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8/22/2019 JKH Circular 2
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JOHN KEELLS HOLDINGS PLC(Company Registration No. PQ 14)
130 Glennie Street, Colombo 02
CIRCULAR TO SHAREHOLDERS
INVESTMENT BY JOHN KEELLS HOLDINGS PLC IN THE
WATERFRONT DEVELOPMENT PROJECT ATJUSTICE AKBAR MAWATHA AND GLENNIE STREET, COLOMBO 2, BORDERING BEIRA LAKE
IF YOU REQUIRE CLARIFICATIONS AS TO THE ACTION YOU SHOULD TAKE YOU SHOULD CONSULT YOUR
INVESTMENT ADVISOR, STOCK BROKER OR OTHER PROFESSIONAL ADVISOR
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ContentsLetter to Shareholders .......................................................... .............................. 2
1. Inormation relating to the Project .......................................................... 3
1.1. Overview o the Project ................................................................. ........ 3
1.2. The investment vehicle and its shareholders ........................................... 5
1.3. The integrated resort concept ........................................................ ........ 5
1.4. Demand drivers ................................................................. ................... 6
1.5. Concessions/Approvals ................................................................. ........ 7
1.6. Financial easibility ............................................................. ................... 8
1.7. Project unding ....................................................... .............................. 8
Annex 1 ....................................................... .................................................... 9
NOTICE OF MEETING ............................................................ ............................ 12
PROXY FORM ........................................................... ....................................... 13
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
Letter to Shareholders
26 July 2013
Dear Shareholder,
INVESTMENT BY JOHN KEELLS HOLDINGS PLC IN THE WATERFRONT DEVELOPMENT PROJECT AT
JUSTICE AKBAR MAWATHA AND GLENNIE STREET, COLOMBO 2, BORDERING BEIRA LAKE
We write urther to the announcement made on 26 July 2013 convening an Extraordinary General Meeting or approving the
aoresaid investment as a Major Transaction.
As per our announcement dated 10 July 2013 John Keells Holdings PLC (JKH) communicated that:
IthasproposedtotheGovernmentofSriLankaaproject,valuedinexcessofUSD650Million,involvingthedeveloping,
owning, managing, operating, selling, leasing and renting a luxury multi/mixed use Integrated Resort (the Project) in the
land owned and occupied by its subsidiaries Ceylon Cold Stores PLC (CCS), John Keells PLC (JKL), John Keells Properties
(Private) Limited (JKP) and Waterront Properties (Private) Limited (Project Company) in Colombo 2.
JohnKeellsHoldingsPLCtogetherwithitssubsidiariesCCS,JKLandJKPwillbemajorityshareholdersintheProject
Company.
YourBoardofDirectorshasapprovedtheProject,inprinciple,subjecttoShareholderapproval(includingapprovalasaMajorTransaction). The Project Company will enter into an agreement with the Board o Investment o Sri Lanka to acilitate the
requisite approvals which are at an advanced stage including the approval as a Strategic Development Project.
UponreceiptofrequisiteapprovalstothesatisfactionofyourBoardofDirectors,furtherannouncementswillbemade.
The anticipated investment in the Project by JKH is greater than hal the value o the assets o JKH as at 30 June 2013 and
thereore constitutes a Major Transaction as per section 185 o the Companies Act No 7 o 2007.
Your Board o Directors recommends the investment by John Keells Holdings PLC in the Project based on the rationale outlined
herein.
To the best o the Directors knowledge and belie, all risk actors which are material to Shareholders in making an inormed
decision on the proposed investment have been considered and action taken, and planned, to mitigate the risks insoar as such is
commercially easible.
In the aoresaid, Shareholder consent is sought by way o a SPECIAL RESOLUTION or the investment by John Keells Holdings
PLC in Waterront Properties (Private) Limited as a MAJOR TRANSACTION in terms o section 185 o the Companies Act No 7
o 2007, as a urther step towards obtaining all approvals, statutory and otherwise, to commence the Project in terms o the
annexed Notice convening the Extraordinary General Meeting.
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1. Inormation relating to the Project
1.1. Overview o the Project
Project description and objective
TheProjectisanintegratedresortconsistingofmultiplebusinessesincludingaluxuryhotel,conventioncentre,
entertainment and gaming acilities, international standard shopping mall, luxury condominiums, serviced
apartments and oce space similar to the integrated resort developments seen in the South East Asian region. It is
a tourism related Project targeted towards the creation o a large and unique development, which will aesthetically
and unctionally add to transorming the landscape o Colombo, potentially making it one o the most sought ater
destinations in South Asia and will urther complement the businesses o the main industry groups o the John
Keells Group.
