management are key aspect of the Group’s overall tax strategy. 2. This is enabled through a decentralised tax structure where expertise is built at each industry group level. 28 | Asian Hotels and Properties PLC 4. Ensure availability of strong and well documented technical support for all tax positions. 5. Obtain independent/external opinions where the law is unclear or subject to interpretation. 6. Foster healthy professional relationships with all regulatory authorities Review and Monitoring 1. Leverage on digital platforms to support, record and report on tax compliance status across the Company and its subsidiary. The JKH approach to tax governance is directly linked to the sustainability of business operations. The presence of a wellstructured tax governance framework ensures the following: • Ability to manage tax efficiently by reducing the tax burden on the Company and its subsidiary, within the ambit of applicable laws. • Manage tax risks and implications on Company and its subsidiary reputation through adequate policies, proactive communication and defence. • Facilitate healthy relationships amongst stakeholders, Government and tax authorities. • Ensuring integrity of reported numbers and timely compliance. f. Stakeholder Management and Effective Communications The JKH Group’s key stakeholder management methodologies adopted by the Company and its subsidiary is shown below. • Presence of an investor relations team • Providing of quality and safe products • Social media presence • Constant engagement with customers • Prompt release of information to public/CSE e Employ • Various means for employee involvement es • Accessibility to all levels of the management Stakeholder Management Other Key stakeholders • Corporate Communications • JK Forum • Young Forum • John Keells Employee Self Service (JESS) Go vern m en t I Sh • Measures in place in case of serious loss of capital r/ lde ho stor e ar ve n • Procedures to ensure long-term business relationships with suppliers s/ er rs e • Effective communication of AGM related matters Cus Su tom pp li • Transactions in compliance with all relevant laws and regulations, transparently and ethically • Zero tolerance policy in ensuring that all business units meet their statutory obligations in time and in full • Provision of formal and sometimes informal, access to other key stakeholders • HIVE • Staff Volunteerism Communication with Shareholders Release of Information to the Public and CSE The Company encourages effective communication with shareholders who are engaged through multiple channels of communication, including the AGM (detailed below), Annual Report, Interim Financial Statements, press releases, social media platforms and announcements to the CSE. The Board recognises its responsibility to present a balanced and understandable assessment of the Company’s financial position, performance and prospects and is committed to fair disclosure, with emphasis on the integrity, timeliness and relevance of the information provided so as not to create a false market. The Board of Directors, in conjunction with the Audit Committee where applicable, is responsible in ensuring the accuracy and timeliness of published information and in presenting a true and fair view, and balanced assessment of results in the quarterly and annual financial statements. Accordingly, the Company has reported a true and fair view of its financial position and performance for the year ended 31 March 2023 and at the end of each quarter of the financial year 2022/23. Shareholders may also, at any time, direct queries and concerns to Directors or Management of the Company through the Company Secretaries - Keells Consultants (Pvt) Ltd, The Company Secretaries maintain a record of all correspondence received and keeps the Board apprised of issues raised by the shareholders to ensure that they are addressed in an appropriate manner. Matters raised in writing are responded to in writing directly by the Company Secretaries, as relevant. All other material and price sensitive information about the Company is promptly communicated to the CSE and such information is also released to employees, the press and shareholders. Constructive use of the Annual General Meeting (AGM) The AGM is the main mechanism for the Board to interact with and account to shareholders and affords an opportunity for shareholders’ views to be heard. At the AGM, the Board provides an update to shareholders on the Company’s Annual Report 2022/2023 | 29 Corporate Governance performance and shareholders may ask questions clarifying matters prior to voting on resolutions. It is the key forum for shareholders to engage in decision making matters reserved for the shareholders which include proposals to adopt the Annual Report and Accounts, appoint Directors and Auditors and other matters requiring special resolutions as defined in the Articles of Association or the Companies Act. The Chairperson ensures the Chairperson of the Audit Committee, Board members, key management personnel and External Auditors, are present to respond to queries that may be raised by the shareholders. All shareholders are encouraged to participate at the AGM and exercise their voting rights. Notice of the AGM, the Annual Report and Financial Statements and any other resolutions to be taken up at the AGM together with the corresponding information, are circulated to shareholders not later than 15 working days prior to the AGM. The Company has an effective mechanism to record and count all proxy votes lodged for each resolution. Serious Loss of Capital In the unlikely event that the net assets of the Company fall below half of its stated capital, shareholders will be notified, and the requisite resolutions would be passed on outlining the proposed way forward. g. Sustainability Governance The Company and its subsidiary places significant emphasis on sustainable development and value creation. The JKH Group’s Sustainability Management Framework ensures specific policies and procedures are established for social and environmental governance in each business unit, ensuring an agreed level of compliance within the Company and its subsidiary. As such, sustainability principles are embedded in the Company business strategy and endorsed throughout its operations. Activities undertaken in recognition of its responsibility as a corporate citizen are presented throughout the Annual Report The integration of sustainability goals into our operation is supported by a robust governance framework that ensures accountability, participation and transparency. During the year we further strengthened our environmental, social and governance (ESG) framework with the establishment of a Center Sustainability Team comprising of a vice president to drive the Group’s sustainability agenda. In addition, ESG Compliance Executives were recruited at each of our resorts to drive sustainability initiatives at business unit level. Industry leading ESG measurement and management platforms meanwhile ensure that progress is continuously measured and monitored. 30 | Asian Hotels and Properties PLC Human Rights The Company and its subsidiary is committed to upholding universal human rights of all its stakeholders whilst maintaining the highest ethical standards in all its operations. John Keells Group’s diversity, equity and inclusion (DE&I) policy John Keells Group’s DE&I policy is followed by all employees of the Company and its subsidiary. The Company and its subsidiary recognises that organisations that constitute diverse and inclusive workforces are best placed to innovate, retain talent and deliver better overall results, and firmly believes that it can achieve its highest potential through bringing together diverse perspectives and backgrounds. The Company and its subsidiary is committed to advancing a culture of equitable inclusion amongst its workforce and value chain and ensuring that the dignity and diversity of all employees and value chain partners are respected. The DE&I policy is based on the key principles of: • Empowerment and inclusion • Zero tolerance for discrimination • Equal opportunity • Equal participation • Diverse value chains The following key initiatives and targets were rolled-out, in furtherance of the Group’s emphasis on creating an inclusive, diverse and equitable work environment; • The Group introduced 100 days of equal parental leave at the birth or adoption of a child. In this regard, while the Group will continue to offer 100 days of maternity leave on the birth or adoption of a child, the five-days of paternity leave was enhanced to 100 days, ensuring equity, and recognising the importance of both parents’ roles in early childcare. • The Group also adopted gender-neutral terminology with the objective of avoiding word choices which may be interpreted as biased, discriminatory or demeaning and with the intention of being inclusive of gender non-binary persons. • As a first step to developing a focused strategy around increasing career opportunities for persons with disabilities (PWDs), a tri-lingual survey to understand the needs and perceptions of PWDs was launched. This was one aspect of a structured phased-out roadmap, which includes identifying roles across the Group that can provide opportunities for PWDs with reasonable accommodation, the appointment of supported employment officers, and conducting job mapping and awareness sessions by industry experts. John Keells Group’s Anti-Corruption Policy JKH Group Policy on Anti-Corruption is followed by all employees of the Company and the Company and its subsidiary. JKH places the highest value on ethical practices and has promulgated a zero-tolerance policy towards corruption and bribery in all its transactions. JKH strives to maintain a culture of honesty and opposition to fraud and corruption. Based on this commitment, the Code of Conduct, anti-fraud, fraud prevention, anti-corruption, anti-bribery, validation and audit policies of JKH outline the principles to which we are committed in relation to preventing, reporting and managing fraud and corruption. It covers inter alia, theft, embezzlement, overriding controls, giving or receiving kickbacks, bribery, allowing oneself to be placed in situations of conflict of interest and statements (financial or non-financial) dishonestly and recklessly made contrary to the factual position. The Company also has a process to ensure compliance with the laws and regulations of the countries it operates in, including anti-corruption and anti-bribery laws. The evaluation of the risk of corruption as part of its risk management process has been put in place and mitigation measures to reduce such risks has been addressed in the Risk Management report on page 48 of the Annual Report. JKH seeks to ensure that ethical business practices are the norm from the business unit level, down to the individual employee. Its transparent control and prevention mechanisms also extend to its value chain, to its customers, suppliers and business partners. At the employee level, every employee and director are required to comply with Company policies, including the Code of Conduct. The Company and Cinnamon Hotels and Resorts Leadership spearheads the implementation of the Code. Further, Directors and all employees of the Company and its subsidiary is given training on JKH Group Policy on Anti- Corruption. John Keells Group’s policy for bidding on contracts and tenders In November 2022, the Group introduced the Policy for bidding on contracts and tenders, which entails a standardised set of guidelines for bidding, including to those of local and foreign governments and related bodies. The Policy for bidding on contracts and tenders, is a step towards promoting organisational transparency and consistent organisational behaviour. Whilst Group companies are required to adhere to local statutory provisions and Government procurement guidelines and meet the requirements stipulated in the request for proposal/guidance notes specified in the contracts/tenders, the policy also requires the bidding entity within the Group to adhere to all Group policies including the Code of Conduct, anti-corruption, anti-bribery and anti-money laundering and gift policies. Policies Policies on forced, compulsory and child labour and child protection - JKH employs stringent checks during its recruitment process to ensure that its minimum age requirements are met and ensures that all employees are educated on key aspects of forced and compulsory labour. Policies on equal opportunities, non-discrimination, career management and promotions - JKH remains committed to maintaining a workplace that is free from discrimination and is committed to hiring, developing and promoting individuals who best meet the requirements of available positions. Gender policy - JKH is committed to striving for gender equity through empowerment & inclusion, equal opportunity and equal participation. Policy against sexual harassment - A zero tolerance for physical, verbal or non-verbal harassment based on gender, race, religion, nationality, age, social origin, disability, sexual orientation, gender identity, political affiliations or opinion is in place. HIV & AIDS workplace policy - JKH does not discriminate in the workplace against employees on the basis of real or perceived HIV status. Policies on anti-fraud, anti-corruption and anti- money laundering and countering the financing of terrorism - All functions are required to include and analyse the risk of corruption as a part of their risk management process. Supplier Code of Conduct - All significant suppliers of JKH shall be in compliance with applicable laws and regulations with regard to labour, human rights, environment and ethical business practices. Policy for bidding on contracts and tenders - This entails a standardised set of guidelines for bidding, including to those of local and foreign governments and related bodies. The companies are required to adhere to local statutory provisions and Government procurement guidelines and meet the requirements stipulated in the request for proposal/guidance notes specified in the contracts/tenders. Annual Report 2022/2023 | 31 Corporate Governance This policy applies to the Company and its subsidiary and, as applicable, to consultants, agents, representatives, and supply chain partners. ASSURANCE MECHANISMS of Conduct as an element of their annual performance appraisal. The Chairperson 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. Code of Conduct Corporate Values The Company and its subsidiary abides by the JKH Group Code of Conduct. To drive cohesive growth across the Group, the Board has established common guidelines including a code of conduct aligned to a strong set of corporate values. The Code applies to all employees including Directors and is inculcated at all levels through structured communication, with the objective of enhancing awareness and driving reinforcement. The code fosters an ethical culture and promotes compliance with relevant laws and legislation, an imperative to retaining the trust of stakeholders. “Cinnamantra” our new purpose and seven corporate values were rolled out during the year. Our seven core values Greatness, Compassion, Agility, Wellbeing, Inclusivity, Trust and Curiosity will be the foundation on which we base our future journey of growth. A series of programs are being carried out to create awareness about the Group’s new purpose and values. The Code of Conduct also includes policies on gifts, entertainment, facilitation payments, proprietary and confidential information. Policies on anti-fraud, anti- corruption and anti-money laundering and countering the financing of terrorism and JKH’s Code of Conduct also encompass: • anti-bribery controls to prevent payments and contributions being made with the aim of obtaining an improper business benefit from any party including, but not limited to clients, service providers, customers, business associates and political parties; and • controls on gifting and favours. The giving or accepting gifts or favours in whatsoever form, including from clients, service providers, customers, business associates and political parties and any other stakeholder we engage with in the course of carrying out duties in our professional capacity, is prohibited if it was possible on the part of a “reasonable person” to conclude that the giving/ acceptance of such gifts or favours could directly or indirectly affect one’s independence in decision making and conduct as an employee and/or if it could be seen by others as a consideration for an official or business favour. The ‘reasonable person’ test should also be applied in respect of charitable donations and sponsorships (financial or in-kind) that are made. Gifts or benefit of a threshold of above USD 50 per gift, either given or received based on business exigencies, are monitored to ensure conformance with the Group’s policies, including policies on gifts and entertainment. Such exceptions are required to be reported to the respective Finance Head of the business (Chief Financial Officer or Sector Financial Controller), where in turn, these are collated and monitored centrally. The Board leads by example setting the ethical tone for the Company. Employees are assessed, recognised and rewarded for conformance with Corporate Values and adherence to the Code 32 | Asian Hotels and Properties PLC Employee Participation in Assurance Employee engagement is encouraged at all levels and the Company and its subsidiary continues to work towards introducing innovative and effective ways of employee communication and employee awareness. Whilst employees have many opportunities to interact with senior management, the Company and its subsidiary has created the ensuing formal channels for such communication through feedback, without the risk of reprisal. Further, any of the communication channels mentioned here are available to any of the employees of the Company and its subsidiary through which employees can report suspected acts of corruption or breaches of anticorruption policies. Such communication and feedback received from the employees by the management are recorded, irrespective of the level of anonymity, and subsequently discussed and followed up. The respective outcomes are duly recorded. Internal Controls The Board has taken necessary steps to ensure the integrity of the Company’s accounting and financial reporting systems and that internal control systems remain robust and effective via the review and monitoring of such systems on a periodic basis. This also entails automated monitoring and workflow based escalation in order to facilitate timely clearing of all transactional entries including complete reconciliation, unreconciled and open entries being flagged and periodically scrutinised, and formal disclosure being made to the relevant Audit Committees, efficient management and tracking of cash and cheque deposits, in line with international best practice and continual streamlining and optimisation of the Internal Audit function via identification of focus areas, improvement opportunities and feedback reporting in order to reinforce governance and assurance. JKH Group Code of Conduct Employee Communication Channels • Allegiance to the Company and the Group that ensures the Group will “do the right thing”, by going further than the letter of any contract, the law and our written policies. • Skip level meetings • Compliance with rules and regulations applying in the territories that the Group operates in • Employee surveys • Conduct all businesses in an ethical manner at all times in keeping with acceptable business practice • Ombudsperson • Exercising of professionalism and integrity in all business and ‘public’ personal transactions • Continuous reiteration and the practice of the “Open-Door” policy • Exit interviews, Young Forum meetings • 360-degree evaluation • Monthly staff meetings • Access to Senior Independent Director Ombudsperson & Grievance Mechanisms i. An Ombudsperson is available to report any complaints from employees of alleged violations of the published Code of Conduct if the complainant feels that the alleged violation has not been addressed satisfactorily by the internally available mechanisms. ii. action taken based on the recommendations; The findings and the recommendations of the Ombudsperson, subsequent to an independent inquiry, is confidentially communicated to the Chairperson-CEO or to the Senior Independent Director upon which the involvement of the Ombudsperson ceases. On matters referred to him by the Ombudsperson, the Chairperson-CEO or the Senior Independent Director, as the case may be, will place before the Board: the decision and the recommendations; iii. where the Chairperson-CEO or the Senior Independent Director disagrees with any or all of the findings and or the recommendations thereon, the areas of disagreement and the reasons, therefore. In situation (iii), the Board is required to consider the areas of disagreement and decide on the way forward. The ChairpersonCEO or the Senior Independent Director is expected to take such steps as are necessary to ensure that the complainant is not victimised, in any manner, for having invoked this process. The current Ombudsperson is an attorney-of-law by profession. Mandate and Role For purposes of easy reference, the Ombudsperson’s mandate and role is set out below: (a) legal and ethical violations of the Code of Conduct for employees, but in an appellate capacity, when a satisfactory outcome using existing procedures and processes has not resulted or when the matter has been inadequately dealt with; (b) violations referred to above by individuals at the Executive Vice President, President and Executive Director levels, including that of the Chairperson-CEO, in which case the complainant has the option of either complaining to the Ombudsperson in the first instance, or first exhausting the internal remedies; (c) sexual harassment, in which event the complainant has the option of either complaining to the Ombudsperson in the first instance or first exhausting the internal remedies. The mandate excludes disciplinary issues from the Ombudsperson’s responsibilities. The right to take disciplinary action is vested exclusively in the Chairperson-CEO and those to whom this authority has been delegated. Annual Report 2022/2023 | 33 Corporate Governance Whistle-blower Policy Internal Audit Independence of the Group’s whistle-blower channels was maintained by the appointment of an Ombudsperson effective 1 December 2020. The Group has witnessed an increased level of communication flow from employees. Such communication and feedback received from the employees by the management are recorded, irrespective of the level of anonymity, and subsequently discussed and followed up. The respective outcomes are duly recorded. Internal audit process of the Company and the Group is conducted by outsourced parties at regular intervals, coordinated by the Group Business Process Review function (GBPR) of the Group. GBPR ensures that the internal audit plan adequately covers the significant risks of the Company and the Group, reviews the important internal audit findings and followup procedures. Whilst there are merits and demerits associated with outsourcing an internal audit, the Company and the Group is of the view that having an external based internal auditor is more advantageous. However, there are certain industries where the domain is very operationally specific and requires an internal auditor in addition to the external auditor. Use Case (Qualified scenario/s): Planned/Existing events Auditor determines how geared the factors of process, systems, and standard operating procedures are aligned and are ready to facilitate predominant use cases [specific scenario(s)] that stem from events occurring, consequent to the current business strategy Degree of Process/Systems alignment (Functional + Controls + SoD) Bottom-up evaluation : determine how well process controls are enforced by the system(s) in use, identify opportunities for process automation and optimising enforcement of segregation of duties (SoD) to enhance efficiencies. Benchmarking: Assessing suitability of processes Top-down assessment: efficacy of the design and placement of process/functional controls are validated/verified and benchmarked with contextually relevant best practices THE NEW INTERNAL AUDIT APPROACH Business Strategy Continuous emphasis on context Facilitate To Resulting transaction trails Transactions resulting from events are scrutinised, anomalies identified, and root cause (contributory effect of Process, Systems, People), and its potential impact to the business are prioritised for further deliberation Domain of Frauds Disclosure of a qualified list of frauds that the process is assessed for its susceptibility and is based on authoritative sources such as ACFE (Association of Certified Fraud Examiners), and amongst others, global knowledge resources of audit firms Focused interventions Prompt active engagement based on prioritised remediation for identified opportunities for continuous improvement of existing processes, systems, standard operating procedures and practices 34 | Asian Hotels and Properties PLC External Audit The External Auditor is appointed subject to the provisions of the Companies Act. The Audit Committee makes recommendations to the Board for the appointment, re-appointment or removal of the External Auditor in-line with professional and ethical standards and regulatory requirements. It monitors and reviews the External Auditor’s independence, objectivity and effectiveness of the audit process considering relevant professional and regulatory requirements. In assignment of non-audit services to External Auditors, the Audit Committee ensures the External Auditor has the necessary skills and experience for the assignment and ascertains that independence and objectivity in carrying out his duties and responsibilities will not be impaired. On the recommendation of the Board, the shareholders approved the reappointment of Messrs. KPMG as the External Auditor for 2022/23 at the last AGM. Compliance The Directors are conscious of their duty to comply with the laws, regulations, regulatory guidelines, internal controls and approved policies on all areas of business of the Group. The Board receives Compliance Statements from the President – Leisure confirming compliance with regulatory requirements each quarter in accordance with its commitment to regulatory compliance. The Group is compliant with all relevant legal and statutory requirements. Any litigations currently pending if any, have been disclosed under the Annual Report of the Board of Directors on page 65 of this Report. APPENDIX I- STATEMENT OF COMPLIANCE UNDER SECTION 7.6 OF THE LISTING RULES OF THE COLOMBO STOCK EXCHANGE (CSE) ON ANNUAL REPORT DISCLOSURE MANDATORY PROVISIONS - FULLY COMPLIANT Rule Compliance Status (i) Names of persons who were Directors of the Entity during the financial year (ii) Principal activities of the entity and its subsidiaries during the year, and any changes therein (iii) (iv) The names and the number of shares held by the 20 largest holders of voting and non-voting shares and the percentage of such shares held The float adjusted market capitalisation, public holding percentage (%), number of public shareholders and under which option the Listed Entity complies with the Minimum Public Holding requirement. Yes Reference (within the Report) Profiles of Directors - Page 9 and 10 Yes Annual Report of the Board of Directors - Page 65 to 72 Yes Information to Shareholders and Investors - Page 135 and 136 Yes Information to Shareholders and Investors - Page 135 and 136 The public holding percentage in respect of non- voting Shares (where applicable) (v) (vi) A statement of each Director’s holding and Chief Executive Officer’s holding in shares of the Entity at the beginning and end of each financial year Yes Information pertaining to material foreseeable risk factors of the Entity Yes Risk and Opportunities Report - Page 48 to 54 Yes During the year 2022/2023, there were no material issues pertaining to employees and industrial relations of the Company Yes Notes to the Financial Statements Page 88 to 132 (vii) Details of material issues pertaining to employees and industrial relations of the Entity (viii) Extents, locations, valuations and the number of buildings of the Entity’s land holdings and investment properties Annual Report of the Board of Directors - Page 65 to 72 Annual Report 2022/2023 | 35 Corporate Governance Rule Compliance Status (ix) Number of shares representing the Entity’s stated capital (x) A distribution schedule of the number of holders in each class of equity securities, and the percentage of their total holdings Yes Yes Reference (within the Report) Notes to the Financial Statements Page 88 to 132 Information to Shareholders and Investors - Page 135 and 136 (xi) Financial ratios and market price information (xii) Significant changes in the Company’s or its subsidiaries’ fixed assets, and the market value of land, if the value differs substantially from the book value as at the end of the year (xiii) Details of funds raised through a public issue, rights issue and a private placement during the year Yes Performance Highlights - Page 4 Yes Notes to the Financial Statements Page 88 to 132 Yes Information to Shareholders and Investors - Page 135 and 136 (xiv) Information in respect of Employee Share Ownership or Stock Option Schemes Yes (xv) Disclosures pertaining to Corporate Governance practices in terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of Section 7 of the Listing Rules Yes (xvi) Related Party transactions exceeding 10% of the equity or 5% of the total assets of the Entity as per audited Financial Statements, whichever is lower Yes Notes to the Financial Statements Page 88 to 132 Corporate Governance - Page 11 to 47 Notes to the Financial Statements Page 88 to 132 STATEMENT OF COMPLIANCE UNDER SECTION 7.10 OF THE LISTING RULES OF THE CSE ON CORPORATE GOVERNANCE MANDATORY PROVISIONS - FULLY COMPLIANT CSE Rule Compliance Status Company Action/Reference (within the Report) 7.10 Compliance a./b./c. Compliance with Corporate Governance Rules Yes The Company is in compliance with the Corporate Governance Rules and any deviations are explained where applicable. Yes All Board members are NEDs. The Company is conscious of the need to maintain an appropriate mix of skills and experience on the Board and to refresh progressively its composition over time. 7.10.1 Non-Executive Directors (NED) a./b./c. At least 2 members or 1/3 of the Board, whichever is higher should be NEDs 7.10.2 Independent Directors a. 2 or 1/3 of NEDs, whichever is higher shall be “independent” b. Each NED to submit a signed and dated declaration of his/her independence or non- independence 36 | Asian Hotels and Properties PLC Yes Yes 3 out of the 8 NEDs are Independent. Independence of the Directors has been determined in accordance with CSE Listing Rules and the 3 Independent NEDs have submitted signed confirmation of their independence. CSE Rule Compliance Status Company Action/Reference (within the Report) 7.10.3 Disclosures relating to Directors a./b. c. d. Board shall annually determine the independence or otherwise of NEDs and Names of each IDs should be disclosed in the Annual Report (AR) Yes A brief resume of each Director should be included in the annual report including the directors’ experience Yes Provide a resume of new Directors appointed to the Board along with details All Independent and Non Independent NEDs have submitted declarations as to their independence. Board of Directors Yes Detailed resumes of the new Independent NEDs appointed are submitted to the CSE. There is one appointed to the Board, during the year under review (Corporate Governance) 7.10.4 Criteria for defining independence a. to h. Requirements for meeting the criteria to be an Independent Director Yes Corporate Governance 7.10.5 Remuneration Committee a.1 a.2 b. Remuneration Committee shall comprise of NEDs, a majority of whom will be independent Yes One NED shall be appointed as Chairperson of the Committee by the Board of Directors Yes Remuneration Committee shall recommend the remuneration of the CEO and the Executive Directors Yes c.1 Names of Remuneration Committee members Yes c.2 Statement of Remuneration policy Yes c.3 Aggregate remuneration paid to EDs and NEDs Yes The Human Resources and Compensation Committee (equivalent of the Remuneration Committee with a wider scope) only comprises of Independent NEDs. The Senior Independent NED is the Chairperson of the Committee. The remuneration of the Chairperson-CEO and the Executive Directors is determined as per the remuneration principles of the Group and recommended by the Human Resources and Compensation Committee. Corporate Governance Corporate Governance Refer Note 7 of the Financial Statements 7.10.6 Audit Committee a.1 Audit Committee (AC) shall comprise of NEDs, a majority of whom should be independent Yes a.2 A NED shall be the Chairperson of the committee Yes The Chairperson of the Audit Committee is an Independent NED. a.3 CEO and CFO should attend AC meetings unless otherwise determined by AC Yes The President - Property Group of John Keells Holdings PLC, Chief Financial Officer - Leisure Industry Group, General Manager of Cinnamon Grand and Cinnamon Lakeside, Sector Financial Controllers of Property and Hotels Sectors together with the Head of Group Business Process Review division of John Keells Holdings PLC, attend Audit Committee meetings by invitation. a.4 The Chairperson of the AC or one member should be a member of a recognised professional accounting body The Audit Committee comprises of three I/NEDs. Yes The Chairperson of the AC is a member of a recognised professional accounting body. Annual Report 2022/2023 | 37 Corporate Governance CSE Rule Compliance Status b. Functions of the AC b.1 Overseeing of the preparation, presentation and adequacy of disclosures in the financial statements in accordance with SLFRS/LKAS Overseeing the compliance with financial reporting requirements, information requirements as per laws and regulations b.2 CSE Rule b.3 b.5 c.1 Names of the Audit Committee members shall be disclosed Audit Committee shall make a determination of the independence of the external auditors Report on the manner in which Audit Committee carried out its functions and manner of compliance of Company in relation to the above. c.2 c.3 Yes Yes Compliance Status Overseeing the process to ensure that the internal and risk management controls, are adequate, to meet the