Ascot Holdings Plc Annual Report 2017-18

10 Ascot Holdings PLC Annual Report 2017/18 BOARD OF DIRECTORS Mr. Mohan Joseph Ratnayake Chairman - Independent Non-Executive Director Mr. Ratnayake is a Chartered Management Accountant by profession and currently functions as the Managing Director of Colonial Motors Ceylon Ltd. He was the Chairman of the Committee that floated the first Internationally Listed Bond for the expansion of Mobitel and SLT, a leading telecom services provider in Sri Lanka, successfully obtaining an international rating for SLT. the Property Director at Newbridge Capital Investments Limited, a property investment and development company, transacting directly into UK commercial and London residential markets. He is the Founder/Managing Director of Steradian Capital Investments (Pvt) Ltd. Archie achieved an MA in Property Valuation and Law at Cass Business School (City University London) and is a Member of the Royal Institute of Chartered Surveyors. Mr. Terence Charles Smith Mr. Ratnayake has an MBA from the University of Washington and is a Fellow of the Chartered Institute of Management Accountants, UK. Mr. Mohamed Hisham Jamaldeen Executive Director Mr. Jamaldeen is a noted Finance Professional with over 15 years of wide-ranging experience as a commercial property investor and advisor. He is the Founder/ Managing Director of Steradian Capital Investments (Pvt) Ltd, responsible for financing, corporate structures, acquisitions and development. He serves as a Director of Singer (Sri Lanka) PLC, Singer Industries (Ceylon) PLC, Hayleys PLC, Talawakelle Tea Estates PLC and Haycarb PLC. He is also an Executive Director of numerous real estate companies focusing on commercial property investment and development. Non-Executive Director Mr. Smith is a Fund Manager, former FTSE CEO and author of bestselling book ‘Accounting for Growth’, with over four decades working in international finance. He began his career at Barclays Bank, before becoming a stockbroker at W Greenwell & Co in London and a toprated bank analyst. Mr. Smith led the management buy-out of the stockbroker Collins Stewart, which was floated on the London Stock Exchange, and later became Chairman of Collins Stewart and Chief Executive of the interdealer broker Tullett Prebon. In 2010, Mr. Smith founded Fundsmith, a fund management company that runs one of the most popular global equity funds in the UK, with an AUM of over 15 billion. In 2012, he was appointed a Member of the New Zealand Order of Merit for services to New Zealand-UK relations. Mr. Ian Joseph McVeigh He is a Fellow of the Association of Certified Chartered Accountants, UK, and holds a Degree in Engineering and Business from the University of Warwick, UK. Mr. Archie Buckland Warman Executive Director Mr. Warman is a qualified Chartered Surveyor. He has practiced in commercial & residential real estate and has been involved in investment brokerage, leasing and letting, valuations & development appraisals, property management, landlord and tenant law and asset management initially in the City and West End of London at Hexell Wylie (now Savills). Mr. Warman was Non-Executive Director Mr. McVeigh commenced his career as a Stockbroker at Sheppards and Chase and subsequently moved to UBS during the period 1979-1998. Later, he took on the role of Fund Manager between 1998-2003, at Schroder Investment Management, a British multinational asset management company. He was mandated to manage institutional and mutual funds including the top-performing Schroder Income Fund. From 2004–2015, he was a Senior Fund Manager at Jupiter Asset Management, running the UK Growth Fund with assets of circa 1 billion. From 2015-2017, he was Head of Governance for Jupiter Asset Management.