TheProjectisforthedevelopment,construction,equipping,commissioning,owning,managing,operating,selling,
leasing, and renting a luxury multi/mixed use iconic integrated resort and to carry on all related business activities
associated therewith including but not limited to the managing, leasing/renting, selling and operating the aoresaid
luxury hotel, convention centre, entertainment and gaming acilities, international standard shopping mall, luxury
condominiums, serviced apartments and oce space.
TheProjectwillcatertomultipleemergingdemanddriversincludingthegrowingmobilityandspendingpowerof
outbound South Asian regional travellers, the increase in global connectivity to Sri Lanka and the accompanying
growth in Sri Lankas tourism sector and the growing demand or entertainment/gaming and retail rom the Middle
East, India and East Asia.
TheProjectisenvisagedtocreateamultipliereffectintheeconomy,spurringgrowthinindustriesrangingfrom
leisure, entertainment, ood and beverage, consumer durables, travel and nancial services among others, as
witnessed in similar developments in the region.
Project features
This development is designed by Balmond Studio Limited, a design rm ounded by Sri Lankan born Cecil Balmond, one
o the worlds most infuential designers. Mr. Balmond currently holds the Paul Philippe Cret chair at Penn Design as
Proessor o Architecture at University o Pennsylvania USA and was the Deputy Chairman o Arup UK, one o the worlds
leading engineering consulting rms. Under Mr. Balmonds artistic direction, Arup has designed some o the worlds most
amous structures including the CCTV tower in China with Rem Koolhaas. He has also been the creative orce behindLondons high prole Serpentine Pavilion. One o Mr. Balmonds most recent projects is the Arcelor Mittal Orbit a 120m
high sculpture designed with Anish Kapoor or the 2012 Olympics in London.
The Project is expected to be completed over a period o ve (5) years or eight (8) years depending on the timing o
Phase 2, i undertaken. It should be noted that the Project Company has the fexibility to undertake the Project in two
phases, with Phase 2 being undertaken subject to, and based on, prevalent market conditions.
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
Phase 1
Luxury hotelThe Project will eature a ve-star luxury hotel with approximately 800 rooms with the attendant acilities.
Convention centre
The convention centre will be built to cater to approximately 2,500 guests at a given time.
Shopping mall
The shopping mall will comprise approximately 400,000 square eet o built-up area.
Entertainment and gaming acilities
The entertainment and gaming acilities will span approximately 150,000 square eet and will be situated with
access to both the hotel and retail acilities.
Luxury condominiums (Residential tower 1)
The Project will have a residential tower which will house approximately 240 luxury condominiums.
Car park acility
The car park acility will eature approximately 2,500 slots.
Phase 2
Serviced apartments or condominiums (Residential tower 2)
This tower will house approximately 200 serviced or residential apartment units.
Ofce complex
The Project will have an oce tower within the property with a built up area o approximately 400,000 square eet.
The Project will consist o a total built up area o approximately 4,500,000 square eet.
Please note that the confguration stated herein is based on the current design envisaged or the Project and may be
adjusted within the overall parameters o an integrated resort.
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1.2. The investment vehicle and its shareholders
WaterfrontProperties(Private)Limited,theProjectCompany,asubsidiaryofJKH,hasbeenincorporatedto
undertake the development o the Project.
TheProjectentailsthedevelopmentofthelandsownedandoccupiedbyCCS,JKL,JKPandtheProjectCompany
at Colombo 2, all subsidiary companies o JKH; CCS, JKL and JKP will receive shares in the Project Company in
consideration or the lands transerred to the Project Company.
ThecombinationofthelandownedbyCCS,JKL,JKPandtheProjectCompany,allsubsidiarycompaniesofJKH,
and land, previously occupied by subsidiaries o JKH on long term leases and Annual Permits, to be leased rom
the Board o Investment o Sri Lanka or a period o 99 years, creates a plot area large enough to undertake an
integrated resort o the scale envisaged.
ThescaleoftheProjectallowstheattractionofconcessionsandbenetsasaffordedundertheStrategic
Development Projects Act (detailed in 1.5 herein). Such benets have a positive impact on the Project nancials
as a result o a reduction in the capital expenditure and the tax benets on operational cash fows which positively
impact the cash fows to equity owners on a sustainable basis.
