compliance with governance best practicecompliance with governance best practice rule jkh...

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Code of Best Practice of Corporate Governance 2013 Issued Jointly by the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)

VOLUNTARY PROVISIONS - FULLY COMPLIANT

A. DirectorsRule JKH Action/Reference within the JKH Annual Report 2017/18A.1 The BoardA.1.1 Need for the Board to meet regularly During the financial year under review, there were four pre-scheduled Board meetings.

Each of the pre-scheduled meetings are generally preceded by a Pre-Board meeting, which is usually held on the day prior to the formal Board Meeting. In addition to these Pre-Board meetings, where issues of strategic importance requiring extensive discussions are considered, the Board of Directors communicated regularly, as and when required. The attendance at the Board meetings held during the financial year 2017/18 is given below

Year

of

Appo

intm

ent

Board Meeting Attendance

26.0

5.20

17

27.0

7.20

17

02.1

1.20

17

30.0

1.20

18

Elig

ibili

ty

Atte

nded

ExecutiveS Ratnayake - Chairman-CEO 1992/93 ü ü ü ü 4 4K Balendra - Deputy Chairman 2016/17 ü ü ü ü 4 4G Cooray - Group Finance Director 2016/17 ü ü ü ü 4 4A Gunewardene* 1992/93 ü ü ü N/A 3 3R Peiris* 2003/04 ü ü ü N/A 3 3Senior Independent Non-ExecutiveN Fonseka 2013/14 ü ü ü ü 4 4Independent Non-ExecutiveA Cabraal 2013/14 ü ü ü ü 4 4A Omar 2012/13 ü ü 4 2P Perera 2014/15 ü ü ü ü 4 4H Wijayasuriya 2016/17 By Phone ü ü 4 3

* Retired from the Board on 31 December 2017A.1.2 The Board should be responsible for matters

including implementation of business strategy, skills and succession of the management team, integrity of information, internal controls and risk management, compliance with laws and ethical standards, stakeholder interests, adopting appropriate accounting policies, fostering compliance with financial regulations and fulfilling other Board functions

The Board provides direction and guidance to the Group in the formulation of sustainable high-level medium and long term strategies which are aimed at promoting growth and sustainability over the long term

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 Group in the formulation of sustainable, high-level, medium, and long-term strategies which are aimed at promoting the long-term success of the Group

• Reviewing and approving annual plans and long-term business plans• Tracking actual progress against plans• Reviewing HR processes with emphasis on top management succession planning• Ensuring operations are carried within the scope of the Enterprise Risk Management

framework• Appointing and reviewing the performance of the Chairman-CEO• Monitoring systems of governance and compliance• 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• Reviewing and approving major acquisitions, disposals and capital expenditure• Approving any amendments to constitutional documents• Approving in principle the issue of JKH equity/debt securities• Ensuring all Related Party Transactions are compliant with statutory obligations

COMPLIANCE WITH GOVERNANCE BEST PRACTICE

2 John Keells Holdings PLC . Supplement to the Annual Report 2017/18


Rule JKH Action/Reference within the JKH Annual Report 2017/18A.1.3 Act in accordance with the laws of the country

and obtain independent professional advice where necessary, at the Company’s expense

The Group is in full compliance with Corporate Governance rules, and other forms of applicable legislation in the country it conducts its business

To preserve the independence of the Board and to strengthen the decision making, the Board seeks independent professional advice, in furtherance of their duties, at the Group’s expense. This is coordinated through the Board Secretary as and when requested

A.1.4 All Directors should have access to the advice and services of the Company Secretary

The Group ensures that all Directors have access to the advice and services of the Company Secretary at all times. The President HR, Legal and Secretarial is the Secretary to the Board. In addition to maintaining Board minutes and Board records, the Board Secretary has provided support in ensuring that the Board receives timely and accurate information, advice relating to corporate governance matters and that Board procedures and applicable rules and regulations are complied with during the year

A.1.5 All Directors should bring independent judgment

All Directors possess the necessary mix of skills, expertise and knowledge complemented with a high sense of integrity and independent judgment on issues of strategy, performance, resources and standard of business conduct. Non-Executive Directors are responsible for providing independent judgment for the proposals made by the Chairman and Executive Directors

A.1.6 Every Director should dedicate adequate time and effort to matters of the Board and Company

The Board has dedicated adequate time for the fulfilment of their duties as Directors of the Group. It is estimated that Non-Executive Directors each devote a minimum of 30 full time equivalent days to the Group during the year. The general time allocation is illustrated below

Time Commitment

5035

15

%

Strategy and performanceAssurance and risk managementOther Board matters

In addition to attending Board meetings and Pre-Board meetings, the Directors have attended the respective Sub-Committee meetings and have also contributed to decision making via Circular Resolutions and one-on-one meetings with key management personnel, when necessary

Directors dedicated sufficient time before Board meetings to review Board papers and request additional material and information for further clarification as deemed necessary

A.1.7 Board induction and training When Directors are newly appointed to the Board, they undergo a comprehensive induction where they are apprised, inter-alia, of the Group Values and culture, its operating model, policies, governance framework and processes, the Code of Conduct and the operational strategies of the Group. Additionally, the newly appointed Directors are granted access to relevant parts of the business and are availed the opportunity to meet with key management personnel and other key third-party service providers such as External Auditors and Risk Consultants

The Directors are encouraged to adopt a mind-set of continuous learning in order to keep abreast of the Group, its dynamic business units, and even their own areas of expertise

The Board of Directors recognise the need for continuous training and expansion of knowledge and undertakes such professional development, as they consider necessary, to assist them in carrying out their duties as Directors

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Rule JKH Action/Reference within the JKH Annual Report 2017/18A.2 Chairman and Chief Executive Officer (CEO)A.2.1 Justification for combining the roles of the

Chairman and the CEOThe appropriateness of combining the roles of the Chairman-CEO was established after rigorous evaluation and debate, internally and externally. Subsequent to these rigorous evaluations the Board deemed that combining the two roles is more appropriate for the Group in meeting stakeholder objectives in a large conglomerate setting. This continues to be the view to-date

The appropriateness continues to be discussed periodically, and in the minimum, at least once a year. These discussions are supported by international best practices accessed through consultancy services and experts

As the head of the Group Executive Committee, the Chairman-CEO provides the overall direction and policy/execution framework for the Board’s decisions via this structure

Experience has proved that the JKH Board composition of majority independent Directors coupled with the role of the Senior Independent Director, and other supporting Board dynamics have enabled him to effectively balance his role as the Chairman of the Board and the CEO of the Company/Group

