Wealth Creation Through Sustainable Development in the Hospitality Industry “Looking Beyond Today” The KHH Botswana Hospitality and Tourism Project Presentation

Wealth Creation Through Sustainable Development in the Hospitality Industry

“Looking Beyond Today”

The KHH Botswana Hospitality and Tourism Project

Presentation to the Government of Botswana

By

Kaanan Hospitality HoldingsDecember, 2012

Kaanan Hospitality Holdings 2

THE KHH GROUP APPROACH-A COMPARISON

Conventional Business Proposal

i. Education costs of 50,000 Pula annually per Batswana student borne by the Government

ii. Based on a Batswana student body of 3,000, annual direct cost to Botswana is 150,000,000 Pula

iii. No plan to partner with Botswana cottage industries

iv. No plan to develop and utilize agricultural and livestock resources of Botswana

v. Focus is on profitability with no emphasis on eco tourism, sustainable development or citizen economic empowerment

vi. No affiliation with World Class hospitality institutions for curriculum and finishing in the US and other international locations resulting in graduates that are not attractive to top tier employers

vii. No guarantee of international student body to serve as ambassadors for the hospitality institute and providing it with international standing

viii. No comprehensive plan to develop resort in the Okavango Delta and a World Class golf resort with top tier operators utilizing sustainable development practices

ix. No discussions with top tier operators (e.g. Ritz Carlton, Taj Group)

x. Developer solicits Government of Botswana

KHH Group Approach

i. Education costs of 50,000 Pula per Batswana student borne by KHH

ii. Based on a Batswana student body of 3,000, annual direct cost savings is 150,000,000 Pula

iii. Utilization of Botswana cottage industries is crucial

iv. Utilization and showcasing of local agricultural and livestock resources are integral

v. Focus on eco tourism and citizen economic empowerment as profits are derived from non-Batswana sources

vi. Establishment of World Class Johnson and Wales affiliated hospitality institution offering finishing abroad including the US resulting in graduates that will be sought after by top tier employers

vii. Hospitality institute will be guaranteed an international student body though its sister school in India providing global visibility

viii. Well trained workforce from hospitality institute integral to successfully establishment of Delta resort and golf resort with top tier operators utilizing sustainable development practices

ix. In preliminary negotiations with top tier operators (e.g. Ritz Carlton, Taj Group)

x. KHH Group introduced as a result of a mandate by the Government and President’s office

INTRODUCTION

“Looking Beyond Today”

Our Mission

Background

The Case for Diversification

Kaanan Hospitality Holdings


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“LOOKING BEYOND TODAY”

“As a result of our high dependence on international markets (for diamonds), Botswana is vulnerable to any slow-down in global demand. Prudent policy choices that promote efficiency in the use of available resources as well as those that enhance development of alternative sources of revenues are therefore necessary.”

“Between July and December 2011, for example, diamond sales fell by over 70%”

“To facilitate employment opportunities there is a need to ensure that the education system produces graduates of the right caliber for the domestic as well as the global job market.”

The “Government must exercise the discipline of focusing expenditure on high return activities particularly in the non-mineral sector…”

“Botswana’s future growth can only be sustained through more rapid expansion of the private sector that is internationally competitive and integrated into the global economy.”

Honourable O.K. Matambo, Minister of Finance and Development PlanningDelivered to the National Assembly, February 2012


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Our Mission

Kaanan Hospitality Holdings (“KHH”) proposes to partner with the Government of Botswana (the “Government”) in creating new centers of wealth generation for the country and Batswana promoting citizen economic empowerment by developing and managing world-class institutions in the hospitality industry utilizing sustainable development and operating practices.

Background

KHH’s proposal in creating new centers of sustainable wealth generation forBotswana and its people is focused on developing and managing world-classinstitutions in the hospitality industry (the “KHH Botswana Hospitality and TourismProject”) in the following areas:

• Education: the development and implementation a hospitality institute• Eco-Tourism: the construction of top tier hotel/resorts including golf. The tourism

developments will also serve an important function as one of the finishingschools for the Batswana population.

The project is a spin off from the mandate issued by the Government of Botswana toincrease private sector investment in the diverse industries across Botswana. To thisend, the KHH Botswana Hospitality and Tourism Project fills the gap by implementing a full service hospitality college with construction of hotel and resorts that will create new jobs and strengthen the job supply market. Perhaps one of the most distinguishing features of the KHH Hospitality and Tourism Project is that it creates a virtuous cycle of reinvestment by enabling technology transfer and economic, social and environmental development on a local, regional and national level. Education delivered through the hospitality college, including training in hospitality, tourism, cottage industry sourcing and sustainable development is conducive for the expansion of ecotourism and sustainable hospitality resorts in Botswana.


