Offering Memorandum Dubai by wkv17520

VIEWS: 191 PAGES: 256

More Info
									                                                                     6FEB200616205475
                     KINGDOM HOTEL INVESTMENTS    (incorporated in the Cayman Islands)

                                               42,944,967 shares
                              in the form of shares or Global Depositary Shares
                   Offering price: $9.25 per share and per Global Depositary Share
This is the initial public offering of 42,944,967 shares of Kingdom Hotel Investments (‘‘KHI’’), an exempt Cayman Islands registered
holding company, in the form of shares and Global Depositary Shares (‘‘GDSs’’), each representing one share.
This offering comprises an offering of shares and GDSs outside the United States in reliance on Regulation S (‘‘Regulation S’’)
under the Securities Act, as amended (the ‘‘Securities Act’’), including an Exempt Offer of shares under the Offered Securities
Rules of the Dubai Financial Services Authority (the ‘‘DFSA’’) in the Dubai International Financial Centre (‘‘DIFC’’). This offering
will include a preferential allocation of up to 4,294,497 shares, in the form of shares or GDSs, offered to certain individuals specified
by us. See ‘‘Subscription and Sale’’. Prior to this offering, there has been no public market for our shares or the GDSs. We have
applied for our shares to be admitted to the Official List of Securities of the Dubai International Financial Exchange (the ‘‘DIFX’’)
and to list our shares on the DIFX under the symbol ‘‘KHI’’. Dealings in our shares prior to listing on the DIFX will not take place.
We expect our shares to be issued and admitted to the Official List of Securities of the DIFX and unconditional dealings in our
shares to commence on or about March 1, 2006.
We have also applied (i) to the UK Financial Services Authority (the ‘‘UK FSA’’) in its capacity as competent authority under the
Financial Services and Markets Act 2000 (the ‘‘FSMA’’) for the GDSs to be admitted to the Official List of the UK Listing Authority
(the ‘‘UKLA’’) and (ii) to the London Stock Exchange plc (the ‘‘London Stock Exchange’’) for the GDSs to be admitted to trading
under the trading symbol ‘‘KHI’’ on the London Stock Exchange’s regulated market for listed securities and to be quoted on the
International Order Book. Conditional dealings in the GDSs on the London Stock Exchange will not take place. We expect the
GDSs to be issued and admitted to the Official List of the UKLA and unconditional dealings in the GDSs to commence on or about
March 1, 2006. Our application to the UK FSA covers the listing of up to 176,074,364 GDSs, consisting of up to 42,944,967 GDSs to
be issued in this offering, up to 4,294,497 additional GDSs to be issued pursuant to the exercise of the over-allotment option, if any,
and up to 128,834,900 additional GDSs to be issued from time to time against the deposit of additional shares with Citibank, N.A.,
as depositary (the ‘‘Depositary’’) pursuant to an agreement dated March 1, 2006 between the company and the Depositary (as
amended from time to time, the ‘‘Deposit Agreement’’).
The DIFX takes no responsibility for the contents of this document, makes no representations as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this
document.
This offering memorandum relates to an Exempt Offer in accordance with the Offered Securities Rules of the DFSA. It is intended for
distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The DFSA
has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this
offering memorandum nor taken steps to verify the information set out in it and has no responsibility for it. The securities to which
this offering memorandum relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the
securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this document you
should consult an authorised financial adviser.
We have granted the international managers listed under ‘‘Subscription and Sale’’ (the ‘‘international managers’’) an option to
purchase up to 4,294,497 additional newly-issued shares, in the form of shares or GDSs, exercisable for up to 30 days from the date
of this offering memorandum, to cover over-allotments, if any.
Investing in our shares and GDSs involves certain risks. See ‘‘Risk Factors’’ beginning on page 8. The GDSs are of a specialist nature
and should normally only be bought and traded by investors who are particularly knowledgeable in investment matters.
Our shares and GDSs have not been and will not be registered under the Securities Act, and are being offered or sold outside the
United States in reliance on Regulation S under the Securities Act.


                                  Joint Global Coordinators and Joint Global Bookrunners

                  Deutsche Bank                                                          Morgan Stanley
                                                       Joint Lead Managers
                 Deutsche Bank                                                             Morgan Stanley
       Deutsche AlAzizia Financial Services                                              The National Investor
                                                             Co-Manager
                                                          Shuaa Capital
                                                            Selling Agents
Abu Dhabi Commercial Bank                       International Financial Advisors                     Mashreqbank               Samba

                                  This offering memorandum is dated February 24, 2006
Four Seasons Hotel George V




                                      Four Seasons Hotel Damascus




Four Seasons Resort Sharm El Sheikh




                                      Four Seasons Hotel Cairo at Nile Plaza
Four Seasons Hotel Amman




Mövenpick Resort El Quseir            Mövenpick Resort & Spa El Gouna
This offering memorandum constitutes an Exempt Offer statement for purposes of Article 3.2 of the
Offered Securities Rules of the DFSA and a Prospectus prepared in accordance with the Prospectus Rules
of the Financial Services Authority (the ‘‘FSA’’) made under section 73A of the Financial Services and
Markets Act 2000.
KHI (i) confirms that this offering memorandum complies with the requirements for an Exempt Offer
pursuant to the Markets Law 2004 of the DIFC and the Offered Securities Rules of the DFSA, (ii) accepts
responsibility for the information contained in this offering memorandum and believes that there are no
other facts the omission of which would make this offering memorandum or any statement herein
misleading or deceptive and (iii) confirms that, to the best of the knowledge of KHI (which has taken all
reasonable care to ensure that such is the case), the information contained in this offering memorandum is
in accordance with the facts and contains no omission likely to affect its import. Moreover, as far as KHI is
aware and is able to ascertain, no facts have been omitted which would render the information reproduced
from the market report study described below inaccurate or misleading and, with respect to the
reproduced information, KHI accepts responsibility only for the accurate extraction of such information
from the third party report.
KHI notes that certain information under the heading ‘‘The Hotel and Tourism Industry in the Middle
East and Africa’’ and related market and competitive data appearing elsewhere in this offering
memorandum has been reproduced from a market report study dated February 6, 2006 that was prepared
by SG&R Valuation Services Company, trading under the name HVS International (‘‘HVS
International’’), a third party, at our request and expense (the ‘‘HVS Study’’). The business address of
HVS International is 7-10 Chandos Street, Cavendish Square, London W1G 9DQ, United Kingdom and is
a global consulting and services organisation focused on the hotel, restaurant, timeshare, gaming and
leisure industries. HVS International has no material interest in our company. Excerpts of the HVS Study
and any summaries of portions of the HVS Study are included in this offering memorandum with the
approval, consent and authorisation of HVS International. HVS International accepts responsibility for
the section entitled ‘‘The Hotel and Tourism Industry in the Middle East and Africa’’ as well as the market
and competitive data sourced to the HVS Study (including tables, figures and narrative discussions) in the
‘‘Business’’ section, particularly under the headings ‘‘Competition’’, and confirms that it has taken all
reasonable care to ensure that the information contained in the parts of the prospectus for which it is
responsible are, to the best of its knowledge, in accordance with the facts and contain no omission likely to
affect their import.
Our independent auditors, Ernst & Young PCC, located at Commerce et Finance Building, 1st Floor,
Kantari Street, Mina El Hosn, P.O. Box 11-1639, Riad El Solh 1107-2090, Beirut, Lebanon, have consented
to the inclusion of their audit report in respect of our interim consolidated financial statements as at and
for the nine-month period ended September 30, 2005. See ‘‘Independent Auditors’’. Ernst & Young PCC
confirms that it has taken all reasonable care to ensure that its audit report appearing on page F-3 of this
offering memorandum is, to the best of its knowledge, in accordance with the facts and contains no
omission likely to affect its import.
In making an investment decision, investors must rely upon their own examination of KHI and its
subsidiaries and the terms of this offering being made in this offering memorandum, including the merits
and risks involved. Neither our shares nor the GDSs have been recommended by any U.S. federal or state
securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed
the accuracy or determined the adequacy of this offering memorandum. Any representation to the
contrary is a criminal offense.
Investors should exclusively rely on the information contained in this offering memorandum. Neither we
nor Deutsche Bank AG and Morgan Stanley & Co. International Limited, as sponsors in relation to our
application for listing on the DIFX (in that capacity, the ‘‘Sponsors’’), nor any of the joint global
coordinators, the joint lead managers, the co-manager, the international managers (or the selling agents
(as defined in ‘‘Subscription and Sale’’)) (the joint global coordinators, the joint lead managers, the
co-manager, the international managers and the selling agents together, the ‘‘managers’’) nor the
Depositary has authorised anyone to provide potential investors with information different from that
contained in this offering memorandum. The Sponsors, the managers and the Depositary make no
representation or warranty, express or implied, as to the accuracy or completeness of the information
contained in this offering memorandum, and nothing contained in this offering memorandum is, or shall
be relied upon as, a promise or representation by the Sponsors, the managers or the Depositary or their
affiliates or advisors. The information contained in this offering memorandum is accurate only as of the



                                                      i
date of this offering memorandum, regardless of the time of delivery of this offering memorandum or of
any sale of our shares or GDSs.
The distribution of this offering memorandum and the offering of our shares and GDSs is restricted by law
in certain jurisdictions, and this offering memorandum does not constitute, and may not be used in
connection with, any offer or solicitation in any such jurisdiction or to any person to whom it is unlawful to
make such offer or solicitation. Other than in the DIFC and the United Kingdom, no action has been or
will be taken in any jurisdiction by us or the managers that would permit a public offering of our shares or
GDSs or possession or distribution of an offering memorandum in any jurisdiction where action for that
purpose would be required. Persons into whose possession this offering memorandum may come are
required by us and the managers to inform themselves about and to observe the restrictions contained in
this offering memorandum. Neither we nor any of the managers nor the Depositary accepts any
responsibility for any violation by any person, whether or not it is a prospective purchaser of our shares or
GDSs, of any of these restrictions.
Neither our shares nor the GDSs have been, and neither will be, registered under the Securities Act, or
with any securities authority of any state of the United States, and these securities may not be offered or
sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements
of the Securities Act and in compliance with any applicable state securities laws. Our shares and GDSs are
being offered outside the United States only in offshore transactions (as defined in, and in accordance
with, Regulation S under the Securities Act). For certain restrictions on purchases, resales and transfers of
our shares and GDSs, see ‘‘Transfer and Selling Restrictions’’.
Neither we nor the managers nor the Depositary, nor any of our or their respective representatives, are
making any representation to any offeree or purchaser of our shares or GDSs offered hereby regarding the
legality of an investment by such offeree or purchaser under appropriate legal investment or similar laws.
Each investor should consult with its own advisors as to the legal, tax, business, financial and related
aspects of the purchase of our shares or GDSs.
This offering memorandum has been prepared by us in connection with this offering solely for the purpose
of enabling a prospective investor to consider the purchase of our shares or GDSs. Reproduction and
distribution of this offering memorandum or disclosure or use of the information contained herein for any
purpose other than considering an investment in our shares or GDSs is prohibited.

                                         PRICE STABILISATION

IN CONNECTION WITH THE ISSUE OF THE SHARES AND GDSs, DEUTSCHE BANK AG ON
BEHALF OF THE INTERNATIONAL MANAGERS OR PERSONS ACTING ON ITS BEHALF,
MAY OVER-ALLOT SHARES OR GDSs OR EFFECT TRANSACTIONS WHICH MAY SUPPORT
THE MARKET PRICE OF THE SHARES OR GDSs AT A LEVEL HIGHER THAN THAT WHICH
MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT DEUTSCHE
BANK AG, OR PERSONS ACTING ON ITS BEHALF, WILL UNDERTAKE STABILISATION
ACTION. ANY SUCH STABILISATION MAY BE CONDUCTED ON THE LONDON STOCK
EXCHANGE, IN THE OPEN MARKET OR IN OVER-THE-COUNTER TRANSACTIONS.
NEITHER DEUTSCHE BANK AG NOR MORGAN STANLEY & CO. INTERNATIONAL
LIMITED, NOR ANY PERSON ACTING ON ITS BEHALF, WILL EFFECT ANY STABILISATION
ACTIVITY WITH RESPECT TO THE SHARES OR GDSs ON THE DIFX. ANY STABILISATION
MAY BEGIN ON THE DATE OF ADEQUATE PUBLIC DISCLOSURE OF THE FINAL PRICE OF
THE SHARES OR GDSs AND MAY END AT ANYTIME, BUT NO LATER THAN 30 CALENDAR
DAYS AFTER THE DATE OF THIS OFFERING MEMORANDUM.

                                      NOTICE TO U.K. INVESTORS

This offering memorandum is being distributed only to and is directed only at (i) persons who are outside
the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’), or (iii) high net worth entities
falling within Article 49(2) of the Order and other persons to whom it may lawfully be communicated (all
such persons being referred to as ‘‘relevant persons’’). Our shares and GDSs are available only to, and any
invitation, offer or agreement to subscribe, purchase or otherwise acquire our shares and GDSs will be
engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on
this document or any of its contents.


                                                      ii
                       NOTICE TO EUROPEAN ECONOMIC AREA INVESTORS

This offering memorandum has been prepared on the basis that all offerings of our shares and GDSs,
other than the offering of our shares and GDSs as contemplated in this offering memorandum once it has
been approved under the Prospectus Directive (2003/71/EC), will be made pursuant to an exemption under
the Prospectus Directive (2003/71/EC), as implemented in member states of the European Economic Area
(‘‘EEA’’), from the requirement to produce a prospectus for offerings of our shares and GDSs. Accordingly
any person making or intending to make any offering within the EEA of our shares or GDSs which are the
subject of the offering contemplated in this offering memorandum should only do so in circumstances in
which no obligation arises for us or any of the managers or the Depositary to produce a prospectus for
such offering. Neither we nor the managers nor the Depositary have authorised or do authorise the making
of any offering of our shares or GDSs through any financial intermediary, other than offerings made by the
managers which constitute the final placement of our shares and GDSs contemplated in this offering
memorandum.

                                        AVAILABLE INFORMATION

We have agreed to furnish the Depositary with all notices of meetings of the holders of our shares and
other reports and communications that are generally made available to holders of our shares. Such
documents will be available for inspection while any of the GDSs are outstanding at the offices of the
Depositary currently located at 388 Grenwich Street, 17th Floor, New York, NY 10013, United States of
America. Upon receipt thereof, the Depositary will make available such reports, notices and
communications to all record holders of the GDSs.

                              ENFORCEMENT OF FOREIGN JUDGMENTS

We are a company incorporated in, and under the laws promulgated by, the Cayman Islands, with our
headquarters in Dubai, United Arab Emirates (‘‘U.A.E.’’), and all of our assets are located in jurisdictions
outside the United Kingdom or the United States. In addition, all except one of our directors and senior
management reside or are located outside of the United Kingdom or the United States. As a result,
investors may not be able to effect service of process within the United Kingdom or the United States upon
us or our directors or senior management, or to enforce judgments obtained against us or our directors or
senior management in foreign courts predicated solely upon the civil liability provisions of the securities
laws of jurisdictions other than the Cayman Islands or Dubai. There is doubt that a lawsuit based upon
U.K. or U.S. federal or state securities laws could be brought in an original action in the Cayman Islands or
Dubai and that a foreign judgment based upon U.K. or U.S. securities laws would be enforced in the
Cayman Islands or Dubai. There is also doubt as to enforceability of judgments of this nature in several of
the other jurisdictions in which we operate and where our assets are located.

              PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION

In this offering memorandum, unless the context otherwise requires, ‘‘KHI’’ refers to Kingdom Hotel
Investments, a Cayman Islands exempted limited liability company incorporated in the Cayman Islands
under Commercial Registration No. CR-100669 issued on May 22, 2000, and ‘‘we’’, ‘‘our’’, ‘‘us’’ and ‘‘the
company’’ refer to KHI together with its subsidiaries and joint ventures.
Certain market information contained in this offering memorandum is derived from the HVS Study.
Certain financial and statistical amounts included in this offering memorandum are approximations and/or
have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not
be exact arithmetic aggregation of the figures that precede them.
We present our financial statements in U.S. Dollars. References in this offering memorandum to ‘‘U.S.
Dollars’’, ‘‘U.S.$’’ or ‘‘$’’ are to United States Dollars; references to the ‘‘Euro’’ or ‘‘A’’ are to the lawful
currency of the European Monetary Union; references to the ‘‘Egyptian Pound’’ or ‘‘LE’’ are to the
Egyptian Pound; references to ‘‘U.A.E. Dirham’’ or ‘‘AED’’ are to the U.A.E. Dirham; references to
‘‘Kenyan Shillings’’ or ‘‘KES’’ are to the Kenyan Shilling; references to ‘‘Lebanese Pounds’’ or ‘‘LBP’’ are
to the Lebanese Pound; and references to ‘‘Tanzania Shillings’’ or ‘‘TZS’’ are to the Tanzania Shilling.
We have prepared the financial statements included in this offering memorandum in accordance with
International Financial Reporting Standards (‘‘IFRS’’).


                                                       iii
In this offering memorandum, references to ‘‘our hotels’’, ‘‘our assets’’, ‘‘our properties’’, ‘‘our entities’’,
our ‘‘hotel owning companies’’, ‘‘our companies’’, and ‘‘our portfolio’’ and similar references include
hotels, resorts, assets, properties, entities and companies in which we have an effective ownership interest
of 50 per cent. or minority interests as well as hotels, resorts, assets, properties, entities and companies in
which we have effective majority interests. Even where we hold a controlling interest, our ability to act with
respect to one of our hotels may be restricted by agreements governing the rights and obligations of the
minority shareholders of our subsidiaries or the relevant hotel owning company. References to our
ownership of a hotel includes those hotel properties that are held by way of leasehold or freehold interest
and references to acquiring a hotel or hotel property include the acquisition of the hotel and all related
facilities and amenities.
References to our ownership or our effective ownership of a hotel refer to our ultimate economic interest,
on a percentage basis, in the results of the hotel owning company of such hotel, which is, in turn, calculated
by reference to our percentage interests in each of our subsidiaries in the ownership chain between the
hotel owning company and KHI. In certain cases, although our effective ownership interest in a hotel
owning company may be less than 50 per cent., we consolidate the results of the hotel owning company of
such hotel because we own more than 50 per cent. of each of the subsidiaries upstream of the hotel owning
company.
Certain financial and operating information for our hotels contained in this offering memorandum is
derived from the unaudited management accounts prepared by those hotels. Certain other financial and
operating information is derived from the audited accounts of the hotel owning companies. Each such
company owns a single hotel, which is its principal asset. However, the financial statements of the hotel
owning company will generally also include interest expense, depreciation and certain administration costs,
which are not included in hotel management accounts.
Solely for your convenience, we have provided our website address and those of certain third parties in this
offering memorandum. We do not take responsibility for the information contained in any third-party
websites and no information in our website or any third-party websites should be deemed to be
incorporated in, or form a part of, this offering memorandum.
The Four Seasons Hotels and Resort trademark, trade name and related logos are the property of Four
Seasons Hotels Inc and its subsidiaries (collectively, ‘‘Four Seasons’’); the Fairmont trademark, trade
name and related logos are the property of Fairmont Hotels & Resorts Inc. and its subsidiaries
                                       o
(collectively, ‘‘Fairmont’’); and the M¨venpick trademark, trade name and related logos are the property
     o                                                      o
of M¨venpick Holding and its subsidiaries (collectively, ‘‘M¨venpick’’). None of Four Seasons, Fairmont or
  o
M¨venpick or any of their affiliates are sponsors of this offering and none of them have provided
information for this offering memorandum nor do they accept responsibility for the information contained
in this offering memorandum.

                                          NON-IFRS MEASURES

Earnings before interest, taxes, depreciation and amortisation (EBITDA) is a financial measure that has
not been prepared in accordance with IFRS and prospective investors should not consider it as an
alternative to the applicable IFRS measure. EBITDA is equivalent to gross profit from operations plus
income from associates, net minus general and administrative expenses and hotel pre-opening expenses.
Prospective investors should not consider EBITDA as a measure of our financial performance or liquidity
under IFRS, as an alternative to profit from operations, net profit or any other performance measures
derived in accordance with IFRS, or as an alternative to cash flow from operating activities as a measure of
our activity. Some of the limitations of EBITDA as a measure include the following:
         it does not take into account minority interest in consolidated entities;
         it does not reflect our capital expenditures or future requirements for capital expenditures or
         contractual commitments;
         it does not reflect changes in, or cash requirements for, our working capital needs;
         it does not reflect the interest expense, net, or the cash requirements necessary to service interest
         or principal payments, on our debt;




                                                       iv
          although depreciation and amortisation are non-cash charges, the assets being depreciated and
          amortised will often have to be replaced in the future, and EBITDA does not reflect any cash
          requirements for such replacements; and
          other hotel and hospitality companies may calculate these measures differently than we do,
          limiting the usefulness of EBITDA as a comparative measure.
Because of these limitations, EBITDA should not be considered as a measure of discretionary cash
available to us to invest in the growth of our business. We rely primarily on our IFRS results and use
EBITDA measures only as a supplemental performance measure.

                          STATISTICAL DATA AND THIRD PARTY PROJECTIONS

This offering memorandum includes statistical data and projections. We believe that the statistical data
and projections included in this offering memorandum are useful in helping you understand the major
trends in the industry and the parameters of the markets in which we operate. However, these figures have
not been independently verified by us or the managers. You should not place undue reliance on the
statistical data included in this offering memorandum. Similarly, third party projections included in this
offering memorandum are subject to significant assumptions and uncertainties that could cause actual data
to differ materially from the projected figures. No assurances can be given that the estimated figures will
be achieved, and you should not place undue reliance on the projections included in this offering
memorandum.

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This offering memorandum includes forward-looking statements. The words ‘‘anticipate’’, ‘‘believe’’,
‘‘expect’’, ‘‘plan’’, ‘‘intend’’, ‘‘estimate’’, ‘‘project’’, ‘‘will’’, ‘‘would’’, ‘‘may’’, ‘‘could’’ and similar expressions
are intended to identify forward-looking statements. All statements other than statements of historical fact
included in this offering memorandum, including, without limitation, those regarding our financial
position, business strategy, management plans and objectives for future operations, are forward-looking
statements. These forward-looking statements involve known and unknown risks, uncertainties and other
factors, which may cause our actual results, performance or achievements, or industry results, to be
materially different from those expressed or implied by these forward-looking statements. These forward-
looking statements are based on numerous assumptions regarding our present and future business
strategies and the environment in which we expect to operate in the future. Important factors that could
cause our actual results, performance or achievements to differ materially from those in the forward-
looking statements include, among other factors referenced in this offering memorandum:
          we operate primarily in emerging markets that are subject to greater risks than more developed
          markets, including significant political, social and economic risks;
          we may experience adverse changes in the general economic and business environments in which
          we operate, including a downturn in business and holiday travel;
          acts of terrorism have affected and may continue to affect the hotel industry;
          we operate in a competitive environment;
          we depend in large part on the performance of third-party hotel management companies to
          manage our hotels;
          rapid growth may strain our managerial, operational and control systems;
          we do not have full operational control of some of our properties;
          we may not realise the benefits we expect from existing and future investments we make in our
          operational and under construction properties or in new properties;
          our business and growth prospects may be disrupted if our current relationship with HRH Prince
          Alwaleed Bin Talal Bin Abdulaziz Al Saud (‘‘HRH Prince Alwaleed’’) changes or is severed or
          reduced; and
          our principal shareholders may take actions that are not in line with, or may conflict with, the best
          interests of our public shareholders.




                                                             v
Additional factors that could cause actual results, performance or achievements to differ materially
include, but are not limited to, those discussed under ‘‘Risk Factors’’. Forward-looking statements speak
only as of the date of this offering memorandum and we expressly disclaim any obligation or undertaking
to publicly update or revise any forward-looking statements in this offering memorandum to reflect any
change in our expectations or any change in events, conditions or circumstances on which these forward-
looking statements are based. Given the uncertainties of forward-looking statements, we cannot assure you
that projected results or events will be achieved and we caution you not to place undue reliance on these
statements.




                                                   vi
                                                      TABLE OF CONTENTS

                                                                                                                                       Page

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION AND
  OPERATING DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              27
SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND
  OPERATING DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              29
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             40
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             41
CAPITALISATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    43
THE HOTEL AND TOURISM INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                74
BUSINESS DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                93
MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                           139
RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         148
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           149
DESCRIPTION OF SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         151
TERMS AND CONDITIONS OF THE GLOBAL DEPOSITARY SHARES . . . . . . . . . . . . . .                                                       155
INFORMATION RELATING TO THE DEPOSITARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       169
THE DUBAI INTERNATIONAL FINANCIAL EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . .                                             170
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   171
SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  173
TRANSFER AND SELLING RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                177
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          179
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   180
LISTING AND GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              181
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          F-1




                                                                     vii
(This page has been left blank intentionally.)
                                                 SUMMARY

This summary should be read as an introduction to, and is qualified in its entirety by reference to, the more
extensive information contained elsewhere in this offering memorandum. This summary may not contain all of
the information that investors should consider before deciding to invest in our shares or GDSs. Accordingly, any
decision by a prospective investor to invest in our shares or GDSs should be based on a consideration of this
offering memorandum as a whole. You should read this entire offering memorandum carefully.
Following the implementation of the relevant provisions of the Prospectus Directive in each member state of the
European Economic Area, no civil liability will attach to KHI and the Directors in any such member state in
respect of this summary, including any translation hereof, unless it is misleading, inaccurate or inconsistent
when read together with the other parts of this document. Where a claim relating to the information contained
in this document is brought before a court in a member state of the European Economic Area, the plaintiff may,
under the national legislation of the member state where the claim is brought, be required to bear the costs of
translating this offering memorandum before the legal proceedings are initiated.

Overview
We are a leading hotel and resort acquisition and development company in the Middle East and Africa,
operating in the first-class and luxury market segments. We also have an investment in Europe, through
our recent acquisition of an interest in the Four Seasons Hotel George V in Paris. We have ownership
interests in 15 operating hotels in eight countries and 11 hotels and resorts currently under construction or
in initial stages of development in nine countries. Our operating hotels contain 3,262 rooms, while our
hotels under development are expected to contain 3,203 rooms.
                                                                              ¨
We do not operate our hotels directly, but engage Four Seasons, Fairmont and Movenpick to operate our
hotels for us under management contracts.

Competitive Strengths
Unique Portfolio of High Quality and Well-Positioned Properties
           Our portfolio includes a number of luxury hotels and resorts in distinctive locations. In some
           cases, according to the HVS Study, we own the best hotel in a market, in terms of net revenue per
           available room (‘‘RevPAR’’) and average daily rate (‘‘ADR’’).
           Our hotels enjoy competitive advantages based on prime locations. In many cases, our hotels are
           located on the most desirable sites within a particular market, with unique access to either
           beaches or other natural attractions and/or are conveniently located for business and leisure
           travellers.
           We believe we have a balanced portfolio, diversified in terms of geography, hotel brands,
           property type and operational maturity.
           Since our operating hotels have been recently acquired, opened or renovated, we generally do not
           expect to make significant capital expenditures on our existing portfolio beyond reserves or
           amounts already accounted for.

Strong Relationships with World Class Hotel Management Companies
We maintain long-standing commercial relationships with three of the world’s leading hotel management
                                         o
companies: Four Seasons, Fairmont and M¨venpick.

Leading Presence in High Growth Markets
Within the Middle East and Africa where our current investments are focused, our hotel properties are
located in markets that we believe have strong demand and growth potential, including cities that are
global and/or regional business and cultural centres, and prominent recreational tourism destinations.

Significant Growth Potential
           Through the extensive industry experience and global and regional contacts of our management
           team, partners, shareholders and directors, including HRH Prince Alwaleed, we have access to a




                                                       1
           number of investment opportunities that may not be available to our competitors and benefit
           from an ability to assess the suitability of these opportunities for our portfolio.
           We have a strong pipeline for external growth opportunities. Since our establishment in 2000 and
           up to September 30, 2005, we have invested $275 million of equity to acquire interests in 21
           hotels. As at the date hereof, we are party to three memoranda of understanding for new
           acquisitions and hotel developments, representing an aggregate investment of $57 million, and we
           are currently in advanced negotiations in respect of numerous other projects.
           As at December 31, 2005, 11 of our hotel and resort properties, representing 35 per cent. of our
           total equity commitments, were under construction or in initial stages of development. As these
           new properties become established and mature operationally, we believe they will contribute
           positively to our earnings.

Conservative Use of Leverage and Financial Discipline
Almost all of our debt financing occurs at the level of our hotel owning companies on a non-recourse basis.
Our targeted loan-to-cost ratio for new property investments is approximately 50 per cent.

Low borrowing costs
Our lenders offer us relatively inexpensive loan capital, with an average cost of borrowing of LIBOR plus
2.5 per cent., which have resulted in a lower average cost of capital and an improved risk profile.

Experienced Management Team
Our Chief Executive Officer, Chief Financial Officer, Senior Vice President Design and Construction,
Senior Vice President Acquisitions and Development and Senior Vice President Asset Management, have
an average of 16 years of experience in the hospitality, real estate and finance industries. As a result, we
believe that our senior management team, led by these individuals, is well-qualified to enhance the value of
our portfolio and create value for our shareholders.

Association with HRH Prince Alwaleed
We have enjoyed strong support from HRH Prince Alwaleed since our company was founded in 2000.
HRH Prince Alwaleed is an internationally recognised figure and is widely known to be a perceptive
investor with a long and successful track record of investment and value creation, including in hotel real
estate assets. In his roles as Chairman of our Board and president and a director of our principal
shareholders, HRH Prince Alwaleed has contributed significantly to our strategy and to our sourcing of
acquisition and development projects.

Strategy
Our objective is to acquire or build, develop and actively asset manage high quality hotel and resort assets
in key city and resort destinations in the Middle East, Africa and Asia and selectively in Central and
Eastern Europe, in order to consolidate our market leadership in the Middle East and North Africa,
strengthen our presence in Africa and penetrate new markets and thereby create value for our
shareholders. We have developed a three-part strategy focusing on:
           selective acquisition and development of hotels and resorts with growth potential;
           active asset management through the repositioning and value enhancement of assets; and
           realisation of the capital appreciation of our assets once their operations and cash flows have
           been stabilised and they are generating significant amounts of income.

Selective Acquisition and Development of Hotels and Resorts with Growth Potential
We acquire assets and invest in existing properties with the goal of enhancing value based on the location
of the property, its management, its physical condition and the cycles of demand and other market
dynamics. Investments in new developments are made in strategic locations with a view to achieving high
growth while maintaining long term value. Our key objective is to capitalise on the future growth potential
of the markets we enter, through the prediction and identification of future market conditions, the




                                                     2
selection of hotel properties with growth and/or development opportunities and partnering with hotel
management companies best suited for the properties and the markets in which they are situated.

Active Asset Management
Once our properties are acquired or developed, we actively asset manage them, with the aim of increasing
their profitability and contribution to our earnings. Our value enhancement strategies include
(i) re-branding to improve the positioning of a property in its market; (ii) targeted capital improvements to
enhance and/or expand facilities and services offered; (iii) implementing purchasing policies based on
competitive bidding practices and other cost control improvement measures; (iv) revenue yield
management to increase RevPAR and profitability; and (v) restructurings and refinancings to release
equity and/or reduce our financing costs, as we deem appropriate.

Realisation of Capital Appreciation of Assets
We aim, within a few years of an acquisition, to optimise the operations and cash flow of our property until
its performance stabilises and it is generating significant amounts of income. We believe that the value of a
property will then have appreciated. We will seek to realise capital appreciation through refinancings,
direct sales of assets, sales of minority interests or mergers. Because we do not expect to realise our capital
appreciation through direct asset sales in the short term, we initially intend to focus on refinancing
strategies and sales of minority interests in respect of assets that we consider to be mature.

Risk Factors
An investment in our shares or GDSs involves certain risks, including (among others): (i) risks relating to
the political, economic and social environments of the countries in which we operate, such as general
emerging markets risks, terrorism and weaknesses and uncertainties relating to the legal and regulatory
systems; (ii) risks related to our business, such as general hotel industry risks, dependence on hotel
management companies, rapid growth and expansion strains, requirements for substantial amounts of
capital, inability to complete construction and development projects, competition for acquisitions and in
our hotel markets, insurance shortfalls, minority investments and joint venture partner risks and the
possible loss of key relationships, including with HRH Prince Alwaleed; and (iii) risks related to this
offering, such as illiquidity, GDS risks and fluctuations in securities markets and the market price of our
shares and GDSs.




                                                      3
                                                         THE OFFERING

Offering . . . . . . . . . . . . . . . . . . . . . .   The offering comprises an offering of shares and GDSs outside
                                                       the United States in reliance on Regulation S under the
                                                       Securities Act, including an Exempt Offer of shares under the
                                                       Offered Securities Rules of the DFSA in the DIFC. The offering
                                                       will include a preferential allocation of up to 4,294,497 shares, in
                                                       the form of shares or GDSs, offered to certain individuals
                                                       specified by us.
GDSs Offered . . . . . . . . . . . . . . . . . .       Each GDS will initially represent one share and will be issued
                                                       pursuant to the Deposit Agreement. GDSs will be evidenced by
                                                       Global Depositary Receipts (‘‘GDRs’’). In particular, upon
                                                       issue, the GDSs will be evidenced by a single global GDR (the
                                                       ‘‘Master GDR’’).
Shares Offered . . . . . . . . . . . . . . . . .       42,944,967 of our ordinary shares, with a nominal value of $5 per
                                                       share and having the same voting, dividend and other rights as
                                                       our outstanding shares.
Depositary . . . . . . . . . . . . . . . . . . . .     The Depositary for the GDSs is Citibank, N.A.
Over-allotment Option . . . . . . . . . . .            We have granted the international managers an option to
                                                       purchase up to an additional 4,294,497 shares, in the form of
                                                       shares or GDSs, to cover over-allotments, if any, made in
                                                       connection with the offering. The joint global coordinators, on
                                                       behalf of the international managers, may exercise the over-
                                                       allotment option, in whole or in part, on one occasion, not later
                                                       than 30 calendar days after the date of this offering
                                                       memorandum. If the over-allotment option is exercised, the
                                                       international managers will purchase such shares severally in
                                                       approximately the same proportions as they purchased shares in
                                                       the initial offering, at the offering price set forth herein.
Offering Price . . . . . . . . . . . . . . . . .       The offering price is $9.25 per share and per GDS.
Payment and Settlement . . . . . . . . . .             Purchasers will be required to make payment for our shares and
                                                       GDSs on the settlement date, which is expected to be on or
                                                       about March 1, 2006, except for certain investors purchasing
                                                       shares on a proportional (linear) basis (in the case of
                                                       oversubscription), who will be required, pursuant to subscription
                                                       agreements, to submit the full purchase price, based on the top
                                                       of the price range, for the shares they are requesting at the time
                                                       of their orders. The subscription agreements provide that, in the
                                                       event such investors are allocated less than the full number of
                                                       shares they request, or the offering price is lower than the top of
                                                       the price range, the difference between the amount subscribed
                                                       and the value of the allocated shares based on the offering price
                                                       shall be refunded to such investors following the closing date,
                                                       without any interest on the amount submitted.
                                                       Delivery of our shares is expected to be made on the settlement
                                                       date to the accounts of purchasers through the book-entry
                                                       facilities of the Central Securities Depositary operated by the
                                                       DIFX and delivery of the GDSs is expected to be made on the
                                                       settlement date to the accounts of purchasers through the book-
                                                       entry facilities of the Euroclear system and Clearstream.
                                                       The Master GDR will be registered in the name of Citivic
                                                       Nominees Limited, as nominee for Citibank, N.A., as common
                                                       depositary for Euroclear Bank S.A./N.V., as operator of the
                                                       Euroclear System (‘‘Euroclear’’) and Clearstream Banking,
                                                           ee
                                                       soci´t´ anonyme (‘‘Clearstream, Luxembourg’’). Euroclear and



                                                                  4
                                                      Clearstream, Luxembourg are expected to accept the GDRs for
                                                      settlement in their respective book-entry settlement systems.
                                                      Except in limited circumstances described herein, investors may
                                                      hold beneficial interests in the GDSs evidenced by the Master
                                                      GDR only through Euroclear or Clearstream.
Shares Outstanding after the
 Offering . . . . . . . . . . . . . . . . . . . . .   Upon closing of the offering there will be 171,779,867 shares
                                                      outstanding (177,274,364 shares assuming the over-allotment
                                                      option is exercised in full and assuming our issuance to Salaam
                                                      Investments Limited (‘‘Salaam Investments’’) following this
                                                      offering of new shares with an aggregate value, at the offering
                                                      price, of $11.1 million (see below)).
Principal Shareholders . . . . . . . . . . .          Upon closing of the offering, our principal shareholders,
                                                      Kingdom 5-KR-124 Ltd. (‘‘Kingdom 5-KR-124’’) and
                                                      Kingdom 5-KR-51 Ltd. (‘‘Kingdom 5-KR-51’’), investment
                                                      entities owned by Kingdom Trust, a trust for the benefit of HRH
                                                      Prince Alwaleed and his family (‘‘Kingdom Trust’’), will own
                                                      43.90 per cent. and 11.12 per cent., respectively in KHI,
                                                      (42.54 per cent. and 10.77 per cent., respectively, assuming the
                                                      over-allotment option is exercised in full and assuming our
                                                      issuance to Salaam Investments following this offering of new
                                                      shares with an aggregate value, at the offering price, of
                                                      $11.1 million (see below)).
Issuance after the offering . . . . . . . .           On November 23, 2005, we entered into a share purchase
                                                      agreement with Salaam Investments pursuant to which we
                                                      agreed to acquire from Salaam Investments an additional
                                                      23.90 per cent. interest in Kingdom Nile Plaza, a company with
                                                      an indirect ownership interest in the Four Seasons Hotel Cairo
                                                      at Nile Plaza, in consideration for $3.7 million in cash and our
                                                      issuance to Salaam Investments following this offering of new
                                                      shares with an aggregate value, at the offering price, equal to
                                                      $11.1 million. Assuming the consummation of the transaction
                                                      described above, following this offering, Salaam Investments will
                                                      own an equivalent of 0.68 per cent. of our share capital.
                                                      Pursuant to an agreement dated February 2, 2003 between KHI
                                                      and Agro Industrial Investment & Development S.A. (‘‘AIID’’),
                                                      which owns 5.5 per cent. of Syrian Saudi Tourism Investments
                                                      Company (‘‘SSTIC’’), the hotel owning company of the Four
                                                      Seasons Hotel Damascus, AIID has the right to exchange its
                                                      shares in SSTIC for our shares based on the relative values of
                                                      the SSTIC shares and our shares as determined in connection
                                                      with this offering. Although we believe that AIID’s rights have
                                                      lapsed under the terms of our agreement, we are continuing to
                                                      discuss with AIID its possible exercise of this exchange right.
                                                      Similarly, pursuant to an agreement dated February 2, 2003
                                                      between KHI and Majid Al-Futtaim Trust (‘‘MAFT’’), which
                                                      owns 13.75 per cent. of SSTIC, we have offered MAFT the right
                                                      to exchange its shares in SSTIC for our shares on the same
                                                      terms as we offer to AIID. We are continuing to discuss with
                                                      MAFT its possible exercise of this exchange right. As a result of
                                                      our discussions, we may issue additional shares to AIID and/or
                                                      MAFT in consideration for our acquisition of AIID’s and/or
                                                      MAFT’s respective ownership interests in SSTIC.
Lock-up . . . . . . . . . . . . . . . . . . . . . .   We, our chief executive officer, our other shareholders prior to
                                                      this offering (except for certain members of our management, as
                                                      described below, and except as otherwise set forth below) and
                                                      Salaam Investments have agreed that, without the prior written


                                                                5
                                                        consent of the joint global coordinators, we and they will not,
                                                        during the 180 days following the date of this offering
                                                        memorandum, offer, pledge, sell, contract to sell, sell any option
                                                        or contract to purchase, purchase any option or contract to sell,
                                                        grant any option, right or warrant to purchase, lend or otherwise
                                                        transfer or dispose of, directly or indirectly, any ordinary shares
                                                        or any securities convertible into or exercisable or exchangeable
                                                        for ordinary shares or enter into any swap or other arrangement
                                                        that transfers to another, in whole or in part, any of the
                                                        economic consequences of ownership of ordinary shares, except
                                                        for certain limited exceptions. In addition, the members of our
                                                        management who also are our shareholders (with the exception
                                                        of our chief executive officer, who is otherwise locked-up as
                                                        described above) have entered into lock-up agreements with us
                                                        on similar terms, with the exception of the lock-up periods,
                                                        which will expire on November 15, 2006. We do not expect to
                                                        receive a signed lock-up agreement from JJW Limited, one of
                                                        our shareholders, prior to the closing of this offering.
Dividends . . . . . . . . . . . . . . . . . . . . .     Our shares and GDSs offered hereby will be eligible for any
                                                        dividends declared and paid after the date of this offering
                                                        memorandum.
Use of Proceeds . . . . . . . . . . . . . . . .         The net proceeds from the offering will be used for the
                                                        expansion of our portfolio of hotel investments through
                                                        acquisitions and new developments and for general corporate
                                                        purposes.
Listing . . . . . . . . . . . . . . . . . . . . . . .   Application has been made for our shares to be admitted to the
                                                        Official List of Securities of the DIFX and to list our shares on
                                                        the DIFX under the symbol ‘‘KHI’’. Dealings in our shares
                                                        prior to listing on the DIFX will not take place. We expect our
                                                        shares to be issued and admitted to the Official List of Securities
                                                        of the DIFX and listed on the DIFX on or about March 1, 2006.
                                                        Application has also been made (i) to the UK FSA in its capacity
                                                        as competent authority under the FSMA for the GDSs to be
                                                        admitted to the Official List of the UKLA and (ii) to the
                                                        London Stock Exchange for the GDSs to be admitted to trading
                                                        under the trading symbol ‘‘KHI’’ on the London Stock
                                                        Exchange’s regulated market for listed securities and to be
                                                        quoted on the International Order Book. Admission to the
                                                        Official List together with admission to trading on the London
                                                        Stock Exchange’s market for listed securities constitute
                                                        admission to official listing on a stock exchange. Conditional
                                                        dealings in the GDSs on the London Stock Exchange will not take
                                                        place. It is expected that the GDSs will be issued and admitted
                                                        to the Official List of the UKLA and that unconditional dealings
                                                        in the GDSs will commence on or about March 1, 2006.
                                                        Prior to this offering, there has been no public market for our
                                                        shares or the GDSs. Our application to the UK FSA covers the
                                                        listing of up to 176,074,364 GDSs, consisting of up to 42,944,967
                                                        GDSs to be issued in this offering, up to 4,294,497 additional
                                                        GDSs to be issued pursuant to the exercise of the over-allotment
                                                        option, if any, and up to 128,834,900 additional GDSs to be
                                                        issued from time to time against the deposit of additional shares
                                                        with the Depositary pursuant to the Deposit Agreement.
Security Codes . . . . . . . . . . . . . . . . .        The ISIN code for our shares is KYG5257E1017.
                                                        The ISIN code for the GDSs is US49567W1018 and the
                                                        Common Code for the GDSs is 024440915.


                                                                   6
Restrictions on Purchases and
 Transfers of Shares and GDSs . . . . .   Our shares and GDSs are subject to certain restrictions on their
                                          purchase, resale and transfer.
                                          Shares may not be withdrawn until the Depositary has received a
                                          written confirmation from the Company that the Shares are
                                          listed on the DIFX. The Depositary shall notify holders of GDSs
                                          of such listing as soon as is reasonably practicable after receiving
                                          such written confirmation.




                                                     7
                                                 RISK FACTORS

Investors should carefully read the risk factors described below and the other information in this offering
memorandum prior to deciding to invest in our shares or GDSs. The risks described below are not the only ones
we face. Additional risk factors not currently known or not currently deemed material may also impair our
operations. Our business, financial condition or results of operations could be materially adversely affected by
any of these risks. The trading price of our shares or GDSs could decline due to any of these risks, and investors
may lose all or part of their investment. This offering memorandum also contains forward-looking statements
that involve risks and uncertainties. Actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks faced by us, described below and
elsewhere in this offering memorandum.

Risks relating to the political, economic and social environment of the countries in which we operate
or may operate in the future

Emerging markets such as those in which we operate or may operate in the future are subject to greater risks than
more developed markets, including significant political, social and economic risks.
Most of our operations are conducted and most of our assets are located in the Middle East and Africa. In
particular, our hotel owning companies own interests in hotel properties located in Egypt, Ghana, Jordan,
Kenya, Lebanon, Libya, Mauritius, Morocco, Palestine, Syria, Tanzania and the U.A.E. These countries
and other countries in which we currently have, or may in the future have, investments are or may be
subject to political, social, economic and market conditions, which differ significantly from those in more
developed countries.
Specific country risks that may have a material impact on our business, operating results, cash flows and
financial condition include:
          political, social and economic instability;
          external acts of warfare and civil clashes;
          government interventions, including tariffs, protectionism and subsidies;
          regulatory, taxation and legal structure changes;
          difficulties and delays in obtaining new permits and consents for our operations or renewing
          existing ones;
          potential lack of reliability as to title to real property in certain jurisdictions where we operate;
          arbitrary or inconsistent governmental action;
          cancellation of contractual rights;
          lack or very poor condition of infrastructure;
          expropriation of assets; and
          inability to repatriate profits and/or dividends.
Many of the countries where we have made, and certain other countries where we may consider making,
investments have in the past experienced periods of political instability and, in some cases, civil unrest and
clashes, and many such countries are located in regions historically characterised by instability.
As the political, economic and social environments in certain countries in which we have made, or may
consider making, investments remain subject to continuing development, investments in these countries
are characterised by a significant degree of uncertainty. Any unexpected changes in the political, social,
economic or other conditions in these or neighbouring countries may have a material adverse effect on the
international investments that we have made or may make in the future, which may in turn have a material
adverse effect on our business, financial condition and results of operations.

Acts of terrorism have adversely affected the hotel industry generally, including our results of operations, and these
adverse effects may continue or, particularly if there are further terrorist events, worsen.
Increased terrorist activities and the heightened threat of terrorism have had a negative impact on hotel
operations globally, resulting in worse than expected performance. The increase in acts of terrorism in


                                                          8
general, and the targeting of popular destinations and hotels for their concentration of foreigners in
particular, have had an adverse impact on business and leisure travel, hotel occupancy rate and RevPAR.
In addition, some of our hotels have been adversely affected from time to time due to safety concerns and
a significant overall decrease in the amount of air travel, particularly transient business and luxury leisure
travel, which includes the corporate and premium segments that generally pay the highest average room
rates. The uncertainty associated with the continuing ‘‘war on terrorism’’ and the possibility of future
attacks, terrorism alerts or outbreaks of hostilities may continue to have a negative effect on business and
leisure travel patterns and, accordingly, the performance of our business.
Examples of recent terrorist activities and social unrest affecting the hotel industry in regions where we
currently operate include the following:
          the terrorist attack at three hotel properties in Amman, Jordan, killing at least 57 and injuring
          over 100 local residents and tourists in November 2005.
          the terrorist attack at a hotel property in Sharm El Sheikh, Egypt, killing over 80 people and
          injuring over 200 local residents and tourists in July 2005; and
          the assassination in Beirut, Lebanon of the former Prime Minister of Lebanon, Mr. Rafic Hariri
          in February 2005.
While our properties in Amman, Sharm El Sheikh and Beirut were not physically damaged in these
attacks, acts of terrorism have affected and may continue to affect the occupancy rate levels, ADR and
RevPAR results of our hotel properties in these cities and may have an adverse effect on our other hotel
properties in the region.

We and certain of our joint venture partners, affiliates and associates have operations in, or render services to,
countries that are currently subject to trade restrictions and may be affiliated with persons or countries as identified
on the ‘‘Specially Designated Nationals and Blocked Persons List’’ of the Office of Foreign Asset Control (‘‘OFAC’’).
We and certain of our joint venture partners, affiliates and associates have operations in, or render services
to, countries that are currently subject to trade restrictions and economic embargoes that prohibit U.S.
incorporated entities, U.S. citizens and residents from engaging in commercial, financial or trade
transactions with such countries (‘‘Blocked Countries’’), unless authorised by OFAC or exempted by
statute. We cannot assure you that the Blocked Country in which we currently operate, namely Syria, and
any Blocked Countries in which certain of our joint venture partners, affiliates and associates currently
operate will not be subject to further and more restrictive sanctions in the future. We also cannot assure
you that OFAC will not impose sanctions on other countries in which we currently, or may in the future,
operate or that we will not make future or additional investments in countries in which OFAC currently
imposes sanctions.
OFAC also maintains the Specially Designated Nationals and Blocked Persons List (‘‘SDN List’’), which
contains the names and descriptions of individuals, companies, associations and other entities identified by
the United States to pose a threat to the interests and security of the United States. We cannot assure you
that the persons and entities with whom we do now or in the future may engage in transactions and employ
will not be implicated on the SDN List.
Any imposition of OFAC sanctions may result in U.S. persons or affiliates associated with us being subject
to a range of civil and criminal penalties. If we are not in compliance with OFAC sanctions, we may be
subject to criminal and civil penalties, which may cause harm to our reputation and to our brand names
and could have a material adverse effect on our business, financial condition and results of operations.

Restrictions imposed by the United States government on Syria may subject U.S. persons or affiliates associated with
us to civil and criminal penalties and may have a material adverse effect on our operations in Syria.
As at September 30, 2005, we had investments in hotel operations in Syria totalling $17 million
($28.9 million on a pro forma basis). See ‘‘Business Description—Our Hotels and Properties—Syria’’.
Syria’s relations with the United States have deteriorated in recent years. In May 2004, President Bush
signed an Executive Order implementing sanctions on Syria pursuant to the Syria Accountability and
Lebanese Sovereignty Restoration Act of 2003, which, among other things, contemplates the potential
imposition of a number of restrictions on Syria, including a general prohibition of U.S. exports to Syria,
except for food and medicine, and a prohibition of flights from Syria to the United States. Further, as a
result of the adoption of United Nations Security Council Resolution 1636 in October 2005, there is a


                                                           9
greater likelihood that sanctions against Syria will be increased, which could have a material adverse effect
on our operations in Syria.
OFAC administers the laws and regulations which impose sanctions on Syria, as well as a number of
sanctions on U.S. persons who are engaged in certain transactions with or in Syria or who, in certain
circumstances, participate in investments in Syria (‘‘Syria Country Programme’’). We believe that the Syria
Country Programme should not apply directly to either our company or our subsidiaries with activities in
Syria. However, we cannot predict OFAC’s enforcement policy and it is possible that OFAC may take a
different view regarding our measures or status and investors of U.S. nationality could be adversely
impacted.
There is also a risk that the company, or our operating companies in Syria, or officers or employees of our
company, joint venture partners, associates, affiliates or hotels engaged in our activities in Syria, may be
implicated on the SDN List, in which event the OFAC sanctions will be triggered against us and such
officers and employees.
Sanctions imposed on Syria or on our company because of any affiliations with persons or entities on the
SDN List could have a material adverse effect on our business, financial condition and results of
operations.

Weaknesses and uncertainties relating to the legal and regulatory systems in many of the countries in which we
operate or may operate in the future create an uncertain and high risk environment for investment and business
activities.
Many of the countries in which we operate or may operate in the future are in various stages of developing
institutions and legal and regulatory systems that are not yet as firmly established as they are in Western
Europe and the United States. Some of these countries are also in the process of transitioning to a market
economy and, as a result, are experiencing changes in their economies and their government policies
(including, without limitation, policies relating to foreign ownership, repatriation of profits, property and
contractual rights and planning and permit-granting regimes) that may affect our investments in these
countries.
The procedural safeguards of the legal and regulatory regimes in these countries are still developing and,
therefore, existing laws and regulations may be applied inconsistently. Often, fundamental contract,
property and corporate laws and regulatory regimes have only recently become effective, which may result
in ambiguities, inconsistencies and anomalies in their interpretation and enforcement. In addition,
legislation may often contemplate implementing regulations that have not yet been promulgated, leaving
substantial gaps in the regulatory infrastructure. All of these weaknesses could affect our ability to enforce
our rights under our contracts or to defend ourselves against claims by others.
Moreover, in certain circumstances, it may not be possible to obtain the legal remedies provided under
current laws and regulations in a timely manner, or at all. The independence of the judicial systems and
their immunity from economic, political and nationalistic influences in many of the countries in which we
operate or may operate in the future remain largely untested. In many of these countries, court systems are
understaffed and underfunded and generally lack experience especially in the areas of business, corporate
and real estate law. Judicial precedents may have no binding effect on subsequent decisions and legislation
and court decisions may not be readily available to the public or organised in a manner that facilitates
understanding. These judicial systems may sometimes be slow or unjustifiably swift. In addition,
enforcement of court orders can, in practice, be very difficult in some of these countries. All of these
factors make judicial decisions in many of the countries in which we operate or may operate in the future
difficult to predict and effective redress uncertain. Furthermore, court claims may be used in furtherance
of political aims or infighting. We may be subject to such claims and may not be able to receive a fair
hearing. Moreover, court orders are not always enforced or followed by law enforcement agencies and
governments may attempt to invalidate court decisions by backdating or retroactively applying relevant
legislative changes.
Instability and uncertainties relating to the legal and regulatory environment in the countries in which we
operate or may operate in the future could have a material adverse effect on our business, financial
condition and results of operations.




                                                     10
Unlawful or arbitrary government action may have a material adverse effect on our business.
Governmental authorities in many of the countries in which we operate or may operate in the future may
have a high degree of discretion and, at times, act selectively or arbitrarily, without hearing or prior notice,
and sometimes in a manner that is contrary to law or influenced by political or commercial considerations.
Such governmental action could include, among other things, the expropriation of property without
adequate compensation or limitations on repatriation of profits and/or dividends. If certain of our
properties were expropriated in such a manner, or certain limitations were imposed on the repatriation of
profits and/or dividends, this could have a material adverse effect on our business, financial condition and
results of operations.
Moreover, governments in these countries often have the power, by regulation or governmental act, to
interfere in certain circumstances with the performance of, or nullify or terminate, contracts. Unlawful,
selective or arbitrary governmental actions could include the denial or withdrawal of licenses, sudden and
unexpected tax audits, criminal prosecutions and civil actions. In addition, government entities sometimes
may use common defects in matters surrounding share issuances and registration as pretexts for court
claims and other demands to invalidate such issuances and registrations or to void transactions, often for
political purposes. In such an environment, our competitors may receive preferential treatment from the
respective governments, potentially giving them a competitive advantage over us. Such a competitive
advantage may result in a material adverse effect on our business, financial condition and results of
operations.

The implications of tax systems in countries in which we operate are uncertain and various tax laws are subject to
differing interpretations.
Tax systems in some of the countries in which we operate are often characterised by frequent changes in tax
regulations, as a result of which many tax regulations are either not subject to firmly established
interpretations or are subject to frequently changing interpretation by the tax authorities. Often, tax laws
have not been in force for significant periods of time or are constantly amended and only a few precedents
regarding tax issues are available. Differing opinions regarding the legal interpretation of tax laws often
exist both among and within governmental ministries and authorities, including tax administrations,
creating uncertainty and areas of conflict for taxpayers and investors. This degree of uncertainty makes tax
planning difficult for us. Changing tax laws and tax incentives and changing interpretations of existing tax
regulations by the tax authorities combined with high penalties for non-compliance and a risk of arbitrary
action by government or administrative authorities may result in tax risks for our companies being
significantly higher than in countries with more stable tax systems. For instance, we cannot assure you that
the tax incentives we currently, or expect to, enjoy in Egypt, Syria or Lebanon will not be retracted by
government or administrative authorities in the future, nor can we assure you that tax authorities in the
countries in which we operate will not take positions that differ from ours with regard to interpretative
issues, any of which events may result in a material adverse effect on our business, financial condition and
results of operations.

Risks Related to Our Business
The hotel industry is subject to certain general risks.
A number of factors, many of which are common to the hotel industry and are beyond our control, could
affect our business, including the following:
          dependence on business, commercial and leisure travellers and tourism;
          dependence on group and meeting/conference business;
          the impact of acts of war or increased tensions between certain countries, increased terrorism
          threats, terrorist events, impediments to means of transportation (including airline strikes, road
          closures and border closures), extreme weather conditions, natural disasters, outbreaks of
          diseases and health concerns, rising fuel costs or other factors that may affect travel patterns and
          reduce the number of business and leisure travellers;
          adverse effects of international market conditions, which may diminish the demand for first class
          and luxury leisure travel or the need for business travel, as well as national, regional and local
          political, economic and market conditions where our hotels operate and where our customers
          live;



                                                          11
          increased competition and periodic local oversupply of guest accommodation, which may
          adversely affect occupancy rates and room rates;
          increases in operating costs due to inflation, labour costs (including the impact of unionisation),
          workers’ compensation and health-care related costs, utility costs (including energy costs),
          increased taxes and insurance costs, as well as unanticipated costs such as acts of nature and their
          consequences and other factors that may not be offset by increased room rates;
          seasonality, in that many of our hotels are located in the Middle East and Africa where they may
          operate at low revenue during varying seasons;
          changes in interest rates and in the availability, cost and terms of debt financing; and
          changes in governmental laws and regulations (including trade restrictions), fiscal policies and
          zoning ordinances and the related costs of compliance.
These factors could have a material adverse effect on our business, financial condition and results of
operations.

Our business, financial condition and results of operations depend in large part upon the performance of, reputation
of and developments affecting the third-party hotel management companies that manage our hotels.
Our hotels are managed by third-party hotel management companies pursuant to management and other
related agreements, as described under the section ‘‘Business Description—Relationships with Hotel
Management Companies’’. Therefore, our business, financial condition and results of operations depend in
large part upon these hotel management companies’ performance under the management agreements and
other agreements, as well as the reputation of and developments affecting these hotel management
companies.
Under the terms of these management agreements, the third-party hotel management companies control
the daily operations of our hotels. For a summary discussion of the material terms of these management
agreements, see ‘‘Business Description—Relationships with Hotel Management Companies’’. Although we
monitor each hotel management company’s performance, and we have the right to review and object to the
annual budget of each hotel prepared by the respective hotel management company, for many of our
hotels, we do not have the direct authority to require any hotel to be operated in a particular manner or to
govern any particular aspect of the daily operations of any hotel (for instance, setting room rates or
managing certain personnel). Thus, even if we believe our hotels are being operated inefficiently or in a
manner that does not result in optimal or satisfactory occupancy rates, RevPAR, ADR or gross operating
profit margins, we may not be able to force the management company to change its method of operation of
our hotels. In addition, in the event that we wish to replace any of our management companies, we may be
unable to do so under the terms of our management agreements or we may need to pay substantial
termination fees and may experience disruptions at the affected hotels. The effectiveness of the hotel
management companies in managing our hotels will, therefore, significantly affect the revenue, expenses
and value of our hotels.
Because all of our hotel properties are managed by third-party hotel management companies, adverse
publicity or other adverse developments that may affect these companies or their brands generally may
result in a material adverse effect on our business, financial condition and results of operations.
In addition, the ownership of a third-party hotel management company may change, which could impact
our future relationship with the company. Furthermore, we may not be adequately protected by
change-in-control clauses in our management agreements and, accordingly, a change in control of one or
more of our third-party hotel management companies may adversely affect the operation of certain of our
assets and/or impact our ability to grow our business in the future.

Our objectives may conflict from time to time with the objectives of a hotel management company, which may
adversely impact the operation and profitability of a hotel.
The hotel management companies which operate our properties and their affiliates have non-exclusive
arrangements with us and own, operate or franchise properties other than our properties, including
properties that directly compete with our properties. Therefore, a hotel management company may have
different interests than our own with respect to short-term or long-term goals and objectives, including
interests relating to the brands under which such hotel management companies operate. Such differences
may be significant depending upon many factors, including the remaining term of our management


                                                        12
agreement, trade area restrictions with respect to competition by the hotel management company or its
affiliates or differing policies, procedures or practices. Any of these factors may adversely impact the
operation and profitability of a hotel, which could harm our business, financial condition and results of
operations.

Non-competition clauses in certain of our agreements may adversely affect our business by limiting our ability to
operate new hotels and resorts within the defined scope and time period of the respective clauses in the agreements.
Certain of our agreements contain non-competition clauses that may limit our ability to operate new hotels
and resorts within the defined scope and time period of these clauses. As a result of these clauses, we may
be unable to pursue development or acquisition opportunities that could be beneficial to us, which could,
in turn, have an adverse effect on our business, financial condition and results of operations.

The bankruptcy or insolvency of a hotel management company may adversely affect the operation of certain hotels
and impact our ability to obtain revenue generated by those hotels.
All revenue generated at our hotels, including credit card receivables, is deposited by the payors into
accounts maintained and controlled by the relevant hotel management company, which pays operating and
other expenses for the relevant hotels (including certain taxes), pays itself management fees in accordance
with the terms of the applicable management agreement and makes deposits into any reserve funds
required by the applicable management agreement. In the event of a bankruptcy or insolvency involving a
hotel management company, there is a risk that the payment of operating and other expenses for the
relevant hotels and payment of revenue to us may be delayed or otherwise impaired. In addition, many
services such as international sales, maintenance of the centralised reservation system and other similar
items are performed for our properties on a centralised basis by hotel management companies. The
bankruptcy or insolvency of a hotel management company may significantly impair its ability to deliver
such centralised services, which could significantly affect the occupancy rates at the hotels managed by the
hotel management company, and, in turn, result in a material adverse effect on our business, financial
condition and results of operations.

Rapid growth and expansion may strain our managerial, operational and control systems and we may encounter
difficulty obtaining personnel and other resources to adequately develop these systems further.
The rapid development and establishment of hotels in new markets, and especially in emerging markets,
may raise unanticipated operational or control risks. We have experienced substantial growth and
development in a relatively short period of time and we believe that we will continue to grow our business
at a relatively rapid rate for the foreseeable future.
Management of growth through newly developed or acquired properties in new markets will require,
among other things:
          continued development of financial and management controls and information technology
          systems and their implementation in newly established or acquired assets;
          integration of business culture and adoption of policies and best practices;
          increased marketing activities; and
          identifying, hiring and training new qualified personnel.
The operating complexity of our business and the responsibilities of our management have increased as a
result of this growth, placing significant strain on our managerial, operational and control systems. In view
of our growth strategy, we will need to continue to improve our operational and financial systems and
managerial controls and procedures to keep pace with our growth. We will also have to maintain close
coordination among our accounting, finance and asset management personnel.
Our inability to successfully manage the impact of rapid growth on our operational and managerial
resources and control systems could have a material adverse effect on our business, financial condition and
results of operations. Moreover, we cannot assure you that we will be able to achieve operating results for
our existing or future properties comparable to the historical operating results of our existing properties.
As we expand our operations and seek additional growth opportunities, our internal controls in particular
need to adapt and respond to the growing demands of our business activities. We are continuing to
evaluate the need for additional staff and other resources in the area of internal controls. However, there



                                                        13
can be no assurance that any such efforts will result in an adequate and effective controls system required
of a public company. Effective internal controls are necessary for us to produce reliable financial reports
and are important to help prevent fraud. As a result, if we fail to achieve and maintain effective internal
controls over financial reporting as our businesses grow, this could result in the loss of investor confidence
in the reliability of our financial statements, which in turn could harm our business, financial condition and
results of operations and negatively impact the trading price of our shares and GDSs.

Integration of new hotels may be difficult and may adversely affect our business, financial condition and results of
operations.
The success of any acquisition will depend, in part, on our ability to realise the anticipated benefits from
integrating acquired hotels with our existing operations. For instance, we may develop or acquire new
hotels in geographic areas in which our management may have little or no operating experience and in
which potential customers may not be familiar with the brands of our hotel management companies. These
hotels may attract fewer customers than our other operating hotels, while at the same time we may incur
substantial additional costs with these new hotel properties. As a result, our results of operations at new
hotel properties may be inferior to those of our other operating properties. Unanticipated expenses and
insufficient demand at a new property, therefore, could adversely affect our business. Our success in
realising anticipated benefits and the timing of this realisation depend upon the successful integration of
the operations of the acquired hotel. This integration is a complex, costly and time-consuming process. The
difficulties of combining acquired or newly developed properties with our existing operations include,
among others:
          co-ordinating sales, distribution and marketing functions;
          integrating information systems;
          preserving the important licensing, distribution, marketing, customer, labour and other
          relationships of the acquired hotel and obtaining new relationships, as required;
          costs relating to the opening, operation and promotion of new hotel properties that are
          substantially greater than those incurred in other areas; and
          successfully re-branding hotels if required.
In addition, the efficient management of our newly developed properties and integration of newly acquired
properties may cause us to face a number of technical difficulties and cultural differences. The resolution
of these difficulties and differences will be essential for our success, however, we cannot assure you that we
will achieve this resolution in an efficient and timely manner. Moreover, we may not accomplish the
integration of acquired or newly developed hotels smoothly or successfully. The diversion of the attention
of our management from our existing operations to integration efforts and any difficulties encountered in
combining operations could prevent us from realising the anticipated benefits from the acquisition or
development and could adversely affect our business, financial condition and results of operations.

We may not realise the benefits we expect from investments we make in our operational and under construction
properties, which may adversely impact our business.
We have made significant investments in our existing hotels properties and in the acquisition and
development of new hotel properties in the markets in which we operate. Renovating and improving our
existing properties and acquiring and developing new and commercially viable properties is important to
the success of our business, and we intend to continue to invest in these areas and expect to make
significant investments in the future. However, we may not be able to obtain the increases in revenue and/
or profit that we anticipate from our investments and our failure to achieve our expected returns on our
investments could result in a reduction in profitability, which could, in turn, restrict our ability to make
required payments of development costs and take advantage of other investment opportunities and,
accordingly, materially adversely affect our business, financial condition and results of operations.

Our working capital reserves may not be adequate to cover all of our cash needs and we may have to obtain
financing from other sources.
Our working capital reserves may not be adequate to cover all of our cash needs and we may have to
obtain financing from either affiliated or unaffiliated sources. We cannot assure you that sufficient
financing will be available or, if available, will be available on reasonable terms. Additional borrowings for



                                                        14
working capital purposes will increase our interest expense and may harm our business, financial condition
and results of operations.

We require substantial amounts of capital for our business operations, and the failure to obtain capital required may
materially and adversely affect our growth prospects and future profitability.
We have experienced substantial growth and development in a relatively short period of time and we
believe that we will continue to grow our business at a relatively rapid rate for the foreseeable future. We
expect that this growth will require significant amounts of investment. While we expect to be in a position
to finance the capital expenditure requirements of our operating assets mainly with funds from our
operating cash flows, furniture, fixtures and equipment (‘‘FF&E’’) reserves or existing debt facilities, we
will also consider raising additional capital to finance our future growth plans by accessing the capital
markets or incurring additional indebtedness.
We may not be able to generate sufficient cash flows to fund capital expenditures for existing operations
and for acquisitions and new developments. In addition, we may face difficulties in obtaining debt
financing, refinancing existing debt or raising capital from capital markets due to reasons that may be
beyond our control, such as general economic conditions of the capital markets, or due to covenants under
our existing or future financing agreements. To the extent we incur additional indebtedness to fund capital
expenditures for existing operations and future investments, our ability to service, repay and refinance our
indebtedness or to fund our other liquidity needs will depend on our ability to generate cash in the future,
which is subject, to a certain extent, to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. Our failure to generate sufficient cash flows or to obtain the
capital required to finance investments in, or other liquidity requirements of, our existing businesses or our
future growth plans could have a material adverse effect on our business, financial condition and results of
operations.
Further equity financings may be dilutive to the existing holders of our shares or GDSs at the time of such
financings. Further debt financings could involve restrictive covenants which could limit our flexibility to
operate our business.

Our indebtedness could adversely affect our financial position.
Our current policy is to incur indebtedness primarily at the level of our hotel operating companies rather
than at KHI. On a consolidated basis, as at September 30, 2005 we had total debt of $85.8 million, of which
$1.6 million was indebtedness of KHI on a stand-alone basis. We also could incur additional indebtedness
in connection with any future acquisitions or developments. By incurring debt at the subsidiary level, we
are exposed to the following risks:
          general adverse political, economic and industry conditions in the countries in which our
          indebted subsidiaries operate may leave us vulnerable to any default of these subsidiaries or we
          may be unable to refinance some or all of the indebtedness of our subsidiaries on commercially
          reasonable terms;
          because a substantial portion of the cash flow from operations of our indebted subsidiaries must
          be dedicated to the repayment of debt, there is a reduction in the amount available for
          distribution to us in order to fund our working capital, capital expenditures, development efforts
          and general corporate purposes or for the distribution of dividends. In addition, the amounts
          required to service debt may exceed the positive cash flow generated in relation to a given hotel
          property;
          financial covenants imposed on our indebted subsidiaries may limit our ability to borrow, may
          result in the obligation to pay on guarantees of our subsidiaries’ debt, limit our access to the cash
          flows generated from our hotels and, under certain circumstances, accelerate the amount due
          under certain of our subsidiaries’ loans;
          increases in interest rates on our or our hotel owning companies’ existing variable rate
          indebtedness would increase our interest expense, which could adversely affect our cash flow; and
          defaults under our financing agreements could lead to foreclosure on our mortgaged properties.




                                                         15
We may be unable to effectively hedge against interest rates.
We seek to hedge against interest rate fluctuations where it is economically feasible to do so. However, it
may not always be possible to hedge against interest rates on a cost-effective basis and this may become
more difficult in the future due to the unavailability or limited availability of hedging counterparties or a
deterioration of our financial standing. If we are unable to effectively hedge against interest rate risks, this
could have a material adverse effect on our business, financial condition and results of operations.

Our holding company structure exposes us to certain risks.
As a holding company, we rely on the ability of our subsidiaries to generate profits and pay management
fees and dividends and any decline in their profits or their ability to pay management fees and dividends
could materially and adversely affect our earnings and operational flexibility.
As we are a holding company, we have no significant operations of our own. We currently conduct all our
operations indirectly through our subsidiaries. Substantially all of our assets are held by, and profits and
cash flows are attributable to, our subsidiaries. If profits from our subsidiaries were to decline, our
consolidated profits and cash flows could be materially adversely affected. Our cash flows are principally
derived from dividends and refinancing proceeds paid to us by our subsidiaries in U.S. Dollars. As a result,
our ability to distribute dividends, in turn, largely depends on the ability of our subsidiaries to generate
profits and pay dividends to us out of those profits.
The ability of our subsidiaries to pay dividends depends on business considerations and regulatory limits,
including local company laws, exchange controls and other regulations and may, also depend on
restrictions in shareholder agreements. In addition, certain of our subsidiaries have incurred indebtedness
to third-party lenders and the terms of their financing arrangements with some of these lenders restrict our
ability to receive dividends from these subsidiaries.
We cannot assure you that our subsidiaries will generate sufficient profits and cash flows to pay
management fees and dividends, or will be otherwise allowed under local company laws, exchange controls
and other regulations and the terms of their financing arrangements or other agreements to distribute
sufficient funds to enable us to meet our obligations, pay interest and expenses or declare dividends. The
diminished ability, or restrictions on the ability, of our subsidiaries to pay management fees and dividends
to us could have a material adverse effect on our business, financial condition and results of operations.
In addition, because of our holding company structure, claims of creditors of our subsidiaries, including
trade creditors and banks and other lenders, will effectively have priority over us with respect to the assets
of our subsidiaries.

A number of our investments have accumulated losses in the past and are expected to incur losses for the coming
years and we may not experience a smooth growth curve in the future.
Eleven of our 26 hotels are currently in development or under construction. Of these, two hotels are
scheduled to open in 2006, three are scheduled to open in 2007 and six are scheduled to open in 2008.
During the construction period, these projects incur losses as they require significant capital expenditures
but generate no revenue. Construction and other delays can extend the duration of this period. See ‘‘—We
have significant construction and capital expenditure requirements.’’ Once operational, a hotel will
typically experience a growth phase during which occupancy and room rates increase. We expect to
experience growth as hotels under development open and as newly opened hotels mature. However,
because of the lack of performance history of investments in their initial operating stage, we may not be
able to accurately predict future performance until the performance of the newly operational investments
stabilise. Moreover, this growth may not continue unless we develop further hotels and the rate of any
future growth we experience may vary significantly from period to period and may not be predictable.
A number of our hotel owning companies, such as the hotel owning companies of the Four Seasons Hotel
                  o                                          o
Damascus, the M¨venpick Royal Palm Hotel and the M¨venpick Hotel and Resort Beirut, have
accumulated losses and will not be able to declare and distribute dividends, even if the assets begin to
generate income in the future, until the accumulated losses have been covered.

We have significant construction and capital expenditure requirements.
Many of our new hotels are under construction or in initial stages of development and have significant
capital expenditure requirements. Our operating hotel properties will need renovations and other capital



                                                       16
improvements, including replacements, from time to time, of FF&E. Some of these capital improvements
are mandated by health, safety or other regulations or by the standards of the hotel management
companies. Construction of new hotels and capital improvements of operating hotels may give rise to the
following risks:
         possible structural and environmental problems;
         construction cost over-runs and delays;
         disruption in service and room availability causing reduced demand, occupancy and rates;
         possible shortage of available cash to fund construction and capital improvements and the related
         possibility that financing for these capital improvements may not be available to us on affordable
         terms; and
         uncertainties as to market demand or a loss of market demand after construction capital
         improvements have begun.
The cost of construction and capital improvements could have a material adverse effect on our business,
financial condition and results of operations.

We may be unable to complete and operate our hotel properties that are under construction or in initial stages of
development.
As of the date hereof, 11 of our 26 hotel and resort properties are under construction or in initial stages of
development. We intend to continue to develop new hotel properties in the markets in which we currently
operate and in new markets. Our current and future development and construction activities involve a
number of risks, including the following significant risks:
         inability to obtain construction financing or, if we finance development projects through
         construction loans, permanent financing, in any case, at all or on favourable terms;
         requirement to make significant current capital expenditures for certain hotels without receiving
         revenue from these hotels until future periods;
         inability to complete development projects on schedule or within budgeted amounts;
         delays or refusals in obtaining all necessary zoning, land use, building, occupancy and other
         required governmental permits and authorisations; and
         fluctuations in occupancy rates and ADR at newly developed or renovated properties due to a
         number of factors, including market and economic conditions, that may result in our investment
         not being profitable.
We cannot assure you that our current or future construction projects will be completed and our inability
to complete a project could have a material adverse effect on our business, financial condition and results
of operations.

We face competition for the acquisition of real estate properties and we may not be successful in identifying or
consummating acquisitions and joint venture opportunities that meet our criteria, which may impede our growth or
harm our profitability.
One of the key components of our business strategy is to expand by acquiring new assets and increasing
investments in existing properties. Implementation of this strategy requires us to identify suitable
acquisition candidates and investment opportunities that meet our criteria and are compatible with our
growth strategy. We may not be successful in identifying or consummating acquisitions and joint ventures
on satisfactory terms.
We compete with owner-operators of hotels, private equity investors, real estate investment trusts,
institutional pension funds, wealthy individuals and others who are engaged in real estate investment
activities for the acquisition of hotels. These competitors may drive up the price we must pay for real
property, other assets or other companies we seek to acquire. In addition, our potential acquisition targets
may find our competitors to be more attractive suitors because they may have greater resources, may be
willing to pay a higher price or may have a more compatible operating philosophy. Our competitors may
succeed in acquiring properties, assets or companies we are seeking to acquire. In addition, the number of
entities competing for suitable investment properties may increase in the future, which could result in
increased demand for these assets and therefore increased prices. If we pay higher prices for properties,
our profitability may be reduced.


                                                       17
Significant competition in markets in which we operate or may operate in the future may have a material adverse
effect on our business, financial condition and results of operations.
The first class and luxury market segments of the hotel business are highly competitive. Our hotels and
resorts compete on the basis of location, room rates, quality of property, service and amenities, reputation,
recognition and reservations systems, among many other factors. There are many competitors in the first
class and luxury hotel market segments, and many of these competitors have substantially greater
marketing and financial resources than we have. New first class and luxury hotels may be constructed in
areas in which our properties are located, without corresponding increases in demand for hotel rooms in
these locations. This competition and/or new supply could reduce occupancy rates and ADR at our hotels
and resorts, which would have a material adverse effect on our business, financial condition and results of
operations. Over-building in the hotel industry and the possibility that governments may relax zoning and
building ordinances may increase the number of rooms available and may decrease occupancy and room
rates. We also face competition from properties that are managed by internationally recognised hotel
brands with which we are not associated, as well as from properties not owned by us that are managed by
                                o
Four Seasons, Fairmont and M¨venpick. In addition, new or existing competitors could significantly lower
rates or offer greater conveniences, services or amenities or significantly expand, improve or introduce new
facilities in markets in which our hotels compete. For a more detailed discussion of our competitors in the
markets in which we operate, see ‘‘Business Description—Competition’’.
Our market position will depend on our ability to anticipate and respond to various competitive factors
affecting the industry, including new hotels and resorts, the offering of new amenities and services in our
markets, pricing strategies by competitors and changes in consumer demographics and preferences and
economic, political and social conditions in the countries in which we operate or may operate in the future.
Any failure by us to compete effectively could have a material adverse effect on our business, financial
condition and results of operations.