Given the need for a combined Chairman-CEO role, the Chairman-CEO does not come up for re-election as in the case with other Executive and Non-Executive Directors. It is noted that the Articles of Association of the Company allow for this

A.3 Chairman’s RoleA.3.1 The Chairman should ensure Board

proceedings are conducted in a proper mannerThe Chairman, together with the Board Secretary continues to ensure that Board proceedings are conducted in a proper manner

A.4 Financial AcumenA.4 The Board should ensure the availability within

it of those with sufficient financial acumen and knowledge to offer guidance on matters of finance

The present Board possesses the financial acumen, and knowledge to offer guidance on matters pertaining to finance

The Group is conscious of the need to maintain an appropriate mix of skills and experience in the Board through a regular review of its composition in order to ensure that the skills representation is in alignment with current and future needs of the Group. Individual Directors being encouraged to seek expert opinion and/or professional advice on matters where they may not have full knowledge or expertise is also a factor that foster better decision making

A.5 Board BalanceA.5.1 In the event the Chairman and CEO is the same

person, NEDs should comprise a majority of the Board

As at 25 May 2018, the Board comprised of 8 Directors, with 5 of them being Non-Executive and Independent Directors. The Group policy is to maintain a healthy balance between the Executive, Non-Executive and Independent Directors, in keeping with the applicable rules and codes, with the Executive Directors bringing in deep knowledge of the businesses and the Non-Executive Independent Directors bringing in experience, objectivity and independent oversight

A.5.2 Where the constitution of the Board of Directors includes only two NEDs, both such NEDs should be “independent”

N/A

A.5.3 Definition of Independent Directors All Independent Directors of the Group conform to a set of pre-defined criteria, which JKH recognises as global best practice

The Group takes necessary steps to ensure that Directors avoid situations in which they have, or could have, a direct or indirect interest which conflicts with, or might possibly conflict with, the interests of the Group

In order to avoid such potential conflicts or biases, the 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. Such potential conflicts are reviewed by the Board from time to time to ensure the integrity of the Board’s independence. Details of companies in which Board members hold Board or Board Committee membership are available with the Company Secretaries for inspection by shareholders, on request

Contd.

A.5.4 Declaration of Independent Directors

A.5.5 Board determinations on independence or non-independence of NEDs


Rule JKH Action/Reference within the JKH Annual Report 2017/18

A.5.3 Definition of Independent Directors Prior to Appointment Once Appointed During Board Meetings

Nominees are requested to make known their various interests

Directors obtain Board clearance prior to:

y Accepting a new position

y Engaging in any transaction that could create or potentially create a conflict of interest

y All NEDs are required to notify the Chairman-CEO of any changes to their current Board representations or interests and a new declaration is made annually

Directors who have an interest in a matter under discussion:

y Excuse themselves from deliberations on the subject matter

y Abstain from voting on the subject matter (abstention from decisions are duly minuted)

The independence of all its Non-Executive Directors was reviewed on the basis of criteria summarised below.

Definition Status of Conformity of NEDs

1. Shareholding carrying not less than 10 per cent of voting rights

None of the individual EDs or NED/IDs shareholding exceeds 1 per cent

2. Director of another company* None of the NED/IDs are Directors of another related party company as defined

3. Income/non-cash benefit equivalent to 20 per cent of the Director’s income

NED/ID income/cash benefits are less than 20 per cent of individual Director’s income

4. Employment at JKH and/or material business relationship with JKH, currently or in the two years immediately preceding appointment as Director

None of the NED/IDs are employed or have been employed at JKH

5. Close family member is a Director, CEO or a Key Management Personnel

No family members of the EDs or NED/IDs is a Director or CEO of a related party company

6. Has served on the Board continuously for a period exceeding nine years from the date of the first appointment

No NED has served on the Board for more than nine years

7. Is employed, has a material business relationship and/or significant shareholding in other companies*. Also entails other companies that have significant shareholding in JKH and/or JKH has a business connection with

None of the NED/IDs are employed, have a material business relationship or a significant shareholding of another related party company as defined

* 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.

Contd.




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A.5.3 Definition of Independent Directors Summary of Non-Executive Independent Directors’ Interests and Conformity

Shar

ehol

ding

(1)

Man

agem

ent

Dire

ctor

– O

ther

Co

mpa

nies

(2)

Mat

eria

l Bus

ines

s Re

latio

nshi

p (3

)

Empl

oyed

by

the

Com

pany

(4)

Fam

ily M

embe

r a

Dire

ctor

/CEO

(5)

Cont

inuo

usly

Ser

ved

for M

ore

than

Nin

e Ye

ars (

6)

Empl

oyee

/M

ater

ial B

usin

ess

Rela

tions

hip/

Sign

ifica

nt

shar

ehol

ding

- O

ther

Co

mpa

nies

(7)

N Fonseka y y y y y y y

A Cabraal y y y y y y y

A Omar y y y y y y y

P Perera y y y y y y y

H Wijayasuriya y y y y y y y

y Indicates no interest, independence



A.5.6 If an Alternate Director is appointed by a NED such Alternate Director should not be an Executive of the company

N/A

A.5.7 In the event the Chairman and CEO is the same person, the Board should appoint one of the Independent NEDs to be the Senior Independent Director (SID)

Given the combined role of the Chairman-CEO, the Senior Independent Director, as part of his role, ensures adherence to the principles of corporate governance, and acts as the independent party to whom concerns could be voiced on a confidential basis

As such, the presence of the Senior Independent Director is important in ensuring that no one person has unfettered decision making powers, and that matters discussed at the Board level are done so in an environment which facilitates independent thought by individual Directors

The Senior Independent Director meets with other Non-Executive Directors, without the presence of the Chairman-CEO, at least twice every year to evaluate the effectiveness of the Chairman-CEO and has regular meetings with the other Non-Executive Directors on matters relating to the effectiveness of the Board or the Board as appropriate. The Senior Independent Director is also kept informed by the Ombudsperson of any matters in respect of the JKH Code of Conduct which has come to his attention

A.5.8 The SID should make himself available for confidential discussions with other Directors who may have concerns

A.5.9 The Chairman should hold meetings with the NEDs only, without the presence of EDs

The Chairman-CEO conducts direct discussions with Non-Executive Directors at meetings held exclusively for Non-Executive Directors, which are convened by the Senior Independent Director. Issues arising from these discussions are actioned in consultation with the relevant persons. During the year under review, the Non-Executive Directors met twice without the presence of the Executive Directors

A.5.10 Where Directors have concerns about the matters of the Company which cannot be unanimously resolved, they should ensure their concerns are recorded in the Board minutes