BasedonestimatedProjectcostsandtheenvisagedcapitalstructure,JKHwillownapproximately79.24%*ofthe
ProjectCompany.WithCCS,JKLandJKPowningapproximately14.15%*,5.03%*and1.57%*respectively,JKH
willhaveeffectivecontrolof96.70%*.
* Can vary based on actual exchange rates
1.3. The integrated resort concept
Theconceptofanintegratedresortisapropertydevelopmentofferingamixedproductportfoliowhichincludesa
luxury hotel, convention centre, entertainment and gaming acilities, international standard shopping mall, luxury
condominiums, serviced apartments and oce space.
Thisformatenablescustomerstoaccessanarrayofproductsandserviceswithminimaleffort.
TheconcepthasgainedimmensepopularityintheAsia-Pacicregionduringthepastdecadeasevidenced
particularly in Singapore, Macau and the Philippines.
Thecompositeofferingofaluxuryhotel,entertainmentandgamingfacilitiesandinternationalstandardshopping
mall through a single destination has appealed to many regional and western tourists, and the region has seen an
increased number o tourist arrivals as a result.
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
1.4. Demand drivers
Sri Lankas macro level conditions SriLankastourismindustryremainedstagnantduringthe30-yearconictperiodwithtouristarrivalsbeingbound
within a narrow range. However, during this period, tourism within the region grew at a rapid pace, demonstrating
the potential that Sri Lanka can exploit in its tourism industry.
Table: International Tourist Arrivals in Millions
Country Year 2012
Malaysia 25.0
Thailand 22.3
Indonesia 8.0
Vietnam 6.8
Cambodia 3.6
Sri Lanka 1.0
Source: UNWTO
SriLankaseconomy,intermsofgrossdomesticproduct(GDP),grewby8.0%,8.3%and6.4%in2010,2011and
2012respectively.ThelatestCentralBankofSriLankatargetforgrowthin2013isestimatedtobe7.5%whilethe
AsianDevelopmentBankhasforecastedagrowthof6.8%.
Leveraging on the strategic location of Sri Lanka Onthetourismfront,keysourcemarketssuchasIndia,theMiddleEastandEastAsiaarepoisedtogenerate
signicant trac to the country on the back o the relatively short fight durations to access the destination via key
airports.
TheColombo-KatunayakeexpresswaywhichisscheduledtobeinoperationbySeptember2013wouldreduce
travel time rom the countrys main international airport to Colombo to approximately 20 minutes.
ArrangementstoincreasethecurrentpassengerhandlingcapacityattheBandaranaikeInternationalAirportwould
enable better travel fow to and rom Sri Lanka.
SriLankaoutperformsregionalpeersinsocialandeconomicbenchmarks,andwithitslocation,ispoisedtobecome
a viable hub or tourism, particularly entertainment and gaming activities similar to other established regional
destinations such as Macau, Singapore and Philippines.
Proximity to key markets in the sub-continent and SAARC region
SriLankaissituatedamidstahighpopulationdensityregionwhichincludesIndia,Bangladesh,Pakistanand
Maldives; the region collectively generates material outbound tourist volumes in the high spending tourist brackets.
India,currentlythe10thlargesteconomyintheworldandgearinguptoreachUSD2TrillioninGDPbytheendof
2013, creates great potential or Sri Lanka to strengthen its retail, leisure and tourism industry.
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Fortherstninemonthsof2012,670,000IndiantouriststravelledtoSingaporewhileMalaysiareceived691,000
Indian tourists or the ull year.
Indiantouristswerethe5thand6thlargestcontributorstoSingaporesandMalaysiastouristarrivalsrespectively.
ThemixedofferingoftheProjectisviewedasacatalyst,andauniquesellingpoint,inattractingashareofthe
Indian outbound travel market.
IndiantouristswouldndtheoptionoftravellingtoSriLankamoreconvenientasopposedtotravellingtoEastAsian
destinations to experience competing oerings.
1.5. Concessions/Approvals
Strategic Development Projects Act Havingconsideredthemagnitude,thestrategicimportanceofthisProjecttothecountry,theBoardofInvestments
o Sri Lanka (BOI) has identied the Project as a Strategic Development Project under the Strategic Development
Projects Act 14 o 2008 (Amended) and an agreement has been entered into between the Project Company and the
BOI in this regard.