We may be required to perform due diligence on our acquisitions with limited resources and on a compressed time
frame, and hotels we acquire may be encumbered by unknown or contingent liabilities or underperform relative to
forecasts.
When we enter into an acquisition, we may have limited time to complete our due diligence prior to
acquiring the hotel or portfolio of hotels. Because our internal resources are limited, we typically rely in
part on third parties to conduct a significant portion of our due diligence. To the extent we or these third
parties underestimate or fail to identify risks and liabilities associated with the hotels we acquire, including
weaknesses and uncertainties in local legal and regulatory systems, we may incur unexpected liabilities,
such as defects in title, be unable to obtain permits, or experience environmental problems or structural or
operational defects requiring remediation, or the properties we acquire may fail to perform in accordance
with our projections. If this occurs it could have a material adverse effect on our business, financial
condition and results of operations.

                                                                     o
Our operations in Beirut and Dubai and our revenue from the M¨venpick Hotel and Resort Beirut and the
  o
M¨venpick Hotel Bur Dubai account for a significant part of our gross hotel operating revenue and our operations
in Egypt account for a significant part of our net income from affiliates.
Our gross hotel operating revenue has historically been derived from our businesses in Beirut, particularly
        o                                                                   o
the M¨venpick Hotel and Resort Beirut, and Dubai, particularly the M¨venpick Hotel Bur Dubai, and
these markets and hotels are likely to continue to account for a large portion of our business in the future.
                                                 o                                           o
In 2004, gross operating revenue from the M¨venpick Hotel and Resort Beirut and the M¨venpick Hotel
Bur Dubai accounted for 71 per cent. and 28 per cent., respectively, of our consolidated gross hotel
                                                                                        o
operating revenue. For the nine-month period ended September 30, 2005, the M¨venpick Hotel and
                             o
Resort Beirut and the M¨venpick Hotel Bur Dubai accounted for 44 per cent. and 26 per cent.,
respectively, of our gross hotel operating revenue. Moreover, historically and for the nine-month period
ended September 30, 2005, 100 per cent. of our net income from affiliates was derived from our properties
in Egypt. Accordingly, we could be materially harmed by an economic downturn, changes in travel
patterns, disasters or terrorist activities in Beirut, Dubai or Egypt. We cannot give you any assurance that
our current levels of gross hotel operating revenue or net income from affiliates from these hotel
properties or markets may not deteriorate or that demand for our properties will increase in these or the
other markets or at these or other hotel properties. If gross hotel operating revenue or net income from
affiliates derived from these hotel properties or markets decline and we are not able to generate gross
hotel operating revenue or net income from affiliates of a comparable size from the other hotel properties


                                                      18
or markets in which we operate, we would experience a material adverse effect on our business, financial
condition and results of operations.

We may not have obtained or be able to obtain and maintain comprehensive insurance on our properties, and
uninsured or under-insured losses could adversely affect our business, financial condition and results of operations.
While we maintain insurance against standard risks, such as fire or accidental damage, the terms of such
insurance are likely to be less comprehensive, provide for lower levels of compensation and be more
expensive than might be expected in more developed markets such as in the United States and Western
Europe. Furthermore, most of our operations are conducted and most of our assets are located in
countries which are subject to increased political, social, economic and market risks. See ‘‘—Emerging
markets such as those in which we operate or may operate in the future are subject to greater risks than
more developed markets, including significant political, social and economic risks’’. Various types of
catastrophic losses, such as losses due to political risk, civil unrest, acts of warfare, terrorist activities,
natural disasters (e.g., earthquakes, floods, hurricanes), pollution, environmental matters or expropriation
of assets, generally are either uninsurable or not economically insurable, or may be subject to insurance
coverage limitations, such as large deductibles or co-payments. In addition, insurance for certain of our
hotel projects under development is provided by the construction company in charge of the project
pursuant to the relevant project construction agreement. See ‘‘Business Description—Insurance’’. While
these agreements may obligate the relevant construction company to provide insurance, we cannot be
certain that the construction company provides adequate insurance or that the construction company
provides insurance at all.
In the event of a catastrophic loss, our insurance coverage may not be sufficient to cover the full current
market value or replacement cost of our lost investment. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as
the anticipated future revenue from the property. In that event, we might nevertheless remain obligated
for any mortgage debt or other financial obligations related to the property. Inflation, changes in building
codes and ordinances, environmental considerations and other factors might also keep us from using
insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed. Under those
circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on
the damaged or destroyed property.
As a result of increased terrorist activities, it has generally become more difficult and expensive to obtain
business interruption property and casualty insurance, including coverage for terrorist activities. Currently,
only certain assets in our portfolio are protected by business interruption, property and casualty insurance
covering terrorist activities and all of these insurance policies are subject to coverage limitations. For
example, the terrorism insurance coverage limitation for the Four Seasons Resort Sharm El Sheikh and the
  o
M¨venpick Hotel and Resort Beirut is $25 million and $10 million, respectively, which may not be
sufficient to cover losses due to terrorism activities. When our current insurance policies expire, we may
encounter difficulty in obtaining or renewing business interruption property or casualty insurance on our
properties at the same levels of coverage and under similar terms. Such insurance may be more limited and
for some catastrophic risks (e.g., earthquake, hurricane, flood and terrorism) may not be generally
available at current levels. Even if we are able to renew our policies or to obtain new policies at levels and
with limitations consistent with our current policies, we cannot be sure that we will be able to obtain such
insurance at premium rates that are commercially reasonable. If we were unable to obtain adequate
insurance on our properties for certain risks, it could cause us to be in default under specific covenants on
certain of our indebtedness or other contractual commitments we have which require us to maintain
adequate insurance on our properties to protect against the risk of loss. If this were to occur, or if we were
unable to obtain adequate insurance and our properties experienced damages, it could materially adversely
affect our business, financial condition and results of operations. See ‘‘Business Description—Insurance’’.

Inflation could increase our costs and decrease our operating margins.
The economies of certain countries in which we operate have, during certain periods in the past,
experienced high rates of inflation. In particular, Egypt, Ghana, Kenya and Mauritius experienced inflation
rates above five per cent. for at least one year between 2002 to 2004. According to the Economist
Intelligence Unit, as reproduced in the HVS Study, in 2004, 2003 and 2002, respectively, inflation rates in
Egypt were 11.3 per cent., 4.3 per cent. and 2.7 per cent., inflation rates in Ghana were 12.6 per cent.,
26.7 per cent. and 14.8 per cent., inflation rates in Kenya were 11.6 per cent., 9.8 per cent. and 2.0 per cent.
and inflation rates in Mauritius were 4.7 per cent., 3.9 per cent. and 6.4 per cent. We incur a substantial


                                                         19
portion of our operating expenses in local currency in the countries in which we operate. As a result, we
tend to experience increases in certain of our local currency costs which are sensitive to rises in the general
price levels, including salaries, energy utility costs and food and beverage consumables, in countries with
high inflation rates. We may not, however, be able to maintain the prices we charge for our products and
services at, or increase our prices to, levels sufficiently high in order to preserve our operating margins, due
to competitive pressures, regulatory requirements or other reasons. Accordingly, high rates of inflation in
countries in which we operate could have a material adverse effect on our business, financial condition and
results of operations.

Hotels in our portfolio have certain fixed costs that we may not be able to adjust in a timely manner in response to a
reduction in demand and revenues and rising expenses could materially adversely affect our business, financial
condition and results of operations.
The fixed costs associated with owning hotels, including committed maintenance costs, property taxes and
leasehold payments may be significant. We may be unable to reduce these fixed costs in a timely manner in
response to changes in demand for services, and failure to adjust our fixed costs may adversely affect our
business, financial condition and results of operations.
Moreover, our properties, and any properties in which we may acquire interests in the future, may be
subject to increases in operating and other expenses due to adverse changes in hotel management contract
terms and increases in property and other tax rates, utility costs, operating expenses, insurance costs,
repairs and maintenance and administrative expenses, which could materially adversely affect our business,
financial condition and results of operations.

We utilise joint venture partnerships for certain hotel acquisitions and/or developments and in certain of these
partnerships we do not have full operational control of our subsidiaries, which may limit our ability to cause these
entities to take actions we believe would be beneficial to our shareholders.
We currently acquire and/or develop hotel properties through joint venture partnerships with third parties
and we may continue to do so in the future. Moreover, we currently have several joint ventures in which we
do not have a controlling ownership percentage and although we are the largest single shareholder in most
of our investments, there are and will be instances where we will take a minority position. As at the date
hereof, we own minority interests in the hotel owning companies of a number of our hotels, including the
   o
M¨venpick Resort & Spa El Gouna (29.28 per cent.), the Four Seasons Hotel Cairo at Nile Plaza
(39.80 per cent., which we expect to increase to 44.23 per cent. in early 2006 upon the successful
                                                                                              o
completion of our acquisition of an additional ownership interest in this property), the M¨venpick Resort
El Quseir (30.50 per cent., but which we expect to increase to 81.16 per cent. in mid-2006 upon the
successful completion of our acquisition of an additional ownership interest in this property), the Four
Seasons Resort Sharm El Sheikh (31.96 per cent., which we expect to increase to 39.31 per cent. in early
2006 upon the successful completion of our acquisition of an additional ownership interest in this
property), the Four Seasons Hotel Amman (13.00 per cent.), The Fairmont Palm Hotel & Resort (20.10
                                                                    o
per cent.), the Fairmont Nile City Cairo (14.83 per cent.), the M¨venpick Hotel Gaza (10.26 per cent.) and
       o
the M¨venpick Hotel Pearl Dubai (16.32 per cent.). We believe that our minority interests in the share
capital of, the management of, and the presence of our directors on the boards of, the above entities do not
(or, in certain cases based on our recent acquisitions, did not) provide us with the ability to control actions
that require shareholder approval for these subsidiaries. Moreover, our joint venture partner could
perform poorly or enter into bankruptcy, which could require us to deal with a new party, such as a trustee,
or could make us liable to our joint venture’s creditors for our joint venture partner’s share of the joint
venture liabilities. As a result, in situations where we have joint venture partners and minority interests, we
may not have the ability to prevent these minority held subsidiaries from engaging in activities or pursuing
strategic objectives that may conflict with our interests or overall strategic objectives, adversely affecting
our investment and hence our business, financial condition and results of operations.

The illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit
our ability to respond to adverse changes in the performance of our properties and harm our financial condition.
Because real estate investments, in general, and real estate investments in countries in which we operate or
may operate in the future, in particular, are relatively illiquid, our ability to promptly sell one or more of
our properties in response to changing economic, financial and investment conditions is limited. The real
estate market is affected by many factors, such as general economic conditions, availability of financing,
interest rates and other factors, including supply and demand, that are beyond our control. We cannot


                                                           20
predict whether we will be able to sell any property for the price or on the terms set by us, or whether any
price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict
the length of time needed to find a willing purchaser and to close the sale of a property. Should we decide
to sell a property during the term of that property’s management agreement, we may have to pay
termination fees to the management company.
In addition, hotel properties may not be readily converted to alternative uses if they were to become
unprofitable due to competition, age of improvements, decreased demand or other factors. The conversion
of a hotel to alternative uses would generally require substantial capital expenditures. In particular, we may
be required to expend funds to correct defects or to make improvements before a property can be sold. We
cannot assure you that we will have funds available to correct defects or to make improvements. These
factors and any others that would impede our ability to respond to adverse changes in the performance of
our properties could have a material adverse effect on our business, financial condition and results of
operations.

We may be unable to extend or renew certain of our leasehold interests which could adversely affect our business
financial condition and the results of our operations.
Many of the hotel properties in which we have an interest are held through leasehold interests and not
freehold interests and certain of our leasehold interests are governed by lease agreements that do not
specify a renewal term and do not specify the maximum amount by which the lease payment may be
increased in the event of renewal. Accordingly, if the terms of these leasehold interests expire, we may be
unable to extend or renew these interests on economically viable terms, which could result in our inability
to continue to operate certain hotel properties, thereby adversely affecting our business, financial
condition and results of operations.

Currency fluctuations may have a material adverse effect on our business, financial condition and results of
operations.
Our financial statements, which are presented in U.S. Dollars, can be impacted by foreign exchange
fluctuations through both:
         translation risk, which is the risk that our financial statements for a particular period or as of a
         certain date depend on the prevailing exchange rates of the various currencies against the U.S.
         Dollar, and
         transaction risk, which is the risk that the currency of our costs and liabilities fluctuates in relation
         to the currency of our revenue and assets, which fluctuation may adversely affect our operating
         margins.
Furthermore, major devaluation or depreciation of any local currencies of the countries in which we
operate or a change in the currency regime of a country from a currency pegged to the U.S. Dollar to a
floating rate currency may result in disruption in the international currency markets and may limit our
ability to transfer or to convert our profits and/or dividends in such currencies into U.S. Dollars. We cannot
assure you that fluctuations in the exchange rates of the currencies of countries in which we operate
against the U.S. Dollar will not have a material adverse effect on our business, financial condition and
results of operations.

Our business and growth prospects may be disrupted if our relationship with HRH Prince Alwaleed is severed or
reduced.
Our success will depend, in part, on our continued relationship with HRH Prince Alwaleed. HRH Prince
Alwaleed has played and continues to play an important role in the company. In addition to being the
Chairman of our Board (the ‘‘Board’’) and the president and a director of each of our principal
shareholders, through his extensive network of business connections in the Middle East and the hotel
industry globally, HRH Prince Alwaleed has access to, and currently provides us with, a significant number
of hotel acquisition and development opportunities that we might not have access to without our
relationship with HRH Prince Alwaleed. While we have been granted a right of investment opportunity
from HRH Prince Alwaleed and Kingdom 5-KR-124, pursuant to which they have agreed not to invest in
any hospitality-related investment opportunity, other than in countries and territories in North, Central
and South America (including the Caribbean) and in Western Europe, without first providing us with the
right to consider and accept the opportunity for the company, this agreement is subject to certain



                                                       21
restrictions and may be terminated by HRH Prince Alwaleed and Kingdom 5-KR-124 upon a change of
control of KHI, such that Kingdom 5-KR-124 and its affiliates no longer hold, directly or indirectly, at least
twenty per cent. of the issued shares of KHI. Furthermore, we cannot assure you that any such investment
opportunity will be concluded on terms favourable to us, if at all. See ‘‘Business Description—Relationship
with HRH Prince Alwaleed.’’ If our relationship with HRH Prince Alwaleed is severed or reduced this
could have a material adverse effect on our business, financial condition and results of operations.

Our business and growth prospects may be disrupted if we are not able to identify and employ expert personnel in the
markets in which we operate or may operate in the future.
Our key personnel also play an important role in the success of our business and our success will depend,
in part, on our ability to continue to attract, retain and motivate qualified personnel, as competition for
personnel with relevant expertise in the market segments and countries in which we operate is intense due
to scarcity of qualified individuals.
Moreover, if one or more of our key personnel were unable or unwilling to continue in their present
position, or if they joined a competitor or formed a competing company, we might not be able to replace
them easily, which could have a material adverse affect on our business, financial condition and results of
operations. Furthermore, competition for personnel with relevant expertise in countries where we operate
is intense due to the scarcity of qualified individuals. We may also experience difficulties in transferring
existing personnel to certain of the countries in which we operate or may operate in the future or in
attracting new qualified personnel for employment in these countries due to the perceived high risk profile
of these countries. We focus on structuring our compensation packages in a manner consistent with the
standards in the respective markets. Since our industry is characterised by high demand and increased
competition for talent and our markets are characterised by scarcity of personnel with expertise in our
field, we may need to offer higher compensation and other benefits in order to attract and retain key
personnel in the future. We are not insured against the detrimental effects to our business resulting from
the loss or dismissal of our key personnel. We cannot assure you that we will be able to attract and retain
the key personnel that we will need to achieve our business objectives. If we are unable to retain key
personnel, or attract new qualified personnel to support the growth of our business, or if we are required
to offer significantly higher compensation to attract and retain key personnel, we could experience a
material adverse effect on our business, financial condition and results of operations.

Our principal shareholders or HRH Prince Alwaleed may take actions that are not in line with, or may conflict with,
our public shareholders’ best interests.
Kingdom 5-KR-124 and Kingdom 5-KR-51 together are expected to hold at least 51 per cent. of our
outstanding share capital immediately after the completion of the offering (assuming full exercise of the
over-allotment option and assuming our issuance to Salaam Investments following this offering of new
shares with an aggregate value, at the offering price, equal to $11.1 million). HRH Prince Alwaleed is the
president and a director of Kingdom 5-KR-124 and the president and sole director of Kingdom 5-KR-51.
Kingdom 5-KR-124, Kingdom 5-KR-51 and HRH Prince Alwaleed through his relationship with Kingdom
5-KR-124 and Kingdom 5-KR-51 currently are, and, following completion of the offering, are expected to
continue to remain, able to influence our business through their ability to control actions that require
majority shareholders’ approval and through Board membership. By owning more than 51 per cent. of our
shares, Kingdom 5-KR-124 and Kingdom 5-KR-51, acting together with shareholders owning more than
15.7 per cent. of our shares, can collectively pass special resolutions to effect extraordinary actions, such as
altering our Memorandum and Articles of Association, changing our name, increasing our share capital,
and approving related party transactions (other than transactions in which Kingdom 5-KR-124, Kingdom
5-KR-51 or HRH Prince Alwaleed are interested). Kingdom 5-KR-124 or Kingdom 5-KR-51 are not
obligated to provide us with financial support or to exercise their rights as a shareholder in our best
interests or in the best interests of our minority shareholders. In fact, Kingdom 5-KR-124, Kingdom
5-KR-51 or HRH Prince Alwaleed may engage in activities that conflict with such interests. If the interests
of HRH Prince Alwaleed or of Kingdom 5-KR-124 or Kingdom 5-KR-51 conflict with the interests of our
other shareholders, or if they choose to cause our business to pursue strategic objectives that conflict with
the interests of our other shareholders, those other shareholders could be disadvantaged by the actions
that they choose to pursue.
Furthermore, although any arrangements between us, our shareholders, our directors, including HRH
Prince Alwaleed or any of their affiliates are currently at arm’s length, we cannot assure you that any such
arrangements that may be concluded in the future will be concluded on as favourable terms to us.


                                                        22
The hotel industry is regulated, including with respect to food and beverage sales, employee relations, construction
and environmental concerns, and compliance with these laws could reduce revenue and profits of properties owned
by the company.
The company and its various properties are subject worldwide to numerous laws, including those relating
to the preparation and sale of food and beverages, such as health and liquor license laws, antitrust
practices, and environmental concerns, such as conservation in national reserves. Our properties are also
subject to laws governing our relationship with our employees in such areas as minimum wage and
maximum working hours, overtime, working conditions, hiring and making employees redundant, pension
and employment termination benefits and work permits. Also, the success of our asset management,
acquisition and development strategies may be dependent upon our obtaining necessary building permits
or zoning variances from local authorities. We have applications pending for various types of governmental
                                                               o
permits to expand many of our properties, such as the M¨venpick Hotel and Resort Beirut and the
   o
M¨venpick Hotel Bur Dubai, and we are awaiting renewals of certain of our trade and commercial licenses
for some of our properties. The failure to obtain any of these permits or licenses could adversely affect our
strategy of increasing revenue and net income through expansion of our existing properties or have an
effect on our day-to-day operations.

You may have limited recourse against us and our directors and senior management because we generally conduct
our operations outside the United Kingdom and the United States and all except one of our directors and senior
management reside outside the United Kingdom and the United States.
Our presence outside the United Kingdom and the United States may limit your legal recourse against us.
We are a company incorporated in, and under the laws promulgated by, the Cayman Islands. All of our
assets are located outside the United Kingdom, the United States and the Cayman Islands and are
principally located in the countries in which we operate. In addition, all except one of our directors and
senior management reside or are located outside of the United Kingdom or the United States. As a result,
you may not be able to effect service of process within the United Kingdom or the United States upon us
or our directors and senior management, or to enforce judgments obtained against us or our directors and
senior management in foreign courts predicated solely upon the civil liability provisions of the securities
laws of jurisdictions other than the Cayman Islands or Dubai. Similarly, there is doubt that a lawsuit based
upon U.K. or U.S. federal or state securities laws could be brought in an original action in the Cayman
Islands or Dubai and that a foreign judgment based upon U.K. or U.S. securities laws would be enforced in
the Cayman Islands or Dubai. There is also doubt as to enforceability of judgments of this nature in several
of the other jurisdictions in which we operate and where our assets are located.

You have limited control as a shareholder regarding any changes we make to our policies.
Our Board determines our major policies, including our investment objectives, financing, growth and
distributions and our Board may amend or revise these and other policies without a vote of our
shareholders. Our executive committee is in charge of the day-to-day management of our business and it
has been delegated all powers of the Board that may be validly delegated to such a committee in
accordance with our Articles of Association and applicable law (including, without limitation, powers in
respect of the acquisition and disposition of investments up to $10 million). Our day-to-day operations are
therefore performed without the direct input of our shareholders. This means that our shareholders will
have limited control over changes in our policies or our day-to-day operations.

Our management has limited experience managing a public company.
Our management team has historically operated our business as a privately-owned company and has
limited experience managing a publicly-owned company. We will need to develop control and reporting
systems and procedures adequate to support a public company, and this transition could place a significant
strain on our management, administrative, operational, internal audit and accounting systems, personnel,
infrastructure and other resources.

If our relationships with our employees were to deteriorate, we may be faced with labour shortages or stoppages,
which would adversely affect our ability to operate our properties.
As at September 30, 2005, we employed a total of 2,180 full-time employees at our head office in Dubai
and at our consolidated subsidiaries. Of these employees, 2,144 are employees of our consolidated hotels
and are, pursuant to the hotel management agreements for each of these hotels, managed directly by third



                                                        23
party hotel management companies. Our relations with our employees in various countries, including the
approximately 717 employees represented by labor unions, could deteriorate due to disputes related to,
among other things, wage or benefit levels or our response to changes in government regulation of workers
and the workplace. Our operations rely heavily on our employees’ providing high-quality personal service,
and any labour shortage or stoppage caused by poor relations with employees, including labour unions,
could adversely affect our ability to provide those services, which could reduce occupancy rate and room
revenue and even tarnish our reputation.
In addition, if an employee managed by one of the hotel management companies were to bring a claim
against us for the actions of the hotel management company, we may not be able to counterclaim
successfully against such hotel management company, and we could be held liable to the employee for
actions over which we have limited control.

Risks Related to this Offering
The DIFX has only recently commenced operations and we cannot assure you as to the level of liquidity that it will
develop.
The DIFX has only recently commenced operations and is substantially smaller in trade size and volume
than established securities markets, such as those in the United States and the United Kingdom. Trading
liquidity is limited, which may contribute to increased volatility for securities on the DIFX. The DIFX has
been open for trading since September 26, 2005, however, to date only one equity security is listed, and has
been trading since mid January 2006, and only seven members have been admitted to trading on the
exchange. Brokerage commissions and other transaction costs on the DIFX are generally higher than those
in Western European countries, and securities settlement may in some instances be subject to
administrative delays by the clearing banks. Such factors could generally decrease the liquidity and increase
the volatility of our share price, which in turn could increase the price volatility of the GDSs and impair the
ability of a holder of a GDS to sell any shares withdrawn by it from our GDR facility in the amount and at
the price and time such holder wishes to do so. See ‘‘The Dubai International Financial Exchange’’ and the
website of the DIFX, www.difx.ae, for more information regarding the DIFX.

Because there has been no prior market for our shares or GDSs or public trading in our shares or GDSs, this
offering may not result in an active or liquid market for our shares or GDSs, and their prices may be lower than
their offering prices and may be highly volatile.
Prior to this offering, there has been no public market for our shares or GDSs. The initial public offering
prices of our shares and GDSs was determined by negotiations between the joint global coordinators and
us and may not be indicative of prices that will later prevail in the trading market. Investors may not be
able to resell their shares or GDSs at or above the respective initial public offering prices. We have applied
to the DIFX for our shares to be admitted to the Official List of Securities of the DIFX and to list our
shares on the DIFX. We have also applied to the UK Financial Services Authority for the GDSs to be
admitted to the Official List of the UK Listing Authority and to the London Stock Exchange for the GDSs
to be admitted to trading on its market for listed securities. Nevertheless, an active public market in our
shares or GDSs may not develop or be sustained after this offering. In addition, if a significant number of
the GDS holders withdraw the underlying shares from our GDR facility and no additional GDSs are
issued, the liquidity of the GDSs would be adversely affected. We cannot assure you that an active trading
market will develop or be sustained following the completion of this offering, or that the market price of
our shares or GDSs will not decline below their initial public offering price.
In addition, stock markets in general may experience extreme price fluctuations. Fluctuations in the prices
of our shares or GDSs may not be correlated in a predictable way to our performance or operating results.
The initial public offering prices for our shares and GDSs may not be indicative of prices that will
subsequently prevail in the market, and you may not be able to resell your shares or GDSs at or above that
initial offering price. The following factors (among others), some of which are beyond our control, could
cause the prices of our shares and GDSs in the public market to fluctuate significantly from the price you
will pay in this offering:
          general, business, political, social and economic environment;
          variations in our semi-annual operating results;
          changes in stock market analyst recommendations regarding us or any of our assets;




                                                       24
         changes in market valuations of companies in related industries;
         fluctuations in stock market prices and volumes, generally;
         additional issuances or future sales (see below) of our shares or GDSs or other securities
         exchangeable for or convertible into our shares or GDSs in the future;
         the addition or departure of key personnel;
         announcements by us or our competitors of new properties; and
         acquisitions or joint ventures.
In the past, class action litigation has often been brought against companies following periods of volatility
in the market price of those companies’ common stock. We may become involved in this type of litigation
in the future. Litigation is often expensive and diverts management’s attention and company resources and
could have a material adverse effect on our business, financial condition and results of operations.

Future sales of shares or GDSs may affect the market price of our shares and GDSs.
Kingdom 5-KR-124 and Kingdom 5-KR-51, our principal shareholders, are together expected to
beneficially own at least 51 per cent. of our outstanding share capital following completion of the offering
(assuming the over-allotment option is exercised in full and assuming our issuance to Salaam Investments
following this offering of new shares with an aggregate value, at the offering price, of $11.1 million). We,
our chief executive officer, our other shareholders prior to this offering (except for certain members of our
management, as described below, and except as otherwise set out below) and Salaam Investments have
agreed that, without the prior written consent of the joint global coordinators, we and they will not, during
the 180 days following the date of this offering memorandum, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant
to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or any
securities convertible into or exercisable or exchangeable for ordinary shares or enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the economic consequences of
ownership of ordinary shares, except for certain limited exceptions. In addition, the members of our
management who also are our shareholders (with the exception of our chief executive officer, who is
otherwise locked-up as described above) have entered into lock-up agreements with us on similar terms,
with the exception of the lock-up periods, which will expire on November 15, 2006. We do not expect to
receive a signed lock-up agreement from JJW Limited, one of our shareholders, prior to the closing of this
offering. See ‘‘Subscription and Sale’’.
Nevertheless, sales, or the possibility or perceived possibility of sales, of substantial numbers of our shares
or GDSs in the public markets following completion of the offering could have an adverse effect on the
market trading prices of our shares or GDSs. Any subsequent equity offerings may dilute the percentage
ownership of our shareholders.

Following the offering you may not be able to deposit shares in exchange for GDSs in order to receive GDSs.
The Depositary may refuse to accept additional shares for deposit in exchange for GDSs whenever it is
notified in writing that we have restricted the transfer of such shares to comply with ownership restrictions
under applicable Cayman Islands law or that such deposit would result in any violation of applicable
Cayman Islands laws or governmental regulations or regulations of the DIFX or the London Stock
Exchange or if the Depositary considers it necessary or advisable, in good faith, at any time or from time to
time because of any requirement of law or of any government or governmental authority, body or
commission, or under any provision of the Deposit Agreement or for any other reason.

You may not receive cash dividends on our shares or GDSs.
While we currently expect that we will pay annual dividends, our actual dividends may vary depending on
our net income and may not be paid at all. Also, our ability to declare and pay cash dividends on our shares
or GDSs is restricted by, among other things, covenants in our credit facilities, the recovery of the
accumulated losses in our subsidiaries, compliance with the shareholder agreements of certain of our
subsidiaries and by provisions of Cayman Island law. As a result, capital appreciation, if any, realised
through a resale of our shares or GDSs, if a liquid market develops, may be your sole source of gain for the
foreseeable future.




                                                      25
Your voting rights with respect to our shares represented by GDSs are limited by the terms of the Deposit Agreement
and the relevant requirements of Cayman Islands law.
Holders of the GDSs will have no direct voting rights with respect to our shares represented by the GDSs.
They will be able to exercise voting rights with respect to shares represented by the GDSs only in
accordance with the provisions of the Deposit Agreement and the relevant requirements of the Cayman
Islands Companies Law (2004 Revision). However, there are practical limitations upon the ability to
exercise voting rights due to the additional procedural steps involved in our communication with GDS
holders. For example, our Articles of Association require us to notify shareholders at least 21 days in
advance of any shareholders meeting. GDS holders will not receive notice directly from us, but from the
Depositary, which has undertaken, in turn, to mail to GDS holders notice of such meeting, copies of voting
materials (if and as received by the Depositary from us) and a statement as to the manner in which voting
instructions may be given by holders. To exercise their voting rights, GDS holders must instruct the
Depositary how to vote shares represented by GDSs they hold. Because of this additional procedural step
involving the Depositary, the process for exercising voting rights may take longer for holders of GDSs than
for holders of shares and we cannot assure you that you will receive voting materials in time to enable you
to return voting instructions to the Depositary in a timely manner. The Depositary will exercise voting
rights pertaining to shares underlying GDSs for which no voting instructions have been timely received
from holders in the same proportion as it has been instructed to vote shares represented by GDSs for
which timely voting instructions were received.
There can be no assurance that holders and beneficial owners of GDSs will (i) receive notice of
shareholder meetings to enable the timely return of voting instructions to the Depositary, (ii) receive
notice to enable the timely cancellation of GDSs in respect of shareholder actions or (iii) be given the
benefit of dissenting or minority shareholders’ rights in respect of an event or action in which the holder or
beneficial owner has voted against, abstained from voting or not given voting instructions. See ‘‘Terms and
Conditions of the Global Depositary Receipts—Voting of Deposited Shares’’ for a description of the voting
rights of holders of GDSs. As a result, you may experience significant difficulty in exercising voting rights
with respect to shares underlying the GDSs.

Shareholders in certain jurisdictions, including the United States, may not be able to exercise their pre-emptive
rights to acquire further shares.
Under our Articles of Association, holders of our shares generally have the right to subscribe and pay for a
sufficient number of shares to maintain their relative ownership percentages prior to the issuance of any
new shares in exchange for cash consideration. U.S. holders of our shares may not be able to exercise their
pre-emptive rights unless a registration statement under the Securities Act is effective with respect to such
rights and the related shares or an exemption from the registration requirement is available. Similar
restrictions exist in certain other jurisdictions. We currently do not intend to register our shares or the
GDSs under the Securities Act or the laws of any other jurisdiction and no assurance can be given that an
exemption from such registration requirements will be available to U.S. or other holders of our shares. To
the extent that U.S. or other holders of our shares are not able to exercise their pre-emptive rights because
no registration statement under the Securities Act or the laws of another jurisdiction is effective with
respect to such rights and no exemption from the registration requirement is available, pre-emptive rights
will lapse and the proportional interests of such U.S. or other holders may be reduced.




                                                        26
              SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION AND
                                    OPERATING DATA

The following selected consolidated financial information and operating data should be read in conjunction
with, and is qualified by reference to, ‘‘Management’s Discussion and Analysis of Financial Condition and
Results of Operations’’ and our consolidated financial statements and the notes thereto included elsewhere in
this offering memorandum. Our consolidated financial statements as at and for the years ended December 31,
2004, 2003 and 2002 and as at and for the nine-month period ended September 30, 2005 have been audited by
Ernst & Young PCC, independent auditors. The unaudited consolidated income statement for the nine-month
period ended September 30, 2004 is derived from our unaudited consolidated interim financial statements that
have been reviewed by Ernst & Young PCC, independent auditors, which we believe have been prepared on the
same basis as the audited consolidated financial statements and reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of our results of operations and financial
position as at the date and for the period. We have prepared our consolidated financial statements in
accordance with IFRS. Results for the nine months ended September 30, 2005 are not necessarily indicative of
results that may be expected for the entire year.

Consolidated Income Statement

                                                       Nine-month period ended
                                                             September 30,                        Year ended December 31,
                                                         2005            2004              2004             2003          2002
                                                       (audited)     (unaudited)                         (audited)
                                                                                       (U.S. Dollars)
Revenue:
Hotel revenue . . . . .         ..........            40,697,390      29,599,930        37,767,266     24,704,558      10,225,789
Other . . . . . . . . . . . .   ..........             2,989,686         464,585           605,874        464,305       3,512,501
Cost of revenue:
Hotel operating costs           ..........            (28,384,704) (19,001,117) (25,528,276) (19,033,809)              (8,908,377)
Other costs . . . . . . .       ..........               (342,188)    (114,062)    (114,062)    (193,560)              (3,233,841)
Gross profit . . . . . . . . . . . . .    ....        14,960,184      10,949,336        12,730,802       5,941,494      1,596,072
Income (loss) from associates,            net .        5,855,757       2,009,475         2,506,943         786,395     (2,187,382)
General and administrative
  expenses . . . . . . . . . . . . . .    ....         (5,671,527)    (3,819,931)       (6,440,094)     (5,683,877)    (7,028,142)
Pre-opening expenses . . . . . .          ....         (1,352,572)            —                 —               —      (1,544,347)
Earnings (loss) before interest,
  depreciation, taxes and
  amortisation (EBITDA) . . . . .             .   .   13,791,842       9,138,880         8,797,651       1,044,012     (9,163,799)
Financial charges, net . . . . . . . .        .   .   (2,166,300)     (2,117,196)       (2,927,740)     (3,059,313)      (634,659)
Other income . . . . . . . . . . . . . .      .   .      290,575              —                 —               —              —
Depreciation . . . . . . . . . . . . . .      .   .   (5,166,361)     (3,339,696)       (4,612,319)     (3,417,146)    (1,350,450)
Amortisation of deferred credits              .   .    1,595,711       2,119,179         2,287,261       2,028,171             —
Income/(loss) before taxes . . . . . . .               8,345,467          5,801,167      3,544,853      (3,404,276) (11,148,908)
Taxes . . . . . . . . . . . . . . . . . . . . . .       (547,915)                —              —          (39,852)     (59,135)
Income (loss) before minority
  interests . . . . . . . . . . . . . . . . . .        7,797,552          5,801,167      3,544,853      (3,444,128) (11,208,043)
Minority interests . . . . . . . . . . . . .             400,364           (209,449)       881,989       3,475,305      280,298
Net income (loss) for the year/
  period . . . . . . . . . . . . . . . . . . .         8,197,916          5,591,718      4,426,842          31,177    (10,927,745)




                                                                     27
Consolidated Balance Sheet

                                                                                                          As at                   As at December 31,
                                                                                                      September 30,
                                                                                                          2005           2004            2003             2002
                                                                                                        (audited)                      (audited)
                                                                                                                            (U.S. Dollars)
ASSETS
Current assets:
Cash and cash equivalents . . .               .   .   .   .   .   .   .   .   .   .   .   .   .   .   273,565,243      40,513,992    43,299,069         51,017,988
Accounts receivable, net . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .    10,306,943       6,220,357     5,719,692          2,925,835
Inventories . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .     1,401,533       1,062,360       657,669            744,570
Real estate held for sale . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .     2,553,614       5,435,889     6,048,633          7,012,725
Prepayments and other assets                  .   .   .   .   .   .   .   .   .   .   .   .   .   .     7,028,754       2,371,542     2,380,388          5,774,849
Total current assets . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   294,856,087      55,604,140    58,105,451         67,475,967
Other long term assets . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .     3,941,453       2,400,462     1,816,029            550,000
Investments available for sale                .   .   .   .   .   .   .   .   .   .   .   .   .   .    75,182,895      69,294,453     9,356,397          8,327,263
Investments in associates, net                .   .   .   .   .   .   .   .   .   .   .   .   .   .    66,211,686      57,960,321    45,793,160         56,294,582
Advances to a contractor . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .     6,439,814       7,248,489            —                  —
Construction in progress . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .    76,406,129      62,370,612    41,694,590         20,076,985
Property and equipment, net .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   284,049,547     242,664,006   221,790,743        183,120,502
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    807,087,611     497,542,483   378,556,370        335,845,299

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . .                                         7,753,718      17,637,996     9,528,490          6,000,000
Current portion of notes payable . . . . . . . . . . . .                                                4,402,437       4,386,094     4,386,094          9,862,790
Accounts payable . . . . . . . . . . . . . . . . . . . . . . .                                         12,881,929       8,134,297    11,639,474          9,170,766
Accrued expenses and other liabilities . . . . . . . .                                                  8,346,986       6,190,025     3,403,880          1,793,008
Total current liabilities . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    33,385,070      36,348,412    28,957,938         26,826,564
Deferred tax liability . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     4,260,553              —             —                  —
Retentions payable . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     6,712,694       6,521,967     5,569,327          2,790,017
Due to related parties, net           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     1,337,361       1,707,222     2,044,271            851,054
Bank borrowings . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    78,001,748      58,682,034    52,261,782         39,000,000
Deferred credit . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    12,831,977      11,867,439    13,183,113         12,071,018
Notes payable . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            —               —      4,386,094          8,453,820
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . .                                   136,529,403     115,127,074   106,402,525         89,992,473
Shareholders’ equity:
Subscribed share capital . . . . . . . . . . . . . . . . . .                                          541,673,000     321,673,000 211,673,000          211,673,000
Unpaid share capital . . . . . . . . . . . . . . . . . . . . .                                                 —      (23,465,000)         —                    —
Paid up share capital . . . . . . . . . . . . . .                         .......                     541,673,000     298,208,000   211,673,000        211,673,000
Cumulative foreign currency translation
  adjustment and other . . . . . . . . . . . .                            .......                     (21,915,333) (22,904,798) (30,350,222) (21,783,406)
Cumulative change in market value . . .                                   .......                      10,710,003    6,565,189           —            —
Accumulated losses . . . . . . . . . . . . . . .                          .......                      (2,642,298) (10,840,214) (15,267,056) (15,298,233)
Total shareholders’ equity . . . . . . . . . . . . . . . . .                                          527,825,372     271,028,177   166,055,722        174,591,361
Minority interest of consolidated subsidiaries . . .                                                  142,732,836     111,387,232   106,098,123         71,261,465
Total liabilities and shareholders’ equity . . . . . .                                                807,087,611     497,542,483   378,556,370        335,845,299




                                                                                                      28
           SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND
                                OPERATING DATA


The unaudited pro forma selected consolidated financial information included in this offering memorandum
has been prepared by our management on the basis described below. While this unaudited pro forma
consolidated financial information is based on our audited consolidated financial statements as at and for the
nine-month period ended September 30, 2005 and prepared on a basis consistent with the accounting policies of
the company, the pro forma financial information has been prepared solely for illustrative purposes and,
because of its nature, addresses a hypothetical situation and therefore does not represent the actual financial
position or results of operations of the company as at any date or for any period.
The pro forma financial information reflects adjustments to our consolidated financial information as at and
for the period ended September 30, 2005 to reflect our acquisitions of ownership interests as described below, as
if such acquisitions, which were completed or are the subject of agreements signed during the period from
January 1, 2005 to January 31, 2006, had been consummated on January 1, 2005:
         Our acquisition of a 55.00 per cent. effective ownership interest in Lonrho Hotels Kenya B.V., the
         indirect owner of interests in the Norfolk Hotel, Mount Kenya Safari Club, the Aberdare Country
         Club, The Ark and Mara Safari Club and the subsequent increase of our effective ownership interest
         in Lonrho Hotels Kenya B.V. to 70.00 per cent. This transaction closed in December 2005.
                                                                                              o
         Our acquisition of a 30.00 per cent. effective ownership interest in the proposed M¨venpick Beach &
         Spa Resort Zanzibar. This transaction is subject to certain closing conditions, including (i) the
         completion of our due diligence review of the property and the parties involved, (ii) the completion of
         the corporate restructuring of the ownership of the hotel, (iii) the securing of debt financing for the
         project and (iv) the receipt of government consents and approvals. While there is no certainty that all
         or some of these conditions will be met or that this acquisition will be completed, we expect to close
         this transaction in February or March 2006.
         Our acquisition of a 50.00 per cent. effective ownership interest in the proposed Four Seasons Resort
         Mauritius. This transaction closed in January 2006.
                                                                                       o
         Our acquisition of 100.00 per cent. effective ownership interest in proposed M¨venpick Ambassador
         Hotel Accra. This transaction closed in January 2006.
         Our acquisition of a 25.00 per cent. effective ownership interest in the Four Seasons Hotel George V,
         Paris. This transaction closed in February 2006.
         Our acquisition of 100.00 per cent. effective ownership interest in the Resort & Spa El Quseir, Egypt
         and an adjacent piece of land. This transaction is subject to certain closing conditions, including
         (i) the completion of our due diligence review of the properties, (ii) the acquisition by Hammerwood
         of the shares of certain minority shareholders that are to be transferred to us in connection with the
         transaction, and (iii) the receipt of government consents and approvals. Satisfaction of certain of the
         closing conditions is not entirely within our control. While there is no certainty that all or some of
         these conditions will be met or that these acquisitions will be completed, we expect to close this
         transaction in mid-2006.




                                                       29
            The increase of our effective ownership interest in the following hotels, principally through our
            acquisition of shareholdings of certain of the minority/majority shareholders in the hotel owning
            companies of such hotels:

                                                                                                                                                     Effective          Effective
                                                                                                                                                  ownership before   ownership after
Operating entity                                                                                                                                    acquisition        acquisition

Four Seasons Hotel Amman . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             11.26%             13.00%
Four Seasons Hotel Cairo at Nile Plaza                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             26.11%             44.23%(1)
Four Seasons Hotel Damascus . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             23.38%             35.75%
Four Seasons Resort Sharm El Sheikh .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             31.96%             39.31%(2)
M¨venpick Resort El Quseir . . . . . . . .
  o                                                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             30.50%             81.16%(3)
The Fairmont Palm Hotel & Resort . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             14.29%             20.10%(4)

Notes:
(1) We acquired a portion of our additional ownership interest in the Four Seasons Hotel Cairo at Nile Plaza from Salaam Investments in
    consideration for cash and shares of the company. However, for purposes of the pro forma financial information, we have assumed
    that all of the consideration paid to Salaam Investments will be in the form of cash. This transaction is subject to certain closing
    conditions, including the establishment of an escrow account and the receipt of the required customary consents and approvals under
    Egyptian law, and while there is no certainty that all or some of these conditions will be met or that this acquisition will be completed,
    we expect to close this transaction in early 2006.

(2) This transaction is subject to certain closing conditions, including the establishment of an escrow account and the receipt of the
    required customary consents and approvals under Egyptian law, and while there is no certainty that all or some of these conditions will
    be met or that this acquisition will be completed, we expect to close this transaction in early 2006.

(3) This transaction is subject to the same closing conditions as our acquisition of the 100.00 per cent. effective ownership interest in the
    Resort & Spa El Quseir described above.

(4) These increases in effective ownership resulted from the change in the capital structure of the relevant hotel project prior to closing.

                                                                                                      o
Our acquisitions of ownership interests in the Four Seasons Resort Mauritius in Mauritius and in the M¨venpick
Hotel Ambassador Accra in Ghana had no pro forma impact on our balance sheet or income statement.
In addition, the pro forma balance sheet as at September 30, 2005 was prepared to reflect the following:
            the increase in our capital by $220 million in July 2005, as if this was completed on January 1, 2005;
            a collection of outstanding payments of subscription fees relating to the $110 million increase of
            capital in August 2004, as if the payments were collected on January 1, 2005;
            the application of cash payments for new and minority acquisitions as if these were made on
            January 1, 2005;
                                                                                   o
            the change in the classification of the hotel owning company of the M¨venpick Resort El Quseir from
            an associate to a subsidiary as if the change occurred on January 1, 2005, as a result of the acquisition
            of additional interests in this hotel owning company increasing our ownership interest to greater than
            50 per cent.; and
            the change in the classification of the hotel owning company of The Fairmont Palm Hotel & Resort
            from an investment available for sale to an associate, as a result of the acquisition of additional
            interests in this hotel owning company.




                                                                                      30
Impact of Pro Forma Adjustments on the Consolidated Income Statement for the Nine-Month Period
Ended September 30, 2005
                                                                                                                                      Actual                          Pro forma
                                                                                                                                    nine-month                       nine-month
                                                                                                                                   period ended                     period ended
                                                                                                                                   September 30,                    September 30,
                                                                                                                                       2005        Adjustments          2005
                                                                                                                                     (audited)                       (unaudited)
                                                                                                                                                   (U.S. Dollars)
Revenue:
Hotel revenue . . . . .       ...............................                                                                        40,697,390      10,286,123       50,983,513
Other . . . . . . . . . . .   ...............................                                                                         2,989,686         209,276        3,198,962
Cost of revenue:
Hotel operating costs         ...............................                                                                       (28,384,704)     (6,919,986)     (35,304,690)
Other costs . . . . . . .     ...............................                                                                          (342,188)             —          (342,188)
Gross profit . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     14,960,184       3,575,413       18,535,597
Income (loss) from associates, net . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      5,855,757       1,135,716        6,991,473
General and administrative expenses                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (5,671,527)        (35,028)      (5,706,555)
Pre-opening expenses . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (1,352,572)             —        (1,352,572)
Earnings (loss) before interest, depreciation,                         taxes           and
  amortisation (EBITDA) . . . . . . . . . . . . .                      ....            ...         .   .   .   .   .   .   .   .     13,791,842       4,676,101       18,467,943
Financial charges, net . . . . . . . . . . . . . . . .                 ....            ...         .   .   .   .   .   .   .   .     (2,166,300)       (126,467)      (2,292,767)
Other income . . . . . . . . . . . . . . . . . . . . .                 ....            ...         .   .   .   .   .   .   .   .        290,575              —           290,575
Depreciation . . . . . . . . . . . . . . . . . . . . . .               ....            ...         .   .   .   .   .   .   .   .     (5,166,361)     (1,158,860)      (6,325,221)
Amortisation of deferred credits . . . . . . . .                       ....            ...         .   .   .   .   .   .   .   .      1,595,711              —         1,595,711
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                   8,345,467       3,390,774       11,736,241
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                              (547,915)        (87,786)        (635,701)
Income before minority interests . . . . . . . . . . . . . . . . . . . . . . .                                                        7,797,552       3,302,988       11,100,540
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                    400,364         659,739        1,060,103
Net income for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                     8,197,916       3,962,727       12,160,643


Explanation of Pro Forma Adjustments to the Income Statement
Net income on a pro forma basis for the nine-month period ended September 30, 2005 was $12.2 million as
compared to $8.2 million for the nine-month period ended September 30, 2005 on an actual basis,
reflecting an increase of 49 per cent.
Net income is derived principally from revenue less cost of revenue, plus income from associates, less
general and administrative expenses, pre-opening expenses, financial charges, net, plus other income, less
depreciation, plus amortisation of deferred credits, less taxes and plus/less minority interests.

Revenue
Revenue on a pro forma basis for the nine-month period ended September 30, 2005 was $54.2 million as
compared to $43.7 million for the nine-month period ended September 30, 2005 on an actual basis,
reflecting an increase of 24 per cent.

Hotel Revenue. Hotel revenue on a pro forma basis for the nine-month period ended September 30, 2005
was $51.0 million, as compared to $40.7 million for the nine-month period ended September 30, 2005 on
an actual basis, reflecting an increase of 25 per cent.




                                                                                                       31
The following table presents the impact of the pro forma adjustments on the components of our hotel
revenue for the nine-month period ended September 30, 2005:
                                                                                                                               Pro forma
                                                                                             Nine-month                       nine-month
                                                                                            period ended                     period ended
                                                                                            September 30,                    September 30,
                                                                                                2005        Adjustments          2005
                                                                                              (audited)                       (unaudited)
                                                                                                            (U.S. Dollars)
Hotel Revenue:
Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     22,838,386       4,430,139       27,268,525
Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           12,595,252       4,996,069       17,591,321
Other operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             5,263,752         859,915        6,123,667
Total Hotel Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           40,697,390      10,286,123       50,983,513

Rooms Revenue. Rooms revenue on a pro forma basis for the nine-month period ended September 30,
2005 was $27.3 million, as compared to $22.8 million for the nine-month period ended September 30, 2005
on an actual basis, reflecting an increase of 20 per cent. The increase in rooms revenue on a pro forma
basis for the nine-month period ended September 30, 2005, as compared to rooms revenue for the
nine-month period ended September 30, 2005 on an actual basis, was principally due to: (a) the inclusion
on a pro forma basis of nine months of rooms revenue from the Kenya hotels held through the
consolidated Lonrho Hotels Kenya B.V. on a pro forma basis since January 2005, as compared to only five
months of rooms revenue (representing the period from the acquisition of these properties in May 2005)
for the nine-month period ended September 30, 2005 on an actual basis, and (b) the inclusion on a pro
                                                             o
forma basis of nine months of rooms revenue from the M¨venpick Resort El Quseir, as compared to no
such inclusion for the period on an actual basis, as a result of the change in the classification of the hotel
                           o
owning company of the M¨venpick Resort El Quseir from an associate to a subsidiary due to the increase
of our percentage ownership from 30.50 per cent. on an actual basis to 81.16 per cent. on a pro forma basis.

Food and Beverage Revenue. Food and beverage revenue on a pro forma basis was $17.6 million for the
nine-month period ended September 30, 2005, as compared to $12.6 million for the nine-month period
ended September 30, 2005 on an actual basis, reflecting an increase of 40 per cent. The increase in food
and beverage revenue on a pro forma basis for the nine-month period ended September 30, 2005, as
compared to the nine-month period ended September 30, 2005 on an actual basis was due to: (a) the
inclusion on a pro forma basis of nine months of food and beverage revenue for the Kenya hotels held
through Lonrho Hotels Kenya B.V. for the 2005 period, as compared to the inclusion of five months of
food and beverage revenue attributable to these hotels for the nine-month period on an actual basis; and
                                                                                               o
(b) the inclusion on a pro forma basis of nine months of food and beverage revenue from the M¨venpick
Resort El Quseir as a result of the change in the classification of the hotel owning company of the
  o
M¨venpick Resort El Quseir from an associate to a subsidiary due to the increase of our percentage
ownership from 30.50 per cent. on an actual basis to 81.16 per cent. on a pro forma basis.

Other Operating Services Revenue. Other operating services revenue was $6.1 million on a pro forma basis
for the period ended September 30, 2005, as compared to $5.3 million for the nine-month period ended
September 30, 2005 on an actual basis, reflecting an increase of 15 per cent. The increase in other
operating services revenue on a pro forma basis for the nine-month period ended September 30, 2005, as
compared to the nine-month period ended September 30, 2005 on an actual basis was primarily due to:
(a) the inclusion on a pro forma basis of nine months of other operating services revenue for the Kenya
hotels held through Lonrho Hotels Kenya B.V. for the nine-month period ended September 30, 2005, as
compared to the inclusion of five months of other operating services revenue for these hotels for the
nine-month period on an actual basis; and (b) the inclusion of nine-months of other operating services
                     o
revenue from the M¨venpick Resort El Quseir as a result of the change in the classification of the hotel
                          o
owning company of the M¨venpick Resort El Quseir from an associate to a subsidiary due to the increase
of our percentage ownership from 30.50 per cent. on an actual basis to 81.16 per cent. on a pro forma basis.

Other Revenue. Other revenue on a pro forma basis for the nine-month period ended September 30, 2005
was $3.2 million, as compared to $3.0 million for the nine-month period ended September 30, 2005 on an
actual basis, reflecting an increase of 7 per cent. The increase for the pro forma nine-month period, as
compared to the nine-month period on an actual basis, was principally due to the inclusion on a pro forma
basis of nine months of other revenue for the Kenya hotels held through Lonrho Hotels Kenya B.V. for the
2005 period, as compared to five months of other revenue, for the nine-month period on an actual basis.



                                                                          32
Cost of Revenue
Cost of revenue was $35.6 million on a pro forma basis for the nine-month period ended September 30,
2005, as compared to $28.7 million for the nine-month period ended September 30, 2005 on an actual
basis, reflecting an increase of 24 per cent.
The following table presents the impact of the pro forma adjustments on the components of our cost of
revenue for the nine-month period ended September 30, 2005:
                                                                                                                                                               Pro forma
                                                                                                                             Nine-month                       nine-month
                                                                                                                            period ended                     period ended
                                                                                                                            September 30,                    September 30,
                                                                                                                                2005        Adjustments          2005
                                                                                                                              (audited)                       (unaudited)
                                                                                                                                            (U.S. Dollars)
Cost of Revenue:
Hotel Operating Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                           (28,384,704)     (6,919,986)     (35,304,690)
Other Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                        (342,188)             —          (342,188)
Total Cost of Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                          (28,726,892)     (6,919,986)     (35,646,878)


Hotel Operating Costs
Hotel operating costs were $35.3 million on a pro forma basis for the nine-month period ended
September 30, 2005, as compared to $28.4 million for the nine-month period ended September 30, 2005 on
an actual basis, reflecting an increase of 24 per cent. The increase in hotel operating costs for the pro
forma nine-month period ended September 30, 2005, as compared to the nine-month period on an actual
basis, was principally due to the $3.6 million increase in hotel operating costs for the Kenya hotels held
through Lonrho Hotels Kenya B.V. resulting from the inclusion on a pro forma basis of nine months of
hotel operating costs for this property rather than five months representing the period from acquisition in
                                                                                                  o
May 2005 on an actual basis and to the $3.3 million increase in hotel operating costs for the M¨venpick
Resort El Quseir due to the inclusion of nine months of hotel operating costs for this property as a result
                                                                        o
of the change in the classification of the hotel owning company of the M¨venpick Resort El Quseir from an
associate to a subsidiary due to the increase of our percentage ownership from 30.50 per cent. on an actual
basis to 81.16 per cent. on a pro forma basis.
The following table presents the impact of the pro forma adjustments on the components of our hotel
operating costs for the nine-month period ended September 30, 2005:
                                                                                                                                                               Pro forma
                                                                                                                             Nine-month                       nine-month
                                                                                                                            period ended                     period ended
                                                                                                                            September 30,                    September 30,
                                                                                                                                2005        Adjustments          2005
                                                                                                                              (audited)                       (unaudited)
                                                                                                                                            (U.S. Dollars)
Hotel Operating Costs:
Rooms . . . . . . . . . . . . . . . . . .   .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,549,189         498,851        4,048,040
Food and beverage . . . . . . . . .         .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      7,793,971       1,924,903        9,718,874
Other operating costs . . . . . . .         .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,033,813         792,831        2,826,644
Hotel general and administrative            expenses    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      5,084,554       1,388,351        6,472,905
Sales and marketing . . . . . . . .         .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      1,281,735         454,986        1,736,721
Fuel, water and electricity . . . . .       .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,868,167         509,109        3,377,276
Repairs and maintenance . . . . .           .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,337,300         647,626        2,984,926
Other . . . . . . . . . . . . . . . . . .   .......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,435,975         703,329        4,139,304
Total Hotel Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .                                             28,384,704       6,919,986       35,304,690


Other Cost
The pro forma adjustments had no impact on our other cost.

Income from Associates, Net
Net income from associates was $7.0 million on a pro forma basis for the nine-month period ended
September 30, 2005, as compared to $5.9 million for the nine-month period ended September 30, 2005 on
an actual basis, reflecting an increase of 19 per cent. The increase in net income from associates for the pro



                                                                                            33
forma nine-month period ended September 30, 2005, as compared to the nine-month period on an actual
basis, was principally due to: (a) the inclusion on a pro forma basis of our share of profit from the Four
Seasons Hotel George V of $1.0 million as a result of our acquisition of a 25 per cent. share in this
property; (b) the increase in share of profit from the Four Seasons Resort Sharm El Sheikh by $0.2 million
due to the increase in our ownership percentage in the entity from 31.96 per cent. on an actual basis to
39.31 per cent. on a pro forma basis; and (c) the increase in share of profit from the Four Seasons Hotel
Cairo at Nile Plaza by $0.4 million due to the increase in our ownership percentage in the hotel owning
company of the Four Seasons Hotel Cairo at Nile Plaza. These increases were partially offset by the
                                            o
elimination of our share of profit in the M¨venpick Resort El Quseir from net income from associates as a
                                                                                 o
result of the change in the classification of the hotel owning company of the M¨venpick Resort El Quseir
from an associate to a subsidiary due to the increase of our percentage ownership from 30.50 per cent. on
an actual basis to 81.16 per cent. on a pro forma basis.

General and Administrative Expenses
The following table presents the impact of the pro forma adjustments on the components of our general
and administrative expenses for the nine-month period ended September 30, 2005:

                                                                                                                                                                        Pro forma
                                                                                                                                      Nine-month                       nine-month
                                                                                                                                     period ended                     period ended
                                                                                                                                     September 30,                    September 30,
                                                                                                                                         2005        Adjustments          2005
                                                                                                                                       (audited)                       (unaudited)
                                                                                                                                                     (U.S. Dollars)
General and Administrative Expenses:
Salaries and employee benefits . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,405,668           22,226       2,427,894
Municipal taxes . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        511,716               —          511,716
Professional fees . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        847,528               —          847,528
Travel . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        736,056            2,241         738,297
Insurance . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        303,532            4,597         308,129
Other . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        867,027            5,964         872,991
Total General and Administrative expenses . . . . . . . . . . . . . . . . .                                                             5,671,527           35,028       5,706,555

General and administrative expenses were $5.7 million on a pro forma and on an actual basis for the
nine-month period ended September 30, 2005.

Financial Charges, Net
Net financial charges were $2.3 million on a pro forma basis for the nine-month period ended
September 30, 2005, as compared to $2.2 million for the nine-month period ended September 30, 2005 on
an actual basis, reflecting an increase of 5 per cent. The increase in net financial charges on a pro forma
basis for the nine-month period ended September 30, 2005, as compared to the net financial charges for
the nine months ended September 30, 2005 on an actual basis, was principally due to the inclusion of nine
                                           ¨
months of net financial charges of Movenpick Resort El Quseir as a result of the change in the
                                                        o
classification of the hotel owning company of the M¨venpick Resort El Quseir from an associate to a
subsidiary due to the increase of our percentage ownership from 30.50 per cent on an actual basis to
81.16 per cent. on a pro forma basis, which increased our financial charges by $0.1 million.

Depreciation
Depreciation was $6.3 million on a pro forma basis for the nine-month period ended September 30, 2005,
as compared to $5.2 million for the nine-month period ended September 30, 2005 on an actual basis,
reflecting an increase of 21 per cent. The increase in depreciation on a pro forma basis for the nine-month
period ended September 30, 2005, as compared to the nine-month period ended September 30, 2005 on an
actual basis, was principally due to: (a) the inclusion on a pro forma basis of nine months of depreciation
expense for the Kenya hotels held through Lonrho Hotels Kenya B.V. for the pro forma period ended
September 30, 2005, as compared to only five months for the actual nine-month period, which resulted in
an increase in depreciation of $0.6 million; and (b) the inclusion of nine months of depreciation for the
  o
M¨venpick Resort El Quseir as a result of the change in the classification of the hotel owning company of
       o
the M¨venpick Resort El Quseir from an associate to a subsidiary, which resulted in an increase in
depreciation of $0.5 million.



                                                                                                     34
Taxes
Income taxes were $0.6 million on a pro forma basis for the nine-month period ended September 30, 2005,
as compared to $0.5 million for the nine-month period ended September 30, 2005 on an actual basis,
reflecting an increase of 20 per cent. The increase in income taxes on a pro forma basis for the nine-month
period ended September 30, 2005, as compared to the nine-month period on an actual basis, was primarily
due to the inclusion of nine months of income taxes for the Kenya hotels held through the consolidated
Lonrho Hotels Kenya B.V. for the nine-month period ended September 30, 2005 on a pro forma basis as
compared to five months of income taxes for the comparative period on an actual basis.

Minority Interests Share of Losses, Net
Net minority interest share of losses was $1.1 million on a pro forma basis for the nine-month period ended
September 30, 2005, as compared to $0.4 million for the nine-month period ended September 30, 2005 on
an actual basis, reflecting an increase of 175 per cent. The increase in the net minority interest share of
losses in the net income of our subsidiaries for the pro forma nine-month period ended September 30,
2005, as compared to the actual period, was primarily due to the increase of our effective ownership
percentage in the Four Seasons Hotel Cairo at Nile Plaza from 26.11 per cent. to 44.23 per cent., which
resulted in a minority interest adjustment of $1.2 million; this adjustment was partially offset by the
increase in the minorities’ share of the losses associated with the Four Seasons Hotel Damascus of
$0.3 million due to the increase in our effective ownership percentage from 23.38 per cent. to 35.75 per
                                                                                    o
cent. and the inclusion of the minorities’ share in the consolidated results of M¨venpick Resort El Quseir
                                                                                                    o
of $0.3 million as a result of the change in the classification of the hotel owning company of the M¨venpick
Resort El Quseir from an associate to a subsidiary due to the increase of our percentage ownership from
30.50 per cent. on an actual basis to 81.16 per cent. on a pro forma basis.




                                                    35
Impact of Pro Forma Adjustments on the Consolidated Balance Sheet as at September 30, 2005

                                                                                                                                                   Actual                          Pro forma
                                                                                                                                                    as at                            as at
                                                                                                                                                September 30,                    September 30,
                                                                                                                                                    2005        Adjustments          2005
                                                                                                                                                  (audited)                       (unaudited)
                                                                                                                                                                (U.S. Dollars)
ASSETS
Current assets:
Cash and cash equivalents . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    273,565,243    (133,586,563)     139,978,680
Accounts receivable, net . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     10,306,943         113,043       10,419,986
Inventories . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      1,401,533              —         1,401,533
Real estate held for sale . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,553,614              —         2,553,614
Prepayments and other assets                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      7,028,754       1,197,321        8,226,075
Total current assets . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    294,856,087    (132,276,199)     162,579,888
Other long term assets . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,941,453              —         3,941,453
Investments available for sale              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     75,182,895              —        75,182,895
Investments in associates, net              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     66,211,686     141,619,338      207,831,024
Goodwill . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             —       24,827,833       24,827,833
Construction in progress . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     82,845,943      29,327,562      112,173,505
Property and equipment, net .               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    284,049,547      15,169,614      299,219,161
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                           807,087,611      78,668,148      885,755,759

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings . . . . . . . . . . . . . . . . . . . . . .                                     .   .   .   .   .   .   .   .   .   .   .   .      7,753,718         868,512        8,622,230
Current portion of notes payable . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .      4,402,437              —         4,402,437
Accounts payable . . . . . . . . . . . . . . . . . . . . . .                                    .   .   .   .   .   .   .   .   .   .   .   .     12,881,929              —        12,881,929
Accrued expenses and other liabilities . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .      8,346,986         419,097        8,766,083
Total current liabilities . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     33,385,070       1,287,609       34,672,679
Deferred tax liability . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      4,260,553              —         4,260,553
Retentions payable . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      6,712,694              —         6,712,694
Due to related parties, net         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      1,337,361      (1,048,377)         288,984
Bank borrowings . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     78,001,748       4,326,399       82,328,147
Deferred credit . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     12,831,977              —        12,831,977
Notes Payable . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             —               —                —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                          136,529,403       4,565,631      141,095,034
Shareholders’ equity:
Paid up share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                       .   .   .    541,673,000      95,500,000      637,173,000
Cumulative foreign currency translation adjustment and other                                                                        .   .   .    (21,915,333)     (1,019,684)     (22,935,017)
Cumulative change in market value . . . . . . . . . . . . . . . . . .                                                               .   .   .     10,710,003       1,376,645       12,086,648
Accumulated losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                        .   .   .     (2,642,298)      3,962,726        1,320,428
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                               527,825,372      99,819,687      627,645,059
Minority interest of consolidated subsidiaries . . . . . . . . . . . . . . .                                                                     142,732,836     (25,717,170)     117,015,666
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . .                                                                   807,087,611      78,668,148      885,755,759


Explanation of Pro Forma Adjustments to the Balance Sheet
Our total assets on a pro forma basis as at September 30, 2005 was $885.8 million, as compared to
$807.1 million on an actual basis as at September 30, 2005, reflecting an increase of 10 per cent. The
increase in our total assets was principally due to changes in net accounts receivables, prepayments and
other assets, net investment in associates, goodwill, construction in progress, net property and equipment.
The increase in liability and shareholders’ equity were due to the increase in bank borrowings, accrued
expenses and other liabilities, due to related parties, net minority interest of consolidated subsidiaries, paid
up share capital, cumulative foreign currency translation adjustment and other, cumulative change in
market value and accumulated losses.




                                                                                                                    36
Accounts Receivable, Net
Net accounts receivables on a pro forma basis as at September 30, 2005 were $10.4 million, as compared to
$10.3 million on an actual basis as at September 30, 2005, reflecting an increase of 1 per cent. The increase
in the net accounts receivables on a pro forma basis as at September 30, 2005, as compared to actual net
accounts to receivables for the same period was principally due to the inclusion of $0.1 million of accounts
                 o
receivables of M¨venpick Resort El Quseir on a pro forma basis.

Prepayments and other assets
Prepayments and other assets on a pro forma basis as at September 30, 2005 were $8.2 million, as
compared to $7.0 million on an actual basis as at September 30, 2005, reflecting an increase of 17 per cent.
The increase in prepayments and other assets on a pro forma basis at at September 30, 2005, as compared
to prepayments and other assets on an actual basis for the same period was principally due to the inclusion
                                                       o
of $1.2 million of prepayments and other assets of M¨venpick Resort El Quseir on a pro forma basis.

Investments in Associates, Net
Net investments in associates on a pro forma basis as at September 30, 2005 were $207.8 million, as
compared to $66.2 million on an actual basis as at September 30, 2005, reflecting an increase of 214 per
cent. The increase in net investments in associates as at September 30, 2005 on a pro forma basis, as
compared to actual net investments in associates as at the same date, was principally due to the acquisition
of the following properties and minority interests:

Four Seasons Hotel Cairo at Nile Plaza: In December 2005 we agreed to acquire the minority interest of
Hyundai Engineering & Construction Company Limited in Novapark Cairo Company, the hotel owning
company of the Four Seasons Hotel Cairo at Nile Plaza, for a total consideration of $14.5 million.

Four Seasons Resort Sharm El Sheikh: Our effective ownership in this hotel as at September 30, 2005 was
31.96 per cent. on an actual basis as compared to 39.31 per cent. on a pro forma basis after giving effect to
a $10.5 million acquisition of additional shares in Alexandria Saudi Company for Touristic Projects, the
hotel owning company of the Four Seasons Resort Sharm El Sheikh.

  o
M¨venpick Beach & Spa Resort Zanzibar: As at September 30, 2005 on a pro forma basis, we owned a
30.00 per cent. effective ownership interest in this hotel after giving effect to a $4.5 million acquisition of
shares in IFA Hotels & Resorts 2.

Four Seasons Hotel George V: As at September 30, 2005 on a pro forma basis we owned a 25.00 per cent.
interest in the Four Seasons Hotel George V, after giving effect to our acquisition of such interest in
exchange for the issuance to Kingdom 5-KR-51, Ltd. of 19,100,000 fully paid newly issued shares with
nominal value of $5 per share. Prior to our acquisition, we obtained an independent valuation of this
property by Christie + Co., which valued the property at A625 million ($750 million).

The Fairmont Palm Hotel & Resort: Our effective ownership interest in this hotel was 14.29 per cent. On a
pro forma basis we increased our ownership to 20.10 per cent. The total consideration for the 20.10 per
cent. ownership interest is $18.7 million according to the amended agreement with the other shareholders
with interests in this property.

  o
M¨venpick Resort El Quseir: Our effective ownership in this hotel as at September 30, 2005 was 30.50 per
cent. on an actual basis as compared to 81.16 per cent. on a pro forma basis; this increase to majority
ownership resulted in the elimination of $3.8 million from net investments in associates due to the change
                                                          o
in the classification of the hotel owning company of the M¨venpick Resort El Quseir from an associate to a
subsidiary.
The transactions described above resulted in an increase in our share of the profits from the Four Seasons
Hotel Cairo at Nile Plaza ($0.4 million), the Four Seasons Resort Sharm El Sheikh ($0.2 million) and the
Four Seasons Hotel George V ($1.0 million). These increases were partially offset by the elimination of
                                                   o
our share of the $0.5 million profit from the M¨venpick Resort El Quseir due to the change in the
                                                      o
classification of the hotel owning company of the M¨venpick Resort El Quseir from an associate to a
subsidiary.
In addition, the transactions described above also resulted in an increase in our share of the foreign
currency translation adjustment from the Four Seasons Hotel Cairo at Nile Plaza $(0.02) million, and the



                                                      37
Four Seasons Resort Sharm El Sheikh $(0.12) million these increase were partially offset by the
                                                                                             o
elimination of our share of a $0.1 million foreign exchange translation adjustment from the M¨venpick
                                                                                             o
Resort El Quseir due to the change in the classification of the hotel owning company of the M¨venpick
Resort El Quseir from an associate to a subsidiary.

Goodwill
Goodwill for the purpose of the pro forma financial information is the excess of consideration paid over
the book value of net assets acquired. Goodwill is subject to revision once the results of the appraisals of
the assets acquired are available.
Goodwill on a pro forma basis as at September 30, 2005 was $24.8 million, as compared to $0 on an actual
basis. The goodwill recognised on a pro forma basis as at September 30, 2005 principally relates to the
excess of consideration over net assets acquired of: (a) Resort El Quseir of $9.3 million; (b) the Kenya
hotels held through Lonrho Hotels Kenya BV of $1.3 million; (c) the Four Seasons Hotel Cairo at Nile
Plaza of $10.2 million; (d) the Four Seasons Hotel Damascus of $3.5 million; and (e) the Four Seasons
Hotel Amman of $0.6 million.

Construction in Progress
Construction in progress on a pro forma basis as at September 30, 2005 was $112.2 million, as compared to
$82.8 million as at September 30, 2005 on an actual basis, reflecting an increase of 35 per cent. The
increase in the construction in progress on a pro forma basis as at September 30, 2005, as compared to
September 30, 2005 on an actual basis, was principally due to the consolidation of the newly acquired
Resort & Spa El Quseir, which was under construction.

Property and Equipment, Net
Net property and equipment on a pro forma basis as at September 30, 2005 was $299.2 million, as
compared to $284.0 million as at September 30, 2005 on an actual basis, reflecting an increase of 5 per
cent. The increase in property and equipment on a pro forma basis as at September 30, 2005, as compared
to September 30, 2005 on an actual basis, was primarily due to the inclusion on a pro forma basis of the net
                                                            o
book value of the net property and equipment of the M¨venpick Resort El Quseir ($15.2 million) as a
                                                                                 o
result of the change in the classification of the hotel owning company of the M¨venpick Resort El Quseir
from an associate to a subsidiary.

Accrued expenses and other liabilities
Accrued expenses and other liabilities on a pro forma basis as at September 30, 2005 were $8.8 million, as
compared to $8.4 million on an actual basis as at September 30, 2005, reflecting an increase of 5 per cent.
The increase in accrued expenses and other liabilities on a pro forma basis as at September 30, 2005, as
compared to on an actual basis for the same period was principally due to the inclusion of $0.4 million of
                                            o
accrued expenses and other liabilities of M¨venpick Resort El Quseir on a pro forma basis.

Bank Borrowings
Borrowings on a pro forma basis as at September 30, 2005 were $82.3 million, as compared to $78.0 million
as at September 30, 2005 on an actual basis, reflecting an increase of 6 per cent. The increase in borrowings
as at September 30, 2005 on a pro forma basis, as compared to on an actual basis, was due to the inclusion
                                     o
of the borrowings relating to the M¨venpick Resort El Quseir of $5.2 million as at September 30, 2005 due
                                                                          o
to the change in the classification of the hotel owning company of the M¨venpick Resort El Quseir from an
associate to a subsidiary.

Minority Interest of Consolidated Subsidiaries
Minority interest of consolidated subsidiaries on a pro forma basis as at September 30, 2005 was
$117.0 million, as compared to $142.7 million as at September 30, 2005 on an actual basis, reflecting a
decrease of 18 per cent. The decrease in the balance of minority interest of consolidated subsidiaries as at
September 30, 2005 on a pro forma basis, as compared to an actual basis, was principally due to the
decrease in the minority interests in the owning companies of the Four Seasons Hotel Cairo at Nile Plaza,
the Four Seasons Hotel Damascus, the Four Seasons Hotel Amman and the Kenya hotels held through the
consolidated Lonrho Hotels Kenya B.V. that resulted from our acquisition of various minority interests for



                                                     38
an aggregate value of $28.6 million. This decrease was partially offset by the inclusion of $2.9 million in
minority interests as at September 30, 2005, resulting from the change in the classification of the hotel
                    o
owning company M¨venpick Resort El Quseir from an associate to a subsidiary.

Paid Up Share Capital
Paid up share capital as at September 30, 2005 on a pro forma basis was $637.2 million, as compared to
$541.7 million on an actual basis, reflecting an increase of 18 per cent. The increase in the paid up share
capital as at September 30, 2005 on a pro forma basis, as compared to as at September 30, 2005 on an
actual basis, was due to the issuance of 19,100,000 fully paid shares with a nominal value of $5 per share to
Kingdom 5-KR-51 related to our acquisition of 25.00 per cent. of the Four Seasons Hotel George V.

Cumulative Foreign Currency Translation Adjustment and Other
The cumulative foreign currency translation adjustment and other as at September 30, 2005 on a pro forma
basis was $(22.9) million, as compared to $(21.9) million as at September 30, 2005 on an actual basis,
reflecting a downward change of 5 per cent. The downward change in the cumulative foreign currency
translation adjustment and other as at September 30, 2005 on a pro-forma basis, as compared to on an
actual basis, was principally due to: (a) the increase in our share in the foreign currency translation
adjustment and other relating to the Four Seasons Hotel Cairo at Nile Plaza of $0.6 million as a result of
the increase of our effective ownership in the entity as at September 30, 2005 from 26.11 per cent. on an
actual basis to 44.23 per cent. on a pro-forma basis; (b) the increase in our share in the foreign currency
translation adjustment and other relating to the Four Seasons Resort Sharm El Sheikh of $0.1 million as a
result of the increase in our effective ownership in the entity as at September 30, 2005 from 31.96 per cent.
on an actual basis to 39.31 per cent. on pro forma basis; (c) the inclusion of the foreign currency translation
adjustment and other of $0.5 million on a pro forma basis relating to Lonrho Hotels Kenya B.V., based on
the assumption that our acquisition of our interest in this entity was made as at January 1, 2005 instead of
the actual date of acquisition in May 2005; and (d) the inclusion of the foreign currency translation
                                                           o
adjustment and other of $(2.2) million relating to the M¨venpick Resort El Quseir due to the increase of
our effective ownership in the entity as at September 30, 2005 from 30.50 per cent. on an actual basis to
81.16 per cent. on a pro forma basis.




                                                      39
                                           USE OF PROCEEDS

The net proceeds from the offering are expected to be approximately $377.2 million ($417.0 million
assuming full exercise of the over-allotment option) after deduction of commissions, fees and costs totaling
approximately $20.0 million payable by us.
We intend to use the net proceeds from the offering to finance the expansion of our portfolio of hotel
investments through acquisitions and new developments and for other general corporate purposes. As of
the date hereof, we have signed memoranda of understanding for three new acquisitions in Saudi Arabia,
the U.A.E. and the Maldives that could represent an aggregate investment of $57 million based on initial
discussions. These projects are subject to further negotiation and, based on these negotiations, may or may
not be finalised and, if finalised, may not be completed on the terms of our initial discussions. We are
currently in active negotiations to acquire further hotels or make further investments in the following
countries: Bangladesh, Botswana, China, India, Indonesia, Liberia, Pakistan, South Africa, Tanzania,
Thailand and Uganda. See ‘‘Business Description—Hotel Pipeline’’ for further information regarding our
current expansion projects.
Moreover, we believe that our cash flow from operations and other sources of liquidity described in
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ will be
sufficient for us to meet the working capital, debt service, anticipated capital expenditure and future equity
commitment requirements of our existing portfolio of operating and development projects for the next
12 months.




                                                     40
                                            DIVIDEND POLICY

The payment of dividends is subject to approval by our Board. To date we have not declared or paid
dividends on our shares. The current intention of our Board is to declare dividends in respect of the 2006
financial year and to adopt a progressive dividend policy with respect to the following years; however, there
can be no assurance that any dividends will be paid either in 2006 or in the following years or as to the level
of any such dividends. The dividend policy of our Board and the amount of any future dividends our Board
decides to pay will depend on a number of factors, including but not limited to, our financial standing,
operating cash flows and investment commitments and plans at the time of such proposal and other factors
deemed relevant by our Board, and is expected to take into account that the majority of funds from our
operating cash flows will be applied towards financing our future capital expenditure and investment
requirements.
GDSs sold in the offering are entitled to any dividends we may declare and pay after the closing of this
offering, including the closing of the over-allotment option, if exercised. Holders of GDSs will receive any
payments of dividends in U.S. Dollars, subject to the fees, taxes, duties, charges, costs and expenses
payable to the Depositary and any applicable withholding tax. See ‘‘Terms and Conditions of the Global
Depositary Receipts’’.
The conditions under which we may declare dividends are based upon Cayman Islands law and our bylaws
as described under ‘‘Description of Share Capital—Dividends’’.