requirements of the SLFRS/LKAS Assessment of the independence and performance of the Entity’s External Auditors Make recommendations to the Board pertaining to External Auditors b.4 Yes CSE Rule Yes Yes Yes Yes The AC assesses the role and the effectiveness of the Group Business Process Review division which is largely responsible for internal control and risk management. The AC assesses the external auditor’s performance, qualifications and independence. The Committee is responsible for recommending the appointment, re-appointment or removal of External Auditors and also providing recommendations on remuneration and terms of engagement. Corporate Governance Yes Yes (b) Details pertaining to Recurrent Related Party Transactions Yes (c) Report of the Related Party Transactions Review Committee Yes | Asian Hotels and Properties PLC Company Action/Reference (within the Report) Refer Report of the Audit Committee. Details pertaining to Non-Recurrent Related Party Transactions 38 The AC has the overall responsibility for overseeing the preparation of financial statements in accordance with the laws and regulations of the country and also recommending to the Board, the adoption of best accounting policies Refer Report of the Audit Committee. (a) (d) The AC carries out all the functions prescribed in this section. The AC assists the Board in fulfilling its oversight responsibilities for the integrity of the financial statements of the Company. Yes Compliance Status Declaration by the Board of Directors as an affirmative statement of compliance with the rules pertaining to RPT, or a negative statement otherwise Company Action/Reference (within the Report) Company Action/Reference (within the Report) Notes to the Financial Statements Notes to the Financial Statements Report of the Related Party Transactions Review Committee. Annual Report of the Board of Directors Yes STATEMENT OF COMPLIANCE PERTAINING TO THE COMPANIES ACT NO. 7 OF 2007 MANDATORY PROVISIONS - FULLY COMPLIANT CSE Rule Compliance Reference Status 168 (1) (a) 168 (1) (b) 168 (1) (c) 168 (1) (d) 168 (1) (e) 168 (1) (f ) 168 (1) (g) 168 (1) (h) 168 (1) (i) 168 (1) (j) 168 (1) (k) 168 (2) The nature of the business of the Company or subsidiaries or classes of business in which it has an interest together with any change thereto Signed Financial Statements of the Group and the Company Auditors’ Report on Financial Statements Accounting policies and any changes therein Particulars of the entries made in the Interests Register Remuneration and other benefits paid to Directors of the Company Corporate donations made by the Company Information on the Directorate of the Company and its subsidiaries during and at the end of the accounting period Amounts paid/payable to the External Auditor as audit fees and fees for other services rendered Auditors’ relationship or any interest with the Company and its Subsidiaries Acknowledgement of the contents of this Report and signatures on behalf of the Board Information specified in paragraphs (b) to (j) of subsection (1) in relation to Subsidiaries. (within the Report) Annual Report of the Board of Directors Yes Yes Yes Yes Yes Yes Yes Financial Statements Independent Auditors’ Report Notes to the Financial Statements Annual Report of the Board of Directors Notes to the Financial Statements Notes to the Financial Statements Board of Directors Yes Notes to the Financial Statements Yes Yes Yes Yes Report of the Audit Committee/Financial Statements Financial Statements/Annual Report of the Board of Directors Financial Statements/Annual Report of the Board of Directors Statement of Compliance with applicable Codes of Best Practice - Voluntary Compliance The Company is also compliant with the Code of Best Practices on Related Party Transactions (2013) advocated by the SEC (mandatory), the Code of Best Practice on Corporate Governance (2013) jointly advocated by the SEC and CA Sri Lanka (voluntary) and almost all the provisions of the Code of Best Practice on Corporate Governance (2017) issued by CA Sri Lanka to the extent of business exigency and as required by the Company. Code of Best Practice of Corporate Governance (2013) Jointly Issued by the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (ICASL) Annual Report 2022/2023 | 39 Corporate Governance Code of Best Practice of Corporate Governance (2013) jointly Issued by the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report Yes Corporate Governance Yes Corporate Governance Yes Corporate Governance A. Directors A.1 The Board A.1 The Board Company to be headed by an effective Board to direct and control the Company A.1.1 Frequency of Board Meetings Board should meet regularly, at least once in every quarter of a financial year, in order to effectively execute board’s responsibilities, while providing information to the board on a structured and regular basis. Responsibilities of the Board › The Board’s role is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls which enables risk to be assessed and managed. In performing its role, the Board should be responsible for matters including: ensuring the formulation and implementation of a sound business strategy; A.1.2 › ensuring that the management team possess the skills, experience and knowledge to implement the strategy; › ensuring the adoption of an effective Key Management Personnel succession strategy; ensuring effective systems to secure integrity of information, internal controls, business continuity and risk management; ensuring compliance with laws, regulations and ethical standards; ensuring all stakeholder interests are considered in corporate decisions; recognising sustainable business development in corporate strategy, decisions and activities; › ensuring that the Company’s values and standards are set with emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations. › fulfilling such other Board functions as are vital, given the scale, nature and complexity of the business concerned. A.1.3 Act in accordance with laws of the country and access to professional advice Procedure to obtain independent professional advice when deemed necessary at the Company’s expense Yes Corporate Governance A.1.4 Access to advise and services of the Company Secretary Ensure adherence to Board procedures and applicable rules and regulations Yes Corporate Governance 40 | Asian Hotels and Properties PLC Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report A.1.5 Independent judgement Directors should exercise independent judgment on issues of strategy, resources, performance (including key appointments) and standards of business judgement Yes Corporate Governance A.1.6 Dedication of adequate time and effort by Directors Every Director should dedicate adequate time and effort to matters of the Board and the Company, to ensure that the duties and responsibilities owed to the Company are satisfactorily discharged. Yes Corporate Governance A.1.7 Board induction and training for Directors The Directors should receive appropriate induction, training, hone skills and expand knowledge to more effectively performduties Yes Corporate Governance A balance of power and authority to be maintained by separating responsibility for conducting Board business from that of executive decision making N/A N/A Chairperson to preserve order and facilitate effective discharge of Board functions by proper conduct of Board proceedings and meetings including ensuring: Yes Corporate Governance Board to ensure adequacy of financial acumen and knowledge within the Board Yes Corporate Governance A.2 Chairperson and Chief Executive Officer A.2.1 Justification for combining the roles of the Chairperson and the CEO A.3 Chairperson’s Role A.3.1 Ensure good corporate governance The effective participation of both EDS and NEDS; › all Directors are encouraged to make an effective contribution, within their respective capabilities, for the benefit of the Company; › a balance of power between EDs and NEDs is maintained; › the views of Directors on issues under consideration are ascertained; and › the Board is in complete control of the Company’s affairs and alert to its obligations to all shareholders and other stakeholders. A.4 Financial Acumen A.4.1 Possession of adequate financial acumen A.5 Balance Board A.5.1 Composition of Board The Board should include a sufficient number of NEDs Yes Corporate Governance A.5.2 Proportion of Independent Directors Two or one-third of the NEDs should be independent Yes Corporate Governance Annual Report 2022/2023 | 41 Corporate Governance Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report A.5.3 Definition of Independence Independent Directors should be independent of management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgement Yes Corporate Governance A.5.4 Declaration of Independence NEDs should submit a signed and dated declaration of their independence/nonindependence annually Yes Corporate Governance A.5.5 Annual determination of criteria of independence/nonindependence and declaration of same by Board The Board should annually determine and disclose the names of Directors deemed to be Independent Yes Corporate Governance A.5.6 Appointment of an alternate Director If an alternate Director is appointed by a NED, such alternate Director should not be an executive of the Company. If an alternate Director is appointed by an Independent Director, such alternate Director should meet the criteria of independence. N/A N/A A.5.7 Appointment of Senior Independent Director (SID) If the roles of Chairman/CEO are combined, an Independent Non-Executive Director should be appointed as a Senior Independent Director N/A N/A A.5.8 Availability of Senior Independent Director to other Directors If warranted, the SID should be available to the other Directors for confidential discussions N/A N/A A.5.9 Interaction between Chairman and Non-Executive, Independent Directors The Chairman should meet the NED/IDs at least once a year without the other Directors being present. Yes Corporate Governance A.5.10 Directors concerns to be recorded When matters are not unanimously resolved, Directors to ensure their concerns are recorded in Board minutes Yes Corporate Governance A.6 Supply of Information A.6.1 Provision of adequate information to Board Management to ensure the Board is provided with timely and appropriate information Yes Corporate Governance A.6.2 Adequacy of notice and formal agenda to be discussed at Board meetings Board minutes, agenda and papers should be circulated at least seven days before the Board meeting Yes Corporate Governance 42 | Asian Hotels and Properties PLC Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report A.7 Appointment to the Board A.7 Appointments to the Board Formal and transparent procedure for Board appointments Yes Corporate Governance A.7.1 Nomination Committee Nomination committee of the ultimate Parent Company may function as such for the Company and make recommendations to the Board on new Board appointments Yes Corporate Governance A.7.2 Annual assessment of Board composition Nomination committee of Board should annually assess the composition of Board Yes Corporate Governance A.7.3 Disclosure of new Board appointments Profiles of new Board appointments to be communicated to Shareholders Yes Corporate Governance A.8 Re-election A.8.1 Appointment of Non- Executive Directors Appointment of NEDs should be for specified terms and re- election should not be automatic Yes Corporate Governance A.8.2 Shareholders’ approval of appointment of all Directors The appointment of all Directors should be subject to election by Shareholders at the first opportunity after such Appointment Yes Corporate Governance A.9 Appraisal of Board Performance A.9.1 Annual appraisal of The Board should annually appraise how effectively it has discharged its key responsibilities Yes Corporate Governance A.9.2 Board performance The Board should evaluate its performance and that of its committees annually Yes Corporate Governance A.9.3 Self evaluation of the Board The Board should disclose how performance evaluations have been carried out in the Annual Report. Yes Corporate Governance Annual Report should disclose the biographical details of Directors and attendance at Board/Sub-Committee meetings Yes Director’s Profiles A.10 Disclosure of Information in respect of Directors A.10.1 Biographical Profiles and relevant details of Directors to be disclosed A.11 Appraisal of the CEO A.11.1 Short, medium and long term, financial and non-financial objectives to be set At the commencement of every fiscal year, the Board in consultation with the CEO, should set, in line with the short, medium and long-term objectives of the Company, reasonable financial and non-financial targets that should be met by the CEO during the year. N/A N/A A.11.2 Evaluation of CEO performance The performance of the CEO should be evaluated by the Board at the end of the year N/A N/A Annual Report 2022/2023 | 43 Corporate Governance Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report B. Directors Remuneration B.1 Remuneration Procedure B.1.1 Evaluation The Board of Directors should set up a Remuneration Committee to make Yes Corporate Governance B.1.2 Composition of Remuneration Committee Remuneration Committee should consist of NEDs Yes Corporate Governance B.1.3 Disclosure of members of Remuneration Committee The Annual Report should disclose the Chairperson and Directors who serve on the Remuneration Committee Yes Corporate Governance B.1.4 Remuneration of Non-Executive Directors Board to determine the level of remuneration of NEDs Yes Corporate Governance B.1.5 Consult Chairperson and/or CEO on proposals on remuneration Remuneration Committee should consult the Chairperson about its proposals relating to the remuneration of other Executive Directors and should have access to professional advice in order to determine appropriate remuneration for Executive Directors Yes Corporate Governance Yes Corporate Governance B.2 Level and Make up of Remuneration B.2.1 to B.2.4 Performance related elements in pay structure and alignment to industry practices Packages should be structured to attract, retain and motivate EDs Packages should be comparable and relative to that of other companies as well as the relative performance of the Company When determining annual increases remuneration committee should be sensitive to that of other John Keells Group companies Performance related elements of remuneration should be aligned with interests of Company B.2.5 Share options Executive share options should not be offered at a discount Yes B.2.6 to B.2.9 Remuneration packages for NonExecutive Directors In designing schemes of performance-related remuneration, Remuneration Committees has complied with the relevant provisions and have reflected time, commitment and responsibilities of role and in line with existing market practice Yes Corporate Governance Disclosure of details The Annual Report should set out the names of on remuneration Directors (or persons in the parent company’s committee in the case of a group company) comprising the remuneration committee, contain a statement of remuneration policy and set out the aggregate remuneration paid to the EDs and NEDs Yes Corporate Governance and Note 7 to the Financial Statements B.3 Disclosure of Remuneration B.3.1 44 | Asian Hotels and Properties PLC Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report C. Relations with Shareholders C.1 Constructive Use and Conduct of Annual General Meeting (AGM) Yes Form of Proxy Yes N/A The Chairperson of Board should arrange for the Chairperson of Audit, Remuneration and Nomination to be available to answer any queries at AGM Yes N/A Notice of AGM 15 working days notice to be given to shareholders Yes Notice of Meeting Procedure for voting at meetings Company to circulate the procedure for voting with Notice of Meeting Yes Notice of Meeting Channel to reach all shareholders to disseminate timely information Yes All reports Policy and Methodology of communication with shareholders and implementation of it according to the Code. Yes Corporate Governance Disclosure for all material facts involving all material transactions including related party transactions Yes Note 30 of the notes to the Financial Statements C.1.1 Proxy votes to be counted The Company should count and indicate the level of proxies lodged for and against in respect of each resolution C.1.2 Separate resolutions Separate resolutions should be proposed for substantially separate issues C.1.3 Availability of Chairperson’s of Committees at AGM C.1.4 C.1.5 C.2 Communication with Shareholders C.2.1 Chanel of Communication C.2.2 – C.2.7 Policy and Methodology of Communication C.3 Major and Material Transactions C.3.1 Disclosure of Major Transactions D. Accountability and Audit D.1 Financial Reporting D.1.1 Presentation of Public Reports Should be balanced, understandable and comply with statutory and regulatory requirements Yes Financial Statements D.1.2 Directors’ Report The Directors’ Report should be included in the Annual Report and confirm that, Yes Statement of Directors’ Responsibility and Annual Report of the Board of Directors Company has not contravened laws or regulations in conducting its activities Material interests in contracts have been declared by Directors The Company has endeavoured to ensure equitable treatment of shareholders That there is reasonable assurance of the effectiveness of the existing business systems following a review of the internal controls covering financial, operational and compliance That the business is a “going concern” Annual Report 2022/2023 | 45 Corporate Governance Code Ref. Subject Applicable Requirement Status Compliance status Applicable Section in the Annual Report D.1.3 Respective responsibilities of Directors and Auditors The Annual Report should contain separate statements setting out the responsibilities of the Directors for the preparation and presentation of the Financial Statements and the reporting responsibilities of the Auditors. Yes Annual Report of the Board of Directors D.1.4 Management Discussion and Analysis Annual report to include section on Management Discussion and Analysis. Yes Management Reports D.1.5 Going Concern Directors to substantiate and report that the business is a going concern or qualify accordingly Yes Annual Report of the Board of Directors D.1.6 Serious Loss of Capital Directors to summon an Extraordinary General Meeting in the event that the net assets of the Company are less than half of its stated capital N/A Corporate Governance D.1.7 Related Party Transactions Disclosure of Related Party Transactions. Yes Note 30 to the Financial Statements Independent Auditors’ Report D.2 Internal Control D.2.1 Effectiveness of system of internal controls Directors to annually conduct a review of the effectiveness of the system of internal controls. This responsibility may be delegated to the Audit Committee. Yes Audit Committee Report D.2.2 Internal Audit Function The internal audit function in Group companies is not outsourced to the external auditor of that Company in a further attempt to ensure external auditor independence. Yes Corporate Governance D.2.3 D.2.4 Continuity of Internal control Maintaining a sound system of internal control according to the provisions of the code. Yes Corporate Governance D.3 Audit Committee D.3.1 Chairperson and Composition of Audit Committee Should comprise a minimum of two NED/IDs. Audit Committee Chairperson should be appointed by the Board. Yes Corporate Governance D.3.2 Duties of Audit Committee Audit Committee should include keeping under review the scope and results of the audit and its effectiveness, and the independence and objectivity of the Auditors. Where the Auditors also supply a substantial volume of non-audit services to the Company, the Committee should keep the nature and extent of such services under review, seeking to balance objectivity, independence and value for money Yes Audit Committee Report Yes Audit Committee Report D.3.3 46 The Audit Committee should have a written Terms Terms of Reference/ of Reference which define the purpose of the Charter Committee and its duties and responsibilities. | Asian Hotels and Properties PLC Code Ref. Subject Applicable Requirement Status D.3.4 Disclosure The Annual Report should disclose the names of Directors serving on the Audit Committee Compliance status Applicable Section in the Annual Report Yes Audit Committee Report The Audit Committee should determine the independence of the Auditors and disclose the basis of such determination The Annual Report should contain a report by the Audit Committee setting out the manner of the compliance of the Company during the period to which the report relates D.4 Code of Business Conduct and Ethics D.4.1 Adoption of Code of Business Conduct and Ethics The Company must adopt a Code of Business Conduct and Ethics for Directors and members of the senior management team and promptly disclose any violation of the Code. Yes Corporate Governance D.4.2 Chairperson’s affirmation The Annual Report must include an affirmation by the Chairperson that he is not aware of any violation of the provision of the Code of Conduct. Yes Corporate Governance D.5 Corporate Governance Disclosures D.5.1 Corporate Governance Report The Annual Report should include a report setting out the manner and extent to which the Company has adopted the principals and provisions of the Code of Best Practice on Corporate Governance. Corporate Governance Yes E. Institutional Investors E.1 Structured Dialogue Yes N/A Institutional investors should be encouraged to consider the relevant factors drawn to their attention with regard to Board structure and composition. Yes N/A E.1.1 Structured Dialogue A regular and structured dialogue should be with Shareholders conducted with shareholders and the outcome of such dialogue should be communicated to the Board by the Chairperson E.2 Evaluation of Governance Disclosure by Institutional Investors F. Other Investors F.1 Individual Investors Individual shareholders should be encouraged to carry out adequate analysis and seek professional advice when making their investment/divestment decisions Yes N/A F.2 Shareholder Voting Individual shareholders should be encouraged to participate in General Meetings of companies and exercise their voting rights. Yes N/A Disclosure on adherence to sustainability principles. Yes Operational Highlights G. Sustainability Reporting G.1- G.1.7 Sustainability Reporting Annual Report 2022/2023 | 47 RISK MANAGEMENT The year under review proved to be yet another challenging year with a number of risks and challenges resulting from instability in the macroeconomic environment. The report details the comprehensive Risk Management Process. The Risk Management Process aims to identify and provide solutions to both internal and external risks ensuring the Group emerges resilient safeguarding its interests as well as all stakeholders’ interests Risk Management Strategy Asian Hotels & Properties PLC has taken a holistic approach in its risk management strategy which is aligned with its sustainability management framework and integrates identification, management and mitigation of risk. The risk management strategy also extends to incorporating non-financial risks such as environmental, community, employee and value chain in addition to operational and financial risks, ensuring productive engagement with both internal and external stakeholders. Principal Risks Risk Governance Risk Management Process Elements of Risk Management Framework 48 › The risk management process includes detailed evaluation of financial and operational risks › The review of risks which could arise from Environmental, Social and Governance (ESG) › John Keells Group Enterprise Risk Management (ERM) division ensures alignment with the John Keels Holdings PLC (Parent) Risk Management policies through reviews, assessments and guidance › An online Enterprise Risk and Incident Management platform is used for the risk management process › The Business Unit oversees the ERM process and reviews risk assessment › Risk assessment is conducted bi-annually › The Board is assisted by the Audit Committee, which oversees risk and internal control matters › The John Keells Group Business Process Review (BPR) Division together with the outsourced Internal Auditors supports the Audit Committee in discharging its duties › The Company takes measures to address significant risks that impact the strategic business objectives of the Company | Asian Hotels and Properties PLC Building a Culture of Risk Awareness Risk Identification by SBUs Strategic Business Unit Evaluate Business Implications Responsible for Identifying, Measuring, Monitoring and Managing Risk Asses Business Impact and Likelihood of Occurrence Preparation of Risk & Control Self Assessment (RCSA) John Keells Group Enterprise Risk Management function Assess Risk Velocity Strategic Business Unit (SBU) Implement Detective Controls to Monitor Risk Review and Constructive Challenge of RCSA Implement Preventive and Corrective Measures to Manage Risk Risk Management Process Risk Governance Structure, Roles & Responsibilities Our Risk Management Structure & Processes Board Review by Respective Audit Committees Review by Respective Boards The Enterprise Risk Management Framework adopted by the John Keells Group and implemented by Asian Hotels & Properties PLC involves the following steps: Identification of Types of Risk Establishment of a Risk Register with Likelihood of Occurrence and Severity of Impact Establishment of Level of Risk Based on the values assigned for each individual risk Annual Report 2022/2023 | 49 RISK MANAGEMENT The ERM Framework adopted by the John Keells Group and implemented by the Company and the Subsidiary involves the following: 1. Identification of Types of Risk • Common Risks - Common Risks are those risks which commonly appear on the risk grids of several companies of the John Keells Group. • Business Specific Risks - Business Specific Risks are defined as those risks which are applicable only to an individual line of business. • Core Risks - Core Sustainability Risks are defined as those risks having a catastrophic impact to and from the Organisation, but may have a very low or nil probability of occurrence. These are risks that threaten the sustainability or long term viability of a business. 2. Establishment of a Risk Register with Likelihood of Occurrence and Severity of Impact. Using Group guidelines, a risk grid is established for the Company. Every risk is analysed in terms of Likelihood of Occurrence and Severity of Impact and assigned a score ranging from 1 (low probability/impact) to 5 (high probability/impact) to signify the probability of occurrence and the level of impact to the organisation. Please see Risk Matrix for further details. 3. Establishment of Level of Risk Based on the values assigned for each individual risk, using the matrix given in table below. The level of risk is established by multiplying the Likelihood of Occurrence with Severity of Impact. Risk Matrix The Risk Matrix is essential in the Establishment of a Risk Register. A risk grid has been established using Group guidelines and each risk is analysed in terms of Likelihood of Occurrence and Severity of Impact. A score of 1-5 is assigned to each risk with 1 indicating low probability/impact, and 5 indicating high probability/impact. Rating Descriptor Impact / Severity Insignificant Low Medium High Ultra-High 5 Catastrophic/ Extreme Impact 5 10 15 20 25 4 Major/ Very High Impact 4 8 12 16 20 3 Moderate/ High Impact 3 6 9 12 15 2 Minor Impact 2 4 6 8 10 1 Low/ Insignificant Impact 1 2 3 4 5 Rare/ Remote to Occur 1 Unlikely to Occur Possible to Occur Likely to Occur Almost Certain to Occur 2 3 4 5 Occurrence/ Likelihood The Colour Matrix implies the following; Priority level 5 4 3 2 1 Colour code Ultra High High Medium Low Insignificant 13-25 10-12 7-9 3-6 1-2 Score 50 | Asian Hotels and Properties PLC RISK MANAGEMENT STRATEGY The Company’s risk management strategy is integrated with its sustainability management framework, enabling a holistic approach towards the identification, management and mitigation of risk. Risk Management therefore extends beyond managing the operational and financial risks faced by the Company, to incorporate broader environmental, community, employee, value chain and other non-financial risks related to the triple bottom-line approach of the Company, providing a foundation for productive engagements with internal and external stakeholders. PRINCIPAL RISKS - 2022/23 The significant risk areas that impact the achievement of the strategic business objectives of the Company and the measures taken to address these risks are discussed below. Potential impact Risk factor Mitigating actions 1. Business Risk Description Increased competitiveness in the industry. • Loss of market share Impact High Likelihood Likely to occur Assessment High • Continuous monitoring of competitors. • Increased price competition • Adaptation of competitive pricing strategies • Decrease in revenue. • Enhancement of product offerings/ Refurbishments • Increased Cost • Retention of talent • Training and development of staff 2. Retention of Skilled Employees Description Retention of skilled employees is an • Challenges in maintaining service • Ongoing investment in talent and competency development ongoing challenge in the hospitality quality and deliverability of industry due to employment opportunities services. • Strengthening rewards and benefit schemes. both locally and internationally. Periodic benchmarking is carried out against • Increased costs associated with market remuneration packages. new recruitments. Impact High • Explore innovative recruitment and • Impact on competitive edge and Likelihood Likely to occur employment models such as part-time work brand loyalty Assessment High and flexible work options to attract and retain non-traditional cohorts • Talent management and succession planning programmes for critical positions Annual Report 2022/2023 | 51 RISK MANAGEMENT Potential impact Risk factor Mitigating actions 3. Threat from Terrorism & Civil Unrest Description Risk of Instability, Ideology/extremism, Breakdown of Law and Order, Global terrorism. Impact High Likelihood Possible to occur Assessment Medium • Loss of revenue due to tourists choosing alternate travel destinations. • Establishment of protocols as per the Business Continuity Plan (BCP) on action to be taken in such an event. • Hindrance to business continuity • Appointment of Vigilance Officers at each location and establishment of reporting protocols. • Property damage • Loss of staff, guests, patrons • Establishment of direct link with local intelligence for information on potential risks. • Review/implementation of Emergency Response Plans for armed intrusions/hostage handling/isolation/bomb threat. 4. Exchange Rate Description Impact on depreciation of the Rupee Impact High Likelihood Possible to occur Assessment Medium • Foreign exchange losses on foreign • Regular monitoring of fluctuations in exchange rates and hedging the exposure currency based transactions. by matching foreign currency earnings and • Increased cost payments. • Regular offering price revisions • Inclusion of terms in third party agreements to mitigate foreign currency exposure 5. Interest rates Description Increased interest rates • Increased borrowing costs • Constant monitoring of market interest rates resulting from rising interest rates and regular communication with Group Treasury on minimum lending rates Impact High Likelihood Possible to occur • Prudent management of financial assets Assessment Medium • Continuous negotiations with financial institutions • Renegotiation of credit periods and constant follow ups on outstanding debt 6. Supply chain issues and shortages Description Disruption to business due to fuel and Gas • Shortage of supplies due to crisis. transporting issues. Impact High Likelihood Possible to occur Assessment Medium • Inability to run the generator during power cuts/failures. • Disruption to operations. • Increased cost. • Frequent/bulk fuel purchases. • Increase inventory par levels. • Provide accommodation for staff within the premises. • Seek for alternative products and suppliers. • Increase storage capacity. • Inability for staff to report to work • Investing in solar power generation. due to transportation issues. 