MOVENPICK HOTEL KARACHI

REVENUE FROM ROOM RENTALS

AUDIT FOR THE YEAR ENDED DECEMBER 31, 2016

UNDERSTANDING OF REVENUE:

Movenpick Hotel conducts three significant hospitality, lodging & leisure services & consequently generates Revenue from each of them. The three
major Revenue streams are:

1. Revenue from Room Rentals (Room Income)

2. Revenue from Food & Beverages (F&B Income)
3. Revenue from Other Operated Departments (MOD Income)

ROOM INCOME:
Movenpick Hotel has a proper establishment of Rooms that are rented out to various guests for the purpose of either accommodation for a longer
time, or short-term lodging. The entity raises the highest amount of Revenue from Room Rentals so far, & offers the following categories of
accommodation:

(a) Classic Rooms (35 sqm),

(b) Superior Rooms (47 sqm),
(c) Deluxe Rooms (35 sqm),
(d) Executive Rooms (35 sqm),
(e) Suite One Bedroom (80 sqm),
(f) Presidential Suite (115 sqm),
(g) Royal Suite Two Bedrooms (155sqm)

The categories are named after the floor space offered within each of them & the associated facilities & access to numerous amenities provided by
the Hotel.

The management broadly features its guests or clients in the following categories:

1. Reservation based guests, (Corporate Clients or Contracted Out Customers)

2. Non-reservation based guests, (Casual Clients or Non-contracted Out Customers)
However, Room Income is primarily categorised according to the specific policies of the Accommodation Services, as determined by the Hotels
management & types of customers who avail the facility. The management maintains identifies its incoming guests, based on certain common
characteristics & features pre-defined by the management themselves beforehand:

1. Transient Business Non-Contracted:

The significant features of this category are:
- Corporate Clients of the Hotel,
- No contractual relationship exists between the Hotel & the clients or the respective employers of the clients,
- Purpose of the stay is for Business only,
- Facilitation of either Room (Room only) or Room plus Breakfast (Bed & Breakfast),
- Services availed through over-the-counter reservation or an Overseas Travel Agent (OTA) who registers & reserves a Room in the name of
the client. The clients are either offered Rack Rate or above per Room Facility or might be offered discounts in case of reservation through an
OTA, if contracted with the OTA itself.

2. Transient Business Contracted:

The significant features of this category are:
- Corporate Clients of the Hotel,
- Contractual relationship exists between the Hotel & the respective employers of the clients, whereby the Hotel enters into a negotiated
Agreement with the employers regarding the Room Rate per night & the provision of other facilities etc, at numerous discount levels of
multiple properties,
- Purpose of the stay is for Business only,
- Terms of the contract between the Hotel & employer varies from case to case, & the employer or the business might be a local incorporation
or overseas branch of a foreign incorporation,
- Such category also includes the contracts negotiated & agreed between multinational Travel Operators where Movenpick turns out to be an
Official Residence Partner, or any other sports tournament event where Movenpick turns out to be an official Residence Partners for
sportspersons & associated staff.
- Reservations in relation to the stay of Government Officials, Embassy or Military personnel also become part of it, whether be at contracted
fixed or dynamic rates.

3. Transient Leisure Non-Contracted:

The significant features of this category are:
- Casual & Individual Clients of the Hotel, i.e. walk-in customers on occasions,
- No contractual relationship exists between the Hotel & the client,
- Purpose of stay is for Leisure only,
- Facilitation of either Room (Room only) or Room plus Breakfast (Bed & Breakfast),
- Services availed through over-the-counter reservation or an Overseas Travel Agent (OTA) who registers & reserves a Room in the name of
the client. The clients are either offered Rack Rate or above per Room Facility or might be offered discounts in case of reservation through an
OTA, if contracted with the OTA itself.
- Such category also includes reservations within combined Package elements of services, which must represent a minimum retail value of
30% of total selling rate. A Package is determined as the Accommodation plus Breakfast & one or more additional components.
- All rates sold via Opaque Channels & Private Sales, which also include Flash Deals etc, & any other Top-Secret or branded private sales
(highly confidential on overall basis), e.g. to online Tourism Agents or any other promotion brands etc also fall under same category.