The Secretary to the Board is responsible for maintaining Board minutes and Board records. All concerns raised and unresolved are recorded and have been documented in sufficient detail

A.6 Supply of Information

A.6.1 Management should provide the Board with appropriate and timely information

Members of the corporate and senior management team continue to have independent contact with the Directors and where necessary, make presentations to the Directors on important issues relating to strategy, risk management, investment proposals, re-structuring and system procedures

A.6.2 Timely submission of the minutes, agenda and papers required for the Board Meetings

The Board is provided with the necessary information well in advance (at least 2 weeks prior to the meeting), by way of Board papers and proposals for all Board meetings, in order to ensure robust discussions, informed deliberation and effective decision making

A.7 Appointments to the Board

A.7.1 Nomination Committee to make recommendations on new Board appointments

Board appointments follow a structured and formal process within the purview of the Nominations Committee, which identifies and recommends suitable candidates for appointment to the Board



A.7.2 Assessment of the capability of the Board to meet strategic demands of the company

The Board works closely with the Nominations Committee to assess the skills required on the Board, given the needs of the businesses. In the event a “skills gap” is identified, a formal document stating a clear description of the role and required capabilities is prepared. Following this, the Committee identifies and recommends suitable candidates

The skills inventory of the company is also discussed by the Board during the Annual JKH Board Evaluation

A.7.3 Disclosure of new Board member profiles and interests

All new Board members are required to submit their profiles and interests

Details of new Directors are disclosed to the shareholders at the time of their appointment by way of public announcement as well as in the Annual Report. The Directors are required to report any substantial changes in their professional responsibilities and business associations to the Nominations Committee, which will examine the facts and circumstances and make recommendations to the Board

A.8 Re-Election

A.8.1 Non-Executive Directors should be appointed subject to re-election and to the provisions in the Companies Act relating to the removal of a Director

All Non-Executive Directors are appointed for a period of three years, and are eligible for re-election by shareholders at the first AGM following their appointment

Non-Executive Directors can serve up to a maximum of three successive terms unless an extended Board tenure is necessitated by the exigencies of the Group

A.8.2 All Directors including the Chairman, should be subject to election by shareholders at the first opportunity after their appointment

The Executive Directors, including the Chairman-CEO, are re-elected by shareholders at the first opportunity after their appointment

A.9 Appraisal of Board Performance

A.9.1 The Board should annually appraise itself on its performance in the discharge of its key responsibilities

The Board conducted its annual Board performance appraisal for 2017/18. 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:

• Role clarity and effective discharge of responsibilities• People mix and structures• Systems and procedures• Quality of participation• Board image

The scoring and open comments are collated by the Senior Independent Director, and the results are analysed to give the Board an indication of its effectiveness as well as areas that require addressing and/or strengthening. Despite the original anonymity of the remarks, the open and frank discussions that follow include some Directors identifying themselves as the person making the remark reflecting the openness of the Board. This process has led to an improvement in the Board dynamics and its effectiveness

The Board’s annual performance appraisal covers both the Board’s own performance and that of the Board Sub-Committees

A.9.2 The Board should also undertake an annual self-evaluation of its own performance and that of its Committees

A.9.3 The Board should state how such performance evaluations have been conducted

A.10 Disclosure of Information in Respect of Directors

A.10.1 Profiles of the Board of Directors and Board meeting attendance

Susantha RatnayakeChairmanSusantha Ratnayake was appointed as the Chairman and CEO of John Keells Holdings PLC (JKH) in January 2006 has served on the JKH Board since 1992/1993 and has 39 years of management experience, all of which is within the John Keells Group. He is a past Chairman of the Sri Lanka Tea Board, Ceylon Chamber of Commerce, and the Employers’ Federation of Ceylon.

Contd.


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Krishan Balendra Deputy Chairman Krishan Balendra is the Deputy Chairman of John Keells Holdings PLC and is responsible for the Leisure and Transportation industry groups, John Keells Stock Brokers and John Keells Office Automation. He is a Director of several companies in the John Keells Group and serves as the Chairman of Nations Trust Bank PLC. He is also the Hon. Consul General of the Republic of Poland in Sri Lanka and a former Chairman of the Colombo Stock Exchange. Krishan started his professional career at UBS Warburg, Hong Kong, in investment banking, focussing primarily on equity capital markets. After a four year stint in Hong Kong, he continued his career in corporate finance at Aitken Spence PLC, Sri Lanka, prior to joining JKH. Krishan holds a law degree (LLB) from the University of London and an MBA from INSEAD.

Gihan CoorayGroup Finance DirectorGihan Cooray is the Group Finance Director and has overall responsibility for the Group’s Finance and Accounting, Taxation, Corporate Finance and Strategy, Treasury and Information Technology functions (including John Keells IT) and John Keells Research. He is a Director of several companies in the John Keells Group and a Non-Executive Director of Nations Trust Bank PLC. Gihan holds an MBA from the Jesse H. Jones Graduate School of Management at Rice University, Houston, Texas. He is an Associate 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.

Amal CabraalNon-Executive Director Amal Cabraal is presently the Chairman of Ceylon Beverage Holdings PLC, Lion Brewery (Ceylon) PLC and CIC Feeds Group of Companies. He is a former Chairman and Chief Executive Officer of Unilever Sri Lanka and has over 3 decades of business experience in general management, marketing and sales in Sri Lanka, the United Kingdom, India and Bangladesh. Amal Cabraal is an Independent Non-Executive Director of Hatton National Bank PLC, Sunshine Holdings PLC and Silvermill Investment Holdings (Pvt) Ltd. and a member of the Supervisory Board of Associated Motorways (Private) Ltd. He is also a member of the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka and a committee member of the Ceylon Chamber of Commerce and serves on the Management Committee of the Mercantile Services Provident Society. A Chartered Marketer by profession and a Fellow of the Chartered Institute of Marketing - UK, he holds a MBA from the University of Colombo and is an executive education alumnus of INSEAD-France.

Nihal FonsekaNon-Executive Director Nihal Fonseka is a career banker and served as the Chief Executive Officer/Ex-Officio Director of DFCC Bank from 2000 until his retirement in 2013. He is currently a Member of the Monetary Board of the Central Bank of Sri Lanka, Non-Executive Director of Phoenix Ventures Pvt Ltd, Chairman of the Group Audit Committee of Brandix Lanka Limited and President of the Sri Lanka National Advisory Council of the Chartered Institute of Securities and Investments, UK. Prior to joining the DFCC Bank, he was the Deputy Chief Executive of HSBC Sri Lanka. H e is a past Chairman of the Colombo Stock Exchange and the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP). He has also served as a Director of the Employees’ Trust Fund Board and as a member of the Presidential Commission on Taxation (2009), National Procurement Commission and Strategic Enterprise Management Agency (SEMA). He holds a BSc from the University of Ceylon, Colombo, is a Fellow of the Institute of Financial Studies, (FIB) UK and a member of the Chartered Institute of Securities and Investments, (MCSI) UK.