Ascot Holdings PLC Annual Report 2017/18 He completed his tertiary education at Merton College (Oxford) by obtaining a Degree in Modern History. He holds an LLM in Banking and Finance Law from University of London, UK and an LLB from the University of Durham, UK. Mr. Mohamed Firdouse Farook Non-Executive Director Mr. Kudagamage Jayantha Pradeep Non-Executive Director Mr. Farook is an Entrepreneur and Investor with over 20 years of experience in diversified fields of business including telecommunications, renewable energy, real estate development, venture capital and investment promotion. He served as a member of the Board of Directors at Sri Lanka Telecom PLC (SLT) and as Director of other subsidiary companies of SLT. He was the Founding Member and Director of Pan Asian Power PLC. He also serves as a Board Member and Director of several Sri Lankan, Malaysian and Singaporean companies including Lake Side Property Developers (Private) Limited, Omega Group (Private) Limited and Power Hub Green Energy (Private) Limited. He is an old boy of Royal College, Colombo. Mr. Saravanan Neelakandan Independent Non-Executive Director Mr. Neelakandan is an Attorney-at-Law and a Barrister of Lincoln’s Inn. He has been practicing in the legal profession for over 12 years and is a Partner of the law of Neelakandan & Neelakandan (formerly Murugesu & Neelakandan) with a wide-ranging legal practice in the areas of commercial law, corporate law, banking & finance law, foreign investment, infrastructure projects and dispute resolution. He is also a Co-Editor of the Bar Association Law Journal. Mr. Pradeep is the Financial Controller of Steradian Capital Investments (Pvt) Limited. He holds a Bachelor of Science in Business Administration (Special) Degree from the University of Sri Jayawardenepura, and he is also an Associate Member of the Institute of Chartered Accountants of Sri Lanka. 11

12 Ascot Holdings PLC Annual Report 2017/18 MANAGEMENT DISCUSSION & ANALYSIS An extensive refurbishment has been planned to upgrade the commercial property by Q3 2019. A joint consortium of investors acquired Ascot Holdings in October 2017 with a view to overhauling the operations, establishing a framework of good governance and positioning the Company for growth. In order to understand why Ascot Holdings PLC was deemed an astute acquisition, it would be pertinent to understand its business potential: Ascot Developments (Private) Limited Ascot Developments is a real estate and property development subsidiary which owns a commercial building in Colombo 10. The building offers office space over 8 floors with a gross internal area of over 70,000 square feet and an automated parking garage. The building is located in the Central Business District (CBD) of Colombo, within close proximity to public transport, health care facilities, restaurants, hotels and other commercial establishments. The space has been rented out to the Ministry of Health, Nutrition, and Indigenous Medicine. Our Response The present tenant’s lease agreement expired on 31st July 2018 and they are expected to vacate the premises. The commercial building is in need of a refurbishment to upgrade the office space and other facilities. Once they vacate the premises, we intend on refurbishing the asset to optimise the space and improve the rent. The return on equity on the property as a result of this refurbishment is expected to be significantly higher. An extensive refurbishment has been planned to upgrade the commercial property by Q3 2019. The refurbishment will include the installation of external cladding to the sides of the building, a curtain wall to the front and rear of the building, refurbishment of the reception, upgrade of the car parking system, complete refurbishment of all floor plates, lift lobbies, water closet’s and development of the rooftop. The refurbishment is expected to position the commercial building as a highly modernised Grade B facility that is expected to attract quality tenants. We are in the process of raising Rs. 632 mn through a rights issue, of which Rs. 250 mn will go towards settling the debt of Ascot Developments (Private) Limited. Rs. 100 mn will be used to buy out the minority shareholder, leaving Ascot Holdings PLC with 100% ownership of Ascot Developments (Private) Limited. Meanwhile, Rs. 25 mn will be channeled towards settling a pending legal case for Ascot Leisure.

Ascot Holdings PLC Annual Report 2017/18 13 Amtrad Limited Amtrad is Sri Lanka’s oldest manufacturer of concrete blocks and paving stones and has been in business since 1980, with recognition as the pioneer in the industry. With more than three decades of heritage in the industry, Amtrad is recognised for its product quality, intergrity and innovation. Amtrad is responsible for large scale contracts such as the Sri Dalada Maligawa Paving Project, World Trade Center, Dutch Hospital, Colombo Hilton as well as the Galle Road paving projects (one of the largest urban projects undertaken in Sri Lanka). It serves a select group of clients such as Nawaloka Construction Group, Sanken Lanka, Mäga Engineering, Sri Lanka’s Road Development Authority, Local Government Authorities and other reputed conglomerates. Our Response At the time of acquisition, Amtrad’s manufacturing operations were almost at a standstill, the factory was in a dilapidated condition and the company was facing working capital issues. Keeping in mind the mega infrastructure developments underway in the country, Amtrad had much to offer. In quick time, we got two manufacturing lines up and running smoothly, with plans to add one more in due course. The factory was duly refurbished and we injected the required working capital to restart operations, enhance output and to drive sales with the intention of putting the company back on the path to recovery. We are delighted to state that since then Amtrad has secured some large orders with additional large orders in the business pipeline. Ascot Leisure (Private) Limited & Ascot Ambalangoda (Private) Limited The two subsidiaries were established to partake in the growing Sri Lankan tourism industry. Ascot Leisure (Private) Limited & Ascot Ambalangoda (Private) Limited own the lease for a 7-acre site in the Yala National Park and the Ambalangoda coastal property respectively. Our Response Our immediate plan for the Yala property is to develop chalets within the world famous Yala National Park. The Park, whilst bordering the Indian Ocean, is the most visited and second largest national park in Sri Lanka. The Park boasts the highest density of leopards found anywhere in the world and we expect this property to turn into an income producing asset fairly quickly. The property at Ambalangoda is on a 50-year lease and we have now embarked on the planning process for this property. Sustainable Strategy The progress made by the Company from the time of acquisition, to enhance the value of its assets, and putting the entities back on track has been impressive, and the Ascot Holdings assets are now poised to produce more growth for shareholders going forward. The Company will benefit from the astute business sense of its Board and senior management of Ascot Holdings PLC as it takes strides towards realising its vision for the island’s real estate sector. Our sustainability aim is clear, we are here to build communities in a sustainable and ethical manner. Ascot Holdings PLC benchmarks itself against the best in the world. In order to demonstrate this commitment, we will obtain internationally accepted certifications wherever