4. Transient Leisure Contracted:

The significant features of this category include:
- Casual & Individual Clients of the Hotel, i.e. walk-in customers on occasions,
- Contractual relationship exists between the Hotel & the clients or the respective Agent on behalf of the clients,
- Purpose of stay is for Leisure only,
- Facilitation of either Room (Room only) or Room plus Breakfast (Bed & Breakfast),
- Services availed in a Packaged Rate sold via an Operator or Wholesale Agent at a fixed contract rate where they apply a minimum mark-up &
is non-commissionable.

5. Transient Others:
The significant features of this category include:
- Casual & Individual Clients of the Hotel, i.e. walk-in customers on occasions,
- Movenpick Staff on duty, for a Business Stay,
- Movenpick Staff on vacation, for a Leisure Stay,
- Day-use Room by any Customer, whether Corporate or Casual, & no overnight stay,
- Such category applies when the guest is paying a contracted extended stay rate or a one-off negotiated long-stay rate. It also applies to Public
Retail Rates for more than 7 nights & 30 nights in Resorts,
- This also includes friends, family & travel discounts & paid familiarization visits. The Hotel also offers Deep Discounts against benchmark
Room Rates under this category, but only with the approval of GM.

6. Group Business:
The significant features of this category include:
- Corporate Clients of the Hotel,
- Contractual relationship exists between the Hotel & the client, but the contract is executable for one-time only, i.e. the contract is only valid for
a single-time performance & doesnt have a period of validity,
- Purpose of stay is for Business only,
- Facilitation of 10 Rooms reservation or more, alongwith the provision of Meeting Rooms as required upon reservation, & varies from case to
case,
- Services commonly offered to those AdHoc, one-off Corporate & Business Groups which need at least 10 Rooms accommodation or more, &
negotiates & settles at a corporate rate, e.g. a business meeting or conference held at another location,
- Such category generally includes all those Professional Groups who require 10 Rooms Reservation or more, e.g. Groupe Fairs, Groups with
Meeting Rooms etc, where clients wish to attend a particular business, or any city-wide event, conference etc,
- Incentive Groups, i.e. the group of 10 Rooms or more for an Incentive Event, where the employer of the client provides entertainment & settles
the total invoice, also from part of same category.

7. Group Leisure:
The significant features of this category include:
- Casual Clients of the Hotel,
- Contractual relationship exists between the Hotel & the client, but the contract is executable for one-time only, i.e. the contract is only valid for
a single-time performance & doesnt have a period of validity,
- Purpose of stay is for Leisure only,
- Facilitation of either 5 Rooms or 10 Rooms, depending on the scheme undertaken by the customers at the time of reservation,
- Services commonly offered in the form of 10 Rooms or more of the accommodation required by a group of clients arriving together on an
organised program or packaged rate, sold via a Tour Operator or Wholesale Agent at a fixed contract or group rate. The rate is non-
commissionable. Such segment is known as Group Inclusive Tour by the Hotel,
- AdHoc Leisure Groups, i.e. those one-off Leisure Groups requiring an accommodation of 10 Rooms or more simultaneously, & settles at either
a group or retail rate, also fall under same category,
- Tour Series, i.e. those group tours that have a minimum of 5 or more recurring groups of a similar size over a period of time, e.g. a season or
a maximum of a year, is also part of same category.

8. Airlines:
The significant features of this category include:
- Clients constitute the Airlines Crew, or passengers occasionally at sometime in situation of an emergency landing,
- Contractual relationship exists between the Hotel & the client, but exceptions exist in case of passengers accommodated after an emergency
landing etc,
- Such category includes regular contracted airline crews, including adhoc extra crew, & any unexpected group of passengers due to an
airline/aircraft incident. Such accommodation is mostly not pre-reserved,
- Training Sessions being conducted by various airlines for their newly-inducted employees, where they stay in a hotel premises & attend a
certain training session for some pre-fixed number of days. This also forms part of the same category.