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The Case For Diversification

• The economy of Botswana is disproportionally reliant on the sale of diamonds and minerals as it produces nearly one fourth of the world’s supply of these precious gems.

• Heavy reliance on diamond sales creates a vulnerability to worldwide movements in diamond demand

• The recessionary environment that has plagued most developed economies over the past several years has negatively impacted the Botswana economy as demand for precious gems has fallen.

• The impact has been severe enough to result in a downgrading of its sovereign credit ratings, though it is still investment grade (S&P “A-”).

WHY SUSTAINABLE DEVELOPMENT IN HOSPITALITY

BENEFITS TO BOTSWANA

General Benefits

Employment Benefits

Environmental Benefits

Education Accessibility and Career Creation


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Why Sustainable Development in HospitalityGENERAL BENEFITS TO BOTSWANA

Properly run hospitality institutions have proven to be very effective in elevating a country’s profile for international investment and tourism with the foundation structured around the establishment of a hospitality college. Economic diversification though the expansion of a hospitality industry utilizing sustainable practices has significant benefits for the entire economy including:

Construction of a world class hospitality college will attract the attention of top tier resort operators such as the Ritz Carlton, expanding tourism in Botswana which has a tremendous positive ripple effect throughout the economy. A top tier resort will view the availability of a well trained local labor force as a significant benefit and a variable which lowers their investment risk.

In conjunction with resorts, develop golf courses and refurbish existing courses with the intent of expanding an already lucrative sports industry.

A hospitality college and resorts create significant demand for both skilled and semi-skilled employment so that all Batswana socioeconomic and age groups will benefit from new employment opportunities both nationally and internationally.

Local agricultural businesses will be the beneficiary of a significant boost in demand for their products as the hospitality college and resorts will need to source meats, poultry, and other agricultural goods locally.

Given the demand for locally sourced products, investment in agricultural planning and infrastructure and horticultural development is justified and will not be just another entitlement resulting in the development and transfer of valuable skills to Batswana and expansion of cottage industries.


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Why Sustainable Development in HospitalityEMPLOYMENT BENEFITS

Investment into industries to support the construction and maintenance of the hospitality college and resort will give rise to new entrepreneurs among Batswana.

A world class hospitality college attracts an international base of students thereby boosting the country’s international visability. International students are great ambassadors for tourism.

Graduates who travel abroad for finishing or employment will need to care for their families resulting in an increase in transfer payments-so while graduates may be earning in dollars, for example, the benefit of a part of these earnings will be spent within the Botswana economy.

Development of sustainable golf courses elevates another international sport within Botswana adding to tourism .

Growth in the availability of locally sourced products will allow for the expansion of restaurant chains and franchises creating further employment opportunities for the local population in the form of infrastructure development and business ownership.


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Why Sustainable Development in HospitalityENVIORNMENTAL BENEFITS

• Sustainable practices can be utilized with respect to all construction– Locally sourced materials– LEED certified– Implementation of recycling and composting programs– Energy and Water conservation measures (resort, golf courses)

• Resorts can promote eco-tourism• Sustainable Golf Courses utilizing the natural terrain• Sustainable agriculture initiatives

– Locally grown organic farms– Locally sourced organic fish, poultry and meats– Organic fish farming– Showcase locally influenced organic menus

• Promotion of local cottage industries through resort


Why Sustainable Development in HospitalityACCESSABLE EDUCATION CREATES BATSWANA ECONOMIC

EMPOWERMENT

• While Hospitality College training is rigorous, curriculum provides less barriers to entry than other disciplines such as engineering resulting in accessible education for all Batswana.

• Well trained graduates can immediately find employment in the global marketplace.

• Multiple and varied job opportunities are available from semi-skilled to highly skilled allowing for a deep and wide cross section of Batswana to benefit.

• Multiple careers offer excellent pay and benefits with compensation ranging from $30,000-$250,000 annually.