14 Ascot Holdings PLC Annual Report 2017/18 MANAGEMENT DISCUSSION & ANALYSIS Our sustainability aim is clear, we are here to build communities in a sustainable and ethical manner. possible. Going forward, all our new developments will use sustainable designs and elements to preserve the environment. The culture and ethics behind our business is what will make us stand out as a business with great integrity. Our Stakeholders Our People Ascot Holdings PLC comprises a world-class senior management team which has amassed impressive Government Ensure full compliance with regulations and full payment of taxes. Employees Ensure a culture of fairness and offer exciting career growth prospects. Product Deliver products benchmarked against the best. Offer a perfect product priced lower than the market. Shareholders Ensure smooth operations to deliver the highest returns to valued shareholders. experience in real estate and finance around the world. The Company has put in place a dynamic team of professionals who are buoyed at the prospects of working for a firm that is determined to reach the forefront of the industry. The senior management engages closely with the team to explain the corporate vision and future strategies to ensure the entire team works together as a cohesive unit. There is a great sense of camaraderie and desire to excel amongst the team, which keeps them motivated. Overall, employee welfare and shareholder wealth maximisation will remain utmost priorities.

Ascot Holdings PLC Annual Report 2017/18 15 CORPORATE GOVERNANCE The Company aspires to adhere to the best practices in Corporate Governance by ensuring greater transparency, business integrity, professionalism and ethical values in the best interests of all stakeholders. Corporate Governance Chairman and Chief Executive Officer The Company aspires to adhere to the best practices in Corporate Governance by ensuring greater transparency, business integrity, professionalism and ethical values in the best interests of all stakeholders. The roles of the Chairman and Executive Directors are separate with a clear distinction of responsibilities, which ensures balance of power and authority. Board of Directors The Board provides leadership to achieve the Company’s strategic goals and compliance with generally accepted corporate governance practices, the requirements under the Listing Rules of the Colombo Stock Exchange and the Code of Best Practice issued by the Institute of Chartered Accountants of Sri Lanka. As at the reporting date, the Board comprised of two (02) Executive and six (06) Non-Executive Directors with experience and knowledge in the relevant areas of business, with specific acumen in terms of commercial, financial, legal and industry expertise. Independence of Directors Based on the declarations submitted by the NonExecutive Directors, the Board has determined that two (02) Non-Executive Directors, the Chairman Mr. R M M J Ratnayake and Director, Mr. Saravanan Neelakandan are ‘Independent’ as per the criteria set out in the Listing Rules of the Colombo Stock Exchange. Mr. R M M J Ratnayake is the Chairman of the Board of Directors and Mr. M H Jamaldeen and Mr. A J B Warman function as Executive Directors. Board Meetings The Board meets formally every quarter as a matter of routine. Ad hoc meetings are held as and when necessary to maintain regular communication to discuss relevant business issues, and any other matter directed to the Board which can be resolved by circular resolution, is decided by Resolutions in writing. Prior to every meeting the Directors are provided with the relevant information and background material relevant to the agenda. The Board’s functions include the assessment of the adequacy and effectiveness of internal controls, compliance with applicable laws and regulations, review of management and operational information, adoption of annual and interim accounts before they are published, review of exposure to key business risks, strategic direction of business, approval of annual budgets, monitoring progress towards achieving the budgets, approvals relating to key appointments, sanctioning major capital expenditure, etc.