                                                      41
                                                         CAPITALISATION

The following table sets forth our capitalisation as at September 30, 2005 on a historical basis and as
adjusted to reflect the offering (assuming full exercise of the over-allotment option and the issuance to
Salaam Investments following this offering of new shares with an aggregate value, at the offering price, of
$11.1 million) after deduction of commissions, fees and costs payable by us.

                                                                                                                                As at September 30, 2005
                                                                                                                                                 As adjusted
                                                                                                                                                   for the
                                                                                                                                                offering and
                                                                                                                                                the issuance
                                                                                                                                                of shares to
                                                                                                                                                   Salaam
                                                                                                                                 Actual         Investments
                                                                                                                                (U.S. Dollars, in millions)
Long term debt (including current portion) . . . . . . . . . . . . . . . . . . . . . . . .                                         (85.75)          (85.75)
Minority interest of consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . .                                      (142.73)         (142.73)
Shareholders’ equity:
Subscribed share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               541.67           783.87
Share premium account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      —            185.87
Paid up share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .      541.67           969.74
Cumulative foreign currency translation adjustment and other                        .   .   .   .   .   .   .   .   .   .   .      (21.91)          (21.91)
Cumulative change in market value . . . . . . . . . . . . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .       10.71            10.71
Accumulated losses/Retained earnings . . . . . . . . . . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .       (2.64)           (2.64)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               527.83           955.90
Total capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                           299.35           727.42

Our share capital prior to the offering consisted of 128,834,900 issued shares and after the offering will
consist of 177,274,364 issued shares (assuming full exercise of the over-allotment option and assuming our
issuance to Salaam Investments following this offering of new shares with an aggregate value, at the
offering price, of $11.1 million).




                                                                     42
        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                            RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with
the information set forth under ‘‘Selected Historical Consolidated Financial Information and Operating Data’’,
‘‘Selected Pro Forma Consolidated Financial Information and Operating Data’’ and our audited interim and
annual consolidated financial statements and notes thereto included elsewhere in this offering memorandum.
Our consolidated financial statements as at and for the years ended December 31, 2004, 2003 and 2002 and as
at and for the nine-month period ended September 30, 2005 have been audited by Ernst & Young PCC,
independent auditors.
The following discussion includes certain forward-looking statements that involve risks and uncertainties about
our future business. Our actual results could differ materially from those contained in the forward-looking
statements. Factors that could cause or contribute to such differences include, without limitation, those
discussed in the sections entitled ‘‘Risk Factors’’ and ‘‘Business’’ and elsewhere in this offering memorandum.

OVERVIEW
We are a leading hotel and resort acquisition and development company in the Middle East and Africa,
operating in the first-class and luxury market segments in the region. In addition, we also have an
investment in Europe, through our recent acquisition of a 25.00 per cent. interest in the Four Seasons
Hotel George V in Paris. We have ownership interests in 26 properties, of which 15 are operating hotels
and resorts in eight countries, including several distinctive first class and luxury properties, and 11 are
hotels and resorts currently under construction or in the initial stages of development in nine countries.
Our operating hotels contain a total of 3,262 rooms, while our hotels under development are expected to
contain an additional 3,203 rooms. In addition, we have non-hotel real estate, such as residential units,
shops and offices, for sale or rent at a number of our hotels.
We do not operate any of our hotels directly. Instead, we engage three internationally known hotel
                                                    o
management companies, Four Seasons, Fairmont and M¨venpick, to operate our hotels for us pursuant to
hotel management agreements.
Although we are not operators, we are also not passive owners of real estate. Instead, we participate in
active asset management of our hotels in order to maximise value. In connection with the asset
management of certain of our hotels, our wholly-owned subsidiary, Kingdom Hotel Asset Management
Service (‘‘KHAMS’’) has signed asset management agreements with the owning companies of the Norfolk
Hotel, The Ark, the Mount Kenya Safari Club, the Aberdare Country Club, the Mara Safari Club, the
  o
M¨venpick Hotel and Resort Beirut, the Four Seasons Hotel Beirut, the Four Seasons Hotel Damascus,
       o                                 o                                      o
the M¨venpick Royal Palm Hotel, the M¨venpick Hotel Bur Dubai and the M¨venpick Hotel Ambassador
Accra. KHAMS also has an asset management agreement with the Four Seasons Riyadh, which we do not
own. Pursuant to these agreements, KHAMS receives asset management fees for supporting the
day-to-day operations of the operating entities of these hotels and for promoting the interests of these
entities with the aim of maximising the asset value of the hotel for the operating entities. For our other
hotel properties, depending on the level of our ownership interest, we actively asset manage our properties
through our participation in and monitoring of various decisions made by the hotel owning companies.

Factors Affecting Financial Condition and Results of Operations and Related Trends
The following is a discussion of the most significant factors that have caused fluctuations in our operational
revenue and costs and thereby have affected our financial condition and results of operations:
         the acquisitions, developments and openings of new hotel properties and the acquisition of
         additional interests in certain of our properties;
         the effect the business building or ramp-up process has on the results of operations of our new
         hotel properties;
         the seasonality of the hotel business in different regions in which we operate;
         foreign currency fluctuations;
         general economic, political, social and market conditions locally in the countries in which we
         operate and in our source markets; and
         additional capital raising through rights issues.


                                                      43
Hotel developments, openings and acquisitions and consolidation of minority interests
Our results of operations during the periods under review have been affected by the opening and
commencement of operations of hotels that have been under development and the acquisition of
additional interests in certain of our existing hotel properties and of new hotel properties, the most
significant of which are discussed below. The impact of these new operations and acquisitions should be
taken into account when comparing our results of operations in the periods under review.
                                           o
In July 2002, construction work on the M¨venpick Hotel and Resort Beirut was concluded and the hotel
commenced operations. Our effective ownership interest in this hotel is 81.21 per cent.; however, because
we have a preferential right to receive our pro rata interest of the first 85 per cent. of all dividends (if any)
declared and paid by Merryland Pour Les Projets Touristique (‘‘MPPT’’), which is the hotel owning
                   o
company of the M¨venpick Hotel and Resort Beirut, after giving effect to both this preferential dividend
right and our share of the remaining dividends attributable to our effective ownership interest in MPPT,
our actual economic benefit from this hotel correlates to a 92.75 per cent. interest.
In July 2003, we established a 51.00 per cent. owned subsidiary that acquired all of the outstanding shares
                                               o
of Kingdom 01-FZ LLC, the owner of the M¨venpick Hotel Bur Dubai. Accordingly, pursuant to IFRS,
our consolidated balance sheet as at December 31, 2003 included the balance sheet of Kingdom 01-FZ
LLC, while our consolidated income statement for the year ended December 31, 2003 incorporated the
results of operations of Kingdom 01-FZ LLC for the period from establishment to December 31, 2003.
Subsequently, in June 2004, we increased our interest in Kingdom 01-FZ LLC from 51.00 per cent. to
100.00 per cent.
In December 2004, we acquired 96.00 per cent. of Tanruss Investment Limited, the owner of the
  o
M¨venpick Royal Palm Hotel; accordingly, our consolidated balance sheet as of December 31, 2004
included the balance sheet of Tanruss Investment Limited, while our consolidated income statement for
the year ended December 31, 2004 incorporated the results of Tanruss Investment Limited for the period
from the acquisition date to December 31, 2004.
In May 2005, we acquired 55.00 per cent. of Lonrho Hotels Kenya B.V., a company holding indirect
majority interests in the following Kenya hotels: the Norfolk Hotel (100.00 per cent.), the Mount Kenya
Safari Club (75.00 per cent.), the Aberdare Country Club (59.67 per cent.), The Ark (59.67 per cent.) and
the Mara Safari Club (100.00 per cent.). Accordingly, our consolidated balance sheet as at September 30,
2005 included the balance sheet of Lonrho Hotels Kenya B.V., while our consolidated income statement
for the nine-month period ended September 30, 2005 incorporated Lonrho Hotels Kenya B.V.’s results of
operations for the period from the acquisition date to September 30, 2005. In December 2005, we
increased our effective ownership in Lonrho Hotels Kenya B.V. from 55.00 per cent. to 70.00 per cent by
acquiring the minority interest of Fairmont Dubai Holdings (Bermuda) Ltd. This latter acquisition is
reflected in the unaudited pro forma consolidated financial information appearing elsewhere in this
offering memorandum.
In October 2005, we acquired the minority interest of Four Seasons (Barbados) Investments Limited in
Kingdom Amman, a company which owns 3.75 per cent. of Mediterranean Tourism Investments Company
(‘‘METICO’’), the hotel owning company of the Four Seasons Hotel Amman. As a result of this
acquisition, our effective ownership in METICO increased from 11.26 per cent. to 13.00 per cent. This
acquisition is reflected in the unaudited pro forma consolidated financial information appearing elsewhere
in this offering memorandum.
In October 2005, we acquired the minority interest of Four Seasons (Barbados) Investments Limited in
Kingdom 5-KR-71, a company which owns 55.00 per cent. of Syrian Saudi Tourism Investments (‘‘SSTI’’),
the hotel owning company of the Four Seasons Hotel Damascus. In addition, we acquired the minority
interest of Mr. Abdul Aziz Al Shiha in Damascus Holding, a company which owns 52.50 per cent. of
Kingdom 5-KR-71. As a result of these acquisitions, our effective ownership in SSTI increased from 23.38
per cent. to 35.75 per cent. This acquisition is reflected in the unaudited pro forma consolidated financial
information appearing elsewhere in this offering memorandum.
In November 2005, we agreed with our joint venture partners to increase our proposed interest in IFA
Hotels & Resorts 1, the company that owns and is developing The Fairmont Palm Hotel & Resort on the
Jumeirah Palm Island in Dubai, from 14.29 per cent. to 20.10 per cent. Closing of the related subscription
and project documentation is expected to occur in early 2006.




                                                       44
In November 2005, we agreed with our joint venture partners to increase our proposed effective ownership
                 o
interest in the M¨venpick Hotel Tripoli, from 30.60 per cent. to 51.00 per cent. Closing of the related
subscription and project documentation is expected to occur in early 2006.
In November 2005, we acquired the minority interest of Four Seasons (Barbados) Investments Limited and
Salaam Investments in Kingdom Nile Plaza, a company which owned 39.80 per cent. of Novapark Cairo
Company, the hotel owning company of the Four Seasons Hotel Cairo at Nile Plaza. Pursuant to the share
purchase agreement with Salaam Investments, we agreed to acquire from Salaam Investments a 23.90 per
cent. interest in Kingdom Nile Plaza in consideration for $3.7 million and our issuance to Salaam
Investments following this offering of new shares with an aggregate value, at the offering price, equal to
$11.1 million (or, if the offering does not occur, the payment of an additional $11.1 million). In
December 2005, we agreed to acquire the minority interest of Hyundai Engineering & Construction
Co. Ltd. in Novapark Cairo Company. The transaction is subject to certain closing conditions; while there
is no certainty that all or some of these conditions will be met, we expect to close this transaction in early
2006 and, accordingly, the acquisition is reflected in the unaudited pro forma consolidated financial
information appearing elsewhere in this offering memorandum. As a result of these acquisitions,
our effective ownership in Novapark Cairo Company is expected to increase from 26.11 per cent. to
44.23 per cent.
In December 2005, we agreed to acquire the minority interest of Jounnou & Paraskevaides (Overseas) Ltd.
in Alexandria Saudi Company for Touristic Projects, which is the owning company of the Four Seasons
Resort Sharm El Sheikh. The transaction is subject to certain closing conditions; while there is no certainty
that all or some of these conditions will be met, we expect to close this transaction in early 2006 and,
accordingly, the acquisition is reflected in the unaudited pro forma consolidated financial information
appearing elsewhere in this offering memorandum. As a result of this acquisition, our effective ownership
in Alexandria Saudi Company for Touristic Projects is expected to increase from 31.96 per cent. to
39.31 per cent.
In December 2005, we signed agreements with Hammerwood (BVI) Ltd (‘‘Hammerwood’’), a privately
held investment group, pursuant to which we agreed to acquire its 100.00 per cent. ownership interest in
(i) a 250-room hotel under construction in El Quseir, Egypt (‘‘Resort & Spa El Quseir’’), (ii) a piece of
                         o
land adjacent to the M¨venpick Resort El Quseir and (iii) its indirectly owned shares in Serena Beach
                                                        o
Hotels Company (the hotel owning company of the M¨venpick Resort El Quseir). This last acquisition will
                                                                   o
increase our effective ownership in the owning company of the M¨venpick Resort El Quseir from 30.50 per
cent. to 81.16 per cent. The transaction is subject to certain closing conditions; while there is no certainty
that all or some of these conditions will be met, we expect to close this transaction in mid-2006 and,
accordingly, the acquisitions are reflected in the unaudited pro forma consolidated financial information
appearing elsewhere in this offering memorandum.
In January 2006, we signed an agreement with IFA Hotels & Resorts 2 and IFA Hotels & Resorts FZE,
pursuant to which we agreed to acquire a 30.00 per cent. equity interest in IFA Hotels & Resorts 2, the
                                  o
lead developer in a 200-room M¨venpick resort on the Northeastern coast of Zanzibar. The M¨venpick     o
Beach & Spa Resort Zanzibar is currently closed for renovation and expansion and is expected to re-open
in 2008. The transaction is subject to certain closing conditions; while there is no certainty that all or some
of these conditions will be met, we expect to close this transaction in the first half of 2006 and, accordingly,
the acquisitions are reflected in the unaudited pro forma consolidated financial information appearing
elsewhere in this offering memorandum.
In January 2006, we signed an agreement to acquire a 50.00 per cent. interest in Anahita Hotel Ltd., the
lead developer in a proposed 119-room Four Seasons resort on the eastern coast of Mauritius. The Four
Seasons Resort Mauritius is expected to open by the end of 2007. This transaction closed in January 2006
and is reflected in the unaudited pro forma consolidated financial information appearing elsewhere in this
offering memorandum.
In January 2006, we signed an agreement to acquire (with retroactive effect to December 2005) 25.00 per
cent. of Kingdom 5-KR-35 Ltd., the indirect owner of a 100.00 per cent. effective ownership interest in the
hotel owning company of the Four Seasons Hotel George V, in exchange for the issuance to Kingdom
5-KR-51 of 19,100,000 fully paid newly issued shares with a nominal value of $5 per share. Prior to our
acquisition, we obtained an independent valuation of this property by Christie + Co., which valued the
property at A625 million ($750 million). This transaction closed in February 2006. This acquisition is
reflected in the unaudited pro forma consolidated financial information appearing elsewhere in this
offering memorandum.


                                                      45
The business building or ramp-up process
Depending on the maturity of the market, a new hotel property will typically take between one and five
years to be integrated into its market. The first phase in the process will often be a six-month ‘‘soft
opening’’ period, followed by a one to four-year introduction and business building period. During the
‘‘soft opening’’ period, a limited number of rooms and food and beverage facilities are available to the
public, with additional facilities introduced weekly or monthly until the entire property is operational.
Most hotel companies use this staged opening approach in order to resolve unanticipated operational
difficulties that typically arise in connection with the opening of a hotel property. Rates are generally
substantially discounted during the first one to three months of the soft opening period.
Following the soft opening period, the hotel begins its business building period, which involves an
aggressive sales process to introduce the hotel to the market, to develop its clientele and to adjust its
marketing strategies in the process. The culmination of the business building period or ‘‘ramp up’’ period is
a stabilised or representative year of operation. Typically, this stabilised year will be a year in which a
stabilised average occupancy rate is achieved and is capable of being maintained, with only minor
fluctuations in the foreseeable future.
In a mature market, the introduction to and development of a hotel’s clientele may take one to five years,
depending upon factors such as brand affiliation, pricing, physical product, location, competition and
market orientation. During this period, gains in market penetration, which comprise the capture of existing
and new demand for hotel rooms, are made as the market becomes aware of the hotel’s products and
services and the optimal relationship between occupancy and ADR is determined. Often, the stabilised
year of operation in a mature market will be the third or fourth full year of operations.
In an immature market with limited competitive lodging facilities, the demand for first class and luxury
hotels may far exceed supply, with the result that the business building period may be considerably shorter
than the one to five years in mature markets, and the hotel could potentially reach a stabilised year of
operation in its first or second year of operation.

Seasonality
Our business is seasonal in nature to the extent that we experience seasonality in the results of our
individual hotel properties. Seasonality also varies somewhat in some of our markets due to differences in
the timing of certain holidays that are based on the Islamic calendar. However, the overall seasonality of
our portfolio is mitigated by the diversity of our portfolio, including the varied locations of our hotel
properties, the mix between leisure and business customers and the division between urban and resort
properties. For example, RevPAR at the Four Seasons Resort Sharm El Sheikh is generally highest in
April, May, October and November and lowest for the months between July and September; whereas
                   o
RevPAR at the M¨venpick Hotel and Resort Beirut is generally highest for the months between July and
September and lowest in March and April.

Foreign currency
Our reporting currency is the U.S. Dollar, while the reporting currency of our subsidiaries, affiliates, and
associates varies depending on their geographic location within the Middle East, Africa or Europe. Some
of the local currencies where we operate are pegged to the U.S. Dollar and as such have a fixed exchange
rate to the U.S. Dollar, while other currencies have a floating rate against the U.S. Dollar. Furthermore, in
the majority of our other markets, management believes that effective pricing, as affected by the rates
charged by competing hotels in the same market or for first class and luxury hotels elsewhere, is
determined in U.S. Dollars or Euro, which limits the impact of any devaluation or appreciation of the
relevant local currency in such markets on our revenues when translated into U.S. Dollars. However, a
substantial portion of our costs are denominated in local currencies, such as expenses for local staff and, in
a number of markets, the costs of sales for our food and beverage service. As a result, a depreciation or
appreciation of a particular local currency against the U.S. Dollar could have either a positive or negative
impact on our profit margin and therefore our net income. Accordingly, foreign currency translation
adjustments are periodically reflected in our balance sheet. For example, we had accumulated translation
losses of $21.9 million as of September 30, 2005, mainly due to the historical devaluation of the Egyptian
Pound against the U.S. Dollar. For more details, on the foreign currency transaction and translation impact
on the company, see ‘‘—Foreign Currency Risk’’.




                                                     46
General economic, political, social and market conditions
The operations of our properties are affected by the general economic, political, social and market
conditions locally in the countries in which we operate and in our source markets, including fluctuations in
gross domestic product, financial markets, oil prices and overall spending patterns as well as general safety
and health concerns, such as fear of political unrest, terrorism and disease.

Ancillary real estate held for sale
Properties such as villas and apartments that are being developed for future sale are reclassified as real
estate held for sale. We expect that in the short-term, real estate held for sale will have an increasing
impact on our revenue as these properties are developed and sold.

Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with standards issued or
adopted by IFRS. The consolidated financial statements have been prepared in U.S. Dollars, which is our
functional and presentation currency. The preparation of these financial statements in conformity with
IFRS required the use of certain critical accounting estimates. Moreover, our management was required to
exercise its judgment in the process of applying our accounting policies. We will similarly be required to
make these estimates and judgments in the future.
We evaluate our estimates on an ongoing basis and base our estimates on historical experience,
information that is currently available to us and on various other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We believe the critical accounting policies described below involve a significant
degree of judgment or complexity or are areas where assumptions and estimates are significant to the
preparation of our consolidated financial statements. For a further discussion of these and other
accounting policies applied by us, see ‘‘Note 2—Summary of Significant Accounting Policies’’ in the notes
to our audited consolidated financial statements.

Consolidation
Subsidiaries
Our subsidiaries are entities over which we have the power to govern their financial and operating policies
and generally accompanying a shareholding of more than one half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are taken into account when
assessing whether we control another entity. Subsidiaries are fully consolidated from the date on which we
gain control and are de-consolidated from the date on which our control ceases.
The purchase method of accounting is used to account for our acquisition of subsidiaries. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of our share of identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than fair value of the net assets of the subsidiary
acquired, the difference is recognised in the consolidated statement of income in the year of acquisition.
Intercompany transactions, balances and unrealised gains on transactions between our subsidiaries are
eliminated. Intercompany losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.

Associates
Associates are all entities over which we have significant influence but which we do not control and
generally accompanying a shareholding of between 20 per cent. and 50 per cent. of the voting rights.
Investments in associates are accounted for by the equity method of accounting and are initially recognised
at cost.




                                                      47
Our share of our associates’ post-acquisition profits or losses is recognised in the consolidated statement of
income, and our share of post-acquisition movements in reserves is recognised in reserves. The cumulative
post-acquisition movements are adjusted against the carrying amount of the investment.
Unrealised gains on transactions between us and our associates are eliminated to the extent of our interest
in the associates. Unrealised losses on such transactions are also so eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of associates have been
adjusted where necessary to ensure consistency with our adopted policies.
When appropriate, our investment in associates includes goodwill (net of accumulated impairment loss, if
any) identified on acquisition.

Affiliates
Affiliates are entities in which we have shareholdings of less than 20 per cent. Investments in affiliates are
initially reflected at cost on the balance sheet and are maintained at the lower of cost or fair value, if
ascertainable. This process is facilitated by the use of a provision account that reflects any impairment of
an affiliate’s value, as determined on each balance sheet date.
If the ownership in an investment increases during a year from less than 20 per cent. to between 20 per
cent and 50 per cent., then the equity method of accounting is applied to the investment from the date on
which the classification was changed. Income from affiliates is reflected in the consolidated statement of
income based on actual dividends declared by each affiliate, if any.
Expenses incurred relating to the acquisition of an investment in an affiliate are capitalised and assessed
for impairment on each balance sheet date.

Investments available for sale
Investments intended to be held for an indefinite period of time, which may be sold in response to needs
for liquidity, are classified as available for sale and are included in non-current assets unless management
has expressed intention of holding the investment for less than 12 months from the balance sheet date or
unless the investments will need to be sold to raise operating capital, in which case they are included in
current assets.
After initial recognition, investments classified as available for sale are remeasured at fair value, unless this
cannot be reliably measured. Realized gains or losses on the sale of these investments, if any, are reported
in the consolidated statement of income and unrealized gains or losses are reported as a separate
component in the shareholders’ equity until the investment is derecognized or the investment is
determined to be impaired. On derecognition or impairment, the cumulative gain or loss previously
reported in the shareholders’ equity is included in the consolidated statement of income.
For investments traded in organised markets, fair value is determined by reference to quoted market bid
prices as of the balance sheet date.
For unquoted equity investments, fair value is determined by reference to the market value of a similar
investment or is based on the expected discounted cash flows.

Interest in joint venture
Our interests in our joint ventures, which are equally owned and controlled by the joint venture partners,
are accounted for by proportionate consolidation of our share of the assets, liabilities, income and
expenses of the joint ventures on a line-by-line basis with similar items in the consolidated financial
statements.

Revenue recognition
Revenues of our operating hotels are recognised at the time the services are performed and billed to
customers, less any discounts and allowances. Other revenue, consisting of fees from consulting, business
development and asset management services, is recognised as rendered. Interest income is recognised as
the interest accrues using the effective interest method.




                                                       48
Real estate held for sale
Properties (including villas and apartments) that are being developed for future sale are reclassified as real
estate held for sale at their deemed cost, which is the carrying amount at the date of reclassification. They
are subsequently carried at the lower of cost and net realisable value. Net realisable value is the estimated
selling price in the ordinary course of business less cost to complete redevelopment and selling expenses.
We expect that in the short-term, real estate held for sale will have an increasing impact on our revenue as
these properties are developed and sold.

Translation of foreign currencies
Functional and reporting currency
Items included in the financial statements of each of our entities are measured using the currency of the
primary economic environment in which the entity operates (i.e., the functional currency). The
consolidated financial statements are presented in U.S. Dollars, which is our functional and reporting
currency.

Our companies
The results and financial position of all of our entities that have a functional currency different from the
presentation currency are translated into the reporting currency as follows:
          assets and liabilities for each balance sheet presented are translated to U.S. Dollars at the closing
          rate at the date of that balance sheet;
          income and expenses for each income statement are translated to U.S. Dollars at average
          exchange rates during the year/period; and
          all resulting exchange differences are recognised as a separate component of equity as translation
          adjustments.
On consolidation, exchange differences arising from the translation of the net investment in foreign
entities, are taken to shareholders’ equity as cumulative foreign currency translation adjustment until the
disposal of the investment. When a foreign operation is sold, such exchange differences are recognised in
the statement of income as part of the gain or loss on sale. No such sale has taken place to date. In the
opinion of our management, the debit balance shown in the cumulative foreign currency translation
adjustment is considered recoverable and does not represent impairment in the value of our investment in
associates.
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated statement of income.
Translation differences on non-monetary items, such as equities classified as available-for-sale financial
assets, are included in the fair value reserve in equity.

Income taxes
While we are subject to income taxes in numerous jurisdictions, we enjoy tax exemptions in several other
jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes.
There are many transactions and calculations for which the ultimate tax determination is uncertain during
the ordinary course of business. We recognise liabilities for anticipated tax audit issues based on estimates
of whether additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.

Basis of Consolidation
Our consolidated financial statements include the assets, liabilities and operating results of our subsidiaries
and the income from our associates in accordance with our consolidation policies described in ‘‘—Critical
Accounting Policies and Estimates—Consolidation’’.




                                                      49
See ‘‘Note 1—General’’ in the notes to our consolidated financial statements for certain information with
respect to our consolidated subsidiaries and our associates included in our financial statements as at
September 30, 2005.

Operating Results
The following table presents our operating results for the nine-month period ended September 30, 2005
and September 30, 2004 and the years ended December 31, 2004, 2003 and 2002.
                                                                Nine-month
                                                                period ended
                                                               September 30,                          Year ended December 31,
                                                           2005             2004               2004             2003          2002
                                                         (audited)       (unaudited)                         (audited)
                                                                                           (U.S. Dollars)
Revenue:
Hotel revenue . . . . .       ............               40,697,390          29,599,930      37,767,266      24,704,558     10,225,789
Other . . . . . . . . . . .   ............                2,989,686             464,585         605,874         464,305      3,512,501
Cost of revenue:
Hotel operating costs         ............               (28,384,704)    (19,001,117)       (25,528,276)    (19,033,809)    (8,908,377)
Other costs . . . . . . .     ............                  (342,188)       (114,062)          (114,062)       (193,560)    (3,233,841)
Gross profit . . . . . . . . . . . . . . . . .   .   .   14,960,184          10,949,336      12,730,802       5,941,494      1,596,072
Income (loss) from associates, net . .           .   .    5,855,757           2,009,475       2,506,943         786,395     (2,187,382)
General and administrative expenses              .   .   (5,671,527)         (3,819,931)     (6,440,094)     (5,683,877)    (7,028,142)
Pre-operating expenses . . . . . . . . .         .   .   (1,352,572)                 —               —               —      (1,544,347)
Earnings (loss) before interest,
  depreciation, taxes and amortisation
  (EBITDA) . . . . . . . . . . . . . . . . . .           13,791,842           9,138,880        8,797,651      1,044,012     (9,163,799)
Financial charges, net . . . . . . . . . . . .           (2,166,300)         (2,117,196)      (2,927,740)    (3,059,313)      (634,659)
Other income . . . . . . . . . . . . . . . . .              290,575                  —                —              —              —
Depreciation . . . . . . . . . . . . . . . . . .         (5,166,361)         (3,339,696)      (4,612,319)    (3,417,146)    (1,350,450)
Amortisation of deferred credits . . . . .                1,595,711           2,119,179        2,287,261      2,028,171             —
Income/(loss) before taxes . . . . . . . . .               8,345,467          5,801,167       3,544,853      (3,404,276)   (11,148,908)
Taxes . . . . . . . . . . . . . . . . . . . . . . .         (547,915)                —               —          (39,852)       (59,135)
Income (loss) before minority interests                    7,797,552          5,801,167       3,544,853      (3,444,128)   (11,208,043)
Minority interests . . . . . . . . . . . . . . .             400,364           (209,449)        881,989       3,475,305        280,298
Net income (loss) for the year/period .                    8,197,916          5,591,718       4,426,842          31,177    (10,927,745)

The principal components of our results of operations are revenue and cost of revenue.

Revenue
Revenue is comprised of hotel revenue and other revenue. Our hotel revenue, which comprises
substantially all of our revenue, consists of rooms revenue, food and beverage revenue and other operating
services revenue.
             Rooms revenue. Rooms revenue consists of revenue generated by hotel guests paying for hotel
             rooms.
             Food and beverage revenue. Food and beverage revenue consists of revenue related to food and
             beverage provided at the hotel restaurants and for group meetings and social affairs.
             Operating services revenue. Operating services revenue consists of ancillary revenue such as
             telephone, parking, entertainment and other guest services.
Changes in our hotel revenue are most easily explained by three performance indicators that are used by
management and commonly used in the hotel industry. These indicators are calculated for the operating
hotels owned by our consolidated hotel owning companies on a rooms-only basis and do not include any of
our villas or other hotel-related real estate:
             occupancy rate, which is measured by the percentage of daily rooms occupied;
             ADR which is the total net room revenue divided by the number of rooms occupied; and
             RevPAR, which is the product of ADR and average daily occupancy, but does not reflect food
             and beverage revenue or other operations services revenue.


                                                                        50
The components of RevPAR from the operating hotels owned by our consolidated hotel owning companies
for the nine-month periods ended September 30, 2005, for the nine-month period ended September 30,
2004 and for the years ended December 31, 2004, December 31, 2003 and December 31, 2002 are
summarised as follows:

                                                                    Nine-month period ended
                                                                         September 30,                     Year ended December 31,
                                                                     2005             2004          2004             2003            2002
                                                                                                (unaudited)
                                                                                               (U.S. Dollars)
Number of rooms         .   .   .   .   .   .   .   .   .   .   .       1,001            656            757             524              223
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .      64.7%          75.1%          76.7%           62.7%            60.5%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .        $127          $129           $141            $123             $104
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .         $82            $97          $108              $77              $63
RevPAR from the operating hotels owned by our consolidated hotel owning companies for the nine-month
period ended September 30, 2005 was $82, as compared to $97 for the nine-month period ended
September 30, 2004, reflecting a decrease of 16 per cent. The decrease in RevPAR for the nine-month
period ended September 30, 2005, as compared to RevPAR for the nine-month period ended
September 30, 2004, resulted largely from the decrease in the overall occupancy rate from 75.1 per cent. to
64.7 per cent. and the decrease in ADR from $129 to $127.
RevPAR from the operating hotels owned by our consolidated hotel owning companies for the year ended
December 31, 2004 was $108, as compared to $77 for 2003, reflecting a year-on-year increase of 40 per
cent. The increase in RevPAR for 2004, as compared to 2003, resulted largely from an increase in
occupancy rates over the period. The year-on-year increase in our occupancy rate from 62.7 per cent. in
2003 to 76.7 per cent. in 2004, was, in turn, principally due to the inclusion of 12 months of operating
                  o
results for the M¨venpick Hotel Bur Dubai, as compared to six months in 2003, and to the improved
                       o
performance of the M¨venpick Hotel and Resort Beirut, as evidenced by the increase in RevPAR at that
hotel to $135 in 2004 from $98 in 2003. The increase in occupancy rates was slightly offset by a decrease in
ADR in 2004, as compared to 2003, principally due to an increase in lower rate generating group travel
and a decrease in higher rate paying corporate travel in 2004.
RevPAR from the operating hotels owned by our consolidated hotel owning companies for the year ended
December 31, 2003 was $77, as compared to $63 for 2002, reflecting a year-on-year increase of 22 per cent.
The increase in RevPAR for 2003, as compared to 2002, resulted principally from an increase in our
occupancy rate and ADR over the period. The year-on-year increase in ADR from $104 in 2002 to $123 in
                                                                         o
2003 was principally due to the inclusion in 2003 of the results of the M¨venpick Hotel and Resort Beirut
                                                                                      o
(occupancy rate 56.1 per cent., ADR $174, RevPAR $98) for 12 months and of the M¨venpick Hotel Bur
Dubai (occupancy rate 71.0 per cent., ADR $73, RevPAR $51) for six months, as compared to the inclusion
                               o
in 2002 of the results of the M¨venpick Hotel and Resort Beirut (occupancy rate 52.5 per cent., ADR $177,
                                                                            o
RevPAR $93) for six months and no inclusion in 2002 of results for the M¨venpick Hotel Bur Dubai.
The other component of revenue is other revenue, which is comprised primarily of consulting fees, revenue
                                        o
from the sale of marina rights of the M¨venpick Hotel and Resort Beirut and fees from asset management
and sourcing of additional properties. Other revenue is driven by a variety of factors including the sourcing
of additional properties, the signing of additional asset management agreements and increases in the
amount of marina rights sold or leased.

Cost of revenue
Cost of revenue is comprised of hotel operating costs and other costs. Substantially all of our cost of
revenue consists of the costs to provide various services within the hotels owned by our consolidated hotel
owning companies. Hotel operating costs consist of rooms cost, food and beverage cost, other operating
services cost, hotel general and administrative expenses, sales and marketing cost, fuel, water and
electricity cost, repairs and maintenance cost and other expenses.
          Rooms cost. Rooms cost consists of payroll expenses and costs of room linens and other
          consumables.
          Food and beverage cost. Food and beverage cost consists of payroll expenses and costs related to
          food and beverage provided at the hotel restaurants and for group meetings and social affairs.




                                                                                 51
         Other operating cost. Other operating cost consists of costs related to telephones, health club,
         spa, laundry and other costs.
         Hotel general and administration expenses. Hotel general and administration expenses consist
         of payroll expenses, audit and consultancy fees, cost of supplies, travel expenses and other.
         Sales and marketing cost. Sales and marketing cost consist of payroll expenses and costs for
         promotions, events and advertising.
         Fuel, water and electricity cost.   Fuel, water and electricity cost consists of the cost to provide our
         hotels with these utilities.
         Repairs and maintenance cost. Repairs and maintenance cost consists primarily of payroll
         expenses, cost of maintenance contracts and expenses for air conditioning, pool, telephone and
         other.
         Other cost. Other cost consist principally of human resource expenses, security expenses and
         management fees paid to hotel management companies.
Most categories of hotel operating costs, including utilities and labor costs, such as housekeeping,
principally fluctuate with changes in occupancy rates, although certain operating costs are also driven by
other factors, such as increases in the number of operating hotels in the case of sales and marketing cost
and increases in the cost of fuel prices in the case of fuel, water and electricity cost. Increases in occupancy
rates are accompanied by increases in most categories of hotel operating expenses, while increases in ADR
typically only result in increases in limited categories of operating costs and expenses, such as management
fees charged by our operators and credit card processing fee expenses, which are based on hotel revenue.
As a result, positive changes in ADR tend to increase operating margins more than positive changes in
occupancy rates.
The other component of cost of revenue, other cost, is comprised primarily of the cost of the sale of marina
               o
rights of the M¨venpick Hotel and Resort Beirut, which is principally driven by an increase in the amount
of marina rights sold.

RECENT DEVELOPMENTS
During the period from September 30, 2005 to date, we entered into agreements to acquire, and/or
completed the acquisition of, ownership interests in the properties described in ‘‘Selected Pro Forma
Consolidated Financial Information and Operating Data’’.
                                                                                       o
In November 2005, we refinanced the debt of the hotel owning companies of the M¨venpick Hotel and
                        o
Resort Beirut and the M¨venpick Hotel Bur Dubai. The refinancings were effected through senior secured
loans and revolving overdraft facilities. The total proceeds from these refinancings, which were
$66.0 million, provided us with a lower weighted average interest rate structure, improved loan terms, an
extended maturity profile and the ability to repatriate approximately $34.5 million of our invested capital
in those entities.
In February 2006, we signed a subscription agreement with SLR Holding Ltd. and Fine Holiday Ltd. to
acquire a 100.00 per cent. interest in a 181 room hotel located in Bel Ombre on the southwest coast of
                                    ¨
Mauritius to be renamed the Movenpick Voile D’Or. The transaction is subject to certain closing
conditions, including (i) the completion of our due diligence review of the property and the parties
involved, (ii) the completion of certain share redemption transactions and (iii) the receipt of government
consents and approvals. While there is no certainty that all or some of these conditions will be met or that
this acquisition will be completed, we expect to close this transaction by the end of March 2006.

COMPARISON    OF NINE-MONTH PERIODS ENDED        SEPTEMBER 30, 2005    AND   SEPTEMBER 30, 2004
Net income for the nine-month period ended September 30, 2005 was $8.2 million, as compared to
$5.6 million for the nine-month period ended September 30, 2004, reflecting an increase of 46 per cent.
Net income is derived principally from revenue less cost of revenue, plus income from associates, less
general and administrative expenses, financial charges, net, and depreciation, plus amortisation of deferred
credits, less taxes and plus/less minority interests.




                                                       52
Revenue
Revenue for the nine-month period ended September 30, 2005 was $43.7 million, as compared to
$30.1 million for the nine-month period ended September 30, 2004, reflecting an increase of 45 per cent.
The following table presents the components of our revenue for the nine-month periods ended
September 30, 2005 and September 30, 2004:

                                                                                                               Nine-month period ended
                                                                                                                    September 30,
                                                                                                                2005              2004
                                                                                                              (audited)       (unaudited)
                                                                                                                    (U.S. Dollars)
Revenue:
Hotel revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       40,697,390     29,599,930
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    2,989,686        464,585
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       43,687,076     30,064,515

Hotel Revenue
Hotel revenue for the nine-month period ended September 30, 2005 was $40.7 million, as compared to
$29.6 million for the nine-month period ended September 30, 2004, reflecting an increase of 38 per cent.
The following table presents the components of our hotel revenue for the nine-month periods ended
September 30, 2005 and September 30, 2004:

                                                                                                               Nine-month period ended
                                                                                                                    September 30,
                                                                                                                2005              2004
                                                                                                              (audited)       (unaudited)
                                                                                                                    (U.S. Dollars)
Hotel Revenue:
Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     22,838,386     17,247,255
Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           12,595,252      8,836,988
Other operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             5,263,752      3,515,687
Total Hotel Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           40,697,390     29,599,930

Rooms Revenue. Rooms revenue for the nine-month period ended September 30, 2005 was $22.8 million,
as compared to $17.2 million for the nine-month period ended September 30, 2004, reflecting an increase
of 33 per cent. The increase in rooms revenue for the nine-month period ended September 30, 2005, as
compared to the rooms revenue for the nine-month period ended September 30, 2004, was principally due
to: (a) the inclusion of five months of rooms revenue for the nine-month period ended September 30, 2005
of the Kenya hotels held through Lonrho Hotels Kenya B.V. (representing the period from their
acquisition in May 2005), as compared to no rooms revenue from these hotels for the nine-month period
                                                                                          o
ended September 30, 2004; (b) the inclusion of nine months of rooms revenues from the M¨venpick Royal
Palm Hotel (which was acquired in December 2004) for the nine-month period ended September 30, 2005,
as compared to no rooms revenues from this property for the nine-month period ended September 30,
2004; and (c) the general improvement in RevPAR for our consolidated operating hotels to $76 from $75
for the nine-month period ended September 30, 2005, as compared to the nine-month period ended
September 30, 2004, which was, in turn, driven by a higher ADR for our consolidated operating hotels of
$116, as compared to $108, for these periods, respectively. These inclusions were partially offset by a
                                      o
decrease in rooms revenue for the M¨venpick Hotel and Resort Beirut for the period ended September 30,
2005, as compared to the nine-month period ended September 30, 2004, due to a reduction in hotel
business in Lebanon following the assassination of the former Prime Minister of Lebanon, Mr. Rafic
Hariri, in February 2005.

Food and Beverage Revenue. Food and beverage revenue for the nine-month period ended September 30,
2005 was $12.6 million, as compared to $8.8 million for the nine-month period ended September 30, 2004,
reflecting an increase of 43 per cent. The increase in food and beverage revenue for the nine-month period
ended September 30, 2005, as compared to the nine-month period ended September 30, 2004, was
primarily due to the inclusion of five months of food and beverage revenue for the Kenya hotels held




                                                                       53
                                                                                           o
through Lonrho Hotels Kenya B.V. and of nine months of food and beverage revenue from the M¨venpick
Royal Palm Hotel for the nine-month period ended September 30, 2005, as compared to no food and
beverage revenue for these hotels for the nine-month period ended September 30, 2004.

Other Operating Services Revenue. Other operating services revenue for the nine-month period ended
September 30, 2005 was $5.3 million, as compared to $3.5 million for the nine-month period ended
September 30, 2004, reflecting an increase of 51 per cent. The increase in other operating revenue for the
nine-month period ended September 30, 2005, as compared to the nine-month period ended
September 30, 2004, was primarily due to the inclusion of five months of other operating services revenue
for the Kenya hotels held through Lonrho Hotels Kenya B.V. and of nine months of other operating
                   o
revenue from the M¨venpick Royal Palm Hotel for the nine-month period ended September 30, 2005, as
compared to no inclusion of other operating services revenue for these hotels for the nine-month period
ended September 30, 2004.

Other Revenue. Other revenue for the nine-month period ended September 30, 2005 was $3.0 million, as
compared to $0.5 million for the nine-month period ended September 30, 2004, reflecting an increase of
500 per cent. The increase for the nine-month period ended September 30, 2005, as compared to the
nine-month period ended September 30, 2004, was principally due to additional business development
incentive fees of $2.0 million paid to us by Fairmont and to business development consideration of
                             ¨
$0.3 million paid to us by Movenpick.

Cost of Revenue
Cost of revenue for the nine-month period ended September 30, 2005 was $28.7 million, as compared to
$19.1 million for the nine-month period ended September 30, 2004, reflecting an increase of 50 per cent.
The following table presents the components of our cost of revenue for the nine-month periods ended
September 30, 2005 and September 30, 2004:

                                                                                                       Nine-month period ended
                                                                                                             September 30,
                                                                                                       2005                 2004
                                                                                                     (audited)          (unaudited)
                                                                                                             (U.S. Dollars)
Cost of Revenue:
Hotel Operating Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (28,384,704)       (19,001,117)
Other Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (342,188)          (114,062)
Total Cost of Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (28,726,892)       (19,115,179)

Hotel Operating Costs
Hotel operating costs for the nine-month period ended September 30, 2005 was $28.4 million, as compared
to $19.0 million for the nine-month period ended September 30, 2004, reflecting an increase of 49 per cent.
The increase in hotel operating costs for the nine-month period ended September 30, 2005, as compared to
nine-month period ended September 30, 2004, was principally due to: (a) to the inclusion of $9.8 million of
hotel operating costs for the Kenya hotels held through Lonrho Hotels Kenya B.V. from May 2005 and for
      o
the M¨venpick Royal Palm Hotel from January 2005, as compared to no hotel operating costs for these
                                                                                          o
properties in 2004; and (b) to a $0.9 million increase in hotel operating costs for the M¨venpick Hotel Bur
Dubai for the nine-month period ended September 30, 2005, as compared to the corresponding period of
the prior year. These inclusions were partially offset by a $1.1 million decrease in the hotel operating costs
         o
of the M¨venpick Hotel and Resort Beirut for the period ended September 30, 2005, as compared to the
nine-month period ended September 30, 2004, due to a reduction in hotel business in Lebanon following
the assassination of the former Prime Minister of Lebanon, Mr. Rafic Hariri, in February 2005.




                                                                      54
The following table presents the components of our hotel operating costs for the nine-month period ended
September 30, 2005 and September 30, 2004:

                                                                                                                                                        Nine-month period ended
                                                                                                                                                              September 30,
                                                                                                                                                         2005                2004
                                                                                                                                                       (audited)         (unaudited)
                                                                                                                                                              (U.S. Dollars)
Hotel Operating Costs:
Rooms . . . . . . . . . . . . . . . . . . .     .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,549,189         2,726,776
Food and beverage . . . . . . . . . .           .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    7,793,971         6,468,047
Other operating costs . . . . . . . .           .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,033,813         1,423,508
Hotel general and administrative                expenses   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    5,084,554         1,846,581
Sales and marketing . . . . . . . . .           .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    1,281,735         1,229,417
Fuel, water and electricity . . . . .           .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,868,167         1,929,578
Repairs and maintenance . . . . .               .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,337,300         1,395,746
Other . . . . . . . . . . . . . . . . . . . .   .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,435,975         1,981,464
Total Hotel Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                          28,384,704        19,001,117

Other Cost
Other cost for the nine-month period ended September 30, 2005 was $0.3 million, as compared to
$0.1 million for the nine-month period ended September 30, 2004, reflecting a 200 per cent increase, which
                                                                         o
was principally due to the increase in the sale of marina rights of the M¨venpick Hotel and Resort Beirut
and the costs associated therewith.

Income from Associates, Net
Net income from associates for the nine-month period ended September 30, 2005 was $5.9 million, as
compared to $2.0 million for the nine-month period ended September 30, 2004, reflecting an increase of
195 per cent. The increase in net income from associates for the nine-month period ended September 30,
2005, as compared to September 30, 2004, was principally due to: (a) the increase in our share of profit in
Four Seasons Hotel Cairo at Nile Plaza as a result of the increase in the hotel’s occupancy rate and ADR,
which increased to 65.4 per cent. from 17.8 per cent. and to $216 from $211, respectively, and resulted in
an increase in RevPAR to $141 from $38 for the nine-month periods ended September 30, 2005 and
                                                                                      o
September 30, 2004, respectively; (b) the increase in our share of profit in the M¨venpick Resort & Spa
El Gouna as a result of the increase in the hotel’s ADR and RevPAR, which increased to $61 from $50 and
to $43 from $40, despite being partially offset by the decrease in the hotel’s occupancy rate to 70.1 per cent.
from 80.1 per cent., respectively, for the nine-month period ended September 30, 2005, as compared to the
nine-month period ended September 30, 2004; (c) the increase in our share of profit in the M¨venpick  o
Resort El Quseir as a result of the increase in the hotel’s ADR and RevPAR, which increased to $55 from
$44 and to $39 from $32, despite being partially offset by the decrease in the hotel’s occupancy rate to
70.2 per cent. from 71.7 per cent., respectively, for the nine-month period ended September 30, 2005, as
compared to the nine-month period ended September 30, 2004; and (d) the increase in our share of profit
in the Four Seasons Resort Sharm El Sheikh as a result of the increase in the hotel’s occupancy rate and
ADR, which increased to 64.6 per cent. from 63.0 per cent. and to $259 from $190, respectively, and
resulted in an increase in RevPAR to $167 from $120 for the nine-month period ended September 30,
2005, as compared to the nine-month period ended September 30, 2004.




                                                                                   55
General and Administrative Expenses
The following table presents the components of our general and administrative expenses for the
nine-month periods ended September 30, 2005 and September 30, 2004:

                                                                                                                                                                 Nine-month period ended
                                                                                                                                                                       September 30,
                                                                                                                                                                  2005                2004
                                                                                                                                                                (audited)         (unaudited)
                                                                                                                                                                       (U.S. Dollars)
General and Administrative Expenses:
Salaries and employee benefits . . . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   2,405,668          2,220,842
Municipal taxes . . . . . . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     511,716                 —
Professional fees . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     847,528            391,367
Travel . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     736,056            328,964
Insurance . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     303,532            183,710
Other . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     867,027            695,048
Total General and Administrative expenses . . . . . . . . . . . . . . . . . . . . . .                                                                           5,671,527          3,819,931

General and administrative expenses for the nine-month period ended September 30, 2005 was
$5.7 million, as compared to $3.8 million for the nine-month period ended September 30, 2004, reflecting
an increase of 50 per cent.
The increase in general and administrative expenses for the nine-month period ended September 30, 2005,
as compared to the same period in 2004, was principally due to the impact of our acquisitions of Lonrho
                              o
Hotels Kenya B.V. and the M¨venpick Royal Palm Hotel. These acquisitions resulted in the inclusion of
five months of general and administrative expenses for the Kenya hotels held through Lonrho Hotels
                                                                                  o
Kenya B.V. and of nine months of general and administrative expenses for the M¨venpick Royal Palm
Hotel for the nine-month period ended September 30, 2005, as compared to no general and administrative
expenses for these hotels for the nine-month period ended September 30, 2004.
In addition, the increase in general and administrative expenses reflected increases in salaries and benefits,
municipal taxes and travel. The increase in salaries and employee benefits related to the increased number
of employees on both the corporate and subsidiary levels. At the corporate level, we hired eight new
employees during the nine-month period ended September 30, 2005, one in the construction and design
department, three in the accounting department and two in each of the asset management department and
acquisition and development department, resulting in a total increase in salaries and benefits on the
corporate level of $0.5 million. This increase was partially offset by the decrease in total salaries and
employee benefits for the consolidated hotel owning companies of $0.2 million.
During the nine-month period ended September 30, 2005 we incurred a charge of $0.5 million for
                                  o
municipal taxes relating to the M¨venpick Hotel and Resort Beirut and the Four Seasons Hotel Beirut.
                                                         o
These taxes consisted of $0.2 million, imposed on the M¨venpick Hotel and Resort Beirut based on a
calculation of the hotel’s market rental value and $0.3 million which was imposed on the Four Seasons
Hotel Beirut by the Investment Development Authority of Lebanon ‘‘IDAL’’ as stamp duty relating to its
granting of tax exemption status to the Four Seasons Hotel Beirut.
The increase in travel expenses during the nine-month period ended September 30, 2005, as compared to
the same period in 2004, was principally due to the growth in our business and pipeline of projects and the
required travel and accommodation associated therewith.

Pre-Operating Expenses
Pre-operating expenses for the nine-month period ended September 30, 2005 was $1.4 million, as
compared to $0 for the nine-month period ended September 30, 2004. The pre-operating expenses in the
2005 period were related to the Four Seasons Hotel Damascus and were principally comprised of salaries
and benefits ($0.8 million), advertising and publicity ($0.3 million) and other expenses relating to the
pre-operating expenses relating to food and beverage consumables, cleaning contracts, training,
recruitment, legal and audit and other expenses.




                                                                                            56
Financial Charges, Net
Net financial charges for the nine-month period ended September 30, 2005 was $2.2 million, as compared
to $2.1 million for the nine-month period ended September 30, 2004, reflecting an increase of 5 per cent.
The increase in net financial charges for the nine-month period ended September 30, 2005, as compared to
the nine-month period ended September 30, 2004, was primarily due to: (a) the inclusion of nine months of
                            o
finance expenses for the M¨venpick Royal Palm Hotel for the 2005 period, amounting to $0.9 million, as
compared to $0 for the corresponding period in 2004; and (b) the increase in LIBOR during the 2005
period, as compared to the corresponding period in 2004, which resulted in an increase in the interest
                                               o                                            o
expense for the loans relating to both the M¨venpick Hotel and Resort Beirut and the M¨venpick Hotel
Bur Dubai. These increases in financial charges were partially offset by an increase in interest revenue
received to $1.8 million from $0.2 million for the nine-month periods ended September 30, 2005 and
September 30, 2004, respectively, which was primarily due to the increase in the average cash available at
the corporate level as a result of our $110 million capital increase in August 2004 and our $220 million
capital increase in July 2005 and to the increase in the interest rates offered on our short and long term
deposits.

Other Income
Other income for the nine-month period ended September 30, 2005 was $0.2 million, which resulted from
the sale of fixed assets at our former head office in Saudi Arabia. We had no other income for the
nine-month period ended September 30, 2004.

Depreciation
Depreciation for the nine-month period ended September 30, 2005 was $5.2 million, as compared to
$3.3 million for the nine-month period ended September 30, 2004, reflecting an increase of 58 per cent.
The increase in depreciation for the nine-month period ended September 30, 2005, as compared to the
nine-month period ended September 30, 2004, was principally due to the inclusion of nine months of
                               o
depreciation relating to the M¨venpick Royal Palm Hotel totaling $1.3 million and of five months of
depreciation for the Kenya hotels held through Lonrho Hotels Kenya B.V. totaling $0.4 million for the
nine-month periods ended September 30, 2005, as compared to no depreciation for these hotels for the
nine-month period ended September 30, 2004.

Amortisation of Deferred Credit
Deferred credit balance resulted from the sale of B shares of Merryland Pour Les Projets Touristiques
(‘‘MPPT’’) that are owned by Kingdom 5-KR-57, Ltd. The B shares represent the indefinite right to use
                                                 o
cabanas and shops, which are located at the M¨venpick Hotel and Resort Beirut and recorded as real
estate held for sale. The proceeds from the sale of the B shares are not transferred to Kingdom 5-KR-57,
                                                                               o
Ltd.; rather, they are remitted to MPPT to complete the financing of the M¨venpick Hotel and Resort
Beirut. Pursuant to a security sharing agreement with a consortium of banks as described in ‘‘Note 10—
Bank Borrowings’’ in the notes to our consolidated financial statements, sales proceeds from the sale of
B shares are not remitted to Kingdom 5-KR-57, Ltd. until the total sale proceeds reach $30,000,000 and
any and all repayments by MPPT to Kingdom 5-KR-57, Ltd are subordinated to MPPT’s debts.
The excess of the sales price of the B shares over the costs of the cabanas and shops is recorded as deferred
credit and is amortised to match the maintenance costs and other expenses which could be incurred in
future years in connection to these cabanas and shops.
The amortisation of the deferred credit for the nine-month period ended September 30, 2005 was
$1.6 million, as compared to $2.3 million for the nine-month period ended September 30, 2004, reflecting a
decrease of 30 per cent.

Taxes
While we are subject to income taxes in numerous jurisdictions, we currently enjoy tax exemptions in
several other jurisdictions. We have tax-exempt status in the Cayman Islands and so do not pay income tax
in the Cayman Islands. Income taxes for the nine-month period ended September 30, 2005 were
$0.5 million, as compared to $0 for the nine-month period ended September 30, 2004. The increase in
income taxes for the nine-month period ended September 30, 2005, as compared to the nine-month period
ended September 30, 2004, was due to the inclusion of $0.5 million of income taxes relating to Lonrho
Hotels Kenya B.V., reflecting five months of income taxes following its acquisition.


                                                     57
Minority Interests
Minority interest represents minorities’ share in the net income or loss of related subsidiaries. Minority
interest for the nine-month period ended September 30, 2005 was $0.4 million, as compared to ($0.2)
million for the nine-month period ended September 30, 2004. The increase in the share of minority
interests in losses for the nine-month period ended September 30, 2005, as compared to the nine-month
period ended September 30, 2004, was primarily due to: (a) the increase in the minorities’ share of losses
from the Four Seasons Hotel Damascus for the nine-month period ended September 30, 2005 amounting
to $1.3 million, as compared to $0.1 million for the corresponding period in 2004; and (b) the minorities’
                        o
share of loss in the M¨venpick Hotel and Resort Beirut of $0.4 million for the nine-month period ended
September 30, 2005, as compared to the minorities’ share of profit of $0.5 million for the prior
corresponding period in 2004.

Financial Condition
Our total assets as at September 30, 2005 was $807.1 million, as compared to $497.5 million as at
December 31, 2004, reflecting an increase of 62 per cent. The increase in our total assets was principally
due to changes in net accounts receivables, investment available for sale, net investment in associates,
construction in progress, net property and equipment. The increase in liability and shareholders’ equity
were due to the increase in bank borrowings, minority interest of consolidated subsidiaries, subscribed
share capital, cumulative foreign currency translation adjustment and change in cumulative change in
market value.

Accounts Receivable, Net
Net accounts receivables as at September 30, 2005 was $10.3 million, as compared to $6.2 million as at
December 31, 2004, reflecting an increase of 66 per cent. The increase in the net accounts receivables as at
September 30, 2005, as compared to as at December 31, 2004, was principally the result of the inclusion of
the accounts receivables of the Kenya hotels held through Lonrho Hotels Kenya B.V. of $2.3 million as at
September 30, 2005, the increase in the accounts receivables of KHI as a result of the sale of our former
head office property in the Kingdom of Saudi Arabia for $0.7 million and the increase of the accounts
                    o                                       o
receivables of the M¨venpick Royal Palm Hotel and the M¨venpick Hotel and Resort Beirut.

Investments Available for Sale
Investments available for sale as at September 30, 2005 was $75.2 million, as compared to $69.3 million as
at December 31, 2004, reflecting an increase of 8.5 per cent. This increase was principally due to the
appreciation of the share value of Mediterranean Tourism Investments (‘‘METICO’’) from $1.21 per share
as at December 31, 2004 to $2.50 per share as at September 30, 2005, which resulted in an overall increase
of $10.5 million in the value of this investment. This increase was partially offset by the decrease in the
share value of both Four Seasons Hotels Inc. and Fairmont Hotels & Resorts Inc. from $81.79 and
$34.64 per share, respectively, as at December 31, 2004 to $57.40 and $33.42, respectively, as at
September 30, 2005.

Investments in Associates, Net
Net investments in associates as at September 30, 2005 was $66.2 million, as compared to $58.0 million as
at December 31, 2004, reflecting an increase of 14 per cent. This increase was principally due to the
recognition of $5.9 million as net share of profit from associates and the positive foreign currency
translation adjustment of $2.7 million, which, in turn, resulted primarily from the appreciation of the
Egyptian Pound against the U.S. Dollar from LE 6.01 per $1.00 as at December 31, 2004 to LE 5.79 per
$1.00 as at September 30, 2005. The increase in net investments in associates as at September 30, 2005, as
compared to December 31, 2004, was partially offset by the negative impact related to the dividend
                  o
received from M¨venpick Resort El Quseir, which decreased our net investment in associates by
$0.3 million.

Construction in Progress
Construction in progress as at September 30, 2005 was $76.4 million, as compared to $62.4 million as at
December 31, 2004, reflecting an increase of 22 per cent. This increase in the construction in progress as at
September 30, 2005, as compared to as at December 31, 2004, was principally due to an increase in the
capitalised expenditures on the construction of the Four Seasons Hotel Damascus ($53.5 million as at


                                                     58
September 30, 2005, as compared to $47.7 million as at December 31, 2004) and an increase in the
capitalised expenditures on the construction of the Four Seasons Hotel Beirut ($22.7 million as at
September 30, 2005, as compared to $14.7 million as at December 31, 2004).

Property and Equipment, Net
Net property and equipment as at September 30, 2005 was $284.0 million, as compared to $242.7 million as
at December 31, 2004, reflecting an increase of 17 per cent. This increase in the net property and
equipment balance as at September 30, 2005, as compared to December 31, 2004, was principally due to:
(a) the inclusion of the $40.0 million for the fair value of the fixed assets of the Kenya hotels held through
the consolidated Lonrho Hotels Kenya B.V. in which we acquired a 55.00 per cent. interest in May 2005;
and (b) the $6.6 million capitalisation of the cost of the furniture of the Four Seasons Hotel Damascus.
This increase was partially offset by the $5.1 million depreciation expense during the nine-month period
ended September 30, 2005.

Bank Borrowings
Bank borrowings as at September 30, 2005 was $78.0 million, as compared to $58.7 million as at
December 31, 2004, reflecting an increase of 33 per cent. This increase in borrowings as at September 30,
2005, as compared to December 31, 2004, was principally due to: (a) the utilisation of a $20 million loan
facility to partially finance the construction of the Four Seasons Hotel Damascus; and (b) a new $5 million
loan obtained in connection with the acquisition of the Kenya hotels held through the consolidated Lonrho
Hotels Kenya B.V. This increase was partially offset by repayments of bank borrowings in an aggregate
                                             o                                       o
amount of $5.5 million relating to the M¨venpick Hotel and Resort Beirut, the M¨venpick Royal Palm
                    o
Hotel and the M¨venpick Hotel Bur Dubai.

Minority Interest of Consolidated Subsidiaries
Minority interest of consolidated subsidiaries represents the share of the minority in the subsidiary’s
equity, which includes capital, cumulative foreign currency translation, cumulative change in the market
value and retained earnings/accumulated losses.
Minority interest of consolidated subsidiaries as at September 30, 2005 was $142.7 million, as compared to
$111.4 million as at December 31, 2004, reflecting an increase of 28 per cent. This increase was principally
due to: (a) the increase in minorities’ capital contribution in the hotel owning companies of the Four
Seasons Hotel Damascus, and the Four Seasons Hotel Beirut, as well as the increase in the foreign
currency revaluation as a result of the increase in the overall value of the Egyptian Pound against the U.S.
Dollar from LE 6.01 per $1.00 as at December 31, 2004 to LE 5.79 per $1.00 as at September 30, 2005;
(b) the inclusion of the minority interest of the Kenya hotels held through the consolidated Lonrho Hotels
Kenya B.V. of $17.2 million as at September 30, 2005, as compared to $0 as at December 31, 2004; and
(c) the appreciation of the share value of METICO from $1.21 per share as at December 31, 2004 to
$2.50 per share as at September 30, 2005, which resulted in the overall increase of minority’s share in the
cumulative change in market value.

Paid Up Share Capital
Paid up share capital as at September 30, 2005 was $541.7 million, as compared to $298.2 million as at
December 31, 2004, reflecting an increase of 82 per cent. The increase in subscribed capital as at
September 30, 2005, as compared to December 31, 2004, was due to the issuance of 2,200,000 new shares
during July 2005 at $100 per share (the nominal value per share) and the collection of the unpaid amounts
due from the August 2004 capital increase, during the nine-month period ended September 30, 2005. See
‘‘Description of Share Capital—Our Share Capital’’.

Cumulative Foreign Currency Translation Adjustment and Other
The cumulative foreign currency translation adjustment and other as at September 30, 2005 was $(21.9)
million, as compared to $(22.9) million as at December 31, 2004, reflecting an upward change of 5 per cent.
This upward change primarily reflected an accumulated translation adjustment made to our investments in
Egypt in accordance with International Accounting Standards 21. We pay and book our investments in U.S.
Dollars, while the respective hotel owning companies book our investments and capital contributions in
Egyptian Pounds at the exchange rate on the transaction date.




                                                     59
The upward change of the cumulative foreign currency translation adjustment and other as at
September 30, 2005, as compared to December 31, 2004, was the result of adjustments made to reflect
changes in the U.S. Dollar/Egyptian Pound exchange rates following the appreciation of the Egyptian
Pound as at September 30, 2005, as compared to as at December 31, 2004, that positively impacted our
shareholders’ equity.

COMPARISON        OF YEARS ENDED          DECEMBER 31, 2004, DECEMBER 31, 2003                   AND   DECEMBER 31, 2002
Net income for the year ended December 31, 2004 was $4.4 million, as compared to net income of
$0.03 million for 2003 and a net loss of $10.9 million for 2002.

Revenue
Revenue for the year ended December 31, 2004 was $38.4 million, as compared to $25.2 million for 2003
and $13.7 million for 2002, reflecting year-on-year increases of 52 per cent. and 84 per cent., respectively.
The following table presents the components of our revenue for the years ended December 31, 2004,
December 31, 2003 and December 31, 2002:

                                                                                                     Year ended December 31,
                                                                                              2004             2003          2002
                                                                                                            (audited)
Revenue:
Hotel revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         37,767,266    24,704,558     10,225,789
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      605,874       464,305      3,512,501
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       38,373,140    25,168,863     13,738,290

Hotel Revenue
Hotel revenue was $37.8 million for the year ended December 31, 2004, as compared to $24.7 million for
2003 and $10.2 million for 2002, reflecting year-on-year increases of 53 per cent. and 142 per cent.
respectively. The following table presents the components of our hotel revenue for the years ended
December 31, 2004, December 31, 2003 and December 31, 2002:
                                                                                                     Year ended December 31,
                                                                                              2004             2003          2002
                                                                                                            (audited)
Hotel Revenue:
Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     21,675,121    12,724,912       5,175,764
Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           11,625,517     8,806,723       4,083,754
Other operating services . . . . . . . . . . . . . . . . . . . . . . . . . . . .             4,466,628     3,172,923         966,271
Total Hotel Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           37,767,266    24,704,558     10,225,789

Rooms Revenue. Rooms revenue was $21.7 million for the year ended December 31, 2004, as compared
to $12.7 million for 2003 and $5.2 million for 2002, reflecting year-on-year increases of 71 per cent. and
144 per cent., respectively. The increase in rooms revenue of $9.0 million for 2004, as compared to 2003,
was principally due to: (a) the inclusion of 12 months of rooms revenue in 2004, as compared to six months
                                     o
of rooms revenue in 2003 for the M¨venpick Hotel Bur Dubai; and (b) increases in the occupancy rate and
in ADR for our consolidated operating hotels in 2004, as compared to 2003. In particular, the occupancy
               o
rate for the M¨venpick Hotel Bur Dubai increased to 86 per cent. in 2004, from 71 per cent. in 2003, while
                  o
ADR for the M¨venpick Hotel Bur Dubai increased to $93 in 2004 from $73 in 2003, and the occupancy
                o
rate for the M¨venpick Hotel and Resort Beirut increased to 70.5 per cent. in 2004 from 56.1 per cent. in
                           o
2003 and ADR for the M¨venpick Hotel and Resort Beirut increased to $191 in 2004 from $174 in 2003.
The increase in total rooms revenue of $7.5 million for 2003, as compared to 2002, was primarily due to the
                                                      o
inclusion of six months of rooms revenue from the M¨venpick Hotel Bur Dubai in 2003, as compared to no
                              o
rooms revenue from the M¨venpick Hotel Bur Dubai in 2002, as well as the inclusion of 12 months of
                          ¨
rooms revenue for the Movenpick Hotel and Resort Beirut in 2003, as compared to seven months in 2002.

Food and Beverage Revenue. Food and beverage revenue was $11.6 million for the year ended
December 31, 2004, as compared to $8.8 million for 2003 and $4.1 million for 2002, reflecting year-on-year



                                                                       60
increases of 32 per cent. and 115 per cent., respectively. The increase of $2.8 million in 2004, as compared
                                                                             o
to 2003, was primarily due to an increase in the occupancy rates of the M¨venpick Hotel Bur Dubai and
       o
the M¨venpick Hotel and Resort Beirut, in addition to an increase in banqueting revenue. The increase in
food and beverage revenue by $4.7 million in 2003, as compared to 2002, was primarily due to the inclusion
                                                          o
of six months of food and beverage revenue from the M¨venpick Hotel Bur Dubai in 2003, as compared to
no food and beverage revenue from this hotel in 2002, as well as the inclusion of food and beverage
                   o
revenue for the M¨venpick Hotel and Resort Beirut for 12 months in 2003, as compared to seven months
in 2002.

Other Operating Services Revenue. Other operating services revenue, which consists of ancillary revenue
such as telephone, parking, entertainment and other guest services, was $4.5 million for the year ended
December 31, 2004, as compared to $3.2 million for 2003 and $1.0 million for 2002, reflecting year-on-year
increases of 41 per cent. and 220 per cent., respectively. Other operating services revenue is primarily
affected by occupancy rates and the year-on-year increases in our other operating services revenue were
                                                           o                                     o
primarily due to the increases in occupancy rates for the M¨venpick Hotel Bur Dubai and the M¨venpick
Hotel and Resort Beirut, as described above.

Other Revenue
Other revenue was $0.6 million for the year ended December 31, 2004, as compared to $0.5 million for
2003 and $3.5 million for 2002, reflecting a year-on-year increase of 20 per cent. for 2004 and a
year-on-year decrease of 86 per cent. for 2003.
Under a Development Consulting Service Agreement signed with Fairmont in 2003 (see ‘‘—Relationships
with Hotel Management Companies—Relationship with Fairmont-Development Consulting Agreement’’),
we received consulting fees of $250,000 for each of the years ended December 31, 2004 and 2003, as
compared to $0 for 2002.
                                                    o
Revenue from the sale of marina rights of the M¨venpick Hotel and Resort Beirut was $0.11 million for
the year ended December 31, 2004, as compared to $0.14 million for 2003, reflecting a decrease of
$0.03 million for the period. The sale of marina rights revenue in 2003 decreased from $3.2 million in 2002.
The decrease in sale of marina rights revenue of $3.1 million in 2003, as compared to 2002, was principally
due to the recognition in 2002 of all of the deferred revenue from the signed sale contracts for the period
from 2001 to 2002 for marina berth locations following the completion of marina construction and the
                   o
opening of the M¨venpick Hotel and Resort Beirut in July 2002.
During 2004, our wholly-owned subsidiary, KHAMS, signed asset management agreements with the
owning companies of the Four Seasons Riyadh, the Four Seasons Hotel Damascus, the Four Seasons Hotel
                o                                   o
Beirut, the M¨venpick Hotel Bur Dubai, the M¨venpick Hotel and Resort Beirut and the M¨venpick         o
Royal Palm Hotel. Pursuant to these agreements, we received asset management fees for supporting the
day-to-day operations of the operating entities of these hotels and for promoting the interests of these
entities with the aim of maximising the asset value of the hotel for the operating entities. In line with IFRS,
revenues recorded for the asset management fees are eliminated against asset management fees shown as
expenses at the level of subsidiaries upon issuing consolidated statements. Net asset management fees were
$100,000 for the year ended December 31, 2004, as compared to $68,853 for 2003 and $0 for 2002.

Cost of Revenue
Cost of revenue was $25.6 million for 2004, as compared to $19.2 million for 2003 and $12.1 million for
2002, reflecting year-on-year increases of 33 per cent. and 58.7 per cent., respectively.
The following table presents the components of our cost of revenue for the years ended December 31,
2004, 2003 and 2002:

                                                                                                  Year ended December 31,
                                                                                           2004             2003          2002
                                                                                                         (audited)
Cost of Revenue:
Hotel operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        25,528,276    19,033,809       8,908,377
Other cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      114,062       193,560       3,233,841
Total Cost of Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        25,642,338    19,227,369     12,142,218




                                                                     61
Hotel Operating Costs
Hotel operating costs increased to $25.5 million for the year ended December 31, 2004, as compared to
$19.0 million for 2003 and $8.9 million for 2002, reflecting year-on-year increases of 34 per cent. and
113 per cent., respectively. The increases in hotel operating costs for our consolidated properties for 2004,
as compared to 2003, and for 2003, as compared to 2002, were principally due to: (a) the increase in hotel
                                                                          o
revenue; and (b) the inclusion of 12 months of financial results of the M¨venpick Hotel Bur Dubai in 2004,
as compared to six months of financial results in 2003, and the inclusion of 12 months of financial results of
      o
the M¨venpick Hotel and Resort Beirut in 2003, as compared to seven months of financial results in 2002.
The increase in hotel operating costs for these periods did not, however, translate into a decrease in gross
operating margin for the periods. Gross operating margin increased to 33 per cent. for the year ended
December 31, 2004, as compared to 24 per cent. for 2003 and 12 per cent. for 2002. The year-on-year
improvements in gross operating margin in each case were principally due to the general improvement in
the hotel industry in the regions in which we operate and the improved regional economic climate, both of
which positively affected occupancy and average room rates, and, accordingly, RevPAR and overall gross
operating profit.
The following table presents the components of our hotel operating costs for the years ended
December 31, 2004, 2003 and 2002:

                                                                                                                           Year ended December 31,
                                                                                                                    2004             2003          2002
                                                                                                                                  (audited)
Hotel Operating Costs:
Rooms cost . . . . . . . . . . . . . . .   .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,636,516      2,428,364        955,299
Food and beverage cost . . . . . .         .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    8,713,289      7,178,565      3,824,426
Other operating services cost . . .        .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    1,850,248      1,568,453        595,165
Hotel general and administrative           expenses   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,294,268      2,245,557        860,424
Sales and marketing cost . . . . . .       .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    1,400,544      1,232,422        638,486
Fuel, water and electricity cost . .       .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,625,057      1,481,374        888,329
Repairs and maintenance cost . .           .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    1,926,581        678,503        655,828
Other expenses . . . . . . . . . . . . .   .......    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,081,773      2,220,571        490,420
Total Hotel Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . .                                     25,528,276    19,033,809       8,908,377

Rooms cost. Rooms cost was $3.6 million for the year ended December 31, 2004, as compared to
$2.4 million for 2003 and $1.0 million for 2002, reflecting year-on-year increases of 50 per cent. and 140 per
cent., respectively. The increase in rooms cost for 2004, as compared to 2003, was primarily due to the
                                                     o
inclusion of 12 months of rooms cost from the M¨venpick Hotel Bur Dubai in 2004, as compared to six
months of rooms cost for 2003, while the increase in rooms cost for 2003, as compared to 2002, was
                                                                       o
primarily due to the inclusion of 12 months of rooms cost from the M¨venpick Hotel and Resort Beirut for
2003, as compared to six months for 2002. In addition, rooms cost also increased due to the increase in
                           o                                       o
occupancy rates at the M¨venpick Hotel Bur Dubai and the M¨venpick Hotel and Resort Beirut.

Food and beverage cost. Food and beverage cost was $8.7 million for the year ended December 31, 2004,
as compared to $7.2 million for 2003 and $3.8 million for 2002, reflecting year-on-year increases of 21 per
cent. and 89 per cent., respectively. The increases in food and beverage cost for 2004 as compared to 2003,
and, as compared to 2002, were driven by similar events to those affecting rooms cost.

Other operating services cost. Other operating services cost was $1.9 million for the year ended
December 31, 2004, as compared to $1.6 million for 2003 and $0.6 million for 2002, reflecting year-on-year
increases of 19 per cent. and 167 per cent., respectively. These increases were principally due to increased
occupancy in each of 2004 and 2003.

Hotel general and administrative expenses. Hotel general and administrative expenses were $2.3 million for
the year ended December 31, 2004, as compared to $2.2 million for 2003 and $0.9 million for 2002,
reflecting year-on-year increases of 5 per cent. and 144 per cent., respectively. These increases were
principally due to increased occupancy in each of 2004 and 2003.

Sales and marketing cost. Sales and marketing cost was 1.4 million for the year ended December 31, 2004,
as compared to $1.2 million for 2003 and $0.6 million for 2002, reflecting year-on-year increases of 17 per
cent. and 100 per cent., respectively. These increases were principally due to an increase in 2004 in the



                                                                              62
number of operating hotels managed by the hotel management companies that we are associated with, as
compared to 2003, thereby increasing sales and marketing costs incurred by the hotel management
companies.

Fuel, water and electricity cost. Fuel, water and electricity cost was $2.6 million for the year ended
December 31, 2004, as compared to $1.5 million for 2003 and $0.9 million for 2002, reflecting year-on-year
increases of 73 per cent. and 67 per cent., respectively. These increases were principally due to both
increased occupancy and higher fuel prices in each of 2004 and 2003.

Repairs and maintenance cost. Repairs and maintenance cost was $1.9 million for the year ended
December 31, 2004, as compared to $0.7 million for 2003, reflecting a year-on-year increase of 171 per
cent. Repairs and maintenance cost was also $0.7 million for 2002. The $1.2 million increase in repairs and
maintenance cost for 2004, as compared to 2003, resulted primarily from the inclusion of 12 months of
                   o
expenses for the M¨venpick Hotel Bur Dubai in 2004, as compared to six months in 2003.

Other expenses. Other expenses were $3.1 million for the year ended December 31, 2004, as compared to
$2.2 million for 2003 and $0.5 million for 2002, reflecting year-on-year increases of 41 per cent. and 340 per
cent., respectively. The year-on-year increases in other expenses for 2004, as compared to 2003, and for
2003, as compared to 2002, were, in each case, primarily due to the increase in management fees paid due
to the increased profitability of our hotel properties and, in 2004, as compared to 2003, the inclusion of
                                         o
12 months of such expenses for the M¨venpick Hotel Bur Dubai in 2004, as compared to six months in
2003 and in 2003, as compared to 2002, the inclusion of 12 months of such expenses for the Movenpick ¨
Hotel and Resort Beirut in 2003, as compared to six months in 2002.

Other cost
                                                                                         o
Other cost is comprised primarily of the cost of the sale of marina rights of the M¨venpick Hotel and
Resort Beirut, which decreased to $0.1 million for the year ended December 31, 2004, as compared to
$0.2 million for 2003 and $3.2 million for 2002, reflecting year-on-year decreases of 50 per cent. and 94 per
cent., respectively. The $3.0 million decrease in other cost for 2003, as compared to 2002, primarily
corresponded to the decrease in revenue from the sale of marina rights from $3.3 million in 2002 to
$0.1 million in 2003.

Income from Associates, Net
Net income from associates was $2.5 million for the year ended December 31, 2004, as compared to net
income from associates of $0.8 million for 2003 and a net loss from associates of $(2.2) million for 2002.
The increase in net income from associates in 2004, as compared to 2003, was principally due to the
reduction in our share of the losses from pre-operating expenses incurred by Novapark Cairo Company,
the hotel owning company of the Four Seasons Hotel Cairo at Nile Plaza, which opened in 2004, and the
increase in our share of the income of Alexandria Saudi Company for Touristic Projects, the hotel owning
company of the Four Seasons Resort Sharm El Sheikh, which opened in 2002, as well as the improvement
in the results of that associate. The increase in net income from associates in 2003, as compared to 2002,
was principally due to the reduction in our share of the losses for pre-operating expenses incurred by
Alexandria Saudi Company for Touristic Projects, and the increase in our share of the income of El Gouna
                                                  o
Company, the hotel owning company of the M¨venpick Resort & Spa El Gouna, and our share of the
                                                                          o
income of Serena Beach Company, the hotel owning company of the M¨venpick Resort El Quseir.