52 | Asian Hotels and Properties PLC Potential impact Risk factor Mitigating actions 7. Guests/Staff Health and Safety Description Events that could have an adverse impact on the health and safety of guests and employees. Impact High Likelihood Possible to occur Assessment Medium • Disruption to business activities • Loss of revenue • Adverse brand reputation • Potential claims and litigation • Establishment of standard operating procedures to ensure Guest and Staff health and safety. • Conduct of periodic audits and addressing of gaps identified through training. • Availability of a periodically trained fire fighting team and first-aid team • Guidelines for client excursions and adventures 8. Technology and Data Risks Description Risk of financial loss, disruption or damage to the reputation resulting from the failure of cyber security and information technology systems. Impact High Likelihood Remote to occur Assessment Low • Potential loss of information assets • Well-defined cyber security incident response process addressing the pillars of device, of the Group information and user • Impact on customer privacy in the • Training employees and creating staff event of a potential loss event awareness on the importance of maintaining information security and handling of sensitive information. • Implementation and regular testing and verification of network protection technology • Contractual binding with JKH-Group IT for BCP protocols 9. Financial Risks – Credit Risk & Liquidity Risk Description Risk of default by customers in settling • Exposure and losses due to default • Constant monitoring and review of debtor their payments & potential liquidity balances with collection targets. of settlement by debtors. constraints arising from operational losses • Adapt progressive action Regular review • Inability to meet financial mechanisms in place to monitor the commitments on due dates Impact High performance of the Company. Likelihood Remote to occur • Credit policy and stringent controls are in Assessment Low place to mitigate the impact of default • Credit limits are reviewed on a regular basis of the business units Annual Report 2022/2023 | 53 RISK MANAGEMENT Potential impact Risk factor Mitigating actions 10. Global Pandemic Outbreak Description International travel restrictions and local travel restrictions Impact High Likelihood Remote to occur Assessment Low • Lower tourist arrivals places pressure on average room rates, squeezing margins and reducing profits • Business Continuity Plans (BCP) on action to be taken in the event of an active case within a business unit. • Loss of life, injury or destruction and damage to property • Business Continuity Plans including alternate working arrangements and emergency response plans • Continue to follow latest guidance and recommendations of Government, global and local health officials on implementation of appropriate health and safety measures for staff and guests at hotel and mall. 11. Natural Disaster and Fire Description Risk of Tsunami/Cyclone/Flooding/Fire Impact Major Likelihood Unlikely to occur Assessment Low • Conduct of Business Process Recovery drills, fire drills and training • Agile Work Environment • Insurance coverage for physical damage of properties • Implementation of safety guidelines based on international best practices including requirements for emergency evacuation 12. Brand and Reputation Impact Description Impact Major • Negative online guest comments • Adverse impact on brand positioning Likelihood Unlikely to occur • Food poisoning incidents • Training and Development of staff Assessment Low • Conduct of Compliance Audits/Brand Audits • Brand positioning, development, and marketing • Establishment of a Crisis Communication Plan/Team and Spokesperson 54 | Asian Hotels and Properties PLC MANAGEMENT REPORTS Annual Report 2022/2023 | 55 MANAGEMENT DISCUSSION & ANALYSIS Macroeconomic Environment Sri Lanka’s economy was already showing signs of weakness before the COVID-19 pandemic. A restrictive trade regime, weak investment climate, episodes of loose monetary policy and an administered exchange rate contributed to external imbalances. Sustained fiscal disparities, driven primarily by low revenue collections, combined with tax cuts in 2019 contributed to high fiscal deficits, large gross financing needs, and a rapid growth in unsustainable debt. import compression, and a surge in the cost of production. Further, significant upward revisions in major utility prices amidst soaring global energy prices and the depreciation of the exchange rate exacerbated the situation, while accelerated inflation and tax hikes affected the disposable income of households. Year-on-year inflation reached an unprecedented 64.3 per cent in August 2022, due largely to high food inflation of 93.7 per cent. In 2022, the Sri Lankan economy registered its deepest economic contraction since independence, mainly driven by the ripple effects of the unprecedented economic crisis amidst the domestic and global headwinds that reversed the post-pandemic recovery. GDP contracted by 7.8% in 2022, compared to the growth of 3.5% in 2021. TOURIST ARRIVALS BY MONTH - 2021 &-,000 100,000 80,000 60,000 40,000 TOURIST ARRIVALS FROM MAIN SOURCE MARKETS 2017 TO 2022 150,000 . December November October August Juliy May June April March 2022 2021 2020 2019 2018 Poland Maldives United States Canada Australia France Germany United Kindom Russia 50,000 2022 2017 All key sectors contracted, amid shortages of inputs and supply chain disruptions. The agriculture sector contracted by 4.6% in 2022, compared to the last year, due to severe shortages in chemical fertiliser and other agrochemicals, increased cost of raw materials, as well as the disruptions of supply networks. The industry sector contracted notably by 16%, year-on-year, primarily due to the dampened performance of the construction and manufacturing subsectors amidst severe shortages in raw materials and input cost escalations. Despite the resilient performance in the services sector during the first quarter of 2022, supported by the gradual normalisation of services sector following the COVID-19 pandemic, economic headwinds that intensified thereafter, hindered a further expansion in the services sector, resulting in an overall contraction of 2%, yearon-year, in 2022. Acute fuel shortages due to the dearth of foreign exchange caused a significant drag on with supply chains being hampered, prolonged power outages, scarcity of raw materials amidst 56 2021 September 250,000 India No. of Tourists 350,000 January 0 450,000 February 20,000 | Asian Hotels and Properties PLC This reflects the impact of rising global commodity prices, monetisation of the fiscal deficit and currency depreciation. Between January and July 2022, the Central Bank raised policy rates by a cumulative 950 basis points to curb inflation. The ban on chemical fertilisers in 2021 and related impact on crop yields has also affected domestic food supplies, agriculture earnings and food security. Poorer households are hardest hit owing to food inflation, job losses, limited fertiliser supply and drop in remittances. With declining remittances and limited tourism receipts, the current account deficit is expected to have widened in this period. Sri Lanka’s central bank floated the Sri Lankan Rupee (LKR) in 2022 and returned to a managed float in May after the currency depreciated by about 78 per cent. Despite mandatory repatriation and conversion rules, it has been challenging to bring export earnings and remittances to Sri Lanka through formal channels due to low market confidence. [Source: World Bank/ADB/CBSL annual report] SOURCE REGION OF TOURIST ARRIVALS TO SRI LANKA EUROPE 432,-% MIDDLE EAST 18,107 2.51% ASIA & PACIFIC 213,-% Asia and the Pacific region recorded the second highest arrivals with 213,537 tourists in 2022, accounting for about 30 per cent of total tourist arrivals. AMERICA 51,429 7.14 AFRICA 4,679 0.65% TOURISM INDUSTRY OVERVIEW Sri Lanka Tourism Tourist arrivals, which started to gather momentum from late 2021, peaked in March 2022, before being hampered by heightened social tensions, shortage of fuel for domestic travel, and resultant negative publicity and travel advisories issued by major source markets. In addition to domestic factors, the outward travel ban in China also negatively impacted the recovery in tourist arrivals. The tourism sector faced a multitude of challenges; an increase in electricity tariffs; increased taxes and levies pertaining to businesses engaging in the tourism sector; lack of skilled staff in hotels due to high labour migration; reduction in arrivals from the CIS region due to the Russia-Ukraine war; high inflation, globally and domestically; looming global recessionary conditions, and the current economic crisis in Sri Lanka. However, some countries reduced the severity of their travel advisories with the dissipation of social tensions, resulting in a gradual pickup of arrivals since October 2022, and increased momentum towards early 2023. The resumption of operations of many international airlines, charter flights and cruise tourism as well as the global promotions in many countries also contributed to the revival of tourist arrivals. Accordingly, tourist arrivals recorded a significant increase during 2022 to 719,978 from 194,495 in 2021. Monthly arrivals, however, have steadily increased during the first three months of 2023, with total arrivals from January to March 2023 amounting to 335,679 compared to 285,334 arrivals during the same period in 2022. Europe continued to be the largest source region of tourist arrivals to Sri Lanka, while India remained the largest single country of tourist arrivals. According to the Sri Lanka Tourism Development Authority (SLTDA), tourist arrivals from across all major regions increased in 2022, compared to 2021, with Europe accounting for 60% of total tourist arrivals, amounting to 432,226 tourists. In terms of tourist arrivals by countries, India was the leading tourist source market in 2022, with 123,004 arrivals, accounting for about 17 per cent of total arrivals, followed by Russia (91,272), the UK (85,187), Germany (55,542), and France (35,482), collectively accounting for 54 per cent of total arrivals. Earnings from tourism in 2022 recorded a significant increase, compared to 2021. Earnings from tourism amounted to US Dollars 1,136 million, compared to US Dollars 507 million in 2021, recording an impressive annual growth of 124.2 per cent. However, earnings from tourism were far below the US Dollars 4.4 billion level achieved in 2018. 719,978 Tourist arrivals USD 164 Receipt per tourist per day 9.34 Tourists Average duration of stay 30.4% Annual room occupancy rate (graded) USD 1,136 Mn Tourism revenue [Source: Sri Lanka Tourism Development Authority - Year in Review 2022] Annual Report 2022/2023 | 57 Management Discussion & Analysis SOURCE MARKETS Russian Federation Arrivals: 91,272 Share: 12.7% 2 United Kingdom Arrivals: 85,187 Share: 11.5% 3 Germany Arrivals: 55,542 Share: 7.7% 4 India Arrivals: 123,004 Share: 17.1% 1 United States of America Arrivals: 22,230 Share: 3.1% 8 France Arrivals: 35,482 Share: 4.9% 5 Poland Arrivals: 18,107 Share: 2.1% 10 Maldives Arrivals: 18,880 Share: 2.6% 9 Canada Arrivals: 26,845 Share: 3.7% 7 Australia Arrivals: 30,924 Share: 4.3% 6 Global Tourism International travel doubled in 2022 compared to levels in 2021, with the Middle East and Europe making a strong comeback, according to the UN World Tourism Organisation (UNWTO). More than 900 million tourists made foreign trips in 2022, as several countries with strict corona virus restrictions eased rules. This represents 63 per cent of pre-pandemic levels, according to the report. In 2019, nearly 1.5 billion people travelled internationally, which reduced to 455 Million in 2021. Before the pandemic, travel and tourism accounted for nearly 10 per cent of the global GDP. The travel industry was valued around $3.5 trillion in 2019, with the pandemic placing millions of jobs at risk. The Middle East enjoyed the strongest relative increase last year as international arrivals climbed to 83 per cent of pre-pandemic levels. Europe, where 31 countries had no COVID restrictions as of June 2021, also made a strong comeback, accounting for 80 per cent recovery as compared to travel levels before the pandemic. Africa and America saw international travel return to about 65 per cent of pre-pandemic levels, while Asia and the Pacific recovered at a much slower pace. 58 | Asian Hotels and Properties PLC With several countries in the Asia-Pacific region still under COVID restrictions, international arrivals reached only 23% of levels before the pandemic. However, the return of Chinese travellers, who are among the world’s top spenders is likely to benefit Asian destinations in the future. Outlook for Global Tourism Based on UNWTO’s forward-looking scenarios for 2023, international tourist arrivals could reach 80 to 90 per cent of pre-pandemic levels this year, depending on the extent of the economic slowdown, the ongoing recovery of travel in Asia and the Pacific and the evolution of the Russian offensive in Ukraine, among other factors. Notable increases in international tourism receipts have been recorded across most destinations, in several cases higher than their growth in arrivals. This has been supported by the increase in average spending per trip due to longer periods of stay, the willingness by travellers to spend more in their destination and higher travel costs due to inflation. However, the global economic situation could translate into tourists adopting a more cautious attitude in 2023, with reduced spending, shorter trips and travel closer to home. Operational Review Performance The economic crisis in 2022 resulted in occupancies to remain low until November 2022. Overall the company experienced two quarters of poor growth. The hotel’s F&B revenue was also affected in the first half of the year due to severe fuel shortage in the country. The situation took a turn for the better from December 2022 onwards, as the fuel and power crisis eased and tourists started arriving into Sri Lanka. However, due to the dearth of business in the sector, city hotels engaged in price wars despite the prevailing inflation. Nevertheless, the company was able to surmount the odds to grow its Revenue. Mitigating Strategies The company was compelled to increase the prices to mitigate the pressure in the F&B segment, due to soaring food inflation and overall rise in operating costs with higher electricity rates. In order to curtail operational costs, the company has looked at different models such as reducing electricity usage, arranging for an energy audit which will assist us to explore opportunities to conserve electricity, water and energy. FINANCIAL REVIEW Highlights 2023 Rs. 8.4 Bn 106% Rs. 3.6 Bn Rs. 93 Mn REVENUE REVENUE GROWTH GROSS PROFIT PROFIT FROM OPERATING ACTIVITIES Performance The performance of the Group during the year under review is one of celebratory growth, given the contentious environment marred by an economic crisis and political instability. An agile strategy coupled with a dedicated workforce was responsible for the Group’s successful performance despite the fluctuations in the tourism industry. The Group recorded Rs. 8.4 Bn in revenue during the year under review, compared to Rs. 4.1 Bn revenue recorded during the last financial year. The impressive growth in revenue was a result of the combined increased contribution from both room revenue, and food and beverage revenue. The encouraging performance in the food and beverage segment was a result of increased tourist arrivals, coupled with increased patronage by local clientele driven by strategic marketing campaigns. During the year under review, the Group took steps to optimise its working capital through continued meticulous monitoring of cashflows to manage discretionary expenses and improve its operational efficiencies. As a result, the Group recorded a significant reduction of 46 per cent to Rs. 278 Mn in post-tax losses attributable to equity holders of the Parent, compared to the pre-tax loss of Rs. 510 Mn recorded the previous year. The hosting of travel influencers and digital nomads from source markets is helping generate interest in the Sri Lankan market. The focus going ahead will be to bring the rates up to remain profitable in this business by offering different packages to drive this strategy. The company is committed to increasing MICE events at its property. The Crescat Boulevard Mall opened its doors for customers in November 2021 after an extensive refurbishment and therefore 2022/23 was its first full year of operations after being closed for ten months. The performance of the mall was mixed because of the deterioration in the socioeconomic and political aspects in the first half of year 2022. Overall, the external environment stymied greater profits during the year due to a drop in footfalls and inability to increase tenant occupancy. The curfew due to social unrest and lack of mobility arising from fuel shortages had an impact on footfalls. However, with the restoration of political and economic stability, the second half of 2022 showed a positive trend of improved footfalls. After the targeted refurbishment to bring Crescat Boulavard on par with new malls in Colombo, the mall is being positioned as a lifestyle destination which will have an expanded lifestyle offering soon. The mall already hosts the Museum for Modern and Contemporary Art, which occupies a good 3,000-plus square feet and attracts the literati of the city and tourists who want to witness the local art. Going ahead, the company intends to organise entertainment based events to drive more footfalls in its drive to make Crescat a lifestyle driven mall rather than a pure retail mall. Revenue Group reported consolidated revenue of Rs. Rs. 8,417 Mn in FY 2022/23, a 105 per cent growth compared to FY 2021/22. Revenue growth was supported by a strong performance by food and beverage segment. Occupancy levels in the Sri Lanka witnessed strong recovery momentum towards the last two quarters of FY 2022/23. Gross Profit Margins The Group witnessed an increase in gross profit margins achieving 43% in 2022/23 compared to the margin of 36% recorded in the previous year which reflects the significant progress achieved despite a rocky first half of the year. The price revisions undertaken during the year and increases in room occupancy amidst inflation further contributed to healthy gross profit margins. Annual Report 2022/2023 | 59 Financial Review Net Operating Profit/ (Loss) Future Outlook The Group was able to reduce the net operating loss by Rs. 500 Mn compared to the previous year, as a result of rationalising costs, improving operational efficiencies and managing cash flow requirements Considering that the main source market of India is showing keen interest in Sri Lanka and China has opened up to outbound travel, we foresee strong growth prospects in 2023. The Group has established global sales offices in key source markets including India, China, UK, Germany and France which is helping us to connect with clients directly and to bring the Cinnamon Hotels & Resorts story to the world. Administrative expenses rose by 49% from Rs. 1.47 Bn in 2021/22 to Rs. 2.2 Bn during the financial period under review as a result of increases in employee salaries, hotel operating fee and depreciation. Finance Cost During the year, the Group reported finance costs of Rs. 393 Mn, which was Rs. 209 Mn higher than the previous year. This increase of 114% was mainly due to increased utilisation of the overdraft and increased interest rates. Net Loss after Tax Net loss after tax reduced significantly during the year by 34 per cent from Rs. 508 Mn in 2021/22 to Rs. 333 Mn in 2022/23. EBITDA Group reported an EBITDA of Rs. 766 Mn in FY 2022/23 compared to an EBITDA of Rs. 142 Mn in FY 2021/22. EBITDA improvement is due to strong revenue growth, higher revenue flow, and constant cost minimisation programmes. Despite the increased inflation locally and globally, the gross profit margin of the Group was 43% compared with the previous year’s margin of 36%, mainly due to the revised pricing strategy, increase in volumes and the depreciation of LKR. Total Assets Total assets of the Group were Rs. 45.9 Bn as at 31 Mar 2023 with the property, plant and equipment accounting for 82% of such assets and Property, Plant and Equipment. The current ratio and quick asset ratios stood at 0.41 and 0.31 respectively, reflecting the increased utilisation of the overdraft facilities to finance operations and supplement the cashflow. 60 | Asian Hotels and Properties PLC Our business strategy will focus on maximising emerging opportunities while expanding revenue and rationalising costs by adhering to the company’s robust processes and frameworks to manage cash management and liquidity. Financial and nonfinancial key performance indicators will be closely monitored and evaluated to ensure stringent control to ensure a stable financial position The company is looking ahead with optimism to increase room occupancy levels up to 68% while also driving F&B revenues to levels above Rs. 3.5 Bn. As interest rates and financial markets stabilise in 2023, this will support a higher level of tourist activity. Our long term commitment to our strategy remains steadfast. The company has proved its resilience and provided uninterrupted services to customers. We will continue to leverage on our world-class restaurants to increase revenue as inbound tourism picks up. After its extensive renovation, Crescat Boulevard is poised to compete with other upscale malls which have opened and will once again become the most preferred retail destination for discerning shoppers while its F&B offerings also attracts footfalls. The green shoots of tourism recovery have been visible in the last quarter of the year under review, with tourist arrivals increasing month-on-month, and coupled with a greater marketing drive by the government in major source markets, should deliver results by way of increased tourist footfalls in the country. SUSTAINABILITY REPORT Sustainability has been of utmost importance to Asian Hotels and Properties PLC. The Group has taken steps to integrate Environmental, Social and Governance (ESG) considerations into all decision-making processes as well as all aspects of its operations and value chain. The ESG strategy is guided by three pillars: the well-being of the planet, the empowerment , the well-being of its people and empowering all for sustainable development. The Group’s sustainability policy is aligned with that of the John Keells Group which provides robust management and accountability framework for sustainability. Mechanisms are in place to monitor progress to ensure the Group is aligned towards achieving the specific sustainability targets set for 2025. Wellbeing of the Planet A conscious effort was made by the Group to maximise the efficient use of natural resources and minimise the adverse effects on the environment during the year under review. As a result, the Group repurposed cooking oil to use as an energy source to heat boilers at its properties, thereby reducing the overall need for furnace oil and saving 3,928 litres. The energy profile and the environmental impact is as follows: 2023 Diesel Usage in Litres Petrol Usage in Litres Furnace Oil Usage in Litres Liquid Petroleum Gas (LPG) in Kg Electricity Usage in KwH 2022 209,-,238 111,040 9,096,677 18,-,171 104,036 7,956,590 Total CO2 Footprint (tCO2e) 7,909 6,676 CO2 Footprint - Direct Energy Through Primary Sources (Scope 1) 1,709 1,252 CO2 Footprint - Indirect Energy Through Primary Sources (Scope 2) 6,200 5,423 The Group was compelled to use diesel powered generators to ensure uninterrupted functioning at its properties despite power outages, which resulted in a higher consumption of diesel during the year under review compared to the previous year. The Group switched to LED light sources as a step towards adopting greener energy sources and increasing its energy efficiency. 2023 Total waste generated Re-used waste 2022 458,716 kg 380,114 kg 85.07% 83.99% Percentage of total waste recycled from the waste generated 3.33% 2.19% Hazardous waste generated 0.12% 0.14% An increase in the amount of waste generated was recorded during the year under review, due to increased business activities compared to the previous year. Empowerment of People Employees are among the most important assets for the Group. The year under review was marked by a number of economic challenges adversely affecting the quality of life of employees. The Group continued its welfare programs for employees while launching initiatives to provide extra support such as, financial assistance to mitigate cost of living during the festive period, a monthly crisis allowance, as well as educational and awareness programs for self-improvement. Category Nature of training (Hrs) Health and safety Safe Chemical Handling and Storage Fire Safety Awareness and Basic Fire Fighting Responsible consumption of Energy and Water Waste Management Human Trafficking in the Tourism Industry – conducted by International Organisation for Migration/UN Child Abuse and Protection – Conducted by LEADS Environment Social 2022/-,- Annual Report 2022/2023 | 61 Sustainability Report Employee demographics at Asian Hotels and Properties PLC FIXED TERM CONTRACT EMPLOYEES PERMANENT EMPLOYEES TRAINEE CONTRACT EMPLOYEES % % % 8 16 20 84 92 Female Male 80 Female Male Female Male Initiatives especially focused towards empowering and encouraging female employees: › Social media engagement to promote female participation › Female specific committee to look into matters of providing accommodation and 100 days of maternity leave, feeding hours for female employees › Improved workplace related policies promoting equality › Better health/hygiene facilities Welfare of Communities A part of the Group’s sustainability strategy involves giving back to the community. Through the implementation of a number of initiatives, the Group ensures its obligations to the community are met. The Group has ongoing partnerships with hotel schools, technical training schools, and vocational training institutes where trainees gain comprehensive practical exposure at the Groups’ properties with the possibility of being absorbed into the Groups’ employee body. During the year under review, 273 industrial trainees were recruited to undergo training in hotel operations. Name of CSR project Description of beneficiaries Number of beneficiaries Location of the CSR project Extra details about the project Meals that Heal – meal donation program (Launched in June 2021) Underprivileged 1,500 communities in Colombo affected by the COVID-19 pandemic and Economic crisis Colombo Won the Gold award for CSR activities at the PATA Awards 2022 Community Kitchen implemented by Gangaramaya Temple Underprivileged communities in Colombo, devotees visiting the temple Colombo The Group provides support by providing Rice steamers, support of Engineering, and kitchen and food safety teams Zero waste school project Students of St. Michael’s 75 College Colombo A project initiated to train and educate students and teachers on the 10R Concept of Waste Management, through a series of workshops and projects such as vegetable and insect garden to enhance biodiversity Mount Lavinia beach Staff volunteered to collect plastic nurdles from the Mt. Lavinia beach following the X-press pearl disaster. The Group has spent 560 volunteer hours on this project and collected 12.25Kg of Nurdles Beach clean-up programs 62 | Asian Hotels and Properties PLC 700 approx FINANCIAL REPORTS Annual Report 2022/2023 | 63 FINANCIAL CALENDAR Interim Reports for 2022/23 1st Quarter 19 July 2022 2nd Quarter 2 November 2022 3rd Quarter 30 January 2023 4th Quarter 23 May 2023 Audited financial statements signed 2021/22 23 May 2022 2022/23 23 May 2023 Annual General Meetings 28th Annual General Meeting 21 June 2022 29th Annual General Meeting 27 June 2023 FINANCIAL REPORTS Annual Report of the Board of Directors.............................................................................. 65 Independent Auditors’ Report................................................................................................... 77 Statement of Profit or Loss.......................................................................................................... 81 Statement of Comprehensive Income.................................................................................... 82 Statement of Financial Position................................................................................................ 83 Statement of Changes in Equity................................................................................................ 84 Statement of Cash Flows.............................................................................................................. 86 Notes to the Financial Statements .......................................................................................... 88 Information to Shareholders................................................................................................... 135 Five Year Financial Summary and Key Indicators......................................................... 137 64 | Asian Hotels and Properties PLC ANNUAL REPORT OF THE BOARD OF DIRECTORS The Directors have the pleasure of presenting the 29th annual report of Asian Hotels and Properties PLC together with the Audited Financial Statements of the Company and the Consolidated Financial Statements of Asian Hotels and Properties PLC and its subsidiaries (“AHP Group”) for the year ended 31st March 2023. SEGMENT REPORTING This Report satisfies the relevant requirements of the Companies Act No. 7 of 2007 (Companies Act), the relevant listing rules of the Colombo Stock Exchange (CSE), recommended reporting and corporate governance best practices, including the Code of Best Practices on Related Party Transactions (2013) issued by the Securities and Exchange Commission of Sri Lanka (SEC), Code of Best Practice on Corporate Governance (2013) jointly advocated by the SEC Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) , Code of Best Practice on Corporate Governance (2017) issued by CA Sri Lanka to the extent of business exigency as required by the Company and recommended accounting practices. Revenue generated by the Company amounted to Rs. 4,848 Mn (Rs. 2,277 Mn in 2022) whilst the AHP Group revenue amounted to Rs. 8,417 Mn (Rs. 4,095 Mn in 2022). Contribution to AHP Group revenue, from the different business segments are provided in Note 5 to the Financial Statements. PRINCIPAL ACTIVITIES The Company is engaged in the business of hoteliering, property development and management. Trans Asia Hotels PLC (the owner of Cinnamon Lakeside Colombo) is the subsidiary of the Company, which is incorporated in Sri Lanka, and its principal activity is hoteliering. There has been no material change in the activities of the Company and its subsidiary (collectively the ‘AHP Group’) during the period under review. REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS The financial and operational performance, during the year ended 31st March 2023 and future business development of the Company and the AHP Group, is provided in the Chairperson’s message and reports on Management Discussion & Analysis and Financial Review. These reports, which form an integral part of the Annual Report of the Board of Directors, together with the Audited Financial Statements, state of affairs of the Company and the AHP Group. FINANCIAL STATEMENTS AND AUDITORS’ REPORT The Financial Statements, duly signed by the Directors, are provided on pages 81 to 132 and Independent Auditors’ Report on the Financial Statements is provided on pages 77 to 80 of this Annual Report. CORPORATE GOVERNANCE A comprehensive report on Corporate Governance practices and principles with respect to the management and operations of the Company are set out from pages 11 to 47 of this report. Segment-wise contribution to AHP Group revenue, results, assets and liabilities are provided in Note 33 to the Financial Statements. REVENUE RESULTS AND APPROPRIATIONS The loss after tax of the Company was Rs. 235 Mn (Rs.512 Mn in 2022) whilst the AHP Group loss attributable to the Owners of the Company, for the year was Rs. 278 Mn (Rs. 510 Mn in 2022). A detailed description of the Group results and appropriations are given below. 2023 2022 Net Loss for the year after providing for expenses including depreciation on property, plant and equipment was: (132,509) (459,227) From which income tax has been reversed/(deducted): (200,254) (48,620) Leaving thereafter a Net Loss after tax of: (332,763) (507,847) (55,174) 2,320 (277,589) (510,167) 5,181,714 5,673,539 10,911 10,911 1,691 13,610 4,916,727 5,187,893 - (6,179) 4,916,727 5,181,714 For the year ended 31st March In Rs.’000s The amount attributable to Minority Interest which has been deducted is: Leaving a Loss available to the Group of: The brought forward Profit after adjustments is: Transferred to Revenue Reserve of: Other Comprehensive Income/ (Expenditure): Leaving an un-appropriated balance to be carried forward of: Surcharge tax adjustment Leaving an un-appropriated balance to be carried forward (adjusted) Annual Report 2022/2023 | 65 Annual Report of the Board of Directors ACCOUNTING POLICIES All the significant accounting policies adopted by the Company and the AHP Group are mentioned in the Notes to the Financial Statements. The Financial Statements, which comprise the Statement of Profit or Loss, Statement of Other 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 CA Sri Lanka and the requirement of the Companies Act, The changes to accounting policies have been applied consistently to all financial periods presented in these Financial Statements, unless otherwise indicated. The accounting policies adopted in preparation of the Financial Statements are given from pages 88 to 132 of this report. RESPONSIBILITY OF DIRECTORS FOR THE FINANCIAL STATEMENTS 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 Sri Lanka Accounting Standards (SLFRS/LKAS), Companies Act, the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the Listing Rules of the CSE. The Statement of Directors’ Responsibility for financial reporting is given on page 75 and forms an integral part of this Annual Report of the Board of Directors DIVIDENDS There was no dividend declared for the financial year ended 31st March 2023. However, if a dividend is declared, it is preceded by a confirmation from the Board of Directors that the Company will satisfy the requirements of Section 56 (2) of the Companies Act No.7 of 2007, and that it will also satisfy the solvency test in accordance with Section 57 of the Companies Act No. 7 of 2007. The Board will also obtain a certificate from the Auditors, prior to recommending the dividend. PROPERTY, PLANT AND EQUIPMENT The book value of Property, Plant and Equipment as at the reporting date amounted to Rs. 33,621 Mn (2022 - Rs. 31,400 Mn) and Rs. 37,686 Mn (2022 - Rs. 34,803 Mn). Capital expenditure for the Company and the AHP Group amounted to Rs 260 Mn (2022 - Rs. 23 Mn) and Rs. 712 Mn (2022 - Rs. 114 Mn) respectively. 