Contd.




Ashroff Omar Non-Executive DirectorGroup Chief Executive Officer of Sri Lanka’s largest Apparel exporter, Brandix Lanka Limited, Ashroff Omar has been instrumental in redefining the Sri Lankan Apparel industry for over four decades. Ashroff spearheads a company that comprises of manufacturing and product development facilities offering end-to-end solutions from Tokyo to the US, including UK, Cambodia, Haiti, Sri Lanka, India and Bangladesh for some of the world’s most renowned brands, with a commitment to offering ‘Inspired Solutions’ to its clientele.

He is also credited with pioneering environmentally-friendly apparel manufacture in the world and establishing the world’s first LEED platinum manufacturing facility for eco-friendly manufacture. His extensive experience and ability to think beyond the norm has secured him positions in the Boards of some of Sri Lanka’s most respected corporates. He is also the Founder Chair of the Joint Apparel Association Forum (JAAF), the apex body of the Sri Lankan Apparel industry.

Premila PereraNon-Executive DirectorPremila Perera was appointed to the Board of the Company with effect from 1 July 2014 as an Independent Non-Executive Director. Premila Perera, formerly a Partner, KPMG in Sri Lanka, also served as the Global Firms Regional Tax Director for ASPAC in 2000/01, as a member of the Global Task force commissioned in 1998, to advise the International Board of KPMG on future directions in determining long term strategic plans, and faculty of the KPMG International Tax Business School. She also served a period of secondment with the US Firm’s National Tax Office in Washington DC, and was a participant at the KPMG-INSEAD International Banking School programme. She is a Fellow of the Institute of Chartered Accountants of Sri Lanka. She served as an Independent Director and Chairperson of the Audit and Related Party Transaction Committees of Ceylon Tobacco Company PLC until October 2017 and as a Non-Executive Director of Holcim (Lanka) Limited until August 2016.

Dr. Hans WijayasuriyaNon-Executive DirectorIn his capacity as the Regional CEO for South Asia, Dr. Hans Wijayasuriya heads the South Asian Operations of the Axiata Group Bhd., spanning Bangladesh, Nepal, Sri Lanka, Pakistan and India. Axiata is Asia’s second largest Telecommunications Group. Up to and including the year 2016, he additionally functioned as the Group Chief Executive of Dialog Axiata PLC. He is a past Chairman of GSM Asia Pacific - the regional interest group of the GSM Association, and also serves on the Board of the TM Forum (TMF), and was also honoured by the GSM Association as the first recipient of the “Outstanding Contribution to the Asian Mobile Industry” Award in 2016.

Dr. Wijayasuriya graduated from the University of Cambridge, UK in 1989. He subsequently obtained his PhD in Digital Mobile Communications from the University of Bristol UK in 1994. A Chartered Engineer and Fellow of the Institute of Engineering Technology UK, Dr. Wijayasuriya also holds an MBA from the University of Warwick, UK. Dr. Wijayasuriya has published widely on the subject of digital mobile communications, including research papers in publications of the Institute of Electrical and Electronic Engineers (IEEE) USA, Royal Society and the Institute of Engineering Technology (IET) UK.


9


A.11 Appraisal of the Chief Executive Officer

A.11.1/ A.11.2

Appraisal of the CEO against the set strategic targets

The Non-Executive Directors, appraised the performance of the Chairman-CEO on the basis of pre-agreed goals for the Group, set in consultation with the Board. These goals cover the ensuing broad aspects and the Group’s performance is assessed both against the goal and peers which involve other listed companies in the Colombo Stock Exchange:

• Creating and adding shareholder value • Success in identifying and implementing projects • Sustaining a first-class image• Developing human capital • Promoting collaboration and team spirit • Building sustainable external relations • Leveraging Board members and other stakeholders • Ensuring good governance and integrity in the Group

B. Directors Remuneration


B.1 Remuneration ProcedureB.1.1 The Board of Directors should set up a

Remuneration CommitteeThe Board has created a Human Resources and Compensation Committee, which comprises entirely of Non-Executive Directors

B.1.2 Remuneration Committees should consist exclusively of NEDs

All members of the Remuneration Committee are Non-Executive Directors and are appointed by the Board

B.1.3 The Chairman and members of the Remuneration Committee should be listed in the Annual Report each year

As disclosed in the JKH Annual Report, the Human Resources and Compensation Committee Meeting Attendance is as follows

23.06.2017 Eligible to Attend Attended

A Cabraal (Chairman) ü 1 1

A Omar ü 1 1

H Wijayasuriya ü 1 1

By InvitationS Ratnayake ü 1 1

G Cooray* ü 1 1

* Appointed as Group Finance Director from 1 January 2018B.1.4 Determination of the remuneration of Non-

Executive DirectorsThe compensation of Non-Executive Directors was determined in reference to fees paid to other Non-Executive Directors of comparable companies, and adjusted, where necessary, in keeping with the complexity of the Group. Non-Executive Directors were paid additional fees for either chairing or being a member of a Sub-Committee and did not receive any performance/incentive payments/share option plans. Total aggregate of Non-Executive Director remuneration for the year was Rs.17 million

B.1.5 The Remuneration Committee should consult the Chairman-CEO about its proposals relating to the remuneration of other Executive Directors

The Human Resource and Compensation Committee consults the Chairman-CEO about any proposals relating to the remuneration of Executive Directors, other than that of the Chairman-CEO

B.2 The Level and Make Up of RemunerationB.2.1 The Remuneration Committee should provide

the packages needed to attract, retain and motivate Executive Directors

The Committee determines the total remuneration package of each Executive Director in line with market trends, performance and past remuneration

B.2.2 The Remuneration Committee should judge where to position levels of remuneration of the Company, relative to other companies

The Human Resources and Compensation Committee understands the value of retaining high calibre talent within the organisation and thus determines a framework for remuneration based on industry trends



B.2.3 The Remuneration Committee should be sensitive to remuneration and employment conditions elsewhere in the Company or Group

The “Pay for Performance” scheme is monitored and the CEO-Chairman and President of Human Resources brief the Human Resources and Compensation Committee regularly on employee compensation

The JKH Group Compensation Policy is as follows:

Performance Management“Pay for performance”Greater prominence is given to the incentive component of the total target compensation.