WHY KAANAN HOSPITALITY

HOLDINGS


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KHH Responsibilities

In partnering with the Government of Botswana, KHH will create significant value for the country and its citizens while minimizing investment risk and limiting the impact on the country’s liquidity reserves. KHH will:

• Handle all aspects of the construction of the hospitality college including the creation of all budgets and the recruitment of a local labor force;

• Develop a world class curriculum in partnership with the Johnson and Wales University thereby insuring job placement opportunities for graduates;

• Train all personnel required for the operation of the hospitality college;• Produce all marketing and promotion collateral for the college;• Actively seek, negotiate and engage a tier one resort operator such as

The Ritz Carlton Group;• Recruit horticultural and other specialists in sustainable agriculture;• Employ best and most up to date practices in sustainable development ;


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KHH Responsibilities

Partner with the following government groups:

• Botswana Development Corporation

• The Human Resources Development Council

• National Economic Diversification Council

• Botswana Meat Commission

• Ministry of Education and Skills Development

• Other Government agencies


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Why KHH

• KHH and its management team have the experience and demonstrated history of success in developing and implementing hospitality projects around the world– Culinary and Hospitality College in Calcutta, India– Ada In-flight Catering, USA, Brussels, India– Ada Restaurant, USA– Cafeteria American University, Antigua – Cafeteria Xavier University, Aruba– In contract to purchase the Cedar Brook Country Club, Brookville, NY

• Johnson and Wales University partnership– Johnson and Wales is one of the premier culinary universities in the

world who has implemented sustainable programs in South Africa• KHH will be a partner to the Government of Botswana to insure that:

– Sustainable construction, agricultural and operational objectives are met– Locally sourced employment objectives are met– Local business participation is maximized– Full transparency


Next Steps ForwardKHH and the Government of Botswana enter into a 5-year agreement whereby KHH will:1) Establish and manage planning and construction and management office in Botswana including hiring

appropriate local staff2) Establish dedicated office in New York area with appropriate staff3) Schedule and organize planning and strategy meetings with required Botswana Government officials.4) Schedule and organize meetings with required development, permitting and licensing authorities within

Botswana5) Work with the government of Botswana in structuring financing for the Project6) Survey appropriate sites for Hospitality College, City Resort and Delta Resort 7) Engage Karl Guggenmoss from Johnson and Wales University (“JWU”) and:

a) provide on location orientation to Botswana b) negotiate and close initial JWU agreement

8) Engage top tier resort operator such as Ritz Carlton and negotiate and close required agreements9) Engage local Botswana and sustainable architect and design firm(s)10) Complete surveys11) Complete all structural, mechanical, electrical and plumbing plans12) Work with Botswana government to obtain its approvals on all plans, drawings and designs (“Final Plans”)

prior to submission to local building, permitting and licensing authorities 13) Obtain approval of Final Plans from local building, permitting and licensing authorities14) Recruit construction management (“CM”) firm to insure completion of Project to specification15) Working with the CM, engage contractors including local firms16) Engage public relations firm to promote Hospitality College and resorts in Botswana, the United states and

globally17) Engage a sports public relations firm to obtain sponsors for and promote an annual international caliber golf

tournament to be held in Botswana.18) Work with Government of Botswana in finalizing a Construction Contractor Agreement with Consultant for the

Project.19) Work with the Government of Botswana in finalizing a Management Services Agreement for the operation of

the Hospitality College


PURPOSE AND RATIONALE FOR PROPOSED FINANCING STRUCTURE


Financing Structure Purpose and Rationale

KHH is seeking a loan for approximately USD 300 million to be deployed over several

years as follows:

Remaining Funds for Hospitality

College and Resort in India: $100 million

Hospitality College Botswana: 48 million

Golf Resort Botswana: 80 million

Delta Resort Botswana: 25 million

Working Capital Reserves: 47 million

Total $300 million

Botswana loan amounts are based upon cost estimates obtained from Botswana

representatives at a Botswana conference held in Atlanta, July 2012.


While a conventional proposal would result in a loan of approximately $122 million, KHH proposal results in perpetual savings to the Government of $21.2 million annually.

Total Investment Funds in Botswana: $153.0 millionLess 20% Equity: 30.6 millionTotal Conventional Funding: $122.4 million

KHH Proposed Loan: $300.0 millionDifference: $177.6 million

Direct Government Tuition Savings $ 21.2 millionDirect Savings over 10 years $212.0 million

The indirect savings are also significant given the employment opportunities available tograduates of the Hospitality Institute eliminating reliance on Government entitlementsafter graduation as well as employment created from vendors servicing the HospitalityInstitute.

Kaanan Hospitality Holdings 21


Funding will be utilized to:• Construct Hospitality College in Botswana; • Construct a “City Resort” in Botswana;• Construct a “Delta Resort” in Botswana, and; • Complete the capital requirements for the

construction of the hospitality college in India which will serve as the “feeder” school for the Botswana Hospitality College



The purpose of the proposed financing structure from the Botswana Development Corporation (“BDC”) will allow for several main overlapping objectives to be met:

• Eliminate the need for tuition education entitlement for Batswana attending the Hospitality College.