66 | Asian Hotels and Properties PLC Total Freehold Land available - Asian Hotels and Properties PLC - Eight Acres and Five Decimal Naught Eight Perches (A8. R00 P05.08). Total Leasehold Land available - Trans Asia Hotels PLC - Seven Acres, One Rood and Twenty-Four Decimal Two Eight Perches (A07. R01. P24.28). Details of Land and Buildings with net book values including details of Property, Plant and Equipment of the Company and the AHP Group and their movements are given in Note 12 to the Financial Statements on page 100. MARKET VALUE OF PROPERTIES All buildings owned by the Company and its subsidiary were last revalued as at 31st December 2022.Valuation was carried out by M/s P. B. Kalugalagedara and Associates, Chartered Valuation Surveyor. All properties classified as investment property were also revalued as at 31st December 2022 in accordance with the requirements of LKAS 40. This valuation too was carried out by M/s P. B. Kalugalagedara and Associates, Chartered Valuation Surveyor. Details of property valuations, including the valuation methods are provided in Note 12.3 to the Financial Statement on page 105 of this report. INVESTMENT PROPERTIES In accordance with LKAS 40-Investment Property, the net book value of properties held to earn rental income, and properties held for capital appreciation have been classified as Investment Properties. The details of Investment Properties are explained in Note 14 to the Financial Statements on page 106. INVESTMENT IN SUBSIDIARY Company Trans Asia Hotels PLC (Quoted) No. of Shares 86,823,028 % Holding 43.41 STATED CAPITAL The Stated Capital of the Company as at 31st March 2023 Rs. 3,345 Mn (2022 - Rs. 3,345 Mn) comprising of 442,775,300 ordinary shares. SHARE INFORMATION The market value of an ordinary share of the Company as at 31st March 2023 was 44.00 (31st March 2022 - Rs. 37.00). The distribution and composition of shareholders and the information relating to earnings, dividend, net assets, and market value per share is given in the Information to Shareholders and Investors and Financial Review section of this annual report. INFORMATION TO SHAREHOLDERS The Board strives to be transparent and provide accurate information to shareholders in all published material. The quarterly financial information and relevant announcements have been sent to the CSE in a timely manner. EQUITABLE TREATMENT OF ALL SHAREHOLDERS The Company has made every endeavour to ensure the equitable treatment of all shareholders and has adopted adequate measures to prevent information asymmetry. MAJOR SHAREHOLDERS The Directors of the Company who held office during the year under review are set out below: Mr. K. N. J. Balendra - Chairperson Mr. J. G. A. Cooray Mr. S. Rajendra Mr. A. S. De Zoysa Mr. J. Durairatnam Mr. M. R. Svensson Mr. C.L.P. Gunawardane Ms. A. Nanayakkara The Board consists of eight (8) Directors comprising of five (5) Non-Executive Non- Independent Directors (NED/NID) and three (3) Non-Executive Independent Directors (NED/ID). In accordance with the criteria for ‘Independence’ specified by section 7.10.4 of the listing rules of the CSE and as identified by the Code of Best Practice on Corporate Governance (2013) jointly advocated by the SEC and CA Sri Lanka, the Board affirms that the aforesaid NED/IDs satisfy the criteria for independence and have satisfied the requirements under clause 7.10.2 (b). Details of the twenty five (25) largest shareholders of the Company and the percentage shareholding held by the public are disclosed in the Information to Shareholders and Investors section of this Annual Report from page 135. The Directors of the subsidiary, Trans Asia Hotels PLC who held office during the year under review are set out below: RESERVES Mr. N. L. Gooneratne Total reserves as at 31st March 2023 for the Company and the AHP Group amounted to Rs 25,530 Mn (2022 - Rs. 28,281 Mn) and Rs. 23,611 Mn (2022 - Rs. 26,385 Mn) respectively. The movements in Other Components of Equity Revenue Reserve of the Company are shown in the Statement of Changes in Equity on page 84 of this report. CONTINGENT LIABILITIES & CAPITAL COMMITMENTS Commitments made for capital expenditure as at 31st March 2023 and the contingent Liabilities as at that date are given in Note 34 to the Financial Statements on page 132. DIRECTORS The Board of Directors of the Company as at 31st March 2023 and brief profiles of each Director are given in the Board of Directors section of this Annual Report. Mr. K. N. J. Balendra - Chairperson Mr. J. G. A. Cooray Ms. J. C. Ponniah** Mr. M. R. Svensson Mr. C.L.P. Gunawardane Mr. S. Rajendra Mr. H. A. J. De Silva Wijeyeratne Ms. S. A. Atukorala * Appointed w.e.f. 22/06/2022* Retired w.e.f 21/06/2022** RESPONSIBILITY OF THE BOARD Details of responsibilities of the Board and the manner in which those responsibilities were discharged during the year are disclosed in the Corporate Governance section of this annual report. RETIREMENT AND RE-ELECTION OF DIRECTORS In accordance with Article 84 of the Articles of Association of the Company, Mr. C. L. P. Gunawardane and Mr. M. R. Svensson retire by rotation and offer themselves for re-election. Brief profiles of Mr. C. L. P. Gunawardane and Mr. M. R. Svensson are contained on Page 9 of this Annual Report. Annual Report 2022/2023 | 67 Annual Report of the Board of Directors BOARD SUB - COMMITTEES Board Audit Committee The following NED/IDs of the Board served as members of the Board Audit Committee during the year ended 31st March 2023. Ms. A. Nanayakkara - Chairperson Mr. A. S. De Zoysa Mr. J. Durairatnam The Report of the Audit Committee is given on pages 73 and 74 of this Report. Nominations Committee The Nominations Committee comprised of 02 NED/IDs and 01 NED/NID and the membership of the Committee during the year ended 31st March 2023 was as follows: Mr. J. Durairatnam - Chairperson Mr. A. S. De Zoysa Mr. K. N. J. Balendra The Nomination Committee of AHP Group also acts as the Nomination Committee of the subsidiary Trans Asia Hotels PLC, The Report of the Nominations Committee is given in the Corporate Governance section of this annual report. Related Party Transactions Review Committee As permitted by the listing rules of the CSE, the Related Party Transactions Review Committee of the Parent Company, JKH, functions as the Related Party Transactions Review Committee of the Company and its subsidiary. The Related Party Transactions Review Committee comprised 03 NED/IDs and following members during the year ended 31st March 2023: Ms. M. P. Perera - Chairperson Mr. D A. Cabraal Mr. A. N. Fonseka The report of the Related Party Transactions Review Committee is given in the Corporate Governance section of this annual report. Project Risk Assessment Committee Project Risk Assessment Committee of JKH, the parent company, functions as the Project Risk Assessment Committee of the Company and its subsidiary. The Project Risk Assessment Committee members of JKH during the year ended 31st March 2023 were as follows. Dr. S. S. H. Wijayasuriya - Chairperson Ms. M. P. Perera Human Resources and Compensation Committee Mr. K. N. J. Balendra As permitted by the listing rules of the CSE, the Human Resources and Compensation Committee of the Parent Company, John Keells Holdings (JKH), functions as the Human Resources and Compensation Committee of the Company and its subsidiary. Mr. J. G. A. Cooray The following members of the JKH Board of Directors who are NED/IDs served on the JKH Human Resources and Compensation Committee during the year ended 31st March 2023; Mr. D. A. Cabraal - Chairperson Mr. A. N Fonseka* Dr. S. S. H. Wijayasuriya Mr. M. A Omar** *Appointed w.e.f- **Resigned w.e.f- The report of the Human Resources and Compensation Committee and the remuneration policy is given in the Corporate Governance section of this annual report. 68 | Asian Hotels and Properties PLC INTERESTS REGISTER The Company and its subsidiary have maintained Interests Registers as contemplated by the Companies Act No.7 of 2007. In compliance with the requirements of the Companies Act, this annual report also contains particulars of entries made in the interest register of its subsidiary which is a Public Listed Company as permitted by Section 30 of the Companies Act. The Interest Register is available at the Registered office of the Company, in keeping with the requirement of the Section 119 (1) (d) of the Companies Act. Particulars of entries in the Interests Register of the Company for the Financial Year 2022/23 are as follows. a. 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 and no additional interests have been disclosed by any Director. b. Share Dealings There have been no disclosures of share dealings during the financial year ending as at 31st March 2023. c. Indemnities and Directors’ Remuneration Details of the remuneration and other benefits received by the Directors of the Company and its subsidiary are set out in Note 7 to the Financial Statements. While any Executive Directors’ remuneration is determined by the Human Resources and Compensation Committee of JKH, the parent company, the remuneration of the Non-Executive Directors is determined according to scales of payment decided upon by the Board. The Directors are of the opinion that the framework assures appropriateness of remuneration and fairness for the Company. Director fees applicable to NEDs nominated by JKH are paid directly to JKH and not to individual Directors. Particulars of entries in the Interests Register of the Subsidiary Trans Asia Hotels PLC has maintained an Interests Register as contemplated by the Companies Act No.7 of 2007. a) Interests in contracts The Directors have all made a general disclosure to the Board of Directors as permitted by Section 192 (2) of the Companies Act and no additional interests have been disclosed by any Director of TAH b) Share Dealings There have been no disclosures of share dealings during the financial year ending 31 March 2023. c) Indemnities and remuneration The Board approved the payment of revised Director fees and Board Sub Committee fees to the Non-Executive Directors of the Company, namely, K N J Balendra, J G A Cooray, S Rajendra, C L P Gunawardane, M R Svensson, N L Gooneratne, H A J de S Wijeyeratne and S A Atukorale which fees are commensurate with the market and complexities of the business of the Company, with effect from 1st July 2022. The fees payable to Directors nominated by John Keells Holdings PLC were remitted to John Keells Holdings PLC rather than to individual Directors. DIRECTORS’ SHAREHOLDINGS OF THE COMPANY The shares held by Directors and their spouses in the Company as of 31st March 2023 are as follows. Full Name Mr. Krishan Niraj Jayasekara Balendra Mr. Joseph Gihan Adisha Cooray Mr. Suresh Rajendra Mr. Jegatheesan Durairatnam Mr. Ashan Suresh De Zoysa Mr. Mikael Svensson Mr. Changa Lashantha Poojitha Gunawardane Ms. Aroshi Nanayakkara Shares as at 31st March 2023 Shares as at 31st March 2022 Nil Nil 10,600 Nil Nil Nil Nil Nil 10,600 Nil Nil Nil Nil Nil Nil Nil EMPLOYEE SHARE OPTION PLAN (ESOP) The Company does not offer its shares under an ESOP Scheme. Employees of the Company receive remuneration in the form of share-based payment under the John Keells Group’s ESOP Scheme. Share options of the parent Company JKH are granted to senior executives of the Company, whereby employees render services as consideration for equity instruments (equity- settled transactions). The cost of the employee services received in respect of the shares or share options granted is recognised in the Income Statement over the period that employees provide services, from the time when the award is granted up to the vesting date of the options. The overall cost of the award is calculated using the number of share options expected to vest and the fair value of the options at the date of grant. The Company has not directly or indirectly provided funds to its employees to purchase shares under ESOP Scheme. The employee remuneration expense resulting from the John Keells Group’s ESOP scheme to the employees of the Company is recognised in the Income Statement of the Company. This transaction does not result in a cash outflow to the Company and expense recognised is met with a corresponding equity reserve increase, thus having no impact on the Statement of Financial Position (SOFP). The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted. The valuation takes into account factors such as stock price, expected time to maturity, exercise price, expected volatility of share price, expected dividend yield and risk-free interest rate. Annual Report 2022/2023 | 69 Annual Report of the Board of Directors DIRECTORS MEETINGS Details of the meetings of the Directors are given on page 16. DIRECTORS’ DECLARATIONS (i) Chairperson’s declaration The Chairperson declares that there were no departures from any of the provisions of the Code of Business Conduct and Ethics. (ii) Directors’ declarations The adverse effects of the pandemic and the macro-economic conditions in the Country, have directly impacted the share price of the subsidiary, Trans Asia Hotels PLC (TAH), resulting in its decrease. This in turn has resulted in the TAH’s float adjusted market capitalisation to fall below the required threshold of Rs.1.0 Billion, despite TAH satisfying the other criteria, as per Option 1 of Rule 7.14.1 (i) (b) of the Listing Rules of the Colombo Stock Exchange thus rendering TAH noncompliant with the Minimum Public Holding Requirements of the Listing Rules. The Directors declare that; a) the Company and its subsidiary have complied with all applicable laws and regulations in conducting its business. Pursuant to the announcement dated 27th August 2021, TAH was transferred to the Secondary Board on 27th August 2021, due to its continued non-compliance with the said Minimum Public Holdings requirements. b) they have declared all material interests in contracts involving the Company and refrained from voting on matters in which they were materially interested. TAH in accordance with Rule 7.14.2 of the Listing Rules, has made announcements to the Market by notices dated last year, 22 April 2022, 19 July 2022, 26 October 2022 and 11 January 2023. c) the Company has made all endeavours to ensure equitable treatment of shareholders. d) the business is a going concern with supporting assumptions or qualification as necessary, e) they 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. f ) the Company has a Code of Business Conduct and Ethics for Directors and members of the senior management team and that all Directors and members of the senior management team have complied with this Code. g) the Company being listed on the CSE is compliant with the rules on Corporate Governance under the Listing Rules of the CSE with regard to the composition of the Board and its Sub-Committees. h) the Company is fully compliant with the Code of Best Practice on Corporate Governance (2013) jointly issued by the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). The Company is almost fully compliant with the 2017 Code of Best Practice on Corporate Governance issued by the CA Sri Lanka, to the extent of business exigency and as required by the Company, and the John Keells Group. 70 | Asian Hotels and Properties PLC TAH continues to be non compliant with the Minimum Public Holding Requirement specified in Rule 7.14.1 (b) of the Listing Rules. The non-compliance is due to the float adjusted market capitalisation not meeting the required threshold, owing to the anomalies brought about through the macro economic conditions of the country. TAH continues to aggressively pursue its business strategies in order to capitalise on all available opportunities and maximise stakeholder value creation. TAH also monitors the situation towards ensuring compliance with the required Public Holding threshold as specified in the CSE Listing Rules. SUSTAINABILITY The Company is conscious of the need to preserve the environment and its natural resources and has taken specific steps, particularly in ensuring the conservation of its natural resources and environment as well as addressing material issues highlighted by its stakeholders. Every endeavour has been made to minimise adverse effects on the environment to ensure sustainable continuity of natural resources. The Company has adopted the main Sustainability disclosures prescribed by the Code of best Practice on Corporate Governance (2013) which cover the elements of economic performance, the environment, labour practice, society and stakeholders, product service responsibility, sustainable reporting, engagement and effective communication. HUMAN RESOURCES The Company continued to implement appropriate human resource management policies to develop employees and optimise their contribution towards the achievement of corporate objectives. The policies and procedures ensure the equitable treatment of all employees. EMPLOYMENT The Company has an equal opportunity policy in respect of employment and these principles are enshrined in specific selection, training, development and promotion policies, ensuring that all decisions are based on merit. The Company, in line with the JKH Group policy, practices equality of opportunity for all employees irrespective of ethnic origin, religion, political opinion, gender, marital status or physical disability. The number of persons employed by the Company and the AHP Group as at 31st March 2023 was 789 (792 in 2022) and 1,390 (1,323 in 2022), respectively. There have been no material issues pertaining to employees and industrial relations of the Company and the AHP Group during the financial year 2022/23. SUPPLIER POLICY The Company, in line with the JKH Group’s policies, 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 2023, the trade and other payables of the Company and AHP Group amounted to Rs. 715 Mn (2022 - Rs. 637 Mn) and Rs. 1,230 Mn (2022 - Rs. 1,020 Mn) respectively. ENVIRONMENTAL PROTECTION The Company is in compliance with the relevant environmental laws, regulations and endeavours to comply with best practices applicable in the Country. The Company has not engaged in any activity that is harmful to the environment. STATUTORY PAYMENTS The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its Subsidiary, all contributions, levies and taxes payable on behalf of, and in respect of the employees of the Company and its Subsidiary, and all other known statutory dues that were due and payable by the Company and its Subsidiary as at the Balance Sheet date have been paid or, where relevant provided for, except as specified in Note 34 to the Financial Statements, covering Contingent Liabilities. ENTERPRISE RISK MANAGEMENT The Board confirms that there is an ongoing process of identifying, evaluating and managing any significant risks faced by the Company, where annual risk reviews are carried out by the Enterprise Risk Management Division and the risks are further reviewed each quarter by the Company. The headline risks are presented to the Board Audit Committee for review by the respective business units. The details of the Risks Report and Risk Management Process are set out from pages 48 to 54 of this Report. INTERNAL CONTROL The Board, through the involvement of the Group Business Process Review (Group BPR) Division, takes steps to gain assurance on the effectiveness of internal control systems in place. The Audit Committee receives regular reports on the adequacy and effectiveness of internal controls in the Company. These include compliance with laws, regulations and established policies and procedures of the Company. The Head of the Group BPR Division has direct access to the Chairperson of the Audit Committee. Reports of the outsourced Internal Auditors are also reviewed by the Audit Committee on matters pertaining to the Company. The Directors acknowledge their responsibility for the Company’s systems of internal controls. The statement of Corporate Governance from pages 11 to 47 sets out in detail the Company’s system of internal controls. RELATED PARTY TRANSACTIONS The Company’s transactions with Related Parties, given in Note 30 to the Financial Statements, have complied with CSE Listing Rule 9 and the Code of Best Practices on Related Party Transactions under the SEC Directive dated 12th December 2013. DONATIONS Total donations made by the Company and AHP Group during the year amounted to Rs. 2.4 Mn (2022 - Rs. 1.5 Mn) and Rs. 5.6 Mn (2022 – Rs. 1.9 Mn) respectively. Annual Report 2022/2023 | 71 Annual Report of the Board of Directors EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE Except for the matters disclosed in Note 36 to the Financial Statements on page 132. there were no material events that require adjustments or disclosure in the Financial Statements. GOING CONCERN The Company has prepared the Financial Statements for the year ended 31st March 2023 on the basis that it will continue to operate as a going concern. In determining the basis of preparing the Financial Statements for the year ended 31st March 2023, based on available information, the management has assessed the prevailing macroeconomic conditions and its effect on the Company and the appropriateness of the use of the going concern basis. It is the view of the management that there are no material uncertainties that may cast significant doubt on the Company’s ability to continue to operate as a going concern. The Company’s businesses recorded strong improvement in profitability compared to the previous year on the back of a fast recovery momentum with the business reaching pre COVID-19 levels of operations post the easing of restrictions. The management has formed the judgement that the Company has adequate resources to continue in operational existence for the foreseeable future, driven by the continuous operationalisation of risk mitigation initiatives and monitoring of business continuity and response plans along with the financial strength of the Company. In determining the above significant management judgements, estimates and assumptions, the impact of the macroeconomic uncertainties, including supply chain disruptions, power interruptions and distribution challenges on account of the prevailing foreign exchange market limitations have been considered as of the reporting date and specific considerations have been disclosed under the notes, as relevant. Having presented the outlook for the Company and subsidiary to the AHP Board, the Directors are satisfied that the Company and its subsidiary have adequate resources to continue in operational existence for the foreseeable future, to justify adopting the going concern basis in preparing these Financial Statements. 72 | Asian Hotels and Properties PLC 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. KPMG, Chartered Accountants, do not have any relationship or interest in the Company and its Subsidiaries. Messrs. KPMG, Chartered Accountants have indicated their willingness to continue as Auditors of the Company, and 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 Note 7 to the Financial Statements of this report. Further details of the work of the Auditor and the Audit Committee are set out in the Audit Committee Report on pages 73 and 74. ANNUAL REPORT The Board of Directors approved the Consolidated Financial Statements on 23 May 2023. 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 as required. ANNUAL GENERAL MEETING The Annual General Meeting will be held as a virtual meeting on 27 June 2023 at 3.30 pm. This Annual Report is signed for and on behalf of the Board of Directors. By Order of the Board Director Keells Consultants (Private) Limited Secretaries 23 May 2023 Director REPORT OF THE AUDIT COMMITTEE INTRODUCTION The Board Audit Committee of Asian Hotels and Properties PLC is a formally established Sub-Committee of the Main Board, to which it is accountable. The Charter of the Committee clearly defines the terms of reference of the Audit Committee and has been drawn in-line with corporate governance best practices adhering to the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. The effectiveness of the Committee is evaluated annually by each member of the Committee and the results are communicated to the Board. This report focuses on the activities of the Audit Committee for the year under review. A more general overview of the Committee’s functions is given under the Corporate Governance Commentary from page 11 to 47. ROLE OF THE COMMITTEE The role of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities in relation to the integrity of the Financial Statements of the Company and of the subsidiary (AHP Group), the internal control and risk management framework and systems of the Group, compliance with legal and regulatory requirements, the External Auditors’ performance, qualifications and independence as well as the adequacy and performance of the Internal Audit function undertaken by the JKH Group’s Business Process Review Division (Group BPR). The scope of functions and responsibilities set out in the terms of reference of the Audit Committee have been approved by the Main Board and is reviewed annually. COMPOSITION OF THE COMMITTEE AND MEETINGS The Audit Committee comprised of three Non-Executive Independent Directors. Ms. Aroshi Nanayakkara serves as the Chairperson of the Audit Committee since June 2021. She is a member of Chartered Institute of Management Accountants (CIMA), UK having gathered extensive experience through her 20 plus years in multinationals as well as some of Sri Lanka’s prominent blue-chip companies. Other members of the committee have specialist banking and IT backgrounds. All Non-Executive Directors satisfy the criteria for independence as specified in the Standards on Corporate Governance for listed Companies issued by the Securities and Exchange Commission of Sri Lanka. The individual and collective knowledge, business experience and independence of members are brought to bear on all matters which fall within the purview of the committee. The Director Finance of the Cinnamon Grand Hotel serves as the Secretary to the Audit Committee. The President - Property Group of John Keells Holdings, Chief Executive Officer – Cinnamon Hotels & Resorts, Chief Financial Officer - Leisure Industry Group, General Manager of Cinnamon Grand, Sector Financial Controllers of Property and Hotels Sectors together with the Head of Group Business Process Review division of John Keells Holdings PLC, attend Audit Committee meetings by invitation. Other officials are invited to attend on a need basis. Outsourced Internal Auditors, PricewaterhouseCoopers (Pvt) Ltd., and Independent External Auditors, KPMG, are required to attend meetings on a regular basis. The Audit Committee held four meetings during the financial year. Information on the attendance at these meetings are given under Corporate Governance on page 19. In addition, the Chairperson 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. The activities and views of the Committee have been communicated to the Board of Directors quarterly through verbal briefings and by tabling the minutes of the Committee’s meetings at the Main Board. FINANCIAL REPORTING The Audit Committee has reviewed and discussed the Group’s quarterly and annual Financial Statements with the Management and the external auditors prior to their publication. The scope of the review included ascertaining compliance of the statements and disclosures with Sri Lanka Accounting Standards and the appropriateness and changes in accounting policies and material judgemental matters. The Committee further discussed with the External Auditors and Management the matters communicated to the Committee by the External Auditors in their report on the audit for the financial year. In addition, the Committee regularly discussed the operations of the Company, the volatility and risks in the industry, risk mitigants and future prospects with the Management and is satisfied that all relevant matters have been taken into account in the preparation of the Financial Statements. The committee obtained independent input from External Auditors on the effects of any new Sri Lanka Accounting Standards that came into effect for the year under review and satisfied themselves that necessary preparatory work was carried out to enable the Company to comply with these new standards. Annual Report 2022/2023 | 73 Report of the Audit Committee INTERNAL AUDIT, RISK AND CONTROLS PricewaterhouseCoopers (Pvt) Ltd continued to serve as the outsourced Internal Auditors of the Company with the audit plans and scope of work being formulated in consultation with Group BPR division and thereafter approved by the Audit Committee. The main focus of Internal Audit was to provide independent assurance on the overall system of internal controls, risk management and governance by evaluating the adequacy and effectiveness of internal controls, compliance with laws and regulations and compliance with established policies and procedures of the Company. Reports from the outsourced Internal Auditors on the operations of the Company were also reviewed by the Committee. The recommendations of the Internal Auditors are implemented as deemed fit and implementation confirmed by the auditors in subsequent follow-up audits. The Audit Committee has also reviewed the processes for the identification, evaluation and management of all significant operational risks faced by the Company. The most significant operational risks and the remedial measures taken to mitigate them have been reviewed with the Management, the John Keells Group Sustainability and Group BPR division as well as the Main Board. Formal confirmations and assurances have been received from senior management on a quarterly basis regarding the efficacy and status of the internal control systems and risk management systems as well as compliance with applicable laws and regulations. The Committee reviewed the whistle blowing arrangements of the Company which is in-line with the Group (JKH) arrangements and had direct access to the Ombudsperson for the Group. EXTERNAL AUDIT The External Auditors’ letter of engagement, including the scope of the audit, was reviewed and discussed by the Committee with the external auditors and Management prior to the commencement of the audit. The External Auditors kept the Committee advised on an ongoing basis regarding any unresolved matters of significance. Before the conclusion of the audit, the Committee met with the External Auditors to discuss all audit issues and agreed on their treatment. The Committee also met the External Auditors, without the Management being present, prior to the finalisation of the Financial Statements. The External Auditors’ final management reports on the audit of the Company and Group Financial Statements for the 74 | Asian Hotels and Properties PLC year 2022/23, together with management’s responses, were discussed with management and the auditors. The Audit Committee is satisfied that the independence of the External Auditors has not been impaired by any event or service giving rise to a conflict of interest. Due consideration has been given to the level of audit and non-audit fees received by the External Auditors from the Group and confirmation has been received from the External Auditors of their compliance with the independence criteria given in the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka. The performance of the External Auditors has been evaluated and discussed with the senior management of the Company, and the Committee has recommended to the Board that KPMG be re- appointed as the External Auditors of Asian Hotels and Properties PLC for the financial year ending 31st March 2024, subject to approval by the shareholders at the Annual General Meeting. CONCLUSION Based on the reports submitted by the External Auditors and the outsourced Internal Auditors of the Company, the assurances and certifications provided by the senior management and the discussions with the Management and the auditors both at formal meetings and informally, the Committee is of the view that the control environment within the Company is satisfactory and provides reasonable assurance that the financial position of the Company is adequately monitored and its assets are safeguarded. Aroshi Nanayakkara Chairperson of the Audit Committee 23 May 2023 Members: Ms. Aroshi Nanayakkara - Chairperson Mr. J. Durairatnam Mr. A. S. De Zoysa STATEMENT OF DIRECTOR’S RESPONSIBILITY The responsibility of the Directors, in relation to the Financial Statements of Asian Hotels and Properties PLC (the “Company”) and the Consolidated Financial Statements of the Company and its Subsidiary (AHP 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 the Auditors in relation to the Financial Statements contained in this Annual Report. As per the provisions of the Companies Act No. 07 of 2007 (Companies Act), the Directors are required to prepare, for each financial year and place before a general meeting, financial statements which comprise of: › Statement of profit or loss, statement of comprehensive income of the Company and AHP Group, which present a true and fair view of the financial performance of the Company and AHP Group for the respective financial year. › Statement of financial position, which represents a true and fair view of the state of affairs of the Company and AHP Group as at the end of the financial year: › A statement of changes in equity; and › A cash flow statement for the year ended 31st March 2023 together with notes to the financial statements. The Board of Directors have ensured that the Financial Statements of the Company and of the AHP Group for the year ended 31 March 2022 presented in the report have been prepared : › using appropriate accounting policies which have been selected and applied in a consistent manner, and material departures, if any, have been disclosed and explained; › in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) and that reasonable and prudent judgements and estimates have been made so that the form and substance of transactions are properly reflected; and › provide the information required by and otherwise comply with the Companies Act the Listing Rules of the Colombo Stock Exchange (CSE), the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the code of best practice on Corporate Governance (2013) jointly advocated by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission of Sri Lanka (SEC) and the code of best practice on Corporate Governance (2017) issued by CA Sri Lanka In preparing the Financial Statements, the Board of Directors have ensured that the Company has adequate resources to continue in operation to justify applying the going concern basis. After considering the financial position, operating conditions, regulatory and other factors and such matters required to be addressed in the Corporate Governance Code, the Directors have a reasonable expectation that the Company possesses 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 Additionally, the Board Directors have a responsibility to; › Ensure that the Company maintains sufficient accounting records to disclose, with reasonable accuracy, the financial position of the Company and of the AHP Group; and › Take all reasonable steps expected of them to safeguard the assets of the Company and of the AHP Group to establish appropriate systems of internal controls to prevent, deter and detect any fraud, misappropriation or other irregularities. The Board of Directors have 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 of the AHP Group. Further in the event of a dividend distribution, as required by Section 56(2) of the Companies Act, and based on the information available, the Board of Directors will ensure that the Company has satisfied the solvency test immediately after the distribution of any dividends in accordance with Section 57 of the Companies Act and have obtained a certificate from the auditors, prior to declaring such dividends. The Board of Directors is 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 Board of Directors is of the view that they have discharged their responsibilities as set out in this Statement. The Board of Directors approved the Annual Report on 23rd May 2023. 