The Revenue Cycle of the Room Income operates in the following manner, initiating from the Reservation of a Room & ending up on the Check-
Out of the guests:

RESERVATION OF ROOMS:
An online Reservation Form is filled by the Reservation Executive (Front-office personnel) against any requisition received in respect of
Accommodation. In case of Corporate Clients, reservation usually takes place over phone calls & emails, while Casual or Individual Clients make
requisitions for reservation either over-the-counter (OTC) after approaching the Hotel, or pre-reserved through a phone call or Movenpick Hotels
website. Reservation is automatically feeded through the system when requisitioned online through website (websites are configured with certain
online Reservation Software which punches all the fields into the Reservation Form of the Hotel as soon as the requisition is submitted online),
else it has to be feeded manually into the system by the staff at all times.

Mr Ahsan Durrani (Front Office Manager) ensures that the reservation Forms are filled against each requisition of Accommodation received &
accepted by the Hotel. After the Reservation Form is filled & feeded into the Opera System, a pre-sequential Confirmation Number is generated by
the system, which is also communicated timely to the prospective client who wishes to lodge within the Hotel . [IT CONTROL ACTIVITY:
REVENUE 01]. Confirmation Number represents a unique ID allocated to each reservation generated by the system every time a new or any
regular guest places a requisition for Accommodation.

The Hotel deploys Opera System as its front-end desk, ERP software & Opera 5.0 is the latest version currently installed throughout the units of
the Hotel.

CHECK-IN OF THE GUESTS:

After the Confirmation Number is received by the guests, the guests visit the Hotel where they undergo a procedure of Check-In as established by
management. Guests who undertake a Reservation over-the-counter after they arrive the Hotel, receives their Confirmation Number & follow their
Check-In process simultaneously.

The guests are required to quote their Confirmation Number to the Guest Servicing Agent (front office staff) at the reception. The Confirmation
Number is punched within the Opera System installed at the reception which then displays the online Reservation Form of the client previously
filled-in upon the requisition. The Reservation Form contains fields related to Customers Profile, Purpose of Stay, and Payment Modes etc, which
is then rechecked & verified by the Guest Servicing Agent (GSA).

Another Registration Form is produced after the prospective guest shows up against its Reservation Form & Confirmation Number, which is
primarily generated through the fields punched-in within Reservation Form, but also contains some additional fields such as Nationality,
Companys name & address where applicable etc. It also contains the Terms & Conditions applied & the responsibilities of the Hotel & the Guests
while they lodge with the Hotel. It is then printed out & any empty fields are either filled-in by the guests or the GSA himself after confirmation from
the guests. The guests check the details within the Form & signs over the form to authorise them. The Form is also initialed by the GSA.
[CONTROL ACTIVITY: REVENUE 02]. The guests are also required to submit a copy of their valid CNIC, Passport or Driving Licence (in case if
the guest is a local national) or the copy of Passport & Visa (in case if the guest is a foreign national) alongwith the initialed Registration Form. The
Registration Form & all the related documents submitted, alongwith the Customers Room Folios which generate as the guests stay within the
Hotel, are retained upon the Front Desk Office until the guests check-out.
The Corporate Clients of the Hotel, where their companies have negotiated Agreements, are charged in arrears for complete amounts overdue,
which mainly incudes Room Rentals. The companies also have negotiated Credit Terms where they settle their dues after a certain charge is
accumulated & within a specified Credit Period.