• Hospitality College will be a “for profit” institution owned by the BDC as KHH will guarantee sufficient non-Batswana student enrollment from its hospitality college in India.

• Proposed financing structure with the BDC lowers capital costs in India allowing for self-sustainability of Hospitality in Botswana at zero cost to the government of Botswana.


Financing Structure Purpose and Rational

Eliminate the need for tuition education entitlement for Batswana attending the Hospitality College.

Currently, the government if Botswana pays for the education of all Batswana from Kindergarten to University. As a result of the proposed financing structure, KHH will eliminate the requirement of any government tuition entitlements for each Batswana student for the four years during their enrollment at the Hospitality College. KHH will accept no funds from the government of Botswana and, instead, pay for the education of the Batswana enrolled.



Eliminate the need for tuition education entitlement for Batswana attending the Hospitality College.

Approximate savings for each student is approximately 50,000 Pula annually.

Assuming an enrollment of 3,000 Batswana, savings to the government totals 150,000,000 (One Hundred Fifty Million) Pula annually.

Aggregate savings over four years to the government of Botswana of 600,000,000 (Six Hundred Million) Pula or approximately USD $85,500,000.



Hospitality College will be a “for profit” institution owned by the BDC as KHH will guarantee sufficient non-Batswana student enrollment from its hospitality college in India.

• The Hospitality College in Botswana will effectively be a campus extension of the college in India. Applications of qualified candidates in India will far exceed the capacity of the college in India thereby guarantying a steady flow of 750-1000 paying students to the Hospitality College in Botswana.

• The tuition fees collected from the India students will be paid to the Hospitality College and will cover all costs of operation including salaries, books, equipment, supplies as well as debt service for loans extended by the BDC.



Proposed financing structure with the BDC lowers capital costs in India allowing for self-sustainability of Hospitality College in Botswana at zero tuition cost to the government of Botswana

• Guaranteed flow of paying students from India campus and related cash flow is integral to the overall strategy in Botswana.

• Substantial profitability of Indian hospitality college boosted by lower capital costs from BDC loans results in an expanded and more robust debt service capacity.


FINANCING STRUCTURE


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Financing Structure

• KHH wishes to obtain a loan from the Botswana Development Corporation (the “Loan”). • KHH will enter into a five year management agreement for the operation of the Hospitality

College with an option to renew every two years thereafter.• The Loan will fund the Hospitality College and resorts in Botswana and for a portion of the

remaining capital required for the hospitality college in India • While the government will ultimately own the Hospitality College, KHH will be responsible

for the day to day management of the Hospitality College.• KHH will remain responsible for the repayment of the government backed financing and

Batswana students will receive free education, eliminating the need for the government to provide a tuition entitlement.

• Hospitality college in India will serve as a feeder for the Hospitality College in Botswana– Creates a guaranteed source of paying students for the college in Botswana resulting in ZERO

government tuition outlays for Batswana students. KHH and not the government pays tuition for Batswana education covered by fees collected from Indian students

– Promotes human capital technology transfer • The Loan is low risk and an attractive mechanism because:

– Return on capital is measured by:(i) low investment risk from strong project cash flows; (ii) elimination of government tuition educational entitlements to 3,000 Batswana of approximately 150 million PULA annually; (iii) reduction in the number of graduates that need to be absorbed on to government payrolls from lack of employment opportunities; (iv) BDC risk will be further mitigated by a first priority security interest in any projects undertaken by KHH with the funds (e.g. real estate, business assets).(v) The projects undertaken by KHH will generate sufficient cash flow to service and retire the amount of the Loan


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BOTSWANA (BDC)

KHH

BotswanaHospitality

College

BotswanaResorts

IndiaHospitality

College

Income

1 2

34

4

4

5

3a

Financing Steps Diagram


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Financing Structure

Financing Steps

Step 1: KHH and BDC enter into a Hospitality College management agreement

Step 1: Botswana Development Corporation provides loan to KHHStep 2: KHH pledges its shares as collateral to BDCStep 3: KHH funds development and construction of the

Botswana Hospitality College, Botswana Resorts and Indian Hospitality College

a) KHH provides first mortgage and other business assets as collateral from projects to the BDC.