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

Compensation Policyy Compensation comprises of fixed (base) payments, short-term incentives and long-term

incentivesy Higher the authority levels within the Group, higher the incentive component as a percentage

of total payy Greater the decision influencing capability of a role, higher the weight given to

organisational performance as opposed to individual performancey Long-term incentives are in the form of Employee Share Options at JKH

Satisfaction“More than just a workplace”Continuously focusses on creating a sound work environment covering all aspects of employee satisfaction.

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

B.2.4 The performance-related elements of remuneration of Executive Directors should be designed to align their interests with those of the Company and main stakeholders

The Human Resources and Compensation Committee is responsible for determining the compensation of the Chairman-CEO and the Executive Directors of the Group

A significant proportion of Executive Director remuneration is variable. The variability is linked to the peer adjusted consolidated Group bottom line and expected returns on shareholder funds. Further, the Human Resources and Compensation Committee consults the Chairman-CEO about any proposals relating to the Executive Director remuneration, other than that of the Chairman-CEO

During the year, ESOPs, valued using a binomial pricing model, were granted to the Executive Directors as well as to all other eligible employees

Excluding Employee Share Options (ESOP) granted, the total aggregate remuneration paid to Executive Directors for the year under review was Rs.193 million, of which Rs.62 million was the variable portion linked to the performance benchmark as described above. This is in comparison to the total remuneration paid in 2016/17 amounting to Rs.154 million, of which Rs.41 million was the variable component. The increase in both the fixed and variable components of remuneration is on account of the Board comprising of five Executive Directors for a majority of 2017/18 compared to three Executive Directors for a majority of 2016/17. Similar to the previous year, the higher proportion of fixed remuneration arises from the Group not meeting certain performance benchmarks

The composition between fixed and variable compensation paid to Executive Directors is depicted below Composition of Executive Director Remuneration

2015/16

2016/17

2017/18

Fixed

53% 47%

73% 27%

68% 32%

Variable


11


B.2.5 Executive share options should not be offered at a discount

Employee Share Options are valued using a binomial pricing model, and are granted at a price that is deemed fair and equitable

B.2.6 Designing schemes of performance-related remuneration

The Human Resources and Compensation Committee considers targets, and benchmark principles for any performance related pay schemes

B.2.7 / B.2.8

Compensation commitments in the event of early termination of the Directors

In the event of an early termination of a Director, there are no compensation commitments other than for:

i. Executive Directors: as per their employment contract similar to any other employeeii. Non-Executive Directors: accrued fees payable, if any, as per the terms of their contract

B.2.9 Level of remuneration of NEDs The compensation of Non-Executive Directors is determined in reference to that of other comparable companies

B.3 Disclosure of RemunerationB.3.1 Disclosure of remuneration policy and

aggregate remuneration The aggregate remuneration paid to Executive and Non-Executive Directors amounted to Rs.210 million

C. Relations with Shareholders


C.1 Constructive Use of the Annual General Meeting and Conduct of General MeetingsC.1.1 Counting of proxy votes Complied at the Annual General Meeting (AGM)/Extraordinary General Meeting (EGM)

C.1.2 Separate resolution to be proposed for each substantially separate issue and adoption of Annual Report and accounts

The Group ensures that separate resolutions are proposed for each issue that is taken up at the AGM and shareholders are given an opportunity to vote on each issue separately

C.1.3 Heads of Board Sub-Committees to be available to answer queries

The Chairpersons of the Audit, Human Resources and Compensation, Nomination and Related Party Transaction Review Committees are available to answer all shareholder queries

C.1.4 Notice of Annual General Meeting to be sent to shareholders with other papers

Notice of the AGM and related documents are sent to the shareholders along with the Annual Report 30 days prior to the meeting

C.1.5 Procedures governing voting at General meetings to be informed

The Group ensures that a summary of procedures governing voting is sent to the shareholders, along with every notice of a general meeting

C.2.1 Channel to reach all shareholders to disseminate timely information

The Group makes sure that timely information reaches all shareholders by way of announcements to the CSE, press releases, the AGM and copies of the Annual Report, and Quarterly Reports

C.2 Communication with ShareholdersC.2.1 Channel to reach all shareholders of the

company to disseminate timely informationThe Group has “Board approved” policies of communication with shareholders. The primary channel of communication is by means of the AGM

C.2.2 Disclose the policy and methodology of communication with shareholders

The Group focuses on open communication and fair disclosure, with emphasis on integrity, timeliness, relevance. The Group announcements are made to the CSE, SEC, and the press as and when appropriate, in compliance with any applicable regulatory and statutory timelines

C.2.3 Disclose how the above policy is implemented Information is provided to shareholders prior to the AGM to give them an opportunity to raise any issues relating to the businesses of the Group. Shareholders are provided with the Annual Report of JKH in CD form and may at any time elect to receive it in printed form, free of charge

Announcements to the CSE and SEC are directed to the said bodies as and when required, while adhering to established protocol

C.2.4 Disclose details of the contact person for such disclosure

Questions, comments and requests are addressed to the Company Secretary

C.2.5 Awareness of Directors on major issues and concerns of shareholders

Shareholders may, at any time, direct questions, and provide comments and suggestions to Directors or management of the Group by contacting the Secretaries, the Senior Independent Director or the Chairman. The Investor Relations team also contributes towards keeping the Board informed of shareholder concerns

C.2.6 Contact person for shareholders Shareholders may contact the Company Secretary for queries and in addition, the Investor Relations team of the Group is responsible for maintaining dialogues and discussions with shareholders to share highlights of the Group’s performance as well as to obtain constructive feedback

C.2.7 Process for responding to shareholders The Group has a communication policy approved by the Board



C.3 Major And Material TransactionsC.3.1 Disclosure of all material facts involving all

material transactions including related party transactions

There were no major or material transactions that materially affected the Group’s asset base

Corporate Governance Commentary - Section 3.2.4

JKH Annual Report 2017/18 - Notes to the Financial Statements

D. Accountability and Audit


D.1 Financial Reporting D.1.1 The Board should present interim and other

price-sensitive public reports to regulators.The Board of Directors, in conjunction with the Audit Committee, is responsible to ensure the accuracy and timeliness of published information and in presenting a true and fair view of the results in the quarterly and annual financial statements

All price sensitive information about the Group is promptly communicated to the CSE and such information is also released to employees, the press and shareholders. The Group ensures that information is communicated accurately and in such manner as to avoid the creation, or continuation of a false market

D.1.2 The Directors’ Report, which forms part of the Annual Report, should contain declarations by the Directors

