The project sponsor is JKH, a public company, listed on the Colombo Stock Exchange. As of March 31, 2006, it was owned by a diversified group of shareholders that include:

- directors and spouses 1.4%
- executives & associates 5.6%
- resident individuals & institutions 47.5%
- foreign individuals & institutions 45.4%

In addition, 0.2% of the shareholding was held in the form of Global Depository Receipts (GDR).

The total project cost is estimated to be about $200 million. IFC’s proposed investment in the company is in the form of a corporate facility of up to $100 million, which may comprise of a combination of debt, equity and/or quasi-equity.

100.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	80.0
Equity	20.0

* These investment figures are indicative

Although not all investment plans have been finalized, JKH’s ongoing investments are being implemented at the following locations:

- hotels and resorts in various cities in Sri Lanka, Maldives, India and the Region;
- Colombo port;
- food and beverage plants in Colombo city; and
- Selected real estate locations in Colombo city.

The proposed corporate investment program will help JKH to expand its current operations in various key sectors in Sri Lanka, Maldives, India and the Region. The facility, among other things, will help JKH to refurbish its existing hotels and resorts, as well as to acquire new hotels and resorts in the Maldives, India and the Region thereby contributing to the improvement of business and tourism infrastructure in the region. The expansion of resorts and hotels will, in turn support local employment, trade and business development.

JKH has recently increased its stake in SAGT, which is one of the top 30 private container ports in the world and the leading trans-shipment port in the South Asia region. SAGT is also the first port in the region to comply with the US Customs Security Initiative, which will allow faster customs clearance of goods to the US, providing a considerable comparative advantage to the regional export companies. The recently signed Indo-Lanka Free Trade Agreement, is also expected to increase the demand for SAGT port facilities, and hence, facilitating regional trade between India and Sri Lanka.

The facility will support cross-border equity flows from Sri Lanka to India, Maldives and the Region which will encourage cross border cooperation and integration. The success of JKH’s investments in the Region is also expected to attract other leading companies in Sri Lanka to consider investments in other countries in the South Asia region.

At present, the Group provides employment to 9300 employees, which will increase to about 12,000, including about 2,000 in the potential Business Process Outsourcing (BPO) investment in India.

The Group has a specialized Corporate Social Responsibility (CSR) unit, which works on developing linkage programs with small businesses. It has ongoing linkage projects with:

- 200 ginger farmers in Kandy region from where it sources ginger for its carbonated beverages;
- an NGO in Sri Lanka, which supports 900 people including 160 farmers, from which the Group sources ingredients for ice-cream;
- three specialized SME greenhouses, where about 200 small farmers are employed, for sourcing fruits & vegetables for its hotel operations;
- over 13,500 small tea farmers; and
- small business service providers related to its hotels & resorts businesses.

These various linkage programs will provide a sustainable source of income and livelihood to the local community. Once its planned investments in the leisure sector in India go through, JKH also plans to set up similar linkage programs with suppliers in India as well.

IFC’s long term debt in tenor (up to 9-10 year maturity) is generally not available from the Company’s existing relationship banks. Also due to the small single borrower limits of the local banks relative to the size of the Company’s investment program and needs, an offshore facility will help to bridge the gap.

IFC’s South Asia Enterprise Development Facility (SEDF) and JKH are considering an SME linkage program for the Group’s hotels and resorts both in Sri Lanka and the Maldives. The two are already working on the development of an ecotourism resort on a pilot basis in south Sri Lanka in conjunction with other leading domestic hotel and resort operating companies.

This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects. IFC’s appraisal revealed that the Group is firmly committed to the principles of good corporate governance, human resource development, responsible environmental, health and safety performance and social development. It ascribes to the United Nations Global Compact – a public-private initiative based on a commitment to the Global Compact’s ten principles in the area of human rights, labor standards, environmental responsibility and anti-corruption. The following environment, health and safety and social impacts were analyzed:

- environment management systems;
- human resources and labor relations;
- drainage and solid waste management;
- pollution control related to marine operations;
- life and fire safety precautions on construction sites and retail properties;
- food safety guidelines in food and beverage operations;
- tourism/resort activities on biodiversity and natural resources;
- out grower programs and extension services; and
- corporate social responsibility initiatives.

The sponsor has systems in place to address potentially adverse impacts to ensure that the activities financed by IFC will comply with host country laws and regulations, IFC environmental and social sustainability policy and performance standards, and the applicable World Bank environmental, health and safety guidelines.