                                                     63
General and Administrative Expenses
The following table presents the components of our general and administrative expenses for the years
ended December 31, 2004, December 31, 2003 and December 31, 2002:

                                                                                                                                        Year ended December 31,
                                                                                                                                 2004             2003          2002
                                                                                                                                               (audited)
General and Administrative Expenses:
Salaries and benefits . . . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   2,700,746      2,185,711      2,008,095
Accrued municipal taxes . . . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     751,908          2,194             —
Legal and professional fees . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     660,468      1,230,736        841,592
Travel and accommodation . . . . . . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     442,550        409,043        470,764
Insurance . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     260,646        309,018        213,348
Maritime lease fee . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     212,670        212,670        212,670
Provision and write off of bad debts . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     198,060        159,783         66,448
Advertising and publicity . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     180,026         73,672        143,271
Telecommunication . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      96,288         97,529        122,931
Sales commission . . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      95,356        147,352        173,934
Opening ceremony expenses . . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          —              —         760,800
Training and recruitment . . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          —              —         681,346
Other . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     841,376        856,169      1,332,943
Total General and Administrative Expenses . . . . . . . . . . . . . .                                                           6,440,094      5,683,877      7,028,142

General and administrative expenses were $6.4 million for the year ended December 31, 2004, as
compared to $5.7 million for 2003 and $7.0 million for 2002, reflecting an increase of 12 per cent. for 2004,
as compared to 2003, and a decrease of 19 per cent. for 2003, as compared to 2002.
The increase in general and administrative expenses for 2004, as compared to 2003, was principally due to
increases in municipal taxes, salaries and benefits and advertising and publicity, partially offset by
decreases in legal and professional fees and sales commission. For 2004, we incurred a one-time charge of
                                                  o
$0.8 million for municipal taxes relating to the M¨venpick Hotel and Resort Beirut for the period between
2002 and 2004, reflecting a settlement with tax authorities.
Salaries and benefits comprising a part of general and administrative expenses include amounts paid to our
personnel employed at the corporate level directly by KHI and the employees of our consolidated hotel
owning company subsidiaries. The increase in salaries and benefits related to the increased number of
employees at both the corporate and consolidated subsidiary levels. At the corporate level, we hired five
new employees during the year ended December 31, 2004, resulting in a total increase in salaries and
benefits on the corporate level of $0.3 million. At the subsidiary level, salaries and benefits increased by
                                                                                       o
$0.2 million, including $0.1 million related to the hotel owning company of the M¨venpick Royal Palm
Hotel.
The decrease in legal and professional fees for 2004, as compared to 2003, reflected the inclusion in 2003
of $0.4 million incurred in fees relating to the raising of debt and equity to finance the construction of the
Four Seasons Hotel Damascus. The decrease in sales commission for 2004, as compared to 2003, resulted
                                                       o
from a decrease in the number of cabanas at the M¨venpick Hotel and Resort Beirut sold during 2004, as
compared to 2003.
The decrease in general and administrative expenses in 2003, as compared to 2002, was principally due to
the absence of opening ceremony expenses and training and recruitment expenses for 2003, as compared
                                                                                       o
to $1.4 million of such expenses incurred in connection with the opening of the M¨venpick Hotel and
Resort Beirut for 2002. Advertising and publicity expenses and other expenses also decreased in 2003, as
compared to 2002. The decrease in these expenses were also related to the non-recurring nature of these
                                                                 o
2002 expenses incurred in connection with the opening of the M¨venpick Hotel and Resort Beirut in 2002.
The increase in legal and professional fees in 2003, as compared to 2002, reflected the inclusion in 2003 of
$0.4 million incurred in fees relating to the raising of debt and equity to finance the construction of the
Four Seasons Hotel Damascus.




                                                                                            64
Financial Charges, Net
Financial charges, net were $2.9 million for the year ended December 31, 2004, as compared to
$3.1 million for 2003 and $0.6 million for 2002, reflecting a year-on-year decrease of 6 per cent. and a
year-on-year increase of 417 per cent., respectively.
We earned interest income in the amount of $0.3 million for the year ended December 31, 2004, as
compared to $0.8 million for 2003 and $0.8 million for 2002. The fluctuations in the interest income earned
was primarily due to fluctuations in the average deposit balance and the applicable interest rates earned on
this balance in each year.
The increase in financial charges, net in 2004 was principally due to the inclusion in 2004 of 12 months of
financial charges relating to the loan drawn down in July 2003 to partially finance the 51 per cent.
                      o
acquisition of the M¨venpick Hotel Bur Dubai, as compared to six months of such finance charges in 2003,
and to the inclusion of seven months of finance charges relating to the June 2004 loan to finance the
                                                      o
acquisition of the remaining 49 per cent. of the M¨venpick Hotel Bur Dubai, as compared to no such
charges in 2003. The year-on-year impact of these additional financial charges in 2004, compared to 2003,
was partially offset by the incurrence in 2003 of a one-time placement fee charge of $0.7 million relating to
the financing of the construction of the Four Seasons Hotel Damascus.
The increase in financial charges, net for 2003, as compared to 2002, was principally due to the inclusion in
2003 of the $0.7 million placement fee relating to the financing of the construction of the Four Seasons
Hotel Damascus, of 12 months of financial charges relating to the loan incurred in connection with the
  o
M¨venpick Hotel and Resort Beirut, as compared to seven months in 2002 (since the first seven months of
interest charges in 2002 were capitalised as part of the project cost of the hotel because it was still under
                                                                           o
construction), and of six months of financial charges relating to the M¨venpick Hotel Bur Dubai loan
drawn down in July 2003 as compared to no such charges in 2002.

Depreciation
Depreciation was $4.6 million for the year ended December 31, 2004, as compared to $3.4 million for 2003
and $1.4 million for 2002, reflecting year-on-year increases of 35 per cent. and 143 per cent., respectively.
The increase in depreciation in 2004, as compared to 2003, was principally due to depreciation expenses
                  o
relating to the M¨venpick Hotel Bur Dubai for 12 months in 2004, as compared to six months in 2003,
which resulted in an increase of $1.0 million in depreciation expenses for that hotel, and to increased
                                        o
depreciation charges relating to the M¨venpick Hotel and Resort Beirut, which increased by $0.2 million
due to the addition of fixed assets to the hotel during 2004 and late 2003. The increase in depreciation in
2003, as compared to 2002, was principally due to the inclusion of 12 months of depreciation of the
   o
M¨venpick Hotel and Resort Beirut in 2003, as compared to seven months in 2002, and to the inclusion of
                                     o
six months of depreciation of the M¨venpick Hotel Bur Dubai in 2003 from the date of acquisition in July
of that year.

Amortisation of Deferred Credits
Deferred credit balance resulted from the sale of B shares of MPPT that were owned by Kingdom
5-KR-57, Ltd. The B shares represent the indefinite right to use cabanas and shops, which are located at
      o
the M¨venpick Hotel and Resort Beirut and are recorded as real estate held for sale. Pursuant to a security
sharing agreement with a consortium of banks as described in ‘‘Note 10—Bank Borrowings’’ in the notes to
our consolidated financial statements, the proceeds from the sale of the B shares are not remitted to
Kingdom 5-KR-57, Ltd. until the total sale proceeds reach $30,000,000; rather, they are remitted to MPPT
                                    o
to complete the financing of the M¨venpick Hotel and Resort Beirut, and any and all repayments by
MPPT to Kingdom 5-KR-57, Ltd. are subordinated to MPPT’s debts.
The excess of the sales price of the B shares over the costs of the cabanas and shops is recorded as deferred
credit and is amortised to match the maintenance costs and other expenses which could be incurred in
future years in connection with these cabanas and shops.
The amortisation for the year ended December 31, 2004 was $2.3 million, as compared to $2.0 million for
2003 and $0 for 2002.




                                                     65
Taxes
While we are subject to income taxes in numerous jurisdictions, we currently enjoy tax exemptions in
several other jurisdictions. We have tax-exempt status in the Cayman Islands and so do not pay income tax
in the Cayman Islands. Taxes relate mainly to government stamp duties and withholding taxes on payments
to vendors outside of the country in respect of particular hotel projects. We did not pay any such taxes for
the year ended December 31, 2004, as compared to $39,852 for 2003 and $59,135 for 2002.

Minority Interest
Minority interest represents minorities’ share in the net income or loss of related subsidiaries. Minority
interest was $0.9 million for the year ended December 31, 2004, as compared to $3.5 million for 2003 and
$0.3 million for 2002, reflecting a year-on-year decrease of 74 per cent. for 2004, as compared to 2003, and
a year-on-year increase of 1,067 per cent. for 2003, as compared to 2002. The decrease in 2004, as
compared to 2003, was principally the result of the sale in 2003 of interests in subsidiaries upstream of the
hotel owning company of the Four Seasons Hotel Damascus, as well as the assumption by the new
investors of $1.0 million of accumulated losses in connection therewith, and of our acquisition during 2004
                                                             o
of the remaining 49 per cent. ownership interest in the M¨venpick Hotel Bur Dubai, which eliminated the
minority interest in that property. The increase in 2003, as compared to 2002, was principally the result of
the above-mentioned sale of interests in the Four Seasons Hotel Damascus in 2003, the inclusion of the
                                      o
minority interest related to the M¨venpick Hotel Bur Dubai due to our acquisition of a 51 per cent.
interest in that hotel in 2003 and the increase in the share of minority interest of the hotel owning company
          o
of the M¨venpick Hotel and Resort Beirut ($1.8 million for 2003, as compared to $0.1 million for 2002).

Financial Condition
Total assets as at December 31, 2004 was $497.5 million, as compared to $378.6 million as at December 31,
2003 and $335.8 million as at December 31, 2002. The year-on-year increases in total assets were
principally due to changes in net accounts receivables, investment available for sale, net investment in
associates, construction in progress, net property and equipment. The increase in liability and shareholders
equity was due to the increase in bank borrowings, minority interest of consolidated subsidiaries,
subscribed share capital, cumulative foreign currency translation adjustment and change in cumulative
change in market value.

Accounts Receivable, Net
Accounts receivables as at December 31, 2004 was $6.2 million, as compared to $5.7 million as at
December 31, 2003 and $2.9 million as at December 31, 2002, reflecting year-on-year increases of 9 per
cent. and 97 per cent., respectively. The increase in the 2004 year-end receivables balance, as compared to
                                                                                             o
the year-end balance in 2003, was principally due to an increase in the revenue of the M¨venpick Hotel
                              o
and Resort Beirut and the M¨venpick Hotel Bur Dubai over the period. The increase in the 2003 year-end
balance, as compared to the year-end balance in 2002, was principally due to the increase in the revenue of
       o                                                                                o
the M¨venpick Hotel and Resort Beirut over the period and the acquisition of the M¨venpick Hotel Bur
Dubai in July 2003.

Investment Available for Sale
Investment available for sale as at December 31, 2004 was $69.3 million, as compared to $9.4 million as at
December 31, 2003 and $8.3 million as at December 31, 2002, reflecting year-on-year increases of 637 per
cent. and 13 per cent., respectively. The increase in the 2004 year-end balance, as compared to the
year-end balance in 2003, was principally due to the in-kind contribution by 5-KR-124 of shares in Four
                           o
Seasons, Fairmont and M¨venpick Hotels and Resorts AG as part of our August 2004 capital increase. The
aggregate market value of the contributed shares as at the date of contribution was $40 million, as
compared to $44.8 million as at December 31, 2004, reflecting an increase of $4.8 million. The increase in
2004, as compared to 2003, was also due to the appreciation in the share value of METICO from $1.41 per
share as at December 31, 2003 to $1.71 per share as at December 31, 2004, which resulted in an overall
$1.7 million increase in the value of this investment as at December 31, 2004, as compared to a total value
of $9.8 million as at the contribution date, as well as to our new investments in 2004 of $10.2 million in the
                                                        o
Fairmont Nile City Cairo and $3.2 million in the M¨venpick Hotel Pearl Dubai.




                                                     66
The year-on-year increase in investment available for sale as at year-end 2003, as compared to year-end
                                                                   o
2002, principally reflected the investment of $1.0 million in the M¨venpick Hotel Gaza and the payment of
$0.8 million towards the increase in the capital of METICO.

Investment in Associates, Net
Net investment in associates as at December 31, 2004 was $58.0 million, as compared to $45.8 million as at
December 31, 2003 and $56.3 million as at December 31, 2002, reflecting a year-on-year increase in 2004,
as compared to 2003, of 26.6 per cent. and a year-on-year decrease in 2003, as compared to 2002, of
19 per cent. The year-on-year increase in 2004, as compared to 2003, was principally due to the recognition
of $2.5 million as net share of profits from associates, the recognition of $3.7 million as share of premium
reported by associates and the positive foreign currency translation adjustment of $6.1 million primarily
resulting from the appreciation of the Egyptian Pound against the U.S. Dollar from LE 7.00 per $1.00 as at
December 31, 2003 to LE 6.01 per $1.00 as at December 31, 2004.
The year-on-year decrease in 2003, as compared to 2002, was principally due to the recognition of a
negative foreign currency translation adjustment of $11.3 million as a result of the devaluation of the
Egyptian Pound against the U.S. Dollar from LE 5.50 per $1.00 as at December 31, 2002 to LE 7.00 per
$1.00 as at December 31, 2003, which was only partially offset by our recognition of $0.8 million as net
share of profit from associates.

Construction in Progress
Construction in progress as at December 31, 2004 was $62.3 million, as compared to $41.7 million as at
December 31, 2003 and $20.1 million as at December 31, 2002, reflecting year-on-year increases of
49 per cent. and 107 per cent., respectively. The increases in construction in progress as at year-end 2004,
as compared to year-end 2003, and as at year-end 2003, as compared to year-end 2002, related to the
progress achieved during 2004 on the construction of the Four Seasons Hotel Damascus ($15.9 million at
year-end 2004, as compared to $17.4 million at year-end 2003) and the construction of the Four Seasons
Hotel Beirut ($4.8 million at year-end 2004, as compared to $4.2 as at year-end 2003).

Property and Equipment, Net
Net property and equipment as at December 31, 2004 was $242.7 million, as compared to $221.8 million as
at December 31, 2003 and $183.1 million as at December 31, 2002, reflecting year-on-year increases of
9 per cent. and 21 per cent., respectively. The year-on-year increase in the net property and equipment
balance as at year-end 2004, as compared to year-end 2003, was principally due to the acquisition of
                                                                         o
96.00 per cent. of Tanruss Investment Limited, the owner of the M¨venpick Royal Palm Hotel, in
December 2004. The net book value of Tanruss Investment Limited’s property and equipment as at the
acquisition date was $25.4 million.
The year-on-year increase in the net property and equipment balance as at year-end 2003, as compared to
                                                              o
year-end 2002, was principally due to the acquisition of the M¨venpick Hotel Bur Dubai, which had a total
asset base valued at $40 million at the time of acquisition.

Bank Borrowings
Bank borrowings as at December 31, 2004 were $58.7 million, as compared to $52.3 million as at
December 31, 2003 and $39.0 million as at December 31, 2002, reflecting year-on-year increases of
12 per cent. and 34 per cent., respectively. The year-on-year increase in the balance of bank borrowings as
at year-end 2004, as compared to year-end 2003, was principally due to our acquisition of Tanruss
Investment Limited in December 2004, which had a total balance of bank borrowings as at year-end 2004
                                                                                        o
of $10.3 million, as well as the borrowing of a short-term loan associated with the M¨venpick Hotel Bur
Dubai, which had a balance as at December 31, 2004 of $11.0 million. The increase in the level of bank
borrowing was partially offset by loan payments made in 2004 in the aggregate amount of $7.1 million on
                               o                                             o
borrowings relating to the M¨venpick Hotel and Resort Beirut and the M¨venpick Hotel Bur Dubai.
The year-on-year increase in bank borrowings as at year-end 2003, as compared to December 31, 2002, was
                                                                  o
principally due to the new loan obtained in connection with the M¨venpick Hotel Bur Dubai during 2003,
the balance of which was $20.4 million as at December 31, 2003. This new borrowing was partially offset by
                                                              o
loan payments made in 2003 of $5.2 million relating to the M¨venpick Hotel and Resort Beirut.




                                                    67
Minority Interest of Consolidated Subsidiaries
Minority interest of consolidated subsidiaries represents the share of the minority in the subsidiary’s
equity, which includes capital, cumulative foreign currency translation, cumulative change in the market
value and retained earnings/accumulated losses.
Minority interest of consolidated subsidiaries as at December 31, 2004 was $111.4 million, as compared to
$106.1 million as at December 31, 2003 and $71.3 million as at December 31, 2002, reflecting year-on-year
increases of 5 per cent. and 49 per cent., respectively.
The year-on-year increase in the balance of minority interest of our consolidated subsidiaries as at
December 31, 2004, as compared to year-end 2003, was principally due to the increases in the minority’s
capital contribution in of the hotel owning companies of the Four Seasons Hotel Damascus and the Four
Seasons Hotel Beirut in 2004, as well as the increase of the minority’s share in the foreign currency
revaluation as a result of the increases in overall value due to the appreciation of the Egyptian Pound
against the U.S. Dollar from LE 7.00 per $1.00 as at December 31, 2003 to LE 6.01 per $1.00 as at
December 31, 2004. This increase was partially offset by the decrease in the minority interest in the hotel
                             o
owning company of the M¨venpick Hotel Bur Dubai as a result of our acquisition of the remaining
49 per cent. of the hotel owning company in 2004.
The year-on-year increase in the balance of minority interest of consolidated subsidiaries as at year-end
2003, as compared to year-end 2002, was principally due to increases in the capital of the hotel owning
companies of the Four Seasons Hotel Damascus and the Four Seasons Hotel Beirut in 2003 and our
                                      o
acquisition of 51 per cent. of the M¨venpick Hotel Bur Dubai (totaling $9.2 million as at December 31,
2003), partially offset by the decrease in the value of our minority interests in the hotel owning companies
     o                                o
of M¨venpick Resort El Quseir, M¨venpick Resort & Spa El Gouna and Four Seasons Resort Sharm
El Sheikh as a result of the devaluation of the Egyptian Pound against the U.S. Dollar from LE 5.5 per
$1.00 as at December 31, 2002 to LE 7.00 per $1.00 as at December 31, 2003.

Cumulative Foreign Currency Translation Adjustment and Other
The cumulative foreign currency translation adjustment and other as at December 31, 2004 was $(22.9)
million, as compared to $(30.4) million as at December 31, 2003 and $(21.8) million as at December 31,
2002, reflecting an upwards change in 2004 of 25 per cent. and a downward change in 2003 of 39 per cent.
These changes primarily reflected accumulated translation adjustments made to our investments in Egypt
in accordance with International Accounting Standards 21. We pay and book our investments in U.S.
Dollars, while the respective hotel owning companies book our investments and capital contributions in
Egyptian Pounds at the exchange rate on the transaction date. The upward change in 2004, as compared to
2003, and the downward change in 2003, as compared to 2002, were the result of adjustments made to
reflect changes in the U.S. Dollar/Egyptian Pound exchange rates following the appreciation of the
Egyptian Pound as at year-end 2004, as compared to year-end 2003, and the resulting positive impact on
our shareholders’ equity, and the depreciation of the Egyptian Pound as at year-end 2003, as compared to
year-end 2002, and the resulting negative impact on our shareholders’ equity, respectively.

LIQUIDITY   AND   CAPITAL RESOURCES
Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses
and other expenditures directly associated with our hotels, including:
         investments relating to acquisitions and new developments;
         interest expense and scheduled principal payments on outstanding indebtedness;
         recurring capital expenditures necessary to maintain our hotels properly; and
         capital expenditures incurred to improve our hotels.
We have in the past derived, and we expect to continue to derive, substantially all of our revenue from
funds generated by our operating subsidiaries, mainly in the form of asset management fees or dividends,
and, therefore, we rely on the ability of these companies to transfer funds to us.




                                                    68
Our principal sources of liquidity are cash on hand, operating cash flows, cash from existing borrowing
facilities and capital contributions by our shareholders. In our directors’ opinion, our cash flow from
operations and other sources of liquidity described below will be sufficient for us to meet our working
capital and debt service requirements for the next 12 months.
The table below presents our cash flows as at and for the nine-month periods ended September 30, 2005
and September 30, 2004 and as at and for each of the years ended December 31, 2004, 2003 and 2002,
respectively:

                                                                As at and for the
                                                            nine-month period ended
                                                                  September 30,               As at and for the year ended December 31,
                                                              2005             2004              2004            2003           2002
                                                            (audited)      (unaudited)                         (audited)
                                                                                            (U.S. Dollars)
Net cash provided from/(used) in operating
 activities . . . . . . . . . . . . . . . . . . . . . . .     7,183,973       (8,296,453)        1,744,929       3,912,535    (10,674,836)
Net cash used in investing activities . . . . . . .         (57,626,391)     (27,351,125)      (64,635,452)    (42,030,885)   (61,393,507)
Net cash provided from financing activities . . .           283,303,719       13,990,978        59,026,266      30,545,896     86,164,390

Cash and cash equivalents
Beginning cash and cash equivalents . . . . . . .            37,545,242      41,409,499         41,409,499     48,981,953      34,885,906
Ending cash and cash equivalents . . . . . . . . .          270,406,513      19,752,899         37,545,896     41,409,499      48,981,953
Net (decrease)/increase . . . . . . . . . . . . . . .       232,861,301      (21,656,600)       (3,864,257)     (7,572,454)    14,096,047

As at September 30, 2005, net cash and cash equivalents for cash flow purposes were $270.4 million, as
compared to $37.5 million, $41.4 million and $49.0 million as at December 31, 2004, 2003 and 2002,
respectively.

Operating activities
Net cash from (used in) operating activities for the nine-month period ended September 30, 2005 was
$7.3 million, as compared to $(8.5) million for the nine-month period ended September 30, 2004. This
increase in net cash from operating activities for the period ended September 30, 2005, as compared to the
period ended September 30, 2004, was principally due to the increase in net income before minority
interest of $7.8 million for the nine-month period ended September 30, 2005, as compared to $5.8 million
for the nine-month period ended September 30, 2004, the increase in depreciation and amortisation
expenses of $5.2 million for the nine-month period ended September 30, 2005, as compared to $3.4 million
for the nine-month period ended September 30, 2004, the increase in cash inflow from inventories and real
estate held for sale of $2.9 million for the nine-month period ended September 30, 2005, as compared to
$0.6 million for the nine-month period ended September 30, 2004, and the increase in the cash inflow from
payables and other liabilities of $2.6 million for the nine-month period ended September 30, 2005, as
compared to a cash outflow of $6.2 million for the nine-month period ended September 30, 2004. These
increases of cash inflow were partially offset by the increase in income from associates of $5.9 million for
the nine-month period ended September 30, 2005, as compared to $2.0 million for the nine-month period
ended September 30, 2004 and the increase in receivables and other assets of $3.7 million for the
nine-month period ended September 30, 2005, as compared to $8.0 million for the nine-month period
ended September 30, 2004.
Net cash from (used in) operating activities for the year ended December 31, 2004 was $1.7 million, as
compared to $4.0 million for the year ended December 31, 2003 and $(10.7) million for the year ended
December 31, 2002, reflecting year-on-year decreases of 58 per cent. in 2004 and 373 per cent. in 2003.
The decrease in net cash flow from operating activities in 2004, as compared to 2003, was principally due to
the increase in income from associates to $2.5 million in 2004 from $0.8 million in 2003 and the decrease in
payables, accrued expenses and other payables to $2.1 million in 2004 from $4.9 million in 2003, partially
offset by the increase in our net income of $4.4 million in 2004, as compared to $0.03 million in 2003, the
increase in depreciation expenses of $4.6 million in 2004, as compared to $3.4 million in 2003, and the
decrease in minorities share of our subsidiaries’ losses of $0.9 million in 2004, as compared to $2.2 million
in 2003.
The increase in cash flow from operating activities in 2003, as compared to 2002, was principally due to the
increase in our net income of $31,000 in 2003, as compared to a net loss of $11.0 million in 2002, the
increase in depreciation and amortisation expenses of $3.4 million in 2003, as compared to $1.4 million in



                                                                       69
2002, the increase in cash from payables, accrued expenses and other payables of $4.9 million in 2003, as
compared to $3.8 million in 2002, and the increase in cash flow from real estate sales of $1.0 million in
2003, as compared to cash outflow $7.8 million in 2002. These increases were partially offset by the change
in the cash flow of receivables and other assets from a cash inflow of $0.9 million in 2002, to a cash outflow
of $0.5 million in 2003, and the inclusion of amortisation of deferred credit of $2.0 million in 2003, as
compared to $0 in 2002.

Investing activities
Net cash from investing activities for the nine-month period ended September 30, 2005 was $(57.6) million,
as compared to $(27.4) million for the nine-month period ended September 30, 2004. The increase in cash
used in investing activities for the nine-month period ended September 30, 2005, as compared to the
nine-month period ended September 30, 2004, was principally due to the increase in cash expended for the
acquisitions of new investments. During the period ended September 30, 2005, we expended $32.2 million
to acquire 55.00 per cent. of Lonrho Hotels Kenya B.V., the owner of the Kenya hotels during the
nine-month period ended September 30, 2005, as compared to $11.1 million to acquire an additional
                                           o
49 per cent. ownership interest in the M¨venpick Hotel Bur Dubai during the nine-month period ended
September 30, 2004. The higher level of cash used in investing activities in the 2005 period, as compared to
the 2004 period, also reflected the increase in the net cash used in construction in progress, representing
the contractor billings and other capital expenditures relating to the Four Seasons Hotel Damascus and the
Four Seasons Hotel Beirut, of $17 million for the nine-month period ended September 30, 2005, as
compared to $12 million for the nine-month period ended September 30, 2004.
Net cash used in the purchase of property and equipment related primarily to purchases of fixtures,
furniture and equipment, where the cost has been capitalised as a part of the overall cost of the relevant
project. Cash outflow relating to property and equipment for the nine-month period ended September 30,
2005 was $8.8 million, as compared to $1.1 million for the nine-month period ended September 30, 2004.
Net cash used in investing activities for the year ended December 31, 2004 was $64.6 million, as compared
to $42.0 million for the year ended December 31, 2003 and $61.4 million for the year ended December 31,
2002, reflecting a year-on-year increase for 2004, as compared to 2003, of 54 per cent. and a year-on-year
decrease for 2003, as compared to 2002, of 32 per cent.
During 2004, we expended $10.7 million to acquire 96.00 per cent. of Tanruss Investment Limited, the
                 o
owner of the M¨venpick Royal Palm Hotel, $11.1 million to acquire an additional 49 per cent. ownership
                  o
interest in the M¨venpick Hotel Bur Dubai and $13.4 million for our investments in the Fairmont Nile City
                    o
Cairo and the M¨venpick Hotel Pearl Dubai. During 2003, we expended $19.6 million to acquire a
                               o
51 per cent. interest in the M¨venpick Hotel Bur Dubai. During 2002, we expended $13.2 million to
                                                                                                o
acquire a 29.28 per cent. interest in El Gouna Company, the hotel owning company of the M¨venpick
Resort & Spa El Gouna, and a 30.50 per cent. interest in Serena Beach Company, the hotel owning
                o
company of M¨venpick Resort El Quseir.
In addition, in 2004, net cash used in construction in progress was $27.9 million, as compared to
$18.8 million for 2003, principally representing, in each year, contractor billings and other capital
expenditures relating to the Four Seasons Hotel Damascus and the Four Seasons Hotel Beirut. In 2002,
net cash used in construction in progress was $10.6 million, principally reflecting the capital expenditure
and contractor billings of $6.0 million and $4.6 million relating to the Four Seasons Hotel Damascus and
the Four Seasons Hotel Beirut, respectively.
Net cash used in the purchase of property and equipment related primarily to purchases of fixtures,
furniture and equipment, where the cost has been capitalised as a part of the overall cost of the relevant
project was $1.9 million for the year ended 2004, as compared to $2.9 million for 2003 and $37.6 million for
2002.

Financing activities
Net cash from financing activities for the nine-month period ended September 30, 2005 was $283 million,
as compared to $14 million for the nine-month period ended September 30, 2004, reflecting an increase of
1,924 per cent. The increase in net cash from financing activities for the nine-month period ended
September 30, 2005, as compared to the nine-month period ended September 30, 2004, was principally due
to: (a) the non-recurring receipt of cash proceeds from our increase of capital during the nine-month
period ended September 30, 2005 of $220 million and the collection of shareholders’ receivables of



                                                     70
$23.5 million from our capital increase in August 2004; (b) the receipt of proceeds from new loans
obtained to finance new acquisitions and construction totaling $20.3 million, which was partially offset by
the repayment of the current portion of long-term debt and short-term borrowings in the amount of
$10.9 million; and (c) the increase in minority interest of $27.9 million for the nine-month period ended
September 30, 2005, as compared to $8.9 for the nine-month period ended September 30, 2004.
Net cash from financing activities for the year ended December 31, 2004 was $59.0 million, as compared to
$30.5 million in 2003 and $86.2 million in 2002, reflecting a year-on-year increase for 2004, as compared to
2003, of 93 per cent. and a year-on-year decrease for 2003, as compared to 2002, of 65 per cent. The
increase in net cash from financing activities in 2004, as compared to 2003, was principally due to the
receipt of proceeds from new loans obtained to finance new acquisitions and from our increase of capital
during 2004 of $46.5 million, partially offset by the repayment in 2004 of the current portion of long-term
debt in the amount of $3.3 million. The decrease in net cash from financing activities in 2003, as compared
to 2002, principally reflected the non-recurring collection of shareholders’ receivables of $16.9 million in
2002, the year-on-year decrease in the net proceeds from loans of $2.8 million in 2003, as compared to
$33.5 million in 2002, and the year-on-year decrease in proceeds from the increase of capital to $0 in 2003,
as compared to $5.0 million in 2002, partially offset by an increase in the contributions of minorities in the
capital of our subsidiaries to $39.8 million in 2003, as compared to $20.1 million in 2002.

Indebtedness
Many of our hotel owning companies have financing arrangements in place. These arrangements are
generally secured by mortgages over the relevant hotel property and pledges of the shares in the hotel
owning company. Pursuant to these arrangements, the hotel owning companies are generally subject to
financial covenants, including a covenant to maintain certain debt coverage ratios. The debt obligations of
certain of the hotel owning companies are guaranteed on a pro rata basis by the upstream subsidiary of the
                                                                                                  o
hotel owning company. In addition, in the case of the financing arrangements related to the M¨venpick
                               o
Hotel Bur Dubai and the M¨venpick Hotel and Resort Beirut (described below), KHI has agreed to
maintain minimum ownership levels in the parent companies of the respective hotel owning companies.
For additional information regarding our bank borrowings, see ‘‘Note 10—Bank Borrowings’’ in the notes
to our consolidated financial statements.
Our total bank borrowings and notes payable as at September 30, 2005 were $85.8 million, as compared to
$76.3 million as at December 31, 2004.

Cost of Investment
For the nine-month period ended September 30, 2005, our cost of investment was $29.2 million, as
compared to $35.8 million for the nine-month period ended September 30, 2004. Our cost of investment
was $50.5 million for the period ended December 31, 2004, as compared to $17.8 million for the period
ended December 31, 2003 and $19.3 million for the period ended December 31, 2002.
The table below presents our capital expenditures by region for the nine-month periods ended
September 30, 2005 and September 30, 2004 and for the years ended December 31, 2004, 2003 and 2002.

                                                      Nine-month      Nine-month
                                                     period ended    period ended           For the year ended December 31,
                                                     September 30,   September 30,
Cost of Investment                                       2005            2004            2004              2003          2002
                                                       (audited)      (unaudited)                        (audited)
                                                                                (U.S. Dollars, millions)
Levant Region . . . . . . . . . . . . . . . .                 4.0              4.6            4.6             5.5                5.5
Gulf Co-operation Council Region .                            0.0             20.6           20.6            11.9                0.0
Africa . . . . . . . . . . . . . . . . . . . . . .           25.2             10.6           25.3             0.4               13.8
Total cost of investment . . . . . . . . .                   29.2             35.8           50.5            17.8               19.3




                                                                     71
Capital Expenditures
The table below presents our anticipated capital expenditures for our operating hotels by hotel for the
years ended December 31, 2005, 2006 and 2007.

                                                                                           Year ended December 31,
Property                                                                           2005              2006            2007
                                                                                            (U.S. Dollars, millions)
 o
M¨venpick Hotel Bur Dubai . . . . . . . . . . . . . . . . . . . . . . . . .           0.25              3.75                  0
 o
M¨venpick Hotel and Resort Beirut . . . . . . . . . . . . . . . . . . .                 —                 —                 2.0
Kenya Hotels (Norfolk Hotel, Mount Kenya Safari Club,
  Aberdare Country Club, The Ark and Mara Safari Club) . . .                          1.25             14.25                9.5
Total capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . .          1.5           18.0            11.5

Commitments and Contingencies
As at September 30, 2005, Kingdom Beirut S.A.L. (the hotel owning company of the Four Seasons Hotel
Beirut), a subsidiary in which we have a 57.20 per cent. effective ownership interest, had contingent
liabilities in respect of bank guarantees of $1.8 million. These guarantees were granted in the ordinary
course of our business.
We and our subsidiaries also have certain commitments and contingencies in respect of legal claims,
contract commitments and borrowing commitments. For a detailed description of these see ‘‘Note 20—
Commitments and Contingencies’’ in the notes to our consolidated financial statements for the nine-month
period ended September 30, 2005 and ‘‘Note 19—Commitments and Contingencies’’ in the notes to our
consolidated financial statements for the years ended December 31, 2004, 2003 and 2002.
In addition, in connection with several of our hotel properties, we have unpaid equity commitments that
we expect to pay during 2006 and 2007 of $126.1 million relating to the following hotel properties: the
  o                                          o
M¨venpick Hotel Ambassador Accra; the M¨venpick Hotel Tripoli; the Four Seasons Resort Mauritius;
     o                                                                o
the M¨venpick Hotel Gaza; the Four Seasons Hotel Marrakech; the M¨venpick Royal Palm Hotel; and the
  o
M¨venpick Hotel Pearl Dubai.

MARKET RISK
In the ordinary course of business, we are exposed to various financial and market risks, including
primarily changes in interest rates and currency exchange rates and changes in the market prices of our
investments. We do not typically hold or issue derivative financial instruments for hedging or trading
purposes; however, we do enter into interest rate hedging instruments for the debt of some of our
properties that we directly control to protect us from potential increases in the LIBOR rate. For currency
exchange rates, our room rates are typically quoted on a U.S. Dollar basis and most of our operating
expenses are on a local currency basis, and, accordingly, property revenues are generally hedged against
any devaluation of the local currencies against the U.S. Dollar. Currency fluctuation, however, may impact
the day-to-day operating results of our properties, with respect to balance sheet transactions, including
acquisition of assets, and maintenance of U.S. Dollar-based facilities.

Interest Rate Risk
We are exposed to interest rate risk on our interest bearing assets and liabilities, such as our deferred
financing cost, bank deposits and long term loans.

Credit Risk
We seek to limit our credit risk with respect to customers by setting credit limits for individual customers
and monitoring outstanding receivables. We provide our services to a large number of internationally
dispersed customers, and accordingly, we believe we have no concentration of credit risk to trade
receivables.

Liquidity Risk
We seek to limit our liquidity risk by keeping our bank facilities available and through refinancing of
indebtedness relating to our properties, while still maintaining control over our properties. In addition, our



                                                                72
liquidity risk is also controlled through our ability to suspend additional business development and
acquisition efforts if there is an unexpected unavailability of cash. Trade receivables are normally settled
within 60 days of the date of service. Trade payables are normally settled within 60 days of the date of
purchase or service rendered.

Foreign Currency Risk
We present our accounts in U.S. Dollars; however, some of our operating entities’ accounts are
denominated in currencies other than the U.S. Dollar. Although in some cases our hotel operating
subsidiaries use functional currencies other than the U.S. Dollar, some of which float freely in the market,
some of our hotel operating subsidiaries use functional currencies that are pegged to, or heavily managed
against, the U.S. Dollar, whereby the exchange rates are fixed or fluctuate only within a very narrow band.
Accordingly, we believe the translation and transaction impact on our financial statements from foreign
currency risk is limited. Because of the structural differences among our operating currencies, we cannot,
however, completely eliminate translation and transaction effects on our financial statements should any of
our functional currencies depreciate or appreciate against the U.S. Dollar. Foreign exchange translation
adjustments are periodically reflected in our balance sheet as a result of changes in the book value of our
assets when translated into U.S. Dollars. Although we have accumulated translation losses of $21.9 million
as of September 30, 2005, mainly due to the historical devaluation of the Egyptian Pound against the U.S.
Dollar, our management believes that the debit balance shown in the cumulative foreign currency
translation adjustment is recoverable and does not represent a permanent impairment of our investment in
associates. For further discussion on the nature of such adjustments, see ‘‘Note 2’’ in the notes to our
audited consolidated financial statements.
In a number of markets in which we operate, such as Egypt, the room rates and prices of certain hotel
services are set in U.S. Dollars. Furthermore, in the majority of our other markets, management believes
that effective pricing, as affected by the rates charged by competing hotels in the same market or for first
class and luxury hotels elsewhere, is generally determined in U.S. Dollars which limits the impact of any
devaluation or appreciation of the relevant local currency in such markets on our revenues when translated
into U.S. Dollars. Moreover, a substantial proportion of our costs, including those relating to senior
expatriate staff at each hotel, and those relating to imported foods and wines, are denominated in U.S.
Dollars. As a result, a depreciation or appreciation of a particular local currency against the U.S. Dollar
could have a positive or negative impact on our profit margin or our net income.

RECENT ACCOUNTING PRONOUNCEMENTS
IFRS 3 applies to accounting for business combinations for which the agreement date is on or after
March 31, 2004. The effect of the adoption of IFRS 3 upon our accounting policies has impacted the
recognition of restructuring provisions arising upon an acquisition. We are now only permitted to recognise
an existing liability contained in the acquiree’s financial statements on acquisition. Previously this type of
restructuring provision could be recognised by the acquirer regardless of whether the acquiree had
recognised this type of liability or not.
Further, upon acquisition we initially measure the identifiable assets and liabilities acquired at their fair
values as at the acquisition date thereby causing any minority interest in the acquiree to be stated at the
minority proportion of the net fair values of those items.

SIGNIFICANT CHANGE    IN   OUR FINANCIAL   OR   TRADING POSITION
Other than the acquisitions described in ‘‘Selected Pro Forma Consolidated Financial Information and
Operating Data’’ on pages 30 and 31 and the information disclosed under ‘‘Liquidity and Capital
Resources—Indebtedness—Recent Borrowings’’ on page 70 and ‘‘Capitalisation’’ on page 41, there has
been no significant change in the financial or trading position of our company and its subsidiaries taken as
a whole since September 30, 2005.




                                                      73
                                 THE HOTEL AND TOURISM INDUSTRY

This Hotel and Tourism Industry section has been extracted from a report prepared by HVS International
at the request of KHI. HVS International hereby confirms that the HVS Study has been accurately
reproduced, and as far as HVS International is aware and is able to ascertain from information published
by it, no facts have been omitted which would render the reproduced information inaccurate or misleading.

INTRODUCTION
The Hotel Industry
Within the hotel industry, hotel operations are generally classified as either full service or limited service,
furthermore, hotels maybe branded with an international or nationally known brand. Where hotel
operations are outsourced to a third party, the hotel management company will control the hotel’s
day-to-day operations including setting room rates, developing budgets, marketing and human resource
plans and will receive fees in return for providing management services. In such cases, the classification of
the hotel will depend heavily on both the reputation of the hotel management company and the quality of
the property. A brand name, similarly to other industries provides a level of recognition, through consistent
service and product standards which provide a level of familiarity to guests, particularly in markets which
are unknown to a traveler. HVS International classifies full service branded hotel into the following
segments: super luxury, luxury, upscale, mid market and economy. These classifications are based on
several factors, such as the available facilities, the size of the guest rooms, the quality of the furnishings in
the public areas and guest rooms and the level of service provided in general. Super luxury and luxury
hotels provide the highest level of service and generally have large guest rooms (in excess of 42m2), several
food and beverage outlets, a health club and/or a full spa with treatment rooms. Super luxury hotels are
                                                                                                            e
distinguished from luxury hotels largely by exceptional features (e.g., exceptional service, design and d´cor,
food and beverage, etc.) which allow such hotels to charge a significant net average daily rate premium
over luxury hotels. HVS International considers brands such as Jumeirah, Four Seasons, Rosewood and
Ritz Carlton to be in the luxury class and brands such as Marriott, Sheraton and Hyatt Regency to be in the
upscale category. HVS International does not consider one single brand to be of a super luxury
positioning, but does consider individual hotels of luxury brand operators to be of a super luxury
positioning. All of the company’s hotels in the Middle East and Africa are either currently operated or
scheduled to operate as super luxury, luxury or upscale properties. HVS International considers all Four
Seasons hotels in the KHI portfolio to be in the super luxury category, Fairmont hotels to generally fall in
the luxury category, with a few Fairmont hotels in the super luxury category and a few Fairmont hotels in
                          o                                                                      o
the upscale category. M¨venpick hotels tend to fall in the upscale category, but certain M¨venpick hotels
can be classified as luxury hotels.
HVS International defines first class hotels to be branded hotel properties in the luxury and upscale
categories. Such properties typically have a four- and five star classification. Hotel-related data in the HVS
Study do not include data for hotels in the super luxury category, including the Four Seasons hotels,
because HVS International believes super luxury hotels achieve such a high net average daily rate premium
in relation to the rest of the sample that RevPAR development in a given market could be skewed by the
inclusion of RevPAR from super luxury hotels in that market. In addition, data for hotels which have been
operational for less then three years are also excluded from the HVS Study as HVS International also
believes the inclusion of such data could also skew RevPAR development results.

Overview of the Hotel Industry in the Middle East and Africa
The hotel industry in the Middle East and Africa, the two regions in which most of KHI’s assets are
currently located, consists of entities which operate in a diversified market under a variety of brand names.
While some industry participants own and operate hotels independently, other hotels, such as the
company’s properties, are owned or leased by one entity and operated by an independent third party
pursuant to an independent management agreement or operating lease, and in some cases under a brand
name owned by the management company or licensed from yet another entity. Other hotels in the region
can be franchised by a branded hotel company, where the owner operates the hotel independently but pays
a fee for the use of the brand and access to group marketing and reservation systems.
Competition in the industry is based primarily on the level of service, quality of accommodation, location
and room rates. The company’s hotels in the Middle East and Africa generally compete with other hotels
of the same segment located in the same city or resort area. However, in periods of extremely high or low



                                                       74
demand, the company’s hotels may also compete with hotels in segments ranked above or below their
segment and/or in nearby cities or resorts.

Overview of the Tourism Industry in the Middle East and Africa
Introduction
This section provides a macro tourism overview of the Middle East and Africa. It then provides a more
detailed discussion of the countries and/or cities in these regions in which the assets are located. Note that
references to tourist arrivals in the HVS Study mean visits (whether for leisure, business or other reasons)
by foreign nationals with respect to a given country.

Economic Backdrop
The Middle Eastern and African countries in which KHI’s operating and under development/in initial
stages of development properties are located, in the aggregate have experienced strong Gross Domestic
Product (‘‘GDP’’) growth since 2000, outpacing western European countries as a whole. The strong
economic growth fundamentals are expected to continue, in 2005 and 2006, according to the Economic
Intelligence Unit (‘‘EIU’’).

Table 1 GDP Growth Index 2000 to 2006 (2005–2006 projected)

      150.00                                                                                       Libya
      145.00
                                                                                                   Tanzania
      140.00
                                                                                                   U.A.E.
      135.00                                                                                       Ghana
                                                                                                   Morocco
      130.00                                                                                       Mauritius
                                                                                                   Jordan
      125.00                                                                                       Kenya
      120.00                                                                                       Egypt
      115.00                                                                                       Syria
                                                                                                   Lebanon
      110.00                                                                                       Western Europe
      105.00

      100.00
                   2000          2001          2002          2003          2004         2005P   2006P   8FEB200620414837
Note 1: Data for Palestine/Gaza is unavailable
Note 2: Western Europe includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
        The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom
Source: Data has been indexed to 2000 levels based on Economist Intelligence Unit, 2005 data.

Demand Dynamics
Table 2 shows the global distribution of tourist arrivals across the five continents in 1990 and 2004. The
combined share of the Middle East and Africa in world tourist arrivals has increased from 5% in 1990 to
9% in 2004. We note that according to the World Tourism Organisation (‘‘WTO’’), Egypt is included in the
definition used in this table as well as the remainder of this report as part of the Middle East rather than
Africa.




                                                                75
Table 2 Overview of World Tourist Arrivals (Worldwide)
         World Tourist Arrivals in 1990 (%)                           World Tourist Arrivals in 2004 (%)

                          Middle East                                                   Middle East
                               2%                                                          5%
                        Africa                                                      Africa
                         3%                                                          4%
         Americas                                                     Americas
          21%                                                          16%




     Asia &                                                       Asia &
     Pacific                                   Europe             Pacific                                     Europe
      13%                                       61%                20%                                         55%

                                                                                                      28JAN200623240520
Source: WTO, January 2003, December 2004 and October 2005.


The following comments can be made with regard to Table 2. Between 1990 and 2004, the percentage of
tourist arrivals to the Middle East compared to other destinations in the world increased by 260% whilst,
the percentage of tourist arrivals to Africa increased by about 120%:
          A large number of currencies in the Middle East and Africa are pegged or managed to the U.S.
          Dollar and, given the recent appreciation of the euro, the region will become increasingly
          attractive to European leisure markets in terms of purchasing power;
          The extensive amount of large-scale developments as well as improvements in the tourism
          infrastructure throughout the Middle East, South Africa and Egypt in particular is likely to
          stimulate both visitation and investment.
Table 3 shows compound annual growth rate (‘‘CAGR’’) for the number of tourist arrivals to different
regions of the world.

Table 3 World Tourist Arrivals (Worldwide) 2005-2020 CAGR (%)

                8.0%

                7.0%

                6.0%

                5.0%

                4.0%

                3.0%

                2.0%

                1.0%

                0.0%
                          Europe           Americas          Africa         Middle East   Asia & Pacific
                                                                                           8FEB200623305740
Source: WTO, January 2003, December 2004 & October 2005.


          HVS International expects this region to experience further growth over the next five to ten
          years. In addition, the WTO expects 5.5% CAGR in Africa and 6.3% CAGR in the Middle East
          between 2005 and 2020;




                                                             76
Table 4 shows annual tourist arrivals growth for the Middle East and Africa between 1990 and 2004.

Table 4 Annual Tourist Arrivals to the Middle East and Africa 1990–2004 (millions)
                 40

                 35

                 30

                 25

                 20

                 15

                 10

                  5

                  0
                         1990       1995        2000       2001       2002   2003        2004

                                                  Middle East     Africa            8FEB200620421526
Source: WTO, January 2003, December 2004 & October 2005.


The following general trends are applicable to the demand dynamics in the Middle East and Africa:
          The Middle East and Africa region experienced positive growth in tourist arrivals in 2003 when
          all other continents suffered from economic slowdown and the global threat of terrorism;
          In 2004 the Middle East and Africa region enjoyed the second-largest increase in tourist arrivals
          after the Asia & Pacific region;
          Particularly North Africa had a positive year, with countries such as Morocco (+16%) and Egypt
          (+34%) experiencing strong growth in tourism arrivals. Morocco benefited from the
          liberalisation of air transport, which opened the destination to low-cost airlines and decreased
          flight prices. Together with Egypt, it also benefited from the strength of the euro zone currency.
          Lebanon (+26%), along with Jordan (+21%) enjoyed strong growth too. Kenya continued its
          strong growth in 2003 with 19% growth in 2004 while South Africa (+3%) experienced more
          modest growth as a result of the strengthening of the South African Rand;
          The growth in tourism in the Middle East was driven mainly by increased intra-regional tourist
          arrivals (an increase which has been noticeable since the events of 11 September 2001),
          increasing international awareness of the region, the decline in the U.S. Dollar (resulting in a
          strengthening of the Euro and therefore increasing the purchasing power of European source
          markets), and an improvement in the global economies. All of these factors stimulated
          international leisure and commercial tourist arrivals;
          Leisure tourism has once again outperformed business tourism, boosted by the availability of low
          cost short haul flights and pent up long haul demand that is being released in the first half of
          2005. Several negative events occurred in late 2004 and the first half of 2005 such as the tsunami
          in Asia Pacific and the terrorist attacks in Turkey, Egypt and London, which have been
          compounded by natural disasters such as hurricanes and droughts. The industry has
          demonstrated resilience to such shocks, and in terms of consumer behaviour it appears that
          traveller confidence has not been affected, and that arguably recovery periods have shortened
          significantly.

Performance
Table 5 shows the performance of first class hotels in the Middle East between 1994 and 2004, as annually
published in HVS International’s Middle East Hotel Markets Survey. First class hotels include branded
four-star and five-star hotels but exclude super luxury hotels and hotels operational for less than three
years. The table shows the recovery and growth in both rate and occupancy in 2004 after the impact of




                                                           77
terrorist attacks and reduced travel globally in 2001. In contrast to many other European and American
hotel markets, the hotel market in the Middle East showed a gradual improvement from 2002 onwards.
The main reasons for this performance in recent years can be attributed to:
           Increases in intra-regional leisure travel. Since September 11, 2001, several European countries
           and the USA have increased passport and visa regulations, leading Middle Eastern leisure
           travellers to select destinations within the Middle East and Egypt;
           Super luxury hotels have experienced a similar trend in the forecast period;

Table 5 Performance of First Class Hotels in the Middle East & Egypt 1994–2004

                                  80                                                              120
                                  75
                                                                                                  100
                                  70
                    Occupancy %




                                                                                                  80
                                  65




                                                                                                        U.S.$
                                  60                                                              60
                                  55
                                                                                                  40
                                  50
                                                                                                  20
                                  45
                                  40                                                              0
                                        1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

                                       Occupancy (%)        Average Rate (U.S.$)      RevPAR (U.S.$)
                                                                                          9FEB200600543376
Source: HVS International Middle East Hotel Markets Survey.


           Increased demand, particularly during the hot summer months, which has resulted in a general
           increase in published rates and net average rates;
           Decline in the value of the U.S. dollar, to which a large number of currencies in the region are
           pegged, increasing the purchasing power of mostly euro denominated source markets.
We note that a similar level of detailed historic performance data is not available for Africa and those
markets where KHI has interests in operating and under development assets or properties in initial stages
of development. The data that we have will be shown in the individual country sections where such data for
a more limited period of time is available. We also note that aggregating this limited data is likely to result
in a skewed presentation, as several markets in Africa are either:
     1.    Emerging and therefore the existing supply is very limited resulting in a strong historic
           performance at existing hotels (Libya);
     2.    Considered to be exclusive holiday destinations where a limited number of branded hotels exist
           and some unbranded hotels achieve a significant rate premium (Mauritius), and;
     3.    In locations where no representative sample of hotels exist (Kenya, Dar Es Salaam, Gaza).

THE HOTEL AND TOURISM INDUSTRY IN SELECTED COUNTRIES
In this section we give some additional background on selected markets in which KHI operates. We have
focused only on those markets where KHI has, or expects to have, either (i) more than 500 rooms
unweighted by ownership or (ii) more than two operating hotels.

The Hotel and Tourism Industry in Egypt
Introduction
Egypt lies in the northeastern corner of Africa and is the most populous country in the Arab world and the
second most populous country in Africa. Approximately 99% of the country’s population lives in Cairo,
Alexandria and the Nile Delta.




                                                                 78
For the purposes of this study, HVS International has focused its hotel research on three key tourism
markets in Egypt: Cairo (city centre), Sharm El Sheikh and Hurghada.

Economic Backdrop
As reported by the EIU the real GDP growth is expected to strengthen from an estimated 2.7% in the
Egyptian fiscal year. 2004 (July 1, 2003–June 30, 2004) to 4.8% in the Egyptian fiscal year 2006, before
settling at a trend level of about 5.2% from the Egyptian fiscal year. 2007. Consumer price inflation
(‘‘CPI’’) is projected to decline from 11.3% in 2004 to about 4.3% in 2007, a rate around which it is
expected to settle.
The following table contains a summary of the economic indicators for Egypt.

Table 6 Key Economic Indicators—2000–2007 (2005–2007 projected)
                                                        Actual                                            Forecast
                               2000          2001        2002           2003      2004          2005        2006            2007

Real GDP growth
  (%) . . . . . . . . . . .        3.2           2.5           3.0         1.8          2.7        4.0           4.8           5.2
Consumer price
  inflation (av %) . .             2.7           2.3           2.7         4.3      11.3           5.4           4.7           4.3
Exchange rate
  E£:U.S.$ (av) . . . .          3.47           3.96        4.63          5.84      6.20          5.78          5.73          5.82
Source: Economist Intelligence Unit, October 2005.

Demand Dynamics
The tourism industry has been Egypt’s leading source of foreign exchange and its most dynamic industry.
For 2004, the World Travel and Tourism Council forecast the travel and tourism industry to contribute 15%
of the gross domestic product of Egypt.
CAGR in the number of visitor arrivals has averaged 12% over the last 11 years, despite the regional and
global events that had a negative impact on travel patterns. Furthermore, tourism demand with respect to
Egypt has proven resilient to terrorist attacks and, despite setbacks, the recovery in demand has remained
strong over the last 11 years.
Table 7 below outlines the growth in visitor arrivals for the period from 1994 to 2004.

Table 7 Annual Tourist Arrivals to Egypt 1994–2004

        9,000,000                                                                                                 40
        8,000,000
                                                                                                                  30
        7,000,000
        6,000,000                                                                                                 20
        5,000,000
                                                                                                                        %




                                                                                                                  10
        4,000,000
        3,000,000                                                                                                 0
        2,000,000
                                                                                                                  -10
        1,000,000
                 0                                                                                                -20
                      1994     1995      1996   1997    1998     1999     2000   2001    2002    2003    2004

                                         Tourist Arrivals             Year on Year Growth                9FEB200600173827
Source: Egyptian Ministry of Tourism.




                                                                 79
We make the following comments with regard to tourist arrivals to Egypt.
           Total tourist arrivals have increased from 2.6 million arrivals in 1994 to 8.1 million in 2004,
           showing a CAGR of 12%;
           Tourist arrivals to Egypt have decreased only twice in the last decade, both times as a result of
           terrorist attacks (in Luxor in 1997 and the September 11th terrorist attack in the USA);
           Egypt immediately rebounded from these events, and within 12 to 18 months of such events
           experienced increases in arrivals beyond those achieved previously;
           The Sharm El Sheikh bombing on July 23, 2005 negatively affected hotel market performance in
           the short term; however, Egypt’s resilience to the effects of terrorist attacks (as displayed
           following the attacks in Luxor) suggests that the market will recover quickly.

Performance
Table 8 shows the historical RevPAR (performance for branded first class (four- and five-star) hotels in
Cairo (city centre), Sharm El Sheikh and Hurghada as published in the Middle East Market Survey by
HVS International. Hurghada is located between El Gouna and El Quseir and provides a good indication
of performance trends for those markets(1).

Table 8 RevPAR Performance of First Class Hotels in Certain Key Tourism Markets in Egypt (U.S.$)
                     80
                     70
                     60
                     50
                     40
                     30
                     20
                     10
                       0
                            1995    1996    1997    1998   1999 2000       2001    2002   2003    2004

                                              Cairo – City Centre                   Hurghada
                                              Sharm El Sheikh                       Average
                                                                                          8FEB200620424439
Source: HVS International—Middle East Market Survey.


Despite the devaluation of the Egyptian Pound against the U.S. Dollar in 2004, the first class hotel markets
for Cairo (city centre), Sharm El Sheikh and Hurghada experienced increases in average RevPAR of 16%,
26% and 63%, respectively.




(1) We note that super luxury hotels have been excluded from this sample as they could skew the results.



                                                              80
Currently there are some 15 branded first class hotels with a total room count of approximately 12,700 in
Cairo. In order to show the representative number of super luxury branded hotels such as Four Seasons
Hotel Cairo at Nile Plaza (partly owned by KHI) we have included such hotels within the graph below.

Table 9 Distribution of Branded Hotel Room Supply in Cairo as at September, 2005
                                                         Holiday
                                               Novotel    Inn Four Seasons
                          Mövenpick             3%        3%                              Hilton
                                                                  5%
                            9%                                                             11%

        Sheraton                                                                                             Sofitel
          11%                                                                                                 7%



  Le Meridien
      6%                                                                                                       Marriott
                                                                                                                9%
               Oberoi
                4% Concorde                                                                         Grand Hyatt
                                                                                          Conrad        6%
                          3%     JW Marriott             InterContinental                  5%
                                    3%                         16%                                        8FEB200621164386
Source: HVS International Research.

Several international hotel brands are represented in Cairo; these include two Four Seasons hotels (one of
which, the Four Seasons Hotel Cairo at Nile Plaza, is owned in part by KHI) three Hiltons and three
                                                           o
Sofitel, three InterContinental, three Sheraton, three M¨venpick (not owned by KHI) two Le Meridien
and two Novotel hotels. The Four Seasons Hotel Cairo at Nile Plaza, partly owned by KHI, provides 365
guestrooms. There are some 28 hotels in Cairo with 12,700 guest rooms. Cairo enjoys three distinctly
separate hotel markets, the city-centre, where the Four Seasons Hotel Cairo at Nile Plaza is located, the
Pyramids area and Heliopolis. All three markets have distinctly different demand characteristics, with the
city centre enjoying the best performance as a result of strong corporate, government and leisure demand
in this location, while the other two locations enjoy predominantly leisure and corporate demand
respectively.

Table 10 Distribution of Branded Hotel Room Supply in Sharm El Sheikh as at September, 2005

                                                               Four
                                                     Iberotel Seasons
                         Holiday Inn                   4%       3%                    Hilton
                            12%                                                        12%

         Rotana
          8%                                                                                                  Sheraton
                                                                                                                12%


     Novotel
      3%
                                                                                                              Sofitel
   Crowne Plaza                                                                                                4%
       5%                                                                                             Marriott
              Hyatt Regency                                                                Conrad      6%
                   6%                 Mövenpick                        InterContinental     5%
                                        10%               Ritz-Carlton
                                                                             6%
                                                               4%                                        8FEB200621054025
Source: HVS International Research.


Sharm El Sheikh’s hotels are characterized by strong brand representation, with some 7,230 first class hotel
rooms attributable to 19 branded hotels, of which only the Four Seasons (in which KHI has an ownership



                                                             81
interest), Ritz-Carlton and Hyatt Regency are considered to be five-star resorts. In order to show the
representative number of super luxury branded hotels such as Four Seasons Resort Sharm el Sheikh (partly
owned by KHI) we have included such hotels within the graph below. We note that the Ritz Carlton hotel
is included in our sample, as it was not built as a Ritz Carlton, but the owners changed the management
contract once the hotel was operational. Brands such as Holiday Inn or Novotel may usually be considered
to be mid-market hotels but in Egypt and in the Middle East such hotels have a higher standard and are
classified as four-star hotels.
Table 11 shows branded hotel rooms for Hurghada and the surrounding area, including El Gouna and
El Quseir. Currently there are some 5,900 branded first class hotels in Hurghada and the surrounding area.
There are some 17 branded hotels in the Hurghada area with Hilton, Sheraton, InterContinental and
  o                                                                                       o
M¨venpick having two hotels in the market area. KHI has ownership interests in both M¨venpick hotels.

Table 11 Distribution of Branded Hotel Room Supply in Hurghada and the surrounding area
         (including El Gouna and El Quseir) as at September, 2005
                                                  Hilton
                                                   10%                       Sheraton
            Le Meridien                                                        11%
               18%                                                                            Sofitel
                                                                                               5%
   Oberoi                                                                                        Marriott
    2%                                                                                              5%



    Melia
     6%                                                                                            Conrad
                                                                                                    4%
     Club Med
        4%
             Steigenberger                                                      InterContinental
                  4%       Iberotel                                                   12%
                                                     Mövenpick
                             6%                        13%                                   8FEB200622071096
Source: HVS International Research.


The Hotel and Tourism Industry in Kenya
Introduction
Kenya lies along the east coast of Africa, covers an area of 586,350 km2 and has an estimated population of
26 million. Most of the country is classified as arid and this has led to a high population density, with 75%
of the population on 10% of the land.
For the purposes of this study, HVS International has focused its hotel research on two key tourism
markets in Kenya: Nairobi and the Kenya safari regions, which include the Masai Mara game reserve,
Aberdare National Park and Mount Kenya National Park.

Economic Overview
According to the EIU, real GDP is forecast to increase from 5.0% in 2005 to 5.3% in 2006 and to 6.0% in
2007, supported by the ongoing increase in the disbursement of donor funds and strong performance in the
tourism sector. Led by real GDP growth, CPI increased from 2.0% in 2002 to 9.8% in 2003 and 11.6% in
2004. Nevertheless, the EIU forecasts CPI will decrease in in the short-term. While 2005 is likely to see a
small increase in CPI to 12.0%, during 2006 and 2007 CPI should revert to levels of 7.5% and 6.0%,
respectively.




                                                     82
Table 12 contains a summary of the economic indicators for Kenya.

Table 12 Key Economic Indicators—2000–2007 (2005–2007 projected)

                                                          Actual                                                Forecast
                               2000         2001           2002           2003          2004        2005          2006             2007

Real GDP growth
  (%) . . . . . . . . . .          0.6          4.4           0.4            2.8           4.3           5.0           5.3            5.5
Consumer Price
  Inflation (av %) .             10.0           5.7           2.0            9.8          11.6          12.0           7.5            6.0
Exchange Rate
  KSh:U.S.$ (av) . .             76.2         78.6           78.8           75.9          79.2          76.4          79.4           84.3
Source: Economist Intelligence Unit, September 2005.


Demand Dynamics
Tourist arrivals to Kenya over the past seven years is summarised in Table 13.

Table 13 Annual Tourist Arrivals to Kenya 1998–2004

       1,600,000                                                                                                         20

       1,400,000
                                                                                                                         15
       1,200,000
                                                                                                                         10
       1,000,000




                                                                                                                               %
         800,000                                                                                                         5

         600,000
                                                                                                                         0
         400,000
                                                                                                                        -5
         200,000

                0                                                                                                        -10
                     1998          1999            2000            2001          2002            2003          2004

                                      Tourist Arrivals                  Year on Year Growth                      8FEB200623252893
Sources: Compendium of Tourism Statistics, WTO, Kenya Tourism Statistics.

The growth rates in 2003 and 2004 were strong, at 14.5% and 18.7%, respectively. The reasons for this
growth lie mainly in the renewed interest for Kenya as a tourist destination in the Middle East, Europe and
the USA;
           Tourist arrivals to Kenya grew at a CAGR of 8.0% per annum from 1998 to 2004;
           The decrease of 4.1% in tourist arrivals in 2001 and very low growth of 0.8% in 2002 were a result
           of a slowdown in the economy and political instability in Kenya. Terrorist attacks in Mombasa in
           October 2002 resulted in low growth during 2002, as trips to Kenya subsequent to the attacks
           were cancelled.




                                                                   83
Table 14 shows the tourist arrivals to Kenya by key source markets in 2003. We have been unable to source
any room night statistics for Kenya and have therefore shown key source markets by tourist arrivals in
Kenya in 2003.

Table 14 Tourist Arrivals to Kenya by Source Market 2003

                                                                        Tanzania
           Other                                                          11%
                                                                                              Uganda
           30%                                                                                 7%


                                                                                                           Other Africa
                                                                                                               9%




                                                                                                           Italy
                                                                                                            5%
    USA
    7%
                            United Kingdom                                          Germany
                                 15%                                                 16%
                                                                                                           8FEB200623255869
Sources: Compendium of Tourism Statistics, WTO, Kenya Tourism Statistics.

Note: The ‘Other’ segment consists of all tourist arrivals from non-African countries, apart from the UK, the USA, Germany
      and Italy.

           Table 14 shows that approximately 31% of all tourist arrivals to Kenya is generated by the UK
           and Germany.
           27% of tourist arrivals to Kenya is generated by African countries, with Tanzania and Uganda
           being the key source markets with a share of 11% and 7%, respectively.
           Another key source market for Kenya is the USA, which took a share in 2003 of 6.6%.

Historical Performance
Table 15 shows the historical RevPAR performance for branded first class (four- and five-star) hotels in the
city of Nairobi. HVS International has received this sample data on information received from KHI. HVS
International notes that no such data is available for the safari regions of Kenya and has therefore been
unable to provide such information.

Table 15 RevPAR Performance of First Class Hotels in Nairobi (U.S.$)

                       50

                       45


                       40


                       35

                       30


                       25
                                 2000           2001            2002         2003          2004
                                                                                       29JAN200622161860
Source: KHI.




                                                               84
Hotels in Nairobi experienced a decline in RevPAR after the Mombasa terrorist attacks in 2002.
Nevertheless, business in Nairobi proved to be resilient and rebounded in 2004, surpassing 2001 levels.
RevPAR growth in 2004 amounted to 28.6%.

Supply Dynamics
Currently there are four branded first class hotels with a total room count of approximately 1,015 in
Nairobi including the Fairmont brand, of which the Norfolk Hotel is part owned by KHI.

Table 16 Distribution of Branded Hotel Room Supply in Nairobi as at September 2005

                            Serena                                        Fairmont
                             19%                                            16%




           Hilton
            28%                                                                  InterContinental
                                                                                        37%
                                                                                     8FEB200622170100
Source: HVS International Research.

Several international hotel brands are represented in Nairobi. The largest brand by number of rooms is the
InterContinental brand with 371 rooms. Hilton is represented with 287 rooms and Serena, which is a local
brand, has 190 rooms. The KHI owned Norfolk Hotel provides 167 guest rooms.

Table 17 Distribution of Branded Hotel Room Supply in the Kenya Safari Regions as at
  September 2005

             Serena
              30%




                                                                                         Fairmont
                                                                                            70%
                                                                                     8FEB200622502416
Source: HVS International Research.


Two main brands operate within the safari regions of Kenya, accounting for a total of 393 branded first
class hotel rooms. Fairmont is represented by the Mount Kenya Safari Club, the Mara Safari Club and the
Ark and Aberdare Country Club. Serena Hotels have a Mountain Lodge at Mount Kenya and a Safari
Lodge in the Masaai Mara National Reserve. The Fairmont hotels in which KHI has an investment provide
a total of 275 guest rooms.

The Hotel and Tourism Industry in Lebanon
Introduction
Lebanon covers an area of 10,452 km2 and has 225 km of coastline on the Mediterranean. Lebanon has a
population of approximately 4.4 million, a quarter of which lives in the capital, Beirut.



                                                   85
Economic Backdrop
According to the EIU, Lebanon experienced real GDP growth of 4.0% in 2004, compared to 2.0% in 2003.
The EIU forecasts national real GDP growth for Lebanon at 1.0% and 3.4% for 2005 and 2006,
respectively, driven mainly by the anticipated developments in the area and an improvement in domestic
and overseas confidence. Real GDP growth is, however, highly vulnerable to regional political
uncertainties, cuts in government consumption and the impact of heavy public borrowing.
The EIU had forecast CPI for Lebanon at 2.4% in 2005. We note that this relative increase in CPI (when
compared to 2000 and 2001) is attributable primarily to the introduction of 10% value-added tax (VAT) to
the Lebanese markets in early 2002.
The following table contains a summary of the economic indicators for Lebanon.

Table 18 Key Economic Indicators 2000–2007 (2005–2007 projected)
                                                        Actual                                            Forecast
                               2000            2001      2002           2003      2004          2005        2006             2007

Real GDP growth
  (%) . . . . . . . . . .       (0.60)            0.8          0.9         2.0          4.0        1.0          3.4             3.7
Consumer price
  inflation (av %)(1)           (1.00)            0.5          4.0         2.5          1.5        2.4          3.0             3.0
Exchange rate
  U.S.$:LBP (av) . .             1508          1,508      1,508         1,508      1,508        1,508       1,508            1,508
(1) The increase in consumer price inflation between 2001 and 2002 is attributable to the introduction of 10% VAT.
Source: Economist Intelligence Unit, October 2005.

Demand Dynamics
A significant factor behind the strong economic growth recorded in 2004 was the strong growth in the
tourism sector.
Table 19 illustrates the number of tourist arrivals to Lebanon between 1994 and 2004. This number has
increased at a CAGR of 13% over the last 11 years, albeit from a relatively low base of tourist arrivals in
1994.

Table 19 Annual Tourist Arrivals to Lebanon 1994–2004

       1,400,000                                                                                                 40
                                                                                                                 35
       1,200,000
                                                                                                                 30
       1,000,000                                                                                                 25
         800,000                                                                                                 20
                                                                                                                       %




                                                                                                                 15
         600,000                                                                                                 10
         400,000                                                                                                 5
                                                                                                                 0
         200,000
                                                                                                                 -5
                0                                                                                                -10
                     1994     1995      1996     1997   1998     1999    2000    2001    2002    2003    2004

                                           Tourist Arrivals               Year on Year Growth             8FEB200623284307
Source: Lebanese Ministry of Tourism.

           Despite the events of September 11, 2001, the total number of tourists visiting Lebanon increased
           by approximately 13% in 2001, and by 14% in 2002.
           According to the Lebanese Ministry of Tourism, despite the war in Iraq, which had a negative
           impact on tourist arrivals in the country during the second quarter of 2003, tourist arrivals to
           Lebanon had increased by approximately 6% for 2003 compared to 2002.
           The reconstruction of central Beirut is well under way and a number of international
           corporations have established their regional headquarters in the city.


                                                                 86
           We note that for 2004 the country experienced a growth rate in tourist arrivals of approximately
           26% over 2003 levels. Growth was further stimulated in the aftermath of the December 2004
           tsunami in Asia, which redirected leisure travellers towards destinations on the coasts of the
           Mediterranean Sea and the Red Sea.
           However, following the political turmoil resulting from the assassination of former Prime
           Minister Mr. Rafic Hariri in 2005, tourist arrivals to Lebanon has decreased drastically. Based on
           fieldwork conducted by HVS International, a market recovery was noticeable in the last quarter
           of 2005, driven by the increase in intra-regional tourist arrivals and the increased awareness of
           Beirut as a leisure destination.
           The figures illustrated in Table 20 do not take into account Lebanese, Syrian or Palestinian
           arrivals in the country. We understand from the Lebanese Ministry of Tourism that there is no
           statistical information available on these visitors.
Table 20 below shows the key source markets of tourist arrivals to Lebanon.

Table 20 Tourist Arrivals to Lebanon by Source Market 2003

                                                    Others
                                          Oceania    0% Africa
                                            3%             2%          America
                                                                        12%
               Europe
                26%




                     Asia
                     13%                                                         Arab Countries
                                                                                       44%
                                                                                   31JAN200623444654
Source: Lebanese Ministry of Tourism.


We make the following comments on tourist arrivals to Lebanon.
           Total tourist arrivals has increased by 72% from 740,000 room nights (the total number of rooms
           sold by all of the hotels in the market) in 2000 to 1.3 million room nights in 2004, showing a
           CAGR of 15%;
           The major source market for Lebanon is the Arab world (including Gulf Corporate Council
           (GCC) and other Arab countries), which makes up approximately 44% of total tourist arrivals.
           This clearly reflects the dependence of the Lebanese tourism sector on GCC and Arab markets;
           The next major source markets for Lebanon are Europe and Asia, which make up 26% and 13%
           of total tourist arrivals, respectively. Most of the European tourist arrivals is business-related
           tourist arrivals or Lebanese visitors entering the country on their foreign passports.
           As mentioned above, due to the events of September 11, 2001, there has been significant growth
           in intra-regional tourist arrivals to the Middle East, with the most frequented destinations being
           Lebanon and the United Arab Emirates. Consequently, Arab tourist arrivals to Lebanon
           increased by a CAGR of 13% from 2001 to 2004.




                                                      87
Table 21 shows the historical RevPAR performance for branded first class (four- and five-star hotels) in
Beirut.

Table 21 RevPAR Performance of First Class Hotels in Beirut (U.S.$)

                                   140

                                   120

                                   100
                  RevPAR (U.S.$)



                                    80

                                    60

                                    40

                                    20

                                    0
                                           1996   1997 1998 1999           2000 2001 2002   2003 2004
                                                                                             8FEB200623022252
Source: HVS International Middle East Survey.


Performance
2004 was a record year for the tourism industry in Lebanon. The number of tourist arrivals increased by
26% over tourist arrivals in 2003, due to significant increase in the number of leisure visitors from the GCC
countries and from Europe. Beirut hotels saw occupancy grow by 12 percentage points in 2004 to 71% and
ADR grew by 9% to U.S.$168. RevPAR thus increased by 31% to U.S.$119.
2005 had a very strong start in tourist arrivals; however the political instability caused by the assassination
of Mr Hariri restricted any considerable growth in ADR. However, despite the decrease in demand in
2005, the hotels in the first class and luxury segments were able to maintain room rate levels, albeit at a
reduction in occupancy levels.
Table 22 below shows the branded four- and five-star hotel supply in Beirut. Currently there are a total of
13 first class hotels operating under an internationally recognised brand. These hotels have a total of 2,173
guest rooms. In order to show the representative number of super luxury branded hotels such as the
InterContinental Vendome we have included such hotels within the graph below. We note that there are
two InterContinental branded hotels in Beirut and this hotel has only 70 guestrooms.

Table 22 Distribution of Branded Hotel Room Supply in Beirut as at September 2005

                        Golden                         Mövenpick                        InterContinental
                         Tulip                           14%                                  21%
                 Sofitel 2%
                  4%

      Holiday Inn
          6%
                                                                                                                Rotana
                                                                                                                 8%
       Crowne Plaza                                                                                         Sheraton
           9%                                                                                                 5%
                                         Le Meridien                                          Marriott
                                                             Four Points        Safir          8%
                                            10%
                                                                6%               7%                       9FEB200600180061
Source: HVS International Research.


Several international hotel brands are represented in Beirut. The branded five-star segment has a total of
approximately 1,000 guest rooms of which 460 belong to the two Intercontinental hotels and 292 belong to
      o
the M¨venpick Hotel & Resort.


                                                                      88
Other branded properties fall into the four-star category and include the following brands: Holiday Inn,
Sofitel, Le Meridien, Golden Tulip and Crowne Plaza.

The Tourism Industry in the United Arab Emirates
Introduction
The U.A.E. consists of seven emirates: Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and
Umm al-Qaiwain.
For the purposes of this study, HVS International has focused its hotel research on Dubai, a key tourism
market in the U.A.E.
Dubai, with an area of 3,885 km2, is the second-largest emirate in the U.A.E. It is located in the
northeastern part of the U.A.E. According to the Dubai Ministry of Planning, 910,000 people (of whom
80% are expatriates) live in Dubai, representing approximately 27% of the U.A.E.’s population.

Economic Backdrop
Despite the government’s substantial efforts to diversify the economy, oil revenues remain the major
economic driver of GDP in the U.A.E., accounting for roughly a third. According to the EIU, this source
of revenue is likely to continue to be the mainstay of the U.A.E.’s economy during the forecast period,
although the country will press ahead with efforts to diversify its economic base, and is expected to
continue to seek sources of new foreign currency inflow. As reported by the EIU, real GDP growth is
expected to gradually taper off from 7.4% in 2004 during the 2005-2007 period and settle down gradually
to 5.1% in 2007. The CPI is envisaged to remain stable from 4.4% in 2004 to 4.0% in 2007. The U.A.E.
dirham is pegged to the U.S. dollar.

Demand Dynamic in Dubai
In recent years, significant investment and government efforts have been made towards improving Dubai’s
infrastructure, commerce, and tourism. Currently, the government of Dubai has aggressive plans to
transform Dubai into the business and leisure centre of the Middle East, and major infrastructure,
commercial, and leisure projects have been undertaken. Dubai currently has a good infrastructure in place,
with Dubai International Airport being one of the busiest airports in the region in terms of transit
passengers. The emirate has two ports, Port Rashid and Jebel Ali, both managed by the Dubai Port
Authority. For 2005, the World Travel and Tourism Council forecast the contribution of the travel and
tourism industry to the real GDP of the United Arab Emirates at 12.5%.
The following table contains a summary of the economic indicators for the United Arab Emirates.

Table 23 Key Economic Indicators 2000–2007 (2005–2007 projected)

                                                              Actual                             Forecast
                                        2000        2001       2002      2003    2004    2005      2006     2007

Real GDP growth (%) . . .                  6.9          2.9        1.8     7.0     7.4     6.7       6.4      5.1
Consumer Price Inflation
  (av %) . . . . . . . . . . . . .         1.8          2.0        2.9     3.1     4.4     4.2       4.0      4.0
Exchange Rate AED:U.S.$
  (av) . . . . . . . . . . . . . . .       3.7          3.7        3.7     3.7     3.7     3.7       3.7      3.7
Sources: Economist Intelligence Unit, September 2005.

The CAGR in the number of visitor arrivals in Dubai has averaged 14.3% over the last 11 years, despite
the global events that had a negative impact on travel patterns. Furthermore, tourism demand in Dubai has
proven resilient to the turmoil that has affected some GCC countries following the 2003 war in Iraq.