JKH Annual Report 2017/18 - The Annual Report of the Board of Directors

D.1.3 The Annual Report should contain statements by Directors and Auditors on responsibilities towards financial reporting

JKH Annual Report 2017/18 - The Statement of Directors’ Responsibility

JKH Annual Report 2017/18 - The Independent Auditors’ Report

JKH Annual Report 2017/18 - The Annual Report of the Board of DirectorsD.1.4 The Annual Report should contain a

Management Discussion and Analysis sectionJKH Annual Report 2017/18 - Management Discussion and Analysis

D.1.5 The Directors should report that the business is a going concern

The Directors are satisfied that the Group, its subsidiaries and associates, have adequate resources to continue in operational existence for the foreseeable future

This is further justified, by adopting a going concern basis in preparing the financial statements

JKH Annual Report 2017/18 - The Statement of Directors’ ResponsibilityD.1.6 In the event of a serious loss of capital the

Directors shall summon an extraordinary general meeting to notify the shareholders of the position

In the unlikely event that the net assets of the Group fall below half of shareholder funds, shareholders would be notified and the requisite resolutions would be passed on the proposed way forward

D.1.7 The Board should adequately and accurately disclose Related Party Transactions in its Annual Report

JKH Annual Report 2017/18 - Notes to the Financial Statements

D.2 Internal ControlD.2.1 The Directors should conduct a review of

internal controls at least annuallyThe Board has taken necessary steps to ensure the integrity of the Group’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

The following initiatives were implemented during the year under review. y Forestpin “Watch List” project - Automated monitoring and workflow based

escalation in order to facilitate timely clearing of all transactional entries including complete reconciliation. Unreconciled and open entries to be flagged and periodically scrutinised, and formal disclosure to be made to the relevant Audit Committees

y Forestpin “Deposits” project - Efficient management and tracking of cash and cheques deposits, in line with international best practice

y Forestpin “Internal Audit Scoping” - 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

y Process for improving the external auditor engagement based on structured surveys, which focus on feedback, sentiment analysis, and pre-defined performance criteria


13


D.2.1 The Directors should conduct a review of internal controls at least annually

Internal Compliance

A quarterly self-certification programme requires the Presidents, Sector Heads and Chief Financial Officers of industry groups to confirm compliance with statutory and other regulatory procedures, and also to identify any significant deviations from the expected norms

System of Internal Control

The Board has, through the involvement of the Group Business Process Review function, taken steps to obtain assurance that systems, designed to safeguard the Company’s assets, maintain proper accounting records and provide management information, are in place and are functioning according to expectations

The risk review programme covering the internal audit of the whole Group is outsourced. Reports arising out of such audits are, in the first instance, considered and discussed at the business/functional unit levels and after review by the Sector Head and the President of the industry group are forwarded to the relevant Audit Committee on a regular basis. Further, the Audit Committees also assess the effectiveness of the risk review process and systems of internal control on a regular basis

Segregation of Duties (SoD) under Sarbanes-Oxley (SOX) Guidelines

The Group is very aware of the need to ensure that no individual has excessive system access to execute transactions across an entire business process or business processes which have critical approval linkages. The increasing use of information technology and integrated financial controls creates unintended exposures within the Group. SoD dictates that problems such as fraud, material misstatements and manipulation of financial statements have the potential to arise when the same individual is able to execute two or more conflicting, sensitive transactions. Separating discrete jobs into task-oriented roles can often result in inefficiencies and costs which do not meet the cost versus benefit criteria. Whilst the attainment of a zero SoD conflict state is utopian, the Group continued to take steps, to identify and evaluate existing conflicts and reduce residual risks to an acceptable level under a cost versus benefit rationale

Data Analytics

Traditionally, internal auditing followed an approach which was based on a cyclical process that involves manually identifying control objectives, assessing and testing controls, performing tests, and sampling only a relatively small population of the dataset to measure control effectiveness and operational performance. Today, the Group operates in a complex and dynamic business environment where the number of transactions has increased exponentially over the years and the traditional cyclical/sample based internal auditing techniques are becoming less effective. As such, the Group continues to use “big data analysis” techniques on the total data using Standard Deviations and Z-Scores in establishing real time, user-friendly “outlier identification” and “early warning triggers”

D.2.2 Companies should have an Internal Audit function

The Group internal audit process 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 Group, reviews the important internal audit findings and follow-up procedures

Whilst there are merits and demerits associated with outsourcing an internal audit, the Group is of the view that having an external based 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

D.2.3 The Audit Committee should review the process and effectiveness of risk management and internal controls

The Audit Committee receives regular reports on the adequacy and effectiveness of internal controls, and compliance with laws and regulations of the Group

The Audit Committee carries out regular review meetings with the management and External Auditors to seek assurance on various matters including internal controls, risk management systems of the Group and quality of financial reporting along with independent auditors





D.2.4 Responsibilities of Directors in maintaining a sound system of internal control and content of Statement of Internal Control

JKH Annual Report 2017/18 - The Statement of Directors Responsibility

D.3 Audit CommitteeD.3.1 The Audit Committee should be comprised

of a minimum of two independent NEDs or exclusively by NEDs, a majority of whom should be independent, whichever is higher

As at 31 March 2018, all members including the Chairman of the Audit Committee are independent NEDs

D.3.2 The duties of the Audit Committee should include keeping under review the scope and results of the audit and the independence and objectivity of the auditors


Scope y Review the quarterly and annual financial statements, including the quality, transparency, integrity, accuracy and compliance with accounting standards, laws and regulations

y Assess the adequacy and effectiveness of the internal control environment in the Group and ensure appropriate action is taken on the recommendation of the internal auditors

y Evaluate the competence and effectiveness of the risk management systems of the Group and ensure the robustness and effectiveness in monitoring and controlling risks

yReview the adequacy and effectiveness of the internal audit arrangements

y Recommend the appointment, re-appointment and removal of the External Auditors including their remuneration and terms of engagement by assessing qualifications, expertise, resources and independence

D.3.3 The Audit Committee should have a written Terms of Reference, dealing clearly with its authority and duties

The Committee has access to a written version of its Terms of Reference, which sets out clearly its mandate and duties

D.3.4 Disclosure of the Audit Committee Report and memberships

Audit Committee Report is found in Section 3.2.1 of the Corporate Governance Commentary - JKH Annual Report 2017/18. Audit Committee meeting attendance is as follows:

18.0

5.20

17

25.0

5.20

17

26.0

7.20

17

01.1

1.20

17

29.0

1.20

18

Elig

ible

to

Atte

nd

Atte

nded

A Cabraal ü ü ü ü ü 5 5

N Fonseka ü ü ü ü ü 5 5

P Perera ü ü ü ü ü 5 5

By InvitationS Ratnayake ü ü ü ü ü 5 5

R Peiris* ü ü ü ü N/A 4 4

G Cooray** ü ü ü ü ü 5 5

K Balendra*** N/A N/A N/A N/A ü 1 1

* Retired from the Board on 31 December 2017** Appointed as Group Finance Director from 1 January 2018*** Appointed as the Deputy Chairman from 1 January 2018

15


D.4 Code of Business Conduct and EthicsD.4.1 Availability of a Code of Business Conduct and

EthicsThe Group abides by the JKH Code of Conduct, which is part of the company’s culture, and is followed by personnel at all levels

JKH Code of Conducty Allegiance to the Company and the Groupy Compliance with rules and regulations applying in the territories that the Group

operates iny Conduct all businesses in an ethical manner at all times in keeping with acceptable

businesses practicesy Exercise of professionalism and integrity in all business and “public” personal

transactions

The objectives of the Code of Conduct are strongly affirmed by a strong set of Values which are well institutionalised at all levels within the Group through structured communication. The degree of employee conformance with Values and their degree of adherence to the JKH Code of Conduct are key elements of the reward and recognition schemes

The Group Values continue to be consistently referred to by the Chairman-CEO, Presidents, Sector and Business Unit Heads during employee and other key stakeholder engagements, in order to instil these Values in the hearts and DNA of the employee

D.4.2 The Chairman must certify that he/she is not aware of any violation of any of the provisions of this Code

The Chairman has certified that he/she is not aware of any violation

JKH Annual Report 2017/18 - Chairman’s Message

D.5 Corporate Governance DisclosuresD.5.1 The Directors should include in the Company’s

Annual Report, a Corporate Governance ReportA Corporate Governance Report, setting out the manner and extent to which the company has complied, has been included in the JKH Annual Report 2017/18

E. Institutional Investors


E.1 Shareholder VotingE.1.1 Need to conduct regular and structured

dialogue with shareholders based on a mutual understanding of objectives

The primary modes of communication between the Company and the shareholders are through the announcements made to the CSE, Annual Reports, Quarterly Reports and the Annual General Meeting (AGM)

Investor Relations

The Investor Relations team of the Group is responsible for maintaining an active dialogue with shareholders, potential investors, investment banks, analysts and other interested parties in ensuring effective investor communication

The Investor Relations team has regular discussions with shareholders, as and when applicable, to share highlights of the Group’s performance as well as to obtain constructive feedback. Commencing from January 2018, Investor Presentations, which include an update on the latest financial results, were made available on the corporate website, to provide easier access and in-depth detail of the operational performance of the Group

Shareholders may, at any time, direct questions, request for publicly available information and provide comments and suggestions to Directors or management of the Group by contacting the Investor Relations team, Secretaries, the Senior Independent Director or the Chairman, although individual shareholders are encouraged to carry out adequate analysis or seek independent advice on their investing, holding or divesting decisions at all times

Contd.



E.1.1 Need to conduct regular and structured dialogue with shareholders based on a mutual understanding of objectives

Release of Information to the Public and CSE

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, JKH has reported a true and fair view of its financial position and performance for the year ended 31 March 2018 and at the end of each quarter of the financial year 2017/18

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. Shareholders may, at any time, direct questions, request for publicly available information and provide comments and suggestions to Directors or Management of JKH. Such questions, requests and comments should be addressed to the Company Secretary

The Group focusses on open communication and fair disclosure, with emphasis on the integrity, timeliness and relevance of the information provided. The Group ensures that information is communicated accurately and in a manner that will avoid the creation or continuation of a false market

Annual General Meeting

Information is provided to the shareholders prior to the AGM to give them an opportunity to exercise the prerogative to raise any issues relating to the businesses of the Group. Shareholders are provided with the Annual Report of JKH in CD form. Shareholders may at any time elect to receive an Annual Report from JKH in printed form, which is provided free of charge

The Group makes use of the AGM constructively towards enhancing relationships with the shareholders and towards this end the following procedures are followed:

• Notice of the AGM and related documents are sent to the shareholders along with the Annual Report within the specified time

• Summary of procedures governing voting at the AGM are clearly communicated• All Executive and Non-Executive Directors are made available to answer queries

• The Chairman-CEO ensures that the relevant senior managers are also available at the AGM to answer specific queries

• Separate resolutions are proposed for each item

• Proxy votes, those for, against, and withheld are counted

E.2 Evaluation of Governance DisclosuresE.2 When evaluating Companies’ governance

arrangements, particularly those relating to Board structure and composition, institutional investors should be encouraged to give due weight to all relevant factors drawn to their attention

The Group prides itself in its widely acclaimed approach to corporate governance and as such, encourages investors of all types to give weight to all relevant factors brought to their attention


17

F. Other Investors


F.1 Investing /Divesting DecisionF.1 Individual shareholders, investing directly in

shares of companies should be encouraged to carry out adequate analysis or seek independent advice in investing or divesting decisions

The Investor Relations team aids investors, both local and foreign, to carry out adequate analysis on the Group and its subsidiaries. Portfolio managers, and analysts covering the Group, are given the freedom to conduct structured discussions with the senior management, through which they are able to obtain all necessary information in order to form a sound, and accurate view of the economic prospects of the Group, and the industries it operates in

F.2 Shareholder VotingF.2 Individual shareholders should be encouraged

to participate in General Meetings of companies and exercise their voting rights

The Group encourages all shareholders to participate in the AGM/EGM, and exercise their voting rights

G. Sustainability Reporting


G. 1 Principles of Sustainability ReportingG.1.1 / G.1.7

Disclosure on adherence to sustainability principles

The Group places great importance on sustainable development. During the 2017/18 financial year, the Group took steps to further realign its approach on sustainability to support the Sustainable Development Goals adopted by the United Nations in 2015

JKH Annual Report 2017/18 - Management Discussion and Analysis


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

Reference (within the Report)

(i) Names of persons who were Directors of the Entity Yes Board of Directors

(ii) Principal activities of the entity and its subsidiaries during the year, and any changes therein

Yes Management Discussion and Analysis

(iii) 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

Yes

Share Information (iv) The public holding percentage Yes

(v) 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

(vi) Information pertaining to material foreseeable risk factors of the Entity

Yes Risk, Opportunities and Internal Controls

(vii) Details of material issues pertaining to employees and industrial relations of the Entity

Yes Sustainability Integration and Stakeholder Engagement

(viii) Extents, locations, valuations and the number of buildings of the Entity’s land holdings and investment properties