The Casual & Walk-In Guests are required to settle the complete Room Rental as they check-in the Hotel. The guests are offered a Room Rate
per day by the Sales & Reservation Representative, based upon the Rack Rate as of the day, plus the margin charged to the guests (individual
guests are always charged with a premium over & above the Rack Rate or Benchmark Rate). The margin is negotiated verbally & mutually agreed
upon by the Sales Representative & the guest, based on the number of days of occupancy & the frequency of the visit to the Hotel by the guest.
This pre-negotiated rate is already feeded into the Reservation Form by the staff upon requisition & is charged out to client upon check-in. The
complete Room Rental is paid-off in accordance with the number of days of occupancy by the guest, plus an additional 10% - 15% amount of the
Room Rental is also received by the Hotel as a security deposit by the guest, in order to cover its incidental costs, like Food & Beverages,
Laundry, and Health Club etc.

The Registration Form is forwarded to the Duty Manager by the respective GSA for the purposes of further verification & approvals. The Duty
Manager checks & ensures the Details of the Registration Form against the Customers Room Folio, generated simultaneously with the
Registration Form, & inquires for discrepancy, if any. The Duty Manager also checks that all the compulsory identification evidences have been
submitted & payments are all cleared. The Duty Manager then authorises the Registration Form. [CONTROL ACTIVITY: REVENUE 03]

Room Rates are quoted in USD per night over the hotels website, in line with the global rates currency of Movenpick Hotels & Resorts, & quoted
in PKR equivalents for Individual Clients who check-in. Rooms are sometimes reserved upon an advance payment of Room Charges, i.e. they
require prepayments before Reservation Form is generated. Room Rates are quoted different each day, based upon the market conditions,
seasonal variations etc. Benchmark Rates are decided upon by the Sales & Reservation Department & authorised by the Head of Department.

Payments may be made through Cash, Debit or Credit Card. Cash & Debit Cards bear advance payments, i.e. the complete amount is charged
out in cash or on Customers account in advance, while Customers with Credit Cards bear a restriction over the Credit Card limit which is blocked
up to the amount as calculated & determined by the Hotels management for advance payment of Accommodation & associated facilities, but not
actually charged out. The Credit Card is actually charged in full & final, alongwith any other outstanding payments once the guest checks-out.

USAGE OF VARIOUS SERVICES BY THE GUESTS DURING THEIR ACCOMMODATION:

While the clients, either Corporate, Casual or Individuals etc stay with the Hotel, they order & call for various services & access to amenities
provided within the Hotel for the facilitation of their guests. Some of them include consumption of chocolates & drinks from the Mini-Bar provided
within each of the Rooms, access to Swimming Pools & other sporting facilities etc, which might not be facilitated to the guests on complimentary
basis, or included within the Package Rate availed by the clients. Such provision of services vary from case to case, & charged by the Hotel
separately to the guests.
For instance, if the guests consume edibles from the Mini-Bar, the consumption is recorded on daily basis through a Mini-Bar Supervisor who visits
the room each day & checks the quantities available within the fridge, & compares it with the quantities recorded the prior day. The difference of
quantities in each of the edibles is recorded as the Consumption by the guests & charged to the client while he or she checks-out of the Hotel. The
Mini-Bar Supervisor is required to make entries of such consumption within the Customers Room Folio maintained in soft form upon Opera
Systems, which is allowed to accumulate until the client departs, & the Hotel receives complete settlement upon the check-out. Corporate Clients
are usually charged in accordance with their respective Agreements in place & the provision of services that have been contracted out to them,
while Individual Clients are charged through their Security Deposits, provided at the time of check-in.

In addition to the above, if the guests call for access to other services & amenities provided by the Hotel, a bill is generated upon receipt of goods
& services, & the guests are allowed with an option for immediate payment to the Hotel, either through cash, cheque or Debit/Credit Cards, or to
accumulate such pending services folios to the Customers Room Folio maintained within Opera Systems, & then settle the final payment upon
check-out [CONTROL ACTIVITY: REVENUE 04]. The bills are also retained by the Front Office Staff for the purposes of physical evidence, in
case if the guests call for copies of those services folios &/or vouchers etc. The Customers Room Folio is always signed by the guests for
acknowledgement purposes, alongwith the subsequent Statement of Refund produced in case of any balances left-over from the Security Deposit,
commonly called as Paid-Out Tips by the Hotel management. Such additional services & facilities commonly include order for additional edibles,
like nuts etc or flower baskets, bouquets etc.

