CIRCULAR TO SHAREHOLDERS
INVESTMENT BY JOHN KEELLS HOLDINGS PLC IN THE WATERFRONT DEVELOPMENT PROJECT AT JUSTICE 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
Contents
Letter to Shareholders......................................................................................... 2 1. 1.1. 1.2. 1.3. 1.4. Information relating to the Project........................................................... 3 Overview of the Project.......................................................................... 3 The investment vehicle and its shareholders............................................ 5 The integrated resort concept................................................................. 5 Demand drivers..................................................................................... 6
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 further to the announcement made on 26 July 2013 convening an Extraordinary General Meeting for approving the aforesaid investment as a Major Transaction. As per our announcement dated 10 July 2013 John Keells Holdings PLC (JKH) communicated that: It has proposed to the Government of Sri Lanka a project, valued in excess of USD650 Million, involving the developing, 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 Waterfront Properties (Private) Limited (Project Company) in Colombo 2. John Keells Holdings PLC together with its subsidiaries CCS, JKL and JKP will be majority shareholders in the Project Company. Your Board of Directors has approved the Project, in principle, subject to Shareholder approval (including approval as a Major Transaction). The Project Company will enter into an agreement with the Board of Investment of Sri Lanka to facilitate the requisite approvals which are at an advanced stage including the approval as a Strategic Development Project. Upon receipt of requisite approvals to the satisfaction of your Board of Directors, further announcements will be made. The anticipated investment in the Project by JKH is greater than half the value of the assets of JKH as at 30 June 2013 and therefore constitutes a Major Transaction as per section 185 of the Companies Act No 7 of 2007. Your Board of Directors recommends the investment by John Keells Holdings PLC in the Project based on the rationale outlined herein. To the best of the Directors knowledge and belief, all risk factors which are material to Shareholders in making an informed decision on the proposed investment have been considered and action taken, and planned, to mitigate the risks insofar as such is commercially feasible. In the aforesaid, Shareholder consent is sought by way of a SPECIAL RESOLUTION for the investment by John Keells Holdings PLC in Waterfront Properties (Private) Limited as a MAJOR TRANSACTION in terms of section 185 of the Companies Act No 7 of 2007, as a further step towards obtaining all approvals, statutory and otherwise, to commence the Project in terms of the annexed Notice convening the Extraordinary General Meeting.
1.
Project features
This development is designed by Balmond Studio Limited, a design firm founded by Sri Lankan born Cecil Balmond, one of the worlds most influential designers. Mr. Balmond currently holds the Paul Philippe Cret chair at Penn Design as Professor of Architecture at University of Pennsylvania USA and was the Deputy Chairman of Arup UK, one of the worlds leading engineering consulting firms. Under Mr. Balmonds artistic direction, Arup has designed some of the worlds most famous structures including the CCTV tower in China with Rem Koolhaas. He has also been the creative force behind Londons high profile Serpentine Pavilion. One of Mr. Balmonds most recent projects is the Arcelor Mittal Orbit a 120m high sculpture designed with Anish Kapoor for the 2012 Olympics in London. The Project is expected to be completed over a period of five (5) years or eight (8) years depending on the timing of Phase 2, if undertaken. It should be noted that the Project Company has the flexibility to undertake the Project in two phases, with Phase 2 being undertaken subject to, and based on, prevalent market conditions.
Phase 1
Luxury hotel The Project will feature a five-star luxury hotel with approximately 800 rooms with the attendant facilities. 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 feet of built-up area. Entertainment and gaming facilities The entertainment and gaming facilities will span approximately 150,000 square feet and will be situated with access to both the hotel and retail facilities. Luxury condominiums (Residential tower 1) The Project will have a residential tower which will house approximately 240 luxury condominiums. Car park facility The car park facility will feature approximately 2,500 slots.
Phase 2
Serviced apartments or condominiums (Residential tower 2) This tower will house approximately 200 serviced or residential apartment units. Office complex The Project will have an office tower within the property with a built up area of approximately 400,000 square feet. The Project will consist of a total built up area of approximately 4,500,000 square feet. Please note that the configuration stated herein is based on the current design envisaged for the Project and may be adjusted within the overall parameters of an integrated resort.
Sri Lankas economy, in terms of gross domestic product (GDP), grew by 8.0%, 8.3% and 6.4% in 2010, 2011 and 2012 respectively. The latest Central Bank of Sri Lanka target for growth in 2013 is estimated to be 7.5% while the Asian Development Bank has forecasted a growth of 6.8%.
For the first nine months of 2012, 670,000 Indian tourists travelled to Singapore while Malaysia received 691,000 Indian tourists for the full year. Indian tourists were the 5th and 6th largest contributors to Singapores and Malaysias tourist arrivals respectively. The mixed offering of the Project is viewed as a catalyst, and a unique selling point, in attracting a share of the Indian outbound travel market. Indian tourists would find the option of travelling to Sri Lanka more convenient as opposed to travelling to East Asian destinations to experience competing offerings.