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 as required. Annual Report 2022/2023 | 75 Statement of Directors Responsibility COMPLIANCE REPORT The Directors confirm that, to the best of their knowledge, all taxes and levies payable by the Company and AHP Group, and all contributions, levies and taxes payable on behalf of the employees of the Company and AHP Group, and all other known statutory obligations as at the reporting date, have been paid or provided for, except as specified in Note 34 to the Financial Statements covering Contingent Liabilities. The Board of Directors confirms that the Company and AHP Group have complied with the Para 23 of the LKAS 24, and all related party transactions are carried out at “arm’s length” basis. By Order of the Board ASIAN HOTELS AND PROPERTIES PLC Keells Consultants (Private) Limited Secretaries 23 May 2023 76 | Asian Hotels and Properties PLC INDEPENDENT AUDITORS’ REPORT KPMG (Chartered Accountants) 32A, Sir Mohamed Macan Markar Mawatha, P. O. Box 186, Colombo 00300, Sri Lanka. Tel Fax Internet : +94 - : +94 - +94 - : www.kpmg.com/lk Tel Fax KPMG (Chartered Accountants) 32A, Sir Mohamed Macan Markar Mawatha, P. O. Box 186, Colombo 00300, Sri Lanka. TO THE SHAREHOLDERS OF ASIAN HOTELS AND PROPERTIES PLC Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Asian Hotels and Properties PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiary (“the Group”), which comprise the statement of financial position as at 31 March 2023, and the statement of profit and loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information as set out on pages 88 to 132 of this Annual Report. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company and the Group as at 31 March 2023, and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Internet : +94 - : +94 - +94 - : www.kpmg.com/lk Basis for Opinion We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the company financial statements and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the company financial statements and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 01. Management assessment of the Company and the Group’s ability to Continue as going concern. Risk Description Our Response The Company and the Group incurred net loss of Rs. 235 Mn and Rs.333 Mn respectively for the year ended 31st March 2023. Further, the Company’s and the Group’s current liabilities exceeded its current assets by Rs 1,265 Mn and 2,409 Mn respectively as at the reporting date. Our audit procedures included: However, these financial statements have been prepared on a going concern basis. In adopting the going concern basis in preparation of the financial statements, the directors have reviewed the Company’s and Group’s cash flow projections, prepared by the management. The cash flow projections were based on management’s assumptions and estimation of future cash inflows and outflows, also taking into consideration the impact of current uncertain economic conditions. KPMG, a Sri Lankan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. › Obtaining the cash flow projections and discussing with management the possible impact on the key assumptions used in preparing the projections due to current uncertain economic conditions. › Inspecting the facility agreements for the Company’s and Group’s long-term loans to identify any financial covenants or similar terms and assessing the implication of these on the Company’s and Group’s liquidity. T.J.S. Rajakarier FCA W.W.J.C. Perera FCA C.P. Jayatilake FCA Ms. S.M.B. Jayasekara FCA W.K.D.C Abeyrathne FCA Ms. S. Joseph FCA G.A.U. Karunaratne FCA R.M.D.B. Rajapakse FCA S.T.D.L. Perera FCA R.H. Rajan FCA M.N.M. Shameel FCA Ms. B.K.D.T.N. Rodrigo FCA A.M.R.P. Alahakoon ACA Ms. P.M.K. Sumanasekara FCA Ms. C.T.K.N. Perera ACA Principals - S.R.I. Perera FCMA(UK), LLB, Attorney-at-Law, H.S. Goonewardene ACA, Ms. F.R. Ziyard FCMA (UK), FTII Annual Report 2022/2023 | 77 Independent Auditors’ Report 01. Management assessment of the Company and the Group’s ability to Continue as going concern. Risk Description Our Response Notes to the financial statements, describes the impact of prevailing uncertain economic conditions to the current year financial statements and possible effects to the Company’s and Group’s future prospects, performance and cash flows. Further, the management has described how they plan to deal with these events and circumstances as the uncertain economic conditions are still prevailing as at the date of this report. › Assessing adequacy of disclosures in the financial statements, in relation to the impact of prevailing uncertain economic condition to sustain its operations in the foreseeable future. We identified management assessment of the Company’s and Group’s ability to continue as going concern and prevailing uncertain economic condition related disclosures as a key audit matter because the cash flow projections referred to above involves consideration of future events and circumstances which are inherently uncertain, and effect of those uncertainties may significantly impact the resulting accounting estimates. Therefore, the assessment requires the exercise of significant management judgement in assessing future cash inflows and outflows which could be subject to potential management bias. 02. Valuation of the land and buildings (Property, Plant and Equipment and Investment Property) – the Group and the Company Refer to note 100 and 105 to the financial statements Risk Description Our Response As at 31st March 2023, the Group’s Land and Buildings stated at fair value, classified as Property, Plant and Equipment and Investment Properties amounted to Rs. 35.4 Bn and Rs. 5.8 Bn respectively and in the Company: Rs. 32 Bn and Rs. 2. 6 Bn respectively. › Our audit procedures included: › Discussions with management and the external valuer and comparison of the key assumptions used against externally published market comparable or industry data where available and challenging the reasonableness of key assumptions based on our knowledge of the industry and the possible impact on the key assumptions and the resulting valuation due to current uncertain economic conditions. › Assessing the key inputs used in the valuation by the independent external valuer against our expectations based on our experience, externally published market comparable and our knowledge of property market, consultation with internal valuation specialist. › Assessing the objectivity, independence, competence and qualifications of the external valuer. › Assessing the adequacy of the disclosures in the financial statements, including the description and appropriateness of the inherent degree of subjectivity and key assumptions in the estimates. The Group has engaged an independent professional Valuer with appropriate expertise to determine the fair value of these properties in accordance with recognised industry standards. Estimating the fair value is a complex process which involves a significant degree of judgment and estimates in respect of price per perch of the land, capitalisation rates, value per square feet, fair market rental and diversity of locations and nature of the land and buildings and investment properties. We identified this as a key audit matter because of the significance of the value of these properties to the Financial Statements and significant judgement/estimation involves in the valuation. 78 | Asian Hotels and Properties PLC Other Information Management is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with SLAuSs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: › Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. › Obtain an understanding of internal control relevant to the audit 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 Company and Group’s internal control. › Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. › Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. › Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. › Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements Annual Report 2022/2023 | 79 Independent Auditors’ Report supervision and performance of the group audit. We remain solely responsible for our audit opinion We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements As required by section 163 (2) of the Companies Act No. 07 of 2007, 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. CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditors’ report is 2599. CHARTERED ACCOUNTANTS Colombo, Sri Lanka 23 May 2023 80 | Asian Hotels and Properties PLC STATEMENT OF PROFIT OR LOSS GROUP For the year ended 31st March In Rs.’000s Revenue from contracts with customers 2023 Page No. Note 94 5 COMPANY 2022 2023 2022 8,416,558 4,094,672 4,847,533 2,277,448 Cost of sales (4,832,495) (2,599,732) (2,760,253) (1,524,994) Gross Profit 3,584,063 1,494,940 2,087,280 752,454 Other operating income Selling and Distribution expenses Administrative expenses Other operating expenses 94 6 55,711 (300,740) (2,204,387) (1,041,681) 148,403 (158,987) (1,475,215) (416,188) 54,732 (157,144) (1,397,003) (587,079) 118,026 (78,118) (920,374) (237,062) Results from operating activities 95 7 92,966 (407,047) 786 (365,074) 96 8 (393,477) 13,609 (379,868) (184,525) 7,493 (177,032) (191,090) 9,807 (181,283) (62,352) 5,635 (56,717) 106 14 154,393 124,852 (59,909) (42,374) (132,509) (459,227) (240,406) (464,165) (200,254) (48,620) 5,139 (47,781) Loss for the year (332,763) (507,847) (235,267) (511,946) Attributable to: Equity holders of the parent (277,589) (510,167) (235,267) (511,946) (55,174) (332,763) 2,320 (507,847) (235,267) (511,946) Rs. (0.63) - Rs. (1.15) - Rs. (0.53) - Rs. (1.16) - Finance cost Finance income Net Finance cost Change in fair value of investment property Loss before tax Income tax (expense)/reversal 97 9 Non-controlling interest Loss per share - Basic/Diluted Dividend per share 99 100 10 11 Figures in brackets indicate deductions The accounting policies and notes as set out in pages 88 to 132 form an integral part of these Financial Statements. Annual Report 2022/2023 | 81 STATEMENT OF COMPREHENSIVE INCOME GROUP COMPANY 2023 2022 2023 2022 (332,763) (507,847) (235,267) (511,946) 2,678,613 8,897 2,687,510 973,677 17,233 990,910 2,351,949 (1,801) 2,350,148 932,484 11,452 943,936 (2,654) (5,060,464) (5,063,118) (809) (136,314) (137,123) (4,888,028) (4,888,028) (130,547) (130,547) Other comprehensive income not to be reclassified to statement of profit or loss in subsequent periods, net of tax (2,375,608) 853,787 (2,537,880) 813,389 Total comprehensive income for the year, net of tax (2,708,371) 345,940 (2,773,147) 301,443 (2,745,027) 320,758 (2,773,147) 301,443 For the year ended 31st March In Rs.000’s Note Loss for the year Other comprehensive income items that will not to be reclassified to statement of profit or loss in subsequent periods Revaluation of land and buildings Re-measurement gain/(loss) on defined benefit plans Deferred tax effect on actuarial valuation Deferred tax effect on land & building revaluation Tax on other comprehensive income 12 26.1 25 Attributable to : Equity holders of the parent Non-controlling interests 36,656 25,182 - - (2,708,371) 345,940 (2,773,147) 301,443 Figures in brackets indicate deductions The accounting policies and notes as set out in pages 88 to 132 form an integral part of these Financial Statements. 82 | Asian Hotels and Properties PLC STATEMENT OF FINANCIAL POSITION As at 31st March In Rs.’000s ASSETS Non current assets Property, plant and equipment Right-of-use asset Investment property Intangible assets Investment in subsidiary Non current financial assets Other non current assets Total non current assets Current assets Inventories Trade and other receivables Amounts due from related parties Other current assets Cash in hand and at bank Total current assets Total assets EQUITY & LIABILITIES Equity Stated capital Revenue reserves Other components of equity Equity attributable to equity holders of the parent Current liabilities Trade and other payables Amounts due to related parties Income tax liabilities Interest bearing borrowings Other current liabilities Bank overdrafts Total current liabilities Total liabilities Total equity and liabilities 2022 COMPANY 2023 2022 Page No. Note - - 37,685,819 707,028 5,784,515 1,202 43,287 8,885 44,230,736 34,803,525 719,432 5,630,122 1,228 34,375 3,088 41,191,770 33,620,536 2,637,-,045 28,444 2,458 36,949,791 31,400,531 2,697,-,045 19,-,779,155 - - 414,597 600,760 116,682 362,137 186,735 1,680,911 45,911,647 204,587 487,899 46,735 344,475 233,184 1,316,880 42,508,650 264,420 271,666 94,070 225,500 120,553 976,209 37,926,000 135,616 292,293 27,519 201,907 177,913 835,248 35,614,403 112 22 112 23 3,345,117 4,916,727 20,613,338 28,875,182 3,345,117 5,187,893 23,093,391 31,626,401 3,345,117 3,498,432 20,112,228 26,955,777 3,345,117 3,735,500 22,649,232 29,729,849 3,362,706 32,237,888 3,332,915 34,959,316 26,955,777 29,729,849 Non-controlling interest Total equity Non current liabilities Interest bearing borrowings Deferred tax liabilities Employee benefit liabilities Total non current liabilities GROUP 2023 - 24 25 26 246,453 9,003,537 333,631 9,583,621 252,710 3,856,597 343,870 4,453,177 125,000 8,397,581 206,674 8,729,255 195,522 3,615,600 211,088 4,022,210 - - 1,230,136 130,316 39,763 180,415 648,280 1,861,228 4,090,138 13,673,759 45,911,647 1,020,667 87,290 44,192 700,451 318,812 924,745 3,096,157 7,549,334 42,508,650 715,499 81,042 18,302 87,881 409,690 928,554 2,240,968 10,970,223 37,926,000 637,141 52,011 19,248 521,093 176,409 456,442 1,862,344 5,884,554 35,614,403 I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007. The Board of Directors is responsible for the preparation and presentation of these financial statements. C.L.P. Gunawardane K.N.J. Balendra J.G.A. Cooray Director/Chief Financial Officer Chairperson Director The accounting policies and notes as set out in pages 88 to 132 form an integral part of these financial statements. 23 May 2023 Colombo Annual Report 2022/2023 | 83 STATEMENT OF CHANGES IN EQUITY Attributable to Equity Holders of the Parent GROUP In Rs.’000s Stated Capital Note As at 1st April 2021 Revaluation Reserve Other Capital Reserve Revenue Reserve Total Non controlling interest Total Equity 3,345,117 22,108,546 178,490 5,673,539 31,305,692 3,307,203 34,612,895 - 817,315 - (510,167) 13,610 (510,167) 830,925 2,320 22,862 (507,847) 853,787 - 817,315 - (496,557) 320,758 25,182 345,940 - (10,911) - 10,911 - - - 3,345,117 22,914,950 (49) 178,441 5,187,893 (49) 31,626,401 530 3,332,915 481 34,959,316 3,345,117 - 22,914,950 - 178,441 - 5,187,893 31,626,401 (6,179) (6,179) 3,332,915 34,959,316 (8,055) (14,234) 3,345,117 22,914,950 178,441 5,181,714 31,620,222 3,324,860 34,945,082 - (2,469,129) - (277,589) 1,691 (277,589) (2,467,438) (55,174) 91,830 (332,763) (2,375,608) - (2,469,129) - (275,898) (2,745,027) 36,656 (2,708,371) - (10,911) - 10,911 - - - - - (13) - (13) 1,190 1,177 3,345,117 20,434,910 178,428 4,916,727 28,875,182 3,362,706 32,237,888 Total comprehensive income (Loss)/profit for the year Other comprehensive income Total comprehensive income Transferred to revenue reserve (Note a) Share based payments As at 31st March 2022 As at 1st April 2022 Adjustment for Surcharge Tax As at 1 April 2022 (Adjusted) 23.2 9.4 Total comprehensive income Loss for the year Other comprehensive income Total comprehensive income Transferred to revenue reserve (Note a) Share based payments As at 31st March 2023 23.2 Note (a) - According to the Sri Lanka Accounting Standard - 16 “Property, Plant and Equipment”, when the revalued asset is used by an entity, the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the assets’ original cost is transferred from revaluation surplus to retained earnings. Figures in brackets indicate deductions. The Notes to the Financial Statements from Pages 88 to 132 form an integral part of these Financial Statements. 84 | Asian Hotels and Properties PLC COMPANY In Rs.’000s Note As at 1st April 2021 Stated Capital Revaluation Reserve Other Capital Reserve Revenue Reserve Total Equity 3,345,117 21,678,694 169,057 4,235,994 29,428,862 - 801,937 801,937 - (511,946) 11,452 (500,494) (511,946) 813,389 301,443 - - (456) - (456) Total comprehensive income Loss for the year Other comprehensive income Total comprehensive income Share based payments 23.2 As at 31st March 2022 3,345,117 22,480,631 168,601 3,735,500 29,729,849 As at 1st April 2022 3,345,117 22,480,631 168,601 3,735,500 29,729,849 - (2,536,079) (2,536,079) - (235,267) (1,801) (237,068) (235,267) (2,537,880) (2,773,147) Total comprehensive income Loss for the year Other comprehensive income Total comprehensive income Share based payments As at 31st March 2023 23.2 (925) 3,345,117 19,944,552 167,676 (925) 3,498,432 26,955,777 Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 88 to 132 form an integral part of these Financial Statements. Annual Report 2022/2023 | 85 STATEMENT OF CASH FLOWS GROUP For the year ended 31st March In Rs. ‘000s COMPANY 2023 2022 2023 2022 (132,509) (459,227) (240,406) (464,165) Note Operating Loss before working capital changes Loss before tax Adjustments for: Finance income 8 (13,609) (7,493) (9,807) (5,635) Finance cost 8 372,323 105,878 191,090 62,352 Change in fair value of investment property 14 (154,393) (124,852) 59,909 42,374 Depreciation of property, plant and equipment 12 499,898 481,183 336,482 327,495 6 (4,097) (8,100) (3,299) (6,396) 13 12,404 12,404 - - Profit on disposal of property, plant and equipment Amortisation of right-of-use assets Amortisation of intangible assets 15 431 452 137 172 Provision/(reversal) for doubtful debts 20 3,397 (9,711) 6,131 (6,466) Employee benefit provision and related costs 26 39,977 36,622 16,861 18,252 Share based payment expenses 23 1,177 481 (925) (456) Provision made for slow moving Inventory 19 3,315 1,526 2,079 1,793 Provision for net realisable value of inventories 19 5,547 - 5,547 - Unrealised (gain)/loss on foreign exchange 6 7,150 64,096 (14,005) (14,551) 641,011 93,259 349,794 (45,231) Operating Profit/(Loss) before working capital changes 641,011 93,259 349,794 (45,231) (Increase)/Decrease in inventories (210,010) (99,028) (128,804) (66,859) (Increase)/Decrease in trade and other receivables (112,861) (315,582) 20,627 (186,848) Operating Activities (Increase)/Decrease amounts due from related parties (69,947) (13,245) (66,551) (7,056) (Increase)/Decrease other current assets (17,662) (208,518) (23,593) (114,471) Increase/(Decrease) trade and other payables 209,469 294,390 78,358 221,392 Increase/(Decrease) amounts due to related parties Increase/(Decrease) other current liabilities Cash generated from/(used in) operations 43,026 329,468 812,494 17,926 50,830 (179,968) 29,031 233,281 492,143 (4,361) 7,389 (196,045) Finance income received 8 13,609 7,493 9,807 5,635 Finance cost paid 8 (370,964) (81,662) (189,731) (48,443) (118,857) (52,392) (101,606) (32,750) Tax paid Surcharge tax paid Gratuity paid Net cash flows from/(used in) operating activities 86 | Asian Hotels and Properties PLC 9 (14,233) - - - 26 (41,319) (53,880) (23,076) (28,036) 280,730 (360,409) 187,537 (299,639) GROUP For the year ended 31st March In Rs. ‘000s COMPANY 2023 2022 2023 2022 Note Investing Activities Purchase/Transfers and construction of property, plant and equipment 12 (712,028) (114,085) (208,359) (22,718) Additions/Transfers to investment property 14 - (386,985) - (386,985) Additions to intangible assets 15 (405) - (145) - 12,506 (14,929) (714,856) 9,081 1,688 (490,301) 7,120 (10,532) (211,916) 6,197 4,211 (399,295) (1,034,806) 486,000 (548,806) (564,135) 1,146,200 582,065 (943,093) 438,000 (505,093) (494,200) 1,146,200 652,000 Net decrease in cash and cash equivalents (982,932) (268,645) (529,472) (46,934) Cash and cash equivalents at the beginning of the year (691,561) (422,916) (278,529) (231,595) (1,674,493) (691,561) (808,001) (278,529) 186,735 233,184 120,553 177,913 Bank overdrafts (1,861,228) (924,745) (928,554) (456,442) Total cash and cash equivalents (1,674,493) (691,561) (808,001) (278,529) Proceeds from disposal of property, plant & equipment Proceeds from/(repayment of ) other assets (net) Net cash flow used in investing activities Financing Activities Repayment long term borrowings Proceeds from long term borrowings Net cash flow from/(used in) financing activities Cash and cash equivalents at the end of the year 24 24 Analysis of cash and cash equivalents Favourable balances Cash and bank Unfavourable balances Cash and Cash Equivalents Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short-term deposits with a maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdraft. Figures in brackets indicate deductions The accounting policies and notes as set out in pages 88 to 132 form an integral part of these Financial Statements. Annual Report 2022/2023 | 87 NOTES TO THE FINANCIAL STATEMENTS 1 REPORTING ENTITY Asian Hotels and Properties 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 No.77, Galle Road, Colombo 03. (c) › Freehold land and buildings which are measured at cost, at the time of acquisition are subsequently recognised at revalued amounts which are the fair values at the date of revaluation less accumulated depreciation and impairment cost if any. › Investment properties which are stated at fair values. › Defined benefit obligations are measured at its present value, based on an actuarial valuation as explained in Note 26. Consolidated financial statements The consolidated financial statements of the Company as at and for the year ended 31st March 2023 comprise the financial information of the Company and its subsidiary; Trans Asia Hotels PLC (together referred to as the ‘Group’ and individually as ‘Group entities’). Approval of financial statements The financial statements for the year ended 31st March 2023 were authorised for issue by the Board of Directors on 23rd May 2023. Principal activities and nature of operations The principal activities of the Company and the Group during the year were hoteliering and property development. There were no significant changes in the nature of the principal activities of the Company and the Group during the financial year under review. Basis of measurement The financial statements have been prepared on the historical cost basis except for followings items, which are measured on an alternative basis on each reporting date. (d) Presentation and functional currency The Financial Statements are presented in Sri Lankan Rupees, the Group’s functional and presentation currency, which is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest Sri Lankan Rupees thousand (Rs.‘000) unless otherwise indicated. (e) Use of estimates and judgements The Group had 1,390 (2022 – 1,323) employees and the Company had 789 (2022 - 792) employees as at the reporting date. The preparation of the Financial Statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. Responsibility for financial statements i) The responsibility of the Board of Directors in relation to the financial statements is set out in the Statement of Directors’ Responsibility in the Annual report. Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following note: 2. BASIS OF PREPARATION › (a) Statement of compliance The financial statements which comprise the statement of profit or loss, 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 in compliance with the Companies Act No. 7 of 2007. ii) (b) Provision for taxation The tax liability arising from the Surcharge Tax Act No: 14 of 2022 has been accounted as recommended by the (Addendum to) Statement of Alternative Treatment (SoAT) issued by the Institute of Chartered Accountants of Sri Lanka as disclosed under Note 9.4 on surcharge tax. 88 | Asian Hotels and Properties PLC Judgements Consolidation: whether the Group has de facto control over an investee - Note 16 Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 March 2023 is included in the following notes: › Measurement of Freehold land & buildings - Note 12 › Measurement of Investment Properties - Note 14 › Measurement of Defined Benefit Plans - key actuarial assumptions - Note 26 › Impairment test: key assumptions underlying recoverable amounts – Note 20 › Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources – Note 34 › Recognition of deferred tax assets; availability of future taxable profits against which deductible temporary differences and tax losses carried forward can be utilised Note 25 (f ) Measurement of fair values: A number of the Group’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities. The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information is used to measure fair values, Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of SLFRS, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Group’s Audit Committee. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: I. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. II. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). III. Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. (g) Going concern The Group has prepared the financial statements for the year ended 31 March 2023 on the basis that it will continue to operate as a going concern. In determining the basis of preparing the financial statements for the year ended 31 March 2023, based on available information, the management has assessed the prevailing macroeconomic conditions and its effect on the Group companies and the appropriateness of the use of the going concern basis. It is the view of the management that there are no material uncertainties that may cast significant doubt on the Group’s ability to continue to operate as a going concern. The management has formed judgment that the Company, its subsidiaries, associates and joint ventures have adequate resources to continue in operational existence for the foreseeable future driven by the continuous operationalisation of risk mitigation initiatives and monitoring of business continuity and response plans at each business unit level along with the financial strength of the Group. In determining the above, significant management judgements, estimates and assumptions, the impact of the macroeconomic uncertainties, including exchange rate volatilities, supply chain disruptions, foreign exchange market limitations and interest rate volatilities have been considered as of the reporting date and specific considerations have been disclosed under the notes, as relevant. (h) 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. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of significant accounting policies have been disclosed along with the relevant individual notes in the subsequent pages and those accounting policies presented with each note, have been applied consistently by the Group and the Company. Other significant accounting policies not covered with individual notes. The following accounting policies, which have been applied consistently by the Company and the Group, are considered to be significant but not covered in any other sections. 3.1 Basis of consolidation (i) Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, a input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Annual Report 2022/2023 | 89 Notes to the Financial Statements (ii) Non-controlling interests (NCI) › NCI are measured at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value at the date of acquisition. it is due to be settled within twelve months after the reporting period › Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period All other liabilities are classified as non-current. (iii) Subsidiaries Subsidiaries are those enterprises controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. (iv) Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. (v) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. 3.2 Current versus non-current classification The Company 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 be 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 The Company classifies all other assets as non-current A liability is current when: › it is expected to be settled in normal operating cycle › it is held primarily for the purpose of trading 90 | Asian Hotels and Properties PLC Deferred tax assets and liabilities are classified as non-current liabilities. 3.3 Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in statement of profit or loss. 3.4 Non financial assets impairment The carrying amounts of the Group/Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset or Cash Generating Unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amounts of the other assets in the CGU (Group of CGUs) on a pro rata basis. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 3.5 Financial instruments (i) Recognition and initial measurement Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. The Groups’ consolidated financial assets classified and measured at amortised cost are limited to its trade debtors, related party receivables, short term investments and cash & cash equivalents. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. The Group’s investment in equity investments are classified as Fair Value through OCI (FVOCI). Financial Assets Financial assets - Business model assessment Classification and subsequent measurement of financial assets On initial recognition, a financial asset is classified as measured at: - amortised cost; fair value through other comprehensive income (FVOCI) - debt investment; fair value through other comprehensive income (FVOCI) - equity investment; or fair value through profit or loss (FVTPL). Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is to hold assets to collect contractual cash flows; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: › the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or › realising cash flows through the sale of the assets; › how the performance of the portfolio is evaluated and reported to the Group’s management; › the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and Annual Report 2022/2023 | 91 Notes to the Financial Statements › the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity. Transfers of financial assets to third parties in transactions that do not qualify for de-recognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL. unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition. Financial assets - Subsequent measurement and gains and losses These assets are subsequently measured at Financial amortised cost using the effective interest assets at amortised cost method. › contingent events that would change the amount or timing of cash flows; › terms that may adjust the contractual coupon rate, including variable-rate features; The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss. These assets are subsequently measured at Equity investments at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly FVOCI represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss. These include Financial assets that the entity Financial either holds for trading purposes or upon initial assets at recognition it designates as at fair value through FVTPL profit or loss. A Debt instrument that meets the cash flow Debt characteristics test and is not designated at instrument FVTPL under the Fair Value option must be through measured at FVTOCI if it is held within a FVOCI business model whose objective is to hold financial assets in order to collect contractual cash flows and sell financial assets. › prepayment and extension features; and Financial Liabilities › terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features). Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers: A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but 92 | Asian Hotels and Properties PLC Classification, subsequent measurement and gain and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on de-recognition is also recognised in profit or loss. (ii) De-recognition Financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised. Financial liabilities The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On de-recognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. (iii)Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. (iv) For trade receivables, the Group applies the simplified approach permitted by SLFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. (v) Write-off The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross carrying amount when the financial asset is 360 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures to recovery of amounts due. 4 Standards issued but not yet effective A number of new standards are effective for annual periods beginning after 1 April 2022 and earlier application is permitted, however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements. The following amendments and improvements are not expected to have a significant impact on the Group’s financial statements. Amendments to LKAS 1 : Classification of liabilities as Current or Noncurrent. Amendments to LKAS 1 : Disclosure of Accounting Policies. Amendments to LKAS 8 : Definition of Accounting Estimates Amendments to LKAS 12 : Deferred Tax related to Assets and Liabilities arising from a Single Transaction. Impairment of financial assets The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the Group’s effective interest rate. Annual Report 2022/2023 | 93 Notes to the Financial Statements 5 REVENUE Accounting policy Contracts with customers Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Performance obligations and significant judgements The Group’s performance obligations and significant judgements are summarised below: The revenue for providing the services are usually recognised at or after the guests’ departure, over the period of stay or at the point of arrival of guests. The entity identifies the services under each contract as one performance obligation. The revenue is accounted based on the output method. Since revenue will be based on the final good or service provided, the output method will provide a faithful depiction in recognising revenue. Accordingly revenue is recognised on the rooms occupied on daily basis and food and beverages and hotel related sales are accounted for at the time of sale and rental income is recognised on an accrual basis. When obtaining destination management service (travel agents), the entity acts as the principal. Customer receives and consumes the benefits of the entity’s performance, as and when the service is performed. Therefore, revenue is recognised at gross over the period, based on the output method. The timing and the amount of cashflow will vary according to the agreements. Transaction price shall comprise of supplier fee and company mark-up, summing up to be the gross service fee. The advance payments are recognised as a liability. Upon provision of the services, the liability is set off and revenue is recognised over the period. GROUP For the year ended 31st March In Rs.’000s 2023 COMPANY 2022 2023 2022 Revenue Rooms Food & Beverage Rental Income from Investment Property Other Revenue Total Revenue 6 2,077,851 5,424,985 241,338 672,384 8,416,558 942,308 2,734,839 104,964 312,561 4,094,672 1,173,976 3,156,786 174,932 341,839 4,847,533 509,745 1,577,975 39,011 150,717 2,277,448 OTHER OPERATING INCOME Accounting policy Other income is recognised on an accrual basis. 