CHECK-OUT OF THE GUESTS:

When the guests check-out after their stay is over, they report at the Reception where they return the keys of the Rooms allotted to them & the
Front Office Staff prints a Customers Room Folio where all the pending services folios also appear alongwith the Room Rentals, as they are
always updated within the Opera System. Most of the services folios are also retained as a hard copy, within the dedicated sleeves of each of the
Rooms within the Hotel, provided upon the Reception Desk. All the Customers Room Folios are pre-numbered & three copies of each of them are
produced upon initiation of transaction. One is retained by the Reservation Department, the other by the Finance Department & one is for the
acknowledgement by the guests.

The Client is presented with the Room Folio for settlement of Rooms Rentals & any other extra services folios retained for the ultimate payment
over check-out. The guests signs the Rooms Folios, which also include all the additional folios charges, if any, & settles the entire payment
through cash or Debit/Credit Cards. The Hotel refunds any left-over balance to the guests if any, after the complete settlement [CONTROL
ACTIVITY: REVENUE 05].

ROLE OF THE NIGHT AUDITORS:

Night Auditors of the Hotel is the Hotel Staff deployed by the management for the purpose of performing certain assignments & responsibilities in
relation to the accounting & recognition process of Revenue within the General Ledger. The activity of Night Auditors are performed on daily basis,
& their shift or working hours begin from 12:00 midnight to 8:00 am. Some of the significant activities of Night Auditors include:

1. Spot Checking of House Banks (Cash-in-Hand), Front Office & Restaurants (Cash held at Counter or Cash Till),
2. Sorting of Customers Room Folios who have checked-out during the entire day (Check-Out Folios),
3. Balancing of Credit Cards (currently Visa & MasterCard are only accepted at Hotel), Revenues from MOD, Rebates claimed during the entire
day,
4. Breakdown of Packages offered within Banquets Reservations,
5. Check & inquire for any Exceptions within Room Rate Variance Report & Zero Rates within the Report,
6. Creation of charge of Revenue through the Customers Folios for the Room Rental of the day (the charge is produced by the Night Auditor as
another separate Folio is generated for the day on account of Rooms Income, & another day is accumulated within the cumulative Customers
Folio),
7. Generation of various Reports for reporting & compliance-check purposes,
8. Associated emails to various key management personnel, e.g. GM, DOF etc.

The Night Auditor runs a Pre-Trial Transaction Report, where it checks & cross-matches every transaction that appears within the Pre-Trial Report
with the source documents, i.e. Customers Folios, Vouchers, slips in case of receipts through Credit Card, cash receipts through physical count of
Cash-in-Hand, supports of the Rebates allowed during the day etc [CONTROL ACTIVITY: REVENUE 06].

Subsequently, the Night Auditor runs the automatic & built-in process of extracting relevant data & details from the Customers Profile Folio &
posting them to relevant Account Codes within Sales Ledger, all executed within the Opera Systems. The amounts of Revenue & associated Sales
Tax has been charged in case of Rooms Income through the Opera Systems, which is now only due to be transferred to the Financial Accounting
Software of the entity. Revenue is triggered within the Financial Reporting Process of the entity once the process is run. A Final Daily Trial Balance
Report is generated in the end by the Night Auditor which shows & balances the complete amount of Revenue & Receipts during the entire day, &
posts the cumulative balance of all transactions pertaining to a specific account code, through creating a batch of all identical transactions.
Another Daily Managers Flash Report is also generated by the Night Auditor, which shows the Gross Amounts of Revenue category-wise [IT
CONTROL ACTIVITY: REVENUE 07].