AspertheGazettepublishedon18July2013(Appendedhereininannex1)under,andintermsof,theStrategic
Development Projects Act, subject to other approvals in terms o the said Act, the Project is to receive, inter alia,
exemptions rom:
a. The provisions o the Inland Revenue Act No. 10 o 2006 relating to the imposition o income tax on the Project
Company on the prot and income generated rom the non-gaming activities o the Integrated Resort or a
period o ten (10) years.
i. The said Tax Exemption Period to commence rom the rst year in which the Project Company makes
taxable prot or three (03) years ater commencement o commercial operations, whichever alls rst.
ii. Ater the expiration o the aoresaid Tax Exemption Period reerred to above, the prots and income o the
ProjectCompanyshallbechargedattherateofthelowerofsixpercentum(6%)orftypercentum(50%)
o the prevailing tax rate or the hotel industry, or a period o teen (15) years immediately succeeding the
last date o the Tax Exemption Period.
b. Income tax on dividends distributed to the shareholders out o the exempted prot during the said Tax
Exemption Period and one year thereater.
c. Withholding Tax, on interest paid on oreign loans and debt obtained or capital expenditure and on technical
ees.
d. Value Added Tax (VAT) on the importation o project related goods and services and the local purchases
o project related goods and services, PAYE tax or oreign employees; Customs Duty and Port and Airport
Development Levy on project related items and Construction Industry Guarantee Fund Levy.
Other approvals
The Project Company is currently at an advanced stage o negotiation with relevant statutory and other authorities to
obtain other approvals.
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
1.6. Financial easibility
TheassumptionsandnancialprojectionsarebasedontheknowledgeandpriorexperienceofJKHincityhotels,
banqueting, retail malls and residential apartments and validated with international benchmarks.
ThetotalcostofthePhase1and2willamounttoapproximatelyUSD820MillionandwithimplementationofPhase
2 being subject to market conditions. It is envisaged that the minimum investment in Phase 1 will be USD650
Million.
BasedontheProjectassumptions,theBoardofDirectorsexpectstheforecastedreturnsinUSdollartermstobe
value accretive to the Project Company and to a JKH Shareholder.
TheexibilityincorporatedinthecongurationoftheProjectaswellastheoptionsavailableinthenancial
structuring o the Project provide an opportunity to de-risk exposure in the event o a change in the macro
environment.
1.7. Project unding
TheProjectwillbenancedthroughacombinationofequityforlandtransferredfromgroupsubsidiaries(CCS,JKL
and JKP), equity inusions into the Project Company, pre-sales o residential apartments during the construction
phase, and debt at the Project Company.
JKHwillfunditsequityrequirementfortheProjectthroughexistingcashreservesandacombinationofdebtand
equity, as appropriate, over the period o the Project so as to ensure an optimum investment by JKH in the Project
Company. I appropriate, and at the relevant time, JKH may seek an inusion o capital to JKH.
TheinitialinvestmentintheProjectCompanywillcompriselandofapproximatelyUSD60Million,equityinfusionrom JKH o approximately USD240 Million and debt or the balance at Project Company. At peak unding, the
Project will have a debt-equity ratio o approximately 60:40.
ProjectCompanyhasmandatedaleadingforeignnancialinstitutiontostructureandraisetherequireddebt
nancing requirements or the Project and signicant progress has been achieved in this regard.
Upon receipt o Shareholder consent as aoresaid or the investment by JKH in the Project Company and obtaining o all
other necessary approvals and or execution o contracts necessary to undertake the Project by the Project Company to
the satisaction o the Board, your Board o Directors intends to make the requisite investments in the Project Company.
The requisite resolution to give eect to the above is set out in the attached notice convening an Extraordinary General
Meeting (EGM) to be held or that purpose on 23 August 2013.