1.5. Concessions/Approvals
Strategic Development Projects Act
Having considered the magnitude, the strategic importance of this Project to the country, the Board of Investments of Sri Lanka (BOI) has identified the Project as a Strategic Development Project under the Strategic Development Projects Act 14 of 2008 (Amended) and an agreement has been entered into between the Project Company and the BOI in this regard. As per the Gazette published on 18 July 2013 (Appended herein in annex 1) under, and in terms of, the Strategic Development Projects Act, subject to other approvals in terms of the said Act, the Project is to receive, inter alia, exemptions from: a. The provisions of the Inland Revenue Act No. 10 of 2006 relating to the imposition of income tax on the Project Company on the profit and income generated from the non-gaming activities of the Integrated Resort for a period of ten (10) years. i. The said Tax Exemption Period to commence from the first year in which the Project Company makes taxable profit or three (03) years after commencement of commercial operations, whichever falls first. ii. After the expiration of the aforesaid Tax Exemption Period referred to above, the profits and income of the Project Company shall be charged at the rate of the lower of six per centum (6%) or fifty per centum (50%) of the prevailing tax rate for the hotel industry, for a period of fifteen (15) years immediately succeeding the last date of the Tax Exemption Period. b. Income tax on dividends distributed to the shareholders out of the exempted profit during the said Tax Exemption Period and one year thereafter. c. Withholding Tax, on interest paid on foreign loans and debt obtained for capital expenditure and on technical fees. d. Value Added Tax (VAT) on the importation of project related goods and services and the local purchases of project related goods and services, PAYE tax for foreign 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 of negotiation with relevant statutory and other authorities to obtain other approvals.
Secretaries
Annex 1
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End of Annex 1
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NOTICE OF MEETING
Notice is hereby given that an Extraordinary General Meeting of John Keells Holdings PLC will be held on 23 August 2013 at 10.00 a.m. at The Auditorium, the Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha (Longdon Place), Colombo 7, to consider and if thought fit, to pass the following as a Special Resolution: SPECIAL RESOLUTION MAJOR TRANSACTION IT IS HEREBY RESOLVED THAT The following transaction which constitutes a Major Transaction in terms of Section 185 of the Companies Act No. 7 of 2007 be and is hereby approved and the Directors be authorised to: a. Invest in the Project, being a project for the development, construction, equipping, commissioning, owning, managing, operating, selling, leasing and renting a luxury multi/mixed use iconic integrated resort consisting of multiple businesses including a luxury hotel, convention centre, entertainment and gaming facilities, international standard shopping mall, luxury condominiums, serviced apartments and office space and at an estimated Project cost of United States Dollars Eight Hundred and Twenty Million (USD820 Million) through Waterfront Properties (Private) Limited (PV 82153) (the Project Company), a special purpose vehicle incorporated for this purpose. b. Infuse the required funds for John Keells Holdings PLCs equity subscription in the Project Company through existing cash reserves and a combination of debt and equity, as appropriate, over the duration of the Project, subject to such approvals as may be necessary in law; and c. To take such further and other action as the Board of Directors shall deem appropriate and necessary for the commencement and execution of the Project including raising debt, borrowing, mortgaging or hypothecating property, guaranteeing or indemnifying the performance of obligations by the Project Company. By Order of 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 of 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 Office of the Company not less than 48 hours before the meeting.
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PROXY FORM
I/We ...... ...... of .. being a member/s of John Keells Holdings PLC hereby ppoint ..... of ... or failing him/her MR. SUSANTHA CHAMINDA RATNAYAKE MR. AJIT DAMON GUNEWARDENE MR. JAMES RONNIE FELITUS PEIRIS MR. EMMANUEL FRANKLYN GAMINI AMERASINGHE MR. TARUN DAS MRS. SITHIE SUBAHNIYA TIRUCHELVAM DR. INDRAJITH COOMARASWAMY MR. ANTHONY RANJIT GUNASEKARA MR. MOHAMED ASHROFF OMAR or failing him or failing him or failing him or failing him or failing him or failing her or failing him or failing him of Colombo
as my/our proxy to represent me/us and vote on my/our behalf at the Extraordinary General Meeting of the Company to be held on 23 August 2013 at 10.00 a.m. at The Auditorium, the Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha (Longdon Place), Colombo 7, and at any adjournment thereof, and at every poll which may be taken in consequence thereof. I/We, the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the specified Resolution as indicated by the letter X in the appropriate cage: SPECIAL RESOLUTION - MAJOR TRANSACTION FOR AGAINST
Signed on this day of Two Thousand and Thirteen. . Signature/s of Shareholder/s NOTE: INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.
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INSTRUCTIONS AS TO COMPLETION OF PROXY 1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature. 2. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 130, Glennie Street, Colombo 2, not later than 48 hours before the time appointed for the holding of the Meeting. 3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company. 4. If the appointer is a company or Corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorised officer of the company or Corporation in accordance with its Articles of Association or Constitution. 5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.
. . Jointly with :
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