Step 4: A portion of the income is segregated for debt serviceStep 5: KHH pays interest and principal on the BDC loan

(i) Debt for Botswana Hospitality College will be paid in full by KHH with ownership held by BDC(ii) Debt for KHH-owned Indian Hospitality College will be paid in full by KHH(iii) Debt for KHH owned Resorts will be paid by KHH from Resort cash flows


Summary• The KHH proposal provides the Government of Botswana via Botswana Development

Corporation with an opportunity to establish a new industry which has farreaching and long lasting economic benefits to the country and its citizens.The financing structure proposed is low risk and serves a dual purpose of eliminating education entitlements for Batswana while providing KHH with low cost funding enabling it to assume costs previously borne by the Government.

•Conclusively, the KHH Botswana Hospitality and Tourism Project creates a virtuous cycle of reinvestment adding value to the economy, developing a world class hospitality institution producing graduates with skill sets that are in demand globally and boosting the construction industry with the development of the hospitality institute and resorts. KHH willset up with the primary objective to: (i) develop and drive growth in the hospitalityindustry via the hospitality college and finishing school (ii) promote technology and intellectual property transfer to Batswana, starting at the hospitality college and then with the development of an actual hotel and resort that are sustainable and linked to cottage industries as mandated by the Government of Botswana (see supplemental marketing package DVD and Final Report by the Permanent Mission of Botswana to the United Nations) as downstream projects and sustainable supply chain. The internal student body and staff at the hospitality college and resorts will further enhance the transfer of technology and awareness of Botswana.

Summary

• KHH fills the unique niche for Batswana civil society, the Botswana Government and the private sector via Botswana Development Corporation.

• The KHH Botswana Hospitality and Tourism Project also fills the gap for PROPERTY DEVELOPMENT via construction of the college, hotel and resort and AGRIBUSINESS by promoting and utilizing locally, organically grown produce, meat/poultry which reduces the reliance on imports and empowering local farmers to contribute to the green supply chain. KHH adds value and strengthens the Botswana SERVICE SECTOR in hotel and tourism as well as infrastructure as Botswana's alternative engines of economic growth.

• The KHH Botswana Hospitality and Tourism Project will create an international bridge for multilateral relationships among prospective candidates from around the world as Botswana will be a premier destination for hospitality education and finishing with a world class hotel and resort and global standardization and accreditation from Johnson & Wales University.

• The KHH Botswana Hospitality and Tourism Project generates sustainable employment for Botswana and adds global skills competiveness to the local workforce. KHH will be proactive in community building through its elaborate Corporate Social Responsibility Program through “private and public partnership”.

• CITIZEN ECONOMIC EMPOWERMENT is assured by training, educating and enabling technology transfer to Batswana local farmers as “development of entrepreneurs” to be part of KHH sustainable supply chain for locally grown produce and meats. KHH is committed towards contributing significantly to the sustainable development of the communities in which it operates, whether its inner cities such as Gaborone or the Okavango Delta, thus incorporating the cottage industries as mandated by H.E. President IanKhama via April 2012 at the Permanent Mission of Botswana to the United Nations in New York (Final Report in Marketing Package).

Summary

• KHH fulfills Botswana Development Corporation pursuit of itsmandate of industrial and commercial sector development for a sustainable economy and the BDC’s goals and objectives and contribute to the overall National Development Plan and Vision 2016 objectives.

• Hence, the KHH Hospitality and Tourism Project adds value and strengthens BDC divestment policy as a new technical partner by proving world class hospitality education and a top tier hotel andhospitality industry in Botswana that brings both financial and managerial resources to BDC.

• KHH Citizen Economic Empowerment creates divestmentprogram through education, training and technology transfer as well as creating local and regional entrepreneurs, which ensures that the interests of Batswana are not lost in the process of divestment.

Conclusion

KHH can assist the Government of Botswana in re-integrating value back into the economy and fostering citizen economic empowerment fulfilling Government mandates through the development of sustainable projects in:

•Education

•Hospitality

•Eco Tourism

The far reaching benefits in sustainable agriculture, employment, foreign exchange, tourism, global awareness, infrastructure and education of our strategy will help Botswana in developing new industries while enhancing existing industries, enriching the lives of Batswana. Education and eco-tourism in Botswana not only results in the retention of more of the value chain within the country but creates new value by expanding benefits and opportunities for wealth creation.

34Kaanan Hospitality

Holdings

Contact Information

Darshan Shah

President and CEO

Tel: (917) 355-4204

Fax: (631) 418-8372

Email: [email protected]

Vijay Chandran

EVP and CFO

Tel: (917) 941-7103

Email: [email protected]

35Kaanan Hospitality

Holdings

Documents

Wealth Creation Through Sustainable Development in the Hospitality Industry “Looking Beyond Today” The KHH Botswana Hospitality and Tourism Project Presentation