By Order o the Board
JOHN KEELLS HOLDINGS PLC
Keells Consultants (Private) Limited
Secretaries
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Annex 1
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
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End o Annex 1
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
NOTICE OF MEETING
Notice is hereby given that an Extraordinary General Meeting o John Keells Holdings PLC will be held on 23 August 2013 at
10.00 a.m. at The Auditorium, the Institute o Chartered Accountants o Sri Lanka, 30A, Malalasekera Mawatha (Longdon Place),
Colombo 7, to consider and i thought t, to pass the ollowing as a Special Resolution:
SPECIAL RESOLUTION MAJOR TRANSACTION
IT IS HEREBY RESOLVED THAT
The ollowing transaction which constitutes a Major Transaction in terms o Section 185 o the Companies Act No. 7 o 2007 be
and is hereby approved and the Directors be authorised to:
a. Invest in the Project, being a project or the development, construction, equipping, commissioning, owning, managing,
operating, selling, leasing and renting a luxury multi/mixed use iconic integrated resort consisting o multiple businesses
including a luxury hotel, convention centre, entertainment and gaming acilities, international standard shopping mall, luxury
condominiums, serviced apartments and oce space and at an estimated Project cost o United States Dollars Eight Hundred
and Twenty Million (USD820 Million) through Waterront Properties (Private) Limited (PV 82153) (the Project Company), a
special purpose vehicle incorporated or this purpose.
b. Inuse the required unds or John Keells Holdings PLCs equity subscription in the Project Company through existing cash
reserves and a combination o debt and equity, as appropriate, over the duration o the Project, subject to such approvals as
may be necessary in law; and
c. To take such urther and other action as the Board o Directors shall deem appropriate and necessary or the commencement
and execution o the Project including raising debt, borrowing, mortgaging or hypothecating property, guaranteeing or
indemniying the perormance o obligations by the Project Company.
By Order o the Board
JOHN KEELLS HOLDINGS PLC
Keells Consultants (Private) Limited
Secretaries
26 July 2013
Notes:
i. A member unable to attend is entitled to appoint a Proxy to attend and vote in his/her place.
ii. A Proxy need not be a member o the Company.
iii. A member wishing to vote by Proxy at the Meeting may use the Proxy Form enclosed.
iv. In order to be valid, the completed Proxy Form must be lodged at the Registered Oce o the Company not less than 48
hours beore the meeting.
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PROXY FORM
I/We ......
...... o
.. being a member/s o John Keells Holdings PLC hereby ppoint
..... o
...
or ailing him/her
MR. SUSANTHA CHAMINDA RATNAYAKE or ailing him
MR. AJIT DAMON GUNEWARDENE or ailing him
MR. JAMES RONNIE FELITUS PEIRIS or ailing him
MR. EMMANUEL FRANKLYN GAMINI AMERASINGHE or ailing him
MR. TARUN DAS or ailing him
MRS. SITHIE SUBAHNIYA TIRUCHELVAM or ailing her
DR. INDRAJITH COOMARASWAMY or ailing him
MR. ANTHONY RANJIT GUNASEKARA or ailing him
MR. MOHAMED ASHROFF OMAR o Colombo
as my/our proxy to represent me/us and vote on my/our behal at the Extraordinary General Meeting o the Company to be held
on 23 August 2013 at 10.00 a.m. at The Auditorium, the Institute o Chartered Accountants o Sri Lanka, 30A, Malalasekera
Mawatha (Longdon Place), Colombo 7, and at any adjournment thereo, and at every poll which may be taken in consequence
thereo.
I/We, the undersigned, hereby direct my/our proxy to vote or me/us and on my/our behal on the specied Resolution as
indicated by the letter X in the appropriate cage:
FOR AGAINST
SPECIAL RESOLUTION - MAJOR TRANSACTION
Signed on this day o Two Thousand and Thirteen.
.
Signature/s o Shareholder/s
NOTE: INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.
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JOHN KEELLS HOLDINGS PLC | CIRCULAR TO SHAREHOLDERS
INSTRUCTIONS AS TO COMPLETION OF PROXY
1. Please perect the Form o Proxy by lling in legibly your ull name and address, signing in the space provided and lling inthe date o signature.
2. The completed Form o Proxy should be deposited at the Registered Oce o the Company at No. 130, Glennie Street,
Colombo 2, not later than 48 hours beore the time appointed or the holding o the Meeting.
3. I the Form o Proxy is signed by an Attorney, the relevant Power o Attorney should accompany the completed Form o Proxy
or registration, i such Power o Attorney has not already been registered with the Company.
4. I the appointer is a company or Corporation, the Form o Proxy should be executed under its Common Seal or by a duly
authorised ocer o the company or Corporation in accordance with its Articles o Association or Constitution.
5. I this Form o Proxy is returned without any indication o how the person appointed as Proxy shall vote, then the Proxy shall
exercise his/her discretion as to how he/she votes or, whether or not he/she abstains rom voting.
Please fll in the ollowing details:
Name :
Address :
.
.
Jointly with :
Share Folio No. :
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