                                                              89
Table 24 shows the evolution of hotel demand in Dubai during the period from 1994 to 2004.

Table 24 Annual Tourist Arrivals to Dubai 1994–2004

      5,000,000                                                                                                40
      4,500,000                                                                                                35
      4,000,000
                                                                                                               30
      3,500,000
      3,000,000                                                                                                25
      2,500,000                                                                                                20




                                                                                                                        %
      2,000,000                                                                                                15
      1,500,000
                                                                                                               10
      1,000,000
        500,000                                                                                                5
              0                                                                                                0
                    1994   1995     1996   1997    1998       1999   2000    2001     2002   2003    2004

                                      Tourist Arrivals               Year on Year Growth                8FEB200623263946
Source: Government of Dubai, Department of Tourism and Commerce Marketing.


We make the following comments with regard to tourist arrivals to Dubai.
          Total tourist arrivals have increased from 1.2 million arrivals in 1994 to 4.7 million in 2004,
          showing a CAGR of 14%;
          Despite the war in Iraq and recent political unrest in the Middle East, the total number of tourist
          arrivals increased by approximately 6% in 2003 and 9% in 2004, reflecting the strong economic
          and leisure competitiveness of Dubai;
          We note that Dubai has benefited from increased intra-regional travel following the events of
          September 11, 2001 as illustrated by the 34% increase in tourist arrivals in 2002 over tourist
          arrivals in 2001.
Table 25 illustrates the source markets by geographical origin for hotel accommodation in Dubai from 1990
to 2004.

Table 25 Tourist Arrivals to Dubai by Source Market 2004

             Asia and the Pacific                                                   Middle East
                    22%                                                                24%




                                                                                                             Africa
                                                                                                             10%

                                                                                        Americas
                           Europe                                                         4%
                            40%                                                                     31JAN200623453023
Source: Dubai Department of Tourism and Commerce Marketing.




                                                              90
The following comments can be made regarding Table 26.
            The largest source market for the region is Europe, which represents 40% of the total number of
            hotel guests in 2004;
            Demand emanating from Asian countries represents the third-largest source market to Dubai.
            This market, together with the Russian market, experienced considerable growth in the last few
            years.
KHI’s assets in Dubai are located in two different submarkets: Jumeirah Beach hotels and City hotels.
HVS International has analysed the geographical market segmentation of each submarket in the following
table.

Table 26 Key Source Markets to Dubai by Room Nights 2004

                Source Market—Jumeirah Beach Hotels.                                              Source Market—City Hotels.

                                        GCC                                                                      GCC
                                                   Non GCC
                                   (except U.A.E.)                                                          (except U.A.E.)
                    U.A.E.                          Arabs                                   U.A.E.
                                         9%                Asia                                                  17%
Russia/CIS/          11%                             4%                     Russia/CIS/      11%
Baltic States                                              5% Austr./
                                                                            Baltic States                                                Non GCC
                                                                Pacific
     5%                                                                          7%
                                                                 1%                                                                       Arabs
                                                                                                                                           10%
                                                                  Africa
                                                                   1%


                                                                                  Europe                                          Asia
                                                                            (excluding Russia)                                    22%
                                    Europe                                                               Africa   Austr./
                                                                                   28%
                              (excluding Russia)                                                          3%      Pacific
                                     64%                                                                           2%            9FEB200600554398
Source: Department of Tourism and Commerce Marketing.

            Total room nights have increased by 73% from approximately 7 million in 2000 to more than
            12 million room nights in 2004, showing a CAGR of 15%.

Performance
Table 27 shows the historical RevPAR performance for branded first class and luxury (four- and five-star)
hotels in Dubai.

Table 27 RevPAR Performance of First Class Hotels in Dubai 1994–2004

                             250

                             200

                             150
                     U.S.$




                             100

                             50

                              0
                                     1994 1995      1996 1997 1998              1999   2000      2001 2002 2003         2004
                                             Dubai Hotels            Jumeirah Beach hotels                  City Hotels
                                                                                                              9FEB200600545622
Source: HVS International Middle East Survey.


The Dubai hotel market achieved a ten-year record performance in 2004, with a RevPAR of approximately
U.S.$124, a 38.7% increase in comparison to RevPAR in 2003. This is largely attributable to an increase in
both average room rate and occupancy. Although a significant increase in RevPAR was observed in both of
Jumeirah Beach hotel and City hotel markets, the difference in terms average room rates achieved in the
two markets are notable, with Jumeirah Beach hotels achieving an average room rate of U.S.$220
compared to U.S.$120 for City hotels.



                                                                           91
Currently there are some 28 branded first class, luxury and super luxury hotels with a total room count of
                                              o                              o
approximately 10,000 in Dubai including the M¨venpick brand of which the M¨venpick Hotel Bur Dubai is
owned by KHI. The international hotel brands represented in Dubai include four Le Meridien Hotels,
three Sheraton Hotels, five Jumeirah Hotels, two Hilton Hotels and two Rotana Hotels.
Table 28 shows the branded supply for Dubai’s City hotel market

Table 28 Branded Hotel Room Supply—Dubai City Hotel Market as at September, 2005
                                                                                          Hyatt
                                                Millenium Mövenpick   Renaissance
                                   Shangri-La                                            Regency
                                                   2%       4%           4%
                                      5%                                                   6%      InterContinental
                        Fairmont
                           6%                                                                            4%
         Jumeirah                                                                                                 Sheraton
       International                                                                                                7%
            6%



                                                                                                                       Le Meridien
         Novotel                                                                                                           6%
          6%

                                                                                                                      Hilton
          JW Marriott
                                                                                                                       2%
             5%
                                                                                                        Crowne
                             Grand Hyatt                                                                 Plaza
                                                       Sofitel                  Rotana
                                10%                                                                      11%
                                                                                 11%
                                                        5%                                                        9FEB200600182713
Source: HVS International Research.

The City hotel market encompasses 19 first class branded hotels totalling some 6,400 rooms including the
  o
M¨venpick brand. The largest hotel brand is Rotana with 687 rooms. We note that Hyatt Corporation
through its brands Grand Hyatt and Hyatt Regency totals 1,074 rooms.
Table 29 presents the branded supply for the Jumeirah Beach hotel market.

Table 29 Branded Hotel Room Supply—Dubai Jumeirah as at September, 2005
                                   One and Only Resorts                   Sheraton
                                          13%                               7%
                 Ritz-Carlton
                      4%                                                                                     Le Meridien
                                                                                                                25%




                                                                                                    Hilton
              Jumeirah International                                                                 11%
                      40%                                                                                 9FEB200600184788
Source: HVS International Research.


The Jumeirah Beach hotel market represents nine first class, luxury and super luxury branded hotels
totalling some 3,600 rooms. In order to show the representative number of super luxury branded hotels
such as the Burj al Arab we have included such hotels within the graph below. The largest brand in
Jumeirah Beach hotel market is Jumeirah International totalling 1,467 rooms.




                                                                 92
                                        BUSINESS DESCRIPTION

Overview
We are a leading hotel and resort acquisition and development company in the Middle East and Africa,
operating in the first-class and luxury market segments. In addition, we also have an investment in Europe,
through our recent acquisition of a 25.00 per cent. interest in the Four Seasons Hotel George V in Paris.
See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors
Affecting Financial Condition and Results of Operations—Hotel openings and acquisitions and
consolidation of minority interests’’ and ‘‘—Our Hotel and Properties—France’’. We have ownership
interests in 26 properties, of which 15 are operating hotels, including several distinctive luxury properties,
and 11 are hotels and resorts currently under construction or in initial stages of development. We have
operating hotels in nine countries and have construction or development projects in eight countries. Our
operating hotels contain a total of 3,262 rooms, while our hotels under development are expected to
contain an additional 3,203 rooms. In addition, we have non-hotel real estate, such as residential units,
shops and offices, for sale or rent at a number of our hotels.
We do not operate any of our hotels directly. Instead, we engage three international hotel management
                                           o
companies, Four Seasons, Fairmont and M¨venpick, to operate our hotels for us under management
contracts.
Although we are not operators, we are also not passive owners of real estate. Instead, we participate in
active asset management of our hotels in order to maximise value. In connection with the asset
management of certain of our hotels, our wholly owned subsidiary, KHAMS has signed asset management
agreements with the owning companies of the Norfolk Hotel, The Ark, the Mount Kenya Safari Club, the
                                                        ¨
Aberdare Country Club, the Mara Safari Club, the Movenpick Hotel and Resort Beirut, the Four Seasons
Hotel Beirut, the Four Seasons Hotel Damascus, the Four Seasons Hotel Marrakech, the M¨venpick       o
                           o                                          o
Royal Palm Hotel, the M¨venpick Hotel Bur Dubai and the M¨venpick Hotel Ambassador Accra.
KHAMS also has an asset management agreement with the Four Seasons Riyadh, which we do not own.
Pursuant to these agreements, KHAMS receives asset management fees for supporting the day-to-day
operations of the operating entities of these hotels and for promoting the interests of these entities with
the aim of maximising the asset value of the hotel for the operating entities. For our other hotel properties,
depending on the level of our ownership interest, we actively asset manage our properties through our
participation in and monitoring of various decisions made by the hotel owning companies.

History
We were established as an exempt Cayman Islands registered holding company in May 2000 under the
name Middle East Hotels Company. We changed our name to Kingdom Hotel Investment Group in
March 2002 and to Kingdom Hotel Investments, our current name, in August 2004. Prior to this offering,
KHI was 58.54 per cent. owned by Kingdom 5-KR-124 and 14.83 per cent. owned by Kingdom 5-KR-51
investment entities owned by the Kingdom Trust. See ‘‘Shareholders’’.
In May 2000, ownership interests in six hotels and resorts, namely the Four Seasons Hotel Cairo at Nile
Plaza, the Four Seasons Resort Sharm El Sheikh, the Four Seasons Hotel Amman, the Four Seasons Hotel
                   o
Damascus, the M¨venpick Hotel and Resort Beirut and the Four Seasons Hotel Beirut, were contributed
to us in the form of a $99 million in cash and in-kind contribution by Kingdom 5-KR-124 as part of our
$212 million initial capitalisation. The remaining $113 million was invested pursuant to cash contributions
by nine other subscribers in 2001 and 2002. See ‘‘Shareholders’’.
In November 2004, shares in the Four Seasons Hotel Inc., Fairmont Hotels and Resorts Inc. and
  o
M¨venpick Hotels and Resorts AG were contributed to us in the form of a $40 million in-kind contribution
by Kingdom 5-KR-124 as part of a $110 million capital increase. See ‘‘Relationships with Hotel
Management Companies’’. The remaining $70 million were contributed to us pursuant to cash
contributions: $40 million by Kingdom 5-KR-124 and the remaining $30 million by Sheikh Nasser M. Al
Mutawa Al Otaibi, International Financial Advisors (‘‘IFA’’) and JJW Limited. See ‘‘Shareholders’’.
In January 2006, we signed an agreement to acquire (with retroactive effect to December 2005) 25.00 per
cent. of Kingdom 5-KR-35 Ltd., the indirect owner of a 100.00 per cent. effective ownership interest in the
hotel owning company of the Four Seasons Hotel George V, in exchange for the issuance to Kingdom
5-KR-51 of 19,100,000 fully paid newly issued shares with a nominal value of $5 per share. Prior to our




                                                     93
acquisition, we obtained an independent valuation of this property by Christie + Co., which valued the
property at A625 million ($750 million). We expect this transaction to close in February 2006.
In September 2005, Kingdom 5-KR-124 and IFA participated in an additional $220 million capital increase.
In February 2006 we effected a 20 to one share split, which increased the number of ordinary shares
outstanding to 128,834,900 and reduced the nominal value of our shares to $5 per share.
We have utilised a portion of the cash we raised through our capital increases in 2004 and 2005, together
with the revenue generated from our operating hotels and the loans of our subsidiaries, for the acquisition
of interests in and development of a number of hotel and resort properties in the Middle East and Africa
and one property in Europe. Since September 30, 2005, we have acquired or are in the final stages of
acquiring interests in additional properties, including a 25.00 per cent. interest in the Four Seasons Hotel
George V, a 50.00 per cent. interest in the Four Seasons Resort Mauritius, a 30.00 per cent. interest in the
  o
M¨venpick Beach and Spa Resort Zanzibar (upon the successful completion of the transaction that is
expected to close in February or March 2006) and a 100.00 per cent. interest in the Resort & Spa El Quseir
(upon the successful completion of the transaction that is expected to close in mid-2006), and have also
                                                                            o
increased our ownership interests in the following hotel properties: the M¨venpick Resort El Quseir (30.50
per cent. to 81.16 per cent., upon the successful completion of the transaction that is expected to close in
mid-2006), the Four Seasons Hotel Amman (11.26 per cent. to 13.00 per cent), the Four Seasons Hotel
Cairo at Nile Plaza (26.11 per cent. to 39.80 per cent., and further to 44.23 per cent., upon the successful
completion of the transaction that is expected to close in early 2006), the Four Seasons Hotel Damascus
(23.40 per cent. to 35.75 per cent.), the Four Seasons Resort Sharm El Sheikh (31.96 per cent. to 39.31 per
cent., upon the successful completion of the transaction that is expected to close in early 2006) and The
Fairmont Palm Hotel & Resort (14.29 per cent. to 20.10 per cent.). See ‘‘Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Basis For Preparation of Pro Forma Financial
Information’’.

Group Organisation
We are the holding company of our group. Our headquarters are located in Dubai, U.A.E. Our head office
coordinates a number of activities throughout our group, including finance, accounting and audit,
acquisition and business development, design and construction, asset management, human resources and
administration. See ‘‘Management and Employees—Senior Management’’.




                                                    94
     The following chart illustrates our corporate structure and investment portfolio prior to this offering and assuming the successful completion of the recent acquisitions
     discussed in ‘‘Management’s Discussion and Analysis of Financial Conditioned Results of Operations—Factors Affecting Financial Condition and Results of
     Operations and Related Trends—Hotel developments and acquisitions and consolidation of minority interests’’:


                                                                                           Kingdom Hotel Investments
                                                                                              MIDDLE EAST                                                                                                                                          AFRICA                                               EUROPE

                               U.A.E.                    SYRIA      JORDAN           LEBANON               PALESTINE                                      EGYPT                                        LIBYA         MOROCCO              KENYA             TANZANIA             MAURITIUS GHANA FRANCE




                                                                                                            Cayman Island Ownership
                                                                                                                  Structure*
95




      100%          100%        16.32%        20.10%      35.75%     13.0%       37.81%       81.21%***     10.26%       39.31%        44.23%       29.28%        81.16%     100%           14.83%       51.00%         78%                  70%         96.00%        30%          50%          100%         25%


                              Dubai Pearl   Palm Hotel    Syrian                             Merryland                    Saudi                                 Serena                  Nile City                                          Lonrho                                  Anahita       KHI        Calonge
                   Kingdom                                                      Kingdom         Pour       Al Mashtal   Alexandria   Novapark      El Gouna                El Quseir       for         Arab Hotels    EHC
     KHAMS**      01 FZ LLC    Hotel (01)   and Resort    Saudi     METICO                                                                                       Beach                                                                      Hotels      Tanruss      ZANCO          Hotel      Ghana 01    Amsterdam
                                                                                 Beirut      Les Projets    Company     Company       Cairo        Company     Company I   Hotel Co.   Tourism &          Co.         Maroc
                                 Ltd.        FZ LLC      Company                                                                                                                                                                          Kenya B.V.                               Limited      Limited       BV
                                                                                            Touristiques                                                                                 Hotels




                                                The        Four       Four        Four                                    Four          Four                                                                           Four                                                         Four                     Four
                  Mövenpick   Mövenpick                                                     Mövenpick      Mövenpick                  Seasons                  Mövenpick    Resort         Fairmont    Mövenpick                          Aberdare     Mövenpick    Mövenpick                 Mövenpick
                                             Fairmont     Seasons    Seasons     Seasons     Hotel &                     Seasons                   Mövenpick                                                          Seasons                                        Beach &      Seasons                   Seasons
                    Hotel        Hotel                                                                      Hotel                    Hotel Cairo    Resort      Resort      & Spa          Nile City     Hotel                   59.67%   Country      Royal Palm                               Hotel
                                            Palm Hotel     Hotel      Hotel       Hotel      Resort                      Sharm                                                                                         Hotel                Club                    Spa Resort     Resort     Ambassador     Hotel
                  Bur Dubai   Pearl Dubai    & Resort    Damascus    Amman                                   Gaza       El Sheikh        at        El Gouna    El Quseir   El Quseir         Cairo      Tripoli      Marrakech                           Hotel                    Mauritius
                                                                                  Beirut     Beirut                                                                                                                                                                  Zanzibar                   Accra       George V
                                                                                                                                     Nile Plaza


       *     Represents direct and indirect ownerships in Cayman Island Companies, a legal and tax structure that is already reflected                                                                                           59.67%    The Ark
             in the effective ownership above of the hotel owning companies

       ** This entity asset manages the following properties:
                                                                                                                                                                                                                                            Mount
             1) Four Seasons Hotel Damascus                                                                                                                                                                                      75.00%     Kenya
                                                                                                                                                                                                                                            Safari
             2) Four Seasons Hotel Beirut                                                                                                                                                                                                   Club

             3) Four Season Hotel Marrakech
                                                                                                                                                                                                                                            Mara
             4) Mövenpick Hotel & Resort Beirut                                                                                                                                                                                  100%       Safari
                                                                                                                                                                                                                                            Club
             5) Mövenpick Hotel Bur Dubai                                                                                                                                     Consolidated Entities
             6) Mövenpick Royal Palm Hotel
                                                                                                                                                                              Non-consolidated Associates                                   The
             7) Mövenpick Hotel Ambassador Accra                                                                                                                                                                                 100%      Norfolk
                                                                                                                                                                                                                                            Hotel
             8) The Norfolk Hotel, Mara Safari Club, Mount Kenya Safari Club, Aberdare Country Club, The Ark
                                                                                                                                                                              Affiliates
             9) Four Seasons Hotel Riyadh

       *** Effective ownership in Merryland Pour Les Projets Touristiques is 81.21% while the economic ownership is 92.75%.                                                                                                                                                                    9FEB200616484213
Competitive Strengths
Unique Portfolio of High Quality and Well-Positioned Properties
  Best hotels in key markets
Our portfolio includes a number of well-known luxury hotels and resorts in distinctive and strategic
locations. In some cases, according to the HVS Study, we own the best hotel, in terms of RevPAR and
ADR, in a market in which we operate. Specific examples include the Four Seasons Hotel George V in
Paris, the Four Seasons Hotel Nile Plaza in Cairo, the Four Seasons Resort Sharm El Sheikh and the Four
Seasons Hotel Amman, each of which operates at the highest RevPAR and ADR of all hotels in their
respective markets.
  Prime locations with competitive advantages
Our hotels enjoy competitive positions that we believe are difficult to replicate in our markets. In some
cases, our hotels are located on the most desirable sites within a particular market, with unique access to
either beaches or other natural attractions and/or are conveniently located for both business and leisure
                                           o
travellers. Specific examples include the M¨venpick Hotel and Resort Beirut, with rare direct and private
beach frontage in Beirut, and the Four Seasons Hotel Cairo at Nile Plaza, which occupies a unique
location on the Nile River that was the last vacant location with frontage on the Nile River in the
prominent Garden City district. In addition, restrictions, such as strict planning regulations and lack of
available land for development in certain markets in which we operate, including Damascus, Sharm
El Sheikh and the Kenyan national parks, create barriers to entry for our potential competitors, thereby
limiting new hotel developments and further enhancing our positioning in these locations.
  A diversified portfolio
We have a balanced and diversified portfolio in terms of:
         Geography: we have 26 hotels in 13 countries and, as at the date hereof, no one country
         represented more than 27 per cent. of own total investments;
         Hotel brands: we engage three different hotel management companies to operate our hotels for
                                              o
         us: Four Seasons, Fairmont and M¨venpick, which managed hotels that represented 54, 8 and
         33 per cent., respectively, of our total investments as at the date hereof;
         Type: as a percentage of our total investments, as at the date hereof, 55 per cent. of our portfolio
         was comprised of urban hotels while the remaining 45 per cent. was comprised of resort
         properties; at the same time, all of our hotels provide a wide range of amenities to attract both
         leisure and business travellers; and
         Operational maturity: our portfolio combines established operating hotels with proven track
         records and strong, generally growing cash flows with newly acquired hotels or hotels under
         development, which we believe should contribute positively to our earnings. Our operating hotels
         provide us with a portion of the cash flow required to fund current operations and future
         development, while we believe our newly acquired hotels and our hotels under development and
         in the start-up phase provide us with significant potential to increase our revenues.
  Low expected capital expenditure for operating properties
All of our operating hotels have either been recently acquired, opened or renovated. Where it is deemed
necessary, our policy is to renovate and refurbish our hotels immediately following their acquisition and
not to defer capital expenditure. In those cases where we do not undertake renovations following the
acquisition of a hotel, we believe that such renovations are not required in the short- to medium-term.
Furthermore, all of the properties in our portfolio have been maintained, at a minimum, in accordance
                                                                 o
with the respective standards of Fairmont, Four Seasons and M¨venpick. Accordingly, with the exception
          o                                 o
of the M¨venpick Hotel Bur Dubai, the M¨venpick Royal Palm Hotel and our hotels in Kenya, which we
have recently acquired and where we are completing a refurbishment and renovation program that will
result in the hotels being re-branded to Fairmont hotels, we do not expect any significant additional capital
expenditure on our existing portfolio beyond the FF&E reserves or amounts already capitalised as part of
the related project investment. See ‘‘Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Capital Expenditures’’.




                                                     96
Strong Relationships with World Class Hotel Management Companies
We have established and long-standing commercial relationships with three of the world’s leading hotel
                                                      o
management companies: Four Seasons, Fairmont and M¨venpick.
Four Seasons manages hotels at the top of the luxury hotel segment, with a presence in the Middle East
and Africa of six operating hotels, comprising over 1,500 rooms, of which four hotels comprising over 1,000
rooms are in our portfolio. In addition, Four Seasons has development plans for further hotels to increase
its presence in these regions. We are currently developing the following hotel properties with Four
Seasons: the Four Seasons Hotel Beirut, the Four Seasons Resort Mauritius and the Four Seasons Hotel
Marrakech.
Fairmont manages hotels in the first class and luxury hotel market, with a presence in the Middle East and
Africa of six operating hotels, comprising around 850 rooms, of which five hotels comprising over
400 rooms are in our portfolio. We have a Development Consulting Agreement with Fairmont, whereby we
have agreed to source further hotel opportunities for the Fairmont brand in the Middle East and Africa in
exchange for annual and incentive fees. See ‘‘—Relationships with Hotel Management Companies—
Relationship with Fairmont—Development Consulting Agreement’’. We are currently developing the
following hotel projects with Fairmont: the Fairmont Nile City Cairo and The Fairmont Palm Hotel &
Resort.
  o
M¨venpick manages hotels in the first class hotel segment, with a presence in the Middle East and Africa
of 27 operating hotels (excluding the two cruise ships in Egypt), comprising around 7,500 rooms of which
                                                             o
5 hotels comprising over 1,500 rooms are in our portfolio. M¨venpick has an active development pipeline
in these regions which presents opportunities for us to expand our portfolio and generate additional
income through our business development agreement. See ‘‘—Relationships with Hotel Management
                                    o
Companies—Relationship with M¨venpick—Business Development Agreement’’. We are currently
                                                 o                o
developing the following hotel projects with M¨venpick: the M¨venpick Hotel Ambassador Accra, the
  o                             o                                               o
M¨venpick Hotel Tripoli, the M¨venpick Beach & Spa Resort Zanzibar, the M¨venpick Hotel Gaza and
      o
the M¨venpick Hotel Pearl Dubai.
In addition to managing hotel properties that we own and, with respect to Fairmont and M¨venpick,o
having business development agreements with us, each of the Four Seasons, Fairmont and M¨venpick o
currently have, or in the past have made, direct investments in certain of our hotel properties.
Having relationships with several hotel management companies allows us to diversify our class of assets
and provides us with the flexibility to develop or acquire hotels that are targeted at the most appropriate
customer base for their respective markets. At the same time, limiting the number of hotel management
companies we work with has allowed us to increase our effectiveness in working with the hotel
management companies and to develop stronger commercial relationships with each of these companies.

Leading Presence in High Growth Markets
The geographic focus of our current investments is predominantly the Middle East and Africa. Within
these regions, our hotel properties are located in markets that we believe have strong demand and growth
potential, including hotel properties in a number of cities that are global and/or regional business and
cultural centres, such as Dubai, Cairo, Beirut, Nairobi, Dar Es Salaam and Accra, as well as hotel
properties in prominent recreational tourism destinations, such as the Red Sea, Kenyan national reserves,
Marrakech and Mauritius.
According to the HVS Study, tourism arrivals to the Middle East and Africa have increased in the period
from 1990 to 2004 by approximately 120 per cent. and 260 per cent., respectively, primarily reflecting
strong GDP growth across most of the region and strong intra-regional travel during the period. In
addition, the WTO expects this growth to continue, predicting compounded annual growth rates in tourism
arrivals of 6.3 per cent. and 5.5 per cent. each year over the period from 2005 to 2020 for the Middle East
and Africa, respectively (HVS Study). In addition, in particular in Egypt and the U.A.E., governments have
been taking a pro-active approach towards improving infrastructure and undertaking commercial and
leisure projects.
We believe our hotels give us a leading presence within the markets in which we operate.




                                                    97
Significant Growth Potential
  Ability to source and assess high quality opportunities
Our acquisition sourcing process benefits from the extensive industry experience and global and regional
contacts of our management team, partners, shareholders and directors, including the Chairman of our
Board, HRH Prince Alwaleed, which give us access to a number of investment opportunities that may not
be available to our competitors and benefit from an increased ability to assess the suitability of these
opportunities for our portfolio. See ‘‘—Association with HRH Prince Alwaleed’’.
  Strong pipeline for external growth opportunities
Since our establishment in 2000 and up to September 30, 2005, we have invested $275 million of equity to
acquire interests in 21 hotels. As at the date hereof, we have signed three memoranda of understanding for
new acquisitions, representing an aggregate investment of $57 million, and we are also currently in
advanced negotiations in respect of numerous other projects. Our acquisition and development team
actively seeks and evaluates a large number of additional external growth opportunities approximately
30 countries. See ‘‘—Hotel Pipeline’’.
  Growth through the operational ramp-up of new hotels
As at the date hereof, 11 of our 26 hotel and resort properties were under construction or in initial stages
of development. These properties collectively represented 35 per cent. of our total equity commitments. By
2008, based on the expected opening dates of our current portfolio of properties under construction or in
initial stages of development, assuming the completion of our current acquisitions and assuming no further
acquisitions, we expect to reach a total of 3,036 rooms weighted by effective ownership in our operating
portfolio. As these new properties become established and mature operationally, we believe they will
contribute positively to our earnings.

Conservative Use of Leverage and Financial Discipline
Almost all of our debt financing occurs at the level of our hotel owning companies on a non-recourse basis.
Our targeted loan-to-cost ratio for new property investments is approximately 50 per cent., which we
believe is conservative within industry standards. We monitor and assess the leverage of our hotel owning
companies for any refinancing opportunities, with a view to reducing our financing costs and repatriating
our invested capital. In addition, we evaluate our investments on the basis of target equity returns and
manage our portfolio at a minimum to meet these targets.
                                                                                  o
In November 2005, we re-financed the outstanding loan agreements relating to the M¨venpick Hotel Bur
                   o
Dubai and the M¨venpick Hotel and Resort Beirut, raising $20 million and $46 million of additional
financing, respectively. In doing so, we generated a return on equity of 95 per cent. of our original
                     o
investment in the M¨venpick Hotel Bur Dubai and a return on equity of 19 per cent. of our original
                     o
investment in the M¨venpick Hotel and Resort Beirut.

Low borrowing costs
We believe that lenders consider us to be a credible and financially viable business, with the result that we
have access to relatively inexpensive loan capital. Our debt is predominantly in U.S. Dollars, on a
non-recourse basis, and we are not exposed to significant currency risk because the majority of our
revenues are received in either U.S. Dollars or currencies that are pegged or managed to the U.S. Dollar,
see ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk. As a result, we have
an average cost of borrowing of LIBOR plus 2.5 per cent., which, in turn, results in a lower average cost of
capital and in an improved corporate risk profile.

Experienced Management Team
Our Chief Executive Officer, Chief Financial Officer, Senior Vice President Design and Construction,
Senior Vice President Acquisitions and Development and Senior Vice President Asset Management have
an average of 16 years of experience in hospitality, real estate or finance, with extensive experience in
operations, asset management, design, acquisitions and financings in the hospitality industry. See
‘‘Management and Employees—Senior Management’’. As a result of this experience, we believe that our
senior management team, led by these individuals, is well-qualified to enhance the value of our portfolio
and create value for our shareholders.




                                                     98
Association with HRH Prince Alwaleed
We have enjoyed strong support from HRH Prince Alwaleed since our company was founded in 2000.
HRH Prince Alwaleed is an internationally recognised figure and is widely known to be a perceptive
investor with a long and successful track record of investment and value creation, including in hotel real
estate assets. In his role as Chairman of our Board and one of our directors, HRH Prince Alwaleed has
contributed significantly to our vision and strategy and, by utilising his extensive network of global and
regional contacts, he has contributed significantly to the sourcing of acquisition and development projects
for us.
In January 2006, HRH Prince Alwaleed and Kingdom 5-KR-124 entered into an agreement with us,
pursuant to which HRH Prince Alwaleed and Kingdom 5-KR-124 agreed to not invest in any hospitality-
related investment opportunity, other than in countries and territories in North, Central and South
America (including the Caribbean) and in Western Europe, without first providing us with the right to
consider and accept the opportunity for the company. In addition, in January 2006, Kingdom Holding
Company, an entity owned by HRH Prince Alwaleed, entered into a trademark license agreement with us,
pursuant to which it granted us a royalty-free, non-exclusive license to use the ‘‘Kingdom’’ trademark,
including related logos. For further details of these agreements, see ‘‘—Relationship with HRH Prince
Alwaleed’’.

Strategy
Our objective is to acquire or build, develop and actively asset manage high quality hotel and resort assets
in key city and resort destinations in the Middle East, Africa and Asia and selectively in Europe, in order
to consolidate our market leadership in the Middle East and North Africa, strengthen our presence in
Africa and penetrate new markets, including Asia and other emerging markets, as well as selected markets
in Central and Eastern Europe, and thereby create value for our shareholders. To achieve this objective, we
have developed a three-part strategy that we believe can be applied successfully in the countries in which
we currently operate, as well as in other countries in which we hope to operate in the future. Our strategy
focuses on:
           selective acquisition and development of hotels and resorts with growth potential;
           active asset management; and
           realisation of the capital appreciation of our assets once their operations and cash flows have
           been stabilised and they are generating significant amounts of income.

Selective Acquisition and Development of Hotels and Resorts with Growth Potential
Our strategy focuses on the acquisition and development of hotel properties with growth potential. We
acquire assets and invest in existing properties with the goal of enhancing value based on the location of
the property, its management, its physical condition and the cycles of demand as well as other market
dynamics. Investments in new developments are made in strategic locations with a view to achieving high
growth while maintaining long term value. The key objective behind this investment strategy is to capitalise
on the future potential of the markets we enter, through the prediction and identification of future market
conditions, the selection of hotel properties with growth and/or development opportunities in the market
and partnering with hotel management companies best suited for the properties and the markets in which
they are situated. Particular focus is on areas that have a sound basis for economic growth, but where we
consider that the full potential of the market has not yet been achieved. Examples of such areas include the
Middle East and certain emerging African and Asian countries, where economies are experiencing high
average growth rates and we believe quality hotels are in short supply.
While our geographic focus is on these high growth markets, our strategy also includes diversifying into
more established markets on an opportunistic basis where we believe such investments would enhance
shareholder value. Our recent acquisition of a 25.00 per cent. interest in the Four Seasons Hotel George V
in Paris is an example of this approach.
Our development model is designed to include a diversified range of properties within our portfolio. We
seek to acquire existing assets selected for their growth potential with a view to achieving value
appreciation in the short-to-medium term. We also invest in new developments located in strategic
destinations with a view to creating longer-term value. We also invest in corporate entities with critical
mass to allow for value engineering, rationalisation of overhead costs, individual value enhancement
through asset management and re-positioning through re-branding.



                                                     99
At any one time, we may be actively evaluating up to 50 projects worldwide. Prior to making any
acquisition or investment decision, we undertake a rigorous selection process to ensure that we only
finalise those projects that are in line with our business model and corporate strategy and that we believe
have significant potential to enhance shareholder value. As part of this selection process, we carry out
evaluation and research on markets and target properties in order to assess the profit potential of each
project. Our decisions are based on a number of considerations, including a minimum target risk-adjusted
internal rate of return ranging between ten per cent. and 20 per cent., the amount of capital to be invested,
the location of the target, the market cycle and available exit strategies. When an appropriate project is
identified, our acquisition and development decision is based on an asset management plan that is jointly
formulated between our Acquisition Department and our Asset Management Division. See ‘‘Business
Description—Management and Employees’’.
A key aspect of our acquisition and development strategy is the structuring of our investment. We structure
our acquisitions to limit our exposure to contingent liabilities, maintain flexibility to manage our assets,
provide us with key governance rights and satisfactory exit strategies. Due to the capital intensive nature of
the hotel industry, and in order to leverage our position, we seek to structure our acquisitions around
partnerships with high net worth private, public or institutional strategic investors with the aim of achieving
significant direct or indirect control for a minimal investment. While in certain development projects we
assume the role of lead developer, in others we take an active yet limited development role and the role of
the lead developer may be assigned to our local partner. In these latter projects, as part of the structuring
of our investment, we enter into agreements with the local partner, including consulting advisory
agreements and shareholders agreements, pursuant to which we receive minority voting rights, cost and
completion date guarantees and veto rights in appropriate circumstances. Through these agreements, we
aim to protect our investment by maintaining a degree of control over the project.

Active Asset Management
Once properties are acquired or developed, we employ an active asset management approach aimed at
increasing their profitability and contribution to our earnings. Our value enhancement strategies include
(i) re-branding to improve the competitive positioning of a property in its market; (ii) targeted capital
improvements to enhance and/or expand facilities and services offered; (iii) implementing purchasing
policies based on competitive bidding practices and other cost control improvement measures; (iv) revenue
yield management to increase RevPAR and profitability; and (v) restructurings and refinancings to release
equity and/or reduce our financing costs, as we deem appropriate.
For hotels in which we hold a majority interest, our asset management team collaborates with and/or
provides input to the hotel management companies on the development of a hotel’s business plan, ongoing
budgeting and capital expenditure programs in order to implement the above strategies. We also closely
monitor the monthly performance of all our hotels and the respective hotel management companies and
conduct regular physical inspections.
Furthermore, depending on the level of our ownership interest, we lead or participate in defining the
strategy and direction of our hotel properties and are actively involved in making financing decisions and
monitoring the budgeting process and preparation of financial statements of the hotel owning companies.

Realisation of Capital Appreciation of Assets
By acquiring and developing properties with high growth potential and then actively asset managing these
properties, we aim, within a few years of the acquisition, to optimise the operations and cash flow of each
of our properties until its performance stabilises and it is generating significant amounts of income. We
believe that once a property reaches this level of performance, its value will have appreciated, at which
time, we will seek to realise this capital appreciation through refinancings, direct sales of assets, sales of
minority interests in the properties or mergers. In the short term, we do not expect that the realisation of
the capital appreciation of our assets will occur through direct asset sales. Instead, we intend to focus on
refinancing strategies and sales of minority interests in respect of assets that we consider to be mature.

Our Hotel and Resort Properties
We have ownership interests in 26 properties, of which 15 are operating hotels and resorts in eight
countries, with a total of 3,262 rooms, including several distinctive luxury properties, as well as 11 hotels
and resorts currently under construction or in initial stages of development in nine countries, which are
expected to add a total of 3,203 rooms to our portfolio. We own a majority interest in ten of our properties,
four of which are not yet operational.


                                                     100
The following table sets forth certain information with respect to our operating properties as at the date
hereof:

                                                                                                                            Effective
                                                                   Month Opened/        Number         Management          Ownership
Operating Properties                             Location            Acquired          of Rooms         Company               (%)
Egypt
M¨venpick Resort & Spa El Gouna
 o                                                   Red Sea        1996/May 2002             517(1)        o
                                                                                                           M¨venpick             29.28
Four Seasons Hotel Cairo at Nile Plaza                  Cairo          August 2004            365        Four Seasons            44.23(2)
M¨venpick Resort El Quseir
 o                                                   Red Sea        1995/May 2002             250          M¨venpick
                                                                                                            o                    81.16(3)
Four Seasons Resort Sharm El Sheikh                  Red Sea             May 2002             200(4)     Four Seasons            39.31(5)

France
Four Seasons Hotel George V                              Paris      1928/Feb 2006             245        Four Seasons            25.00

Jordan
Four Seasons Hotel Amman                              Amman              May 2003             193        Four Seasons            13.00

Kenya
Norfolk Hotel                                         Nairobi       1904/May 2005             167            Fairmont            70.00
Mount Kenya Safari Club                        Mount Kenya          1959/May 2005             116            Fairmont            52.50
Aberdare Country Club                               Aberdare        1969/May 2005              48            Fairmont            41.77
The Ark                                             Aberdare        1969/May 2005              60            Fairmont            41.77
Mara Safari Club                                 Masai Mara         1989/May 2005        50 tents            Fairmont            70.00

Lebanon
M¨venpick Hotel and Resort Beirut
 o                                                     Beirut            July 2002            292          M¨venpick
                                                                                                            o                    81.21(6)

Syria
Four Seasons Hotel Damascus                        Damascus              Dec 2005             297        Four Seasons            35.75

Tanzania
 o
M¨venpick Royal Palm Hotel                    Dar Es Salaam         1995/Dec 2004             230           o
                                                                                                           M¨venpick             96.00

U.A.E.
M¨venpick Hotel Bur Dubai
 o                                                     Dubai        2001/July 2003            232(7)        o
                                                                                                           M¨venpick            100.00

Notes:
(1) The property is currently undergoing an expansion that is expected to increase the number of rooms from 517 to 576 and to be
    completed in Spring 2006.

(2) Assumes the successful completion of the acquisition of an additional ownership interest in this property to increase our effective
    ownership from 39.80 per cent. to 44.23 per cent. We expect this transaction to close in early 2006. See ‘‘Management’s
    Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Financial Condition and Results
    of Operations and Related Trends—Hotel openings and acquisitions and consolidation of minority interests’’.

(3) Assumes the successful completion of the acquisition of an additional ownership interest in this property to increase our effective
    ownership from 30.50 per cent. to 81.16 per cent. We expect this transaction to close in mid-2006. See ‘‘Management’s Discussion
    and Analysis of Financial Condition and Results of Operations—Factors Affecting Financial Condition and Results of
    Operations and Related Trends—Hotel openings and acquisitions and consolidation of minority interests’’.

(4) Includes 136 hotel rooms plus 64 chalets in the rental pool.

(5) Assumes the successful completion of the acquisition of an additional ownership interest in this property to increase our effective
    ownership from 31.96 per cent. to 39.31 per cent. We expect this transaction to close in early 2006. See ‘‘Management’s
    Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Financial Condition and Results
    of Operations and Related Trends—Hotel openings and acquisitions and consolidation of minority interests’’.

                                                 o
(6) Although our effective ownership of the M¨venpick Hotel and Resort Beirut is 81.21 per cent., we receive 92 per cent. of the
    profits of this property because the real estate owners of B shares who own 7.25 per cent. of this property are not entitled to
    receive dividends on their shares. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
    Operations—Amortisation of Deferred Credit’’ for additional information about B shares.

(7) The property is currently undergoing an expansion that is expected to increase the number of rooms from 232 to 258 and to be
    completed in October 2006.




                                                                 101
The following table sets forth certain information with respect to our properties under development as at
the date hereof:

                                                                                            Expected
                                                                                Expected    Number                        Effective
                                                                                 Year of       of         Management     Ownership
Properties under development                             Location              Completion    Rooms         Company          (%)
Egypt

Resort & Spa El Quseir                                             Red Sea           2006        250       Brand to be        100.00(1)
                                                                                                            confirmed

Fairmont Nile City Cairo                                               Cairo         2007        552          Fairmont         14.83

Ghana

M¨venpick Hotel Ambassador Accra
 o                                                                   Accra           2008        260(2)      o
                                                                                                            M¨venpick         100.00

Lebanon

Four Seasons Hotel Beirut                                            Beirut          2007        230      Four Seasons         37.81

Libya

 o
M¨venpick Hotel Tripoli                                             Tripoli          2008        250         o
                                                                                                            M¨venpick          51.00

Mauritius

Four Seasons Resort Mauritius                                    East Coast          2007        119(3)   Four Seasons         50.00

Morocco

Four Seasons Hotel Marrakech                                     Marrakech           2008        180(4)   Four Seasons         78.00

Palestine

 o
M¨venpick Hotel Gaza                                                   Gaza          2006        222         o
                                                                                                            M¨venpick          10.26

Tanzania

M¨venpick Beach & Spa Resort Zanzibar
 o                                                  East Coast of Ugunja             2008        190        M¨venpick
                                                                                                             o                 30.00(5)

U.A.E.

The Fairmont Palm Hotel & Resort                                     Dubai           2008        400          Fairmont         20.10

 o
M¨venpick Hotel Pearl Dubai                                          Dubai      2009/2010        550         o
                                                                                                            M¨venpick          16.32

Notes:
(1) Assumes the successful completion of the acquisition of an interest in this property, which is expected to close in mid-2006. See
    ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Financial
    Condition and Results of Operations and Related Trends—Hotel openings and acquisitions and consolidation of minority
    interests’’.

(2) Includes 250 hotel rooms plus 10 serviced apartments in the rental pool.

(3) Includes 90 hotel rooms plus 29 villas in the rental pool.

(4) Includes 140 hotel rooms plus 40 villas that can be added in the rental pool.

(5) Assumes the successful completion of the acquisition of an interest in this property, which is expect to close in February or
    March 2006. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting
    Financial Condition and Results of Operations and Related Trends—Hotel openings and acquisitions and consolidation of
    minority interests’’.




                                                                 102
The following map illustrates the distribution of our operating hotels and hotels under development,
identified by the hotel management company that manages each hotel.




       Paris, France




                                                    Beirut, Lebanon
                           Tripoli, Libya
Marrakech,                                             Damascus, Syria
                                  Gaza, Palestine
 Morocco                                               Amman, Jordan
                                 Cairo, Egypt
                                                     Sharm El Sheikh, Egypt
                                El Gouna, Egypt
                                                                           Dubai, U.A.E.
                                El Quseir, Egypt




                                      Aberdare,
                                      Kenya                      Nanyuki, Kenya
                 Accra,
                 Ghana                                    Nairobi, Kenya
                                    Masai Mara,
                                    Kenya
                                                          Zanzibar
                                                          Dar Es Salaam, Tanzania



                                                                      Mauritius




                                                                                                  23FEB200618554506




                                                                          Operating Hotels (15)

                                                                              Four Seasons Hotel (5)
                                                                              Mövenpick Hotel/Resort (5)
                                                                              Fairmont Hotel (5)


                                                                          Hotels Under Development (11)
                                                                              Four Seasons Hotel (3)
                                                                              Mövenpick Hotel/Resort (5)
                                                                              Fairmont Hotel (2)
                                                                              Brand to be confirmed (1)
                                                                                                  23FEB200618564922


                                                    103
The following charts illustrate the diversity of our portfolio, as a percentage of our total investments, by the
geographic locations of our investments, the hotel brands in which we are invested, the type of hotels in
which we are invested (city or resort) and by the operational maturity of our investment (operating or
under construction):

                         Location                                             Resort/City Hotels
                   (as % of KHI Investment)                                  (as % of KHI Investment)

                     Jordan
              Kenya    1%
                4%
                   Libya              Palestine
        Tanzania    3%                  0.3%
           4%
                                              Egypt
        Ghana                                 27%
          5%
   Mauritius                                                      Resort
     5%                                                            45%
   Morocco
    7%                                                                                                      City
                                                                                                            55%
        Syria
         5%                                   Lebanon
                                                16%
           U.A.E.
              8%          France
                           15%                                                                          8FEB200601381548

              Management Companies                                  Operating/Under Construction Hotels
                   (as % of KHI Investment)                                  (as % of KHI Investment)

                    Other
            Fairmont 5%
               8%
                                                                 Under
                                                              construction
                                                                  35%
                                                Mövenpick
                                                  33%

                                                                                                            Operating
                                                                                                              65%

  Four Seasons
     54%                                                                                                23FEB200618561849
Egypt
Operating Hotels
 o
M¨venpick Resort & Spa El Gouna

The Property. The M¨venpick Resort & Spa El Gouna opened in January 1996 and we acquired our
                       o
interest in the hotel in 2002. The hotel is currently undergoing a staged 172-room expansion and as of
spring 2006 is expected to contain 576 rooms in a luxury Mediterranean style resort hotel located directly
on the Red Sea coastline in the resort area of El Gouna. Amenities and facilities include ten food and
beverage outlets, conference facilities, four swimming pools, a spa and fitness centre, tennis courts, a diving
and water sports centre and a shopping arcade.

Ownership and Indebtedness. We indirectly own a 29.28 per cent. interest in the M¨venpick Resort & Spa
                                                                                 o
El Gouna. See ‘‘—Group Organisation’’. We own the land and property related to the M¨venpick  o
Resort & Spa El Gouna by way of a freehold interest. The other significant shareholder in the hotel
                        o
owning company of the M¨venpick Resort & Spa El Gouna is Orascom Hotel Holding S.A.E., which owns



                                                            104
a majority interest in the hotel owning company. Pursuant to a shareholders’ agreement, we have certain
minority shareholder rights with respect to this property, including the right to appoint three out of the
eleven directors and certain put option rights. Under this agreement, there are also certain share transfer
restrictions, including right of first refusal and tag along rights in connection with proposed share transfers.
                                     o
This property is managed by M¨venpick pursuant to hotel management and related agreements. See
                                                                                o
‘‘Relationships with Hotel Management Companies—Relationship with M¨venpick’’. As at September 30,
                                                                         o
2005, the total amount of net indebtedness associated with the M¨venpick Resort & Spa El Gouna was
$5.9 million.

Operating and Occupancy History. The following table sets out historical information regarding the
operations of the M¨venpick Resort & Spa El Gouna:(1)
                   o

                                                                              Nine-month period
                                                                             ended September 30,                                      Year ended December 31,
                                                                            2005             2004                             2004              2003              2002

Exchange Rate ($:LE) .                      .   .   .                  5.84                                       6.24            6.24            5.91                4.66
Number of rooms . . . . .                   .   .   .                   517                                        417             432             418                 418
Occupancy rate . . . . . . .                .   .   .                70.1%                                      80.1%           80.8%           54.7%               55.0%
ADR . . . . . . . . . . . . . .             .   .   .                   $61                                        $50             $56             $44                 $43
RevPAR . . . . . . . . . . . .              .   .   .                   $43                                        $40             $45             $24                 $24
Total revenue . . . . . . . .               .   .   .           $10,744,246                                 $8,446,930     $12,947,288      $7,855,354          $7,788,267
Gross operating profit(2)                   .   .   .            $5,927,284                                 $4,908,744      $7,783,640      $4,155,609          $3,587,629
Gross operating margin .                    .   .   .                55.2%                                      58.1%           60.1%           52.9%               46.1%
Hotel EBITDA(3) . . . . .                   .   .   .            $4,739,310                                 $3,914,495      $6,243,134      $3,247,320          $2,766,381
Hotel EBITDA Margin .                       .   .   .                44.1%                                      46.3%           48.2%           41.3%               35.5%
Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel except for total revenue,
    gross operating profit and hotel EBITDA for year-end 2004, 2003 and 2002, where the audited financial accounts of the hotel
    were used.

(2) Gross operating profit before management fees.

(3) Hotel EBITDA after management fees, incentive fee, FF&E reserve, insurance, tax and rent.

Competition. According to the HVS Study, the main competitors of the M¨venpick Resort & Spa
                                                                                o
El Gouna are the Sheraton Miramar Resort and the Steigenberger Golf Hotel; however, due to its rate
                  o
positioning, the M¨venpick Resort & Spa El Gouna also competes with properties in Hurghada, which is
another resort area 30 kilometers away from El Gouna, and in other resort areas within the vicinity.
According to the HVS Study, other secondary competitor hotels are the Marriott Hurghada Beach Resort,
the InterContinental Resort & Casino Hurghada, the Oberoi Sahl Hashees, the Sheraton Soma Bay and
the InterContinental Abu Soma Resort. According to the HVS Study, new hotels anticipated to enter the
market include the 400-room Steigenberger Resort Hurghada, the 250-room Kempinski Resort Hurghada,
both of which are under construction and are expected to open in 2007 or 2008, and the proposed 80-room
Four Seasons El Gouna (not owned by us), which is in the early development stages and has a proposed
opening date of 2009; our competitors currently have 1,941 rooms.
                                                                                     ¨
The following table sets out historical information regarding the operations of the Movenpick Resort &
Spa El Gouna as compared to the competitor hotels set forth above:

                                                                                                                      Year ended                      Year ended
                                                                                                                 December 31, 2004               December 31, 2003
                                                                                                                                 o
                                                                                                                              M¨venpick                          o
                                                                                                                                                              M¨venpick
                                                                                                                             Resort & Spa                    Resort & Spa
                                                                                                                        (1)                             (1)
                                                                                                            Competition        El Gouna     Competition        El Gouna

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          1,539              432          1,525              418
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           81%              81%            68%              55%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $54              $56            $45              $44
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $44              $45            $30              $24
Source: Competition information derived from the HVS Study.

Note:
                               o
(1) Includes the rooms of the M¨venpick Resort & Spa El Gouna.




                                                                                                             105
Four Seasons Hotel Cairo at Nile Plaza
The Property. The Four Seasons Hotel Cairo at Nile Plaza opened in August 2004 and contains 365 rooms
in a high-rise landmark hotel. The hotel is located in the Garden City area of Cairo and has 145 square
meters of frontage facing the Nile. The property includes a real estate component comprising 131
apartments, of which, as of September 30, 2005, 49 had been sold. In the future, a portion of the
apartments may be added to the hotel rental pool. In addition, the property features 4,700 square metres
of saleable office space and 6,780 square metres of commercial space for lease, of which, as of
September 30, 2005, 3,940 square metres and 6,030 square metres had been sold and leased, respectively.
The commercial space is located in a retail shopping mall on the ground level and first floor of the hotel.
Amenities and facilities of the hotel include eight food and beverage outlets, a spa and wellness centre,
indoor and outdoor swimming pools, a 24-hour business centre, conference facilities, administrative offices
and a large underground car parking area.

Ownership and Indebtedness. We indirectly own a 39.80 per cent. interest (44.23 per cent. upon the
successful completion of our acquisition of an additional ownership interest in this property) in the Four
Seasons Hotel Cairo at Nile Plaza. See ‘‘Group Organisation’’. We own the land and property related to
the Four Seasons Hotel Cairo at Nile Plaza by way of a freehold interest. Other significant shareholders in
the hotel owning company of the Four Seasons Hotel Cairo at Nile Plaza include Sheikh Muhammad Bin
Issa Al Jaber (a director of JJW Limited, one of our shareholders) and Alexandria Real Estate Investment
Company, neither of which has a larger ownership interest than we do. We have certain shareholder rights
with respect to this property, including the right to appoint three out of the six directors, including the
chairman. This property is managed by Four Seasons pursuant to hotel management and related
agreements. See ‘‘Relationships with Hotel Management Companies—Relationship with Four Seasons’’.
As at September 30, 2005, the total amount of net indebtedness associated with the Four Seasons Hotel
Cairo at Nile Plaza was $87.4 million.

Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Four Seasons Hotel Cairo at Nile Plaza:(1)
                                                Nine-month period ended
                                                      September 30,                      Year ended December 31,
                                                 2005             2004(2)      2004(3)             2003              2002

Exchange Rate ($:LE) .            .   .   .           5.84            6.24         6.24                N/A                  N/A
Number of rooms . . . . .         .   .   .            365             365          365                N/A                  N/A
Occupancy rate . . . . . . .      .   .   .        65.4%            17.8%        30.3%                 N/A                  N/A
ADR . . . . . . . . . . . . . .   .   .   .          $216            $211         $232                 N/A                  N/A
RevPAR . . . . . . . . . . . .    .   .   .          $141              $38          $70                N/A                  N/A
Total revenue . . . . . . . .     .   .   .   $22,393,219         $993,349   $5,800,192                N/A                  N/A
Gross operating profit(4)         .   .   .   $11,434,384         $383,638   $1,706,298                N/A                  N/A
Gross operating margin .          .   .   .        51.1%            38.6%        29.4%                 N/A                  N/A
Hotel EBITDA(5) . . . . .         .   .   .    $8,553,560         $251,327   $1,142,914                N/A                  N/A
Hotel EBITDA Margin .             .   .   .        38.2%            25.3%        19.7%                 N/A                  N/A

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.
(2) Partial results for the period from August to September 2004.
(3) Partial year results for the period from August to December 2004.
(4) Gross operating profit before management fees.
(5) Hotel EBITDA after management fees, incentive fee, FF&E reserve, insurance and tax.

Competition. According to the HVS Study, the principal competitors of the Four Seasons Hotel Cairo at
Nile Plaza are the Four Seasons First Residence (not owned by us), the Conrad and the Grand Hyatt. In
addition, the Nile Hilton, the Ramses Hilton, the Cairo Sheraton, the El Gezirah Hotel, the Marriott and
the InterContinental Semiranis are considered to be secondary competitors of the Four Seasons Hotel
Cairo at Nile Plaza. According to the HVS Study, the Four Seasons Hotel Cairo at Nile Plaza is the market
leader in terms of ADR and has achieved the highest RevPAR in the Cairo market. According to the HVS
Study, new hotels anticipated to enter the market include the 254-room Park Hyatt and the 552-room
Fairmont Nile City Cairo (which is one of our hotels—see ‘‘—Hotels under Development—Fairmont Nile




                                                                  106
City Cairo’’), both of which are under construction and are expected to open in 2007 or 2008; our
competitors currently have 5,844 rooms.
The following table sets out historical information regarding the operations of the Four Seasons Hotel
Cairo at Nile Plaza as compared to the competitor hotels set forth above:
                                                                                                                      Year ended                      Year ended
                                                                                                                 December 31, 2004               December 31, 2003
                                                                                                                             Four Seasons                    Four Seasons
                                                                                                            Competition(1)     Nile Plaza   Competition(1)     Nile Plaza

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          3,746             365           3,227                 N/A
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           74%           30.3%             64%                  N/A
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $87           $232              $80                 N/A
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $64             $70             $51                 N/A
Source: Competition information derived from the HVS Study.
Note:
(1) Includes the rooms of the Four Seasons Hotel Cairo at Nile Plaza.

 o
M¨venpick Resort El Quseir
The Property. The M¨venpick Resort El Quseir opened in May 1995 and we acquired our interest in the
                       o
hotel in May 2002. The hotel underwent a 72-room expansion in 2002 and now contains 250 rooms. The
resort is an Arabesque style resort located on its own private beach 125 kilometres south of Hurghada. The
   o
M¨venpick Resort El Quseir is one of the few properties on the Red Sea coast line to offer its own coral
reef and offers guests of the hotel exclusive access to snorkeling and scuba diving. Access to this property is
either via Hurghada International Airport (140 kilometres) or via the recently opened Marsa Alam
International Airport located 68 kilometres south of Quseir. Amenities and facilities include seven food
and beverage outlets, spa facilities, a fitness club, two heated pools, one at each end of the resort, a diving
centre, tennis courts, squash courts and a playground.
Ownership and Indebtedness. We will indirectly own a 30.50 per cent interest (81.16 per cent. interest
upon the successful completion of our acquisition of an additional ownership interest in this property,
                                                 o
which is expected to close in mid-2006) in the M¨venpick Resort El Quseir. See ‘‘Group Organisation’’.
                                                o
We own the land and property related to the M¨venpick Resort El Quseir by way of a freehold interest.
                                                                    o
Other significant shareholders in the hotel owning company of the M¨venpick Resort El Quseir include
Blockfield Properties, which has a larger ownership interest than we do. This property is managed by
  o
M¨venpick pursuant to hotel management and related agreements. See ‘‘Relationships with Hotel
                                               o
Management Companies—Relationship with M¨venpick’’. As at September 30, 2005, the total amount of
                                        ¨
net indebtedness associated with the Movenpick Resort El Quseir was $4.6 million.
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the M¨venpick Resort El Quseir:(1)
                   o
                                                                              Nine months ended
                                                                                 September 30,                                        Year ended December 31,
                                                                            2005               2004                           2004              2003              2002

Exchange Rate ($:LE) .                      .   .   .                     5.84                                    6.24            6.24            5.91                4.66
Number of rooms . . . . .                   .   .   .                      250                                     250             250             250                 202
Occupancy rate . . . . . . .                .   .   .                   70.2%                                   71.7%           73.0%           50.4%               53.2%
ADR . . . . . . . . . . . . . .             .   .   .                      $55                                     $44             $51             $49                 $41
RevPAR . . . . . . . . . . . .              .   .   .                      $39                                     $32             $37             $25                 $22
Total revenue . . . . . . . .               .   .   .               $5,565,478                              $5,095,627      $7,609,750      $5,401,045          $4,413,677
Gross operating profit(2)                   .   .   .               $2,798,903                              $2,811,907      $4,405,707      $2,965,499          $1,890,826
Gross operating margin .                    .   .   .                   50.3%                                   55.2%           57.9%           54.9%               42.8%
Hotel EBITDA(3) . . . . .                   .   .   .               $2,057,218                              $2,111,397      $3,344,354      $2,209,329          $1,315,325
Hotel EBITDA Margin .                       .   .   .                   37.0%                                   41.4%           43.9%           40.9%               29.8%
Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel except for revenue, gross
    operating profit and hotel EBITDA for year-end 2004, 2003 and 2002 where the audited financial accounts of the hotel were
    used.
(2) Gross operating profit before management fees.
(3) Hotel EBITDA after management fees, incentive fee, FF&E reserve, insurance, rent and government fees.



                                                                                                             107
Competition. According to the HVS Study, the principal competitors of the M¨venpick Resort El Quseir
                                                                              o
are the Kahramana Beach Resort, the Iberotel Coraya Beach Resort, the Sheraton Soma Bay and the
Flamenco Beach Resort. According to the HVS Study, new hotel supply anticipated to enter the market
include Sun International (two hotels) at Port Ghalib and an extension of the Kahramana Beach Resort;
our competitors currently have 1,141 rooms.
                                                                                     o
The following table sets out historical information regarding the operations of the M¨venpick Resort
El Quseir as compared to its competitors:

                                                                                                                      Year ended                     Year ended
                                                                                                                 December 31, 2004              December 31, 2003
                                                                                                                                 o
                                                                                                                              M¨venpick                         o
                                                                                                                                                             M¨venpick
                                                                                                                                 Resort                         Resort
                                                                                                            Competition(1)     El Quseir   Competition(1)     El Quseir

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            846             250            846             250
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           70%             73%            52%             50%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $65             $51            $55             $49
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $45             $37            $29             $25

Source: Competition information derived from the HVS Study.

Note:
                               o
(1) Includes the rooms of the M¨venpick Resort El Quseir.


Four Seasons Resort Sharm El Sheikh
The Property. The Four Seasons Resort Sharm El Sheikh property opened in May 2002 and contains 200
luxurious guest rooms. The property includes a real estate component comprising 34 villas and 112 chalets,
of which, as of September 30, 2005, 22 and 57, respectively, had been sold; 64 chalets are included in the
hotel’s rental pool of 200 rooms. The hotel is located on the Red Sea, with access to world-class snorkeling
and scuba diving. Villas and chalets are situated to optimise Red Sea views. Amenities and facilities include
six food and beverage outlets, conference facilities, a spa and wellness centre with private treatment rooms
and outdoor massage areas, two pools, tennis courts and several specialty boutiques. The Four Seasons
Resort Sharm El Sheikh attracts visitors from throughout the world and is a favoured venue for corporate
conferences and other business meetings, as well as weddings and other gala functions.
In July 2005, a terrorist attack occurred in Sharm El Sheikh. The Four Seasons Resort Sharm El Sheikh
was not damaged in the attack as it was not located in the direct vicinity of the explosions. The terrorist act
has, according to the HVS Study, affected the short-term market performance. However, according to the
HVS Study, the terrorist attack is expected only to have a short-term effect on the tourism industry in
Egypt and its market research has indicated that the impact of the terrorist attack should be overcome
within 12 months.

Ownership and Indebtedness. We indirectly own a 31.96 per cent. interest (39.31 per cent. interest upon
the successful completion of our acquisition of an additional ownership interest in this property, which is
expected to close in early 2006) in the Four Seasons Resort Sharm El Sheikh. See ‘‘Group Organisation’’.
We own the land and property related to the Four Seasons Resort Sharm El Sheikh by way of a freehold
interest. Other significant shareholders in the hotel owning company of the Four Seasons Resort Sharm
El Sheikh include Sheikh Muhammad Bin Issa Al Jaber and Alexandria Real Estate Investment Company,
neither of which has a larger ownership interest than we do. We have certain shareholder rights with
respect to this property, including the right to appoint three out of seven directors, including the
Chairman, and the right of first refusal over share transfers. This property is managed by Four Seasons
pursuant to hotel management and related agreements. See ‘‘Relationships with Hotel Management
Companies—Relationship with Four Seasons’’. As at September 30, 2005, the total amount of net
indebtedness associated with the Four Seasons Resort Sharm El Sheikh was $25.9 million.




                                                                                                            108
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Four Seasons Resort Sharm El Sheikh:(1)

                                                                          Nine months ended
                                                                             September 30,                                              Year ended December 31,
                                                                        2005               2004                                  2004             2003            2002(2)

Exchange Rate ($:LE) .                      .   .   .                   5.84                                        6.24             6.24             5.91            4.66
Number of rooms . . . . .                   .   .   .                    200                                         200              200              200             200
Occupancy rate . . . . . . .                .   .   .                64.6%                                       63.0%             64.1%            45.2%           32.1%
ADR . . . . . . . . . . . . . .             .   .   .                  $259                                        $190             $198             $186            $192
RevPAR . . . . . . . . . . . .              .   .   .                  $167                                        $120             $127               $84             $62
Total revenue . . . . . . . .               .   .   .           $16,169,846                                 $11,381,779       $15,954,760      $10,378,799      $4,937,361
Gross operating profit(3)                   .   .   .            $8,270,068                                  $5,089,647        $7,066,522       $3,420,745       $(498,798)
Gross operating margin .                    .   .   .                51.1%                                       44.7%             44.3%            33.0%         (10.1)%
Hotel EBITDA(4) . . . . .                   .   .   .            $5,218,908                                  $3,127,227        $4,363,064       $1,944,903     $(1,095,084)
Hotel EBITDA Margin .                       .   .   .                32.3%                                       27.5%             27.3%            18.7%         (22.2)%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.

(2) Partial year results for the period from May to December 2002.

(3) Gross operating profit before management fees.

(4) Hotel EBITDA after management fees, incentive fee, FF&E reserve, insurance, tax and rent to villa owners.

Competition. According to the HVS Study, the principal competitors of the Four Seasons Resort Sharm
El Sheikh are the Ritz-Carlton Hotel and the Hyatt Regency and given the supply and demand
characteristics of the hotel market in Sharm El Sheikh, only the suites at the Hyatt Regency and the
Ritz-Carlton compete with the Four Seasons Resort Sharm El Sheikh. According to the HVS Study, the
Four Seasons Resort Sharm El Sheikh achieved the highest RevPAR in the Sharm El Sheikh market for
the years ended December 31, 2004 and 2003. According to the HVS Study, new hotel supply anticipated
to enter the market is the proposed 350-room Millennium Hotel, scheduled to open in 2007; our
competitors currently have 760 rooms.
The following table sets out historical information regarding the operations of the Four Seasons Resort
Sharm El Sheikh as compared to its competitors:

                                                                                                                         Year ended                      Year ended
                                                                                                                    December 31, 2004               December 31, 2003
                                                                                                                                Four Seasons                    Four Seasons
                                                                                                                                    Resort                          Resort
                                                                                                                                    Sharm                           Sharm
                                                                                                                Competition(1)    El Sheikh     Competition(1)    El Sheikh

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           770              200            770             200
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          76%              64%            61%           45.2%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $107             $198            $95           $186
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           $82             $127            $58             $84

Source: Competition information derived from the HVS Study.

Note:
(1) Includes the rooms of the Four Seasons Resort Sharm El Sheikh.


Hotels under Development
Fairmont Nile City Cairo
The Property. The Fairmont Nile City Cairo is scheduled to open at the end of 2007. The hotel is expected
to comprise 552 rooms and will be the front tower of the Nile City office and retail complex, which also
includes 100,000 square meters of office space, 11,000 square meters of retail space, upscale residential
apartments and extensive underground parking in two 34 storey towers. The development is located on a
prime site overlooking the Nile and 30 minutes from the historic sites at Giza. Planned amenities include




                                                                                                                109
eight food and beverage outlets, meeting facilities, business centre, health club and a rooftop space with a
restaurant overlooking the Nile.
Ownership. We indirectly own a 14.83 per cent. interest in the Fairmont Nile City Cairo. See ‘‘Group
Organisation’’. Pursuant to a shareholders’ agreement, the land related to the Fairmont Nile City Cairo is
required to be registered in the name of the hotel owning company, and once this is completed we will own
the land and property related to the Fairmont Nile City Cairo by way of a freehold interest. Other
significant shareholders in the hotel owning company of the Fairmont Nile City Cairo include Nile City
Investments Company, which has a larger ownership interest than we do, and Fairmont Dubai Holdings
(Bermuda) Ltd. Pursuant to a shareholders’ agreement, we have certain shareholder rights with respect to
this property, including the right to appoint one out of five directors, the right of first refusal over share
transfers and a performance guarantee in the form of a promissory note from Nile City Investments
Company. Under this agreement we also have the right to put our shares in the hotel owning company or
call Nile City Investments Company’s shares in the hotel owning company in the event that the opening
date of the hotel has not occurred within three years of the date of the agreement or the land is not
registered in the name of the hotel owning company within four years of the date of the agreement. We
have a separate right to put our shares to Nile City Investments Company in the event that the hotel
management agreement with Fairmont is terminated for certain reasons and Nile City Investments
Company has the right to exercise a call option for our and Fairmont Dubai Holding (Bermuda) Ltd.’s
shares in the hotel owning company in the event that the hotel management agreement is terminated due
to Fairmont’s failure to achieve certain hotel performance targets thereunder. This property is managed by
Fairmont pursuant to hotel management and related agreements. See ‘‘Relationships with Hotel
Management Companies—Relationship with Fairmont’’.
Competition. According to the HVS Study, the Fairmont Nile City Cairo is expected to compete with the
Four Seasons Hotel Cairo at Nile Plaza (which is one of our hotels—see ‘‘—Operating Hotels—Four
Seasons Nile Plaza’’) as well as the same group of hotels as the Four Seasons Hotel Cairo at Nile Plaza.

Resort & Spa El Quseir
The Property. We have signed an agreement to acquire a hotel 125 kilometres south of Hurghada, which is
scheduled to open in mid-2006. The 250-room Resort & Spa El Quseir will be managed by an international
operator affiliated with our company. Facilities will include three restaurants and a bar, meeting space,
retail units, a diving centre and a spa.
Ownership and Indebtedness. We expect to indirectly own a 100 per cent. interest in the Resort & Spa
El Quseir (upon the successful completion of our acquisition of an ownership interest in this property,
which is expected to close in mid-2006). See ‘‘Group Organisation’’. We will own the land and property
related to the Resort & Spa Quseir by way of a freehold interest. As at the closing of this transaction, we
expect that there will be no net indebtedness associated with the Resort & Spa El Quseir.
Competition. According to the HVS Study, the Resort & Spa El Quseir is expected to compete with the
                             o
same group of hotels as the M¨venpick Resort El Quseir (which is one of our hotels—see ‘‘—Operating
          o
Hotels—M¨venpick Resort El Quseir’’).

France
Operating Hotels
Four Seasons Hotel George V
The Property. In January 2006, we signed an agreement to acquire (with retroactive effect to December
2005) 25.00 per cent. of Kingdom 5-KR-35 Ltd., the indirect owner of a 100.00 per cent. effective
ownership interest in the hotel owning company of the Four Seasons Hotel George V, in exchange for the
issuance to Kingdom 5-KR-51 of 19,100,000 fully paid newly issued shares with a nominal value of $5 per
share. Prior to our acquisition, we obtained an independent valuation of this property by Christie + Co.,
which valued the property at A625 million ($750 million). This transaction closed in February 2006. The
Four Seasons Hotel George V first opened in 1928. The hotel was closed for refurbishment in
November 1997 and re-opened as the Four Seasons Hotel George V in 2000. We acquired our interest in
the hotel in February 2006. The 245-room hotel occupies a prominent site in the centre of Paris
                                                    e
approximately 300 meters south of the Champs Elys´e and within one kilometer of the Arc de Triomphe.
Amenities and facilities include a restaurant, two bars, banqueting space, a business centre, a spa with
11 treatment rooms, a swimming pool, a health club and a boutique.



                                                     110
Ownership and Indebtedness. We indirectly own a 25.00 per cent. interest in the Four Seasons Hotel
George V. See ‘‘Group Organisation’’. The land and property related to the Four Seasons Hotel George V
is owned by way of a freehold interest. The other shareholder in the Four Seasons Hotel George V is
Kingdom 5-KR-51 Ltd., an investment entity owned by Kingdom Trust, which continues to own a majority
interest in the property.
As a minority shareholder, we have certain rights with respect to our indirect investment in the Four
Seasons Hotel George V. These rights include certain consent rights, the right to appoint at least
one-quarter of the board of directors (of each of the company owning the Four Seasons Hotel George V
and the company in which we have invested directly) and certain rights to information. Our consent rights
do not constitute a veto over the matters to which they relate, rather they provide us with an exit
mechanism in the event that we do not wish to consent to a given matter.
We have tag along rights in respect of our investment, which (provided that the sale of our interest
generates an internal rate of return of at least ten per cent.) is also subject to a drag along right exercisable
by Kingdom 5-KR-51 Ltd.
Our investment is also subject to certain put and call rights (each at fair market value) from and in favour
of Kingdom 5-KR-51 Ltd. Such rights become exercisable if we have not agreed to a given consent matter
on two separate occasions. Kingdom 5-KR-51 Ltd.’s call right over our investment also becomes
exercisable if we are subject to a change of control whereby the Kingdom Trust or its affiliates no longer
hold the majority of our shares and another entity and its affiliates own 30 per cent. or more of our shares
and our put right also becomes exercisable if we and Kingdom 5-KR-51 Ltd. and our respective affiliates
no longer together own a majority interest in the company in which we have invested.
This property is managed by Four Seasons pursuant to hotel management and related agreements. See
‘‘Relationships with Hotel Management Companies—Relationship with Four Seasons’’. As at
September 30, 2005, the total amount of net indebtedness associated with the Four Seasons Hotel
George V was A265 million.
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Four Seasons Hotel George V: (1)
                                                 Nine months ended
                                                    September 30,                       Year ended December 31,
                                               2005               2004          2004              2003               2002

Exchange Rate ($:EUR) .             .   .         0.831            0.733          0.733             0.797              0.954
Number of rooms . . . . .           .   .           245              245            245               245                245
Occupancy rate . . . . . . .        .   .        82.0%            76.4%          76.8%             73.3%              83.8%
ADR . . . . . . . . . . . . . . .   .   .          $836            $928           $927              $787               $695
RevPAR . . . . . . . . . . . .      .   .          $686            $709           $712              $577               $582
Total revenue . . . . . . . . .     .   .   $73,712,131      $77,706,398   $105,721,594       $86,031,254        $81,934,212
Gross operating Profit(2) .         .   .   $27,111,913      $28,782,992    $38,082,062       $25,614,425        $29,246,746
Gross operating margin .            .   .        36.8%            37.0%          36.0%             29.8%              35.7%
Hotel EBITDA(3) . . . . . .         .   .   $19,779,455      $20,895,000    $27,447,151       $17,034,838        $21,219,752
Hotel EBITDA Margin .               .   .        26.8%            26.9%          26.0%             19.8%              25.9%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.
(2) Gross operating profit before management fees.
(3) Hotel EDITDA after management fees, incentive fee, FF&E reserve, insurance and tax.

Competition. The Four Seasons Hotel George V was recognised as the ‘‘Best Hotel in the World’’ in 2004
by Institutional Investor, as the ‘‘Best City Hotel Worldwide’’ by the 2005 Gallivanter’s Guide and as the
‘‘Top International City Hotel’’ by the 2005 Andrew Harper’s Hideaway Report for a record fifth
consecutive year. According to the HVS Study, the principal competitors of the Four Seasons Hotel
                                            e
George V are Le Bristol, the Plaza Athen´e, Le Crillon and the Hotel Ritz. According to the HVS Study,
new hotel supply anticipated to enter the market is the Hotel Fouquet Barriere expected to open in 2008
and an extension of Le Bristol expected to open in May 2007; our competitors currently have 685 rooms.
On November 25, 2005, the Competition Council of France issued a decision which imposed a fine on the
Four Seasons Hotel George V of A115,000 and similar fines on five other luxury Paris hotels for certain



                                                                 111
anti-competitive practices, which were found to violate certain provisions of the French Code of
Commerce.
The following table sets out historical information regarding the operations of the Four Seasons Hotel
George V as compared to its competitors:

                                                                                                                         Year ended                     Year ended
                                                                                                                    December 31, 2004              December 31, 2003
                                                                                                                                Four Seasons                   Four Seasons
                                                                                                                                    Hotel                          Hotel
                                                                                                                Competition(1)    George V     Competition(1)    George V

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           930             245            930             245
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          68%             77%            64%             73%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $906            $927           $815            $787
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $612            $712           $521            $577

Source: Competition information derived from the HVS Study.

Note:
(1) Includes the rooms of the Four Seasons Hotel George V.


Ghana
Hotels under Development
 o
M¨venpick Hotel Ambassador Accra
The Property. In January 2006, we acquired a 100.00 per cent. effective ownership interest in M¨venpick
                                                                                                  o
                                                                             o
Ambassador Hotel Accra, which is currently under development. The M¨venpick Hotel Ambassador
Accra is scheduled to open in 2008. The 260-room hotel will be located in the central business district of
Accra. It is planned to be the anchor of a mixed-use development, which is scheduled to be constructed in
three phases. In the first phase, the hotel will be developed with 250 rooms and ten serviced apartments,
                                    o
which are all to be operated by M¨venpick. Planned amenities and facilities will include one restaurant, a
lobby lounge, meeting facilities, a health club and spa, a swimming pool, tennis courts and a retail outlet.
The second and third phases of the construction of the project are anticipated to commence after the
opening of the hotel and are expected to include serviced and residential apartments and office and retail
space.

Ownership and Indebtedness. We indirectly own a 100.00 per cent interest in the M¨venpick Hotelo
Ambassador Accra. See ‘‘Group Organisation’’. We sub-lease the land and property related to the
  o
M¨venpick Hotel Ambassador Accra pursuant to a sub-lease agreement with an initial term of 49 years
and an option to renew for an additional 50 years. Prior to the completion of the hotel we are obliged to
make a one-time initial lease payment of $10,000 and for the first three years following completion of the
hotel, the annual lease payment will be four per cent. of net revenue of the premises, excluding the hotel,
plus two per cent. (for the first two years) or three per cent. (for the third year) of the hotel’s net revenue.
Following this three year period, the annual lease payment will be four per cent. of the net revenue of the
premises, including the hotel. The amount of the lease payment is subject to review after twenty-five years
following the opening of the hotel, at which time the amount will be increased to five per cent. of net
revenue if the average occupancy rate is 70 per cent., or more. Our ownership interest in the hotel owning
                    o
company of the M¨venpick Hotel Ambassador Accra is asset managed by our subsidiary KHAMS, for
which KHAMS receives a payment of $1,000,000 during the pre-opening phase and an annual
management fee equal to the greater of $150,000 or 1.0 per cent. of the hotel’s annual gross revenue after
                                                              o
opening. The property is expected to be managed by M¨venpick pursuant to hotel management and
related agreements. See ‘‘Relationships with Hotel Management Companies—Relationship with
  o                                                                                             o
M¨venpick’’. As at September 30, 2005, there was no indebtedness associated with the M¨venpick Hotel
Ambassador Accra.

Competition. According to the HVS Study, the principal competitors of the M¨venpick Hotel
                                                                                       o
Ambassador Accra are expected to be La Palm Royal Hotel, the Golden Tulip, the Labadi Beach Hotel
and the Novotel Accra City Centre. According to the HVS Study, new hotel supply anticipated to enter the
market is the Holiday Inn Airport expected to open in 2007; our competitors currently have 662 rooms.




                                                                                                                112
The following table sets out historical information regarding the operations of hotels that HVS
                                           o
International expects to compete with the M¨venpick Hotel Ambassador Accra:
                                                                                                                                                                                                      Year ended      Year ended
                                                                                                                                                                                                     December 31,    December 31,
                                                                                                                                                                                                         2004            2003
                                                                                                                                                                                                     Competition     Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             622             622
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            77%             75%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $106            $100
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .             $81             $75

Source: Competition information derived from HVS Study.