Yes Group Real Estate Portfolio

(ix) Number of shares representing the Entity’s stated capital Yes

Share Information (x) A distribution schedule of the number of holders in each class

of equity securities, and the percentage of their total holdingsYes

(xi) Financial ratios and market price information Yes

(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

Yes Notes to the Financial Statements

(xiii) Details of funds raised through a public issue, rights issue and a private placement during the year

Yes

Share Information (xiv) Information in respect of Employee Share Ownership or

Stock Option SchemesYes

(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

Corporate Governance Commentary (xvi) Related Party transactions exceeding 10 per cent of the

equity or 5 per cent of the total assets of the Entity as per audited financial statements, whichever is lower

Yes

Statement of Compliance under Section 7.10 of the Listing Rules of the CSE on Corporate Governance


CSE Rule Compliance Status

JKH Action/Reference (within the Report)

7.10 Compliancea./b./c. Compliance with Corporate Governance Rules Yes The Group is in compliance with the Corporate Governance

Rules and any deviations are explained where applicable

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 NEDsYes 5 out of 8 Board members are NEDs. The JKH Group 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


19



7.10.2 Independent Directors a. 2 or 1/3 of NEDs, whichever is higher shall be “independent” Yes All NEDs are Independent

b. Each NED to submit a signed and dated declaration of his/her independence or non-independence

Yes Independence of the Directors has been determined in accordance with CSE Listing Rules and the 5 Independent NEDs have submitted signed confirmation of their independence

7.10.3 Disclosures relating to Directorsa./b. Board shall annually determine the independence or

otherwise of NEDsYes All Independent NEDs have submitted declarations as to

their independencec. A brief resume of each Director should be included in the

annual report including the directors’ experienceYes Refer Board of Directors section of the Annual Report

d. Provide a resume of new Directors appointed to the Board along with details

Yes Detailed resumes of the new Independent NEDs appointed during the financial year were submitted to the CSE. It is noted that there were no appointments to the Board, during the year under review

7.10.4 Criteria for defining independencea. to h. Requirements for meeting the criteria to be an Independent

DirectorYes Refer Summary of NEDs interests section

7.10.5 Remuneration Committeea.1 Remuneration Committee shall comprise of NEDs, a majority

of whom will be independentYes The Human Resources and Compensation Committee

(equivalent of the Remuneration Committee with a wider scope) only comprises of Independent NEDs

a.2 One NED shall be appointed as Chairman of the Committee by the Board of Directors

Yes The Senior Independent NED is the Chairman of the Committee

b. Remuneration Committee shall recommend the remuneration of the CEO and the Executive Directors

Yes The remuneration of the Chairman-CEO and the Executive Directors is determined as per the remuneration principles of the Group and recommended by the Human Resources and Compensation Committee

c.1 Names of Remuneration Committee members Yes Refer Board Committees section of the Annual Report

c.2 Statement of Remuneration policy Yes Refer Director Remuneration section

c.3 Aggregate remuneration paid to EDs and NEDs Yes Refer Director Remuneration section

7.10.6 Audit Committeea.1 Audit Committee (AC) shall comprise of NEDs, a majority of

whom should be independentYes The Audit Committee comprises only of Independent NEDs

a.2 A NED shall be the Chairman of the committee Yes Chairman of the Audit Committee is an Independent NED

a.3 CEO and CFO should attend AC meetings Yes The Chairman-CEO, Group Finance Director, Group Financial Controller and the External Auditors attended most parts of the AC meetings by invitation

a.4 The Chairman of the AC or one member should be a member of a recognised professional accounting body

Yes The Chairman of the AC is a member of a recognised professional accounting body

b. Functions of the AC Yes The AC carries out all the functions prescribed in this section

b.1 Overseeing of the preparation, presentation and adequacy of disclosures in the financial statements in accordance with SLFRS/LKAS

Yes The AC assists the Board in fulfilling its oversight responsibilities for the integrity of the financial statements of the Company and the Group

b.2 Overseeing the compliance with financial reporting requirements, information requirements as per laws and regulations

Yes 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, on the adoption of best accounting policies

b.3 Overseeing the process to ensure the internal and risk management controls, are adequate, to meet the requirements of the SLFRS/LKAS

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




b.4 Assessment of the independence and performance of the Entity’s External Auditors

Yes The AC assesses the external auditor’s performance, qualifications and independence

b.5 Make recommendations to the Board pertaining to External Auditors

Yes The Committee is responsible for recommending the appointment, re-appointment, removal of External Auditors and also providing recommendations on the remuneration and terms of Engagement

c.1 Names of the Audit Committee members shall be disclosed Yes Refer Board Committees section

c.2 Audit Committee shall make a determination of the independence of the external auditors

Yes Refer Report of the Audit Committee

c.3 Report on the manner in which Audit Committee carried out its functions.

Yes Refer Report of the Audit Committee

Statement of Compliance under Section 9.3.2 of the Listing Rules of the CSE on Related Party Transactions




(a) Details pertaining to Non-Recurrent Related Party Transactions


(b) Details pertaining to Recurrent Related Party Transactions Yes Notes to the Financial Statements

(c) Report of the Related Party Transactions Review Committee Yes Refer Report of the Related Party Transactions Review Committee

(d) Declaration by the Board of Directors as an affirmative statement of compliance with the rules pertaining to Related Party Transactions, or a negative statement otherwise

Yes Annual Report of the Board of Directors

Statement of Compliance pertaining to Companies Act No. 7 of 2007




168 (1) (a) The nature of the business together with any change thereof

Yes Group Directory

168 (1) (b) Signed financial statements of the Group and the Company

Yes Financial Statements

168 (1) (c) Auditors’ Report on financial statements

Yes Independent Auditors’ Report

168 (1) (d)

Accounting policies and any changes therein Yes Notes to the Financial Statements

168 (1) (e) Particulars of the entries made in the Interests Register

Yes Annual Report of the Board of Directors

168 (1) (f )

Remuneration and other benefits paid to Directors of the Company


168 (1) (g)

Corporate donations made by the Company Yes Notes to the Financial Statements

168 (1) (h)

Information on the Directorate of the Company and its subsidiaries during and at the end of the accounting period

Yes Group Directory

168 (1) (i)

Amounts paid/payable to the External Auditor as audit fees and fees for other services rendered


168 (1) (j)

Auditors’ relationship or any interest with the Company and its Subsidiaries

Yes Report of the Audit Committee/Financial Statements

168 (1) (k)

Acknowledgement of the contents of this Report and signatures on behalf of the Board

Yes Financial Statements/Annual Report of the Board of Directors


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