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 statement of profit or loss, after deducting from the proceeds from 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. GROUP For the year ended 31st March In Rs.’000s Exchange gain Net gain on disposal of property, plant and equipment Car park income Promotional income Taxi commission Insurance claim Sundry income 94 | Asian Hotels and Properties PLC 2023 8,098 4,097 11,-,461 5,374 21,590 55,711 COMPANY 2022 76,961 8,100 2,573 4,035 1,031 48,109 7,594 148,403 2023 8,098 3,299 11,-,461 5,374 21,409 54,732 2022 49,632 6,396 2,573 4,035 1,031 48,109 6,250 118,026 7 RESULTS FROM OPERATIONS Accounting policy Expenditure recognition Expenses are recognised in the statement of profit or loss 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 statement of profit or loss. For the purpose of presentation of the statement of profit or loss, 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. Profit/(Loss) before tax is stated after charging all expenses including the following; GROUP For the year ended 31st March In Rs.’000s 2023 COMPANY 2022 2023 2022 Note Remuneration to Non-Executive Directors 13,843 8,615 5,660 3,315 2,415 2,100 1,495 1,300 - - - - 56,295 47,828 33,179 29,458 165,531 127,803 101,953 81,496 Remuneration to Auditors Audit Audit related service - fee Cost of defined employee benefits Defined benefit plan cost 26 Defined contribution plan cost - EPF and ETF Other long term employee benefit cost 26.2 Staff Expenses (16,318) (11,206) (16,318) (11,206) 1,934,417 1,190,875 1,092,478 701,709 336,482 327,495 Depreciation of property, plant and equipment 12 499,898 481,183 Amortisation of right of use assets 13 12,404 12,404 - - 5,629 1,895 2,420 1,506 Donations/CSR Amortisation of intangible assets 15 431 452 137 172 Provision/(reversal) for impairment losses on trade and other receivables 20 3,397 (9,711) 6,131 (6,466) (499) 2,060 286 1,793 (8,098) (76,961) (8,098) (49,632) Provision/(reversal) for slow moving inventory Foreign exchange gain 6 Annual Report 2022/2023 | 95 Notes to the Financial Statements 8 FINANCE INCOME AND FINANCE COSTS Accounting policy Finance income Finance income comprises interest income derived on funds invested as Fixed Deposits and Savings. Interest income is recorded as it accrues using the effective interest rate (EIR). Finance cost Accounting policy Finance costs comprise interest expense on borrowings, overdraft and exchange loss on borrowings. Interest expenses are recognised using the effective interest method. Borrowing cost Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent the borrowing costs that are directly attributable to the acquisition or construction of an asset that takes a substantial period of time to get ready for its intended use, and are capitalised as part of that asset. GROUP For the year ended 31st March In Rs.’000s 2023 COMPANY 2022 2023 2022 Finance income Interest income on loans to employees 6,583 2,823 3,974 1,390 Income from short term investments/Savings 7,026 4,670 5,833 4,245 13,609 7,493 9,807 5,635 Interest expense on long term borrowings 127,119 22,170 98,183 11,863 Exchange loss on long term borrowings Interest expense on Bank overdraft Total finance cost 21,154 245,204 393,477 78,647 83,708 184,525 92,907 191,090 50,489 62,352 Net finance income/(cost) (379,868) (177,032) (181,283) (56,717) Total finance income Finance cost 96 | Asian Hotels and Properties PLC 9 INCOME TAX EXPENSE Accounting policy Income tax expenses comprise of current tax and deferred tax. It is recognised in profit or loss except items recognised directly in equity or in Other Comprehensive Income. The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes and are therefore accounted for under LKAS 37 provision for contingent liabilities and contingent assets. Current Tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. Current tax assets and liabilities are offset only if certain criteria are met. The subsidiary was liable for taxation at the rate of 14% as per the first schedule of the Inland Revenue Act, No. 24 of 2017, on its profits derived from promotion of tourism until September 30, 2022. Thereafter, all profits (including promotion of tourism and others) are liable at 30%, as per the Inland Revenue (Amendment) Act No. 45 of 2022. In accordance with BOI agreement dated 11th March 1994 the profits and income of the Company were exempt from taxation until 2014 and at the expiry of said period the following options were available for the Company. (a) Income tax payable for the year of assessment shall be computed at 2% of the turnover of the Company or (b) To adapt the provisions of the Inland Revenue Laws for the time being imposed The Board of the Company resolved to compute the income tax at 2% of the turnover of the Company with effective from 01st April 2014. The Group is liable for Income Tax on any other income at 30% as per the new rates legislated as per the Inland Revenue (Amendment) Act No 45 of 2022 (24% up to 30 Sep 2022). The Group has complied with the arms’ length principles relating to transfer pricing as prescribed in the Inland Revenue Act. GROUP For the year ended 31st March In Rs.’000s 2023 COMPANY 2022 2023 2022 Income tax expense Current tax charge (Note 9.1) (Reversal)/Charge for deferred tax (Note 9.2) 9.1 116,432 65,938 100,908 52,018 83,822 (17,318) (106,047) (4,237) 200,254 48,620 (5,139) 47,781 Reconciliation between Income Tax Expense and the Product of Accounting Profit For the year ended 31st March 2023 2022 In Rs.’000s COMPANY Taxable Revenue 4,917,610 2,394,326 Income Tax charged at Standard rate of 24% until September 30, 2022 Standard rate of 30% after October 1, 2022 Concessionary rate of 2% Under provision on Income tax for previous years Current tax charge 761 3,912 1,991 - 98,156 100,908 47,-,018 Annual Report 2022/2023 | 97 Notes to the Financial Statements 2023 For the year ended 31st March 2022 In Rs.’000s SUBSIDIARY Profit Before Tax Income not liable for Income Tax Accounting profit chargeable to income taxes 107,894 (1,192) 106,702 4,938 4,938 Disallowable expenses 238,583 244,537 Aggregate Allowable expenses Tax losses not utilised Taxable Income (398,599) 110,841 57,527 (336,419) 144,870 57,926 6,936 13,902 8,588 15,524 18 13,920 Income Tax charged at Standard rate of 24% until September 30, 2022 Standard rate of 30% after October 1, 2022 Under provision on income tax for previous years Current income tax charge GROUP Company 100,908 52,018 Subsidiary 15,524 13,920 116,432 65,938 Group current income tax charge 9.2 Provision for Deferred Tax GROUP COMPANY 2023 2022 2023 2022 (71,152) (4,237) (106,047) (4,237) Benefit arising from tax losses and other credits (171,735) (4,877) - - For the year ended 31st March In Rs.’000s Deferred Tax arising from Change in fair value of investment property Accelerated depreciation for tax purposes 412,224 (1,432) - - Others (ROU assets/liabilities, trade receivables etc) (63,363) (7,818) - - Employee benefits (22,152) 1,046 - - Total deferred tax (reversal)/charge 83,822 (17,318) (106,047) (4,237) Deferred tax liability has been computed taking into consideration the tax rate of 14% applicable for the tourism industry as per the new Inland Revenue Act No. 24 of 2017 until September 30, 2022. Deferred tax is provided at 30% w.e.f 1 Oct 2022 as per the Inland Revenue (Amendment) Act No. 45 of 2022. The Gains/losses of the Group arising from valuation at fair value of investment properties were liable at 10% up to 30 Sep 2022 and is liable at 30% from October 1, 2022. 98 | Asian Hotels and Properties PLC 9.3 Tax Losses Carried Forward GROUP 2023 For the year ended 31st March In Rs.’000s At the beginning of the year Adjustment on finalisation of the liability 2022 731,115 696,278 71,680 (110,033) Tax losses arising during the year 110,841 144,870 Balance at the end of the year 913,636 731,115 9.4 Surcharge Tax Surcharge Tax Act No. 14 of 2022 was enacted on 8th April 2022 and is applicable to the John Keells Group as the collective taxable income of companies belonging to the Group, calculated in accordance with the provisions of the Inland Revenue Act No. 24 of 2017, exceeds Rs. 2,000 million, for the year of assessment 2020/2021. The liability is computed at the rate of 25 per cent on the taxable income of the individual Group companies, net of dividends from subsidiaries and deemed to be an expenditure in the financial statements in the year of assessment which commenced on 1 April 2020. Total Surcharge Tax liability of LKR 14.2 Mn has been recognised for the Group as an opening adjustment to the 1 April 2022 retained earnings in the statement of Changes in Equity as per the Addendum to the Statement of Alternative Treatment (SoAT) issued by The Institute of Chartered Accountants of Sri Lanka. The Subsidiary was liable to pay Surcharge Tax on the respective individual entity level. The Subsidiary share of total Surcharge Tax liability of Rs. 14.2 Mn has been included in Surcharge Tax charge recognised in the Group Statement of Changes in Equity as an adjustment to the 01 April 2022 opening retained earnings. The impact of the surcharge tax under the Surcharge Tax Act on the comparative year would have been as given below: In Rs.’000s Loss after Tax for the year ended 31 March 2021 Surcharge Tax charge Less: Surcharge Tax share of Non-controlling Interest Surcharge tax attributable to owners of the Company Adjusted comparable Profit for the year ended 31 March 2021 10 GROUP (14,234) (8,055) (6,179) COMPANY (2,244,002) (1,425,256) (6,179) (2,250,181) (1,425,256) EARNING PER SHARE (EPS) Accounting policy Basic EPS is calculated by dividing the profit/(loss) for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. The basic earnings/(loss) per share is based on the profit attributable to Asian Hotels & Properties PLC. Diluted EPS is calculated by dividing the profit/(loss) attributable to ordinary equity holders of the parent (after adjusting outstanding share option scheme and warrants) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. There were no potentially dilutive ordinary shares outstanding at any time during the year/previous year. Therefore diluted earning Per share is the same as basic (loss)/earnings per share. Annual Report 2022/2023 | 99 Notes to the Financial Statements GROUP 11 COMPANY 2023 2022 2023 2022 (277,589) 442,775 (0.63) (510,167) 442,775 (1.15) (235,267) 442,775 (0.53) (511,946) 442,775 (1.16) For the year ended 31st March Net Loss for the year (in Rs.’000s) Number of ordinary shares (in ’000s) Basic/Diluted loss per share (Rs.) GROUP DIVIDEND PER SHARE No dividend declared for the financial year ended 31st March 2023, (2022 - Nil). 12 PROPERTY, PLANT AND EQUIPMENT Accounting policy Basis of recognition Property, plant and equipment are 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. Basis of measurement All items of property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, the entire class of such assets is revalued at fair value. All items of property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, the entire class of such assets are revalued at fair value. Except for land and buildings all other assets 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. 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. 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. Revaluation of land and buildings The Group has adopted a policy of revaluing assets at least every three years. When an asset’s carrying amount is increased as a result of a revaluation, the increase shall be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. When an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus. The revaluation surplus included in equity in respect of an item of property, plant and equipment may be transferred directly to retained earnings when the asset is derecognised. The Group engaged independent expert valuers to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence of transaction prices for similar properties. Valuations are based on open market prices, adjusted for any difference in the nature, location, or condition of the specific property. These valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The date of the most recent revaluation was carried out on 31st December 2022. Consequently, as at the reporting date, the value reflected represents the best estimate based on the market conditions that prevailed, which in their considered opinion, meets the requirements in SLFRS-13 Fair Value Measurement. 100 | Asian Hotels and Properties PLC De-recognition An item of property, plant and equipment is de-recognised 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 statement of profit or loss in the year the asset is de-recognised. Depreciation Depreciation is calculated by using straight-line method on the cost or valuation of all property, plant and equipment, other than freehold land, in order to write off such amounts over the estimated useful economic life of such assets. The estimated useful life of assets is as follows: Assets Years Buildings Plant and Machinery Motor Vehicles Floating Restaurant Furniture Fittings & Equipment Computers Base Stock/Circulating Assets Outdoor Carpark Development - The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end. Buildings of the subsidiary are depreciated using straight line method in order to depreciate over the balance lease period of 57 years. Depreciation of an assets ceases at the earlier of the date that the asset is classified as held for sale and the date that asset is de-recognised. Capital work-in-progress Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred on property, plant and equipment, awaiting capitalisation. Annual Report 2022/2023 | 101 GROUP 102 | Asian Hotels and Properties PLC - 21,638 10,532,363 - 24,878,890 - 10,515,924 8,411,724 - 11,783 - - 11,783 11,783 - - - - - 11,783 601,668 640,014 982,688 (40,635) - 63,763 959,560 1,584,356 1,602 - - (44,794) 27,974 1,599,574 385,479 337,712 1,510,359 (33,758) - 81,909 1,462,208 1,895,838 606 - - (35,086) 130,398 1,799,920 Plant & Base Stock & Outdoor Car park Machinery Circulating Assets Development 1,228,671 1,245,266 1,815,585 (63,293) - 147,507 1,731,371 3,044,256 2,277 - - (66,215) 131,557 2,976,637 Furniture, Fittings & Equipment 25,043 28,334 52,433 - 3,291 49,142 77,476 - - - - - 77,476 Motor Vehicles 50,144 6,475 - - - - 50,144 (26,123) - - - 69,792 6,475 Capital Work in Progress 37,685,819 - 4,389,287 (137,686) (332,926) 499,898 4,360,001 42,075,106 - (332,966) 2,678,613 (146,095) 712,028 39,163,526 Total 2023 34,803,525 4,360,001 (51,070) (170,254) 481,183 4,100,142 39,163,526 - (170,254) 973,677 (52,466) 114,085 38,298,484 Total 2022 12.1(c) - Details of Groups’ Land and Building stated at valuation are indicated below 12.1(b) - The capital working progress of the Group includes the renovation of Car Porch and Earls Court roof. Had the revalued buildings of the Group been included at cost, the carrying value of the said asset would amount to Rs. 5,103 Mn. (Rs.4,926 Mn in 2022) had the revalued Land of Group been included at cost, the carrying value of the said asset would amount to Rs.470 Mn (Rs.470 Mn in 2022). (Details of the fair Value hierarchy is given in note 12.3) 12.1(a) - Freehold Land and Buildings of the Group were valued by M/s. P.B. Kalugalagedara & Associates, an independent Chartered Valuer as at 31st December 2022, and the book values were written up to correspond with the valuation. Further there is no significant value change as at 31st March 2023. 24,878,890 24,134,000 16,439 - Disposals Depreciation adjustment on revaluation At the end of the year Carrying Value As at 31st March 2023 As at 31st March 2022 (332,926) - Charge for the year 203,428 - 145,937 (332,966) - 1,933,723 - 744,890 352,307 8,557,661 Buildings - 24,134,000 Freehold Land At the beginning of the year Accumulated Depreciation Depreciation adjustment on revaluation Transfers from work in progress At the end of the year Revaluations gain Disposals Additions At the beginning of the year Cost or Valuation In Rs. ‘000s As at 31st March 12.1 Notes to the Financial Statements Property Land/Building Extent Fair Value as at- Location In Rs. ‘000s Freehold Land and Building Company Land (I) A06 - R2- P22.21 No 77, Galle Road, Colombo 03 Land (II) A01 - R1- P22.87 No 77, Galle Road, Colombo 03 Building- Stage(I) 350,237 Sq Ft No 77, Galle Road, Colombo 03 Building- Stage (II) & (III) 299,975 Sq Ft No 77, Galle Road, Colombo 03 Life style Building 49,280 Sq.Ft No 77, Galle Road, Colombo 03 New Associate Life Style Building 36,859 Sq. Ft No 77, Galle Road, Colombo 03 Company Building 145,196 Sq Ft No 89, Galle Road, Colombo 03 Subsidiary Building 55,548 Sq Ft No. 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 02. 24,878,890 7,222,110 Investment Properties Note 14 Land A01 - R02- P30.0 No. 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 02. Building 344,383 Sq Ft No. 115, Sir Chittampalam A. Gardiner Mawatha, Colombo 02. 3,333,412 Land A05 - R02- P34.28 No. 115, Sir Chittampalam A. Gardiner Mawatha, Colombo 02. Note 13 Leasehold Properties Subsidiary Note-12.1.d The floating restaurant of the Subsidiary has been classified under Motor Vehicles. Note-12.1.e The cost of the fully depreciated assets in the Group which are still in use of the Group amounts to Rs.2,445 Mn (Rs. 2,361 Mn in 2022). Note-12.1.f There are no assets pledged as at the reporting date that require disclosure in the Group. Annual Report 2022/2023 | 103 COMPANY 104 | Asian Hotels and Properties PLC - 15,163 7,245,111 - 24,878,890 - The capital working progress of the Company includes the refurbishment of associate lifestyle building and main lobby roof. 31,400,531 2,398,579 (30,025) (121,363) 327,495 2,222,472 33,799,110 - (121,363) 932,484 (30,224) 22,718 Note-12.2.e 33,620,536 Total 2022 32,995,495 There are no assets pledged as at the reporting date that require disclosure in the Company. 19,165 - 2,492,280 (104,556) (138,225) 336,482 2,398,579 36,112,816 - (138,225) 2,351,949 (108,377) 208,359 33,799,110 Note-12.2.d - - - - - 19,165 (19,648) 38,813 - Total 2023 The cost of the fully depreciated assets which are still in use of the Company amounting Rs.1,227 Mn (Rs. 1,175 Mn in 2022). 955,561 968,155 3,450 - - 3,450 3,450 3,450 Capital Work in Progress Note-12.2.c 247,688 243,245 1,157,126 (57,853) - 99,164 1,115,815 2,112,687 2,277 (59,457) 85,897 2,083,970 Motor Vehicles Had the revalued Buildings of the Company been included at cost, the carrying value of the said asset would amount to Rs.3,328 Mn. (Rs.3,414 Mn in 2022) Had the revalued Land been included at cost, the carrying value of the said asset would amount to Rs.470 Mn (Rs.470 Mn in 2022). 321,336 347,642 669,484 (24,249) - 49,036 644,697 917,172 606 (24,672) 53,296 887,942 Furniture, Fittings & Equipment Note-12.2.b - 603,222 (22,454) - 38,425 587,251 924,558 1,602 (24,248) 12,311 934,893 Plant & Base Stock & Machinery Circulating Assets Freehold Land and Buildings of Asian Hotels and Properties PLC were valued by M/s. P.B. Kalugalagedara & Associates, an independent Chartered Valuer as at 31st December 2022, and the book values were written up to correspond with the valuation. Valuation Method used is direct capital comparison approach. Further there is no significant value change as at 31st March 2023. 7,197,896 5,707,489 11,783 - - 11,783 11,783 - - - - - 11,783 Outdoor Car park Development Note-12.2.a 24,878,890 24,134,000 47,215 - Disposals Depreciation adjustment on revaluation At the end of the year Carrying Value As at 31st March 2023 As at 31st March 2022 (138,225) - Charge for the year 149,857 - 35,583 (138,225) - 1,607,059 - 744,890 18,042 5,743,072 Buildings - 24,134,000 Freehold Land At the beginning of the year Accumulated Depreciation Depreciation adjustment on revaluation Transfers from work in progress At the end of the year Revaluation gain Disposals Additions At the beginning of the year Cost or Valuation In Rs. ‘000s As at 31st March 12.2 Notes to the Financial Statements 12.3 Details of Group’s land, building and other properties stated at valuation are indicated below; Method of valuation Effective date of valuation Property valuer Buildings on leasehold land of Trans Asia Hotels PLC. Direct Capital Comparison Method 31-Dec-22 P B Kalugalagedara, Chartered Valuation Surveyor Land and building of Asian Hotels and Properties PLC. Direct Capital Comparison Method 31-Dec-22 P B Kalugalagedara, Chartered Valuation Surveyor (i) Fair value hierarchy The fair value of property was determined by external independent property valuers having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The fair value measurement for all of properties has been categorised as level 03 fair value based on the input to the valuation technique used. (ii) Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of property, as well as the significant unobservable inputs used. Significant Unobservable Inputs Valuation Technique Estimates for unobservable inputs Interrelationship between Key Unobservable Inputs and Fair Value Measurements GROUP Direct Capital Comparison Method Estimated price per square feet of building Rs.9,500/- per sq. ft. Positive correlated sensitivity Rs.7,000/- per sq. ft. Rs.5,000/- per sq. ft. Rs.600/- per sq. ft. Rs.450/- per sq.ft. Capitalisation rate 6.25% & 3% for 57 years Negative correlated sensitivity Estimated price per square feet of building Rs.15,000/- per sq. ft. Positive correlated sensitivity Rs.12,000/- per sq. ft. COMPANY Direct Capital Comparison Method Rs.11,000/- per sq. ft. Rs.10,500/- per sq. ft. Rs.6,500/- per sq. ft. Rs.4,500/- per sq. ft. Rs.3,500/- per sq. ft. Rs.3,000/- per sq. ft. Estimated cost per perch of land Rs. 20.0 Mn per perch Positive correlated sensitivity Rs. 18.0 Mn per perch (iii) Summary description of valuation methodologies Direct capital comparison method This method may be adopted when the rental value is not available from the property concerned, but there are evidences of sale price of properties as a whole. In such cases, the capitalised value of the property is fixed by direct comparison with capitalised value of similar property in the locality. Annual Report 2022/2023 | 105 Notes to the Financial Statements 13 RIGHT OF USE ASSET Accounting policy The Group recognises right of use assets when the underlying asset is available for use. Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life or the lease term. Right of use assets are subject to impairment. GROUP As at 31st March 2023 In Rs.’000s Cost 2022 945,160 945,160 At the beginning of the year Charge for the year Balance at the end of the year 225,728 12,404 238,132 213,324 12,404 225,728 Carrying amount 707,028 719,432 Accumulated amortisation Leasehold property is the land which the hotel (Trans Asia Hotels) is located. The leasehold land is on a 99 years long term lease agreement entered with the Urban Development Authority, Sri Lanka, which commenced from 7th August 1981 and is being amortised on a straight line basis over a period of 94 years which commenced from 1st April 1986. 13.1 Details of leasehold Property Property Land extent In Rs. ‘000s (in acres) Trans Asia Hotels PLC, Colombo A07 - R01 - P24.28 14 Lease period GROUP 2023 99 years from 7th August 1981 2022 707,028 719,432 707,028 719,432 INVESTMENT PROPERTY Accounting policy Basis of recognition and measurement Investment property is held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in Statement of profit or loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self - constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. Any gains or losses on retirement or disposal are recognised in Statement of profit or loss in the year of retirement or disposal. Transfers are made to and from investment property only when there is a change in use in accordance with the criteria listed in Sri Lanka Accounting Standard 40 “Investment Property”. 106 | Asian Hotels and Properties PLC GROUP As at 31st March In Rs.’000s At the beginning of the year COMPANY 2023 2022 2023 2022 5,630,122 5,005,270 2,697,390 2,239,764 Additions - 386,985 - 386,985 Transfers from work in progress - 113,015 - 113,015 154,393 124,852 (59,909) (42,374) At the end of the year Net gain/(loss) from fair value remeasurement 5,784,515 5,630,122 2,637,481 2,697,390 Freehold property 2,637,481 2,697,390 2,637,481 2,697,390 Leasehold property 3,147,034 2,932,732 - - 5,784,515 5,630,122 2,637,481 2,697,390 14.1 Valuation details of investment property Investment properties of the Group were valued by a qualified professional valuer as at 31st December 2022, details of which are as follows; In order to adopt the Fair Value model on Investment Property, as per Sri Lanka Accounting Standard 40 “Investment Property” the Land & Building classified as Investment Property of Asian Hotels and Properties PLC which includes Crescat Boulevard was valued by Mr. P.B. Kalugalagedera, a Chartered Valuation Surveyor using Investment/Income method of valuation on 31st December 2022. The Commercial Centre of Trans Asia Hotels PLC was valued by Mr. P.B. Kalugalagedera, a Chartered Valuation Surveyor using the direct capital comparison method on 31st December 2022. Changes in the values are recognised as gains in Statement of profit or loss. All gain are unrealised. Further there is no significant value change as at 31st March 2023 as per Valuer’s statement. Consequently, as at the reporting date, the value reflected represents the best estimate based on the market conditions that prevailed, which in considered opinion, meets the requirements in SLFRS-13 Fair Value Measurement. Rental Income earned from Investment Property by the Company and Group amounted to Rs. 175 Mn (Rs. 39 Mn in 2022) and Rs. 241 Mn (Rs. 105 Mn in 2022) respectively. Direct Operating Expenses incurred by the Company and Group amounted to Rs. 161 Mn (Rs. 116 Mn in 2022) and Rs. 170 Mn (Rs. 124 Mn in 2022) respectively. The methods used by the valuer are as follows; Property Method of Valuation Fair Value as at- In Rs. ‘000s Asian Hotels and Properties PLC. Crescat Boulevard, Colombo 3 Investment Income Method 2,637,481 Trans Asia Hotels PLC. Commercial Centre, Colombo 2 Direct Capital Comparison Method 3,147,034 (i) Fair Value Hierarchy The fair value of property was determined by external independent property valuer having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The fair value measurement for all of properties has been categorised as level 03 fair value based on the input to the valuation technique used. Annual Report 2022/2023 | 107 Notes to the Financial Statements (ii) Valuation Technique and Significant Unobservable Inputs The following table shows the valuation technique used in measuring the fair value of investment property, as well as the significant unobservable inputs used: Valuation Technique Significant Unobservable Inputs Estimates for unobservable inputs Interrelationship between Key Unobservable Inputs and Fair Value Measurements Direct Capital Comparison Method Capitalisation rate Estimated price per square feet Estimated price per perch Annual rent income Capitalisation rate 6.25% & 3% for 57 years Rs. 6,000/- per sq. ft Negatively correlated sensitivity Rs.16 Mn per perch Rs. 172 Mn 6.00% Positively correlated sensitivity Positively correlated sensitivity Negatively correlated sensitivity Investment/Income method Positively correlated sensitivity Refer Note 12.3 for summary description of valuation methodologies (iii) Summary description of valuation methodologies Investment/income method This method involves capitalisation of the expected rental income at an appropriate rate of years purchase currently characterised by the real estate market. 15 INTANGIBLE ASSETS Accounting policy Basis of Recognition An intangible asset is an identifiable non monetary asset without physical substance held for use in the production or supply goods or other services, rental to others or for administrative purposes. An intangible asset is initially recognised at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. (i) Computer software All computer software costs incurred, licensed for use by the Group, which are not integrally related to associated hardware, which can be clearly identified, reliably measured and it is probable that they will lead to future economic benefits, are included in the Statement of Financial Position under the category intangible assets and carried at cost less accumulated amortisation and any accumulated impairment losses. (ii) Amortisation Intangible assets with finite lives are amortised over the estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Intangible assets are amortised on a straight line basis in the Statement of profit or loss from the date on which the asset was available for use, over the best estimate of its useful life. The estimated useful life of software is 5 years. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year- end. Amortisation shall cease at the earlier of the date that the asset is classified as held for sale or the date that asset is de-recognised. 108 | Asian Hotels and Properties PLC (iii) De-recognition An intangible asset is de-recognised on disposal or when no future economic benefits are expected from its use and subsequent disposal. GROUP 2023 As at 31st March In Rs.’000s COMPANY 2022 2023 2022 Computer Software Cost At the beginning of the year Additions Disposals At the end of the year 10,-,927 34,458 (23,936) 10,522 7,-,740 7,595 7,595 Accumulated Amortization At the beginning of the year Amortisation Disposals At the end of the year 9,-,725 32,778 452 (23,936) 9,294 6,-,913 6,-,776 Carrying value As at 31 March 1,202 1,228 827 819 The intangible assets of the Company with a cost of Rs.6 Mn (2022 - Rs.6 Mn) have been fully amortised and continue to be in used by the Company. 16 INVESTMENT IN SUBSIDIARY Accounting policy Investment in subsidiaries is initially recognised at cost in the financial statements of the Company. Any transaction cost relating to acquisition of investment in subsidiaries is immediately recognised in the statement of profit or loss. After the initial recognition, Investments in subsidiaries are carried at cost less any accumulated impairment losses. COMPANY 2023 As at 31st March In Rs.’000s 2022 Carrying value Investments in subsidiary at cost Number of shares Trans Asia Hotels PLC. (Quoted) - 86,823,028 86,823,028 Effective holding % 43.41% 43.41% 660,045 660,045 660,045 660,045 Cost of Investment 660,045 660,045 Market Value 3,924,401 4,184,870 Power and exposure, or rights, to variable returns Trans Asia Hotels PLC (the owner of Cinnamon Lakeside Colombo) is a subsidiary of the Company, and its principal activity is Hoteliering. There has been no material change in the activities of the subsidiary during the period under review. Asian Hotels & Properties PLC (AHP) considers Trans Asia Hotels PLC (TAH) as a subsidiary since the AHP has power and exposure, right to variable returns and ability to use its powers over TAH, based on the factors mentioned below even though it has only 43.41% ownership. It is AHP that strategises the marketing, positioning and sales of TAH, thereby, affecting the operating return, in addition to the dividend. This duly approved operating model established for AHP and TAH is driven by AHP as the lead. Annual Report 2022/2023 | 109 Notes to the Financial Statements AHP is exposed to variable returns from its involvement with TAH as a result of its performance. In addition AHP has quantitative, and qualitative, returns that are not available to other interest holders, due to its ability to use TAH’s assets in combination with its own to achieve economies of scale, cost savings and other synergies in their mutual interest. In addition to having the lead of the operating model, AHP also has the right to nominate directors to the TAH board. JKH had assigned the power to AHP in order to nominate Directors to TAH. Non Controlling Interest in subsidiary The following table summarises the information relating to the Group’s subsidiary that has NCI. As at 31st March In Rs. ‘000s 2023 2022 56.59% 56.59% 7,940,988 7,072,661 715,838 482,684 Non current liabilities Current liabilities Net assets Net assets attributable to NCI (854,364) (1,860,236) 5,942,226 3,362,706 (430,966) (1,234,797) 5,889,582 3,332,914 Revenue 3,569,025 1,817,224 (97,497) 162,272 64,775 (55,174) 4,100 40,398 44,498 2,320 91,830 22,861 50,229 (35,817) (282,104) (24,738) (256,613) (50,073) (39,576) (125,466) NCI percentage Non current assets Current assets (Loss)/Profit Other comprehensive income Total Comprehensive income (Loss)/Profit allocated to NCI OCI allocated to NCI Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net increase in cash and cash equivalents 17 NON CURRENT FINANCIAL ASSETS Loans to executives Refer Note 32.1.2 GROUP As at 31st March In Rs.’000s 2023 COMPANY 2022 2023 2022 At the beginning of the year 41,662 36,957 23,568 21,228 Loans granted/(transfers) Recoveries At the end of the year 38,812 (19,963) 60,511 30,775 (26,070) 41,662 24,758 (11,510) 36,816 11,525 (9,185) 23,568 Receivable within one year (Note 20) Receivable between one and five years 17,224 43,287 60,511 7,287 34,375 41,662 8,372 28,444 36,816 4,194 19,374 23,568 110 | Asian Hotels and Properties PLC 18 OTHER NON CURRENT ASSETS GROUP As at 31st March In Rs.’000s Prepaid cost of staff motor vehicle loan 19 2023 8,885 COMPANY 2022 3,088 2023 2022 2,458 996 INVENTORIES Accounting policy 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. GROUP As at 31st March In Rs.’000s Food & Beverage General Diesel/Furnace/Gas Stock Engineering Stock Provision for net realisable value Provision for slow moving inventory Amount at the end of the year 20 COMPANY 2023 2022 2023 2022 261,957 71,077 49,389 41,036 (5,547) (3,315) 414,597 148,352 13,022 24,106 21,351 (2,244) 204,587 154,392 51,547 42,166 23,941 (5,547) (2,079) 264,420 102,725 8,313 14,715 11,656 (1,793) 135,616 TRADE AND OTHER RECEIVABLES Accounting policy Refer Note 3.5 for accounting policy of financial instruments The Group has obtained customer deposit from major customers by reviewing their past performance and credit worthiness, as collateral. The requirement for an impairment is analysed at each reporting date on an individual basis for major customers and uses a provision matrix to calculate Expected Credit Loss (ECL) for the balance. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns. The provision matrix was initially based on the Group’s historical observed default rates. The Group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The Group considers a financial asset including trade and receivable in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. GROUP As at 31st March In Rs.’000s 2023 COMPANY 2022 2023 2022 Trade receivables 788,528 679,381 217,160 237,379 Other receivables 92,009 94,835 59,749 58,204 Loans to executives (Note 17) 17,224 7,287 8,372 4,194 (297,001) (293,604) (13,615) (7,484) 600,760 487,899 271,666 292,293 Impairment (Note 20.1) Annual Report 2022/2023 | 111 Notes to the Financial Statements GROUP 2023 As at 31st March In Rs.’000s 20.1 2022 Provision for the year Reversal At the end of the year 2022 293,604 303,315 7,484 13,950 6,131 - 6,131 - (2,734) (9,711) - (6,466) 297,001 293,604 13,615 7,484 OTHER CURRENT ASSETS GROUP 2023 As at 31st March In Rs.’000s Prepayments and non cash receivables Tax recoverable Advance to creditors COMPANY 2022 58,324 VAT refund 22 2023 Impairment At the beginning of the year 21 COMPANY 68,194 2023 2022 45,871 30,093 14,853 - 199 - 231,112 222,227 157,769 156,512 57,848 54,054 21,661 15,302 362,137 344,475 225,500 201,907 STATED CAPITAL The ordinary shares of Asian Hotels and Properties PLC are quoted on the Colombo Stock Exchange. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are eligible for one vote per share at Annual General Meetings of the Company. 2023 2022 Number of shares As at 31st March Value of shares Number of shares Value of shares In Rs.’000s Issued and fully paid ordinary shares 23 442,775 3,345,117 442,775 3,345,117 OTHER COMPONENTS OF EQUITY GROUP As at 31st March In Rs.’000s Note 2023 COMPANY 2022 2023 2022 Revaluation reserve 23.1 20,434,911 22,914,950 19,944,552 22,480,631 Share based payments 23.2 178,427 178,441 167,676 168,601 20,613,338 23,093,391 20,112,228 22,649,232 112 | Asian Hotels and Properties PLC 23.1 REVALUATION RESERVE GROUP As at 31st March In Rs.’000s At the beginning of the year Revaluation gain on freehold land & buildings Transferred to revenue reserve 2023 COMPANY 2022 2023 2022 22,914,950 22,108,546 22,480,631 21,678,694 2,493,754 950,365 2,351,949 932,484 (10,911) (10,911) - - Deferred tax on land & building (4,962,882) (133,050) (4,888,028) (130,547) At the end of the year 20,434,911 22,914,950 19,944,552 22,480,631 The Revaluation Reserve relates to revaluation of land and buildings and comprises the cumulative increase in the fair value of the property at the date of revaluation and related deferred tax adjustments. Further, it includes transfer from revaluation surplus to retained earnings, as per the LKAS 16 – Property plant and equipment, when the revalued asset is used by an entity, the difference between depreciation based on the revalued carrying amount and depreciation based on the original cost of the asset. 23.2 Share-based payment plans -Group Accounting policy In accounting for employee remuneration in the form of shares, SLFRS 2 – Share based payments, is effective for the Company’s parents entity John Keells Holdings PLC, from the financial year beginning 2013/14. Employees of the Company receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments of the Parent entity John Keells Holdings PLC (equity settled transactions). The cost of the employee services received in respect of the shares or share options granted is recognised in the statement of profit or loss over the period that employees provide services, from the time when the award is granted up to the vesting date of the options. The overall cost of the award is calculated using the number of share options expected to vest and the fair value of the options at the date of grant. The employee remuneration expense resulting from the John Keells Holdings PLC’s share option scheme to the employees of Asian Hotels and Properties PLC is recognised in the statement of profit or loss of the company. This transaction does not result in a cash outflow to the Company and expense recognised is met with a corresponding equity reserve increase, thus having no impact on the Statement of Financial Position (SOFP). The fair value of the options granted is determined by the John Keells Holdings PLC using an option model and the relevant details are communicated by the John Keells Holdings PLC to all applicable subsidiary companies. Accounting judgements, estimates and assumptions Estimating fair value for share-based payment transactions require determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires the determination of the most appropriate inputs to the valuation model, including the expected life of the share option, volatility and dividend yield and making assumptions about them. The John Keells Group measures the cost of equity settled transactions with employees relevant to the entire Group by reference to the fair value of the equity instruments on the date at which they are granted. The same assumptions have been used by the Company as John Keells Group’s Employee Share Option Scheme applies to the Company. The expected life of the share options is based on the historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome either. The following information were used and results were generated using binomial model for ESOP. Annual Report 2022/2023 | 113 Notes to the Financial Statements As at 31st March Dividend yield (%) Expected volatility (%) Risk free interest rate (%) Expected life of share options (Years) Weighted average share price at the grant date (LKR) Weighted average remaining contractual life for the share options outstanding (Years) Weighted average fair value of options granted during the year (LKR) Exercise price for options outstanding at the end of the year (LKR) Exercise price for options outstanding at the end of the year (LKR) (adjusted as at-) 2023 Plan No. 11 award 1 2022 Plan No. 10 award 3 2021 Plan No. 10 award 2 2020 Plan No. 10 award 1 2019 Plan No. 9 award 3 - - - - - 39.95 44.21 44.91 46.23 51.37 121.91 136.64 132.86 136.97 154.10 121.91 136.34 132.86 136.97 154.14 Employee Share Option Scheme Under the John Keells Group’s Employees Share Option scheme (ESOP), share options of the parent are granted to senior executives of the Company 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 Group does not have a past practice of cash settlement for these share options. The expense recognised for employee services received during the year is shown in the following table: GROUP As at 31st March In Rs.’000s At the beginning of the year Expense arising from equity-settled share-based payment transactions At the end of the year with non- controlling interest 2023 COMPANY 2022 2023 2022 191,267 190,786 168,601 169,057 1,177 481 (925) (456) 192,444 191,267 - - Non-controlling interest at the end of the year (14,017) (12,827) - - At the end of the year 178,427 178,440 167,676 168,601 114 | Asian Hotels and Properties PLC Movements during the year - Group The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the year: 2023 No. 2022 WAEP No. WAEP Outstanding as at 1st April 376,201 161.50 756,508 154.54 Granted during the year 158,500 133.06 109,600 136.64 Lapses/Forfeited during the year (192,456) 173.25 (180,487) 145.07 Transfers in/(out) (14,746) 154.11 (309,420) 145.26 Outstanding as at 31st March Exercisable as at 31st March 327,499 130,224 - 376,201 305,458 - Movements during the year - Company The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the year: 2023 No. 2022 WAEP No. WAEP Outstanding as at 1st April 221,188 165.07 562,115 152.87 Granted during the year 111,300 131.02 57,900 136.64 Lapses/Forfeited during the year (126,659) 173.25 (114,643) 142.83 36,954 129.67 (284,184) 144.11 242,783 92,708 - 221,188 209,681 - Transfers in/(out) Outstanding as at 31st March Exercisable as at 31st March Fair value of the share option and assumptions The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted. The valuation takes into account factors such as stock price, expected time to maturity, exercise price, expected, volatility of share price, expected dividend yield and risk free interest rate. Annual Report 2022/2023 | 115 Notes to the Financial Statements 24 INTEREST BEARING LOANS AND BORROWINGS Accounting policy Borrowings are initially recognised at fair value less any directly attributable transaction costs. Subsequently, they are stated at amortised cost, any difference between the proceeds (net of transaction cost) and the repayable amount (including interest) is recognised in Statement of profit or loss over the period of the loan using effective interest method. Refer note 3.5 for accounting policy of financial liabilities GROUP 2023 2022 2023 2022 953,161 486,000 (1,034,806) 1,359 21,154 426,868 268,233 1,146,200 (564,135) 24,216 78,647 953,161 716,615 438,000 (943,093) 1,359 212,881 50,706 1,146,200 (494,200) 13,909 716,615 700,451 252,710 953,161 87,881 125,000 212,881 521,093 195,522 716,615 As at 31st March In Rs.’000s At the beginning of the year Loans obtained Repayments Accrued interest Exchange difference At the end of the year COMPANY Repayable within one year Repayable after one year 180,415 246,453 426,868 Security and repayment terms 2023 In Rs.’000s Nature of facility Company Saubagya COVID - 19 Renaissance Facility Loan Credit Guarantee and Interest subsidy loan scheme Short term revolving loan Term Loan Interest rate Repayment terms 4% 4% AWPR + 1% Revised monthly Year 1 8.25% Year 2 8.50% Company Total Subsidiary Term Loan (USD) 116 LIBOR+ Margin 16 equal monthly instalments of Rs.1.47 Mn and final instalment of Rs.1.46 Mn commencing from Jul 2022 16 equal monthly instalments of Rs.1.47 Mn and final instalment of Rs.1.46 Mn commencing from Jul 2022 Each sub-loan granted under the facility should be repaid in full within 180 days Security Face value 2022 Carrying value Face value Carrying value None 11,761 11,761 26,353 26,353 None 11,761 11,761 26,353 26,353 None - - 462,550 462,550 12 equal monthly instalments of Rs.4 Mn commencing from Jan 2023 11 equal monthly instalments of Rs. 9 Mn and final instalment of Rs.53 Mn commencing from Jan 2023 None 189,359 189,359 201,359 201,359 212,881 212,881 716,615 716,615 Capital Repayment in 4 equal quarterly instalments of USD 187,500 commencing on-. Interest to be serviced monthly. None - - 226,239 226,239 | Asian Hotels and Properties PLC 2023 In Rs.’000s Nature of facility Interest accrued on term loan USD during COVID moratorium phase 1 and 2 Term Loan (USD) Interest rate Repayment terms Security Face value 2022 Carrying value Face value Carrying value LIBOR+ Margin To be repaid in one instalment on- None - - 10,307 10,307 LIBOR+ Margin 12 equal monthly instalments of USD 17,552 commencing from January 2023 and 11 equal monthly instalments of USD 40,955 commencing from January 2024 and final instalment of USD 40,957 on December 2024. None 213,987 213,987 - - 426,868 426,868 953,161 953,161 Group Total The Group and the Company continued to place emphasis on ensuring that cash and undrawn committed facilities are sufficient to meet the short, medium and long-term funding requirements, unforeseen obligations as well as unanticipated opportunities. Constant dialogue between Companies and banks regarding financing requirements, ensures that availability within each single borrower limit is optimised by efficiently reallocating under-utilised facilities within the Company. The daily cash management processes at the business units include active cash flow forecasts and matching the duration and profiles of assets and liabilities, thereby ensuring a prudent balance between liquidity and earnings. 25 DEFERRED TAXATION Accounting policy Deferred taxation is provided using the Statement of Financial Position liability method providing for temporary difference between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted by the reporting date. Deferred tax assets including those related to tax effects of income tax losses and credits available to be carried forward, are recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that is no longer probable that the related tax benefit will be realised. GROUP As at 31st March In Rs.’000s At the beginning of the year Recognised in statement of profit or loss Recognised in other comprehensive income At the end of the year COMPANY 2023 2022 2023 2022 3,856,597 83,822 5,063,118 9,003,537 3,736,792 (17,318) 137,123 3,856,597 3,615,600 (106,047) 4,888,028 8,397,581 3,489,290 (4,237) 130,547 3,615,600 Income tax and Deferred tax have been provided as per the new rates legislated by the Inland Revenue (Amendment) Act No 45 of 2022. The deferred tax reversal in the Income Statement includes Rs. 88 Mn for the Company relating to the tax rate differential. The deferred tax charge in the Other Comprehensive Income statement includes Rs. 4.2 Bn for the Company relating to the tax rate differential. Annual Report 2022/2023 | 117 Notes to the Financial Statements The closing deferred tax liability is made-up as follows; GROUP As at 31st March In Rs.’000s Revaluation of land Revaluation of buildings Accelerated depreciation for tax purposes Employee Benefit Liability Losses and other credits available for offset against future taxable income Revaluation of investment property Others COMPANY 2023 2022 2023 2022 7,322,667 1,462,566 758,871 (38,087) (274,091) 3,312,960 411,809 345,139 (18,589) (102,356) 7,322,667 1,224,998 - 3,312,960 346,677 - (116,698) (111,691) 9,003,537 (44,037) (48,329) 3,856,597 (150,084) 8,397,581 (44,037) 3,615,600 As per the Inland Revenue Act No. 24 of 2017, business income includes gains from realisation of land owned by the Company. Accordingly, the gains from the realisation of land shall be the amount by which the sum of the consideration received for the land which exceeds the acquiring cost of the asset or liability at the time of realisation. The Company has recognised a revaluation reserve on freehold land (capital assets of the Company) amounting to Rs. 24,409 Mn as at 31st March 2023 which is the amount by which the sum of the carrying value of the freehold land exceeds the acquiring and improvement cost of the land based on the revaluation carried out and accounted for as at the reporting date. Accordingly, the Company has recognised a deferred tax liability of Rs. 7,323 Mn pertaining to revaluation reserve of freehold lands which is provided as per the new rates legislated by the Inland Revenue (Amendment) Act No 45 of 2022. Revaluation gain on building also was considered in computing deferred tax after considering the amendments in the newly enacted Inland Revenue Act. The Group has recognised deferred tax on revaluation of it’s buildings classified as investment property (Investment assets) at the rates specified in the Inland Revenue (Amendment) Act No 45 of 2022. Accordingly the Company has recognised deferred tax of Rs. 150 Mn as at 31st March 2023 on the revaluation loss reported during the year. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for Subsidiary. 26 EMPLOYEE BENEFIT LIABILITIES Accounting policy (i) Defined Contribution Plans - EPF/ETF Employees’ Provident Fund and Employees’ Trust Fund (EPF & ETF) are recognised as incurred. Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund contributions in line with respective statutes and regulations. The Company and the Group contribute 3% of gross emoluments of employees to the Employees’ Trust Fund. The company contributes 15% of the gross emoluments of the employees as of 30th September 2022, and 12% of the employees hired after 1st October 1, 2022, to the Employees’ Provident Fund. The subsidiary contributes 12% of the gross emoluments of employees to the Employees’ Provident Fund. (ii) Defined benefit plans - Gratuity A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company and the Group are liable to pay retirement benefits under the Payment of Gratuity Act, No. 12 of 1983. The liability recognised in the statement of financial position is the present value of the defined benefit obligation as at 31st March 2023. 118 | Asian Hotels and Properties PLC The defined benefit obligation is calculated by a qualified actuary as at 31st March 2023 using the Projected Unit Credit (PUC) method as recommended by LKAS 19 - ‘Employee Benefits’. Such actuarial valuations will be carried out every year. The liability is not externally funded. All Actuarial gains or losses are recognised immediately in the other comprehensive income. Under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five-years of continued service. When the benefits or a plan are changed or when a plan is curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. (iii) Other long term employee benefit A new Long-Term Incentive Plan (LTI) has been launched in 2018/19 for senior employees of the Group. The overall incentive was to will be paid in cash as a lump sum payment upon achievement of key performance indicators linked to the five-year strategic plan in place. The liability recognised in respect other long term employee benefits are measured as the present value of the estimated future cash outflows expected to be made by the Group in relation to the performance and the services of the relevant employees, up to the reporting date. The management has decided to cease the LTI plan due to failure in achieving overall key performance indicators linked to the five-year strategic plan. Therefore, the total provision has been reversed. GROUP As at 31st March In Rs.’000s Note Employee defined benefit plan - gratuity Other long term employee benefits 26.1 26.2 26.1 -,631 333,631 COMPANY-,552 16,318 343,870 -,674 206,674 -,770 16,318 211,088 Employee defined benefit plan - Gratuity GROUP As at 31st March In Rs.’000s At the beginning of the year Current service cost Interest cost on benefit obligation Payments (Gain)/Loss arising from changes in assumptions Transfers At the end of the year COMPANY 2023 2022 2023 2022 327,552 26,816 29,479 (37,133) (8,897) (4,186) 333,631 350,837 19,761 28,067 (45,376) (17,233) (8,504) 327,552 194,770 15,650 17,529 (23,016) 1,801 (60) 206,674 204,800 13,074 16,384 (22,670) (11,452) (5,366) 194,770 The employee benefit liability of the Company and Group is based on the actuarial valuations carried out as at 31st March 2023 by Mr. P. Gunasekera, AIAA, M/s. Smiles Global (Pvt) Ltd and Mr. M. Poopalanathan, AIA, M/s. Actuarial & Management Consultant (Pvt) Ltd; firms of professional actuaries respectively. The principal assumptions used in determining the cost of employee benefits were: GROUP 2023 Discount rate Future salary increases 19.50% 15.00% COMPANY-% 8.00% -% 15.00% -% 8.00% The actuarial valuation involves making assumptions about discount rates and future salary increases. Due to the complexity of the valuation and 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. Annual Report 2022/2023 | 119 Notes to the Financial Statements The Management tested several scenario based calculations on possible changes of the assumptions due to the prevailing macroeconomic conditions. Based on those calculations, the management has concluded that there is no material impact to retirement benefit obligations liability of the Company and its Subsidiary. 26.1.1 Sensitivity of assumptions used If one percentage point change in the assumed discount rate would have the following effects: 2023 2023 In Rs.’000s Discount rate GROUP COMPANY Salary increment GROUP COMPANY Increase by one percentage point Decrease by one percentage point (13,769) 14,977 16,118 (15,015) 26.1.2 (8,218) 8,908 9,609 (8,984) Maturity analysis of the payments The following payments are expected on employee benefit liabilities in future years 2023 As at 31 March In Rs 000’s Within the next 12 months Between 1-2years Between 2-5years Between 5-10 years Beyond 10 years Total GROUP 2022 COMPANY 27,271 31,533 71,516 189,504 13,807 333,631 5,346 4,426 39,302 157,600 206,674 GROUP 16,073 28,147 55,226 212,456 15,650 327,552 COMPANY 6,882 26,702 161,186 194,770 The average duration of the defined benefit plan obligation at the end of the reporting period is 6.45 years. 26.2 Other long term employee benefits GROUP As at 31st March In Rs.’000s At the beginning of the year Provision/(Reversal) At the end of the year 27 COMPANY 2023 2022 2023 2022 16,318 (16,318) - 27,524 (11,206) 16,318 16,318 (16,318) - 27,524 (11,206) 16,318 TRADE AND OTHER PAYABLES Accounting policy Trade payables are the aggregate amount of obligations to pay for goods or services, that have been acquired in the ordinary course of business. Trade payable are classified as current liabilities if payment is due within one year and initially recoganised at Fair Value and subsequently measured at amotised cost using the effective interest method. GROUP As at 31st March In Rs.’000s Trade Payables Retention on Construction Accrued Expenses Other Creditors 120 | Asian Hotels and Properties PLC -,231 11,566 388,207 385,132 1,230,136 COMPANY 2022 397,231 39,105 271,385 312,946 1,020,667 -,496 11,566 92,810 312,627 715,499 -,847 39,105 113,856 179,333 637,141 28 INCOME TAX LIABILITIES GROUP As at 31st March In Rs.’000s At the beginning of the year Charge for the year Payments and set-off against refunds and credits Under/(over) provision At the end of the year 29 COMPANY 2023 2022 2023 2022 44,192 116,432 (120,737) (124) 39,763 37,192 65,938 (58,938) 44,192 19,248 100,908 (101,730) (124) 18,302 6,507 52,018 (39,277) 19,248 2022 2023 OTHER CURRENT LIABILITIES GROUP As at 31st March In Rs.’000s Contract liabilities -,761 COMPANY 221,228 2022 116,500 100,905 Other Advances 106,986 83,211 74,186 66,275 Other tax payables 348,533 14,373 219,004 9,229 648,280 318,812 409,690 176,409 30 RELATED PARTY DISCLOSURES Terms and conditions of transactions with related parties Transactions with related parties are carried out in the ordinary course of business. Outstanding current account balances at year end are unsecured, interest free and settlement occurs in cash. Non-recurrent related party transactions There were no non-recurrent related party transactions which in aggregate value exceeds 10% of the equity or 5% of the total assets whichever is lower of the Company as per 31 March 2022 audited financial statements, which required additional disclosures in the 2022/23 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and Exchange Commission Directive issued under Section 13(c) of the Securities and Exchange Commission Act. Recurrent related party transactions There were no recurrent related party transactions which in aggregate value exceeds 10% of the consolidated revenue of the Group as per 31 March 2022 audited financial Statements, which required additional disclosures in the 2022/23 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and Exchange Commission Directive issued under Section 13(c) of the Securities and Exchange Commission Act. Group carried out transactions in the ordinary course of its business on an arm’s length basis with parties who are defined as related parties as per LKAS 24 “Related Party Disclosure”. 30.1 Parent and Ultimate Controlling Party The Company’s Ultimate Parent undertaking and controlling party is John Keells Holdings PLC (JKH PLC). The amounts receivable from and payable to related parties as at 31st March 2023, are presented below, Annual Report 2022/2023 | 121 Notes to the Financial Statements 30.2 Amounts due from related parties GROUP As at 31st March In Rs.’000s Parent-John Keells Holdings PLC (JKH PLC) Subsidiary-Trans Asia Hotels PLC Companies under common control of JKH PLC 30.3 2023 COMPANY 2022 2022 14,106 6,541 7,537 2,256 - - 11,137 1,051 102,576 40,194 75,396 24,212 116,682 46,735 94,070 27,519 Amounts due to related parties GROUP As at 31st March In Rs.’000s Parent-John Keells Holdings PLC (JKH PLC) Subsidiary-Trans Asia Hotels PLC Companies under common control of JKH PLC 30.4 2023 2023 14,069 COMPANY 2022 7,321 2023 2022 8,653 2,809 - - 6,669 1,461 116,247 79,969 65,720 47,741 130,316 87,290 81,042 52,011 Transactions with Related Parties The Group and Company carried out transactions with the following related entities. GROUP For the year ended 31st March In Rs.’000s (a) Transactions with Parent Company The company's parent is John Keells Holdings PLC (JKH PLC) Rendering of services Receiving of Services Rent Received (b) Transactions with Subsidiary - Trans Asia Hotels PLC Rendering of services Receiving of services 2023 COMPANY 2022 2023 2022 53,968 96,183 - 2,725 98,728 28,693 15,315 65,257 - 266 59,935 - - - 8,091 416 997 224 (c) Transaction with companies Under common control of JKH PLC Purchase of Goods 27,836 1,511 18,610 1,455 169,301 55,428 115,868 35,780 Receiving of services 695,399 368,916 415,077 211,553 Rent Received 146,403 90,605 78,956 28,382 Rendering of services 12,353 2,240 5,479 374 Receiving of services 13,619 11,096 13,619 10,981 - 1,511 - 1,511 Rendering of services (d) Transactions with Equity Accounted Investees of JKH PLC Interest Received 122 | Asian Hotels and Properties PLC 30.5 Compensation of key management personnel GROUP 2023 For the year ended 31st March In Rs.’000s Remuneration to Non-executive Directors 13,843 COMPANY 2022 8,615 2023 2022 5,660 3,315 31 FINANCIAL INSTRUMENTS - ACCOUNTING CLASSIFICATION AND FAIR VALUES OF THE GROUP 31.1 Financial Assets and Liabilities by Categories - Group Financial assets and liabilities in the tables below are split into categories in accordance with SLFRS 9. Financial assets at amortised Financial liabilities cost measured at amortised cost As at 31st March In Rs.’000s 2023 Note Financial instruments in non-current assets/non-current liabilities Other non-current financial assets 17 Other non-current assets 18 Interest bearing borrowings 24 Financial instruments in current assets/current liabilities Trade and other receivables/payable Amounts due from/due to related parties Interest bearing borrowings Cash in hand and at bank Bank overdrafts Total 20 &- 2022 2023 2022 43,287 8,885 - 34,375 3,088 - 246,453 252,710 600,760 116,682 186,735 956,349 487,899 46,735 233,184 805,281 832,944 130,316 180,415 1,861,228 3,251,356 749,282 87,290 700,451 924,745 2,714,478 The management assessed that the fair value of cash at bank, short term deposits, trade receivables, other payables, bank overdrafts and other current financial liabilities approximate their carrying amounts largely due to the short term maturities of these instruments. Accordingly the fair value hierarchy does not apply. 31.2 Financial Assets and Liabilities by Categories - Company Financial assets and liabilities in the tables below are split into categories in accordance with SLFRS 9. Financial assets at amortised Financial liabilities cost measured at amortised cost As at 31st March In Rs.’000s Financial instruments in non-current assets Other non-current financial assets Other non-current assets Interest bearing borrowings Financial instruments in current assets Trade and other receivables/payable Amounts due from/due to related parties Interest bearing borrowings Cash in hand and at bank Bank overdrafts Total Note 2023 2022 2023 2022 17 18 24 28,444 2,458 - 19,374 996 - 125,000 195,522 20 &- 271,666 94,070 120,553 517,191 292,293 27,519 177,913 518,095 613,704 81,042 87,881 928,554 1,836,181 523,285 52,011 521,093 456,442 1,748,353 Annual Report 2022/2023 | 123 Notes to the Financial Statements The management assessed that the fair value of cash at bank, short term deposits, trade receivables, other payables, bank overdrafts and other current financial liabilities approximate their carrying amounts largely due to the short term maturities of these instruments. Accordingly the fair value hierarchy does not apply. 32 Financial risk management Objectives and Policies Financial instruments held by the Group, principally comprise of cash at bank, short-term deposits, other non current assets,amounts due from/due to related parties, trade receivables, trade payables, bank overdrafts, borrowings and other current financial liabilities. The main purpose of these financial instruments is to manage the operating, investing and financing activities of the Group. Financial risk management of the Group is carried out based on guidelines established by its parent company’s central treasury department (Group Treasury) which comes under the purview of the Group Executive Committee (GEC) of the parent company. The Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The parent company provides guidelines for overall risk management, as well, covering specific areas such as credit risk, investment of excess liquidity, interest rate risk and foreign currency risk. The 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. The Audit Committee of John Keells Holdings PLC, the parent Company, oversees how management monitors compliance with the Group’s risk management policies and procedures,and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 32.1 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 and financial institutions, foreign exchange transactions and other financial instruments. The Group trades only with recognised, credit worthy 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 bad debts is not significant. With respect to credit risk arising from the other financial assets of the Group, such as cash and cash equivalents, Trade receivables, Related party receivables and investments in fixed deposits, 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 the counterparties fulfil their obligations. The individual receivable balances were re-assessed, specific provisions were made wherever necessary, existing practice on the provisioning of trade receivables were re-visited and adjusted to reflect the different rearrangement of homogeneous groups. Receivable balances are monitored on an ongoing basis to minimise bad debt risk and to ensure default rates are kept very low, whilst the improved operating environment resulted in improved collections during the financial year although there could be stresses in the ensuing year on account of the macroeconomic uncertainty and related impacts to our customers on account of elevated inflation and interest rates and the possible impact on consumer discretionary spend. 32.1.1 Risk exposure Credit risk is the risk of financial loss to the Group, if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and placements in deposits with banking institutions. The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts (without consideration of collateral, if available). Following table shows the maximum risk positions. 124 | Asian Hotels and Properties PLC Annual Report 2022/2023 | 125 Loans to executives 28,444 28,444 Other non current financial assets 43,287 43,287 Other non current financial assets 120,553 120,553 271,666 271,666 94,070 94,070 Amounts due from related parties 116,682 116,682 Amounts due from related parties 2023 600,760 600,760 Cash in Trade hand and and other at bank receivables 186,735 186,735 Cash in Trade hand and and other at bank receivables 28,444 271,666 94,070 120,553 514,733 Total 43,287 600,760 116,682 186,735 947,464 Total 34,375 34,375 6% 53% 18% 23% 100% 19,374 19,374 % of Other non allocation current financial assets 5% 63% 12% 20% 100% % of Other non allocation current financial assets 177,913 177,913 292,293 292,293 27,519 27,519 Amounts due from related parties 46,735 46,735 Amounts due from related parties 2022 487,899 487,899 Cash in Trade hand and and other at bank receivables 233,184 233,184 Cash in Trade hand and and other at bank receivables 2022 19,374 292,293 27,519 177,913 517,099 Total 34,375 487,899 46,735 233,184 802,193 Total 4% 57% 5% 34% 100% % of allocation 4% 61% 6% 29% 100% % of allocation Loans to executive portfolio is largely made up of vehicle loans which are given to staff at manager level and above. The respective business units have obtained the necessary Power of Attorney as collateral for the loans granted. 32.1.2 Loans to executives Trade and other receivables Amounts due from related parties Cash in hand and at bank Total credit risk exposure In Rs. ’000s Risk exposure - Company As at 31st March Loans to executives Trade and other receivables Amounts due from related parties Cash in hand and at bank Total credit risk exposure In Rs. ’000s Risk exposure - Group As at 31st March 2023 Notes to the Financial Statements 32.1.3 Trade and other receivables GROUP As at 31st March In Rs.’000s Neither past due nor impaired 2023 COMPANY 2022 2023 2022 133,956 165,551 77,427 102,874 0-30 days 222,510 182,061 68,082 110,424 Past due but not impaired 31–60 days 181,115 91,461 67,119 58,738 61–90 days 32,277 24,960 20,628 3,863 91–120 days 31,629 22,710 24,875 16,106 121–180 days > 181 days Gross carrying value Less: impairment provision 22,973 273,301 897,761 10,057 284,703 781,503 18,675 8,475 285,281 2,354 5,418 299,777 Individually assessed impairment provision (297,001) (293,604) (13,615) (7,484) Total 600,760 487,899 271,666 292,293 The Group has obtained customer deposit from major customers by reviewing their past performance and credit worthiness, as collateral. The requirement for an impairment is analysed at each reporting date on an individual basis for major customers and uses a provision matrix to calculate Expected Credit Loss (ECL) for the balance. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns. The provision matrix was initially based on the Group’s historical observed default rates. The Group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The Group considers a financial asset, including trade and receivable in default, when contractual payments are 180 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. 32.1.4 Amounts due from related parties The Group’s amounts due from related party mainly consists from Parent, Subsidiary and other related entities. 32.1.5 Credit risk relating to cash and cash equivalents In order to mitigate settlement and operational risks related to cash and cash equivalents, the Company uses several banks with acceptable rating for its deposits. 32.2 Liquidity Risk Liquidity risk is the risk that will encounter difficulty in meeting the obligation associated with it’s financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Company’s reputation. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted such as natural disasters. 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, overdrafts and over a broad spread of maturities. 126 | Asian Hotels and Properties PLC 32.2.1 Net debt/(cash) GROUP As at 31st March In Rs.’000s Cash in hand and at bank Total liquid assets Non current portion of borrowings -,735 186,735 COMPANY 2022 2023 233,184 233,184 120,553 120,553 -,913 177,913 246,453 252,710 125,000 195,522 Current portion of borrowings Bank overdrafts Total liabilities 180,415 1,861,228 2,288,096 700,451 924,745 1,877,906 87,881 928,554 1,141,435 521,093 456,442 1,173,057 Net debt/(cash) 2,101,361 1,644,722 1,020,882 995,144 32.2.2 Liquidity risk management The Group’s approach to managing liquidity is to as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage top’s reputation. The Group maintains a portion of its assets in highly liquid form in order to meet its contractual obligations during the normal course of its operations. The Group monitors the level of expected cash flows on trade and other receivables together with expected cash outflow on trade and other payables and it expected a significant portion of trade receivables as at the reporting date would mature within a shorter period of time, given the historical trends, which enable to meet its contractual obligations. The Group has implemented a mixed approach that combines elements of the cash flow matching approach and the liquid assets approach. The business units attempt to match cash outflows in each time bucket against the combination of contractual cash inflows plus other inflows that can be generated through the sale of assets and other secured borrowings. The Group continued to place emphasis on ensuring that cash and undrawn committed facilities are sufficient to meet the short, medium and long-term funding requirements, unforeseen obligations as well as unanticipated opportunities. Constant dialogue between Group companies and banks regarding financing requirements, ensures that availability within each single borrower limit is optimised by efficiently reallocating under-utilised facilities within the Group. The daily cash management processes at the business units include active cash flow forecasts and matching the duration and profiles of assets and liabilities, thereby ensuring a prudent balance between liquidity and earnings. Annual Report 2022/2023 | 127 Notes to the Financial Statements Maturity analysis - Group The table below summarises the maturity profile of the Group’s financial liabilities at 31st March 2023 based on contractual undiscounted payments. As at 31st March In Rs. ’000s Within 1 Between 1-2 Between 2-3 Between 3-4 Between 4-5 More than 5 year years years years years years Interest bearing borrowings 180,415 Trade and other payables Amounts due to related parties Bank overdrafts 246,453 - - - Total 2023 - 426,868 1,230,136 - - - - - 1,230,136 130,316 - - - - - 130,316 1,861,228 - - - - - 1,861,228 3,402,095 246,453 - - - - 3,648,548 The table below summarises the maturity profile of the Group’s financial liabilities at 31st March 2022 based on contractual undiscounted payments. As at 31st March In Rs. ’000s Interest bearing borrowings Trade and other payables Amounts due to related parties Bank overdrafts Within 1 Between 1-2 Between 2-3 Between 3-4 Between 4-5 More than 5 year years years years years years Total 2022 700,451 252,710 - - - - 953,161 1,020,667 - - - - - 1,020,667 87,290 - - - - - 87,290 924,745 - - - - - 924,745 2,733,153 252,710 - - - - 2,985,863 Maturity analysis - Company The table below summarises the maturity profile of the Company financial liabilities at 31st March 2023 based on contractual undiscounted payments. As at 31st March In Rs. ’000s Interest bearing borrowings Trade and other payables Amounts due to related parties Bank overdrafts Within 1 Between 1-2 Between 2-3 Between 3-4 Between 4-5 More than 5 year years years years years years Total 2023 87,881 125,000 - 212,881 715,499 - - - - - 715,499 81,042 - - - - - 81,042 928,554 - - - - - 928,554 1,812,976 125,000 - - - - 1,937,976 The table below summarises the maturity profile of the Company financial liabilities at 31st March 2022 based on contractual undiscounted payments As at 31st March In Rs. ’000s Within 1 Between 1-2 Between 2-3 Between 3-4 Between 4-5 More than 5 year years years years years years Interest bearing borrowings 521,093 195,522 - 716,615 Trade and other payables 637,141 - - - - - 637,141 52,011 - - - - - 52,011 Amounts due to related parties Bank overdrafts 128 Total 2022 456,442 - - - - - 456,442 1,666,687 195,522 - - - - 1,862,209 | Asian Hotels and Properties PLC 32.3 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 four types of risk: › Interest rate risk › Foreign Currency risk › Commodity price risk › Equity price risk The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. 32.3.1 Foreign Currency risk Foreign currency risk that the fair value or future cash flows of a financial instrument will fluctuate, due to changes in foreign exchange rates. The Group as at the reporting date, do not hold significant “ Financial Instruments” denominated in currencies other than its functional/reporting currency, hence do not get significantly exposed to currency risk from transaction of such balances in to the functional/reporting currency, which is Sri Lankan Rupees. The bank loan obtained in US Dollar terms are matched with US Dollar receipts from customers. The annual average US Dollar receipts of the Company is approximately USD 3.4 Mn. However, the Group engages in transactions associated with foreign currencies in its ordinary course of operations, hence exposed to ‘Currency risk’. Across the industry, the hotel rates targeting the foreign tourists are quoted in US Dollar terms. However a fluctuation in the exchange rate will not have a significant impact since majority of the quotes are converted to local currency at the point of invoicing. The Group attempt to mitigate the exposure to currency risk arising from its transactions. The Sri Lankan Rupee depreciated significantly in the first two quarters of the financial year and witnessed significant volatility during certain periods of the financial year. The foreign exchange markets were largely inactive and liquid during the first half of the financial year amidst significant foreign exchange shortages and macroeconomic uncertainty. However, from the second half of the financial year, the foreign exchange liquidity improved on the back of a trade surplus given the sharp contraction of imports due to the fiscal and monetary policy measures adopted in the country and the continuation of import restrictions at the time. The Rupee appreciated during the final quarter with the improving foreign exchange liquidity situation in the country and the Extended Fund Facility (EFF) from the International Monetary Fund (IMF), at the time. The Group adopted prudent measures, as and when required, to manage the financial impacts arising from the liquidity constraints and currency fluctuations by matching liabilities with corresponding inflows. At a Group level, the translation risk on foreign currency debt is largely hedged “naturally” as a result of the conscious strategy of maintaining US Dollar cash balances at the holding company whilst also ensuring obligations can be managed through US Dollar denominated revenue streams. The Group was able to navigate the liquidity challenges through matching its obligations with foreign currency inflows, as far as possible and permissible, while also using the strength of the Group balance sheet to manage the situation. Annual Report 2022/2023 | 129 Notes to the Financial Statements The table below illustrates the Group and Company’s profit before tax sensitivity to a reasonable possible change in exchange values, with all other variables held constant. Effect on profit before tax Increase/(Decrease) in exchange rate USD Rs.000’s GROUP COMPANY 5,374 2023 + 12.6% 20,749 - 12.6% (20,749) (5,374) 2022 + 52.0% 88,965 58,942 - 52.0% (88,965) (58,942) 33.3.2 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group is exposed to interest rate risk for USD loan obtained from HNB. However, management monitors the sensitivities on regular basis and ensure risks are managed on a timely manner. The Central Bank of Sri Lanka (CBSL) continued the tightening of monetary policy stance during current financial year, resulting in a sharp upward trend in the first half of the financial year, particularly with the uncertainty of a domestic debt restructuring being factored in to secondary market yields on Government Securities. The shortage of liquidity in the first half of the financial year further put pressure on market interest rates. There was a decrease in interest rates in the last three months of the financial year on account of the reduced Government debt financing requirements and improved liquidity position in the country. The Group had mitigated the risk of increasing interest rates by balancing its portfolio of borrowings and moving a sizeable portion of its Sri Lankan Rupee borrowings on a long-term basis prior to the sharp upward movement in interest rates. Similarly, where relevant and possible, a majority of the Rupee long-term facilities were on a fixed rate basis over the tenor of the loan. In respect of the Group’s foreign currency borrowing portfolio, interest rate swap agreements are in place for a sizeable portion of the facilities. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s and the Company’s profit before tax. Increase/(decrease) in basis points Effect on profit before tax Rs.000’s Rupee borrowings- Other currency borrowings GROUP COMPANY +1407 + 451 (119,144) - -1407 - 451 119,144 - + 273 + 30 (46,447) (32,728) - 273 - 30 46,447 32,728 The assumed spread of basis points for the interest rate sensitivity analysis is based on the currently observable market environment and changes to base rates such as AWPLR and LIBOR. The Company has a fixed rate of interest as of the reporting date. 32.4 Capital management The 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. 130 | Asian Hotels and Properties PLC 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 2023 As at 31st March In Rs.’000s Total liabilities Less: cash in hand and at bank Adjusted net debt Total equity Adjusted net debt to adjusted equity ratio 33 COMPANY 13,673,759 186,735 13,487,024 32,237,-% 2022 7,549,334 233,184 7,316,150 34,959,-% 2023 10,970,223 120,553 10,849,670 26,955,-% 2022 5,884,554 177,913 5,706,641 29,729,-% OPERATING SEGMENT INFORMATION Accounting policy A segment is a distinguishable component of the Company that is engaged either in providing products or services which are subject to risks and rewards that are different from those of other segments. The Group has the following two strategic divisions, which are its reportable segments. The following summary describes the operations of each reportable segment. Reportable Segments Operations Hotel Provide hoteliering services to local and foreign tourists Property Property Development and renting out premises HOTELS For the year ended 31st March In Rs.’000s External revenue Inter segment revenue Total segment revenue PROPERTY 2023 Group Total 2023 2022 2022 2023 2022 8,241,626 (66,406) 8,175,220 4,055,661 (65,953) 3,989,708 174,932 66,406 241,338 39,011 65,953 104,964 8,416,558 8,416,558 4,094,672 4,094,672 Segment operating profit/(loss) before finance expenses Finance expenses 35,066 (379,755) 71,510 (19,800) 106,576 (399,555) (364,157) (174,589) (29,320) (9,936) (393,477) (184,525) Change in fair value of investment properties Company Commercial centre of subsidiary Profit/(loss) before tax Income tax expense Profit/(loss) after tax Non-controlling interest Profit/(loss) attributable to equity holders (329,091) (301,548) (630,639) (209,001) (421,638) (554,344) (48,017) (602,361) (124,781) (477,580) (59,909) 214,301 196,582 101,294 297,876 153,827 144,049 (42,374) 167,226 95,116 (602) 94,514 127,101 (32,587) (59,909) 214,301 (132,509) (200,254) (332,763) (55,174) (277,589) (42,374) 167,226 (459,227) (48,620) (507,847) 2,320 (510,167) Annual Report 2022/2023 | 131 Notes to the Financial Statements HOTELS 2023 For the year ended 31st March In Rs.’000s Assets Segment assets Elimination Total assets PROPERTY 2022 2023 Group Total 2022 2023 2022 46,582,829 (671,182) 45,911,647 43,169,746 (661,096) 42,508,650 35,959,588 32,969,235 10,623,241 10,200,511 35,959,588 32,969,235 10,623,241 10,200,511 Liabilities Segment liabilities Elimination 13,424,023 7,183,331 260,873 367,054 13,684,896 (11,137) 7,550,385 (1,051) Total liabilities 13,424,023 7,183,331 260,873 367,054 13,673,759 7,549,334 34 CONTINGENT LIABILITIES Accounting policy Provisions are recognised when the Company 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. Contingent liabilities are disclosed if there is a possible future obligation as a result of a past event, or if there is a present obligation as a result of a past event but either a payment is not probable or the amount cannot be reasonably estimated. The contingent liability of the Group as at 31st March 2023, relates to the following: Income Tax Assessments - Subsidiary Income tax assessments relating to years of assessments 2012/13 to 2017/18. The subsidiary has lodged appeals against the assessments and is contesting these under appellate procedure. Having discussed with independent legal and tax experts and based on the information available, the contingent liability as at 31st March 2023 is estimated at Rs. 192 Mn. CMC Tax matter - Group In the year 2009, Colombo Municipal Council (CMC) imposed a trade tax on the hotel revenue for all the hotels within the city limits with subsequent gazetted amendments. However, the hoteliers together with Tourist Hotels Association of Sri Lanka (THASL) are in the process of negotiations with CMC through court, for which the resolution is still pending. Accordingly, the Company and the Group have made provisions in the financial statements amounting to Rs. 3 million per year based on the guidelines issued by THASL. 35 CAPITAL COMMITMENTS The Subsidiary had capital expenditure contracted for Rs. 306 Mn as at 31st March 2023, which were not provided for in the consolidated financial statements. 36 EVENTS SUBSEQUENT TO THE REPORTING DATE AND OTHER MATTERS Other than the contingent liabilities and capital commitments referred to in Note 34 & 35 to the Financial Statements, there have been no events subsequent to the reporting date which would have any material effect on the Company and the Group. 37 DIRECTORS’ RESPONSIBILITY STATEMENT The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Please refer to the page 75 for the Statement of Directors’ Responsibility for Financial Reporting. 132 | Asian Hotels and Properties PLC SUPPLEMENTARY INFORMATION Annual Report 2022/2023 | 133 CONSOLIDATED VALUE ADDED STATEMENT For the year ended 31 March In Rs. ‘000s 2023 Revenue 2022 8,416,558 4,094,672 154,393 124,852 Adjustment for Finance Income Adjustment for other Income 13,609 55,711 8,640,271 7,493 148,403 4,375,419 Less : Cost of Materials & Services purchased from external sources (5,764,926) (2,806,523) Value Added 2,875,345 1,568,896 Adjustment for Change in Fair Value of Investment Property In Rs. ‘000s 2023 % 2022 % Distributed as follows: To Employees as Remuneration To the Government as Taxes 2,139,925 74% 1,355,300 86% 193,840 7% 120,320 8% To the Providers of Capital as Interest on Loans 372,323 13% 105,878 7% as Minority Interest (55,174) (2%) 2,320 0% as Depreciation 500,329 17% 481,635 31% as Reserves (275,898) (10%) To Shareholders as Dividends Retained within the business 2,875,345 100 (496,557) (32%) 1,568,896 Distribution of Value Added 2022 / 2023 2021 / 2022 % -2 % -10 -19 17 53 13 74 7 To Employees as Remuneration To the Government as Taxes as Interest on Loans To Shareholders as Dividends 134 19 0 as Depreciation as Minority Interest as Reserves | Asian Hotels and Properties PLC 0 4 5 To Employees as Remuneration To the Government as Taxes as Interest on Loans as Minority Interest To Shareholders as Dividends as Depreciation as Reserves 100 INFORMATION TO SHAREHOLDERS & INVESTORS Stock Exchange Listing The Issued Ordinary Shares of Asian Hotels and Properties PLC are listed on the Colombo Stock Exchange of Sri Lanka. Distribution of Shareholdings From 1 1,001 10,001 100,001 1,000,001 To 1,000 10,000 100,000 1,000,000 and above - No. of shares held Percentage of share holdings 2,247 559,-,501,-,946,799 31 8,006,-,760,839 3,154 442,775,300 Number of share holders - No. of shares held Percentage of share holdings - 2,228 561,-,473,-,817,252 29 9,180,-,742,252 - 100.0 3,117 442,775,300 100.0 Number of share holders Analysis of Shareholders Categories of Shareholders- Holdings Number Individuals Institutions Resident Non Resident Public Non Public* % - Holdings Number % 16,076,911 426,698,389 3.63 16,193,-,581,948 - 442,775,300 -,775,300 100.00 439,252,821 3,522,479 -,123,-,651,981 - 442,775,300 -,775,300 100.00 94,940,508 347,834,792 442,775,300 - 94,940,508 347,834,792 - -,775,300 100.00 *Includes shareholdings of Parent Company, Directors & Spouses. Public shareholding The Public Shareholding (%) Number of Public Shareholders Compliant under option 4 - Float adjusted market capitalisation (LKR Bn) 2023 2022 21.44 3,152 4.18 21.44 3,115 3.51 Annual Report 2022/2023 | 135 Information to Shareholders & Investors Date Market Value Highest Market Price per share Lowest Market Price per share Last Traded Market Price per share - 2022/23 Rs. Date - Dividend Payments Dividend per Share - 2021/22 Rs- - - TOP TWENTY THREE SHAREHOLDERS As at- No. of Share shares holdings percentage Name As at- No. of Share shares holdings percentage John Keells Holdings PLC 347,824,192 78.56 347,824,192 78.56 Employees Provident Fund 45,249,798 10.22 45,249,798 10.22 Sri Lanka Insurance Corporation Ltd-Life Fund 11,939,442 2.70 10,055,900 2.27 Bank of Ceylon A/C Ceybank Unit Trust 8,978,984 2.03 8,978,984 2.03 Dr. S. Yaddehige 3,415,200 0.77 3,415,200 0.77 Bank of Ceylon-No. 2 A/C (BOC PTF) 2,481,053 0.56 2,481,053 0.56 Bank of Ceylon-No. 1 Account 2,367,741 0.53 2,367,741 0.53 Mr. G. Ramanan 1,968,139 0.44 1,624,975 0.37 Mr. A.M. Weerasinghe 1,276,238 0.29 1,276,238 0.29 Bank of Ceylon A/C Ceybank Century Growth Fund 1,260,052 0.28 1,260,052 0.28 Dr. A.K.A. Jayawardene 800,000 0.18 784,305 0.18 Employee Trust Fund Board 767,478 0.17 767,478 0.17 Mr. M. Mannawarajan 650,124 0.15 650,124 0.15 Richard Pieris & Co Ltd - Account No. 01 639,400 0.14 639,400 0.14 Seylan Bank PLC/Anuja Chamila Jayasinghe 506,949 0.11 Nil - Commercial Bank of Ceylon PLC/Andaradeniya Estate (Pvt) Ltd 359,841 0.08 482,796 0.11 Commercial Bank of Ceylon PLC/Metrocorp (Pvt) Ltd 300,000 0.07 300,000 0.07 Ravi Exports (Pvt) Ltd 270,000 0.06 310,000 0.07 Hatton National Bank PLC/Nishantha Priyanjith Sooriyaarachchi 240,643 0.05 242,057 0.05 Mr. D.K.A.K. Weerathunga 238,271 0.05 238,271 0.05 Merrill J Fernando & Sons (Pvt) Ltd 220,000 0.05 220,000 0.05 Mr. G. Anuragavan 213,947 0.05 Nil - Hatton National Bank PLC A/C No.05 (Trading Portfolio) 207,476 0.05 207,476 0.05 -,376,040 96.97 432,174,968 136 | Asian Hotels and Properties PLC 5 YEAR FINANCIAL SUMMARY OF THE GROUP 2022/23 Rs '000 2021/22 Rs '000 2020/21 Rs '000 2019/20 Rs '000 8,416,558 (332,763) (277,589) 4,094,672 (507,847) (510,167) 1,790,116 (2,244,002) (1,780,674) 5,559,550 105,919 (49,828) 7,658,470 1,077,935 811,157 Stated Capital Other Components of Equity Revenue reserves Shareholders' Funds 3,345,117 20,613,338 4,916,727 28,875,182 3,345,117 23,093,391 5,187,893 31,626,401 3,345,117 22,287,036 5,673,539 31,305,692 3,345,117 22,151,217 7,445,171 32,941,505 3,345,117 21,532,409 7,907,652 32,785,178 Minority Interest 3,362,706 32,237,888 3,332,915 34,959,316 3,307,203 34,612,895 3,750,825 36,692,330 3,646,757 36,431,935 Assets & Liabilities Current Assets Current Liabilities Net Current Assets/(Liabilities) 1,680,911 (4,090,138) (2,409,227) 1,316,880 (3,096,157) (1,779,277) 788,058 (2,081,448) (1,293,390) 2,033,169 (1,617,135) 416,034 2,457,373 (1,906,545) 550,828 Non Current Assets Non Current Liabilities Net Non Current Assets 44,230,736 (9,583,621) 34,647,115 41,191,770 (4,453,177) 36,738,593 40,080,874 (4,174,589) 35,906,285 40,548,653 (4,272,357) 36,276,296 40,066,525 (4,185,418) 35,881,107 2023 2022 2021 2020 2019 Revenue Profit after taxation Profit/(Loss) attributable to equity owners 2018/19 Rs '000 Share Capital & Reserves Ratio Analysis Earnings Per Share (Rs) (0.63) (1.15) (4.02) (0.11) 1.83 Net assets per share (Rs) 65.21 71.43 70.70 74.40 74.04 Current Ratio (Times) 0.41 0.43 0.38 1.26 1.28 After tax return on net assets (%) (0.96) (1.61) (5.69) (0.15) (2.47) - - - 1.00 2.00 (70.18) (32.11) (9.30) (257.70) 22.87 - - - (8.89) 1.09 Dividend Per Share (Rs)* P/E Ratio Dividend Payout Ratio* * No dividend declared for the financial year ended 31st March 2023. 5 YEAR FINANCIAL SUMMARY OF THE PROPERTY DEVELOPMENT DIVISION 2022/23 Rs '000 2021/22 Rs '000 2020/21 Rs '000 2019/20 Rs '000 2018/19 Rs '000 Revenue Cost of Sales Gross Profit/(Loss) 174,932 88,428 86,504 39,011 48,969 (9,958) 83,479 73,530 9,949 255,031 102,006 153,025 355,038 108,693 246,345 Net Finance and Other Income Administration & Other Overheads Change in Fair Value of Investment Property Net Profit/(Loss) before Tax (4,389) 97,452 59,909 (75,246) 11,344 88,496 42,374 (129,484) 53,341 106,193 349,236 (392,139) 75,021 136,279 9,410 82,357 80,183 126,047 39,351 161,130 Annual Report 2022/2023 | 137 5 YEAR FINANCIAL SUMMARY CINNAMON GRAND COLOMBO HOTEL 2022/23 Rs '000 2021/22 Rs '000 2020/21 Rs '000 2019/20 Rs '000 2018/19 Rs '000 Revenue Rooms Food Beverage Food & Beverage Others Telephone Rental Income Other Operating Income Total Revenue 1,173,976 2,768,480 388,306 122,-,865 197,009 4,672,601 509,745 1,398,746 179,229 68,541 9 15,202 66,964 2,238,436 38,918 689,331 108,122 8,808 3 6,939 43,548 895,669 1,077,116 1,479,204 237,819 3,-,212 156,153 2,975,924 1,899,741 1,993,705 338,664 16,-,983 200,521 4,478,007 Expenses Room Food Cost Beverage Cost Food & Beverage Other Telephone Other Total Expenses Gross Operating Income/(Loss) 306,298 1,171,552 130,547 994,792 5,458 185,496 2,794,143 1,878,458 172,706 559,211 57,384 639,196 4,089 65,692 1,498,278 740,158 130,879 284,007 36,542 538,305 3,787 43,730 1,037,250 (141,581) 305,939 527,123 66,041 745,206 4,163 136,676 1,785,148 1,190,776 399,502 782,792 105,968 810,446 4,330 174,831 2,277,869 2,200,138 Expenses Administrative & General Advertising & Sales Promotion Heat, Light & Power Repair & Maintenance Total Deductions 484,187 141,836 458,579 239,624 1,324,226 283,225 64,771 198,232 120,771 666,999 298,634 77,771 165,041 98,921 640,367 414,744 137,314 240,112 151,562 943,732 443,507 142,066 287,212 170,055 1,042,840 Gross Operating Profit/(Loss) Interest Income Dividend Income Sundry Income 554,232 7,532 32,077 593,841 73,159 1,802 100,578 175,539 (781,948) 8,755 168,311 (604,882) 247,044 49,273 43,412 64,979 404,708 1,157,298 77,213 74,668 10,481 1,319,660 Insurance Interest Expenses Rates Hotel Operating/Marketing Fee Depreciation 19,544 161,770 17,658 223,820 336,208 759,000 20,108 52,416 16,784 93,745 327,203 510,256 15,090 7,497 16,784 35,860 351,437 426,668 11,048 16,784 135,237 385,052 548,121 9,999 16,884 240,647 393,262 660,792 Net (Loss)/Profit Before Tax (165,159) (334,717) (1,031,550) (143,413) 658,868 138 | Asian Hotels and Properties PLC GLOSSARY OF FINANCIAL TERMS Accounting Policies Debt/Equity Ratio The specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements. Debt as a percentage of shareholders’ funds. Accrual Basis Recognising the effects of transactions and other events when they occur without waiting for receipt or payment of cash or its equivalent. Amortisation The systematic allocation of the depreciable amount of an intangible asset over its useful life. Average Room Rate (ARR) 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. Dividend Cover The ratio of company’s earnings (net income) over the dividend paid to shareholders, calculated as earnings per share divided by the dividend per share. Hotel room revenue divided by the number of rooms sold. Booking Engine Application which helps the travel and tourism industry support reservation through the Internet. It helps guests to book hotel services online. Capital Employed Dividend Per Share (DPS) The total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. Dividend Payout Ratio The percentage of earnings paid to a shareholder as dividends. Shareholders’ funds plus 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. Contingencies A condition or situation existing at Balance Sheet date where the outcome will be confirmed only by occurrence or nonoccurrence of one or more future events. Current Ratio Current assets divided by current liabilities. Capital Reserves Reserves identified for specific purposes and considered not available for distribution. Capital expenditure The total additions to property, plant and equipment. Earnings Per Share (EPS) Profit attributable to equity holders divided by the weighted average number of ordinary shares in issue during the period. EBIT Earnings before interest and tax (includes other operating income). EBIT includes interest income, depreciation and fair value gains/losses on investment property, but excludes exchange gain or loss. EBITDA Earnings before interest, tax, depreciation and amortisation. EBITDA includes interest income and fair value gains/losses on investment property, but excludes exchange gain or loss. Effective Tax Rate Provision for taxation for the year divided by the profit before tax. EPS Growth Percentage increase in the EPS over the previous year. Corporate Governance The process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of an entity, the supervision of executive actions and accountability to owners and others. Equity Assets Ratio Total assets divided by shareholder’s equity. Annual Report 2022/2023 | 139 Glossary of Financial Terms Fair Value Occupancy Fair value is the amount for which an asset could be exchanged between acknowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction. The number of rooms occupied at a given time at the Hotel Operational Risk Gross Profit Margin This refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage. Pre-Tax Return on Capital Employed (ROCE) 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 physical substance. Interest Cover 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. 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. 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 period. Net Assets Quick Asset Ratio The quick ratio measures a company’s ability to meet its shortterm obligations with its most liquid assets and is calculated by deducting the inventories from the current assets and comparing with the current liabilities. 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 (ROE) Profit attributable to shareholders as a percentage of average shareholders· funds. Room Night One hotel room occupied for one night; a statistical unit of occupancy. Shareholders’ Funds Stated capital plus capital and revenue reserves. Total assets minus current liabilities minus long term liabilities. Net Assets Per Share Shareholders· funds divided by the weighted average number of ordinary shares. 140 | Asian Hotels and Properties PLC Total Debt Long term loans plus short-term loans and overdrafts NOTICE OF MEETING NOTICE IS HEREBY GIVEN that the Twenty Ninth Annual General Meeting (“Meeting”) of Asian Hotels and Properties PLC will be held as a virtual meeting on 27th June 2023 at 3.30 p.m. via Microsoft Teams 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 2023 with the Report of the Auditors thereon. 3. To re-elect as a Director, Mr. M R Svensson, who retires in terms of Article 84 of the Articles of Association of the Company. A brief profile of Mr. M R Svensson is contained in the Board of Directors section of the Annual Report. 4. To re-elect as a Director, Mr. C L P Gunawardane, who retires in terms of Article 84 of the Articles of Association of the Company. A brief profile of Mr. C L P Gunawardane is contained in the Board of Directors section of the Annual Report. 5. To re-appoint Auditors, Messrs. KPMG, Chartered Accountants, 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. This year the Annual Report and Financial Statements of the Company are available on the below links, once the financial statements ending 31st March 2023 are released to the stock exchange. (1) Corporate website of the Company https://keells. com/resource/reports/group-annual-reports/ Asian-Hotels-and-Properties-PLC.pdf and (2) The Colombo Stock Exchange website - https://www.cse.lk/pages/companyprofile/company-profile.component. html?symbol=AHPL.N0000 Members may also access the Annual Report and Financial Statements on their electronic devices by scanning the above QR code. For clarifications on how to download and/or access the Annual Report and Financial Statements, please contact Mr. Fazal Cader on - during normal office hours (8.30 a.m. to 4.30 p.m.) or email-Should Members wish to obtain a hard copy of the Annual Report, they may send a written request to the registered office of the Company by filling the request form attached to the Form of Proxy. A printed copy of the Annual Report will be forwarded by the Company within eight (8) market days from the date of receipt of the request. By Order of the Board, ASIAN HOTELS AND PROPERTIES PLC KEELLS CONSULTANTS (PRIVATE) LIMITED Secretaries Colombo 23 May 2023 Note: › 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 Form of Proxy enclosed herein. › Members are encouraged to vote by Proxy through the appointment of a member of the Board of Directors to vote on their behalf and to include their voting preferences on the resolutions to be taken up at the Meeting in the Form of Proxy. › In order to be valid, the completed Form of Proxy must be lodged at the Registered Office of the Company or forwarded to the email address:-or Fax No. - not later than 48 hours before the Meeting. › A vote can be taken on a show of hands or by poll. If a poll is demanded, each share is entitled to one vote. Votes can be cast in person, by Proxy or corporate representatives. In the event an individual Member and his/her Proxy holder are both present at the Meeting, only the Member’s vote is counted. If the Proxy holder’s appointor has indicated the manner of voting, only the appointor’s indication of the manner to vote will be used. Annual Report 2022/2023 | 141 NOTES 142 | Asian Hotels and Properties PLC FORM OF PROXY I/We………………………………………………………………………………………………………………………………………………………………………….…………of …………………………………………………………………………………………………………………………………………………………………………….………...being a Member/s of Asian Hotels and Properties PLC hereby appoint…………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………..………..…. of …………………………………………………………………………………………………….…... or failing him/her Mr. Krishan Niraj Jayasekara Balendra or failing him Mr. Joseph Gihan Adisha Cooray or failing him Mr. Suresh Rajendra or failing him Mr. Changa Lashantha Poojitha Gunawardane or failing him Mr. Mikael Roland Svensson or failing him Ms. Aroshi Nanayakkara or failing her Mr. Jegatheesan Durairatnam or failing him Mr. Ashan De Zoysa as my/our proxy to represent me/us and vote on my/our behalf at the Twenty-ninth Annual General Meeting of the Company to be held on the 27th June 2023 at 3.30 p.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof. I/We, the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the specified Resolution as indicated by the letter “X” in the appropriate cage: FOR AGAINST To re-elect as a Director, Mr. M R Svensson, who retires in terms of Article 84 of the Articles of Association of the Company. To re-elect as a Director, Mr. C L P Gunawardane, who retires in terms of Article 84 of the Articles of Association of the Company. To re-appoint Auditors Messrs. KPMG, Chartered Accountants and to authorise the Directors to determine their remuneration. Signed on this ……………………….day of ……………… Two Thousand and Twenty-Three …………………………………. Signature/s of shareholder/s Note: INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE. Annual Report 2022/2023 | 143 Form of Proxy INSTRUCTIONS AS TO COMPLETION OF THE FORM OF PROXY 1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature. 2. The completed Form of Proxy should be deposited at the Registered Office of the Company or forwarded to the email address:-or facsimile No-, no 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 appointor is a Company or Corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorised officer of the Company or Corporation in accordance with its Articles of Association or Constitution. 5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting. Please fill in the following details: Name : …………………………………………………………………..………………………… Address : ……………………………………………………………..……………………………… ……………………………………………………………………...………………………. ………………………………………………………………….............…………………. Jointly with: ………………………………………………………………………...................…………… Share Folio No./CDS account No.: ………………………………………….……………………………… National Identity Card No.: ……………………………….………………………………….........……….. 144 | Asian Hotels and Properties PLC CORPORATE INFORMATION NAME OF COMPANY BANKERS Asian Hotels and Properties PLC Deutsche Bank AG - Colombo LEGAL FORM A Public Limited Liability Company incorporated in Sri Lanka in 1993. The Company was re-registered as per the New Companies Act No. 7 of 2007 on 15th June 2007 Seylan Bank - Millennium Branch, Colombo Hongkong & Shanghai Banking Corporation - Colombo Nations Trust Bank - Union Place, Colombo DFCC Bank - Colombo 03 Citi Bank N.A - Colombo Bank of Ceylon - Colombo STOCK EXCHANGE LISTING Commercial Bank of Ceylon - Colombo The issued Ordinary shares of the Company are listed on the Main Board of the Colombo Stock Exchange Hatton National Bank - City Office, Colombo COMPANY REGISTRATION NO. PQ 2 BOARD OF DIRECTORS Mr. Krishan Niraj Jayasekara Balendra - Chairperson Mr. Joseph Gihan Adisha Cooray Mr. Suresh Rajendra Mr. Jegatheesan Durairatnam Mr. Ashan Suresh De Zoysa Mr. Mikael Roland Svensson Mr. Changa Lashantha Poojitha Gunawardane Ms. Aroshi Nanayakkara COMPANY SECRETARIES Keells Consultants (Private) Limited 117, Sir Chittampalam A . Gardiner Mawatha, Colombo 2. REGISTERED OFFICE No.77, Galle Road, Colombo 03 Tel: - Fax: - E-mail:- AUDITORS KPMG Chartered Accountants 32A, Sir Mohamed Macan Markar Mawatha Colombo 03. Asian Hotels and Properties PLC No.77, Galle Road, Colombo 03 Tel: - Fax: - E-mail:-