Jordan
Operating Hotels
Four Seasons Hotel Amman
The Property. The Four Seasons Hotel Amman opened in May 2003 and is a 193-room high-rise building.
The hotel is located between the Al Sweifiyah residential area and the Shmeisani financial district.
Amenities and facilities include three restaurants, two lounges, a wellness centre, squash facilities, a spa
with sauna and private treatment rooms, two swimming pools, a shopping arcade and a grand ballroom.
In November 2005, a terrorist attack occurred in Amman. Although the Four Seasons Hotel Amman was
not damaged in the attack as it was not located in the direct vicinity of the explosions, according to the
HVS Study, the terrorist act resulted in a drop in demand, which had a negative impact on market wide
occupancy in November and December. According to the HVS Study, following the terrorist attack, the
performance (in terms of occupancy rate) in the first quarter of 2006 is likely to be lower than it was over
the same period in 2005; however, the hotel market is expected to recover from the second quarter of 2006
onwards.

Ownership. We indirectly own a 13.00 per cent. interest in the Four Seasons Hotel Amman. See ‘‘Group
Organisation’’. We own the land and property related to the Four Seasons Hotel Amman by way of a
freehold interest. The hotel owning company of the Four Seasons Hotel Amman is Mediterranean Tourism
Investments Company (‘‘METICO’’), a publicly traded company that is listed on the Amman Stock
Exchange. As of the date of this offering memorandum we own 5,754,568 quoted shares of METICO.
Other significant shareholders in METICO include Al Yakin (Abu-Hani), Abed el Khader Al Khadi,
Amman Jordan Investment Bank, Prince Hamad bin Jasim, Mr. Mahmoud Makha and Hani Al Khadi.
While none of these shareholders has a majority interest in METICO, some hold greater ownership
interests than we do. This property is managed by Four Seasons pursuant to hotel management and related
agreements. See ‘‘Relationships with Hotel Management Companies—Relationship with Four Seasons’’.

Competition. According to the HVS Study, the principal competitors of the Four Seasons Hotel Amman
are the Grand Hyatt, the Sheraton and Le Royal. According to the HVS Study, new hotel supply
anticipated to enter the market is the 500-room Hilton expected to open in 2009; our competitors currently
have 866 rooms.
The following table sets out the historical information regarding the operations of the hotels that compete
with the Four Seasons Hotel Amman:

                                                                                                                                                                                                     Year ended       Year ended
                                                                                                                                                                                                    December 31,     December 31,
                                                                                                                                                                                                        2004             2003
                                                                                                                                                                                                    Competition(1)   Competition(1)

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                696              696
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .               79%              73%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                $93              $86
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                $74              $62
Source: Competition information derived from HVS Study.

Note:
(1) Includes the rooms of the Four Seasons Hotel Amman.



                                                                                                                    113
Kenya
Operating Hotels
On May 11, 2005, we acquired a Kenyan company that owns, directly and indirectly, interests in the
Norfolk Hotel, Mount Kenya Safari Club, the Aberdare Country Club, The Ark and Mara Safari Club.
The other shareholder with interests in these hotel properties is IFA, one of our shareholders.

Group Indebtedness. As at September 30, 2005, the total amount of cash after deduction of aggregate
indebtedness associated with the five Kenya hotels held through the consolidated Lonrho Kenya
Hotels B.V. was $1.4 million.

Norfolk Hotel
The Property. The Norfolk Hotel was opened in 1904, and we acquired our interest in the hotel in
May 2005. The hotel consists of 167 rooms and suites. Amenities and facilities include four food and
beverage outlets, a ballroom, meeting rooms, a business centre, an outdoor heated swimming pool and a
fully equipped health club. The hotel is located 30 minutes from Jomo Kenyatta International Airport and
a short distance from Nairobi’s shopping and business district.
Upon our acquisition of the property, we entered into hotel management and related agreements with
Fairmont pursuant to which it agreed to take over the management of the hotel. See ‘‘Relationships with
Hotel Management Companies—Relationship with Fairmont’’. The hotel will be re-branded to the
Fairmont Norfolk Hotel once 50 per cent. of the proposed refurbishment capital has been spent. We expect
to meet this threshold during 2006. The Norfolk Hotel is scheduled to undergo a $7.8 million staged
renovation that is expected to be completed in 2006. The renovation consists of improvements to the
hotel’s guestrooms, public areas, restaurants, conference facilities, leisure facilities, systems and back of
house facilities.

Ownership and Indebtedness. We indirectly own a 70.00 per cent. interest in the Norfolk Hotel. See
‘‘Group Organisation’’. We lease the land and property related to the Norfolk Hotel pursuant to several
leases that relate to the hotel and its surrounding premises. The remaining terms of these leases range
from two years to 74 years. There are annual lease payments associated with these leases, which average
approximately $18,000 per year over the three-year period ending December 31, 2006. In addition, see
‘‘—Kenya—Operating Hotels—Group Indebtedness’’, above.
Our ownership interest in the hotel owning company of the Norfolk Hotel is asset managed by our
subsidiary KHAMS, for which KHAMS receives an annual management fee equal to the greater of
$80,000 or 1.0 per cent. of the hotel’s annual gross revenue. KHAMS has subcontracted certain hotel
advisory services for this property to IFA Hotels & Resorts FZ-LLC, a subsidiary of IFA, the other
shareholder in this hotel, and has agreed to pay IFA Hotels & Resorts EZ-LLC 20 per cent. of the asset
management fee it receives in respect of the Norfolk Hotel. See ‘‘Group Organisation’’.




                                                    114
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Norfolk Hotel:(1)
                                                       Nine months ended
                                                         September 30,                                                              Year ended September 30,(2)
                                                      2005           2004                                               2005           2004           2003            2002

Exchange Rate
  ($:KES) . . . . .       .   .   .                76.29                                   79.55                         76.29          79.55           76.32           79.15
Number of rooms           .   .   .                  167                                     167                           167            167             167             167
Occupancy rate . .        .   .   .               71.7%                                   55.8%                         67.3%          51.9%           33.7%           36.0%
ADR . . . . . . . . .     .   .   .                  $91                                     $85                           $93            $86             $89             $91
RevPAR . . . . . . .      .   .   .                  $65                                     $47                           $62            $44             $30             $33
Total revenue . . .       .   .   .           $5,854,395                              $4,715,649                    $7,584,424     $6,036,468      $4,471,288      $4,763,486
Gross operating
  profit(3) . . . . . .   ...                 $2,200,464                              $1,982,374                    $2,819,588     $2,455,334      $1,204,051      $1,475,317
Gross operating
  margin . . . . . .      ...                     37.6%                                   42.0%                         37.2%          40.7%            26.9%         31.0%
Hotel EBITDA(4)           ...                 $1,614,595                              $1,375,440                    $2,003,527     $1,657,787         $384,734      $741,303
Hotel EBITDA
  Margin . . . . . .      ...                             27.6%                                   29.2%                  26.4%          27.5%             8.6%         15.6%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.
(2) Prior to the acquisition of the hotel, the fiscal year ended September 30.
(3) Gross operating profit before management fees.
(4) Hotel EBITDA after management fees, incentive fee, FF&E reserve (2005 only), insurance, tax, rent, asset management fee
    (2005 only) and governmental fees.

Competition. According to the HVS Study, the principal competitors of the Norfolk Hotel are the
InterContinental, the Hilton, the Serena, the Mayfair, the Grand Regency and the Stanley. According to
the HVS Study, no new hotels are anticipated to enter the market; our competitors currently have 1,430
rooms
The following table sets out historical information regarding the operations of the Norfolk Hotel as
compared to its competitors:
                                                                                                                           Year ended                      Year ended
                                                                                                                      December 31, 2004               December 31, 2003
                                                                                                                                     Norfolk                         Norfolk
                                                                                                                  Competition(1)      Hotel       Competition(1)      Hotel

Number of rooms           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          1,597            167             1,597           167
Occupancy rate . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           57%            52%               54%           34%
ADR . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $93            $86               $91           $89
RevPAR . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $53            $44               $49           $30

Source: Competition information derived from the HVS Study.
Note:
(1) Includes the rooms of the Norfolk Hotel.

Mount Kenya Safari Club
The Property. The Mount Kenya Safari Club opened in 1959 and we acquired our interest in the hotel in
May 2005. The hotel has 116 rooms and is located near the equator, approximately ten kilometres from the
township of Nanyuki and 210 kilometres from Nairobi. Amenities and facilities include seven food and
beverage outlets, conference facilities, a boardroom, a nine-hole golf course, horse riding, croquet, a
bowling green, table tennis, a swimming pool and an animal orphanage.
Upon our acquisition of the property, we entered into hotel management and related agreements with
Fairmont pursuant to which it agreed to take over the management of the hotel. See ‘‘Relationships with
Hotel Management Companies—Relationship with Fairmont’’. The hotel will be re-branded to the
Fairmont Mount Kenya Safari Club once 50 per cent. of the proposed refurbishment capital has been
spent. We expect to meet this threshold during 2006. The Mount Kenya Safari Club is scheduled to



                                                                                                                  115
undergo a $10.3 million staged renovation that is expected to be completed in 2006. The renovation
consists of improvements to the hotel’s guestrooms, public areas, restaurants, conference facilities, leisure
facilities, systems and back of house facilities.
Ownership and Indebtedness. We indirectly own a 52.50 per cent. interest in the Mount Kenya Safari Club,
including owning, through a subsidiary, a majority ownership interest in the hotel owning company of the
Mount Kenya Safari Club, see ‘‘Group Organisation’’. We lease the land and property related to the
Mount Kenya Safari Club pursuant to a lease with a remaining term of 43 years. There is a nominal annual
lease payment associated with this lease. In addition, see ‘‘—Kenya—Operating Hotels—Group
Indebtedness’’, above.
Our ownership interest in the Mount Kenya Safari Club is asset managed by our subsidiary KHAMS, for
which KHAMS receives an annual management fee equal to the greater of $36,000 or 1.0 per cent. of the
hotel’s annual gross revenue. KHAMS has subcontracted certain hotel advisory services for this property
to IFA Hotels & Resorts EZ-LLC, the subsidiary of IFA, the other shareholder in this hotel, and has
agreed to pay IFA Hotels & Resorts FZ-LLC 20 per cent. of the asset management fee it receives in
respect of the Mount Kenya Safari Club. See ‘‘Group Organisation’’.
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Mount Kenya Safari Club:(1)
                                        Nine months ended
                                          September 30,                          Year ended(2) September 30,
                                       2005           2004             2005         2004             2003             2002

Exchange Rate
  ($:KES) . . . . .      .   .   .        76.29        79.55           76.29          79.55           76.32            79.15
Number of rooms          .   .   .          116          115             116            115             115              115
Occupancy rate . .       .   .   .       52.6%        40.1%           52.8%          39.9%           39.2%            46.2%
ADR . . . . . . . . .    .   .   .          $61          $56             $62            $55             $44              $47
RevPAR . . . . . . .     .   .   .          $32          $23             $33            $22             $17              $22
Total revenue . . .      .   .   .   $2,335,965   $1,784,171      $3,214,258     $2,305,847      $2,135,873       $2,953,606
Gross operating
  profit . . . . . . .   ...          $391,507       $94,018          $567,939     $203,997          $13,513        $732,653
Gross operating
  margin . . . . . .     ...            16.8%          5.3%             17.7%         8.8%            0.6%            24.8%
Hotel EBITDA(4)          ...          $104,513      $(60,859)         $237,704    $(116,291)      $(359,776)        $365,782
Hotel EBITDA
  Margin . . . . . .     ...              4.5%        (3.4)%             7.4%        (5.0)%         (16.8)%            12.4%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.
(2) Prior to the acquisition of the hotel, the fiscal year ended September 30.
(3) Gross operating profit before management fees.
(4) Hotel EBITDA after management fees, incentive fee, FF&E reserve (2005 only), insurance, tax, rent, asset management fee
    (2005 only) and governmental fees.

Competition. According to the HVS Study, no hotels directly compete with the Mount Kenya Safari Club
and no new hotels are anticipated to enter the region. No historical information comparing the operations
of Mount Kenya Safari Club to competitors is available.

Aberdare Country Club and The Ark
The Properties. The Aberdare Country Club, located in the scenic Aberdare Mountains, and The Ark,
located in Aberdare National Park, are managed as one unit and all of the registration facilities for guests
of The Ark are provided by the Aberdare Country Club. The two hotels are 17 kilometres apart and
approximately 150 kilometres from Nairobi. Both properties were opened in 1969 and we acquired our
interests in both hotels in May 2005. The Aberdare Country Club has 48 rooms and amenities and facilities
include three food and beverage outlets, conference facilities, a business centre, a nine-hole golf course,
horse-riding, a swimming pool and tennis courts. In addition, guests of the hotel can participate in safari
excursions. The Ark has 60 rooms and is designed in the shape of an ark. The Ark is located in the
Aberdare National Park, on the edge of a waterhole, and the building serves as a platform for viewing



                                                                116
wildlife. Amenities and facilities of The Ark include a dining room, a lounge and a bar. The Aberdare
Country Club and The Ark are approximately seven miles from Mweiga Airfield, one hour from Nyeri
Airstrip and two hours from Nanyuki Airstrip.
Upon our acquisition of the properties, we entered into hotel management and related agreements with
Fairmont pursuant to which it agreed to take over the management of the hotels. See ‘‘Relationships with
Hotel Management Companies—Relationship with Fairmont’’. The hotels will be re-branded to the
Fairmont Aberdare Country Club and the Fairmont Ark once 50 per cent. of the proposed refurbishment
capital for each hotel has been spent. We expect to meet this threshold during 2006. The Aberdare
Country Club is scheduled to undergo a $3.8 million staged renovation and The Ark is scheduled to
undergo a $1.5 million staged renovation, which are both expected to be completed in 2006. The
renovations consist of improvements to each hotel’s guestrooms, public areas, restaurants, conference
facilities, leisure facilities, systems and back of hotels facilities.
Ownership and Indebtedness. We indirectly own a 41.77 per cent. interest in each of the Aberdare Country
Club and The Ark, including owning, through a subsidiary, a majority ownership interest in the hotel
owning companies of the Aberdare Country Club and The Ark, see ‘‘Group Organisation’’. We lease the
land and property related to these hotels pursuant to multiple leases, with remaining terms for the leases
over the Aberdare Country Club plots of 63 and 913 years and for the lease over The Ark of eight years,
with an option to renew for an additional 33 years. Annual lease payments associated with the Aberdare
Country Club leases are currently nominal; however, these lease payments are subject to market review
every ten years. The annual lease payment associated with The Ark is 12.5 per cent. of gross hotel receipts
per year and is subject to re-negotiation upon exercise of the renewal period. In addition, see
‘‘—Kenya—Operating Hotels—Group Indebtedness’’, above.
Our ownership interest in the hotel owning companies of the Aberdare Country Club and The Ark are
asset managed by our subsidiary KHAMS, for which KHAMS receives an annual management fee equal to
the greater of $14,000 or 1.0 per cent. of the hotel’s annual gross revenue for each hotel. KHAMS has
subcontracted certain hotel advisory services for these properties to IFA Hotels & Resorts FZ-LLC, a
subsidiary of IFA, the other shareholder in this hotel, and has agreed to pay IFA Hotels & Resorts FZ-LLC
20 per cent. of the asset management fee it receives in respect of the Aberdare Country Club and The Ark.
See ‘‘Group Organisation’’.
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Aberdare Country Club and The Ark:(1)(2)
                                    Nine months ended
                                      September 30,                              Year ended(3) September 30,
                                   2005           2004                2005          2004             2003             2002

Exchange Rate
  ($:KES) . . . . . .       ..        76.29            79.55            76.29          79.55           76.32            79.15
Number of rooms .           ..          108              108              108            108             108              108
Occupancy rate . . .        ..       54.5%            48.6%            52.2%          45.5%           33.9%            40.2%
All Inclusive Room
  Rate . . . . . . . . .    ..          $18             $10              $18            $14              $7              $13
RevPAR . . . . . . . .      ..          $10              $5              $10             $6              $2               $5
Total revenue . . . .       ..   $1,592,903      $1,442,936       $2,116,599     $1,807,287      $1,422,767       $1,731,236
Gross operating
  profit(4) . . . . . . .   ..    $153,755         $363,510          $240,342      $386,090        $125,087         $256,120
Gross operating
  margin . . . . . . .      ..       9.7%            25.2%            11.4%          21.4%            8.8%            14.8%
Hotel EBITDA(5) .           ..    $(83,946)        $117,026        $(106,146)       $63,392       $(194,779)        $(64,106)
Hotel EBITDA
  Margin . . . . . . .      ..      (5.3)%             8.1%            (5.0)%          3.5%         (13.7)%           (3.7)%
Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.
(2) Combined figures for both hotels.
(3) Prior to the acquisition of the hotel, the fiscal year ended September 30.
(4) Gross operating profit before management fees.
(5) Hotel EBITDA after management fees, incentive fee, FF&E reserve (2005 only), insurance, rent, asset management fee (2005
    only) and governmental fees.



                                                               117
Competition. According to the HVS Study, the principal competitors of the Aberdare Country Club and
The Ark are the Treetops Lodge, the Mountain Lodge-Serena and Shima Hills, which have, in the
aggregate, 124 rooms; there are no new hotels anticipated to enter the region. According to the
HVS Study, the occupancy rates at the Aberdare Country Club and The Ark for the years ended
September 30, 2004 and September 30, 2003 were 46 per cent. and 34 per cent., respectively, as compared
to the occupancy rates for their competitor hotels during the same periods of 38 per cent. and 30 per cent.,
respectively. ADR and RevPAR figures for these periods are not available for the competitor hotels of the
Aberdare Country Club and The Ark.

Mara Safari Club
The Property. The Mara Safari Club was opened in 1989 and we acquired our interest in the hotel in
May 2005. The Mara Safari Club is a semi-permanent tented camp with 50 high standard tents with netted
four-poster beds and permanent bathrooms. The hotel is located adjacent to the Masai Mara National
Park, one of the most famous wildlife reserves in the world and is 270 kilometres from Nairobi. Amenities
and facilities include three food and beverage outlets, a library that can be also used for conferences and a
swimming pool. The hotel also offers game drives, safari excursions and bird walks.
Upon our acquisition of the property, we entered into hotel management and related agreements with
Fairmont pursuant to which it agreed to take over the management of the hotel. See ‘‘Relationships with
Hotel Management Companies—Relationship with Fairmont’’. The hotel will be re-branded to the
Fairmont Mara Safari Club once 50 per cent. of the proposed refurbishment capital has been spent. We
expect to meet this threshold during 2006. The Mara Safari Club is scheduled to undergo a $2.4 million
staged renovation that is expected to be completed in 2006. The renovations consist of improvements to
the tents, public areas, restaurants, conference facilities, leisure facilities, systems and back of house
facilities.

Ownership and Indebtedness. We indirectly own a 70.00 per cent. interest in the Mara Safari Club. See
‘‘Group Organisation’’. We lease the land and property related to the Mara Safari Club pursuant to a lease
agreement, with a remaining term of seven years and an option to renew for an additional 15 years. There
is an annual lease payment of 14 per cent. of the hotel’s gross revenue, with the amount of the lease
payment for the renewal period to be reviewed based on market conditions. In addition, see
‘‘—Kenya—Operating Hotels—Group Indebtedness’’, above.
Our ownership interest in the hotel owning company of the Mara Safari Club is asset managed by our
subsidiary KHAMS, for which KHAMS receives an annual management fee equal to the greater of
$26,000 or 1.0 per cent. of the hotel’s annual gross revenue. KHAMS has subcontracted certain hotel
advisory services for this property to IFA Hotels & Resorts FZ-LLC, a subsidiary of IFA, the other
shareholder in this hotel, and has agreed to pay IFA Hotels & Resorts FZ-LLC 20 per cent. of the asset
management fee it receives in respect of the Mara Safari Club. See ‘‘Group Organisation’’.




                                                    118
Operating and Occupancy History. The following table sets out historical information regarding the
operations of the Mara Safari Club:(1)

                                         Nine months ended
                                           September 30,                         Year ended(2) September 30,
                                        2005           2004            2005         2004             2003             2002

Exchange Rate
  ($:KES) . . . . .       .   .   .        76.29        79.55          76.29          79.55           76.32            79.15
Number of rooms           .   .   .           50           50             50             50              50               50
Occupancy rate . .        .   .   .       74.8%        55.4%          73.7%          53.4%           42.1%            46.8%
ADR . . . . . . . . .     .   .   .          $40           27            $37            $29             $11              $19
RevPAR . . . . . . .      .   .   .          $30           15            $27            $15              $5               $9
Total revenue . . .       .   .   .   $1,954,843   $1,351,462     $2,559,656     $1,662,992      $1,250,352       $1,445,625
Gross operating
  profit(3) . . . . . .   ...          $691,997      $473,012         $939,891     $534,150        $213,961         $364,167
Gross operating
  margin . . . . . .      ...            35.4%         35.0%            36.7%        32.1%           17.1%            25.2%
Hotel EBITDA(4)           ...          $363,635      $204,181         $473,573     $181,571       $(134,849)         $57,479
Hotel EBITDA
  Margin . . . . . .      ...             18.6%         15.1%           18.5%         10.9%         (10.8)%             4.0%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available for the related hotel owning company.
(2) Prior to the acquisition of the hotel, the fiscal year ended September 30.
(3) Gross operating profit before management fees.
(4) Hotel EBITDA after management fees, incentive fee, FF&E reserve (2005 only), insurance, rent, asset management fee (2005
    only) and government fee.

Competition. According to the HVS Study, the hotel’s principal competitors are the Mara Serena Safari
Lodge and the Sarova Mara Tented Lodge, which have, in the aggregate, 151 rooms; there are no new
hotels anticipated to enter the region. According to the HVS Study, the occupancy rates at the Mara Safari
Club for the years ended September 30, 2004 and September 30, 2003 were 53 per cent. and 42 per cent.,
respectively, as compared to the occupancy rate for its competitor hotels during the same periods of 63 per
cent. and 49 per cent., respectively. ADR and RevPAR figures for these periods are not available for the
competitor hotels of the Mara Safari Club.

Lebanon
Operating Hotels
 o
M¨venpick Hotel and Resort Beirut
The Property. The M¨venpick Hotel and Resort Beirut opened in July 2002 and contains 292 guest rooms
                      o
in a luxury city hotel with resort amenities. The property includes a real estate component comprising
72 chalets, 1,010 cabanas (75 of which are controlled by the hotel), 126 units of marina rights (15 of which
are controlled by the hotel) and 1,700 square metres of retail space. As of September 30, 2005, all of the
chalets and 932 cabanas had been sold, and 77 units of marina rights (with the remaining 34 available for
rent) and 845 square metres of retail space (with the remaining 855 square metres available for rent) had
been sold. The hotel is located directly on the Mediterranean Sea coastline in the scenic Raouche area of
Beirut. Amenities and facilities include five food and beverage outlets, three swimming pools (including an
Olympic sized pool), a sandy beach, a spa and fitness centre, two tennis courts, a basketball court, a marina
and water sports centre, conference facilities, a shopping arcade and a beauty centre.
In February 2005, the former Prime Minister of Lebanon, Mr. Rafic Hariri, was assassinated when a bomb
                                    ¨
exploded in Beirut. Although the Movenpick Hotel and Resort Beirut was not damaged in the attack as it
was not located in the direct vicinity of the explosion, the bombing resulted in political instability in
Lebanon, which, according to the HVS Study, had a detrimental impact on demand for hotel
accommodation throughout the year. However, according to the HVS Study, the situation in Lebanon is
expected to stabilise in 2006 and to recover from 2007 onwards.




                                                                119
Ownership and Indebtedness. We indirectly own a 81.21 per cent. interest in the M¨venpick Hotel and
                                                                                    o
                                                                                        o
Resort Beirut. See ‘‘Group Organisation’’. We own the land and property related to the M¨venpick Hotel
and Resort Beirut by way of a freehold interest.
                                                                o
Our ownership interest in the hotel owning company of the M¨venpick Hotel and Resort Beirut is asset
managed by our subsidiary KHAMS, for which KHAMS receives an annual management fee equal to the
greater of $100,000 or 1.0 per cent. of the hotel’s annual gross revenue.
                                o
This property is managed by M¨venpick pursuant to hotel management and related agreements. See
                                                                        o
‘‘Relationships with Hotel Management Companies—Relationship with M¨venpick’’. As at September 30,
                                                                 o
2005, the total amount of net indebtedness associated with the M¨venpick Hotel and Resort Beirut was
                                                                                            o
$20.6 million. In November 2005, we refinanced the debt of the hotel owning company of the M¨venpick
Hotel and Resort Beirut through a senior secured loan and a revolving overdraft facility. See
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Indebtedness—Recent Borrowings’’ for further details.

Operating and Occupancy History. The following table sets out historical information regarding the
operations of the M¨venpick Hotel and Resort Beirut:(1)
                   o

                                                   Nine months ended
                                                      September 30,                       Year ended December 31,
                                                 2005               2004         2004               2003              2002(2)

Exchange Rate ($:LBP)             .   .   .      1,518.41         1,547.83      1,547.83           1,553.23           1,565.80
Number of rooms . . . . .         .   .   .           292              292           292                292                292
Occupancy rate . . . . . . .      .   .   .        63.0%            77.9%         70.5%              56.1%              52.5%
ADR . . . . . . . . . . . . . .   .   .   .          $189            $195          $191               $174               $178
RevPAR . . . . . . . . . . . .    .   .   .          $119            $152          $135                 $98                $93
Total revenue . . . . . . . .     .   .   .   $18,115,131      $21,345,902   $26,187,650        $20,795,247         $9,845,049
Gross operating profit(3)         .   .   .    $6,757,031       $9,213,745   $10,090,434         $5,752,254         $1,680,784
Gross operating margin .          .   .   .        37.3%            43.2%         38.5%              27.7%              17.1%
Hotel EBITDA(4) . . . . .         .   .   .    $4,306,026       $5,948,556    $6,077,399         $3,882,884          $717,371
Hotel EBITDA Margin .             .   .   .        23.8%            27.9%         23.2%              18.7%               7.3%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel except for revenue, gross
    operating profit and hotel EBITDA for year-end 2004, 2003 and 2002 and year-to-date 2005 where the audited financial accounts
    of the hotel were used.

(2) Partial year results for the period from July to December 2002.

(3) Gross operating profit before management fees.

(4) Hotel EBITDA after management fees, incentive fees, FF&E reserve, insurance, and asset management fees (2004 and 2005
    only).

Competition. According to the HVS Study, the principal competitors of the M¨venpick Hotel and Resort
                                                                               o
Beirut are the Phoenicia InterContinental, the Metropolitan Palace, the Habtoor Grand and the Gefinor
Rotana. Secondary competition includes the Sheraton Coral Beach, the Four Points by Sheraton, the
Marriott Beirut, Le Meridien Commodore, the Safir Heliopolitan, the Crowne Plaza, the Holiday Inn
Dunes, the Riviera Hotel and the Monroe Hotel. According to the HVS Study, new hotels anticipated to
enter the market are the Four Seasons Hotel Beirut (which is one of our hotels—see ‘‘—Four Seasons
Hotel Beirut’’), the Saint George, the Grand Hyatt, the Hilton, the Rotana Suites, the Philippe Starck, the
Ritz-Carlton, the JW Marriott and the Old Holiday Inn. According to the HVS Study, for the nine months
                                      o
ended September 30, 2005, the M¨venpick Hotel and Resort Beirut was positioned ahead of its
competitors in terms of occupancy rate and RevPAR; our competitors currently have 1,949 rooms.




                                                                  120
                                                                                 o
The following table sets out historical information regarding the operations of M¨venpick Hotel and
Resort Beirut as compared to its competitors:

                                                                                                                              Year ended                   Year ended
                                                                                                                          December 31, 2004            December 31, 2003
                                                                                                                                        o
                                                                                                                                      M¨venpick                      o
                                                                                                                                                                   M¨venpick
                                                                                                                                         Hotel                        Hotel
                                                                                                                                      and Resort                   and Resort
                                                                                                                      Competition       Beirut     Competition       Beirut

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          1,420(1)          292        1,420(1)          292
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           71%             71%          61%             56%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           $174            $191         $158            $174
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           $124            $135          $96             $98

Source: Competition information derived from HVS Study.
Note:
                               o
(1) Includes the rooms of the M¨venpick Hotel and Resort Beirut.

Hotels under Development
Four Seasons Hotel Beirut
The Property. The Four Seasons Hotel Beirut is scheduled to open in 2007. The hotel is expected to
comprise 230 rooms in a high-rise building and to be one of the most luxurious hotel in Beirut. The hotel
will be located on the Corniche, directly across from the new Solidere marina facilities. It will benefit from
excellent views of the Mediterranean coastline, as well as views of the mountains, from its fifteen-floor
guestroom tower. Planned amenities and facilities include two restaurants, a rooftop pool and health club,
a lounge and bar, banqueting facilities and a business centre. The hotel design was created by a team of
leading international architectural firms. The conceptual and final design and execution drawings were
completed by Dar Al Handassah, while the interior design was awarded to the renowned interior designer
Pierre Yves Rochon, who designed the Four Seasons Hotel George V (see ‘‘—France—Operating
Hotels—Four Seasons Hotel George V’’) and other landmark hotels around the world.

Ownership and Indebtedness. We indirectly own a 37.81 per cent. interest in the Four Seasons Hotel
Beirut and a majority ownership interest in the related hotel owning company. See ‘‘Group Organisation’’.
We own the land and property related to the Four Seasons Hotel Beirut by way of a freehold interest.
Our ownership interest in the hotel owning company of the Four Seasons Hotel Beirut is asset managed by
our subsidiary KHAMS, for which KHAMS receives a payment of $200,000 during the pre-opening phase
and an annual management fee of $100,000 plus 2.0 per cent. of the hotel’s annual EBITDA after opening.
This property will be managed by Four Seasons pursuant to hotel management and related agreements.
See ‘‘Relationships with Hotel Management Companies—Relationship with Four Seasons’’. As at
September 30, 2005, the total amount of cash after deduction of indebtedness associated with the Four
Seasons Hotel Beirut was $4.8 million.

Competition. It is management’s intention that at the time of its opening, the Four Seasons Hotel Beirut
will be one of the most luxurious hotels in Beirut. According to the HVS Study, the principal competitors
                                            o                          o
of this property are expected to be Le Vendˆme InterContinental, the M¨venpick Hotel and Resort Beirut
                                               o
(which is one of our hotels—see ‘‘—M¨venpick Hotel and Resort Beirut’’), the Phoenicia
InterContinental, the Metropolitan Palace and the Habtoor Grand. According to the HVS Study, new
hotels expected to compete with the Four Seasons Hotel Beirut include the Ritz-Carlton, the Philippe
Starck, the Grand Hyatt, the Hilton and the JW Marriott. According to the HVS Study, the Four Seasons
Hotel Beirut will be one of the best hotels in Beirut, offering a unique quality of service and the best
product and will penetrate the high-end markets more strongly than the hotels in the competitive set; our
competitors currently have 1,133 rooms.




                                                                                                                    121
The following table sets out historical information regarding the operations of the hotels that HVS
International expects to compete with the Four Seasons Hotel Beirut:

                                                                                                                                                                                                     Year ended       Year ended
                                                                                                                                                                                                    December 31,     December 31,
                                                                                                                                                                                                        2004             2003
                                                                                                                                                                                                    Competition      Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           843(1)           843(1)
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          74%              64%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $231             $208
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $171             $132

Source: Competition information derived from HVS Study.
Note:
(1) Includes the rooms of the Four Seasons Hotel Beirut.

Libya
Hotels under Development
 o
M¨venpick Hotel Tripoli
The Property. In November 2005, we agreed with our joint venture partners to increase our proposed
                                     o
effective ownership interest in the M¨venpick Hotel Tripoli, from 30.60 per cent. to 51.00 per cent. Closing
                                                                                                   o
of the related subscription and project documentation is expected to occur in early 2006. The M¨venpick
Hotel Tripoli is scheduled to open in 2008. The hotel is expected to have 250 rooms in a 13-storey building.
The hotel will be located in the eastern district of the city on a site that is expected to offer extensive
recreational, conference and banqueting facilities. The hotel will also have access to the international
airport. Planned amenities and facilities include three food and beverage outlets, meeting space, business
centre, spa and health club, outdoor swimming pool, tennis courts and other recreational facilities.

Ownership and Indebtedness. We expect to indirectly own a 51.00 per cent. interest in the M¨venpick
                                                                                               o
                                                                                               ¨
Hotel Tripoli. See ‘‘Group Organisation’’. We will lease the land and property related to the Movenpick
Hotel Tripoli pursuant to a lease, the terms of which are still subject to negotiation.
                                                ¨
This property is expected to be managed by Movenpick pursuant to hotel management and related
                                                                                      o
agreements. See ‘‘Relationships with Hotel Management Companies—Relationship with M¨venpick’’. As
                                                                          o
at September 30, 2005, there was no net indebtedness associated with the M¨venpick Hotel Tripoli.

Competition. It is management’s intention that at the time of its opening, the M¨venpick Hotel Tripoli
                                                                                   o
will be the most luxurious hotel in the Libyan market. According to the HVS Study, the most likely
                    o
competitor of the M¨venpick Hotel Tripoli will be the Corinthia Bab Africa. According to the HVS Study,
a new hotel anticipated to compete with the hotel is the Pearl Continental Hotel; our competitor currently
has 299 rooms.
The following table sets out historical information regarding the operations of the hotels that HVS
                                            o
International expects to compete with the M¨venpick Hotel Tripoli:

                                                                                                                                                                                                     Year ended       Year ended
                                                                                                                                                                                                    December 31,     December 31,
                                                                                                                                                                                                        2004             2003
                                                                                                                                                                                                    Competition      Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           299              299
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          74%              43%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $205             $191
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $152              $81
Source: Competition information derived from HVS Study.




                                                                                                                    122
Mauritius
Hotels under Development
Four Seasons Resort Mauritius
The Property. In January 2006, we acquired a 50.00 per cent. interest in the Four Seasons Resort
Mauritius, which is currently under development. The Four Seasons Resort Mauritius is scheduled to open
in 2007. The hotel will comprise a 90-suite hotel and 29 villas that will form part of a rental pool system.
The 29 villas (24 two-bed villas and 5 three-bed villas) will be sold as residential real estate and managed by
Four Seasons as part of a mandatory rental pool program, which provides the owners of the villas with a
right of use for a specified number of days each year. For the remainder of the year, the villas will be part
of the hotel’s inventory. There is also the potential to develop a further ten villas and the owners of these
units may elect, but are not required, to participate in the rental program. The hotel will be located on the
east coast of Mauritius. Planned amenities and facilities include five food and beverage outlets, two bars,
conference facilities, a business centre, a spa with ten treatment rooms, a gymnasium, two outdoor
swimming pools, two tennis courts, a kids club, an 18-hole par 72 championship Ernie Els signature golf
course (of which we will be a partial owner—see below) and other recreational facilities. Furthermore,
each of the 90 suites will have its own swimming pool and terrace. In addition, next to the resort we expect
250 Anahita branded villas and apartments to be developed and sold. The villas, which are not part of our
interests in the Four Seasons Resort Mauritius, will be promoted separately by Anahita Estates Ltd. on
behalf of the third-party owner/developer in conjunction with a marina and other recreational and retail
facilities.

Ownership. We indirectly own a 50.00 per cent. interest in the Four Seasons Resort Mauritius. See
‘‘Group Organisation’’. We own the land and property related to the Four Seasons Resort Mauritius by
way of a freehold interest. The other 50.00 per cent. interest is owned by Deep River Beau Champ
Limited. It is expected that the hotel owning company of the Four Seasons Resort Mauritius will own a
39 per cent. interest in the planned golf course expected to be developed adjacent to the hotel, with the
remaining ownership interests to be owned by Anahita Golf Limited and Anahita Estates Limited.
Pursuant to a shareholders’ agreement, we have certain rights with respect to this property, including the
right to appoint two out of four directors and the right of first offer over transfers of ownership interests in
the hotel owning company. However, under this agreement our ownership interest is also subject to a drag
along right in the event that Deep River Beau Champ Limited wishes to transfer its shares to a third party.
Our ownership interest in the hotel owning company of the Four Seasons Resort Mauritius is expected to
be asset managed by our subsidiary KHAMS pursuant to an asset management agreement to be negotiated
following the closing of our acquisition of the hotel. This property will be managed by Four Seasons
pursuant to hotel management and related agreements. See ‘‘Relationships with Hotel Management
Companies—Relationship with Four Seasons’’. As at September 30, 2005, there was no net indebtedness
associated with the Four Seasons Resort Mauritius.

Competition. It is management’s intention that at the time of its opening, the Four Seasons Resort
Mauritius will be the most luxurious hotel in Mauritius. According to the HVS Study, the principal
competitors of the Four Seasons Resort Mauritius are likely to be the One & Only Le St. Geran, the Royal
Palm, the Oberoi, Le Prince Maurice and the Taj Exotica Resort & Spa. According to the HVS Study, a
new hotel anticipated to compete with the Four Seasons Resort Mauritius is the Ananda Spa Resort; our
competitors currently have 481 rooms.
The following table sets out historical information regarding the operations of the hotels that HVS
International expects to compete with the Four Seasons Resort Mauritius:

                                                                                                                                                                                                     Year ended     Year ended
                                                                                                                                                                                                    December 31,   December 31,
                                                                                                                                                                                                        2004           2003
                                                                                                                                                                                                    Competition    Competition
Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           481            481
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          52%            53%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $611           $583
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $318           $308

Source: Competition information derived from the HVS Study.




                                                                                                                    123
Morocco
Hotels under Development
Four Seasons Hotel Marrakech
The Property. The Four Seasons Hotel Marrakech is scheduled to open in 2008. The hotel is expected to
have 140 rooms as well as 40 villas, which will be sold as residential real estate and managed by Four
Seasons. Of the 40 villas, 15 will be three-bed villas and 25 will be four-bed villas. Owners of these villas
may elect, but are not required, to participate in the hotel’s rental pool program, which provides the
owners of the villas with a right of use for a specified number of days each year. For the remainder of the
year, the villas will be part of the hotel’s inventory. The property development is located around the
Menara Gardens and the hotel design and layout will reflect Morocco’s heritage and architectural culture.
Planned amenities and facilities include various food and beverage outlets, conference facilities, a business
centre, a swimming pool, a spa and a gymnasium and other recreational facilities.

Ownership and Indebtedness. We indirectly own a 78.00 per cent. interest in the Four Seasons Hotel
Marrakech. See ‘‘Group Organisation’’. We have entered into an agreement pursuant to which we will own
the land and property related to the Four Seasons Hotel Marrakech by way of a freehold interest upon the
satisfaction of a condition, which we expect to satisfy in the near future. Pursuant to a shareholders’
agreement, we have certain rights with respect to this property, including the right to appoint three out of
five directors and the right of first offer over transfers of ownership interests in the hotel owning company
to non-affiliates. There is also a put and a call right with respect to the minority shareholders’ interest in
the property. We also have a drag along right in the event that we wish to transfer a majority ownership
interest in the property.
Our ownership interest in the hotel owning company of the Four Seasons Hotel Marrakech is asset
managed by our subsidiary KHAMS, for which KHAMS will receive a payment of $400,000 during the
pre-opening phase and an annual management fee equal to the greater of $100,000 or 1.0 per cent. of the
hotel’s annual gross revenue after opening. This property will be managed by Four Seasons pursuant to
hotel management and related agreements. See ‘‘Relationships with Hotel Management Companies—
Relationship with Four Seasons’’. As at September 30, 2005, there was no net indebtedness associated with
the Four Seasons Hotel Marrakech.

Competition. It is management’s intention that, at the time of its opening, the Four Seasons Hotel
Marrakech will be the most luxurious hotel in Marrakech. According to the HVS Study, the principal
competitors of the Four Seasons Hotel Marrakech are anticipated to be the Amanjena, La Mamounia, the
Palmeraie Golf Palace, the Sofitel and Le Meridien. According to the HVS Study, new hotels expected to
compete with the Four Seasons Hotel Marrakech include the Medina & Spa, the Barcelo, the Mandarin
Oriental, the Mandarin Oriental Villas, the Medina Club Vacance, the River Palm Residential
Development, La Maison Branitz and the Banyan Tree Hotel & Resorts Villas; our competitors currently
have 1,136 rooms.
The following table sets out historical information regarding the operations of the hotels that HVS
International expects to compete with the Four Seasons Hotel Marrakech:

                                                                                                                                                                                                     Year ended     Year ended
                                                                                                                                                                                                    December 31,   December 31,
                                                                                                                                                                                                        2004           2003
                                                                                                                                                                                                    Competition    Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           284            284
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          44%            40%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $344           $313
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $153           $124

Source: Competition information derived from the HVS Study.




                                                                                                                    124
Palestine
Hotels under Development
 o
M¨venpick Hotel Gaza
The Property. The M¨venpick Hotel Gaza is scheduled to open in summer 2006. The hotel will have 222
                       o
rooms in an eight storey tower and a connected one storey building. The hotel is located in the Al Mashtal
development, a large and prestigious integrated housing complex that comprises residential units, retail
outlets, a school, a marina and other recreational facilities. The hotel has views over the Mediterranean
Sea and is located adjacent to a planned residential development comprising 120 chalets. Planned
amenities and facilities will include two restaurants, two bars, meeting space, health club, beauty salon,
outdoor pool and retail units.

Ownership and Indebtedness. We indirectly own a 10.26 per cent. interest in the M¨venpick Hotel Gaza.
                                                                                    o
                                                                            o
See ‘‘Group Organisation’’. We own the land and property related to the M¨venpick Hotel Gaza by way of
                                                                                           o
a freehold interest. Other significant shareholders in the hotel owning company of the M¨venpick Hotel
Gaza include Palestine Company for Real Estate Investments, PADICO, PALTEL, Palestinian Investments
Company and Jordanian Company for Consolidated Contractor. While none of these shareholders has a
majority interest in the hotel, some hold greater ownership interests than we do. We have certain minority
shareholder rights with respect to this property, including board representation. The property is expected
                      ¨
to be managed by Movenpick pursuant to hotel management and related agreements. See ‘‘Relationships
                                                             o
with Hotel Management Companies—Relationship with M¨venpick’’.

Competition. According to the HVS Study, there are currently no internationally branded hotels in Gaza
                                                         o
and no hotels that would directly compete with the M¨venpick Hotel Gaza. The HVS Study did not
identify any new hotels that are expected to enter the market that would be expected to compete with the
  o
M¨venpick Hotel Gaza.

Syria
Operating Hotels
Four Seasons Hotel Damascus
The Property. The Four Seasons Hotel Damascus opened in December 2005. The hotel is a high-rise
building, which comprises 297 rooms, suites and furnished apartments. The property includes a real estate
component comprising 11 residential units for lease, ranging from 79 to 192 square meters in size, of
which, as of September 30, 2005, none had been leased. In addition, the property features commercial
space for lease in a commercial centre called the Northern Strip that is currently being constructed and is
expected to be composed of a row of low-rise buildings that will accommodate 13 shops, two restaurants
and one nightclub. As of September 30, 2005, none of the commercial space had been leased. Amenities
and facilities of the hotel include four food and beverage outlets, banqueting and conference facilities, a
large ballroom, a health club and an outside swimming pool with a separate outdoor Jacuzzi.
The hotel market in Syria may be affected by Syria’s political relations with the United States, which have
deteriorated in recent years. In May 2004, the United States implemented sanctions on Syria, including a
prohibition of flights from Syria to the United States. Further, as a result of the adoption of United
Nations Security Council Resolution 1636 in October 2005, there is a greater likelihood that sanctions
against Syria will be increased, which could have a material adverse effect on our operations in Syria. See
‘‘Risk Factors—Restrictions imposed by the United States government on Syria may subject U.S. persons
or affiliates associated with us to civil and criminal penalties and may have a material adverse effect on our
operations in Syria’’.

Ownership and Indebtedness. We indirectly own a 35.75 per cent. interest in the Four Seasons Hotel
Damascus, although we own, through a subsidiary, a majority ownership interest in the hotel owning
company of the Four Seasons Hotel Damascus. See ‘‘Group Organisation’’. We own the land and property
related to the Four Seasons Hotel Damascus by way of a freehold interest. Other significant shareholders
in the hotel owning company of the Four Seasons Hotel Damascus include the Governate of Damascus,
the Ministry of Tourism of Syria, AIID, MAFT and Kuwait Saudi Holding Company, none of which own a
larger interest than us.
Pursuant to an agreement dated February 2, 2003 between KHI and AIID, which owns 5.5 per cent. of
SSTIC, AIID has the right to exchange its shares in SSTIC for our shares based on the relative values of


                                                     125
the SSTIC shares and our shares as determined in connection with this offering. Although we believe that
AIID’s rights have lapsed under the terms of our agreement, we are continuing to discuss with AIID its
possible exercise of this exchange right. Similarly, pursuant to an agreement dated February 2, 2003
between KHI and MAFT, which owns 13.75 per cent. of SSTIC, we have offered MAFT the right to
exchange its shares in SSTIC for our shares on the same terms as we offer to AIID. We are continuing to
discuss with MAFT its possible exercise of this exchange right.
Our ownership interest in the hotel owning company of the Four Seasons Hotel Damascus is asset
managed by our subsidiary KHAMS, for which KHAMS received a payment of $300,000 during the
pre-opening phase and receives an annual management fee equal to the greater of $100,000 or 0.5 per
cent. of the hotel’s annual gross revenue after opening. This property is managed by Four Seasons
pursuant to hotel management and related agreements. See ‘‘Relationships with Hotel Management
Companies—Relationship with Four Seasons’’. As at September 30, 2005, the total amount of net
indebtedness associated with the Four Seasons Hotel Damascus was $9.1 million. This indebtedness was
held entirely by our direct Cayman Island subsidiary.

Operating and Occupancy History. Due to the short period of operation for this hotel, no historical
operating and occupancy data is available for this property.

Competition. According to the HVS Study, there are two internationally branded hotels in Damascus, the
270-room Le Meridien Damascus and the 278-room Sheraton Damascus Hotel and Towers; however, both
properties are somewhat aged and are not considered to offer five-star services or products of an
international standard. The HVS Study states that, accordingly, the Four Seasons Hotel Damascus benefits
from a ‘‘significantly superior’’ product, when compared to the current supply in the market, which will
enable the Four Seasons Hotel Damascus to command a substantial rate premium over the market
performance. The HVS Study identified one proposed new hotel that could compete with the Four
Seasons Hotel Damascus, a 250-room hotel that is anticipated to enter the market in 2009. According to
the HVS Study, our competitors currently have 548 rooms.
The following table sets out historical information regarding the operations of hotels that HVS
International expects to compete with the Four Seasons Hotel Damascus:

                                                                                                                                                                                                     Year ended     Year ended
                                                                                                                                                                                                    December 31,   December 31,
                                                                                                                                                                                                        2004           2003
                                                                                                                                                                                                    Competition    Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           628            628
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          70%            66%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $101           $100
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           $71            $66

Source: Competition information derived from the HVS Study.


Tanzania
Operating Hotels
 o
M¨venpick Royal Palm Hotel
The Property. The M¨venpick Royal Palm Hotel opened in October 1995 as the Sheraton Royal Palm
                        o
Hotel and we acquired our interest in the hotel in December 2004. Upon our acquisition of the property,
                 o
we engaged M¨venpick to take over the management of the hotel and the hotel was re-branded to the
  o
M¨venpick Royal Palm Hotel. The 230-room hotel is located in the city centre and is 12 kilometers from
the Dar Es Salaam airport. Amenities and facilities include five food and beverage outlets, meeting
facilities, business centre, outdoor pool, a fitness centre with sauna, a hair and beauty salon, tennis and
squash courts and access to an adjacent golf course.
The hotel is scheduled to undergo an extensive renovation commencing in April 2006 that is expected to be
completed in October 2006. The renovations will consist of improvements to the rooms, restaurants,
meeting rooms, lobby, kitchen and the air conditioning systems and are designed to re-position the
property in the market.




                                                                                                                    126
Ownership and Indebtedness. We indirectly own a 96.00 per cent. interest in the M¨venpick Royal Palm
                                                                                 o
                                                                                 o
Hotel. See ‘‘Group Organisation’’. We own the land and property related to the M¨venpick Royal Palm
Hotel by way of a freehold interest.
                                                              o
Our ownership interest in the hotel owning company of the M¨venpick Royal Palm Hotel is asset managed
by our subsidiary KHAMS, for which KHAMS receives an annual management fee equal to the greater of
$450 per inventory room or 2.0 per cent. of the hotel’s annual gross revenue. This property is managed by
  o
M¨venpick pursuant to hotel management and related agreements. See ‘‘Relationships with Hotel
                                                o
Management Companies—Relationship with M¨venpick’’. As at September 30, 2005, the total amount of
                                         o
net indebtedness associated with the M¨venpick Royal Palm Hotel was $7.3 million. Our debt service for
this property is currently higher than the income it is producing; accordingly, we are currently evaluating
options to reduce the debt service level on this property effective in early 2006.

Operating and Occupancy History. The following table sets out historical information regarding the
operations of the M¨venpick Royal Palm Hotel:(1)
                   o

                                                                                             Nine months ended                                Year ended
                                                                                               September 30,                                 December 31,
                                                                                            2005           2004                   2004           2003            2002

Exchange Rate ($:TZS) . .                       .   .   .   .   .   .   .              1,416.13                  1,112.83        1,112.83       1,062.81         994.12
Number of rooms . . . . . .                     .   .   .   .   .   .   .                   230                       230             230            230            230
Occupancy rate . . . . . . . .                  .   .   .   .   .   .   .                57.1%                     57.9%           57.4%          56.8%          52.7%
ADR . . . . . . . . . . . . . . .               .   .   .   .   .   .   .                   $90                       $85             $85            $81            $88
RevPAR . . . . . . . . . . . . .                .   .   .   .   .   .   .                   $51                       $49             $49            $46            $46
Total revenue . . . . . . . . .                 .   .   .   .   .   .   .           $5,381,986                 $5,248,357      $7,014,561     $6,609,379     $6,404,400
Gross operating profit(2)(3)                    .   .   .   .   .   .   .           $1,364,466                 $1,597,829      $1,920,156     $1,808,093     $1,760,960
Gross operating margin . .                      .   .   .   .   .   .   .                25.4%                     30.4%           27.4%          27.4%          27.5%
Hotel EBITDA(4) . . . . . .                     .   .   .   .   .   .   .             $873,562                 $1,420,627      $1,684,740     $1,654,040     $1,605,976
Hotel EBITDA Margin . .                         .   .   .   .   .   .   .                16.2%                     27.1%           24.0%          25.0%          25.1%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel. Audited financial accounts
    are only available at the hotel owning company level.

(2) Gross operating profit before management fees.

(3) YTD September 2005 includes a non-recurring pre-opening expense of $55,641 before GOP.

(4) Hotel EBITDA after management fees, incentive fee, FF&E reserve (2005 only), insurance, tax rent and asset management fee
    (2005 only).

Competition. According to the HVS Study, the principal competitors of the M¨venpick Royal Palm Hotel
                                                                               o
are the Kilimanjaro Kempinski Hotel, the Holiday Inn, the Sea Cliff Hotel, the Golden Tulip Hotel and the
New Africa Hotel. According to the HVS Study, no new hotels are anticipated to compete with the
  o
M¨venpick Royal Palm Hotel; our competitors currently have 655 rooms.
                                                                                     o
The following table sets out historical information regarding the operations of the M¨venpick Royal Palm
Hotel as compared to its competitors:

                                                                                                                      Year ended                      Year ended
                                                                                                                 December 31, 2004               December 31, 2003
                                                                                                                                 o
                                                                                                                              M¨venpick                          o
                                                                                                                                                              M¨venpick
                                                                                                                              Royal Palm                      Royal Palm
                                                                                                                        (1)                             (1)
                                                                                                            Competition          Hotel      Competition          Hotel

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            703             230             703             230
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           67%             57%             67%             57%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $77             $85             $80             $81
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $52             $49             $54             $46

Source: Competition information derived from the HVS Study.

Note:
                           o
(1) Includes the rooms of M¨venpick Royal Palm Hotel.




                                                                                                            127
Hotels under Development
 o
M¨venpick Beach & Spa Resort Zanzibar
The Property. This property opened in 2002 as the Zanzibar Beach Hotel and Resort. In January 2006, we
signed an agreement to acquire a 30.00 per cent. equity interest in the hotel. This resort originally
consisted of a 59-room hotel, which has been closed and is currently scheduled to undergo an extensive
refurbishment and expansion program. Upon completion of this renovation, the resort is anticipated to
                                                                    o
re-open in 2008 with a total of 190 rooms and will be managed by M¨venpick. The hotel development is
located on a pristine beach and is close to the prime fishing grounds near Mnemba Island. The site is
approximately 45 kilometres from Stone Town. Planned amenities and facilities include various food and
beverage outlets, conference facilities, swimming pools, a spa, a diving centre, retail units and other
recreational facilities.

Ownership and Indebtedness. We expect to indirectly own a 30.00 per cent. interest in the M¨venpicko
Beach & Spa Resort Zanzibar (upon the successful completion of our acquisition of an ownership interest
                                                                                                   o
in this property, which is expected to close in April 2006). The land and property related to the M¨venpick
Beach & Spa Resort Zanzibar is leased pursuant to three leases with the Zanzibar government, each with a
remaining term of 48 years and one 49-year optional extension. The total annual lease payments associated
with these leases is approximately $27,500, subject to review and adjustment every three years from the
date of commencement of the lease at an amount not exceeding one per cent. of the rent preceding such
review.
                                o
This property is managed by M¨venpick pursuant to hotel management and related agreements. See
                                                                      o
‘‘Relationships with Hotel Management Companies—Relationship with M¨venpick’’. As at September 30,
                                                         o
2005, there was no net indebtedness associated with the M¨venpick Beach & Spa Resort Zanzibar.

Competition. According to the HVS Study, the principal competitors of the M¨venpick Beach & Spa
                                                                                o
Resort Zanzibar are anticipated to be the Serena Inn, the Bluebay Beach Resort, the Karafuu Beach
Resort, the Ocean Paradise, the Mapenzi Beach Club, the Breezes Beach Club, the Palms, the Ras Nungwi
and the Gemma Dell Este. According to the HVS Study, a new hotel that is also expected to compete with
      o
the M¨venpick Beach & Spa Resort Zanzibar is the Kempinski Zamani Resort scheduled to open in 2006;
our competitors currently have 654 rooms.
The following table sets out historical information regarding the operations of the hotels that HVS
                                            o
International expects to compete with the M¨venpick Beach & Spa Resort Zanzibar:
                                                                                                                                                                                                     Year ended     Year ended
                                                                                                                                                                                                    December 31,   December 31,
                                                                                                                                                                                                        2004           2003
                                                                                                                                                                                                    Competition    Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           518            482
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          70%            60%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $144           $130
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $101            $78

Source: Competition information derived from the HVS Study.


United Arab Emirates, Dubai
Operating Hotels
 o
M¨venpick Hotel Bur Dubai
The Property. The M¨venpick Hotel Bur Dubai opened in September of 2001 as the Holiday Inn-Hotel
                       o
Bur Dubai, and we acquired our interest in it in July 2003. Upon our acquisition of the property, we
            o
engaged M¨venpick to take over the management of the hotel and the hotel was re-branded to the
  o
M¨venpick Hotel Bur Dubai. The hotel is a 232-room luxury property that is scheduled to undergo an
expansion that is expected to increase the number of rooms to 258 by October 2006. The hotel is centrally
located adjacent to Healthcare City, 15 kilometres from Dubai International Airport and close to Dubai’s
business districts. Amenities and facilities include six food and beverage outlets and a popular nightclub, an
executive floor and club lounge, meeting facilities, a business centre, a fitness centre, a hairdresser, an
outdoor pool and a sauna.




                                                                                                                    128
Ownership and Indebtedness. We indirectly own a 100.00 per cent. interest in this hotel property. See
                                                                     o
‘‘Group Organisation’’. We own the land and property related to the M¨venpick Hotel Bur Dubai by way
of a freehold interest.
                                                              o
Our ownership interest in the hotel owning company of the M¨venpick Hotel Bur Dubai is asset managed
by our subsidiary KHAMS. KHAMS receives an annual management fee equal to the greater of $100,000
                                                                                   o
or 1.0 per cent. of the hotel’s annual gross revenue. This property is managed by M¨venpick pursuant to
hotel management and related agreements. See ‘‘Relationships with Hotel Management Companies—
                     o
Relationship with M¨venpick’’. As at September 30, 2005, the total amount of net indebtedness associated
           o
with the M¨venpick Hotel Bur Dubai was $15.3 million. In November 2005, we refinanced the debt of the
                                  o
hotel owning company of the M¨venpick Hotel Bur Dubai through a senior secured loan and a revolving
overdraft facility. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Indebtedness—Recent Borrowings’’ for further details.

Operating and Occupancy History. The following table sets out historical information regarding the
operations of the M¨venpick Hotel Bur Dubai:(1)
                   o

                                                                                         Nine Months ended
                                                                                           September 30,                                   Year ended December 31,
                                                                                        2005           2004                         2004             2003            2002

Exchange Rate ($:AED)                       .   .   .   .   .   .   .               3.67                               3.67           3.67             3.67           3.67
Number of rooms . . . . .                   .   .   .   .   .   .   .                232                                232            232              232            232
Occupancy rate . . . . . . .                .   .   .   .   .   .   .            76.6%                               88.5%          86.1%            71.0%          65.5%
ADR . . . . . . . . . . . . . .             .   .   .   .   .   .   .              $148                                 $85            $93              $73            $67
RevPAR . . . . . . . . . . . .              .   .   .   .   .   .   .              $113                                 $75            $80              $51            $44
Total revenue . . . . . . . .               .   .   .   .   .   .   .       $10,551,795                          $7,682,964    $10,719,623       $7,064,596     $6,451,134
Gross operating profit(2) .                 .   .   .   .   .   .   .        $5,168,204                          $2,918,362     $4,009,445       $2,169,384     $1,787,807
Gross operating margin .                    .   .   .   .   .   .   .            49.0%                               38.0%          37.4%            30.7%          27.7%
Hotel EBITDA(3) . . . . .                   .   .   .   .   .   .   .        $4,215,134                          $2,325,332     $3,195,005       $1,789,592     $1,363,744
Hotel EBITDA Margin .                       .   .   .   .   .   .   .            39.9%                               30.3%          29.8%            25.3%          21.1%

Notes:
(1) The financial information was obtained from unaudited management accounts produced by the hotel except for revenue, gross
    operating profit and hotel EBITDA for year-end 2004 where the audited financial accounts were used.

(2) Gross operating profit before management fees.

(3) Hotel EBITDA after management fee, incentive fee, FF&E reserve, insurance, asset management fee (2003–2005) and
    governmental fees.

Competition. According to the HVS Study, the principal competitors of the M¨venpick Hotel Bur Dubai
                                                                           o
are the Crowne Plaza, the Al Bustan Rotana, the Rotana Towers, the Sheraton Deira, the Sofitel City
Centre, the Dusit Dubai and the Novotel. According to the HVS Study, new hotels expected to compete
           o
with the M¨venpick Hotel Bur Dubai are the InterContinental Hotel—DFC, the Crowne Plaza—DFC,
each scheduled to open in 2007, and the Conrad Hotel, scheduled to open in 2008; our competitors
currently have 2,522 rooms.
                                                                                     o
The following table sets out historical information regarding the operations of the M¨venpick Hotel Bur
Dubai as compared to its competitors:

                                                                                                                         Year ended                      Year ended
                                                                                                                    December 31, 2004               December 31, 2003
                                                                                                                                    o
                                                                                                                                 M¨venpick                          o
                                                                                                                                                                 M¨venpick
                                                                                                                                  Hotel Bur                       Hotel Bur
                                                                                                                           (1)                             (1)
                                                                                                                Competition         Dubai       Competition         Dubai

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          1,838            232            1,741             232
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           84%            86%              72%             71%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           $100            $93              $95             $73
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            $85            $80              $68             $51
Source: Competition information derived from the HVS Study.

Note:
                           o
(1) Includes the rooms of M¨venpick Hotel Bur Dubai.




                                                                                                                129
Hotels under Development
The Fairmont Palm Hotel & Resort
The Property. The Fairmont Palm Hotel & Resort is scheduled to open in 2008. The hotel is expected to
comprise 400 rooms in a high-rise building and will be located on the stem of The Palm Jumeirah. The
hotel will be attached to the Golden Mile, a 60,000 square metre international shopping and residential
destination. Planned amenities and facilities include six food and beverage outlets, ballroom facilities,
tennis courts, a spa, an activity area and a boat dock. Adjacent to the resort ‘‘The Fairmont Palm Vacation
Club,’’ comprising 460 one to four-bedroom vacation ownership residences, is also being developed, but is
not owned by us.

Ownership and Indebtedness. We indirectly own a 20.10 per cent. interest in The Fairmont Palm Hotel &
Resort. See ‘‘Group Organisation’’. The project company which owns and is developing the hotel owns the
land and property related to The Fairmont Palm Hotel & Resort by way of a freehold interest. Other
significant shareholders in The Fairmont Palm Hotel & Resort include IFA Hotels & Resorts FZE (an
affiliate of IFA, one of our shareholders), which holds a majority interest in the hotel, and FHR Gulf
Management FZ-LLC (a Fairmont company). Pursuant to a shareholders’ agreement, we have certain
minority shareholder rights with respect to the hotel owning company of the hotel, including the right to
appoint one out of the five directors and the right of first refusal over proposed share transfers. Under this
agreement our ownership interest is also subject to a tag along right in the event that IFA Hotels & Resorts
FZE transfers its shares with the result that it would own less than 31 per cent. of the project company
owning The Fairmont Palm Hotel & Resort.
Our ownership interest in the hotel owning company of The Fairmont Palm Hotel & Resort is asset
managed by IFA Hotels & Resorts FZE; however, our subsidiary KHAMS has contracted with IFA
Hotels & Resorts FZE to provide IFA Hotel & Resorts FZE with hotel advisory services with respect to
The Fairmont Palm Hotel & Resort, for which KHAMS will receive a payment of 20.0 per cent. of IFA’s
asset management fees. This property will be managed by Fairmont pursuant to hotel management and
related agreements. See ‘‘Relationships with Hotel Management Companies—Relationship with
Fairmont’’. As at September 30, 2005, there was no indebtedness associated with The Fairmont Palm Hotel
& Resort.

Competition. According to the HVS Study, the hotels expected to compete with The Fairmont Palm
Hotel & Resort are the Royal Mirage, the Jumeirah Beach Hotel, the Ritz-Carlton, Le Meridien Mina
Seyahi, the Hilton, Le Royal Meridien, the Sheraton Jumeirah Beach, the Mina A’Salam Hotel, the Al
Qasr Madinat Jumeirah and the Dar Al Masyaf. According to the HVS Study, several new hotels are
expected to be completed and to compete with The Fairmont Palm Hotel & Resort, including the
  o                                                                 o
M¨venpick Hotel Pearl Dubai (which is one of our hotels—see ‘‘—M¨venpick Hotel Pearl Dubai’’), the
  o
M¨venpick Crescent Resort, the Hilton, the Taj Palace Hotel, the Sofitel Thalasso Resort, the Radisson
SAS, Atlantis, Habtoor Grand Resort, the Fairmont The Palm Crescent, the Kempinski Emerald Palace,
       o
the M¨venpick Resort, the Oberoi, the Shangri La, the Iberotel, the Robinson Select and the Trump
Tower, as well as certain other hotel projects where the hotel management company has not been
identified; our competitors currently have 3,435 rooms.
The following table sets out historical information regarding the operations of the hotels that HVS
International expects to compete with The Fairmont Palm Hotel & Resort:

                                                                                                                                                                                                     Year ended     Year ended
                                                                                                                                                                                                    December 31,   December 31,
                                                                                                                                                                                                        2004           2003
                                                                                                                                                                                                    Competition    Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         2,432          2,157
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          85%            76%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $221           $180
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $187           $137
Source: Competition information derived from the HVS Study.


 o
M¨venpick Hotel Pearl Dubai
The Property. The M¨venpick Hotel Pearl Dubai is scheduled to open in 2009/2010. The hotel is expected
                    o
to comprise approximately 550 rooms in a high-rise building and will be located on the stem of the Palm



                                                                                                                    130
Island, in the Media City Free Zone. The hotel will be part of an integrated office, residential, retail and
entertainment development with views of Dubai Palm Island. The hotel is expected to have a visible and
prominent location and to capture demand from both corporate and leisure travellers. Planned amenities
and facilities include seven food and beverage outlets, including a tower roof top restaurant, a ballroom
and conference facilities, a health club, a spa and an indoor pool.

Ownership. We indirectly own a 16.32 per cent. interest in the M¨venpick Hotel Pearl Dubai. See ‘‘Group
                                                                  o
                                                                 o
Organisation’’. We lease the land and property related to the M¨venpick Hotel Pearl Dubai pursuant to a
sub-lease with a remaining term of 48 years, and with an option to renew for an additional 25 years. There
is an annual lease payment associated with this lease of AED 15,400,000 (approximately $4,000,000) for
each of the first five years, beginning upon completion of the hotel. There is an open market upward
adjustment to the annual lease payment every five years, provided that the adjustment shall be an increase
between five and ten per cent. The other shareholder in the hotel owning company of the M¨venpick o
Hotel Pearl Dubai is Dubai Pearl Hotels, which owns a majority interest in the hotel. Pursuant to a
shareholders’ agreement, we have certain minority shareholder rights with respect to this property,
including the right to appoint two out of six directors and certain put and call option rights. However,
under this agreement our ownership interest is also subject to a drag along right in the event that Dubai
Pearl Hotels wishes to transfer its shares to a non-affiliate third party. This property is expected to be
                o
managed by M¨venpick pursuant to hotel management and related agreements. See ‘‘Relationships with
                                                       o
Hotel Management Companies—Relationship with M¨venpick’’.

Competition. According to the HVS Study, the hotels expected to compete with the M¨venpick Hotel
                                                                                       o
Pearl Dubai are the Royal Mirage, the Jumeirah Beach Hotel, the Ritz-Carlton, Le Meridien Mina Seyahi,
the Hilton, Le Royal Meridien, Le Meridien Grosvenor House, the Sheraton Jumeirah Beach and the
Madinat Jumeirah. According to the HVS Study, several new hotels are expected to be completed and to
compete with The Fairmont Palm Hotel & Resort, including The Fairmont Palm Hotel & Resort (which is
one of our hotels—see ‘‘—The Fairmont Palm Hotel & Resort’’), the Radisson SAS—Media City, the
Kempinski Resort Mall of the Emirates, the Hilton Resort (Trunk), the Trump Tower Hotel (Trunk), the
                     o                                                         o
Oricon Resort, the M¨venpick Crescent Resort, the Radisson SAS (Trunk), the M¨venpick Resort and the
Kempinski Emerald Palace; our competitors currently have 3,652 rooms.
The following table sets out historical information regarding the operations of the hotels that HVS
                                            o
International expects to compete with the M¨venpick Hotel Pearl Dubai:

                                                                                                                                                                                                     Year ended     Year ended
                                                                                                                                                                                                    December 31,   December 31,
                                                                                                                                                                                                        2004           2003
                                                                                                                                                                                                    Competition    Competition

Number of rooms         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         1,828          1,741
Occupancy rate . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          86%            73%
ADR . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $202           $160
RevPAR . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          $173           $118

Source: Competition information derived from the HVS Study.


Hotel Pipeline
We continually engage in discussions with various parties throughout our extensive network of business
connections in the Middle East and Africa and Asia as well as in the hotel industry globally regarding
potential investments in new and existing hotel projects. We are currently in active negotiations to acquire
hotels and further interests in hotels currently in our portfolio in the following countries: Bangladesh,
India, Pakistan, Dubai, the Maldives, Liberia, Botswana, Uganda, Tanzania, China, Thailand, Indonesia,
South Africa. Our investment decisions are made in accordance with our corporate strategy. See
‘‘—Strategy’’.
As of the date hereof, we have signed memoranda of understanding for three new acquisitions in Saudi
Arabia, the U.A.E. and the Maldives that will represent an aggregate investment of $57 million based on
initial discussions. These projects are subject to further negotiation and, based on these negotiations, may
or may not be finalised.




                                                                                                                    131
Hotel Awards and Accolades
The following table presents some of the awards and recognition received by our hotels and hotel
management companies:

               Hotel                                            Award/Recognition

Four Seasons Hotels and Resorts      Lodging Leadership Award for Board Performance—HVS
                                     Executive Search (2002)
                                     Best Hotel Group Worldwide—Gallivanter’s Guide (2005)
 o
M¨venpick Hotels & Resorts           Fastest Growing Hotel Chain in the Middle East—World Travel
                                     Market Exhibit (2003)
  o
M¨venpick Resort & Spa               Green Planet Award/Environment—Kuoni Travel Ltd (2000, 2001,
El Gouna                             2003, 2005)
                                     Amongst the 100 Most Popular Hotels Worldwide—TUI Holly
                                     Award (2001)
                                     Environmental Hotel Award—Hotelplan (2001, 2002, 2004)
                                     Green Globe—SGS (2003, 2004, 2005)
 o
M¨venpick Resort El Quseir           Amongst the 100 Most Popular Hotels Worldwide—TUI Holly
                                     Award (2001–2005)
                                     Environmental Champion Award—TUI Holly Award (2004)
                                     Best Environmental Hotel (Gold)—MENA Travel Awards (2005)
Four Seasons Resort Sharm            Best New Hotel/Resort Discover—Gallivanter’s Guide (2003)
El Sheikh                            Best Resort in Europe, Africa and the Middle East—Gallivanter’s
                                     Guide (2003, 2004)
                                     Tatler’s Annual Travel Guide—Tatler (2003–2005)
Four Seasons Hotel George V          Top International City Hotel—Andrew Harper’s Hideaway Report
                                     (2001–2005)
                                     Best City Hotel Worldwide—Gallivanter’s Guide (2005)
                                     Best Hotel Resort Cuisine Worldwide—Gallivanter’s Guide (2005)
                                     Best Hotel in the World—Institutional Investor (2004)
                                     No. 1 Hotel in the World—ZAGAT Survey (2004)
Mount Kenya Safari Club              Amongst the top 100 Hotels in the World—Travel & Leisure
                                     Magazine (2005)
                                     Amongst the top 25 Hotels in Africa & the Middle East—Travel &
                                     Leisure (2005)
  o
M¨venpick Hotel and Resort           Conference Hotel of the Year—DEPA Middle East Hotel
Beirut                               Awards (2004)
                                     Nominated for Best Spa—MENA Travel Awards (2005)
                                     Best Hotel Construction—HERMES Award (2002)
 o
M¨venpick Hotel Bur Dubai            Best Price for Value Hotel (Silver)—MENA Travel Awards (2005)

Relationships with Hotel Management Companies
Relationship with Four Seasons
We are a shareholder of Four Seasons Hotels Inc. and have entered into hotel management agreements
with Four Seasons with respect to five operating properties (the Four Seasons Hotel Cairo at Nile Plaza,
the Four Seasons Resort Sharm El Sheikh, the Four Seasons Hotel George V and the Four Seasons Hotel
Damascus) and two properties under development (the Four Seasons Hotel Beirut and the Four Seasons
Resort Mauritius).

Shareholding. In 1996, entities owned by Kingdom Trust purchased approximately 24 per cent. of the total
outstanding shares of Four Seasons Hotels Inc. Certain of these shares were, in turn, contributed to
Kingdom 5-KR-124 and, in August 2004, Kingdom 5-KR-124 made an in-kind contribution of 179,322
shares of Four Seasons Hotels Inc., representing 0.64 per cent. of the total outstanding shares, to KHI in




                                                   132
exchange for 120,000 shares of KHI. The Four Seasons shares owned by us were valued at $10.3 million as
at January 31, 2006 and as at September 30, 2005.

Hotel Management Agreements.
Our hotel management relationships with Four Seasons are, in line with market practice, each governed by
a set of hotel management and related agreements, each pertaining to a distinct aspect of the management
of the subject hotel property. The term of the agreements pertaining to pre-opening services end six
months following the opening of the hotel and the term of the agreements pertaining to the operation of
the hotel are typically for an initial term of 15 to 20 years, with Four Seasons having the option in its sole
discretion to extend the agreements for three successive 15 to 20-year extensions. Pursuant to these
agreements, Four Seasons receives fees that are either lump sum consulting fees, fees expressed as a
percentage of gross hotel receipts or incentive fees expressed as a percentage of adjusted hotel gross
operating profit.
Under the agreements, Four Seasons is responsible for payment on our behalf of real estate and property
taxes and repairs and maintenance, utilities, insurance and employment related expenses. Four Seasons is
obligated to maintain the property in good repair and condition and to make or cause to be made routine
repairs and minor alterations as it determines to be necessary or as required pursuant to the terms of the
management agreements. Reserves are established to fund such maintenance and renovations and for the
replenishment of FF&E. Four Seasons may, with our prior written approval, make more extensive
improvements to the property. The management agreements require Four Seasons to furnish certain
services that are generally made available to other hotels and resorts managed by Four Seasons, including
instalment and operation of computer systems and reservation services, management and administrative
services, marketing and sales services, human resources training services and such additional services as
may from time to time be more efficiently performed on a national, regional or group level. During the
term of the management agreements, the service marks, symbols and logos currently used by Four Seasons
may be used in the operation of the hotel.
The management agreements may be terminated by either party upon the occurrence of, among other
things, an event of default (such as the bankruptcy of the other party or a material breach of the
management agreement); by the Four Seasons if the hotel is not opened by a specified date (in the case of
a hotel under development); or by us in the event that insurance proceeds are insufficient to cover hotel
damage to the extent of 20 per cent. of its replacement cost or if the cost of repair exceeds 20 per cent. of
replacement cost in the final three years of the term of the agreement. In addition, the management
agreements limit our ability to assign or dispose of our interest in the hotel managed by Four Seasons by
providing Four Seasons with a consent right in the event that we wish to assign or dispose of our interest to
persons that are involved in the business of operating luxury hotels.
The management agreements generally do not allow Four Seasons to assign its interest in the management
agreements without our prior consent, other than to an affiliate or in the event of a change of control of
Four Seasons resulting from sales of its publicly traded shares.

Relationship with Fairmont
We are a shareholder of Fairmont Hotels & Resorts Inc. and have entered into hotel management
agreements with Fairmont with respect to five operating properties (the Norfolk Hotel, the Mount Kenya
Safari Club, the Aberdare Country Club, The Ark and the Mara Safari Club) and two properties under
construction (the Fairmont Nile City Cairo and The Fairmont Palm Hotel & Resort), as well as a
development consulting agreement with Fairmont.

Shareholding. In 1996, entities owned by Kingdom Trust purchased approximately 50 per cent. of the total
outstanding shares of Fairmont Hotel Management Limited Partnership. Through a series of transactions
this interest became a five per cent. interest in Fairmont Hotels & Resorts Inc. Certain of the shares in
Fairmont Hotels & Resorts Inc. were, in turn, contributed to Kingdom 5-KR-124 and, in connection with
our August 2004 capital increase, Kingdom 5-KR-124 made an in-kind contribution of 326,117 shares of
Fairmont Hotels & Resorts Inc., representing 0.42 per cent. of the total outstanding shares, to KHI in
exchange for 90,920 shares of KHI. The Fairmont Hotels & Resorts Inc. shares owned by us were valued at
$14.4 million as at January 31, 2006 and as at September 30, 2005. In January 2006, Kingdom Hotels
International, an affiliate of our principal shareholders, Kingdom 5-KR-124, announced that it, together
with Colony Capital LLC, an investment firm, will acquire all of the outstanding shares of Fairmont,
including our shares.


                                                     133
Hotel Management Agreements.
Our hotel management relationships with Fairmont are, in line with market practice, each governed by a
set of hotel management and related agreements, each pertaining to a distinct aspect of the management
of the subject hotel property. The terms of agreements pertaining to pre-opening services end after the
date on which the hotel opens and the terms of the agreements pertaining to the operation of the hotel
range from an initial term of 15 to 25 years, with Fairmont having the option to extend the agreements for
extension periods ranging from five to 15 years, up to a maximum total extension period of 25 years. In
certain cases, Fairmont’s option to extend the agreements is conditioned upon Fairmont managing a
minimum number of rooms worldwide or managing a certain number of hotels in a geographic area and
meeting certain performance criteria. Pursuant to these agreements, Fairmont receives fees that are lump
sum consulting fees, fees expressed as a percentage of total hotel revenue or incentive fees expressed as a
percentage of adjusted hotel gross operating profit.
Under the agreements, Fairmont is responsible for payment on our behalf of real estate and property taxes
and repairs and maintenance, utilities, insurance and employment related expenses. Fairmont is obligated
to maintain the property in good repair and condition and to make or cause to be made routine repairs and
minor alterations as it determines to be necessary or as required pursuant to the terms of the management
agreements. Reserves are established to fund such maintenance and renovations and for the replenishment
of FF&E. Fairmont may, with our prior written approval, make more extensive improvements to the
property. The management agreements require Fairmont to furnish certain services that are generally
made available to other hotels and resorts managed by Fairmont, including instalment and operation of
computer systems and reservation services, management and administrative services, marketing and sales
services, human resources training services and such additional services as may from time to time be more
efficiently performed on a national, regional or group level. During the term of the management
agreements, the service marks, symbols and logos currently used by Fairmont may be used in the operation
of the hotel.
The management agreements may be terminated by either party if the other party becomes insolvent or
commits a material breach of the management agreement; by Fairmont if, in the case of our properties in
Kenya, we fail to make certain capital expenditures or improvements by certain dates; or by us upon the
occurrence of certain events, including, among others, in the event that insurance proceeds are insufficient
to cover hotel damage by a certain percentage or in the event that Fairmont fails to meet certain
performance criteria. In certain instances, we may have to pay a termination fee to Fairmont upon
termination of the management agreement.
The management agreements permit transfers of our interest in the hotel, provided that the transfer is not
to a competitor of Fairmont, but do not generally permit Fairmont to assign its interest in the management
agreement without our prior consent. However, certain management agreements prohibit us from
transferring our interest in the relevant hotel for a specified period and provide Fairmont with a right of
first refusal after such period. In addition, certain management agreements prohibit Fairmont from
operating hotels of the same or similar type as the relevant hotel that is or will be located within a specified
distance of the hotel.