16 Ascot Holdings PLC Annual Report 2017/18 CORPORATE GOVERNANCE The attendance of the Directors at Board Meetings held during the year was as follows : No. of Meetings Mr. Ratnayake Mudiyanselage Mohan Joseph Ratnayake * NED/IND 7/7 Mr. Terence Charles Smith (appointed on 07.11.2017) NED 2/5 Mr. Ian Joseph McVeigh (appointed on 07.11.2017) NED 3/5 Mr. Mohamed Hisham Jamaldeen (appointed on 07.11.2017) ED 4/5 Mr. Archie James Buckland Warman (appointed on 07.11.2017) ED 5/5 Mr. Saravanan Neelakandan (appointed on 07.11.2017) NED/IND 3/5 Mr. Mohamed Firdouse Farook (appointed on 07.11.2017) NED 5/5 Mr. Kudagamage Jayantha Pradeep (appointed on 07.11.2017) NED 5/5 Mr. Niroshan Dakshina Gunaratne (resigned on 31.07.2017) ED 1/1 Mr. Rohan Abhaya Iriyagolle (resigned on 14.11.2017) ED 4/4 Mr. Denzil Jayalath Gunaratne (resigned on 12.12.2017) NED/IND 1/5 Mr. Don John Thivanka Kodikara (resigned on 12.12.2017) NED 3/3 Mr. Maurice Dayantha Asoka Weerasooriya (resigned on 18.01.2018) NED/IND 5/6 NED Non-Executive Director, ED Executive Director, IND Independent Director, *Chairman Appointment of Directors Board Sub-Committees The Board collectively decides on the appointment of Directors. The Company’s Articles of Association requires any Director appointed during the year to hold office until the next Annual General Meeting, at which he retires and seeks re-election by the shareholders. One third of Directors retire by rotation at each Annual General Meeting and if eligible, seek re-election by the shareholders. The Board of Directors have formed three subcommittees in compliance with the Listing Rules of the Colombo Stock Exchange. Consequent to the changes in the Directorate during the year under review these sub-committees were re-constituted and the current composition of Board sub-committees is set out in the Annual Report of the Board of Directors appearing on pages 21 and 22. As required by the Listing Rules, the Reports of the Audit Committee and the Related Party Transactions Review Committee appear on pages 26 and 27 respectively. Company Secretary P W Corporate Secretarial (Pvt) Ltd acts as the Company Secretary. The Company Secretary maintains minutes of all Board, Audit Committee, Related Party Transactions Review Committee, Remuneration Committee, meetings and attends to shareholder related matters. The Company Secretary assists in ensuring the Board procedures are followed. Internal Controls The Board is responsible for the Company’s internal controls. In this respect controls are established for safeguarding the Company’s assets, making available accurate and timely information and imposing greater

Ascot Holdings PLC Annual Report 2017/18 discipline on decision making. The process is strengthened by regular review by the Audit Committee on internal controls and procedures in the areas of finance, operations, human resources, and relevant legal and regulatory compliance. Compliance with Laws and Regulations All necessary steps have been taken by the Board and the management to ensure compliance with all relevant laws and regulations. The services of lawyers, auditors and other consultants are obtained whenever necessary to provide assurance to the Board in this respect. Shareholders are provided with the Annual Report and, the Company disseminates to the market, Interim Financial Statements in accordance with the Listing Rules of the Colombo Stock Exchange. The Annual General Meeting provides a platform for shareholders to discuss and seek clarifications on the activities of the Company and its subsidiaries. By Order of the Board Ascot Holdings PLC Going Concern The Directors are satisfied that the Company and its subsidiaries have adequate resources to continue their operations for the foreseeable future and have adopted the going concern principle in preparing the financial statements. Financial Reporting The Board aims to provide and present a balanced assessment of the Company’s

ended at Ascot Holdings PLC. Taking a unanimous decision, the consortium acquired a majority stake in Ascot Holdings on 24th October 2017. The shares of Ascot Holdings PLC were bought via a combination of market transactions coupled with a mandatory offer. Over the course of the year, the consortium raised their stake from 56% to 78%.