A standard Checklist in respect of Duties of the Night Auditor is also filled-in by the respective Night Audit personnel. The Checklist accounts for
the complete responsibilities of the Night Auditor, & is reviewed & authorized by Mr Rashid Malik - Income & Internal Auditor [CONTROL
ACTIVITY: REVENUE 08].

At the end of each Business Day, a Daily Revenue Report (DRR) & its related Sales Recap Report is generated by the Night Auditor in
spreadsheet. The DRR is checked, & cross-matched against the Managers Flash Report by Mr Rashid Malik Income & Internal Auditor, as both
the reports demonstrate the Gross Revenues category-wise [CONTROL ACTIVITY: REVENUE 09]. The Sales Recap Report is also checked, &
cross-matched against the Daily Trial Balance Report by Mr Rashid Malik Income & Internal Auditor, as both the reports demonstrate the Gross
Revenue streamline-wise [CONTROL ACTIVITY: REVENUE 10].

The Daily Revenue Report (DRR) & related Sales Recap Report is also reviewed & authorised by Mr Shoaib Ahmad Deputy Director Finance
[CONTROL ACTIVITY: REVENUE 11].

RECORDING OF REVENUE WITHIN FINANCIAL ACCOUNTING SOFTWARE OF THE HOTEL:

The Hotel deploys a Financial Reporting ERP named as Micro Fidelity Financials (MFF) for the purpose of Financial Accounting & Reporting. The
Financial ERP is integrated with the front-desk ERP software, Opera through an interface already established & configured between the two ERPs.
The Night Auditor produces batches of transactions with identical account codes, all of which pertain to Revenue based transactions. Such
batches have unique account codes which are recognised by MFF, in order to feed the complete batch of a certain day within the General Ledger
of the entity. Mr Rashid Malik Income & Internal Auditor imports the batches of the last day upon the very next morning of the day, through the
application of certain commands within the ERP. MFF feeds the account balances to the General Ledger in accordance with the codes of those
accounts which owe balances. The Batch Post to General Ledger is finally reviewed & authorized by Ms Anila Shahabuddin Assistant Accounts
Manager, where she approves the batch after she ensures that accurate balances are transferred from Opera to MFF [CONTROL ACTIVITY:
REVENUE 12].

MODES OF PAYMENT ACCEPTED AT THE HOTEL:

The Hotel accepts cash, cheques, Debit & Credit Cards against the settlement of invoices. Some of the commonly-held & traded Foreign
Currencies are also accepted against payments. Such currencies include USD, GBP, Euros, Saudi Riyal, UAE Dirham etc. The Hotel has a
mutually agreed policy of accepting foreign currencies at a discounted exchange rate of 5% than the open market rate of the day. The
management justifies that it isnt a Foreign Currency Broker by business, & needs to cover itself against the Exchange Rate Risk of fluctuations
which would affect its Revenue streams, once the foreign currencies accepted by the Hotel depreciates against the PKR.

SYSTEM-GENERATED REPORTS & IPEs REQUIRED DURING THE COURSE OF AUDIT:

The Reports which would be required from the client & used as an IPE, during the audit of Rooms Income are as follows:

1. Opera Rooms Revenue Journal: This is a detailed Rooms Revenue Report generated at the transaction level, & for a complete month,
through the Opera Systems.

2. Daily Trial Balance Report: This is a final Trial Balance Report generated at clubbed accounts level, for a complete day, through the Opera
systems, upon which is dependent the Batch Post of Revenue for that entire day.
3. Daily Revenue Report (DRR): This is a summarized Revenue Report produced by Night Auditor, which demonstrates Gross Revenues
according to the categories as defined by the entity.

4. Managers Flash Report: This is also a summarized Revenue Report generated by Night Auditor, alongwith the Final Trial Balance Report,
which also demonstrates Gross Revenues according to the categories as defined by the entity.