Development Consulting Agreement. In 2003, we entered into a Development Consulting Agreement with
Fairmont pursuant to which we agreed to source hotel properties for Fairmont. Under the agreement,
Fairmont agreed to pay us a $250,000 annual fee as well as a transaction-specific incentive fee. This
agreement is for a term of one year and is renewable annually. To date, we have sourced six properties for
Fairmont under this agreement and Fairmont has paid us incentive fees of $2.0 million.

                   o
Relationship with M¨venpick
We are a shareholder of, and our Chief Executive Officer, Mr. Sarmad Zok, also serves on the board of
               o
directors of, M¨venpick Hotels and Resorts AG. We have entered into, or expect to enter into, hotel
                                  o
management agreements with M¨venpick with respect to five operating properties (the M¨venpicko
                               o                                o
Resort & Spa El Gouna, the M¨venpick Resort El Quseir, the M¨venpick Hotel and Resort Beirut, the
  o                                          o
M¨venpick Royal Palm Hotel and the M¨venpick Hotel Bur Dubai) and five properties under
                     o                                         o
development (the M¨venpick Hotel Ambassador Accra, the M¨venpick Hotel Tripoli, the M¨venpicko
                  o                                                  o
Hotel Gaza, the M¨venpick Beach & Spa Resort Zanzibar and the M¨venpick Hotel Pearl Dubai) and
have acquired the right to receive certain compensation under a business development agreement with
  o
M¨venpick.



                                                      134
Shareholdings. In 1998, entities owned by Kingdom Trust purchased approximately 27 per cent., which
                                                                                    o
was subsequently increased to 33.33 per cent., of the total outstanding shares of M¨venpick Hotels and
Resorts AG. Certain of these shares were, in turn, contributed to Kingdom 5-KR-124 and, in August 2004,
Kingdom 5-KR-124 made an in-kind contribution of 7.81 per cent. of the total outstanding shares of
  o                                    o
M¨venpick Hotels and Resorts AG (‘‘M¨venpick AG’’) to KHI in exchange for 189,084 shares of KHI. The
  o
M¨venpick AG shares owned by us were valued at $18.9 million by HVS International in August 2004; we
do not believe there has been any impairment to this value and, accordingly, considered that these shares
continued to have a value of $18.9 million as at both September 30, 2005 and January 31, 2006.

Hotel Management Agreements.
                                              o
Our hotel management relationships with M¨venpick are, in line with market practice, each governed by a
set of hotel management and related agreements, including a management agreement, each pertaining to a
distinct aspect of the management of the subject hotel property. The terms of agreements pertaining to
pre-opening services end six months following the opening of the hotel and the terms of the agreements
                                                                                                   o
pertaining to the operation of the hotel range from an initial term of ten to 20 years, with M¨venpick
having the option in its sole discretion to extend the agreements for extension periods ranging from one
                                                                   o
5-year extension to two 20-year extensions. Following the M¨venpick optional renewal terms, the
agreements are generally subject to automatic renewal for further terms of two to three years, unless the
                                                                                          o
agreements are terminated with notice by either party. Pursuant to the agreements, M¨venpick receives
fees that include lump sum consulting fees, fees expressed as a percentage of gross hotel operating revenue
and/or incentive fees expressed as a percentage of gross operating profit.
                           o
Under the agreements, M¨venpick is responsible for payment on our behalf of real estate and property
                                                                                               o
taxes and repairs and maintenance, utilities, insurance and employment related expenses. M¨venpick is
obligated to maintain the property in good repair and condition and to make or cause to be made routine
repairs and minor alterations as it determines to be necessary or as required pursuant to the terms of the
management agreements. Reserves are established to fund such maintenance and renovations and for the
                               o
replenishment of FF&E. M¨venpick may, with our prior written approval, make more extensive
                                                                        o
improvements to the property. The management agreements require M¨venpick to furnish certain services
                                                                            o
that are generally made available to other hotels and resorts managed by M¨venpick, including instalment
and operation of computer systems and reservation services, management and administrative services,
marketing and sales services, human resources training services and such additional services as may from
time to time be more efficiently performed on a national, regional or group level. During the term of the
                                                                                    o
management agreements, the service marks, symbols and logos currently used by M¨venpick may be used
in the operation of the hotel.
The management agreements may be terminated by either party upon the occurrence of, among other
things, an event of default (such as the bankruptcy of the other party or a material breach of the
management agreement); by us in the event that insurance proceeds are insufficient to cover hotel damage
by a certain percentage, in the event that we elect to sell or lease all or substantially all of our interest in
                                                 o
the hotel or, in some cases, in the event that M¨venpick fails to meet certain performance criteria; or by
  o                                                                           o
M¨venpick if we transfer our interest in the hotel to an entity deemed by M¨venpick to be a competitor or
to not have adequate financial capacity to perform our obligations. In certain instances, we may have to
                            o
pay a termination fee to M¨venpick upon termination of the management agreement.
Subject to the previous paragraph, the management agreements permit certain transfers of our interest in
                                           o
the hotel, but generally do not permit M¨venpick to transfer or assign its interest in the management
agreements, unless the assignment is to an affiliate or the transfer is to an entity that is acquiring
  o
M¨venpick and has recognised experience in hotel management to meet certain luxury hotel standards.
However, certain management agreements prohibit us from selling or disposing of our interest in the
                                                                   o
relevant hotel during the term of the agreement without providing M¨venpick with a right of first refusal.
                                                               o
In addition, certain management agreements also prohibit M¨venpick from operating hotels within a
specified distance of the relevant hotel without our consent.

Business Development Agreement.
                                                      o
In addition to the in-kind contribution of shares of M¨venpick AG described above, Kingdom 5-KR-124
also contributed to KHI the right to receive an 23.44 per cent. interest in the amount of compensation
                                                                                 o
Kingdom 5-KR-83 Ltd. (an affiliate of Kingdom 5-KR-124) receives from M¨venpick pursuant to a




                                                      135
                                                           o
Business Development Agreement dated July 29, 1998 (the ‘‘M¨venpick Business Development
Agreement’’).
               o
Under the M¨venpick Business Development Agreement, Kingdom 5-KR-83, Ltd. has the exclusive right,
                                                                                              o
during the specified exclusivity period described below, to market and promote certain M¨venpick hotel
services and to solicit proposals from hotel owners and developers to enter into management and similar
                  o
contracts with M¨venpick (the ‘‘MHR Hotel Contracts’’) in Syria, Lebanon, Morocco, Tunisia, Turkey,
Saudi Arabia, Kuwait, Bahrain, Qatar, the U.A.E., Oman, Iran, Iraq, Yemen and all of Africa (including
the Seychelles, Mauritius and Madagascar, but excluding Libya, Algeria and Egypt) (the ‘‘Kingdom
Territory’’). The exclusivity period commenced on February 1, 1998 and has been extended through
December 31, 2008. The exclusivity period will be extended for a further five-year period to December 31,
                                      o
2013 if, by December 31, 2008, M¨venpick has entered into MHR Hotel Contracts in the Kingdom
Territory, Egypt or Jordan in respect of a total of at least 5,500 rooms during the prior ten-year period.
Notwithstanding the foregoing, the exclusivity period automatically terminates upon the occurrence of
certain events, including certain affiliates of KHI ceasing to hold collectively at least 20 per cent. of the
                                                                  o
equity (in the form of shares and participation certificates) in M¨venpick AG, Kingdom 5-KR-83 (and/or
KHI) ceasing to be held by a trust for the benefit of HRH Prince Alwaleed and his family or by HRH
Prince Alwaleed directly, and certain other ownership thresholds ceasing to be met.
        o
The M¨venpick Business Development Agreement terminates in its entirety in the event that (i) certain
                                                                                   o
affiliates of KHI fail to continue to hold at least an aggregate of 30,000 M¨venpick AG shares and
participation certificates and at least five per cent. of the issued and outstanding shares and participation
certificates (affiliates of KHI currently hold 175,000 shares and participation certificates, constituting
                                                             o
33.33 per cent. of the total issued and outstanding M¨venpick AG shares), (ii) the M¨venpick AGo
                                                                                               o
shareholders agreement has been terminated due to a default by Kingdom 5-KR-83 or (iii) M¨venpick AG
                                                                               o
and its affiliates cease holding any shares or participation certificates in M¨venpick.
              o
Under the M¨venpick Business Development Agreement, Kingdom 5-KR-83, Ltd. is entitled to receive
30 per cent. of certain management and trademark licensing and similar fees and other amounts received
     o                                                                              o
by M¨venpick and its affiliates in connection with the MHR Hotel Contracts for M¨venpick hotels inside
the Kingdom Territory and 30 per cent. of certain management and trademark licensing and similar fees
                                   o
and other amounts received by M¨venpick and its affiliates in connection with MHR Hotel Contracts for
  o
M¨venpick hotels in countries outside the Kingdom Territory, subject to certain exceptions, including a
20 per cent. reduced rate applicable to hotels in certain countries in Asia and the Pacific region, and
additional conditions relating to Kingdom 5-KR-83 Ltd.’s involvement in the acquisition or development of
                o
the relevant M¨venpick hotel).

Relationship with HRH Prince Alwaleed
HRH Prince Alwaleed has played and continues to play an important role in our company. In addition to
being the Chairman of the Board and one of our directors, through his extensive network of business
connections in the Middle East and the hotel industry globally, HRH Prince Alwaleed has access to, and
currently provides us with, a significant number of hotel investment opportunities that we might not have
access to without our relationship with him.
HRH Prince Alwaleed is a member of the Saudi Royal Family and a highly successful businessman with
interests in a diversified portfolio of assets that includes hotel properties in North America and Europe
and shareholdings in the hotel management companies Four Seasons, Fairmont and M¨venpick. Seeo
‘‘—Relationships with Hotel Management Companies’’. In May 2000, Kingdom Trust, a trust for the
benefit of HRH Prince Alwaleed and his family, consolidated its indirect ownership interests in six hotels
and resorts that were under development in the Middle East through its capitalisation of KHI (initially
incorporated as Middle East Hotels Company). KHI was initially capitalised with $212 million, comprised
of $99 million invested by Kingdom 5-KR-124 in the form of cash and an in-kind contribution of ownership
interests in six hotels and resorts, namely the Four Seasons Hotel Cairo at Nile Plaza, the Four Seasons
Resort Sharm El Sheikh, the Four Seasons Hotel Amman, the Four Seasons Hotel Damascus, the
  o
M¨venpick Hotel and Resort Beirut and the Four Seasons Hotel Beirut, and $113 million in cash
contributions by nine other subscribers.
In November 2004, we increased our share capital to $321 million. Kingdom 5-KR-124’s share of this
capital increase consisted of its contribution of approximately $40 million in cash and approximately
$40 million of in-kind contribution in the form of shares in the Four Seasons Hotel Inc., Fairmont Hotels &




                                                    136
                  o
Resorts Inc. and M¨venpick Hotels and Resorts AG. See ‘‘Relationships with Hotel Management
Companies’’.

Right of Investment Opportunity Deed
In February 2006, we entered into a right of investment opportunity deed with HRH Prince Alwaleed and
Kingdom 5-KR-124. Pursuant to this deed, HRH Prince Alwaleed and Kingdom 5-KR-124 agreed to grant
us the right of investment opportunity over the investment in any hospitality-related opportunity that HRH
Prince Alwaleed or Kingdom 5-KR-124 and their respective affiliates and family intend to make, except for
investments in hospitality-related opportunities in countries and territories in North, Central and South
America (including the Caribbean) and in Western Europe. Our right of investment opportunity under this
agreement is subject to certain exceptions, such as HRH Prince Alwaleed’s right to invest in up to five per
cent. of the issued share capital of certain publicly traded companies and in investments in projects in
which he would hold on aggregate less than 10 per cent. of the issued capital. In addition, there is no
restriction under the terms of the deed with respect to any investment in, or any investment or other
                                                                                         o
activity undertaken by, or capital contributions to, Four Seasons, Fairmont or M¨venpick or their
respective successors or affiliates, whether or not any such entity becomes an affiliate of HRH Prince
Alwaleed or Kingdom 5-KR-124; provided that we will have a right of investment opportunity if any such
entity refers an investment opportunity to HRH Prince Alwaleed or Kingdom 5-KR-124. This agreement
has no fixed termination date, but can be terminated by HRH Prince Alwaleed or Kingdom 5-KR-124 in
the event we undergo a change of ownership such that HRH Prince Alwaleed and his family or trusts for
their benefit no longer directly or indirectly own at least 20 per cent. of our share capital.

Trademark License Agreement
In January 2006, we entered into a trademark license agreement with Kingdom Holding Company to
govern our intellectual property rights with respect to the ‘‘Kingdom’’ trademark. Pursuant to this
agreement, Kingdom Holding Company has granted us a royalty-free, non-exclusive license to use the
‘‘Kingdom’’ trademark, including related logos, in its current and future forms. This agreement has no
fixed termination date, but Kingdom Holding Company has retained the right under this agreement to
revoke the trademark license and terminate the trademark license agreement in the event that we undergo
a change of ownership such that HRH Prince Alwaleed and his family or trusts for their benefit no longer
directly or indirectly own at least 20 per cent. of our share capital.

Competition
The hotel industry is highly competitive. Our hotels compete for guests with other hotels and visitor
accommodations in each market in which we operate. Competitive advantage is based on a number of
factors, including level of service, quality of accommodation, location, brand affiliation, room rates, and
range of services and guest amenities. Competition is often specific to the individual markets in which our
hotels are located and includes competition from existing and new hotels operated under various brands in
the luxury and first class segment. Increased competition could have a material effect on the occupancy
rate, ADR and RevPAR levels at our hotels or may require us to provide additional amenities or make
capital improvements that we otherwise would not have to make, which may reduce our profitability.
We believe that our properties enjoy competitive advantages associated with their operations under the
                                  o
Four Seasons , Fairmont and M¨venpick hotel brand systems. We believe that the global marketing
programs and reservation systems of these brands, combined with the strong management systems and
expertise they provide, should enable our properties to continue to perform favourably in terms of
occupancy rate, ADR and RevPAR. Each of the hotel management companies of our hotels maintains
international reservation systems with reservation agents that have the current status of the rooms
available and rates from the properties. In addition, we believe that repeat guest business is enhanced by
guest rewards programs offered by some of our brands.
Competition for the acquisition of hotels or land for hotel development is highly fragmented. We face
competition from institutional pension funds, private equity investors, REITs and numerous local, regional
and national owners, including franchisors, in each of our markets. Some of these entities may have
substantially greater financial resources than we do and may be able and willing to accept more risk than
we can prudently manage. Competition generally may increase the bargaining power of property owners
seeking to sell and reduce the number of suitable investment opportunities offered to us.




                                                   137
Property and Facilities/Offices
As of the date of this offering memorandum, we held 17 freehold interests in ten countries and nine
leasehold interests in five countries. For additional information on our property interests, see ‘‘—Our
Hotels and Properties’’.
We have recently relocated our headquarters from Riyadh, Saudi Arabia to Dubai, U.A.E. We lease on
commercial terms our headquarters building, which is located at Dubai International Financial Centre,
P.O. Box 121223, Dubai, U.A.E. We believe that our current facilities are adequate for our present and
future operations.

Intellectual Property Rights
We have entered into a trademark license agreement with Kingdom Holding Company Limited governing
our intellectual property rights with respect to the ‘‘Kingdom’’ trademark. See ‘‘—Relationship with HRH
Prince Alwaleed—Trademark Licensing Agreement’’. The ‘‘Kingdom’’ trademark, including related logos,
is registered in Canada, the European Union, Mexico, Singapore, South Africa, Switzerland and Turkey
and is pending registration in the Philippines. In each of the registrations, except for the registration in
Mexico, the trademark registrations include hotels as the class of goods and services for which the
trademark was registered. We do not own any registered patents or copyrights.
The Four Seasons trademark, trade name and related logos are the property of Four Seasons; the
                                                                                        o
Fairmont trademark, trade name and related logos are the property of Fairmont; and the M¨venpick
                                                             o
trademark, trade name and related logos are the property of M¨venpick. Our hotel management and
related agreements allow us to use these trademarks, trade names and logos in connection with the
operation of our hotels.

Litigation
We are party to a number of litigation proceedings in the ordinary course of our business. However,
neither we, nor any of our subsidiaries, were involved in any governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which we are aware) during the last
12 months which may have, or have had, in the recent past significant effects on the financial position or
profitability of the company and/or the company and our subsidiaries taken as a whole.

Insurance
Insurance for certain of our hotel projects under development is provided by the construction company in
charge of the relevant project pursuant to a project construction agreement. Under these construction
agreements, it is a contractual obligation for the construction company to take out contractors all risk
insurance as well as third party liability insurance. In addition, upon completion of the project, the
construction company is required to take out insurance on our behalf to insure against any latent defects in
the construction of the hotel for a period of ten years following completion. In other cases, our hotel
projects under development are not covered by insurance as we do not believe insurance is necessary for
properties that are closed or in the early stages of planning.
For our operational hotels, pursuant to our hotel management agreements, the management companies
are largely responsible for obtaining and maintaining insurance on our properties against property,
liability, operational and business interruption risks at our cost and on our behalf. In some cases, we may
obtain and maintain certain types of insurance directly. Insurance policies on our hotel properties are
purchased, whether by us or the management companies, from insurers that are internationally recognised
and that meet established solvency criteria. The amount of insurance purchased varies according to an
estimation of the maximum foreseeable loss, which is, in turn, based on the current market replacement
cost and the potential loss of revenue due to a disruption in operations. We believe that our insurance
programs in force at present provide satisfactory coverage.
In addition to the above-described types of insurance, the following properties are covered for a certain
portion of the damage and business interruption we incur as a result of terrorism activities: the Four
Seasons Resort Sharm El Sheikh; the Four Seasons Hotel Cairo at Nile Plaza; the Four Seasons Hotel
                  o                                    o
Damascus; the M¨venpick Hotel Bur Dubai; the M¨venpick Hotel and Resort Beirut; the M¨venpick     o
Royal Palm Hotel; the Four Seasons Hotel Amman and the Fairmont Kenya hotels. The terrorism
insurance that we have purchased for these properties does not cover the full replacement value of the
properties as we do not believe that purchasing this level of terrorism insurance coverage is economical at
this time. Terrorism insurance is generally excluded from the other types of insurance covering our
properties.


                                                    138
                                 MANAGEMENT AND EMPLOYEES

Board of Directors
Our board of directors (the ‘‘Board’’) currently consists of nine members serving staggered three-year
terms. The Board meets upon the request of the Chairman of the Board or, in his absence, at the request
of two directors, as often as the chairman or two directors may deem necessary. The Board has broad
powers to manage our company, in accordance with our Articles of Association, including, without
limitation, the power to cause the Company to borrow money and to issue securities and the power to
establish committees and to delegate to committees certain of the powers, authorities and discretions
vested in the Board.
The primary responsibility of the Board is to foster the long-term success of the company. This includes,
but is not limited to, the following:
         Selecting, compensating, monitoring and, when necessary, replacing our officers and other key
         executives and overseeing succession planning;
         Reviewing and guiding corporate strategy, risk management policies, financial planning, annual
         budgets and business plans as recommended by our management;
         Setting performance objectives;
         Monitoring the implementation of hotel management and other related agreements and
         corporate performance;
         Overseeing major capital expenditures;
         Approving acquisitions and divestitures that exceed $10 million;
         Reviewing remuneration committee resolutions relating to senior management and Board
         remuneration;
         Monitoring and managing potential conflicts of interest of senior management, Board members
         and shareholders;
         Ensuring the adequacy of our internal accounting and financial reporting systems, including to
         support our independent audit functions and ensuring that appropriate systems of control are in
         place, particularly systems for monitoring risk, financial controls and compliance with relevant
         laws;
         Monitoring the effectiveness of corporate governance practices; and
         Overseeing the process of corporate public disclosure and communications.




                                                  139
The following table sets forth, as at the date hereof, the members of the Board, their ages, the years in
which they first became members of the Board, their principal occupations and the expiry of their term in
office:

                                                Member                                             Expiry of
Name                                      Age    Since                  Position(s)                  Term

HRH Prince Alwaleed Bin Talal Bin         48    2002     Chairman of the Board, member of           2009
Abdulaziz Al Saud                                        the executive committee
P.J. Shoucair                             39    2005     Board Member, chair of the                 2008
                                                         remuneration committee
Saleh Al Ghoul                            49    2005     Board Member, chair of the audit           2007
                                                         committee
Walid Arab Hashem                         48    2005     Board Member                               2008
Jassim M. Al-Bahar                        63    2005     Board Member, member of the                2009
                                                         executive committee
Sarmad N. Zok                             37    2002     Board member, Chief Executive              2009
                                                         Officer, member of the executive
                                                         committee
Sheikh Nasser Al Mutawa Alotaibi          56    2005     Board Member, member of the audit          2007
                                                         committee and remuneration
                                                         committee
Tarek Abdel Meguid                        49    2005     Board Member, member of the audit          2008
                                                         committee and remuneration
                                                         committee
Ra’ed W. Saqfelhait                       36    2006     Board Member, Chief Financial              2007
                                                         Officer

HRH Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud. HRH Prince Alwaleed is the Chairman of our Board,
a member of our executive committee and the president and a director of Kingdom 5-KR-124 and the
president and sole director of Kingdom 5-KR-51, our principal shareholders. HRH Prince Alwaleed was
born in 1957. HRH Prince Alwaleed holds a Bachelor of Science in Business Administration from Menlo
College in California and a Masters of Social Science from Syracuse University in New York. HRH Prince
Alwaleed has also received numerous honorary degrees, including an honorary Doctorate in Business
Management from Kyungwon University in Seoul, Korea, honorary Doctorates in Law from the University
of Syracuse, Exeter University in the United Kingdom and the American University in Cairo, an honorary
Doctorate in Humanities from the Al Aqsa University in Palestine and honorary Doctorates in Letters
from the University of New Haven in Connecticut, the University for Development Studies in Ghana and
the University of Uganda.
HRH Prince Alwaleed is the founder and chairman of the Kingdom Establishment for Commerce and
Trade, which was restructured in 1996 into the Kingdom Holding Company, and is a diversified investment
group with major interests, among others, in international banking, real estate, entertainment, information
technology, media, broadcasting, travel telecommunications, broadcasting, and hotels. Prince Alwaleed’s
                                                                                                   o
investment portfolio includes, among others, interests in Citigroup, Four Seasons, Fairmont, M¨venpick
and Apple Computers Inc. HRH Prince Alwaleed is a member of the board of directors of several
companies in which he holds investments. HRH Prince Alwaleed is a citizen of the Kingdom of Saudi
Arabia and is fluent in English and Arabic.

P.J. Shoucair. Mr. Shoucair is a member of our Board and the chair of our remuneration committee.
Mr. Shoucair was born in 1966. Mr. Shoucair holds a Masters in Business Administration from the
University of Southern California. Since 1996, Mr. Shoucair has been employed by Kingdom Holding
Company as the international investment advisor to HRH Prince Alwaleed, responsible for direct
investments, capital market activities and major investment projects in the Middle East and North Africa
region. Prior to joining Kingdom Holding Company, Mr. Shoucair was employed as a senior management
consultant in Saudi Arabia for the management consulting firm Arthur D. Little. Mr. Shoucair is a United
States citizen and is fluent in English and Arabic.



                                                   140
Saleh Al Ghoul. Mr. Al Ghoul is a member of our Board and the chair of our audit committee.
Mr. Al Ghoul was born in 1956. Mr. Al Ghoul holds a Bachelor of Science in Business Administration
from the University of Jordan. Since 1995, Mr. Al Ghoul has been employed by Kingdom Holding
Company as the Executive Director, Finance and Administration and Chief Financial Officer, responsible
for the design, establishment and implementation of accounting, budgetary, treasury and insurance policy
procedures. Prior to joining Kingdom Holding Company, Mr. Al Ghoul was the Group Head, Corporate
Banking of the United Saudi Bank. Mr. Al Ghoul is a Jordanian citizen and is fluent in English and Arabic.

Walid Arab Hashem. Dr. Walid Hashem is a member of our Board. Dr. Hashem was born in 1957.
Dr. Hashem holds a Bachelor of Arts in Economics from the American University in Cairo and a Master
of Arts and a Ph.D. in Economics from Georgetown University in Washington, D.C. Since April 2005,
Dr. Hashem has been a Member of Majlis Ash Shura in the Kingdom of Saudi Arabia and since 1991 he
has been an Associate Professor in the Economic Department at King Abdul Aziz University in Kingdom
of Saudi Arabia. Dr. Hashem is also the Vice President of the board of directors of Okaz Press
Corporation and the managing director of Rotana Video & Audio Visual Company. Dr. Hashem is a
citizen of the Kingdom of Saudi Arabia and is fluent in English and Arabic.

Jassim M. Al-Bahar. Mr. Jassim M. Al-Bahar joined our Board in 2005. Mr. Al-Bahar was born in 1942.
Mr. Al-Bahar holds a Bachelor of Arts in Political Science and International Relations and a Masters of
Public Administration, both from the University of Southern California. Mr. Al-Bahar is the Chairman and
Managing Director of International Financial Advisors, one of our shareholders. Mr. Al-Bahar is also a
member of our Board and executive committee and is a member of the boards of directors of several other
companies, including Kuwait Real Estate Company, Al-Qabas Newspaper, Kingdom Beirut and United
Investment Portugal. Mr. Al-Bahar is a Kuwaiti citizen and is fluent in English and Arabic.

Sarmad N. Zok. Mr. Zok is our Chief Executive Officer. Mr. Zok, whose legal name is Sarmad El Zaouk,
was born in 1968. Mr. Zok holds a Bachelor of Science in Hotel Management from the University of
Surrey and a Masters of Arts in Property Valuation and Law from City University Business School in
London. Mr. Zok began working with HRH Prince Alwaleed in 1995 and has been employed since
September 2001 as Chief Executive Officer of KHI. From 1999 to 2001, Mr. Zok worked with Kingdom
Hotel Partners LLC, a private equity fund operating in New York and London. Prior to 1999, Mr. Zok
worked with KHI as an Executive Vice President of Acquisitions and Development and was responsible for
our hotel investment and asset management activities within the Middle East, Africa and Asia. Mr. Zok
                                                                                      o
has actively participated in the development of numerous Four Seasons, Fairmont and M¨venpick hotels in
which KHI has invested. Prior to joining KHI, Mr. Zok headed Forte plc’s development efforts in the
Middle East, Africa and India and worked at HVS International, a leading hotel consulting and valuation
firm in London covering European markets. Mr. Zok is a member of our Board and executive committee
                                                o
and is a member of the board of directors of M¨venpick. Mr. Zok is a dual Lebanese and United Kingdom
citizen and is fluent in English, French and Arabic.

Sheikh Nasser Al Mutawa Alotaibi. Sheikh Al Mutawa Alotaibi is a member of our Board, our audit
committee and our remuneration committee. Sheikh Al Mutawa Alotaibi was born in 1949 and holds an
engineering degree from Marquette University in the United States. Sheikh Al Mutawa Alotaibi is a
prominent Saudi businessman and founder of Samama Group (a conglomerate in several businesses,
including hospital management, construction contracting and security services). Sheikh Al Mutawa
Alotaibi’s other major business include dairy production, cement and waterproofing manufacturing,
mining, oil and gas, petrochemicals, telecommunication and tourism. Sheikh Al Mutawa Alotaibi is an
active board member of the Saudi Chamber of Commerce in Riyadh, the U.S. Saudi Business Council, the
French Saudi Business Council, the National Committee of Museums and Art Galleries, the Saudi
Orphans Foundation, the Handicapped Children Foundation, the Patients Friends Foundation, the Taibh
Charity Foundation, the Saudi Red Crescent Foundation and the Foundation for Caring for Prisoners and
their Families. He is also a board member of Yamama Cement Company and Almarae Group. Sheikh Al
Mutawa Alotaibi is a citizen of the Kingdom of Saudi Arabia and is fluent in English and Arabic.

Tarek Abdel Meguid. Mr. Abdel-Meguid is a member of our Board, our audit committee and our
remuneration committee. Mr. Abdel-Meguid was born in 1956. Mr. Abdel-Meguid holds a Bachelor of
Science in Physiology from McGill University in Montreal and a Masters of Business Administration from
Columbia University in New York. Mr. Abdel-Meguid has 25 years of investment banking experience at
Morgan Stanley. From 2000 to 2005 Mr. Abdel-Meguid was the Head of Worldwide Investment Banking at
Morgan Stanley and a member of Morgan Stanley’s management committee. Prior to this position,



                                                   141
Mr. Abdel-Meguid has held various positions at Morgan Stanley. In addition to his experience with
Morgan Stanley, Mr. Abdel-Meguid also founded and managed Prince Gate Investors, a private equity
investment vehicle for private families. Mr. Abdel-Meguid is also a board member of Layalina Productions.
Mr. Abdel-Meguid is a United States citizen and is fluent in English and Arabic, with a working knowledge
of French.

Ra’ed W. Saqfelhait. Mr. Saqfelhait is our Chief Financial Officer. Mr. Saqfelhait was born in 1969.
Mr. Saqfelhait holds a Bachelor of Arts in Business Administration from the American University of Cairo
with a Minor in Economics and he is a Certified Public Accountant registered with the California State
Board of Accountancy. Mr. Saqfelhait joined KHI as Chief Financial Officer in November 2003. Prior to
joining KHI, Mr. Saqfelhait was the CFO of the Dubai International Financial Centre (the ‘‘DIFC’’), a
regional capital market located in Dubai. Prior to joining the DIFC, Mr. Saqfelhait was the CFO and
co-founder of Aragon Ltd, an e-business solutions provider in Amman, Jordan from 2000 to 2003. Prior to
2000, Mr. Saqfelhait was Vice President of Finance and a board member of Orascom Hotel Holdings
(‘‘OHH’’), one of the largest tourism groups and hotel-owning companies in the region. Before joining
OHH, Mr. Saqfelhait was an audit supervisor at Arthur Andersen & Co. in Amman. Mr. Saqfelhait
currently serves on the boards of directors of several of our subsidiaries and associates, including
METICO, and was a member of the board of directors of Zara Hotel Investment Company in 2002.
Mr. Saqfelhait is a Jordanian national and is fluent in English and Arabic.
The business address of each of our directors is: c/o Kingdom Hotel Investments, Dubai International
Financial Centre, P.O. Box 121223, Dubai, U.A.E.
Our directors are not under service contracts with us with respect to their roles as directors and we do not
have contractual obligations to provide benefits to our directors upon termination of their directorships.

Senior Management
We are managed by our Chief Executive Officer and our executive committee. Our Chief Executive Officer
is responsible for the formulation and supervision of the implementation of the business strategy of the
company. He is in charge of business development of the company and supervises the identification and
further development of new business opportunities. Our Chief Executive Officer also reviews and validates
our global budget, which is approved by our Board.
Our executive committee, which consists of HRH Prince Alwaleed, Jassim M. Al-Bahar and Sarmad Zok,
is in charge of the day-to-day management of our business. The executive committee was delegated all
powers of the Board that may be validly delegated to such a committee in accordance with our Articles of
Association and applicable law (including, without limitation, powers in respect of the acquisition and
disposition of investments up to $10 million), provided that the executive committee’s exercise of such
delegated powers is required to conform to any regulations that may be imposed on it by the Board.
Our management adopts a collective approach to key decision making and to the formulation of Company
procedures and strategies. Members of the management team meet on a regular basis to share information
on Company activities and collectively participate in key decisions relating to the implementation of our
strategy.




                                                    142
The following table sets forth, as at the date hereof, our senior management, their ages, the year they
joined our company and their principal responsibilities:

Name                                            Age    Joined              Principal Responsibilities

HRH Prince Alwaleed Bin Talal Bin               48     2000     Chairman and member of executive
Abdulaziz Al Saud                                               committee
Jassim M. Al Bahar                              63     2005     Member of executive committee
Mr. Sarmad N. Zok                               37     2001     Chief Executive Officer and member of
                                                                executive committee
Mr. Ra’ed W. Saqfelhait                         36     2003     Chief Financial Officer
Mr. Antoine Ltaif                               60     2001     Senior Vice President Design and
                                                                Construction
Mr. Timothy J. Hansing                          38     2002     Senior Vice President Acquisitions and
                                                                Development
Mr. Roger. N. Blackall                          38     2003     Senior Vice President Asset Management
Mr. David Mandefield                            59     2006     Senior Vice President Legal Affairs and
                                                                Corporate Secretary

HRH Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud. HRH is our Chairman and a member of our
executive committee (see ‘‘—Board of Directors’’).

Jassim M. Al Bahar. Mr. Al Bahar is a member of our executive committee (see ‘‘—Board of Directors’’).

Sarmad N. Zok. Mr. Zok is our Chief Executive Officer and a member of our executive committee
(see ‘‘—Board of Directors’’).

Ra’ed W. Saqfelhait. Mr. Saqfelhait is our Chief Financial Officer and a member of our Board (see ‘‘—
Board of Directors’’).

Antoine Ltaif. Mr. Ltaif is our Senior Vice President Design and Construction. Mr. Ltaif was born in 1945.
Mr. Ltaif holds an architectural degree from the Lebanese Academy of Fine Arts—Beirut. Mr. Ltaif began
working with HRH Prince Alwaleed when he joined Kingdom Holding Company in 1991 and has been
employed by KHI since September 2001. Prior to joining KHI, Mr. Ltaif worked on the design and
construction of private projects (palaces, mosques, sports complexes, etc.) and investment projects
(Kingdom City, Kingdom Hospital, Kingdom School, Kingdom Centre, etc.) undertaken by HRH Prince
Alwaleed. Mr. Ltaif has also actively participated in the design and construction of numerous Four Seasons
              o
hotels and M¨venpick hotels in which both KHI and Kingdom has invested. From 1972 to 1991, Mr. Ltaif
worked for Triad Condas International, a consulting company specialising in architecture and interior
design, in Beirut, Paris and Riyadh. Mr. Ltaif is a board member of several of KHI subsidiaries. Mr. Ltaif a
dual Lebanese and French national and is fluent in English, French and Arabic.

Timothy J. Hansing. Mr. Hansing is our Senior Vice President Acquisitions and Development. Mr. Hansing
was born in 1967. Mr. Hansing holds a degree (HCIMA) in hotel management from the University of East
Anglia and a Diploma in Hotel and Restaurant Administration from the University of Niagara Falls in
Canada. Mr. Hansing joined KHI in February 2002 as Senior Vice President Acquisitions and
                                                                  o
Development. Prior to joining KHI, Mr. Hansing headed the M¨venpick Hotels and Resorts development
                                                 o
division, based in Zurich. He was recruited by M¨venpick directly from Arthur Andersen’s hospitality and
leisure consulting division, where he headed the division for the Middle East and Africa, based in Bahrain.
Prior to joining Arthur Andersen, Mr. Hansing was a senior consultant with PKF hotel consultants based
in London, where he spent four years advising clients on hotel investment opportunities across Europe, the
Middle East and Africa. Prior to joining PKF hotel consultants, Mr. Hansing worked directly in the hotel
industry, with companies such as Canadian Pacific Hotels (now Fairmont), Forte, Thistle and the
Whitbread Hotel Group. Mr. Hansing is a United Kingdom national and is fluent in English and has a
working knowledge of French.

Roger N. Blackall. Mr. Blackall is our Senior Vice President Asset Management. Mr. Blackall was born in
1968. Mr. Blackall holds a Bachelor of Science degree from the Cornell University School of Hotel



                                                      143
Administration and also attended graduate-level real estate classes at American University in Washington,
D.C. Mr. Blackall joined KHI in September 2003 as Senior Vice President Asset Management. Prior to
joining KHI, Mr. Blackall worked at Shimizu Asset Management, Inc. (a subsidiary of Shimizu
Corporation of Tokyo, Japan) in Los Angeles, California, where his primary responsibility was the asset
management of the Four Seasons Resort, Maui, a 380-room resort hotel. While employed with Shimizu,
Mr. Blackall also asset managed and subsequently represented Shimizu in the disposition of the
Ritz-Carlton Hotel in Palm Beach, Florida, a 270-room beachfront resort, and the Hyatt Hill Country
Resort, a 500-room golf resort located in San Antonio, Texas. Prior to joining Shimizu, Mr. Blackall
operated his own company in Palm Beach, Florida, specialising in hotel appraisals, feasibility studies,
acquisition due diligence, impact studies and general management advisory and consulting assignments for
hotel, restaurant, golf course and other related recreational projects. Mr. Blackall has also held a variety of
hospitality industry consulting and operational management positions throughout the United States at
Arthur Andersen, Marriott International Corporate Hotel Development, PKF Consulting, Four Seasons
Hotels and Resorts, and the Walt Disney World Resort Division. Mr. Blackall is a United States citizen
who is fluent in English and has a working knowledge of French.

David Mandefield. Mr. Mandefield is our Senior Vice President Legal Affairs and Corporate Secretary.
Mr. Mandefield was born in 1946. Mr. Mandefield holds a Bachelor of Arts in English Literature, a
post-graduate diploma in Air and Space Law from McGill University in Montreal (Canada) and a
Doctorate in Law from Bordeaux University (France). Mr. Mandefield will be joining KHI as Senior Vice
President Legal Affairs and Corporate Secretary effective March 2006. From 1990 to 2006, Mr. Mandefield
                   e
worked with Le M´ridien Hotels & Resorts as General Counsel. During this time Mr. Mandefield actively
participated in a number of acquisitions and disposals of assets, including in the sale of the group to Forte
                                                                                             ´
International, Granada, Compass, Nomura and finally to Starwood. Prior to joining Le Meridien Hotels &
Resorts, Mr. Mandefield worked as a legal adviser for Air France. Mr. Mandefield is a citizen of France
and is fluent in French, English and Italian.

Other Information
The business address of each member of our senior management is: c/o Kingdom Hotel Investments,
Dubai International Financial Centre, P.O. Box 121223, Dubai, U.A.E.
There are no family relationships between any members of our Board and/or between any members of our
senior management.
In 2005 and 2004 we paid aggregate remuneration of approximately $1.6 million and $1.2 million,
respectively, to our directors and senior managers listed above. Due to the recent addition of new members
to our Board and senior management and recent changes to certain existing employment agreements with
members of our senior management, we expect the aggregate remuneration to increase further in 2006. In
January 2006, Mr. Zok, our Chief Executive Officer, signed an employment agreement with us, pursuant to
which, in addition to his salary, his eligibility to receive discretionary bonuses (in shares and/or cash) and
his right, which the Company has agreed to grant promptly following this offering, to receive a certain
number of our shares pursuant to, or in lieu of, a long term incentive plan, Mr. Zok is eligible to receive in
connection with this offering a one-time payment immediately following this offering in an amount equal
to one per cent. of the increase in the value of the company’s hotel investments from September 15, 2001
until the date of this offering, determined by the difference between the price per share in this offering and
the paid up capital per share of the company.
Our directors do not currently have service contracts with us or any of our subsidiaries that provide for
benefits upon termination of employment.




                                                     144
The following diagram illustrates the organisational structure of the company, which reflects recent
recruitment in several key management positions:

                                                                                   HRH
                                                                     Chairman of the Board of Directors
                                                                       Member-Executive Committee
                                                                        Member-Board of Directors



                                                                              Sarmad Zok
                                                                         Chief Executive Officer
                                                                       Member-Executive Committee
                                                                        Member-Board of Directors




                                                                                                                                        David Mandefield
             Tim Hansing                             Antoine Ltaif             Roger Blackall                       Raed Saqfelhait
                                                                                                                                          Counsel &
           SVP Acquisitions &                        SVP Design &               SVP Asset                           Chief Financial
                                                                                                                                           Corporate
             Development                              Construction             Management                              Officer
                                                                                                                                           Secretary




   Taras Ettl           James McGee                             Yvonne Thomsen           Alexandre Sogno   Ala Al-Malak       Fareed Bilbeisi       Margy Mommertz
VP Acquisitions &      VP Acquisitions &                           VP Asset                 VP Asset       Treasurer &        Group Financial        HR & Admin
  Development            Development                             Management               Management        Budgeting           Controller             Manager
                            Africa                                                                            Officer




Roger Stevenson         Kenneth Kerr       Fouad Makhlouf    Samer Abu Ayash
VP Feasibility &       VP Acquisitons &     VP Design &        VP Design &
   Planning             Development         Construction       Construction
                         Asia Pacific
                                                                                                                                                  9FEB200617005719
Potential Conflicts of Interest
HRH Prince Alwaleed, one of our directors, is a director of Kingdom 5-KR-124, one of our shareholders,
and also a director of Kingdom 5-KR-51 Ltd., one of our shareholders and joint venture partners. In
addition, Kingdom Trust, a trust for the benefit of HRH Prince Alwaleed, indirectly has shareholdings in
                                                                  o
Four Seasons Hotels Inc., Fairmont Hotels & Resorts Inc. and M¨venpick Hotels and Resorts AG, entities
related to the hotel management companies of our hotel properties. In January 2006, an entity owned by
Kingdom Trust announced that it, together with Colony Capital LLC, an investment firm, will acquire all of
the outstanding shares of Fairmont Hotels & Resorts Inc., including our shares. Jassim M. Al-Bahar, one
of our directors, is the chairman of IFA, one of our shareholders, and an affiliate of one of our joint
                                                                ¨
venture partners in The Fairmont Palm Hotel & Resort, the Movenpick Beach & Spa Resort Zanzibar and
our Kenya hotels. Sheikh Nasser Al Mutawa Alotaibi, one of our directors, is also one of our shareholders.
Accordingly, the duties of these directors to our shareholders as a whole may at times conflict with their
private interests or their outside duties, as the case may be. See ‘‘Related Party Transactions’’.

Shares Held by Directors
Certain of our directors own shares in our share capital. See ‘‘Shareholders’’.
We are currently considering adopting a share option plan for our senior management and employees and
expect that our shares to be issued and distributed pursuant to such plan, if implemented, will not exceed
levels that are typical for companies in the industry at a similar stage of development as our company.
As part of this offering, our senior management may purchase shares or GDSs under a friends and family
program. See ‘‘Subscription and Sale’’.

Corporate Governance and Internal Audit
In addition to our executive committee, we have established an audit committee and a remuneration
committee. The audit committee is comprised of three directors, Mr. Saleh Al Ghoul, Sheikh Nasser Al
Mutawa Alotaibi and Mr. Tarek Abdel Meguid; the latter two are independent. Mr. Saleh Al Ghoul is the
chairman of the audit committee.
The remuneration committee is comprised of three directors, Mr. P.J. Shoucair, Sheikh Nasser Al Mutawa
Alotaibi and Mr. Tarek Abdel Meguid; the latter two are independent. Mr. P.J. Shoucair is the chairman of
the remuneration committee.
Our audit and remuneration committees operate in accordance with charters approved by our Board. The
chairman and the other members of the audit and the remuneration committees are designated by our



                                                                                  145
Board. At least one member of the audit committee must have particular experience in financial and
accounting matters. Each of our audit and remuneration committees may delegate to its members the
exercise of particular competences. Each of our audit and remuneration committees holds at least four
ordinary meetings each year and may also hold extraordinary meetings when deemed necessary.
Our audit committee’s charter is reviewed annually by our Board following a recommendation by the audit
committee. Our audit committee is responsible, among other things, for:
         examining and evaluating the efficiency of our internal controls and procedures;
         examining our quarterly, semi-annual and annual financial statements and evaluating their
         completeness and consistency prior to their publication;
         advising our Board regarding the selection of external auditors;
         examining with the external auditors the framework and methodology of the annual audit and
         supervising and evaluating their performance;
         examining, following the completion of the annual audit, all issues that have arisen during the
         audit, the results of the audit and any issues raised by the external auditors during the execution
         of their work; and
         examining and evaluating the independence of the external auditors and suggesting to the Board
         measures to be taken in order to maintain their independence.
Our remuneration committee’s charter is reviewed annually by our Board following a recommendation by
the remuneration committee. Our remuneration committee is responsible, among other things, for:
         monitoring and recommending the level and structure of all direct and indirect remuneration of
         our directors and senior management;
         monitoring and recommending separation agreements for our directors and senior management
         and determining forfeiture conditions of awards granted to such persons;
         monitoring and recommending awards under any deferred compensation plans and any incentive
         share plans implemented by the company; and
         developing a formal and transparent policy for fixing the remuneration packages of directors.
In addition, pursuant to our Memorandum and Articles of Association related party transaction must be
approved by a majority of non-interested directors.
We comply with applicable corporate governance rules in effect in the Cayman Islands and in the DIFC.

Employees
As at September 30, 2005, we had 2,180 full-time employees employed by KHI at our head office in Dubai
and at our consolidated subsidiaries, as compared to 980, 669 and 679 employees as at December 31, 2004,
2003 and 2002, respectively. As at September 30, 2005, 24 of our employees were employed at our head
office in Dubai, 11 were employed by our consolidated hotel owning companies and 2,144 were employed
by our consolidated hotels. Pursuant to the hotel management agreements for each hotel, our hotel
employees are employed on behalf of and for the account of our subsidiary companies, however, all aspects
of the employer-employee relationship, including the recruitment, engagement, training, negotiation of
collective bargaining agreements, payment of salaries and discharge, of these employees, are managed by
the respective hotel management companies of each hotel.




                                                   146
The table below sets out the number of our employees of our consolidated subsidiaries by region as at
September 30, 2005:

                                                                                                                                                                                                                                                              As at
                                                                                                                                                                                                                                                          September 30,
                                                                                                                                                                                                                                                              2005

Kenya . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            882
Lebanon       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            464
Syria . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            252
Tanzania      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            302
U.A.E. .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            255
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                2,155

Our 24 employees in our head office are mainly engaged in accounting, finance and compliance, human
resources and general management and services, business development and acquisition, asset
management, design and construction and administration. All of the vice-president and senior vice
president employees at our head office hold professional certifications and have experience in the tourism,
lodging or real estate industries.
Our human resources department in our head office supervises our human resource policies and identifies
management recruiting needs on a company level.
The table below sets out the number of our head office employees by function as at September 30, 2005:

                                                                                                                                                                                                                                                              As at
                                                                                                                                                                                                                                                          September 30,
                                                                                                                                                                                                                                                              2005
Function
Finance . . . . . . . . . . . . . . . . . . . . . .                                               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              3
Compliance . . . . . . . . . . . . . . . . . . .                                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              2
Human resources . . . . . . . . . . . . . . .                                                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              2
General management . . . . . . . . . . . .                                                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              1
General services . . . . . . . . . . . . . . . .                                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              1
Business development and acquisition                                                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              4
Asset management . . . . . . . . . . . . . .                                                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              3
Design and construction . . . . . . . . . .                                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              5
Administration . . . . . . . . . . . . . . . . .                                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .              4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                   25

Since September 30, 2005, we have hired a Senior Vice President of Legal Affairs and Corporate Secretary,
an accountant and a senior financial controller at our head office and two new company representatives
that will be based in Johannesburg and Singapore.
We seek to employ talented professionals with a strong degree of integrity. Candidates for senior positions
at our head office are required to undertake a collective process of recruitment including a final interview
with our Chairman, HRH Prince Alwaleed. Our team consists of young and dynamic professionals whose
skill sets are as important as their attitude, a cornerstone of our corporate culture.
We seek to enhance the performance of our employees by adopting defined objectives for them to achieve.
All of our senior members participate in an incentive-based compensation scheme with specific
performance measures and vesting periods that extend beyond the time for achievement of the
performance targets.

Policies, Procedures and Training. We are in the process of formalising our human resources policies and
procedures in the form of a written manual. The human resources manual will contain our corporate
policies and procedures governing employment, compensation and benefits, professional development,
operations and local rules and policies for our headquarters, as approved by our Chief Executive Officer
and our senior management. In addition, we believe that training and development is essential for
improving the performance of our workforce. Accordingly, we are in the process of establishing formalised
training programs designed to enhance our employees’ know-how, skills and abilities in a manner which
can help support our performance and strengthen our corporate culture.




                                                                                                                                      147
                                   RELATED PARTY TRANSACTIONS

We have, from time to time, entered into arrangements and agreements with some of our shareholders,
directors, subsidiaries and affiliated companies. These related party transactions include entering into
agreements for the acquisition and development of several of our hotels, including the acquisition of our
interest in the Four Seasons Hotel George V from an affiliate of one of our principal shareholders,
Kingdom 5-KR-124, and co-investments with certain of our shareholders or affiliates of our shareholders,
such as our co-investment with MBI International, the parent company of our shareholder JJW Limited, in
the Four Seasons Hotel Cairo at Nile Plaza and the Four Seasons Resort Sharm El Sheikh, with our
                                                                                    o
shareholder IFA or its affiliates in The Fairmont Palm Hotel & Resort, the M¨venpick Beach & Spa
Resort Zanzibar and our properties in Kenya, and with Libyan Arab Foreign Investment Company
                           o
(‘‘LAFICO’’) in the M¨venpick Hotel Tripoli. We have also entered into certain intra-company
transactions, including the non-interest bearing advances provided to certain of our subsidiaries (see
‘‘Note 12-Due to Related Parties, Net’’ in the notes to our audited consolidated financial statements) and
the asset management agreements that our subsidiary KHAMS has entered into with several of our other
subsidiaries, including the hotel owning companies of the Norfolk Hotel, The Ark, the Mount Kenya Safari
                                                                 o
Club, the Aberdare Country Club, the Mara Safari Club, the M¨venpick Hotel and Resort Beirut, the Four
Seasons Hotel Beirut, the Four Seasons Hotel Damascus, the Four Seasons Hotel Marrakech, the
   o                                   o                                       o
M¨venpick Royal Palm Hotel, the M¨venpick Hotel Bur Dubai and the M¨venpick Hotel Ambassador
Accra. In addition, in February 2006, 70,000 shares of KHI with a nominal value of $100 were issued at a
price of $100 per share (the price at which we have issued shares in prior capital increases) to certain
members of our management, including 50,000 shares to Mr. Sarmad Zok, 6,000 to Mr. Ra’ed Saqfelhait,
5,000 to Mr. Antoine Ltaif, 4,000 to Mr. Timothy Hansing, 2,000 to Mr. Roger Blackall, 2,000 to Mr. Samer
Abu Ayash and 1,000 to Mr. Fareed Bilbeisi. Except for the share issuances described in the preceding
sentence, we believe that each of our related party transactions was entered into on an arm’s length basis in
accordance with our normal business practices.
In addition, we and affiliates of our principal shareholders, Kingdom 5-KR-124 and Kingdom 5-KR-51,
                                                                                       o
have shareholdings in Four Seasons Hotels Inc., Fairmont Hotels & Resorts Inc. and M¨venpick Hotels
and Resorts AG, entities related to the hotel management companies of our hotel properties. In January
2006, Kingdom Hotels International, an affiliate of our principal shareholders, Kingdom 5-KR-124 and
Kingdom 5-KR-51, announced that it, together with Colony Capital LLC, an investment firm, will acquire
all of the outstanding shares of Fairmont Hotels & Resorts Inc., including our shares.
We are not currently aware of any plans of our shareholders or directors to subscribe in the offering (other
than pursuant to the preferential allocation of shares to certain individuals as described herein) or of any
intention by any such persons to subscribe for more than five per cent. of the offering.
Transactions involving members of our Board are subject to special Board voting procedures. Directors
with an interest in a transaction must disclose the nature of their interest prior to the Board’s consideration
of the transaction and, subject to certain exceptions, the interested director is not permitted to vote or be
counted in the quorum on any resolution concerning such transaction.




                                                     148
                                                             SHAREHOLDERS

The following table sets forth the names of our shareholders prior to the offering, together with the
amount of their interest in our share capital prior to and following the offering assuming no exercise and
assuming full exercise of the over-allotment option (in both cases, assuming our issuance of new shares to
Salaam Investments as described below):

                                                                                                            Assuming Full Exercise of
                                                                                                           the Over-Allotment Option
                                                                                                            and Issuance of Shares to
                                                  Prior to the Offering       After the Offering(1)(2)        Salaam Investments(3)
                                                Number of       Percentage   Number of      Percentage      Number of     Percentage
Shareholders                                     Shares          Holding      Shares         Holding          Shares        Holding

Kingdom 5-KR-124 Ltd . . . .            ..      75,416,240           58.54   75,416,240            43.90   75,416,240           42.54
Kingdom 5-KR-51 Ltd . . . .             ..      19,100,000           14.83   19,100,000            11.12   19,100,000           10.77
JJW Limited . . . . . . . . . . .       ..       8,466,920            6.57    8,466,920             4.93    8,466,920            4.78
International Financial
  Advisors . . . . . . . . . . . . .    ..       8,418,280            6.53    8,418,280             4.90    8,418,280            4.75
Libyan Arab Foreign
  Investment Company . . . .            ..       4,233,460            3.29    4,233,460             2.46    4,233,460            2.39
Sheikh Nasser Al Mutawa
  Alotaibi . . . . . . . . . . . . .    ..       4,000,000            3.10    4,000,000             2.33    4,000,000            2.26
Mohamed Ali Abdulqader
  Hafez . . . . . . . . . . . . . .     ..       2,400,000            1.86    2,400,000             1.40    2,400,000            1.35
Hisham Ali Abdulquader
  Hafez . . . . . . . . . . . . . .     ..       2,400,000            1.86    2,400,000             1.40    2,400,000            1.35
HRH Prince Mishal Bin
  Abdulaziz Al-Saud . . . . .           .   .    2,000,000            1.55    2,000,000             1.16    2,000,000            1.13
Management . . . . . . . . . . .        .   .    1,400,000(4)         1.09    3,615,171             2.10    3,615,171            2.04
Mousa Limited . . . . . . . . . .       .   .    1,000,000            0.78    1,000,000             0.58    1,000,000            0.56
Salaam Investments Limited              .   .            0            0.00            0             0.00    1,200,000            0.68
Other . . . . . . . . . . . . . . . .   .   .            0            0.00   40,729,796            23.71   45,024,293           25.40
Total . . . . . . . . . . . . . . . . . . . 128,834,900             100.00 171,779,867           100.00 177,274,364           100.00

Notes:
(1) Assuming no exercise of the over-allotment option.

(2) Assuming no exercise of the over-allotment option, our shareholders will experience an immediate dilution of 25.0 per cent.
    resulting from the offer of our shares and GDSs.

(3) Assuming full exercise of the over-allotment option, our shareholders will experience an immediate dilution of 27.3 per cent.
    resulting from the offer of our shares and GDSs.

(4) In February 2006, 70,000 shares of KHI were issued at $100 nominal value to certain members of our management, including
    50,000 shares to Mr. Sarmad Zok, 6,000 to Mr. Ra’ed Saqfelhait, 5,000 to Mr. Antoine Ltaif, 4,000 to Mr. Timothy Hansing,
    2,000 to Mr. Roger Blackall, 2,000 to Mr. Samer Abu Ayash and 1,000 to Mr. Fareed Bilbeisi. These shares were issued prior to
    the 1 to 20 share split described in ‘‘Description of Share Capital-Our Share Capital’’.

Upon our issuance to Salaam Investments following this offering in connection with our acquisition of
additional interests in the Four Seasons Hotel Cairo at Nile Plaza of new shares with an aggregate value, at
the offering price, equal to $11.1 million, Salaam Investments is expected to hold an interest equivalent to
0.68 per cent. of our share capital following the offering, taking into account the issuance of these new
shares. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Factors Affecting Financial Condition and Results of Operations—Hotel openings and acquisitions and
consolidation of minority interests’’.
Our share capital consists of one class of ordinary shares, each with nominal value of $5. All of our shares
carry equal voting rights.
Our principal shareholders are Kingdom 5-KR-124 and Kingdom 5-KR-51, Cayman Islands investment
entities owned by the Kingdom Trust, a trust for the benefit of HRH Prince Alwaleed and his family. In
addition, HRH Prince Alwaleed is the president and a director of Kingdom 5-KR-124 and the president
and sole director of Kingdom 5-KR-51. See ‘‘Business Description—Relationship with HRH Prince
Alwaleed’’ and ‘‘Management and Employees—Board of Directors’’. While our principal shareholders
own a majority of our outstanding shares and may therefore take actions that are not in line with, or may



                                                                      149
conflict with, our public shareholders’ best interests, after the offering certain protections will be in place
that seek to limit the ability of our principal shareholders to abuse their control. These include the fact that
corporate decisions may only be made in accordance with the applicable laws of the Cayman Islands and
the requirements in our Memorandum and Articles of Association. In addition, any amendments thereto
require a special resolution of 662⁄3 per cent. of our shareholders. See ‘‘Description of Share Capital’’.




                                                      150
                                    DESCRIPTION OF SHARE CAPITAL

Set out below is a summary of certain information concerning our shares and certain provisions of our
Memorandum and Articles of Association, and applicable laws and regulations in effect as at the date hereof.
This summary does not purport to be complete.
GDS holders will be able to exercise their rights with respect to the shares underlying the GDSs only in
accordance with the provisions of the Deposit Agreement and the relevant requirements of applicable law.
See ‘‘Terms and Conditions of the Global Depositary Receipts’’ for more information.

Our Share Capital
On our formation in May 2000, we were initially capitalised with $211,673,000, consisting of 2,116,730
shares, each with a nominal value of $100. In August 2004, we increased our share capital through the
issuance of 1,100,000 shares, each with a nominal value of $100. In September 2005, we further increased
our share capital through the issuance of an additional 2,200,000 shares, each with a nominal value of $100.
There were 3,216,730 shares outstanding on January 1, 2005 and 5,416,745 shares outstanding on
December 31, 2005. Since January 1, 2002, more than ten per cent. of our share capital has been paid for
with assets other than cash. See ‘‘Business Description-History’’.
In February, 2006, we issued 70,000 shares at nominal value of $100 to certain members of our
management. In February, 2006, the nominal value of our shares was reduced from $100 per share to $5
per share when we effected a 1 to 20 share split. In February, 2006, we also issued 19,100,000 shares with a
nominal value of $5 per share in exchange for a 25.00 per cent. interest in Kingdom 5-KR-35 Ltd., the
owner of a 100.00 per cent. indirect interest in the hotel owning company of the Four Seasons Hotel
George V. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations-
Factors Affecting Financial Condition and Results of Operations-Hotel openings and acquisitions and
consolidation of minority interests’’. As a result, as of the date hereof, our share capital is $644,174,500,
consisting of 128,834,900 shares, each with a nominal value of $5. The company’s current authorised share
capital is $1,500,000,000, including 171,165,100 authorised, but unissued shares. Our share capital is fully
paid.

Our Memorandum and Articles of Association
The rights of our shareholders are governed by our Memorandum and Articles of Association (the
‘‘Articles’’) and the Cayman Islands Companies Law (2004 Revision) (the ‘‘Companies Law’’).
The following is a summary of the rights under our Articles and the Companies Law relating to voting,
dividends and transfers, which attach to our existing shares, with which our new shares will rank pari passu
in all respects when unconditionally allotted and fully paid.
In the following description of the rights attaching to our shares, a holder of shares and a shareholder is, in
either case, the person registered in our shareholders’ register as the holder of the relevant shares.
Shareholders may opt to have their shares evidenced by share certificates (in certificated form) as opposed
to being held in book-entry form.

Objective
According to Article 3 of our Memorandum and Articles of Association, the objects for which KHI is
established are unrestricted, but include without limitation:
            carrying on the business of an investment company;
            carrying on the business of realtors, developers, consultants or dealers in or vendors of all types
            of property, including services;
            exercising and enforcing all rights and powers related to the ownership of securities; and
            providing managerial and other executive, supervisory and consultant services for or in relation to
            any company in which we have an interest.

Share Capital
Our share capital is $644,174,500, consisting of 128,834,902 shares, each with a nominal value of $5. We
have the power, insofar as it is permitted by law, to redeem or purchase any of our shares and to increase


                                                      151
or reduce our share capital subject to the provisions of the Articles and the Companies Law and to issue
any part of our capital, whether original, redeemed or increased, with or without any preference, priority
or special privilege or subject to any postponement of rights or to any conditions or restrictions. Unless the
conditions of an issuance of shares expressly declare otherwise, every issue of shares, whether declared to
be preference or otherwise, shall be subject to the powers described in the previous sentence.
All shares of the same class shall have the same rights. If at any time our share capital is divided into
different classes of shares, the rights attached to any class (unless the conditions of an issuance of shares
expressly declares otherwise) may be varied with the consent in writing of the holders of 75 per cent. of the
issued shares of that class, or with the sanction of a special resolution passed at a general meeting of the
holders of our shares of that class.

Share Certificates
Shares certificates shall be in such form as determined by the directors but may not be in bearer form.
Share Certificates shall be consecutively numbered or otherwise identified and shall specify the shares to
which they relate. The name and address of the person to whom the shares are issued with the number of
shares and date of issue shall be entered in our shareholders’ register.
Unless the conditions of allotment of the shares otherwise provide, we are required to provide to every
shareholder within two months after allotment or lodgement of transfer one share certificate for all
allotted or transferred shares or several share certificates, each for one or more of his shares, upon
payment of $0.50 (or such lesser amount as the directors may determine) for every certificate after the first
certificate.
If a share certificate is defaced, lost or destroyed, it may be renewed on payment of a fee of $1 or such
lower sum and on such terms, which may include indemnity and payment of expenses incurred by us in
investigating the ownership of the certificate, as the directors may determine.

Voting Rights
Every shareholder present in person or by proxy at a general meeting shall have one vote for each share
registered in its name in the shareholders’ register.

Pre-emptive Rights
In the event of an increase in share capital by the issuance of new shares for cash, existing shareholders
have pre-emptive rights in connection therewith and are entitled to participate in the share capital increase
on a pro rata basis based on the percentage of the outstanding share capital held by each existing
shareholder prior to the issuance of such new shares. Shareholders are not entitled to pre-emptive rights in
connection with the issuance of shares for non-cash consideration. Shareholders may waive the
pre-emptive rights on behalf of all shareholders by way of a special resolution of 662⁄3 per cent. of the
shareholders.

Alteration of Memorandum and Articles of Association; Changes in Share Capital
We may by a special resolution of 662⁄3 per cent. of the shareholders:
         change our name;
         alter our objects;
         increase our authorised share capital by such sum, to be divided into shares of such amount or
         without nominal or par value, as the resolution shall prescribe and with such rights, priorities and
         privileges as our general meeting may determine;
         consolidate and divide all or any of our share capital into shares of larger amount than our
         existing shares;
         divide, by subdivision of our existing shares or any of them, the whole or any part of our share
         capital into shares of smaller amount than is fixed by our Memorandum and Articles of
         Association or into shares without nominal or par value;
         cancel any shares which at the date of the passing of the resolution have not been taken or agreed
         to be taken by any person;



                                                     152
          waive shareholder pre-emptive rights; and
          amend our Memorandum and Articles of Association.

Dividends
Subject to the Companies Law, our Board may from time to time declare dividends (including interim
dividends) and distributions on outstanding shares and authorise payment of the same out of the funds of
the company lawfully available therefor. No dividend or distribution shall be payable except out of our
profits, realised or unrealised, or out of the share premium account or as otherwise permitted by the
Companies Law.
Under the Companies Law, dividends may be declared and paid only out of profit or share premium and a
dividend may not be paid if its payment would result in the company being unable to pay its debts as they
fall due in the ordinary course of business.

Transfer of Shares
Transfer of shares must be in writing and executed by or on behalf of the transferor, who is deemed to
remain the holder of such transferred shares until the name of the transferee is entered in the
shareholders’ register in respect such transferred shares.

General Meetings of our Shareholders
Our Board is required to call and hold an annual general meeting of our shareholders. If no other date and
time is set for the annual general meeting, the annual general meeting shall be held at the registered office
of the company on the second Wednesday in December of each year. Our Board may, when it sees fit, and
is required to, on the request of shareholders holding ten per cent. of our paid-up capital, convene a
general meeting of the shareholders. In accordance with our Articles, we are required to give to our
shareholders at least twenty one days’ notice of an annual general meeting or any other general meeting.
A quorum of shareholders holding in aggregate more than 50 per cent. of our shares in issue, present in
person or by proxy, is required in order to transact any business at any general meeting of our
shareholders, and no such meeting may take place unless a quorum is present. A resolution in writing
signed by all existing shareholders at the time is deemed to be valid and effective as if the same had been
passed at a general meeting duly convened and held.
The general meeting is presided over by the Chairman of the Board, or, if the Chairman of the Board is
absent, by a director elected by the present directors or in the absence of such a director or the Chairman
of the Board, by a shareholder of the general meeting elected by the shareholders in attendance.
A resolution put to the vote of the general meeting will be decided on a show of hands unless a poll is
before or on the declaration of the result of the show of hands, demanded by the Chairman or any member
present or by proxy. The demand for a poll may be withdrawn. In the case of an equality of votes, the
Chairman is not entitled to a second or casting vote.

Directors’ Votes
The quorum necessary for the transaction of business of the directors shall be a majority of the number of
directors constituting the whole Board. Decisions shall be made by a majority vote of the directors and
alternate directors present at a meeting at which there is a quorum and the Chairman will have a casting
vote in case of an equality of vote.
In respect of any contract or transaction in which a director or alternate director has, directly or indirectly,
any interest or duty whether or not it conflicts or may conflict with the interests of the company, the nature
of such interest shall be disclosed by him or the alternate director appointed by him at or prior to a
consideration of an issue related to such contract or transaction.
Subject to certain exceptions, a director or alternate director shall not vote or be counted in the quorum at
a meeting of the Board, or of a committee of the Board, on any resolution concerning a matter in which he
has, directly or indirectly, any interest or duty whether or not it conflicts or may conflict with the interests
of the company.




                                                      153
Directors’ Remuneration
The remuneration to be paid to our directors shall be such remuneration as our directors shall determine.
Such remuneration shall be deemed to accrue from day to day. Our remuneration committee submits
recommendations for the remuneration of directors to the Board.

Appointment and Retirement of Directors
Our Board consists of nine directors, or such other number as may be specified from time to time by
ordinary resolution of the shareholders, provided that two or more directors on the Board at any one time
shall satisfy the independence criteria adopted from time to time by the Board and shall be designated as
‘‘Independent Directors’’ by the Board. Our shareholders may by ordinary resolution appoint any person
to be a director and may in like manner remove any director. Our directors have the power at any time to
appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors.

Directors’ Powers
Our business shall be managed by our directors in such manner as they see fit. The Board may delegate
any of the powers, authorities and discretions from time to time vested in our Board to any committee,
local board, manager, agent or one or more of our directors (but not an alternate director) appointed to
the office of managing director.
The directors have established an executive committee, an audit committee and a remuneration
committee. See ‘‘Management and Employees—Senior Management’’ and ‘‘Management and
Employees—Corporate Governance and Internal Audit’’ for a description of these committees and their
respective powers.

Right to Share in Surplus upon Winding Up
If in a winding up the assets available for distribution among the shareholders shall be more than sufficient
to repay the whole of the capital repaid at the commencement of the winding up, the excess shall be
distributed among the shareholders in proportion to the capital paid up at the commencement of the
winding up on the shares held by them respectively.

Redemption
Subject to the Companies Law and the Memorandum and Articles of Association, shares may be issued on
the terms that they are, or are at the option of the company or the holder, to be redeemed on such terms
and in such manner as the company, before the issue of the shares, may by special resolution determine.




                                                      154
                TERMS AND CONDITIONS OF THE GLOBAL DEPOSITARY SHARES

The Global Depositary Shares (‘‘GDSs’’) are each issued in respect of one equity share of par value $5
each (the ‘‘Shares’’) in the company pursuant to and subject to an agreement to be made between the
company and Citibank, N.A. as depositary (the ‘‘Depositary’’) (such agreement, as amended from time to
time, being hereinafter referred to as the ‘‘Deposit Agreement’’). Pursuant to the provisions of the Deposit
Agreement, the Depositary has appointed HSBC Bank Middle East, Bur Dubai as Custodian (as defined
below) to receive and hold on its behalf the Shares at any time represented by GDSs (the ‘‘Deposited
Shares’’) and all rights, securities, property and cash deposited with the Custodian which are attributable to
the Deposited Shares (together with the Deposited Shares, the ‘‘Deposited Property’’). The Depositary
shall hold Deposited Shares for the benefit of the Holders (as defined below) in proportion to the number
of Shares in respect of which the GDSs held by them are issued. In these terms and conditions (the
‘‘Conditions’’), references to the ‘‘Depositary’’ are to Citibank, N.A. and/or any other Depositary which
may from time to time be appointed under the Deposit Agreement, references to the ‘‘Custodian’’ are to
HSBC Bank Middle East, Bur Dubai or any other Custodian from time to time appointed under the
Deposit Agreement and references to the ‘‘Office’’ mean, in relation to the Custodian, its office at HSBC
Bank Middle East, Custody and Clearing, 3rd Floor, HSBC Building, 312/45 AI Suq Road, Bur Dubai,
United Arab Emirates (or such other office as from time to time may be designated by the Custodian with
the approval of the Depositary).
GDSs may take the form of GDSs evidenced by one or more Master GDRs (each a ‘‘Master GDR’’) registered
in the name of a common nominee for, and held by Citibank, N.A. (London), the common depositary (the
‘‘Common Depositary’’) for, Clearstream, Luxembourg and Euroclear, and held for the account of
accountholders in Clearstream, Luxembourg or Euroclear, as the case may be, exchangeable, at the option
of the Holder (as defined below) of such Master GDR and at the expense of any person shown in the records of
Clearstream, Luxembourg or Euroclear as the owner of a GDS and upon delivery to the Depositary of a
certificate substantially in the form of Schedule 3, Part A of the Deposit Agreement, for a certificate in definitive
registered form in respect of GDSs evidenced all or part of the interest of such person in such Master GDR.
If at any time when GDSs are evidenced by a Master GDR, the Holder of such Master GDR is unwilling or
unable to continue as a Depositary and a successor Depositary is not appointed within 90 calendar days or the
Depositary has determined that, on the occasion of the next payment in respect of the GDSs, the Depositary or
its Agent would be required to make any deduction or withholding (in respect of any tax or governmental
charges) from any payment in respect of the GDSs which would not be required were the GDSs represented by
certificates in definitive registered form, the Depositary will make available certificates in definitive form in
respect of GDSs. If at any time when Deposited Shares are evidenced by a Master GDR, Clearstream,
Luxembourg or Euroclear announces an intention to cease business or does in fact do so, the company will
consult with the Depositary regarding other arrangements for book-entry settlement of interests in such Master
GDR. If no alternative clearing system satisfactory to the Depositary is available, the company will instruct the
Depositary to make available certificates in definitive registered form in respect of GDSs.
Under the terms of the GDSs, each purchaser of GDSs is deemed to have represented and agreed, among other
things, that the GDSs have not been and will not be registered under the Securities Act and may be offered, sold,
pledged or otherwise transferred only outside the United States in accordance with Regulation S under the
Securities Act. Each GDS will contain a legend to the foregoing effect.
References in these Conditions to the ‘‘Holder’’ of any GDS shall mean the person registered as Holder on
the books of the Depositary maintained for such purpose. These Conditions include summaries of, and are
subject to, the detailed provisions of the Deposit Agreement, which includes the forms of the certificate in
respect of the GDSs. Copies of the Deposit Agreement are available for inspection at the specified office
of the Depositary and each Agent (as defined in the Deposit Agreement) and at the Office of the
Custodian. Holders are deemed to have notice of and be bound by all of the provisions of the Deposit
Agreement. Terms used in these Conditions and not defined herein but which are defined in the Deposit
Agreement have the meanings ascribed to them in the Deposit Agreement.




                                                        155
1.   Deposit of Shares and Other Securities
(A) After the initial deposit of Shares by the company in respect of each GDS, unless otherwise agreed by
    the Depositary and the company and permitted by applicable law, only the following may be deposited
    under the Deposit Agreement in respect of such GDS:
          (i) Shares issued as a dividend or free distribution on Deposited Shares pursuant to
              Condition 5;
          (ii) Shares subscribed or acquired by Holders from the company through the exercise of rights
               distributed by the company to such persons in respect of Deposited Shares pursuant to
               Condition 7;
          (iii) securities issued by the company to the Holders in respect of Deposited Shares as a result of
                any change in the par value, sub-division, consolidation or other reclassification of Deposited
                Shares or otherwise pursuant to Condition 10. References in these Conditions to ‘‘Deposited
                Shares’’ or ‘‘Shares’’ shall include any such securities, where the context permits; and
          (iv) (to the extent permitted by applicable law and regulation) any other Shares in issue.
(B) The Depositary will issue GDSs in respect of Shares accepted for deposit under this Condition. Under
    the Deposit Agreement, the company must inform the Depositary if any Shares issued by it which may
    be deposited under this Condition do not, by reason of the date of issue or otherwise, rank pari passu
    in all respects with the other Deposited Shares. Subject to the provisions of Conditions 5, 7 and 10, if
    the Depositary accepts such Shares for deposit it will arrange for the issue of temporary GDSs in
    respect of such Shares which will form a different class of GDSs from the other GDSs until such time
    as the Shares which they represent become fully fungible with the other Deposited Shares.
     Subject to the terms and conditions of the Deposit Agreement and applicable law, upon physical delivery to
     the Custodian of Shares, delivery to the Depositary of a certificate substantially in the form of Schedule 3,
     Part C of the Deposit Agreement and available from the Depositary or the Custodian and payment of
     necessary taxes, governmental charges (including transfer taxes) and other charges as set forth in the
     Deposit Agreement, the Depositary will adjust its records for the number of GDSs issued in respect of the
     Shares so deposited and will notify the Common Depositary, as the case may be, as to the increase in the
     number of GDSs evidenced by a Master GDR. Each person receiving a GDS or interest therein will be
     deemed to make the representations, covenants and acknowledgements set forth under ‘‘Transfer
     Restrictions’’.
(C) The Depositary will refuse to accept Shares for deposit whenever it is notified in writing that the
    company has restricted the transfer of such Shares to comply with ownership restrictions under
    applicable Cayman Islands law or that such deposit would result in any violation of any applicable
    Cayman Island laws or governmental regulations or Dubai or DIFX regulations or London Stock
    Exchange regulations. The Depositary may also refuse to accept Shares for deposit in certain other
    circumstances as set out in the Deposit Agreement.
(D) Subject to the limitations set forth in the Deposit Agreement, the Depositary may (but is not required
    to) issue GDSs prior to the delivery to it of Shares in respect of which such GDSs are to be issued.

2.   Withdrawal of Deposited Property
(A) Deposited Property may not be withdrawn until the Depositary has received a written confirmation
    from the company that the Shares are listed on the DIFX. The Depositary shall notify the Holders of
    such listings in accordance with Condition 23 as soon as is practically possible after receiving such
    written confirmation. Subject as set out above, any Holder may request withdrawal of, and the
    Depositary shall thereupon relinquish, the Deposited Property attributable to any GDS upon
    production of such evidence that such person is the Holder of, and entitled to, the relative GDS as the
    Depositary may reasonably require at the specified office of the Depositary or any Agent
    accompanied by:
          (i) a duly executed order (in a form approved by the Depositary) requesting the Depositary to
              cause the Deposited Property being withdrawn to be delivered at the Office of the
              Custodian, or (at the request, risk and expense of the Holder) at the specified office from
              time to time of the Depositary or any Agent (located in the Cayman Islands or such other
              place as permitted under applicable law from time to time) to, or to the order in writing of,



                                                       156
              the person or persons designated in such order and a certificate substantially in the form of
              Schedule 3, Part B of the Deposit Agreement and available from the Depositary or the
              Custodian;
         (ii) the payment of such fees, duties, charges and expenses as may be required under these
              Conditions or the Deposit Agreement; and
         (iii) the surrender (if appropriate) of GDS certificates in definitive registered form to which the
               Deposited Property being withdrawn is attributable.
(B) Certificates for withdrawn Deposited Shares will contain such legends and withdrawals of Deposited
    Shares may be subject to such transfer restrictions or certifications, as the company or the Depositary
    may from time to time determine to be necessary for compliance with applicable laws.
     The Board of Directors of the company may in certain circumstances refuse to register the transfer of
     Deposited Shares from the name of the Depositary or its nominee.
(C) Upon production of such documentation and the making of such payment as aforesaid, the
    Depositary will direct the Custodian, within a reasonable time after receiving such direction from such
    Holder, to deliver at its Office to, or to the order in writing of, the person or persons designated in the
    accompanying order:
         (i) a certificate for, or other appropriate instrument of title to, the relevant Deposited Shares,
             registered in the name of the Depositary or its nominee and accompanied by such
             instruments of transfer in blank or to the person or persons specified in the order for
             withdrawal and such other documents, if any, as are required by law for the transfer thereof;
             and
         (ii) all other property forming part of the Deposited Property attributable to such GDS,
              accompanied, if required by law, by one or more duly executed endorsements or instruments
              of transfer in respect thereof as aforesaid;
         provided that the Depositary (at the request, risk and expense of any Holder so surrendering a
         GDS):
         (a) will direct the Custodian to deliver the certificates for, or other instruments of title to, the
             relevant Deposited Shares and any document relative thereto and any other documents
             referred to above (together with any other property forming part of the Deposited Property
             which may be held by the Custodian or its Agent and is attributable to such Deposited
             Shares); and/or
         (b) will deliver any other property forming part of the Deposited Property which may be held by
             the Depositary and is attributable to such GDS (accompanied by such instruments of
             transfer in blank or to the person or persons specified in such order and such other
             documents, if any, as are required by law for the transfer thereto),
         in each case to the specified office from time to time of the Depositary or, if any, any Agent
         (located in the Cayman Islands or such other place as is permitted under applicable law from
         time to time) as designated by the surrendering Holder in such accompanying order as aforesaid.
(D) Delivery by the Depositary, any Agent and the Custodian of all certificates, instruments, dividends or
    other property forming part of the Deposited Property as specified in this Condition will be made
    subject to any laws or regulations applicable thereto.
(E) The Depositary may suspend the withdrawal of all or any category of Deposited Property during any
    period when the register of shareholders or other relevant holders of other securities of the company
    is closed, generally or in one or more localities, or in order to comply with any applicable Cayman
    Islands law or governmental regulations or Dubai stock exchange regulations. The Depositary shall
    restrict the withdrawal of Deposited Shares whenever it is notified in writing that such withdrawal
    would result in a breach of ownership restrictions under applicable Cayman Islands law.

3.   Transfer and Ownership
     GDSs are in registered form each issued in respect of one Share. Title to the GDSs passes by
     registration in the records of the Depositary. The Depositary will refuse to accept for transfer any
     GDSs if it reasonably believes that such transfer would result in a violation of applicable laws. The


                                                     157
     Holder of any GDS will (except as otherwise required by law) be treated as its absolute owner for all
     purposes (whether or not any payment or other distribution in respect of such GDS is overdue and
     regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss
     of, any certificate issued in respect of it) and no person will be liable for so treating the Holder.
     The Deposit Agreement defines the ‘‘owner of GDSs’’ as, in respect of any GDS represented by a Master
     GDR, such person whose name appears in the records of Clearstream, Luxembourg or Euroclear and, in
     respect of any other GDS, the Holder thereof and ‘‘beneficial owner of GDSs’’ as a person holding
     beneficial title to such GDSs or interests therein.

4.   Cash Distributions
     Whenever the Depositary shall receive from the company any cash dividend or other cash distribution
     on or in respect of the Deposited Shares (including any amounts received in the liquidation of the
     company) or otherwise in connection with the Deposited Property, the Depositary, its Agent or
     Custodian shall as soon as practicable convert the same into United States dollars in accordance with
     Condition 8. The Depositary shall, if practicable in the reasonable opinion of the Depositary, give
     notice to the Holders of its receipt of such payment in accordance with Condition 23, specifying the
     amount per Deposited Share payable in respect of such dividend or distribution and the date,
     determined by the Depositary, for such payment and shall as soon as practicable distribute any such
     amounts to the Holders in proportion to the number of Deposited Shares represented by the GDSs so
     held by them respectively, subject to and in accordance with the provisions of Conditions 9 and 11;
     provided that:
         (a) in the event that any Deposited Shares shall not be entitled, by reason of the date of issue or
             transfer or otherwise, to such full proportionate amount, the amount so distributed to the
             relative Holders shall be adjusted accordingly; and
         (b) the Depositary will distribute only such amounts of cash dividends and other distributions as
             may be distributed without attributing to any GDS a fraction of the lowest integral unit of
             currency in which the distribution is made by the Depositary and any balance remaining shall
             be retained by the Depositary beneficially as an additional fee under Condition 16(A)(iv).

5.   Distributions of Shares
     Whenever the Depositary shall receive from the company any distribution in respect of Deposited
     Shares which consists of a dividend in, or free distribution or bonus issue of, Shares, the Depositary
     shall cause to be distributed to the Holders entitled thereto, in proportion to the number of Deposited
     Shares represented by the GDSs held by them respectively, additional GDSs representing an
     aggregate number of Shares received pursuant to such dividend or distribution by an increase in the
     number of GDSs evidenced by the Master GDR or an issue of certificates in definitive registered form
     in respect of GDSs, according to the manner in which the Holders hold their GDSs; provided that, if
     and in so far as the Depositary deems any such distribution to all or any Holders not to be reasonably
     practicable (including, without limitation, owing to the fractions which would otherwise result or to
     any requirement that the company, the Custodian or the Depositary withhold an amount on account
     of taxes or other governmental charges) or to be unlawful, the Depositary, after consultation with the
     company (if practicable in the opinion of the Depositary), shall sell such Shares so received (either by
     public or private sale and otherwise at its reasonable discretion, subject to Cayman Islands laws and
     regulations) and distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4
     to the Holders entitled thereto, provided, however, that no distribution pursuant to Condition 5 shall
     be delayed by any action at the Depositary or its agents, subject to the provisions of Condition 4.

6.   Distributions Other than in Cash or Shares
     Whenever the Depositary shall receive from the company any dividend or distribution in securities
     (other than Shares) or in other property (other than cash) on or in respect of the Deposited Property,
     the Depositary shall distribute or cause to be distributed such securities or other property to the
     Holders entitled thereto, in proportion to the number of Deposited Shares represented by the GDSs
     held by them respectively, in any manner that the Depositary may deem equitable and practicable for
     effecting such distribution; provided that, if and in so far as the Depositary deems any such
     distribution to all or any Holders not to be reasonably practicable (including, without limitation, due
     to the fractions which would otherwise result or to any requirement that the company, the Custodian


                                                     158
     or the Depositary withhold an amount on account of taxes or other governmental charges) or to be
     unlawful, the Depositary, after consultation with the company (if practicable in the opinion of the
     Depositary), shall sell the securities or property so received, or any part thereof, (either by public or
     private sale and otherwise at its discretion, subject to Cayman Islands laws and regulations) and
     distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4 to the Holders
     entitled thereto.

7.   Rights Issues
     If and whenever the company announces its intention to make any offer or invitation to the holders of
     Shares to subscribe for or to acquire Shares, securities or other assets by way of rights, the Depositary,
     after consultation with the company (if practicable in the opinion of the Depositary), shall as soon as
     practicable give notice to the Holders in accordance with Condition 23 of such offer or invitation
     specifying, if applicable, the earliest date established for acceptance thereof, the last date established
     for acceptance thereof and the manner by which and time during which Holders may request the
     Depositary to exercise such rights as provided below or, if such be the case, give details of how the
     Depositary proposes to distribute the rights or the proceeds of sale. The Depositary will deal with such
     rights in the manner described below and after consultation with the company (if practicable in the
     opinion of the Depositary):
         (i) if at its reasonable discretion, the Depositary shall be satisfied that it is lawful and reasonably
             practicable and, to the extent that it is so satisfied, the Depositary shall make arrangements
             whereby the Holders may, upon payment of the subscription price in U.S. Dollars or other
             currency (where appropriate) together with such fees, taxes, duties, charges, costs and
             expenses as may be required under the Deposit Agreement and completion of such
             undertakings, declarations, certifications and other documents as the Depositary may
             reasonably require, request the Depositary to exercise such rights on their behalf with
             respect to the Deposited Shares and in the case of Shares so subscribed or acquired to
             distribute them to the Holders entitled thereto by an increase in the numbers of GDSs
             evidenced by the Master GDR or an issue of certificates in definitive form in respect of
             GDSs, according to the manner in which the Holders hold their GDSs; or
         (ii) if, at its reasonable discretion, the Depositary shall be satisfied that it is lawful and
              reasonably practicable and to the extent that it is so satisfied, the Depositary shall distribute
              such securities or other assets by way of rights or the rights themselves to the Holders
              entitled thereto in proportion to the number of Deposited Shares represented by the GDSs
              held by them respectively in such manner as the Depositary may at its discretion determine;
              or
         (iii) if and in so far as the Depositary is not satisfied that any such arrangement and distribution
               to all or any Holders is lawful and reasonably practicable (including, without limitation,
               owing to the fractions which would otherwise result or to any requirement that the company,
               the Custodian or the Depositary withhold an amount on account of taxes or other
               governmental charges) or is so satisfied that it is unlawful, the Depositary will, provided that
               Holders have not taken up rights through the Depositary as provided in (i) above, and after
               consultation with the company (if practicable in the opinion of the Depositary) sell such
               rights (either by public or private sale and otherwise at its discretion subject to Cayman
               Islands laws and regulations) and distribute the net proceeds of such sale as a cash
               distribution pursuant to Condition 4 to the Holders entitled thereto except to the extent
               prohibited by applicable law.
     If at the time of the offering of any rights, at its discretion, the Depositary shall be satisfied that it is
     not lawful or practicable (for reasons outside its control) to dispose of the rights in any manner
     provided in (i), (ii) or (iii) above the Depositary shall permit the rights to lapse. In the absence of its
     own wilful default, negligence or bad faith the Depositary will not be responsible for any failure to
     determine that it may be lawful or practicable to make rights available to Holders in general or to any
     Holder in particular.
     The company has agreed in the Deposit Agreement that it will, unless prohibited by applicable law,
     give its consent to, and, if requested, use all reasonable endeavours (subject to the next paragraph) to
     facilitate any such distribution, sale or subscription by the Depositary or the Holders, as the case may
     be, pursuant to Condition 4, 5, 6, 7 or 10.


                                                       159
     If the company notifies the Depositary that registration is required in any jurisdiction under any
     applicable law of the rights, securities or other property to be distributed under Condition 4, 5, 6, 7 or
     10 or the securities to which such rights relate, in order for the Depositary to offer such rights or
     distribute such securities or other property to the Holders or owners of GDSs and to sell the securities
     represented by such rights, the Depositary will not offer such rights or distribute such securities or
     other property to Holders of GDSs unless and until the company procures at the company’s expense,
     the receipt by the Depositary of an opinion from counsel reasonably satisfactory to the Depositary
     that the necessary registration has been effected or that the offer and sale of such rights, securities or
     property to Holders of GDSs are exempt of registration. Neither the company nor the Depositary
     shall be liable to register such rights, securities or other property or the securities to which such rights
     relate and they shall not be liable for any losses, damages or expenses resulting from any failure to do
     so.

8.   Conversion of Foreign Currency
     Whenever the Depositary shall receive any currency other than United States dollars by way of
     dividend or other distribution or as the net proceeds from the sale of securities, other property or
     rights, and if at the time of the receipt thereof the currency so received can in the judgement of the
     Depositary be converted on a practicable basis into United States dollars and distributed to the
     Holders entitled thereto, the Depositary shall as soon as practicable itself convert or cause to be
     converted by another bank, by sale or in any other manner that it may determine, the currency so
     received into United States dollars. If such conversion or distribution can be effected only with the
     approval or licence of any government or agency thereof, the Depositary, with the reasonable
     assistance of the company, shall make reasonable efforts to apply, or procure that an application be
     made, for such approval or licence, if any, as it may consider necessary. If at any time the Depositary
     shall determine that in its judgement any currency other than United States dollars is not convertible
     on a practicable basis into United States dollars and distributable to the Holders entitled thereto, or if
     any approval or licence of any government or agency thereof which is required for such conversion is
     denied or, in the opinion of the Depositary, is not obtainable, or if any such approval or licence is not
     obtained within a reasonable period as determined by the Depositary, the Depositary may distribute
     such other currency received by it (or an appropriate document evidencing the right to receive such
     other currency) to the Holders entitled thereto to the extent permitted under applicable law, or the
     Depositary may in its reasonable discretion hold such other currency for the benefit of the Holders
     entitled thereto. If any conversion of any such currency can be effected in whole or in part for
     distribution to some (but not all) Holders entitled thereto, the Depositary may in its reasonable
     discretion make such conversion and distribution in United States dollars to the extent possible to the
     Holders entitled thereto and may distribute the balance of such other currency received by the
     Depositary to, or hold such balance on non-interest bearing accounts for the account of, the Holders
     entitled thereto and notify the Holders accordingly.

9.   Distribution of any Payments
(A) Any distribution of cash under Condition 4, 5, 6, 7 or 10 will be made by the Depositary to those
    Holders who are Holders of record on the record date established by the Depositary (which shall be
    the same date as the corresponding record date set by the company or, if different from the record
    date set by the company, shall be set after consultation with the company and shall be as near as
    practicable to any record date set by the company) for that purpose and, if practicable in the opinion
    of the Depositary, notice shall be given promptly to Holders in accordance with Condition 23, in each
    case subject to any laws or regulations applicable thereto and (subject to the provisions of Condition
    8) distributions will be made in United States dollars by cheque drawn upon a bank in New York City
    or, in the case of the Master GDR, according to usual practice between the Depositary and
                               ee
    Clearstream Banking soci´t´ anonyme (‘‘Clearstream, Luxembourg’’) and Euroclear Bank S.A./N.V.,
    as operator of the Euroclear System (‘‘Euroclear’’), as the case may be. The Depositary or the Agent,
    as the case may be, may deduct and retain from all moneys due in respect of such GDS in accordance
    with the Deposit Agreement all fees, taxes, duties, charges, costs and expenses which may become or
    have become payable under the Deposit Agreement or under applicable law in respect of such GDS
    or the relative Deposited Property.
(B) Delivery of any securities or other property or rights other than cash shall be made as soon as
    practicable to the entitled Holder, subject to any laws or regulations applicable thereto. If any



                                                      160
    distribution made by the company with respect to the Deposited Property and received by the
    Depositary shall remain unclaimed at the end of 12 years from the first date upon which such
    distribution is made available to Holders in accordance with the Deposit Agreement, all rights of the
    Holders to such distribution or the proceeds of the sale thereof shall be extinguished and the
    Depositary shall (except (i) for any distribution upon the liquidation of the company, which remains
    unclaimed for such period as aforesaid, when the Depositary shall retain the same and (ii) where
    otherwise required by law) return the same to the company for its own use and benefit.

10. Capital Reorganisation
    Upon any change in the par value, sub-division, consolidation or other reclassification of Deposited
    Shares or any other part of the Deposited Property or upon any reduction of capital or upon any
    reorganisation, merger or consolidation of the company or to which it is a party (except where the
    company is the continuing corporation), the Depositary shall as soon as practicable give notice of such
    event to the Holders in accordance with Condition 23 and, at its discretion, may treat such event as a
    distribution and comply with the relevant provisions of Conditions 4, 5, 6 and 9 with respect thereto or
    may execute and deliver additional GDSs in respect of Shares or may require the exchange of existing
    GDSs for new GDSs which reflect the effect of such change.

11. Taxation and Applicable Laws
(A) Payments to Holders of dividends or other distributions made to Holders on or in respect of the
    Deposited Shares will be subject to deduction of Cayman Islands and other withholding taxes, if any,
    at the applicable rates.
(B) If any governmental or administrative authorisation, consent, registration or permit or any report to
    any governmental or administrative authority is required under any applicable law in the Cayman
    Islands in order for the Depositary to receive from the company Shares to be deposited under the
    Conditions or in order for Shares, other securities or other property to be distributed under Condition
    4, 5, 6 or 10 to be subscribed under Condition 7, the Depositary shall request that the company apply
    for such authorisation, consent, registration or permit or file such report on behalf of the Holders
    within the time required under such law. In this connection, the company has undertaken in the
    Deposit Agreement, to the extent reasonably practicable and that it does not involve unreasonable
    expense on behalf of the company, to take such action as may be required in obtaining or filing the
    same. The Depositary shall not distribute GDSs, Shares, other securities or other property with
    respect to which such authorisation, consent or permit or such report has not been obtained or filed,
    as the case may be, and shall have no duties to obtain any such authorisation, consent or permit or to
    file any such report except in circumstances where the same may only be obtained or filed by the
    Depositary without, in the opinion of the Depositary, unreasonable burden or expense.

12. Voting Rights
(A) Upon timely receipt of notice of any meeting of holders of Deposited Shares or other Deposited
    Property, if requested in writing by the company (the Depositary having no obligation to take any
    further action if both the notice and the request shall not have been received by the Depositary at
    least 21 days prior to the date of such vote or meeting), the Depositary shall, as soon as practicable
    thereafter and provided such actions do not violate any applicable laws, mail to the Holders a notice
    or solicitation of consent or proxy, the form of which shall be in the sole discretion of the Depositary
    and shall contain (a) such information as is contained in such notice of meeting, solicitation of consent
    or proxy received by the Depositary from the company, (b) a statement that the Holders as at the
    close of business on a specified record date will be entitled, subject to any applicable provision of the
    laws of the Cayman Islands, the provisions of the Deposit Agreement, the Constitutive Documents
    and the provisions of or governing the Deposited Shares, to instruct the Depositary as to the exercise
    of the voting rights, if any, pertaining to the number of Deposited Shares or other Deposited Property
    represented by their respective GDSs and (c) a brief statement as to the manner in which and the date
    by which such instructions may be given, including an express indication that, if the Depositary does
    not timely receive voting instructions, it shall vote the Deposited Shares represented by GDSs for
    which no voting instructions have been timely received from Holders in the same proportion as the
    Deposited Shares represented by GDSs for which timely voting instructions were received from their
    Holders. Upon the timely receipt of voting instructions from a Holder of GDSs on the applicable
    record date, the Depositary shall endeavor, in so far as practicable and permitted under applicable


                                                    161
    law, the provisions of the Deposit Agreement, the Articles and the provisions of or governing the
    Deposited Shares, to (i) request, or cause to be requested, that voting by poll take place with respect
    to all resolutions to be considered at the applicable meeting in respect of which voting instructions
    were received from Holders, and (ii) vote or cause to be voted the number of Deposited Shares or
    other Deposited Property represented by the GDSs in accordance with the instructions set forth in the
    voting instructions so received. The Depositary shall not vote or attempt to exercise the right to vote
    that attaches to Deposited Shares other than in accordance with voting instructions actually received
    from Holders (which shall, as described below, be applied proportionately to Deposited Shares
    represented by GDSs in respect of which no voting instructions were received from the Holders
    thereof).
(B) If (i) the company has made a timely request to the Depositary as contemplated by the first sentence
    of Condition 12(A) and (ii) no voting instructions have been received by the Depositary from a
    Holder with respect to the number of Deposited Shares represented by the GDSs evidenced by such
    Holder’s GDSs on or before the date established by the Depositary for that purpose, the Depositary
    shall vote that number of Deposited Shares in the same proportion as the Deposited Shares in respect
    of which timely voting instructions were received from Holders of GDSs. In the event that no timely
    voting instructions have been received by the Depositary by any Holders of GDSs, the Depositary
    shall not vote the Deposited Shares represented by the GDSs outstanding.
(C) By continuing to hold GDSs, all Holders and owners shall be deemed to have agreed to the provisions
    of this Condition, as it may be amended from time to time in order to comply with applicable Cayman
    Islands law or the constitutive documents of the company.
(D) The Depositary shall not, and the Depositary shall use its reasonable endeavours to ensure that the
    Custodian and its nominees do not, vote or attempt to exercise the right to vote that attaches to the
    Deposited Shares, other than in accordance with instructions given by Holders of GDSs and neither
    the Depositary nor the Custodian shall, under any circumstances, exercise any discretion as to voting,
    and neither the Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in
    any way make use of for purposes of establishing a quorum or otherwise, the Shares or other
    Deposited Shares represented by GDSs except pursuant to and in accordance with voting instructions
    received from Holders (which may, as described above, be proportionately applied to Deposited
    Shares represented by GDSs for which no timely voting instructions were received from Holders
    thereof).
    Shares which have been withdrawn from the depositary facility and transferred on the company’s register of
    members to a person other than the Depositary or its nominee may be voted only by the holders thereof.
    However, Holders or owners of GDSs may not receive sufficient advance notice of shareholder meetings to
    enable them to withdraw the Shares from the depositary facility and vote the Shares at such meetings.

13. Documents to be Furnished, Recovery of Taxes, Duties and Other Charges
    The Depositary shall not be liable for any taxes, duties, charges, costs or expenses which may become
    payable in respect of the Deposited Shares or other Deposited Property or the GDSs, whether under
    any present or future fiscal or other laws or regulations, and such part thereof as is proportionate or
    referable to a GDS shall be payable by the Holder thereof to the Depositary at any time on request or
    may be deducted from any amount due or becoming due on such GDS in respect of any dividend or
    other distribution. In default thereof, the Depositary may, for the account of the Holder, discharge the
    same out of the proceeds of sale and, subject to Cayman Islands law and regulations, of an
    appropriate number of Deposited Shares (being an integral multiple of the number of Shares in
    respect of which a single GDS is issued) or other Deposited Property and subsequently pay any
    surplus to the Holder. Any such request shall be made by giving notice pursuant to Condition 23.

14. Liability
(A) In acting hereunder the Depositary shall have only those duties, obligations and responsibilities
    expressly specified in the Deposit Agreement and these Conditions and, other than holding the
    Deposited Property for the benefit of Holders as bare trustee, does not assume any relationship of
    trust for or with the Holders or the owners of GDSs.
(B) None of the Depositary, the Custodian, the company, nor any of their agents, officers, directors or
    employees nor any Agent shall incur any liability to any other of them or to any Holder or owner of a



                                                    162
    GDS if, by reason of any provision of any present or future law or regulation of the Cayman Islands or
    any other country or of any relevant governmental authority or by reason of the interpretation or
    application of any such present or future law or regulation or any change therein or by reason of any
    other circumstances beyond their control or, in the case of the Depositary, the Custodian, any of their
    agents, officers, directors or employees or any Agent, by reason of any provision, present or future, of
    the constitutive documents of the company, any of them shall be prevented, delayed or forbidden
    from doing or performing any act or thing which the terms of the Deposit Agreement or these
    Conditions provide shall or may be done or performed; nor (save in the case of wilful default,
    negligence or bad faith) shall any of them incur any liability to any Holder, owner of a GDS or person
    with an interest in any GDS by reason of any non-performance or delay, caused as aforesaid, in
    performance of any act or thing which the terms of the Deposit Agreement or these Conditions
    provide shall or may be done or performed, or by reason of any exercise of, or failure to exercise,
    caused as aforesaid, any voting rights attached to the Deposited Shares or any of them or any other
    discretion or power provided for in the Deposit Agreement. Any such party may rely on, and shall be
    protected in acting upon, any written notice, request, direction or other document believed by it to be
    genuine and to have been duly signed or presented (including a translation which is made by a
    translator believed by it to be competent or which appears to be authentic).
(C) Neither the Depositary, the Custodian nor any Agent shall be liable (except by reason of its own wilful
    default, negligence or bad faith or that of its agent, officers, directors or employees) to the company or
    any Holder or owner of a GDS, by reason of having accepted as valid or not having rejected any
    certificate for Shares or GDSs purporting to be such and subsequently found to be forged or not
    authentic.
(D) Neither the company nor the Depositary nor any of their respective agents shall be liable to Holders
    of GDSs for any indirect, special, punitive or consequential damages.
(E) The Depositary and each of its Agents (and any holding, subsidiary or associated company of the
    Depositary) may engage or be interested in any financial or other business transactions with the
    company or any of its subsidiaries or affiliates or in relation to the Deposited Property (including,
    without prejudice to the generality of the foregoing, the conversion of any part of the Deposited
    Property from one currency to another), may at any time hold GDSs for its own account, and shall be
    entitled to charge and be paid all usual fees, commission and other charges for business transacted
    and acts done by it as a bank or in any other capacity, and not in the capacity of Depositary, in relation
    to matters arising under the Deposit Agreement (including, without prejudice to the generality of the
    foregoing, charges on the conversion of any part of the Deposited Property from one currency to
    another and any sales of property) without accounting to Holders or any other person for any profit
    arising therefrom.
(F) The Depositary shall endeavour to effect any such sale as is referred to or contemplated in Condition
    5, 6, 7, 10, 13 or 21 or any such conversion as is referred to in Condition 8 in accordance with the
    Depositary’s normal practices and procedures, but shall have no liability (in the absence of its own
    wilful default, negligence or bad faith or that of its agents, officers, directors or employees) with
    respect to the terms of such sale or conversion or if such sale or conversion shall not be possible. In
    the absence of its own wilful default, negligence or bad faith the Depositary will not be responsible for
    any failure to determine that it may be lawful or practicable to make rights available to Holders in
    general or to any Holder in particular pursuant to Condition 7.

15. Issue and Delivery of Replacement GDRs and Exchange of GDRs
    Subject to the payment of the relevant fees, taxes, duties, charges, costs and expenses and such terms
    as to evidence and indemnity as the Depositary may require, replacement GDRs will be issued by the
    Depositary and will be delivered in exchange for or in replacement of outstanding lost, stolen,
    mutilated, defaced or destroyed GDRs upon surrender thereof (except in the case of destruction, loss
    or theft) at the specified office of the Depositary or (at the request, risk and expense of the holder) at
    the specified office of any Agent.




                                                     163
16. Depositary’s Fees, Costs and Expenses
(A) The Depositary shall be entitled to charge the following remuneration and receive the following
    remuneration and reimbursement (such remuneration and reimbursement being payable on demand)
    from the Holders in respect of its services under the Deposit Agreement:
        (i) for the issue of GDSs (other than upon the issue of GDSs on the date hereof) or the
            cancellation of GDSs upon the withdrawal of Deposited Property: $0.05 or less per GDS
            issued or cancelled;
        (ii) for issuing GDS certificates in definitive registered form in replacement for mutilated,
             defaced, lost, stolen or destroyed GDS certificates: a sum per GDS certificate which is
             determined by the Depositary to be a reasonable charge to reflect the work, costs and
             expenses involved;
        (iii) for issuing GDS certificates in definitive registered form (other than pursuant to (ii) above):
              a sum per GDS certificate which is determined by the Depositary to be a reasonable charge
              to reflect the work, costs (including, but not limited to, printing costs) and expenses involved;
        (iv) for receiving and paying any cash dividend or other cash distribution on or in respect of the
             Deposited Shares: a fee of $0.02 or less per GDS for each such dividend or distribution;
        (v) in respect of any issue of rights or distribution of Shares (whether or not evidenced by
            GDSs) or other securities or other property (other than cash) upon exercise of any rights,
            any free distribution, stock dividend or other distribution (except where converted to cash):
            $0.05 or less per outstanding GDS for each such issue of rights, dividend or distribution;
        (vi) for the operation and maintenance in administering the GDSs an annual fee of $0.02 or less
             per GDS; provided, however, that if the Depositary imposes a fee under this clause (vi), then
             the total of fees assessed under this clause (vi), combined with the total of fees assessed
             under clause (iv) above, shall not exceed $0.02 per GDS in any calendar year;
        (vii) in connection with inspections of the relevant share register maintained by the local
              registrar, if applicable, undertaken by the Depositary, the Custodian or their respective
              agents: an annual fee of $0.01 or less per GDS (such fee to be assessed against Holders of
              record as of the date or dates set by the Depositary as it sees fit and collected at the sole
              discretion of the Depositary by billing such Holders for such fee or by deducting such fee
              from one or more cash dividends or other cash distributions); and
       (viii) for the issue of GDSs pursuant to a change for any reason in the number of Shares
              represented by each GDS, regardless of whether or not there has been a deposit of Shares to
              the Custodian or the Depositary for such issuance: a fee of $0.05 or less per GDS (or portion
              thereof);
    together with all expenses, transfer and registration fees, taxes, duties and charges payable by the
    Depositary, any Agent or the Custodian in connection with any of the above including, but not limited
    to charges imposed by a central depositary and such customary expenses as are incurred by the
    Depositary in the conversion of currencies other than U.S. dollars into U.S. dollars and fees imposed
    by any relevant regulatory authority.
(B) The Depositary is entitled to receive from the company such fees, taxes, duties, charges, costs,
    expenses and other payments as agreed between them in any agreement concerning such fees, taxes,
    duties, charges, costs, expenses and other payments.

17. Agents
(A) The Depositary shall be entitled to appoint one or more agents (the ‘‘Agents’’) for the purpose,
    inter alia, making distributions to the Holders.
(B) Notice of appointment or removal of any Agent or of any change in the specified office of the
    Depositary or any Agent will be duly given by the Depositary to the Holders.

18. Listing
    The company has undertaken in the Deposit Agreement to use its reasonable endeavours to obtain
    and thereafter maintain, so long as any GDS is outstanding, a listing for the GDSs on the Official List


                                                    164
    and trading on the regulated market for listed securities of the London Stock Exchange and a listing
    of the Shares on the DIFX. For that purpose the company will pay all fees and sign and deliver all
    undertakings required by the UKLA, the London Stock Exchange and/or the DIFX in connection
    therewith. In the event that such listings are not maintained, the company has undertaken in the
    Deposit Agreement to use its reasonable endeavours to obtain and maintain a listing of the GDSs on
    another international recognised investment exchange designated as a ‘‘recognised investment
    exchange’’ for the purposes of s.841 (1) (b) of the United Kingdom Income and Corporation Taxes
    Act (ICTA) 1988 and a listing of the Shares on one or more stock exchanges in Dubai.

19. The Custodian
    The Depositary has, pursuant to the Deposit Agreement, agreed with the Custodian that the
    Custodian will receive and hold (or appoint agents approved by the Depositary to receive and hold) all
    Deposited Property for the account and to the order of the Depositary in accordance with the
    applicable terms of the Deposit Agreement, which include a requirement to segregate the Deposited
    Property from the other property of, or held by, the Custodian. The Custodian shall be responsible
    solely to the Depositary; provided that, if at any time the Depositary and the Custodian are the same
    legal entity, references to them separately in these Conditions and the Deposit Agreement are for
    convenience only and that legal entity shall be responsible for discharging both functions directly to
    the Holders and the company. Upon receiving notice of the resignation of the Custodian, the
    Depositary shall promptly appoint a successor custodian which shall, upon acceptance of such
    appointment, become the Custodian under the Deposit Agreement. Whenever the Depositary in its
    discretion determines that it is in the best interest of the Holders to do so, it may terminate the
    appointment of the Custodian and, in the event of the termination of the appointment of the
    Custodian, the Depositary shall promptly appoint a successor Custodian which shall, upon acceptance
    of such appointment, become the Custodian under the Deposit Agreement on the effective date of
    such termination. The Depositary shall notify Holders of such change as soon as is practically possible
    following such change taking effect in accordance with Condition 23. Notwithstanding the foregoing,
    the Depositary may temporarily deposit the Deposited Property in a manner or a place other than as
    herein specified; provided that, in the case of such temporary deposit in another place, the company
    shall have consented to such deposit and such consent of the company shall have been delivered to the
    Custodian. In case of transportation of the Deposited Property under this Condition, the Depositary
    shall obtain appropriate insurance at the expense of the company if, and to the extent that, the
    obtaining of such insurance is reasonably practicable and the premiums payable are of a reasonable
    amount.

20. Resignation and Termination of Appointment of the Depositary
(A) Unless otherwise agreed to in writing between the company and Depositary from time to time, the
    company may terminate the appointment of the Depositary under the Deposit Agreement by giving at
    least 90 days’ notice in writing to the Depositary and the Custodian, and the Depositary may resign as
    Depositary by giving 90 days’ notice in writing to the company and the Custodian. Within 30 days after
    the giving of such notice, notice thereof shall be duly given by the Depositary to the Holders in
    accordance with Condition 23. Such resignation by the Depositary shall be subject to the terms and
    conditions of any other agreement executed between the Depositary and the company.
    The termination of the appointment or the resignation of the Depositary shall take effect on the date
    specified in the relevant notice provided that no such termination of appointment or resignation shall
    take effect until the appointment by the company of a successor depositary, the grant of such
    approvals as may be necessary to comply with applicable laws and with the constitutive documents of
    the company for the transfer of the Deposited Property to such successor depositary, the acceptance
    of such appointment to act in accordance with the terms thereof by the successor depositary and the
    payment to the Depositary of all fees, taxes, duties, charges, costs, expenses and other payments as
    agreed by the Depositary and the company in any agreement concerning such fees, taxes, duties,
    charges, costs, expenses and other payments. The company has undertaken in the Deposit Agreement
    to use its best endeavours to procure the appointment of a successor depositary with effect from the
    date of termination specified in such notice as soon as reasonably possible following notice of such
    termination or resignation. Upon any such appointment and acceptance, notice thereof shall be duly
    given by the successor depositary to the Holders in accordance with Condition 23.




                                                   165
(B) Upon the termination of appointment or resignation of the Depositary, the Depositary shall deliver to
    its successor depositary sufficient information and records to enable such successor efficiently to
    perform its obligations under the Deposit Agreement and shall deliver and pay to such successor
    depositary all Deposited Property held by it under the Deposit Agreement. Upon the date when such
    termination of appointment or resignation takes effect, the Deposit Agreement provides that the
    Custodian shall be deemed to be the Custodian thereunder for such successor depositary and shall
    hold the Deposited Property for such successor depositary and the Depositary shall thereafter have no
    obligation thereunder.

21. Termination of Deposit Agreement
(A) Subject as set out below, either the company or the Depositary but, in the case of the Depositary, only
    if the company has failed to appoint a replacement Depositary within 90 days of the date on which the
    Depositary has given notice pursuant to Condition 20 that it wishes to resign, may terminate the
    Deposit Agreement by giving 90 days’ notice to the other and to the Custodian. Within 30 days after
    the giving of such notice, notice of such termination shall be duly given by the Depositary to Holders
    of all GDSs then outstanding in accordance with Condition 23.
    If the company terminates the Deposit Agreement, it will (unless the termination is due to the wilful
    default, negligence or fraud of the Depositary) be obligated, prior to such termination, to reimburse to
    the Depositary all amounts owed to the Depositary as set out in the Deposit Agreement and in any
    agreement between the Depositary and the company.
(B) During the period beginning on the date of the giving of such notice by the Depositary to the Holders
    and ending on the date on which such termination takes effect, each Holder shall be entitled to obtain
    delivery of the Deposited Property relative to each GDS held by it, subject to the provisions of
    paragraph (D) of Condition 2 and upon compliance with Condition 2, and further upon payment by
    the Holder of any sums payable by the Depositary to the Custodian in connection therewith for such
    delivery and surrender but otherwise in accordance with the Deposit Agreement.
(C) If any GDSs remain outstanding after the date of termination, the Depositary shall as soon as
    reasonably practicable sell the Deposited Property then held by it under the Deposit Agreement and
    shall not register transfers, shall not pass on dividends or distributions or take any other action except
    that it will deliver the net proceeds of any such sale, together with any other cash then held by it under
    the Deposit Agreement, pro rata to Holders of GDSs which have not previously been so surrendered
    by reference to that proportion of the Deposited Property which is represented by the GDSs of which
    they are Holders. After making such sale, the Depositary shall be discharged from all obligations
    under the Deposit Agreement and these Conditions, except its obligations to account to Holders for
    such net proceeds of sale and other cash comprising the Deposited Property without interest.
(D) The company has agreed not to appoint any other depositary for the issue of depositary receipts so
    long as Citibank, N.A. is acting as Depositary under the Deposit Agreement.

22. Amendment of Deposit Agreement and Conditions
    All and any of the provisions of the Deposit Agreement and these Conditions (other than this
    Condition 22 and Clause 12 of the Deposit Agreement) may at any time and from time to time be
    amended by written agreement between the company and the Depositary in any respect which they
    may deem necessary or desirable. Notice of any amendment of these Conditions (except to correct a
    manifest error) shall be duly given to the Holders by the Depositary and any amendment (except as
    aforesaid) which shall increase or impose fees or charges payable by Holders or which shall otherwise,
    in the opinion of the Depositary, be materially prejudicial to the interests of the Holders (as a class)
    shall not become effective so as to impose any obligation on the Holders of the outstanding GDSs
    until the expiry of 30 days after such notice shall have been given. Each Holder at the time when any
    such amendment so becomes effective shall be deemed, by continuing to hold a GDS, to approve such
    amendment and to be bound by the terms thereof in so far as they affect the rights of the Holders. In
    no event shall any amendment impair the right of any Holder to receive, subject to and upon
    compliance with Condition 2, the Deposited Property attributable to the relevant GDS.




                                                     166
23. Notices
    All notices to Holders shall be validly given if mailed to them at their respective addresses in the
    register of Holders maintained by the Depositary or furnished to them by electronic transmission as
    agreed between the company and the Depositary and, so long as the GDSs are listed on the Official
    List of the UKLA and the London Stock Exchange and traded on the regulated market for listed
    securities of the London Stock Exchange and the rules of the London Stock Exchange so require, all
    notices to be given to Holders generally will also be published in a leading daily newspaper having
    general circulation in London (which is expected to be the Financial Times).
    All notices required to be given by the company to the Holders pursuant to any applicable laws,
    regulations or other agreements shall be given by the company to the Depositary and upon receipt of
    any such notices, the Depositary shall forward such notices to the Holders. The Depositary shall not
    be liable for any notices required to be given by the company which the Depositary has not received
    from the company, nor shall the Depositary be liable to monitor the obligations of the company to
    provide such notices to the Holders.

24. Reports and Information on the Company
(A) The company has undertaken in the Deposit Agreement (so long as any GDS is outstanding) to
    furnish the Depositary with six copies in the English language by mail, facsimile or electronic
    transmission as agreed between the company and the Depositary (and to make available to the
    Depositary, the Custodian and each Agent as many further copies as they may reasonably require to
    satisfy requests from Holders) of:
        (i) in respect of the financial year ending on December 31, 2006 and in respect of each financial
            year thereafter, the consolidated balance sheet as at the end of such financial year and the
            consolidated profit and loss account for such financial year in respect of the company,
            prepared in conformity with either generally accepted accounting principles in the Cayman
            Islands or, at the option of the company, in accordance with International Accounting
            Standards and reported upon by independent public accountants selected by the company, as
            soon as reasonably practicable (and in any event within nine months) after the end of such
            year; and
        (ii) semi-annual consolidated financial statements as soon as practicable after the same are
             published.
(B) The Depositary shall, upon receipt thereof, give due notice to the Holders that such copies are
    available upon request at its specified office and the specified office of any Agent.

25. Copies of Company Notices
    On or before the day when the company first gives notice, by mail, publication or otherwise, to holders
    of any Shares or other Deposited Property, whether in relation to the taking of any action in respect
    thereof or in respect of any dividend or other distribution thereon or of any meeting or adjourned
    meeting of such holders or otherwise, the company has undertaken in the Deposit Agreement to
    transmit to the Custodian and the Depositary such number of copies of such notice and any other
    material (which in the opinion of the company contains information having a material bearing on the
    interests of the Holders) furnished to such holders by the company in connection therewith as the
    Depositary may reasonably request. If such notice is not furnished to the Depositary in English, either
    by the company or the Custodian, the Depositary shall, at the company’s expense, arrange for an
    English translation thereof (which may be in such summarised form as the Depositary may deem
    adequate to provide sufficient information) to be prepared. The Depositary shall, as soon as
    practicable after receiving notice of such transmission or (where appropriate) upon completion of
    translation thereof, give due notice to the Holders which notice may be given together with a notice
    pursuant to paragraph (A) of Condition 9, and shall make the same available to Holders in such
    manner as it may determine.

26. Moneys Held by the Depositary
    The Depositary shall be entitled to deal with moneys paid to it by the company for the purposes of the
    Deposit Agreement in the same manner as other moneys paid to it as a banker by its customers and




                                                   167
    shall not be liable to account to the company or any holder or any other person for any interest
    thereon, except as otherwise agreed.

27. Disclosure of Beneficial Ownership and Other Information
    The Depositary may from time to time request Holders or former Holders or any clearing system in
    which the GDSs are from time to time cleared to provide information as to the capacity in which they
    hold or held GDSs and regarding the identity of any other persons then or previously interested in
    such GDSs and the nature of such interest and various other matters. Each such Holder agrees to
    provide any such information reasonably requested by the Depositary pursuant to the Deposit
    Agreement whether or not still a Holder at the time of such request.

28. Severability
    If any one or more of the provisions contained in the Deposit Agreement or in these Conditions shall
    be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
    the remaining provisions contained therein or herein shall in no way be affected, prejudiced or
    otherwise disturbed thereby.

29. Governing Law
(A) The Deposit Agreement and the GDSs are governed by, and shall be construed in accordance with,
    English law. The rights and obligations attaching to the Deposited Property will be governed by
    Cayman Islands Law. The company has submitted in respect of the Deposit Agreement and these
    Conditions to the jurisdiction of the English courts.
(B) The courts of England are to have jurisdiction to settle any disputes which may arise out of or in
    connection with the GDSs and accordingly any legal action or proceedings arising out of or in
    connection with the GDSs (‘‘Proceedings’’) may be brought in such courts. This submission is made
    for the benefit of each of the Holders and shall not limit the right of any of them to take Proceedings
    in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more
    jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or
    not).
(C) The Depositary irrevocably appoints any vice president of the ADR Division of Citibank, N.A.—
    London Branch, currently situated at Citigroup Center, Canada Square, Canary Wharf, London
    E14 5LB, England as its authorised agent for service of process in England. If for any reason the
    Depositary does not have such an agent in England, it will promptly appoint a substitute process agent
    and notify the company of such appointment. Nothing herein shall affect the right to serve process in
    any other manner permitted by law.




                                                     168
                         INFORMATION RELATING TO THE DEPOSITARY

Citibank, N.A. (‘‘Citibank’’) has been appointed as Depositary pursuant to the Deposit Agreement.
Citibank is an indirect wholly owned subsidiary of Citigroup Inc., a Delaware corporation. Citibank is a
commercial bank that, along with its subsidiaries and affiliates, offers a wide range of banking and trust
services to its customers throughout the United States and the world.
Citibank was originally organised on June 16, 1812, and is now a national banking association organised
under the National Bank Act of 1864 of the United States of America. Citibank is primarily regulated by
the United States Office of the Comptroller of the Currency. Its principal office is at 399 Park Avenue,
New York, NY 10043.
The consolidated balance sheets of Citibank as of December 31, 2004 and December 31, 2003 are set forth
in Citicorp’s 2004 Annual Report on Form 10-K, and its consolidated balance sheet as of September 30,
2005 is set forth in Citigroup’s Quarterly Report on Form 10-Q for the nine months ended September 30,
2005. Citicorp’s 2004 Annual Report on Form 10-K and Citigroup’s Quarterly Report on Form 10-Q are on
file with the United States Securities and Exchange Commission, but are not incorporated into, and do not
form a part of, this offering memorandum.
Citibank’s Articles of Association and By-laws, each as currently in effect, together with Citicorp’s 2004
Annual Report on Form 10-K are available for inspection at the Depositary Receipt Office of Citibank,
388 Greenwich Street, New York, New York 10013.




                                                   169
                        THE DUBAI INTERNATIONAL FINANCIAL EXCHANGE

The DIFX is a securities exchange located in the DIFC, a financial free zone in the Emirate of Dubai in
the U.A.E. The DIFX commenced operations on September 26, 2005. The DIFX was incorporated as a
limited liability company under the DIFC Companies Law No. 2 (the ‘‘Companies Law’’), on
September 29, 2004 and it is a wholly owned subsidiary of the DIFC Authority.
The DIFX has adopted three sets of rules: the Clearing and Settlement Rules, the Business Rules and the
Listing Rules. The Clearing and Settlement Rules govern procedures, responsibilities and fees regarding
clearing and settlement of securities traded on the DIFX. The Business Rules govern membership in the
DIFX, including eligibility requirements for financial institutions, categories of membership, rights and
obligations of members and the process for membership applications. The Listing Rules govern the listing
of equity, debt and other securities on the DIFX, covering such areas as eligibility of issuers for listing, the
listing application process, continuing obligations following a listing and sanctions for non-compliance with
the Listing Rules. The Clearing and Settlement Rules, the Business Rules and the Listing Rules are
available on the website of the DIFX at www.difx.ae.
The DIFX is governed by its board of directors, comprised of ten directors, including the Chief Executive
Officer and Chief Operating Officer, and three committees: the executive committee, the audit and risk
management committee and the nomination and remuneration committee, all of which have formal
charters. The executive committee discharges the board of directors’ responsibilities outside regularly
scheduled board meetings. The audit and risk management committee is responsible for the independent
and objective oversight of legal and regulatory compliance, governance issues, internal control and risk
management, financial reporting, external and internal auditors and financial controls. The nomination
and remuneration committee is responsible for recommending new members to the board, succession
planning for the board and senior management, performance evaluation of the board and key executives
and determining remuneration of directors and senior managers and employee benefit structures.
The DIFC has an independent legal system which was established in 2004. Companies operating in the
DIFC are subject to the Companies Law. Financial activities in the DIFC are governed by the DIFC
Regulatory Law No. 1 of 2004 (the Regulatory Law), which also establishes and governs the operation of
the DFSA, an agency of the government of the Emirate of Dubai that acts as the independent financial
regulator in the DIFC. Legislation, rules and regulations governing companies incorporated in the DIFC
and financial activities in the DIFC are available on the website of the DFSA at www.dfsa.ae.




                                                      170
                                                    TAXATION

The following is a general summary of certain tax consequences of the acquisition, ownership and disposition of
our shares or GDSs based upon the tax laws of the Cayman Islands and the United Kingdom as in effect on the
date of this offering memorandum, and is subject to changes in Cayman Islands or the United Kingdom,
including changes that could have a retroactive effect. It is not a complete analysis of all the potential tax effects
relevant to a decision to invest in our shares or GDSs. The following discussion does not take into account or
discuss the tax laws of any country other than the Cayman Islands and the United Kingdom, nor does it take
into account investors’ individual circumstances. Investors are advised to consult their own tax advisors as to
Cayman Islands or the United Kingdom or other tax consequences of the acquisition, ownership and disposition
of our shares or GDSs. Tax consequences may differ according to the provisions of different double taxation
treaties as well as according to an investor’s particular circumstances.

Cayman Islands Tax Considerations
The Government of the Cayman Islands will not, under existing legislation, impose any income, corporate
or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon KHI or its shareholders.
The Cayman Islands are not party to any double taxation treaties.
KHI has received an undertaking from the Governor-in-Cabinet of the Cayman Islands that, in accordance
with section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period of 20 years
from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be
levied on profits, income, gains or appreciations shall apply to KHI or its operations and, in addition, that
no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or
inheritance tax shall be payable (i) on our shares, debentures or other obligations of KHI or (ii) by way of
the withholding in whole or in part of a payment of dividend or other distribution of income or capital by
KHI to its members or a payment of principal or interest or other sums due under a debenture or other
obligation of KHI.

United Kingdom Tax Considerations
The comments below are of a general nature and are based on current UK law and published
HM Revenue and Customs practice at the date of this offering memorandum, both of which are subject to
change, possibly with retrospective effect. The summary only covers the principal UK tax consequences of
holding shares or GDSs for absolute beneficial holders who are resident (and, in the case of individuals
only, ordinarily resident) in the United Kingdom for tax purposes (‘‘UK Holders’’). In addition, the
summary: (i) only addresses the tax consequences for UK Holders who hold our shares or GDSs as capital
assets, and does not address the tax consequences which may be relevant to certain other categories of UK
Holders, for example, dealers; (ii) does not address the tax consequences for UK Holders that are
insurance companies, collective investment schemes or persons connected with the company; (iii) only
addresses the tax consequences of dividends for a UK Holder where the dividends paid are regarded for
UK tax purposes as that UK Holder’s own income (and not the income of some other person);
(iv) assumes that the UK Holder is not interested in or deemed to be interested in, either alone or together
with one or more associated or connected persons, directly or indirectly, 10% or more of the share capital
or the voting power or the profits of the company; (v) assumes that there will be no register in the United
Kingdom in respect of our shares or GDSs; (vi) assumes that our shares will not be held by, and that the
GDSs will not be issued by, a depositary incorporated in the United Kingdom and (vii) assumes that
neither our shares nor the GDSs will be paired with shares issued by a company incorporated in the United
Kingdom.
The following is intended only as a general guide and is not intended to be, nor should it be considered to
be, legal or tax advice to any particular UK Holder. Accordingly, potential investors should satisfy
themselves as to the overall tax consequences, including the consequences under UK law and
HM Revenue and Customs practice, of acquisition, ownership and disposition of shares or GDSs in their
own particular circumstances by consulting their own tax advisers.

Dividends
A UK Holder will generally be subject to UK income tax or corporation tax, as the case may be, on any
dividends paid by the company.




                                                         171
An individual UK Holder who is not domiciled in the United Kingdom will be liable to UK income tax
only to the extent that dividends paid by the company are received or deemed to be received in the United
Kingdom.

Capital gains
A disposal or deemed disposal of shares or GDSs by a UK Holder may give rise to a chargeable gain or
allowable loss for the purposes of UK taxation of capital gains depending on the individual circumstances
of the holder and subject to any available exemption or relief. In addition, individual holders who dispose
of their shares or GDSs while they are temporarily non-resident may be treated as disposing of them in the
year in which they cease to be non-resident.
An individual UK Holder who is not domiciled in the United Kingdom will be liable to UK capital gains
tax only to the extent that amounts (if any) are received or deemed to be received in the United Kingdom.
Taper relief can be used to reduce a chargeable gain for the purposes of capital gains tax (but not
corporation tax on chargeable gains), depending on the period for which our shares or GDSs are held prior
to disposal, but not to create or increase an allowable loss. Indexation allowance may be available to
corporate holders to reduce or eliminate a chargeable gain but not to create or increase an allowable loss.

Stamp duty and stamp duty reserve tax
No UK stamp duty reserve tax will be payable on the issue of the GDSs or on any agreement to transfer
shares or GDSs. No UK stamp duty will be payable on the issue of our shares or the GDSs; nor will stamp
duty be payable on the acquisition or transfer of shares or GDSs provided that the instrument of transfer is
executed outside the United Kingdom and does not relate to any property situated in the United Kingdom
or to any matter or thing done or to be done in the United Kingdom.




                                                    172
                                                     SUBSCRIPTION AND SALE

We have entered into a purchase agreement dated February 24, 2006 with Deutsche Bank AG and Morgan
Stanley & Co. International Limited acting as joint global coordinators and representatives of the
managers, including the international managers named below, with respect to our shares being offered by
this offering memorandum. Pursuant to the purchase agreement, each international manager has agreed,
severally and not jointly and subject to specified conditions, to purchase or procure the purchase of the
number of shares as is indicated below opposite the name of such international manager. The international
managers may elect to receive all or a portion of their allotment of shares in the form of GDSs (each GDS
representing one share).

                                                                                                                                    Number of
International Manager                                                                                                                shares
Deutsche Bank AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            21,472,484
Morgan Stanley & Co. International Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        21,472,483
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   42,944,967

Deutsche AlAzizia Financial Services (under formation) and The National Investor Private Joint Stock
Company are acting as joint lead managers together with Deutsche Bank AG and Morgan Stanley & Co.
International Limited. Shuaa Capital PSC is acting as co-manager. Abu Dhabi Commercial Bank pjsc,
International Financial Advisors K.S.C.C., Mashreqbank psc and Samba Financial Group are acting as
selling agents (the ‘‘selling agents’’).
In consideration of the commitments of the managers in the purchase agreement, including the agreement
by the international managers to purchase or procure the purchase of our shares, and subject to our shares
being sold as provided in the purchase agreement, we will pay to the international managers selling,
underwriting and management commissions of 3.05 per cent. of the aggregate offering price of our shares
sold in the international offering, together with any applicable taxes on such commissions. In addition, we
may award to some or all of the joint lead managers after the date of the purchase agreement or the
closing of the offering an incentive fee payable at our sole discretion of up to 0.75 per cent. of the
aggregate offering price for the shares sold in the offering (including with respect to any additional shares
sold as a result of any exercise of the over-allotment option) together with any applicable taxes. We have
also agreed to indemnify the managers against certain liabilities that the managers may incur in connection
with the offering. The managers may, from time to time, engage in transactions with and perform services
for us in the ordinary course of their business.
We expect the closing date of the offering to be on or about March 1, 2006. The purchase agreement
provides that the obligations of the international managers to purchase or procure the purchase of our
shares are subject to certain conditions precedent and that the purchase agreement may be terminated by
the joint global coordinators, acting jointly, on or before the closing date, upon the occurrence of certain
events, including, under certain circumstances, upon the default by one or more of the international
managers to purchase or procure the purchase of our shares. We expect our shares to be delivered against
payment on or about March 1, 2006 through the book-entry facilities of the Central Securities Depositary
operated by the DIFX and our GDSs to be delivered against payment on or about March 1, 2006 through
the book-entry facilities of the custodian for the Euroclear System or the custodian for Clearstream.
The purchase agreement also provides that the international managers may terminate the purchase
agreement if our shares are not admitted to the Official List of the DIFX and to trading on the DIFX by
the day falling one week after the closing date, or if the GDSs are not admitted to the Official List of UK
Listing Authority and admitted to trading on the London Stock Exchange by the day falling one week after
the closing date. Upon termination of the purchase agreement, and in certain other circumstances, the
offering will automatically be revoked.
As part of the offering of our shares and GDSs, we are planning to offer a number of shares or GDSs,
representing up to approximately 10 per cent. of the total shares and GDSs offered in this offering, to our
employees and designated friends and relatives under a friends and family program. The number of shares
and GDSs available for sale to investors as part of this offering will be reduced by the number of shares
and GDSs purchased by participants in this program. Preferential allocation criteria will be applied to
orders for our shares and GDSs placed to one or more of the international managers under the friends and
family program.



                                                                       173
In connection with the offering, each of the managers and any affiliate of the managers acting as an
investor for its own account may take up shares and in that capacity may retain, purchase or sell shares and
may offer or sell such shares (or other investments) otherwise than in connection with the offering. The
managers do not intend to disclose the extent of any such investment or transactions otherwise than in
accordance with any legal or regulatory obligation to do so.

Pricing of the Offering
Prior to the offering, there has been no public market for our shares or GDSs. The initial offering price has
been determined by negotiations between the joint global coordinators and us. Among the factors
considered in determining the initial offering price following the bookbuilding process were our future
prospects and the prospects of our industry in general, our revenue, our net income and certain other
financial operating information with respect to us in recent periods, and the financial ratios, market prices
of securities and certain financial and operating information of companies engaged in activities similar to
ours.
This pricing methodology differs significantly from that used in certain other initial public offerings for
Middle Eastern companies, many of which are priced at nominal value. As a result, it is expected that the
offering price will be significantly in excess of their nominal value of $5 per share. Consequently, the
performance of our share price in the secondary market may be substantially different from that in other
Middle Eastern initial public offerings.
Pursuant to subscription agreements to be entered into by investors in the Linear Tranche (as defined
under ‘‘—Allocation’’), we expect such investors will be required to submit the full purchase price, based
on the top of the price range, for the shares they are requesting at the time of their order and that in the
event that they are allocated less than the full number of shares they request, or the offering price is lower
than the top of the price range, the difference between the amount subscribed and the value of the
allocated shares based on the offering price shall be refunded to such investors following the closing date,
without any interest on the amount submitted.
In the event that any potential investors are considering borrowing in order to finance all or part of the
purchase price of the shares they request, they should consider, among other things, the possibility that
they will not receive an allocation of the full amount of shares that they request, the fact that they will not
receive any interest on the amount they submit at the time of their order (regardless of whether they are
allocated the full number of shares they request or not), and the potential after-market performance of the
shares.

Price Stabilisation
In order to facilitate the offering of our shares and GDSs, Deutsche Bank AG may engage in transactions
that stabilise, support, maintain or otherwise affect the price of our shares or GDSs. Specifically, Deutsche
Bank AG, on behalf of the international managers, may sell more shares or GDSs than are required to be
purchased under the purchase agreement, creating a short position. A short sale is covered if the short
position is no greater than the number of shares and GDSs available for purchase under the
over-allotment option described below. The joint global coordinators can close out a covered short sale by
exercising the over-allotment option on behalf of the international managers or purchasing shares or GDSs
in the open market. In determining the source of our shares or GDSs to close out a covered short sale, the
joint global coordinators will consider, among other things, the open market price of our shares or GDSs
compared to the price available under the over-allotment option.
As an additional means of facilitating the offering, Deutsche Bank AG, acting as stabilisation manager, or
its agent, may bid for, and purchase, shares or GDSs in the open market to stabilise the price of our shares
or GDSs for a period of 30 calendar days after the date of this offering memorandum.
The managers have advised us that certain of the managers presently intend, following the stabilisation
period, to actively trade in our shares or GDSs as permitted by applicable laws and regulations. The
managers are not required to engage in these activities, and may end any of these activities at any time.
Accordingly, no assurance can be given as to the liquidity of, or trading markets for, our shares or GDSs.
Buyers of our shares or GDSs may be required to pay stamp taxes and other charges in accordance with
the laws and practices of the country of purchase in addition to the offering price.




                                                     174
Over-allotment Option
We have granted the international managers an option to purchase up to an additional 4,294,497 shares, in
the form of shares or GDSs, to cover over-allotments, if any, made in connection with the offering. The
joint global coordinators, on behalf of the international managers, may exercise the over-allotment option,
in whole or in part, on one occasion, not later than 30 calendar days after the date of this offering
memorandum. If the over-allotment option is exercised, the international managers will purchase such
shares severally in approximately the same proportions as they purchased shares in the initial offering, at
the offering price set forth herein.

Lock-up Period
We, our chief executive officer, our other shareholders prior to this offering (except for certain members of
our management, as described below, and except as otherwise set forth below) and Salaam Investments
have agreed that, without the prior written consent of the joint global coordinators, we and they will not,
during the 180 days following the date of this offering memorandum, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or
any securities convertible into or exercisable or exchangeable for ordinary shares or enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the economic consequences of
ownership of ordinary shares, except that the foregoing shall not apply to (i) the sale of our shares and the
GDSs pursuant to this offering, (ii) the issuance by us of any ordinary shares upon the exercise of an option
or warrant, (iii) the conversion of a security outstanding on the date hereof of which the managers have
been advised in writing, (iv) the issuance by us of any ordinary shares pursuant to any employee stock
option plan, stock ownership plan or dividend reinvestment plan existing on the date hereof, (v) the
issuance by us of any ordinary shares in connection with any merger or acquisition transaction, provided
that the issuance of shares shall not constitute in the aggregate for all such issuances greater than 15 per
cent. of our outstanding share capital at the time of the transaction and (vi) the issuance by us of ordinary
shares to Salaam Investments in connection with our acquisition from Salaam Investments of an additional
23.90 per cent. interest in Kingdom Nile Plaza, and the issuance, if any, by the company of ordinary shares
to AIID and/or to MAFT in exchange for their respective interests in SSTI. In addition, the members of
our management who also are our shareholders (with the exception of our chief executive officer, who is
otherwise locked-up as described above) have entered into lock-up agreements with us on similar terms,
with the exception of terms of the lock-up periods, which will expire on November 15, 2006. We do not
expect to receive a signed lock-up agreement from JJW Limited, one of our shareholders, prior to the
closing of this offering.

Allocation
As part of the offering of the shares and GDSs we are offering a number of shares and GDSs, representing
6.29 per cent. of the total number of shares and GDSs offered in this offering, as a part of a preferential
allocation, to our employees and designated friends and relatives under a friends and family program.
We are also offering a number of shares representing 3.53 per cent. of the total number of shares and
GDSs offered in this offering, to institutions and other investors where the allocation of the shares among
such institutions and other investors, if there is over subscription among them, will be made on a
proportional basis according to the relative numbers of shares applied to be purchased by such investors
(the ‘‘Linear Tranche’’). The Linear Tranche will be allocated to investors in the form of shares only. All
applications for shares in the Linear Tranche will require pre-funding by the prospective investor.
We are offering the balance of the shares and GDSs offered in this offering, representing 90.18 per cent.
of the total number of shares and GDSs offered in this offering, to institutions and other investors where
the allocation of the shares and GDSs among such institutions and other investors, if there is over
subscription among them, will be determined at the discretion of the joint global coordinators and us after
indications of interest from prospective investors have been received (the ‘‘Discretionary Tranche’’). At the
discretion of the joint global coordinators, acceptance of indications of interest into the Discretionary
Tranche may be restricted to the joint lead managers. The factors that the joint global coordinators and we
may take into account when determining the allocations between prospective investors in the event of over
subscription may include participation in the marketing process for the offering, holding behaviour in
previous offerings, holdings in similar companies, pre-funding of indication of interest and other factors
that the joint global coordinators and we may deem relevant.



                                                     175
Unconditional Dealings
Unconditional dealings in the shares on the DIFX and the GDSs on the London Stock Exchange are
expected to commence upon listing of the shares on the DIFX and admission to trading of the GDSs on
the London Stock Exchange, respectively. The dates and times may be changed. Dealings prior to the
commencement of unconditional dealings will not take place. Accordingly, dealings in the shares prior to
listing on the DIFX will not take place and conditional dealings in the GDSs will not take place prior to
admission to trading on the London Stock Exchange.

Relationships between the company, our principal shareholders and the managers in the Offering
The shareholders of Deutsche AlAzizia Financial Services (under formation) are Deutsche Bank AG and
AlAzizia Commercial Investment Company. Each of the two shareholders have an interest of 50 per cent.
HRH Prince Alwaleed, the Chairman of our Board and the president, a director and one of the
beneficiaries of Kingdom Trust, which owns Kingdom 5-KR-124 and Kingdom 5-KR-51, our principal
shareholders, is a shareholder in AlAzizia Commercial Investment Company.
Deutsche Bank AG and AlAzizia Commercial Investment Company are responsible under the laws of the
Kingdom of Saudi Arabia for the acts of Deutsche Bank AG and AlAzizia Commercial Investment
Company carried out for, on behalf of or in the name of Deutsche AlAzizia Financial Services until such
time as Deutsche AlAzizia Financial Services is incorporated.
International Financial Advisors, one of the selling agents for the offering, is a shareholder in the
Company. International Financial Advisors and IFA Hotels & Resorts FZE, an affiliate of International
                                                                               o
Financial Advisors, hold interests in the Fairmont Palm Hotel & Resort, the M¨venpick Beach & Spa
Resort Zanzibar and our hotels in Kenya.
The managers and their respective affiliates have, from time to time, performed, and may in the future
perform, various financial advisory, investment and commercial banking and other services in relation to us
or to our affiliates or shareholders, for which they received or will receive fees and expenses.




                                                   176
                               TRANSFER AND SELLING RESTRICTIONS

Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer
for, resale, pledge or other transfer of, our shares.

United States

Our shares and GDSs offered hereby are being offered in accordance with Regulation S under the
Securities Act. Terms used in this section that are defined in Regulation S under the Securities Act are
used herein as defined therein. Our shares and GDSs have not been and will not be registered under the
Securities Act or with any securities regulatory authority of any state or other jurisdiction within the
United States and may not be offered or sold in the United States or to or for the account of any U.S.
person except in accordance with applicable laws.
Each purchaser of our shares or GDSs offered hereby will be deemed to have represented and agreed as
follows:
    The purchaser understands that neither our shares nor GDSs have been, and neither will be,
    registered under the Securities Act or with any securities regulatory authority of any state or other
    jurisdiction of the United States and neither may be reoffered, resold, pledged or otherwise
    transferred except (i) in an ‘‘offshore transaction’’ complying with Rule 903 or Rule 904 of
    Regulation S (and not in a pre-arranged transaction resulting in the resale of such shares into the
    United States) or (ii) pursuant to a registration statement which has been declared effective under the
    Securities Act, in each case, in accordance with all applicable securities laws of any state or territory of
    the United States and of any other jurisdiction.

The United Kingdom
Each manager has represented, warranted and agreed that:
    (i) it has only communicated or caused to be communicated and will only communicate or cause to
        be communicated any invitation or inducement to engage in investment activity (within the
        meaning of section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by
        it in connection with the issue or sale of any shares or GDSs in circumstances to which
        section 21(1) of the FSMA does not apply; and
    (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to
         anything done by it in relation to our shares or GDSs in, from or otherwise involving the United
         Kingdom.

The European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a ‘‘Relevant Member State’’) an offer to the public of any shares or GDSs which are the
subject of the offering contemplated by this Offering Memorandum may not be made to the public in that
Relevant Member State other than the offers contemplated in the prospectus in relation to our shares and
GDSs once it has been approved by the UK Listing Authority except that an offer of our shares or GDSs
may be made to the public in that Relevant Member State at any time under the following exemptions
under the Prospectus Directive, if they are implemented in that Relevant Member State:
         to legal entities which are authorised or regulated to operate in the financial markets or, if not so
         authorised or regulated, whose corporate purpose is solely to invest in securities;
         to any legal entity which has two or more of (1) an average of at least 250 employees during the
         last financial year; (2) a total balance sheet of more than A43,000,000 and (3) an annual net
         turnover of more than A50,000,000, as shown in its last annual or consolidated accounts;
         to fewer than 100 natural or legal persons (other than qualified investors as defined in the
         Prospectus Directive) subject to obtaining the prior consent of the joint global coordinators for
         any such offer; or
         in any other circumstances falling within Article 3(2) of the Prospectus Directive;




                                                      177
provided that no such offer of shares or GDSs shall result in a requirement for the publication by us or any
manager of a prospectus pursuant to Article 3 of the Prospectus Directive.
Each purchaser in a Relevant Member State will be deemed to have represented and agreed that:
         it is a qualified investor within the meaning of the law implementing Article 2(1)(e) of the
         Prospectus Directive; and
         in the case of any shares or GDSs acquired by a financial intermediary, as that term is used in
         Article 3(2) of the Prospectus Directive, such financial intermediary will be deemed to have
         represented and agreed that our shares or GDSs acquired by it in the offering have not been
         acquired other than on a discretionary basis, where that fact means that the offer to the financial
         intermediary is deemed to be an offer to a qualified investor on behalf of, nor have they been
         acquired with a view to their offer or resale to persons in any Relevant Member State other than,
         qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in
         which the prior consent of the joint global coordinators has been given to the offer or resale.

Dubai International Financial Centre
Our shares and GDSs described in this offering memorandum may not be, are not and will not be offered,
distributed, sold, transferred or delivered, directly or indirectly, to any person in the DIFC other than by
way of an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services
Authority.

United Arab Emirates
Our shares and GDSs described in this offering memorandum may not be, have not been, and are not
being, publicly offered, sold, promoted or advertised in the U.A.E. other than in compliance with the laws
of the U.A.E. governing the issue, offering and sale of securities. Further, this document does not
constitute a public offer of securities in the U.A.E. and is not intended to be a public offer.

Kingdom of Bahrain
This offering is restricted in the Kingdom of Bahrain to banks, financial institutions and professional
investors and any person receiving this document in the Kingdom of Bahrain and not falling within those
categories is ineligible to purchase our shares and GDSs.

Kingdom of Saudi Arabia
No action has been or will be taken in the Kingdom of Saudi Arabia that would permit a public offering or
private placement of our shares and GDSs in the Kingdom of Saudi Arabia, or possession or distribution
of any offering materials in relation thereto.
Our shares and GDSs may only be offered and sold in the Kingdom of Saudi Arabia in accordance with
Part 5 (Exempt Offers) of the Offers of Securities Regulations dated 20/8/1425 AH (corresponding to
4/10/2004) (the Regulations) and, in accordance with Part 5 (Exempt Offers) Article 17(a)(3) of the
Regulations, shares and GDSs will be offered to no more than 60 offerees in the Kingdom of Saudi Arabia
with each such offeree paying an amount not less than Saudi Riyals one million or its equivalent.
Investors are informed that Article 20 of the Regulations places restrictions on secondary market activity
with respect to our shares and GDSs.
Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with the
above-stated restrictions shall not be recognised by us.

Cayman Islands
No offer or invitation to subscribe for our shares or GDSs may be made to the public in the Cayman
Islands.




                                                    178
                                          LEGAL MATTERS

The validity of our shares and certain matters governed by Cayman Islands law will be passed on by Maples
and Calder.
Certain other matters governed by U.S. law and English law will be passed on for us by Dewey Ballantine,
our U.S. and English counsel, and for the managers by Allen & Overy LLP, U.S. and English counsel to the
managers.




                                                  179
                                     INDEPENDENT AUDITORS

Our consolidated financial statements as at and for the years ended December 31, 2004, 2003 and 2002 and
as at and for the nine-month period ended September 30, 2005 included in this offering memorandum
have been audited by Ernst & Young PCC, independent auditors and members of the Lebanese
Association of Certified Accountants, as stated in their audit report appearing herein.




                                                  180
                              LISTING AND GENERAL INFORMATION

1.   We are incorporated under the name ‘‘Kingdom Hotel Investments’’ as a limited liability company in
     the Cayman Islands under commercial registration number CR-100669. Our registered office is
     located at Kingdom Hotel Investments, c/o M&C Corporate Services Limited, South Church Street,
     George Town, P.O. Box 309GT, Grand Cayman, Cayman Islands. The business address of our
     headquarters is Kingdom Hotel Investments, Dubai International Financial Centre, P.O. Box 121223,
     Dubai, U.A.E. and our telephone number is +9714 361 1800. Our web address is
     www.kingdomhotels.com. The content of our website is not incorporated into, and does not form part
     of, this offering memorandum.
2.   The issue of our shares was authorised by our Board of Directors at a meeting held on February 7,
     2006.
3.   We expect our shares to be issued and admitted to the Official List of Securities of the DIFX and
     listed on the DIFX on or about March 1, 2006. Application has been made for our shares to be
     admitted to the Official List of Securities of the DIFX.
4.   We expect that the GDSs will be issued and admitted, subject only to the issue of the Master GDR, to
     the Official List of the UK Listing Authority on or about March 1, 2006. Application has been made
     for the GDSs to be traded on the London Stock Exchange. Prior to admission to the Official List,
     however, dealings will be permitted by the London Stock Exchange in accordance with its rules.
     Transactions will normally be effected for delivery on the third working day after the day of the
     transaction.
5.   The ISIN for our shares is KYG5257E1017. The ISIN code for our GDR is US49567W1018 and the
     Common Code for our GDR is 024440915. Our shares and GDSs are in registered, book-entry form.
6.   Each share has a nominal value of $5. Our shares are governed by the laws of the Cayman Islands.
     The offering price of $9.25 per share and per GDS represents a premium of 85 per cent. to the
     nominal value of our shares. Purchasers of shares or GDSs will not be required to pay any expenses
     incurred in connection with the international offering.
7.   Copies (together with English translations where appropriate) of the following documents may be
     inspected at the offices of Morgan Stanley & Co. International Limited, during customary business
     hours on any weekday (public holidays excepted) following the date of this offering memorandum:
     (a) our Memorandum and Articles of Association;
     (b) the audited IFRS consolidated financial statements for the year ended December 31, 2004, 2003
         and 2002 and the audited interim consolidated financial statements for the nine-month period
         ended September 30, 2005, including relevant comparative financial data;
     (c) the unaudited interim consolidated financial statements for the nine-month period ended
         September 30, 2004, including relevant comparative data;
     (d) the audit and review reports of Ernst & Young PCC in respect of the IFRS consolidated financial
         statements on display;
     (e) the Deposit Agreement; and
     (f) the HVS Study.
8.   There has not been an official conviction for fraudulent offences for the last five years, or any
     bankruptcy, receivership or liquidation, and there is no official public incrimination of and/or
     sanctions on any of (a) the members of the administrative, management or supervisory bodies of the
     company; or (b) any senior manager who is relevant to establishing that the company has the
     appropriate expertise and experience for the management of the company’s business by statutory or
     regulatory authorities (including designated professional bodies) and no such person has ever been
     disqualified by a court from acting as a member of the administrative, management or supervisory
     bodies of the company or from acting in the management or conduct of the affairs of the company for
     at least the previous five years.




                                                  181
9.   The names and addresses of the managers of the offering are:

     Deutsche Bank AG                                    Morgan Stanley & Co. International Limited
     Winchester House                                    25 Cabot Square
     1 Great Winchester Street                           Canary Wharf
     London, EC2N 2DB                                    London, E14 4QA
     United Kingdom                                      United Kingdom

     Deutsche AlAzizia Financial Services (under         The National Investor Private Joint Stock
     formation)                                          Company
     P.O. Box 918 96                                     TNI Tower
     Riyadh, 11643                                       Zayer 1st Street
     Saudi Arabia                                        Khalidiya, Office Level 2
                                                         P.O. Box 47435,
     Shuaa Capital psc                                   Abu Dhabi, U.A.E.
     Emirates Towers
     Level 28                                            International Financial Advisors K.S.C.C.
     P.O. Box 31045                                      P.O. Box 4694
     Dubai                                               Safat 13047
     United Arab Emirates                                Kuwait

     Abu Dhabi Commercial Bank pjsc                      Samba Financial Group
     P.O. Box 939                                        P.O. Box 833
     Abu Dhabi                                           Riyadh 11421
     United Arab Emirates                                Kingdom of Saudi Arabia

     Mashreqbank psc
     P.O. Box 1250
     Dubai
     United Arab Emirates
10. The address of Euroclear is 1 Boulevard Du Roi Albert II, 1210 Brussels, Belgium; and the address of
    Clearstream is 42 Avenue J. F. Kennedy, 1855 Luxembourg.




                                                   182
11. All of our direct subsidiaries are incorporated in and have their registered offices in the Cayman
    Islands. The following table presents our significant subsidiaries, associates and affiliates and their
    countries of incorporation, as at the date of this offering memorandum:

                                                                                         KHI’s
                                                                                        effective    Status of
     Significant subsidiary (hotel owning company)                                     ownership    operation of
              and country of incorporation                           Hotel                 (%)         hotel
    Consolidated Operating Entities—Subsidiaries
    (1)    Kingdom 01-FZ-LLC                              o
                                                         M¨venpick Hotel Bur Dubai        100.00    Operating
           U.A.E.

    (2)    Merryland Pour Les Projets Touristiques(1)     o
                                                         M¨venpick Hotel and Resort        81.21    Operating
           Lebanon                                        Beirut

    (3)    Kingdom Beirut S.A.L.                         Four Seasons Hotel Beirut         37.81    Under
           Lebanon                                                                                  Construction

    (4)    Syrian Saudi Tourism Investments Co.          Four Seasons Hotel Damascus       35.75    Under
           Syria                                                                                    Construction

    (5)    Tanruss Investment Ltd.                        o
                                                         M¨venpick Royal Palm Hotel        96.00    Operating
           Tanzania

    (6)    Lonrho Hotels B.V.                            Aberdare Country Club             41.77    Operating
           The Netherlands

                                                         The Ark                           41.77    Operating

                                                         Mount Kenya Safari Club           52.50    Operating

                                                         Mara Safari Club                  70.00    Operating

                                                         Norfolk Hotel                     70.00    Operating

    (7)    El Quseir Hotel Company(2)                    Resort & Spa El Quseir           100.00    Under
           Egypt                                                                                    Construction

    (8)    Anahita Hotel Limited                         Four Seasons Resort               50.00    Under
           Mauritius                                       Mauritius                                Construction

    (9)    KHI Ghana 01 Limited                           o
                                                         M¨venpick Hotel Ambassador       100.00    Under
           Ghana                                          Accra                                     Construction

    (10) EHC Maroc                                       Four Seasons Hotel                78.00    Under
         Morocco                                           Marrakech                                Construction

    (11) Kingdom Hotel Asset Management                  N/A                              100.00    N/A
         Services(3)
         Cayman Islands

    Non Consolidated Operating Entities—Associates

    (12) Novapark Cairo Company(4)                       Four Seasons Hotel Cairo at       44.23    Operating
         Egypt                                             Nile Plaza

    (13) Saudi Alexandria Company(5)                     Four Seasons Resort Sharm         39.31    Operating
         Egypt                                             El Sheikh

    (14) Serena Beach Company(6)                          o
                                                         M¨venpick Resort El Quseir        81.16    Operating
         Egypt

    (15) El Gouna for Hotels Co.                          o
                                                         M¨venpick Resort & Spa            29.28    Operating
         Egypt                                            El Gouna

    (16) IFA Zanzibar Beach Hotel & Resort                o
                                                         M¨venpick Beach & Spa             30.00    Under Re-
         Company Limited(7)                               Resort Zanzibar                           development
         Tanzania




                                                        183
                                                                                                        KHI’s
                                                                                                       effective      Status of
Significant subsidiary (hotel owning company)                                                         ownership      operation of
         and country of incorporation                                        Hotel                        (%)           hotel
(17) Calonge Amsterdam B.V.                                   Four Seasons Hotel George V                  25.00    Operating
     The Netherlands

(18) Arab Hotels Company                                       o
                                                              M¨venpick Hotel Tripoli                      51.00    Under
     Libya                                                                                                          construction

Non Consolidated Operating Entities—Affiliates

(19) Al Mashtal Co. for Touristic Investment                   o
                                                              M¨venpick Hotel Gaza                         10.26    Under
     Palestine                                                                                                      construction

(20) Mediterranean Tourism Investments                        Four Seasons Hotel Amman                     13.00    Operating
     Company
     Jordan

(21) Dubai Pearl Hotel (01) Ltd.                               o
                                                              M¨venpick Hotel Pearl Dubai                  16.32    Under
     U.A.E.                                                                                                         construction

(22) Nile City Hotels and Tourism Co.                         Fairmont Nile City                           14.83    Under
     Egypt                                                                                                          construction

(23) The Palm Hotel and Resort FZE                            The Fairmont Palm Hotel &